(1) approve the 2011 Operating Plan as detailed in the attached Appendix A to give the CEO spending authority for 2011; and

Transcription

1 2011 Operating Plan Item 4 April 6, 2011 BOARD OF DIRECTORS To: Board of Directors Report:TCHC: From: Chief Financial Officer Date: March 23, 2011 Page 1 of 2 PURPOSE: To seek Board approval for the 2011 Operating Plan. RECOMMENDATIONS: It is recommended that the Board: (1) approve the 2011 Operating Plan as detailed in the attached Appendix A to give the CEO spending authority for 2011; and (2) authorize the appropriate Toronto Community Housing officials to take the necessary action to give effect to the recommendations. REASONS FOR RECOMMENDATIONS: The Toronto Community Housing 2011 Operating Plan (Appendix A) has been prepared based on the financial targets and the priority initiatives set in the business plan Community Management Plan (CMP). At the December 2010 meeting, the Board of Directors approved an interim 2011 Operating Plan ( Plan ) to give the CEO spending authority for 2011, pending confirmation of funding level from the Service Manager (City of Toronto). Toronto Community Housing s subsidy is based on the funding formula in the Operating Agreement as follows: Rent Supplements based on agreements for the number of units in these programs. Property tax subsidy based on actual for buildings under the Social Housing Reform Act (excludes rent supplement programs units);

2 2011 Operating Plan Report: TCHC: of 2 Mortgage subsidy based on actual for buildings under the Social Housing Reform Act (excludes rent supplement programs units); and Residual funding based on previous year with inflation adjustment (excludes rent supplement programs units). The Service Manager has confirmed the 2011 subsidies based on funding formula with an adjustment to increase the 2011 subsidy by $1.20 million to further offset most of the added city waste pickup charges. The City also confirmed the remaining approved funds for SHRRP phase 2 of $17.1 million for capital repairs against Toronto Community Housing s submission of $48 million. The Plan also included $20.9 million for SHRRP renewable energy projects and $22.9 million of funds remaining from the City hydro sale funding allocation of $75 million. The attached 2011 Operating Plan sets out the total spending envelope for Toronto Community Housing including the Buildings and Communities Investment Plan. The Investment Plan highlights the priority areas of resource allocation for 2011 including funding from the SHRRP for 2010 (phase 2). The Plan also includes the financial impact of 2011 Community Management Plan (CMP) priority initiatives. The Plan in Appendix A also incorporated other changes to the December interim plan as a result of better information and adjustments after 2010 year end. IMPLICATIONS AND RISKS: The 2011 Operating Budget approval will allow for the continual implementation of the CMP approved by the Board. The impacts of implementation of this budget will be communicated to staff, tenants and other stakeholders. Project specific communication plans are developed as initiatives are implemented. Len Koroneos Len Koroneos Chief Financial Officer Attachment: Staff Contact: A: 2011 Operating Plan Len Koroneos Chief Financial Officer Len.Koroneos@torontohousing.ca

3 APPENDIX A 2011 OPERATING PLAN I. Operating Plan Overview II. Table A Operation Cash Flow Table B Investment Plan

4 I. Operating Plan Overview The 2011 Operating Plan ( Plan ) was developed based on the 2010 operating projected results and adjusted for inflation including required increased OMERS pension plan benefit contributions, operations of new buildings opened during 2010, and the the full year impact of HST. The Buildings and Communities Investment Plan incorporates all the resources required to implement the Community Management Plan priority initiatives Operating Budget The phase 1 development of Regent Park buildings completed and operational in 2010 (261 units at 1 Oak, 30 Regent, Block 12 & 14 townhouses, and Rivertowne phase 2) are now budgeted for a full year of operation. The completion of 717 Broadview with its 69 units begins operations in the first quarter of Revenue: Rent-Geared-to-Income is projected based on 2010 actuals with no increase to rent levels. The additional months of operation on new buildings add $215,000 of RGI rent. The rent budgets are shown as gross revenue before vacancy losses. However, units vacated for Regent Park phase 2 have reduced the rent by $872,000. This estimated loss has been included in the plan. Market rent gross revenue is projected based on 2010 actuals plus an average increase of 0.7%, which is the 2011 rent increase guideline. The additional months of operation on new buildings add $511,000 of market rent. The vacancy loss for RGI and market units are targeted to improve by 24.4% from the 2010 levels. The 2011 budget for non-rental revenue of $29.7 million includes revenue from commercial operation (parking and laundry), external revenues estimated to be generated by our 100% owned subsidiary HSI, commercial space retail and cable fees. The budgeted increase includes higher revenue from antennas, parking, and other commercial leases. Other Revenue includes the anticipated proceeds from the sale of 5 houses estimated at $3.2 million, the sale of 267 Jarvis estimated at $1.5 million and the sale of other investments for $3.8 million. Interest income is projected higher than the budget for 2010 and expected to increase in This increase is due to higher rates of return, partly due to transferring more invested funds from short term to long term investments, 2

5 and also the spread between interest paid and charged on the $61 million loan for Regent Park phase 2. The budgeted subsidy reflects funding agreements with the City s Social Housing Unit (acting as SHRA Service Manager). Under the Operating Agreement with the City, Mortgages, Property Taxes and rent supplement programs are based on actual payments. The Operating Agreement allows for net residual base subsidy increase at the cost of living increase which is based on the Statistics Canada report published at the end of each year. CMHC mortgages (50 year term) on 3 buildings will expire in By agreement with the City s Social Housing Unit these will switch from the funding under the subsidy formula in the Operating Agreement into the commercial rent supplement program. With funding from the City s commercial rent supplement program Toronto Community Housing will be able to continue to operate these buildings as Rent-Geared-to-Income units. Additional subsidies include funding for the city waste pickup charges of $5.7 million, which would be short of the expected costs in 2011 by $1.4 million. Also included are the Affordable Housing Program monthly subsidies for new buildings at Carlton, 60 Richmond, and 501 Adelaide which are funds to cover financing costs of these projects. Bad debt allowance is an estimate based on probabilities to collect the aged receivables. This estimate at $2.7 million is based on 2009 and 2010 trends. The total revenue for the housing operation is about $591.1 million. Subsidy that flows through to Access Housing Connection is another $35.1 million for a total Toronto Community Housing revenue budget of about $626.2 million. Expenditures Manageable costs are estimated to have inflationary increases of 2.5% which includes an increase in benefit contributions for OMERS pension plans of 1% of salaries which will add $720,000 to manageable costs (and $96,000 to other costs in AHC, commercial operations, and capital administration). The additional impact of HST in 2011 is $119,000 and the new requirement for Electrical Safety Authority annual inspection of $400,000 has been added to operations as directed by our external auditors. A reduction of $1.5m is included for estimated savings on our current vacant staff positions not expected to be filled due to a hiring freeze. The additional months of operating new buildings for 2011 adds $396,000 to the manageable costs. 3

6 Utilities rate increases average 4.2% above the actual 2010 levels with hydro estimated to increase 5%, gas estimated to increase by 0%, and water announced to increase by 9%. Harmonization of PST/GST tax, now HST, adds $714,000 to the 2011 budget. The reduction of hydro, gas and water consumption resulting from appliance and other energy management programs is estimated to result in savings of $3,383,000 and offset by financing charges for the capital investment in conservation measures (appliance program, energy retrofit program and building renewal program). These financing charges are included in the utilities budget. The 2010 energy management programs capital projects will have a full year of financing charges in 2011 compared to ½ year in 2010 for an increase of $2.4 million in financing charges. The additional months of operating new buildings for 2011 adds $304,000 while vacated units for Regent Park phase 2 result in savings of $514,000. The overall 2010 budget to 2011 budget increase including financing charges increases by 4.0%. Waste pickup fees are projected to be reduced due to the measures taken (such as compaction, and recycling). The projected cost for 2011 includes an estimated price increase of 2%. The subsidy is $1.4m less. The Operating Agreement provides for flow-through of mortgages and property taxes covered under the Social Housing Reform Act. About 13% of mortgages and taxes are for buildings not covered by the operating agreement. The lower mortgage budget reflects a lower interest rate at renewal. CMHC Mortgages (50 year term) on 3 buildings will expire in By agreement with the City s Social Housing Unit these will switch from the funding under the subsidy formula in the Operating Agreement to the commercial rent supplement program. There will be a small increase in overall net subsidies for these buildings. Toronto Community Housing will be able to continue to operate these buildings as Rent-Geared-to-Income units. Corporate Debt Service increases by $2.8 million as completion of Regent Park phase 1 buildings and Rivertowne phase 2 makes their financing an operating cost rather than a capitalized development cost. Commercial operations costs are increased at the inflation factor of 1.9% for maintenance and labour increases. Insurance increases by $4.0 million due mainly to a provision for the Wellesley fire of $3.5 million, which is also partly provided for in 2010 ($3.7 million). The remaining increase is for higher insurance claims, and higher premiums. 4

7 The Operating budget for Access Housing Connections is as negotiated with the City. The bulk of the expenditure represents payments to private sector landlords under the various rent supplement programs as well as the City s Housing Allowance program. As noted above and in Table A, the total 2011 expenditure from housing operations, including Access Housing Connections, is about $549.5 million. Net Operating Cash Flow With revenue of $626.2 million and expenditure of $549.5 million, the net operating cash flow is $76.7 million. This is about $1.3 million lower than the 2010 budget due mainly to higher insurance, and higher inflation on utilities and manageable costs compared to rent revenue increases and subsidies, which are partly offset by revenues from planned sale of 5 houses, the 267 Jarvis property, and other investments. Buildings and Communities Investment Plan The Investment section in Table B shows the $162.3 million of investment in buildings and communities as follows: The Building Capital Plan is the CMP commitment to maintain buildings in good repair. The detail of the 2011 Plan totaling $120.3 million has the following major components: Building Repair Capital Program ($36.8 million) - includes major capital repairs to building mechanical systems, roof, structures, etc. Component Replacement Program ($4.5 million) the capital provision as part of the implementation of the annual preventative maintenance program. Replacement of major components of mechanical systems (rather than total asset replacement) is an approach to extend the useful life of an asset. Unit Refurbishment Program was a multi-year initiative to refurbish kitchen and bathroom of housing units and other in-suite renovations and pairs. The program ended in Community Based Capital Programs ($18.1 million) - provides capital to operating units for local initiatives. 5

8 Building Renewal Program ($0.5 million) this four year program totaling $120 million to renew 19 developments partially funded by energy savings was largely completed in 2010 with a small carry over of jobs to be finished. Building Energy Retrofit Program ($31.8 million) This program concentrates on energy efficient and conservation improvements on nineteen existing developments. The onsite construction commenced in August 2009 and will be complete by March 31, The program will result in energy savings that will reduce greenhouse gas emissions annually. Tower Renewal ($6.0 million) In 2009, Toronto Community Housing issued a Request for Proposal and asked the potential developer partners to develop a demonstration pilot project with the over-arching objective to achieve a comprehensive tower renewal from a triple bottom line perspective (social, environmental, and economic). The renewal scope encompassed the thermal efficiency of buildings, systems and infrastructure upgrades, energy management systems, resident engagement, green space, and sustainable community and renewal energy. Energy conservation programs ($12.8 million) - in addition to the water and hydro conservation measures, the 2011 energy and utility conservation programs include re-commissioning and retrofit of existing building systems (optimization) an energy information system with remote monitoring capability renewable energy projects (solar photovoltaic, solar thermal, geothermal) web based building automation system Most of the initiatives will be self-funding by leveraging energy savings to pay for the capital costs. There are also incentives available from various sources such as Toronto Hydro, OPA, etc. Appliance Program ($0.5 million) is a provision for one-off replacement in case of emergency breakdowns. Accessibility Program ($3.1m) as per the Accessibility Plan. Commercial Program ($2.2m) - general corporate capital provision for renovations and repairs of Toronto Community Housing commercial real estate portfolio and commercial operations. Green Program ($4.0m) supports the Waste Management Plan ($3.5m), and the Green Education Program ($0.5m). 6

9 Other Investments Corporate Other ($7.5 million) includes self-funded insurance reserve ($2.0m), information technology ($2.9m), provision for human resources ($1.4m), and other departmental capital provisions ($1.2m) - for items such as community safety vehicles, etc. CMP Priority Investments ($4.3 million) - directed to the three strategic focus areas strengthening people, strengthening places, and strengthening foundation., Strengthening People $2,070,000 Promoting Successful Tenancies Empowering Tenants Strengthening Places $619,000 Well-Maintained Buildings Valuable Community Spaces Community Safety Sound Investments in Real Estate Assets Strengthening Foundation $1,636,000 Improved Customer Service Healthy Workplaces Maintaining Financial Discipline Managing Risk and Effective Governance Better Communications Total CMP Investments $4,325,000 Development Strategy Support ($5.0 million) includes $2.6 million for the operation of the Development Division for the implementation of CMP City Building initiatives, and the other development support costs for tenant relocations $0.6 million, community consultations on revitalization $0.5 million, and legal and financial administration costs $0.3 million. An adequate reserve for legal fees connected to potential litigation has been provided. Capital Reserve ($9.2 million) mandated reserve contributions for the current non-profit portfolio plus contributions for new buildings. To ensure redeveloped buildings will have adequate funding for future capital repair 7

10 needs, all redeveloped buildings will contribute to capital reserves at $800 per unit per year. Contribution to Development and Regeneration ($12 million) $10 million contribution to the Regent Park Reserve and an additional $2 million towards the build-out of the Regent Park s Community Energy Plant. Corporate Contingency ($4 million) - to manage unexpected costs such as emergencies, and overages due to tender results, change orders, and other corporate requirements. The above planned 2011 investment is $162.3 million as shown in Table B. This decrease in investment from 2010 reflects the reduction in capital grants funding from governments. Funding of the Investment Plan The sources of funding for this plan are shown in the Funding of Investment section of Table B and summarized as follows: Cash flow from operations of $76.7 million 2011 Capital Grants from Provincial/City/SHRRP of $61.0 million including phase 2 SHRRP funds as follows: Government Grants Total City $75m 9,139,000 16,449,192 26,503,108 22,950,000 75,041,300 Provincial $34.7m 23,540,868 11,159, ,700,000 SHRRP YR1 53,734,989 20,434,606 74,169,595 SHRRP YR2 31,593,422 17,093,969 48,687,391 SHRRP Renewable 491,830 20,908,170 21,400,000 Initiative (estimated) Total 32,679,868 81,343,313 79,022,966 60,952, ,998,286 It should be noted that the approval of the SHRRP phase 2 grants are a significant component to the 2010/2011 capital plan. Energy program incentives ($1.1 million) Withdrawn from reserves ($10.4 million) are mainly from the non-profit capital reserves for their 2011 capital expenditures and also include a $3.7 million carry over of capital from

11 Financing of $14.5 million is planned to fund the energy conservation programs supported by savings when fully implemented. Debt services for the programs are incorporated into the utilities lines in Table A. The above totals $163.8 million against $162.3 million of investment for a net free cash flow of about $1.5 million. 9

12 II. Tables A & B Table A 2011 TCHC Operations Revenue and Expenditures Statement 2011 Board Interim Budget 2011 Revised Budget REVENUE - Housing Operations RGI Rent Revenue 219,679, ,596,000 Market Rental Revenue 56,934,000 57,319,000 Vacancy Loss (6,161,000) (6,161,000) Non-Rental Revenue 29,734,000 29,734,000 Other Revenue 3,200,000 8,500,000 Interest Income 9,928,000 9,928,000 Bad Debt Allowance (2,700,000) (2,700,000) Total Housing Operations 310,614, ,216,000 Housing Program Subsidies 270,214, ,855,000 Waste charge subsidy 7,122,000 5,698,000 Tax Exemption subsidy Affordable Housing Program Subsidies 1,375,000 1,375,000 Total Housing Operations Revenue 589,325, ,144,000 Access Housing Connections Subsidies 35,072,000 35,072,000 TOTAL REVENUES 624,397, ,216,000 EXPENDITURES - Housing Operations Manageable Cost Building Operations & Maintenance 93,424,000 95,523,000 Tenancy Management 26,517,000 26,498,000 Community Support Services 9,658,000 9,075,000 Community Safety Services 12,287,000 11,723,000 Corporate Services 24,393,000 23,231,000 Total Manageable Cost 166,279, ,050,000 Other Cost Utilities 120,941, ,941,000 Waste pickup 7,122,000 7,122,000 Property Taxes 106,509, ,935,000 Mortgage & Lease payments 90,968,000 90,968,000 Corporate Debt Service 12,511,000 12,511,000 Commercial Operations 3,616,000 3,687,000 Insurance 6,662,000 8,171,000 Total Other Housing Operations Cost 348,329, ,335,000 Total Housing Operations Cost 514,608, ,385,000 Access Housing Connections (AHCI) Wait List Management & Administration 5,434,000 5,434,000 Landlord Payments & Housing Allowance 29,638,000 29,638,000 Total Access Housing Connections 35,072,000 35,072,000 TOTAL OPERATING EXPENDITURES 549,680, ,457,000 NET OPERATING CASHFLOW 74,717,000 76,759,000 10

13 Table B 2011 TCHC Operations Sources & Application of Funds 2011 Board Interim Budget 2011 Revised Budget INVESTMENT Building Repair Capital Program (& contingency) 28,300,000 36,762,000 Components Replacement 4,000,000 4,500,000 Community Based Capital Program 22,500,000 18,121,000 Building Renewal Program 520,000 Building Energy Retrofit Program 31,255,000 31,841,000 Tower Renewal 4,950,000 5,950,000 Energy Programs 12,810,000 12,810,000 Appliance Program 500, ,000 Corporate (Accessibility ) 1,500,000 3,109,000 Corporate (Commercial) 2,200,000 2,200,000 Corporate (Green) 3,500,000 4,000,000 Total Building Capital Plan 111,515, ,313,000 Corporate Other (Insurance) 1,500,000 2,000,000 Corporate Other (Information Technology) 2,800,000 2,893,000 Corporate Other (Severance/VEO) 900,000 1,400,000 Corporate Other (other capital) 1,153,000 1,245,000 CMP Initiatives: Strengthening People 2,488,000 2,070,000 Strengthening Places 1,445, ,000 Strengthening Foundation 1,045,000 1,636,000 Development Strategy Support 5,350,000 4,955,000 Reserve Contributions (Capital & Other) 9,192,000 9,192,000 Reserve Contributions (Regeneration & CES) 12,000,000 12,000,000 Corporate Contingency 4,000,000 4,000,000 TOTAL INVESTMENT 153,388, ,323,000 FUNDING OF INVESTMENT Cashflow from Operations 74,717,000 76,759,000 Grants (Provincial/City/2009 Stimulus) 50,244,000 60,952,000 Energy Program Incentives 1,141,000 1,141,000 Reserves Withdrawn 11,723,000 10,444,000 3rd Party Financing: Capital & Energy Programs 16,630,000 14,519,000 TOTAL SOURCES OF FUNDS 154,455, ,815,000 NET CASHFLOW 1,067,000 1,492,000 11