LONG-TERM FINANCIAL SUSTAINABILITY FRAMEWORK

Transcription

1 LONG-TERM FINANCIAL SUSTAINABILITY FRAMEWORK Prepared by Corporate Fiace ad Corporate Plaig March 2018 Log-Term Fiacial Sustaiability Framework a

2 CONTENTS b b Fiacial Services

3 EXECUTIVE SUMMARY 1 LONG-TERM FINANCIAL SUSTAINABILITY FRAMEWORK 7 Itroductio 7 Strathcoa Couty Backgroud 8 Strategic Likages 10 Log-Term Fiacial Sustaiability Priciples 13 Log-Term Fiacial Sustaiability Strategies 16 Strategy: Asset Maagemet 16 Strategy: Reserves & Reserve Fud Maagemet 18 Strategy: Debt Maagemet 20 Strategy: Capital Fudig 21 Strategy: Off-Site Levies 23 Strategy: Fiscal Impact Aalysis 26 Strategy: Fiacial Feasibility Aalysis 27 Strategy: Ivestmets 29 Strategy: Utilities Self-Sustaiig Strategy 30 Strategy: Library Operatig Tax-Rate Strategy 31 Strategy: Service Levels 32 Strategy: Busiess Plaig ad Budget Methodology 33 Strategy: Forecastig Methodology 34 Strategy: Evirometal Sca Aalysis 36 Strategy: Other 39 Log-Term Fiacial Sustaiability Process 40 SUMMARY AND CONCLUSION 44 GLOSSARY 46 APPENDICES 50 APPENDIX I: Strategic Likages 51 APPENDIX II: Base Case Forecast Assumptios 52 Log-Term Fiacial Sustaiability Framework i

4 ii EXECUTIVE SUMMARY

5 Overview Strathcoa Couty s visio is to become Caada s most livable commuity. Prioritized strategic goals have bee idetified i the strategic pla to help facilitate this visio. To achieve the strategic visio, the Couty must have the fiacial capability to do so. This capability is referred to as fiacial sustaiability: the log-term ability to deliver the level ad types of services expected by the commuity, as well as meet fiacial commitmets at acceptable levels of taxatio i relatio to the eviromet i which we operate. Numerous fiacial challeges ad pressures ca threate the Couty s fiacial sustaiability. These issues iclude, but are ot limited to expediture pressures, ew growth, iflatio, securig sustaiable reveues ad fudig sources, ad pressure to keep muicipal taxes affordable. The Log-Term Fiacial Sustaiability Framework (LTFSF) has bee created to cosider future fiacial challeges through agreed upo priciples, strategies ad process. The implemetatio of the framework will guide the orgaizatio i makig decisios ecessary to pla for fiacial sustaiability, while maitaiig a level of adaptability, i order to help achieve the strategic pla s visio. Outcomes There are three primary outcomes that arise from the developmet of the framework: The framework will be used as a REFERENCE i all fiacial decisio-makig i the orgaizatio. This icludes iformig master-plaig, capital plaig, budgetig processes, as well as other emerget fiacial issues. The framework: Idetifies fiacial sustaiability priciples ad the cosideratios ad impacts to be deliberated i fiacial decisio-makig. Outlies sigificat fiacial plaig areas ad associated fiacial strategies to be followed. The framework idetifies FUTURE STRATEGY AREAS based o curret kowledge, where further work may be warrated to refie curret fiacial strategies ad/or create ew fiacial strategies. The framework establishes a collaborative LONG-TERM FINANCIAL SUSTAINABILTY PROCESS that will be repeated o a four-year cyclical basis to complemet the strategic pla. The process will: Create log-term fiacial forecasts ad scearios to illustrate future fiacial challeges ad facilitate a log-rage perspective for decisio-makers. Use the log-term fiacial forecasts ad scearios to help illustrate the eed for fiacial strategies, guide which curret strategy areas may eed to be refied ad/or idetify the eed for the creatio of ew strategies. Log-Term Fiacial Sustaiability Framework 1

6 Strategic Likages The strategic pla is the Couty s highest level ad pricipal guidig documet for goverace, commuity developmet, ifrastructure ad service delivery. It is reviewed aually ad updated every four years, ad shows how Couty activities alig to achieve its visio for the year The strategic pla directs the log-term plaig for the Couty ad serves as a foudatio o which the corporate busiess pla, departmet busiess plas, master plas ad budgets are developed. The Couty must be fiacially sustaiable to have the capability to achieve log-term strategic goals. The framework serves as a complemet to the strategic pla by commuicatig fiacial strategies ad priciples to be refereced i decisio-makig. These strategies ad cosideratios help lead to the fiacial sustaiability of the Couty. As well, the log-term fiacial plaig process lauched subsequet to the framework s approval will help provide awareess of fiacial capacity, ad will further refie/create ew fiacial strategies to help avigate the challeges idetified. Log-Term Fiacial Sustaiability Priciples Fiacial sustaiability priciples have bee established as the guidig cosideratios agaist which fiacial strategies ad decisios will be deliberated. The priciples are to be applied i all fiacial decisio-makig. The overarchig fiacial sustaiability priciples are as follows: Foudatioal Priciples The foudatioal priciples are SUSTAINABILITY, FLEXIBILITY, ad MINIMIZE VULNERABILITY. These are the most sigificat idicators of a govermet s fiacial coditio as commuicated i the Public Sector Statemets of Recommeded Practice (SORP-4). To be fiacially SUSTAINABLE ow ad i the future by providig ad maitaiig programs at acceptable levels of taxatio. To maitai a degree of fiacial FLEXIBILITY to be able to adapt to chagig circumstaces. To MINIMIZE VULNERABILITY by cosiderig the reliace o sources of fudig outside Couty cotrol or ifluece, ad by strategically allocatig fudig sources i a sustaiable maer. Supplemetal Priciples To make fiacial decisios that are aliged with the STRATEGIC PLAN AND CORPORATE PRIORITIES. To provide services i a EFFICIENT maer with the resources available. To provide services at a EQUITABLE (fair) amout: Services are provided at a rate that reflects the value ad level of services provided. To the greatest extet possible, those who beefit from the services pay for the services (supportig the otio of itergeeratioal equity). To be TRANSPARENT with key stakeholders by clearly commuicatig key challeges ad cosideratios i fiacial decisios. 2

7 Log-Term Fiacial Sustaiability Strategies Log-term fiacial sustaiability strategies are coscious practices ad methods used to achieve a specific purpose ad/or goal, ad esure the fiacial health of the Couty. Curret fiacial strategies are cosolidated ad commuicated i the framework ad will be used as a referece i fiacial decisio-makig. As well, the relevat fiacial sustaiability priciples ad cosideratios are applied to each fiacial sustaiability strategy. Debt Maagemet Capital Fudig Strategy Asset Maagemet Off-Site Levies Library Operatig Tax-Rate Strategy Service Levels Fiacial Sustaiability Strategies Fiscal Impact Aalysis Fiacial Feasibility Aalysis Budget Methodology Utilities Self-Sustaiig Strategy Forecastig Methodology Ivestmets Evirometal Sca Aalysis Other Fiacial Policies ad/or Strategies Log-Term Fiacial Sustaiability Framework 3

8 Log-Term Fiacial Sustaiability Process The Couty curretly egages i umerous log-term fiacial plaig practices ad applies several fiacial strategies, however, a formal log-term fiacial sustaiability process is required. As there are may fiacial plaig strategies, a collaborative process will help determie which strategies should be developed ad/or refied first to alig with priorities ad assist i avigatig challeges. The process will ivolve the creatio of loger term fiacial forecasts ad scearios to illustrate future fiacial realities ad a log-rage perspective for decisio-makers. The log-term forecasts ad scearios, i cojuctio with collaboratio with key stakeholders, will guide which strategy areas may eed to be developed ad/or refied. I additio, the process will occur every four years to idetify ad address chagig priorities ad circumstaces, ew issues ad potetial threats, ad their impacts o forecasts, plas, strategies ad practices. Oce a cycle of the process has bee completed, the framework will be reviewed to icorporate chages to priciples, strategies, ad process where applicable. Coclusio The Log-Term Fiacial Sustaiability Framework (LTFSF) has bee developed to cosider future fiacial capacity through agreed upo priciples, strategies ad process. The implemetatio of the framework will guide the orgaizatio i makig decisios ecessary to help realize the Couty s log-term goals ad objectives. The creatio of the framework is a key step i plaig for fiacial sustaiability, i order to help achieve the strategic pla s visio of becomig Caada s most livable commuity. 4

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10 6 Log-Term Fiacial Sustaiability Framework

11 Itroductio Strathcoa Couty Strathcoa Couty, located i the heart of Alberta, is a eergetic ad thrivig commuity. A leader i North America s petroleum idustry ad a champio for advacig diverse agricultural busiess, we use our eergy to power our ew tomorrow. We are a specialized muicipality, ad work cooperatively with urba ad rural residets to gover as a sigle muicipality. Proud of our distict goverace model, we promote ad demostrate our achievemets. The Couty is a welcomig place to live ad attract people of all ages, cultures ad walks of life to joi us. Families thrive i our dyamic, carig ad safe commuity. We strive to be a model of ecological itegrity, protectig our eviromet ad preservig our agricultural heritage. Ivestmet i ifrastructure, quality services, cultural ad recreatioal programs ad facilities is a priority ad sets us apart. To meet the strategic visio of becomig Caada s most livable commuity ad to deliver the level ad types of services expected by the commuity, the Couty must have the fiacial capability to do so. This capability is referred to as fiacial sustaiability, the log-term ability to deliver the level ad types of services expected by the commuity as well as meet fiacial commitmets at acceptable levels of taxatio i relatio to the eviromet i which we operate. Purpose of the Log-Term Fiacial Sustaiability Framework Numerous factors ca threate the Couty s fiacial sustaiability. Issues such as securig sustaiable reveues ad fudig sources, expediture pressures, ew growth, iflatio, amog others, combied with the objective to keep muicipal taxes affordable cotribute to fiacial challeges that the Couty faces. The Log-Term Fiacial Sustaiability Framework has bee created to take actio to cosider future fiacial challeges through agreed upo priciples, strategies ad process. The implemetatio of the framework will guide the orgaizatio i makig decisios ecessary to pla for fiacial sustaiability, while maitaiig a level of adaptability, to help achieve the strategic pla s visio of becomig Caada s most livable commuity. Outcomes of the Framework There are three primary outcomes that arise from the developmet of the framework: The framework will be used as a REFERENCE i all fiacial decisio-makig i the orgaizatio. This icludes iformig master-plaig, capital plaig, budgetig processes, as well as other emerget fiacial issues. The framework: Idetifies fiacial sustaiability priciples ad the cosideratios ad impacts to be deliberated i fiacial decisio-makig. Outlies sigificat fiacial plaig areas ad associated fiacial strategies to be followed. The framework idetifies FUTURE STRATEGY AREAS based o curret kowledge, where further work may be warrated to refie curret fiacial strategies ad/or create ew fiacial strategies. The framework establishes a collaborative LONG-TERM FINANCIAL SUSTAINABILITY PROCESS that will be repeated o a four-year cyclical basis to complemet the strategic pla. The process will: Create log-term fiacial forecasts ad scearios to illustrate future fiacial challeges ad facilitate a log-rage perspective for decisio-makers. Use the log-term fiacial forecasts ad scearios to help illustrate the eed for fiacial strategies, guide which curret strategy areas may eed to be refied ad/or idetify the eed for the creatio of ew strategies. Log-Term Fiacial Sustaiability Framework 7

12 Strathcoa Couty Backgroud Expectatios ad Collaboratio The framework is to be used ad refereced i all fiacial decisio-makig, icludig whe fiacial decisios are brought forward to Executive-Team ad Coucil (ad other key stakeholders). At a miimum, the priciples will be discussed i relatio to the fiacial matter at had; ad where relevat, the associated strategies addressed i the framework will be refereced. The framework also lauches a ew ad highly collaborative process that requires participatio from the Executive Team ad Coucil whe applicable. Directio ad discussio will be required o certai issues, strategies, ad aalysis. Ivolvemet from other key stakeholders such as the public may also be required. This process is discussed further i the framework. Operatios The Couty is comprised of 19 departmets that provide a large array of services to our commuity. We serve the commuity directly through a variety of services icludig: Police, ambulace ad fire service Delivery of safe drikig water Road ad parks maiteace Recreatio ad social programs Sow removal Waste collectio ad recyclig Wastewater collectio Plaig log-term ifrastructure eeds Trasit Busiess attractio ad retetio Developmet ad plaig Public egagemet ad commuicatio Ad more We also serve the commuity idirectly through the followig services: Maiteace of facilities ad fleet Stewardship ad sustaiability of fiacial assets Secure iformatio techology Legal ad legislative support Payroll ad huma resources Procuremet of commodities Ad more The Couty s operatios are fuded through property taxes (residetial, commercial ad idustrial), user fees ad rates, govermet grats, pealties ad fies, ivestmet icome, ad other reveues. 8

13 Capital Costs I additio to the day-to day services provided, the Couty deals with the costs to develop ew ifrastructure ad ameities, ad ivests i log-term fixed assets required for service delivery. Such costs may iclude ivestmets i ew water lies or roads, ew facilities ad techology, lad ad vehicles. I additio, the Couty must cosider the costs of maitaiig existig ad future ifrastructure. Exteral Compliace Various exteral bodies create legislatio, plas, or other guidace to which the Couty must adhere. Exteral bodies with sigificat impact o the Couty iclude, but are ot limited to: Alberta Muicipal Affairs the Muicipal Govermet Act (MGA) Edmoto Metropolita Regio Board (EMRB, origially kow as the Capital Regio Board) the Edmoto Metropolita Regio Growth Pla Public Sector Accoutig Board (PSAB) Public Sector Accoutig Stadards (PSAS) The MGA is the legislative framework uder which Strathcoa Couty operates. As at Jauary 1, 2018, the MGA cotais 18 parts ad more tha 650 sectios. The three major themes i the MGA are goverace, plaig ad developmet, ad assessmet ad taxatio. The EMRB was established uder the ewly defied MGA Edmoto Metropolita Regio Regulatio 189/2017. It plas for ad maages growth of the Edmoto Metropolita Regio. The regulatio gives the EMRB a madate to do two thigs: implemet the Edmoto Metropolita Regio Growth Pla ad create a Metro Servicig Pla. The Board has bee grated the authority to approve Muicipal Statutory plas ad esure the compliace with the Growth Pla, i accordace with the Regioal Evaluatio Framework (REF). The relevat fiacial guidace the Couty must adhere to is the Public Sector Accoutig Stadards (PSAS). The Public Sector Accoutig Board (PSAB) issues stadards ad guidace with respect to matters of accoutig i the public sector. PSAB issues such stadards ad guidace to service the public iterest by stregtheig accoutability i the public sector through developmet, ad recommedig ad gaiig acceptace of accoutig ad fiacial reportig stadards of good practice. The stadards apply to all public sector etities that issue geeral purpose fiacial statemets. Legislatio ad other exterally madated guidelies may be modified or reformed over time, ad the Couty must have the ability to adapt to such chages. Log-Term Fiacial Sustaiability Framework 9

14 Strategic Likages There are several overarchig documets that guide the Couty i high level decisio-makig. This sectio outlies these documets ad how this framework fits i. These overarchig documets provide guidace ad plas for the Couty without cosideratio to the fiacial feasibility or implicatios of achievig such plas. The Log- Term Fiacial Sustaiability Framework, as well as the log-term fiacial sustaiability process that is discussed further i this documet, will provide the loger-term fiacial picture ad guidace required for decisio-makig i the orgaizatio. Please see below for discussio, as well as Appedix I for a diagram of the strategic likages betwee the overarchig documets i the Couty ad the framework. Strategic Pla The strategic pla is the Couty s highest level plaig documet ad is the pricipal guidig documet for goverace, commuity developmet, ifrastructure ad service delivery. It is reviewed aually ad updated every four years, ad shows how Strathcoa Couty activities alig to achieve its visio for the year The strategic pla directs the log-term plaig for the Couty ad serves as a foudatio o which the Couty s corporate busiess pla, departmet busiess plas, master plas ad budgets are developed. This framework serves as a complemet to the strategic pla. The framework outlies fiacial strategies to be followed, as well as fiacial sustaiability priciples ad cosideratios to be refereced i fiacial decisio-makig. These strategies ad cosideratios are to help lead to fiacial sustaiability of the Couty. As well, the logterm fiacial sustaiability plaig process helps provide awareess of fiacial challeges, ad further refies ad creates ew fiacial strategies to help avigate the challeges idetified. The Couty must esure fiacial sustaiability, while maitaiig a level of adaptability, to have the capability to achieve log-term strategic goals. Corporate Busiess Pla The corporate busiess pla is the bridgig documet that iterprets the visio provided i the strategic pla ad provides four-year focused directio for departmet busiess plas. The corporate busiess pla idetifies goals that alig departmet activities to meetig Coucil s prioritized strategic goals. The corporate busiess pla also idetifies the corporate values: Itegrity, Respect, Safety, Fairess, ad Cooperatio. The first goal outlied i the Corporate Busiess Pla was to pla for log-term fiacial sustaiability i support of service delivery ad ifrastructure asset maagemet. This icluded the objective of establishig a log-rage fiacial pla to facilitate decisio-makig o appropriate growth, balace ad timig of operatig ad capital costs. Departmet Busiess Plas Departmet busiess plas are created by Strathcoa Couty s departmets. Withi these plas, departmet activities are built to support corporate directio provided by the corporate busiess pla ad the goals withi it. 10

15 Departmet Master Plas Strathcoa Couty has several master plas that have bee created by specific areas withi the orgaizatio. The purpose of these plas is typically to provide a i-depth aalysis ad pla for a specific area or topic. Strathcoa Couty master plas iclude: Agriculture Master Pla Itegrated Trasportatio Master Pla Trasit Master Pla Sustaiable Rural Roads Master Pla Ardrossa Commuity Recreatio Master Pla Trails Master Pla Emergecy Services Master Pla Other Sustaiability Frameworks Strathcoa Couty has established other frameworks desiged to sustaiably maage the growth of our commuities ad help guide decisio-makig. I the Muicipal Developmet Pla, sustaiability is defied as developig i a maer that meets the eeds of the preset without compromisig the ability of future geeratios to meet their ow eeds, while strikig a balace betwee ecoomic prosperity, social resposibility ad evirometal stewardship. This defiitio is related more to growth ad developmet specifically, versus the defiitio of fiacial sustaiability previously discussed. The Ecoomic Sustaiability Framework was approved i 2011 ad guides our approach to ecouragig ecoomic prosperity. This documet discusses the defiitio of sustaiability ad four sciece-based sustaiability priciples cosistet with those outlied i the Muicipal Developmet Pla. As well, log-term fiacial sustaiability is oe of the four themes discussed i the documet, ad the correspodig strategy idetified is to develop a log rage fiacial pla. This Log-Term Fiacial Sustaiability Framework is the first requiremet i developig the log rage fiacial pla. The Social Framework was approved i 2007 ad reewed i 2017 ad guides Strathcoa Couty s approach to supportig a carig ad coected commuity. This framework was desiged to help decisio-makers at the goverace ad service delivery levels i Strathcoa Couty determie the impact of their decisios o social sustaiability. The Evirometal Sustaiability Framework was approved i 2009 ad guides our approach to protectig ad coservig our atural eviromet. This framework is desiged to help decisio-makers at the goverace ad service delivery levels i Strathcoa Couty determie the impact of their decisios o evirometal sustaiability. Muicipal Developmet Pla The Muicipal Developmet Pla (MDP) is the Couty s pla for future developmet. It sets out a clear visio for how Strathcoa Couty will grow ad develop over the ext 20 years ad beyod. It provides a comprehesive log-term lad use policy framework withi which curret ad projected growth ad developmet may take place. The primary fuctio of the MDP is to provide directio for log-term developmet cotaied i both statutory ad o-statutory documets, such as area structure plas, area redevelopmet plas, ad coceptual schemes. The MDP has to be cosistet with the Edmoto Metropolita Regio Growth Pla. I additio, it presets ot oly a visio of what the ladscape could look like i the future, but also the meas by which the log-term goals ca be achieved through the day-to-day decisio-makig process. Log-Term Fiacial Sustaiability Framework 11

16 Budgetig Process The operatig ad capital budgets are the mechaisms to allocate resources to the prioritized strategic goals idetified i the strategic pla, corporate busiess pla, departmet busiess plas, ad master plas. Budgets are primarily where log-term fiacial strategies from the framework are implemeted. The Couty also uses the priority-based budgetig (PBB) approach as a tool for decisio-makig i which all of our actios ad budget decisios are drive by commuity priorities. Whe traslatig the various plas ito actio through the budgetig process, competig demads are cosidered orgaizatioally ad decisios are made based o strategic priorities. Log-Term Fiacial Sustaiability Process This process is where the fiacial implicatios of the various plas discussed above will be aalyzed through forecastig. Creatio of log-term fiacial forecasts ad scearios will illustrate future fiacial impacts of operatig ad capital activities, ad future fiacial challeges. The fiacial forecasts ad scearios are used to help illustrate the eed for fiacial strategies, ad guide which strategy areas may eed to be refied ad/or created. The process is described i more detail later i the framework. Please see Appedix I for a diagram of how the overarchig plas ad guidig documets are related to each other. Log-Term Fiacial Sustaiability Framework The framework is the highest level fiacial documet i the orgaizatio. The framework helps eable the Couty to achieve log-term goals through agreemet ad commuicatio of fiacial priciples, strategies ad process. 12

17 Log-Term Fiacial Sustaiability Priciples Fiacial sustaiability priciples have bee established as the guidig cosideratios agaist which fiacial strategies ad decisios will be deliberated. The priciples are to be applied to all fiacial decisio-makig. The objective is to strike a balace amog the priciples to foster the future fiacial health of the orgaizatio. The priciples geerate questios to be asked i fiacial decisio-makig. The geeral questios associated with the priciples are outlied i this sectio ad will be used for more cosistet ad iformed decisio-makig. I additio, withi each fiacial strategy area discussed i the log-term fiacial sustaiability strategies sectio of the framework, the primary related priciples ad some specific questios geerated are discussed to demostrate how they are applied. If there is a emerget fiacial matter ot yet discussed i the log-term fiacial sustaiability strategies sectio, the geeral cosideratios ad cocepts of the priciples as outlied o the ext page should be applied. Supplemetal Priciples To make fiacial decisios that are aliged with the STRATEGIC PLAN AND CORPORATE PRIORITIES. To provide services i a EFFICIENT maer with the resources available. To provide services at a EQUITABLE (fair) amout: Services are provided at a rate that reflects the value ad level of services provided. To the greatest extet possible, those who beefit from the services pay for the services (supportig the otio of itergeeratioal equity). To be TRANSPARENT with key stakeholders by clearly commuicatig key challeges ad cosideratios i fiacial decisios. Foudatioal Priciples The foudatioal priciples are SUSTAINABILITY, FLEXIBILITY, ad MINIMIZE VULNERABILITY as these are the most sigificat idicators of a govermet s fiacial coditio as commuicated i the Public Sector Statemets of Recommeded Practice (SORP-4). To be fiacially SUSTAINABLE ow ad i the future by providig ad maitaiig programs at acceptable levels of taxatio. To maitai a degree of fiacial FLEXIBILITY to be able to adapt to chagig circumstaces. To MINIMIZE VULNERABILITY by cosiderig the reliace o sources of fudig outside Couty cotrol or ifluece, ad by strategically allocatig fudig sources i a sustaiable maer. Log-Term Fiacial Sustaiability Framework 13

18 Whe emerget fiacial matters arise, fiacial strategies are developed, ad whe decisios are cotemplated, the impact o each of the priciples should be cosidered: Foudatioal Priciple Cosideratios Sustaiability What is the immediate fiacial impact? Upfrot costs Impacts o debt, reserves, rates, other balaces What is the future fiacial impact? Operatig costs Maiteace costs Replacemet costs What is the immediate ad future tax rate ad/or user rate impact? Tax rate impact from all required costs What is the impact o other orgaizatioal services provided? Are there sufficiet resources to provide service? Will other service levels have to decrease or icrease? Is it feasible/practical to maitai i the future? Flexibility What is the impact o debt capacity? Debt fiacig required Debt term required What is the impact o reserve balaces? Reserve fudig required Impact o reserve optimal balace where applicable What is the impact o the immediate ad future tax rate (or other rates)? Upfrot costs ad future operatig costs Debt servicig costs What impact does this have o the remaiig ability to icrease taxes or other rates? 14

19 Supplemetal Priciple Cosideratios Miimize Vulerability What type of fudig is available? Grats, third party, taxes, user rates/fees, reserves, other What type of expediture is required? Oe time, or ogoig ito the future? Is the fudig source guarateed? Is there a risk fudig will ot be received? Will the fudig source be available i time for the iteded purpose? Is the fudig source sustaiable or usustaiable? Is fudig required i the future, ad will the fudig source still be available? What are other relevat risks to the Couty? If the fudig source is deferred or o loger available, what other optios are available? Ay other factors that may put the Couty at risk (timig, other situatioal factors, etc.)? What is the risk of ot takig actio (such as ifrastructure failure, etc.)? Strategic Pla ad Corporate Priorities Does the decisio support the strategic pla? Is the decisio a orgaizatioal priority? Based o the strategic pla, corporate busiess pla, ad priority-based budgetig What impact does the decisio have o other orgaizatio priorities? What would have to be sacrificed (if applicable) by proceedig with x (decisio, service, etc.)? Other types of programs, services, other service levels, other capital projects, maiteace, etc. Efficiecy How may resources are required (fiacial, time, huma capital)? Are there other meas to achieve the goal? What other services are impacted? Fiacially (resources available for other services, cost of ew decisio) Qualitatively (quality of service provided, other advatages/disadvatages) Equitability Is the perceived value i lie with the fiacial impact? Are those who beefit from the service the oes payig for the service? Trasparecy Was there appropriate commuicatio with decisio-makers ad/or key stakeholders (residets, staff, Executive Team, Coucil, other relevat groups as applicable, etc.)? Were all sigificat challeges ad cosideratios commuicated to decisio-makers? Log-Term Fiacial Sustaiability Framework 15

20 Log-Term Fiacial Sustaiability Strategies As previously discussed, the framework develops a commo uderstadig of the Couty s fiacial future by commuicatig agreed upo existig strategies to be adhered to, creatig ad applyig agreed upo fiacial sustaiability priciples, ad through the creatio of a log-term fiacial sustaiability process. This sectio idetifies the curret fiacial strategies i place, as well as potetial future strategies, ad the relevat fiacial sustaiability priciples ad cosideratios for each strategy area. For the purposes of the framework, fiacial strategies are the coscious practices ad methods used to achieve a specific fiacial purpose ad/or goal. Fiacial strategies should foster the fiacial health ad sustaiability of the orgaizatio. Typically, fiacial policies should be created to eable the fiacial strategies. Strategy: Asset Maagemet The ability to balace the eed to deliver services expected by the commuity i a affordable maer, ad to provide adequate fudig for asset maiteace is itegral to the log-term sustaiability of the Couty. Capital assets iclude facilities, roads ad utilities ifrastructure, equipmet ad etworks that help eable the delivery of Couty services. The performace ad ogoig use of these assets is vital to the health, safety, ecoomic developmet ad quality of life of those who receive the services. If assets are ot properly maitaied, the public health, safety ad quality of life ca be threateed. If maiteace ad replacemet costs are deferred or put off, the physical coditio of assets declie, ad the costs to maitai or replace assets will likely icrease over time. Curret Strategies The Couty has a decetralized approach to asset maagemet (AM). Departmets are resposible to idetify ad prioritize ifrastructure reewal eeds that exist withi their area. O a ogoig basis, departmets maage, review, ad forecast their ifrastructure requiremets for the effective delivery of operatios ad maiteace eeds. I additio, there is a Aual Program Philosophy i place to help deal with the aual ivestmets required to avoid ifrastructure deficits. Aual programs idetify assets i log-term capital plas that require cotiued rehabilitatio ad replacemet by asset type ad prompts plaig for cotiued ad sustaiable fudig. Specific, dedicated reserves have bee built over time to esure secure, sustaiable fudig for the aual programs. These 16 reserves are the primary fudig source for aual capital projects, ad are supported by other fudig sources whe projects exceed the reserve balace. Grats, whe available ad eligible, are the secodary fudig source. Note: Whe recogizig reveue for costs icurred, the order is reversed. Grats (or whatever is the most restricted fudig) are used first, followed by the use of reserve fuds. However, whe there are projects plaed with 10% of fudig from muicipal sources to cover ieligible costs, the fudig recogized is prorated 90/10 betwee the restricted source ad muicipal source, respectively. Aual programs with specific dedicated reserves at the Couty iclude the followig: Buildigs Aual Facility Capital Lifecycle Aual Parkig Lot Rehab Program Electroic Hardware/Software IT Ifrastructure Replacemet Program Machiery & Equipmet Aual Water Meter / Radio Frequecy Program Roadway Ifrastructure Aual Rural Road Rehab Program Aual Traffic & Pedestria Safety Program Aual Traffic Sigal / Itersectio Replacemet Program Aual Asphalt Trail Rehab Program Aual Residetial Rehabilitatio Program

21 Aual Arterial Rehabilitatio Program Aual Bridge Replacemet Program Utilities Aual Corrosio Cotrol Program Aual Hydrat / Valve Replacemet Program Vehicles Aual Fleet Replacemet Program Aual Trasit Vehicle Replacemet Program Future Strategies The Couty has ot had ay sigificat issues with regard to the coditio of assets historically, however as the Couty grows there are competig priorities ad a cetralized or updated approach i the future may be ecessary to assist i esurig the most importat eeds are addressed. I 2017, the Couty developed a Corporate Asset Maagemet Framework that established a AM steerig team ad a five-year roadmap for developig the Couty s AM program. This team is resposible for the successful implemetatio of a comprehesive ad sustaiable AM program ad will provide overall owership ad guidace of the program. As well, the team will esure that the defied AM program measures of success are achieved. AM developmet at the Couty is cotiuous ad will be sustaied ito the future to provide the appropriate levels of service, at the appropriate level of affordability, for customers ad stakeholders through: Preservatio of assets Fiacial sustaiability Protectio of the eviromet Cosideratio of health ad safety implicatios Sustaiable growth Traiig ad capacity buildig Through the Corporate Asset Maagemet Framework, AM etworks will cotiue to be formed to provide a forum for AM practitioers to stadardize ad establish cosistecy i AM practices, strategies, plaig, ad itegrated project coordiatio across the Couty s asset classes. The etworks are: AM Strategy & Plaig Network AM Productivity Network AM Project Maagemet Network AM Kowledge & Performace Maagemet Network Although the Couty has established the aual program philosophy, there eeds to be guidace to outlie ad prioritize ifrastructure requiremets. As Couty admiistratio cotiues to stregthe AM practices ad philosophies, they will eed to be icorporated ito future versios of the LTFSF. Policy developmet for AM practices ad philosophies may also be required. Priciples The primary fiacial sustaiability priciples that are relevat to asset maagemet ad some of the questios they geerate are as follows: Sustaiability What are the costs to maitai curret assets ow ad i the future? What is the tax rate impact? Ca we afford to maitai ad/or replace curret assets i the future? What ew assets are required i the future? What will they cost? How much will they cost to maitai? How much will they cost to replace? Ca we afford these costs? Flexibility What fudig sources are available for asset maiteace ad what impact would there be o the orgaizatio if they are utilized? What is the impact o debt capacity, reserve balaces, ad the tax rate? Miimize Vulerability To what degree are fudig sources used for asset maiteace sustaiable/cotrollable? Log-Term Fiacial Sustaiability Framework 17

22 Strategy: Reserves & Reserve Fud Maagemet Reserves are a key compoet of fiacial maagemet ad are established to: Provide fuds for future eeds Provide stabilizatio for fluctuatios i operatig ad capital activities i.e. allow fiacial flexibility for potetially chagig or ucertai circumstaces Curret Strategies A reserve policy FIN outlies the types ad purpose of reserves i place. Optimal balace formulas for applicable reserves are also outlied i the policy. The policy also creates cosistet stadards ad guidelies for the maagemet of reserves ad executio of reserve trasactios, ad esures that all reserve trasactios are approved by Coucil ad carried out i accordace with this approval. The Couty has the followig categories of reserves: Stabilizatio ad Cotigecy Reserves aid i stabilizig ad smoothig the temporary impact of uforesee evets, or fluctuatios plaed i activity. Reserves i place: Stabilizatio Cotigecy Project Reserves provide fudig for o-cyclical eeds of departmets icludig oetime operatig items ad tagible capital asset projects. Reserves i place: Year-Ed Carry Forwards Muicipal Muicipal Projects Ifrastructure Lifecycle, Maiteace ad Replacemet Reserves - provide fudig for ifrastructure lifecycle, maiteace ad replacemet projects. Reserves i place: Muicipal ifrastructure Lifecycle, Maiteace ad Replacemet Special Purpose Reserves - provide fudig for uique purposes that have a oe-to-oe relatioship with the reserve descriptio. Reserves i place: Coucil Priority Fuds Strathcoa Commuity Ivestmet Program Public Reserve Trust Geeral Lad Muicipal Levy Debt Repaymet Major Recreatio Facility Debt Repaymet Cultural Developmet Fud Iteral Fiacig Secodary Approaches Broadmoor Golf Course Library Reserves - are maitaied by the Library admiistratio ad approved by the Strathcoa Couty Library Board i accordace with the Library Reserve Policy FI02. Reserves i place: Library Utilities Reserves separate utilities reserves are maitaied to provide fudig for: utility rate stabilizatio ad cotigecy, utilities projects, utilities ifrastructure lifecycle, maiteace ad replacemet, as well as utility levy debt repaymet. 18

23 Future Strategies Future work will iclude: Cotiual review of optimal balace formulas for all reserves as deemed ecessary Ivestigatig the eed for ad clarifyig miimum required balaces o a idividual ad aggregate basis Determiig a target percetage of committed to desigated reserves i.e. Determiig how much real flexibility there should be Determiig a target rate of optimal reserve balaces to total reserves per year i.e. Determiig a acceptable rage betwee actual balaces ad optimal balaces Researchig ad bechmarkig with other muicipalities Priciples The primary fiacial sustaiability priciples that are relevat to reserves ad reserve maagemet ad some of the questios they geerate are: Flexibility Are there suitable reserve types ad balaces to respod to uforesee circumstaces? What balace of reserves is ucommitted? Are there sufficiet reserves to deal with future eeds? What are curret reserve balaces compared to optimal or miimum required balaces? Sustaiability Are optimal reserve balaces maitaiable i the future, where applicable? Miimize Vulerability Are there appropriate types of reserves for future eeds that help reduce reliace o ucertai sources of fudig i the future? Log-Term Fiacial Sustaiability Framework 19

24 Strategy: Debt Maagemet Debt ca be a effective tool to help fiace capital projects, as well as complemet the sustaiability of the orgaizatio, as it ca help achieve growth ad service provisio objectives. The icurrece of log-term debt supports the otio of itergeeratioal equity as the beeficiaries of the capital ifrastructure fiaced by the debt are resposible for the future paymets. If maaged appropriately ad plaed wisely, debt may be a effective way to meet orgaizatioal objectives. However, to esure curret ad future services are ot comprised as a result of debt issuace, debt levels ad costs must be maaged appropriately. There are MGA prescribed debt servicig (repaymet) ad limit regulatios that the Couty must adhere to. Curret Strategies The Couty s debt maagemet policy (FIN ) cotais the followig fiacial strategies: The Couty will oly icur ew debt whe it is a orgaizatioal priority based o the strategic pla, corporate busiess pla, ad priority-based budgetig to support priority capital projects pursuat to approved capital budgets. Log-term debt will ot be icurred for operatig purposes. This strategy is i lie with the sustaiability priciple because fiacig operatios through debt is ot maitaiable. Itergeeratioal equity is cosidered whe determiig capital projects that will proceed for debt approval. This strategy is to idetify who the users are of the capital project, ad help esure the geeratios that ejoy the beefits of the capital assets help pay for the assets built today. This strategy is i lie with the equitability priciple because it helps esure that services (capital projects are the coduit to provide services) are provided at a fair amout to those who ejoy the beefit. Iteral debt limits have bee established i additio to the MGA prescribed limits to help esure sustaiability by ot over-committig future operatig fuds for debt repaymets. However, the creatio of iteral debt limits reduces the amout of debt that ca be issued, which ca threate the ability to achieve itergeeratioal equity. This cotrast illustrates the eed to strike a balace i the priciples. Future Strategies Future work will iclude: Further defiig goals to achieve itergeeratioal equity Creatig a debt service ratio target Creatig a detailed debt maagemet pla Priciples The primary fiacial sustaiability priciples that are relevat to debt maagemet ad some of the questios they geerate are: Flexibility Is there sufficiet debt capacity to respod to uforesee circumstaces? Sustaiability Ca we afford debt paymets ow ad i the future? Note: Debt will ot be icurred to fiace operatios because this is ot sustaiable ito the future Strategic Pla ad Corporate Priorities Is the debt icurred cosistet with orgaizatioal priorities to support priority capital projects? Equitability What source of fudig will pay the debt servicig costs (taxes, reserves, other)? Who beefits from the capital project(s) (ad resultig services) for which the debt is beig issued? Are those who are beefittig, payig for the debt service costs? 20

25 Strategy: Capital Fudig Capital projects should be fuded strategically. As capital projects vary i their ature ad purpose, the type of project should be aliged with a appropriate fudig source to foster fiacial sustaiability. For example, it is appropriate to alig oe-time capital expeditures with a oe-time or a usustaiable fudig source (i.e. a grat that will ot cotiue); whereas ogoig capital expeditures (i.e. rehabilitatio, aual programs) are kow expeses that perpetuate ito the future ad typically require a more sustaiable fudig source to esure future projects ca be completed. Curret Strategies As discussed, specific dedicated reserves have bee built over time, to esure secure, sustaiable fudig for the aual programs, ad are fuded through operatios. These reserves are the primary fudig source for aual capital projects, ad are subsidized by other fudig sources whe projects exceed the reserve balace. Grats, whe available ad the project is eligible, are typically the preferred secodary fudig source, followed by other muicipal fudig optios. Note: Whe recogizig reveue for costs icurred, the order is reversed. Grats (or most restricted fudig) are used first, followed by the use of reserve fuds. However, whe there are projects plaed with 10% of fudig from muicipal sources to cover ieligible costs, the fudig recogized is prorated 90/10 betwee the restricted source ad muicipal source, respectively. The followig sources of fudig ad fiacig may be used for capital projects: Off-Site Levy Fudig: Off-site levies are used to fud applicable off-site leviable ifrastructure projects i a developmet area. I the evet there are isufficiet fuds i the appropriate levy accout, either i total or a year by year basis, the Couty may choose to use levy serviced debt to frot-ed the project, or elect to defer the project. Detailed fiacial aalysis is required for each developmet project to determie appropriate fudig optios, as well as associated risks with frotedig all or a portio of a project. Ay portio of the project deemed ot leviable must be fuded through other muicipal fudig sources. Also see the off-site levy strategy sectio for further iformatio o off-site levies. Grat Fudig: Certai capital projects may be eligible to be fuded through grats that the Couty receives, such as the Federal Gas Tax grat, Muicipal Sustaiability Iitiative grat ad others. Grats are maily used to fud growth ad oe-time projects, rather tha used for replacemet ad maiteace projects. This is because third party fudig icreases the vulerability of the Couty. The fudig is ot completely reliable ad secured i the log-term because it is from other levels of govermet that may chage the types ad amouts of grat fudig allocated i the future. I order to be sustaiable, the Couty should have the ability to maitai ad replace ifrastructure without the use of third party fudig. As such, projects to be fuded by the use of grats are strategically determied based o the ature of the project ad other relevat factors. Reserve Fudig: Projects may be fuded from muicipal reserves. However, other exterally restricted fudig optios are to be explored for availability ad eligibility prior to usig this fudig source. This is because reserves help maitai the flexibility of the Couty s fiacial positio. Restricted sources of fudig (such as levies ad grats) should be utilized where there are eligible projects so that these sources are ot lost or have to be repaid. However, there may be circumstaces where reserve fudig is used, based o the ature of certai projects ad plaig strategies idetified for the situatio. Third Party Cotributios: Exterally restricted third party cotributios fud the relevat expeditures they are iteded for. Debeture Fiacig: Debt is a tool that may be used to fiace capital projects, ad should ot be mistake for a fudig source. Debeture fiacig for capital projects is to be paid off by developer levy paymets, residetial taxes, or utility rates. As discussed previously, debt ca be a effective tool that ca help achieve itergeeratioal equity. Log-Term Fiacial Sustaiability Framework 21

26 Iteral Fiacig: Iteral fiacig may be cosidered as a alterative to debeture fiacig, ad will be provided through the iteral fiacig reserve. Iteral fiacig is provided i accordace with the debt maagemet policy FIN Iterim Fiacig: From time to time there may be a requiremet for iterim fiacig because of a differece i the timig of fud recogitio ad expeditures. Examples of whe iterim fiacig may be required are whe debeture fiacig is utilized or whe the source of fudig is third party reveues such as levies or cotributios. Curretly, cash-ohad provides iterim fiacig to address the timig of debetures. Also, there are a umber of ad-hoc iterim fiacig scearios approved that utilize various sources of fuds, icludig projects addressig growth ifrastructure where off-site developer levy reveues have yet to be collected. Capital Project Fudig Cotigecy: For capital projects that are fuded with restricted fudig sources (i.e. grats ad developer levies), the Couty plas for 5-10% to be fuded from the most flexible ad least restricted muicipal reserves to cover o-eligible costs that ievitably appear i the costructio, purchase, or creatio of capital assets. Future Strategies Future work will iclude: Creatio of formal capital fudig guidelies Developmet of a formal iterim fiacig process Further refiemet ad policy creatio for orgaizatioal grat strategies ad process Please also refer to the respective strategy sectios for off-site levies, debt maagemet, ad reserves for other future strategies to pursue. Priciples The primary fiacial sustaiability priciples that are relevat to capital fudig strategies ad some of the questios they geerate are: Sustaiability Are capital projects that are part of ogoig programs, fuded through maitaiable fudig sources? Are o-aual program capital expeditures fuded with oe-time or usustaiable fudig sources to the extet possible? Miimize Vulerability Are capital projects that are required o a ogoig, cotiuous or periodic basis fuded through sources that are more cotrollable ad/or certai? Flexibility Are capital projects fuded through the restricted fudig sources prior to usig uspecified reserves, to help maitai the flexibility of the Couty s fiacial positio? Are restricted sources of fudig (such as off-site levies ad grats) used where there are eligible projects so that these sources are ot lost or have to be repaid? 22

27 Strategy: Off-Site Levies Off-site ifrastructure is the ifrastructure ecessary to be put i place to allow for a residetial, commercial, or idustrial area to be developed. Such ifrastructure may iclude water, wastewater, storm-water ad arterial roads. A off-site levy is a charge imposed o developers withi a area to help pay for all or part of the capital cost for offsite ifrastructure, which icludes ay or all of the followig as per MGA 648(2) (Please ote that the MGA is beig modified to iclude additioal ifrastructure.): a. New or expaded facilities for the storage, trasmissio, treatmet or supplyig of water b. New or expaded facilities for the treatmet, movemet or disposal of saitary sewage c. New or expaded storm sewer draiage facilities c.1 New or expaded roads required for or impacted by a subdivisio or developmet d. Lad required for or i coectio with ay facilities described i clauses (a) to (c.1) These charges that are imposed o developers will subsequetly be passed o to the ed user via the sale of a uit i the developmet area. Developers will wat to recover costs they icur ad still ear a profit. Therefore, the higher the charges imposed o developers, the higher the sales price of a uit. There is a aual Strathcoa Couty bylaw created i accordace with MGA 648(1) ad 648 (6). The bylaw provides the followig iformatio: Levy rates for the year by area Iformatio about legislative authority ad process, capital cost fudig allocatios Other applicable iformatio pertaiig to specific levies Curret Strategies The curret off-site levy structure ad strategies are: Purpose: To recover leviable off-site ifrastructure costs from the developer. Types: Levy rates are charged to developers for water, wastewater, stormwater ad arterial road improvemets leviable ifrastructure. Rate: I geeral, Couty levy rates are determied by takig the leviable area-specific costs ad dividig by the leviable hectares i the area. The total leviable costs required to build out the specific area are based upo egieerig cost estimates for proposed capital projects ad actual costs of completed work (icludig fiacig costs). Who does the work?: The Couty typically performs the work (ad/or hires cotractors) to set up/develop the off-site ifrastructure. However, there may be circumstaces where a developer will perform the work. Who frot-eds the costs?: Historically, the Couty has typically paid for the off-site ifrastructure costs up frot, ad collected levies subsequet to this. The Couty is curretly ivestigatig other optios ad philosophies. See most recet approved bylaw for more detailed iformatio ad exceptios. Fiacig costs: Curretly the Couty icludes debt servicig costs for ifrastructure i ew developmet areas i the levy rates whe a debeture is take out. The levy rate will be updated ad therefore the charge to the remaiig area will icrease based o the revised total attributable costs at a poit i time. How are levies formalized?: Levies are formalized with developers i a Developmet Agreemet. Log-Term Fiacial Sustaiability Framework 23

28 Whe are levies collected?: Levies shall be paid by the developer o later tha oe year followig the date of executio of the Developmet Agreemet. Caveats protectig the Couty s fiacial iterest shall be registered o all applicable titles at the developer s expese. Please also refer to the most curret approved bylaw for more detail o default of paymets. Ivestmet i developmet: The Couty may choose to ivest i leviable ifrastructure, which will lower the developmet rate. Reasos for ivestmet may iclude: To ecourage developmet to begi i certai areas To create a fair levy rate i differet areas To help ecourage affordable housig Other costs: There may also be additioal costs that are ot leviable, for example: Costs above exterally regulated stadards that are icurred to adhere to iteral stadards As these are t cosidered leviable, the Couty does ot cosider them a ivestmet to reduce the levy rate. Costs associated with ew developmet that beefits existig areas that have already bee levied i the past These costs that are allocated to beefit previously levied areas are absorbed by the Couty. Costs that are required for a specific area ad/ or piece of ifrastructure ad do ot meet leviable cost criteria These costs are typically paid by the developers through Cotributios i Aid of Costructio (CIACs). Beefittig areas: Iteral experts determie the relevat beefittig areas from off-site ifrastructure ad the correspodig percetage of leviable costs to them. Future Strategies Develop cosesus o philosophical plaig strategies related to off-site levies Develop cosesus o risk appetite How much developmet is the Couty willig to frot-ed ad fiace, if ay? - I what circumstaces? - Why? - How? Determie if there are circumstaces where the Couty may wat to ivest i certai off-site leviable ifrastructure If so, what criteria will be used to make the decisio to ivest? If so, what is the strategy for how the ivestmets are fuded (i.e. tax rates, grats etc.)? Uderstad ad commuicate the implicatios/ risks of ivestmets, such as settig precedece, etc. Revisit developmet levy model to esure all risks are captured ad dealt with appropriately Esure debt fiacig costs are appropriately accouted for Aticipate legislatio chages ad be ready for how these will impact the curret model ad strategies 24

29 Priciples The primary fiacial sustaiability priciples that relate to the off-site developer levies ad some of the questios they geerate are: Miimize Vulerability How much risk do our off-site levy strategies ad practices pose to the Couty? What is the level of risk of frot-edig costs ad developmet ot proceedig (i.e. ot collectig levies)? What is the level of risk of frot-edig costs ad developmet ot proceedig whe aticipated (i.e. ot collectig levies whe expected)? Sustaiability Are levy strategies ad practices sustaiable for future developmets? Equitability Are those who beefit from the developmet the oes payig for the relevat costs? Flexibility If the Couty ivests i all or a portio of leviable developmet costs, what is the impact o other balaces (reserves, grats, debt)? Strategic Pla ad Corporate Priorities If the Couty ivests i all or a portio of leviable developmet costs, is this i lie as a orgaizatioal priority? What would have to be sacrificed by proceedig with the ivestmet? Other types of services, other service levels, other capital projects, etc. Log-Term Fiacial Sustaiability Framework 25

30 Strategy: Fiscal Impact Aalysis The determiatio of curret ad future fiscal impacts that may arise from ay project, iitiative or decisio is required. A fiscal impact aalysis (FIA) demostrates what the curret ad future fiacial effects of a project, iitiative or decisio may be o operatig reveues ad expeditures. It may also determie hard ad soft capital ifrastructure requiremets to service the project, iitiative or decisio i questio. Hard ifrastructure refers to the physical etworks required to service a area, such as roads, water ad wastewater systems. Soft ifrastructure refers to the assets desired to maitai the ecoomic, health, cultural ad social stadards of our commuity. A FIA should ot be cofused with a fiacial feasibility aalysis (see ext sectio), as it does ot determie how the ew project, iitiative or decisio ad associated costs will be fuded, the availability of resources required to implemet it, etc. A FIA is cosidered a fiacial strategy because the way i which it is completed ad the iformatio icluded may ifluece decisios that impact log-term operatios. Future Strategies Refiemet of FIA workbook ad methodology to be used i future aalyses Priciples The primary fiacial sustaiability priciple that relates to the fiscal impact aalysis ad some of the questios it geerates are: Sustaiability What are the total up-frot costs of the project, iitiative or decisio? What are the future costs of the project, iitiative or decisio? What is the immediate ad future aual tax rate impact? Curret Strategies Although there is o formally commuicated methodology, the Couty has utilized a FIA workbook through work with a exteral cosultat for past aalyses coducted. The FIA cosiders: All kow types of operatig ad capital expeditures that will evetually be required Such as buildigs, utilities, roadways, ad other services (icludig i facig services such as IT requiremets, staffig, etc.) Potetial taxatio ad user fee reveues geerated Primary drivers of costs (for example, populatio) ad triggers for whe certai costs would be required Potetial debt fiacig costs 26

31 Strategy: Fiacial Feasibility Aalysis A fiacial feasibility aalysis will complemet a fiscal impact aalysis, to provide sufficiet evidece for the decisio-makig process. A fiacial feasibility aalysis differs from the FIA (see previous sectio) because it cosiders how the ew project, iitiative or decisio ad associated costs will be fuded, the availability of resources required to implemet it, as well as additioal orgaizatioal cosideratios. This type of fiacial aalysis is required ot oly for large projects such as etire growth areas, but also for small capital projects or other iitiatives ad decisios. As with the FIA, fiacial feasibility aalysis is cosidered a fiacial strategy because the way i which it is completed ad the type of iformatio icluded i the aalysis may ifluece decisios that impact log-term operatios. Curret Strategies There is o curret orgaizatioal fiacial feasibility aalysis methodology. Ad-hoc fiacial feasibility aalyses are performed whe warrated for various projects ad decisios. These aalyses vary by the type of project ad certai circumstaces. Future Strategies Cosistet methodology is to be developed ad followed to esure all aalyses cotai the same cosideratios (where applicable). Geeral cosideratios i a fiacial feasibility aalysis iclude: Iitial cost idetificatio ad aalysis Iitial capital ivestmet required for the project, iitiative or decisio Short-term operatioal impacts Sesitivity ad sceario aalysis for ay estimates/ assumptios to show a rage of fiacial impacts ad implicatios o the Couty The types of implicatios ad chages i assumptios will vary by aalysis Fudig ad fiacig optios Fudig optios for all compoets/stages of project, iitiative or decisio Fiacig optios ad costs Associated risks with timig ad collectios for repaymet Resource cosideratios How may resources are required to complete the project, iitiative or decisio? Are the resources available? Other orgaizatioal impacts What other potetial projects, iitiatives or decisios or services would be compromised, give up, ad/or impacted? How does the project alig as a orgaizatioal priority? What areas are at risk ad to what degree for example, safety, madate, replacemet, sustaiability, fudig, ad/or operatios. Risk level may be high, medium or low Future impacts Aual tax rate impacts over the life of the project, strategic iitiative or decisio Future operatioal costs to maitai ad provide services Future capital replacemet costs Future soft ad hard capital requiremets, if applicable Projected reveues geerated, if applicable Other relevat cosideratios ot listed may arise depedig o the specific project, iitiative or decisio, or circumstaces. Log-Term Fiacial Sustaiability Framework 27

32 Priciples Fiacial feasibility aalyses should cosider all of the fiacial sustaiability priciples. Some of the questios geerated iclude: Sustaiability What are the total up-frot costs of the project, iitiative or decisio? What are the future costs of the project, iitiative or decisio? What is the immediate ad future aual tax rate impact? What resources are required to implemet ad maitai the project, iitiative or decisio? Is it feasible/practical to maitai i the future? Flexibility What is the impact of the project, iitiative or decisio o debt capacity? I cosideratio of other orgaizatioal priorities, what is the total impact o the tax rate? What is the impact o reserve balaces? Miimize Vulerability What type of fudig sources are available for both up-frot costs ad ogoig/future costs? Is the fudig source guarateed? Are the fudig sources sustaiable or usustaiable? Are the fudig sources i lie with the capital fudig strategies? Strategic Pla ad Corporate Priorities Does the project, iitiative or decisio support a orgaizatioal priority? What impact would pursuig the project have o other priorities, projects or services? Efficiecy How may resources (fiacial, time, huma capital) are required to maitai the project/ service? What other services are impacted fiacially? Is the quality of other services impacted? Trasparecy Was there appropriate commuicatio with stakeholders where relevat? 28

33 Strategy: Ivestmets The ability to effectively maage fuds ad ivestmets helps demostrate fiduciary care of muicipal fuds, ad returs yielded ca be used to help achieve certai orgaizatioal objectives. Curret Strategies The Couty s Ivestmet Policy (FIN ) outlies ivestmet objectives ad guidelies. The Couty ivests public fuds i a prudet maer that will provide optimum ivestmet returs with the maximum security. The Couty must meet cash flow requiremets ad coform to the Muicipal Govermet Act ad all other provicial statutes ad regulatios goverig the ivestmet of muicipal fuds. Priciples The primary fiacial sustaiability priciples related to ivestmets ad some of the questios they geerate are as follows: Sustaiability Are ivestmets that provide returs to help fud operatios of the Couty maitaiable? Miimize Vulerability Are ivestmets made i a prudet maer ad moitored o a ogoig basis with maximum security to miimize risk? Future Strategies There are o sigificat chages to ivestmet strategies at this time. The Couty is to esure cotiual review of ad compliace with the ivestmet policy. Log-Term Fiacial Sustaiability Framework 29

34 Strategy: Utilities Self-Sustaiig Strategy Strathcoa Couty provides utility services to residets that iclude water & wastewater services, solid waste maagemet services, as well as the related utilities ifrastructure. Curret Strategies The Utilities departmet is fiacially self-sufficiet through the use of a utility rate model ad does ot use muicipal property taxes to support operatioal or capital requiremets, except for recyclig statios ad eviroservices. Utilities operate as a self-sufficiet etity because of the ature ad magitude of services provided. Future Strategies The Couty will cotiue to apply the curret utilities selfsustaiig strategy through the utility rate model. Future policy is to be developed to support compoets of this methodology. I 2016, Strathcoa Couty cotracted a exteral party, FCS GROUP, to perform a review of fiacial policies for the Couty s five utilities: Water, Wastewater, Stormwater, Waste Maagemet, ad Commuity Eergy. I 2017, FCS GROUP developed a report with suggested fiacial policies o utility debt limits, utility fiacial reserves, ad utility retur o equity. This report will be used to iform modificatios to, or affirm curret fiacial policies (i.e. debt limits, reserves); or to support the developmet of ew fiacial policies (i.e. retur o equity). Priciples The primary fiacial sustaiability priciples related to this strategy are: Sustaiability Are utilities services ad ifrastructure maitaiable ow ad i the future through the utility user rate model? Flexibility Esurig utilities is fiacially self-sufficiet eables the Couty to utilize muicipal property tax dollars to fud other operatios, ad creates more flexibility with the muicipal property tax rate for other services. 30

35 Strategy: Library Operatig Tax-Rate Strategy The Strathcoa Couty Library (SCL) provides muicipal services uder the directio of a commuity Library Board, appoited by Strathcoa Couty Coucil ad is govered by the Libraries Act. Curret Strategies The SCL operatios are primarily fuded through library operatig tax reveues, which are separate from muicipal operatig tax reveues. However, the process of raisig ad collectig the library operatig taxes is coducted through the muicipal operatig tax process, ad the tax will appear o all property tax bills i the Couty as a distict item (ote there are separate library tax rates for residetial/farmlad ad o-residetial properties). The separate library operatig tax icreases trasparecy (versus cosolidatig SCL operatios ito muicipal operatios ad tax rates). The SCL may also receive operatig grats, user fees ad charges, pealties ad fies, ad other reveues. As with muicipal operatios, if budgeted reveues (with cosideratio of aticipated chages i the tax base) are ot sufficiet to fud budgeted operatig expeses, a icrease to the library operatig-tax rate may be approved by the Library Board ad Coucil. Priciples The primary fiacial sustaiability priciples related to this strategy are: Sustaiability Are library services maitaiable ow ad i the future through the Library operatig tax? Flexibility Esurig the SCL is fiacially self-sufficiet eables the Couty to utilize muicipal property tax dollars to fud other operatios, ad creates more flexibility with the muicipal property tax rate for other services. Trasparecy Creatig ad showig the library operatig tax-rate separate from the muicipal operatig tax-rate icreases visibility of operatios ad tax-rates. Future Strategies There are o sigificat chages to this strategy kow at this time. SCL operatios will cotiue to be fuded primarily through library operatig tax reveues. Log-Term Fiacial Sustaiability Framework 31

36 Strategy: Service Levels Service levels refer to the performace of programs provided by the Couty. They iclude the measure of outputs from a program, idetificatio of who the primary customers are ad what stadards are to be delivered. Service levels impact the log-term fiacial sustaiability of the Couty because of the cost implicatios of maitaiig services ad stadards, while also dealig with icreasig populatio, chagig demographics, iflatio ad other factors. Curret Strategies There are o formal corporate fiacial strategies i relatio to service levels. The latest service level review was coducted i 2008 as part of the Busiess Pla ad 2009 Budget plaig process. However, a ivetory of programs has bee idetified ad associated budgeted costig is completed o a aual basis after the budget is approved. I additio, some service levels are defied i policy, such as witer maiteace i policy SER Priciples The fiacial sustaiability priciples related to service levels ad the questios they geerate are: Sustaiability Are curret service levels maitaiable i the future? Efficiecy Are service levels provided i a efficiet maer with the resources available? Miimize Vulerability Are there ay core services fuded through sources outside the Couty s cotrol? Strategic Pla ad Corporate Priorities Do the services ad service levels provided support a orgaizatioal priority? Future Strategies Service level reviews at the departmet level will be required to idetify service outputs, customers, curret ad future cost implicatios, ad if service stadard chages are ecessary ad/or desirable. Documetatio of these service levels should be made available to the orgaizatio ad public. Service level iformatio is required to help iform budgetig ad plaig decisios at the program level. I additio, to assist i makig iformed program ad service level decisios, program costig methodology ad guidelies will eed to be created. Future strategies also iclude developig a service level review for major assets as part of the Asset Maagemet Framework Roadmap (discussed i the Asset Maagemet Strategy). Other relevat cosideratios may iclude comparisos to other muicipalities, idustry stadards, etc. 32

37 Strategy: Busiess Plaig ad Budget Methodology The budget is the key mechaism ad process through which fiacial strategies are implemeted to achieve strategic, corporate, ad departmet busiess plaig goals. Although a budget is prepared for a short-term widow, the strategies itegrated withi it have log-term fiacial impacts. The budget methodology also cotributes to the decisio-makig process ad perspective. For example, a multi-year budget will help illustrate a loger-term view of fiacial iformatio for scrutiy, compared to a sigleyear budget which may lead to shorter-term thikig ad decisio-makig. As well, providig forecastig data alog with budgets ca provide cotext to a curret year budget to iform decisios. Curret Strategies The followig are curret strategies i the orgaizatio: The orgaizatio itegrates curret strategies as previously discussed withi the budget process (fudig strategies, debt strategies, ivestmet strategies, etc.) Priority-based budgetig (PBB) is used as a les to help guide decisio-makig i the budget process. This has ivolved developig a ivetory of all of the Couty s programs ad scorig them agaist the prioritized strategic goals. This helps brig a more strategic plaig aspect to the budget process. 3-year operatig ad 5-year capital outlooks are preseted with budget. A evirometal aalysis is coducted durig the budget process to provide cotext to decisios i the upcomig year. Future Strategies Strathcoa Couty is shiftig towards a multi-year budgetig process to itegrate mid-term term thikig ad decisio-makig ito the budget process ad to esure compliace with chagig MGA requiremets. Creatio of updated ad cosistet forecastig techiques ad revised models (please also refer to Forecastig Methodology sectio). Creatio of program costig methodology to budget ad report o program costs. Priciples The budget process should cosider all fiacial sustaiability priciples ad geeral questios previously discussed through its implemetatio. Log-Term Fiacial Sustaiability Framework 33

38 Strategy: Forecastig Methodology A fiacial forecast is a predictio of the orgaizatio s future fiacial coditios. A forecast idetifies treds i historical data ad cosiders other iformatio to project future operatios. It is used to iform decisio-makers about what the fiacial status of the orgaizatio is likely to be at some poit i the future. For the purposes of the framework, the followig termiology will be used: Projectio: Short ad mid-term (1-10 years) estimatio of the orgaizatio s future fiacial coditio, that icludes expected iitiatives, capital projects, ad relevat assumptios. Forecast: Log-term (11-30 years) estimatio of the orgaizatio s future fiacial coditio. A base case forecast will be created, alog with sceario ad sesitivity aalysis ad relevat assumptios (Appedix II). See below for further details. Curret Strategies There are projectio tools i place that are used to predict operatios five years ito the future. The three year projectio is provided i the aual budget documet for public iformatio ad to esure compliace with MGA requiremets. There is a 10-year capital pla updated aually as part of the budget process, however the purpose is to idetify all potetial projects withi this time frame, ad is ot yet scrutiized or prioritized from a corporate perspective. I additio, ot all capital costs for future developmet areas are ecessarily icluded. Future Strategies Further refiemet of the operatig ad capital projectios is required to create a more cosistet approach for projectio iformatio. The refiemet of the curret projectios will also lead ito the creatio of log-term forecasts. Operatig ad Capital forecasts will be created based o the followig methods: Timelies: I order to provide a meaigful look ito our fiacial future, capital ad operatig forecasts will be developed over a 30 year timelie. This period will help to ucover log-term fiacial impacts of curret operatios ad decisios, as well as future developmet ad growth costs. This period of time will help ucover sigificat issues or gaps i operatios, or show sigificat ew capital requiremets ad maiteace cycles. Ay poit i time up to 30 years ca be examied (i.e. 10 years, 15 years etc.). For the aual budget process, a five year projectio will still be created to be scrutiized ad aalyzed alog with the budget. Level of detail: The level of detail i which the logterm projectios ad forecasts are created will be at the muicipal level by budget expese category. Assumptios Base Case Projectios: A base case operatig forecast will be the first created. The purpose of creatig a base case is to idetify potetial future fiacial challeges that exist withi curret operatios. Therefore, a base case forecast is estimatig operatios ito the future if operatios cotiued as they do ow, with cosideratio of growth, iflatio ad other assumptios i order to create a meaigful log rage fiacial picture (see Appedix II). A base case capital forecast will also be created. To be cosistet with the base case operatig forecasts, a ew base case capital forecastig methodology will be utilized. The base case will iclude ecessary capital projects for aual costs, rehabilitatio ad replacemet costs. Separate scearios will be developed with varyig capital costs projected. Please refer to Appedix II for a list of assumptios used i operatig ad capital base case forecasts. The base case assumptios will also be applied to the shortterm projectios. Sesitivity Aalysis: Sesitivity aalysis refers to the modificatio of certai variables withi the base case projectios to demostrate the magitude of impact o the log-term fiacial picture. Various sesitivities will be cosidered throughout the log-term fiacial sustaiability process. Examples of sesitivities may iclude: 34

39 Varyig degree of capital costs i capital projectios For example: Addig growth related capital; icludig oly a percetage of capital costs; determiig eeds versus ice to have capital costs Varyig degree of operatig impacts of capital icluded i projectios To be correlated with sesitivity variables chaged i capital projectio Varyig degree of ew operatig iitiatives i operatig projectios For example: icludig all or oly a percetage of iitiatives Varyig the magitude ad types of other assumptios. For example: varyig the rate of iflatio/growth Sceario Aalysis: Sceario aalysis refers to idetifyig situatios that the Couty may face ad forecastig fiacial implicatios of these. Sceario forecasts will be created as part of the log-term fiacial sustaiability process described further i this documet. Scearios may iclude situatios such as: Chages to reveue or expeses arisig from sigificat challeges or threats i the eviromet such as chages to legislatio Such challeges or threats will be idetified i the STEEP aalysis (refer to ext sectio) Chagig/removig/addig assumptios ad/or certai reveue ad expeses based o discussios/decisios through the log-term fiacial sustaiability process Such as decisios to limit property tax rate icreases over time, remove/add certai services Separate projectios/fiscal impact aalysis/fiacial feasibility aalysis o growth areas Sceario ad sesitivity aalysis may be iterrelated, because chagig the magitude of a certai variable (sesitivity) may also be cosidered a sceario i some istaces. Frequecy: Operatig ad capital baselie projectios will be updated o a aual basis to be scrutiized with the budget process. Sesitivity ad scearios will be created as a result of the process (discussed further i this documet) which will be coducted every four years. Priciples Forecasts ad projectios are used to help iform curret decisios. They will be aalyzed by usig the fiacial sustaiability priciples to idetify areas of potetial cocer or those that preset fiacial challeges, for example: Sustaiability What do the results of the forecast suggest regardig sustaiability do we have the fiacial ability to cotiue to provide services citizes expect ad value? What is the future tax rate impact of cotiuig to provide curret services? Flexibility What fiacig may be required for future capital? What impact will this have o debt capacity ad the tax rate? Ca reserve optimum balaces be maitaied i the future to respod to emerget or uforesee circumstaces? Miimize Vulerability What fudig sources are cosidered i the forecasts? What assumptios are icluded for sources outside Couty cotrol? Strategic Pla ad Corporate Priorities What strategic goals ca be achieved ad i what time frame? Equitability Are those beefittig from the services the oes payig over time? Log-Term Fiacial Sustaiability Framework 35

40 Strategy: Evirometal Sca Aalysis For the purpose of the framework, a evirometal sca refers to examiatio of both iteral ad exteral factors that may preset sigificat risks ad opportuities to the Couty. These risks or opportuities may come from legislatio, other levels of govermet, ecoomic ad social treds, iteral pressures, ad more. It is importat to idetify these evirometal factors ad their associated orgaizatioal implicatios. Curret Strategies Various departmets coduct aalysis of some form i order to be aware of legislative chages ad other potetial impacts. I 2017, Corporate Plaig has take steps to develop a ew aalysis that will idetify sigificat Social, Techological, Ecoomic, Evirometal, ad Political (STEEP) factors ad iflueces at a corporate perspective. Future Strategies Corporate Plaig is goig to refie ad execute the STEEP aalysis. The aalysis will iclude examiatio of high level Social, Techological, Ecoomic, Evirometal, ad Political iflueces that may have sigificat orgaizatioal impacts, ad will be coducted o a aual basis. The STEEP aalysis will also help iform coversatios i the log-term fiacial sustaiability plaig process. The breakdow of the aalysis is as follows: Social: The social area cosiders idividual ad commuity health ad well-beig, ad how we relate to ad care for oe aother. For the purposes of the STEEP aalysis, sigificat social challeges (or opportuities) from a corporate perspective will be idetified. The focus will be o high level socio-ecoomic idicators as these help quatify our commuity s meas ad ecoomic ability to geerate reveue relative to the commuity s demad for services. For example, relevat socio-ecoomic idicators iclude: Populatio ad Demographic Treds: Populatio treds impact both reveues (assessmet base) as well as expeditures ad therefore are importat idicators of the amout of services that should be provided; while demographic treds may be a importat idicatio of what types of services should be provided. If populatio is expected to grow at a sigificat pace, the this will have corporate implicatios as more of the same services will eed to be provided to maitai Strathcoa Couty stadards. This is why a growth variable is icluded for projectio purposes i base case projectios. If demographic treds idicate a sigificat shift, such as a agig populatio the this may sigal the eed for ew services to be provided (for example ew types of recreatio activities), or more of a certai type of service to be provided (for example, more mobility bus services). Household Icome, Uemploymet, EI recipiets: These treds are helpful idicators of what citizes ca afford i relatio to property taxes. As household icome icreases, this could sigal higher affordability ad ability to pay taxes. O the cotrary, as uemploymet ad EI recipiets icrease, this could idicate lower affordability of taxes i the Couty. These idicators may also help idetify the eed for ew or icreased services (for example, affordable housig) while reducig costs i other areas for affordability. Other: Other aalysis based o emergig treds may be required. Techological: Techological treds ad factors will be examied to idetify potetial sigificat implicatios to the Couty. For example: New techology that may be required for busiess operatios, ad costs of such techology New techology that will improve operatios, ad costs of such techology Chages i cyber-security, iformatio, or other requiremets Methods to coect our commuity digitally 36

41 Ecoomy: As stated i the strategic pla, the stregth of our ecoomy is the foudatio supportig our etire commuity. A healthy, sustaiable ecoomy allows us to ivest i ifrastructure ad provide the quality programs ad services residets ad busiesses value. It is, therefore, vital to be aware of certai ecoomic idicators ad iflueces that could have sigificat orgaizatioal implicatios. Assessmet Compositio (mix of residetial ad oresidetial assessmet): The assessmet compositio is a idicatio of the mix of which the Couty ca collect taxes. A greater mix of o-residetial assessmet assists the Couty to provide ad maitai services to the commuity. Assessmet Growth: The expected assessmet growth i the future sigals how much our reveue base will icrease ad support the growth ad maiteace of services. Property Taxes as a Percetage of Icome: Comparig muicipal property taxes as a percetage of average household icome gives isight ito the affordability of taxes for our residets. Muicipal Levy per Capita: Comparig the muicipal tax levy per capita year-over-year i the Couty helps us idetify treds i our muicipal taxes relative to populatio. The types ad levels of services provided each year may differ; as such treds i this idicator should cosider these factors. Assessmet per Capita: Comparig the assessmet per capita i Strathcoa Couty year-over-year ca help us uderstad treds i our base. The higher the assessmet per capita, the stroger our base is which sigals a stroger fiacial coditio. Strathcoa Couty Busiess by Idustry Sector: Uderstadig the compositio of the types of busiesses i Strathcoa Couty by sector ca help us idetify how diverse our ecoomy is. Employmet Idicators: Examiig employmet idicators i the Couty will help demostrate the stregth of the local ecoomy. These idicators may iclude employmet rates, employmet sectors, ad educatio levels. Eviromet: As stated i the strategic pla, the eviromet icludes the atural areas both withi ad aroud Strathcoa Couty, alog with our commitmet to protect ad preserve our atural eviromet ad to live sustaiably. For the purposes of the STEEP aalysis, evirometal challeges/implicatios (or opportuities) from a corporate perspective will be idetified. For example, challeges could iclude chages i evirometal legislatio (carbo tax); how ew growth ad developmet removes ecosystems ad agricultural lads; ad opportuities could iclude ivestig i ew evirometally friedly techology ad facilities. Political: The political priority area refers to goverace ad cooperative parterships with commuity, busiess, idustry ad eighbourig govermets. The aalysis will idetify potetial challeges or chages i these areas that may have a sigificat corporate impact. Federal: Decisios made by the federal govermet may have direct impact o our operatios. We must idetify the most sigificat iflueces ad potetial kow chages (if ay) i order to quatify ad project chages or impacts to our operatios. For example, if there are chages i political power ad policies/budgets, this could lead to a sigificat chage i types ad amout of grat fudig available to the Couty. Provicial: The most sigificat provicial ifluece is the Muicipal Govermet Act (MGA). Whe there are chages to the MGA there may be sigificat impacts o Couty policy, procedures ad process. We eed to be aware of ay potetial upcomig chages that could have a sigificat fiacial implicatio. Such potetial chages could be to off-site developmet levies, idustrial assessmet, ad iter-muicipal collaboratio agreemets. I additio to the MGA, there are other provicial policies ad decisios reflected i the provicial budget that have sigificat impacts o Strathcoa Couty s operatios, such as grat fudig that is available to the Couty. Log-Term Fiacial Sustaiability Framework 37

42 Regioal: The most sigificat regioal iflueces would be from the Edmoto Metropolita Regio Board (EMRB). The board creates regulatios ad policies that have direct impact o Strathcoa Couty. We must be aware of sigificat potetial chages from the EMRB ad orgaizatioal implicatios they may have (for example, cost ad/or service sharig agreemets). Regioal iflueces also iclude existig ad future parterships with eighbourig muicipalities such as the Metro Mayors Alliace. There may also be other challeges, such as aexatio pressures. These issues may have sigificat orgaizatioal implicatios, such as shared reveues or expeditures for shared services, potetial loss of tax base etc. Commuity: It is importat to be aware of commuity expectatios as well as perceptios o certai issues, ad how these may chage over time. The commuity may have a ifluece o corporate decisios i certai circumstaces. There are various public egagemet opportuities at the Couty o specific issues, as well as surveys which cover a variety of questios about the Couty. Such applicable questios from a corporate perspective iclude how citizes perceive the value they receive for their tax dollars. As part of the STEEP Aalysis, the most recet public surveys may be refereced to determie relevat attitudes ad perceptios that may ifluece orgaizatioal discussios. 38

43 Strategy: Other I additio to the policies metioed, there are other fiacial strategies/policies i coectio with log-term fiacial plaig. Curret Strategies Other fiacial strategies ot metioed previously related to fiacial plaig iclude the followig: Allocatio of Year-Ed Operatig Surplus for Tax Purposes (policy FIN ): The purpose of this strategy ad policy is to help esure the allocatio of Aual Operatig Surpluses for Tax Purposes aligs with, ad cotributes to the ecoomic health ad sustaiability of Couty operatios. The surplus is the excess of reveues over expeditures, et of budget carryover items, icludig o-operatioal items, such as reserve trasfers ad debt paymets. Budget carryover items are items that have bee approved i the curret year budget but have ot bee completed at year-ed, ad are iteded to be completed i the followig year. These items are allocated to Desigated Reserves at year-ed, ad are ot cosidered part of the year-ed surplus. The curret guidelies idicate that the surplus may be allocated to: Desigated reserves to be expeded i future years, as approved by Coucil i accordace with the reserve policy (FIN ) to provide future fudig requiremets ad emerget costs. Fud o-recurrig expeditures withi the followig year s operatig or capital budget. This strategy is to alig oe-time geerated surpluses (i.e. fudig sources) to oe-time expeditures (i.e. to esure fudig sources that are ot sustaiable do ot fud ogoig expeditures). The Stabilizatio Reserve to smooth future property tax dollar icreases i periods of high iflatio, to stabilize fluctuatios i operatig ad capital activity, to address the risk of reveue or expediture volatility, or other circumstaces. If there is a Aual Operatig Surplus for Tax Purposes i the Utilities departmet it will be allocated withi these operatios ad respective reserves. If there is a Aual Operatig Surplus for Tax Purposes from The Strathcoa Couty Library, it will be allocated pursuat to the Strathcoa Couty Library Board directio. Future Strategies Other future strategy areas will iclude: Ivestigatio ito more specific uses of Allocatios of Year-Ed Operatig Surplus for Tax Purposes, ad how it should be determied through a prioritizatio process, etc. Policy creatio to formalize all fiacial strategies ad practices i place at the Couty, ad as ew strategies arise. For example, there are ot yet formal fiacial policies relatig to capital fudig strategies ad aual programs discussed i this sectio. Creatio of more specific fiacial performace idicators ad ratios that the Couty should be held accoutable to through policy. Creatio of ew reveue ad expediture strategies with supportig policies, ad other strategies that arise from legislatio chages ad the log-term fiacial sustaiability process described i the ext sectio. Log-Term Fiacial Sustaiability Framework 39

44 Log-Term Fiacial Sustaiability Process Log-term fiacial sustaiability plaig at the Couty will evetually iclude the future strategies idetified i the previous sectio, icludig (amog others): Updated levy procedures/practices/philosophy Asset maagemet pla Debt maagemet pla Multi-year budgetig Other fiacial strategies i accordace with challeges ad priorities As there are may extesive strategies that log-term fiacial sustaiability plaig may ivolve, it is vital to follow a collaborative process that will ucover the Couty s most sigificat challeges ad priority areas. The purpose of the process is to brig to light future fiacial implicatios of curret decisios, as well as potetial fiacial issues, ad to reduce risk by developig fiacial strategies to mitigate these challeges. The Couty already egages i umerous log-term fiacial plaig practices as discussed i the previous sectio. However, there eeds to be a formal log-term fiacial sustaiability plaig process i place. The process will be comprised of the followig steps: 1. Base case fiacial forecasts 2. Sesitivity aalysis 3. Checkpoit 1: stakeholder discussio ad directio 4. Aalysis ad scearios 5. Checkpoit 2: stakeholder review of optios ad selectio of desired fiacial strategy 6. Implemetatio pla 7. Coucil approval (as required) Step 1: Base case fiacial forecasts The startig poit of the process is to create fiacial forecasts based o curret iformatio, i order to idetify what the fiacial future may look like i 30 years if we cotiued to operate the way we do ow. The base case forecasts iclude various assumptios ad variables (see Appedix II). The purpose of the 30 year operatig forecast is to idetify ay potetial gaps betwee operatig reveues ad expeditures. The purpose of the 30 year capital forecast is to idetify capital projects ad aual projects over the log-term ad to show the fiacial implicatios of these, icludig gaps i fudig. The base case will iclude ecessary capital projects for aual costs, rehabilitatio ad replacemet costs. Separate scearios will be developed with varyig capital costs projected based o future eeds. Step 2: Sesitivity aalysis As previously discussed, sesitivity aalysis is required to demostrate the magitude of impact o the log-term fiacial picture by alterig certai variables. This helps gai isight ito the degree of risk that variables may impose. 40

45 Step 3: Checkpoit 1 stakeholder discussio ad directio Oce steps 1 ad 2 are complete, the base case projectios ad sesitivities will be discussed with idetified key stakeholders as deemed ecessary (for example, Executive Team). I additio, sigificat fidigs from the Social, Techological, Ecoomic, Eviromet, ad Political (STEEP) aalysis coducted by Corporate Plaig will be discussed. The purpose of this checkpoit is to provide ad discuss the followig iformatio: Base case fiacial forecasts, prior to ay sigificat chages to operatios or the eviromet i which we operate (legislatio, provicial policies etc.) Fiacial forecasts with some variables modified to demostrate the magitude of impact (i.e. sesitivity aalysis) Fidigs from Corporate Plaig s STEEP aalysis that could have sigificat fiacial implicatios I additio, the purpose is also to receive directio from the key stakeholders o the followig, i order to revise forecasts ad create scearios as ecessary: Which sigificat challeges idetified i the STEEP aalysis should be ivestigated further to create scearios ad determie potetial fiacial impacts Types of limitatios to icorporate ito forecasts, if ecessary ad/or desired For example: tax icrease limitatios, debt limitatios If adjustmets to sesitivities are required Other types of scearios that are desired ad/or ecessary to ivestigate for either forecasts, or isolated fiacial impacts For example: growth area aalysis, debt maagemet plas, levy model review Step 4: Aalysis ad scearios As a result of the collaborative discussio ad directios i Step 3, Corporate Plaig will create the fiacial aalysis, scearios ad updated projectios as required. The purpose will be to create further aalysis o challeges idetified (withi ay defied limitatios, if applicable), ad to develop potetial fiacial strategies ad optios to help mitigate them. This step will iclude: Updatig projectios model ad/or creatig fiacial scearios/aalysis based o collaborative discussios Aalyzig results of aalysis ad creatig potetial fiacial strategies to resolve potetial issues (such as gaps from reveues ad expeditures) with cosideratio of defied limitatios (tax rates, debt limits, reserve balaces, other ratios etc.) Creatig a list of potetial optios/strategies Demostratig potetial/estimated fiacial impacts by quatifyig the potetial optios ito projectios/ fiacial aalysis Idetifyig the relatioship or impact that each strategy has o each of LTFSF priciples Log-Term Fiacial Sustaiability Framework 41

46 Step 5: Checkpoit 2 stakeholder review of optios ad selectio of desired fiacial strategy Oce Step 4 is complete, the results of the fiacial aalysis ad suggested optios will be reviewed by the key stakeholders. The purpose of this checkpoit will be for the key stakeholders to review the results of the fiacial aalysis ad list of potetial fiacial strategies ad to egage i a collaborative discussio to help select a desired fiacial strategy to pursue. A meetig will be held with the key stakeholders idetified to review the results of the aalysis. Depedig o the specific circumstaces ad aalysis, a fiacial strategy will be selected that the Couty should pursue to help mitigate future fiacial challeges ad help esure fiacial sustaiability i the log term. Cotiuous Improvemets The process (steps 1-7) will occur every 4 years. This is because priorities ad circumstaces may chage, ew issues ad potetial threats may arise; ad existig projectios, plas, strategies ad practices may eed to be updated. There are also may practices that may be desired to be pursued by the Couty, but will eed to be cosidered oe at a time o a priority basis as idetified through the process. The amout of time each cycle (steps 1-7) requires will vary depedig o the aalysis i questio. This framework documet will be updated every 4 years to icorporate refiemets to the process as well as iclude ew strategies that have bee developed ad/or revisios to curret strategies. Step 6: Implemetatio pla Oce the recommeded fiacial strategy is determied i Step 5 it will eed to be implemeted ad icorporated ito curret practice. Depedig o the aalysis ad strategies chose, implemetatio steps may vary. A edorsed work pla will be created i order to put the desired strategy ito effect. This may iclude creatig ew policies, updatig curret policies, creatig ew maagemet plas, makig chages to the budget process ad strategies, etc. Step 7: Coucil approval (as required) Fiacial strategies resultig i ew policy or policy chage will be brought forward for Coucil approval. 42

47 Log-Term Fiacial Sustaiability Framework 43

48 44 SUMMARY ad CONCLUSION

49 To meet the strategic visio of becomig Caada s most livable commuity ad to deliver the level ad types of services expected by the commuity, there must be the fiacial capability to do so. As a muicipality, the Couty is faced with umerous challeges ad pressures that ca threate fiacial sustaiability. Issues such as sustaiable reveues ad fudig sources, expediture pressures, ew growth, iflatio, amog others, combied with the pressure to keep muicipal taxes affordable are factors cotributig to the fiacial realities of the Couty. The framework has bee created to take actio to iform discussios ad, ultimately, decisios through agreed upo priciples, strategies ad process. The creatio of the framework is a key step i plaig for fiacial sustaiability to help achieve the strategic pla s visio of becomig Caada s most livable commuity. Log-Term Fiacial Sustaiability Framework 45

50 GLOSSARY Fiacial Services

51 Base Case Fiacial Forecast or Projectio: A forecast or projectio that estimates future operatios based o the status quo, alog with relevat assumptios pertaiig to growth, iflatio ad other variables. The purpose of the base case is to preset a future fiacial picture if othig sigificat chages. Corporate Busiess Pla: A bridgig documet that iterprets the visio provided i the strategic pla ad provides four year focused directio for departmet busiess plas. Debt Capacity: The differece betwee the debt limit ad the balace of debt outstadig (i.e. the maximum remaiig amout of debt that ca be issued). Debt Limit: The maximum allowable amout of debt that ca be issued by the orgaizatio. There is the MGA debt limit, as well as a iteral debt limit (both defied withi this sectio). Debt Service Ratio: Ratio of reveue available for debt servicig for iterest, pricipal ad lease paymets (total iterest, pricipal, lease paymets divided by operatig reveue). Efficiecy: The degree to which the types ad levels of services expected by the commuity ca be provided with the least amout of resources, time ad effort. Equitability: The degree to which residets pay a fair rate of taxatio ad fees for the services received; ad to the greatest extet possible, those who beefit from the services pay for the services (supportig the otio of Itergeeratioal Equity). Fiacial Forecast: A log-term (11-30 year) estimatio of the orgaizatio s future fiacial coditio. Fiacial Projectio: A short or mid-term (1 10 year) estimatio of the orgaizatio s future fiacial coditio. Fiacial Strategies: The coscious practices ad methods used to achieve a specific fiacial purpose ad/or goal. Flexibility: The degree to which a govermet ca chage its debt or tax burde o the ecoomy withi which it operates to meet its existig fiacial obligatios both i respect of its service commitmets to the public ad fiacial commitmets to creditors, employees ad others. 1 Itergeeratioal Equity: I the ecoomic cotext, this refers to distributig the costs associated with capital growth across the geeratios which will be ejoyig the beefits of the capital assets built today. Iteral Debt Limit: The iterally authorized maximum amout of debt commuicated i policy FIN that ca be issued by the orgaizatio. The iteral debt limit is calculated to be 80% of the MGA Debt Limit as defied withi this sectio. MGA Debt Limit: The legal maximum amout of debt that ca be issued by the orgaizatio. The limit is 1.5 times the reveue of the muicipality as defied ad calculated i the MGA Debt Limit Regulatio 255/2000, as ameded. Muicipal Developmet Pla: The Couty s pla for the future that sets out a clear visio for how Strathcoa Couty will grow ad develop over the ext 20 years ad beyod. Muicipal Govermet Act (MGA): The provicial legislative framework uder which Strathcoa Couty operates. Off-Site Ifrastructure: The ifrastructure ecessary to be put i place to allow for a area to be developed. Such ifrastructure icludes water, sewer, storm-water ad arterial roads. 1. CPA Public Sector Statemets of Recommeded Practice 4 Idicators of fiacial coditio Log-Term Fiacial Sustaiability Framework 47

52 Off-Site Levy: A charge imposed o developers for a area to help pay for all or part of the capital cost for leviable off-site ifrastructure, as defied i the MGA. Operatig Iitiative: The idetificatio of ew services ad service level chages ad the associated fiacial impacts. Priority Based Budgetig: A process developed by the Dever, Colorado-based Ceter for Priority Based Budgetig (CPBB) that eables commuities to reassess their priorities i order to make soud, log-term fudig decisios 2. Public Sector Accoutig Stadards: The fiacial guidace Strathcoa Couty must adhere to. Sesitivity Aalysis: Fiacial aalysis that ivolves the modificatio of certai variables that exist i the base case fiacial forecast/projectio to demostrate the magitude of impact o the log-term fiacial picture. Sceario Aalysis: Fiacial aalysis that ivolves idetifyig situatios that the orgaizatio may face ad estimatig fiacial implicatios of these. Specialized Muicipality: A uique muicipal structure that allows urba ad rural commuities to coexist i a sigle muicipal govermet. Stakeholder: A idividual or group who has a specific iterest or is impacted by a topic or issue. Stakeholders may iclude residets, o-residets, groups, busiesses, orgaizatios, idividuals, represetatives ad/or Couty staff, depedig o the issue. Strategic Pla: The highest level ad pricipal guidig documet i Strathcoa Couty for goverace, commuity developmet, ifrastructure ad service delivery. Sustaiability: The degree to which a govermet ca maitai its existig fiacial obligatios both i respect of its service commitmets to the public ad fiacial commitmets to creditors, employees ad others without icreasig the debt or tax burde relative to the ecoomy withi which it operates 1. Trasparecy: The degree to which decisios made are commuicated ad ope with stakeholders. Miimize Vulerability: The degree to which a govermet is depedet o sources of fudig outside its cotrol or ifluece or is exposed to risks that could impair its ability to meet its existig fiacial obligatios both i respect of its service commitmets to the public ad fiacial commitmets to creditors, employees ad others CPA Public Sector Statemets of Recommeded Practice 4 Idicators of fiacial coditio 2. CPBB Website ( 48

53 Log-Term Fiacial Sustaiability Framework 49

54 APPENDICES 50

55 APPENDIX I: Strategic Likages Goals: without corporate fiacial cosideratio Actio: how are we able to meet our goals fiacially Overarchig Guidig Plas Strategic Pla Overall visio, log-term goals ad objectives Log-term evirometal, ecoomic ad social sustaiability factors LONG-TERM LTFS Framework Corporate Busiess Pla Departmet Busiess Plas Fiacial strategies to help achieve goals What goals ca we afford i the log-term? Log-term impact of fiacial strategies ad decisios o ecoomic, evirometal ad social sustaiability LTFS Process New, approved programs, projects to cosider Fiacial strategies implemeted Master Plas Other Frameworks What ca we afford/ what is priority/what is goig to happe i the short-term? SHORT-TERM BUDGET What are the short-term goals? MDP Log-Term Fiacial Sustaiability Framework 51

56 APPENDIX II: Base Case Forecast Assumptios The assumptios below are for future years forecasts, ad may ot ecessarily be the assumptios utilized i a curret year budget (for example, more specific iflatioary ad growth measures may be cosidered if available). Operatig: The assumptios i the operatig forecast will iclude: Issue Assumptio * Iflatio rate forecasts expeditures Salary ad wage No-salary ad wage Salaries, wages, beefits iflatio Salaries ad wages are projected to chage at a rate based o the historical 5 year tred of approved COLA Beefits are projected to chage at a rate based o historical treds Average Expediture Iflatio: Projected Muicipal Price Idex (MPI) Traiig & Developmet Busiess Expeses Advertisig & Pritig Professioal Services Retals & Leases Cotracted Services Supplies ad materials Repairs & Maiteace Equipmet Purchases (o-capital) Telecommuicatios Other Expeses Operatig Impacts of Capital From Reserve Fud (o-operatig) To Reserve Fud (o-operatig) Other iflatio Isurace: per Treasury ad Risk Maagemet (T&RM) Ivestmet Icome: per T&RM Debt Muicipal (ew debt oly): per T&RM Debt Utilities (ew debt oly): per T&RM Utilities water ad sewer treatmet for resale (part of supplies ad materials): per Utilities 52

57 Issue Assumptio * cotiued Growth o Salaries ad Beefits Impact of populatio growth o operatig expeditures No iflatio Grats & Requisitios Iterprogram Amortizatio A allowace is icluded i Fiscal Services each year for staff ad beefit growth Applicable expeditures icrease based o populatio growth factor Busiess Expeses Advertisig & Pritig Professioal Services Retals & Leases Cotracted Services Supplies & Materials Repairs & Maiteace Equipmet Purchases Utilities Other Expeses Amortizatio Populatio growth forecast Multi-year projectios are determied ad estimated by iteral experts Property tax Property ivetory growth per sector (i.e. residetial, commercial, heavy idustrial etc.) is determied ad estimated by iteral experts. If there is a projected orgaizatioal shortfall or surplus i a year, a correspodig icrease or decrease is applied to property taxes i the subsequet year cotiued ext page * Assumptios may evolve as the log-term fiacial sustaiability process progresses ad/or better iformatio becomes available. Log-Term Fiacial Sustaiability Framework 53

58 Issue Assumptio * Other reveues Utility user rates User fees & charges Pealties ad fies Ivestmet Icome Other Geeral growth factor Utility user rates growth is based o a geeral reveue growth factor User fees & charges growth is based o a geeral reveue growth factor Pealties ad fies growth is based o geeral reveue growth factor Ivestmet icome growth ad iflatio factors are determied by Strathcoa Couty s Treasury ad Risk Maagemet group No growth ad iflatio o other reveues Geeral iflatio factor Utility user rates iflatio is based o a geeral reveue iflatio factor User fees & charges iflatio is based o a geeral reveue iflatio factor Pealties ad fies iflatio is based o a geeral reveue iflatio factor. However, this will be adjusted to exclude iflatio o pealties ad fies cotrolled by exteral parties Base/Startig Poit Most recet approved budget is the startig poit Service Levels Service levels remai at existig levels i base projectios Debt fiacig Debt repaymets are depedet o the capital ad debt fiacig requiremets idetified i base capital projectios New services No ew services are icluded i base projectios Operatig impacts of capital Operatig impacts of future approved capital are icluded based o the base capital projectios Aexatio activity No aexatio is projected. If circumstaces chage it would be cosidered i a future update * Assumptios may evolve as the log-term fiacial sustaiability process progresses ad/or better iformatio becomes available. 54

59 Capital: The assumptios i the capital forecast will iclude: Issue Assumptio * Base: capital budget Iclude oly capital project costs required for major asset rehabilitatio or replacemet, ad aual programs The base philosophy is to maitai curret asset ivetory, ad o ew assets will be icluded Follow capital fudig strategies outlied i the framework * Assumptios may evolve as the log-term fiacial sustaiability process progresses ad/or better iformatio becomes available. Log-Term Fiacial Sustaiability Framework 55

60