Financial Condition of the City of Nagoya

Transcription

1 Financial Condition of the City of Nagoya December 2012 Finance Bureau, City of Nagoya [Inquiries] Funds Division, Finance Department, Finance Bureau, City of Nagoya TEL:(from in Japan) (from outside Japan) FAX:(from in Japan) (from outside Japan)

2 2 Table of Contents Ⅰ. Profile of Nagoya Profile of Nagoya 3 The Attractive and Dynamic City of Nagoya 4 Economic Size of Nagoya 5 Characteristics of the Nagoya Economic Zone 6 Ⅱ. Fiscal Condition Municipal tax Revenue 7 Overview of the 10% Residential Tax Cut of FY Outstanding Municipal Bonds (General Account) 9 Outstanding Municipal Bonds (Total Accounts) 10 Local Tax Grants 11 Financial Indicators 12 Ratio for Determining Financial Soundness/Financial Shortfall Ratio 13 Actual Debt Expenditure Ratio in Nagoya 14 Primary Balance of General Account 15 Public Bonds Redemption Fund (Bullet Bonds) 16 Early Redemption of Public Funds with Exemption of Compensation 17 Rating 18 Comparison of Fiscal Condition with Other Cities (1) 19 Comparison of Fiscal Condition with Other Cities (2) 20 Comparison of Fiscal Condition with Other Cities (3) 21 Number of Nagoya City Employees (Quota) 22 Implementation Status of Recommendations for Salary Scales of Nagoya 23 Number of Extra-governmental Organizations 24 Revenue and Expenditure of Public Enterprises (1) 25 Revenue and Expenditure of Public Enterprises (2) 26 Future Fiscal Management 27 Ⅲ. Issuance of Municipal Bonds Actual Issuance of Public Subscription Bonds (Nationwide) 28 Actual Issuance of Public Subscription Bonds for FY Postwar History of Public Subscription Bonds in Nagoya 30 Comparison of Issuing Organizations of Public Subscription Municipal Bonds 31 Area around Nagoya Station Nagoya Castle

3 3 Profile of Nagoya Overview of the City of Nagoya Area km 2 (July 1, 2011) Average temperature 16.6 C (Average in 2010) Precipitation 1,730.0 mm (Total in 2010) Population 2,266,536 (July 1, 2011) Households 1,028,246 (July 1, 2011) Daytime population 2,516,196 (October 1, 2005) Business establishments 132,199 (July 1, 2009) Hokuriku Expressway Tokai-Hokuriku Expressway Gifu Tokai-Kanjo Expressway Chuo Expressway 1.5 hours to Tokyo by Shinkansen Tokyo Employees 1,533,964 (July 1, 2009) Prefectural Nagoya Airport Osaka 1 hour to Osaka by Shinkansen Kinki Expressway Meishin Expressway The Second Meishin Expressway Mie Ise Expressway Nagoya Isewangan Expressway Tsu Ise Bay Ise Toyota Aichi The Second Tomei Expressway Mikawa Toyohashi Bay Tokaido Shinkansen Central Japan International Airport Centrair To the world Shizuoka Tomei Expressway Shinkansen Tomei and Meishin Expressways Expressway

4 4 The Attractive and Dynamic City of Nagoya To Meitetsu inuyama Line To Meitetsu komaki Line Higashiyama Line Meijo Line Meiko Line Transfer station Kami Otai Shonai Ryokuchi Koen Shonai-dori Kurokawa Shiga-hondor i Kamiiida Ozone Nagoya Dome-mae Yada Tsurumai Line Sakura-dori Line Kamiiida Line New Building at the Nagoya City Science Museum Opened on March 19, 2011 Hosts the world s largest planetarium (35 meters in diameter) and a -30 room where visitors can view images of the aurora borealis. SCMAGLEV and Railway Park Opened on March 14, 2011 Exhibits the superconducting Maglev, as well as one of Japan s largest railway dioramas and train driving simulators. Visitors can enjoy this attraction all day long. Nakamura Nisseki Nakamura Koen Iwatsuka Hatta Takabata Joshin Sengen-cho Honjin Kamejima Kokusai Center Nakamura Kuyakusho (International Center) Nagoya Fushimi Osu kannon Meijo Koen Shiyakusho Marunouchi Kamimaezu Higashi Betsuin Hibino Rokuban-cho Tokai-dori Minato Kuyakusho Tsukiji-guchi Nagoyako (Nagoya Port) Takaoka Hisaya-odori Sakae Shinsakemachi Chikusa Yaba-cho Fukiage Tsurumai Arahata Heian-dori Kurumamichi Imaike Gokiso Sakurayama Kanayama Mizuho kuyakusho Nishi Takakura Jingu Nishi Demma-cho Temma-cho Mizuho Undojo Nishi Myoon-dori Sunadabashi Fujigaoka Chayagasaka Hongo Kamiyashiro Jiyugaoka Issha Hoshigaoka Ikeshita Kakuozan Kawana Irinaka Yagoto Aratama-bashi Motoyama Higashiyama Koen (Higashiyama Park) Nagoya Daigaku Yagoto Nisseki October 16, 2004 The Meijo Line, the first looped subway line in Japan Shiogama-guchi Ueda Hara Hirabari Akaike Sogo Rihabiri Center Mizuho Undojo Higashi To Meitetsu Toyota Line OPEN Sakura -honmachi Tsurusato Nonami Narukokita Aioiyama Kamisawa Tokushige Higashiyama Zoo and Botanical Gardens Opened in March 1937 and ranks second in Japan for the number of visitors per year. Subway Sakura-dori Line Nonami Tokushige Opened on March 27, 2011 It takes approximately 35 minutes to travel from Nagoya to Tokushige, a reduction of 15 minutes from before.

5 5 Economic Size of Nagoya Population Populations of Major Cities (July 2011) As of July 2011, the population of Nagoya was 2,267,000, up 0.3% from The population has increased for 15 years in a row from 2,152,000 in January 1996, a total increase of approximately 115,000. Daytime population is 2,516,000 (National Census for FY 2005), and the ratio of daytime to nighttime population is 114.7%, suggesting a significant population inflow from surrounding areas. (Thousand people) 4,000 3,500 3,000 2,500 2,000 1,500 1, Same size as Paris (2,267,000) Nagoya Sapporo Sendai Saitama Chiba Kawasaki Yokohama Sagamihara Niigata Shizuoka Hamamatsu Kyoto Osaka Sakai Kobe Okayama Hiroshima Kitakyushu Fukuoka Gross product The gross product of Nagoya in FY 2008 was the second largest among ordinance-designated cities after Osaka. The gross product of Nagoya accounts for approximately 2.8% of Japan s GDP. (Trillion yen) 25 Same size as New Zealand 20 ( trillion yen) Gross Product (FY 2008) 0 Nagoya Sapporo Sendai Saitama Chiba Kawasaki Yokohama Kyoto Osaka Kobe Hiroshima Kitakyushu Fukuoka *Cities not mentioned in the above graphs have not provided data for FY 2008.

6 6 Characteristics of the Nagoya Economic Zone The gross product of the Nagoya area accounts for approximately 10% of Japan s GDP. In particular, manufacturers are concentrated in the area, and the ratio of shipment value of manufactured goods is the highest among the three major metropolitan areas. In addition to the industrial environment, Nagoya provides an attractive living environment. Among the three major metropolitan areas, Nagoya has the lowest rent and the shortest commuting time, resulting in a comfortable living and working environment. The Nagoya area is an economic zone accounting for about 10% of Japan s GDP. Category Nationwide Nagoya Area Tokyo Area Osaka Area Population 128,056, % 27.8% 14.4% Gross product 5,560,960 (100 million yen) 9.9% 31.3% 13.8% Establishments 5,886, % 24.8% 14.6% Employees 58,442, % 29.5% 14.6% Shipment value of manufactured goods 2,652,590 (100 million yen) 18.2% 17.7% 13.2% Annual sales of wholesale trade 4,135,317 (100 million yen) 9.6% 46.6% 15.7% Annual sales of retail trade 1,347,054 (100 million yen) 9.2% 28.2% 14.4% Annual revenue of service industry 1,518,159 (100 million yen) 7.9% 40.8% 14.4% (Yen/tatami mat) 6,000 5,000 4,000 3,000 2,000 1,000 Rent per Tatami Mat 3,084 yen 5,665 yen 3,628 yen (Minutes) Average Commuting Time 30.7 minutes 41.6 minutes 32.2 minutes 0 Nagoya Tokyo Osaka *FY 2008 (Source) Housing and Land Survey 0 Nagoya Tokyo Osaka *FY 2008 (Source) Housing and Land Survey

7 Municipal Tax Revenue (Billion yen) (Fiscal year) Residential tax (Individual) Residential tax (Corporate) Property tax Other taxes Decrease in revenue due to tax cuts *Tax revenue up to FY 2010 is the settled amount, while the final budget amount is used for FY 2011 and the original budget amount is used for FY *Decrease in tax revenue due to tax cuts is not included in the total amount. 7

8 8 Overview of the 10% Residential Tax Cut of FY Purpose of the Tax Cut To support civil life and to revitalize the local economy in response to current economic conditions 3. Effects of the Tax Cut (Settlement for FY 2010) (Million yen) Category Per capita basis Per income and corporate tax Tax cut 16,012 1,050 14,962 Residential tax (Individual) Residential tax (Corporate) 13, ,169 2, , Tax Rate After the Tax Cut (1) Residential Tax (Individual) (Per capita) Before tax cut 3,000 yen 2,700 yen (By income) Before tax cut 6% 5.4% (2) Residential Tax (Corporate) (Per capita) Before tax cut 50,000 yen - 3 million yen 45,000 yen million yen (By corporate tax) Before tax cut 14.7% 13.23% 12.3% 11.07% 4. Application (1) Residential Tax (Individual) For FY 2010 (Applied starting in June) (2) Residential Tax (Corporate) For the fiscal year between April 1, 2010 and March 31, 2011

9 Outstanding Municipal Bonds (General Account) Due to the development of social infrastructure in response to several government economic policies and measures to secure funds associated with the special tax cut, the amount of municipal bonds issued has increased. However, as a result of curbing the issuance of municipal bonds by reducing investment expenses, outstanding municipal bonds declined in FY 2005 for the first time in 46 years since FY Since then, outstanding municipal bonds declined four years in a row until FY 2008, but they are expected to increase in the future because the issuance of special municipal bonds (including bonds for extraordinary financial measures) increased from FY 2009 to FY In FY 2012, outstanding municipal bonds are expected to decrease for the first time in four years. (Billion yen) 2,000 1,800 1, ,600 1,400 1,200 1, , , , , , , , , , , , , (Fiscal year) Special municipal bonds: Bonds to supplement tax cuts, Temporary bonds to supplement tax rev enue, Bonds f or extraordinary f inancial measures, Bonds to supplement tax cuts (special bonds), Bonds to promote ref orms to quasi-public corporations Regular bonds *Outstanding balance up to FY 2010 is the settled amount, while an estimate is used for FY 2011 and after. *Because bonds for Nagoya City University are included in the general account from FY 2006 due to its transformation into an independent administrative institution, bonds for Nagoya City University before FY 2005 are also reclassified in the general account for the purpose of comparison. 9

10 10 Outstanding Municipal Bonds (Total Accounts) (Billion yen) 4,000 3,500 3, , , , , , , , , , , , ,000 2,500 2,000 1,500 1, (Fiscal year) Corporate account Special account General account

11 11 Local Tax Grants Ordinary tax grants are provided when the standard administrative costs (amount of basic fiscal demand) of individual local governments exceed the standard local tax revenue (amount of basic fiscal revenue), to compensate for the revenue shortfall. Nagoya did not receive ordinary tax grants for the six years between 1956 and 1961, in 1988, for the three years between 1991 and 1993, and for the four years between 2006 and Special tax grants are provided for special administrative costs not covered by ordinary tax grants (costs incurred for disasters such as earthquake and wind/flood damage and fund transfers to public enterprises such as hospitals and buses). (Billion yen) (%) Special tax grants (Billion yen) Ordinary tax grants (Billion yen) Ratio of local tax grants to revenue (%) (Fiscal year) *The figure used for tax grants is the settled amount up to FY 2010, and the budget for FY 2011.

12 Financial Indicators The ratio of current income to current expenditure indicates how much of the general budget (municipal tax and local tax grants) is allocated to current fixed expenditures (personnel expenses, assistance expenses, and debt expenditure). In Nagoya, this ratio is increasing due to increased debt expenditure (as a result of accumulation of the issuance of bonds for extraordinary financial measures created in FY 2001) and increased assistance expenses (as a result of an increase in livelihood assistance payments). While current expenditures such as debt expenditure and assistance expenses increased in FY 2010, the general budget decreased due to decreased residential tax revenue (individual) as a result of a tax cut, leading to a 1.3-point increase in the ratio. The financial capability index is calculated by dividing standard revenue used for calculating ordinary tax grants by standard expenditure. If the index is greater than 1, the government has the financial capability to implement standard fiscal management without ordinary tax grants. Although Nagoya did not receive ordinary tax grants from 2006 to 2009, it started receiving grants in FY (%) Ratio of Current Income to Current Expenditure (Fiscal year) Financial Capability Index (Single year) (Fiscal year) 12

13 13 Ratio for Determining Financial Soundness/Financial Shortfall Ratio Nagoya passed all standards for the ratio determining financial soundness in FY Nagoya is committed to promoting well-planned fiscal management without placing an excessive burden on future generations, while taking care to ensure equitable burden-sharing among generations. Regarding the financial shortfall ratio of public enterprises in FY 2010, the city bus operation account faced a fund shortage. Category Actual deficit ratio Consolidated actual deficit ratio Actual debt expenditure ratio Future burden ratio Ratio for Determining Financial Soundness Overview Ratio of actual deficit of general account to standard fiscal scale Ratio of actual deficit of all accounts to standard fiscal scale Ratio of redemption money for principal and interest and expenditure equivalent to such money paid from general account to standard fiscal scale Ratio of actual debt to be borne by general account (e.g. outstanding municipal bonds, planned expenditure based on debt burden) to standard fiscal scale Ratio in Nagoya Early rehabilitation Fiscal reconstruction FY 2009 FY 2010 Difference Standard Standard *11.25% *20% *16.25% 35% * 12.7% 12.1% -0.6% *25% *35% 218.6% 216.3% -2.3% 400% Financial Shortfall Ratio Category Overview Ratio in Nagoya FY 2009 FY 2010 Difference Standard for management rehabilitation Hospital account City bus operation account Ratio of fund shortage to business scale of public enterprise 15.0% % 53.6% 31.7% -21.9% *20% *Transitional measures are applied to the standard for fiscal reconstruction for the consolidated actual deficit ratio. The standard for FY 2008 and 2009 is 40%, 35% for FY 2010, and 30% for FY 2011 and after.

14 14 Actual Debt Expenditure Ratio in Nagoya 25% (Standard for early rehabilitation) 18% Average of ordinancedesignated cities: 13.8% (Settlement for FY 2008) Actual debt expenditure ratio: 25% or above (Organizations exceeding the standard for early rehabilitation) Required to prepare a plan for fiscal rehabilitation to obtain approval for issuing a municipal bond. Actual debt expenditure ratio: Between 18% and 25% (Organizations needing to formulate a plan to optimize burden of debt expenditure) Required to prepare a plan for optimizing the burden of debt expenditure to obtain approval for issuing a municipal bond. The actual debt expenditure ratio is the ratio of redemption money for principal and interest and the expenditure equivalent to such money paid from the general account to the standard fiscal scale. The actual debt expenditure ratio in Nagoya is below the average of ordinancedesignated cities, and there is room for further improvement. Nagoya: 13.5% (Settlement for FY 2008) Average of ordinancedesignated cities: 13.2% (Settlement for FY 2009) Average of ordinancedesignated cities: 12.8% (Settlement for FY 2010) Nagoya: 12.7% (Settlement for FY 2009) Actual debt expenditure ratio in Nagoya Settlement for FY % (Three-year average from FY 2008 to FY 2010)

15 15 Primary Balance of General Account The primary balance indicates the relationship between benefits and burdens among generations and is calculated by the formula (Revenue Bond revenue) (Expenditure Debt Expenditure). The primary balance is adequate with balanced benefits and burdens among generations when expenditure (excluding debt expenditure) is covered by revenue (excluding bond revenue). A negative primary balance means the current generation receives more administrative services than their burdens and places a burden on future generations. Nagoya has maintained a positive primary balance since FY (Billion yen) (Fiscal year)

16 16 Public Bonds Redemption Fund (Bullet Bonds) Withdrawal exceeded funding in FY 2005 and 2006 because the funding amount decreased due to recent controlled issuance of municipal bonds, while a greater portion of the fund was used for redeeming municipal bonds issued to cover public works as stimulative measures after FY 1992, because they had reached maturity. However, since FY 2007, funding has again exceeded withdrawal. To ensure future redemptions, Nagoya funds the municipal bonds redemption fund with an annual rate of 6% for bullet bonds. Consequently, there are no problems related to redemption such as shortage of funding (Billion yen) (Fiscal year) *Data from the general account is used. Reversal Funding Balance

17 17 Early Redemption of Public Funds with Exemption of Compensation Purpose We implement early redemption (with no compensation) of public funds with interest rates of 5% and higher (funds of the former Trust Fund Bureau, funds of former postal life insurance, and funds of the former Japan Finance Corporation for Municipal Enterprises), and contribute to improving financial soundness as well as the management of public enterprises. Actual early redemption and its effects from FY 2007 to FY 2009 Early redemption 92.5 billion yen Decrease in interest payments due to early redemption FY billion yen FY billion yen FY billion yen *Refinanced a part of funds with a low interest rate depending on remaining period. Estimate from FY 2010 to FY 2012 Estimated early redemption 43.3 billion yen 19.1 billion yen Estimated decrease in interest payments due to early redemption Reduction of debt expenditure Further enhancement of fiscal soundness FY 2010 FY 2011 FY billion yen 14.7 billion yen * Plan to refinance a part of funds with a low interest rate depending on the remaining period. 9.8 billion yen

18 18 Rating Nagoya obtained a rating from Moody s Investors Service Inc. (currently Moody s Japan K.K.) on November 7, ムーディーズ格付け Rating by Moody s Aa3 ((Stable) 安定的 ) BCA (Credibility of municipality): 5 * Sapporo, Shizuoka City, Hamamatsu, Fukuoka City, Sakai, Shizuoka Prefecture, Hiroshima Prefecture, Fukuoka Prefecture: 5 Kyoto City, Osaka City, Niigata Prefecture: 6 Strong tax revenue base supported by stable local economy Various measures and achievements related to fiscal soundness

19 Comparison of Fiscal Condition with Other Cities (1) The amount of outstanding municipal bonds of Nagoya is about 3.6 times larger than the amount of municipal tax revenue for FY This is the second lowest after Yokohama City among the former five major cities, and compares favorably with other cities. The municipal tax collection rate of Nagoya was highest among ordinance-designated cities for 31 years in a row until FY Nagoya ranked second in FY 2010 after Yokohama City. We will continue to work to secure municipal tax revenue. Municipal Tax Revenue, Outstanding Municipal Bonds and Collection Rate of Major Cities in FY 2010 (General Account) (Billion yen) (Ratio) 3,000 2, ,000 1,500 1, Collection rate: The ratio of municipal tax revenue to the amount of money city-wide eligible for taxation, indicating the actual tax collection Collection rate(%) Nagoya Sapporo Sendai Saitama Chiba Municipal tax revenue (billion yen) Kawasaki Yokohama Sagamihara Niigata Shizuoka Hamamatsu Outstanding municipal bonds (billion yen) Kyoto Osaka Sakai Kobe Okayama Hiroshima Kitakyushu Fukuoka Ratio of outstanding municipal bonds to municipal tax revenue (Ratio) 19

20 Comparison of Fiscal Condition with Other Cities (2) The amount of current outstanding municipal bonds of Nagoya was about 12 times larger than debt expenditure in FY This ratio is small for organizations that became ordinance-designated cities recently, due to background factors before becoming such cities. Among the former five major cities, which have been historically large, Nagoya s factor is the second lowest. In the light of the factor of current outstanding municipal bonds to municipal tax revenue (on Page 19), we redeem bonds without postponement based on strong revenue sources. Debt Expenditure and Current Outstanding Municipal Bonds of Major Cities in FY 2010 (General Account) (Billion yen) 3,000 2,500 2,000 1,500 1, (Year becoming (Year becoming an ordinance-designated city) city) Nagoya Sapporo Sendai Saitama Chiba Kawasaki Yokohama Sagamihara Niigata Shizuoka Hamamatsu Kyoto Osaka Sakai Kobe Okayama Hiroshima Kitakyushu Fukuoka (Ratio) Debt expenditure (in 1 billion yen) Outstanding municipal bonds (in 1 billion yen) Ratio of current outstanding municipal bonds to debt expenditure (Ratio) 20

21 21 Comparison of Fiscal Condition with Other Cities (3) The financial independence ratio is the ratio of financial resources a municipality can secure on its own (municipal tax, usage fees and service charges) to total revenue. In general, the higher the financial independence ratio, the more stable the revenue structure and the stronger the financial base may be. The financial independence ratio of Nagoya is 65.1%, the third highest among ordinance-designated cities. The financial capability index is calculated by dividing standard revenue used for calculating ordinary tax grants by standard expenditure. If the index is larger than 1, the government has the financial capability to implement standard fiscal management without local tax grants. The financial capability index of Nagoya was below 1 in FY 2010 and 2011; thus, we receive ordinary tax grants. However, the three-year average exceeds 1. Only two cities have a three-year average financial capability index greater than 1 among 19 ordinance-designated cities. Nagoya is the second highest after Kawasaki. (%) Nagoya Nagoya 50.6 Sapporo 55.8 Sendai Financial Independence Ratio of Major Cities in FY Saitama Chiba Kawasaki Yokohama 59.3 Sagamihara 48 Niigata Shizuoka Hamamatsu Kyoto 60.7 Osaka 48.7 Sakai 53.3 Financial Capability Index of Major Cities in FY 2011 (Three-year Average) Sapporo Sendai Saitama Chiba Kawasaki Yokohama Sagamihara Niigata 0.9 Shizuoka Kobe 49 Okayama Hiroshima Kitakyushu 61.5 Fukuoka Hamamatsu Kyoto Osaka Sakai Kobe Okayama Hiroshima Kitakyushu Fukuoka

22 Number of Nagoya City Employees (Quota) Nagoya is working to reduce the number of its employees and has achieved a decrease of approximately 5,900 employees (about 19%) over the 10 years from FY 2002 to FY Compared to the peak period (FY 1980) of 33,390 employees, the number has decreased by approximately 8,300 (about 25%). (Employees) 35,000 31,051 30,000 25,000 30,662 30,024 29,321 28,751 27,158 26,839 26,570 26,103 25,816 25,470 25,122 20,000 15,000 10,000 5, Bureaus under the control of the mayor Corporate Bureau (Fiscal year) *With the establishment of the Hospital Bureau, employees engaged in the hospital operation were reclassified from the bureaus under the control of the mayor to the Corporate Bureau starting in FY

23 23 Implementation Status of Recommendations for Salary Scales of Nagoya In light of various conditions including Nagoya s fiscal condition, we are temporarily cutting the salaries and allowances of management-level employees. Director-General/Department Director: 2% salary cut, 30% cut in allowances Division Director: 1% salary cut, 30% cut in allowances Basic monthly salary (Recommended rate) Equivalence to monthly salary per year (Months) Special pay (Bonus) Year-to-year change (Months) Average annual salary of administrative employees Change (1000 yen) Year-to-year change FY % % FY % % FY % % *By March 31, After April 1, 2011, only salaries are cut. FY FY % % FY FY % FY % % FY % % FY % %

24 Number of Extra-governmental Organizations Nagoya is promoting the reform and improvement of extra-governmental organizations from the following perspectives: (1) Promotion of consolidation and abolition (2) Reexamination of involvement (3) Voluntary and independent management (Organizations) With the (1) Implementation Plan for Reform of Extra-governmental Organizations and (2) Plan for Intensive Administrative and Fiscal Reform, Nagoya reduced the number of extragovernmental organizations from 54 to 29 during the period between FY 2003 and FY We will continue to work on reforms (Fiscal year) Extra-governmental organization *Organizations whose capital investment and investment without compensation from Nagoya City account for more than a quarter of capital are used for the graph. 24

25 25 Revenue and Expenditure of Public Enterprises (1) Since the fund shortfall ratio exceeded the standard for management rehabilitation for city bus operation, we formulated a plan for management rehabilitation via a city council resolution in March 2010, based on the Act on Assurance of Sound Financial Status of Local Governments. We aim to decrease the fund shortfall ratio to below the standard for management rehabilitation in FY For subway operation, we formulated the Plan for Management Rehabilitation of Municipal Transportation Operation in March 2010 with a plan for city bus operation, and aim to maintain the actual fund shortfall at 269 billion yen in FY In FY 2010, the first year of the Plan for Management Rehabilitation of Municipal Transportation Operation, we steadily promoted various measures in the Plan based on the policy of Safety first and providing more convenient and comfortable transportation services. (Billion yen) Management Income and Expenditure (Transportation Operation) (Fiscal year) City bus operation Subway operation

26 26 Revenue and Expenditure of Public Enterprises (2) Water services, industrial water, and sewerage operations remained in surplus in FY Recently, the management situation of public hospitals has been difficult nationwide, and hospital operation in Nagoya has had a deficit for nine years in a row. To enhance the medical system and expand and improve medical facilities through selection and consolidation, we have decided to transfer West Medical Center Josai Municipal Hospital to the private sector and introduce the designated administrator system to Midori Municipal Hospital. In addition, we have formulated a new plan to reform the municipal hospitals in Nagoya over three years from FY 2011 to FY 2013, in order to respond appropriately to medical needs and fundamentally improve management. Management Income and Expenditure (Hospital, Water Services, Industrial Water, and Sewerage Operations) (Billion yen) (Fiscal year) Hospital operation Water service operation Industrial water operation Sewerage operation

27 27 Future Fiscal Management Policy To implement well-planned fiscal management without placing an excessive burden on future generations, while taking care to ensure equitable burden-sharing among generations Creating a Discipline Municipal bonds play the role of ensuring equitable burden-sharing among generations for projects that provide benefits over the long term such as construction of facilities, leveling fiscal expenditure, and temporary supplements for tax revenue shortage. Meanwhile, because repaying municipal bonds places a burden on fiscal management as debt expenditure, we establish a certain discipline for current outstanding municipal bonds. We also establish a target amount for the financial adjustment fund from the perspective of securing fiscal resilience between fiscal years. Details of the Discipline To maintain current outstanding municipal bonds of the general account at less than 1,900.9 billion yen, the highest level in the past (As of the end of FY 2004) (See Page 10). (1) To minimize the issuance of municipal bonds (including special bonds such as bonds for extraordinary financial measures) To maintain a positive primary balance every fiscal year (See Page 12) To refrain from issuing administrative reform promotion bonds Administrative Reform Promotion Bonds (billion yen) FY 2006 FY 2007 FY 2008 FY 2009 FY (2) To maintain the ratio for determining financial soundness at a certain level (See Page 13) To maintain the future burden ratio at less than 250% To maintain the actual debt expenditure ratio at less than 18% To aim for 10-billion-yen funding for the financial adjustment fund Balance of Financial Adjustment Fund (Billion yen) (Fiscal year)

28 28 Actual Issuance of Public Subscription Bonds (Nationwide) Following decentralization in the Japanese national government, Nagoya terminated the joint issue system in FY 2007 and adopted a method to independently decide terms for public subscription bonds. Recently, we have been raising capital by balancing bonds with short maturities and those with long maturities, mainly 10-year bonds. Nagoya introduced flexible bonds in FY 2009, allowing a flexible response to financial conditions. (Billion yen) Amount of Public Subscription Bonds Issued (Fiscal year) 100% 80% 60% 40% 20% 0% 10-year bonds 5-year bonds 20-year bonds 30-year bonds Jointly-issued bonds Flexible bonds Public Subscription Bonds by Maturity year bonds 5-year bonds 20-year bonds 30-year bonds Jointly-issued bonds (10 years) Flexible bonds (Fiscal year) *For FY 2011, the planned issuance has been used. *Amount issued each fiscal year is used.

29 29 Actual Issuance of Public Subscription Bonds for FY 2011 Actual Issuance for FY 2011 (Million yen) Category Planned amount for issue Monthly plan for issue Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 5-year bonds 20,000 10,000 10, year bonds 72,000 20, ,000 20,000 20,000 years Super-long bonds 24,000 14,000 City resident bonds 3,000 3,000 10, years 3-year bonds 10,000 10,000 Total 129,000 10,000 20,000 14,000 12,000 3,000 30,000 20,000 20,000 Category Amount for issue (Reference) Actual Issuance in FY 2010 (Million yen) Monthly plan for issue Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 5-year bonds 22,000 12,000 10, year bonds 80,000 20, years 20,000 20,000 years 20,000 Super-long bonds 22,000 10,000 12,000 City resident bonds 3,000 3,000 Total 127,000 12, , ,000 20,000 3,000 10,000 20, ,000 20,000

30 30 Postwar History of Public Subscription Bonds in Nagoya Started to issue public subscription municipal bonds (10- year bonds) Issued foreign bonds denominated in pound sterling 1966 Started to issue national government bonds Recent Issues of Public Subscription Bonds 2000 Started to issue 5- year bonds 2004 Started to issue 20- year bonds April, 2006 Adopted a method to independently determine conditions for issuance Year/Month FY 2010 Name Amount for issue (million yen) Maturity (Years) Nominal coupon Apr 14 th 12, % Jun 471 st 20, % Aug 12 th 10, % Sep 472 nd 20, % Oct 8 th City resident bonds 3, % Nov 15 th 10, % Dec 473 rd 20, % 2003 Started to issue city resident bonds 2005 Started to issue 30-year bonds 2010 Circulation of public subscription bonds reached 1 trillion yen FY 2011 Feb 7 th 12, % Mar 474 th 20, % May 16 th 10, % Jun 475 th 20, % Aug 13 th 14, % Sep 476 th 12, % Nagoya started to issue public subscription bonds in Municipal bonds in Nagoya have a longer postwar history than national government bonds. Before the war, in 1909, Nagoya issued foreign bonds denominated in pound sterling

31 31 Comparison of Issuing Organizations of Public Subscription Municipal Bonds There are 51 issuing organizations of public subscription municipal bonds (nationwide) in Japan. Of those, 32 are prefectures and 19 are ordinancedesignated cities. Among those, Nagoya ranks 12 th in municipal tax revenue and 18 th in population. Among ordinance-designated cities, Nagoya ranks third after Yokohama and Osaka City. Only 9 organizations exceed Nagoya in terms of municipal tax revenue, and only 15 organizations exceed Nagoya in terms of population. (Billion yen) 44,000 42,000 1,600 4,200 1,400 1,200 1, ,400 42, Tokyo 1, , Kanagawa Comparison of Municipal Tax Revenue of Issuing Organizations in FY 2009 Osaka Prefecture Aichi Saitama Prefecture Yokohama Chiba Prefecture Osaka City Hyogo Hokkaido Fukuoka Prefecture Nagoya Shizuoka Prefecture Ibaragi Hiroshima Prefecture Kyoto Prefecture Kawasaki Sapporo Kobe Fukuoka City Miyagi Kyoto City Niigata Prefecture Tochigi Nagano Prefecture In terms of municipal tax revenue, 8 organizations in the top 25 are ordinance-designated cities while 4 organizations are ordinancedesignated cities in terms of census population. Nagoya s financial capability and population compare favorably with those of prefectural governments. (Thousand) 14,000 13,160 12,000 10,000 8,000 6,000 4,000 2,000 0 Tokyo Comparison of Census Population of Issuing Organizations in FY ,050 8,860 7,410 7,190 6,220 5,510 5,590 5,070 3,7703,690 2,970 2,670 2,860 2,370 2,640 2,260 2,080 2,010 2,350 1,940 2,150 2,030 2,010 1,910 Kanagawa Osaka Prefecture Aichi Saitama Prefecture Chiba Prefecture Hyogo Hokkaido Fukuoka Prefecture Shizuoka Prefecture Yokohama Ibaragi Hiroshima Prefecture Osaka City Kyoto Prefecture Niigata Prefecture Miyagi Nagoya Nagano Prefecture Gifu Prefecture Fukushima Prefecture Gunma Tochigi Okayama Prefecture Sapporo

32 Table of Contents (Reference Material) Overview of General Account Budget for FY Fiscal Structure of Nagoya (Revenue) 40 Results of Settlement of General Account 33 Fiscal Structure of Nagoya (Expenditure) 41 Settlement of General Account for FY 2010 (Revenue) 34 Management Status of Extra-governmental Organizations for FY Settlement of General Account for FY 2010 (Expenditure) 35 Settlement of Special Account for FY Settlement of Public Enterprise Account for FY Financial Statements for FY 2010 (1) 43 Financial Statements for FY 2010 (2) 44 Financial Statements for FY 2010 (3) 45 Management Status of Public Enterprises in FY Financial Statements for FY 2010 (4) 46 Status of Fund (Fund Balance as of the End of FY 2010) 39

33 32 Overview of General Account Budget for FY 2012 In FY 2012, municipal tax revenue is expected to fall substantially below the budget of FY 2011, due to a decrease in corporate revenue, the residential tax cut, and a re-evaluation of property tax. Regarding expenditure, we cannot avoid an increase in mandatory expenses such as nursing care and medical costs. Other, billion yen The original budget of the general account was 1,028.8 billion yen, a decrease of 21.1 billion yen compared to the original budget for FY 2011 (year-to-year: 98.0%), the first such decrease in five years. Municipal bonds, 92 billion yen 8.9% 29.8% National treasury disbursement, billion yen 14.7% Revenue Local tax grants, 7.5 billion yen 0.7% Municipal tax, billion yen 45.9% Other, 391 billion yen 38.0% Investment expenses, 73.2 billion yen 7.1% Expenditure Personnel expenses, billion yen 16.7% Debt expenditure, billion yen 13.5% Assistance expenses, billion yen 24.7%

34 33 Results of Settlement of General Account The net balance of settled accounts is calculated by deducting the financial resources for projects carried forward to the next year from the balance after deducting expenditure from income. Although municipal tax revenue decreased due to the residential tax cut and the deteriorating employment situation, FY 2010 was also in surplus as a result of reducing personnel expenses and implementing administrative efficiencies. (Billion yen) 1,200 1,150 1,542 1,100 1,791 1,372 1,334 1,771 1,108 2,142 1,859 1,134 2,537 2,442 (Million yen) 3,000 2,000 1,000 1, ,000-1, , ,000 (Fiscal year) Revenue (Billion yen) Expenditure (Billion yen) Net balance of settled accounts (Million yen)

35 34 Settlement of General Account for FY 2010 (Revenue) Because residential tax (individual) decreased due to the residential tax cut and the deteriorating employment situation, the ratio of municipal tax revenue to the general account decreased 2.1 points compared to the previous fiscal year. Nagoya received local tax grants for the first time in the five years since FY The ratio of national treasury disbursement to the general account decreased 0.5 points compared to the previous fiscal year, due to the overall reduction of the subsidy for expenses to provide fixed-amount benefits. The ratio of municipal bonds to the general account increased 1.3 points compared to the previous fiscal year. The ratio of other revenue to the general account increased 0.8 points compared to the previous fiscal year. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Total billion yen Total billion yen % (Fiscal year) Municipal tax Local tax grants National treasury disbursement Municipal bonds Other

36 35 Settlement of General Account for FY 2010 (Expenditure) The ratio of personnel expenses to the general account decreased 0.8 points due to salary revisions, but the ratio of assistance expenses increased 3.9 points due to the overall increase in child allowances, as well as livelihood protection payments. The ratio of investment expenses to the general account decreased 0.2 points due to a decrease in reconstruction work at the pharmacology department building of Nagoya City University. The ratio of other expenditure to the general account decreased 2.8 points due to the termination of fixed-amount benefits, which is an economic policy of the national government. 100% 90% 80% 70% 60% 50% 40% Total billion yen Total billion yen % 20% % % (Fiscal year) Personnel expenses Debt expenditure Assistance expenses Investment expenses Other

37 Settlement of Special Account for FY 2010 We have 13 special accounts and 7 public enterprise accounts, in addition to the general account. A special account is established in accordance with city ordinance when it is necessary to separate accounting of revenue and expenditure from the general account, such as a special operation funded by special revenue. Account Revenue Expenditure Difference Description of operation National health insurance 206, ,288 1,695 Medical care for people aged 75 and over 37,687 37, (Million yen) Management of national health insurance operation Provision of medical care for people aged 75 and over Medical care for the aged Provision of medical care for the aged Nursing care insurance 127, , Loans to single mothers and widows Agricultural insurance Market and slaughterhouse 7,869 7,869 - Loans to land readjustment associations Management of nursing care insurance operation 1,499 1, Lending to single mothers and widows Urban area redevelopment Graveyard and park development Fund 97,974 97,974 - Pre-acquisition of land 9,126 9,126 - Public bond 618, , Total 1,109,488 1,106,329 3,159 Management of agricultural insurance operation Management of Main market, Hokubu market, Nambu market and slaughterhouses Lending to private land readjustment associations Implementation of urban area redevelopment operation Implementation of graveyard and park development operation Management of 14 funds including education fund Implementation of pre-acquisition of land for public facilities Consolidated management of borrowing and redemption of public bonds * Individual amounts are rounded off, so the total may not agree with the sum of items shown. 36

38 37 Settlement of Public Enterprise Account for FY 2010 The public enterprise account is a special account to which the Local Public Enterprise Act is applied. Account Revenue Expenditure Difference Hospital 20,703 22,983-2,280 Josai Hospital 4,850 4, Water service 48,577 48, Industrial water Sewerage 73,324 72, Bus 25,286 23,594 1,692 Subway 79,598 75,580 4,017 Total 253, ,297 4,842 Description of operation (Million yen) Management of city hospitals and improvement of related facilities Management of Josai Hospital (Transferred to the private sector on April 1, 2011) Management of water service operation and improvement of related facilities Management of industrial water operation and improvement of related facilities Management of sewerage operation and improvement of related facilities Management of city bus operation and improvement of related facilities Management of subway operation, construction of new lines and improvement of related facilities *Individual amounts are rounded off, so the total may not agree with the sum of items shown.

39 Management Status of Public Enterprises in FY 2010 (Million yen) Hospital Josai Hospital Water service Industrial water Sewerage Bus Subway Total assets 55, ,236 20,192 1,055,933 22, ,530 Balance sheet Assets Liabilitie s Fixed assets 48, ,234 18,389 1,014,855 21, ,713 Current assets 6, ,003 1,803 40,028 1,607 19,817 Offsetting account , Total liabilities 10, , ,237 32, ,990 Noncurrent liabilities 5,450-35, ,872 24, ,592 Current liabilities 4, , ,365 7,628 28,399 Total equity 45, ,020 19,943 1,029,696-9, ,540 Profit and loss statement Equity Core capital 29,394 4, ,692 11, ,760 21, ,700 Borrowed capital 32,086-98,442 7, ,508 13, ,899 Surplus -16,350-4,770 12, ,428-44, ,059 Total liabilities and equity 55, ,236 20,192 1,055,933 22, ,530 Revenue 20,703 4,850 48, ,324 25,286 79,598 Expenses 22,983 4,782 48, ,482 23,594 75,580 Net income -2, ,692 4,017 Retained earnings carried over from previous year -15,807-4, , ,489 Unappropriated retained earnings -18,087-4, , ,472 * Individual amounts are rounded off, so the total may not agree with the sum of items shown. 38

40 39 Status of Fund (Fund Balance as of the End of FY 2010) Fund name Balance Overview of fund (Million yen) Public bond redemption fund 189,484 Fund to secure financial resources for redemption of public bonds by planned funding (Of those, for bullet maturity amortization) (183,153) Financial adjustment fund 7,501 Fund to secure financial resources for bullet maturity amortization of public subscription bonds Fund to adjust financial resources between fiscal years by funding surplus financial resources and using reserve funds Special-purpose fund 21,465 Reserve fund for nursing care payments 4,282 Provident fund for international exchange programs Provident fund for cultural promotion programs 2,270 1,278 Environmental conservation fund 815 Fund whose reserve funds and returns are used for special purposes or special programs Temporary special fund for improving the working conditions of nursing care professionals other funds 12,392 Fixed-amount fund 3,500 Land fund 3,000 Fund for acquisition of fine art, etc. 500 Fund to repeat purchase and sale of land and fine art, etc., and manage in a fixed amount Total 221,950

41 40 Fiscal Structure of Nagoya (Revenue) Settled Amount of Revenue of General Account (Billion yen) 1,200 1,000 1, , , , , (Fiscal year) Municipal tax Local tax grants National treasury disbursement Municipal bonds Other * Individual amounts are rounded off, so the total may not agree with the sum of items shown.

42 41 Fiscal Structure of Nagoya (Expenditure) Settled Amount of Expenditure of General Account (By Type) (Billion yen) 1,200 1,000 1, , , , , , (Fiscal year) Personnel expenses Assistance expenses Debt expenditure Investment expenses Other * Individual amounts are rounded off, so the total may not agree with the sum of items shown.

43 Management Status of Extra-governmental Organizations for FY 2010 (Million yen) Statement of investment Nagoya City Land Development Corporation Nagoya City Housing Supply Corporation Nagoya Expressway Public Corporation 17 other organizations Investment ,382 8,284 Of those, investment by Nagoya ,691 5,514 (Investment ratio) 100% 100% 50% Number of investors Total assets 67,846 32,569 1,640,250 82,831 Balance sheet Assets Liabilities Fixed assets 24 24,208 1,628,381 62,415 Current assets Deferred account Total liabilities Noncurrent liabilities Current liabilities 67,822 8,361 10,641 20, , ,363 28,355 1,332,868 66,140 51,471 12,287 1,324,439 51,423 14,892 16,067 8,430 14,717 Net worth 1,483 4, ,382 16,691 Total liabilities and net worth 67,846 32,569 1,640,250 82,831 Revenue 6,222 11,788 63,177 61,698 Expenditure 6,222 11,758 63,177 49,156 Profit and loss statement Net income (after tax) ,542 Retained earnings carried over from previous year Unappropriated retained earnings 1,536 4, ,300 1,463 4, ,471 * Organizations selected are those with 50% or higher of its financing provided by the City of Nagoya. Individual amounts are rounded off, so the total may not agree with the sum of items shown. Net income in the profit and loss statement is a change in general net worth in the net worth matrix for incorporated foundations. 42

44 Financial Statements for FY 2010 (1) Debit [Assets] Balance Sheet (General Account) (As of March 31, 2011) *Prepared using the revised model of the Ministry of Internal Affairs and Communications (MIC). Credit [Liabilities] Public property 3,655.3 Noncurrent liabilities 1,907.0 Tangible fixed assets 3,613.1 Municipal bonds 1,698.7 Available-for-sale assets 42.2 Long-term accrued liabilities 18.9 Investments Reserve for retirement benefits Investments and capital investments Reserve for compensation for loss 57.5 Loans Current liabilities Funds 20.3 Current portion of municipal bonds Long-term bad loans 18.0 Short-term borrowing - Unrecoverable loans (estimate) -1.2 Accrued liabilities 1.8 Current assets Current portion of retirement benefits 19.8 Cash and deposits Reserve for bonuses 8.6 Financial adjustment fund 7.5 Total liabilities 2,154.6 Sinking fund (Billion yen) Annual cash 5.3 [Net worth] Accounts receivable 4.6 Subsidy from government and prefecture for development of public property, etc General revenue for development of public property, etc. 2,401.2 Other general revenue, etc Valuation difference on assets -2.5 Total net worth 2,492.8 Total assets 4,647.4 Total liabilities and net worth 4,