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By rdnewsNOW staff

Loans to Local Authorities program

Province says its taking steps to lower costs for municipalities

Sep 29, 2024 | 1:27 PM

The Alberta government says it is lowering the cost of borrowing for municipalities, in hopes it will enable them to invest more in services and infrastructure.

Government officials say municipalities play an important role in shaping vibrant communities and contributing to a stronger province. With that in mind, the government says it will now lend money to local authorities, which include municipalities, airports, counties and irrigation districts, at a lower rate.

Officials say these entities will now pay the same interest rate as the province on money borrowed for infrastructure and other capital projects. The change is expected to save municipalities about $7 million in 2025-26 and about $12 million in 2026-27.

In a time of high interest rates, Alberta’s government says it is helping to reduce budgetary pressures faced by local governments and frees up funds for purposes other than servicing debt.

With Alberta’s balancing of the budget, government officials say the province has been able to reduce outstanding debt by more than $19 billion. With continued strong results, government officials say Alberta’s borrowing costs are expected to remain low.

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The government says the Loans to Local Authorities program allows even the smallest municipalities in Alberta to benefit from the province’s fiscal strength and well-established access to global capital markets. Officials say the province lends money to local authorities to help finance their capital projects, such as roads and upgrades to local water, sewer, gas and electric services.

“Alberta has lowered our cost of borrowing, and now we are passing that savings on to municipalities,” says Nate Horner, President of Treasury Board and Minister of Finance. “They are our partners in providing services to Albertans, and by working together we can ensure that investments can be made with a minimum cost to service debt.”

“Our government provides billions of dollars in support to municipalities, ranging from grants to capital funding,” adds Ric McIver, Minister of Municipal Affairs. “Lowering the cost of borrowing for municipalities is just one more way we are ensuring that municipalities, counties, airports and irrigation districts can invest in their citizens.”

Background

• The Loans to Local Authorities program was set up to ensure that all municipalities and qualifying local authorities in Alberta have access to funds at the lowest possible cost.
• Interest rates charged on new loans to local authorities were revised to better reflect the cost of credit for municipal borrowers that raise debt financing in the capital markets.
• The current loan pricing model under the Loans to Local Authorities program came into effect in December 2021.
• Prior to the change, lending rates were equal to the province’s estimated cost of borrowing for debt with the same terms.
• The change will take effect in Budget 2025.

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