Financial Strategy - 2016 Budget Summary

Sound financial management and planning are key elements in the Niagara Region's mandate to provide cost-effective and sustainable programs and services for residents.

Financial strategies are developed to achieve the business goals of the organization, and provide Regional Council and staff with high quality information necessary to establish metrics and measures to base sound fiscal decisions. The Region's financial strategy is based on the following policies and guidelines:

Guidance Affordability Policy

In our annual and multi-year budgeting, the guidance policy sets a financial target to ensure practical and cautious use of taxpayer dollars. The guidance policy is based on the premise that outside of best efforts to reduce budgets and minimize the potential of annual increases, a framework is provided that sets a ceiling for annual budgets - tied directly to economic factors in our community.

The policy establishes guidance by adding the annual inflation pressures for goods and services (the Niagara Region uses the Bank of Canada's Core Consumer Price Index to estimate), with our forecast assessment growth, in a given year from new properties.

Standard and Poor's Credit Rating

Standard & Poor's credit rating is fundamental to our long-term strategy planning, in that it determines the ability of the Niagara Region to meet its financial commitments. The Region uses the rating provided by Standard & Poor's and identified trends to inform its long-term debt strategies.

Capital Program Funding Model

Various forms of financing are used to support our capital plan, including:

  • Debt financing
  • Dollars from other levels of government
  • Reserves (accumulated from previous planning)
  • Levy (current year taxes)

Debt financing is proposed in an extremely conservative manner, with no more than 12 cents of every revenue dollar spent on financing debt from capital projects

Reserves and Reserve Fund Policy

The use of reserves is an integral part of the budget planning process and an important financial tool in developing short and long-term fiscal policies. Prudent use of reserves helps mitigate fluctuations in taxation and rate requirements and assists in funding capital projects.

Refer to the appendix for a full review of all financial policies followed by the Niagara Region.

Long-term Debt Strategy

Fundamental to the long-term financial health of the Niagara Region and Local Area Municipalities is Niagara Region's Standard & Poor's rating.

In January 2016 Standard & Poor's undertook a credit rating review and reaffirmed Niagara Region's stable "AA" rating. The rating reflects Standard & Poor's opinion that Niagara Region has strong budgetary performance, exceptional liquidity and a low debt burden.

Highlights of the report also note that Niagara Region could receive a stronger rating if the Region demonstrated significant and sustained economic improvement through healthier growth in population and household incomes.

As a result of the trends identified by Standard & Poor's in the 2016 budget, Niagara Region has continued using the debt charge placeholder as a tool to control both debt charge levels and future debt issuance amounts, continues to use levy reserves, and is funding economic development initiatives.

Capital Program Funding Model

The purpose of the capital program funding model is to balance immediate and future needs, affordability and sustainability, while minimizing risk and supporting economic growth in the Niagara region. This model is fundamental to the long-term financial health of Niagara region, supports Standard & Poor's rating, and therefore minimizes the cost of borrowing to the Region and local area municipalities.

The intent of the model is achieved by adhering to the following concepts:

  • Capital projects are budgeted in their entirety to support transparency of total project costing. Where a project could be considered for phasing the design and construction costs can be budgeted in different years.
  • A source of funding is required for each capital project so one Council does not impede a future Council. This ensures the 2016 program is maintained within the affordability envelope and accountability of project funding lies with the approving Council.

This model is a conservative approach to managing the Region's capital funding requirements.

To support the 2016 budget, the total authorized long-term debt will rise to $451.8 million in 2016 ($473.6 million by 2025).

However, based on planned issuance, the debt balance is forecasted to be $415.3 million by 2025 and the Annual Repayment Limit is not expected to go above 11 per cent (related debt charges as a percentage of own source revenue), meaning that no more than 11 cents per every own source revenue dollar will be spent on debt charges (principal and interest).

Staff work diligently throughout the year to ensure that available funds are used to reduce the amount of long-term outstanding debt through capital project close-outs reports and budget reductions.

The capital program funding model, as outlined above, has been designed to support a strong and stable Standard & Poor's rating.

2016 Long-term Debt Strategy

Levy Beginning Balance* Forecasted Debt Issuance** Principal Repayments Interest Payments Ending Balance**
Corporate Services   $2,599,015     $2,599,015
Properties Management 19,219,132 38,566,000 (1,356,698) (969,828) 56,428,434
Planning and Development 206,676   (85,368) (8,884) 121,309
Public Works Levy 81,822,801 51,130,985 (11,369,094) (2,685,459) 121,584,692
Community Services 24,241,148   (2,192,772) (1,214556) 22,048,375
Public Health 5,973,655 2,180,097 (1,050,015) (156,262) 7,103,737
Niagara Regional Housing 16,515,694 4,733,149 (1,812,716) (505,537) 19,436,127
Niagara Regional Police Service 88,339,322 21,476,000 (3,745,766) (3,221,184) 106,069,556
Total Levy 236,318,428 120,685,246 (21,612,429) (8,761,709) 335,391,245
RATE          
Water 10,297,999   (436,944) (569,121) 9,861,055
Wastewater 65,145,361   (2,645,132) (3,319,835) 62,500,228
Waste Management 4,410,819   (1,417,048) (183,695) 2,993,771
Total Rate 79,854,179   (4,499,124) (4,072,651) 75,355,055
Forecasted Long-term Debt Outstanding $316,172,607 $120,685,246 $(26,111,553) $(12,834,360) $410,746,300
DEBT PER CAPITA***         $914.60
Total Authorized Unissued Debt         $41,048,705
Total Authorized Long-Term Debt         $451,795,005
Total Authorized Debt per Capita         $1,006.01

*Net of estimated sinking fund asset balances
**For modelling purposes only, all authorized unissued debt from prior years is assumed to be issued. Actual issuance amounts will depend on a number of variables, including percentage of completion.
*Population of 449,098 as per July 1, 2015 Statistics Canada estimate

Back to top

Unissued Debt

  Niagara Regional Housing Niagara Regional Police Service Properties Managment Public Works Levy IT Solutions Public Health and EMS Total
Beginning Total Authorized Unissued Debt $4,733,149 $21,476,000 $38,566,000 $51,130,985 $2,599,015 $2,180,097 $120,685,246
Less: 2016 Forecasted Debt Issuance* 4,733,149 21,476,000 38,566,000 51,130,985 2,599,015 2,180,097 120,685,246
Add: Authorized Debt Approved in 2016 Capital Budget" 4,213,705   5,375,000 31,460,000     41,048,705
Ending Total Unissued Debt $4,213,705   $5,375,000 $31,460,000     $41,048,705

* For modelling purposes only, all authorized unissued debt from prior years is assumed to be issued. Actual issuance amounts will depend on a number of variables, including percentage of completion.

Annual Repayment Limit Forecast

Chart showing the annual repayment limit forecast

Read a text-only description of the Annual Repayment Limit Forecast chart.

The annual repayment limit represents the proportion of the Region's own source revenues that are expected to be paid on the Region's long-term borrowings. The Region currently projects that no more than 11 cents of every own source revenue dollar will be spent on financing the debt from capital projects.

Back to top

2016 Reserves and Reserve Fund Forecast

Description Balances at Dec. 31, 2014 Balances at Dec. 31, 2015 Forecasted Net Transfers from / (to) Operating 2016 Capital Budget Reserve Funding 2016 Capital Commitments 2016 Forecasted Balance at Dec. 31, 2016
Wastewater Capital 1 $55,545,038 $45,199,496 $17,960,865 $(26,000,000) $(1,580,000) $35,580,361
Water Capital 71,416,028 69,800,903 19,597,364 (24,980,000) (500,000) 63,918,267
Waste Management 2 20,703,084 23,557,923 3,287,439 (6,375,150) (1,845,000) 18,625,212
General Capital Levy (including debt charge placeholder) 3 20,351,609 26,610,656 22,927,384 (19,555,343) (6,523,000) 23,459,697
Court Services Facility Renewal 1,258,388 2,408,388 598,542   (1,650,000) 1,356,930
Niagara Regional Housing 4 9,448,931 10,233,369 (393,302) (2,898,000)   6,942,067
NRH Owned Units 2,867,357 2,932,357 808,595 (743,595)   2,997,357
NRPS LTA Financing 2,059,840 2,653,037 (1,330,415)     1,322,622
Police Capital Levy 2,190,858 2,137,608 1,000,000 (1,367,500) (400,000) 1,370,108
Police Ontario Police Video Training Alliance 46,850 37,882       37,882
Police Vehicle and Equipment Replacement 522,528 522,528 1,400,000 (1,400,000)   522,528
Total Capital Reserves 186,410,512 186,094,147 65,856,473 (83,319,588) (12,498,000) 156,133,032
             
Wastewater Stabilization 5,967,435 6,064,579 34,889     6,099,468
Water Stabilization 3,940,739 3,949,029 23,040     3,972,069
Encumbrance 3,461,270 10,671,424       10,671,424
Investment Income Stabilization 789,671 (188,739) (190,092)     (378,831)
Taxpayer Relief 30,531,595 29,723,404 1,196,266 (1,704,885)   29,214,785
NRH Rent Supplements 366,425 342,425 (24,000)     318,425
Police Contingency 486,029 1,289,014 880,000     2,169,014
Police Services Board Contingency 305,904 339,229       339,229
Total Corporate Stabilization Reserves 45,849,069 52,190,365 1,920,102 (1,704,885)   52,405,582
             
Ambulance Communication 1,622,866 1,534,890 (248,525)     1,286,365
Circle Route Initiatives 1,382,681 1,382,681       1,382,681
Total Specified Contribution Reserves 3,005,547 2,917,571 (248,525)     2,669,046

2016 Reserves and Reserve Fund Forecast continued

Description Balances at Dec. 31, 2014 Balances at Dec. 31, 2015 Forecasted Net Transfers from / (to) Operating 2016 Capital Budget Reserve Funding 2016 Capital Commitments 2016 Forecasted Balance at Dec. 31, 2016
Future Benefit Costs 25,579,508 25,395,179 (200,000)     25,195,179
Self Insurance 2,308,184 2,269,819       2,269,819
Smart Growth 2,073,582 2,073,582       2,073,582
NRH Employee future benefits 792,733 792,733       792,733
Police Accumulated Sick Leave 3,873,372 3,105,289 (400,000)     2,705,289
Police Future Benefit Cost 3,852,734 4,765,066 712,332     5,477,398
Police WSIB 2,669,590 2,669,590       2,669,590
Total Future Liability Reserves 41,149,702 41,071,258 112,332     41,183,590
             
Hospital Contribution (13,457,391) (13,131,650) 337,142     (12,794,508)
Total Other Reserves (13,457,391) (13,131,650) 337,142     (12,794,508)
Total (Excluding Deferred Revenues) $262,957,440 $269,141,691 $67,977,524 $(85,024,473) $(12,498,000) $239,596,742
             

Deferred Revenues (Development Charges and Gas Tax Reserve Funds)

Description Balances at Dec. 31, 2014 Balances at Dec. 31, 2015 Forecasted Net Transfers from / (to) Operating 2016 Capital Budget Reserve Funding 2016 Capital Commitments 2016 Forecasted Balance at Dec. 31, 2016
Development Charges - General Government 771,078 713,157 (256,839)   (28,641) 427,677
Development Charges - Police Services 1,230,319 1,814,558 416,249     2,230,807
Development Charges - Roads 23,291,123 28,523,946 8,216,595 (6,602,500) (13,625,535) 16,512,506
Development Charges - Sewer 22,503,964 19,142,946 3,991,343 (2,610,000) (6,780,306) 13,743,983
Development Charges - Water 15,607,519 16,945,422 1,590,264 (75,000) (4,831,873) 13,628,813
Development Charges - Emergency Medical 387,489 540,821 100,889     641,710
Federal Gas Tax 11,121,247 8,251,138 13,104,096 (13,100,000) (7,932,017) 323,217
Provincial Gas Tax 1,283,234 761,987 7,806 (450,000) (90,000) 229,793
Total $76,195,972 $76,693,975 $27,170,404 $(22,837,500) $(33,288,372) $47,738,507
             

Total capital reserves have decreased by 10 per cent due to the following:

1 Capital project spending approved in the 2016 budget for the Port Weller wastewater treatment plant upgrade

2 Capital project spending approved in the 2016 budget for the Humberstone Landfill and Recycling Centres

3 Capital project spending approved in the 2016 budget for various projects in excess of the annual contribution to the reserve, as well as funding committed for projects that are not yet complete. These spending approvals are partially off-set by the debt charge placeholder contribution to the reserve.

4 Capital project spending approved to fund Niagara Regional Housing Investment in Affordable Housing Extension New Development Capital project - new affordable housing units

Back to top

Appendix Table of Contents Table of Contents Capital Budget Summary


Page Feedback Did you find what you were looking for today?