City decreases operating line of credit to previous level
The City of Swift Current has been able to maintain a strong cash flow position since the start of the COVID-19 pandemic and therefore did not have to make use of an operating line of credit with a higher limit.
Councillors approved a recommendation from City administration at a regular council meeting on Oct. 5 to re-establish the lower limit on the operating line of credit.
The cap on the operating line of credit was increased from $2 million to $7 million at a special council meeting on March 27 to ensure the City’s ability to meet financial obligations and to respond to any unforeseen circumstances during the pandemic.
Council members were pleased with the City’s good cash flow situation and the fact that there was no need to use the operating line of credit.
“Obviously encouraging that the City's position is in such a state that we're not going to need to rely on these extra funds through a line of credit,” Councillor Ryan Plewis said. “So a good news story moving in the seventh month of COVID or is it the tenth year it feels like, but a good news story nonetheless.”
Mayor Denis Perrault referred to the uncertain situation early in the pandemic when council made the decision to increase the operating line of credit limit to $7 million.
“There was so much uncertainty and this extension of our credit line was anticipating the uncertainty,” he said. “We genuinely did not know what was coming and I want to say a huge thank you to the public, thank you to businesses, and thank you to every resident in the city of Swift that although had an option to defer their taxes to the end of September, what we saw was the majority continued to make those payments.”
He also expressed appreciation towards the provincial government for providing revenue sharing and gas tax payments in a lump sum to municipalities.
“This allowed our cash flow projections to be a little bit more certain for our community, but for all communities across Saskatchewan,” he said.
City General Manager of Corporate Services Kari Cobler provided details during the online meeting about the impact of the pandemic on the City’s cash flow situation.
“Over the past six months, cash inflow has decreased in recreational and cultural areas due to the closure of many facilities,” she said. “As well, many residents and businesses have taken advantage of the payment deferral program for property tax and utility payments, with no interest or penalty charges being applied to outstanding accounts up to Sept. 30, 2020.”
She added that many of the City’s operational expenses were reduced to offset the reduction in cash inflow. These reductions include variable overhead costs related to facility closures and programming cancellations.
“Spending was also reduced in other areas to only those costs that were considered essential to ensure the level of service to residents and businesses remained unchanged,” she said. “The City was also able to secure long-term debt at a historically low interest rate, thereby reducing debt reducing costs.”
The City will usually receive the revenue sharing and gas tax payments in monthly instalments, but the provincial government’s decision to make these payments as a lump sum helped to ease the pressure on the City’s cash flow.
Cobler elaborated on the City’s decision to decrease the operating line of credit during an online media briefing after the council meeting.
“Over the past six months our financial position and our cash flow position continued to remain strong,” she said. “So at this point in time we don't see a need to take the additional increase to our operating line of credit forward into the future. Of course, if our circumstances change in the new year, we can always readdress that, but at this point in time, we felt it was prudent that we do reduce our operating line of credit back to $2 million.”
She noted that the City was able to decrease operational expenditure through a careful approach to any proposed expenses.
“Before we entered into any contracts or we extended ourselves into any liabilities for contractors, consultants, any other purchases that we may have incurred, we definitely took a keen eye to whether they were essential to ensure that we maintain that level of service to residents and businesses,” she said.
Residents and businesses took advantage of the payment deferral program, but others continued with regular payments and outstanding amounts were also paid before the Sept. 30 deadline.
“We did see an increase in the amount of property tax and utility accounts that were outstanding until Sept. 30,” she said. “What that told us is many businesses and residents valued the payment deferral program that we did put in place earlier this year. Many did pay their property taxes up to September 30 and certainly any of those accounts that were still outstanding towards the end of September were paid prior to Sept. 30 or on the due date. So it's a great thing to see. We're thankful that the public was able to do that and take advantage of the deferral program that was in place as well.”
The City will have to submit an application to the Saskatchewan Municipal Board before the end of the year to re-establish its debt limit, but the intention is to keep this limit at the current level.
“We're not requesting an increase to our debt limit at this point in time,” Cobler said. “And currently our debt limit is $110 million, and it does expire at the end of 2020. So we will make an application to the Saskatchewan Municipal Board to re-establish that at $110 million.”