Council has approved the return of $406,325 in loan repayments made by the Olds Institute (OI) to the town, in an attempt to help the organization manage a ìcash flow situationî as it works to consolidate loans over a longer term.
OI originally received two provincial loans from Alberta Capital Finance that were filtered through the town: one was made in 2010 for $6 million over a 10-year term; a second in 2014 for $8 million over a 15-year term.
OI negotiated interest-only payments for the first three years of the loans; however now that that time has elapsed. Payments include principal amounts and total about $1.3 million annually.
ìI wouldn't say that it hasn't been tight,î said Mitch Thomson, executive director of OI. ìWe have struggled from a financing perspective in the fact that the loans that were initially taken out, were taken out over a 10-year period and, similar to traditional business financing or financing your home, that's always put a lot of pressure on the organization.î
As a remedy, the OI is looking to renegotiate both original loans into a single loan of $14 million spread over 25 years. To that effect, council approved first reading of both a borrowing and loan bylaw at the June 12 meeting, along with the proposal to return the June principal payments to the OI.
If council approves the restructuring, the loan repayments would be about $865,000 annually, saving the OI close to $400,000 each year in the short term.
The consolidation is expected to be finalized by September. In the interim, the town has agreed to return the sum of principal payments ñ a total of $406,325 ñ that the OI owes for June this year.
ìThis will create a space where the Olds Institute will have a little more flexibility in our cash flow,î said Thomson. ìThe company is cash flow positive, is doing well, but with growth, there are those kinds of financial pressures.î
Thomson said the goal is to be able to continue to expand the Olds fibre network, and have the flexibility to investigate growth opportunities.
Garth Lucas, chief financial officer for the town, said the situation wasn't cause for concern.
ìIt's timing of money coming in and out,î he said.
Lucas also said that while the town will be out the cash for the next few months, that doesn't pose any significant problems.
Typically, as taxes come due by June 30, the town deposits a portion of those funds into term deposits, to hold for when school requisitions come due the following spring. Instead, they will use that money to support the OI this quarter.
Once the consolidated loan proposal has been approved by council, Alberta Capital Finance will forward the funds, again through the town. OI in turn will repay the two outstanding loans in full, funnelling them back through the town, which will recoup its $406,325.
While both the loan consolidation and the temporary return on the June principal portion are both occurring at the same time, they are separate issues.
ìAs we continue to invest in development, the town has provided some relief to some of that funding on occasion, so that we can continue to invest in the community,î said Thomson.
"This will create a space where the Olds Institute will have a little more flexibility in our cash flow."MITCH THOMSON EXECUTIVE DIRECTOROLDS INSTITUTE
