Under normal circumstances, debenture borrowing is paid off over a ten year period, so that, the cost of the capital works is spread out over that period of time. The City is required to make full provision in its annual budget for the principal and interests costs associated with its borrowing program. At the time, the Director of Finance advised Council that it was anticipated a further debenture issue would be required in 1999, likely aimed at the external market. The City utilizes RBC-Dominion Securities as its fiscal agent to provide advice on how to structure the debenture issue to make it attractive in the market and as to when to enter the market to ensure a successful issue. Staff have also been tracking interest rates and market conditions.
Interest rates are at very low levels.
The markets have been somewhat volatile over the past few months. Most analysts are suggesting that interest rates may increase in the new year, but there is not a consensus on the timing and degree of change. The advice being given by most analysts, including our fiscal agent is that, if the City is to go to the market this fall, that borrowing should take place in the near future. With that in mind, staff have begun preparations for an issue prior to the end of October. The time frames for obtaining Council approval do not support this degree of flexibility.