Municipal Debt

Borrowing is a way to finance capital projects and maintain major infrastructure over the longer term. Like most businesses, municipalities may borrow a portion of their capital requirements and pay it back over the life of the project being financed. Municipalities do not borrow for day-to-day operations.

When faced with the decision to build a major capital structure, Council has to decide on how to finance the project. Options include raising taxes that year to pay for it, reduce spending on other capital projects to make room in the current capital budget, use money that has been saved up in reserves, or borrow the funds and repay the debt using tax revenue over a period of time. Council considers debt financing when a new or one-time type of project comes along, and occasionally when major reconstruction is needed on large expensive assets.

The majority of borrowing is through Infrastructure Ontario (a crown corporation of the Province of Ontario) as rates are more competitive than local lending institutions or private debenture issues, thus lowering costs to taxpayers of Town of Amherstburg. Other Lenders are also considered based on competitive rates, timelines and intent or ability to repay debt earlier as there is no ability to repay debt with Infrastructure Ontario early.

Long-term debt outstanding at the end of 2024 was $23,789,132 (2023 – $25,925,683). Note: Debt details do not include municipal drain and tile drain loans.

In 2024, Town of Amherstburg paid $2,136,550 principal.

Yes, Council has approved debt financing for the Amherstburg Water Treatment Plant project and the Fire Station.

The Province monitors municipal debt levels and annually calculates Town of Amherstburg’s debt capacity and ability to repay the debt. Council is restricted by the Ministry of Finance to approve any debt that will result in total annual debt payments that will be more than 25% of Town of Amherstburg’s net annual revenues. Town of Amherstburg has an internal policy where the total annual debt payment does not exceed 20% for Tax funded assets and 25% for Rate Based Assets (Water & Waste Water). In 2025, based on 2024 FIR Town of Amherstburg total annual debt payments is 6% of our net annual revenues.

There are two considerations. First, some debt agreements do not allow for early repayment. Second, the majority of reserve funds are allocated to specific future projects and cannot be used for other purposes.

Town of Amherstburg does look for ways to reduce debt costs, such as taking advantage of Provincial and Federal programs that provide subsidized interest rates. Researching grants based on an approved project and alignment to grants available.  In addition, recommending incremental increase to base budget based on recognition of a future replacement of an infrastructure project. (EG. Fire Hall, Town Hall, Fire Ladder Truck)

Town of Amherstburg is not unique in its use of debt. Infrastructure deficits exist in most, if not all, municipalities, and the Provincial and Federal governments as well. Most municipalities are also choosing to borrow a portion of their capital construction needs to finance long term assets and pay for them over the lifespan of the asset.

The Ministry requires municipalities to file a Financial Information Return (FIR) after completion of their Audited Financial Statements.  Information from the Audited Financial Statements used to calculate the Net Revenues allowed for this calculation.  The Net Revenues are then multiplied by 25%.  The current debt payments including both principal and interest are subtracted from the 25% to provide the Estimated Annual Repayment Limit that the Municipality must stay within.  This is not the amount of Total Debt, this is the amount of payment on debt (principal & interest) that the municipality can issue. Financial Information Return (FIR) Schedule 81.