Click to edit Master title style 1 Infrastructure Ontario’s Loan Program Affordable financing in...
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Click to edit Master title style www.infrastructureontario.ca 1 Infrastructure Ontario’s Loan Program Affordable financing in support of infrastructure renewal
Click to edit Master title style 1 Infrastructure Ontario’s Loan Program Affordable financing in support of infrastructure
Click to edit Master title style www.infrastructureontario.ca 1
Infrastructure Ontarios Loan Program Affordable financing in
support of infrastructure renewal
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Crown agency of the Ontario government, created in 2005 Focused on
modernizing and financing the renewal of public infrastructure,
maximizing the value of public real estate and managing government
facilities Four lines of business: Buildings: landlord to the
Ontario Public Service Lands: managing the Provinces property
portfolio Corporate Development: optimizing Provincial assets Major
Projects: delivering Ontarios larger and more complex public sector
infrastructure Loans: lending to broader public sector entities in
Ontario through the Provinces access to the capital markets
Infrastructure Ontario
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The Loan Program Affordable long-term financing to help renew
public infrastructure and deliver value to customers and residents
across Ontario
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The Association of Municipalities of Ontario (AMO) estimates an
infrastructure gap of at least $60 Billion that will take 10 years
to close, leaving municipal governments with a bill of $6 Billion
each year Almost half of this gap exists within road and bridge
infrastructure, with the remaining amounts occurring in other core
infrastructure categories such as drinking water, wastewater, storm
water, public transit and solid waste Ontario Infrastructure
Snapshot 70% of Torontos road network is over 30 years old 20% of
Ottawa's roads are between 20 to 40 years old, and 15% are more
than 40 years old 50% of Torontos sanitary sewer system is over 50
years old 27% of Ottawas piped infrastructure is over 40 years of
age; 50% is between 20 and 40 years old 50% of Torontos watermains
are over 55 years old 30% of City facilities are over 40 years old,
and 40% are between 20 and 40 years old Accumulated state of good
repair backlog in 2012 is $1.7 Billion. Ottawas municipal
infrastructure assets are valued at $32 Billion Source: Association
of Municipalities of Ontario, The State of Municipal Infrastructure
- Regional Snapshots (Federation of Canadian Municipalities -
September 2012)
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Infrastructure Funding Strategies There are two fundamental ways
that the broader public sector can fund infrastructure Full Cost
Pay as you go Loan Financing
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Funding Strategies: Pay as You Go The traditional approach to
building and renewing infrastructure Can only undertake projects
that are fully-funded using finite sources: Reserves Development
charges Tax increases Apply for senior government assistance when
it is available
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Funding Strategies: Loan Financing Assuming manageable debt Current
and future tax-payers share the benefits over the life of the asset
Projects financed over extended periods of time Match finance term
to asset life (5 to 40 years) User fees Development charges Apply
for senior government assistance when it is available
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Funding Considerations Cost of deferring the project Rise in
operations and maintenance costs Lost opportunity costs May limit
the opportunity for growth Will population or industrial growth be
limited without the new infrastructure? Project financing Time to
raise or save the required capital Ability and cost of servicing
loans Impact of construction cost increases Uncertain economic
conditions
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Project cost = $1.0M Annual construction cost increase = 7.5%
Funding Example FULL COST DEVELOPMENTLOAN FINANCED DEVELOPMENT
Assume 4 yrs. to save at $250,000/yr. plus 3.5% interest Construct
Project in 2012 = $1.0M Finance $1.0M such that principle +
interest = or < $1.30M 2014 Project Cost = $1.33M Accumulated
Interest = $26,500 Net 2016 Project Costs = $1.30M 10 yr. Term
Amortized @ 2.74% Total Cost = $1.15M Additional Considerations: -
Existing asset = increased O&M cost - Greenfield = price of
lost opportunity Additional Benefits: - Use of the asset today -
Reduced O&M cost
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10 Providing Access to Capital Markets INFRASTRUCTURE ONTARIO
Infrastructure Renewal Bonds CAPITAL MARKETS Short /Long-Term Money
Rating Agencies $$$ Eligible Borrowing Pool (Municipalities,
non-profit long-term care, universities etc.)
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11 How is IO Different From a Bank? Infrastructure OntarioBank
Financing Rating FeeNone Advisory and Other ProfessionalNone50-75
basis points Legal CostsNone Varies with transaction size and
complexity Ease of Application ProcessModerate Interest Rate
Markets + Cost of providing the service Directly related to credit
worthiness of borrower TermUp to 40 years5 to 10 years Refinancing
RiskNoYes Interest Rate RiskNoYes Needed Knowledge/ExperienceLow -
ModerateModerate - High Amount$0 150 MillionTypically to $10 or $20
Million Access to FundsContinuous Debt StructureFlexible
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12 Aboriginal health access centres Community health and social
service hubs Hospices Housing providers Social, affordable,
co-operative, supportive Local services boards Long-term care homes
(non-profit) Municipal corporations Electricity distribution, power
generation, transit Municipalities Professional arts training
facilities (non-profit) Sports and recreation organizations
(non-profit) Universities and affiliated colleges Who is
Eligible?
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13 Eligible Municipal Projects Most depreciable capital
expenditures are eligible for affordable, long-term financing,
including: New construction, renovations and retrofits Water,
wastewater and waste management Roads, bridges and public
transportation Municipal housing projects Ambulances, fire trucks,
transit vehicles, snow ploughs, garbage trucks and other rolling
stock Accessibility and energy efficiency projects Local police,
fire, admin and recreation facilities (arenas) Equipment, systems
and asset management tools Land and facility acquisition
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14 South-West Oxford partnered with IO to help finance its LED
street lighting retrofit project. The project involves the
conversion of 432 existing High Pressure Sodium street light
fixtures to new, energy efficient LED fixtures. Oxford County South
West Oxford 47% ENERGY SAVINGS $34,153.00 Reduced energy and
maintenance costs will help finance the cost of the project HPS
Lights 74,500 KW LED Lights 39,650 KW $40,112.13 Loan Amount
$348,000 @ 2.67% over 10 yrs @ $ 0.98/KW ENERGY SAVINGS (Estimated
Annual) LOAN PAYMENT (Estimated Annual)
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15 Since 2003 the Loan Program has received over $7.5 billion in
loans from public sector clients all over Ontario Supporting over
1,900 infrastructure renewal projects Over $5.4 billion in
affordable financing has been advanced Success of the Loan Program
Loan Clients - As of Aug 2012
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16 Total Loans Approved $6.3 Billion Loan Program Portfolio
Approved and Executed - As of April 2013
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17 Total Approved & Executed Municipal Loans $4,458.4 M
Municipal Loans Breakdown As of April 2013
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18 Offered in both a short-term construction rate and long-term
debentures (up to 40-years) Extra long terms are typically not
available from traditional lenders or capital markets Terms are
designed to match useful life of the asset Rates are the same for
all borrowers, within each sector Flexible Terms
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19 Serial Loans: Constructed to pay equal principal amounts every 6
months with interest computed on the declining balance Serial &
Amortizer Loans Savings Amortizer Loans: Constructed to pay equal
total payments every 6 months, interest component decreases while
principal component increases over the term
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20 Affordable long-term rates No additional fees and no need to
renegotiate Borrowing pool aggregates the infrastructure needs of
many borrowers, from unrated to AAA Ready to build, or already
building? Our construction financing is the most affordable way to
manage your short-term cash needs Two kinds of long-term rates
Serial and Amortizer Affordable Rates Visit our website today for
current lending rates!
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21 Todays Rates
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22 Client Resources Available Online
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23 Clients can download the municipal loan model from the IO
website located in the Resources section at the bottom of the
Municipal webpage Municipal Loan Model
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24 Available on our website, this tool allows users to enter loan
amount, interest rate and length of loan to help determine monthly
payment amount, payment schedule and amount of interest paid. The
payment schedule is created in a PDF format which easy to save and
print for use at council meetings. Loan Payment Calculator
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25 Loan Program Benefits Provide both short-term construction loans
and long-term take-out financing Rates are all-in blended rates so
there are no additional transaction fees or commissions Cost of
capital is very low Rates are the same for all borrowers, within
each sector Rates apply for the full length of the term
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26 Loan Program Summary All capital expenditures eligible
Hassle-free access to capital markets No need to be rated, no
minimum / no maximum Affordable market rates No extra fees or
commissions Longer terms than generally available elsewhere One
month construction loans and 5- to 40-year debentures Online
application Dedicated knowledgeable staff
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27 95% of clients say they will work with IO again 95% agree that
IOs rates are preferable in comparison to other sources 85% of
clients rate the loan process highly 97% of loan clients would
recommend working with IO Survey results from 2010-11
Infrastructure Ontarios Client Survey, Dec. 2010 What our clients
are saying My experience with Infrastructure Ontario and the Loan
Program have been exceptional and Timmins will definitely apply to
the program for future capital funding. Joe Torlone, CAO, City of
Timmins My experience with Infrastructure Ontario and the Loan
Program have been exceptional and Timmins will definitely apply to
the program for future capital funding. Joe Torlone, CAO, City of
Timmins
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28 Loan Clients in the North East
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