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Home My WebLink AboutCST 10-12 135 City o~ Report To Executive Committee PICKERING Report Number: CST 10-12 Date: May 14, 2012 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2012 Annual Repayment Limit for Debt and Financial Obligations Recommendation: That Report CST 10-12 of the Director, Corporate Services & Treasurer regarding the 2012 Annual Repayment Limit for Debt and Financial Obligations be received for information. Executive Summary: The Annual Repayment Limit presented in this report represents, under a Provincial formula, the maximum amount which the City has available to commit to payments relating to debt and financial obligations. An update to the Annual Repayment Limit is required to determine the annual repayment limit for both internal and external borrowings. This update is required to enable the City to borrow externally. The Municipal Act delegates the authority to the Treasurer and provides that the Treasurer can certify the appropriateness of funding for each capital project involving debt, lease or other form of long term financial commitment as long as certain criteria are met. Otherwise, Ontario Municipal Board approval is required. Financial Implications: There are no financial implications associated with this report. Discussion: Recently, the Ministry of Municipal Affairs and Housing (MMAH) provided information regarding the City's 2012 Debt and Obligation Repayment Limit. Debt for these purposes includes all forms of loans, leases and other long term financial obligations and commitments. The 2012 Annual Repayment Limit (ARL) was calculated based on 25 percent of 2010 net own-source revenues as reported in City of Pickering's 2010 Financial Information Report (FIR) submitted to the Ministry of Municipal Affairs and Housing (MMAH). The FIR was prepared in conjunction with the annual financial statements. Own-source revenues represent generally the discretionary revenues of a municipality including property taxes, user fees, licenses and fines and exclude all grants, internal transfers and extraordinary items such as the one time sale of land or other fixed assets and non-discretionary items such as development charges. Report CST 09-12. May 14, 2012 136 Subject: 2012 Annual Repayment Limit for Debt. Page 2 and Financial Obligations The calculated 2012 ARL based on 25% of net revenue after taking into account net debt charges, is $14,973,156. This is based on the 2010 Financial Information Return which included the total annual principal and interest charges and all other financial obligations as recorded in the City's books of $2,375,310. However, for City purposes staff have chosen to update this number, as we have in past years, to take into account debt incurred in 2011 and the resultant increase in annual debt charges of $1,793,272 thereby reducing the 2012 ARL to $13,179,884. This represents the maximum additional principal and interest payments that could be undertaken without requiring Ontario Municipal Board approval. As at December 31, 2011 the City had $19,131,687 in external debt and $806,848 in internal loans for a total of $19,938,535. It must be pointed out that this calculation does not: measure affordability; take into account other commitments the City may have; identify the need to change levels of service or the amount property taxes must be -increased to repay the new debt. This limit represents the maximum amount which the municipality has available for approval and certification by the Treasurer as of December 31, 2011 to commit to payments relating to debt and financial obligations. The limit is effective January 1, 2012 for the calendar year. For illustration purposes, if the City could borrow at 5%, the rate used by MMAH in the calculation, the net ARL of $13,179,884 would allow it to undertake additional long term borrowing as follows: Term (years) Debt Amount a) 5 57,062,000 b) 10 101,770,000 c) 15 136,800,000 d) 20 166,250,000 Attachment: 1. Letter from the Ministry of Municipal Affairs and Housing dated January 3, 2012 Prepared By: Approved / Endorsed By: Caryn Kong, CGA Gillis A. Paterson, Senior Financial Analyst - Capital & Director, Corporate Services & Treasurer Debt Management Copy: Chief Administrative Officer Report CST 09-12 May 14, 201 137 Subject: 2012 Annual Repayment Limit for Debt Page 3 and Financial Obligations Recommended for the consideration of Pickering ity Council 2, 21 /Z Tony Prevedel, P. Eng. Chief Administrative Officer ATTACH MENT# TO REPORT #.LV Ministry of Minist6re des Municipal Affairs Affaires municipales t a r i (c) and Housing et du Logement 138 Municipal Finance Policy Branch Direction des politiques relatives aux finances municipales 777 Bay Street, 13th Floor 777, rue Bay, 13.1 etage Toronto ON M5G 2E5 Toronto ON M5G 2E5 Phone: 416 585-6951 Telephone : 416 585-6951 RECEIVED CITY OF PICKERtNQ Fax: 416 585-6315 Telecopieur : 416 585-6315. APR 2 7 2011 April 20, 2011 CORPORATE SERVM Dear Municipal Treasurer, Clerk/Treasurer: I am pleased to enclose a report showing your municipality's 2011 Annual Repayment Limit (ARL) respecting long-term debt and financial obligations. Your 2011 ARL was calculated based on 25 percent of your 2009 net own source revenues as reported in your 2009 FIR. If you require any further information, please contact the appropriate Municipal Services Office of the Ministry of Municipal Affairs and Housing (list enclosed). Yours truly, Trevor Bingler Director Enclosures r~~ 1 3 ~ - Ontario Ministry of Municipal Affairs and Housing Ministere des offaires municipales et du logement 777 Bay Street, 777 rue Bay, Toronto, Ontario M5G 2E5 Toronto (Ontario) M56 2E5 MMAH CODE: 10102 FIR CLEAN FLAG C + r a MUNID:. 18001 MUNICIPALITY: ' Pickering C UPPER TIER: Durham R REPAYMENT LIMIT: $ 14,081,357 The repayment limit has been calculated based on data contained in the 2009 Financial Information Return, as submitted to the Ministry. This limit represents the maximum amount which the municipality had available as of December 31, 2009 to commit to payments relating to debt and financial obligation. Prior to the authorization by Council of a long term debt or financial obligation, this limit must be adjusted by the Treasurer in the prescribed manner. The limit is effective January 01, 2011. FOR ILLUSTRATION PURPOSES ONLY, The additional long-term borrowing which 'a municipality could undertake over a 5-year, a 10-year, a 15-year and a 20-year period is show. If the municipalities could borrow at 5% drr,7% annuallY, the annual repayment limits shown above.would allow it to undertake additional long-term borrowing as follows: (a) 20 years @ 5% p.a. $ 175,484,833 (a) 15 years @ 5% p. a. $ 146,159,670•,. (a) 10 years @.5% p.a. $ 108,732,506. (a) 5 years C~. 5% p.a $ 60,964,907 (a) 20 years @ 7% p. a. - 149;178,097 (a) 15 years '@ 7% p. a. $ 128,251,789 (a) 10 years @ 7% p.a.. $ 98,901,559 (a) 5 years C 7% p.a 5 57,736,344" RMW L l - '.1fi , ~ ::tom C t N F L~C 1: ET Debt.Charges for the Current Year - 0210 Principal.(SLC74309901) [ ~ _ _ - 1,891,393 0220 Interest (SLC 74 3099 02). . . . . . . . . . . . . . : 7_42,139 ; 0299 Subtotal 2,633,532 Ontario Clean. Water Agency Provincial Projects 0410 Water projects - For this Municipality only,(SLC 74 281003). 0 0420 Water projects'- Share of integrated project(s)"(SLC 74 2820 03).a 0 0430 Wastewater projects - For this Municipality only (SLC 74 2830 03). . . . . . 0440 Wastewater projects Share of integrated project(s) (SLC 74 2840 03). . . . ! 0499 Subtotal 0 . 0610% ' Payments for Long Term Commitments and Liabilities financed from the consolidated statement of 0 operations (SLC 426010 01) . . . . . 0810 Debt Charges for Lease Purchase Agreements (Tangible Capital Leases) (SLC 74 3140 03) . . . .m 9910 Total Debt Charges 3 2,633 532 Amounts Recovered from Unconsolidated Entities 1010 Electricity Principal '(SLC 74 3030 01) . . 1020 Electricity - Interest (SLC 74 3030 02) . 0 1030 Gas Principal (SLC'74 3040 01) . • • I 0 1040 - Gas - Interest (SLC 74 304002) . . 'LL.. . . i 1050 Telephone - "Principal (SLC 74 3050 01) . . . . . . . . . . . . . . . 0 1060 Telephone Interest (SLC 74 3050 02) . . . ( .mw~ 0 1099 Subtotal 1410 Debt Charges for Tile'Drainage/Shoreline Assistance (SLC 74 3015 01 + SLC 74 3015 02) . 0 1420 s Total Debt Charges to be Excluded wo 71- Net Debt Charges 2,633,532 9920 SLI. Total Revenues ( Excluding Donations of Tangible Capital Assets) 1610 73,084,158 . (SLC 1.0 991001 - SLC 53 06i0 01) . . . . . . 2010 Fees for Tile Drainage / Shoreline Assistance (SLC 12 1850 04) . ~0 Grants from, Government of Ontario, Canada and Other Municipalities.,. 2210 Ontario :Grants, including Grants for Tangible Capital Assets (KC 10 0699 01. + SLC110 0810,01 . t SLC10 0815 01) { 1,546,045 2220 Canada Grants, including Grants for Tangible Capital Assets (SLC 10 0820 01 + SLC 10 0825 01) : 3,534,919 2230 Revenue from other municipalities (SLC 10 1099 01) . . . 129,918 2240 Gain/Loss on sale of land li capital assets (SLC 10 1811 01) 46,758 2250 Deferred revenue earned" (Development Charges) (SLC 10 8812 01) . . . . . . i 966,962 2299 r Subtotal X6,224 602 2410 Fees and Revenue for Joint Local Boards for Homes for the Aged . . .0 2610 Net Revenues 66,859 556 2620 25% of Net Revenues 16,714,889 9930 ESTIMATED ANNUAL REPAYMENT LIMIT i 142081,357 (25% of Net Revenues less Net Debt Charges) " ' SLC denotes Schedule, Line Column. i