Long Term Financial Overview

2017 and BeyondPresented to:  Committee of the Whole

January 25, 2017

Presentation Agenda 2017 Budget Overview Questions & Answers Infrastructure and Infrastructure Deficit Debt and Reserve Funds  Questions & Answers BMA Study 2016 ‐ Taxation and Affordability Economic Environment Financial Projections 2018‐2022 Questions & Answers

BUDGET VIDEO

2017 BUDGET OVERVIEW

2017 Proposed BudgetCity Manager Direction

2017 departmental budgets to come in at 0% increase over 2016 level (not including wage increases)

Savings Target from budget directions of $1.8 million to be identified to mitigate impact of tax levy from operations

Expansions reviewed and minimized Review all corporate accounts for reductions Focus on Operating Budget Stabilization to address 

unfavourable variances and begin to restore reserve fund contributions for sustainability

Investing in Canada Federal and Provincial Infrastructure Funding

2017 Gross Budget

2017 Projected Grant Subsidy

Public Transit Infrastructure Fund $8,129.5 $3,364.2

Clean Water and Waste Water Fund (Tax)

$5,487.0 $4,106.3

Clean Water and Waste Water Fund (Rate)

$6,197.4 $3,953.8

Social Infrastructure Fund $8,348.1 $3,800.8

Green Infrastructure Fund $5,279.0 $2,374.5

Total $33,441.0 $17,599.6

*

* Approval received

2017 2018 2019 3 Year Average

Comments

Budget DirectionTotal Municipal Tax Levy

4.41% 3.64% 3.87% 3.97%

Estimated Municipal Levy Impact on Existing Taxpayers (Net of Growth)

4.40% 3.10% 3.00% 3.50% Based on estimated Growth at $9K in 2017 and $1M in 2018 and $1.7M in 2019

Proposed BudgetTotal Municipal Tax Levy

3.53% 4.19% 3.85% 3.86% Revised 2018/2019 projections to be discussed later on

Municipal Levy Impact on Existing Taxpayers (Net of Growth)

3.07% 3.37% 3.07% 3.17% Based on Growth of $821K in 2017,$1.5M in 2018 and  $1.5M in 2019

2017 – 2019 Proposed Municipal Tax Levy Increase

2.79%3.77%

2.67%

0.02%

2.22%

0.61%1.64%

4.56%

5.64%

2.35%

0.10%

0.22%

‐0.06%

2.38%

1.69%

1.99%

1.38%

‐1.82%‐2.62%

0.00%

1.10%

1.02%

1.18%

‐3.00%

‐1.00%

1.00%

3.00%

5.00%

7.00%

9.00%

11.00%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Proposed

City of Thunder BayMunicipal Tax Levy % Change (Before Growth)

How Spent

Net Operating Budget Increase % of Levy Capital (including EIRP) % of Levy Stabilization % of Levy

2017 Budget Key Drivers$ Municipal TaxLevy Increase

($000s)

% Change in TotalMunicipal Tax Levy

Comments

Base Increase $ 3,307.5 1.86%Mainly wages (75% of Depart.Gross Budget is Wages)

Stabilization Measures $ 2,295.6 1.29%Legal, Insurance Claims, Golf Revenue, Early Leave

Reserve Fund Contributions $ 1,244.4 0.70%Legal, Insurance, WSIB, Renew TBay, Prior Year one time

Debenture Payments $ 922.5 0.52%Golf Links, Waterfront, Construction Financing

Other Expansions $ 687.3 0.39% Solid Waste, Roads Quality, Material & Purchase Services $ 816.1 0.46% Energy costs,  Snow Removal

Thunder Bay Police Service $ 1,098.4 0.62%Increase to deal with previous unfavourable variances

Total Before Reductions $ 10,371.8 5.84%

Operating Reductions ($ 2,776.1) (1.56%)City Manager Review Process, Insurance Premiums

Increased revenue ($ 1,314.7) (0.75%)Municipal Tax Levy Increase Before Growth

$ 6,281.0 3.53%

Taxable Growth ($ 821.0) (0.46)Total Municipal Tax Levy Increase Net of Growth

$ 5,460.0 3.07%

Budget Stabilization• 2011 to 2014 Focus on Capital – restraining increases to 

Operating Budget• Very “tight” operating budgets faced increasing pressure 

mainly related to:– Harsh Winters– Legal Expenditures (External Fees)– Insurance Claims

• Year End Budget Deficit in 2013, 2014 • Multi‐year budget stabilization strategy introduced in 

2015 Budget, continued in 2016, and finalized in 2017

Surplus (Deficit) History• 2009  $2.2M Favourable Variance• 2010  $5.8M Favourable Variance• 2011  $1.6M Favourable Variance• 2012 No Significant Variance• 2013  ($8.2M) Unfavourable Variance• 2014  ($3.6M) Unfavourable Variance• 2015  ($1.1 to $1.7M) Unfavourable Variance  ‐ Q3

Projection• 2015 $1.0M Favourable – Actual *• 2016 No Significant Variance (Projected)

* Actual variance would have been ($2.4) million unfavourable without additional supplemental tax revenue

Stabilization Measures Included in 2017 Budget

2017 Proposed

Legal Fees 682,000

Early Leave/Retirement Costs 187,900

Golf Revenue Adjustment 250,000

Insurance Claims 982,900

Remove Reliance on Other Reserve Funds 192,800

Total 2,295,600

Other Stabilization Measures Included in 2017 Budget

2017 Proposed

Legal Reserve Fund – One Time 500,000

Insurance Reserve Fund – One Time 250,000

WSIB Reserve Fund – One Time 500,000

Renew Thunder Bay Reserve Fund 250,000

Total 1,500,000

Cost Containment/Deficit Management Reduction (Tax Supported)

• 2012 ‐ $1.3 million (Report No. 2012.111)• 2013 ‐ $1.4 million (Report No. 2013.101)• 2014 ‐ $1.7 million (Report No. 2014.079)• 2015 ‐ $0.5 million (Report No. R138/2015)• 2016 ‐ $3.0 million (Report No. R136/2016)• 2017 ‐ $2.8 million proposed• Total $10.7 million from 2012 to 2016

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cumulative Wage Increases Emergency vs Non Emergency Services

Emergency Groups Non‐Emergency Groups (including Non‐Union)

Average Increase Last 5 years:

Emergency Service Groups: 2.66%

Non‐Emergency Service  Groups: 1.89%

City of Thunder BayMunicipal Tax Levy % Change

YEAR% CHANGE

% Net Growth% CHANGE 

Before Growth Net of Growth2008 2.89% ‐0.42% 3.31%2009 4.00% 0.07% 3.93%2010 2.60% 0.68% 1.92%2011 2.40% 0.41% 1.99%2012 3.91% 0.70% 3.21%2013 2.60% 0.72% 1.88%2014 3.02% 1.33% 1.69%2015 3.83% 0.65% 3.18%2016 4.04% 1.94% 2.10%2017* 3.53% 0.46% 3.07%

10 Year Average 3.28% 0.65% 2.63%

* Proposed 2017 Municipal Tax Levy Increase

2017 Proposed BudgetWhat do my municipal taxes pay for? 

$ Annual

Public Safety (Police, Fire, EMS) 331

Public Works (Roads , Transit, Waste , Asset Management/Engineering/Central Support )

164

Social Services (DSSAB , Homes for the Aged) 88

Parks, Recreation, Tourism 79

General Corporate 74

Administration 64

Outside Boards & Agencies (excluding Police) 63

Debenture payments (Capital Projects) 56

Enhanced Infrastructure Renewal Program 36

Development Services 15

Capital Programs 13

Tax Rebates and Write‐offs 17

TOTAL CITY SERVICES $1,000

Per $1,000of municipal

tax levy

Public Safety and

Public Works Is 50% of Total

Questions ?

INFRASTRUCTURE AND INFRASTRUCTURE DEFICIT

2017 Enhanced Infrastructure Renewal Program (EIRP)

Roads $2.8 Storm Water Management $1.3 Facilities $1.2 Parks $2.2 Bridges and Culverts $0.5 Sidewalk Replacement $0.3 Street Lighting $0.1

Remains at $8.4 million (Consistent with 2016)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Proposed

Millions

Tax Supported Capital Financing

Capital out of Revenue Debenture Enhanced Infrastructure Renewal Program Total

Comprehensive Asset Management Plan V3 Tax Supported Deficit

Asset Category $ Millions

Roads $4.5

Sidewalks $3.7

Bridges & Culverts $3.0

Storm Sewers $3.6

Facilities $5.2

Fleet $4.0

Land Improvements $1.6

Machinery & Equipment $2.0

Total Tax Supported Deficit $27.6

• Projected to be eliminated in 16 years by:

• All Federal and provincial Gas Tax and OCIF funding dedicated to tax supported capital;

• Utilize debt of $7.144 million annually;• Maintain tax supported capital spending at the 2016 level in 

2017, a slight increase of $0.7 million in 2018, an increase of $1.4 million in 2019;

• Further increases in tax supported capital year over year until 2014 spending levels are reached, followed by increases of 2.5% per year.

• Enhanced Infrastructure Renewal Program (EIRP) consistent with 2016 level until 2022 with increases in future years. 

• Reinvesting net savings in debt services costs related to maturity of debt into EIRP.

Strategy to Eliminate Tax Supported Infrastructure Deficit

DEBT & RESERVE FUNDS

• Debentures a funding source for infrastructure renewal

• Ontario Ministry of Infrastructure – Municipal Infrastructure Strategy

Intergenerational equity Long term financing strategy Municipalities must be open to alternative 

financing 

Municipal Infrastructure & Debt

Debt Management Strategy

• Key components of Debt Management Strategy Reinvest debt servicing savings into EIRP 2013 annual capital level of $6.8 million adjusted 

annually for inflation Establish debt service target ratios Long term financial plans for Wastewater and Solid 

Waste Additional debenture financing for major capital 

(new non‐recurring and significant, large legacy and special projects – multi‐generational and/or generate significant long term economic growth)

Debt Service Ratios

Debt Service Ratio 2014 Actual 2015 ActualMaximum Limit    

(Note 1)% % %

Overall  5.5 5.6 10.0 Tax 4.7 4.8 7.5 Water  23.3 23.3  26.0 Wastewater ** 26.6 21.6 30.0 

Note 1:  Maximum Limits per Debt Management Strategy** Efforts are to be made to achieve a 15% in future years

189 200 

190 182 

170  169 177 

169  170 179 

 ‐

 50

 100

 150

 200

 250

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Debt OutstandingIn $millions

Total Debt Outstanding

Tax Supported Debt

Rate Supported Debt(including Tbaytel)

Debenture Balance

Outstanding at December 31, 2015

Outstanding at December 31, 2016

Tax Supported $74,744,509 85,345,915

Wastewater $37,982,944 $38,230,020

Water Authority $56,004,585 $62,745,774

TBaytel $10,220,000 $6,400,000

Total Outstanding Balance $178,952,038 $192,721,709

 ‐

 50,000,000

 100,000,000

 150,000,000

 200,000,000

 250,000,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Total Projected Long Term Debt2016 to 2026

Tax Supported

Rate Supported

Tbaytel

Total

Purpose of Reserve Funds 

Stabilize tax rates Financing for one‐time or short‐term 

requirements

Internal financing

Acquisition of capital assets

Future liabilities

Fiscal challenges

Ensure adequate cash flows

Tax Discretionary Reserves as a % of Taxation(BMA Municipal Study 2016)

30.0% 29.0% 32.0%

57.0% 55.0%

72.0%

40.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Sault Ste Marie North Bay Timmins Greater Sudbury Thunder Bay Survey Avg Northern Avg

Ratio of Total Debt to Total Discretionary Reserves(BMA Municipal Study 2016)

0.5 0.3

1.6 1.8

2.3

1.1 1.3

-

0.5

1.0

1.5

2.0

2.5

Greater Sudbury Sault Ste Marie Timmins Thunder Bay North Bay Survey Average Northern Average

Ratio of Total Debt to Total Discretionary Reserves(BMA Municipal Study 2016)

Reserve Funds vs Debt Tax‐Supported

0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$ in

milli

ons

Year

Tax-Supported Reserve Funds vs Tax-Supported Debt

Tax Supported RF's

Tax Supported Debt

For every dollar in Tax Supported Reserve Funds the City has $0.75 in Tax Supported Debt

Uncommitted Reserve Funds vs DebtTax Supported

Estimated UncommittedReserve Fund

Tax Supported  Debt

Projected

Debt to Reserve Fund Ratio

2016 70.9 85.3 1.2

2017 70.0 80.7 1.2

Actual Ratio as at Dec. 31, 2015 ‐ 0.75

Questions ?

BMA STUDY 2016 –TAXATION AND AFFORDABILITY

Residential ‐ Single Family Detached Bungalow2016 Municipal Tax Per Household Municipalities > 100,000 population

Source: BMA Municipal Study – 2016Ontario Average includes all  Municipalities participating in 2016 BMA Study (105 municipalities)

 ‐

 1,000

 2,000

 3,000

 4,000

 5,000

Ontario Average  $3,213  

Ontario  Average – Municipalities > 100,000 population $3,665

Thunder Bay $ 3,606

 1,000

 1,500

 2,000

 2,500

 3,000

 3,500

 4,000

2010 2011 2012 2013 2014 2015 2016

Residential Single Family Detached BungalowMunicipal Tax Per Household (2010‐2016) 

BMA Municipal Study

Thunder Bay

Ontario Average

Ontario > 100,000population

• Detached 3 bedroom single story house with 1.5 bathrooms and a one car garage• Total area of house of approximately 1,200 sq. ft.• Lot size of approximately 5,500 sq. ft.• Weighted Median Value of a dwelling of $173,522 in Thunder Bay for 2016

 ‐

 0.50

 1.00

 1.50

 2.00

 2.50

 3.00

 3.50

2010 2011 2012 2013 2014 2015 2016

Commercial – Office BuildingsMunicipal Tax Per Square Foot (2010‐2016) 

BMA Municipal Study

Thunder Bay

Ontario Average

Ontario > 100,000population

Source: BMA Municipal Study ‐ 2016

 ‐

 0.50

 1.00

 1.50

 2.00

 2.50

 3.00

 3.50

 4.00

2010 2011 2012 2013 2014 2015 2016

Commercial – Neighbourhood ShoppingMunicipal Tax Per Square Foot (2010‐2016) 

BMA Municipal Study

Thunder Bay

Ontario Average

Ontario > 100,000population

Source: BMA Municipal Study ‐ 2016

 ‐

 0.20

 0.40

 0.60

 0.80

 1.00

 1.20

 1.40

 1.60

2010 2011 2012 2013 2014 2015 2016

Industrial‐Standard IndustrialMunicipal Tax Per Square Foot (2010‐2016) 

BMA Municipal Study

Thunder Bay

Ontario Average

Ontario > 100,000population

Source: BMA Municipal Study ‐ 2016

Affordability

2016 Median Value of Dwelling

2016 Estimated Average 

Household Income

Median Value of Dwelling to Average 

Household Income$ $

Thunder Bay 173,522 80,607 2.2

Ontario Average 292,279  97,825 3.0Ontario Average > 100,000 population 336,261 100,113 3.4

Source:  BMA Municipal Study 2016

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

2010 2011 2012 2013 2014 2015 2016

Property Taxes as % of Income (2010‐2016) BMA Municipal Study

Thunder Bay

Ontario Average

Ontario > 100,000population

• Thunder Bay is 45th out of 105 Ontario municipalities in 2016• Thunder Bay is 12th out of 25 Ontario municipalities in 2016 

(>100,000 population)

Average Municipal Tax, Water/Wastewater BurdenAverage Household ‐ 2016 BMA Municipal Study

Municipalities > 100,000 population 

 ‐

 1,000

 2,000

 3,000

 4,000

 5,000

 6,000

Tax Water/Wastewater Ontario >100,000 Population

‐‐‐‐‐ Ontario Average‐Municipalities> 100,000 population $ 4,445

‐‐‐‐‐ Ontario Average‐All Municipalities $ 4,372

Thunder Bay $ 4,063

2016 BMA Study – Weighted Median Value of Dwelling‐Thunder Bay $173,522& average annual water consumption of 200 m3

ECONOMIC ENVIRONMENT

By the Numbers

Unemployment Rate – 6.3% (Nov 2016) {Canada – 6.8%; Ontario 6.3%} Vacancy Rate (apartments) – 5.0% ( CMHC ‐October 2016) Major Employers:

Top Public Sector

Thunder Bay Regional Health Sciences Centre  Acute Care Hospital  2,824 

Lakehead District School Board  Elementary & Secondary Education 2,200 

Lakehead University Education  2,103 

Top Non‐Retail/Industrial/Service Sector

Bombardier Transportation  Mass Transportation Equipment Manufacturing  1,100 

Resolute All Operations 642

Tbaytel Telecommunications 400

International Students:  Lakehead University 2018 projection: 1,000 (2016 actuals – 969) Confederation College 2018 projection: 500 (2016 actuals – 515)

Projected Economic ImpactMining Sector in NWO (2016-2021)*

4-7 new mines Estimated life 8-20 years 631 Kilometers road construction

required 363 Kilometers transmission construction

required 774.2 Megawatts power required 2,450 construction jobs created 2,018 operational jobs created

*Industry statistics compiled as at December 1, 2016, for CEDC

*Current employment levels at the 4 existing mines(Red Lake, Musselwhite, Lac des Iles, Williams) is 3,142

employees

Possible economic impacts listed below, but metal prices  will slow the development of these projects

Forecasted Additional Assessment (Growth)

• Apartment Buildings and Condominiums former Hillcrest High School 

• New Carpenter’s Union Office and Training Centre on Capital Way

• New two storey Commercial with Residential Apartments on Victoria Ave

• New commercial and residential building on Hodder Ave

• New Car wash at The Great Canadian Oil Change on Memorial Ave

• New Apartment bldg. Algoma St• New Aviation building at MNR Fire Base –

Arthur St

• Wacky Wings• New Tim Horton's – May St• New two storey Commercial 

building on Cobalt Crescent• New two storey restaurant next to 

Holiday Inn – Carrick St• New Beer Store – Fort William Rd• New Office Building – Balmoral St• Addition to The Keg• New Apartment Building – Oasis 

Lane• Addition to Maltese Grocery

City of Thunder Bay Economic Environment

CMHC – Thunder Bay Total housing starts expected to be lower in 2017 compared to 2015 

as apartment starts come in at levels more in keeping with longer term averages

Expected 1% increase in house prices in 2017 and 2018 Weaker Cdn $ good for export segment of Northwestern Ontario and 

should deter out‐shopping

Standard & Poor's Revised rating for City to AA‐ positive

Thunder Bay Port Authority Handled 8.8 million metric tonnes of cargo – third highest volume in 

the past 15 years

FINANCIAL PROJECTIONS 2018 ‐ 2022

Nature of Projections

Assist in future planning Future economic climate a factor Actual results will vary from projection – examples from 

past years OMERS Fluctuations in commodity prices Arbitration & wage settlements Support from Canada and Ontario

Projected Municipal Tax Levy Increase 

Total Net of Growth[1]2018 4.19% 3.37%2019 3.85% 3.07%2020  3.72% 2.99%2021 3.69% 2.99%2022 3.67% 2.99%

[1] – Based on estimated annual growth of $1.5 million 

Assumptions – Operating

• No changes in service levels or complement• Removal of 2017 proposed one time items• Inflationary increases from 0% to 2.5% excluding 

Insurance premiums, insurance claims and legal• OMPF grant expected be stable• No changes in service levels related to Boards• Debenture payments increase based on previous 

approved borrowing and projections for future borrowing

Assumptions – Operating (Cont’d)

• CPP Reform Introduced • Solid Waste (Waste Diversion into Tax)• Roads Quality Objectives (R94/2016)• Reserve Fund contributions increased gradually:

• Post Employment increased annually by $102k• Community Partnership increased $25k in 2018 & 2019

• WSIB Reserve Fund Contribution increased by $250kin 2018

• Insurance Reserve Fund Contribution increased by $100k in 2018

• Renew Thunder Bay increased contribution by $250kin 2019.

Assumptions – Capital

• Capital out of revenue increases returning to 2014 levels by 2022 ($13.8 million)

• Annual debenture borrowing increased annually by 2.5% from 2017 proposed level of $7.3 million

• No new special one time tax supported borrowing • Future debt repayment over 10 years @ 4.0% • Enhanced Infrastructure Renewal Levy Increases:

– Consistent with 2016 and 2017 levels ($8.4 million)

– No increases until 2022 when Capital out of revenue returns to 2014 levels

– Reinvesting net savings in debt services costs related to maturity of debt into EIRP.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2014 2015 2016 2017 Proposed 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022 Projected

Millions

Tax Supported Capital Financing2014 to 2016 Actual

2017 to 2022 Projected

Capital out of Revenue Debenture Enhanced Infrastructure Renewal Program Total

2018 – 2022 Future Directions Continue to pursue senior government funding  Support political efforts to reduce municipal costs  (e.g. 

AMO) Advocate for tax policy flexibility with Province Promote and aggressively pursue assessment growth 

through economic development Explore new budget revenue sources Work closely with Boards and Agencies re: multi year 

budgeting and restraint

Community Goals & Directions

Budget

Questions ?