RESERVES AND RESERVE FUNDS 2016 TOWN OF MILTON APPROVED BUDGET

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1 RESERVES AND RESERVE FUNDS 16 TOWN OF MILTON APPROVED BUDGET

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3 Overview and reserve funds are a critical component of long-term financial planning and are used to maintain a stable financial position, minimize fluctuations in the tax rate and to support future cash requirements. They are funded through annual contributions from the operating budget as well as external sources. and reserve funds are a key funding source for capital infrastructure with 88% of the approved capital budget funded from reserve and reserve funds including development charges and capital provision revenues. A reserve is an allocation of accumulated net revenue and is governed by Council policies that identify the intended purpose, target balance and funding sources. are part of the Town s overall revenue fund and are non-interest bearing. Therefore, any interest earned by the Town from the investment of funds in reserves is retained as revenue in the overall operating fund. 1. Obligatory : 2. Discretionary : Funds acquired by the Town for a legislated purpose or for a specifically defined purpose through a financial agreement. Obligatory reserve funds are segregated and created solely for the purpose prescribed for them (i.e. Development Charge, Federal and Provincial Gas Tax ). Funds segregated from the general revenues of the Town, but are established based on Council direction and used to finance specific future expenditures or to fund specific contingent liabilities. (i.e. Hospital Expansion Reserve Fund, Property Transactions Reserve Fund) The following pages include an overview of the reserves and reserve funds by their intended/legislated use. Complete definitions and funding sources can be found in the Supplementary Information section on pages 411 to 422. Reserve funds are established to segregate funds that are acquired for a specific purpose as identified through legislation, financial agreements or Council direction. Reserve funds are interest bearing and earnings are applied to each Reserve Fund based on yields earned on the Town s total investment portfolio and cash balances. There are two types of reserve funds as follows: MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 387

4 Overview Stabilization Stabilization reserves are used to offset extraordinary and unforeseen expenditure requirements, one-time expenditures, revenue shortfalls, manage cash flows and to minimize large fluctuations in the tax levy. The estimated balance at December 31, 2015 for these reserves is expected to be $7.1 million. The budget is forecast to reduce these reserves by a further $1.1 million to a balance of $6.0 million. Stabilization Tax Rate Stabilization $ 2,290,933 $ 1,743,196 $ (471,338) $ 1,271,858 Election - 91,000 92, ,820 Winter Control 722, , , ,470 Building Rate Stabilization 4,130,335 4,390,876 (820,440) 3,570,436 Total Stabilization $ 7,144,238 $ 7,073,042 $ (1,071,458) $ 6,001,585 Corporate Use Corporate Use reserves provide for various contingent and potential future liabilities. At December 31, 2015, the estimated balance of Corporate Use reserves is $4.6 million. Corporate Use Legal Matters $ 57,659 $ 308,568 $ 236,261 $ 544,829 Per Unit Development Processing Fee 1,303,373 1,176, ,969 1,344,992 Insurance 663, , , ,661 WSIB 402, ,589 (114,879) 201,710 Working Funds 1,064,000 1,064,000-1,064,000 Training 228, ,345 (41,324) 178,021 Growth Related Resources 970, ,814 (98,441) 879,373 Total Corporate Use $ 4,690,079 $ 4,607,638 $ 261,948 $ 4,869,586 Capital Capital reserves are used to fund specific replacement/renewal of existing capital assets to maintain assets in a good state of repair as well as the development of new growth infrastructure. As the value of assets owned by the Town increases, so should the contribution from the operating budget to these reserves for replacement and refurbishment based on lifecycle costing. The estimated total balance for these reserves at December 31, 2015 is $87.8 million, compared to the 2014 year-end balance of $65.2 million. The Town has prepared Asset Management Plans for Roads and Structures, as well as Facilities and Transit. The Plans identified an annual funding shortfall of $0.5 million for roads and structures, compounded by an existing infrastructure deficit of $21.2 million, while the facilities and transit plan presented an annual funding deficit of $0.2 million for transit. With respect to facilities, the AMP recognized that current levels of funding are sufficient for the 10 year forecast; however, future budgets will require increased investment to maintain the growing and aging infrastructure asset base in a state of good repair. It is financially responsible to ensure that contributions to reserves to fund future renewal and replacement of assets are adequate. Increases to the contributions to reserves to fund asset management will be included in future budgets. Capital Infrastructure Renewal $ 200,800 $ 305,168 $ 152,426 $ 457,594 Municipal Building Components 2,401,300 3,705,539 (44,918) 3,660,621 Capital Provision 10,104,377 12,103,694 2,462,790 14,566,484 Capital Works 6,955,056 7,266,566 (2,126,888) 5,139,678 Transit and Transportation 683, ,089 6, ,483 Computer Requirements 1,097,770 1,101,025 (597,399) 503,626 Equipment Replacement 3,352,772 3,755,792 1,412,226 5,168,018 Municipal Buildings Replacement 789, , ,256 1,155,645 Cash-in-lieu of Parkland 3,142,776 3,966,020 32,338 3,998,358 Property Transactions 2,048,178 5,143, ,246 5,538,977 Cash-in-lieu of Parking 14, ,871 2, ,169 Cash-in-lieu of Storm Water Management 138, ,618 2, ,430 Ontario Lottery Corporation Proceeds 10,571,946 10,747, ,397 10,932,112 Development Charges 23,662,860 37,742,303 2,252,061 39,994,364 Total Capital $ 65,163,220 $ 87,771,522 $ 4,409,039 $ 92,180,561 MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 388

5 Overview Development Charge Capital Development Charge are included in the capital reserves. Development charges are a source of funding utilized to recover the capital costs of providing infrastructure associated with growth at the same level as historically provided to the community. The Development Charges Act gives the authority for municipalities to impose these charges. Late in 2015, the legislated update to the Development Charge Background Study was presented to Council to take into account revised costing for growth related capital projects and updated growth estimates used to set development charge rates. Once adopted, these revised rates together with the prudent use of development charge debt will ensure that development reserve funds remain at a positive balance throughout the forecast. Government Funded These are established to track revenues received from the Provincial and Federal Governments for transit and roads infrastructure. Funding received from other levels of government will be used in future budgets in accordance with the guidelines of each program. The balances shown in the table below reflect any outstanding commitments against these reserves and reserve funds. Government Funded Aggregate Permit Fees $ 637,732 $ 957,855 $ 40,046 $ 997,901 Provincial Gas Tax 858,755 1,071, ,365 1,330,761 Federal Gas Tax 3,191,050 5,704,421 (4,552,064) 1,152,357 Total Government Funded $ 4,687,537 $ 7,733,672 $ (4,252,653) $ 3,481,019 Program Specific Program specific reserves are established to dedicate funds to specific programs or contain special funding received. Program Specific Perpetual Maintenance $ 453,685 $ 462,340 $ 59,747 $ 522,087 Sportsfield Development 90, ,819 11, ,825 Investment in the Arts 801, ,141 (138,607) 388,534 Metrolinx Bike Mayor's Legacy Fund 82,034 83,557 1,671 85,228 Total Program Specific $ 1,427,816 $ 1,173,940 $ (66,183) $ 1,107,757 Boards and Committees These reserves are established for the exclusive use of Town boards and committees. Boards and Committees Library Tax Rate Stabilization $ 433,837 $ 641,748 $ 431,875 $ 1,073,623 Library Capital Works 548, ,385 80, ,354 DBIA Surplus 13,610 33,880 (5,580) 28,300 Seniors' Fundraising 112, ,311 (1,000) 111,311 Milton District Hospital Expansion 2,426,288 17,747, ,588 18,000,394 Total Boards and Committees $ 3,534,295 $ 19,340,130 $ 758,852 $ 20,098,982 Reserve and Reserve Fund Policies In December 2006, Council approved policies for various reserves and reserve funds that identify the purpose and target balance of each. An update to the reserve and reserve fund policies, and particularly a review of the policy target balances, will be conducted in to ensure that target balances are set at appropriate levels to strengthen the Town s financial sustainability to meet its long-term needs. MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 389

6 Overview Summary of Significant Changes in and Reserve and Reserve Fund s Showing Significant Increases When compared year over year, 2015 to 2014, the following reserve and reserve fund balances show increases greater than 10%: Winter Control Reserve Legal Matters Reserve Infrastructure Renewal Reserve Municipal Buildings Component Reserve Capital Provision Reserve Transit and Transportation Reserve Equipment Replacement Reserve Municipal Buildings Replacement Reserve Cash in Lieu of Parkland Reserve Fund Property Transactions Reserve Fund Cash in Lieu of Parking Reserve Fund Development Charges Sportsfield Development Reserve Fund Library Tax Rate Stabilization Reserve Library Capital Works Reserve Downtown Business Improvement Area Reserve Milton District Hospital Expansion Reserve Fund Aggregate Permit Fees Reserve Provincial Gas Tax Reserve Fund Federal Gas Tax Reserve Fund Increases in reserves such as Winter Control are due to replenishment of draws on the reserve in previous years due to extreme weather events, while others such as Legal Matters are due to contributions made in anticipation of future needs. such as Infrastructure Renewal, Municipal Building Components, Transit and Transportation, and Equipment Replacement are increasing in an effort to achieve balances to support future requirements. Increases in development charges and development related reserves and reserve funds such as Capital Provision, Cash in Lieu of Parking and Cash in Lieu of Parkland are due to increased development activity in The increase in the Hospital Expansion Reserve Fund is due to the debenture proceeds deposited in this reserve fund. Provincial and Federal Gas Tax and Aggregate Permit revenues can fluctuate year over year as funds are received, accumulated and used for projects in the capital program. The Downtown Business Improvement Area Reserve increase is due to a projected surplus in 2015 that will be transferred to the reserve at year end. MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 390

7 Overview Reserve and Reserve Fund s Showing Decreases The following reserves and reserves funds reflect significant decreases in year over year balances: Tax Rate Stabilization Reserve Insurance Reserve WSIB Reserve Investment in the Arts Reserve Fund These reserves and reserve funds have been accumulating balances over the years in preparation for times of need. The decline in Insurance Reserve is due to higher than anticipated claims in 2015 and is expected to return to 2014 levels in. The decrease in Investment in the Arts Reserve Fund is due to the continued use of the fund for the intended purpose of supporting Arts programming in the Town. Due to a smaller value of the 2015 capital program, a shortfall in the capital surcharge revenue compared to the cost to administer the capital program resulted in a required use of the Tax Rate Stabilization Reserve. These draws are seen as temporary and the reserves and reserve funds will be replenished when surpluses exist. Summary of Contribution from revenue totals $23.4 million and represents grants or other funds received as well as transfers from the operating budget into the reserves and reserve funds. Other revenue totals $67.9 million and represents revenue from external sources such as federal and provincial levels of government, developers and cash flow assistance that the Town has secured through letters of credit from developers to mitigate a deficit in the Roads Development Charge Reserve Fund. As part of capital project financing, transfers from reserves and reserve funds are made in order to fund projects. The amount of these transfers for is $86.2 million and includes committed funds that were approved in previous years budgets but have not yet been spent. Transfer to revenue for totals $3.3 million which includes contributions to support the operating budget for activities including: insurance and WSIB transactions, legal matters, staff training, arts programming, transit costs, transfers to the community fund, building rate stabilization and others. Debt principle and interest payments of $2.9 million are related to debt previously approved and issued. The total estimated net movement is a small overall increase of $0.04 million but actual balances may differ due to the timing of receipts and payments particularly related to capital projects. Reserve and reserve fund balances for are outlined in the tables on the following pages. MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 391

8 Schedule of Movement Interest Earned Contribution from Revenue Other Revenue Transfer to Capital Transfer to Revenue Debt Payments Tax Rate Stabilization $ 2,290,933 $ 1,743,196 $ - $ 68,820 $ - $ - $ (540,158) $ - $ 1,271,858 Infrastructure Renewal 200, , ,410 - (719,984) ,594 Library Tax Rate Stabilization 433, , , ,073,623 Library Capital Works 548, , ,661 - (391,692) ,354 Legal Matters 57, , , (50,000) - 544,829 Per Unit Development Processing Fee 1,303,373 1,176, , (533,111) - 1,344,992 Election - 91,000-92, ,820 Winter Control 722, , , ,470 Insurance 663, , , (90,000) - 656,661 WSIB 402, , , (221,000) - 201,710 Municipal Building Components 2,401,300 3,705,539-1,436,839 - (1,481,757) - - 3,660,621 Capital Provision 10,104,377 12,103,694-3,324,674 - (861,884) ,566,484 Capital Works 6,955,056 7,266,566-4,455,121 - (6,582,009) - - 5,139,678 Transit and Transportation 683, , ,145 - (457,751) ,483 Computer Requirements 1,097,770 1,101, ,486 - (929,885) ,626 Equipment Replacement 3,352,772 3,755,792-2,647,328 - (1,235,102) - - 5,168,018 Working Funds 1,064,000 1,064, ,064,000 Aggregate Permit Fees 637, , ,919 - (241,873) ,901 DBIA Surplus 13,610 33, (5,580) - 28,300 Seniors' Fundraising 112, ,311-23, (24,000) - 111,311 Training 228, , , (147,445) - 178,021 Growth Related Resources 970, , ,000 - (198,441) ,373 Municipal Buildings Replacement 789, , , ,155,645 Total $ 35,034,679 $ 39,756,247 $ - $ 16,808,799 $ - $ (13,100,378) $ (1,611,294) $ - $ 41,853,374 MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 392

9 Schedule of Movement Interest Earned Contribution from Revenue Other Revenue Transfer to Capital Transfer to Revenue Debt Payments Provincial Gas Tax $ 858,755 $ 1,071,396 $ 23,784 $ - $ 817,371 $ - $ (581,790) $ - $ 1,330,761 Perpetual Maintenance 453, ,340 9,747 50, ,087 Cash-in-lieu of Parkland 3,142,776 3,966,020 78, , (246,517) 3,998,358 Building Rate Stabilization 4,130,335 4,390,876 77, (194,315) (704,023) - 3,570,436 Property Transactions 2,048,178 5,143, , , (393,053) 5,538,977 Milton District Hospital Expansion * 2,426,288 17,747, , , , (775,226) 18,000,394 Cash-in-lieu of Parking 14, ,871 2, ,169 Cash-in-lieu of Storm Water Management 138, ,618 2, ,430 Sportsfield Development 90, ,819 2,105 8, ,825 Investment in the Arts 801, ,141 9, (147,673) - 388,534 Metrolinx Bike Federal Gas Tax 3,191,050 5,704,421 44,661-2,564,873 (7,161,599) - - 1,152,357 Mayor's Legacy Fund 82,034 83,557 1, ,228 Milton District High School Reunion Scholarship Fund Ontario Lottery Corporation Proceeds 10,571,946 10,747, ,652 5,500,000 - (5,250,000) (280,255) - 10,932,112 Development Charges 23,662,860 37,742, ,859-63,976,218 (60,527,280) - (1,463,737) 39,994,364 Total $ 51,612,506 $ 87,943,697 $ 1,194,121 $ 6,565,302 $ 67,908,463 $ (73,133,194) $ (1,713,741) $ (2,878,533) $ 85,886,115 * The Other Revenue for the Milton District Hospital Expansion Reserve Fund reflects the transfer of funds from the Ontario Lottery Corporation Proceeds Reserve Fund. MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 393

10 Forecast (-2025) The 10 year forecast for reserve balances are reflected on the following tables. Reserve and reserve fund balances can be difficult to predict as their use is affected by uncertain future events. Currently reserves are expected to generally maintain their overall balances with the sharpest decline in capital provision in , following the build out of the Boyne secondary planning area. Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 Dec 31, 2025 Tax Rate Stabilization $ 2,290,933 $ 1,743,196 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 $ 1,271,858 Infrastructure Renewal 200, , , , , , , , , , , ,190 Library Tax Rate Stabilization 433, ,748 1,073,623 1,522,773 1,989,889 2,475,689 2,980,922 3,506,364 4,052,824 4,621,142 5,212,192 5,826,885 Library Capital Works 548, , ,354 1,085,739 1,274,753 1,458,786 1,632,145 1,777,354 2,036,796 2,249,138 2,446,157 2,688,041 Legal Matters 57, , , ,815 1,034,641 1,288,424 1,548,282 1,814,337 2,086,713 2,365,537 2,650,938 2,943,046 Per Unit Development Processing Fee 1,303,373 1,176,023 1,344,992 1,344,992 1,344,992 1,344,992 1,344,992 1,344,992 1,344,992 1,344,992 1,344,992 1,344,992 Election - 91, , , ,460-92, , ,460-92, ,640 Winter Control 722, , ,470 1,105,520 1,238,171 1,373,475 1,511,485 1,652,255 1,795,841 1,942,299 2,091,685 2,244,059 Insurance 663, , , , ,111 1,004,289 1,124,831 1,247,784 1,373,195 1,501,115 1,631,594 1,764,682 WSIB 402, , , , , , , , , , , ,710 Municipal Building Components 2,401,300 3,705,539 3,660,621 4,615,397 5,123,508 6,346,247 5,520,564 6,535,307 6,693,328 6,673,464 6,882,509 6,178,649 Capital Provision 10,104,377 12,103,694 14,566,484 17,379,417 17,903,103 16,451,815 16,724,386 17,376,113 14,475,950 11,475,438 7,118,097 5,087,075 Capital Works 6,955,056 7,266,566 5,139,678 3,530,997 3,459,230 3,103,408 3,539,854 3,062,866 3,160,878 3,083,890 3,160,333 4,120,590 Transit and Transportation 683, , , , , , , , , , , ,763 Computer Requirements 1,097,770 1,101, , , , , , , , , , ,309 Equipment Replacement 3,352,772 3,755,792 5,168,018 5,698,192 5,825,703 5,702,882 4,456,856 6,445,536 4,112,572 4,494,164 4,041,103 3,109,113 Working Funds 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 1,064,000 Aggregate Permit Fees 637, , , , ,739 93, , , ,415 1,221,334 1,503,253 1,785,172 DBIA Surplus 13,610 33,880 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 Seniors' Fundraising 112, , , , , , , , , , , ,311 Training 228, , , , , , , , , , , ,021 Growth Related Resources 970, , , , , , , , , , , ,733 Municipal Buildings Replacement 789, ,389 1,155, , ,411 1,000,667 1,275,923 1,551,179 1,826,435 1,648,412 1,470,389 1,745,645 Total $ 35,034,679 $ 39,756,247 $ 41,853,374 $ 44,253,927 $ 46,575,177 $ 46,832,336 $ 47,175,519 $ 52,410,177 $ 49,605,198 $ 47,911,594 $ 45,159,210 $ 44,762,787 MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 394

11 Forecast (-2025) Reserve fund balances are expected to decline in years before progressively increasing in years This change is driven primarily from the decrease in Development Charge Reserve Fund balances which are used to fund growth related capital projects. These Development Charge Reserve Fund balances are expected to increase in through increased revenues from development activity and proceeds of development charge debt. This debt will be repaid through development charge revenues as development continues in the Boyne survey. Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 Dec 31, 2025 Provincial Gas Tax $ 858,755 $ 1,071,396 $ 1,330,761 $ 1,595,313 $ 1,865,156 $ 2,140,396 $ 2,421,141 $ 2,707,500 $ 2,999,587 $ 3,297,516 $ 3,601,403 $ 3,911,368 Perpetual Maintenance 453, , , , , , , , , ,145 1,045,148 1,116,551 Cash-in-lieu of Parkland 3,142,776 3,966,020 3,998,358 4,497,784 5,046,243 2,208,275 2,330,251 2,493,505 2,660,025 2,791,035 2,963,506 3,139,425 Building Rate Stabilization 4,130,335 4,390,876 3,570,436 3,346,311 2,521,173 2,534,616 2,562,202 2,584,173 2,612,749 2,629,051 2,658,526 2,688,589 Property Transactions 2,048,178 5,143,730 5,538,977 4,546,400 4,997,181 5,466,085 5,970,025 6,755,290 3,526,731 1,566,651 2,237,554 8,844,571 Milton District Hospital Expansion * 2,426,288 17,747,806 18,000,394 (212,237) (296,642) (368,764) (427,796) (472,896) (511,039) (541,929) (565,261) (580,720) Cash-in-lieu of Parking 14, , , , , , , , , , , ,027 Cash-in-lieu of Storm Water Management 138, , ,430 45,299 46,205 47,129 48,071 49,033 50,013 51,014 52,034 53,075 Sportsfield Development 90, , , ,052 33,503 43,163 53,016 63,066 73,318 83,774 94, ,318 Investment in the Arts 801, , , , , , Metrolinx Bike Federal Gas Tax 3,191,050 5,704,421 1,152,357 74, , ,458 89,493 40, ,305 86,875 50,595 38,487 Mayor's Legacy Fund 82,034 83,557 85,228 86,933 88,672 79, Milton District High School Reunion Scholarship Fund Ontario Lottery Corporation Proceeds 10,571,946 10,747,715 10,932,112 11,120,197 11,312,043 11,507,727 11,707,324 11,910,912 12,118,573 12,330,387 12,546,437 12,766,808 Development Charges 23,662,860 37,742,303 39,994,364 37,867,513 20,827, ,456 5,385,063 22,590,569 35,063,589 54,151,008 83,154,234 82,834,553 Total $ 51,612,506 $ 87,943,697 $ 85,886,115 $ 64,142,787 $ 47,855,328 $ 25,899,792 $ 31,039,166 $ 49,690,063 $ 59,841,613 $ 77,555,418 $ 107,976,205 $ 115,058,367 * The Other Revenue for the Milton District Hospital Expansion Reserve Fund reflects the transfer of funds from the Ontario Lottery Corporation Proceeds Reserve Fund. MILTON APPROVED BUDGET RESERVES AND RESERVE FUNDS 395