Debenture Issue Process
Municipalities, municipal enterprises, regional school boards, and hospitals in Nova Scotia are eligible to participate in a NSMFC debenture issue.
Before borrowing, clients should know:
- All Municipal borrowings must be approved by the Minister of Municipal Affairs (DMA)
- Municipal enterprises and villages require the municipality where they are located to guarantee the borrowing before it can participate in the debenture process
- Municipal guarantees are also subject to ministerial approval
- Fire departments incorporated under the Rural Fire District Act or under special legislation can borrow through the MFC with a municipal guarantee
- School boards require the approval of the Minister of Education to borrow; hospitals require the approval of the Minister of Health.
Step #1 – Submitting a Capital Budget
- All municipal units are required by legislation—section 87 of the Municipal Government Act (MGA)—to submit a capital budget to DMA.
- The capital budget should outline all capital projects that a municipality is planning to undertake and where the financing will come from.
Step #2 – Obtaining Approval to Borrow
- Municipalities receive ministerial approval for all borrowing (Section 88 of the MGA)
- To obtain ministerial approval, municipalities must submit a borrowing resolution – borrowing resolutions can extend up to a period of 10 years with the Minister's permission.
- Before being given ministerial approval, the borrowing is evaluated to ensure that the municipality has the authority to borrow for the stated purpose (MGA, s. 65 and 66) and that the debt service ratio for the municipality is within the range determined by DMA.
- When a municipality receives authority to borrow, it can participate in the NSMFC debenture issue.
Step #3 – Participating in the Debenture Issue
- The NSMFC sends out letters in mid-January and mid-July asking municipal units to confirm that they will be participating in the upcoming debenture issue.
- These letters are binding and those who respond with a Commitment Letter must have the authority to confirm the municipality's intent to borrow.
- Included with the commitment letter is a blank Pre-Approval Form.
- Pre-approval requires a resolution of council, and it establishes the parameters that council is willing to participate.
- Once the NSMFC has priced the debenture issue, each client is sent loan documents for signature and a repayment schedule.
- Provided that all of the necessary loan documents are returned by the closing date, the funds are transferred to the client’s bank account.