ST. PAUL – The Town of St. Paul council clarified during the July 14 council meeting that it is not borrowing $3 million through its operating line of credit, during discussions to update its Borrowing Bylaw - Operating Line of Credit.
Council is required to review and re-approve the borrowing bylaw each year. An annual review of the borrowing bylaw involves a review of the Town’s line of credit.
Mitchel Bachelet, Chief Financial Officer (CFO) of the Town of St. Paul, said administration’s request is to only review the borrowing bylaw every few years instead of an annual review to save “time and resources.”
An annual review of the borrowing bylaw involves preparing a Request-for-Decision (RFD) which then has to be passed over three readings every year. Administration has recommended a three-year review instead.
Council passed a motion for the bylaw to be “reviewed by administration and brought before council for consideration of any recommendations made by administration every three years.”
Having a line of credit is standard practice in a municipality, said Bachelet, addressing concerns from the community that council may be borrowing $3 million despite having a surplus in the previous year.
He said the Town’s $3 million line of credit has not changed since 2011.
Explaining what a line of credit is, Coun. Ron Boisvert said a line of credit is a buffer, or “a temporary cushion until we get our funding.”
Bachelet affirmed that having an operating line of credit is typical to help with large expenses a municipality may incur prior to receiving annual funding.
For example, the Town receives its tax revenue on or after June 1 of each year but has to pay the RCMP over $500,000 before June 1. Many other Town expenses are also paid before tax revenue is collected, including insurance, utility bills, and provincial requisitions.
“It is also important to remember that most years, we are starting capital projects and incurring costs long before grant funding comes in,” Bachelet added.
A line of credit will pay for those expenses, then is paid off right away when tax revenue comes in.
“You don't control when you're going to get the money. But you have to spend [the money] when the contractor gives you the bill,” he said.
