City of Hamilton

2007 Tax Budget Update

January 8th, 2007

City of Hamilton

Introduction

City Manager

City of Hamilton

Operating Budget Highlights

General Manager of Corporate Services

4

2006 Tax Budget by Dept

Other13%

Capital7%

Public Health

4%

Social Services &

Housing44%

Public Works

22%

HES8%

Boards & Agencies

16%

$1.04 Billion (Gross)

5

2006 Tax Budget by Expense

Other14%

Contractual8%

Employee Related

47%

Agencies & Support Pymnts

23%

Capital Financing

8%

$1.04 Billion (Gross)

6

2006 Tax Budget Revenue

Other6%

Tax Levy55%

Grants & Subsidies

25%

Fees & General

14%

$1.04 Billion (Gross)

7

Components of the Residential Municipal Tax Impact

Budget x%

Reassessment y%

+

Tax Policies(ratios, area rating)

z%

+

=

Total Tax Impact x% + y% + z%

= 0%

8

• Draft budget contains no service or program reductions.

• Roll-out of Council approved Solid Waste Management Master Plan– target 65% waste diversion avoids need to search

for a new landfill.– 45% diversion expected in 2007 (2001 = 16%)

• $2.7m in additional Public Health subsidy providing -$1.2M reduction to levy while increasing gross program spending over $1.5M.

• Second phase of tree trimming enhancement approved in 2006.

2007 Budget Highlights

9

• Revised Winter Control forecast reduces final phase-in from $1.9m to $0.3m.

• Energy prices stabilized, not a significant pressure for 2007.

2007 Budget Highlights

10

2007 Draft Net Operating Budget

Note – All figures rounded

2006 2007 DraftBudget Budget $ %

($ millions) ($ millions)PLANNING & EC DEV 14.7 15.2 0.5 3.4%PUBLIC HEALTH 10.4 9.1 (1.3) (12.2%)COMMUNITY SERVICES 151.2 161.4 10.1 6.7%PUBLIC WORKS 151.0 159.4 8.4 5.5%HES 71.0 72.9 1.9 2.6%OTHER DEPTs 31.9 32.8 0.9 2.8%POLICE SERVICES 107.1 111.1 4.0 3.7%BOARDS & AGENCIES 41.5 43.2 1.7 4.2%NON-PROG REV (61.5) (61.1) 0.5 0.8%CAPITAL FINANCING 72.1 75.1 3.0 4.2%PROVINCIAL FUNDING (15.0) (17.0) (2.0) (13.3%)

TOTAL LEVY 574.4 602.1 27.7 4.8%

Net Operating BudgetChange

11

Tax Policies

• Levy Restriction – only able to tax commercial and industrial properties 50% of the residential tax increase.

• Education tax rates will remain at 2006 levels.• There is no reassessment this year.• Draft budget assumes no changes to tax ratios

or other tax policies.• Evaluate impact of moving C/I to threshold • Tax ratio and other tax policy options will be

presented to Council during deliberations.

12

Residential Tax Impact

Note – All figures rounded

Base budget levy increase 4.8%Less: Assessment growth (1.0%)

Tax Increase (Unrestricted) 3.8%Add: Levy restriction impact 0.7%

Residential Tax Increase 4.5%

• Provincial levy restrictions on commercial &

industrial classes cause residential taxes to

increase 4.5% instead of 3.8%

13

• For 2006 an additional $2.6 million was received. 2006 Budget = $33.1m.

• The 2007 allocation is based on final 2006 = $2.6m increase over 2006 budget. 2007 Budget = $35.7m.

• Risk that other provincial funding may be adjusted.• Staff estimate approximately $1.2m net shortfall for

ODB/ODSP/Housing despite additional OMPF.

Ontario Municipal Partnership Fund

14

Budget Pressures

Waste - Diversion initiatives (2006 app’d) 3.0Capital program (0.5% of levy) 2.9ODSP/ODB & other 2.5Tax assessment / write offs 2.3 Homes for the aged 2.2 Culture & recreation 1.4Housing-mandated benchmark increase1.4Waste – recycling revenue loss 1.3 Library 1.1Transit (Risk, Parts) 1.0Additional OMPF Funding (2.6)Fuel Tax (Provincial) – Transit (0.9)Other (Investment, Supplementary tax) (0.7)

$ millions

15

Assessment Appeals

($ millions) 2003 2004 2005 2006

Budget 7.3 7.8 8.2 8.2

Actuals Appeals 3.6 5.1 9.2 8.8 Vacancy rebates 1.5 1.9 1.8 1.8 Other Write-Offs 6.2 4.7 2.5 1.6

11.3 11.7 13.5 12.2

Budget Shortfall (4.0) (3.9) (5.3) (4.0)

2007 draft budget $10.5 million

16

Assessment Growth

2001 0.8%2002 1.3%2003 1.4%2004 1.7%2005 1.6%2006 1.7%2007 1.0%

• 1% growth equals approximately $5m

17

2007 Draft Net of Extraordinary Items

Note – $ Millions; all figures rounded.

Res. TaxIncrease

PROJECTED RESIDENTIAL PROPERTY TAX IMPACT $ 27.7m 4.5%

Net of Major Pressures:WM - Green Cart, CRC, Composting (3.0)Property Tax Appeals/Write-offs (2.3)Homes for the Aged (2.2)Social Service Mandated (in excess of OMPF) (1.2)

(8.7)

TAX IMPACT NET OF EXTRAORDINARY ITEMS $ 19.0m 2.8%

TAX IMPACT EXCLUDING LEVY RESTRICTION 2.4%

18

Referred Items / Enhancements

• Council Referred $1.2M - includes NCB programs, Farmer’s Market parking, Floral Traffic Island.

• Legislated $0.5M - includes Grow-op inspections, Homes – Dieticians.

• Zero-Net – do not affect levy• Safety $1.4M – Ancaster & Flamborough Fire• Other (including staff review and CoW

motions) • Enhancements of $5M would = 1% tax impact

Items referred by Council to the 2007 budget processAnd other enhancements.

19

Potential Tax Impact on an Average Home ($205,000 Assessment)

* - For illustrative purposes example of $5m enhancements used. Area rating may increase or decrease final impact by community.

2006 Taxes *

2007 Taxes *

$ $ $ %

CITY - BASE BUDGET 2,426 2,534 108 4.5%CITY - ENHANCEMENTS * 0 24 24 1.0%EDUCATION 543 543 0 0.0%

TOTAL PROPERTY TAXES 2,969 3,101 132 4.4%

Property Tax Impact

20

Area Rating

• Some program enhancements will have area rated impact:– Transit (Stoney Creek, Hamilton, Dundas)– Fire (Ancaster & Flamborough)

• Borers Creek debt retired. Additional $1.5m in slot revenue. Revenue has been included in draft budget but decision on allocation pending.

• Area Rating sub-committee to report back during process

21

• Tax Capping program (mandated)• Transit Fare options• Additional provincial revenue to match

mandated social services shortfall ($1.2m).• Reviewing assessment appeal provision.• Revenue strategy (eg. PIL’s).• Energy - Interval metering• Continued review of budget submissions.• Review of 2006 actuals during year-end

process.

Potential Reduction Options

22

• Provincial funding budgeted at $17 million.• EMS Operational review• Living Wage review• Risk Management (claims still exceed budget;

utilizing reserves).• Energy prices – No contingency for sustained

price spikes.• Winter Control based on average.• Job Equity (collective agreement) costs could

exceed contingencies.• Most user fees assumed inflationary increase.

Risks & Assumptions

City of Hamilton

Capital Budget Highlights

General Manager of Corporate Services

24

2007 Capital Budget

• As per final 2006 Budget Report, Staff continued the following Capital strategies for 2007 :

1. Not to further increase debt levels

2. Direct additional funding to Roads/ Facilities Rehabilitation and Council’s Strategic Capital Program.

3. Meet with each individual Councilor regarding Ward specific Capital Plan.

25

2007-2016 Available Capital Funding

2007 - 2016 Capital Forecast by Program $1.6 Billion

Roads43.7%Facilities

10.2%

Fleet4.7%

Emergency Services3.5%

Waste6.4%

Transit6.0%

RHVP2.2%

Downtown/Waterfront7%

Other6.4%

Parks / Forestry9.9%

26

2007-2016 Available Capital Funding

2007 - 2016 Sources of Capital Funds Forecast $1.6 Billion

Subsidy / Other Revenue,

$500.7M, 31%

External Debt, $134.5M, 8%

Reserves / DC's, $618.9M, 39%

Transfer from Operating,

$348.7M, 22%

27

2007 Proposed Capital Budget

2007 PROPOSED TAX CAPITAL BUDGET (000's)

GROSS NET GROSS NET$ $ $ $

Roads 42,250 31,002 54,544 25,000

Expressway 45,522 29,550 29,357 17,753

Waste Management 9,005 7,736 24,905 24,905

Transit Services 11,371 0 14,544 0

Industrial Land & Airport Development 11,041 2,537 19,429 5,025

Outside Boards & Agencies (Library etc) 7,190 1,629 12,854 3,862

Open Space Development 7,426 0 9,669 4,046

Fleet and Facilities – Corporate Buildings 3,500 3,500 5,000 5,000

Community Facilities-Repairs/Replacements 4,040 4,000 5,010 5,000

Community Facilities-New Facilities/Upgrades (YMCA, Flamborough Arena) 704 704 9,746 3,550

Downtown Renewal 2,750 2,750 2,800 2,750

Tree Planting 1,550 1,550 1,500 1,500

City Hall Renovations 5,000 5,000 13,630 13,630

Other Capital Projects 32,775 14,620 32,335 7,625

Total Affordable Projects 184,124 104,578 235,323 119,646

2006 APPROVED 2007 PROPOSED

28

City Capital Program – Growth History

Total Capital

94

134 141160

183

215

184

236

0

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007

Year

$ M

illio

ns

Proposed

29

2007 Capital Budget

• Increase in proposed Capital Budget due mainly to increased Fed/Prov Subsidies and HFF funding:

1. Roads rehab $15m.

2. Employment Lands $11.5m

3. Federal Gas Tax $3.1m

4. Future Fund Loan $17.3m (waste/roads)

Total $47 million

30

GAS TAX FUNDING/FORECAST

Revenue SourcesRevenue Sources 2005 2006 2007 2008 2009

Federal Gas Tax $9.6M $9.6M $12.7M $15.9M $31.9M

Transit Federal Gas Tax

$0 $4.9M ? ? ?

Provincial Gas Tax

$5.9M $8.6M $11.4M $11.4M $11.4M

TOTAL $15.5M $23.1M $24.1M+ $27.3M+ $43.3M+

31

Outstanding Debt

PROJECTED OUTSTANDING DEBT - TAX

235

317 310 304 292 281 277 257 233207

173

39 52 5754

49 4540

3632

28

42

0

50

100

150

200

250

300

350

400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

YEAR

$ M

ILL

ION

S

Tax Supported DC Funded

277277

356 362 361 346 330322

297 269

239

201

32

Debt Charges

PROJECTED DEBT CHARGES

33.2 30.936.5 38.1 39.5 40.9 42.9 42.3 42.8 43.3 43.4

13.0

14.9 15.1 14.5 14.4 13.6 13.6 12.7 11.9 11.95.6 4.2

4.15.8 6.8 6.8 6.8 6.2 6.2 6.1 6.1

11.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

YEAR

$ M

ILL

ION

S

External Debt Internal Debt DC Funded

50.0 48.155.5

59.0 60.8 62.1 63.3 62.1 61.7 61.3 61.4

33

Capital Program Forecast

Total Capital

184

236

140 150 152 153

0

50

100

150

200

250

2006 2007 2008 2009 2010 2011

Year

$ M

illi

on

s

34

Affordable Capital Program

10 Year Capital Forecast (2007-2016)

$ Millions

Total Capital Financing Available 1,602.9

Total Capital Required 2,224.8

Unaffordable Capital (621.9)

Assumes 10-year Federal Gas Tax Subsidy

35

Affordable Capital Issues

10-year Infrastructure Shortfall at a minimum $620 million.

• Roads Repair and Rehabilitation = Fully Funded

• Facilities shortfall = $30m + annually

• Park Development shortfall = $5m annually

• Forestry shortfall = $20m + annually

• Additional Waste Management Requirements ???

• Minimal capacity for any new capital initiatives.

36

Affordable Capital Program

• Capacity has been used for:– Waste Management Master Plan– Red Hill Valley Project– Facilities (City Hall, Wentworth Lodge)

• Unaffordable Capital over the next 10-years is at a minimum $620 million

• Two Options regarding a Capital Levy Increase.

Option 1 = 0.5% tax levy increase for Capital$2.9M

Option 2 = 1.0% tax levy increase for Capital $5.7M

Note: Either option could be enhanced with additional

borrowing from the Hamilton Future Fund

37

2007 Draft Capital Budget

• Option 2, generates additional $150 million over 10 years

• Require sustainable funding from senior levels of government, particularly older cities

• All larger/mature municipalities face this magnitude of capital funding shortfall.

38

Operating Budget Impact

CAPITAL BUDGET IMPACT ON OPERATING BUDGET ($000's)

2006 2007 2007APPROVED OPTION 1 $ % OPTION 2 $ %

Debt Charges 44,359 43,947 (412) -0.9% 43,947 (412) -0.9%Transfer from Operating 29,152 32,434 3,282 11.3% 35,304 6,152 21.1%

Total Impact 73,511 76,381 2,870 3.9% 79,251 5,740 7.8%

Note - $73.5 m is 12.8% of the 2006 Total Levy. Similar municipalities range from 15 - 20%

CHANGE CHANGE

39

• Development of Financial Sustainability Plan• Infrastructure review• Multi-Year budgeting• Assessment growth and business retention• Develop during 2007

Sustainability Plan

40

Next Steps

• Jan 8th CoW – Budget update

• Early Feb – Print & Distribute Budget Books

• Feb – User Fee Report • Feb – Department presentations• Feb – Public delegations• Feb/Mar – Budget deliberations• Mar – Budget Approval• Feb-Apr – Tax Policy / Area Rating