Spring 2016 Debenture Issue

Transcription

1 quarterly newsle er Volume 2 Issue 1 June Summer is upon us! The spring debenture is over and all par cipants received their funds by May 16. With the house rising on May 20, Bill 152 (removal of the municipal seal on debentures) passed third reading and received Royal Assent from the Lieutenant Governor. Municipal Finance Corpora on staff have begun working on the paperless debenture process. They will no fy municipal staff on the process that will be used this fall and for debenture issues in the future. In striving to help improve financial management capacity in Nova Sco a municipali es, we are always seeking, reviewing and developing tools and programs to help municipali es make financial decisions. If you have any sugges ons, please do not hesitate to contact us. We are more than willing to help. Thank you for taking the me to read this newsle er and have a great summer! Paul Paul Wills, CPA, CMA CEO/Treasurer

2 Nova Sco a Municipal Finance Corpora on Mission Statement: Our Loca on Nova Sco a Municipal Finance Corpora on Mari me Centre 1505 Barrington Street, Suite 1501 Halifax, Nova Sco a Our Mailing Address Nova Sco a Municipal Finance Corpora on PO Box 850, Sta on M Halifax, Nova Sco a Canada B3J 2V2 MFC Staff CEO/Treasurer: Paul Wills, CPA, CMA P: (902) E: paul.wills@novasco a.ca Manager of Financial Services: Bob Audoux, CPA, CGA P: (902) E: bob.audoux@novasco a.ca Administra ve Assistant: Margo Horne P: (902) E: margo.horne@novasco a.ca To provide capital infrastructure financing at the lowest available cost, within acceptable risk parameters, and to provide financial management advice and assistance to clients. This mission is achieved through the issuance of debentures. The corpora on pools municipal borrowing requirements which eliminates the need for individual municipali es to nego ate and administer their own debenture issues. Under this arrangement, the debt issuance func on remains in the public sector domain. Why the Municipal Finance Corpora on? The Nova Sco a Municipal Finance Corpora on (MFC) was established by an Act of the Legislature of the Province of Nova Sco a in 1979 (Municipal Finance Corpora on Act, Chapter 301). The MFC concept is widely used in Canadian provinces and American states as a cost effec ve, efficient means of raising long-term debenture funds to finance municipal capital projects. Studies have shown that smaller municipali es with lower credit ra ngs receive the greatest interest savings from MFC par cipa on and that all municipali- es can benefit from savings in the cost of administra on on outstanding debenture issues. In addi on, two of the five members of the board of directors are appointed based on the recommenda on of the Union of Nova Sco a Municipali- es, which ensures strong municipal representa on. Who must finance capital projects through the MFC? The objec ve of the corpora on is to provide financial assistance to its clients, including municipali es, villages, municipal enterprises, school boards, and hospitals (MFC Act, S7). All municipali es, villages, and municipal enterprises must finance their external capital requirements through the corpora on through the issuance of a debenture (MFC Act, S16 (1) and S16(2)). The MFC uses credit enhancement and debtpooling techniques to meet clients approved funding requirements at the lowest possible cost. Long-Term Loans For Capital Infrastructure Pooled debenture issues are the most used product that the MFC offers its clients. The MFC regularly goes to market with two debenture issues each fiscal year, in the spring and fall.

3 Spring 2016 Debenture Issue On April 25, 2016 the Nova Scotia Municipal Finance Corporation priced its spring debenture. Eighteen municipalities and four municipal enterprises participated in the issue which totaled $64,567,282. The debenture closed on May 16, The loans the Corporation provided to municipalities helped finance the following infrastructure investments: The interest rates for this debenture issue are: Series Pricing "All-in" Costs Maturity Coupon Rate Term "All-in" Cost 16-May % 5 years 1.94% 16-May % 10 years 2.52% 16-May % 15 years 2.97% 16-May % 20 years 3.18% 16-May % 25 years 3.28% 30 years 3.33% 16-May % 16-May % Total 2.95% 16-May % The "all-in" cost is for 16-May % straight serial loans and 16-May % any final year "balloon." 16-May % 16-May % 16-May % 16-May % 16-May %

4 MFC Best Practice Profile Audit Committees In 2013, the Financial Management Best Prac ce Commi ee was reconvened to iden fy core financial best prac ces for municipali es in Nova Sco a, including audit commi ees. Having audit commi ees was originally recommended by the Government Finance Officers Associa on, approved by the Commi ee on Canadian Issues in 2003, and updated by the associa on in Other sources used are footnoted in the text. Some aspects of the prac ce have been revised by the Financial Management Best Prac ce Commi ee for use by Nova Sco a municipal governments. Recommenda ons The Government Finance Officers Associa on advises that audit commi ees become a part of the audi ng process in municipali es and offers some recommenda ons for establishing them. An audit commi ee enhances the creditability of financial repor ng, the independence of external auditors, and increases the reliability of financial repor ng. Its primary purpose is to procure, liaise and oversee the work of the external auditor. Ini ally, the audit commi ee should formally establish a charter to provide the commi ee with legal authority. The charter should provide clarity around composi on (e.g., number of members, nonelected representa on), mee ngs (e.g., who a ends, independence from management), and the commi ee s responsibili es. Audit commi ee members should possess accoun ng, audi ng, financial repor ng, and finance exper se. It is important for the commi ee to have an understanding of the audi ng procedure and the components associated with audi ng in order to resolve the issues brought forth by the external auditor. In addi on, members should be educated regarding their roles and personal responsibili es as members. An audit commi ee should consist of five to seven members, at least two of which should be non-elected, so there are enough members to possess the required skills, while remaining efficient. Staff should provide support to the commi ee, but should not be vo ng members. An audit commi ee should also oversee the external audit of the municipality s financial statements, which would include the selec on of the external auditor and the resolu on of audit findings. Furthermore, the commi ee should have access to reports, such as any internal audit reports and any annual internal audit work plans. Lastly, the commi ee should issue an annual wri en report of how it has performed its du es and met its responsibili es to the councillors. This report should also be disclosed to the public.

5 Con nued from page 4 MFC Best Practice Profile Municipali es are obligated to establish an audit commi ee, as is outlined in Sec on 44 of the Municipal Government Act. By establishing an audit commi ee, the independence of an external auditor is enhanced because there is a direct link between the auditors and the councillors. Audit commi ees also facilitate communica on between the auditor, the governing board, and the councillors. Furthermore, the audit commi ee acts in an advisory role to the governing body because the commi ee is extensively informed on various ma ers rela ng to the financial statement audit. Short-Term Loan Program In 2014, the corpora on secured a $50-million line of credit from the Nova Sco a Department of Finance and Treasury Board to facilitate requests from municipali es. Previously, the corpora on s reserve fund was used to provide shortterm loans to clients that had completed capital projects and were awai ng par cipa on in the next debenture issue. This change creates an opportunity for the municipal client to access even lower interest than before, and for the corpora on to invest and earn more interest on its reserve fund. Interest is charged at 90-day Bankers Acceptance plus 50 basis points (1/2%) calculated using the Canadian Dollar Offered Rate. If you have a completed capital project but missed the spring debenture offering, contact Bob Audoux at (902) or bob.audoux@novasco a.ca for informa on on how to access this program. Upcoming Items MFC Board As of June 30, the terms of all current members of the board of directors will expire. The board is comprised of two Union of Nova Sco a Municipali es representa ves, one Associa on of Municipal Administrators representa ve, two senior civil servants, and one member at large. We have received and processed the applica ons for the various posi ons and are awai ng the official Execu ve Council appointments. The term of the new board is from July 1, 2016 to June 30, Once the official appointments have been made, we will make announce the new members. Fall Debenture Packages With the possibility of a postage strike or lockout looming, it is our intent to send the fall debenture packages out electronically in mid-july. We ask CAOs and directors of finance to please keep an eye open for this . Paperless Debenture In an cipa on of switching to the paperless debenture process this fall, staff are currently compiling a list of authorized signatories for each municipal unit. Once a unit has commi ed to par cipa ng in the fall debenture issue, we will seek confirma on of the appropriate signatories. New Directors of Finance Mentoring Program As of April 1, we have a mentoring program that can help new directors of finance with the basic informa on to help them understand their role and various aspects of their responsibili es.