HomeMy WebLinkAboutFND-014-11 C!aIIIJgIOIJ REPORT
FINANCE DEPARTMENT
Meeting: GENERAL PURPOSE AND ADMINISTRATION
Date: JUNE 13, 2011 Resolution#: CPA -4'3G-// By-law#:
Report#: FND-014-11 File#:
Subject: MUNICIPALITY OF CLARINGTON'S DEBT STATUS
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following:
1. THAT Report FND-014-11 be received for information.
Submitted by:
by:b /N//. /� Reviewed b
Y � . Y
ancy 'aylor, :.B.A., C.A. Franklin Wu, •
Director of Finance/ Chief Administrative Officer
Treasurer
NT/LG/hjl
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L1C 3A6 T (905)623-3379
REPORT NO.: FND-014-11 PAGE 2
COMMENTS AND BACKGROUND:
1.0 At the General Purpose and Administration Committee meeting of May 9, 2011, the
following resolution was passed:
"THAT the Director of Finance be requested to prepare a report showing debt and debt
financing including a comparison to other municipalities."
The purpose of this report is to provide the requested information.
1.1 Clarington issues debentures with Council's approval to finance new construction or for
major additions to its buildings.
1.2 The new construction or major addition to a building is a significant financial undertaking.
Clarington typically issues a debenture that is to be paid back with interest over the
following 10 to 15 years. Occasionally at the end of the 10 years, there is a balloon
payment that Clarington may pay off or re-debenture over the next 5 years.
1.3 As the Municipality of Clarington is a lower tier government and with Council's approval,
Clarington must issue debentures through the Region of Durham per the Municipal Act,
2001 S. 401 (3).
1.4 The Ontario Ministry of Agriculture, Food and Rural Affairs offer a the loan program for a
10 year term. The maximum amount of loan available to an individual farmer in 1 year
is $50,000. The the drainage loans have been excluded from Clarington's total debt as
the drainage loans are for the individual farmers within the municipality.
1.5 The repayment of the loan is collected through the farmer's final property tax bill.
Clarington forwards the the drainage loan annual repayment (principal and interest) to
the Region of Durham. The Region of Durham submits the the drainage loan repayment
to the Province of Ontario.
1.6 Currently, Clarington has one the drainage loan in the original amount of $6,400 that
started repayments in October 2008 and ends October 2017.
1.7 Below is a bar chart illustrating Clarington's total debt (principal) for the last 5 years. In
the chart, the increase in the year 2007 is due to the debenturing for the construction of
the Newcastle & District Recreation Complex. In subsequent years, Clarington's total
debt declines as the older debentures are nearing the end of their repayment term. As
approved by Council, a balloon payment occurs in 2011, further reducing the debt
outstanding. Council approved paying off the 2011 balloon payment on the debenture
for New Library Main Branch and MAC expansion in the principal amount of $2,378,000.
That provided a savings to Clarington of approximately $600,000 in interest as opposed
to re-debenturing the balloon payment for another 5 years and annual tax levy savings of
$600,000 per year.
REPORT NO.: FND-014-11 PAGE 3
Clarington Debt Outstanding
$40,000,000. _ _ ~
$35,000,000
$30,000,000 -_ -__ _-...
$25,000,000 -°
$20,000,000 -
$15,000,000 - -
$10,000,000 - -
$5,000,000 --
$0 __,u. ~~E... Debt Outstanding
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1.8 The chart belovu lists Clarington's total debenture received; by facility, its funding sources
and splits. Growth-related facilities are generally proportionately split 90% development
charges and 10% other sources of financing. This must be adjusted if there is any
replacement component, as is the case with both the Library Main Branch and the
Newcastle Library. Council has also through budget approvals, subsidized the Library
component of the development charges due to shortfalls in this area. The other item of
note is that the South Courtice Arena debenture is funded 100% from development
charges because the municipality funded its 10% non-growth-related component upfront
so the entire debenture represents the development charges 90%growth-related
component.
Region Debenture Total Original Funding Funding Split
By-Law # Term Facility Debenture Sources by Percentage
Tax -Levy 66%
Library Development
71-2001 2002 to 2011 Library Main Branch/MAC $8,100,000 Charges 34%
Indoor Recreation
56-2002 2003 to 2012 South Courtice Arena $12,000,000 Development Charges 100%
Contribution from
Darlington Soccer Club 10%
Bowmanville Indoor Soccer Indoor Recreation
45-2004 2005 to 2014 and Lacrosse Bowl $3,385,000 Development Charges 90%
52-2006006 to 2021 Total Hockey Museum $1,111,640 Tax Levy 100%
Tax Levy 10%
Newcastle & District Indoor Recreation
07-2007 2007 to 2022 Recreation Complex $17,325,000 Development Charges 90%
Tax Levy 10%
Public Library
65-2008 2009 to 2018 Newcastle Library $1,084,000 Development Charges 90%
REPORT NO.: FND-014-11 PAGE 4
1.9 The next 3 charts are from the BMA Municipal Study 2010. The first bar chart compares
Clarington's 2009 debt outstanding to the municipalities to the north, east, and west with
their debt in ascending order.
VARIOUS MUNICIPAL DEBT OUTSTANDING
$soo,ooo,ooo ~
$90,000,000
$80,000,000
$70,000,000 _ _ . , .
$60,000,000 .
$50,000,000 u.
$40,000,000
$30,000,000 ~ ~~-°•-~ - - ----~ ----- ---------~--- - 2009 OUTSTANDING DEBT
$20,000,000 -_______._...._.___.
$10,000,000
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1.10 The second chart lists 2009 debt outstanding per capita for the same municipalities used
in the above graph.
MUNICIPALITY 2009 OUTSTANDING DEBT 2009 DEBT PER CAPITA
Halton Hills $ 6,311,517 $ 102.13
Pickering $ 14,219,970 $ 147.85
Ajax $ 17,371,911 $ 177.22
Caledon $ 18,922,000 $ 293.79
Whitby $ 20,936,932 $ 172.99
Belleville $ 22,631,244 $ 445.81
Milton $ 25,009,928 $ 308.76
Clarington $ 32,353,598 $ 382.41
Peterborough $ 53,612,441 $ 685.25
Kawartha Lal<es $ 60,987,513 $ 796.26
Oshawa $ 93,566,201 $ 600.04
REPORT NO.: FND-014-11 PAGE 5
1.11 The third chart provides additional comparative debt data. It is important to review these
three charts together as the debt per capita sheds additional light by putting the debt
outstanding into some context as does debt per assessment and debt interest per
revenue.
Debt/$100,000 of Debt Interest/Own
MUNICIPALITY Unweighted Assessment Source Revenue
Halton Hills $ 84 0.6%
Pickering $ 161 1.2%
Whitby $ 163 0.8%
Ajax $ 165 0.8%
Caledon $ 194 2.8%
Milton $ 236 1.2%
Clarington $ 397 0.5%
Kawartha Lal<es $ 689 2.1%
Oshawa $ 726 3.7%
Peterborough $ 829 2.1%
Belleville not available 0.1%
BMA Study Average + $ 635 i 1.4%
CONCLUSION:
2.0 The Ministry of Municipal Affairs and Housing regulates the level of debt that may be
incurred by municipalities. Only 25% of the total own purpose revenue can be used to
service debt and other long term obligations without receiving Ontario Municipal Board
approval.
2.1 Each year, the Ministry of Municipal Affairs and Housing sends a letter to each
municipality's Treasurer advising the municipality of its Annual Repayment Limit (ARL)
respecting long-term debt and financial obligations. For example: Clarington's 2011
ARL is calculated on 25% of Clarington's 2009 net own source revenues reported in our
2009 Financial Information Return (FIR). Clarington only utilizes 29% or less than 1/3 of
it's allowable debt capacity without needing OMB approval.