+ RMA Rural Municipalities
of Alberta

Resolution 13-15F

Non-Profit Housing Organizations Borrowing from the Alberta Capital Finance Authority

Date:
November 26, 2015
Expiry Date:
November 30, 2018
Active Status:
Expired
Sponsors:
Sturgeon County
District:
3 - Pembina River
Year:
2015
Convention:
Fall
Category:
Community Services
Status:
Intent Not Met
Vote Results:
Carried
Preamble:

WHEREAS Section 21 of the Alberta Capital Finance Authority Act provides that: ‘The business of the corporation is to provide local authorities that are its shareholders with financing for capital projects’; and 

WHEREAS Section 32(1) of the Alberta Capital Finance Authority Act provides that a local authority may borrow money from the Corporation in any form or manner and on any terms that are acceptable to the Corporation; and

WHEREAS Section 1(g) of the Alberta Capital Finance Authority Act defines local authority as: ‘a city, an educational authority, a health authority, a municipal authority, regional authority or a town’ and does not include housing foundations and other non-profit housing organizations; and

WHEREAS Section 271 (c) of the Municipal Government Act states that the Minister of Municipal Affairs may make regulations respecting how debt limits for a municipality are determined; and

WHEREAS the Minister of Municipal Affairs has established Alberta Regulation No. 255/2000 for the purpose of calculating the debt limit of a municipality; and

WHEREAS the stated mission of the Alberta Capital Finance Authority is: ‘To provide local authorities within the Province with flexible funding for capital projects at the lowest possible cost’; and

WHEREAS housing foundations and non-profit housing organizations are created for the public benefit to deliver affordable housing options and deliver a public good; and

WHEREAS a portion of the debt associated with these foundations and non-profit organizations currently resides within various municipalities’ debt; and

WHEREAS incurring that debt is required by municipalities to both address significant deferred maintenance and infrastructure deficits and invest in the infrastructure required to ensure the sustainability and viability of these foundations and non-profit organizations;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties lobby the Government of Alberta to allow housing foundations and other provincial and local non-profit affordable housing organizations to directly borrow from the Alberta Capital Finance Authority without impacting a local authority’s borrowing capacity.

Member Background:

It is essential for attracting and maintaining a diverse workforce that ensures economic development and vitality and provides a necessary and needed service throughout the province.

Despite these facts, the Bank of Canada is calling the imbalance in the housing market the number one domestic risk facing the economy.

According to the Federation of Canadian Municipalities (FCM), one out of every four Canadians currently spends more than 30% of their income on housing. The FCM estimates that 733,275 low-income Canadians are in “extreme” housing need; paying more than 50% of their income on housing. In terms of homelessness, the FCM estimates over 235,000 Canadians experience homelessness every year at a cost of upwards of $7 billion to the economy.

In the provincial context, the average cost of owning a home in Alberta has risen 44% since 2001. Although the federal government provides subsidies for 37,250 households in Alberta worth $50 million annually through federal social housing agreements, these subsidies are expiring and future of one-third of these units is at risk.

While housing foundations and similar non-profits have stepped in to help address these pressures, their efforts are being limited through provincial legislative barriers.  While they are providing a much needed public service and, by definition, are capital intensive, they are excluded from directly applying to the Alberta Capital Finance Authority. In absence of this ability, these organizations may seek funding indirectly through agreements with local authorities such as municipalities. As these arrangements impact municipalities’ provincially established debt limits, housing foundations and similar non-profit affordable housing organizations face unnecessary and unfair limits on their borrowing capacities. Lack of sufficient funding limits their ability to perform their vital functions, and may impact a municipalities’ prioritization of its capital borrowing through the Alberta Capital Finance Authority.

The proposed resolution seeks to remove these regulatory barriers and support the appropriate and efficient development and maintenance of affordable housing options throughout the province.

RMA Background:

2-10S: Debt for Seniors’ Housing Authorities

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request that the Government of Alberta amend the Alberta Capital Finance Authority Act to add Seniors’ Housing Authorities as shareholders of the Alberta Capital Finance Authority.

1-07S: Debt for Seniors’ Housing Authorities

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request that the Government of Alberta amend the Alberta Capital Finance Authority Act to add Seniors’ Housing Authorities as shareholders of the Alberta Capital Finance Authority.

DEVELOPMENTS: Through the government response to the above resolutions and meetings with the Minister of Finance and Enterprise, the AAMDC has continued to receive responses that do not support the change requested to the Alberta Capital Finance Authority Act. While a challenge for municipalities is recognized, there is an indication that allowing senior’s housing authorities in to the Alberta Capital Finance Authority would increase the overall borrowing risk of the organization. However, a committee was struck with Municipal Affairs, the Alberta Urban Municipalities Association, and the Alberta Senior Citizen’s Housing Association to find financial solutions to the challenges faced by seniors facilities. Recommendations from this committee were sent to the Minister in 2014. It is unclear what the current governments intention is with this group.

Government Response:

Municipal Affairs: The Municipal Government Act (MGA) allows municipalities to lend money to a non?profit organization as defined in section 241(f) of the MGA. The Alberta Capital Finance Authority (ACFA) can loan money to a municipality for a capital project for a municipal purpose. Municipal purposes are defined in Section 3 of the MGA and include providing “services, facilities or other things that, in the opinion of council, are necessary or desirable for all or a part of the municipality.”

The Debt Limit Regulation establishes two benchmark calculations to guide how much a municipality can borrow: the debt limit calculation and the debt service limit. The Minister of Alberta Municipal Affairs can approve municipal borrowing in excess of the regulated limits.

Treasury Board and Finance: Allowing non-profit housing organizations to borrow directly from the ACFA could lead to calls from other organizations for similar treatment as well as potential changes to the ACFA risk profile which could, in turn, affect borrowing costs for all shareholders. There may also be a need to increase ACFA administrative resources to deal with additional borrowing by unfamiliar sectors.

The Government of Alberta recognizes that municipalities are currently borrowing from the ACFA on behalf of non-profit housing organizations. Under the MGA, municipal borrowing limits can be reviewed and adjusted if municipalities require an increase.

Development:

The Government of Alberta response does not indicate any willingness to consider the possibility of allowing non-profit housing authorities to borrow directly from ACFA, which is the request made in the resolution. Under the current framework, municipalities are unnecessarily included in the borrowing process for non-profit housing authorities, causing unnecessary administrative burdens, liability risk, and impacts to municipal borrowing limits. This resolution has been assigned a status of Intent Not Met and will continue to be advocated on by the AAMDC.

Provincial Ministries:
Municipal Affairs,
Treasury Board and Finance
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