LongRangeFinancialPlan July22,2013

StatusUpdate
Decemberworkshoppresentedtheresultsofthefinancialcondition assessmentfortaxrelatedservices Trends Industrybenchmarks SWOTanalysis Draftpolicyrecommendations

NextStepswereto: ReviewtheCity s existingwater/ wwfinancialplanandincorporateinto totalLRFP Buildalongrangefinancialplanwithoptionsandalternatives, incorporatingtherecommendedpolicies

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PurposeofSession
ProvideanoverviewoftheSWOT analysispresentedinDecemberto summarizethefinancialcondition assessmentalongwithsupporting recommendedpolicies

PresentaLongRangeFinancial Planwithvariousoptionsand alternativesforCouncil consideration

KeyElementsofaLRFP

CompletedinDecember2012and presentedtoCouncil

SummaryofFinancialConditionAssessment

Strengths
Regularlyreviewuserfeesandrevenuegeneratingopportunities Relativelystrongconstructionactivity
SignificantplanningworkundertakenthroughMaster,StrategicPlansand AssetConditionAssessments

Lowlevelsofdebtfortaxrelatedcapitalinfrastructure 10yearcapitalbudgethasbeendevelopedfortaxandwater/ ww Annualcontributionstoreplaceassets,whilenotfullymeetingallneeds, createsanexcellentfoundationuponwhichtobuildafinanciallysustainable planforthefuture Higherthanaverageperhouseholdincome Lowerthanaveragemunicipalburden ( taxandwater/ ww)inrelationtoincome levels
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Weaknesses
Decliningoverallfinancialpositionsince2006 Water/ WWreservesinanegativepositionwith $ 29millioninunfinanced capital Taxcapitalreservebalancesarelowinrelationtoassets Taxesreceivableareaboveindustrystandards Aginginfrastructurewithlimitedfundstoaddressbacklogsandgaps identifiedinconditionassessmentreports

Opportunities
Constructiongrowth Firerelocationstudy Additionalefficiencieswithintheoperations ImprovedquantificationoftheCity slongterminfrastructureneeds Parksrationalization Potentialforneworupdateduserandpermitfees ( e. g.billboards,signs, tippingfees,rentalfacilities) Uploadingofsocialservicecosts SaleofGoldMineanduseofproceeds

Threats/ Challenge
Decliningorunknowngrants ( ConnectingLinks,GasTax)
Lowerrelativeassessmentbaseuponwhichtoraisetaxes Additionalappealsforminingandreassessment

Changesinassessmentincreaserelianceonresidentialassessment Agingpopulationwithpotentiallydifferentserviceneeds
Legislativerequirementsimpactthecapitalprogram( e. g. accessibility requirements, OFMregulations, GreenEnergyAct) e. g. transitfareparity ConflictinggoalswillposeasignificantchallengetotheCity Minimizing/ suppressingtaxincreases
Maintainingorenhancingexistingprogramsandservices

Implementingnewinitiatives PostEmploymentBenefitliabilities(approx.$ 10million) Salarynegotiations

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AchievingFinancialSustainability

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Strategies:PrudentAssetManagementCapital
ExistingSituation Approximately50%oftheCity staxsupportedassetsaredepreciated withlimitedcapitalreservestosupportreplacement

City sapproachhasbeentofundcapitalfromoperatingwhichhas workedrelativelywellbutcapitalbudgetrequirementsvaryfromyear toyear,particularlyforlargeprojects

Withlimitedcapitalreserves,theonlyoptionistodeferorissuedebt Negativewater/ wwreserves

Strategieshavebeenincludedtograduallyaddressgaps

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ProposedAssetManagementPolicies
1. Basedonaffordabilityconsiderations, aphaseinstrategyhasbeen developedtoprovideforincreasedcontributionstoCapitalReserves. 2. Newassetswillcontributetoreplacementreserves.Iffundedthrough debt,annualcontributionswillbemadeoncethedebtrepayments havebeencompleted.
3. Capitalprojectswillbereviewedandprioritizedbyacross Departmentalteam.

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Strategies: UsingDebtStrategically
ExistingSituation Provinciallimit 25%ofamunicipality sownsourcerevenues

Taxrelateddebtchargesis1. 6% in2012 ( additionaldebtcouldbeconsidered toclosetheinfrastructuregap)

Existing10yearplanrequirestheissuanceof $ 80. 25millioninwater/wwdebt includingunfinancedcapital)

Inlightofthecapitalrequirements, debtpoliciesshouldbeestablishedto ensurethattheCityisabletoeffectivelyfinancethecapitalbudget

Giventhedifferentfinancialneedsinwater/ wwandtax, thestrategyistoestablishseparatetargetsforwater/ ww andtaxaswellasaconsolidatedmaximumdebt threshold

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ProposedPolicies DebtManagement
1. TaxDebtChargesasa % ofOwnSourceRevenuesshouldnotexceed 10%. 2. Water/ WWDebtChargesasa % ofOwnSourceRevenuesshouldnot exceed25%. 3. TheconsolidatedWater/ WWandTaxDebtChargesasa % ofOwn SourceRevenuesshouldnotexceed10%.

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Strategies:ProvidingforContingencies
ExistingSituation GovernmentFinanceOfficers Associationrecommendsstabilization andcontingencyreservesshouldbe5% 15%ofOwnSourceRevenues

Taxsupportedcontingencyreserves 8% Nocontingencyreservesfor Water/ WWreserves

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Strategies:ProvidingforContingencies
TaxContingencyReservesasa % ofOwnSourceRevenues

FormalizeapolicyforContingencyfortaxandwater/ ww
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ProposedPolicies ProvidingforContingencies
1. Targetbalanceoftaxcontingencyreservesof5%15%oftaxOwn SourceRevenues. 2. MinimumWater/ WWReservesof10%asa % ofOwnSource Revenues. 3. Useonlyforextraordinarytypeexpendituresoronetime expendituresincludingpreviousyearsoperatingdeficits. 4. OncetheTaxStabilization/ ContingencyReserveshavereachedthe upperendofthetarget,transfertheoperatingsurplustotheCapital Reserves.

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Strategies: OperatingwithPrudentForesight
ExistingSituation Councilandstaffhasbeenactivelyparticipatinginthedevelopmentofa numberofstrategicplansandMasterPlanswhichsettocourseforthe futureofTimmins
StrategicPlanrequiresasolidfinancial foundation

Strategic Plan

Master Plans
LongCapital Rangeand FinancialOperating PlanBudgets

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Strategies: OperatingwithPrudentForesight

1. TheCitywillmaintainaLongRangeFinancialPlantoassessthe longtermfinancialimplicationsofcurrentandproposedpolicies. 2. TheOperatingandCapitalBudgetswillbealignedwiththeCity s LongRangeFinancialPlan,theStrategicPlanandMasterPlans. 3. TheCity sfinancialtrends ( reserves,debt,financialposition,A/ R, etc.)willbemonitoredcloselyandreportedtoCouncilonanannual basis.

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Strategies:ContinuousImprovement
Involves Strengtheningaccountability Establishinganunderstandingofthe expectedresultsorservicestandards ineacharea Identifyingandtrackingprogress againstorganizationalgoals Identifyingopportunitiesfor improvement Ensuringcommunityrequirements arebeingmet Improvingthebudgetprocess

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Strategies:ContinuousImprovement
Staffidentifyopportunitiesforserviceimprovementsaswellas opportunitiestocreateefficienciesandrealignresourcestoareasof highestneed e. g.includeconsiderationof: TransitRouteRationalization Firerelocation Accessibletransitserviceequality Springcleanup Energyauditsandefficiencies, utilitysavings Realigningresourcestostrategicpriorities tourism,TEDC Realigningresourcestomeetdemandandsafetyrequirements building, roads
Incorporateassumptionsforcontinuousimprovement intoLRFPtoreflectimpact
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Strategies:ContinuousImprovement

1. Programandservicereviewswillcontinuetobeundertakentoensure thattheyareprovidedinanefficientandcosteffectivemanner.

2. Efficiencygainswillbedirectedtofundinfrastructureandcapital programs.

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Strategies: MaximizingRevenueOpportunities
ExistingSituation Outstandingtaxesreceivable 10. 5% Cityproactivelymanagesitsuserfees, licensesandpermits TheCityconsidersadditionalopportunitiesto generatenontaxrevenues E. g.incorporatenewbuildingpermit revenueassumptions Recyclingcharge, environmentalfee increase Hallandicerentals
Incorporateallfuturerevenueoptionsandopportunities inLRFPmodeling
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Strategies: MaximizingRevenueOpportunities
1. Collectionpolicygoalforoutstandingtaxesreceivabletobenomore than10%oftaxeslevied. 2. TheCitywillreviewandupdateuserfeesannuallytakinginto considerationtheincreaseinallcosts ( directandindirect),thecurrent market situation, andminimizingthenegativeimpactstothepublic. 3. Acomprehensive userfeereviewwillbeundertakenaminimumofevery fiveyears,orearlier, asrequiredtoreflectchangesinthecostofservice, demandforserviceorserviceofferings.

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LongRange FinancialPlan LRFP)

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OutcomesofLRFP
Stabilityandpredictabilityoftaxesand rates ProtectstheCity sassets

Quantifiesanygapsbetweenavailable fundsandanticipatedexpensesandhelps determinestrategiestoclosethegap

Maximizingfinancialflexibility

Helpsfairsharinginthedistributionof resourcesbetweencurrentandfuture tax/ ratepayers

FinancialSustainability

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KeyChallengesFacingtheCity
CostsEscalatingFasterThanInflation

UnderfundedAsset Renewal/ ReplacementProgram InflexibleRevenueRaisingTools DecliningGrants

ShiftingDemographics ResistancetoTaxIncreases
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TaxOptionsConsidered
ModelModel ModelModel
Currentcontributions

ModelModel

L CapitalCapitalContributionsContributions 3% LevyLevyIncreaseIncrease

3% levyincrease graduallyincreasethe contributionstothecapitalfunds.

ModelModel

L CapitalCapitalContributionsContributions 3. 5% LevyLevyIncreaseIncrease

3. 5% levyincrease graduallyincreasethe contributionstothecapitalfunds. Notean alternativedebtoptionhasalsobeen included

4% levyincrease graduallyincreasethe contributionstothecapitalfunds.

ModelModel

L CapitalCapitalContributionsContributions 4% LevyLevyIncreaseIncrease

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OperatingModelAssumptions
1. 5% increaseforsalariesandwagesin2013,2% annualincrease thereafter 3. 6% increaseinbenefitsin2013,3% thereafter Annualincreaseof2% forthemajorityofexpendituresincludingoffice supplies,professionalservices, miscellaneousexpenses Annualincreaseof3% forMaintenanceandRepairs

Annualincreaseof5% forHydro
Annualincreaseof3. 5% annuallyforwater

Annualincreaseof2 % forgas Annualincreaseof2% forgeneralrevenues ContributiontoCapital/ Reservesvariesbasedonmodel

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TaxOperatingBudget
201420152016201720182019202020212022
Model162,509,685$$ Model262,012, 435$$ Model362,615, 435$$ Model463,222, 435$$ 64, 220, 024$ 65, 958, 961$ 67, 603, 376$ 69, 469, 550$ 71, 421, 509$ 73, 237, 998$ 75, 207, 833$ 77, 312, 520 63, 876, 118$ 65, 789, 857$ 67, 763, 395$ 69, 796, 869$ 71, 894, 161$ 74, 046, 867$ 76, 268, 648$ 78, 556, 855 64, 808, 118$ 67, 076, 857$ 69, 424, 395$ 71, 853, 869$ 74, 369, 161$ 76, 971, 867$ 79, 665, 648$ 82, 454, 855 961, 869$ 76, 921, 161$ 79, 997, 867$ 83, 197, 648$ 86, 525, 855 65, 752, 118$ 68, 381, 857$ 71, 117, 39573,

Model12. 0% 2. 7% 2. 7% 2. 5% 2. 8% 2. 8% 2. 5% 2. 7% 2. 8% Model23. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% Model33. 5% 3. 5% 3. 5% 3. 5% 3. 5% 3. 5% 3. 5% 3. 5% 3. 5% Model44. 0% 4. 0% 4. 0% 4. 0% 4. 0% 4. 0% 4. 0% 4. 0% 4. 0%

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Water/ WWOperatingBudget

Water9,200, 000$$ 9, 294, 456$ 9, 388, 912$ 9, 483, 368$ 9, 672, 279$ 9, 861, 191$10, 050, 103$10, 239, 014$10, 427, 926$ 10, 616, 838$10, 805, 749 WW7, 500, 000$$ 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, 500 Total16, 700, 000$$ 17, 781, 956$ 18, 138, 912$18, 495, 868$18, 947, 279$19, 398, 691$ 19, 850, 103$20, 301, 514$20, 665, 426$ 21, 029, 338$21, 393, 249 Change6. 5% 2. 0% 2. 0% 2. 4% 2. 4% 2. 3% 2. 3% 1. 8% 1. 8% 1. 7% Water9,200, 000$$ 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, 157 WW7, 500, 000$$ 8, 487, 500$ 8, 742, 125$ 9, 004, 389$ 9, 274, 520$ 9, 552, 756$ 9, 839, 339$10, 134, 519$10, 438, 554$ 10, 751, 711$11, 074, 262 Total16, 700, 000$$ 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 Change6. 5% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0% 3. 0%

3% increasewillgenerateadditionalreservesavailableforcapitaland/ or reducethedebtrequirements

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10yearTaxSupportedCapitalBudget

107. 7millionoverthenext10years Notethatthisdoesnotaddress theinfrastructuregapthatexists

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Strategies:PrudentAssetManagementCapital
CapitalBudgetdoesnotreflectallCity requirements:
7millionindeferredworkrelatedtofacilities 47%ofroadsdeficient underfundedprogram 0. 7millionannuallyneededforbridgesand culverts
Limitedcapitalfundingavailableforparksand recreationcapital

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ContributionstoCapital
Amountofcapitalfunds available: Model1 $ 104. 0million Model2 ( 3%) 106. $ 0million Model3 ( 3. 5%) 125. $ 5 million Model4 ( 4%) 145. $ 7million

Opportunitytoincreasetheavailabilityoffundsforcapitalprogramsandto addresstheinfrastructuregapbyincreasingtheannualnetlevyby0. 5%1%

Thiswouldbeavailabletoaddressbridge,buildingsandroadinfrastructuregaps aswellasnewinitiatives.
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StrategiestoClosetheInfrastructureGap
Model2 3%
Model3 3. 5%

Year1 -$ 8. 2millionYear1 -$ 8. 5million Year2 -$ 9. 0 millionYear2 -$ 9. 6 million Year3 -$ 9. 4 millionYear3 -$ 10. 4million Year4 -$ 9. 8millionYear4 -$ 11. 2million Year5 -$ 10. 4 millionYear5 -$ 12. 1 million Year6 -$ 10. 8 millionYear6 -$ 12. 9 million Year7 -$ 11. 2 millionYear7 -$ 13. 7 million Year8 -$ 11. 8 millionYear8 -$ 14. 8 million Year9 -$ 12. 4 millionYear9 -$ 15. 8 million Year10 -$ 12. 8 millionYear10 -$ 16. 7 million 106milliongenerated
Extra $ 20 millionfor capital

125. 5milliongenerated

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StrategiestoClosetheInfrastructureGap
DebtStrategies Toexpeditecapitalworksinan environmentwheretherearelimited reservesandinterestratesarelow considerissuingdebt Issueadditionaldebttoaddress infrastructuregapsandunmet needs. Limitedroominwater/ wwtoissue moredebtastheexistingplanis approachingthemaximum25% ceiling

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GuideforMunicipalAssetManagementPlans
BuildingTogether: Ministryof
InfrastructureOntario Asaconditionoffutureprovincial infrastructurefunding, municipalitieswill berequiredtodemonstratethatafull rangeofavailablefinancingandrevenue generationtoolshasbeenexplored Forexample,Model3at3. 5% annuallevyincrease Additional $ 20millionforcapital withoutdebtissued Alternativeistouseadditional taxrevenuestoissue $ 32. 5 millionindebt
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Water/ WWOptionsConsidered
BaseBaseModelModel
ReflectstheCity sexistingwater/ wwplan andincorporatesthecapitalrequirements andrateincreasesassetoutintheCity s plan

3% AnnualAnnualRateRateIncreaseIncrease

Reducesdebtissuanceduringthe10year period. Annualrateincreaseof3% annually from20152023

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10YearWater/ WWCapitalBudget

Significantcapitalrequirementsin20132016 Duetothelackofreservesandadesiretomanagerateincreases, $ 50. 7 millionindebtfinancingwillberequiredoverthe10years +unfinanced capitalof $ 29. 6million

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Water/ WWFinancingOptions

Capitalbudgetisthesameunderbothmodels,however,thedebtis $ 9. 3 millionlowerinModel1
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Water/ WWDebtChargesRatio

CombinedWater/ WWMax

Proposedpolicyforwaterandwastewateristhatthecombineddebt shouldremainbelow25%ofownsourcerevenues
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TaxDebtChargesRatio

Asthereisnonewdebtissuedduringtheforecast,taxdebtcharges remainswellbelowtherecommendedtargetof10%. Thealternativemodelwhichissuesanadditional $ 32. 5millionindebtis alsowellbelowthetarget.

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ConsolidatedDebtRatio
CombinedWater/ WWMax

CombinedTotalMax

Additionaldebtroom

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ConsolidatedDebtRatio ( AlternativeDebt)
CombinedWater/ WWMax

CombinedTotalMax

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PrioritizationPrioritizationandandBalanceBalanceAreAre CriticalCriticaltoto SuccessSuccess

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AdditionalOptionsandStrategies
Reducingcapitalprogramrequirements through capitalprioritizationanddeterminingthemostcost effectiveoptions Institutingauserfeesurchargeforthe replacementofassets Additionalgrantfundingtoleverageotherlevelsof governmentwherethereisalignmentwiththe community spriorities Additionaldepartmental efficienciesorprogram reductions PublicPrivatePartnerships
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Summary

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Summary
Timmins, likemanymunicipalitiesisfacingsignificantchallengeswhich willrequiredecisionstobemadetomeettheneedsofthecommunity andtheirwillingnesstopayforservices: Increasingoperatingexpendituresataratefasterthaninflation RevenuePressures -Grantsandsubsidiesareinconsistentand havebeendeclining TaxResistance Desiretolimitpropertytaxincreases ShiftingDemographics Assetsarereachingthestagewheretheywillrequirereviewing, replacingandupgrading Newprojectstomeettheneedsofthecommunity Thechallengeistofindtherightbalancewithlimitedresourcestomeet yourcommunityneeds
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