Financial Strategy - 2016 Budget Summary

• Long-term Debt Strategy
• Unissued Debt
• Annual Repayment Limit Forecast
• Reserves and Reserve Fund Forecast

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

*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

* 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

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

Back to top

2016 Reserves and Reserve Fund Forecast

2016 Reserves and Reserve Fund Forecast continued

Deferred Revenues (Development Charges and Gas Tax Reserve Funds)

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

Government, Council

• Council and Committees
• By-laws
• Conflict of Interest Registry
• Lobbying in Niagara
• Property Taxes
• Budget and Finance
• Flag Raising, Sign Lighting