LETTER – Questions about the City’s short-term borrowing of $40 million

(Image: Mel Rothenburger)

NOTE: The City has now responded to the KCU’s letter. The response is attached at the bottom of the letter.

Dear Mayor and Council,

We are writing to seek clarification regarding Revenue Anticipation Borrowing Bylaw No. 66-5, which would authorize up to $40 million in short-term borrowing and is scheduled to come before City Council on March 10, 2026.

It is understood that temporary borrowing early in the year is a tool municipalities may use to address timing-related cash-flow needs until property tax revenues are collected. However, the size of the borrowing authority being discussed is significantly higher than in previous years.

City documents show the City adopted Revenue Anticipation Borrowing bylaws in 2014, 2015, 2016, and 2017, each authorizing borrowing of up to $6 million. In 2020, the limit was increased to $15 million to protect the City’s cash flow due to expected delays in property tax and utility payments during the COVID-19 pandemic.

With that context, we would appreciate your response to the following questions:

1. What factors explain the much higher borrowing limit being proposed compared to previous years?
2. To what extent are expenditures related to major capital projects affecting the City’s early-year cash-flow and temporary borrowing needs?
3. What is the City’s most current projection of its cash position at the lowest point in 2026, before property taxes are collected?
4. How do current reserve balances and reserve investments available for early-year expenses compare to the City’s position in 2020 and subsequent years?

Thank you for your time,

COLEY ECKER and KATHRINE WUNDERLICH
Kamloops Citizens United

1. The Revenue Anticipation Bylaw is similar to a line of credit at a bank, but with much better borrowing rates. In 2020, the City was expecting reduced operational expenses during COVID and did not anticipate needing as much money to cushion any “shocks” to the cash flows. Typically, the City spends between $30-$40 million for operational expenses each month. The City is not expecting to borrow the full $40 million, neither at once nor during the full period. Previous years are not a fair comparison. There are too many factors in the economies of the time that influence current year requirements.
2. The various delays in short-term and long-term borrowing has affected the City’s cash flow but the 3-month borrowing being put forward is for operational expenses only.
3. The City tries to maintain an extra $10-$20 million dollars in cash reserves over and above the normal operational revenues and expenditures.
4. Again, previous years are not a fair comparison. There are too many factors in the economies of the time that influence current year requirements. Current capital and project reserve balances are long-term invested at better than market rates to allow for the best use of the money. This money is not easily available to provide for operational uses. If the City were to liquidate investments, it would incur a penalty. Additionally, the interest rate paid on the requested ability to borrow is lower than the investment rates the City is currently receiving. Liquidating the investments will mean a loss in revenue greater than the payment of interest both today and over the period of time the money is invested. Again, the City is only borrow what it needs where the investments cannot be liquidated in small amounts but as a group.