Multi-year Budget (2020 to 2023) · City of Winnipeg 1999 Budget, Appendix 10Real Estate News, March 1997 In the mid-1990’s, residents and businesses were becoming increasingly

Council Briefing

October 18, 2019

Multi-year Budget (2020 to 2023)

1

• Multi-year Budget Context • Multi-year Budget Process • EPC Recommended Operating and Capital Targets to Balance

Multi-year Budget (2020 to 2023) Agenda

2

Multi-year Budget (2020 to 2023) Multi-year Budget Context

3

4

The 1990s: A Challenging Decade

Winnipeg’s current fiscal policies were custom tailored to the situation it faced in the 1990s

• Population Decline

• Negative experiences (Flood of 1997, Winnipeg Jets leaving)

• Low Revenue Growth

• High Dependence on property taxes

• Among the highest property taxes in Canada

5

The 1990s: A Challenging Decade

As a result, the City hoped to stop, or manage, the decline with:

• Years of property tax freezes

• Restricted Capital Investment

• Expenditure Reductions

• Reduced FTE’s

• Reduced Debt

• Withdrawals from reserves

6

The 2010s: A Decade of Growth

Winnipeg’s economic challenges have reversed since the 1990s. One of main challenges now is meeting the demands of a growing city.

• Fastest population growth since the 1950’s

• Second fastest Real GDP in 2018 out of major cities

• Lowest municipal property tax of any major Canadian city

• Low reliance on property tax

• Low debt payments

7

The 2010s: A Decade of Growth

As a result, we are now experiencing growing pains that we have to address to keep our population moving forward.

• There is a structural imbalance between revenues and the costs generated by growth (including new infrastructure)

• Failure to meet this challenge could impede on future growth and the desirability of Winnipeg as a destination for prospective residents and businesses

8

Present: New Solutions are Needed

The solutions the City adopted in the 1990s are no longer working

• Low property tax revenue has led to deferred capital investment and constrained service delivery

• Dedicated property tax increases (2.33%) has led to an improvement in street renewal and transit infrastructure

• Options for closing the gap between operating revenues and expenditures with funding from reduced debt payments and drawing from reserves is limited and unreliable going forward

9

Present: New Solutions are Needed

The City has hard fiscal choices to make.

• Deferral of capital investment means the infrastructure gap will grow, and key community needs won’t be met – a civic competitiveness issue

• Continued operating expenditure constraints, and FTE reductions mean making hard choices about service priorities and cuts

How does Winnipeg’s current growth compare to our past?

10

Is Winnipeg Growing?

1990-1999 +14k

2000-2009 +33k

2010-2018 +90k

2010’s

Over the past 9 years, Winnipeg has grown

by over 90,000 people, or roughly 27 people

per day.

In the 2000’s, Winnipeg grew by 33,000 people, equivalent to 9 people

per day

2000’s

In the 1990’s, Winnipeg grew by 14,000 people, equivalent to 4 people

per day

1990’s

Yes, the fastest it has in recent history.

11

Source: Statistics Canada, Conference Board of Canada, Manitoba Bureau of Statistics. Please note that prior to 1986, population values outside of census years are linearly interpolated and census undercount values are assumed to be 1.5% of the census population. 12

City of Winnipeg’s Population: 1871 to 2018

City of Winnipeg’s Population: 1980 to 2018

Source: Statistics Canada, Conference Board of Canada, Manitoba Bureau of Statistics. Please note that prior to 1986, population values outside of census years are linearly interpolated and census undercount values are assumed to be 1.5% of the census population.

Population is growing at 3 times the rate this decade than in the previous decade

13

Population Growth Across Canada

Source: Statistics Canada, 2011 Census and 2016 Census, Conference Board of Canada Spring 2019 Metropolitan Outlook

14.8%

13.0%

11.4% 10.9%

6.3% 5.8%

4.6% 4.5% 3.3% 3.3% 3.3% 3.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Total Population Growth

2011 to 2016 (CY)

10.6% 10.3%

10.2%

10.0% 9.3%

7.3% 7.3% 6.8% 6.5% 5.6%

4.5% 3.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Total Population Growth Projections

2018 to 2023 (CMA)

Winnipeg was the fastest growing non-energy based city in Canada

14

What was our financial situation like in the 1990s?

15

Financial History – The 1990’s

City of Winnipeg Research Branch, December 1993

Real Estate News, October 1994

Winnipeg 2000 Economic Development Corporation, Property Tax Review, February 1997

Real Estate News, March 1997 City of Winnipeg 1999 Budget, Appendix 10

In the mid-1990’s, residents and businesses were becoming increasingly concerned about 3 things within the City:

1. Winnipeg had high property taxes

2. Winnipeg had a higher proportion of it’s revenue coming from property taxes

3. Winnipeg had high debt servicing costs

16

"Our taxes are among the highest in the country - moving out of the city to avoid those taxes has been a trend for years." - Winnipeg Sun, January 1997

City of Winnipeg Committee on Tax Reform, “Rethinking Taxation: Making Winnipeg Competitive”, June 1998

Third highest average municipal property tax in 1998

Source: City of Edmonton Property Tax Survey Data, 1985 to 2000

$2,600

$1,759

$1,350 $1,281

$1,017 $1,007 $910 $906

$817 $722

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Montreal Toronto Winnipeg Halifax Regina Victoria SaskatoonVancouver Edmonton Calgary

17

Sources of Revenue - Dependence on Property Tax - 1998

Source: City of Winnipeg Annual Financial 1998 Report

40%

15%

11% 10%

6% 6% 5% 5% 4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

PropertyTaxes

Water &Sewer User

Fees

OperatingGrants

User Fees& Charges

BusinessTax

Interest,Land Sales

& Other

TransitFares

CapitalGrants

Other Taxes

18

Proportion of Budget toward Debt and Finance - 1998

Source: City of Winnipeg 1998 Tax-supported Operating Budget

All Other Expenditures

$546,999,816

81%

Total Debt and Finance

Charges

$127,800,990 19%

19

How did the City respond?

20

Reduced mill rates

Source: City of Winnipeg Assessment and Taxation Department 21

Stopped taking on debt, reduced debt payments

Source: City of Winnipeg Department of Corporate Finance

$21

$4

$1

$8 $7

$4 $5 $6 $7

$1

$8

$3

$35

$5

$12

$2 $1

$0

$5

$10

$15

$20

$25

$30

$35

$40

Tax

-su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Tax-Supported Funds Freed up from Expired Debt Payments

Total operating funds that have been reallocated from debt payments since 1995: $130 million

22

Reduced Cash to Capital


$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

20002001200220032004200520062007200820092010201120122013201420152016201720182019

Tax

-Su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Adopted Cash to Capital Cut Cash to Capital

23

Reduced expenditures and reserve withdrawals


$60

$105

$76 $83 $83

$93 $95

$107 $99

$105

$84

$75 $76

$0

$20

$40

$60

$80

$100

$120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Tax

-Su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Expenditure reductions and transfers from other funds and reserves vary in size and availability each year. They’ve averaged $88 million over the past 5 years.

24

Started a Utility Dividend in 2011


$17 $18 $19 $20

$31 $32

$36 $38

$34

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2011 2012 2013 2014 2015 2016 2017 2018 2019

Tax

-Su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s Utility Dividends used to help balance the tax-supported operating budget have averaged $34 million in the last 5 years

25

Used additional revenue for capital projects

Source: City of Winnipeg Adopted Tax-Supported Operating Budget Documents, 1985 to 2018

$997

$454

$768

$1,125

$0

$200

$400

$600

$800

$1,000

$1,200

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Rev

enu

e M

illio

ns

Compared to 2008, revenues are up $357 million. 36% of this increase, or $128 million in annual revenue, has been dedicated to public works, street renewal, and BRT.

26

Of the $431 million increase in the tax supported operating budget since 2004, $300 million, or 70% is due to Salary and Benefits.

Source: City of Winnipeg Adopted Tax-Supported Operating Budget Documents, 1985 to 2019

$454

$694

$1,125

$0

$200

$400

$600

$800

$1,000

$1,200

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Rev

enu

e M

illio

ns

27

This is due, in part, to an increase in average salary and benefit expenditure per FTE by area

Source: City of Winnipeg Adopted Tax-Supported Operating Budget Documents, 2004 to 2019 28

$71,825

$129,095

$50,077

$78,313

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average per FTE by Area

Emergency Services All Other DepartmentsCAGR: 4.0%

CAGR: 3.0%

and also a shift in the quantity of FTEs by area.


2,717

3,319

2,974

2,734

1,000

1,500

2,000

2,500

3,000

3,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Full

Tim

e E

qu

ival

ent

(FT

E) E

mp

loye

es

Emergency Services FTE All Other Departments FTE

Finally, of the $300 million increase in salary and benefits expenditure, $233 million (78%) was allocated to Emergency Services


$0

$50

$100

$150

$200

$250

$300

$350

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ion

s

Increase in Tax Supported Expenditures on Salary and Benefit by Area, Relative to 2004

Emergency Services All Other Departments

What was the result of these changes and how do we compare to other cities?

31

Second largest mill rate reduction locally

Source: City of Winnipeg Assessment and Taxation Department, various Rural Municipality’s 2018 Financial Plans.

Between 2000 and 2018, Winnipeg reduced its mill rate by 60%. Only Headingley reduced theirs more, by 65%.

32

$3,943 $3,805

$3,006 $2,805 $2,743 $2,699 $2,586

$2,256 $2,081 $2,000 $1,967

$1,774

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Lowest Average Municipal Property Tax - 2019

Source: Cities Assessment and Taxation Websites and various other media sources

In 2019, Winnipeg had the lowest average municipal property taxes out of 12 major Canadian cities

33

$3,943

$3,006 $2,805 $2,743 $2,699 $2,586 $2,256 $2,081 $2,000 $1,967 $1,774

$273

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Ottawa Toronto Victoria Vancouver Québec Edmonton Regina Saskatoon Calgary Halifax Winnipeg

Lowest Average Municipal Property Tax - 2019

Source: Cities Assessment and Taxation Websites and various other media sources

$273

34

Street Renewal Frontage Fee

Provincial charges, District-specific taxes,

HOA Improvement Charges

Local Improvements and Special Taxes

Capital District Charges, Capital Hospital Charges,

Charge for BC Assessment, Municipal Finance Authority

City Building Fund

Low proportion of property tax non-residentially

Source: City of Calgary Property Tax Survey, 2017 * Note: Revenue received from Business taxes in Calgary and Winnipeg are included in the total amount of taxes received from non-residential properties.

57%

51% 50%

44%

36% 35% 35%

26%

0%

10%

20%

30%

40%

50%

60%

Calgary Edmonton Vancouver Halifax Toronto Winnipeg Regina Saskatoon

Winnipeg has among the lowest proportion of its tax revenue coming from non-residential properties.

* *

35

Less reliant on tax, more reliant on transfers

Source: City of Winnipeg 1998 and 2016 Annual Financial Reports

40%

15%

11% 10%

6% 6% 5% 5% 4%

33%

17%

11% 13%

3% 4% 5%

9%

5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

PropertyTaxes

Water &Sewer User

Fees

OperatingGrants

User Fees& Charges

BusinessTax

Interest,Land Sales

& Other

TransitFares

CapitalGrants

Other Taxes

1998 2017

More reliant on capital grants from other levels of government as well as user fees and charges.

Less reliant on property tax revenue and Business Tax

36

Lowered debt and finance charges

Source: City of Winnipeg Tax-Supported Operating Budgets, 1994 to 2019

$124

$35

$0

$20

$40

$60

$80

$100

$120

$140

$160

To

tal T

ax-S

up

po

rted

Deb

t an

d F

inan

ce

Ch

arge

s

Mill

ion

s

Total Debt and Finance Charges reduced from $124 million to $35 million of the Tax-Supported operating budget

37

Net Tax Supported Debt is Increasing

Source: City of Winnipeg Treasury Department 38

-

50

100

150

200

250

300

350

400

450

Net

Exi

stin

g T

ax S

up

po

rted

Deb

t

Mill

ion

s

Increase in 2016 due to Police Headquarters Financing

Lowest expenditures per capita

Source: Cities’ 2017 Tax-Supported Operating Budgets and Annual Reports

$1,937 $1,952 $1,999

$1,585 $1,557 $1,829

$1,573 $1,492 $1,540 $1,348

$470 $403 $343 $627

$488 $164 $273

$217 $152 $260

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Vancouver Edmonton Calgary Toronto Ottawa Regina Halifax Hamilton Saskatoon Winnipeg

Expenditure Per Capita Transit Expenditure Per Capita

39

Low capital investment per capita

Source: 2012 to 2017 Cities Annual Financial Reports

$1,657

$1,540

$1,275

$1,093

$959

$722 $684

$404 $330

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Saskatoon Edmonton Toronto Ottawa Calgary Winnipeg Hamilton Montreal Halifax

Average: $963 per capita

40

Low revenue per capita

Source: Cities’ 2017 Tax-Supported Operating Budgets, Utility Budgets, and Annual Reports * Note: The City of Edmonton figures for water and sewer includes land drainage only. This does not include water and sewer revenue collected by the EPCOR utility.

$3,398 $2,993

$2,440 $2,528

$1,836

$194 $546

$537 $566

$397

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Edmonton Calgary Saskatoon Regina Winnipeg

Tax Supported Revenue per Capita Water and Sewer Revenue per Capita

*

41

Past approaches are no longer sustainable to meet the needs of a growing City.

42

The structural fiscal deficit: 2008-2028

Source: City of Winnipeg Economic Research Office Budget Model

$500

$700

$900

$1,100

$1,300

$1,500

$1,700

Adopted Budget Projected Expenses Projected Revenues

$241 million deficit

projected by 2028

This gap would not exist in a multi-year budget. In the short term, future years would also need to be balanced, not just the current one

43

We can no longer rely on reduced debt


$0

$5

$10

$15

$20

$25

$30

$35

$401

99

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0f

202

1f

202

2f

202

3f

202

4f

202

5f

202

6f

202

7f

202

8f

Tax

-su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Tax-Supported Funds Freed up from Expired Debt Payments

Debt payments are forecasted to increase in the near-term then fall

slightly, leaving little-to-no additional funds to allocate to

operations

44

We can no longer rely on cutting cash to capital


$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028

Tax

-Su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Adopted Cash to Capital Cut Cash to CapitalUnder the current projections, all

cash to capital would need to be cut to get us closer to a balanced budget

45

Expenditure reductions and transfers from reserves are unreliable


$0

$20

$40

$60

$80

$100

$120

Tax

-Su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Expenditure reductions and transfers from other funds and reserves vary in size and availability each year.

Funds available in reserves are hard to predict and not necessarily sustainable as we use them up

46

Utility dividends face growth pressure


0

5

10

15

20

25

30

35

40

45

50

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f 2028f

Tax

-Su

pp

ort

ed O

per

atin

g B

ud

get

Fun

ds

Mill

ion

s

Utility dividends may be increasing but there is pressure to reduce them

(Note: dotted line current assumes 11% dividend on projected WWD sales as in the 2019 rate report)

47

But even with these measures, we still have a gap – and this does not include unfunded capital. The challenge is structural.

Source: City of Winnipeg Department of Corporate Finance, Economic Research Office Budget Model

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

Fun

ds

use

d t

o B

alan

ce t

he

Op

erat

ing

Bu

dge

t M

illio

ns

Historical

202

0f

202

1f

202

2f

202

3f

202

4f

202

5f

202

6f

202

7f

202

8f

Forecast Forecasted Tax-Supported Operating Budget Deficit

48

49

The Structural Deficit

Structural Deficit: A permanent deficit that results from an underlying imbalance in government revenues and expenditures.

City 2020 Budgeted Deficit Submissions:

• 2020: $89.6 million

• 2021: $119.9 million

• 2022: $158.6 million

• 2023: $174.9 million

50

Conclusion:

• The 1990’s were a challenging decade: Low population growth, negative shocks, high property tax and debt;

• The City hoped to stop the decline with tax and operating/capital expenditure deferrals and reductions;

• Currently, we are facing an inverse situation: exceptional population growth and the lowest property tax and spending per capita;

• The context has changed; the solutions used in the past are no longer reliable

Multi-year Budget (2020 to 2023) Multi-year Budget Process

51

Introducing a four year balanced budget process will help the City with long-term, sustainable planning. This multi-year balanced budget aims to: • control expenses, • invest in priority services, • drive efficiencies, and • achieve sustainability and greater certainty for taxpayers,

stakeholders, and the Federal and Provincial governments. Citizen needs and expectations are evolving. This multi-year balanced budget process provides an opportunity to develop a transformative budget that creates a sustainable financial plan to meet the dynamic needs of a growing city.

52

53

Multi-year Budget Process

• October 18 – EPC setting of multi- year budget parameters including expenditure targets

• November 12 to December 9 – SPCs, EPC, Police Board meetings

• November 12 to November 20 – Multi-year Budget presentations

• November 22 to November 27 – Multi-year Budget delegations

• November 28 to December 9 – Multi-year Budget recommendations

• January 2020 – BWG / EPC deliberate on budget recommendations from SPCs

• February 2020

• EPC tables preliminary multi- year budget

• SPC and Board preliminary budget review meetings

• March 2020 – Council approval of multi-year budget

• Annual review of future budgets

Multi-year Budget (2020 to 2023) EPC Recommended Operating and Capital Targets to Balance

54

55

Key Assumptions

These proposed recommended targets present a balanced tax-supported operating budget from 2020 to 2023

1. Property Tax Increases: 2.33% annually (road renewal and BRT)

2. Fees and Charges: Inflationary increases annually

3. Natural Assessment Base Growth: 1.2% annually

4. Efficiencies/Vacancy Management: $17 Million annually

5. Additional Transfers/Savings: $32.5 million in 2020 growing to $40 million by 2023

6. Provincial Operating Grants: Flat at $149.7 million annually (2016 level)

7. Utility dividend rate: 11% of Water and Sewer Sales

8. Remaining Tax Supported Debt Room: $150 million in total

EPC Recommended Target To 4-Year Balance

56

Services Annual Budget Growth Rate

Police, Fire, Transit, Water & Waste 2.0%

Public Works 1.5%

Community Services 0.5%

Property, Planning, and Development, SOAs, and Internal Services (Corporate, Audit, Innovation, Assessment & Taxation)

0.0%

Department Operating Budget Growth Rates

Capital Financing: reduced to $20 million annually Capital Financing Source Annual Amount

Cash to Capital $20M

Debt Financing (incremental to capital budget forecast) $0

Information Provided to Councillors to assist with budget process: • OurWinnipeg • Community Trends Report (2016 – 2020) • Adopted Capital Budgets (2016-2019) • Adopted Operating Budgets (2016-2019) • Annual Reports (2016-2018) • Detailed Financial Statements (2016-2018) • State of the Infrastructure Report • City Asset Management Plan • Open Budget (Open Capital Projects) • Unfunded Capital Projects • Legislated & Non-Legislated Services List • PeopleSoft General Ledger Balances (training to be provided)

57

510 Main Street | Winnipeg | Manitoba | Canada | R3B 1B9 | winnipeg.ca