Report to: General Committee – Finance & Admin.        Date Report Authored: March 9, 2010

 

 

SUBJECT:                         Canada Mortgage and Housing Corporation Loan

PREPARED BY:               Mark Visser, Manager, Financial Strategy & Investments      

 

 

 

RECOMMENDATION:

1)                  THAT the report dated March 9, 2010 entitled “Canada Mortgage and Housing Corporation Loan” be received.

2)                  THAT Council approve the submission of a loan application (through the Region of York) to Canada Mortgage and Housing Corporation to fund the purchase of the Markham District Energy Birchmount plant

3)                  AND THAT staff be authorized and directed to do all things necessary to give effect to this resolution.

 

 

 

PURPOSE:

The purpose of this report is to obtain Council’s approval to submit a loan application (through the Region of York) to Canada Mortgage and Housing Corporation (CMHC) to fund the purchase of the Markham District Energy Birchmount plant.

 

BACKGROUND:

On December 15, 2009 Council approved the submission to the Building Canada Stimulus Fund to fund the construction of the Birchmount Energy Centre, a new district energy plant to produce hot and chilled water which are supplied via underground pipes to provide heating and cooling services to customers east of Warden Avenue in downtown Markham Centre. The report further outlined the ownership model whereby MDE has a permanent easement on the land upon which the Birchmount Energy Centre is situated and the Town would own the constructed energy centre facility and lease it back to MDE. The budgeted cost of the Birchmount Energy Centre is $13,055,000 excluding land costs. To fund the project an application was submitted to the Building Canada Stimulus Fund, whereby if approved the project cost would be shared on a 1/3 basis between the Government of Canada, Province of Ontario and the Town of Markham ($4,351,667 each).

 

OPTIONS/DISCUSSION::

 

The December 15 Council report identified that the Town’s share of the project be funded from the Lifecycle reserve. Since that time Town staff have been pursuing a low cost loan opportunity available through the CMHC Municipal Infrastructure Lending Program.  As of March 11th, the Town has not heard back regarding its Building Canada Fund Stimulus Fund application.  If it is not approved the Town would increase the CHMC loan request to $13,055,000 to cover the total cost of the project.

 

The CMHC Municipal Infrastructure Lending Program provides low cost loans to Municipalities for projects such as; housing services, power generation, local transportation, and residential infrastructure. The program will fund qualified projects with start dates after January 27, 2009 and completion dates before April 1, 2012.  CMHC will only loan money directly to municipalities, which is further reason for the Town to own the facility.  Through the CMHC program, the Town could borrow funds at an interest rate that is approximately 85 to 100 basis points less than rates currently anticipated by the Region.  The CMHC rate is currently at 4.28% and is subject to change based on market conditions (although the spread to the Region’s borrowing rate would likely remain in the 85 to 100 bps range).

 

As a lower tier Municipality the Town does not have the ability to borrow long-term funds, therefore the borrowing must be through the Regional Municipality.  Town staff have been in contact with the Region regarding this potential CMHC loan and Region staff have advised that they would support the application to Regional Council, subject to all legal and program requirements relating to the application being met.

 

Staff therefore recommends Council approve the submission of a loan application to Canada Mortgage and Housing Corporation for the purchase of the Markham District Energy Birchmount plant.

 

FINANCIAL CONSIDERATIONS AND TEMPLATE:

 

The financial savings, assuming a 90 basis point reduction for a $13,000,000 loan with a 20 year term, is approximately $1,500,000.  The Town and MDE will structure the lease so that both parties benefit from these savings.

 

 

ATTACHMENTS: None

 

 

 

 

Attachments:

None

 

 

Comments & Questions: