fin-2013!07!22 - presentation to council - long term financial plan
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7/27/2019 FIN-2013!07!22 - Presentation to Council - Long Term Financial Plan
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LongRangeFinancialPlanJuly 22, 2013
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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
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Purpose of Session
Provide an overviewof the SWOTanalysis presentedin Decembertosummarizethe financial conditionassessment along with supportingrecommendedpolicies
Present a Long RangeFinancialPlan with variousoptions andalternatives for Councilconsideration
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KeyElementsof a LRFP
Completedin December2012 andpresented to Council
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Summaryof FinancialConditionAssessment
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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
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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
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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
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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
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AchievingFinancialSustainability
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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
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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.
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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
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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%.
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Strategies:Providingfor Contingencies
ExistingSituationGovernment Finance Officers’
Associationrecommendsstabilizationand contingencyreservesshould be 5%15% of Own Source Revenues
Tax supportedcontingencyreserves8%
No contingency reserves forWater/ WW reserves
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Strategies:Providingfor Contingencies
Tax ContingencyReservesas a % fOwn SourceRevenues
Formalizea policyfor Contingencyfor tax and water/ww
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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.
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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
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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.
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Strategies:ContinuousImprovementInvolves
Strengtheningaccountability
Establishingan understandingof theexpectedresults or service standardsin eacharea
Identifyingand tracking progressagainst organizationalgoals
Identifying opportunitiesforimprovement
Ensuringcommunity requirements
are being metImproving the budget process
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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
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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.
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Long RangeFinancialPlanLRFP)
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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
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KeyChallengesFacingthe City
Costs EscalatingFasterThan Inflation
Underfunded AssetRenew al/Replacem entProgram
Inflexible RevenueRaising Tools
DecliningGrants
Shifting Demographics
Resistance to Tax Increases
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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.
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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
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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%
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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
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10 yearTax SupportedCapitalBudget
107. 7 millionover the next 10 years – Note that this does not addressthe infrastructuregap that exists
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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
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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.
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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
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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
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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
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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
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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
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Water/WW FinancingOptions
Capitalbudgetis the sameunderbothmodels,however,the debt is $ 9.3million lowerin Model1
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Water/WW DebtChargesRatio
CombinedWater/ WWMax
Proposedpolicy for water and wastewateris thatthe combineddebtshould remain below 25% of own sourcerevenues
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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.
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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
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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
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Summary
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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
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