Sustain ability and Growth · Long-Term Financi al Pla nning • Capit al Finan cing Al tern ati ves Sustain ability and Growth Finance Committee • September 22, 2003 Presentation

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."



"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."



"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."


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


• Municipal infrastructure is failing

• Municipal responsibilities have increased

• No new funding mechanisms

• Need for Provincial and Federal involvement

National/Provincial Scene


• 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


Supporters



Sources of Capital Financing in Ontario Municipalities


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)


Provincial Grant Losses


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:


• 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


Benefits:


• 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


Benefits:


• 10 Year Financial Forecast

• 9 Principles supported by 34 Policies

• 4 Areas of Recommendations with12 Specific Actions


Specifics Outcomes:


ì Ensure Long-Term Financial Sustainability

• Adopt Multi-year Budgeting Process

• Recognize Inflation

• Apply Life Cycle Costing Approach to Infrastructure


Highlights


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


Highlights (Cont’d)


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




• Implement an Infrastructure Renewal Levy





Annual Capital Needs


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


Components of Capital Funding Gap


Roads

56%

CorporateS ervices

3%

Transit & Fleet Requirements

8%

Citizen & Leisure

6%

Buildings

20%

Other

7%


Oracle SurveyImportance of Service


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


Oracle SurveyImportance versus SatisfactionRoads Maintenance


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


BMA Competitiveness Study


• 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


BMA Competitiveness Study


• 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


Levy Per Capita



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


Taxes for a Detached Bungalow



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.


Total Taxes and Utilities (Water, Wastewater, Hydro)



Total Taxes and Utilities (Water, Wastewater, Hydro)


º

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


Tax Rate and Relative Position


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


• 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


Common Elements


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


Differences


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


Differences (Cont’d)


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


2

1

• OMEIFA Funding

• 50% Re-payment

• Municipal Up-front Financing

• Percentage Interest Rate Experienced isInterest Rate Charged

• 15 year Term


Common Elements


• One Completes 50% of the Projects

• The Other Completes 100% - All of the Projects


Differences


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

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


Impact on Average User (240 cubic metres per year)


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



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



1

2

3

Finance CommitteeSeptember 22, 2003

Presentation by: D. Wuksinic

Long-Term Financial Planning



Documents

Sustain ability and Growth · Long-Term Financi al Pla nning • Capit al Finan cing Al tern ati ves Sustain ability and Growth Finance Committee • September 22, 2003 Presentation