Town helps NOTL Hydro finance capital improvements
The Town of Niagara-on-the-Lake has discovered an innovative way to raise money for running the municipality.
Niagara-on-the-Lake Hydro has been offered a loan of $3 million from the town for a transformer for its transformer station and for other capital ventures. The hydro company borrows money on a regular basis for capital projects from financial institution.
The current rate offered by Infrastructure Canada is 2.75 % which is available to Niagara-on-the-Lake Hydro, but the town has negotiated an interest rate of 3% with the utility to be repaid over 10 years.
“It is not a usual arrangement,” said chief administrative officer Mike Galloway at the corporate services advisory committee meeting Monday. “(The town) had a cash position of $20 million at the end of 2013.”
He said the finances are still being tallied for the end of the 2014 fiscal year, but he did not see a cash-flow problem with lending the money.
“Either they can go to the bank or we can lend them the money,” said Galloway. “At the end of the day, there is only one taxpayer.”
Corporate services staff reported that the loan application was vetted by the town’s lawyer and auditors. They agreed that it was low risk as it is callable with 90 days’ notice at any time.
Currently, the town earns 1.25% on its cash holdings. The loan will bring in an extra $50,000 to its coffers in the first year.
Niagara-on-the-Lake Hydro requires the funds by Feb. 1. The committee voted in favour of the staff recommendation to provide the loan and a final decision will be made by council next Monday.
The decision to lend money to the utility, which is 100% owned by the Town, is an example of the flexibility that ownership allows, and the goal of the Town and the utility - to do what’s best for the taxpayers of NOTL, Galloway told the Advance.