The Nation municipality overdrew from its approved loan from Infrastructure Ontario and had to pay back more than $1 million.
The Nation council met August 14 to discuss the status of a progress loan taken out in January 2022 with Infrastructure Ontario (IO). The short-term loan was meant to fund the construction of the Sports Dome Complex in Limoges and was meant to be converted to a long-term loan once construction was completed.
Council was called to discuss a discrepancy in the amount approved for the loan, and the amount that the project actually cost. The project was estimated to cost $10,462,082, which is the amount that IO approved for the loan. But the project drew a total of $11,672,942 by the time it was completed at the beginning of 2023, meaning The Nation Municipality overdrew from the loan in the amount of $1,210,860.
In addition, council discussed the conversion of the short-term loan to a long-term loan. As of July 2023, the lending rates at IO stood at 4.65 per cent on a 20-year loan and 4.67 per cent on a 25-year loan. However, according to the report, “it is likely that by the time the IO loan closes, the rate will be much higher” due to “yet another recent increase in prime rate (which is now at five per cent) and the Bank of Canada possibly planning another (rate increase) in a month…”
IO loans are locked in at the contracted rate for the full term of the loan, rather than be refinanced every few years. Thus, the administration recommended that council obtain quotes from other financial institutions prior to locking in the loan from IO.
“While the rate for the initial term may be higher, the municipality may gain the long term when the loan is refinanced in a few years if interest rates have dropped,” the report concluded.
In the meantime, the report also recommended that council approve repayment of the overdraft amount to IO.
