TAMRMS#: B06
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Capital Funding Strategies
Presented by: Diane McMordie, Director, Finance & Assessment/CFO
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RECOMMENDATION(S)
recommendation
That Council Policy C-FS-05 - Budget and Guiding Principles be amended to incorporate the following:
That effective for the 2020, 2021 and 2022 budget, the equivalent of a 1.50% property tax increase be included in the municipal tax requirement and specifically targeted to capital reserves to support the repair, maintenance and replacement of existing capital assets.
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PURPOSE OF REPORT
To receive Council approval of a recommendation made during the June 10, 2019 Governance, Priorities and Finance Committee meeting relating to a three (3) year commitment of additional funding to capital reserves to support the Repair, Maintain, Replace capital plan.
ALIGNMENT TO PRIORITIES IN COUNCIL’S STRATEGIC PLAN
Strategic Priority #4: Infrastructure Investment: Identify and build needed capital assets.
Update and implement the Capital Plan based on an assessment of community needs and financial capacity, including a review of all funding options and shared use opportunities.
4.4
Identify an inventory of existing facilities including an assessment of condition and usability and identify gaps in land and facility supply and demand.
4.5
Adopt a total cost of ownership approach in assessing lifecycle of existing and new assets.
ALIGNMENT TO LEVELS OF SERVICE DELIVERY
Financial Planning
Stewardship of development of annual operating and capital budgets for Municipal and Utility operations.
Municipal Capital Budget Development:
Available capital dollars are used towards the repair, maintenance and replacement of existing assets prior to consideration of new capital growth projects and assets.
ALIGNMENT TO COUNCIL DIRECTION OR MANDATORY STATUTORY PROVISION
Municipal Government Act
283.1 (3) Each municipality must prepare a written plan respecting its anticipated capital property additions over a period of at least the next 5 financial years
On March 11, 2019, the Governance, Priorities and Finance Committee passed the following motion:
(AR-19-024)
That by Q2 2019, Administration develop options and recommendations for a detailed funding strategy related to RMR (Repair, Maintain, Replace) capital requirements that is designed to both close the current capital asset funding gap as well as develop a sustainable capital funding solution for future years.
BACKGROUND AND DISCUSSION
On March 11, 2019 and June 10, 2019 the Governance, Priorities and Finance Committee (GPFC) were presented with information and recommendations regarding the state of funding for our existing asset RMR requirements.
The committee generally accepted administrations recommended funding strategy with an amendment to commit to the strategy for a finite 3 year period at this time (2020, 2021 and 2022).
As the asset management committee continues it’s work and compiles further data, Administration will bring updates as to how this new data may inform a longer term or permanent funding strategy related to the City’s RMR needs. Recommendations will be brought GPFC prior to the expiry of this 3 year funding commitment.
STAKEHOLDER COMMUNICATIONS OR ENGAGEMENT
N/A
IMPLICATIONS OF RECOMMENDATION(S)
Financial:
Property taxes will be impacted at a rate of 1.5% each year for a period of 3 years.
Legal / Risk:
Not addressing this issue will potentially create a scenario where the City will not be able to adequately maintain or replace capital assets in the future. While the current commitment from Council is for a 3 year period, a long term/permanent strategy is still required.
Program or Service:
Shortfalls in capital funding may impact the level of service that our assets are able to perform at. Deferral of major maintenance, while reducing cash outflows in the near term, will have a long-term negative impact on the life and performance of the asset and is therefore not recommended.
Organizational:
None at this time.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1. Council may choose to change the policy to reflect a longer term or permanent commitment to address the funding gap.
Alternative 2. Do nothing. The RMR funding gap is large and real. Not taking/delaying steps to address this financial challenge will ultimately lead to the failing of City assets and prevent service levels from being maintained.
Report Date: June 24, 2019
Author: Diane McMordie, Director Finance & Assessment/CFO
Department: Finance & Assessment Department
Deputy Chief Administrative Officer: Kerry Hilts
Chief Administrative Officer: Kevin Scoble