Cypress County eyes a change to short-term borrowing strategy

By MEDICINE HAT NEWS on November 5, 2022.

https://www.medicinehatnews.com@MedicineHatNews

Cypress County could alter its short-term borrowing strategy to avoid selling short-term bonds into a bear market, according to documents presented to county councillors at this week’s regular meeting in Dunmore.

Last year the county bought bonds with the intention of using the proceeds in early 2023 to carry over finances to a new mid-year tax collection date in June.

However, a reversal in bond markets would now mean taking a 7.5 per cent loss on the value for trading them rather then taking them to term, at which point par value is guaranteed plus interest in the interim.

Instead, administrators suggest a debenture bylaw worth $10 million to meet cashflow needs until property taxes are collected this summer and bonds mature at face value.

County officials also say ratepayers should be encouraged to move on to an instalment payment plan to make more funds available to the county during the year.

The total cost of the borrowing plan is estimated to be between $50,000 and $100,000, though it could be as high as $500,000.

They expect the county’s current bond portfolio to return 5.5 per cent over time, and for conditions to normalize in 2023.

The county arranges bond maturity on a ladder, allowing equal amounts to come due at regular intervals.

Almost 90 per cent of the county’s bond holdings are liquid and could be cashed in at any time, but at discounted market price rather than face value.

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