Global instability, municipal spending spurs $40M Kamloops loan

Kamloops council may take on $40 million in debt as a “cushion” in case city funds dwindle.

It would fund typical city operations in case it goes over budget before the summer, but finance manager Lewis Hill said it’s no cause for concern.

It’s not the first time city council has been asked to approve a short-term loan to bolster the year’s budget, especially when faced with an uncertain economy.

“I’m looking at what the one- to two-month need is for the city if things went sideways drastically,” Hill said in an interview with iNFOnews.ca

He said the last time council approved similar short-term debt was a $15 million request in 2020 just as the COVID-19 pandemic began. Similar to that time, he said it would have cost the city more to pull its investments out than to take out short-term credit.

That $15 million debt was never used in 2020. It’s not clear how much, but at least some of the $40 million credit line would be used, going toward only operational costs to pay for staff and contractors.

Hill added that it can’t be used for big capital projects, like the performing arts centre.

According to Hill’s report to council, the city has lowered tax rates by using reserve funds while taking on more expensive projects. He said the city could pull more reserve funding for the potential shortfall, but that route would cost more while the loan would accrue interest at a lower 2.8 per cent.

He also said global economic instability, like rising oil prices from the war in Iran and US tariffs on Canada, reinforce the need to have a $40 million buffer.

“Probably we should have had this rolling every year before 2020 and since, just to be there as a cushion. Back in 2020 we didn’t borrow it at all,” Hill said. “This time, I’m probably going to have to borrow some of it because that’s not good. I would rather not.”

At the outset of the COVID-19 pandemic, he said the city was worried homeowners might default on their property taxes. This time, he anticipates the full amount will be repaid in the summer when tax bills come due.

Although city debt is expected to climb substantially in the coming years, peaking at more than $400 million by 2029, this short-term debt is expected to be paid off within the coming months.