2009 Operating Plan (Interim)

Transcription

1 2009 Operating Plan (Interim) Item 3 Monday December 8, 2008 BOARD OF DIRECTORS To: Board of Directors Report: TCHC: From: Finance Committee Date: November 25, 2008 Page 1 of 3 PURPOSE: To seek Board of Directors approval for the interim 2009 Operating Plan. RECOMMENDATIONS: It is recommended that the Board of Directors: (1) approve the 2009 Operating Plan (interim) as detailed in the attached Appendix A to give the CEO spending authority for 2009, pending confirmation of funding level from the Service Manager (City of Toronto); (2) direct the CEO to report to the Board of Directors upon approval of subsidy levels by the Service Manager (City of Toronto); and (3) authorize the appropriate Toronto Community Housing officials to take the necessary action to give effect to the recommendations. FINANCE COMMITTEE COMMENTS: At its meeting on November 24, 2008 the Finance Committee adopted the report and recommended it be forwarded to the Board of Directors for approval. BACKGROUND: The Toronto Community Housing 2009 Operating Plan has been prepared based on the financial targets and initiatives set in the business plan Community Management Plan (CMP). The detail of the Plan is in Appendix A attached.

2 2009 Operating Plan (Interim) Report TCHC: Page 2 of 3 REASONS FOR RECOMMENDATIONS: The City of Toronto is the Service Manager for all social housing in the City. The CMP financial plan was based on funding program consolidation and a multi-year subsidy formula with an annual increase to offset some inflationary costs. The key underlying assumption in the CMP was to have increases in rental revenues and subsidy offsetting most of the increases in salary, energy, property tax and other operating costs. Toronto Community Housing would then be able to direct most of the operating efficiencies toward the pressing need for reinvestment in building improvements. The City has signed the long term Operating Agreement with program consolidation and a funding formula based on the principles outlined in the Shareholder Direction and the CMP. Toronto Community Housing funding is part of the City s overall social housing cost budgeted and administered by the Shelter, Support and Housing Administration division as the Service Manager. The overall funding envelop for the City as Service Manager still need to be approved by City Council even with a long term agreement. The attached 2009 Operating Plan (Appendix A ) 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 as detailed in the report 5 Year Building Capital Plan submitted to the Committee for consideration in November Staff are working with Operating Unit managers and tenants to finalize the detail within each priority areas for each building communities. A Building Capital Plan with project level detail will be submitted for consideration in February Staff will submit a final Operating Plan upon approval of the subsidy. Pending the submission of the detailed Building Capital Plan and the final Operating Plan, approval of this report will provide the CEO with interim spending authority. FINANCIAL IMPLICATIONS: This 2009 Operating Plan (interim) sets out, at a high level, the revenue and cost envelope for 2009 pending the City s approval on the 2009 funding level. Approval of this interim Plan will provide the CEO with spending authorization for If the City funding approval is different from the assumption in the Plan, the Operating Plan will be revised and brought forward for Board confirmation. LEGAL IMPLICATIONS: N/A

3 2009 Operating Plan (Interim) Report TCHC: Page 3 of 3 COMMUNICATIONS IMPLICATIONS: The 2009 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. Derek Ballantyne Chief Executive Officer Contact: Gordon Chu Chief Financial Officer & Treasurer gordon.chu@torontohousing.ca Attachment: Appendix A

4 APPENDIX A 2009 OPERATING PLAN (interim) I. Operating Plan Overview II. Table A Operation Cash Flow Table B Investment Plan

5 I. Operating Plan Overview The 2009 Operating Plan ( Plan ) was developed based on the 2008 operating and projected results and adjusted for inflation and implementation of CMP revenues and costs initiatives. The Housing Program Operating Budget incorporates all the CMP initiatives generating non-rental revenue and operating savings. The Buildings and Communities Investment Plan incorporates all the resources required to implement the CMP initiatives. Housing Program Operating Budget The phase 1 development at Regent Park will have several buildings (611 units) completed and going into operation during 2009 (246 Sackville, 252 Sackville, 92 Carlton, 60 Richmond, 501 Adelaide) as will Rivertowne and acquired buildings at 2350 Finch West and 1900 Sheppard West. These have been budgeted for the expect months of operation. Revenue: Rent-Geared-to-Income rent projection is projected based on 2008 actual plus vacancy improvement over 2008 actual (2.8% 2008 actual). The target vacancy rate for 2009 is 1.98%. There is $1.7 million budgeted for the added building units. Market rent revenue is projected based on 2008 actual plus an average increase of 1.8%, which is the 2009 rent increase guideline. Target vacancy for 2009 market unit is 3.7% (5.5% 2008 actual). The budgeted subsidy reflects funding agreement with the City s Social Housing Unit (acting as SHRA Service Manager). Under the Operating Agreement with the City, Mortgages, taxes and Access Housing Connections rent supplement program are based on actual payments. The Operating Agreement allows for net residual base subsidy increase at 1.8%, a provincial factor. City Council has not approved this request from the City s social housing unit. CMHC mortgages (50 year term) on 1 building will expire in Agreement has been reached with the City s Social Housing to switch this from the funding under the subsidy formula in the Operating Agreement into the commercial rent supplement program. There will not be a reduction of overall net subsidies for these building. Toronto Community Housing will be able to continue to operate these buildings as Rent- Geared-to-Income units. 2

6 The 2009 budget for non-rental revenue includes revenue from commercial operation, cable fees and interest income. The projected variance for 2008 is about $2.7 million. This favourable variance is largely due to the higher interest income ($1.7 million) from investing the unused portion of the $250 million bond proceeds, higher commercial parking and other commercial leases. The 2009 budget reflects this trend with increased interest revenue, commercial parking, cable and wireless. An expected net contribution from Housing Service Inc. external sale remains estimated at $500,000 for 2009 accounting. The total revenue for housing operation is about $578.7 million. Subsidy for flow through to Access Housing Connection is another $33.5 million for a total Toronto Community Housing revenue budget of about $612.2 million. Expenditure Average manageable cost inflation factor is set at 3.0% over the 2008 budget. Divisions have to absorb all inflationary increases, including the 3% and the increases for bargaining units which is to be negotiated, within this framework. The new buildings add $0.9M to the manageable costs. CMHC Mortgages (50 year term) on 1 building will expire in Agreement has been reached with the City s Social Housing Unit to switch it from the funding under the subsidy formula in the Operating Agreement into the commercial rent supplement program. There will not be a reduction of overall net subsidies for these building. Toronto Community Housing will be able to continue to operate these buildings as Rent-Geared-to-Income units. The Operating Agreement provides for flow-through of mortgages and taxes covered under SHRA. About 13% or mortgages and 7% of taxes are for buildings not covered by the operating agreement. The lower mortgage budget reflects lower interest rate at renewal. There are no significant increases to mortgages and taxes not covered by the operating agreement other than the mortgage added for 2350 Finch ($448K). Utilities increases averaging about 2.5% above 2008 projected actual with hydro, gas and water increases at 1.3%, 0% and 9% respectively. Usage savings of $2.3M in 2008 are expected to continue into The reduction of hydro and water consumption resulting from appliance and other program are offset by financing charges to support the investment in conservation measures (appliance program, energy retrofit program and building renewal 3

7 program). These financing charges are included in the utilities budget. The overall budget to budget increase is approximately 0.7%. Other operating costs in the 2009 are based on 2008 projected results and projected forward for inflationary and other program initiatives. Operating budget for Access Housing Connections is as negotiated with the City. The bulk of the expenditure represents payments to private sector landlord under the various rent supplement programs as well as the City s Housing Allowance program. As noted above and in Table A, the total 2009 expenditure from housing operations including Access Housing Connections will be about $525.1 million. Net Operating Cash Flow With revenue of $612.2 million and expenditure of $525.1 million, the net operating cash flow is about $87.1 million. This is about $4 million higher than 2008 budget. This is still an interim budget subject to subsidy approval by the City. Buildings and Communities Investment Plan The Investment section in Table B shows the $211 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 2009 Plan totaling $168.7 million is included in the report entitled 5 Year Building Capital Plan 2009 to 2013 submitted to the Committee for consideration in the November The Plan has the following major components: Building capital program including local priority capital and contingency Unit refurbishment program 3-year to refurbish kitchen and bathroom of housing units and related in-suite repairs. Community based capital program provides capital to local communities based on local priorities. Component Replacement program the capital provision as part of the implementation annual preventative maintenance program (in building maintenance line). Replacement of major components of mechanical systems (rather than total asset replacement) is an approach to extend 4

8 the useful life of an asset. In 2009, contract management buildings will be included in the Toronto Community Housing preventative maintenance program. Appliances program a small provision for one-off replacement in case of emergency breakdown. Building Renewal Program the final year of a 4-year program totaling $100 million to renew 19 developments using energy savings Energy conservation programs - self-funding initiatives by leveraging energy savings. In addition to the water and hydro program, the 2009 energy and utility conservation program will emphasize the recommissioning and retrofit existing building systems (optimization), an energy information system with remote monitoring capability, new and building automation system and smart building operating center. Other holistic building system retrofit projects include the Building Energy Retrofit Program (BERP) and Tower Renewal (a City led initiative). Green Plan, Green Education Program and Accessibility initiatives as per CMP. Commercial envelop includes the completion the parking control system implementation, new access control system and general capital provision for Toronto Community Housing commercial real estate portfolio. Staff are working with operation managers and tenants to finalize the detail plan (by building) and submit for Board consideration in February Other Investment Investing in Communities and Tenants These investments support a combination of activities. On an annual basis, a continued commitment of $1m for the Social Investment Fund and $400k for the Tenant Engagement System remain. In addition, funds ($362k) have been allocated for the implementation of the Seniors Strategy and the completion of the Children and Youth Strategy in 2009 and Economic opportunities and the incubation of a series of tenant-owned businesses will be supported with an investment of $500k in For comparison purposes, Investing in Communities and Tenants covers areas identified in the 2008 budget including: Councils and Community Economic Development, Seniors and Youth Strategies, and the Social Investment Fund. 5

9 Quality Housing Services Supporting this Community Management Plan priority includes a financial investment in three key areas: response to increase in bed bug infestations through a bed bug program ($1m); introducing a new curb appeal program in a select number of communities each year ($1m), and improvements to customer service and process reengineering to accompany organizational changes ($744k). The latter includes training, system upgrades and remaining organizational changes required in Effective Organization - $900k has been allocated to support activities that drive positive organizational changes resulting in a good workplace for staff. An investment of $300k will continue to support Community Training Plans. $400k will be used for organizational development initiatives including Diversity Plan, Succession Management, Leadership Development, Performance Management, and Rewards and Recognition. The remaining $200k will fund research studies that support areas of interests related to advocacy or programs and services. Corporate Other - $11.4 million includes information technology, selffunded insurance reserve, staff voluntary exit initiatives and other departmental capital provisions. Information technology ($5.86 million) including the replacement of the housing management system, accounts for more than 50% of this amount. A self-funded insurance reserve, voluntary exit and severance contingencies, business development, and miscellaneous department capital are the remaining portion. Development Strategy of $2.0 million has been earmarked to support the work of the Development Division in the implementation of CMP City Building initiatives. Capital Reserve mandated reserve contributions of about $7.5 million for the non-profit portfolio. Contribution to Development and Regeneration $10 million contribution to the Regent Park Reserve and an addition $2 million toward Regent Park s Community Energy Plant. Corporate Contingency - $3,000,000 to manage unexpected costs such as emergencies, and overages, due to tender results, change orders, and other corporate requirements. The above planned 2009 investment is $211.0 million as shown in Table B. The increase in investment from 2008 reflects the capital grants funding allowing Toronto Community Housing to increase capital repairs in

10 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 $87.1 million Provincial and City grants of $53.7 million (2009 portion) Withdrawn from capital and contingency reserves of $7.7 million. $64.3 million of 3rd party financing will be required to support the Building Renewal Program (BRP), BERP and capital repairs. Energy savings will be used to service the financing charges for the BRP, BERP and other energy projects. Capital repairs will come from the $250 million bond issue to support the unit refurbishing and capital upgrade program now redeployed (see report 5 year Building Capital Program). Debt services has been incorporated into the utilities and corporate debt service lines in Table A. The above totals $212.8 million against $211.0 million of investment for a net free cash flow of about $1.8 million. II. Tables A & B 7

11 Table A 2009 TCHC Operations Revenue and Expenditures Statement 2008 Budget v Projection 2009 Budget REVENUE - Housing Operations RGI Rent Revenue 212,232, ,432, ,834,000 Market Rental Revenue 50,567,000 50,387,000 53,283,000 Non-Rental Revenue 31,884,000 34,592,000 35,190,000 Bad Debt Allowance (2,000,000) (2,370,000) (2,402,000) Total Housing Operations 292,683, ,041, ,905,000 Housing Program Subsidies 275,619, ,969, ,814,379 Total Housing Operations Revenue 568,302, ,010, ,719,379 Access Housing Connections Subsidies 35,519,000 32,511,000 33,458,000 TOTAL REVENUES 603,821, ,521, ,177,379 EXPENDITURES - Housing Operations Manageable Cost Building Operations & Maintenance 85,040,000 85,035,000 88,155,000 Tenancy Management 24,801,000 25,725,000 24,857,000 Community Support Services 6,371,000 6,233,000 9,717,000 Community Safety Services 11,991,000 11,941,000 11,644,000 Corporate Services 19,082,000 18,521,000 18,272,000 Total Manageable Cost 147,285, ,455, ,645,000 Other Cost Insurance 3,823,000 3,823,000 3,310,000 Utilities 115,500, ,700, ,328,000 Property Taxes 114,175, ,875, ,568,000 Mortgage & Lease payments 92,464,000 92,770,000 92,758,000 Corporate Debt Service 8,467,000 8,388,737 8,340,000 Commercial Operations 3,470,000 3,600,000 3,708,000 Total Other Housing Operations Cost 337,899, ,156, ,012,000 Total Housing Operations Cost 485,184, ,611, ,657,000 Access Housing Connections (AHCI) Wait List Management & Administration 5,111,000 5,111,000 5,264,000 Landlord Payments & Housing Allowance 30,408,000 27,400,000 28,194,000 Total Access Housing Connections 35,519,000 32,511,000 33,458,000 TOTAL OPERATING EXPENDITURES 520,703, ,122, ,115,000 NET OPERATING CASHFLOW 83,118,000 86,398,263 87,062,379 8

12 Table B 2008 TCHC Operations Sources & Application of Funds 2008 Budget 2008 INVESTMENT v.4 Projection 2009 Budget Building Repair Capital Program (& contingency) 32,112,000 39,810,000 49,899,690 Unit Refurbishment Program 32,000,000 34,700,000 34,300,000 Community Based Capital Program 15,500,000 15,500,000 15,500,000 Components Replacement 6,880,000 6,880,000 5,850,000 Building Renewal Program 23,500,000 18,800,000 29,515,660 Energy Programs Building Energy Retrofit Program 18,120,000 Tower Renewal 3,500,000 Other Energy Programs 19,630,000 7,499,690 4,743,060 Appliance Program 500, , ,000 Corporate (Commercial, Green, Accessibility) 8,345,000 6,200,000 7,007,990 Total Building Capital Plan 138,467, ,889, ,686,400 Corporate Other (Insurance, IT, Severances...) 11,420,000 11,120,000 11,054,600 Quality Housing Services 1,244,000 1,244,000 2,744,000 Investment in Communities and Tenants 2,240,000 2,292,000 Effective Organization 900, ,000 Tenant Survey 200, ,000 Development Strategy-Redevelopment Projects 2,000,000 2,000,000 2,000,000 Reserve Contributions (Capital & Other) 7,532,000 7,870,000 8,327,860 Reserve BRP Equity 890, ,000 Reserve Contributions (Regeneration & CES) 16,000,000 16,000,000 12,000,000 Corporate Contingency 3,000,000 3,000,000 3,000,000 TOTAL INVESTMENT 183,893, ,213, ,004,860 FUNDING OF INVESTMENT Cashflow from Operations 83,118,000 86,398,263 87,062,379 Provincial & City Grants 37,000,000 53,698,000 Carryover of BRP equity 12,890,000 12,890,000 Capital Reserves Withdrawn for Capital, BRP & CMP Initiatives 25,475,000 17,475,000 7,744,000 3rd Party Financing: Capital and Energy Programs 63,130,000 19,300,000 64,251,660 TOTAL SOURCES OF FUNDS 184,613, ,063, ,756,039 NET CASHFLOW 720, ,573 1,751,179 9