sustain ability and growth · long-term financi al pla nning • capit al finan cing al tern ati...

Long-Term Financial Planning• Capital Financing Alternatives

Sustainability and Growth

Finance Committee • September 22, 2003Presentation by: D. Wuksinic

• Council Decisions

• National/Provincial Scene

• Long-Term Financial Plan

• Capital Financing Alternatives

• Water/Wastewater Capital FinancingAlternatives

• Resolutions

Long-Term Financial Planning

Overview

Sustainabilityand Growth

• A Value of $1.4 million to $1.8 million inRoads Maintenance

Council Decisions - June 25, 2003

"THAT the Roads Maintenance Budget for2003 continue as forecasted in the Reportfrom the General Manager of Public Worksdated June 4th, 2003, and that Option "C"as outlined in that Report be approved."

Sustainabilityand Growth

Council Decisions - June 25, 2003

"THAT as Roads Maintenance is considereda priority of the community, and that historyhas shown that the Roads MaintenanceExpenditure has exceeded their approvedBudget by an average of $5 million, it isrecommended that $2 million additionalRoads Funding be brought forward in the2004 Roads Maintenance Base Budget."

Sustainabilityand Growth

Council Decisions - June 25, 2003

"THAT a Financing Plan be brought back toCouncil in the Fall of this year outliningvarious options in keeping with the Long-Term Financial Plan for fundingCapital Infrastructure, and that theseoptions include the introduction of a CapitalRenewal Levy and participation in OMEIFA(Ontario Municipal Economic InfrastructureFinancing Authority) funding."

Sustainabilityand Growth

2003 Current Budget Process - Parking Lot Issues: Councillor Daveyrequested that a Report be preparedregarding funding scheme to providesewer and water service to projects inthe Sewer and Water Priority List

Council Decisions - March 3, 2003

Sustainabilityand Growth

• Municipal infrastructure is failing

• Municipal responsibilities have increased

• No new funding mechanisms

• Need for Provincial and Federal involvement

National/Provincial Scene

Sustainabilityand Growth

• FCM (Federation of Canadian Municipalities)

• AMO (Association of Municipalities of Ontario)

• 5 large Cities Group

• TD Canada Trust

• Universal Workers' Union

• Northern Ontario Mayors

• United Way, Frances Lankin, President

• Federal Task Force on Urban Studies, Judy Sgor

• Conference Board of Canada, Ann Golden

• Toronto Board of Trade

National/Provincial Scene

Supporters

Sustainabilityand Growth

National/Provincial Scene

Sources of Capital Financing in Ontario Municipalities

Sustainabilityand Growth

1988

25.1%

50.9%

16.3%

1996

21.7%

49.9%

18.3%

2000

4.2%

71.7%

14.0%

Grants

Transfers from own Funds

Long-Term Borrowing

Sources

7.7% 10.1% 10.0%Other

Source: Calculated from data in the Financial Information Returns, Ontario Ministry of Municipal Affiars and Housing

Harry Kitchen (Novem ber 2000) “Mun icipal Finance in a New Fiscal Environm ent”, Commentary (Toronto: C.D. Howe Institute)

National/Provincial Scene

Provincial Grant Losses

Sustainabilityand Growth

18.3

5.0

11.3

1998

1996

1997

18.31999

18.32000

18.3

18.3

2002

2001

18.32003

$126.1Total Cumulative Loss

$ millions

To provide Council and the Communitywith a Plan for Financial Sustainability

New approach to financialmanagement that shifts the emphasisfrom bottom line financial concerns toservice delivery, within a longer-termfinancial planning horizon.

Long-Term Financial Plan

Purpose:

Sustainabilityand Growth

• Helps the City to betterunderstand/address its long-termcommitments

• Provides accurate and timely information

• Provides principles to guide decision-making

• Ensures municipal responsibilities arealigned with appropriate revenue sources

• Provides for public participation and inputinto Council policy decisions

Long-Term Financial Plan

Benefits:

Sustainabilityand Growth

• Fosters confidence in both the public andthe business community by demonstratingleadership and planning by this Council

• Supports Council's direction of "Councilcontrol through policy"

• Continues to keep open the politicaloptions of approaching the Federal andProvincial Governments

Long-Term Financial Plan

Benefits:

Sustainabilityand Growth

• 10 Year Financial Forecast

• 9 Principles supported by 34 Policies

• 4 Areas of Recommendations with12 Specific Actions

Long-Term Financial Plan

Specifics Outcomes:

Sustainabilityand Growth

ì Ensure Long-Term Financial Sustainability

• Adopt Multi-year Budgeting Process

• Recognize Inflation

• Apply Life Cycle Costing Approach to Infrastructure

Long-Term Financial Plan

Highlights

Sustainabilityand Growth

ð Manage City's Capital Assets to Maximize Long-Term Community Benefit

• Maintain Infrastructure in "state of good repair" through Life Cycle Costing

• Implement Capital Plan to addressInfrastructure Renewal Requirements

Long-Term Financial Plan

Highlights (Cont’d)

Sustainabilityand Growth

ò Use Debt Financing Where Appropriate

• New, non-recurring infrastructure

• Programs and facilities which are self-supporting

• Projects where the cost of deferringexpenditures exceeds debt servicing costs

Long-Term Financial Plan

Highlights (Cont’d)

Sustainabilityand Growth

• Implement an Infrastructure Renewal Levy

Long-Term Financial Plan

Highlights (Cont’d)

Sustainabilityand Growth

Long-Term Financial Plan

Annual Capital Needs

Sustainabilityand Growth

Current Capital

Capital Needs in Excess of

Current Spending

Inflation

$0

$10

$20

$30

$40

$50

$60

$70

$80

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$ millions

Long-Term Financial Plan

Components of Capital Funding Gap

Sustainabilityand Growth

Roads

56%

CorporateS ervices

3%

Transit & Fleet Requirements

8%

Citizen & Leisure

6%

Buildings

20%

Other

7%

Long-Term Financial Plan

Oracle SurveyImportance of Service

Sustainabilityand Growth

1999Priority

%

Fire

Public HealthUnit ServicesPublic HealthUnit Services

Maintenanceof Main Roads

Winter RoadsMaintenance

N/A

90

88

91

2000Priority

%

N/A

96

94

95

2001Priority

%

73

78

79

83

2002Priority

%

95

94

91

91

Service

Long-Term Financial Plan

Oracle SurveyImportance versus SatisfactionRoads Maintenance

Sustainabilityand Growth

91%

21%0

20%

40%

60%

80%

100%

Importance of Service

Satisfaction

Maintenance of Main Roads

91%

40%0%

20%

40%

60%

80%

100%

Importance of Service

Satisfaction

Winter Roads Maintenance

Long-Term Financial Plan

BMA Competitiveness Study

Sustainabilityand Growth

• Cities Surveyed 2001• 43 Ontario municipalities

took part in the Study• Representing 47% of the

population of Ontario

• Cities Surveyed 2002• 54 Ontario municipalities

took part in the Study• Representing 71% of the population

Long-Term Financial Plan

BMA Competitiveness Study

Sustainabilityand Growth

• 2001• City of Greater Sudbury ranked 9th lowest

out of 43 municipalities

• 2002• City of Greater Sudbury is 8th lowest out of

54 municipalities• Sudbury’s net levy per capita is $771, which

is the 8th lowest of the municipalities in thesurvey and is significantly lower than theaverage of $897

Long-Term Financial Plan

Levy Per Capita

Sustainabilityand Growth

Long-Term Financial Plan

2002 Net Levy Per Capita

Sustainabilityand Growth Low

Medium

High

º

• 2001• City of Greater Sudbury ranked 2nd lowest

• 2002• City of Greater Sudbury now ranks

3rd lowest out of a large number of municipalities

• Sudbury’s taxes of $1,720 are substantiallybelow the average of $2,393

Long-Term Financial Plan

Taxes for a Detached Bungalow

Sustainabilityand Growth

Long-Term Financial Plan

Residential - Detached Bungalow

Sustainabilityand Growth Low

Medium

High

º

• 2001• City of Greater Sudbury ranked 2nd lowest

• 2002• City of Greater Sudbury is now ranked

4th lowest in total burden (taxes, water, wastewater and hydro).

• Sudbury's total burden of $3,637 issubstantially below the average of $4,224.

Long-Term Financial Plan

Total Taxes and Utilities (Water, Wastewater, Hydro)

Sustainabilityand Growth

Long-Term Financial Plan

Total Taxes and Utilities (Water, Wastewater, Hydro)

Sustainabilityand Growth

º

• City of Greater Sudbury's relative position inall property types are in the low to mid-rangein comparison to the other municipalities.

Long-Term Financial Plan

Tax Rate and Relative Position

Sustainabilityand Growth

City of Greater Sudbury's taxes are low,well below the average of the other 54 citiesthat represent 71% of Ontario's population.

$6.1 million per year Managed Debt Programfor 10 years

OR

$15 million per year Managed Debt Programfor 4 years

Capital Financing Alternatives

Sustainabilityand Growth

• 2.27% per year Infrastructure Renewal Levy

• plus Inflation Protection

• Annual Impact of $39.58 on a Typical Home

• Meets 70% completion

• Meets Capital Needs in 10th Year

• Demonstrates Commitment to Sustainability

• Positions the City Well with the Province forAdditional Funding

Capital Financing Alternatives

Common Elements

Sustainabilityand Growth

ì Staged Program of $6.1 million per year for 10 years

• More Manageable

• Achievable with Current Resources

• More Flexible

• But Less Responsive to Current Needs

• Less Disruptive

Capital Financing Alternatives

Differences

Sustainabilityand Growth

í Accelerated Program of $15 million per year for 4 years

• Better Value for Money Spent

• Less Manageable

• May not be Achievable with CurrentResources

• Less Flexible

• But More Responsive to Current Needs

• More Disruptive

Capital Financing Alternatives

Differences (Cont’d)

Sustainabilityand Growth

Managed Debt Program of $1.75 millionper year for 10 years

Managed Debt Program of $3.5 millionper year for 10 years

W/WW Capital Financing Alternatives

Sustainabilityand Growth

2

1

• OMEIFA Funding

• 50% Re-payment

• Municipal Up-front Financing

• Percentage Interest Rate Experienced isInterest Rate Charged

• 15 year Term

W/WW Capital Financing Alternatives

Common Elements

Sustainabilityand Growth

• One Completes 50% of the Projects

• The Other Completes 100% - All of the Projects

W/WW Capital Financing Alternatives

Differences

Sustainabilityand Growth

• .25% per year Increase in Rate versus .5%

• $1.51 Additional Cost each year versus $3.02Additional Cost each year

W/WW Capital Financing Alternatives

Impact on Average User (240 cubic metres per year)

Sustainabilityand Growth

2.27% per year Infrastructure Renewal Levyplus Inflation Protection

Managed Debt Program of $6.1 million peryear for 10 years

OR

2.27% Infrastructure Renewal Levy plusInflation Protection

Managed Debt Program of $15 million peryear for 4 years

OR

Defeat Both

Review of Decisions Package

Capital Financing Alternatives

Sustainabilityand Growth

1

2

3

$1.75 million per year Managed Debt Programfor 10 years

OR

$3.5 Million per year Managed Debt Programfor 10 years

OR

Defeat Both

Review of Decision Package

W/WW Capital Financing Alternatives

Sustainabilityand Growth

1

2

3

Finance CommitteeSeptember 22, 2003

Presentation by: D. Wuksinic

Long-Term Financial Planning

Capital Financing Alternatives

Sustainabilityand Growth