Chunking it: South Glengarry won’t do $10M long-term infrastructure loan

South Glengarry CAO Tim Mills (top, right) speaks to South Glengarry council during a budget meeting on Friday, Nov. 19, 2021. The township won't be taking a big long-term loan for infrastructure because of the unknown around interest rates. (YouTube/South Glengarry via Newswatch Group)

LANCASTER – Armed with new financial information, South Glengarry council is not about to go big and long with it comes to borrowing money for roads and other infrastructure projects.

During Friday’s (Nov. 19) budget meeting, CFO Lachlan McDonald told councillors if the $10.7 million council was leaning towards were borrowed, the interest rate would be variable around 0.67 per cent but then it would be locked in at the interest rate of the day, five years from now, when construction is completed.

Deputy Mayor Lyle Warden called it “crazy” to borrow a large chunk of cash without knowing the interest rate.

Coun. Stephanie Jaworski agreed and felt that “chunking it” – borrowing about $4.7 million for two years for around 3 per cent – would be a better strategy. That money would be focused on hamlets and priority roads.

Under financing rules, if the township takes out a loan under a fixed interest rate, it has to take out all the money immediately. Deputy Mayor Warden mused whether the municipality could buy a short-term GIC during construction – possibly six months – to offset any interest costs. The idea will be explored by the finance department.

South Glengarry is making roads and road maintenance at priority in the 2022 budget.

The draft budget plans to collect about 3 per cent more tax dollars. With a levy decrease of about the same in 2021, the municipality would be returning to about the same amount of taxes it collected in 2020.