Improvement District Borrowing Procedures
Borrowing allows improvement districts to finance capital asset construction or purchase. Through their taxes and tolls, landowners repay a portion of the debt and interest cost each year; this lowers the annual cost of major capital expenditures by spreading those costs over several years.
Borrowing Authorization Bylaw
The improvement district board of trustees may adopt bylaws to authorize borrowing to finance capital asset construction or purchase.
Before adopting the bylaw, the improvement district would submit a request for pre-approval to the Ministry of Municipal Affairs and Housing staff. The review of the proposed project, cost estimates and method of property owner approval by ministry staff, streamlines the subsequent registration of the bylaw by the Inspector of Municipalities.
Property Owner Approval
All improvement district borrowing requires the approval of the Inspector of Municipalities (through registration). As part of the this approval, the Inspector must be confident that the improvement district has sought and obtained the approval of property owners within its boundaries.
Once borrowing amount has been set by the improvement district board of trustees, the improvement district would then obtain long-term borrowing terms from their financial institution. The improvement district can then provide an accurate estimate of the maximum amount of anticipated borrowing and the potential tax impact on landowners.
This information will be important for the landowners as they decide whether to approve the adoption of the loan authorization bylaw. This approval may be obtained by assent voting, through the alternative approval process or by a vote at a general meeting.
After the approval of the landowners has been obtained, the board of trustees may adopt a bylaw to authorize the borrowing of a maximum amount over a certain term. In general, the term for long-term borrowing for land, buildings, infrastructure, and other fixtures would not exceed 20 years. For vehicles or other chattels, borrowing would not exceed 15 years. Before any borrowing can be undertaken, the bylaw must still be registered with the Inspector of Municipalities.
The repayment of a loan is secured by the toll and taxing powers of the improvement district, not by the value of its assets.
Registering the Loan Authorization Bylaw
After approval of the landowners has been obtained and adoption of the loan authorization bylaw by the improvement district trustees, the improvement district must submit three original signed and sealed copies of the loan bylaw and supporting information to the Inspector of Municipalities.
Until the bylaw is registered with the Inspector, the capital project, purchase of assets or other purpose for the borrowing cannot be undertaken. Once approval is received from the Inspector and the bylaw is formally registered, one copy of the bylaw will be kept by the ministry and two copies will be returned to the improvement district (one will be kept by the improvement district and the other will be presented to the financial institution when borrowing is sought).
Most improvement district borrowing is done through commercial lending institutions. However, Improvement districts that provide fire protection may borrow from the Surveyor of Taxes. The Surveyor advances the loan to the improvement district and then collects the annual cost to repay the debt from the property owners through the rural taxation system.
Improvement districts do not have access to lines of credit, as this is a form of borrowing has no end-term; that does not make it possible to inform the property owners of the long-term tax impact of such borrowing.