FIN-2013!07!22 - Presentation to Council - Long Term Financial Plan

7/27/2019 FIN-2013!07!22 - Presentation to Council - Long Term Financial Plan

http://slidepdf.com/reader/full/fin-20130722-presentation-to-council-long-term-financial-plan 1/25

LongRangeFinancialPlanJuly 22, 2013

1

StatusUpdate

Decemberworkshoppresentedthe results of the financialconditionassessment for tax related services

Trends

Industry benchmarks

SWOT analysis

Draft policy recommendations

Next Stepswere to:

ReviewtheCity’ s existingwater/ wwfinancialplan and incorporateintototal LRFP

Build a long range financialplan with optionsand alternatives,incorporatingthe recommendedpolicies

2



Purpose of Session

Provide an overviewof the SWOTanalysis presentedin Decembertosummarizethe financial conditionassessment along with supportingrecommendedpolicies

Present a Long RangeFinancialPlan with variousoptions andalternatives for Councilconsideration

3

KeyElementsof a LRFP

Completedin December2012 andpresented to Council



Summaryof FinancialConditionAssessment

5

Strengths

Regularlyreviewuserfees and revenuegeneratingopportunities

Relativelystrongconstructionactivity

SignificantplanningworkundertakenthroughMaster,StrategicPlans andAsset ConditionAssessments

Lowlevelsof debtfor tax relatedcapitalinfrastructure

10 yearcapitalbudgethas beendevelopedfor tax and water/ww

Annualcontributionsto replaceassets, whilenot fully meetingall needs,createsan excellentfoundationuponwhichto build a financiallysustainableplan for the future

Higherthan averageper householdincome

Lowerthan average municipalburden (tax and water/ww) n relationto incomelevels

6



Weaknesses

Decliningoverall financialpositionsince2006

Water/ WW reservesin a negativepositionwith $ 29 million in unfinancedcapital

Tax capital reservebalancesarelow in relation to assets

Taxes receivableare aboveindustry standards

Aging infrastructurewith limitedfunds to addressbacklogsand gapsidentifiedin conditionassessment reports

7

Opportunities

Constructiongrowth

Fire relocationstudy

Additionalefficiencieswithin the operations

Improvedquantificationof theCity’ s longterm infrastructureneeds

Parks rationalization

Potentialfor ne wor updateduserandpermitfees ( e. g. illboards,signs,tipping fees, rental facilities)

Uploadingof social servicecostsSale of Gold Mineanduse of proceeds

8



Threats/ChallengeDecliningor unknowngrants (ConnectingLinks,GasTax)

Lowerrelativeassessment baseuponwhichto raisetaxesAdditionalappealsfor miningand reassessmentChangesin assessmentincrease relianceon residentialassessmentAgingpopulationwith potentiallydifferentserviceneedsLegislativerequirementsimpactthecapitalprogram( e. g. accessibilityrequirements,OFMregulations, GreenEnergyAct)–e. g. ransitfareparity

ConflictinggoalswillposeasignificantchallengetotheCityMinimizing/ suppressingtaxincreasesMaintainingorenhancingexistingprogramsandservicesImplementingnewinitiatives

Post- EmploymentBenefitliabilities(approx.$10million)Salarynegotiations

9

AchievingFinancialSustainability

10



Strategies: Pruden tAssetManagementCapitalExistingSituation

Approximately50% of theCity’ s tax supportedassets are depreciatedwith limited capital reservesto support replacement

City’s approachhas been to fund capital from operatingwhich hasworkedrelativelywell but capital budgetrequirementsvary from yearto year, particularlyfor large projects

With limitedcapital reserves,the only option is to defer or issue debt

Negative water/ wwreserves

Strategies have beenincluded to gradually address gaps

11

ProposedAssetManagementPolicies

1. Based on affordability considerations,a phase- n strategy has beendevelopedto providefor increasedcontributionsto CapitalReserves.

2. New assets will contributeto replacementreserves.If funded throughdebt, annualcontributionswillbe made once the debt repaymentshave been completed.

3. Capital projects will be reviewed and prioritized by a crossDepartmentalteam.

12



Strategies:UsingDebt StrategicallyExistingSituation

Provinciallimit -25% of a municipality’s own sourcerevenues

Taxrelateddebtchargesis 1. 6% n 2012 (additionaldebt could be consideredto close the infrastructuregap)

Existing10 year plan requiresthe issuance of $80.25 millionin water/wwdebtincludingunfinancedcapital)

In lightof the capitalrequirements,debt policiesshouldbe establishedtoensure thattheCity is ableto effectivelyfinancethe capital budget

Giventhe differentfinancialneedsin wa ter/ww andtax,

the strategyis to establishseparatetargetsfor water/wwand tax as well as a consolidatedmaximumdebtthreshold

13

ProposedPolicies –Debt Management

1. Tax Debt Charges as a % fOwn Source Revenuesshould not exceed10%.

2. Water/ WW Debt Charges as a % fOwn Source Revenues should notexceed 25%.

3. The consolidatedWater/ WW and Tax Debt Charges as a % fOwnSource Revenuesshould not exceed10%.

14



Strategies:Providingfor Contingencies

ExistingSituationGovernment Finance Officers’

Associationrecommendsstabilizationand contingencyreservesshould be 5%15% of Own Source Revenues

Tax supportedcontingencyreserves8%

No contingency reserves forWater/ WW reserves

15

Strategies:Providingfor Contingencies

Tax ContingencyReservesas a % fOwn SourceRevenues

Formalizea policyfor Contingencyfor tax and water/ww

16



ProposedPolicies –Providingfor Contingencies

1. Target balance of tax contingencyreservesof 5%- 5% of tax OwnSource Revenues.

2. Minimum Water/ WW Reservesof 10% as a % fOwn SourceRevenues.

3. Use only for extraordinarytype expendituresor one- imeexpendituresincludingpreviousyears’ operatingdeficits.

4. Once the Tax Stabilization/ContingencyReserves have reachedtheupperend of the target, ransferthe operatingsurplusto the CapitalReserves.

17

Strategies: Operatingwith PrudentForesight

ExistingSituation

Counciland staffhas been activelyparticipatingin the developmentof anumberof strategicplans and MasterPlanswhich set to coursefor thefuture of Timmins

Strategic Plan requiresa solid financialfoundation

StrategicPlan

MasterPlans

Lo ng Cap t aRangeand

FnancaOperatingPanB ud ge s

18



Strategies: Operatingwith PrudentForesight

1. The City will maintain a Long Range Financial Plan to assess thelong- erm financialimplicationsof currentand proposedpolicies.

2. The Operatingand Capital Budgetswill be aligned with the City’sLong RangeFinancialPlan, he StrategicPlan and MasterPlans.

3. The City’s financialtrends ( eserves,debt, inancial position, A/ R,etc.) willbe monitoredcloselyand reportedto Councilonan annualbasis.

19

Strategies:ContinuousImprovementInvolves

Strengtheningaccountability

Establishingan understandingof theexpectedresults or service standardsin eacharea

Identifyingand tracking progressagainst organizationalgoals

Identifying opportunitiesforimprovement

Ensuringcommunity requirements

are being metImproving the budget process

20

1





Strategies:MaximizingRevenueOpportunities

ExistingSituation

Outstandingtaxes receivable –10.5%City proactivelymanages its user fees,licenses and permits

The City considersadditionalopportunitiestogenerate non- ax revenues

E. g. ncorporate new building permitrevenueassumptions

Recycling charge, environmental feeincrease

Hall and ice rentals

Incorporateall futurerevenueoptionsand opportunitiesin LRFP modeling

23

Strategies:MaximizingRevenueOpportunities

1. Collection policy goal for outstanding taxes receivableto be no morethan 10% of taxeslevied.

2. The City will review and update userfees annually taking intoconsiderationthe increasein all costs (direct and indirect),the currentma rket” situation,and minimizingthe negativeimpactsto the public.

3. A comprehensiveuser fee review willbe undertakena minimum of everyfive years, or earlier,as requiredto reflect changesin the cost of service,demand for service or serviceofferings.

24

1



Long RangeFinancialPlanLRFP)

25

Outcomesof LRFP

Stabilityand predictabilityof taxes andrates

Protectsthe City’s assets

Quantifiesany gaps betweenavailablefunds and anticipatedexpensesand helpsdeterminestrategiesto close the gap

Maximizingfinancialflexibility

Helps fair sharingin the distributionof

resourcesbetweencurrentandfuturetax/ atepayers

FinancialSustainability

1



KeyChallengesFacingthe City

Costs EscalatingFasterThan Inflation

Underfunded AssetRenew al/Replacem entProgram

Inflexible RevenueRaising Tools

DecliningGrants

Shifting Demographics

Resistance to Tax Increases

27

Tax OptionsConsidered

M o d e l M o d e lM o d e l M o d e l Currentcontributions

M o d e l M o d e lL C a p i t a l C a p i t a l C o n t r i b u t i o n s C o n t r i b u t i o n s3% evy increase - gradually increase the3% e v y L e v y I n c r e a s e I n c r e a s econtributions to the capital funds.

M o d e l M o d e lL C a p i t a l C a p i t a l C o n t r i b u t i o n s C o n t r i b u t i o n s3.5% evy increase - gradually increase the3.5% e v y L e v y I n c r e a s e I n c r e a s econtributionsto the capitalfunds. Note an

alternative debt option has also beenincluded

M o d e l M o d e lL C a p i t a l C a p i t a l C o n t r i b u t i o n s C o n t r i b u t i o n s4% evy increase - gradually increase the4% e v y L e v y I n c r e a s e I n c r e a s econtributions to the capital funds.

28

1



OperatingModelAssumptions1.5% ncrease for salariesand wagesin 2013, 2% nnualincrease

thereafter3.6% ncrease in benefitsin 2013, 3% hereafter

Annualincreaseof 2% or the majority of expendituresincludingofficesupplies,professionalservices, miscellaneousexpenses

Annual increaseof 3% or Maintenanceand Repairs

Annual increaseof 5% or Hydro

Annual increaseof 3.5% nnually for water

Annual increaseof 2 % or gas

Annual increaseof 2% or generalrevenuesContributionto Capital/ Reserves varies based on model

29

Tax OperatingBudget

20142015201620 17201820192 02020212022

Model162,509,685$ $ 64,220,024$ 65,958,961$ 67,603,376$ 69,469,550$ 71,421,509$ 73,237,998$ 75,207,833$ 77, 312,520Model262,012,435 $$ 63,876,118$ 65,789,857$ 67,763,395$ 69,796,869$ 71,894,161 $ 74, 046,867$ 76,268,648$ 78, 556,855Model362,615,435$ $ 64,808,118$ 67,076,857$ 69,424,395$ 71,853,869$ 74, 369,161 $ 76,971,867$ 79,665,648$ 82, 454,855

73,961,869$ 76,921,161 $ 79,997,867$ 83, 197,648$ 86, 525,855odel463,222,435 $$ 65,752,118$ 68,381,857$ 71, 117,395

Mode12 0%7%7%5%8%8%5%7%8%Mode23 0%0%0%0%0%0%0%0%0%Mode33 5%5%5%5%5%5%5%5%5%Mode44 0%0%0%0%0%0%0%0%0%

30

1



Water/ WW OperatingBudget

Water9,200,000$$ 9, 294, 456$ 9, 388, 912$ 9, 483, 368$ 9, 672, 279$ 9, 861, 191$ 10,050, 103$ 10,239, 014$ 10,427, 926$ 10,616, 838$ 10, 805,749WW7,500,000$$ 8, 487, 500$ 8, 750, 000$ 9, 012, 500$ 9, 275, 000$ 9, 537, 500$ 9, 800, 000$ 10,062, 500$ 10,237, 500$ 10,412, 500$ 10, 587,500Total16,700,000$$ 17,781, 956$ 18,138,912$ 18,495, 868$ 18,947, 279$ 19,398, 691$ 19,850, 103$ 20,301, 514$ 20,665, 426$ 21,029, 338$ 21, 393,249

Cha ng e6 5 %0 %0 %4 %4 %3 %3 %8 %8 %7 %

Water9,200,000$$ 9, 294, 456$ 9, 573, 290$ 9, 860, 488$ 10,156, 303$ 10,460, 992$ 10,774, 822$ 11,098, 066$ 11,431, 008$ 11,773, 939$ 12, 127 ,157WW7,500,000$$ 8, 487, 500$ 8, 742, 125$ 9, 004, 389$ 9, 274, 520$ 9, 552, 756$ 9, 839, 339$ 10,134, 519$ 10,438, 554$ 10,751, 711$ 11, 074,262Total16,700,000$$ 17,781, 956$ 18,315, 415$ 18,864, 877$ 19,430, 823$ 20,013, 748$ 20,614, 160$ 21,232, 585$ 21,869, 563$ 22,525, 650$ 23, 201 ,419

Cha ng e6 5 %0 %0 %0 %0 %0 %0 %0 %0 %0 %

3% ncreasewill generateadditionalreservesavailablefor capital and/ orreduce the debt requirements

31

10 yearTax SupportedCapitalBudget

107. 7 millionover the next 10 years – Note that this does not addressthe infrastructuregap that exists

32

1



Strategies: Pruden tAssetManagementCapital

Capital Budget does notreflect all Cityrequirements:

7 millionin deferred work related to facilities

47% of roadsdeficient – underfundedprogram

0.7 million annually needed for bridges andculverts

Limitedcapital funding availablefor parks andrecreation capital

33

Contributionsto Capital

Amount of capital fundsavailable:

Model 1 $ 04.0 million

Model2 ( 3%) $ 06.0 million

Model3 ( 3.5%) $ 25. 5 million

Model4 ( 4%) $ 45. 7 million

Opportunityto increasethe availabilityof fundsfor capitalprogramsand toaddress the infrastructuregap by increasingthe annualnetlevy by 0.5%- 1%

This wouldbe availableto address bridge,buildingsand roadinfrastructuregapsas well as new initiatives.

34

1



Strategiesto Closethe InfrastructureGapModel 3 –3.5%Model 2 –3%

Year 1 -$ 82 mllionYear 1 -$ 85 mllionYear 2- $90 mllionYear 2- $96 mllionYear 3- $94 mllionYear 3-$ 0. 4 mllionYear 4 - $98 mllionYear 4 -$ 1. 2 mllion

Year 5-$ 0. 4 mllionYear 5-$ 2. 1 mllion

Year 6-$ 0. 8 llionYear 6-$ 2. 9 mllionYear 7-$ 1. 2 llionYear 7-$ 3. 7 mllionYear 8-$ 1. 8 llionYear 8-$ 4. 8 mllionYear 9-$ 2. 4 mllionYear 9-$ 5. 8 mllion

Year 10 -$12. 8 mllionYear 10 -$16. 7 mllionExtra $ 20million for106 million generated 125. 5 million generated

capital

35

Strategiesto Closethe InfrastructureGap

Debt Strategies

To expeditecapital works in anenvironmentwhere there are limitedreservesandinterest rates are lowconsider issuing debt

Issue additional debt to addressinfrastructuregaps and unmetneeds.

Limited room in water/ wwtoissuemoredebt as the existing plan isapproachingthe maximum 25%ceiling

36

1



Guidefor MunicipalAssetManagementPlans

BuildingTogether: inistry of

InfrastructureOntario

As a conditionof future provincialinfrastructurefunding, municipalitieswillbe requiredto demonstratethat a fullrange of availablefinancing and revenuegenerationtools has been explored

For example, Model 3 at 3.5%annual levy increase

Additional $ 20 million for capitalwithout debt issued

Alternativeis to use additionaltax revenuesto issue $ 32. 5million in debt

37

Water/WW OptionsConsidered

Reflectsthe City’s existingwater/ww planB a s e B a s e M o d e l M o d e l and ncorporatesthe capitalrequirements

andrate increases as set out in the City’splan

Reducesdebt issuanceduring the 10 yearperiod. Annualrate increaseof 3% nnually

3% n n u a l A n n u a l R a t e R a t e I n c r e a s e I n c r e a s efrom 2015-2023

38

1



10 YearWater/ WW CapitalBudget

Significantcapital requirementsin 2013-2016

Due to the lack of reservesand a desire to managerate increases, $50.7million in debt financingwill be requiredover the 10 years + unfinancedcapital of $29. 6 million

39

Water/WW FinancingOptions

Capitalbudgetis the sameunderbothmodels,however,the debt is $ 9.3million lowerin Model1

40

2



Water/WW DebtChargesRatio

CombinedWater/ WWMax

Proposedpolicy for water and wastewateris thatthe combineddebtshould remain below 25% of own sourcerevenues

41

Tax Debt ChargesRatio

As there is no new debt issuedduring the forecast,tax debt chargesremains well below the recommendedtarget of 10%.The alternativemodel which issues an additional $32. 5 million in debt isalsowell below the target.

42

2





P r i o r it iz a t io n P r io r it iz a t io n a n d a n d B a l a n c e B a l a n c e A r e A r eCri t i ca lCr i t i ca l to toÇ

S u c c e s s S u c c e s s

45

AdditionalOptionsand StrategiesReducing capital programrequirements throughcapital prioritizationand determiningthe mostcosteffective options

Institutinga user fee surchargefor thereplacementof assets

Additionalgrant funding to leverage other levels ofgovernmentwhere there is alignmentwith thecommunity’ s priorities

Additionaldepartmentalefficiencies or programreductions

PublicPrivate Partnerships

46

2



Summary

47

SummaryTimmins,ike many municipalitiesis facing significantchallengeswhichwill requiredecisionsto be made to meet the needs of the communityandtheir willingnessto pay for services:

Increasingoperatingexpendituresat a rate faster than inflation

Revenue Pressures -Grants and subsidies are inconsistent andhave been declining

Tax Resistance–Desire to limit property tax increases

Shifting Demographics

Assets are reaching the stage where they will require reviewing,replacingand upgrading

New projects to meet the needs of the community

The challengeis to find the right balancewith limited resourcesto meetyour communityneeds

48

2



49

Documents

FIN-2013!07!22 - Presentation to Council - Long Term Financial Plan