Association of Municipalities of OntarioAugust 18, 2009

Association of Municipalities of OntarioAugust 18, 2009

The case for municipal public The case for municipal public private partnershipsprivate partnerships

About ForumAbout Forum• Richard A. Abboud, President & Founder• Privately held• $500 million built/bought and sold since 2002• 4 P3’s closed - $300 million• 2 P3’s in negotiation - $350 million total• Real estate portfolio of net leased single tenant primarily office

buildings.

Forum’s P3 Track RecordForum’s P3 Track Record• 6 P3s launched and selected to date• Total commitments $300 million• Ontario Power Generation, Design/Build/Lease/Operate - $12 M• City of Ottawa, Design/Build/Finance/Operate/Transfer - $22M• City of Hamilton, Co-Investment Program - $40M Target• City of Ottawa, Design/Build/Operate/Finance/Transfer, Sale

leaseback, Mixed Use Development - $225M• Highway Service Centres - $300 million • Centre for Addiction and Mental Health - $50 million

Key Forum Team Participants/Suppliers

Key Forum Team Participants/Suppliers

Kilmer Van Nostrand Capital PartnerJohnson Controls/BLJC OperationsAecon Buildings Design BuilderLemay + Doyle Architects Architect YMCA/YWCA of Ottawa-Carleton Land swap/Options/

Services PartnershipCommunishare 10 Local not for profits

Public Sector BenefitsPublic Sector Benefits

• Execution accountability transfer• Risk transfer• Schedule certainty • Cost certainty• Private sector innovation• Capital/Operating/Lifecycle Cost optimization• Total investment of $225MM• Economic spin-off of $75.2 MM • Annual realty taxes $3.2MM• Development and Permit fees of $12.1MM

Risk TransferRisk Transfer• Driving Principle – acceptance of controllable risk• Completion risk (force majeure carve out)• Construction cost risk • Design risk• Unforeseen soils risk (except hazmat and antiquities)• Some operating risk

• Mixed Use Development Schedule Risk

Public Private Partnerships

A YMCA Perspective

YMCA of Hamilton / Burlington / Brantford

3 Examples of Municipal / YMCA Partnerships• Township of Flamborough• City of Hamilton• City of Brantford

Other YMCA / Municipal PartnershipsFactors Contributing to Successful Partnerships

Township of Flamborough

• In 1997, the community desired an indoor pool• Town of Waterdown had a population under 9,000, and

Township population was 30,000• Concerns about facility design and operations expertise,

capital construction costs and ongoing operating costs• Mayor had a vision beyond an “indoor pool”• Centre of the Community that would focus on children

and families, go beyond basic recreation and include

Vision – Centre of the Community

Programs and services would include• Variety of aquatic and wellness programs• Day camps• Youth drop in programs• Youth leadership development• Licensed child care• Adult fitness

Project Partners

YMCA and Township were key partnersAdditional benefits of project• Proximity to elementary and secondary schools• Proximity to green space• Future urban development in area• Centre of the community for Flamborough residents

Project Overview

Components of a new community YMCA• 45,000 sq ft on 4.7 acres of land• Adjacent to elementary and secondary schools• 8,000 sq ft aquatic centre with 2 pools & whirlpool• 3 “half gyms” in L shape (6,000 sq ft)• 8,000 sq ft of Health and Wellness space• 5 change rooms including Special Needs / Family• Licensed Child Care Centre

Some Benefits to the Township

YMCA expertise in design, build and operate• Staff and volunteer (Board & Committee) expertise

National programs in aquatics, fitness, wellness, leadershipMajor community capital fund raising campaign (local &

regional) resulting in lower cost to TownshipState of the art facility open 365 days each yearFacility that is open to all, regardless of ability to pay a feeOngoing annual campaign to provide financial assistanceNo ongoing operational costs and no ongoing capital costs

Flamborough YMCA

Project Costing

Facility opened 2001Project costs, all in, was $12M• Township provided $4M and land• Community Campaign (local and regional) $4M• YMCA contribution $4M

Hamilton Mountain YMCA

City of Hamilton’s population exceeds 500,000Hamilton Mountain (south part of city) is major growth areaUrgent need for a recreation centrePlans for a new Police Station and LibraryIn 2002, the newly amalgamated City experienced the

benefits of Municipal / YMCA partnershipsSuggestion to build the three facilities together and

experience possible synergies

Project Overview - Final Partners

Over a 2 year period, the final project includes• Mountain Police Station• 25,000 sq ft Library• 53,000 sq ft YMCA• Hamilton Health Sciences • Skateboard Park• City of Hamilton - 12 Ball Diamonds

Library / Police / Hospital / City Partnership

Benefits of community policing – community interactionResidents benefit from “one stop” community centreYMCA / Library / Skate park benefit from shared clientele Wider range of programs and services to all participantsHospital expertise and leadership in preventative medicine• Bone & joint, cardiac, cancer wellness, youth obesityEfficient capital construction and operations

City of Brantford Project – Planning Stages

Project Partners• City of Brantford• YMCA• Laurier University• Nipissing University• Mohawk College• First Nations• Private Developers

Project Vision

To assist with downtown revitalization, construct a new YMCA / Post Secondary recreation complex• YMCA facilities• University varsity athletic facilities• Shared instructional facilities – YMCA & Post

Secondary Institutions• University residences, support facilities• Private developer partnerships for commercial

investments

Why Consider Partnerships?

Currently over 40 YMCA / Municipal collaborations in Canada benefiting our communities, regardless of City size including

• Vancouver, Edmonton, Calgary, Montreal, Toronto, Hamilton, Niagara Falls, Innisfil Township, Wasaga Beach, Cobourg, Quinte West, Goderich

Every collaboration has been a success

Monetary Benefits of Partnerships

Philanthropic Revenues • Communities support effective & efficient partnershipsAccess to Provincial Funding• $2M from Province of Ontario for Hamilton Mountain• Provincial Recreation Infrastructure fundingAccess to Federal Government Funding• Recreation Infrastructure funding

Critical Success Factors

Project Champions• Mayor Ted McMeekin in Flamborough• Community Leaders – Mel Hawkrigg (McMaster)• YMCA – John Mayberry (Dofasco) Shared Vision and Values among all partners• Time to develop a common vision Big Picture Thinking• Keep your eye on the VisionTrust

YMCA Learnings

50 years ago, all new YMCAs were built once money from community campaign was in the bank

30 years ago, new YMCAs built with community campaigns, operational funding and financing

Past 10 years, new YMCAs built in partnership with Cities, community groups, schools, libraries and other organizations

Next 10 years, in building new facilities, the YMCA will need to consider working with all of the above partners and the private sector

Thank You

Jim Commerford

(905) 317-4919Jim_Commerford@ymca.ca

President & CEOYMCA of Hamilton / Burlington / Brantford

Public Financing Support for Municipal AFP ProjectsThe Infrastructure Ontario Loan ProgramSteve Rohacek, Vice President – Business Development & Customer Relations

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Agenda

• Infrastructure Ontario

• Overview of the loan program

• How public and private financing can co- existing in a municipal AFP/P3 project

• Financing considerations

• Summary

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Infrastructure Ontario

• A Crown corporation dedicated to building and renewing public infrastructure in Ontario

• Among the world leaders in public infrastructure development

• Has two main business streams

1. Alternative Financing and Procurement (AFP)– Large, provincially-assigned infrastructure projects– Over $10.0 billion in capital brought to the market since 2006

2. Loan Program– Financed the development of over $4 billion in local projects – Advanced over $2.0 billion in loans– Over 220 public sector clients– Successful since 2003

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Loan Program

A public sector lending vehicle that provides efficient access to

capital market financing

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Providing Access to Capital Markets

InfrastructureRenewal

Bonds

Long-Term Money

Borrowing Pool for Eligible Loan

Clients

CapitalMarkets

$30million

$3M

$1M

$.5M

$5M

enewal Bonds

gMoney

InfrastructureOntario

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Loan Terms and Interest Rates

• Terms up to 40 years or useful life of the asset

• Interest rate based on market sector

• Within a sector and a give term (i.e. 10 yrs) the interest rate is the same regardless of loan amount

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Infrastructure Ontario Credit Ratings

• North America’s three leading credit rating agencies have consistently confirmed IO’s stellar credit ratings:– DBRS AA– Moody’s Aa2– S&P AA+

• Benefits of high credit rating: financial discipline and internal efficiencies are passed directly on to clientsthrough affordable rates

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Eligible Borrowers

Borrowers include:

• Municipalities and local services boards• Universities and affiliated colleges• Non-profit long-term care homes• Hospices• Municipal Corporations

– Electricity distribution, power generation, transit• Non-profit professional arts training facilities• Housing providers

– Social, affordable, co-operative, supportive

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Municipal vs. Municipal Corporation

Municipal

• Debt vs. own purpose revenues

• Debt per household• Reserves• Economic, demographic and

population trends

Municipal Corp.

• 100% municipally owned – can have more than one owner

• Business case approach• Management & Governance• Source of revenues• Debt to equity ratios• Debt service coverage ratios• Retained earnings

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Financing of AFP (DBFM) Projects

Three components:

• Construction financing – Project Company• Long term private financing – Project

Company• Take-out (long term) public financing -

Municipality

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DBFM Model – Transaction Phase Timeline

RFP

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11 to 12 months

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Financing Considerations

• Capital market conditions– Capital market liquidity (availability of funds)– Slope of the yield curve

• Public and private long term interest rates– Cost of funds via the capital markets– Cost differential (spread) between public and private

financing

• Debt structure– Debt vs. equity (funds from grants, reserves etc.)– % of public vs. private financing– Blend rate and terms

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Summary

• Municipalities and municipal corporations – (100% municipally owned) are eligible for the loan program.

• Traditional or AFP/P3 projects.

• Public financing can co-exist in a municipal AFP project

Ministry of Municipal Affairs and HousingMinistère des Affaires municipales et du Logement

Tools for Municipalities Addressing Infrastructure Needs

Dana RichardsonAMO Conference 2009

August 18, 2009 Municipalities and Infrastructure 2

Municipalities and Infrastructure

� Infrastructure is important to economic competitiveness and quality of life in every municipality and the province as a whole.

� Provincial and municipal governments invested heavily in infrastructure, especially in the 1950s and 1960s� This infrastructure is, in many cases, reaching the end of its

expected life.

� Municipalities are on the frontlines of infrastructure provision and management � Broad powers under spheres of jurisdiction in the Municipal

Act, 2001;� In 2006, municipal capital expenditures totalled $7.3 billion;� Municipal infrastructure makes up almost half of all public

infrastructure in Ontario (see chart).

August 18, 2009 Municipalities and Infrastructure 4

PMFSDR Infrastructure Table

� Provided research and analytical support to the Coordinating Table of the Provincial-Municipal Fiscal and Service Delivery Review (PMFSDR)

� Looked at the funding of municipal infrastructure, including discussing respective roles and responsibilities.

� Considered linkages between municipal infrastructure and shared federal, provincial and municipal priorities, including:� safe drinking water and the protection of water resources;� effective transportation and transit systems for competitiveness

and reduction in greenhouse gases;� sustainable waste management systems; and� cultural and recreational facilities that support healthy, vibrant,

active communities.

August 18, 2009 Municipalities and Infrastructure 5

Infrastructure Gap

� The PMFSDR Infrastructure Table studied the infrastructure deficit in Ontario in roads and bridges, water and wastewater, stormwater, transit, conservation authorities, and solid waste management.

� It identified an additional $6 billion/year that needs to be spent for the next 10 years to close the infrastructure gap, in addition to existing spending.

� Modelling Ontario’s municipal infrastructure gap was driven by the need for better data� Discussions about infrastructure are often clouded by lack of

information about what stock of infrastructure exists and the related financial needs;

� Going forward, the implementation of PSAB capital accounting standards is an opportunity for municipalities and the province to begin collecting better data.

Infrastructure gap estimates for Ontario municipalities ($ millions)

Investment needs

Average spending, past 5 yrs

Gap (need less spending)

Lifecycle Eliminate deficit

Growth Total need

Roads and bridges $2,671.1 $935.8 $651.6 $4,258.5 $1,460.2 $2,798.3

Water and wastewater $844.3 $1,277.7 $661.3 $2,783.3 $1,520.5 $1,262.8

Stormwater $525.3 $27.8 $234.7 $787.8 $106.7 $681.1

Transit $899.8 $0.0 $730.1 $1,629.9 $563.7 $1,066.2

Cons. Authorities $4.4 $3.2 $0.0 $7.6 NA $7.6

Solid waste mgt. $316.5 NA $77.4 $393.9 $291.1 $102.8

Totals $5,261.4 $2,244.5 $2,355.1 $9,861.0 $3,942.2 $5,918.8

Source: Ministry of Energy and Infrastructure. Excerpted from PMFSDR Infrastructure Table Report: www.amo.on.ca/Content/NavigationMenu/PolicyIssues/ProvincialmunicipalFiscalServiceDeliveryReview/default.htm

Note: Estimate was calculated using average annual estimates from 2006 to 2045, in 2006 dollars.Does not include an analysis of other municipal infrastructure such as libraries, arenas, parks and recreational facilities, and other public buildings.

August 18, 2009 Municipalities and Infrastructure 7

Tools to Help Address the Gap

� Addressing this investment gap represents a significant burden on municipalities � Modeling results show the financial impact of addressing the

infrastructure deficit on the average Ontario family is roughly $1,200 per year over the first 10 years and $700 per year over the next 30 years.

� There is no single solution. Both the province and municipalities have a role to play, and a combination of measures will be required. Possibilities include:� Best practices in municipal asset management;� Increased investment from all levels of government;� Use of “user pay”, particularly in sectors such as solid waste

management and transportation;� Where appropriate, alternative financing and procurement (AFP) or

alternative service delivery models (eg. municipal service corporations).

August 18, 2009 Municipalities and Infrastructure 8

Municipal Service Corporations

� Municipal Act, 2001� Section 203 of the Act provides municipalities with the authority to

create corporations for most services that the municipality is able to provide.

� Ontario Regulation 599/06: Municipal Service Corporations� The regulation outlines the general powers of municipalities in

relation to corporations, in addition to the duties and rules for the municipality, and the rules by which corporations must follow.

� Corporations Authority� Councils continue to determine how best to provide services and

facilities for their citizens;� Municipalities have broad authority to establish services corporations

and can determine the method of financing and operating, including alternative financing.

August 18, 2009 Municipalities and Infrastructure 9

Summary

� Infrastructure remains a core business for Ontario municipalities

� Ontario must see a continuing partnership on infrastructure issues between the Province and municipalities.

� All orders of government need to be involved in finding a solution to the infrastructure gap� Deteriorating infrastructure reduces quality of life in Ontario and threatens

economic competitiveness.

� The Province has been making considerable investments in infrastructure� 2009 Provincial Budget committed $32.5 billion over the next two years for

new infrastructure that will support more than 300,000 jobs;� Infrastructure Ontario’s role in providing project management, loans program

and implementation strategies for AFP programs.

� Municipalities need to make full use of the tools already available to them, including municipal service corporations and potentially alternative financing/delivery models.