2019 Budget Overview. Presentation to Budget Committee December 11, 2018

Transcription

1 2019 Budget Overview Presentation to Budget Committee December 11, 2018

2 Introductory Comments Mike Murray Chief Administrative Officer

3 2019 Budget Challenges Base Budget pressures Infrastructure funding Service enhancements Uncertainty 3

4 Base budget pressures Annualization of 2018 Budget Issue Papers (e.g. Transit, Paramedic Services) Service contract costs Funding for development charge exemptions Fuel, utility and material costs 4

5 Infrastructure funding Existing Historical cost in excess of $4 billion Needs to be maintained, renewed, upgraded and replaced Inadequate annual funding; too much debt financing New Required to serve our growing community Water,,wastewater, roads, facilities, vehicles and equipment Development charges not covering growthrelated capital costs 5

6 Service Enhancements Implementation of numerous master plans o Paramedic Services (add ambulances and paramedics) o GRT service expansion o MobilityPLUS service enhancements Service enhancements driven by growth and changing demographics Additional staff at Sunnyside Traffic signal maintainers Organizational capacity IT security, facilities support etc. 6

7 Uncertainty Federal and Provincial infrastructure funding programs Status? Timing? Process? Provincial policies and funding Interest rates, fuel prices, utility costs 7

8 Base Budget Adjustments Efficiencies and cost savings without impacting service levels: energy saving retrofits reviewing and adjusting staffing levels and overtime requirements restructuring hardware replacement costs Office supplies and minor maintenance Base Budget Reductions ($millions) Total Tax supported $1.8 $1.7 $2.6 $1.7 $1.1 $8.8 User rates Subtotal $2.3 $2.6 $3.4 $2.1 $2.2 $12.5 8

9 Budget Region Of Information Waterloo Links to electronic documents on the Region's website Preliminary budget document: Budget Issue Papers: Committee agenda (staff report): %20December%2011,% pdf 9

10 2019 Regional Budget Objectives of today's meeting Overview of the preliminary 2019 Budget and the Capital Program Major factors that impact the Region's budget Feedback from Council on those areas for which additional information is required 10

11 2019 Regional Budget Today's Agenda Introduction Economic Indicators Water and Wastewater Operating Budget and Capital Program Tax Supported Operating Budget and Capital Program Questions 11

12 Government Tax Dollars Municipal 9% Federal 47% Ontario 44% 12

13 2018 Average Property Tax Bill* Regional Services $1, % Education $ % Local Services $1, % *Based on an average residential property having a market value of $333,800 for

14 Purpose of the Budget Achieve strategic objectives Corporate Strategic Plan Establish service levels Approve financial and staff resources Determine property tax and user rate revenue requirements Set user rates and fees 14

15 Long term master plans Recently approved master plans Paramedic Services Airport GRT Business plan Police Accommodation Wastewater and Biosolids Transportation Underway: Regional Accommodation, Waterloo Region Housing 15

16 Budgeting at the Region User Rate Budgets Property Tax Budget Region-wide wholesale water supply and wastewater treatment Retail function in two townships Funding from user rates and development charges All other services Net expenditure (after all other revenue sources) funded from property taxes Includes Police Services 16

17 Types of Budgets Capital Operating Investment in capital assets: land, facilities, infrastructure, vehicles, technology and equipment Expenditure: compensation, materials & supplies, services, social assistance, utilities, debt servicing Revenue: grants, development charges, property taxes and user rates Revenue: grants/subsidies, user fees and charges, property taxes 17

18 Property Tax and User Rate Requirements User Rate Budget Operating expenditure for water/wastewater Property Tax Budget Operating expenditure for all other services Plus: Funding for capital Funding for capital Less: Recoveries, surcharges Grants, subsidies, user fees and charges Equals: Net user rate revenue requirement ($) Net property tax levy requirement ($) 18

19 2018 Funding for Regional Operations 19

20 2018 Funding for Regional Operations 2018 Funding Sources for Major Services Police Services Public Transit (including RTMP) Income Support Community Housing Wastewater Children's Services Water Waste Management Road Repairs Seniors' Services Public Health Paramedic Services Region of Waterloo International Airport Property Taxes Provincial & Federal Subsidies User Fees & Charges and Other Third Party Revenue $0 $50 $100 $150 $200 Program spending ($ millions) 20

21 2018 Funding for Regional Operations 2018 Funding Sources for Major Services Police Services Public Transit (including RTMP) Income Support Community Housing Wastewater Children's Services Water Waste Management Road Repairs Seniors' Services Public Health Paramedic Services Region of Waterloo International Airport Property Taxes Provincial & Federal Subsidies User Fees & Charges and Other Third Party Revenue $0 $50 $100 $150 $200 Program spending ($ millions) 21

22 2018 Funding for Regional Operations 2018 Funding Sources for Major Services Police Services Public Transit (including RTMP) Income Support Community Housing Wastewater Children's Services Water Waste Management Road Repairs Seniors' Services Public Health Paramedic Services Region of Waterloo International Airport Property Taxes Provincial & Federal Subsidies User Fees & Charges and Other Third Party Revenue $0 $50 $100 $150 $200 Program spending ($ millions) 22

23 Capital infrastructure Existing Historical cost in excess of $4 billion Needs to be maintained, renewed, upgraded and replaced New Required to serve our growing community Water and wastewater capacity New roads, facilities, vehicles and equipment 10 year capital program Funded from property taxes, user fees, development charges, grants Financed through current year revenues, reserves, and long term borrowing 23

24 Capital financing sources 24

25 Capital financing sources Waste Management Capital Plan Sources of Financing for Major Infrastructure ($ millions) Housing Grants, Subsidies, Recoveries Own Source Reserves Airport Facilities Transit Services Non-Growth Related Debt Development Charges Growth Related Debt Transportation $0 $200 $400 $600 $800 $1,000 25

26 Capital financing sources Waste Management Capital Plan Sources of Financing for Major Infrastructure ($ millions) Housing Grants, Subsidies, Recoveries Property Taxes Airport Facilities Transit Services Non-Growth Related Debt Development Charges Growth Related Debt Transportation $0 $200 $400 $600 $800 $1,000 26

27 Capital financing sources Waste Management Capital Plan Sources of Financing for Major Infrastructure ($ millions) Housing Grants, Subsidies, Recoveries Property Taxes Airport Facilities Transit Services Non-Growth Related Debt Development Charges Growth Related Debt Transportation $0 $200 $400 $600 $800 $1,000 27

28 Internal Budget Review Process Detailed reviews of departmental budgets with CAO, CFO and departmental staff Capital projects 3 year budget versus actual comparisons Base budget review User fees and charges 28

29 The Budget Cycle Budget analysis and preparation Variance monitoring and reporting Preliminary Budget Document Council approval Budget Committee review, public input 29

30 Budget Terminology Budget Issue Paper Budget Information Paper Full Time Equivalent (FTE) Service expansion request Required for staff additions Background and details Councillor request or staff initiated Measures staff complement Consistent and comparable 30

31 Changing economic climate Two Years Ago Last year Now Federal deficit ($17.8 b) ($28.5 b) ($18.1 b) Provincial deficit ($1.0 b) $0.0 ($6.7 b) ($14.5 b) Ontario CPI 1.5% 1.5% 2.5% Unemployment rate (KCW) 5.7% 4.4% 5.2% Ontario Works caseload 8,882 9,285 9, year cost of borrowing 2.1% 2.9% 3.1% Oil price per barrel ($US) $51 $57 $51 $1 CAD $0.77USD $0.80USD $0.75USD 31

32 Economic Indicators 2019 Inflation (CPI) forecast (%) (as of October 2018) Federal Government 2.0 Provincial Government 2.0 Bank of Canada 2.0 National Bank Financial 2.3 CIBC 2.4 RBC 2.4 Scotiabank 2.4 BMO

33 Economic Indicators Oil prices 33

34 Fuel Prices $/L $1.20 $1.15 $1.10 $1.05 $1.00 $0.95 $ Year to Date and 2019 Budget Fuel Price Comparison 20-Oct Sep-18 8-Sep Aug Jul-18 7-Jul Jun May-18 5-May Apr Mar-18 3-Mar Feb Jan Dec Nov YTD Gasoline price 2018 YTD Diesel price 2019 budgeted fuel price 34

35 Cost of Regional Borrowing 3.50% Region of Waterloo Cost of borrowing for debenture issues 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Fall 2016 (14-Sep-2016) Spring 2017 (05-Jun-2017) Fall 2017 (07-Nov-2017) Spring 2018 (31-May-2018) Fall 2018 (26-Sep-2018) Canada Ontario & AAA Muni Spread 35

36 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Economic Indicators 10,000 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 Monthly OW caseload SAMS Implementation OW Caseload 36

37 Economic environment Significant federal and provincial deficits Cost of borrowing remains low Low unemployment rate Increasing OW caseload Cost of fuel volatile 37

38 Water and Wastewater overview Water supply 54 million m 3 per year Over 100 supply wells Supply to all 7 area municipalities, retail function in 2 Wastewater treatment 13 treatment plants Higher level of treatment required due to discharge in rivers 38

39 2018 User Rate Budgets recap User Rate Budgets approved on Dec. 13/17 Rate Revenue Requirement = $132.2 m 10 year capital spending = $1.1 b User Rate impacts Water Supply = 1.9% Wastewater Treatment = 7.9% Retail water = 7.9% Retail wastewater = 5.9% 39

40 2019 User Rate Budgets ($ m) Division Summary Operating expenditure (net of nonrate revenue) Plus: debt servicing Plus: capital reserve contribution Less: recoveries from RDCs for prior year oversizing and debt servicing Equals: Rate Revenue Required Water Supply $33.7 $0.5 $24.7 ($1.1) $57.7 Wastewater Treatment $40.7 $18.8 $26.7 ($9.4) $76.8 Water Distribution $2.1 $0.0 $0.3 $0.0 $2.5 Wastewater Collection $1.2 $0.0 $0.2 $0.0 $1.4 40

41 User Rate budget issue papers Proposed User Rate budget issue papers: Addition of one permanent Water Coordinator, Source Protection Planning to ensure the delivery of the Source Protection Plan Conversion of one Water Supervisor from temporary to permanent to ensure continuation of operations and systems during the replacement of critical infrastructure and expansion of the asset management program. 41

42 Proposed User Rates Wholesale Rate (effective January 1, 2019) 2018 approved user rate increase Projected 2019 user rate increase from 2018 forecast Current estimate of 2019 user rate increase Water supply 1.9% 2.9% 2.9% Wastewater treatment 7.9% 6.9% 6.9% Water distribution 7.9% 7.9% 7.9% Wastewater collection 5.9% 4.9% 4.9% 42

43 Average Annual Wholesale Cost Per Household 2018 Proposed 2019 Inc. Water Supply $213 $219 $6 Wastewater Treatment $240 $256 $16 Annual Total $453 $475 $22 43

44 Water Capital Program capital plan ($481 m) slightly lower than the capital plan ($487 m) $26 m in non-growth related debt for manganese treatment upgrades Debt financing required for growth: $86 m over 10 years 44

45 Wastewater capital program forecast reflects new Wastewater master plan 10 year capital plan reduced by $78 m from $604 m to $526 m - expansion of Waterloo Wastewater Treatment Plant deferred Minimal user rate supported debt required RDC supported debt = $97 m over 10 years 45

46 2019 Budget Update Key Messages User Rate Budgets All rate increases consistent with projections from last year Growth related debt to be reviewed during the Regional Development Charges background study process Detailed presentations on January 16,

47 2018 Tax Supported Budget Recap Tax Supported Budget approved December 13, 2017 Operating budget = $1 billion Tax levy = $514 million Average tax rate increase of 2.74% Direct Regional Services 2.27% tax impact WRPS 0.47% tax impact Assessment growth = 1.93% 47

48 Tax Supported Budget status TAX SUPPORTED OPERATING BUDGET Tax rate % DIRECT REGIONAL PROGRAMS impact* Base Budget 1.67% Regional Transportation Master Plan (RTMP) funding strategy 0.65% Debt servicing and contributions to capital/reserves 0.85% Subtotal 3.17% Less: regional share of assessment growth (1.32%) Net tax impact (excluding budget issue papers and Police Services budget) 1.85% * Assessment growth of 1.92% for 2019 Revenue generated by a 1% tax increase = $5.2m Cost of 1% increase to average household valued at $333,800 = $

49 2019 Base Budget Pressures Public transit Paramedic Services Service contracts Infrastructure funding Development Charge Exemptions Provincial policy and funding 49

50 2018 Budget Issue papers property tax levy impact $millions 2018 Annualiz Total Public transit $1,332 $1,991 $3,323 Paramedic ,245 Employment & Income Support Seniors Other Total $2,912 $2,378 $5,290 50

51 RTMP funding strategy Previous Regional Transportation Master Plan 1.5% in 2012, 2013, 2015, 2016 and % in 2014 and 2018; 0.75% in 2019 Required to cover operating and capital financing costs relating to ION and abrt Provincial upload offset 51

52 Major 2019 Budget Pressures Infrastructure funding Capital financing principles approved in June 2016 State-of-good-repair: Renewal, refurbishment and replacement Service expansion Working towards full funding of all vehicle replacements from reserves Capital asset renewal funding strategy including Facilities Lifecycle funding 52

53 Capital financing from tax supported operating budget $millions Increased funding from operating Debt avoided over 10 years Interest savings over term of debt Asset renewal funding $2.1 $21.0 $4.3 Savings in Roads debt servicing costs reallocated to direct funding for roads capital works Downtown core Development Charges exemption funding Inflation on Roads capital contributions $1.1 $10.5 $2.1 $0.8 n.a. n.a. $0.3 $3.2 $0.6 Funding for Sunnyside capital $0.1 $1.3 $0.3 Subtotal $4.4 $36.0 $7.3 53

54 Major 2019 Budget Pressures Downtown Core Devt. Charge exemption funding Feb. 28, 2019: full Regional DC exemption expires in Kitchener and Cambridge, partial exemption expires in Waterloo Voluntary exemptions must be funded COR-FSD Downtown Core Regional Development Charge Exemptions Funding Strategy dated November 22,

55 Downtown core RDC exemption funding strategy Roads Tax Levy impact: increase $750k in 2018, $750k in 2019 and ~ $750k in 2020 Water/Wastewater provisions built into rate models Exemption funding over 10 years Public Transit funded from RTMP reserve fund Waste Management/Other funded by existing $400K budget provision 55

56 Provincial policy/funding Provincial funding for regional programs is significant 2019 Provincial Operating Funding $270 Fall Economic 2018 Statement provided little direction; policy and funding directives 2015 from new government are not known 2011 $188 $212 $260 $- $100 $200 $300 $ millions 56

57 Provincial Base Operating Subsidies Program 2018 Budget 2019 Budget Change Transit $10.7 $10.7 $0.0 Police POA Cultural Services Library Child Care OW Administration OW Benefit Programs Housing Seniors' Services - Long Term Care Senior's Services - Community Programs Immigration Partnership Council Public Health Paramedic Services Total $ $ $

58 Base Budget Adjustments Efficiencies and cost savings without impacting service levels: energy saving retrofits reviewing and adjusting staffing levels and overtime requirements restructuring hardware replacement costs Office supplies and minor maintenance Base Budget Reductions ($millions) Total Tax supported $1.8 $1.7 $2.6 $1.7 $1.1 $8.8 User rates Subtotal $2.3 $2.6 $3.4 $2.1 $2.2 $

59 Assessment Growth History of Assessment Growth 2.50% 2.00% 2.15% 1.85% 1.72% 1.71% 1.52% 1.93% 1.92% 1.50% 1.34% 1.41% 1.34% 1.00% 0.50% 0.00% Budget Year 10 Year average assessment growth 59

60 Budget Issue Papers - criteria meets a legislative or regulatory requirement addresses a significant health and safety issue Council direction on a specific issue (master/business plan) provides broad community benefit supports the Region s Strategic Plan in a direct way 60

61 Budget Issue Papers Sample of 2019 Proposed Service Enhancements Provide additional Sunnyside staff (PSWs) Paramedic Services master plan implementation GRT business plan implementation Mobility PLUS business plan implementation Support staff required to maintain current levels of service Additional POA prosecution resources 61

62 Budget Issue Papers Sample of 2019 Proposed Service Enhancements Transportation system support and maintenance resources Funding for economic development initiatives Community energy and environmental initiatives 2019 cost approximately $6.3 million (tax impact 1.20%); annualization of $3.4 million (tax impact approx. 0.64%) 62

63 2019 Budget Issue papers property tax levy impact $millions 2019 Annualiz Total Public Transit $3,294 $1,089 $4,383 Paramedic Seniors Housing ,244 Transportation ,257 ITS Other Total $6,306 $3,374 $9,680 63

64 2019 GRT Service Enhancements Conestoga College U-Pass Service additional 15,000 service hours Implementation of GRT business plan additional 35,000 service hours Mobility PLUS business plan add 2 expansion vehicles plus driver resources 64

65 2019 Paramedic Services Enhancements Add 2 12 hour ambulances and support staff Includes 2 12 hour ambulances for 2019 per master plan to attain 35% unit utilization (10 paramedics) 2 support positions 65

66 2019 Seniors' Requests Additional PSW resources required for Nights at Sunnyside Home and for high intensity needs residents at Sunnyside Home Increasingly complex needs of residents who require 2- person care Increasing number of residents exhibiting high risk behaviours, requiring more one-on-one care 66

67 2019 ITS Request Network Infrastructure security and support operational support for information technology security systems and increasingly complex infrastructure project support for all Regional projects requiring information technology security 67

68 Tax Supported Budget status TAX SUPPORTED OPERATING BUDGET Tax rate % DIRECT REGIONAL PROGRAMS impact* Base Budget 1.67% Regional Transportation Master Plan (RTMP) funding strategy 0.65% Debt servicing and contributions to capital/reserves 0.85% Subtotal 3.17% Less: regional share of assessment growth (1.32%) Net tax impact (excluding budget issue papers and Police Services budget) 1.85% * Assessment growth of 1.92% for 2019 Revenue generated by a 1% tax increase = $5.2m Cost of 1% increase to average household valued at $333,800 = $

69 Draft Tax Supported Capital Program 10 year investment plan = $2.3 b Roads rehabilitation and expansion Lifecycle work at facilities and housing sites Grand River Transit Waste Management Paramedic Services Airport 69

70 Capital Funding & Financing FUNDING Grants / Subsidies / Recoveries Development Charges FINANCING Contributions from other levels of government and third parties Directly from reserve funds Long term borrowing Property taxes Current year revenues Directly from reserves Long term borrowing 70

71 Significant capital program changes Police Facilities Accommodation master plan Adjustments to timing of Airport master plan Trigger 2 and 3 projects Transportation Master Plan update Federal/Provincial Infrastructure funding 71

72 Infrastructure funding Bilateral agreements signed Public transit: $341 m over 10 years National Housing Strategy: $40 b program Green Infrastructure 72

73 capital program Debt outstanding projection 73

74 capital program Debt servicing cost projection $ millions Projected Debt Servicing Costs By funding source 2019 capital plan $160 $140 $120 $100 $80 $60 $40 $20 $ Taxation User Rates Development Charges 74

75 Capital Financing Capital Program Financing % of Tax Levy/User Rate Sources Reserves Long term borrowing Transportation 74% 26% Grand River Transit 55% 45% Housing Services 67% 33% Facilities Management 20% 80% Waste Management 29% 71% Airport 27% 73% 75

76 Capital Financing Principles some programs have adequate budget contributions to finance capital investments others do not and rely on debenture financing State-of-good-repair program overly reliant on debt financing Capital asset renewal funding in 2019 = $6.1m; contribution required in the range of $40-45m per year 76

77 Borrowing considerations The resulting debt servicing costs The need for balance Fiscal flexibility in the future Legislative provisions 77

78 Capital Program Key Messages Build operating budget capacity to finance capital Prospect of higher interest rates means higher future debt servicing costs Work towards financing all asset renewal projects from non-debt sources Focus debt on significant new infrastructure Implementation of a capital asset renewal funding strategy 78

79 WRPS (Waterloo Regional Police Service) Preliminary 2019 Budget 2018 Approved Operating Budget 2019 Budget (presented to Police Services Board November 21) Expenditure $177,652,671 $188,937,515 Revenue 16,459,520 17,423,109 Property Tax Requirement $161,193,151 $171,514,406 Year over year levy increase 5,391,611 10,321,255 Year over year % levy increase 3.46% 6.4% Tax Rate Impact (2019 based on assessment growth at 1.92%) 0.47% 1.38% 79

80 WRPS Budget Budget presented to the PSB on November 21/18 PSB approval of 2019 budget on January 16/19 Presentation to Budget Committee on February 6/19 80

81 Public input Increased public engagement opportunities in past two budget cycles Created educational video about municipal budgeting to enhance engagement 2019 public input process being developed 81

82 2019 Budget schedule Dec. 11, 2018: Financial overview to new council Jan. 16, 2019: Budget Committee reviews to start Feb. 6, 2019: user rate budget approval Feb. 19, 2019: tax supported budget approval 82

83 2019 Budget Update Key Messages context Uncertainty regarding provincial policy and funding Volatile interest rates and fuel prices, inflation moderating capital financing Asset replacement/renewal and new infrastructure Federal/Provincial infrastructure programs Managing our debt levels and maintaining AAA credit rating operations Service expansion per master plan approvals Provincial subsidy Utility costs, fuel, service contracts 83

84 2019 Budget Update Key Messages Tax Supported Budget: Base position 1.85% (excluding Police and Budget Issue Papers) Capital program update to reflect major 2018 approvals Need for additional funding for state-ofgood-repair 84

85 Preview of January 16, 2019 meeting 2019 User Rate Budgets, GRCA 2019 Tax Supported Operating Budget and Capital Program Proposed Budget Issue Papers Information Papers Respond to Councillor requests Public Input 85

86 2019 Budget Questions? 86