New Tec holds off multi-million dollar wastewater plant debenture

New Tecumseth Free Press Online February 15, 2011

New Tecumseth’s plan to borrow $32.8 million over a 20 year term with the National Bank of Canada has been postponed pending a more favourable interest rate.

Last week in a special council meeting, councillors approved issuing the debenture that is supposed to be serviced by development charges. However, the DC accounts are currently insufficient to service the debt, which one initial estimate pegged at about $46 million principle and interest.

The debenture is to pay for the DC eligible component of the regional wastewater treatment plant rebuild and expansion. One option under consideration is tapping the development community to upfront funds, which would be repaid as a DC credit.

Mark Sirr, New Tecumseth’s Manager of Finance, provided additional information at last night’s council meeting announcing that since last week, interest rates had increased, nullifying the advantage National Bank of Canada had over the Ontario government’s in-house municipal lending program.

“Conditions in the Capital Debt market have fluctuated notably over the past week from when staff originally completed their calculations and comparisons,” according to Mr. Sirr’s report to council. “The unexpected interest rate changes are a function of several global and domestic factors which were different than esconomist forecasts. The benefits of the National Bank deal versus that of Ontario Infrastructure Projects Corporation (OIPC) have been currently eliminated. OIPC rates have also increased but not at the same level as was seen in the open market. Staff under the advice of National Bank representatives, will not be proceeding with the debenture deal under the originally planned time frame Market conditions will be monitored daily by National Bank and when a more beneficial opportunity occurs we will proceed immediately with the issue. As the TD construction loan matures on March 31, 2011 the issue will be made prior to that date.”