Municipal units in Nova Scotia, municipal enterprises, regional school boards, and hospitals in Nova Scotia are eligible to participate in a NSMFC debenture issue.
All municipal borrowings must be approved by the Minister of Service Nova Scotia and Municipal Relations before they may be included in the debenture issue. Municipal enterprises and villages require the municipality where they are located to guarantee the borrowing of the municipal enterprise or village before it can participate in the debenture process. Municipal guarantees are also subject to ministerial approval. 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 the Department of Service Nova Scotia and Municipal Relations (SNSMR).
- The capital budget should outline all capital projects that a municipality is planning to undertake, as well as where the financing will come from.
Step #2. Obtaining approval to borrow
- Section 88 of the MGA requires that municipalities receive ministerial approval for all borrowing, except operating lines of credit.
- To obtain this approval, a municipal unit must submit a borrowing resolution. The borrowing resolution can be extended 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 SNSMR.
- When an approved borrowing resolution is in place, the municipal unit can participate in the NSMFC debenture issue.
Step #3. Participating in the debenture issue
- The CEO of the NSMFC sends out letters asking municipal units to confirm that they will be participating in the upcoming issue. These letters are binding, so the individual who responds to a confirmation letter must have the authority to confirm the municipality's intent to borrow.
- Included with the confirmation letter is a blank "Pre-approval of debenture subject to interest rate" form. Pre-approval, which requires a resolution of council, establishes the parameters within which council is willing to participate.
- The NSMFC board has established a policy that requires all municipal enterprises and villages to secure a guarantee from the municipality where they reside before they can borrow from the NSMFC.
- Once the NSMFC has priced the debenture issue, each participating municipality is sent forms for signature and a repayment schedule.
- Provided that all of the necessary forms are returned by the closing date, the funds are transferred to the borrower's bank account.
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