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By Alessia Proietti

Precautionary measure

Red Deer city council approves increased borrowing bylaws

Feb 20, 2024 | 5:30 PM

Red Deer city council approved a bylaw amendment that would raise maximum quoted interest rates by roughly three per cent for various active capital projects.

At their meeting on Monday, council passed second and third reading of the amendment, which was given first reading in January.

Several capital projects, approved in previous years, have been budgeted to require borrowing as a funding source. As a result, council had also approved borrowing bylaws for each project.

Administration states they do not borrow for the project all at once; they wait until the funds are required and borrow at that time.

The City says the current 30-year interest rates offered by Loans to Local Authorities are at 5.22 per cent and have risen quickly over the past few years, creating a risk that they can exceed rates authorized within the borrowing bylaws.

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They note the following projects have their maximum interest rates at risk:

• Bylaw 3544/2015: Riverlands Project – 5.642 per cen
• Bylaw 3661/2021: 2021-2022 Road Offsite Projects – 5.414 per cent
• Bylaw 3663/2021: 2021-2022 General Municipal Works Projects – 5.414 per cent
• Bylaw 3664/2021: 2021-2022 Roads Projects – 5.414 per cent

City officials say they would like to address the risk in a proactive way and avoid any potential delays in capital work by increasing the maximum rate by three per cent. Therefore, the maximum interest rates would rise to 8.642 and 8.414 per cent, respectively.

Administration said while they do not believe interest rates will increase to that amount and acknowledge that rates are slowly declining, they suggest the amendment as a precautionary measure. If interest rates do go above the maximum rate authorized within the borrowing bylaw, the capital project would need to be suspended until a revised bylaw could be passed which can take time.

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