S USTAINABLE I NFRASTRUCTURE AND F INANCING by InfraCycle Fiscal Solutions for the 2013 FOF Conference InfraCycle Fiscal Solutions – Dedicated to improving your municipality’s fiscal performance Ray Essiambre President and Founder Craig Davidson CAO Hastings Highlands Senior Associate

Sustainable Infrastructure and Financing Issues and Solutions Our Topic

External influences you do not control Populations are generally declining Residents have greater expectations – want more Housing stock is aging and lower assessments Assets are aging and they cost more Defining the Problem

Internal influences and things you can change Council’s Fiscal Theme The decision making process Access to tools and new techniques Defining the Problem

Changes in land use trigger future lifecycle costs and revenues in perpetuity Decisions at planning committee and council Roll the dice - a good financial decision or a bad one? Deal with fiscal implications after-the-fact at budget time Treasurer is left out the process The disconnect in decision making Defining the Problem

Business Park $2million net gain over 10 years or $200,000/yr Residential $(-50million net loss) over 10 years or (- $5million) net loss /yr Net Loss ($4.8million/yr) Solutions Improve Decision Making

Quantifying Land Use Options Un-serviced Industrial $350,000 /1,000 acres Agricultural $1,000 /1,000 acres General Industrial $5,500,000 /1,000 acres Premium Mixed Use $16,000,000 /1,000 acres Predicting Success – Employment Areas

Defining the Problem – Waiting Too Long

Solutions Best Practice for Asset Management

Using new technologies Dam Road Bridge Mink Lake Hastings Highlands Solutions Trends

Old Versus New Construct in place Total project from concept to completion estimated to be over 12 months Road closure for many months Increase need for detours Cost estimated at $1,000,000 Prefabricated Total project from concept to finish 6 month Road closed for 10 days No detours Alternative plans available Cost - $500,000 Solutions Trends

Solutions Out with the Old

Solutions In with the New

Solutions On the Road Again

Community engagement Communication strategies Compromise Cooperation between work forces Cooperation with residents Cooperation with business community A success? Solutions Other Lessons Learned

Directions What should be charged by use? Subsidized operations? At what level? Communicating the change Solutions Other Lessons Learned

Summary

External influences you do not control Services like libraries, community centres etc. may not be able to handle development without increased financial contribution Defining the Problem Historic underfunding of municipal operations for both operating and capital

External influences you do not control As property taxes make up more of the household budget – more scrutiny about the value for money Defining the Problem Most municipalities derive most of their revenues from property taxes – 75% in rural Ontario on average

Defining the Problem Short-term thinking and solutions don’t work Municipal finance is more complex Solutions need to extend beyond 1 or 2 terms of council The current operating and capital budget processes are not enough

External influences you do not control Less ability to develop smartly to increase revenues outside growth areas Defining the Problem Limited ability to create new sources of funding Provincial downloading

External influences you do not control Defining the Problem Grant programs support start-up costs Little support for ongoing costs outside municipal structure No support for soft costs to keep programs running

External influences you do not control Defining the Problem Property Taxes increase over previous years Little to reflect shrinking Provincial support for increasing operating costs Little to reflect the increasing responsibilities of Municipalities

Defining the Problem – Waiting Too Long

1975 Defining the Problem – Waiting Too Long

Solutions and Examples

Avoid Risk and the Slippery Slope Municipality in Balance Reluctance to increase taxes and user fees Reduce reserves Increase borrowing Municipal crisis Solutions - Avoid Risk Longer-term Financial Planning Steep increase in taxes and user fees

Link land use to fiscal outcomes Solutions Fiscal Impact Analysis

Capital Replacement Maintenance Operating All inclusive calculation of the following Time Solutions Lifecycle Costing and Think Long-term

Life cycle costCapital Building Capital Books & Equipment FinancingReplacement Building Replacement Books & Equipment ResaleWaterEnergyStaff Salary 43,950,000 10,000,000 1,200, ,000 3,000,000 2,400,0000 2,500,000 4,000,000 17,600,000 Solutions Understand the True Cost

$(5,982,000) Unfunded Liabilities ($22,982,000) $(422,982,000) Solutions Lifecycle costing of ALL municipal assets

Solutions Trends Roads were constructed Roads were used Minor maintenance  Potholes filled  Lines painted Road deteriorated Road was reconstructed Historically

Historical Factors Level of funding We all like new! More emphasis on capital programing rather than ongoing maintenance Solutions Trends

Shift in Priorities Less funding Looking for efficiencies Looking for new way of operating Focus on the asset Solutions Trends

Life Cycle Approach Regular maintenance Major projects at life cycle significant points Keep asset in good condition Extends life of asset Cost to maintain is less than cost to rehabilitate once the asset has deteriorated Solutions Trends

Taxation vs User Charges Factors for change  Council focus on tax rates  Walkerton – full recovery from rates  Change in approach from a cost shared by assessment to a cost based on use Solutions Trends

Ray Essiambre, President InfraCycle Fiscal Solutions How may we help you? Craig Davidson, CAO Hastings Highlands Senior Associate Questions ?

Three primary topics Session Format Questions and Answers How to get started Defining the problem – how did it come to this? Solutions and examples

FAR FAR Economic Development Strategy Solutions Increase Revenues – Better Choices