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Municipal Finance Orientation Package

Municipal - MFOA€¦ · Municipal Government 101 ... multi-year budgeting process. Unlike federal and provincial budgets, municipal budgets must be balanced at the end of the year

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Municipal

Finance

Orientation

Package

on your new position!CONGRATULATIONS

We at the Municipal Finance Officers' Association (MFOA) have prepared thisorientation package to help with the transition into your new position. Whether youare new from the private sector or new to the workforce in general, we hope thatthis orientation package will provide a brief overview of what to expect as anemployee in the public sector.

In this package you will find a crash course on municipal government, whichoutlines what it means to work in the public sector and some basic roles and rulesthat apply to all Ontario municipalities. At the end is a list of useful resources that werecommend you visit to learn more about municipal finance and municipalgovernment in general.

The YPN Communications Subcommittee(2015/2016) served as subject matter expertsin the development of this orientationpackage. Their input and guidance shaped itscontent. 02

What is a municipality?#1

Municipal Government 101

According to Section 1 of the Municipal Act, 2001, a municipality is a "geographic area whose inhabitantsare incorporated." But this definition does not do the term justice, as municipalities represent the people,places and services that live within it. This means that municipalities are diverse across Ontario and notwo municipalities are alike. Variation across municipalities is caused by a number of factors:

Population Services Service LevelsTotal persons in a municipality What the municipality provides Outcomes of services provided

Property AssessmentAssessment values impact property

taxes

Property Assessment MixCommercial vs. industrial vs. residential

Revenue SourcesHow a municipality raises funds

Tax LevelsMunicipalities set the property tax levy

InfrastructureRoads, bridges, buildings, water,

wasterwater, and transit

GrowthSome municipalities are growing,

others are declining

Municipal government structures also vary. Some services are provided to a number of lower-tiermunicipalities (City of Vaughan) by an upper-tier known as a region or county (Regional Municipality ofYork). When there is only one (independent) level of municipal government, it is called a single-tiermunicipality (City of Kenora).

03

Within Ontario, municipalities are experiencing both population growth and population decline. Areas ofNorthern and Central Ontario are facing population decline while most of Southern Ontario isexperiencing growth. There are many reasons for population variation within Ontario such as agingpopulation and migration.

Projections from the Ministry of Finance estimate that the Greater Toronto Area (GTA) will hold over 50percent of Ontario's population by 2041.

The GTA is the fastest growing region in Ontario, with its population very concentrated on a smallportion of Central Ontario's landmass. On the other hand, Northeast and Northwest Ontario compriseof the majority of Ontario's landmass.The following map shows the five Ontario regions as defined bythe Ministry of Municipal Affairs.

Source: Statistics Canada, 1991-2011; and Ontario Ministry of Finance projections

Sources: Census Division Boundaries, StatisticsCanada; Municipal Service Offices, Ministry ofMunicipal Affairs

04

What services dogovernments provide?

#2

Services provided to citizens is split between the federal, provincial and municipal government withsome overlap. The following diagram gives you an idea of the vast services provided by all levels ofgovernment.

Municipal*

Provincial Federal

- Long-term care & senior housing- Parks & recreation- Planning community developments- Provincial offences administration- Public health- Roads & highways- Sidewalks, streetlights- Social housing- Water, sewage & storm sewers

- Airports- Animal control- Cemeteries- Child care- Economic development- Electric utilities- Emergency services- Garbage collection & recycling- Heritage services - Libraries

- Arts, culture &tourism***- Public transit***- Social services - Tax collection****

- Administration of justice- Provincial highways- Provincial prisons- Provincial property & civil rights

- Citizenship &immigration- Education***- Health care***- Natural resources &the environment**

- Census- Copyrights- Criminal law- Employment insurance- Foreign policy- Money & banking- National defence- Post office- Regulation of trade &commerce

NOTES:

* Where there are upper and lower-tier municipalities, responsibilities are divided between them

** Federal government influence has jurisdiction for offshore and northern resources,interprovincial and international trade, taxation and treaty making. Municipalities also have aneffect on environmental policy through their jurisdiction in water and sewage, public transit,garbage collection, etc.

*** Federal government influences these through funding transfers

**** Municipalities collect property taxes. Provincial and federal governments levy sales andincome taxes

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Public sector vs. privatesector

#3

If you are new to the public sector the structure of a municipality may be confusing. Here is a quicktable to summarise the main differences.

Public Sector Private Sector

MotivationPublic good maximization. Not-for-profit, though cost recuperation

may occur

Profit maximization

Accountable to the public throughmechanisms such as access toinformation requirements, public

consultations, democratic electionsheld every four years and more

Accountable to the owner, Board ofDirectors and shareholders

Includes multiple stakeholders indecision-making, can be time-

consuming

Lower expectations for formalizeddue process, focus on expediency

Politicians decide services provided,service levels and rates with input

from stakeholders (citizens,businesses, etc.) via public

consultations and other channels.Professional staff provide politicianswith information they need to makelong-term, financially sustainable

decisions

Owners and/or Board of Directorsmake decisions about

products/services. Stakeholders(employees, shareholders, etc.)

are sometimes represented on theBoard.

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Accountability

Due Process

Decision Making

Basics that apply to allOntario municipalities

#4

With the exception of the City of Toronto, which is governed by the City of Toronto Act, all Ontariomunicipalities are formed under the Municipal Act. The Municipal Act is a legislative framework thatoutlines the broad range of powers that municipalities have as local governments but it is not theonly legislation that governs municipalities. There are hundreds of provincial and federal legislationthat can apply to municipalities, and within each municipality there are unique policies and by-laws.As you become more adjusted into your new position, take the time to explore the Municipal Actand some of the local policies that help to shape your municipality

Where should I start in the Municipal Act?

Part V - Accountability and Transparency Outlines a municipality's accountability to the public.Part VI - Practices and Procedures Role of some municipal employees (Council, clerk, CAO, etc.).Part VII - Financial Administration Role of treasurer. Financial reports required, budget requirements and

other financial administration rules.

Part VIII - Municipal Taxation Regulations for tax rates and levies.Part XIII - Debt and Investment Regulations for reserve funds, temporary borrowing and

investments.

Sections 289, 290 and 291 of theMunicipal Act outline the regulationsfor a municipality's yearly budget ormulti-year budgeting process. Unlikefederal and provincial budgets,municipal budgets must be balancedat the end of the year. Beyond theMunicipal Act, municipalities mustcomply with the generally acceptedaccounting principles (GAAP) set bythe Public Sector Accounting Board(PSAB).

Although municipalities take differentapproaches to tackling the budget, theprocess generally follows a similarcycle.

Preliminaryestimates/forecast

Detailed budgetpreparation

Council - budgetdiscussion

Budget approval andtax calculations

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Budgets

Municipal budgets contain both an operating budget and capital budget. Operating budgets are createdannually, whereas capital budgets typically forecast for 10 years. It is important to note that underlegislation, municipalities cannot finance operations with debt. The following visual shows an averageoperating budget, based on 2014 Financial Information Return (FIR) data of Ontario municipalities.

A capital budget provides a municipality with a view into the potential expenses and investmentsrequired in the future. The capital budget focuses on larger costs rather than smaller costs like anoperating budget. The following visual shows an average capital expenditures by service, calculatedby the cost of tangible capital asset additions and betterments in the 2014 FIR data of Ontariomunicipalities.

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* Does not include capital expenses under threshold

Average Operating ExpensesLess Amortization

Average Operating Revenue

Average Capital Expenditures by Service*

Municipalities are organised in a hierarchical manner, but a municipality functions best when everydepartment works cooperatively. In the hierarchy, the Council and Head of Council are at the top,however they must answer to the public through public inquiries, council meetings and publicengagement exercises.

CorporateServices

Culture &Recreation

DepartmentsPublicWorks

EmergencyServices

Finance

HumanResources

Public

Accountability

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Council,Head ofCouncil

Chief Administrative

Officer

Role of...#5

Position GovernedBy Role

Head of Council.Also known aswarden, chair, reeveor mayor

The Municipal Act,2001 s.225 & s.226

Act as the chief executive officer of themunicipality; provide leadership to council;represent the municipality; uphold and promotethe purposes of the municipality

Council The Municipal Act,2001 s.224

Represent the public and consider the well-being of the municipality; develop and evaluatepolicies and programs; determine whichservices the municipality provides; and ensureaccountability and transparency of themunicipality

Chief AdministrativeOfficer

The Municipal Act,2001s.229

Responsible for managing the affairs of themunicipality and ensuring efficient and effectiveoperation of the municipality

Chief FinancialOfficer or Treasurer

The Municipal Act,2001s.286

Collects money payable to the municipality;deposits money received; pays all debts of themunicipality and other expenditures; maintainsaccurate records and accounts of financialaffairs; provides council with information onfinancial affairs; and ensures investments arecompliant with regulations

Clerk The Municipal Act,2001s.228

Records all resolutions, decisions and otherproceedings of council; keeps originals andcopies of all bylaws and minutes of the council;and any other duties assigned by themunicipality

Ontario Ombudsman Public Sector andMPP Accountabilityand Transparency

Act, 2014

Independently investigate municipal matters.Cannot compel municipalities to take action butcan make recommendations to council and themunicipality

10

Emerging concepts inmunicipal finance

#6

Canadian InfrastructureGap

Municipalities own and maintain nearly 60 percent of Canada'score public infrastructure. Competing priorities in the 1970s and1980s led to cuts in government spending on public infrastructure.This funding gap is still felt today, with one-third of all municipalinfrastructure in fair, poor or very poor condition which increasesthe risk of service disruption.

Aging infrastructure and underinvestment will cause undue harmon public infrastructure in the near future. To alleviate this issue,municipalities must create adequate asset management plans tohelp identify critical repairs to infrastructure. Provincial and federalgovernments must also collaborate with municipal governments tohelp fund these projects.

For more informationThe CanadianInfrastructure ReportCard

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Fiscal Sustainability

Fiscal sustainability is a municipality'sability to meet financial and serviceobligations now and in the future. It looksat the relationship between levels ofexpenditure requirements and revenuesat a point of time as well as therelationship between growth rates inexpenditures and revenues. Fiscalsustainability is achieved when municipalbudgets, asset management plans andstrategic planning works holisticallytogether.

For more informationCanadianMunicipalities: FiscalTrends andSustainability by Harry

Kitchen

Budgeting Exercise

AssetManagement

Plan

StrategicPlan

FiscalSustainability

If viewing online, click on sticky notes for more information.

For more informationGFOA Long-Term

Levels of Service

Municipal assets exist for the purpose of supporting the delivery ofmunicipal services to its customers. Levels of service will reflect theoutcomes that customers receive from services provided and can beexpressed in terms of cost, quantity, quality, responsiveness andperformance.

Levels of service are necessary in creating an asset management plan inorder to control asset life cycle costs, forecast expected return oninvestment in infrastructure and state how success or failure will bemeasured. It is also useful in communicating with council and the publicabout the general state and trends of a municipality's infrastructure.

For more informationDeveloping Levels ofService: A BestPractice Guide

Long-Term FinancialPlanning

Long-term financial planning combines financial forecasting withstrategizing. It is the process of aligning financial capacity withlong-term service objectives and is a highly collaborative processthat considers future scenarios and helps governments navigatechallenges.

Financial planning uses forecasts to provide insight into futurefinancial capacity so that strategies can be developed to achievelong-term sustainability in light of the government's serviceobjectives and financial challenges.

For more informationGFOA Long-TermFinancial Planning Best

Practices

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Asset ManagementPlanning

Municipalities deliver many of the services that are critical toOntarians and these services rely on well-planned, well-built andwell-maintained infrastructure. Resolving municipal infrastructurechallenges begins with improved asset management.

In the Province's "Building Together - Guide for Municipal AssetManagement Plans", the province stated that any municipalityseeking provincial infrastructure funding must demonstrate how itsproposed project fits within a detailed asset management plan. Thisensures that limited resources are directed to the most criticalneeds.

For more informationBuilding Together -Guide for MunicipalAsset ManagementPlans

Multi-Year Budgeting

Under legislation, Ontario municipalities are required to approveannual budgets, but some municipalities have begun to adoptmulti-year budgets to help ease the annual budget process. Amulti-year budget cycle is typically three or four years and isviewed as a better way for municipal governments to plan andallocate resources.

Multi-year budgets can be cost effective as future approvedfunding can allow a municipality to give out multi-year contracts,and it ensures that "boring, but necessary" projects prioritizedappropriately alongside high-profile projects. However, multi-year budgeting can be an onerous task for a municipality withoutthe resources to devote to planning.

For more informationMulti-YearBudgeting: A Primerfor Finance Officers

Public Engagement

Municipal governments work to serve the public. Publicengagement brings citizens, community organizations,businesses and government together to ensure that municipalservices and budgets reflect public needs. With fewerhouseholds owning landlines, municipalities must find alternativeapproaches to public engagement such as online surveys.

When municipalities are better connected to the communitieswithin it, trust between citizens and government improves.

For more informationGFOA Tips on PublicEngagement

Revenue Tools

Municipalities rely on traditional municipal revenue tools that areregulated by the Municipal Act, 2001. These include property taxes, feesand charges, investment income, special services/area ratings, localimprovement charges and development charges. However, compared tomunicipalities in the US and the UK, Ontario municipalities are limited inways to raise revenue.

Ontario municipalities rely on property tax for approximately 41 percent oftheir revenue (on average). A fiscally sustainable municipality shouldhave a diverse array of revenue tools to ensure that funding remainsstable in the long-term. Currently, the City of Toronto, under the City ofToronto Act, is able to implement a land transfer tax and billboard tax,but these revenue tools are unavailable to other Ontario municipalities.

For more informationMunicipal RevenueSources Review -Government ofBritish Columbia

13

Useful Resources

Important Organizations#1

AFMO represents the interests ofFrancophone municipal professionals in theprovince. The organization acts as aspokesperson in areas of common interestto its members and offers variousprofessional development services.

Association française desmunicipalités de l 'Ontario

AMCTO is Canada's largest association oflocal government professionals. It runs anumber of education courses, and itsCertified Municipal Officer (CMO)designation is a comprehensiveaccreditation program for municipal officials.

Association of Municipal Managers,Clerks and Treasurers of Ontario

AMO produces policy positions and advocateson behalf of Ontario municipalities and organizesinter-municipal conferences and workshops.AMO offers an online collection of research on avariety of topics.

Association of Municipalities ofOntario

Assessment Review Board (ARB)The ARB is an independent adjudicativetribunal that hears appeals from people whobelieve that properties are incorrectlyassessed or classified. They provideresources to keep municipalities updated onassessment appeals in their area

Government Finance OfficersAssociationGFOA represents public finance officialsthroughout Canada and the US. Theyprovide best practice guidance, consulting,publications, research and trainingopportunities.

Local Authority ServicesLAS assists municipalities in realizing lowercosts, higher revenues and enhanced staffcapacity through cooperative procurementefforts and innovative training, programs andservices.

Ministry of Municipal AffairsMMA is a provincial ministry and isresponsible for municipal issues in Ontario.

Municipal Finance Officers'AssociationMFOA represents the interests of municipalfinance officers in the province, providingresources and training. MFOA initiatesstudies and sponsors seminars that helpdiscuss and develop position on importantpolicy and financial management issues.

Municipal Property AssessmentCorporationMPAC administers property assessmentsand appeals of assessment in Ontario.MPAC's Municipal Connect tool providesinformation on preliminary values tomunicipalities.

Ontario Good Roads AssociationThe OGRA represents the transportationand public works interests of municipalitiesthrough advocacy, consultation, training andthe delivery of identified services.

Ontario Municipal Tax andRevenue AssociationOMTRA brings together municipal taxcollectors in Ontario, undertaking advocacyand education related to the laws andpractices around municipal tax billing andcollection.

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If viewing online, click on the icons to be directed to the website.

Research & Libraries#2

AMO Policy BackgroundersContains brief summaries of key municipalpolicy issues; can be filtered by year andissue.

Institute on Municipal Finance &GovernancePart of the Munk Centre at the University ofToronto, IMFG is dedicated to advancingconcerns of municipal finance and governance.Research focus includes fiscal health andgovernance challenges.

MIDASWebsite with schedule data for all Ontariomunicipalities from the Financial InformationReturn (FIR), and the MPMP. Also providesaccess to Energy Management Tool.

MFOA Virtual LibraryContains sample policies, reports, and RFPs onvarious topics including asset management;budgeting and financial planning; reserves andreserve funds; and much more.

MMA Resources for MunicipalitiesContains a wide variety of key municipalpolicy issues; can be filtered by year andissue.

Financial Information ReturnThe main data collection tool used by theMinistry of Municipal Affairs to collectfinancial and statistical information onmunicipalities. Updated each year to complywith reporting requirements.

Key Legislation andPolicies

#3

Assessment Act, 1990Governs how Ontario properties (Crown,commercial, industrial and residential) areassessed. Gives MPAC the power to assessproperty values.

15

Development Charges Act, 1997Overarching legislation that sets out the processfor municipalities to pass their own developmentcharges bylaws and how revenue from chargescan be used.

Consultations DirectoryDatabase of all current Ontario publicconsultations.

E-LawsDatabase of official copies of Ontario legislation.

Local Services Realignment: AUser's GuideA guide to reforms in the division of responsibilityof responsibility between the Government ofOntario and its municipalities.

Municipal Act, 2001The main piece of legislation that governs thecreation and administration of Ontariomunicipalities.

Planning Act, 1990Sets out the regulations for land use planning inOntario and describes how land uses can becontrolled and who may control them.

Regulatory RegistryDatabase of new and upcoming regulations thataffect Ontario businesses.

Extras#4

List of MunicipalitiesList of all 444 Ontario municipalities, includingcontact numbers. Available on the Ministry ofMunicipal Affairs website.

Municipal Government in CanadaExplains how municipal government relates tothe other orders of government in Canada.Available on the Canadian federal governmentwebsite.

Municipal Government in OntarioExplains the differences between the varioustypes of municipality (single-tier, regional,county, etc.) and outlines how municipalgovernment is structured across the Province.Available on the Ministry of Municipal Affairswebsite.

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Annual General Meeting

Development Charges

Energy Management Tool

Municipal Benchmarking Networking Canada

Municipal DataWorks

Ontario Municipal Partnership Fund

Ontario Provincial Police

Public Sector Accounting Standards

Common Acronyms#5

Having trouble decoding the language of your colleagues? There is a good chance they are talking inacronyms. The following list should help with the translation.

General Accounting TermsARL

NBV

RFQ

TCA

CPA

RFP

RFT

Annual Repayment Limit

Net Book Value

Request for Quotation

Tangible Capital Assets

Chartered Professional Accountant

Request for Proposal

Request for Tender

Municipal Finance TermsAGM

DC

EMT

MBNC

MDW

OMPF

OPP

PSAS

AMP

DSSAB

FIR

OPTA

PMFSDR

PSAB

QMS

Asset Management Plan

District Social Services AdministrationBoard

Financial Information Return

Online Property Tax Analysis

Provincial-Municipal Fiscal & ServiceDelivery Review

Public Sector Accounting Board

Quality Management System (for drinkingwater)

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About MFOAMFOA is a non-profit association representing the specific interests of municipalfinance officers in the province. We also provide research and education tomunicipal staff

Many Ontario municipalities are members of MFOA. All employees of a member municipality have theopportunity to join MFOA. As a member, you are entitled to a variety of services provided by MFOA. Pleasecontact Julie Turcsanyi at [email protected] to get you started.

Intergovernmental RelationsThrough our advocacy work we have developed an extensive network at themunicipal and provincial levels, acting as a collective voice for municipal financeofficers.

Policy Development & AdvocacyWe conduct research and share best practices to promote municipal fiscal sustainability. We enhance yourcapacity by providing write-ups on a range of issues of interest and importance to our members.

Want to influence policy? Join an existing MFOA committee or join a new one. We believe that municipalengagement and consensus building are key to sound policy development.

Information SharingOur Virtual Library has hundreds of examples of policies that have been approved by municipal councils. Ifyou can't find what you need, let us know and we will try to find it.

Subscribe to our monthly eNewsletter for updates on best practices and ongoing consultations.

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Professional Development & EducationWe organize networking events and an annual conference to allowmembers to network and develop their professional connections.

We offer webinars and workshops on "core" and "new" topics such asAsset Management, Reserve and Reserve Funds, Government FundingUpdates and more. Be sure to look out for Municipal Finance 101sessions - a must attend 2-day workshop for new municipal employees.

COMING SOON!Interactive e-

learning modules

Job OpportunitiesPositions in municipalities and ministries are advertised on our website and in our monthly eNewsletter.

One Investment ProgramThis offers various products including Money Market, Bond Portfolio, Equity Portfolio, UniverseCorporate Bond and High Interest Savings Account (HISA).

Expand Your Network withYPN@MFOA

MFOA's Young Professional Network!

The Young Professionals Network (YPN) is a group of individuals who areunder the age of 35 and/or have worked in municipal finance for less thanfive years. Young financial professionals working in any areas within amunicipality are encouraged to join networking, training and annualconference events to build upon their professional capacity.

What is YPN@MFOA?

What does YPN@MFOA Do?YPN@MFOA allows young finance professionals become part of agrowing network where you can interact with colleagues from othermunicipalities to learn best practices, ask questions or just chat andlearn about the world of municipal finance!

Are There Networking Opportunities?

YPN Talk sessions can be accessed online!

Join us for the YPN@MFOA networking event at the annualMFOA conference!

Standalone networking events!

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Ways to Get InvolvedWe encourage you to check if your municipality is an MFOA member. If yes, make sure yourname, title and contact information are added to our database. You will get exclusive access tomember pricing on training, new policy information and be connected to municipal financeprofessionals across the province.To get involved, access the YPN@MFOA webpage on MFOA's website or join our group onLinkedIn (YPN@MFOA).

Want to do more? Join our YPN Committee consisting of 10-12 members representing all types ofOntario municipalities. Their purpose is to assist MFOA in identifying the evolving needs of youngprofessionals and act as subject matter experts in a focus group when identifying professionaldevelopment and networking opportunities.