Belleville Loan Policy allows loans to not-for-profits in “extenuating circumstances”

The city currently has loans receivable made to a small number of organizations. These have been made on an ad hoc basis and as the result of mortgage takebacks on property sales, long-term lease agreements and a charitable capital campaign loan ($125k to the Children’s Safety Village).

Generally it is not recommended that investments in loans receivable are made by the City. Loans receivable represent an interest bearing investment, and would otherwise be invested in other interest bearing securities, falling under O. Reg 438/97 Eligible Investments and forward rate agreement.

If loan requests are to be considered it is important for the city to review and evaluate these in a fair, transparent and equitable fashion. This is a process that has been identified by auditors of other municipalities as well, with recommendations provided to develop a policy concerning loans to community groups if they make this a practice.

Considerations to be made and included in the draft loan policy (attached) include, but are not limited to:

• Eligibility of organizations (location, type, etc.)
• Clearly demonstrated benefits to the city ratepayers
• A demonstrated ability to repay the loan, substantiated through items such as the organizations credit rating, financial history, detailed budget, credentials of the directors and officers, etc.
• Securities provided against default
• Other funding sources being pursued
• Contingency plans for budget variance in projected revenue and expenses
• Documentation from financial institutions where loan requests have been denied
• Appropriateness of interest rate given existing market rates, City’s investment rate of return, and risk premium for particular investment
• City cashflow requirements and availability of funding

The City does not traditionally issue loans to community organizations and provides support to various community groups through the City’s grant programs (Community Impact, Tourism, Social Infrastructure and Arts and Culture).

In the extenuating circumstances where the City identifies it as appropriate to act as a financial lender the Loan policy will be followed.