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City of Mississauga Plans for the Future through Proposed Debt Management Policy

Dec 07, 2011

At today's General Committee meeting, City of Mississauga Council reviewed a proposed debt management policy to provide guidelines for issuing debt to finance the City's infrastructure needs for residents and businesses.

"We have recognized for many years that the City would issue debt and incorporated it into our business planning process," said City Manager and CAO Janice Baker. "That time has come. The demands we are experiencing now for replacing infrastructure are ineligible for development related funding per the provincial legislation. This means the City will need to issue debt to make efficient use of available financial resources and ensure we can keep our infrastructure in a state of good repair. The policy is a proactive approach to managing debt, protects the City's AAA credit rating, safeguards our long-standing financial reputation and adheres to legislative requirements. It is important to note that most major urban centres use debt to finance required infrastructure spending."

The proposed Debt Management Policy defines guidelines for the types of projects that would be eligible for debt financing:

• Facilities and infrastructure not funded through development charge funding.
• Projects that provide future cost savings or cost avoidance.
• Major reconstruction or rehabilitation projects.
• Development charge projects required to be emplaced before revenues are received.

Baker added, "An example of a project suited to debt financing is the proposed citywide program to retrofit streetlights with a more energy-efficient light source. This project requires up-front funding; however, will result in long-term savings based on reduced energy consumption and lower maintenance costs. The City of Mississauga is well known for its fiscal responsibility and award-winning budget processes. Staff will continue to look for efficiencies using the debt policy as a responsible measure."

The policy sets the debt charge limit at 10 per cent of revenues - less than half of the 25 per cent limit under the Municipal Act. The City’s estimated ten-year requirements in the 2011-2020 capital forecast are $446.1 million. Annual debt repayment charges to service the debt will have an average annual impact of 1 per cent on property taxes over the next ten years. There will still be a need to have an annual infrastructure levy in addition to the debt service to balance debt financing with 'pay as you go funding.' Neighbouring municipalities have debt limits set ranging from 6.25 to 15 per cent.

As noted in the corporate report, the City of Mississauga is responsible for approving its capital budget and approving its debenture needs. As required by the Municipal Act in a two tier government structure, the upper tier has full responsibility for issuing debt financing. The City notifies the Region of Peel of its requirements and the Region issues debt on the City's behalf.

As Canada's sixth largest city, Mississauga is home to 734,000 residents and 55,000 businesses, including 63 Fortune 500 companies with Canadian head offices or major divisional head offices. A diverse, progressive and award-winning municipality located on the shores of Lake Ontario in the heart of the Greater Toronto Area, Mississauga is "Leading Today for Tomorrow" by focussing on delivering services, implementing its Strategic Plan, delivering value for money, maintaining infrastructure and continuing to be an employer of choice.


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Related Links:
   Debt_Management_Policy_.pdf


Media Contact:
Catherine Monast
Senior Communications Advisor, Transportation & Works
Phone: 905-615-3200 x5046
TTY:    905-896-5151
Email:   catherine.monast@mississauga.ca


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