AGENDA-Finance Advisory Committee-20210413Town of Aurora
Finance Advisory Committee
Meeting Agenda
Date:Tuesday, April 13, 2021
Time:5:45 p.m.
Location:Video Conference
Pages
1.Procedural Notes
This meeting will be held electronically as per Section 19. i) of the Town's
Procedure By-law No. 6228-19, as amended, due to the COVID-19 situation.
2.Approval of the Agenda
3.Declarations of Pecuniary Interest and General Nature Thereof
4.Receipt of the Minutes
4.1.Finance Advisory Committee Meeting Minutes of March 8, 2021 1
That the Finance Advisory Committee meeting minutes of March 8, 2021,
be received for information.
5.Delegations
Note: At this time, the Municipal Offices are closed. This meeting will be live
streamed at https://www.youtube.com/user/Townofaurora2012/videos.
Anyone wishing to provide comment on an agenda item is encouraged to
visit www.aurora.ca/participation for guidelines on electronic delegation.
6.Matters for Consideration
6.1.Memorandum from Senior Financial Management Advisor; Re: Draft
Fiscal Strategy
5
(Presentation to be provided by Rachel Wainwright-van Kessel, Director
of Finance)
That the memorandum regarding the Draft Fiscal Strategy be
received; and
1.
That the Finance Advisory Committee comments regarding the2.
Draft Fiscal Strategy be received and referred to staff for
consideration and further action as appropriate.
7.New Business
8.Adjournment
1
Town of Aurora
Finance Advisory Committee
Meeting Minutes
Date:
Time:
Location:
Monday, March 8, 2021
5:45 p.m.
Video Conference
Committee Members: Councillor Harold Kim (Chair)
Mayor Tom Mrakas
Councillor Michael Thompson
Other Attendees: Doug Nadorozny, Chief Administrative Officer
Rachel Wainwright-van Kessel, Director of Finance
Jason Gaertner, Manager, Financial Management
Lianne Jalali, Project Management Office
Linda Bottos, Council/Committee Coordinator
_____________________________________________________________________
1. Procedural Notes
This meeting was held electronically as per Section 19. i) of the Town's
Procedure By-law No. 6228-19, as amended, due to the COVID-19 situation.
The Chair called the meeting to order at 5:46 p.m.
2. Approval of the Agenda
Moved by Mayor Mrakas
Seconded by Councillor Thompson
That the agenda as circulated by Legislative Services be approved.
Carried
3. Declarations of Pecuniary Interest and General Nature Thereof
There were no declarations of pecuniary interest under the Municipal Conflict of
Interest Act, R.S.O. 1990, c. M.50.
Page 1 of 82
2
4. Receipt of the Minutes
4.1 Finance Advisory Committee Meeting Minutes of February 9, 2021
Moved by Councillor Thompson
Seconded by Mayor Mrakas
That the Finance Advisory Committee meeting minutes of February 9,
2021, be received for information.
Carried
5. Delegations
None.
6. Matters for Consideration
6.1 Memorandum from Manager, Financial Management; Re: 2022 Budget
Process and Timelines
Staff provided a brief overview of the memorandum and proposed 2022
Budget meeting schedule. Staff confirmed that the 2022 Budget Public
Session would be held prior to the General Committee meeting on June 1,
2021. The Committee stressed the importance of finding ways to engage
residents and promote public participation in the Town's budget process.
Moved by Councillor Thompson
Seconded by Mayor Mrakas
1. That the memorandum regarding the Town’s 2022 Budget Process
and Timelines be received for information.
Carried
6.2 Memorandum from Project Management Office; Re: Town's Major Capital
Projects Update
Staff provided an overview of the memorandum and five major capital
projects underway, now including the Financial System and the
Technology Strategic Plan - Implementation.
The Committee and staff discussed various aspects including the Library
Square budget update respecting Town allowances, better alignment of
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3
the Fire Hall 4-5 budget update information with Joint Council Committee
reporting, and Contingency reserve expectations.
The Committee inquired about planned updates on the Corporate
Technology Strategic Plan implementation, and staff advised that a further
update would be provided to Council before the year-end.
Moved by Mayor Mrakas
Seconded by Councillor Thompson
1. That the memorandum regarding Town’s Major Capital Projects
Update be received for information.
Carried
6.3 Memorandum from Manager, Financial Management; Re: Summary of the
Finance Advisory Committee’s Term Accomplishments To Date
Staff provided a brief overview of the memorandum. The Committee
expressed appreciation to everyone for their efforts.
Moved by Mayor Mrakas
Seconded by Councillor Thompson
1. That the memorandum regarding Summary of the Finance Advisory
Committee’s Term Accomplishments To Date be received for
information.
Carried
7. New Business
The Committee inquired about options for the Finance Advisory Committee to
provide input to the upcoming service level review process, and staff confirmed
that the Committee could be involved early in the process and meet with the
consultant.
The Committee inquired about the allocation of the additional COVID-19 relief
funding recently received by the Town, and staff provided clarification.
The Committee inquired about employee home office expenses and the target
date for employees to return to Town Hall, and staff provided a response noting
the potential return date of September 1, 2021.
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4
The Committee requested an update on the One Investment program, and staff
provided clarification noting that the program is still being considered as part of
the Town's fiscal strategy and an update would likely be brought back to Council
in the fall.
8. Adjournment
Moved by Councillor Thompson
Seconded by Mayor Mrakas
That the meeting be adjourned at 6:24 p.m.
Carried
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100 John West Way
Aurora, Ontario
L4G 6J1
(905) 727-3123
aurora.ca
Town of Aurora
Memorandum
Finance
____________________________________________________________________________________
Re: Draft Fiscal Strategy
To: Finance Advisory Committee
From: Sandeep Dhillon, Senior Financial Management Advisor
Date: April 13, 2021
____________________________________________________________________________________
Recommendations
1. That the memorandum regarding the draft fiscal strategy be received; and
2. That the Finance Advisory Committee comments regarding draft fiscal strategy
be received and referred to staff for consideration and further action as
appropriate.
Background
As part of the 2021 budget process, the fiscal strategy was identified as an
important initiative. This memo provides an overview of the draft fiscal strategy and
outlines the importance for the town to begin taking a longer-term view on financial
health. This includes defining the fiscal strategy pillars, strategic objectives, and the
actions to be taken to maintain financial health in the long run.
The draft fiscal strategy defines the path to ensure long-term financial sustainability
through clearly defined strategic objectives. The strategic objectives identify the
need to “invest in sustainable infrastructure” and the importance of the fiscal
strategy being able to be flexible and adaptable to demographic shifts, economic
changes, and service level requirements. The draft fiscal strategy also serves as a
backbone to develop and re-evaluate policies to support growth related
infrastructure needs and affordability for longer-term planning.
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Fiscal Strategy
April 13, 2021 Page 2 of 3
Analysis
The fiscal strategy framework includes four distinct pieces
The draft fiscal strategy includes four main pieces: fiscal strategy pillars, strategic
elements, strategic objectives, and strategic actions. They are defined as:
Fiscal strategy pillars: The four fiscal areas are capital planning, reserve
management, debt management and revenue management and they must
work together over the long-term to achieve financial sustainability
Strategic elements: The five primary lenses through which each strategic pillar
is viewed are: asset management, growth management, master/strategic
plans and studies, multi-year budget and intergenerational equity
Strategic objectives: High-level strategic goals and objectives that are defined
for each strategic element and fiscal strategy pillar
Strategic actions: The recommended actions (or initiatives) that support the
strategic objectives
These four pieces work together to define a financially sustainable path for the town
to follow.
Reporting and monitoring progress will be important to long-term financial
sustainability
Another important component for the draft fiscal strategy is reporting and
monitoring the progress of the plan. The fiscal strategy needs to be responsive to
changes within the community and remain flexible with a long-term. The progress on
the effectiveness of the strategic objectives needs to be reviewed at least annually
as part of the multi-year budget process. This will ensure that the planning and
decision making included in the budget process support long-term fiscal goals.
An action plan will be developed once the fiscal strategy is approved. This action
plan will be a “living document” which will define the actions to ensure the town sets
and stays on a financially sustainable path.
The Fiscal Strategy Report will be presented to General Committee on June 1, 2021.
Attachments
Attachment #1: Draft Fiscal Strategy
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Fiscal Strategy
April 13, 2021 Page 3 of 3
Attachment #2: Draft Presentation to General Committee
Attachment #3: Draft Strategic Objectives Summary
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FISCAL STRATEGY
Draft report to Council
June 1, 2021
2021
Prepared by
Town of Aurora
Finance Department
Attachment 1
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Fiscal Strategy Page 2
Table of Contents
Fiscal strategy overview ......................................................................................................... 3
The fiscal strategy framework ............................................................................................... 4
Fiscal strategy pillars .......................................................................................................... 4
Strategic elements............................................................................................................... 6
Strategic objectives ............................................................................................................. 9
Strategic actions ................................................................................................................ 12
Bringing together the pillars, elements, objectives and actions .................................... 12
The capital planning pillar ..................................................................................................... 13
Capital planning overview ................................................................................................. 13
Capital planning strategic objectives ............................................................................... 17
Capital planning strategic actions ................................................................................... 19
The reserve management pillar ............................................................................................ 22
Reserve management overview ....................................................................................... 22
Reserve management strategic objectives ..................................................................... 26
Reserve management strategic actions .......................................................................... 27
The debt management pillar ................................................................................................ 31
Debt management overview ............................................................................................. 31
Debt management strategic objectives ........................................................................... 33
Debt management strategic actions ............................................................................... 35
The revenue management pillar ........................................................................................... 37
Revenue management overview ...................................................................................... 37
Revenue management strategic objectives .................................................................... 39
Revenue management strategic actions ......................................................................... 42
Conclusion and next steps ................................................................................................... 45
Develop a strategic action plan ........................................................................................ 45
Reporting and monitoring the progress ........................................................................... 45
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Fiscal Strategy Page 3
Fiscal strategy overview
During the 2021 budget process, the fiscal strategy was introduced as an important
initiative for setting the financial policy framework the town can use to ensure it stays
on a financially sustainable path. This report provides an overview of the fiscal strategy
and outlines its importance for the Town of Aurora to begin taking a longer-term view on
financial health. This includes defining the fiscal strategy pillars, strategic objectives
and the actions to be taken to maintain financial health in the long run.
The main objective of the fiscal strategy is to achieve long-term financial sustainability.
Financial sustainability for a municipality can be defined as:
“...a government’s ability to manage its finances so it can meet its spending
commitments, both now and in the future. It ensures future generations of
taxpayers do not face an unmanageable bill for government services
provided to the current generation.”
Source: Local Government Association of Australia
Following the fiscal strategy and the policy objectives included within will set the path to
financial sustainability. In practice the fiscal strategy will:
• Provide a long-term view to financial stewardship and financial management
• Ensure the town maintains desired service levels and adapts to growth
• Manage and moderate the fiscal impacts from year-to-year
• Enable the town to effectively maintain and replace assets
• Prepare the town to adapt to changing economic circumstances
• Assess financial impacts between current and future tax and rate payers to
reduce fiscal shocks and share financial burden fairly across multiple
generations
How the town will get there is by following the strategic objectives and implementing
the strategic actions included in this report.
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Fiscal Strategy Page 4
The fiscal strategy framework
The fiscal strategy framework includes four main pieces: fiscal strategy pillars, strategic
elements, strategic objectives and strategic actions. They are defined as:
• Fiscal strategy pillars: The four fiscal areas are capital planning, reserve
management, debt management and revenue management and they must work
together over the long-term to achieve financial sustainability
• Strategic elements: The five primary lenses through which each strategic pillar is
viewed are: asset management, growth management, master/strategic plans and
studies, multi-year budget and intergenerational equity
• Strategic objectives: High-level strategic goals and objectives that are defined
for each strategic element and fiscal strategy pillar
• Strategic actions: The recommended actions (or initiatives) that support the
strategic objectives
These four pieces work together to define the financially sustainable path for the town
to follow.
Fiscal strategy pillars
The fiscal strategy includes four pillars
that must work together over the long-
term to achieve financial sustainability.
The four pillars are: capital planning,
reserve management, debt management
and revenue management. The fiscal
strategy balances the objectives of all
four pillars and lays in the centre where
the four pillars meet.
Each of these four pillars are critical to
having an effective fiscal strategy. In
developing a long-term plan if one pillar
is not considered then it could mean the
plan is not financially sustainable.
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Fiscal Strategy Page 5
The four fiscal strategy pillars are defined as:
• Capital planning: A long-term capital plan ensures the town’s current and future
capital asset goals and objectives are met
• Reserve management: Maintains reserves to meet the needs of the long-term
capital plan and manage the risk for unexpected economic impacts
• Debt management: Ensures debt financing is used to manage the long-term
financial flexibility of the town
• Revenue management: Optimizes revenues from all available sources to ensure
reserves are adequately funded
A change to one pillar can affect the other three
A successful fiscal strategy balances the four pillars over the long-term as an
adjustment to one pillar can affect one or more of the other pillars. The next few
examples explain the impact each pillar can have on the others.
Capital planning: Increasing the capital plan to include more growth capital
projects will mean that additional reserve funding, debt
financing and development charge revenues could be needed.
If the additional growth represents an increase to the service
levels currently provided, there could also be an impact on tax
and/or ratepayers.
Reserve management: In the situation where contributions to tax funded reserves are
reduced for a few years, the capital plan would also almost
certainly need to be reduced. To be able to allow original
capital plans to proceed, further unplanned debt financing or
increasing revenue through grants could be considered.
However, any additional debt financing would need to be
repaid. This action would just defer the reduction to capital
planning, or the increase to capital contributions, into the
future effectively shifting the burden to future tax or
ratepayers.
Debt management: If the town decided to proceed with issuing significant debt to
build one or more large capital projects over a short period of
time it could impact the town’s ability to issue debt in the
future. Reserves must be used to pay back debt first which
reduces the funding available for the capital plan until it is
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Fiscal Strategy Page 6
repaid. If other projects come along, further revenues must be
raised to fund them including grants, taxes and user rates.
Revenue management: The town improves its investment income returns on its
portfolio. This would result in the reserves that are invested
earning more investment income providing the opportunity to
either increase the capital plan or reduce the town’s reliance
on tax and user rate funding.
These examples demonstrate why it is important that the fiscal strategy balances these
pillars over the long-term. These fiscal pillars are discussed in detail in the sections that
follow.
Strategic elements
Each of the four fiscal strategy pillars are viewed under five different lenses which are
called strategic elements. These fiscal elements ensure that the fiscal strategy
manages the larger financial obligations in its long-term capital plan and balances the
responsibility for funding them fairly over time. The strategic elements are defined as:
• Asset Management is based on a long-term financial and operational plan that
ensures all capital asset management life-cycle requirements are met.
• Managing Growth through planning for the long-term impact of growth and its
impact on current and future service-levels.
• Master/Strategic Plans & Studies inform long-term capital and reserve planning
subject to the affordability of the plan.
• Multi-Year Budget and 10-year capital plan that is informed and guided by the
fiscal strategy objectives and can adapt to short-term economic impacts.
• Intergenerational Equity fairly shares the financial impact between current and
future tax and rate payers.
Asset management requires a long-term view
The town currently owns $709 million with a replacement value of $1,311 million. These
assets have a life cycle spanning anywhere from two to 80 years. When viewing each
pillar for asset management, we need to consider a time period long enough to include
all major repairs to assets and their future replacement, otherwise the fiscal strategy
may miss significant future obligations.
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Fiscal Strategy Page 7
Improvements to the town’s asset management plan, that are required under provincial
legislation, will operationalize the plan meaning it will become a living plan driven by the
asset service-level needs defined by the town.
Managing growth effectively maintains the town’s service levels
By managing growth effectively, the town will strive to ensure that service-levels remain
consistent over time. The challenge is that growth can be impacted by external factors,
such as the economy and provincial legislation, resulting in growth being slower or
faster than anticipated. The graph that follows shows the varying levels of assessment
growth that Aurora has experienced from 2005 through 2021. The percentage growth in
assessment includes the new residential and commercial developments added to the
tax roll, along with other adjustments to existing property values. The graph shows
assessment growth as high as 5.6 percent in 2005 and as low as 1.7 percent in 2014.
To adapt to these changing levels of growth, the fiscal strategy needs to remain flexible.
Aurora’s assessment growth from 2005 to 2021
For municipalities, growth is intended to pay for growth. The additional taxes collected
through assessment growth and the development charge revenues collected on new
developments are to be used to maintain Aurora’s existing service levels today for a
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Fiscal Strategy Page 8
growing community and are not intended to be used to enhance an existing service
level.
Master, strategic plans and studies provide insight into the future
Master plans, strategic plans and other studies guide long-term capital planning. These
documents look ahead to plan for future growth, shape the community, define service
levels and plan for how the town can provide these services in the future. The challenge
is that these plans may not be affordable or may only be affordable if the financial
impact is planned for in advance.
Aurora has a number of master, strategic plans and studies including:
• Accessibility Plan
• Active Transportation Plan
• Asset Management Plan
• Aurora Promenade Plan
• Community Energy Plan
• Community Improvement Plan
• Corporate Environmental Action
Plan
• Cultural Master Plan
• Customer Service Strategy and
Implementation Plan
• Development Charge Study
• Economic Development Strategic
Plan
• Energy Conservation and
Demand Management Plan
• Fleet Study
• Green Fleet Action Plan
• Information Technology Strategic
Plan
• Museum Plan
• Official Plan
• Parkland Dedication Bylaw
• Parks & Recreation Master Plan
• Sports Field Development
Strategy
• Sport Plan
• Storm Water Management
Master Plan
• Strategic Plan (Vision 2031)
• Stream Management Master Plan
& Tannery Creek Flood Relief
Study
• Trail Master Plan
• Transportation Master Plan
• Urban Forest Management Policy
Multi-year budget manages the short-term impact
The fiscal strategy must be flexible to adapt to Council priorities, economic impacts and
unexpected events. The multi-year operating budget and 10-year capital plan represent
the first few years of the long-term planning resulting from the fiscal strategy. The fiscal
strategy framework ensures the budget fits within the long-term plan too.
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Fiscal Strategy Page 9
The annual budget process is also the ideal opportunity to review the progress of the
fiscal strategy to determine if any course corrections are needed to ensure the town
remains on a financially sustainable path.
Intergenerational equity ensures fairness over time
Intergenerational equity in the fiscal strategy is about ensuring each generation, today
and in the future, are treated fairly and equally. Looking at recent history, the graph
below shows 6,982 property ownership changes over a five-year period from 2016 to
2020. So, the question becomes: to ensure fairness between residents today and in the
future, under what circumstances
does the town contribute to reserve to
pay for future capital needs and when
does the town use debt financing to
pay later?
The fiscal strategy follows this
principle: for existing infrastructure
the town should plan to use reserves
to pay for the asset management
needs, except under special
circumstances, and the use of
reserves and debt financing for
growth should be aligned with the
development charge study, defined
services levels, and the pace of
growth. Following this practice will
ensure that asset management
financial commitments are balanced
over time especially in years where
the financial obligations could be significantly higher.
Strategic objectives
The fiscal strategy defines 20 strategic objectives, one for each combination of the four
pillars and the five strategic elements. These strategic objectives will need to be
considered together as the fiscal strategy is put into practice. An overview of the 20
strategic objectives by pillar and strategic element is shown on the two pages that
follow. They are then discussed in more detail in the capital planning, reserve
management, debt management and revenue management sections of this report.
Property ownership changes
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Fiscal Strategy Page 10
Fiscal strategy strategic objectives
Capital
Planning
Reserve
Management
Debt
Management
Revenue
Management
Asset management
Asset Replacement
based on the
Town's Asset
Management Plan
with the defined
levels of service
over a long-term
planning horizon
Planning asset
management
reserve
requirements over
the long-term to
ensure full life-cycle
asset funding
requirements can
be met
Debt should be
avoided, except
when there is an
incremental
revenue source, or
savings, resulting
from the capital
investment which
will fully fund the
debt repayment
Actively seek out
and maximize
grant, investment,
user fees and other
alternative funding
opportunities to
minimize the
burden on tax and
rate payers
Growth management
Growth
management will
maintain the
Town's existing
service levels for a
growing and
urbanizing
community aligned
with the
Development
Charge study and
informed by master
plans and other
studies
Growth capital tax
and rate funded
reserves are
adequately funded
to meet the timing
of growth in the
community over the
long-term
Debt could be
considered when
the asset is built in
advance of growth
Optimize the
Development
Charge Study to
ensure that growth
pays for all planned
eligible growth
projects
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Fiscal Strategy Page 11
Capital
Planning
Reserve
Management
Debt
Management
Revenue
Management
Master/strategic plans and studies
Studies and master
plans support and
provide background
for future
affordable
operating and
capital service
levels
Studies and master
plans include the
impact on future
reserve and
operating budgets
Debt financing
should not be used
for studies or plans
Studies and master
plans consider
opportunities to
optimize non-tax
revenue sources
where applicable
and identify future
tax levy and user
rate impacts
Multi-year budget
The budget is
informed by studies
and plans to
manage year-to-
year fiscal impacts
with the goal of
achieving long-term
financial
sustainability
Maintain healthy
reserves by
ensuring reserve
definitions and
contributions align
with long-term
capital planning
needs
The capital plan
may consider debt
financing for
growth projects
where funding
sources are known
and the operating
budget will include
the repayment of
the debt obligations
Ensure operating
budget revenues
are predictable,
stable and
sustainable
Intergenerational equity
Match the timing of
the capital
investment with the
timing of when the
growth will occur
Funding reserves
for long-term plans
should not overly
burden one
generation over
another and should
avoid fiscal shocks
Manage the timing
difference between
when the capital
projects are being
built and the future
growth that they
will benefit
Leverage
investment income,
user fees and other
revenue sources to
ensure reserves
grow over time to
offset the cost of
inflation
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Fiscal Strategy Page 12
Strategic actions
Strategic actions are the high-level actions that support the strategic objectives for each
pillar. The actions recommend:
• Guiding philosophies to follow for the development of future budgets and
financial plans
• The development of new long-term analytical plans and forecasts
• The development of new, or changes to, existing policies, guidelines and process
flows
• Broader actions that may need to be broken down into smaller projects
• A combination of one-time or on-going actions
Upon approval of the fiscal strategy an action plan will be developed. This action plan
will identify and plan out the strategic actions to support the fiscal strategy, including
more detail on the specific actions and the timing of the work to support them. The
action plan will be a living document that will change over time as these actions
represent only the ones identified today to initiate the fiscal strategy. The action plan
can then be used as a method to report back on the progress of the fiscal strategy and
ensure it adapts to the needs of the town over time.
Bringing together the pillars, elements, objectives and actions
The next four sections of this report each focus on one pillar of the fiscal strategy. The
pillars are explored in more detail and graphs are provided to show context including
comparative analysis to other GTA municipalities from the BMA Consulting Inc. 2020
Municipal Study which includes 2019 results from participating municipalities.
These sections also explore the strategic lenses as they apply to each pillar and provide
context for the strategic objective recommended. They are then followed by the
overview of each strategic action.
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Fiscal Strategy Page 13
The capital planning pillar
A long-term capital plan ensures the Town's current and future capital asset
goals and objectives are met
Capital planning overview
Capital planning strategic objectives
•Asset Replacement based on the Town's Asset Management Plan with the defined levels of service over a long-term planning horizon
Asset Management
•Growth will maintain the Town's existing service levels for a growing and urbanizing community aligned with the Development Charge study and informed by master plans and other studies
Managing Growth
•Studies and master plans support and provide background for future affordable operating and capital service levels
Master/Strategic Plans & Studies
•The budget is informed by studies and plans to manage year-to-year fiscal impacts with the goal of achieving long-term financial sustainability
Multi-Year Budget
•Match the timing of the capital investment with the timing of when growth revenues will be received
Intergenerational Equity
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Fiscal Strategy Page 14
Recent improvements to the capital budget provide a strong foundation
for long-term capital planning
The 2021 to 2022 Budget and 10-Year Capital Plan included a number of improvements
to capital planning that will set a strong foundation to build upon including better
forecasting of planned capital spending, prioritization of projects based on resources
available and the introduction of capital programs for repair and replacement projects.
The recent budget also tied capital planning closer to reserve and debt management by
ensuring the plan was affordable for the first five years. Capital planning expands upon
this work to ensure the capital plan is affordable over the long-term.
Capital planning has a long-term view
The first 10-years of the long-term capital plan will be aligned with the budget. In the
outer years of the plan it will be informed by the master plans, strategic plans and
studies to develop a long-term forecast of capital requirements. To ensure larger
growth projects and all asset management requirements are captured, the length of the
planning horizon needs to be at least 80 years.
The main reason the plan needs to be at least 80 years is because that represents the
longest asset life span for any of the town’s assets, specifically water, wastewater and
storm water underground infrastructure which is very costly to replace. Using this
longer-term view, the town can take action today to ensure the plan is affordable in the
future.
Aurora’s assets are relatively young, providing time to plan for the future
Asset consumption is a financial measure that shows the percentage of assets
amortized (used up) to date. Based on this measure Aurora’s assets are relatively
young. This provides time to plan for future asset management needs, including
replacement or rehabilitation. At the end of 2019, Aurora’s asset consumption for all
assets was 33.2 percent, as shown in the graph that follows comparing Aurora to other
municipalities in the GTA that participated in the BMA Consulting Inc. 2020 Municipal
Study. Overall the graph shows that many of York Region’s municipalities have relatively
young assets, which stems from a recent period of significant growth resulting in the
addition of new assets to their total asset base.
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Fiscal Strategy Page 15
2019 asset consumption ratio
Aurora’s asset consumption ratio did not vary significantly for assets funded from tax,
water and wastewater based on the study. It was 33.7 percent for tax-funded assets,
34.7 percent for water-funded assets and wastewater funded assets a little lower at
27.6 percent. This means on average Aurora has roughly two-thirds of the assets useful
life remaining to plan for major replacements and rehabilitation. However, this is a
financial measure and other factors can extend or shorten the actual useful life,
including the amount of wear on an asset, the minimum service-level and the
maintenance over the life of the asset.
The following graph looks at the long-term asset management needs for the town’s
current assets, excluding any new assets and those currently under construction. The
asset replacement cost includes planned major repairs and replacements by decade
and indexed for inflation. These amounts are an estimate based solely on each asset’s
estimated useful life and do not consider any established asset and will change over
time as service levels and do not consider new asset additions. However, these
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Fiscal Strategy Page 16
estimates provide good insight into the significant replacement costs that are on
Aurora’s medium to long term horizon.
Asset replacement costs by decade
The asset management needs for tax funded assets increase significantly in the 2030’s
which covers the next 10-year period after the latest capital plan presented in the
budget. In the 2030’s the asset management needs reach a more steady state but they
do not include asset management requirements for any growth capital planned in the
future.
The asset management needs for water and wastewater funded assets reach their peak
in the 2050’s providing more time to plan and save. However, the storm water asset
management needs increase significantly over the next couple of decades peaking in
the 2050’s.
The second-generation asset management plan, currently under development, will
include significant enhancements that will help to refine Aurora’s asset management
needs now and into the future. These enhancements will include the development and
implementation of clearly defined level of service measures for each key asset
category.
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Fiscal Strategy Page 17
Plans and studies help inform growth planning
The long-term plan also needs to consider growth in addition to asset management
requirements for current assets. Master plans, strategic plans and studies provide
insight into how Aurora’s community will develop in the future. In developing the long-
term capital plan, assumptions must be made on the future growth trends included in
these studies and plans and the future asset management needs that follow.
Capital planning strategic objectives
The strategic objectives for capital planning outline how to balance the fiscal strategy
through this strategic pillar and discuss in more detail the actions and philosophies to
follow to achieve the strategic objective for each element.
Asset management
Strategic objective: Asset Replacement based on the town’s Asset Management
Plan with the defined level of service over a long-term planning
horizon
Asset management capital planning is based on the town’s asset management plan.
The town is developing a second-generation plan which will also include defined service
levels for linear assets (i.e. roads, sidewalks, streetlights, water, wastewater, storm
water infrastructure) which will guide all plans for repairs and replacement capital work
for years to come. Level of service measures will be added to the asset management
plan for all remaining asset categories by 2023. This will enable Aurora to develop a
long-term, 80+ years, forecast that supports the replacement of all assets at least once,
including underground infrastructure has a life span of up to 80 years. The plan will
need to be updated regularly and adapt for new assets and updates to service levels.
This long-term asset management plan will be key to developing the long-term reserve
requirements.
Growth Management
Strategic objective: Growth management will maintain the Town’s existing service
levels for a growing and urbanizing community aligned with
the Development Charge study and informed by master plans
and other studies
Aurora is a growing community but growth will change over time as the amount of
greenspace available for development decreases. Capital planning for growth should
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ensure that the service levels the town provides today continue and are maintained in
the future.
The development charge study, and possible community benefit charge study, should
reflect the growth planned in the community over the near term and are updated at least
every five years. These studies need to be aligned with capital planning and the long-
term capital forecast to ensure planning growth capital is complete and service levels
are maintained.
Master, strategic plans and studies
Strategic objective: Studies and master plans support and provide background for
future affordable operating and capital service levels
Master, strategic plans and studies are used to inform capital planning. These plans
and studies can identify capital needs over a short or long term. However, how they are
implemented is subject to budget constraints.
Multi-year budget
Strategic objective: The budget is informed by studies and plans to manage year-
to-year fiscal impacts with the goal of achieving long-term
financial sustainability
The multi-year budget includes a 10-year capital plan. It is important to ensure the 10-
year plan aligns with longer-term plans and studies, but is also affordable and complete.
The recent changes to the 10-year capital plan, including the introduction of capital
programs and capital budget authority, provide for better planning and more certainty
around the timing of capital projects. To ensure the plan is affordable, the town is now
prioritizing repair and rehabilitation projects based on the asset management plan and
all other capital projects as per the Integrated Business Planning Process presented to
Council on February 22, 2021.
Intergenerational Equity
Strategic objective: Match the timing of the capital investment with the timing of
when the growth will occur
In capital planning intergenerational equity is achieved when growth projects are
planned based on the timing of when the growth is expected to occur and asset
management follows the asset management plan. This ensures that service levels for
the use of town assets are maintained at a consistent level for the community over
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time. This timing is particularly important for growth capital because if growth capital is
built too early then the community will become accustomed to a higher level of service
and increasing service levels will impact the ability to fund the project from
development charges.
Capital planning strategic actions
The following strategic actions for capital planning support the strategic objectives
above.
Draft capital budget principles that reflect the recent changes to the
budget framework
The 2021 to 2022 Budget included a number of changes to the framework of the 10-
year capital plan. The capital budget principles should be developed to reflect these
changes that include:
• Budget Spending Authority for capital projects which reflects the project budget
cost to-date and future commitment along with the planned cash flow
• Capital planning to have a long-term focus
• The capital plan be affordable and complete in all 10-years
• The impact of the 10-year plan on reserves
• The 10-year plan aligns with the asset management plan, development charge
study, master plans and other studies
• The method for prioritization of growth projects, studies and other non-asset
management capital projects through the Integrated Business Planning Process
• The capital budget to identify the impact on the operating budget including the
ongoing operating cost of the asset along with the repair and replacement asset
management costs
• Guidelines for the management of capital programs
Further develop asset management planning
The asset management plan developed by the town should be further developed to
meet the legislative requirements by the province and also provide a planning tool for
the town to support reserve requirements analysis. The town should further develop
asset management planning by:
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• Developing a second generation asset management plan, including definitions of
levels of service for linear assets (e.g. roads and sewers) and meeting legislative
requirements (currently underway)
• Develop levels of service for the remaining asset categories ahead of the
provincially prescribed timelines
• Operationalize the asset management plan to align it with the 10-year capital
plan and develop longer-term capital funding requirements to ensure capital
reserves are sustainable
• Review and update the asset management plan regularly in accordance with
legislation and operational needs of the assets
Ensure the development charge study and the capital plan are aligned
To ensure the projects required for growth are properly planned and recovered from
development charges the capital plan and the development charge study should be
aligned. This would include:
• Matching the growth projects in the capital plan to the development charge study
• Fund capital projects based on what is planned in the development charge study
Improve longer-term growth forecasts to maintain existing levels of
service
The 10-year capital plan and longer-term forecasts should include capital projects that
support maintaining existing service levels for growth. While the 10-year capital plan
may identify specific projects, a longer-term forecast may include placeholders based
on the growth forecast and informed by master, strategic plans and studies. Also, in
developing the longer-term growth forecast, the impact of service level changes will
need to be managed carefully to ensure funding sources are available. This will aid in
identifying future reserve requirements. These longer-term forecasts will:
• Clearly identify whether growth projects maintain or enhance service levels as
this will impact funding sources
• Consider the timing of growth and affordability
• Prioritize growth that ensures the town's existing level of service is maintained
Review the affordability of strategic plans and studies to support long-
term capital planning
Existing master, strategic plans and studies need to be reviewed from an impact on
existing levels of service and affordability perspective as they are used to inform the
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long-term capital plan, while new studies and plans should consider long-term
affordability while they are being developed. This will enable Council to understand the
proposed impacts to existing levels of service and the affordability of the plan or study
at the time they are being presented for consideration by Council. To do this master,
strategic plans and studies must be complete including:
• Estimated capital costs and annual operating costs
• Identifying any proposed impacts to existing levels of service
• Future asset management requirements
• Identifying land acquisition needs for growth projects
• The understanding that master, strategic plans and studies with a future budget
impact should be "endorsed" by Council and are subject to future budget
constraints
• Include a method for reporting back on the progress of the plan
Develop a longer-term capital forecast
A longer-term capital forecast will bring together the asset management and future
growth needs. The first 10-years of the forecast would reflect the capital plan and then
the remaining years would reflect the asset management plan and growth forecast. The
development of the second-generation asset management plan and the update to the
town’s Official Plan will form the foundation for this long-term plan. The plan will:
• Use master, strategic plans and studies to inform growth needs
• Include the requirements identified in the second-generation asset management
plan
• Align with the 10-year capital plan and development charge study in the early part
of the forecast
• Span at least 80 years to ensure all asset replacements are forecasted at least
once to aid in long-term planning for reserves
• Be able to adapt to changes to economic conditions, service levels and the
addition of new assets
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The reserve management pillar
Reserve management maintains reserves to meet the needs of the long-
term capital plan and manage the risk for unexpected economic impacts
Reserve management overview
Reserve management strategic objectives
Reserve management is about planning for the contributions to and draws
from reserve
Reserve management plays an important role in long-term fiscal planning and financial
sustainability to support the town’s financial health. Through the management of
reserves, the town can plan the future reserve draws and contributions needed to
support the long-term capital plan. By taking a long-term view of reserves, the town can
plan for future increases in asset management capital plan needs and more effectively
•Planning asset management reserve requirements over the long-term to ensure full life-cycle asset funding requirements can be met
Asset Management
•Growth capital tax and rate funded reserves are adequately funded to meet the timing of growth in the community over the long-term
Managing Growth
•Studies and master plans include the impact on future reserve and operating budgets
Master/Strategic Plans & Studies
•Maintain healthy reserves by ensuring reserve definitions and contributions align with long-term capital planning needs
Multi-Year Budget
•Funding reserves for long-term plans should not overly burden one generation over another and should avoid fiscal shocks
Intergenerational Equity
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fund them over time while minimizing the annual impact to tax and ratepayers, to
ensure the funds are available when needed to support the plan.
The one percent fiscal strategy levy supports tax-funded reserves
Tax-funded reserves are used to pay for studies, growth projects (the part not funded
through development charges) and asset management costs relating to the town’s
assets including recreation facilities, roads, parks, playgrounds, fleet vehicles and other
town facilities. In 2011, Council began allocating an annual increase equal to one
percent of the tax levy to support contributions to tax-funded capital reserves and
weaning the town off non-sustainable revenues (supplementary taxes) in recognition of
a growing infrastructure renewal funding gap. The tax-funded capital reserve
contributions are distributed to the various tax-funded reserves based on historical
trend information. These reserves are then drawn from as required to support the 10-
year capital plan.
2019 tax-funded reserves per capita
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The recent 2020 Municipal Study by BMA Management Consulting Inc. shows how
Aurora compares to other municipalities for tax-funded reserves on a per capita basis.
The study showed a quite favourable $1,087 per capita for Aurora but this number
includes the town’s hydro sale proceeds reserve, without the hydro sale proceeds
reserve this amount becomes $570 per capita.
Reserves for water, wastewater and storm water are funded through user
rates
Water, wastewater and storm water budgets are funded through the rates charged to
customers through water billings. Since developers build most of the growth capital for
water, wastewater and storm water services during the construction of a new
development, Aurora does not need to plan for the capital cost to build the majority of
these initial investments. However, Aurora must plan for the eventual replacement and
rehabilitation of these assets. These asset management costs are funded through
contributions to reserves included in the water, wastewater and storm water rates.
These reserves are also used to balance the operating budget at yearend. Therefore,
any deficit or surplus will impact the planned balances for these reserves making overall
reserve management more difficult.
2019 water and wastewater reserves per capita
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In comparing Aurora’s water and wastewater reserves per capita to others in the GTA,
Aurora lags behind. The graph shows that at the end of 2019 Aurora had only $136 in
water and wastewater reserves per capita. Understanding the reserve needs for long-
term capital planning will help determine where this number needs to be.
Reserves manage future and current needs
Building reserves over time helps manage large increases for capital replacement needs
in the future, essentially smoothing the peaks created by large asset replacements or
the impact of many asset replacements arising from a time of significant rapid growth
in the past. These situations can create a short-term pressure in the future that needs to
be planned for.
Some assets are repaired or replaced on a more regular basis allowing for reserve
contributions to be managed on a pay-as-you-go basis. For example, if the town
resurfaces about the same amount of roads on an annual basis then this could be
funded pay-as-you-go because the cost is predictable and doesn’t vary much from year
to year. However, periods of high or rapid growth in the past can create peaks in the
asset management reserve needs in the future. Taking action early to build reserves can
help manage and plan for these peaks.
A long-term reserve forecast will guide future reserve contributions
A long-term reserve requirements forecast needs to be developed to define the reserve
funding needs to ensure they can be met. The sooner this forecast is developed, the
more time the town will have to fund the reserves to ensure all asset management
needs are planned for. The forecast will also consider the various options for funding
asset management and growth capital needs that will affect the tax levy and user rates.
Since the forecast will identify future needs by each reserve type, it can then be used to
inform decisions on how to distribute funding between similarly funded reserves.
Reserve balances are a clear indicator of financial health
Reserve balances are an indicator of financial health. Maintaining positive balances
ensures long-term affordability if large reserve draws are needed in the future. Once
these reserve balances are compared to a long-term forecast, more insight can be
gained to understand if the town is on a long-term financially sustainable path.
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Reserve management strategic objectives
The strategic objectives for reserve management outline how to balance the fiscal
strategy through this strategic pillar and discuss in more detail the actions and
philosophies to follow to achieve the strategic objective for each element.
Asset management
Strategic objective: Planning asset management reserve requirements over the
long-term to ensure full life-cycle asset funding requirements
can be met
Asset management has a significant impact on reserve management. The goal is to
have reserves sufficiently funded to be able to meet asset management needs over the
long-term. The development of a long-term reserve forecast will help ensure these
obligations can be met and identify how funds should be distributed between similarly
funded reserves.
Growth Management
Strategic objective: Growth capital tax and rate funded reserves are adequately
funded to meet the timing of growth in the community over the
long-term
Not all growth capital is funded wholly from development charges or other development
driven revenues. For example, most growth capital projects that result in a service
enhancement are ineligible for development driven revenues. In past budgets, having
sufficient tax funded growth reserves was a challenge resulting in some planned
projects needing to be delayed or internal borrowing from other reserves being
necessary. A long-term reserve forecast will project future reserve requirements for tax
and user rate-funded growth too.
Master, strategic plans and studies
Strategic objective: Studies and master plans include the impact of future reserve
and operating budgets
Reserve management will allow the town to determine the affordability of existing and
new master, strategic plans and studies. The longer-term capital and reserve forecast
will identify the funding needed to enact the recommendations of a master, strategic
plan or study to determine if and when they are affordable.
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Multi-year budget
Strategic objective: Maintain healthy reserves by ensuring reserve definitions and
contributions align with long-term capital planning needs
The budget’s 10-year capital plan is updated annually to reflect any changes to
priorities, economic impacts or other changes to reserves. The long-term reserve
forecast will be a key part of informing the 10-year plan. The multi-year budget provides
the best opportunity to report on the progress of reserve management.
Intergenerational Equity
Strategic objective: Funding reserves for long-term plans should not overly burden
one generation over another and should avoid fiscal shocks
Reserve requirements over a long period can change dramatically. Intergenerational
equity provides an opportunity to smooth reserve funding requirements from tax and
user ratepayers over the long-term. It supports the idea that those using the town’s
assets should contribute to paying for their replacement over time, thus sharing the
burden between residents and businesses today and in the future.
Reserve management strategic actions
The strategic actions for reserve management that follow support the strategic
objectives above.
Develop a reserve management policy
A reserve management policy will provide the framework around how reserves should
be managed while maintaining overall long-term reserve health. The policy will:
• Establish minimum balances and target polices for reserves to keep them in a
healthy position
• Outline the rules for access to reserves to fund capital projects and give funding
priority to other revenue sources first such as grants
• Draw a clear link between reserve management and long-term capital planning
requirements for asset management needs
• Define how contributions for tax and user rate funded reserves should be
allocated
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• Link the funding of growth projects to the development charge study and clearly
outline how the benefit to existing (non-development charge eligible costs)
should be funded
• Address how debt financing costs should be managed in the reserve
• Require a long-term approach to reserve management which balance
intergenerational equity to ensure the capital plan does not overly burden one
generation over another
• Identify when new reserves should be created or existing ones should be
reviewed
Review reserve definitions and update capital reserve bylaws
Each reserve has a Council approved bylaw which outlines the definition and intended
use of the reserve. These bylaws should be reviewed periodically to:
• Keep up to date with any legislation that governs the reserve and reference the
legislation definition for its intended use (if applicable)
• Review all reserves to see which ones should be closed, combined or separated
based future capital needs
• Ensure the reserve funding sources are consistent and their use aligns with the
financial reporting requirements in the Public Sector Accounting Standards
Develop a long-term reserve forecast
A long-term reserve forecast should be developed to accompany the long-term capital
plan. This reserve forecast will ensure that reserves remain healthy based on the
requirements from the reserve management policy. This reserve forecast will:
• Show the reserve draws needed to support the capital plan and operating budget
• Identify the required contributions to reserve to maintain all reserve health
targets
• Manage the impact of capital project debt financing through the reserves
• Identify the target reserve balances by year to ensure future needs are met
Develop options for tax and user rate reserves to reach full-cost recovery
for asset management needs
This analysis leverages the long-term reserve forecast to smooth the impact of reserve
contributions for tax and user rate funded reserves, particularly for years where reserve
contributions peak in response to large planned capital requirements. It is intended to
support intergenerational equity by providing options to smooth contributions to
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reserves and leverage investment income on reserves to ensure the impact to tax and
rate payers is carefully managed and balanced over time. This analysis will:
• Redefine the annual reserve contribution requirements in the operating budget,
including revisiting the current one percent fiscal strategy on the tax levy
• Provide the analysis which will determine the allocation of tax levy contributions
to tax-funded reserves
• Recommend contributions to reserve which are smoothed over time, while still
ensuring reserve health is maintained
• Identify the “steady-state” reserve contributions after reserves are able to meet
long-term obligations
• Consider the addition of future assets and how to manage the replacement cost
contributions to reserve when they are built
Regularly update internal guidelines for the use and funding of reserves to
support the budget process
The 2021 to 2022 Budget included a number of significant improvements to the 10-year
capital plan. Internal guidelines need to be updated regularly and posted internally to
support capital project managers as they plan their project budgets. These guidelines
will:
• Outline the framework for allocating contributions to reserves based on the long-
term reserve forecast
• Include a process map on how to fund capital projects for the annual 10-year
capital plan
• Align the funding of growth projects to the development charge study
• Align funding with accounting revenue recognition requirements by funding as
the project work is completed (cash flow timing)
• Indicate how to manage available annual reserve funding in the 10-year capital
plan for prioritizing capital projects
Monitor and manage reserve health through the annual budget process
The annual budget process is the best time to review and update reserve health
analysis as the longer-term plans and forecasts are established. The budget should
continue to include an analysis on reserves, which will include:
• New key performance indicators for long-term reserve health based on long-
term future requirements
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• The impact of recent changes to the capital plan and the reserve contributions
needed to support it
• Analysis of the progress towards meeting full-cost recovery for capital asset
management needs
• A 10-year schedule of reserve balances including the assumptions for future
reserve contributions
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The debt management pillar
Debt management ensures debt financing is used to manage the long-term
financial flexibility of the Town
Debt management overview
Debt management strategic objectives
Debt can be a useful financing tool if well managed
Debt is a financing tool that municipalities use to manage the timing difference between
when a capital project is built and when the funding for the project is received. This
funding can come from a variety of sources including development charges, tax levy,
user rates for water, wastewater and storm water and user fees. The town must plan for
the repayment of all debt in the operating budget and future reserve forecasts at the
time that it is issued. Debt financing should only be considered in instances where a
clear funding source for the repayment is known and is relatively guaranteed.
•Debt should avoided, except when there is an incremental revenue source, or savings, resulting from the capital investment which will fully fund the debt repayment
Asset Management
•Debt could be considered when the asset is built in advance of growth
Managing Growth
•Debt financing should not be used to fund studies or plans
Master/Strategic Plans & Studies
•The capital plan may consider debt financing for growth projects where funding sources are known and the operating budget will include the repayment of the debt obligations
Multi-Year Budget
•Manage the timing difference between when the capital projects are being built and the future growth that will benefit
Intergenerational Equity
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Issuing debt provides the flexibility to proceed with planned capital projects sooner, but
it must be managed carefully and also consider future long-term plans to ensure
actions today do not limit future capital plans. Issuing too much debt could mean
projects planned years from now may have to wait until existing debt is paid off, as the
province regulates how much debt a municipality can issue.
2019 total debt repayment costs as a percentage of own-source revenue
The province regulates the use of debt by municipalities
The province regulates how much debt municipalities can issue through the Annual
Repayment Limit (ARL) prescribed by Ontario Regulation 403/02 under the Municipal
Act. The ARL limits the total annual repayment cost of the debt, principal and interest, to
25 percent of the municipality’s own-source revenues. Own-source revenues include
most of the town’s revenues such as tax levy, user rates and user fees but not
development charge revenues. The town’s ARL is re-calculated at the end of each year
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to reflect its most recent year’s own-source revenues. To exceed this limit, permission
from the Ontario Municipal Board is required.
To be fiscally sustainable the town should not seek authority to exceed this limit or plan
to use the full 25 percent as doing so would limit the town’s ability to issue debt in the
future. In the 2020 Municipal Study by BMA Consulting Inc. Aurora’s annual debt
repayment costs were 1.5 percent, when adding in the recent approvals for debt this
increases to 3.2 percent. In comparison to other municipalities in the GTA Aurora’s debt
is on the lower end of the scale and still well within the 25 percent limit. This means that
the town has the flexibility to use further debt to finance projects within the ARL limit
and is well positioned to establish a comprehensive debt policy to ensure debt is used
wisely over the long-term.
The town should continue to use debt wisely
While debt financing is a useful tool, careful consideration should be given to when debt
could be used and when it should not. For example, debt could be used for the building
of a new recreation facility. New facilities are large capital investments for the town and
the development charges that often fund this type of project are collected over time and
often after the facility is built. In this case issuing development charge funded debt
would be reasonable.
However, the town regularly resurfaces and reconstructs roads on an annual basis at a
significant cost. Issuing debt is not recommended in this case because the work
continues on an annual basis with a different set of roads. In this situation, the ideal
strategy is to balance the work from year-to-year in the capital plan and fund the road
resurfacing or replacement from reserves.
Debt management strategic objectives
The strategic objectives for debt management outline how to balance the fiscal strategy
through this strategic pillar and discuss in more detail the actions and philosophies to
follow to achieve the strategic objective for each element.
Asset management
Strategic objective: Debt should be avoided, except when there is an incremental
revenue source, or savings, resulting from the capital
investment which will fully fund the debt repayment
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Based on this objective, in most cases asset management should only be funded
through reserves and grants and only in situations where there is a clearly defined
revenue stream, or savings to fully repay the debt over time, debt could be considered.
An example was when the town converted the street lighting to LED bulbs. The
electricity savings is being used to payback the capital investment through a 10-year
debenture that will be paid off in 2026.
Growth Management
Strategic objective: Debt could be considered when the asset is built in advance of
growth
When making investments in municipal infrastructure there are often times when a
significant investment is made in advance of the growth it is planned to serve. In the
Development Charge Study this is referred to as a post period benefit.
Development charges are used to pay for many growth projects in the town including
recreation facilities (indoor and outdoor), fire, library, water, wastewater and roads.
However, the development charge revenues are collected over an extended period as
the new developments are built. Issuing debt can be helpful in managing the timing
difference between when the project is built and when the revenues are received.
Master, strategic plans and studies
Strategic objective: Debt financing should not be used to fund studies and plans
Generally, plans and studies identify future capital and operating projects to support the
community. While some of the projects that are recommended in the study or plan may
need to consider debt financing, the plan or study itself should not be funded from debt.
Multi-year budget
Strategic objective: The capital plan may consider debt financing for growth
projects where funding sources are known and the operating
budget will include the repayment of the debt obligations
The annual budget process is the opportunity to review and re-evaluate the debt
recommendations for capital projects. Year-to-year changes, such as change in the
pace of growth or emerging priority projects, can be managed through the budget
process to adapt the capital plan for debt management and the operating budget will
manage the impact of the debt repayment.
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Intergenerational Equity
Strategic objective: Manage the timing difference between when the capital
projects are being built and the future growth that they will
benefit
The issuing of debt can support intergenerational equity by aligning the debt repayment
with the timing of new growth coming into the community that will benefit from it. When
building large growth capital projects the development charge revenues could be
collected over many years and possibly from future development charge studies as a
post period benefit. Debt financing for growth projects enables the Town to collect
those revenues over time and use them to pay back the debt.
Debt management strategic actions
The following strategic actions for debt management support the strategic objectives
above.
Develop a comprehensive debt management policy
A comprehensive debt management policy will set the framework for how debt is used
and managed at the Town. The policy will address the following:
• Seeking approval for capital budget and debt authority at the same time
• Identify the types of capital projects for which debt financing could be
considered and avoid the use of debt financing for asset management capital
projects except where exceptional or emergency circumstances exist
• Set policy for the use of debt for development charges to align with the post
period benefit (benefiting future growth) identified in the Development Charge
Study
• Outline how debt financing can be used to support capital planning and reserve
management objectives
• Identify when the different types of debt could be considered including a
construction line of credit, capital loan and/or long-term debenture
Develop process flows and guidelines for debt management
The process flows will outline the process from the approval of debt authority through
to the retirement of debt, including:
• The process on issuing debt and managing debt transactions
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• How to manage draws and repayment of the various types of debt including
construction lines of credit, capital loans and long-term debentures
• Outline how the debt is managed in the budget
Develop a longer-term debt forecast
Currently, the debt forecast is aligns with the 10-year plan in the budget. As the town
begins to do longer-term capital and reserve planning, a longer-term debt forecast will
help in identifying when eligible projects could move forward and will ensure that overall
debt obligations remain well managed within the annual repayment limit. The long-term
debt forecast will also consider other long-term plans such as the Official Plan, master
plans and other studies. The forecast will:
• Include only debt that is in alignment with the town’s new debt management
policy and where a clear funding source for the debt has been identified
• Align debt repayment for growth projects with the forecasted period of time over
which its intended funding sources will be collected
• Consider the potential debt needs arising from existing and proposed strategic
plans and studies to ensure they align with the longer-term debt planning and are
financially feasible
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The revenue management pillar
Revenue management optimizes revenues from all sources to ensure
reserves are adequately funded
Revenue management overview
Revenue management strategic objectives
Capital reserves are funded mostly from tax and user rates
Most of the funding for capital reserves comes from the tax levy or the user rates for
water, wastewater and storm water services as contributions to reserve in the operating
budget. Generating the revenue for these reserve contributions can result in increases
to the tax levy and user rates.
The annual tax levy increase currently includes an annual one percent increase for fiscal
strategy. Historically, these funds have been used to reduce the budget reliance on an
unsustainable level of supplementary taxes and investment income and increase
•Actively seek out and maximize grant, investment, user fees and other alternative funding opportunities to minimize the burden on tax and payers
Asset Management
•Optimize the Development Charge Study to ensure that growth pays for all planned eligible growth projects
Managing Growth
•Studies and master plans consider opportunities to optimize non-tax revenue sources where applicable and identify future tax levy and user rate impacts
Master/Strategic Plans & Studies
•Ensure operating budget revenues are predictable, stable and sustainable
Budget
•Leverage investment income, user fees and other revenue sources to ensure reserves grow over time to offset the cost of inflation
Intergenerational Equity
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contributions to capital reserves. This strategy is providing the town with the vital
revenues that are needed to fund the capital plan.
Similar actions are being taken on the user rate funded budgets too. The water,
wastewater and storm water rates include contributions to capital reserves. The actual
amounts contributed for water and wastewater can vary compared to what was
budgeted. The budget includes an estimate for the volume of water to be billed during
the year and any yearend surplus or deficit impacts the reserve balance for these
services. Storm water revenues are not subject to the same variability as they are
charged based on a flat fee per property.
Increasing revenues will reduce the reliance on tax and ratepayers
Over the next 10 years taxes
and user rates account for 60
percent of the contributions to
capital reserves. Then
revenues, including
development charges, grants
and investment income make
up the remaining 40 percent.
Development charges make
up the largest share of
revenues representing 25
percent of the contributions to
capital over the next 10 years
with a significant proportion
of these revenues are being
debt financed.
Development charges are
regulated by the province and
are to be used for growth
projects identified in the
Aurora’s development charge
study. It is important that the study is as complete as possible to ensure all future
growth projects are included. This will ensure that growth continues to pay for growth
and reduces the pressure on the tax and ratepayers.
2021 to 2030 total contributions
to capital reserves
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Aurora needs to focus on increasing revenues from grants and investment income to
further reduce the reliance on taxes and user rates
Improve the ability to seek out more grant opportunities
Aurora regularly applies for and seeks out grant opportunities to pay for both operating
programs and capital projects. However, there are many grant opportunities that the
town may not be aware of or have the administrative capacity to seek out. Therefore the
town should invest in the tools and/or services necessary to assist it in its grant
management to greater leverage this valuable revenue source.
Improve investment income earning potential
Aurora currently invests its cash using the legal list of permitted investments as
regulated by the province. These types of investments included under the legal list are
low risk and provide modest returns. The intent of the legal list is to safeguard
municipal reserves as most small to medium size municipalities are not large enough to
have the appropriate level of investment expertise in-house.
The province has provided an opportunity to expand the investment opportunities
available to municipalities for longer-term cash holdings through the prudent investor
regime. The prudent investor regime allows for the potential for higher investment
income, but it does come along with some higher risk. That is why it focuses on the
longer-term investments because time mitigates the risk.
Revenue management strategic objectives
The strategic objectives for revenue management outline how to balance the fiscal
strategy through this strategic pillar and discuss in more detail the actions and
philosophies to follow to achieve the strategic objective for each element.
Asset management
Strategic objective: Develop revenue strategies that encompass all asset types
and identify opportunities to relieve pressures to tax and rate
payers
Asset management is mostly funded through contributions to reserve from the tax levy
and user rates for water, wastewater and storm water. Contributions to these reserves
should be planned over the long term to minimize the annual impacts on tax and user
ratepayers. Long term planning can identify how to fund these reserves over time
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reducing the risk of significant one-time increases. Earning investment income on
longer-term reserve balances can help offset the impact of inflation and reduce the
reliance on taxes and user rates.
Some asset management projects are also funded through grants with the two most
significant being Federal Gas Tax and the Ontario Community Infrastructure Fund.
These two grants are expected to contribute $28 million to Aurora’s capital asset
management projects over the next 10 years. These grants along with seeking out
additional grants will reduce the reliance on the tax and ratepayer for funding asset
management projects.
Growth Management
Strategic objective: Optimize the Development Charge Study to ensure that growth
pays for all planned eligible growth projects
Development charge revenues are collected on new development growth in Aurora.
These revenues are used to pay for capital projects to support growth including new
recreation facilities, fleet vehicles, playgrounds and more. These revenues are collected
based on the rates defined in the development charge study, sections of the Planning
Act and potentially a community benefit charge study. A complete list of fully costed
growth projects needs to be included in the studies to ensure the maximum possible is
recovered through these revenue sources. The full growth cost may include the cost of
the environmental assessment, design, construction and land. Projects not included in
the development charge study are not eligible to be funded as the use of development
revenues to fund unplanned capital requirements will consume funds that are intended
for another planned project. That is why a complete capital plan aligned with the
development charge study is important.
The development charge study includes an estimate of the revenue that will be
collected but is based on assumptions for when growth will occur. However, growth
may occur faster or slower than expected which has a direct impact on revenues. The
projected development charge study revenues should be monitored closely and a
forecast should be developed, as changes to the estimates will affect capital planning,
reserve management and debt management.
Master, strategic plans and studies
Strategic objective: Studies and master plans consider opportunities to optimize
non-tax revenue sources where applicable and identify future
tax levy and user rate impacts
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Aurora develops master plans, strategic plans and studies as part of its capital budget
and longer-term planning processes. Often these plans and studies lead to capital
investments or changes to operating programs. These studies should include, where
possible, the potential for new revenues and a longer-term revenue forecast along with
any incremental operating costs. For example, a new baseball diamond will add
additional permit revenues where a new playground would not generate additional
revenue.
Identifying these potential revenues will help in the development of a comprehensive
revenue model. Ensuring revenue projections in all master plans and strategic studies
align with long-term revenue forecast planning can help Aurora plan for longer term tax
impacts and reduce the reliance on tax payers if planned early.
Multi-year budget
Strategic objective: Ensure operating budget revenues are predictable, stable and
sustainable
The multi-year budget sets the annual tax levy and user rates for water, wastewater and
storm water. Aurora implemented multi-year budgeting in 2019. The three-year
operating budget presented a plan to Council for the balance of their term with a
strategic approach to budgeting as the year-over-year impacts were considered.
Aurora’s Council approved budget principles for tax increases keeps the increase in line
with inflation plus one percent for fiscal strategy, which supports contributions to
capital for asset management. However, inflation for a municipality does not always
align with the Consumer Price Index. The Town purchases a very different basket of
goods, meaning the town spends money on different items to the average consumer. A
municipal price index, which looks at the specific basket of goods and services that are
relevant to Aurora, would provide better insight into inflationary pressures.
In addition, after the longer-term reserve management plans are developed Aurora will
have a better understanding of the true long-term reserve needs. At this time, the
existing one percent fiscal strategy element in the tax levy should be revisited and be
based on forward looking plans.
Intergenerational Equity
Strategic objective: Leverage investment income, user fees and other revenue
sources to ensure reserves grow over time to offset the cost
of inflation
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Fiscal Strategy Page 42
Longer-term planning ensures that Aurora is being fair to todays and future tax and
ratepayers. In managing revenue, the town should ensure investment income is used to
grow reserves over time especially for asset management reserves that are mostly
funded through tax and user rates. Contributions to reserve are set aside for longer-term
assets such as water and wastewater assets. These reserve balances need to
maximize the investment income that they earn to offset the impact of inflation over
time. Moving forward as a prudent investor will enable Aurora to invest these funds with
the potential of higher returns to reduce the funding needs from taxes and user rates.
Revenue management strategic actions
The following strategic actions for revenue management support the strategic
objectives above.
Develop a strategy to explore opportunities to increase grant revenue
Developing a strategy to improve grant revenue will have a direct impact on reducing
the reliance on the tax and ratepayer. The strategy should include the following:
• Guidelines for developing a prioritized list of projects that are “ready-to-go” as
grant timing can be short
• Investment in a grant management tool and/or services for the identification of
grant opportunities, as well as for the management of grant applications and
reporting requirements to maximize grant opportunities and improve process
efficiency
• A review of Aurora’s existing grant management capacity
Improve investment income on reserves by becoming a prudent investor
Funds set aside in reserve need to earn investment income to offset inflation. Over time
this will reduce the amounts needed to be contributed to reserve from the tax levy and
user rates. To move forward as a prudent investor the Town should:
• Continue the process to move forward with joining the ONE JIB (joint investment
board)
• Review and update the investment policy to align investments with the future
reserve requirements
• Develop a policy for the management of the Aurora’s short-term investments
• Review and update the investment income allocation policy
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Align future development charge studies with projected growth and a
funding strategy
Firstly, Aurora should immediately update the development charge study and bylaw for
the recent changes to legislation and evaluate the need for a community benefit charge.
Going forward Aurora should ensure that these studies, master plans and the budget
are all in alignment. To do this:
• The studies should ensure they include a comprehensive list of all eligible
growth projects and the project costs are complete including land requirements
• Process maps and guidelines should be developed for the collection and use of
development charge and community benefit charge revenues, if required
Develop revenue forecasts for less controllable revenues
Unlike the tax levy, other revenues collected by Aurora can be less predictable and
subject to economic conditions and growth. Aurora should develop forecasts for these
revenues to help with short-term and long-term planning. In the short-term, these will
help with capital planning, reserve management and debt management. Revenue
forecasts should be developed for:
• Development charges and community benefit charges, if applicable based on
actual growth trends and planned development in the short-term
• Assessment growth revenue to assist in multi-year budgeting
Develop a revenue management policy
Aurora needs to develop a clear policy that addresses how revenues are to be managed.
This would identify the revenues that support the operating budget and/or the capital
reserves. This policy will provide a clear framework for managing the 10-year capital
plan and beyond, and the multi-year operating budget. The policy should consider:
• Reducing the reliance of operating budget on less reliable revenues such as tax
penalties and supplementary taxes by contributing them to asset management
reserves
• The operating budget to only include investment income earned on working-
capital (short term investments) and investment income earned on reserves to
be directly dedicated to that reserve
• Ensure that the makeup of the fee and charges are clear and supports the activity
it is charged for based on the relevant study if applicable
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Develop a longer-term planning approach to user rates for water,
wastewater and storm water
User rate budgets are based on full-cost recovery for the service they pay for. A long-
term approach will ensure that all operating and capital needs are considered and
factored into the rates over time. This will ensure that the full cost recovery includes the
following:
• Long-term asset management requirements
• Impact of climate change on infrastructure
• Ensuring master, strategic plans and studies are addressed
• The impact of growth, water conservation and weather in managing rates
Review and update operating budget principles
Review and update the operating budget principles at the beginning of each Council
term with the Finance Advisory Committee or more frequently if required. The budget
principles should be updated to also include:
• A municipal price index to capture the true inflationary pressures for the town
• A review of the one percent fiscal strategy annual increase to the budget to
ensure alignment with fiscal strategy objectives
• Ensuring that the budget principles accurately reflect the current multi-year
budget process and identify any improvements
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Conclusion and next steps
The fiscal strategy will be responsive to changes within the community while remaining
flexible and keeping a long-term focus. The fiscal strategy provides the financial policy
framework to ensure Aurora can set and stay on a financially sustainable path. This is
done through the balancing of all four pillars: capital planning, reserve management,
debt management and revenue management and following the 20 strategic objectives.
Develop a strategic action plan
Putting the fiscal strategy into action will require the development of a detailed strategic
action plan. The development of this plan will begin after the approval of the fiscal
strategy.
The strategic action plan will be a living document that will explore each strategic action
in more detail and plan out the work required to implement them. As the action plan
evolves, it will support long-term financial sustainability and ensure the milestones and
achievements remain aligned with the fiscal strategy.
Some of the strategic actions that will be included in this plan are already underway or
complete, including:
• Recent improvements to the capital budget process
• Updating the development charge study and bylaw for recent changes to
legislation
• Evaluating the feasibility of implementing a community benefit charge
• The development of the second generation asset management plan including
service levels
• The exploration of alternative revenue sources in support of reserve
requirements
Reporting and monitoring the progress
Once developed, the strategic action plan will be monitored and reported on regularly as
the policies and analytical work is completed and rolled out. The strategic action plan
includes analytical work and policies that will establish financial targets for asset
management planning, reserve management and the use of debt. These targets will be
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Fiscal Strategy Page 46
used to develop key performance indicators to be used for monitoring of the fiscal
strategy’s progress and the overall financial health of Aurora.
An update on the progress of the fiscal strategy will be included as part of the annual
budget process. The fiscal strategy will be integrated within the budget documents, as it
is a key element in budget development particularly for the 10-year capital plan and the
planned reserve contributions.
Reporting on the fiscal strategy will expand as the work to be included in the strategic
action plan is completed and new items are added to the plan.
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Fiscal StrategyJune 1, 2021 General Committee (Draft version for FAC)%XXEGLQIRXPage 54 of 82
Agenda•Financial sustainability & fiscal strategy framework•Fiscal strategy pillars•Capital Planning•Reserve Management•Debt Management•Revenue Management•Next stepsPage 55 of 82
Financial sustainabilityThe overarching objective of the fiscal strategyPage 56 of 82
What is financial sustainability•A long-term view to financial stewardship and financial management•Ensures the Town can maintain desired service levels and adapt to growth •Manages and moderates fiscal impacts from year-to-year•Enables the Town to effectively maintain and replace assets•The ability to adapt to changing economic circumstances•Fairly shares the financial impact between current and future tax and rate payers (intergenerational equity)Page 57 of 82
Fiscal strategy and the four pillarsCapitalPlanningReserveManagementRevenueManagementDebtManagementFiscalStrategyPage 58 of 82
Strategic elements Asset managementManaging growthMaster/Strategic plans & studiesMulti-year budget Intergenerational equityPage 59 of 82
20 strategic objectivesCapital PlanningReserve ManagementDebt ManagementRevenue ManagementAsset ManagementStrategic objectiveStrategic objectiveStrategic objectiveStrategic objectiveGrowth ManagementStrategic objectiveStrategic objectiveStrategic objectiveStrategic objectiveMaster, Strategic Plans & StudiesStrategic objectiveStrategic objectiveStrategic objectiveStrategic objectiveMulti-Year BudgetStrategic objectiveStrategic objectiveStrategic objectiveStrategic objectiveIntergenerational EquityStrategic objectiveStrategic objectiveStrategic objectiveStrategic objectivePage 60 of 82
Capital planningA long-term capital plan ensures the Town's current and future capital asset goals and objectives are metPage 61 of 82
Aurora’s assets are relatively youngPage 62 of 82
Asset management over the long-termPage 63 of 82
Capital planning strategic objectives• Asset Replacement based on the Town's Asset Management Plan with the defined levels of service over a long-term planning horizonAsset Management• Growth will maintain the Town's existing service levels for a growing and urbanizing community aligned with the Development Charge study and informed by master plans and other studiesManaging Growth• Studies and master plans support and provide background for future affordable operating and capital service levelsMaster/Strategic Plans & Studies• The budget is informed by studies and plans to manage year-to-year fiscal impacts with the goal of achieving long-term financial sustainabilityMulti-Year Budget• Match the timing of the capital investment with the timing of when growth will occurIntergenerational EquityPage 64 of 82
CCapital pplanningKey strategic actions• Draft capital budget principles that reflect the recent changes to the budget framework• Further develop asset management planning• Ensure the development charge study and the capital plan are aligned• Improve longer-term forecasts to maintain existing levels of service• Review the affordability of strategic plans and studies to support long-term capital planning• Develop a longer-term capital forecastPage 65 of 82
Reserve ManagementReserve management maintains reserves to meet the needs of the long-term capital plan and manage the risk for unexpected economic impactsPage 66 of 82
Current level of tax funded reservesPage 67 of 82
Reserve management strategic objectives• Planning asset management reserve requirements over the long-term to ensure full life-cycle asset funding requirements can be metAsset Management• Growth capital tax and rate funded reserves are adequately funded to meet the timing of growth in the community over the long-termManaging Growth• Studies and master plans include the impact on future reserve and operating budgetsMaster/Strategic Plans & Studies• Maintain healthy reserves by ensuring reserve definitions and contributions align with long-term capital planning needsMulti-Year Budget• Funding reserves for long-term plans should not overly burden one generation over another and should avoid fiscal shocksIntergenerational EquityPage 68 of 82
Reserve managementKey strategic actions• Develop a reserve management policy• Review reserve definitions and update capital reserve bylaws• Develop a long-term reserve forecast• Develop options for tax and user rate reserves to reach full-cost recovery for asset management needs• Regularly update internal guidelines for the use and funding of reserves to support the budget process• Monitor and manage reserve health through the annual budget processPage 69 of 82
Debt ManagementDebt management ensures that debt financing is used to manage the long-term financial flexibility of the TownPage 70 of 82
Debt repayment costs are manageablePage 71 of 82
Debt management strategic objectives• Debt should avoided, except when there is an incremental revenue source, or savings, resulting from the capital investment which will fully fund the debt repaymentAsset Management• Debt could be considered when the asset is built in advance of growthManaging Growth• Debt financing should not be used to fund studies or plansMaster/Strategic Plans & Studies• The capital plan may consider debt financing for growth projects where funding sources are known and the operating budget will include the repayment of the debt obligationsMulti-Year Budget• Manage the timing difference between when the capital projects are being built and the future growth that will benefit Intergenerational EquityPage 72 of 82
Debt managementKey strategic actions• Develop a comprehensive debt management policy• Develop process flows and guidelines for debt management• Develop a longer-term debt forecast Page 73 of 82
Revenue ManagementRevenue management optimizes revenue from all sources to ensure reserves are adequately fundedPage 74 of 82
2021 to 2030 total contributions to capital reservesPage 75 of 82
Revenue management strategic objectives• Actively seek out and maximize grant, investment, user fees and other alternative funding opportunities to minimize the burden on tax and rate payersAsset Management• Optimize the Development Charge Study to ensure that growth pays for all planned eligible growth projectsManaging Growth• Studies and master plans consider opportunities to optimize non-tax revenue sources where applicable and identify future tax levy and user rate impacts Master/Strategic Plans & Studies• Ensure operating budget revenues are predictable, stable and sustainableMulti-Year Budget• Leverage investment income, user fees and other revenue sources to ensure reserves grow over time to offset the cost of inflationIntergenerational EquityPage 76 of 82
Revenue managementKey strategic actions• Develop a strategy to explore opportunities to increase grant revenue• Improve investment income on reserves by becoming a prudent investor• Align future development charge studies with projected growth and a funding strategy• Develop revenue forecasts for less controllable revenues• Develop a revenue management policy• Develop a longer-term planning approach to user rates for water, wastewater and storm water• Review and update operating budget principles Page 77 of 82
Next stepsPage 78 of 82
Develop a strategic action plan•Explore the strategic actions in more detail and plan the work•Maintain it as a living document•Build upon work already underway:•Recent improvements to capital budget•Development charge study update•Second generation asset management planPage 79 of 82
Reporting and monitoring progressRegular reporting as part of the budget processMonitor key performance indicators of financial healthUpdate and adapt the strategic action plan over timePage 80 of 82
QuestionsPage 81 of 82
Draft Strategic Objectives Summary
Capital
Planning
Reserve
Management
Debt
Management
Revenue
Management
Asset management
Asset Replacement based on
the Town's Asset
Management Plan with the
defined levels of service over
a long-term planning horizon
Planning asset
management reserve
requirements over the
long-term to ensure full
life-cycle asset funding
requirements can be met
Debt should be avoided,
except when there is an
incremental revenue source,
or savings, resulting from the
capital investment which will
fully fund the debt repayment
Actively seek out and
maximize grant,
investment, user fees and
other alternative funding
opportunities to minimize
the burden on tax and rate
payers
Growth management
Growth management will
maintain the Town's existing
service levels for a growing
and urbanizing community
aligned with the Development
Charge study and informed by
master plans and other
studies
Growth capital tax and
rate funded reserves are
adequately funded to
meet the timing of growth
in the community over the
long-term
Debt could be considered
when the asset is built in
advance of growth
Optimize the Development
Charge Study to ensure
that growth pays for all
planned eligible growth
projects
Master/strategic plans and studies
Studies and master plans
support and provide
background for future
affordable operating and
capital service levels
Studies and master plans
include the impact on
future reserve and
operating budgets
Debt financing should not be
used for studies or plans
Studies and master plans
consider opportunities to
optimize non-tax revenue
sources where applicable
and identify future tax levy
and user rate impacts
Multi-year budget
The budget is informed by
studies and plans to manage
year-to-year fiscal impacts
with the goal of achieving
long-term financial
sustainability
Maintain healthy reserves
by ensuring reserve
definitions and
contributions align with
long-term capital
planning needs
The capital plan may
consider debt financing for
growth projects where
funding sources are known
and the operating budget will
include the repayment of the
debt obligations
Ensure operating budget
revenues are predictable,
stable and sustainable
Intergenerational equity
Match the timing of the
capital investment with the
timing of when the growth will
occur
Funding reserves for
long-term plans should
not overly burden one
generation over another
and should avoid fiscal
shocks
Manage the timing difference
between when the capital
projects are being built and
the future growth that they
will benefit
Leverage investment
income, user fees and other
revenue sources to ensure
reserves grow over time to
offset the cost of inflation
%XXEGLQIRX
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