The Town of Niagara-on-the-Lake will open a $10 million line of credit with the Royal Bank of Canada, just in case.

The decision was approved Monday night during a special meeting of council and is intended to last until the end of 2020.

The line of credit will help the town deal with uncertainties over revenues from tax, water and wastewater payments, said treasurer Kyle Freeborn.

Lord Mayor Betty Disero said she can’t envision a scenario in which the town would need to spend the full $10 million. The town pays no fees unless it dips into the line of credit.

“It is not a means to spend outside the existing approved budget,” Freeborn said.

Because the town has waived penalties on late payments until June 30, it is planning in case people don’t pay until then, or can’t pay right away.

“We are not intending on using it unless we run into a cash flow problem. We have deferred late-fee interest payments on taxes and water payments until the end of June and so we are assuming people will delay paying their taxes until the end of June,” Disero said.

“We have to pay the region what we have collected on their behalf in May and this might leave us with not a lot of cash in the bank. That's when we would have to draw from the line of credit and repay it at the end of June when taxes are paid.”

Freeborn said a line of credit withdrawal $1 million will cost the town about  $1,400 a month in interest, significantly less than late fees to Niagara Region, which would have been about $12,500 monthly.

The reason RBC was chosen, Freeborn said, is because it is town’s current banking provider. The town consulted with financial experts who said there wouldn’t be much difference in the interest rate with other financial institutions, he said.

He said many municipalities carry a line of credit under normal operating circumstances, so the town opted for something similar.

Right now Niagara Falls has a $9 million line of credit, Pelham has $7 million and is looking to go to $11 million, and Port Colborne has $4 million and is looking to increase it, Freeborn told council.