Strathmore council approves borrowing

By Sean Feagan, Local Journalism Initiative Reporter

Strathmore town council has approved a new bylaw permitting the town to borrow $3 million to meet the challenges presented by the COVID-19 public health crisis.
The purpose of the Emergency and Working Capital Borrowing Bylaw is to cover new direct costs caused by the COVID-19 public health crisis not contained within the town’s existing budget, and to maintain working capital in light of revenue losses from facility closures and utility and (potential) tax deferments.
“This borrow will maintain cash flow liquidity and enable the town to meet operating and capital obligations,” said Mel Tiede, the town’s director of corporate services.
The direct cost of COVID-19 will depend on the length of the crisis, but the town estimates a cost of “$100,000 for a shorter event to significantly more for a longer term.”
The temporary closure of Strathmore facilities, resulting in lost bookings, is estimated to cause $133,000 per month in lost revenue.
“The closure of the recreation venues has put a halt to one of our revenue sources, but the expense of the facilities continue on,” said Tiede.
Administration recommended the town engage in a $3 million borrow that will be divided into two draws, with the first draw completed “as soon as possible,” with the remainder to be attained on an as-needed basis for a one-year term, said Tiede.
The loan will be a one-year term, which according to Tiede has the lowest possible interest rate, at two per cent or less, resulting in an estimated $60,000 in interest.
Without borrowing the funds, the town might experience a financial crunch, especially considering the second quarter of the calendar and fiscal year is the quarter with the lowest available working capital and cash in the bank.
“During our normal construction season for the town, we have a cash requirement of an additional $2.5 to $3 million that we normally would fund from other sources that would need to go into our bank,” said Tiede.
The loan will be paid from the additional cash the town will receive once the situation subsides and residents make up for deferments, said Tiede.
The town has contacted some of its major supply organizations to increase the terms of its current payment due dates to preserve cash and keep some money in the bank. While one supplier has agreed to increase the payment dates, another has declined the request, said Tiede.
Council support for the bylaw was unanimous through three readings.