The Municipal Finance Authority of British Columbia (MFA) was formed in 1970, uniting the borrowing power and requirements of BC’s municipalities by providing a collective long-term debt issuance facility. The methodology inherent in the MFA Act was creative, unique, and promised to change the provincial/municipal political landscape. In the early months of that year, the Bill to introduce the MFA and its underlying Act underwent lively debate in BC’s legislature.
Opponents believed the provincial government was offloading responsibilities onto municipalities, then characterized paternalistically as its' “creatures” or “children”. They asserted that municipalities should be supported instead by a provincial debt guarantee and were not convinced of the viability of this proposed and previously unheard of structure. At this time, provincial or state debt guarantees were practically universal and larger municipalities would go it alone in the debt financing markets to meet their own long-term borrowing needs. This system created wide variance in debt servicing rates, in the ability to access debt markets to fund infrastructure, and limited the independence of governments at the municipal level. The disparity of needs and means between varied municipalities exacerbated the inequalities between regions and the province’s residents.
Proponents of the Bill emphasized the administrative and monetary economies of scale that collective borrowing would enable, and that bringing the full borrowing power of all of BC’s local governments together would garner improved market acceptance and confidence. The creation of BC’s Regional District system, completed in 1968, was both a mechanism and precursor to move to a collaborative borrowing model. This system encapsulated the full property tax base of the province into distinct entities, allowing each region to better serve all of its populace, while taking full advantage of the tax base each area represented. The model took this further by making all borrowing “joint & several”, in effect guaranteeing that all debt undertaken would have the full backing of every unit of local government in the province.
The opportunity inherent in the MFA system was evident and the Act was assented to on the 3rd of April, 1970. All local governments in British Columbia opted in to the system with the sole exception of the City of Vancouver. Although the City is able to borrow from the MFA, it is the only local government entity in BC that does not, however, remains part of the joint and several borrowing guarantee as part of the Metro Vancouver Regional District. The MFA is governed by the Members of the Authority representing all regional districts in BC, proportional to population. Within the Members is an elected Board of Trustees to oversee the executive and administrative powers and duties.
At its inception, the MFA represented the collective long-term borrowing interests of BC’s regional districts and municipalities; however, the collective borrowing function was extended to BC’s Water and Sewer Utilities in 1995, E-Comm in 1998, the Greater Vancouver Transit Authority, Regional Hospital Districts in 1999, and the Capital Region Emergency Services Telecommunications (CREST) in 2005.
In addition to expanding the range of local governments on whose behalf it borrows, objectives and mandate have also been updated to include Pooled Investment Funds (PIF) in 1989 and equipment financing in 1995. These optional programs are open to a wider audience than capital financing, including universities and school districts. The MFA once again leverages its larger scale buying power to provide these added-value programs at competitive rates for very low fees, with only a small percentage of revenues derived from tax levies.
To this day, the MFA remains unique in Canada. In all other Provinces where a municipal borrowing entity exists, they bear the guarantee of their governments. In fact, many of these agencies are themselves de facto “creatures” of their provincial governments which retain the control and resultant benefit of their consolidated borrowing efforts. The MFA's continued AAA credit rating, the highest possible, is shared by few other municipal borrowing agencies or even other provinces in our country, and has not required a provincial debt guarantee to achieve it. With nearly 50 years of demonstrated fiscal success, the original mandate has flourished, evolved and continues to enhance and increase the financial well-being, equality, and autonomy of BC’s local governments.