City of Winnipeg issues $200M in bonds to fund capital projects

The City of Winnipeg is turning to investors as it looks to fund some large-scale infrastructure projects, including the enhancements of libraries, community centres and police stations.

On Thursday, the city announced that it has issued $200 million in new bonds, which have already been purchased. The money will go to projects including the South End Water Pollution Control Centre, the north district police station, and the St. James Civic Centre.

The bonds were issued on a 40-year term at an interest rate of 4.65 per cent. The city notes that unlike federal and provincial governments, it can’t legally borrow to balance operating budgets.

According to Mayor Scott Gillingham, there was a lot of demand when the city put out the $200 million offer.

“The response from the market was really strong, which means that the market has confidence in the City of Winnipeg’s financial plans and strategies and our debt management policy as well,” he said at a news conference on Thursday.

Shiu-Yik Au, an assistant professor of finance at the Asper School of Business, said it’s difficult to say whether this is a good or bad decision as it’s hard to predict which way interest rates will go.

“It can be a good fiscal decision, it cannot be depending on what interest rates are like,” he said.

“Currently interest rates are higher than normal, but given the interest rate they got, which I believe is 4.65 per cent, it’s quite reasonable in this interest rate environment.”

Au said it’s common for municipal governments to do this as a way to fund infrastructure projects, adding that borrowing is more equitable for taxpayers.

“Because people who use the projects over the next 40 years will be the ones who actually end up paying for it,” he explained.

“So it’s nice to smooth the expenses and make it a little bit more fair for taxpayers.”

City council is expected to debate an updated debt management policy in the next few months.