Region of Waterloo seizes record low-cost loans

The Region of Waterloo capitalized on a drop in the bond market to secure the lowest borrowing costs in the municipality’s history.

The region issued $65 million on ten and 20-year debentures for infrastructure spending at record low interest rates of 2.6 and 3.3 per cent.

The region will borrow about $53.4 million and the cities of Kitchener, Cambridge and Waterloo will carry the rest of the $65 million loan.

Moody’s Investor Service scores the region’s credit rating at AAA, the highest rating available. That gives the region access to the most inexpensive borrowing rates possible at any given time. The local municipalities in-turn piggy-back onto the region to enjoy the same rates.

October 21 debenture breakdown by municipality
The Region of Waterloo and the cities of Kitchener, Cambridge and Waterloo issued a combined $65 million in debentures. The deal closes on Thursday. (Region of Waterloo/ staff report)

Councillors received a staff report for information on Tuesday afternoon, detailing the interest rates and an overview of the spending plans for the previously approved debt.

The issue was priced and purchased through fiscal agents with CIBC World Markets on Tuesday, October 21, a day described in the staff report as a “quiet afternoon in the market relative to pending municipal and provincial,” borrowing.

In an interview on Tuesday afternoon, Craig Dyer, the region’s chief financial officer, said timing was critical.

“From the third week of September right through until a couple of weeks ago when we priced and placed the issue, bond yields came down significantly. So we tried to capture that low point as best we could.

“In terms of investing in infrastructure and financing it over a ten-year term, this has been a really good time period to do that.”

The region’s funds will be funneled into infrastructure projects approved in 2013 and 2014. Those projects are either complete, underway or about to begin, including:

  • $23 million for wastewater treatment plants
  • $7.1 million for waste management
  • $7.1 million for regional buildings
  • $6 million for Grand River Transit garage expansion plans
  • $4.4 million for courthouse renovations
  • $2.8 million for Waterloo Regional Police capital projects

The region remains on track to meet its year-end debt projection of $507 million, when factoring in debt repayment of $41.2 million, Dyer said.

Since 2009, the region has been able to secure interest rates on ten-year debentures from 3.74 per cent at the highest to the record setting low 2.6 per cent.

Waterloo Region has capitalized on historically low interest rates to make long-term infrastructure investments. (Region of Waterloo staff report)
Waterloo Region has capitalized on historically low interest rates to make long-term infrastructure investments. (Region of Waterloo staff report)

This latest debenture closes Thursday and the proceeds will be received that day, according to the staff report.