Province of British Columbia

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1 Province of British Columbia CALIFORNIA October 2017 Ministry of Finance Website:

2 Quick Facts on British Columbia 4.8 million population 364,764 sq. mi on west coast of Canada; third-largest province; size of France and UK combined Borders the Pacific Rim Strategic ports for North America trade Parliamentary system of government 2015 nominal gross domestic product: C$250 Billion (13% of Canadian economy) 2

3 BC s Diversified Economy Share of BC GDP at basic prices (chained $2007) by major industry, 2016 Manufacturing & Utilities 9.0% Natural Resources 6.9% Wholesale & Retail Trade 10.8% Transportation & Warehousing 5.8% Public Admin, Health Care & Education 17.0% Construction 8.6% Other Services 17.8% Finance, Insurance & Real Estate 24.2% Source: Statistics Canada (may not add to 100 per cent due to rounding) 3

4 BC real GDP (annual per cent change) Prudent Economic Forecast Ministry of Finance Economic Forecast Council Sources: BC Ministry of Finance, Economic Forecast Council 4

5 Private Sector Economic Growth Expectations Forecast annual growth in 2017 real GDP (per cent) Canada AB BC ON QC MB SK PE NS NB NF Source: Private Sector Average (subset of the Economic Forecast Council: BMO, RBC, CIBC, TD, Scotiabank and IHS Markit) as of September 22,

6 BC Employment 2,500 BC employment (000s, sa) 2,400 2,300 Jun 2008: 2,256 Aug 2017: 2,480 2,200 Mar 2009: 2,184 2, Source: Statistics Canada 6

7 7,500 7,000 6,500 6,000 5,500 5,000 BC retail sales ($ millions, sa) Jun 2008: 4,957 BC Retail Sales Jul 2017: 7,199 4,500 4,000 Dec 2008: 4, Source: Statistics Canada 7

8 BC Housing Starts 60,000 BC housing starts (annualized units, sa) 50,000 40,000 30,000 *Hist. avg: 29,465 20,000 10,000 Year-to-date to Aug 2017: 40, * Historical average (January 1990 to December 2016) 2017 Source: Canada Mortgage and Housing Corporation 8

9 Owner s Equity as a Share of Residential Assets (per cent) Canada 2017 Q2: 74.3% US 2017 Q2: 58.4% Sources: Statistics Canada, St. Louis Federal Reserve 9

10 BC Exports 4,000 BC international merchandise exports ($ millions, sa) 3,500 Oct 2008: 3,050 3,000 2,500 Jul 2017: 3,265 2,000 1,500 May 2009: 1, Source: BC Stats 10

11 Japan 9.6% China 15.2% BC Annual share of international goods exports by province, 2016 Other Asia 9.7% Other 11.2% Alberta Asia 7.2% BC Trade Diversity Other 6.5% Asia 3.4% Ontario Other 15.7% US 54.3% US 86.3% US 80.9% Source: BC Stats (may not add to 100 per cent due to rounding) 11

12 Three-year Operating Plan $ millions Actual 2016/17 Budget Estimate 2017/18 Plan 2018/19 Plan 2019/20 Revenue 51,459 52,407 52,557 53,677 Expense excluding Contingencies Vote (48,722) (51,261) (51,729) (52,720) Contingencies Vote (600) (300) (350) Total Expense (48,722) (51,861) (52,029) (53,070) Surplus before forecast allowance 2, Forecast allowance - (300) (300) (350) Surplus... 2,

13 Affordable Debt Taxpayer-supported debt to GDP 2016/ BC* Ontario Quebec Canada UK US Japan Source: Moody s; *BC Budget 2017 September Update 13

14 Operating Debt Elimination $ billions Budget Budget 2017 Update /17 17/18 18/19 19/20 14

15 Maintaining Debt Affordability Per cent Per cent Budget 2017 Update Debt to GDP Budget Budget 2017 Update Budget 2017 Debt to Revenue /16 16/17 17/18 18/19 19/20 15/16 16/17 17/18 18/19 19/20 15

16 Infrastructure Spending Allocations Three-year infrastructure spending totals $23.1 billion ($billions) BC Hydro Education 2.6 Post-Secondary Institutions 3.1 Health Other Transportation 16

17 Priority Investments Over $1.8 billion in new ministry investments over 3 years in support of: improving affordability enhancing services building a strong, sustainable economy 17

18 Improving Competitiveness Reducing health care premiums by 50% PST on electricity phased out beginning with a 50% cut in the coming months and eliminated April 1, Small business corporate income tax rate reduced to 2% from 2.5% effective April 1, Restore tax treatment for credit unions. Innovation Commissioner / Emerging Economy Task Force 18

19 Risks to the Fiscal Plan Wildfires Softwood lumber and NAFTA New compensation mandate Increasing interest rates 19

20 Prudence Remains Important Contingencies Vote totals $1,250M over the ensuing 3 years Forecast Allowance totals $950M over the ensuing 3 years Prudent economic growth outlook 20

21 Competitive Corporate Income Tax % of taxable income UK BC / Can Italy Germany Japan France US Combined central and sub-central corporate income tax rates for 2016 (source: OECD Tax Database) Combined BC/federal 2018 rate 21

22 Competitive Personal Income Tax 2017 provincial personal income taxes Single individual earning $125,000 18,857 13,087 10,269 10,291 BC AB ON QC Source: BC Ministry of Finance 22

23 British Columbia s Public Sector Pension Risk Management Defined Benefit/Defined Contribution hybrid plan design Joint trusteeship Sound funding and actuarial policies set by the trustees Strong pension plan governance % funded on a funded or actuarial basis 23

24 Gross Market Debt Outstanding by Source as of September 22, 2017 Europe Public / Private 5.8% INR Public 0.2% CNH Public 0.9% USA Public 8.5% Canada CPP & Other 10.0% Gross Debt Outstanding: $60.6 Billion Australia Public 1.4% Canada Private 12.7% Canada Public 60.5% Market debt does not include guaranteed and non-guaranteed debt of SUCH sector and P3s. 24

25 $3.5 billion borrowing program for 2017/18; $2.4 billion remaining $5.3 billion to $6.9 billion in outer years Manageable borrowing program Debt Management Will rely on province s significant access to domestic and international capital markets 25

26 Green Bond Program Objectives: Establish a credible & sustainable mechanism to fund green entities and projects in BC s public sector. Build on BC s existing financial management & environmental leadership. Follow international best practices Access a wider range of investors Open the domestic provincial bond market to support growth of low carbon economy Next Steps: Finalize internal program governance May consider issuance in 2018/19 26

27 BC s Strong Credit Ratings Moody s Investor Service Aaa Stable Standard and Poor s AAA Stable Fitch AAA Stable DBRS AA(high) Stable 27

28 Disclosure Statements Certain statements used in this presentation are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of Such forward-looking statements include, but are not limited to, statements concerning the Province s budgetary and program plans, fiscal outlook, expectations of future economic and trade conditions, and plans for pension risk management and debt management, and other statements that are not historical or current fact. These statements are based on the Province s current estimates or projections and therefore you should not place undue reliance on them. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the state of our economy or fiscal position to differ materially from the forecasts and economic outlook expressed or implied by any forward-looking statements. In addition, such statements are based on a number of assumptions that are subject to change. We refer you to the Province s filings with the U.S. Securities and Exchange Commission for a discussion of the various factors that may affect the Province s economy. Forward-looking statements speak only as of the date they are made. The Province undertakes no obligation to update any forward-looking statements except as required by law. 28

29 Appendix 29

30 Canadian Mortgage Rules Maximum amortization period of 25 years for insured mortgages Minimum down payment of 5 per cent for any insured mortgage for homes priced below $500,000 An additional 10 per cent down payment is required for the portion of a home price between $500,000 and $1,000,000 Maximum refinancing of 80 per cent of the value of the home Interest rate stress test required for all insured mortgages Maximum borrowing of 65 per cent of the value of the property through a nonamortizing home equity line of credit Federally-backed mortgage insurance is available only for homes with a purchase price of less than $1 million Insurance is mandatory for down payments below 20 per cent 30

31 Infrastructure Investments at Record Levels Capital Spending ($ millions) Budget 2017 Update Fiscal Plan 7,081 6,580 6,309 6,044 5,670 5,895 6,032 6, ,490 2,701 2,635 7,968 3,154 Self-supported 3,362 2,470 2,744 2,765 2,519 2,488 2,573 2,725 3,719 4,110 3,565 3,279 3,151 3,407 3,459 3,659 4,956 4,855 4,814 Taxpayer-supported 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 31

32 Pension Plan Positions Pension Plan Number of Members (thousands) Most recent Valuation Funding Basis (millions) Accrued Basis (millions) Public Service 119 Mar 31, 2014 $ % Teachers 94 Dec 31, 2014 $ % College 26 Aug 31, 2015 $ % Municipal 321 Dec 31, 2015 $2, % $ % ($704) 96% $ % $1, % 32

33 Federal Contributions as a Percentage of Total Revenues % /05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 Source: BC Ministry of Finance 2017 British Columbia Financial and Economic Review 33

Province of British Columbia

Province of British Columbia CALIFORNIA December 2017 Ministry of Finance Website: http://www.gov.bc.ca/ The Compelling Canada Story One of only two G-7 country to receive AAA credit rating One of the