Email this pageMunicipal Act, 2001: New Financial Regulations and Regulatory Amendments
New Financial Regulations and Regulatory Amendments
As part of the government’s commitment to review municipal legislation and look at ways to better support local communities, a new regulation and a number of regulatory amendments have been made. This regulatory package provides municipalities with more flexibility and tools to better manage their local financial circumstances. Providing these new financial tools is part of the province’s broader plan for reform, including Municipal Act reform.
The regulatory package has a number of components:
Eligible Investments
Amendments to the regulation:
- Enable municipalities to hold corporate shares or debt in the case of bequest or insolvency
- Permit municipal investment in long term Canadian corporate debt (‘A’ rated) and equity through the ONE Funds
- Permit the City of Ottawa to invest in long term Canadian corporate debt (‘A’ rated) and equity for the purposes of its $200 million Hydro Ottawa funds, subject to certain conditions
- Permit municipal investment in short-term (up to 5 years) Canadian corporate debt with a prescribed rating requirement of ‘AA-’
- Permit municipal investment in debt issued or guaranteed by a supranational financial institution or governmental organization (AAA rated)
- Permit municipal investment in debt instruments provided by the Ontario Strategic Financing Authority and other broader public sector entities
- Permit municipalities to enter forward rate agreements for the purpose of hedging against interest rate fluctuations for future investments.
Debt-Related Financial Instruments and Financial Agreements
The new regulation:
- Permits municipalities to enter financial agreements for the purpose of hedging commodity prices for commodities used in the normal operation of the municipality; this is a tool to help protect against price increases and add stability to the budgeting process
- Permits municipalities to enter bond forward agreements for the purposes of interest rate hedging when debentures are issued or refinanced, subject to several conditions
- Expressly permits municipalities to enter long-term leases that are not municipal capital facility leases
Other Tools and Housekeeping Amendments
- Amends current applicable regulations to make reference to Fitch Ratings, a credit rating agency, where there are rating requirements
- Amends the current regulations to include Schedule III banks as a viable lender to municipalities
- Clarifies that a municipality without debt may use its own credit rating to comply with a regulation even if it does not have debt
- Clarifies the treasurer’s report back requirements and strengthens the link between the portfolio and the municipality’s statement of investment goals and principles
- Clarifies the ability of a municipality to hold or dispose of hydro promissory notes.