The City of Kelowna may borrow up to $150 million to keep the city afloat as it continues to combat the COVID-19 pandemic.
City council passed the bylaw allowing for the borrowing unanimously on April 20.
“Given the potential financial difficulties experienced by many local businesses and residents, it is anticipated that cash flows may need support through other financial tools, such as short-term borrowing,” read the report given to council.
The provincial community charter allows municipalities to borrow up to 75 per cent of what they collected in the previous year’s property taxes. For Kelowna, that was nearly $255 million, allowing them to borrow up to just over $190 million this year.
Mayor Colin Basran said the city will only borrow what it needs. That number, however, is largely dependent on how much money the city receives in property taxes.
“As mentioned, it’s critical that those who can pay, do pay their taxes on July 2, 2020, to avoid cuts to city services, delay or cancellation of important municipal infrastructure or increased borrowing,” said Basran.
The city recently deferred its property tax penalty date to the end of August, to assist those who may be struggling financially amid the pandemic.
The city’s main sources of revenue – taxation, reserves, and fees – each provide approximately 30 per cent of the total revenue. Basran said this puts Kelowna in a better position than some municipalities.
“Due to our responsible fiscal management over the years, we only rely on property taxes to fund approximately one-third of our operations whereas other cities can be over 70 per cent reliant on taxation,” he said.
Last week, the provincial government also announced tax deferrals, for certain commercial properties, including schools, to Oct. 2, which Basran said provides some “much-needed flexibility.”
“The deferral of payments for school taxes and borrowing will help with our short-term cash flow in light of the anticipated reduction in revenues,” said Basran.
Borrowed funds would be repaid, with interest, by the end of the year.