High interest rates take toll on city hall’s $30 million debt issuance this year

An undated image of London city hall. (Daryl Newcombe/CTV News London)

Everyone is feeling the pain of higher interest rates—even city hall.

On Monday, the Corporate Service Committee (CSC) held a brief meeting to consider the results of a serial debenture issuance for $30 million to fund a number of capital projects.

The net interest rate is 4.427 per cent over the 10-year term.

“While interest rates are higher, the principal amount to be issued is lower than budgeted for 2024,” the CSC report states. “The total debt servicing cost is accommodated within the existing established budget for 2024 due to the lower than budgeted amount of the debt issuance.”

London’s borrowing costs are typically lower than other Canadian municipalities because it has maintained a stellar AAA credit rating since 1977.

“The City’s AAA credit rating allows the City to achieve the most favourable rates possible, given the City’s credit profile and prevailing market conditions,” reads the report.

Over the past five years, the City of London has issued a total of approximately $150.9 million in debentures.

Rising interest rates have seen the city’s cost of borrowing increase from a historic low in 2020.

• 2024: $30,000,000 — 4.427 per cent
• 2023: $21,500,000 — 3.88 per cent
• 2022: $21,000,000 — 3.56 per cent
• 2021: $23,000,000 — 1.82 per cent
• 2020: $36,000,000 — 1.67 per cent

A list of capital projects financed through debt is contained in the appendix of the CSC report.

Council is expected to approve the 2024 debt issuance at its meeting on April 23.