Municipal Finance Orientation January 16, 2019 1
2 Municipal Finance Financial Sustainability ……………………………3 1. Budget………………………………………………………6 a) The Municipal Budget Process……………7 b) The Property Tax System…………………32 c) Boundary Adjustment………………………59 d) Development Charges……………….…….64 2. Capital Plan / Asset Management……………….67 3. Debt Management…………………………………….70 4. Reserve Management………………………………..73
Municipal Finance Financial Sustainability 3
4 Council Orientation Financial Sustainability Council Endorsement In June, 2017, Council approved the following motion: Whereas the County of Brant endeavors to manage finances in a fiscally responsible and sustainable manner; And Whereas Financial Sustainability Guidelines have not been updated since 2011; And Whereas key components of a strong Financial Sustainability plan include Debt Management and Reserve Management Plans; Therefore, that the Guidelines for Achieving Financial Sustainability be received for information; That the Debt Management Plan be approved; And that the Reserve Management Plan be approved.
Financial Sustainability Quick Reference Guide Capital Plan Debt Management Reserve Management Budget Asset Management Plan (AMP) Debt Management Plan Reserve Management Plan Council - Annually Current AMP recommendations to Review/approve with each term of Review/approve with each term of Presentations: November and 2018. Development of long term plan is Council. Annual Report to Council. Council. Annual Report to Council. December. Approval in December. in the planning stages. Asset Management Plan Statutory Limitations Types of Reserve Funds Base budget Completed in August 2013 Annual Repayment Limit (ARL) Discretionary Reserve Fund: Previous year's budget, minus one time Based on the County's prior year - Created at the discretion of Council revenues/expenses, plus any Council Key Recommendations Financial Information Return (FIR) to earmark revenues to finance future approved in-year revenues or expenses The County should spend $19M per expenditures of a purpose designated year, over the next 10 years to renew by Council. Wage Increases No more than 15% of Own Source the highest risk infrastructure. Current - Subdivided into Operating, Capital and Tied to the Consumer Price Index (CPI) Revenues (OSR) can service debt. At spending is approximately $17M/year. Specific Use. December 31, 2015 the County's rate - Bylaw required. Expenditures was 6%. Obligatory Reserve Fund: - Inflationary increases as applicable. Year AMP Target Capital Bud. - Required by legislation or agreement - Percentage increase equal to the new 2013 $7.4M $7.9M Categories: to be segregated from general growth for the proceeding year. 2014 $7.7M $5.1M 1. Tax Supported - Levy impact. revenues for a special purpose. - Increases from approved additional 2015 $8.0M $5.3M - Classified as Deferred Revenue on services. 2016 $8.4M $6.6M 2. DC or Rate Based - Paid for through financial statements. - Increases from approved enhanced 2017 $8.7M $7.8M Development Charges or recovered - Subdivided into Operating and Capital. services. 2018 $9.0M through Rates. - Increases to debt service charges * $1.2M required in 2018 budget to Reserve vs. Reserve Fund based on issuance of debt. meet AMP Target 3. Investment - Pays for itself over Reserve: - Decreases for redundant services, time (i.e. Solar projects, Business Park). - Makes no reference to any specific debt discharge etc. Long Term asset and does not require the physical The County should continue to spend Keep in Mind: segregation of money. Revenues approximately $19M (plus inflation) per - Debt is not issued until a project is - Established primarily for the purpose - User Fees increased based on analysis year to sustain existing infrastructure. complete. of providing working funds. and market comparators. - Current debt does not include all - Cannot have a revenue / expense - New revenue streams to offset loss 2016 State of the Infrastructure - approved debt. itself, only transfers in/out. of revenue (i.e. grant revenue) to be Roads - Issuance of debt has a direct impact Reserve Fund: explored. - key component of the AMP on the operating budget in terms of - A fund that is segregated and - Fund new services or enhancements - ID'd the need for additional funding of servicing (repaying) the debt. restricted to meet a specified purpose from other revenue sources where $250K/yr over next 5 years until it and includes both obligatory and a applicable. reaches at least $7.3M. discretionary reserve fund. 5
6 BUDGET
Municipal Finance The Municipal Budget Process 7
8 Council Orientation Municipal Budget Legislated Budget Requirements Municipal Act, 2001 • There is a legal requirement under section 290(1) of the Municipal Act, 2001 that Council adopt estimates of all sums required during the coming year for the purposes of the municipality • The budget shall be prepared during the year or in the immediately preceding year • Exception: in a year following an election year, must be prepared only in the current year (2019 must be approved in 2019) • Municipal budgets must be balanced under Section 290(2) meaning that estimated revenues are equal to the estimated expenditures
Council Orientation Municipal Budget 2019 Budget: Starting Point Council approved the following resolution: That staff be directed to prepare a draft operating budget which: a. maintains the current level of service; b. includes decision packages that would increase the level of service; And that staff be directed to prepare a draft capital budget a. to fund maintenance and/or replacement of existing assets/infrastructure with a capital tax levy of $9,342,771 b. to include decision packages for the purchase/construction of new assets. 9
10 Council Orientation Municipal Budget Elements of Budgeting: Planning Coordination Control
Council Orientation Municipal Budget Elements of Budgeting: Determination of services or functions that the municipality must provide Includes background studies, documents, and decisions such as: Planning • Strategic Plan • Asset management plans • Needs studies (Roads, Municipal Properties, Etc.) • Official Plans and Area Studies • Development Charge Background Study • Bylaws and resolutions of Council 11
12 Council Orientation Municipal Budget Elements of Budgeting: Review of municipal fiscal context and budget drivers Review of budget estimates Coordination Evaluation of individual budget elements Final consideration of a draft budget for eventual approval Committee of the Whole - Council
Council Orientation Municipal Budget Elements of Budgeting: Regular review of monthly variances Action if necessary on monthly variances Use of annual budget as a: Control • policy document • operations guide • financial plan • communications tool 13
14 Council Orientation Municipal Budget Budget Process: Prepare Evaluate / Approve Implement Budget Estimates / Review Draft Budget / Budget and Timetable Draft Budget Budget Bylaws Controls Staff and Staff and Staff Council Council Council Council
Council Orientation Municipal Budget Budget Process: Municipal Budget Operating Budget Capital Budget Funding Ongoing Day-to-Day Funding Infrastructure and Assets Operations Buildings Salaries, Wages Roads Utilities Water / Wastewater Assets Maintenance Activities Vehicles and Equipment Supplies Technology Assets 15
16 Council Orientation Municipal Budget Budget Process: Municipal Budget Operating Budget Capital Budget Tax & DC Rate Supported Tax Supported Rate Supported Supported Capital Operating Budget Operating Budget Capital Budget Budget Driven by a needs Driven by a needs Driven by a cost- Driven by a cost- methodology, methodology, recovery recovery supported by supported by methodology, methodology, policies, plans, policies, plans, supported by supported by studies, and social studies, and social plans and studies plans and studies requirements requirements
Council Orientation Municipal Budget Budget Process: Revenues Fees and Charges Grants Reserves and Investments The Municipal Budget as a Simple Financing (Debt) Statement of Operations Property Taxes Expenses Assets and Infrastructure Operations Financing (Debt Servicing) Other 17
18 Council Orientation Municipal Budget Budget Process: Revenues Municipalities are able to recover costs for a range of activities through fees and charges Fees and Charges (outlined in Section 391 of the Municipal Grants Act ): - Facility use charges Reserves and Investments - Licenses and Permits Financing (Debt) - Fees for water and wastewater - Fines Property Taxes - Development Charges Expenses Some fees are structured through legislated documents (water and wastewater rates, Assets and Infrastructure development charges), some are based on Operations the capacity of the marketplace (facility user fees, business licensing), and some are driven Financing (Debt Servicing) by the values of the community (social Other program access, children’s programming)
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