Revenue Anticipation Borrowing Bylaw FAQs

Revenue Anticipation Borrowing Bylaw FAQs

Council adopted a new Revenue Anticipation Borrowing bylaw at their April 22, 2020 regular meeting

What is a revenue anticipation borrowing bylaw?

A revenue anticipation borrowing bylaw is a tool available for local governments that allows municipalities to borrow money for a short term to continue municipal operations while waiting for anticipated revenue (e.g. property taxes) to be received.

With this new bylaw, what can the Town borrow money for?

The revenue anticipation borrowing bylaw authorizes the Town to temporarily borrow funds totalling the unpaid taxes imposed for the current year; the Town is not able to borrow more than what is anticipated to come in. These borrowed funds are repaid as property taxes are collected.

Why do we need this bylaw now?

The Town had an existing temporary borrowing bylaw that was adopted in 1995 with a $2 million borrowing limit. The legislation has changed since that bylaw was adopted, and therefore a new bylaw was required. Updating this bylaw was on the work plan list and was prioritized during the COVID-19 pandemic. This bylaw is intended for cash flow issues that could arise between the beginning of the year and when taxes are collected. This allows the Town to meet its financial obligations while giving flexibility to residents and businesses during challenging times.
To be clear: the Town already had a similar bylaw in place, and revenue anticipation bylaws are a common tool used by local governments. The bylaw is not intended and cannot be used as a 'buy-out'; it exists only to cover expenditures while waiting for monies from taxes or grants to be received. It does not mean businesses or residents will be exempted from paying any portion of their taxes.

Is the Town expecting a shortfall due to COVID-19?

The Town is required to pay other governments (Regional District, Provincial School, Library, etc.) approximately $5 Million at the end of July for their portion of property taxes. At their April 22, 2020 regular meeting, Council kept the July 2 tax deadline, but extended the first penalty date to October 2 with a reduced penalty of 1%. The second penalty date was also extended, with a penalty of 9%. Since the Town has to pay other governments about $5 million on August 1 for their share of taxes, there could be a temporary cash flow shortfall up to the October 1 due date. If a significant amount of property taxes and homeowner grants are paid by the July 2 deadline, then borrowing as per the Revenue Anticipation Borrowing Bylaw may not be necessary. It is anticipated that any money borrowed would likely be repaid by the end of the year.

More information can be found at:

https://www2.gov.bc.ca/gov/content/governments/local-governments/finance/borrowing-liabilities/revenue-anticipation-borrowing
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