City of Surrey's Annual Financial Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS  CITY OF SURREY

For the year ended December 31, 2020 [tabular amounts in thousands of dollars]

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)

f)

Debt Reserve Fund Demand Note The City has a contingent liability with respect to the Municipal Finance Authority of BC’s (“MFA”) Debt Reserve Fund Demand Notes. This contingent liability is a condition of the borrowings undertaken by the City. As a condition for each debenture issue, the City is required to execute demand notes in connection with each debenture whereby the City may be required to loan certain amounts to the MFA. The debt agreement with the MFA provides that if at any time the scheduled payments provided for in the agreement are not sufficient to meet the MFA’s obligations in respect to such borrowing, the resulting deficiency becomes the joint and severed liability of the City and all other participants to the agreement through the MFA. The City is similarly liable on a contingent basis for the debt of other municipalities secured through the MFA.

Demand note amounts are as follows:

DRF Demand Note

Issue

LA

SI

Rgn SI

Purpose

Term

116 116 116 121 126 126

17173 17180 17231 17231 17928 17929

R10-2022 R10-2357

1139 1141 1142 1142 1188 1188

Other Other Other Other Other Other

25 25 25 25 30 30

$

319 637

R11-124 R11-124

1,035

743 943 280

R13-1059 R13-1061

Total

$

3,957

Management does not consider payment under this contingency to be likely and therefore no amounts have been accrued.

g)

Policing services The City entered a contract with the Provincial Government that provides for the Royal Canadian Mounted Police (“RCMP”) to deliver policing services for the City through to March 31, 2032. In 2018, Council unanimously approved a motion to direct staff to commence work on terminating its contract with the RCMP and create a Surrey Police Service. As a result of this work, on February 27, 2020 the Provincial Government granted approval to the City to create a municipal police board. The Surrey Police Board was subsequently formed and in November 2020 they hired a Police Chief to lead the transition to a Surrey Police Service. In accordance with the Provincial contract for the RCMP, necessary notice was provided and therefore the City is not expected to incur additional costs for the early termination of the RCMP services. Biofuel processing facility The City entered a 25-year agreement in 2015 to design, build, finance, operate and maintain the Surrey Organics Biofuel Processing facility. Under the agreement, the City guaranteed to provide a minimum tonnage of City organic waste (as defined in the agreement) for processing. In return the City will receive 100% of the biomethane produced at the facility and will share in certain other revenues generated at the facility. In 2018, the City recorded the facility as a tangible capital asset in the amount of its cost of construction of $50.0 million. The City also recorded a loan payable liability for an equal amount representing the capital financing for the facility. The liability will be amortized over the term of the agreement as payments are made to the operator for the City organic waste processed by the facility.

h)

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