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HomeMy WebLinkAboutFIN 07-19� Subject: �:�:�� �� Stan Karwowski Director, Finance & Treasurer Report to Executive Committee Report Number: FIN 07-19 Date: May 6, 2019 Development Charges Reserve Fund — Statement of the Treasurer for the Year Ended December 31, 2018 Recommendation: That Report FIN 07-19 of the Director, Finance & Treasurer respecting the Development Charges Reserve Fund be received for information. Executive Summary: Section 43 of the Development Charges Act, 1997 (the "Act") requires that the Treasurer provides Council with a financial statement relating to the development charges by-law and reserve fund established for each service as established under Section 33 of the Act. On December 3, 2015, the Province passed Bill 73 which amended the Act to add additional reporting requirements. The Treasurer's Statement (Statement) attached to this report has been expanded to comply with the new reporting requirements. Attachment 1 provides details of the activity of the Development Charges Reserve Fund for the year ended December 31, 2018 in the manner prescribed by section 43(2)(a) of the Act. Attachment 2 provides details on information related to assets funded by the development charges by-law as stipulated by section 43(2) (b) of the amended Act. The amended Act introduced a new section: 43(2.1), which now requires Council to ensure that the Statement is made available to the public. The Statement will be posted on the City's website to facilitate compliance with the amendment. Financial Implications: In 2018, a number of inedium density multiple residential developments in the urban area of Pickering, and the non-residential development related to Durham Live have resulted to a large increase in development charges collections. The ongoing development in the Duffin Heights neighbourhood, and the new development in the Seaton lands have also contributed to the increase in development charges collected in 2018. The total 2018 development charges collected was $13 million; an increase of 145 per cent compared to the 2017 collections of $5.3 million. FIN 07-19 May 6, 2019 Subject: Development Charges Reserve Fund — Statement of the Page 2 Treasurer for the Year Ended December 31, 2018 The reserve fund remains at a healthy balance of approximately $58.7 million pending future use of funds for qualified projects. The funds are well managed with investment returns consistently exceeding market indicators. Investment income is added to the balance of each fund as such income is earned. Attachment 1 provides a breakdown of the various DC funding components. Two of the components are in a negative position due to planned budget activity: DC funding for a new operations centre and a new financial system. Negative balances will be addressed through DC fees collected from current growth related activity and through the next DC Study. For the next DC study, credit balances are treated as a cost that will be recovered through higher DC rates. Discussion: Funds are not transferred out of the Development Charges Reserve Fund for projects until the funds are actually needed, as required by applicable accounting rules. This ensures that the reserve fund continues to earn interest income on the unspent monies until such time as actual expenses are incurred. The total reserve fund balance of $58.7 million represented in Attachment 1 represents the unspent monies as at December 31, 2018. Please note that there are approximately $25.7 million of committed capital projects and financial obligation that have been approved in prior years, but have not proceeded or are still ongoing as at December 31, 2018. Taking into account these commitments, the net fund balance available for future expenditures is approximately $33 million. The financial obligation refers the development charges debenture financing undertaken for the construction of the new Operations Centre, at $12.8 million, which includes both the principal and interest payments. This amount represents approximately 49 per cent of the commitments of $25.7 million. In order to meet the new requirement under section 43(2.1) of the amended Act, it is recommended that the Statement be placed on the City's website upon approval by Council. Attachments: 1. 2018 Statement of the Treasurer — Development Charges Reserve Fund 2. Amount Transferred to Assets — Capital & Current Funds Transactions FIN 07-19 May 6, 2019 Subject: Development Charges Reserve Fund — Statement of the Treasurer for the Year Ended December 31, 2018 Prepared By: %��'"Y✓'' � Caryn Kong, CPA, CGA Senior Financial Analyst — Capital & Debt Management Approved/Endorsed By: s I ' � .'' �,� -i' � . � Stan Karwowski, CPA, CMA, MBA Director, Finance & Treasurer Recommended for the consideration of Pickering City Council �, 2�1� Tony Prevedel, P.Eng. 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