The District of Muskoka called a special council meeting on July 6, seeking approval from council to borrow another $30M for Fairvern.
District Chair Jeff Lehman thanked councillors for attending the meeting. He said it was called in order to take advantage of special borrowing rates that may not be available when council meets later this month. He noted that securing the funds now at the current borrowing rate is the easiest way to save Muskoka taxpayers hundreds of thousands of dollars.
The funds will help finance the redevelopment of the new Fairvern Long-Term Care Home, marking the second major phase of the municipality’s long-term financing strategy for the $135-million project.
A report from Commissioner of Finance and Corporate Services Suzanne Olimer recommended District Council authorize the issuance of a 10-year instalment debenture in the principal amount of $30 million. The borrowing represents the second of four planned debenture issuances approved as part of the District’s overall $80.7 million external financing strategy for the Fairvern redevelopment.
The financing comes with an all-in borrowing cost of 4.01 per cent, including commissions, which is below the 4.24 per cent rate staff had originally projected when developing the financing plan. It is slightly higher than the 3.90 per cent rate secured during the first debenture secured in November 2025.
According to the report, staff delayed the second borrowing after market volatility early in 2026 pushed municipal debt rates higher than anticipated. By waiting until rates eased, the District was able to secure more favourable financing terms.
The debenture is structured over a 10-year term but amortized over 25 years. This means annual principal and interest payments are calculated as though the debt would be repaid over 25 years, leaving a remaining balance, commonly referred to as a “balloon payment,” at the end of the 10-year period. The report notes that the structure gives the District flexibility to refinance or repay the remaining balance using reserves expected to accumulate over time, while benefiting from lower short-term borrowing costs.
District staff say Muskoka remains well within provincial borrowing limits. According to Olimer, the municipality currently has capacity for an additional $39.5 million in annual debt repayments and could support approximately $490.3 million in additional long-term borrowing under current provincial calculations—well above the District’s projected borrowing needs over the next decade.
The report states that once the second debenture is issued, approximately $30.7 million in external financing will still be required to complete the Fairvern redevelopment. An additional $4.4 million in borrowing is expected for the Fairvern Early Learning and Childcare Centre, bringing the remaining long-term debt requirements to about $35.1 million. The childcare centre borrowing requirement is lower than originally anticipated due to additional grant funding.
The report estimates annual repayments on the proposed debenture will range between approximately $1.88 million and $2.14 million. Overall, the Fairvern redevelopment carries an estimated cost of just under $135.1 million and is being financed through reserve funds, government grants and external borrowing.
Following completion of the second financing tranche, 62 per cent of the District’s approved borrowing strategy will be complete, Olimer told councillors. Staff estimate total interest costs incurred between 2026 and 2036 will amount to approximately $16.7 million—about 57 per cent of the interest originally projected at this stage of the Fairvern financing plan.
The report notes the financing strategy is currently performing better than expected, although staff caution that ongoing market uncertainty and global economic conditions could still affect future borrowing.
Most of the debt servicing costs will be offset through annual Construction Fund Subsidy payments from the Ministry of Long-Term Care, which are expected to contribute $3.3 million annually over 25 years and cover about 64 per cent of carrying costs. The remaining 36 per cent will be funded through the Fairvern Debt Reserve, established in 2023 to gradually smooth the project’s impact on taxpayers by increasing annual reserve contributions by $350,000 through 2029.
While the financing report itself has no direct climate implications, staff note the new Fairvern facility has been designed with energy-efficient systems and technologies intended to reduce carbon emissions and improve resilience to future climate conditions compared with the existing building.
The majority of councillors present at the Zoom meeting gave staff the green light to move forward with the borrowing costs required for the 160-bed long-term care home.
The only councillor present who voted against it was Guy Burry, who said he’s uncomfortable with the amount of borrowing. He called the building of the Fairvern Long-Term Care home discretionary. “Let’s be clear, this was a discretionary build. This is not an obligation, and we are taking on a big debt load, and I’m going to go on record to say I’m really uncomfortable with this.”
Staff are expected to finalize the debenture issuance with the District’s fiscal agent and legal counsel. A final report covering the remaining Fairvern financing is expected to be presented to council later in 2026 or early 2027.
You can find the staff report HERE.
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