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Financial
Management Plan
Long term financial health and sustainability
for the City of Winnipeg
Vision
Corporate Mission
To be a vibrant and healthy city which places its highest
priority in quality of life for all its citizens.
Working together to achieve affordable, responsive and
innovative public service.
Introduction
5
- What is the Financial Management Plan?
- Have the goals from the previous plan been achieved?
Financial Vision
6
- Long-term Financial Health & Sustainability
- Current Reality
- Moving Forward
1. Ensure a Sustainable Revenue Structure
7
- Change in Government Tax Revenue
2. Support a Sustainable and Competitive Tax Environment
8
- Average Assessed Value and Property Tax
3. Support Economic Growth
9
- The City's Property Assessment Base is Growing
4. Support Long-Term Financial Planning
10
- Tax-Supported Operating Budget - 10 Year Projection
5. Build, Maintain, and Enhance Infrastructure Assets
11
- Estimated Capital Funding to Deficit Distribution per Service Area
6. Manage Expenditures
12
- 2017 Cities Comparison of Operating Expenditure per Capita
7. Manage Debt
13
- Net Debt as a Percentage of Revenue
8. Ensure Adequate Reserves and Liquidity
14
- Total City Liquidity
City Contact Information & Photo Credits
15
Table of Contents
2020 Update
Periodic review and reporting on the Financial
Management Plan is done in accordance
with OurWinnipeg, which provides financial
strategies and targets with a view to
long-term financial health and sustainability.
5
City of Winnipeg | Financial Management Plan
Introduction
WHAT IS THE FINANCIAL MANAGEMENT PLAN?
The Financial Management Plan is the City of Winnipeg's (the
City) strategy for guiding financial decision-making, meeting
long-term obligations, and improving its economic position
and financial stability. The Plan sets forth the guidelines
against which current and future financial performance can
be measured, and assists the City in planning fiscal strategy
with a sustainable, long-term approach.
HAVE THE GOALS FROM THE PREVIOUS PLAN
BEEN ACHIEVED?
The first Financial Management Plan was approved by Council
in 1995 and an updated Plan was adopted by Council on
April 25, 2001 and a further update on March 23, 2011.
Significant achievements have been made with respect to the
goals of the previous Financial Management Plan:
- Promote Economic Growth - The City's property assess-
ment base grew by 58% between 2011 and 2018
- Support Environmental Sustainability - The City has been
supporting sustainability through financial decisions that
include sustainable procurement and capital investment
prioritization based on a triple bottom line approach, which
includes assessing projects based on social, economic and
environmental factors
- Maintain Infrastructure Assets - Since 2011, the City has
made significant progress in implementing leading practices
in Asset Management with a formal Asset Management
Program. The City most recently completed its Asset Manage-
ment Plan, and the 2018 State of the Infrastructure Report
- Manage Debt - A Debt Strategy, including maximum debt
limits was approved by Council and updated in 2015
- Manage Expenditures - Cost increases from 2011 to 2018
related to city services other than police, fire and emergency
medical services have kept below the inflation adjusted for
growth level of 25.1%
- Ensure a Sustainable Revenue Structure - Tax-supported
operating revenue increased by 27.7% from 2011 to 2018
compared to 25.1% inflation adjusted for growth. The City
will continue to advocate for a long-term growth oriented
revenue source from the other levels of government.
- Support a Competitive Tax Environment - Winnipeg's 2018
municipal residential property taxes are the lowest
compared to other large Canadian cities
- Ensure Adequate Reserves - The Financial Stabilization
Reserve target balance of 6% of tax supported expenditures
was exceeded with a 2018 ending balance above target level
at 10.3%
Following the downgrade of the Province of Manitoba's credit
rating in 2015, Moody's downgraded the City's rating from the
Aa1 negative to Aa2 stable. The Aa2 rating was confirmed again
in 2018 with a stable outlook.
Source: Moody's Investors Service
CREDIT RATING 1999-2018
Standard & Poor's Credit
Ratings of Canadian Cities
October 2018
CITY
RATING
Winnipeg
AA
Vancouver
AAA
Calgary
AA+
Edmonton
AA+
Saskatoon
AAA
Regina
AA+
Windsor
AA
Hamilton
AA+
Toronto
AA
Mississauga
AAA
Ottawa
AA
Montreal
AA-
Aaa
Aa1
Aa2
Aa3
A1+
A1
A1-
Aa1
Aa2
Aa2
Aa3
A1+
A1
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
6
City of Winnipeg | Financial Management Plan
Financial Vision
CURRENT REALITY
An updated Financial Management Plan is required to guide
financial decision-making under direction of Council. The
tax-supported operating budget has a structural deficit which
is financially unsustainable. This is a result of 14 years (1998 to
2011) of property tax reductions or freezes. Tax increases in
the last seven years (2013-2019) have primarily been used for
capital improvement, of the increase, specifically from 2016
to 2019, 2.33% dedicated to roads (2%) and the Southwest
Rapid Transitway (Stage 2) and Pembina Highway Underpass
Payment Reserve (.33%). Property taxes are now the lowest
of other major Canadian cities. (In 2012, an increase of 3.5%
marked the only year in the past 21 years that a property tax
increase was solely dedicated to supporting the operating
budget.) Methods used to balance operating budgets,
including one time transfers from reserves and sales of assets,
are now nearly exhausted. A tax strategy will be determined
in the context of maintaining the City's financial sustainability
but will not necessarily prescribe a tax increase. The City
is also facing a significant infrastructure deficit requiring
continued prioritization. Increased focus on innovation
throughout the organization challenges departments on
better ways to deliver services.
MOVING FORWARD
The Financial Management Plan guides sound financial
decision making in support of City Council's approved
plans, programs and projects. It is an integrated part of the
OurWinnipeg planning framework by supporting the City's
vision: It's Our City, It's Our Plan, It's Our Time. It also aligns
with OurWinnipeg by supporting:
Long-Term Financial Health
& Sustainability
"Financial Sustainability is when
planned service and infrastructure
levels can be met without resorting
to unplanned increases in rates or
disruptive cuts to services"
- Hemson Consulting Ltd.
A city that works: "The basics" matter: public safety, water
quality, wastewater and transportation infrastructure, and
public amenities and facilities are the essentials to keeping
people healthy. To this end, the Financial Management Plan
supports sound and forward-looking financial management
of our assets.
A sustainable city: Social, environmental and economic
sustainability are essential to Winnipeg's long-term well-being.
Our financial decisions should be based on understanding the
long-term implications - direct and indirect - of our activities.
Quality of life: Opportunity, vitality and creativity are
examples of social aspects of our community that are critical
to our overall well-being. The City is committed to collaborat-
ing within its mandate with other governments and service
providers. The Financial Management Plan is cognizant of
responsive to social priorities including affordability and
equity.
OurWinnipeg is currently being updated.
This Financial Management Plan establishes the following
renewed goals which together will work to address the current
unsustainable operating and capital budget deficits:
1. Ensure a sustainable revenue structure
2. Support a sustainable and competitive tax environment
3. Support economic growth
4. Support long-term financial planning
5. Build, maintain, and enhance infrastructure assets
6. Manage expenditures
7. Manage debt
8. Ensure adequate reserves and liquidity
Structural Deficit is a permanent deficit
that results from an underlying imbalance
in government revenues and expenditures.
A structural deficit will not improve even in
a strong economy when revenue would be
expected to rise due to increased activity.
7
City of Winnipeg | Financial Management Plan
1. Ensure a Sustainable Revenue Structure
The City of Winnipeg's main source of revenue is derived from property taxes,
a revenue stream that went through 14 years (1998 to 2011) of reductions or freezes
and the most recent seven years (2013 to 2019) of increases were primarily earmarked
for capital improvement (In 2012, an increase of 3.5% marked the only year in the past
21 years that a property tax increase was solely dedicated to supporting the operating
budget.) The City is now unable to meet projected operational requirements and
address its infrastructure deficit. The pressure to invest more in infrastructure makes
it very difficult to increase spending on other priorities.
Utility rates for water, sewer and solid waste, including recycling and waste diversion,
are also a significant source of revenue and adjusted annually to support operating
costs and planned capital activity. Utility rates continue to be competitive to other
municipalities. Keeping utility rates affordable for citizens is important and must
balance infrastructure improvements, environmental stewardship and the provision
of essential services. A sustainable revenue structure should consider the following:
- Adequacy
- Growth potential
- Appropriate cost recovery
- Diversification
- Ease of administration
- Timing of cash flow
- Stability
To aid in the creation of a sustainable revenue structure the City created a new
revenue source, the Impact Fee, which was adopted by Council in 2016 and partially
implemented in 2017. The Impact Fee is charged on new development at the time
building permits are issued and will be utilized to fund capital projects that are
determined to be growth related. Full implementation will be reviewed in future years.
Even with the addition of the Impact Fee, additional revenue sources are still required
for the City to be able to continue providing the level of services its citizens expect.
A move to a sustainable revenue structure does not override the need to look inter-
nally to find efficiencies, improve operations, and reduce costs. These activities are
complementary and will continue within the organization.
In addition, the provincial funding model for both capital and operating grants to the
City has changed beginning in 2017. The City continues to be challenged by long-term
uncertainty and lack of predictability of provincial grants.
The City of Winnipeg's ability to introduce new revenue sources or change existing
taxation policies through greater fiscal and legislative powers is primarily subject to
approval of the provincial government.
The City continues to pursue a predictable growth oriented revenue source.
Target:
A revenue structure that keeps pace
with inflation adjusted for growth.
Measurement:
Increase in operating revenue should
be, at a minimum inflation adjusted
for population growth.
"Local governments need
to preserve enough
independence from
provincial and federal
government to make
choices that best fit local
conditions."
- Government Finance
Officers Association
(GFOA 2018)
CHANGE IN GOVERNMENT TAX REVENUE 2001-2017
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Province of Manitoba
Government of Canada
City of Winnipeg
140%
120%
100%
80%
60%
40%
20%
0%
-20%
Sources:
City of Winnipeg:
City of Winnipeg, Annual
Financial Reports, 2001 to 2017
Province of Manitoba:
Manitoba Finance, Annual
Reports, 2001 to 2017
Federal Government of Canada:
Department of Finance report
of the Government of Canada,
Fiscal years 2001-2002 to
2017-2018
8
City of Winnipeg | Financial Management Plan
2. Support a Sustainable and Competitive Tax Environment
Historically the City has assessed its tax environment by comparing taxation rates to
other comparable Cities across Canada. The City's property taxes have fallen to the
lowest level compared to other similar Canadian cities. Continuing with the lowest
level of property taxes is not in the City's best interest for the financial sustainability
of the organization, but raising rates to the average level of other jurisdictions is also
not realistic given how large an increase this would be. In 2018 Winnipeg citizens pay
approximately 30% less in property taxes than the Canadian average for an average
or median single-detached home.
The City should create a sustainable and competitive property tax strategy.
This strategy will address multiple areas of taxation including Property taxes, Business
taxes and Frontage levies. Such a tax strategy will not necessarily prescribe a tax
increase and the tax strategy will be determined in the context of maintaining the
City's financial sustainability.
Target:
A stable and competitive taxation
system.
Measurement:
Taxation levels adopted through
multi-year budgets to meet service
requirements.
AVERAGE ASSESSED VALUE AND PROPERTY TAX 1990-2018 (%)
Average Residential Assessment
Property Tax Revenue
5%
4%
3%
2%
1%
0%
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Source: City of Winnipeg, Community Trends and Performance Report - Volume 1, 2019 Budget
Even though the assessed value of a property determines the calculation of the
amount of property tax paid, since 1990, property tax has increased on an annual
average rate of 1.8%, vs the Assessed Value increasing by 5.4%. This is because the
mill rate is recast each year to ensure property taxes paid are not increasing due to
the increased market value of their home.
The City has continued to reduce business taxes to improve its competitive position
and make Winnipeg a good place to invest. The business tax rate was decreased from
9.75% in 2006, to 6.39% in 2010, to 4.97% in 2019.
While a competitive tax environment encourages economic growth, there are other
factors that are key to new development. Citizens value City services. Meeting service
expectations and maintaining infrastructure investment must be balanced with
affordable taxation levels. Currently the level of taxation, in combination with the City's
other sources of revenue, is unable to sustain current service levels and infrastructure
needs. Thus the need for a sustainable property tax strategy developed as part of
long-term financial planning and balanced multi-year budgets to determine how the
City will move forward and establish predictable and affordable levels of taxation for
its residents, while delivering the level of service they expect.
Supporting elected officials with more reporting on a complex tax structure will
enhance understanding. It will help explain the relationship between property
assessment values and annual rental values and tax revenues.
9
City of Winnipeg | Financial Management Plan
3. Support Economic Growth
The City's ability to support the growth of its existing business community and
the community at large as well as attract new businesses and people is key to the
future economic prosperity for Winnipeg and its citizens. Standard and Poor's Credit
Rating from July 2018 states "Winnipeg's economy is one of the most diverse in
Canada, enabling it to better withstand the impact of changes in the economic cycle.
The diversity of its economy provides Winnipeg with access to a broad and stable
tax base which translates into predictable property tax revenues independent of the
economic cycle."
Winnipeg has recently been growing at increasing rates, and is forecast to grow by
approximately 25% over the next 20 years. This growth has changed demographics,
economies and even climate considerations within the City. OurWinnipeg will look at
how this growth is driving innovation, sustainability and social consciousness and
develop an approach to guide growth within the City.
To support economic growth, the City of Winnipeg partners with other levels of
government and partner organizations, as well as supporting economic development
initiatives such as:
- Emerging neighbourhoods
- Community Incentive Grant Program (CIGP)
- Commercial destinations
- Community Club Operational Grant (to GCWCC)
- CentrePort Canada
- Per Capita Grants (Community Committee)
- Rapid Transit
- Annual Operating Grants (City Clerk's)
- Journey of Reconciliation
o Urban reserves
o Other initiatives
- Historical Resource Conservation &
Heritage Research - Gail Parvin
Hammerquist Fund
- Film and culture
- Existing grant and discount programs
- Heritage Conservation Tax
Grant Program
- Expedited permit processing support -
one stop shop, online services, concierge
The City must strategically use economic development tools to ensure that such
measures produce value for money or return on investment to the City.
Target:
Increase assessment base.
Measurement:
Growth in assessment base.
Partner organizations include:
- CentreVenture Development
Corporation
- Economic Development Winnipeg,
Yes! Winnipeg, and Tourism Winnipeg
- Business Improvement Zones
- Winnipeg Metropolitan Region
THE CITY'S PROPERTY ASSESSMENT BASE IS GROWING
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
2006 Reassessment
Billions
2012 Reassessment
2016 Reassessment
2010 Reassessment
2014 Reassessment
2018 Reassessment
10
City of Winnipeg | Financial Management Plan
4. Support Long-Term Financial Planning
This goal reflects Council's commitment to a multi-year balanced budget process and
is a major step forward in long term financial planning. OurWinnipeg identifies the need
for planning for a prosperous future by thinking long-term and inclusion of this goal in
the Financial Management Plan further acknowledges this need. Ultimately, the City's
multi-year budget should reflect the priorities described in OurWinnipeg, recognizing
that the multi-year budget needs to support ongoing financial sustainability for the City.
Historical City budget processes see preparation of a three year operating budget,
however, only one year is balanced. Together with the operating budget a six year
balanced capital program is also approved. The first year of the capital program is
adopted by Council, and five forecast years are adopted in principle. As both capital
and operating budgets are closely integrated, the five forecast years of the capital
budget that are adopted in principle include unfunded capital projects in the forecast
years, since the projects are allocated funding from an operating budget that is not yet
balanced. Only one year can be adopted in the operating budget due to the structural
deficit that exists. This deficit in the operating budget contributes to the City's inability
to fund needed capital projects. Continuing in this direction will seriously diminish
the organization's financial ability to delivery service to its citizens. Moving towards
multi-year balanced budgets and long-term financial planning will provide citizens with
greater long term certainty concerning City taxes and fees as well as clarity regarding
service levels. A sustainable institution must consider the impact of decisions beyond
one year, and how deficiencies will be addressed.
On June 21, 2018 Council directed the Public Service to initiate a process to implement
a multi-year budget approach effective for the 2020 budget year, with a particular focus
on addressing the structural deficit in tax-supported City operations. The following
chart illustrates the increasing structural deficit to be addressed through multi-year
balanced budgets.
Target:
Transition to multi-year balanced
tax-supported operating budgets.
Measurement:
A four year balanced tax supported
operating budget.
"Long-term financial
planning is the process
of aligning financial
capacity with long-term
service objectives."
- GFOA 2018
"Financial planning uses
forecasts to provide
insight into future
financial capacity
so that strategies
can be developed to
achieve long-term
sustainability in light of
the government's service
objectives and financial
challenges."
- GFOA Best Practices
An important component to the success of long term financial planning is having a clear understanding of the Organization's strategic
plans and service priorities. The development of a strategic plan is being undertaken as part of the multi-year budget process. A direct
benefit achieved from implementing a multi-year balanced operating budget will be the identification of funding gaps well in advance to
enable the development of financial strategies and plans to address the gaps. This will support the importance of discussions on service
levels decisions as Council determines how to allocate the financial resources the City has. On March 20, 2019 Council directed the Chief
Administrative Officer to undertake additional activities in preparation of the multi-year budget planning process for 2020, the details of
which are available in Recommendation V of Volume 2 of the 2019 Adopted Budget.
Includes: Budgeted Cash to Capital Investments and no One Time Transfers from Reserves and Other Sources
TAX-SUPPORTED OPERATING BUDGET - 10 YEAR PROJECTION
$1,600
$1,500
$1,400
$1,300
$1,200
$1,100
$1,000
$900
$800
$700
$600
2009
2008
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Total Expenditures
2027 2028
Total Revenues
Assumptions:
- Includes budgeted cash to capital investments
- No one time transfers from reserves and other sources
- Does not include unfunded capital
$105M
deficit by
2020
$236M
deficit by
2028
Adopted
Tax Supported
Budgets
$ (Millions)
11
City of Winnipeg | Financial Management Plan
5. Build, Maintain, and Enhance Infrastructure Assets
Target:
Continue to implement leading
practices for asset management.
Measurement:
Reduced infrastructure deficit.
Investments in key services and infrastructure are critical to support a growing,
thriving, modern city, now and in the future. Building, maintaining and enhancing the
City's assets and infrastructure is essential in meeting the needs of Winnipeg citizens
and attracting new investment and business to the City. The 2018-2027 Infrastructure
Deficit for both new and existing infrastructure is $6.9 billion. The largest portion of the
$6.9 billion relates to road infrastructure. Additional investment in recent years has
helped reduce the infrastructure deficit to this level.
The City has averaged an annual capital budget for the period 2010-2019 of $485 million
per year for both tax-supported and utilities, excluding any in-year approvals. This level
of funding is short of what is needed to be sustainable. To eliminate the infrastructure
deficit within 10 years would require an additional annual budget of $690 million, which
is at a level the City cannot afford with the existing revenue sources.
In January 2015, Council approved the City's Asset Management Policy, making asset management a core business function. The
adoption of the Policy also established the framework for infrastructure stewardship through comprehensive Asset Management
Plans. These plans are integrated with and help guide the long-range infrastructure investment planning process based on
considerations such as affordability, and in the future defined service levels.
As well, the City has released several infrastructure documents to guide Council's decision-making on infrastructure investment,
including:
- 2018 City Asset Management Plan
- 2018 State of the Infrastructure Report
- Unfunded Major Capital Projects Detail
- 2020 Infrastructure Plan
Decisions to effectively address the deficit may include:
- Increasing access to revenue
- Developing well-defined levels of service
- Apply a cost benefit lens to Policy Development and Strategic Plans
- Reviewing assets in poor to very poor condition
- Better alignment between the budget process and asset management
An asset management prioritization tool is also used to assist Council decision-making. The tool uses a weighted, multi-criteria
analysis to evaluate how the proposed investments contribute to a range of service needs and strategic priorities. By comparing
the benefits from these investments to the overall cost, projects' relative values can be assessed using a cost benefit points ratio.
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Bridges
Parks &
Open
Spaces
Water
Utility
Sewer
Utility
Land
Drainage
Utility
Solid
Waste
Utility
Police
Services
Fire &
Paramedic
Services
Community
Services
Municipal
Properties
Transit
Information
Technology
Roads
% Capital Plan
% City Deficit
ESTIMATED CAPITAL SPENDING TO DEFICIT DISTRIBUTION
PER SERVICE AREA 2018-2027
12
City of Winnipeg | Financial Management Plan
6. Manage Expenditures
Affordability is recognized by City Council as being important to the citizens of
Winnipeg. Winnipeg has a comparatively low ratio of operating expenses per capita
when compared to other cities across Canada. From 2011 to 2018, tax-supported
operating expenditures have increased by 27.7% compared to 25.1% inflation adjusted
for population growth. During this period, the City continued to increase spending on
public safety services at a rate greater than inflation offset by lower spending increases
on other services.
Target:
Operating expenditure increases
should not exceed inflation adjusted
for population growth.
Measurement:
Increase in operating expenditure over
prior year should not exceed inflation
adjusted for population growth.
"Local governments often
can't solve complex
community challenges
by itself. It must join with
others to form a network of
enterprises committed to
addressing the challenges
for a sustainable cost."
- GFOA 2018
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
Calgary
Edmonton Vancouver
Regina
Toronto
Halifax
Ottawa
Saskatoon Hamilton
Winnipeg
$1,999
$1,952
$1,937
$1,829
$1,585
$1,573
$1,557
$1,540
$1,492
$1,348
$343
$403
$470
$164
$627
$273
$488
$152
$217
$260
Comparable Expenditures per Capita
Transit Expenditures per Capita
2017 CITIES COMPARISON OF OPERATING EXPENDITURE PER CAPITA
The City has been successful in managing expenditures while ensuring public services
are maintained. Performance measure information is available for each City service
ensuring that service trends can be monitored to assist in resource allocation and to
ensure accountability for outcomes.
The City's strategy to manage expenditures, and find efficiencies includes:
- Strong governance and management practices
- Increasing focus on innovation and technology to improve service delivery and
increase efficiencies
- A review of core services including: rationalizing and consolidating services, delivery
systems and facilities
- Maintaining skilled and flexible workforce of same to similar size
- Partnering with other levels of government and other organizations, including
service sharing
Comparing operating expenditure between cities can be challenging due to differences between
service type and size. Therefore to create a fair comparison, the City of Winnipeg compiled a common
'basket of services': Police, Fire, Roads, Water, Sewer, Land Drainage, Solid Waste, Recycling, Parks,
Recreation, Libraries, Arts & Culture, City Planning, Development and Permits, Animal Services, Fleet,
Municipal Buildings, Corporate Services and Council. This does not include Ambulance, Assessment,
Cemeteries, Public Health, Social Services, Housing , Electrical Utilities, Transit and Interest. City of
Edmonton excludes EPCOR.
Note: In the Vancouver area, TransLink provides transit services to the entire region. As such, the
per-capita transit expenditures for Vancouver is calculated by multiplying TransLink's expenses
(excluding interest and amoritization of capital assets) by the porportion of it's service area that
is made up of Vancouver residents.
13
City of Winnipeg | Financial Management Plan
7. Manage Debt
On June 22, 2011, Council adopted the initial Debt Strategy which imposed limits for
tax supported, utilities and total City borrowing. Debt limits are reviewed regularly to
establish a prudent level of debt to support the City's capital infrastructure program
while maintaining an appropriate credit rating, long-term financial flexibility and
sustainability. The Debt Strategy was last updated on October 28, 2015.
The City is currently facing a substantial infrastructure deficit related to water and
wastewater facilities, roads, parks, transit, community facilities, and others.
To address the City's infrastructure deficit, the City has undertaken several public-private
partnerships to advance capital projects. These public-private partnership arrangements
constitute long-term financial obligations that are also factored into the debt metrics.
The City's debt load is projected to grow to $1.89 billion in 2023 from $1.07 billion in
2017 based on projected capital spending.
Issuance of debt must consider growth in City revenues and remain affordable to the
citizens of Winnipeg. By ensuring new debt remains within the limits set in the Debt
Strategy, Council is able to assess this affordability when setting annual budgets.
The Debt Strategy measures multiple metrics: Debt Capacity, Affordability, and Debt
per capita.
The addition of debt to finance capital projects is a large driver of increased operating
expenses and utility rates as debt servicing costs (interest and principal) for the
repayment of the debt are added to the operating budget.
Loan guarantees constitute meaningful commitments by the City of Winnipeg. When
the City guarantees a loan, it must disclose this contingent liability in its financial
statements. In the case of a consolidated entity, the outstanding loan balance is
recorded as a liability in the financial statements and forms a part of the consolidated
debt of the City of Winnipeg. If the organization defaults on the loan, the City would
be obligated to make payments on the loan or pay out the remaining balance of the
loan. The City has implemented a Loan Guarantee policy to minimize this risk.
Target:
That debt issuance and outstanding
debt is in accordance with the Debt
Management Policy and Debt Strategy.
Measurement:
Net debt as a percentage of revenue,
debt servicing as a percentage of
revenue and debt per capita remains
within Debt Strategy Limits.
Measuring net debt as a percentage
of operating revenue speaks to the
organization's ability to service the
debt.
Debt servicing as a percentage of
revenue is a measure of affordability
and speaks to the cost of servicing
the City's consolidated debt position
from a historical and current
perspective.
"Adherence to a debt
management policy
signals to rating agencies
and the capital markets
that a government is well
managed and therefore
is likely to meet its debt
obligations in a timely
manner."
- GFOA Best Practice
The following considerations are
assessed in determining whether
debt issuance would be supported
for a project:
- Intergenerational in nature
- Benefitting the community at large
- Growth related
- A major rehabilitation
- Financed by a dedicated revenue
stream
NET DEBT AS A PERCENTAGE OF REVENUE
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2015
Tax-Supported
Utility Operations
Total City
14
City of Winnipeg | Financial Management Plan
8. Ensure Adequate Reserves and Liquidity
Maintaining adequate reserves provides the City with the ability to respond to
unexpected events and extraordinary situations, maintain stable taxes and ensure
sufficient funds are available for major capital projects.
Liquidity also ensures the City's ability to respond to unexpected events and is
an important factor in credit rating determination as it is an indicator of the City's
ability to service its financial obligations. Credit ratings impact the cost of borrowing.
Maintaining adequate reserves is a significant factor in maintaining liquidity for the
organization.
Council has approved a target level for the Financial Stabilization Reserve of 6% of tax
supported expenditures. This reserve is available to fund major unexpected expenses
or deficits recorded in the General Revenue Fund. The City is considering setting
additional targets to assist with maintaining liquidity through the Debt Management
Policy.
In addition to reserves, liquid assets and the City's uncommitted credit facilities are
both contributing factors towards liquidity.
The City will continue to monitor its reserve and liquidity positions against future
requirements to ensure adequate balances are maintained.
Target:
Reserve balances maintained at
Council approved levels.
Measurement:
Reserve balances maintained at
Council approved levels.
"Modest but improving
liquidity profile - While
this ratio remains modest
compared to highly rated
Canadian municipalities,
it has consistently
improved since 2012."
- Moody's 2018
"Governments should
maintain a prudent level
of financial resources
to protect against the
reducing service levels
or raising taxes and fees
because of temporary
revenue shortfalls or
unpredicted one-time
expenditures."
- GFOA
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
December 2015
December 2016
December 2017
December 2018
41%
44%
44%
47%
TARGET = 30%
TOTAL CITY LIQUIDITY
Source: City of Winnipeg, Community Trends and Performance Report - Volume 1, 2019 Budget
15
City of Winnipeg | Financial Management Plan
City Contact Information
Photo Credits
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Information on the City of Winnipeg is available at winnipeg.ca
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Mike Peters
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Mike Peters
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