1. Capital Financing Strategy
Jason Bevan
Mike Mayes
CNAM 2014 Conference
Toronto, Ontario
May 20-23, 2014

2. Today we will discuss... Study background Process
Key recommendations and findings
Lessons learned
Questions

3. About the Town of Newmarket
Lower tier municipality in the Region of York
Population of 80,000
Relatively compact community
Responsible for local water and sewer infrastructure

4. Capital Financing Study Phases
Peer review of existing asset management reports, policies and funding deficiency estimates
Prepared report with technical and policy recommendations
Excel model for sensitivity testing to be left with the Town
Development Charges Study and By-law
Thorough examination of growth-related capital

5. Study Context

6. Capital Funding Options
Funding Options Considered
Capital Funding Options
Category
In Use in Newmarket
Potential Annual Funding Amounts
Primary Use of Funds
Replacement
Enhancement
Growth
Asset Replacement Fund (ARF)
Yes
Millions X
Recommending a
Strategy (RAS) Surcharge
Hundreds of thousands  X
Other User Fees (for capital)
Pay-as you-go Capital (capital funded out of operating) X 
Regional Uploading
City of Toronto Act Charges
No (not permitted)
Local Improvement Charges
Minor
Development Charges
Cash-in-Lieu Parkland and
Parking

7. Capital Funding Options (cont.)
Funding Options Considered
Capital Funding Options (cont.)
Category
In Use in Newmarket
Potential Annual Funding Amounts
Primary Use of Funds
Replacement
Enhancement
Growth
Density Bonusing (Sec 37)
Future Secondary Plan
Hundreds of thousands X
Stormwater Rate No  X
Federal Gas Tax
Yes
Millions
Other Infrastructure Grants
Most funding has ended X 
Debt
X(DC)
PPPs, Private Contributions and Sponsorships
Developer Funded Items
Collaboration with Other Municipalities
Variable
Sale of Property
X (of land)
Hydro dividend

8. Key Model Considerations: Smoothed Contribution Increases

9. Key Model Considerations: Integration of Future Growth
In growing municipalities, new development can have significant impact on future AM funding requirements
Assessment of new units is often higher than existing base
Intensification can lead to reduced infrastructure requirements
Not always the case e.g. ring roads in Newmarket Urban Centre

10. Key Model Considerations: Use of Debt/Borrowing
The Town has effectively used debt to reduce spikes in tax rates
Particularly with buildings
Better aligns to benefiting principal i.e. those that use the refurbished/upgraded facility are the ones that pay for the facility
The Town has also made use of internal loans to undertake capital improvements that lower operating costs
Energy retrofits

11. Key Recommendations Establish dynamic asset inventory
Establish service level targets to assist with funding decisions
Consider a more advanced (software) asset management solution
Create assessment management report cards

12. Key Recommendations (cont.)
Move to a 10-year capital budget
Establish three categories of capital (i.e. growth, repair & replacement, enhancement)
Establish a Storm Water Utility Rate

13. Key Recommendations (cont.)
Review and Update Corporate Debt Policy
Follow recently completed Investment Strategy
Other
Review carry-forward projects and reassign funds if projects are no longer required
Merge outdated, small or infrequently used capital reserves with the Asset Replacement or other reserves

14. Funding Option 1: Status Quo
Asset Replacement Fund contribution increases at inflation only
Recreation surcharge and operating capital held static
Gas tax growth at 2% per year
$500M cumulative funding shortfall at 2033

15. Funding Option 2: Full Funding
Full funding of useful life and replacement cost based contributions
Asset Replacement Fund contribution, recreation surcharge and operating capital increases with growth and inflation
Requires 1.8% annual tax increase to 2033

16. Funding Option 3: Adjusted Targets
Same as Option 2 with adjusted funding targets:
Requires 1.08% annual tax increase to 2033
Asset Type
% of Ideal Contribution
Buildings
70%
Land Improvements
Vehicles and Equipment
100%
Roads and Related
90%
Storm

17. Funding Option 4: Rate Supported Storm
Adjusted funding targets
Assume taxation room from storm infrastructure is applied to other tax- supported assets
Requires 0.85% annual tax increase to 2033

18. Lessons Learned Centralized asset inventory is key
The Town, like many municipalities, had several asset inventories already on hand
Interest and inflation assumptions can have a significant impact on the results
Storm and land improvement services (parking, park development etc.) will likely take longest to reach targets
There are no “magic” revenue sources

19. Questions? Jason Bevan Mike Mayes CNAM 2014 Conference
Toronto, Ontario
May 20-24, 0214