The City of Toronto s Long-Term Financial Direction

The City of Toronto s Long-Term Financial Direction

Introduction The City has been able to achieve balanced budgets on an annual basis, despite underlying concerns regarding sustainability. The staff report: reviews the expense and revenue patterns of recent budgets provides early/basic forecasts of future expense pressures and revenue performance outlines a series of principles and directions to ensure long-term financial stability. Circumstances of the recent past have been uniquely favourable. Trends do not form a reliable basis for future fiscal planning. Changes in both expense and revenue management are likely to be required. 2

City Governance City Council has direct control of 43% of the Budget Direct City Control, 5,026.2, 43% $11.8 Billion Debt Charges, 486.7, 4% Agencies (Indirect), 3,498.5, 30% Provincially Funded (Cost Shared), 2,743.0, 23% 3

$Billions Expenditure Growth in Operating Budget Base vs. New/Enhanced $14 $12 $10 $8 $6 $4 $2 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nominal $ Base New/Enhanced 4

Change in Gross Expenditures - 2005 to 2016 12% 6.0% average annual growth 10% 9.9% 8% 6.9% 6.9% 2.3% average annual growth 6% 4.8% 4.7% 4% 2% 2.6% 2.4% 1.6% 1.9% 3.1% 2.5% 2.5% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 5

Gross Expenditure Per Resident (Adjusted for inflation & population) $4,500 $4,000 $4,291 $4,222 $4,168 $4,139 $4,123 $4,133 $4,126 City Operations, Agencies, & Corp Acc $3,500 $3,000 $1,355 $1,354 $1,341 $1,312 $1,305 $1,289 $1,297 Health & Social Services $2,500 $1,190 $1,118 $1,080 $1,054 $1,001 $977 $963 Emergency Services $2,000 $1,500 $626 $612 $608 $602 $627 $643 $622 TTC $1,000 $612 $618 $604 $627 $631 $652 $653 $500 $0 $508 $520 $536 $544 $558 $572 $591 2010 2011 2012 2013 2014 2015 2016 Water, Waste, & Parking 6

Budget Overall Expenses for 2010 to 2016 (Adjusted for Inflation) 30.0% Budget Overall Expense Increase - 2010 to 2016 (Real $'s) 25.0% 23.9% 20.0% 15.0% 13.7% 10.0% 5.0% 4.6% 5.8% 1.2% 0.0% (5.0%) (10.0%) (15.0%) (13.8%) (20.0%) 2016 Expense ($ millions) Rate Programs Debt/CFC Emergency Services TTC Other Cost Shared $1,684 $722 $1,772 $1,860 $2,972 $2,743 7

Budget Overall Revenues for 2010 to 2016 (Adjusted for Inflation) 150.0% 167.2% 130.0% 110.0% 90.0% 70.0% 50.0% 30.0% 10.0% 23.9% 17.7% 9.0% (10.0%) (30.0%) 2016 Expense ($ millions) (4.4%) Rate Programs Upload MLTT TTC - Fare/Ridership User Fees, Licenses, Permits (4.8%) (4.9%) Property Tax Increase Assessment Growth (18.2%) (19.1%) Government Transfers $1,684 $251 $527 $1,249 $609 $3,931 N/A $1,865 $1,639 Other 8

Total Annual Capital Budget 2010 to 2016 3,500 3,000 2,500 3,191 761 2,709 693 3,037 2,904 699 631 2,814 2,825 602 825 3,183 942 2,000 1,500 1,000 2,431 2,016 2,338 2,273 2,212 2,000 2,241 500 0 2010 2011 2012 2013 2014 2015 2016 Tax Supported Rate Supported Total City 9

Summary of Unmet Capital Needs ($M) Major Unmet Capital Needs ($Million) Unmet Need Priorities (Tier 1 Projects, TCHC & Waterfront 2.0) TCHC Province/Federal Share of $2.6 billion requirement 1,728 TCHC Capital Maintenance 650 TCHC Revitilization Projects 356 Less Prov Grant on Energy Retro Fit -29 SOGR Backlog to 2% of Asset Value (Exc.TCHC) 1,046 TTC Board Approved Unfunded 2,679 SSHA (George Street Revitalization) 480 Long Term Homes Care Services 246 Other City Priorities 1,318 Lower Don Flood Protection 975 Waterfront Land Servicing (EBF, WDL and Keating) 150 Waterfront Public Realm Initiatives 350 Less Waterfront DCS/Federal & Provincial Funding -1,125 Unfunded Projects from Environmental Assessments 2,000 Tier 2 Unmet Need Priorities TTC Future Capital Needs 2,323 Other Programs 597 Unfunded Transit Expansion Initiatives All Unfunded Transit Expansion Initiatives 15,300 (Preliminary - Pre-Design Estimates) Total of Unfunded Capital Projects ($Million) 29,043 10

Projected Incremental Base Expense Growth ($M) 2017 to 2021 700 600 622 23 500 400 300 121 60 459 10 137 63 308 6 60 373 7 53 312 52 46 200 419 44 100 250 198 261 266 2017 2018 2019 2020 2021 Base Operations Rate Programs Base Capital Financing Annualizations 11

Projected Incremental Debt Charge Growth for Unmet Capital Needs ($M) - 2017 to 2021 250 225 200 196 150 135 100 50 49 73 2017 2018 2019 2020 2021 12

Projected Incremental Revenue Growth ($M) 2017 to 2021 300 240 180 120 60 (60) 140 14 60 14 20 63 16 44 52 46 52 53 54 55 56 40 41 42 42 43 (59) 261 14 74 216 217 219 14 14 15 71 (9) 73 76 (20) (16) 2017 2018 2019 2020 2021 Assessment Growth Property Tax Increase - Res. @ 2% MLTT Fed/Provincial Grants Rate Programs Other Revenue Changes City Building Fund 13

Incremental Revenue Growth 2010 to 2016 (budgeted) and 2017 to 2021 (projected) $M 500 462 450 400 350 337 300 250 200 150 248 164 198 284 292 140 261 216 217 219 100 50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 14

Projected Cumulative Net Pressures ($M) 2017 to 2021 2017 2018 2019 2020 2021 (200) (400) (600) (483) (800) (681) (773) (1,000) (1,200) (929) (1,022) 15

Expense and Revenue vs. Prior Six Year Average ($M) 700 600 622 500 459 400 373 300 200 140 261 308 312 216 217 219 100 2017 2018 2019 2020 2021 Expense Forecast Revenue Forecast Gross Exp Increase per Prior 6 Yr Avg 16

2017 Operating Pressures 17

Potential Shortcuts to Balance the Budget Provincial or federal government funding for capital projects Continued gains from the Municipal Land Transfer Tax Drawn down reserve funds Manage down surpluses Lower capital from current financing. 19

Next Steps The report recommends that staff report back by the end of the year with approaches to strengthen financial planning, decision-making and oversight, including: Strategies and processes to improve integration between program and financial planning A multi-year expenditure management plan A multi-year revenue strategy. Staff are scheduled to report back to Executive Committee on revenue options in June 2016. 20

Appendix 21

City Governance City Council has direct control of 23% of the Budget Direct City Control, 901.3, 23% Agencies (Indirect), 1,821.6, 46% Debt Charges, 463.4, 12% City Tax Levy $3.9 Billion Provincially Funded (Cost Shared), 744.9, 19% 21

Budget Overall Expenses for 2010 to 2016 50.0% Budget Overall Expense Increase - 2010 to 2016 40.0% 39.0% 30.0% 20.0% 23.9% 16.3% 17.4% 18.7% 27.6% 13.7% 13.6% 10.0% 0.0% (10.0%) 4.6% 5.8% (1.8%) (0.7%) 6.8% 1.2% (4.9%) (3.3%) (20.0%) (13.8%) (19.1%) (30.0%) Rate Programs Debt/CFC Emergency Services TTC Other Cost Shared 2016 Expense $1,684 $722 $1,772 $1,860 $2,972 $2,743 Unadjusted Real Real Per Capita 22

Budget Overall Revenues for 2010 to 2016 250.0% Budget Revenue Changes - 2010 to 2016 200.0% 150.0% 199.8% 167.2% 151.0% 100.0% 50.0% 0.0% (50.0%) 2016 Expense ($ millions) 39.0% 23.9% 16.3% 7.3% (4.4%) (10.2%) 32.1% 17.7% 10.5% Rate Programs Upload MLTT TTC - Fare/Ridership 22.3% 9.0% 2.4% User Fees, Licenses, Permits 6.8% 6.7% (4.8%) (4.9%) (10.6%) (10.7%) Property Tax Increase Assessment Growth (8.2%) (9.2%) (18.2%) (23.2%) (19.1%) Government Transfers $1,684 $251 $527 $1,249 $609 $3,931 N/A $1,865 $1,639 Unadjusted Real Real per Capita Other 23 (24.0%)

Projected Incremental Net Pressures ($M) 2017 to 2021 2017 2018 2019 2020 2021 (100) (200) (300) (199) (92) (156) (93) (400) (500) (483) (600) 24

Reserves per Capita Comparison Reserves per capita (December 31, 2014) 3,500 Average of the rest of the GTA $2,806 3,000 2,500 Overall Average $1,868 2,000 1,500 $1,281 1,000 500 0 Toronto City Durham R.M. York R.M. Peel R.M. Halton R.M. Ottawa City Hamilton City Waterloo R.M. London City Windsor City 25

Unfinanced Debt Capital from 2006 to 2015* 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Trsf to Operating Trsf to Reserve Budgeted but Unissued Debt *Note: 2015 is a preliminary number and subject to change 26