2013 Capital Budget – March 8, 2013

1. 2013 Capital Budget – March 8, 2013 1

2. Infrastructure Background Information Our municipal infrastructure is vital in sustaining the economic, environmental, social and cultural life of the community. The quality of life enjoyed by City’s citizens is directly related to the condition of the infrastructure, such as quality of drinking water. 2

3. Capital Budget Challenges Infrastructure issues are common amongst most municipalities across the country. In 2007, FCM reported municipal infrastructure deficit in Canada was $123 billion. City’s infrastructure deficit – two components Infrastructure Reserve Fund Levels Capital Budget Funding Levels (deferred maintenance) New asset creation (Council approved master plans) New assets also require ongoing maintenance and upgrade funding Ongoing maintenance and upgrade funding for many new assets has not been added to the operating budget; departments have had to absorb these increased costs 3

4. Infrastructure Reserve Fund Deficit • Current replacement cost of the City’s infrastructure is approximately $1.7 billion • Based on asset replacement values Infrastructure Reserve Funds should be $500M and are only $66M • Adequate reserves would allow the City to replace assets as they need replacing. • It is not the City’s intent to have $500M of funding in reserves. A combination of funding sources (capital property tax levy, reserves, grants, debt and user fees for utilities) are used to fund the capital budget. • Financial Sustainability Policy outlines a funding strategy to continue to address this deficit: • Transfer new assessment revenue to infrastructure 4

5. Capital Budget Funding Levels(deferred maintenance) The capital budget needs be increased to catch up on maintenance/upgrades of existing assets. The Financial Sustainability Policy outlines a funding strategy to continue addressing this Levy an annual 1.5% property tax increase Based on current data, if the City increases the capital budget property tax levy by 1.25% for 2013 – 2015; and 1.5% for 2016 to 2018, the additional tax levy can be discontinued in 2019. Increases based on current information have been built into the 20-year Capital Plan and amounts will continue to be refined as part of ongoing asset management.

6. Capital Budget Funding Strategiesas per the Financial Sustainability Policy Levy an annual 1.5% increase in property taxes (reduced to 1.25% for 2013-2015). Transfer all new assessment revenue to infrastructure reserves Transfer annual operating budget surplus into infrastructure reserves Actively pursue third party funding for projects included in the 20-year capital plan Where possible, only add new debt in years when other debt issues are retired and/or use debt reduction reserve to minimize impact on property taxes

7. Capital Budget Funding Key Points • Sound capital asset funding strategies are in place, e.g. increase to capital levy to address deferred maintenance, and annual increase to reserves • Although the funding strategies have not been consistently followed, the City has increased infrastructure funding over: • increased the capital funding through the capital property tax levy from $1.5M in 1999 to $10.5M in 2013 • increased annual transfer to Building and Infrastructure Reserve from $1.5M in 1999 to $4.3M in 2013 • Based on current data, if the levy increase is consistently added (1.25% for 2013-2015 and 1.5% for 2016-2018), it can be discontinued as early as 2019. 7

8. Capital Reserves

9. Future Reserve Balances • Planned expenditures exceed reserve fund contributions for 2013 • From 2014 onwards, reserve fund contributions exceed planned expenditures, and reserves grow by an average of $3 million per year • The above calculations assume: • $500,000 budgeted increase to the reserve fund transfer is implemented from 2014 through 2017 • increases to the capital property tax levy is implemented as planned 9

10. Comparative Debt Servicing (2011) 10

11. Draft 2013 Capital Budget The City has a 20-year capital plan totaling over $900 million. The 2013 Capital Budget outlines spending of $83M. Council approved the following budget reduction principles which impact the 2013 to 2015 capital budgets: Share of Budget Cuts Consider existing assets before adding new. Split the tax increase between Capital and Operating as follows: Capital budget property tax levy increase 1.25% Operating budget property tax levy increase max 2.0% The 2013-2015 capital budget originally included a 1.5% levy increase. Reducing this to 1.25% results in a required reduction in planned capital programs of $275,000 for 2013, $285,000 for 2014 and $290,000 for 2015.

12. Proposed Reductions As per the Council approved principle, the reductions would be made to those programs that create new assets: Pedestrian Master Plan Bicycle Master Plan Parks Management Plan Implementation Park Upgrades Greenways Plan Implementation

13. Recommended Budget Reductions2013-2015 However, reducing only those programs that create new assets may not meet community expectations. Therefore, the proposed list of reductions is a combination of those programs that create new assets and those that address existing infrastructure needs:

14. Recommended Budget Reductions2013-2015 continued

15. 2013 Capital Budget HighlightsEngineering • Johnson Street Bridge Replacement – $40.1M: Movement of people, goods and service, alternative transportation amenities, economic vitality • Storm Drain Upgrades - $5.3M: Environmental protection, flood prevention, capacity upgrades • Sewer Upgrades - $4.3M: Inflow and Infiltration reduction, capacity upgrades for Downtown • Waterworks Upgrades – $3.2M: Capacity upgrades, potable water, fire prevention 15

16. 2013 Capital Budget HighlightsParks, Recreation and Culture • Parks Upgrades - $3.6M: Park upgrades, greenways, harbour pathway, play areas • Recreation/Culture - $1.1M: Crystal pool, RAP, Cameron Band Shell 16

17. Recommendations That the proposed 2013-2015 Capital Budget reductions be approved That the reduced 2013-2015 Capital Budget be approved in principle