WORKSHOP BACKGROUND. 10 year Capital Planning Education and Training Workshop - September 22, 2015 For discussion purposes only

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WORKSHOP BACKGROUND

On April 8, 2015, staff presented an update of the Town’s 10 Year Capital Forecast to help Council understand the story of the Town’s current ﬁ nancial reality through a high level review of approved Plans, Civic Precinct and other items not in the forecast.

10 YEAR CAPITAL FORECAST & FINANCIAL PRESSURES:

• The 10 Year Capital Forecast amounted to $559.0 million for the 2016 to 2025 time horizon

• As shown in the chart below, majority of the capital projects are either a) growth related and funded by development charges or b) repair and replacement type capital projects funded by the tax levy

• As a result of various Council approved Plans, the capital projects place signiﬁ cant pressures on the Town’s reserve funds:

• DC Reserve Funds – timing of growth related capital projects in advance of development and DC collection

• Repair and Replacement and Cash to Capital Reserve Funds – expire in 2022 (2016) if annual contributions in the operating budget remain the same *including R&R reserve funds established from Hydro proceeds

• Ecological Legacy Reserve Fund – to date identiﬁ ed as only funding source for EAB, need strategy to fund remaining program and to replenish RF for its intended purpose – discussion of operating budget going forward

• Balance in reserve funds decline from $328 million in 2015 to $144 million in 2025.

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10 year Capital Planning Education and Training Workshop - September 22, 2015

OTHER SIGNIFICANT PROJECTS:

• In addition to the 10 Year Capital Forecast, the following items were presented for discussion:

• $178.5 million was earmarked for Projects 1 and 2 of the Civic Precinct (2015$) • Community Enhancement & Economic Vitality Reserve Fund – balance needs to be protected and grown through investments for Civic Precinct project • $5.7 million for Valleyland Capital Plan

• Water Quality Protection Reserve Fund – stormwater management fee needs to be increased annually to provide for both storm ponds and valleylands • David Dunlap Observatory Master Plan – capital cost info not available at the time • Richmond Green: Tennis Strategy and Review of Agricultural Buildings 1 and 2 – capital cost info not available at the time

COMBINED FINANCIAL PRESSURES:

• $743.3 million total for 10 Year Capital Forecast, Valleyland Capital Plan plus Civic Precinct

• Excluding: DDO Master Plan, RG Tennis Strategy and Review of Agricultural Buildings

• Council members requested a follow-up workshop on other potential revenue generating mechanisms and alternative fund options to alleviate

the funding pressures:

• Design-Build Partnerships (P3s)

• Private Operators / Management Companies • Naming Rights

• Foundations

• Council also requested that staff investigate/present key elements of a draft Debt Policy

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INFRASTRUCTURE FUNDING GAP

As part of the 2014 work plan, staff undertook an update of the Town’s Lifecycle Replacement Model - an assessment of the current asset inventory and estimated total replacement costs. The results of the update indicated if annual contributions in the operating budget remain the same, the Repair and Replacement Reserve Funds will expire in 2022.

Repair & Replacement Reserve Funds provide for infrastructure replacement to maintain existing capital facilities and structures in full service and safe operating condition.

NEED TO ESTABLISH A REPAIR & REPLACEMENT FUNDING STRATEGY:

• To provide adequate, sustainable and stable reinvestment in existing infrastructure • To address the infrastructure gap

• Determine optimal contribution target to minimize gap and achieve asset sustainability

POLICY CONSIDERATIONS:

• Closing the funding gap must be balanced against acceptable levels of taxation and other priorities that the Town may face

• If annual contributions in the operating budget were increased by the equivalent of one percent of a tax rate each year until 2025, then the reserve funds would last to 2030

• Consider moving towards a Pay As You Go approach (Average annual spend $19.1 million) • PAYG in 5 years – 2.8% tax rate each year to achieve average spend in 2020 • PAYG in 10 years – 1.4% tax rate each year to achieve average spend in 2025

• Average annual contribution required for 100% provision - $54.4 million vs. $6.4 million current contribution – infrastructure funding gap

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HYDRO RESERVE FUNDS

On March 30, 2015, Council directed staff to review the six speciﬁ c reserve funds from the Richmond Hill Hydro sale proceeds (in 2002) and report back in the Fall of 2015 regarding its purpose and need for realignment; and that the public consultation process for new services to include collection of views and opinions on the future use of the six speciﬁ c reserve funds under current or realigned purpose.

HYDRO RESERVE FUNDS HISTORY:

• In 2003, Council approved the by-laws necessary to create six new reserve funds using the proceeds from the sale of Richmond Hill Hydro of $146 million. The initial contributions are as follows:

• Capital Asset Continuity Reserve Fund - $55,000,000

• Transportation Network Repair & Replacement Reserve Fund - $25,000,000 • Water Quality Protection Reserve Fund - $15,000,000

• Ecological Legacy Reserve Fund - $6,000,000

• Community Enhancement and Economic Vitality Reserve Fund - $40,000,000 • Strategic Rapid Transit Reserve Fund - $5,000,00

• Staff propose to include a question in the 2016 Town Community Survey regarding the future use of these reserve funds

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CAPITAL ASSET CONTINUITY REPAIR AND

REPLACEMENT RESERVE FUND

PURPOSE: To ﬁ nance capital expenditures for the restoration and replacement of Town

assets and infrastructure such as general fl eet and equipment, fi re stations, fl eet, apparatus, administration buildings, recreation facilities and park development.

RESERVE FUND HIGHLIGHTS:

2003 Established Balance: $ 55.0 million • 2015 Projected Year End Balance: $ 31.0 million

RESERVE FUND HISTORY:

• $48.4 million in capital/operating expenditures

• $16.5 million – Parks repair and replacement (including parks equip.) • $11.6 million – Facilities repair and replacement

• $8.8 million – Public Works ﬂ eet and equip. repair and replacement • $3.5 million – Library repair and replacement

• $2.8 million – Fire Services repair and replacement (including ﬁ re trucks) • $2.6 million – Arena repair and replacement

• $1.6 million – IT repair and replacement • $1.0 million – Misc. small capital projects • $23.5 million interest income

FORECASTED EXPENDITURES:

10 Year (2016-2025) Capital Forecast: $ 71.0 million ($7.1 million average/year) 10 Year Operating Budget Contributions: $ 25.5 million ($2.6 million average/year)

• The 10 Year Capital Forecast projects $71.0 million in expenditures: • $40.0 million – Facilities repair and replacement

• $25.0 million – Parks repair and replacement

• $6.2 million – Library furniture and collection repair and replacement • In the April 2015 Capital Planning Workshop, the outlook on how long this and other R&R reserve funds would last was 2022

• If annual contributions in the operating budget were increased by the equivalent of one percent of a tax rate each year until 2025, then this and other R&R reserve funds would last to 2030

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TRANSPORTATION NETWORK REPAIR AND

REPLACEMENT RESERVE FUND

PURPOSE: To ﬁ nance capital expenditures for the repair and replacement of the

Town’s transportation infrastructure.

2003 Established Balance: $ 25.0 million

2015 Projected Year End Balance: $ 23.2 million

• $20.0 million in capital expenditures

• $13.8 million – Roads repair and replacement, reconstruction • $4.8 million – Hwy 404 Bridge – Markham (non-growth component) • $0.8 million – Misc. capital projects

• $0.6 million – Municipal streetscape (Yonge Street BRT) • $13.5 million interest income

10 Year (2016-2025) Capital Forecast: $67.9 million ($6.8 million average/year) 10 Year Operating Budget Contributions: $23.4 million ($2.3 million average/year)

• The 10 Year Capital Forecast projects $67.9 million in expenditures related to roads reconstruction and overlays

• In the April 2015 Capital Planning Workshop, the outlook on how long this and other R&R reserve funds would last was 2022

• If annual contributions in the operating budget were increased by the equivalent of one percent of a tax rate each year until 2025, then this and other R&R reserve funds would last to 2030

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WATER QUALITY PROTECTION RESERVE FUND

PURPOSE: To be used on rehabilitation of environmental stormwater management

systems and to add environmental systems within Richmond Hill to ensure continued ﬂ ood protection, erosion control, downstream watercourse and habitat quality

protection, and the protection of drinking water sources for the long term.

2003 Established Balance: $15.0 million • 2015 Projected Year End Balance: $16.0 million

• $8.7 million in capital expenditures • $2.0 million – Rumble Pond Rehab. • $1.8 million – Pioneer SWM Pond Rehab. • $1.2 million – Elgin Mills greenway restoration • $1.2 million – Misc. capital projects

• $1.1 million – Harding Park East Pond Rehab. • $0.6 million – Don Head West Pond Rehab. • $0.5 million – Lake Wilcox Baif Pond Rehab.

• $0.3 million – Yonge St. storm sewer system repair • $7.0 million interest income

• $2.3 million revenue from Stormwater management fee

10 Year (2016-2025) Capital Forecast: $20.0 million ($2.0 million average/year) 10 Year Operating Budget Contributions: $11.1 million ($1.1 million average/year)

• The updated 10 Year Capital Forecast reﬂ ects $5.7 million in expenditures for the Valleyland Capital Plan in addition to $14.3 million for storm ponds

• The reserve fund balance will gradually decline over time as a result of capital funding for storm ponds and valleyland (projected to have deﬁ cit in 2020)

• The Stormwater Management Fee is structured to provide funding for the above mentioned projects

• Update Stormwater Management Financial Plan in 2016 to reﬂ ect revised assumptions • The Stormwater Management Fee needs to be increased by at least 5% annually to provide for both storm ponds and valleyland beyond the forecast period

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ECOLOGICAL LEGACY RESERVE FUND

PURPOSE: To provide funding for community based projects to further ecological

initiatives within the community.

*2003 Council motion was for the $6.0 million principal to be protected (only interest to be used). However, Emerald Ash Borer was not envisioned at the time of by-law establishment. The need to fund the EAB program resulted in Council’s approval to use of the principal.

2003 Established Balance: $6.0 million • 2015 Estimated Year End Balance: $2.6 million

• $7.7 million in capital/operating expenditures

• $4.2 million – Urban forest management (Emerald Ash Borer) • $1.4 million – Organic collection (green bins 2006/07)

• $1.2 million – Community tree planting (Community Stewardship Program) • $0.5 million – Operating budget transfers (ES staff)

• $0.4 million – Misc. small capital projects • $3.8 million interest income

FORECASTED EXPENDITURES & REVENUES:

10 Year (2016-2025) Capital Forecast: $6.9 million ($0.7 million average/year) 10 Year Operating Budget Contributions: $ 0.0 million

• In the 2013 Capital Workshop, it was identiﬁ ed that this reserve fund will be fully used by 2016 being the only funding source for Emerald Ash Borer (EAB). Principal has been used to fund for the 2014 and 2015 EAB program. $5.2 million remaining to complete the EAB program

• Some municipalities are dealing with EAB through a special levy to all residents (ie. Markham and Mississauga) or re-purposing reserve funds

• Community Stewardship Program funding of $170,000 per year – matched by funding partners

• Funding strategy required for the approximate $2.6 million unfunded portion of the EAB strategy and the Community Stewardship Program

• In June of 2015, Council directed staff to include a 1% tax over 5 years for consideration in the 2016 Operating Budget to support the Town’s remaining capital costs of EAB

• Re-establishing the Ecological Legacy RF principal for future ecological initiatives to be funded by interests earned

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COMMUNITY ENHANCEMENT

AND ECONOMIC VITALITY RESERVE FUND

PURPOSE: To provide funding for projects that will enhance the quality of life and/or

enrich the economic vitality of the community.

2003 Established Balance: $40.0 million

2015 Projected Year End Balance: $49.2 million

• $31.4 million in capital/operating expenditures • $11.7 million – RHCPA

• $10.0 million – Donation to York Central Hospital

• $4.4 million – Community Capital Grants (Careﬁ rst, Pathways, Reena Elder Home, York Centre For Children, Canadian Museum of Hindu Civilization)

• $1.6 million – IT telephone, hardware equipment, portal system • $1.0 million – Donation to Mon Sheong Foundation

• $0.9 million – Royal Le Page building (Post Ofﬁ ce building exterior) • $0.5 million – Terry Fox Tribute

• $0.5 million – Operating budget transfers (secondments) • $0.6 million – Misc. small capital projects

• $38.3 million interest income

• The primary project currently identiﬁ ed for use of these funds is the Civic Precinct

• Speciﬁ c investments are earmarked for the balance of this reserve fund

• If the Civic Precinct project proceeds then the current balance needs to be protected to allow for balance to grow through investments ($65.2 million in 2021)

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STRATEGIC RAPID TRANSIT RESERVE FUND

PURPOSE: To be used for funding long range strategic rapid transit projects which

are multi-jurisdictional in nature. Funding committed by the Town would be used to leverage and attract signiﬁ cant funding from other levels of government and/or public-private partnership arrangements.

2003 Established Balance: $5.0 million

2015 Projected Year End Balance: $8.6 million

• $25,000 Grade Separation Study • $3.3 million interest income

• None

• Potential funding source for the non-growth portion of the Town’s future grade separation projects

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PUBLIC-PRIVATE PARTNERSHIPS (P3S)

P3s are a long-term performance-based approach to procuring public infrastructure where the private sector assumes a major share of the risks in terms of ﬁ nancing and construction and ensuring effective performance of the infrastructure from design and planning, to long-term maintenance. Canada is increasingly being recognized as a world leader in establishing successful public-private partnerships (P3s) to address its infrastructure deﬁ cit.

Alternative Financing and Procurement (AFP) is the name given to the form of P3s frequently used in Ontario, managed by Infrastructure Ontario (IO).

DesignͲBuildͲFinanceͲ OperateͲMaintain BuildͲOwnͲOperate (OutrightPrivatization) Greater Pr iv at e Secto r Respo n sibility TraditionalModel: DesignͲBidͲBuild GreaterPrivateSectorRiskAssumed BuildͲFinance DesignͲBuildͲFinance DesignͲBuild DesignͲBuildͲFinanceͲ Maintain P3 Models MUNICIPAL BENCHMARKING:

• Thunder Bay – Courthouse – AFP model. Project value $247.7 million. DBFM structure

• OPP – Construction of 18 new OPP detachments, regional headquarters. AFP model. Project value $292.7 million. DBFM structure • Markham/Toronto – Pan American Centre, Etobicoke

Olympium and Pan American Field Hockey Centre. AFP model. Project value $80.5 million. BF structure.

• Toronto – Athletes Village for Pan American Games. Project value $709 million – buildings will become housing development, dormitory for students at

George Brown College and training facility will become a YMCA

• York Region Rapid Transit Corporation - H2 portion of Hwy7 VivaNext rapidway – AFP model. Project value undisclosed. DBF structure. YRRTC project manage day-to-day construction, York Region will operate YRT/Viva service. Metrolinx will retain ownership of the assets

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PUBLIC-PRIVATE PARTNERSHIPS (P3S)

WHAT MAKES A GOOD P3/AFP PROJECT: • Capital costs greater than $100 million

• Project has a sizable maintenance component

• Project is complex and includes ﬁ nancing and construction risks that the private sector is best to assume

• Project which the private sector has a proven AFP delivery track record POSSIBLE REVENUES AND/OR COST SAVINGS:

• Value for Money compares the cost of delivering a project under two different delivery models to determine which provides the lower estimated total project cost. • Value for Money savings are achieved if the higher cost elements of the AFP procurement model are more than offset by the reduction of retained risks

BENEFITS:

• Utilize private project management expertise and innovation to build/rebuild infrastructure • Transfer risks to private sector (Detail Design, Financing, Scheduled Lifecycle, Maintenance) • Require the consortia to include the entire concession lifecycle costs up front (DBFM/DBFOM) • Allow deductions for poor performance against KPIs (DBFM/DBFOM)

CHALLENGES:

• P3s or AFPs are the right solution only when the beneﬁ ts exceed the costs

• Every partnership has risks involved, the public sector is paying the price to transfer those risks to the private sector (project/cost creep)

• Choosing the right model to ﬁ t project

• Upfront time commitment and contract management to establish agreement (specialized contracting experts, unless utilizing AFP structure delivered by IO) • Declining municipal ﬂ exibility and control

POTENTIAL TRH PROJECTS:

• Consider P3/AFP approach for Civic Precinct Project 1 – Estimated costs of $171.1 million (2015 $) and project duration of 8 years

• Provides alternative procuring and ﬁ nancing approach to Civic Precinct Project

• That staff further investigate the Alternative Financing and Procurement (AFP) approach for the Civic Precinct Project and that a Council Education and Training Workshop be held on the topic of AFP as part of the 2016 Capital Budget Process.

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PRIVATE OPERATORS

AND MANAGEMENT COMPANIES

Municipal partnerships for the operation of indoor recreation facilities are increasingly common. Two types of arrangements are common between municipalities and the private partner: 1) The private operator owns and operates the facility but receives some municipal support 2) The municipality as the owner of the facility and the private sector partner as the operator

MUNICIPAL BENCHMARKING:

• Markham – Uplands Golf and Ski Centre – Management company has exclusive right to maintain, manage and operate the facility; pays tiered annual fee to the City

• Vaughan – The Sports Village Complex – Municipal capital agreement with a private party to develop the facility. 45% investment from the City, ﬁ nancial arrangement for other 55% guaranteed by the City and serviced by the private partner through revenues. City owns and leases the land to the private partner. The ‘tenant’ operates the facility and is responsible for managing all day-to-day business and operations

• Calgary – City ﬁ nancing and leading the planning, D&C of the four new facilities while each operator (Canlan and YMCA) will be responsible for the ops, programs and maintenance • Chatham Kent – Proposed indoor recreational complex funded and operated by Canlan • Oshawa/Brampton – YMCA received capital donations and waiving of development fees

POSSIBLE REVENUES AND/OR COST SAVINGS:

• Capital cost savings • Operating cost savings

BENEFITS:

• Maximize service delivery to the public – potential savings on capital costs and improving operating cost efﬁ ciency

• Proven effective programs run by private partners

CHALLENGES:

• Higher user fees – argued as greater value

• Long term ownership considerations – lifecycle replacement

• Private operators/mgmt. companies have preferences towards the size/type/age of facilities • Contract management

• May not meet Recreation Plan and community needs

• Consider partnerships to develop proposed indoor recreation facilities and new arena pads

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NAMING RIGHTS

Naming rights are a type of sponsorship and form of advertising in which an external individual, organization or corporation purchases the exclusive right to name an asset or venue for a ﬁ xed period of time in exchange for cash and/or other considerations under a long-term arrangement

• Markham – Flato Markham Theatre – 10 years @ $1 million plus $30,000 for changes to the signage from Flato Developments. Commitment to sponsor/underwrite all the artistic cost of bringing, once a year, one major South Asian celebrity for a performance

• Whitchurch-Stouffville – Lebovic Centre – Now the Whitchurch-Stouffville Leisure Centre. $500,000 over 10 years donated by Joseph Lebovic Charitable Foundation, expired in 2011 • Newmarket – Magna Centre – $5.6 million over 10 years. Components within the facility such as the aquatic centre, ice rinks and gym are also individually named by other sponsors • City of Toronto – Extensive naming rights and sponsorship program including Sony Centre, Scotia Bank Nuit Blanche, CN Tower (no payments have been made from CN since 1990s) • Manitoba – Sponsor Winnipeg program offers naming rights to every ambulance, parking structure, deﬁ brillator, dog park, recreation program and parking meter in the city to give average citizens as well as corporations a chance to support for services

• Milton – Mattamy National Cycling Centre – Cisco Milton Pan Am / Parapan Am Velodrome

• Revenues generated from Naming Rights may be allocated to the general fund

(offset operating costs), or towards capital reserves (facility R&R) and debt management

BENEFITS:

• New revenue streams to reduce the potential burden on the tax base and user fees • Generate new funds to help the municipalities with asset management and repair and renewal requirements of aging facilities

• Opportunity for the individuals and corporations to give back to the community

CHALLENGES:

• Community perceptions about sponsorship and detraction from the municipal brand • Assessing the value of the Naming Rights opportunities and ﬁ nding the right sponsor “ﬁ t” – mostly interested in new facilities

• Potential need for dedicated staff resources

• Consider naming rights for new Town assets such as parks and trails, the proposed indoor recreation facilities and libraries

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FOUNDATIONS

A municipality may set up a foundation (registered charity) to bring donors to contribute as community builders, matching their interests and concerns with

community needs and organizations, and ﬁ nding innovative and responsible ways to give their investments a lasting impact.

• Friends of Markham Museum – a registered charity (incorporated in 2008) established by The City of Markham to be an advocate of the Museum within the community (Raising $60,000+ from Gala, other donations and fundraising $20,000+) • Friends of the Museums of Mississauga – a registered charity to promote, strengthen and support the museums of Mississauga (Raising $40,000 through annual Galas, additional $120,000 in cash plus $200,000 in donated goods and services) • Mississauga Heritage Foundation Inc. – a registered charitable organization dedicated to promotion of local heritage

• Grants and donations

• Events and sponsorships (eg. Fundraising Gala)

BENEFITS:

• Residents can contribute and help build the community

• Raise funds to support development of cultural assets and/or promote local heritage

CHALLENGES:

• Initial set up – time commitment, governance structure and set up costs • Ongoing administration – community members to lead the work with staff as advisory and committee to provide support, guidance and oversight

• Consider a registered charitable foundation to promote and protect the cultural assets in Richmond Hill

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GRANTS

PURPOSE: Funding for infrastructure projects and studies creating the opportunity to

invest in our community while protecting reserves and lessening the load on property tax.

GRANTS HIGHLIGHTS (2007 TO 2014):

Total Received: $29.2 million • By Application: $21.4 million

• Allocation by Population: $7.8 million

FUNDED PROJECTS BREAKDOWN

• Infrastructure $29.1 million for 24 projects - Buildings (9), Stormwater (2), Roads (7), Parks (6)

• Studies and other initiatives $132,000 for 4 projects

GRANTS RECEIVED SINCE 2007:

• 2007 - $45,663 • 2008 - $10,279,994 • 2009 - $17,048,746 • 2010 - $40,000 • 2011 - $1,000,000 • 2012 - $722,833 • 2013 - $90,080 • 2014 - $0 GRANTS SUMMARY:

• Signiﬁ cant but inconsistent source of funding averaging $3.65 million per year over past 8 years

• Past allocation not a reliable indicator of future opportunities • Annual grants strategy to maximize opportunities

• David Dunlap Observatory • Oak Ridges Corridor Reserve

• Railway Crossings (Grade Separations)

• Grants have extended the life of the Town’s reserves and could do so in the future • With grant opportunities provided annually, no way to predict long term potential from future grants

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COMMUNITY BENEFIT CHARGE

Currently municipalities may negotiate with developers to receive voluntary payments (also known as Community Beneﬁ t Charges) to support growth-related infrastructure not covered under the Development Charges Act.

These voluntary payments may assist municipalities to pay for the non-growth share or discounted portion of growth-related capital infrastructure projects, as well as capital projects ineligible for development charge funding without incurring debt.

• Barrie – $4,500 per unit capital charge in addition to development charges to upgrade existing roads and services

• Whitchurch-Stouffville – $3,500 for parks

• East Gwillimbury – amount negotiated but not disclosed

• Markham – proposed levy on newly built homes to fund 50% of NHL-size arena • Aurora – $3,000 per unit capital charge in addition to development charges for parks • King – $5,000 + developer contributions to reduce the cost of the sewers to residents of Nobleton and King City

• Milton (Known as Capital Provision) – recover 50% of the Non-DC’able charges for growth capital (i.e. the 10% deduction, ineligible services, capital costs in excess of the DC standard)

• Voluntary payments (Community Beneﬁ t Charges) are new revenue streams to provide funding for capital projects

BENEFITS:

• Provides funding to assist municipalities to pay for the non-growth share or DC ineligible capital infrastructure projects – without the potential burden on property taxes

• Allows infrastructure to be constructed to support growth in a timely manner and without impacting other planned Town capital infrastructure projects

CHALLENGES:

• Argued that charges in addition to DCs may reduce housing affordability

• Proposed change in Bill 73 to remove the ability for municipalities to impose voluntary payments not speciﬁ cally permitted by the Development Charges Act

• Consider Community Beneﬁ t Charge for Civic Precinct and/or DDO project POLICY CONSIDERATIONS:

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DEBT FINANCING

The goal for capital ﬁ nancing is to ﬁ rst maximize all funding from external sources, development charges and reserve funding, before using the Town’s own revenue sources, namely operating contribution and debt.

Most municipalities are experiencing the ﬁ nancial pressures caused by growing community and limited revenue sources therefore turning to debt ﬁ nancing to fund capital infrastructure.

TWO TYPES OF DEBT FINANCING:

External Debt – Includes any obligation for the payment of funds which normally consists of debentures (issued through the Region) as well as notes or cash loans, and leases.

Internal Financing – Borrowing from other reserves with commitment to repay with interest.

WHAT IS APPROPRIATE FOR DEBT FINANCING:

• Signiﬁ cant capital infrastructure due to either growth or replacement need? • Up-front investment to mitigate future operating costs or generate

operating revenues?

• Fund other capital projects that will beneﬁ t the community?

• Municipal Act

• Allows issuance of debentures to build and rehabilitate infrastructure assets used to provide municipal services.

• Two-tier government structure – debentures issued by upper tier

• Debt charges – 25% of own source net revenues - Annual Repayment Limit (ARL) • Term of ﬁ nancing not to exceed the lesser of 40 years or the useful life

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DEBT FINANCING

Municipality CouncilApprovedARL ProjectFunding

Mississauga 15.00% Capitalprojects– BRT,infrastructureupkeep,growth

projects

Toronto 15.00% Capitalprojects– TTC,PoliceandEMS

Newmarket 10.00% Capitalprojects– landandnewfacilities

Vaughan 10.00% Capitalprojects– primarilyroadsrehabilitation($9million

peryear)

YorkRegion 25.00%+Growthcost supplement

Capitalprojects– roads,water&wastewater

Oshawa 15.00% Capitalprojects– DurhamRegionCourthouse,Amazing

PlacesProgram

BENEFITS:

• Allows for distribution of costs over the life of assets and for intergenerational equity • To accelerate the timing of DC funded growth infrastructure in advance of development (DC related debt is entirely recoverable through DC rates) • Funding of large capital infrastructure (non-DC) projects that will beneﬁ t the community over a long time that are not eligible for other funding sources (eg. Civic Precinct)

• Up-front investments to generate future operational savings

• Reduce the current infrastructure gap and minimize the impact on tax rates. Avoiding debt when no other sources are available will increase the “infrastructure gap” • Historically low interest rates (10 Yr-2.25%, 20 Yr-3.13%) resulting in low borrowing cost

CHALLENGES:

• Borrowing poses risk if credit conditions change

• Recognize when borrowing is appropriate to minimize the impact on tax rates • Need to ﬁ nd an optimal level and have a prudent ﬁ scal strategy

• Servicing of debt is an operating budget pressure – impact on property taxes • Ongoing debt management

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DEBT FINANCING

• TRH would have a $47.3 million annual repayment limit (principal & interest) calculated as 25% of net revenues (10 Years at 5% p.a., this allows for $365 million of borrowing, 20 Years at 5% - $589 million)

• 10% of net revenues - $18.9 million repayment limit – 10 Yr @$146 million, 20 Yr @$236 million

• 15% of net revenues - $28.4 million repayment limit – 10 Yr @$219 million, 20 Yr @$353 million

• Consider accelerating DC growth projects

• Approximately $83 million required for RG and North Leslie Indoor Rec. Facilities, Ops Centre Master Plan, Central Library Expansion, RH Centre Library

• DC related debt ﬁ nancing consumes part of ARL, however repayments are entirely recoverable through DC rates to offset operating budget impact • 10 Years at 2.25% - $9.4 million, 20 Years at 3.13% - $5.6 million • Consider debt ﬁ nancing unfunded portion of Civic Precinct $43 million • 10 Years at 2.25% - $4.8 million, 20 Years at 3.13% - $2.9 million (5.1% and 3.1% tax rate equivalent)

• Consider debentures for infrastructure upkeep

• Consider up-fronting capital investments to generate future operational savings – Unfunded portion of LED Conversion approximately $8 million

• 10 Years at 2.25% - $0.9 million, 20 Years at 3.13% - $0.5 million (1% and 0.5% tax rate equivalent)