HomeMy WebLinkAboutFCS-17-051 - 2016 Audited Financial StatementsStaff Report
rR finance and Corporate Services Department www.kitchener.ca
REPORT TO: Audit Committee
DATE OF MEETING: June 26, 2017
SUBMITTED BY: Dan Chapman, Deputy CAO, Finance and Corporate Services and
City Treasurer, 519-741-2200 ext 7347
PREPARED BY: Sheri Brisbane, Supervisor of Financial Reporting, 519-741-2200
ext 7349
WARD(S) INVOLVED: All
DATE OF REPORT: June 19, 2017
REPORT NO.: FCS -17-051
SUBJECT: 2016 Audited Consolidated Financial Statements
RECOMMENDATION:
THAT the 2016 Audited Consolidated Financial Statements of the City of
Kitchener be approved.
BACKGROUND:
Staff is pleased to submit the 2016 Audited Consolidated Financial Statements of the
City of Kitchener. A presentation of financial statement highlights will be given at the
Audit Committee meeting on June 26. Representatives of the City's external auditors
will also be in attendance to discuss the Audit Findings Report.
REPORT:
The consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles for local governments as established by the
Public Sector Accounting Board of the Chartered Professional Accountants of Canada.
These financial statements are prepared on a full accrual basis and combine the results
of the tax -based operations, enterprises, local boards, capital activity, and reserve fund
activities. Local boards include The Centre in the Square Inc., Kitchener Public Library,
Belmont Improvement Area, and Kitchener Downtown Improvement Area. The 2016
year end results for the tax -based operations and the enterprises were reported to
Council in March. Please see Appendix A to this report for a reconciliation between the
non -consolidated figures presented in March and the Audited Consolidated Financial
Statements.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The recommendation of this report supports the achievement of the city's strategic
vision through the delivery of core service.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
1-1
FINANCIAL IMPLICATIONS:
None
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in
advance of the council / committee meeting. The audited financial statements will be
posted on the City website and notice will be provided to all residents through one of the
widely distributed local newspapers in accordance with Section 295 (1) of the Municipal
Act, 2001.
ATTACHMENTS:
• City of Kitchener Financial Report for the Year Ended December 31, 2016
• Audit Committee Presentation
• Audit Findings Report for the year ended December 31, 2016 (KPMG)
ACKNOWLEDGED BY:
Dan Chapman, Deputy CAO of Finance and Corporate Services and City Treasurer
1-2
Appendix A — Annual Surplus Reconciliation
The annual surplus presented in the Audited Consolidated Financial Statements
reconciles to the City of Kitchener year-end results provided to Finance & Corporate
Services Committee on March 20, 2017 as follows:
Year Ended
Dec 31, 2016
Tax supported surplus (deficit) 940,672
Enterprise surplus 2,417,317
Total operating surplus as presented in March 3,357,989
Consolidation
Kitchener Public Library 13,911
The Centre in the Square 174,382
Kitchener Downtown Improvement Area (69,361)
Belmont Improvement Area 7,195
Kitchener Power Corporation and its Affiliates 5,525,130
Kitchener Generation Corporation 24,480
5,675,737
Revenues not included in operating surplus
Development charge revenue recognized 10,388,476
Investment income and dividend from
Kitchener Power Corporation 7,649,406
Other reserve fund revenue 6,296,383
Donated assets 4,404,349
Othercapital revenue 11,270,960
40,009,574
Expenses included in Operating surplus,
not in consolidated statements
Net transfers to capital and reserves
60,854,974
Various PSAB adjustments
7,704,001
68,558,975
Expenses not included in Operating surplus
Amortization of tangible capital assets
(40,612,167)
Expenses in capital
(17,770,535)
Change in actuarial estimate for employee
future benefits
(3,928,057)
Expenses in reserve funds
(3,639,317)
(65,950,076)
Surplus pe r Consol idated F/S
51,652,199
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1-31
m
REPORT
DECEMBER 31 2016
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SB C I lii Nii°iu
Message from the Mayor
Kitchener City Council
Organizational Structure
Message from the City Treasurer
III Iii riii a iiriii c Iii a III S e c"It lI o iiriii
Consolidated Financial Statements
Trust Funds
Belmont Improvement Area Board of Management
Kitchener Downtown Improvement Area Board of Management
Kitchener Public Library
The Centre in the Square Inc.
Gasworks Enterprise
Kitchener Generation Corporation
Kitchener Power Corporation
Statstit a III S e c fli wriii
Financial and Statistical Review
� III�"fte IIIIII" °'"°s
2
3
4
5
23
46
52
58
67
79
91
94
101
138
2016 KITC JR FIN NCIJEPOBT
2
On behalf of city council, I am pleased to introduce the 2016 Annual Financial Report. Last year, City of
Kitchener staff and council worked really hard on a number of initiatives that kept the priorities of our
strategic plan —and therefore, our citizens—front and centre. We made difficult decisions in order to deliver a
balanced budget.
As we look ahead to crafting our next strategic plan, our commitment to accountability, transparency and
community participation ensures our city is a place where every resident can make a good living, and live
a meaningful life. Our city is an inspiring and exciting place to be. It is thriving. We work hard to make sure it
thrives, aided in no small way by our bold approach to economic development — Make It Kitchener — and
through our new Neighbourhood Strategy, where the city supports residents who are working together to take
the lead in creating great places and connecting people.
We actively advocate with other orders of government to make sure the momentum created by Make It Kitchener
continues. One of the ways we did this was to set up a Waterloo Region Day in Ottawa last November, where
local municipal leaders and other stakeholders in our community met with the prime minister, governor general,
government ministers and staff to find ways to deliver on our priorities.
The Government Finance Officers' Association (GFOA) awarded our accounting division the Canadian Award for
Financial Reporting for their 2015 financial report. Open communication, two-way citizen engagement and
transparency in governance are hallmarks of the ways our staff do business.
Beyond any legislated requirements, we at the City of Kitchener are proud to produce reports like these each
year, demonstrating our commitment to openness and transparency. This report provides a financial
perspective on how we met the challenge of making big things happen in 2016.
1-35
K 'iiiiii t cm n h iiiiii n h iiiii 'iiiiii t
MAYOR
Berry Vrbanovic
WARD 1 Councillor WARD 2 Councillor WARD 3 Councillor WARD 4 Councillor WARD 5 Councillor
Scott Davey Dave Schnider John Gazzola Yvonne Fernandes Kelly G alloway-Sea lock
WARD 6 Councillor WARD 7 Councillor WARD 8 Councillor WARD 9 Councillor WARD 10 Councillor
Paul Singh Bil loannidis Zyg Janecki Frank Etherington Sarah Marsh
2016 KITC JR FIN NCIJEPQ$T 3
�Iw!III II:: III�I� II �Iw!Iii .ii Il�i�ll
1RIII IIS III S IG iii Jii VIII �I� IIII:� III �I� II:II�
Jeff Willmer: Chief Administrative Officer
Corporate Communications and Marketing
Corporate Customer Service
Economic Development
Office of the Mayor and Council
Project Integration and Coordination
Strategy and Business Planning
Ug3 3A IIS
Dan Chapman: Deputy CAO
Accounting
Financial Planning
Human Resources
Information Technology
Legal Services
Legislated Services
Revenue
SAP Business Solutions
Supply Services
4
I ILII Il AS Iw��ll����ilJu� Iw ilPu llll�: II S
Cynthia Fletcher, Justin Readman:
Interim Executive Directors
Asset Management
Engineering
Facilities Management
Fleet
Operations - Roads and Traffic
Operations - Environmental Services
Transportation Services
Utilities
l�' NA NA I IIS III"II Y
Michael May: Deputy CAO
Building
Bylaw Enforcement
Community Programs and Services
Sport and Cemeteries
Fire
Planning
1-37
Message froin thei
I am pleased to present the Annual Financial Report for the City of Kitchener for the year ended
December 31, 2016. This report communicates the 2016 financial results for the City of Kitchener to
council, residents and other interested parties. These results demonstrate Kitchener's
continued sound financial management and fiscal prudence.
FINANCIAL MANAGEMENT
The financial statements and related information contained in this annual report are the
responsibility of the management team of the City of Kitchener. Management has instituted a system
of internal controls intended to safeguard assets and to provide accurate, timely and complete
financial information for both internal decision-making and external reporting.
The City has the following foundations in place to ensure appropriate financial controls
and accountability are maintained, and to take a proactive approach to identify and
address financial challenges.
1-38
FOCUS ON EFFECTWE AND EFROENT GOVERMMENTIlh TRS E Ih Rl ANMNGh
At the beginning of each new four-year term of council, the City of Kitchener develops a
strategic plan to advance the vision, mission and goals for Kitchener. The 2015-2018 strategic plan
was developed in collaboration with extensive community input. The plan is designed to ensure
that over time, the public funds the City is entrusted to manage on behalf of citizens are allocated
to top public priorities, invested effectively and spent efficiently. Simply stated, the strategic plan
serves as the community's roadmap to take us from where we are today to where we want to go in the
coming years.
1-39
The 2015-2018 plan includes five key strategic priorities:
Open Government
We will be transparent and accountable to citizens, providing easy access to
information, a great customer service experience, and meaningful
opportunities to participate in the democratic process.
Strong & Resilient
We will work within a collaborative network of city -builders to create a
Economy
dynamic and prosperous Kitchener that is rich with employment
opportunities and successful business ventures that can grow and thrive
within the broader global economy.
Safe &Thriving
We will work with community partners to create complete, connected, safe
Neighbourhoods
and walkable neighbourhoods with a range of housing options. We will
encourage people to come together, interact with one another and build
relationships through inclusive programs, services, events and great public
gathering places.
Sustainable
We will have well planned, managed and cost effective infrastructure
Environment &
systems that support long-term community needs for services,
Infrastructure
harnessing the benefits of nature through green infrastructure programs to
create a healthy urban environment.
Effective & Efficient
We will deliver quality public services that meet the day-to-day needs of the
City Services
community in a reliable and affordable way, made possible through
technology, innovation, employee engagement and a sound long-term
financial plan.
1-40
BU&MSS P11l h D BUDGET
Business planning
The purpose of the business planning process is to manage and support the strategic plan to
guide the medium-term course of the corporation. This involves the development,
communication and facilitation of a process that engages council, the corporate leadership team,
management and staff in establishing operational priorities that:
are driven by the objectives of the strategic plan,
meet the expectations of the community,
respond to emerging issues in a sustainable and affordable way.
With this plan, the organization as a whole will be able to make progress on its strategic
priorities, as well as maintain and continuously improve the city's core services.
The business plan is updated annually and is comprised of a brief overview of each
department. It contains a profile of the city's 44 core services delivered by those departments, service
trends and future challenges, and a listing of project commitments by division identifying the
primary link back to the strategic plan.
The City implemented a comprehensive performance measurement framework to monitor and report
on key results on an annual basis. In 2016, the City reported on 37 performance measures related to
10 different core services and has started collecting performance data for 13 additional core services
that will be reported in 2017.
FII
Budget process
In addition to the business planning process city council approves the annual budget, made up of three
parts: operating, capital and reserves. The City of Kitchener is charged with responsibly
managing and investing the tax dollars and user fees its residents pay to meet the needs of the
community and ensure all of the strategic priorities are addressed.
City Council and staff are committed to striking a healthy balance between offering valued
services and programs to residents, making strategic investments in community priorities, and keeping
property taxes at a reasonable rate.
To provide transparency in the budget process, budget information is posted on the city's
website and budget meetings are held in a public forum. Citizens are able to provide their input
through a number of channels, including by phone, letter, email, social media, or in person at a
public delegation night.
Management staff review their budgets regularly. Detailed variance reports are prepared and
presented to council three times per year, at the end of April, August and December. These reports
ensure departmental accountability for financial results and are a key tool to allow management
to respond to financial pressures during the year.
External audit
As required by the Municipal Act, city council has appointed a public accounting firm, KPMG LLP, to
express an independent audit opinion on management's consolidated financial statements.
Their reports to the members of council, inhabitants and ratepayers of the Corporation of the
City of Kitchener accompany the various financial statements in the financial section of this
report.
Audit committee
The audited consolidated financial statements are presented to the audit committee for
approval. The committee provides a focal point for communications between council, the
external auditor, the internal auditor and management, and facilitates an impartial, objective and
independent review of management practices through the internal and external audit functions.
1-42
FINANCIAL STATEMENT DISCUSSION AND ANALYSIS
The City of Kitchener's consolidated financial statements have been prepared in accordance with
reporting standards set by the Public Sector Accounting Board (PSAB) of the Chartered
Professional Accountants of Canada. KPMG LLP have audited the financial statements and
provided the accompanying auditors' report. The financial statements and auditors' report
satisfy a legislated reporting requirement as set out in the Municipal Act of Ontario.
The following financial statement discussion and analysis has been prepared by management and
should be read in conjunction with the audited consolidated financial statements and financial
and statistical review.
There are four required financial statements:
- statement of financial position;
- statement of operations;
- statement of change in net financial assets, and
- statement of cash flow.
The consolidated financial statements reflect the assets, liabilities, reserves, surpluses/deficits,
revenue, and expenditures of city funds and governmental functions or entities. These
functions and entities comprise a part of the combined city operations based upon control
exercised by the city. The exception is the city's government business enterprises, which are
accounted for on the modified equity basis of accounting. References to the "City'
below include all activity for the consolidated entity.
1-43
CONSG� DATED STATEMENT OF RIII IIII
The Consolidated Statement of Financial Position highlights four key figures that together
describe the financial position of a government: 1) cash resources, 2) net financial asset
position, 3) non-financial assets that are normally held for service provision such as tangible capital
assets, and 4) accumulated surplus (deficit). The statement is used to evaluate the City's ability to
meet its financial obligations and commitments.
The City's net financial asset balance is $214 million (2015 - $194 million), an increase of $20
million. This balance is calculated as total financial assets less liabilities and represents the
amount available to finance future operations. The increase year over year is due to the
culmination of changes in the various balance sheet accounts which are described in the
paragraphs below.
Cash and cash equivalents
The City's cash position is closely managed and remains adequate along with short-term
investments to meet ongoing cash requirements. The cash position has increased to $39 million from
$27 million in 2015 as certain large monthly payments were made after yearend in 2016 but prior to
yearend in 2015. The Consolidated Statement of Cash Flows summarizes the sources and uses of
cash in both 2016 and 2015.
F�IA IIAI
Trade and other accounts receivable
The amount in Trade and other accounts receivable has decreased to $29 million from $34 million
in 2015. This is due primarily to the settlement of a significant receivable that was outstanding in
2015.
Investments
It is the policy of the City of Kitchener to invest public funds in a manner that provides the
highest investment return while protecting and preserving capital, maintaining liquidity to meet the
daily cash flow demands and to conform to all legislation governing the investment of public
funds.
The balance in investments grew in 2016 to $158 million from $139 million in 2015. This
increase relates primarily to funding received for specific capital projects that had not been fully spent.
Investment in Kitchener Power Corporation & Kitchener Generation
Corporation
The City's investment in both Kitchener Power Corporation and its affiliates and Kitchener
Generation Corporation is made up of the City's initial investment and its share of net
income since acquisition less dividends received. See Notes 6 and 7 to the Consolidated
Financial Statements for further details.
Deferred revenue — obligatory reserve funds
The increase in deferred revenue — obligatory reserve funds is due to funding received for
specific capital projects that has not been spent in the year. Please see Note 9 to the financial
statements which provides greater detail regarding activity in 2016 compared to 2015.
Municipal Debt
The City has three components that comprise the overall debt total. Debt has been issued to fund:
• a portion of the tax -supported capital program
• capital improvements to Enterprises, where the debt charges will be funded
through user fees or external sources, such as the Parking Enterprise or the
Kitchener Rangers
• the Economic Development Investment Fund (EDIF)
1-45
Millions
$125
$�1oo
$7'5
$2'5
M
20,12 20,15 2014 20,15 20,1
MTax 11 Enterprise i ED, IF
The City's capital investment philosophy ensures that any increases in debt charges from one year
to the next do not exceed assessment growth (excluding the impact of the debt associated with EDIF).
As well, the overall contribution from the tax base through taxes and debt charges will not increase
more than assessment growth plus inflation from one year to the next.
This philosophy has ensured that the impact on the taxpayer does not exceed inflation and that the
City must prioritize projects to fit the funding available.
The City created EDIF in 2004 as a $110 million commitment to invest in catalyst projects to
strengthen the local economy and stimulate urban development in Downtown Kitchener. The fund
has provided dollars for major strategic investment projects including the University of Waterloo
School of Pharmacy, Communitech Hub, and King Street streetscaping. EDIF investments
have had a remarkable positive impact on the City, increasing the City's recognition as
a location for innovation, entrepreneurship, and a sought-after urban lifestyle.
Municipal debt has decreased to $85 million from $94 million in 2015. The change in debt is a result
of new debt issuance of $2.4 million offset by repayment of $11.1 million of existing debt. Debt is
expected to decrease for the next number of years as the ten year EDIF program continues to
be paid down.
1-46
IM Land
$19,0M )$l.asm)
Assets under cc�nstruct�i,o
Tangible Capital Assets
UM Lana Ilmpirovement
a Buildings
$IS5M )$IHM)
10 Leasehold (Improvements
$2M )$2M)
M IIMachineiryand Equipment
'v Computer Hardware &
Sdtwaire
$2.5M )$7M)
a Vehicles
Linear Assets
$576,M1 $5291M)
Tangible capital assets are recorded at cost which includes all amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost less
residual value of the tangible capital assets is amortized on a straight-line basis over their
estimated useful lives ranging from 2 to 100 years.
During 2016, the City acquired $75 million in tangible capital assets (2015 - $91 million).
Amortization of assets was $43 million (2015 - $40 million). Refer to Note 13 and Schedule A of the
Consolidated Financial Statements for a detailed breakdown of tangible capital asset activity for
2016. The net book value of tangible capital assets at December 31, 2016 is $1.07 billion, up from
$1.03 billion in 2015.
Accumulated Surplus
Illinvest:ed ilini Tains, ,iiibllle Calpiiit:alll
Assets
$1,0651f" ($ 1„03311 ;l
0tlheim-
$1 ($-14M)
WO EgUiity iiia IKPC.
$201M ($1961M)
IEgUiity iiia IKGC;
$31M ($311)
IEirnIplll yee IFUt:Uire IBeiniefits
$-421M ($-381P)
IPeseinve IFUnds
$5511” ($511P)
The City's accumulated surplus for fiscal 2016 is $1.28 billion (2015 - $1.23 billion). The
accumulated surplus reflects the resources that have been built over time at the City and
the balance includes items such as tangible capital assets, equity in Kitchener Power Corporation
and Kitchener Generation Corporation and various reserves.
1-48
Millonis
$60
$50
$40
$30
$20
$10
2012 2013 20141 2015 2016
Reserve funds are included as part of accumulated surplus and these balances are disclosed in Note
14 to the financial statements. Reserve fund balances have increased during 2016 to $55 million (2015
- $51 million).
Under the authority of the Municipal Act, the City has established reserve funds to set aside funds
to be used for future purposes.
Reserve funds are established to ensure future liabilities can be met, capital assets are properly
maintained and sufficient financial flexibility exists to respond to economic cycles or
unanticipated financial requirements. Council is responsible for exercising discretion with
respect to the use of reserve funds, subject to the terms of Council policy, as well as statutory and
legal requirements.
The reserve policy contains guiding principles to ensure the reserves continue to support the
financial goals and serve the highest priority needs of the City and its citizens.
1-49
DATED STATEMENT OF OPERATONSI'
The Consolidated Statement of Operations reports the revenue collected by the City, the cost of
providing municipal services and the resulting annual surplus/deficit.
This year, overall assessment growth was 1.29%. While this new assessment creates revenue for the
City, there is also a cost to provide services to new development. In addition, cost increases in
excess of inflation, public demand for new services and unreliable revenue sources all place significant
pressure on the City budget. The tax rate increase for 2016 operations was 1.46%.
1-50
Millions
12'0'
loo
&D
&u
X40
$20
Taxation Gas Dirks ",Mater, other useirfees Giraruts Other
serer &
stcirrn water
'it, 20 16 Bull et M 2016 ActuaI' w2015 Actual
Revenue
Revenue is received from the following sources: taxation; user fees from gasworks, water, sewer,
storm water and other; grants and other. Kitchener is one of only two municipalities in Ontario that
own and operate a natural gas utility.
Gasworks revenue is $14M lower than 2015 due to lower supply rates charged to customers as planned
and decreased usage due to milder temperatures experienced in 2016. It is less than budget due to
the decreased usage.
Water, sewer & storm water revenue is $10M greater than in 2015 due to the approved
increases in the user fee rates charged for these services.
Grant revenue is less than budget and prior year due to the deferral of unspent Federal Gas Tax funds.
These funds will be spent in future years on eligible capital projects.
The 'Other' category in the chart above includes contribution of tangible capital assets,
investment income, penalties and interest on taxes, obligatory reserve funds revenue
recognized, and share of net income of Kitchener Power Corporation and Kitchener
Generation Corporation. Revenue is lower in this category for 2016 compared to 2015, due to
significantly smaller amounts of contributed assets to the City.
1-51
Millions,
6th
$50
$46
$ 30
$26
$16
Generalll Prote�ct'iiion Transport- Eiji ron- R�ecre�atlio�n othe,I, Gasworks
govern-iment services atlon menta ll & cullturall''
se roce,s see -rliCe,s se rOICes
W 2015 lBudget W 2016.Actual �,rj 2055 Actual
Expenses
The City of Kitchener is a diversified government institution and provides a wide range of
services to its citizens including fire, roads, water, sewer, natural gas, libraries, and community
services. Schedule B of the Consolidated Financial Statements breaks the expenses into major
functional activities, consistent with provincially -legislated requirements.
As is common with most Ontario municipalities, the City of Kitchener does not budget for
amortization of tangible capital assets or gains and losses on disposal of assets. In order that the
actual results may be compared to budget in a meaningful way, the Council -approved budgets
have been adjusted to include amortization expense and other accounting adjustments mandated by
the Public Sector Accounting Board to express the financial statements on an accrual basis. This
provides greater clarity for all readers in assessing budget to actual variances.
General government expenses are $7.6 million higher in 2016 than 2015. This is primarily due to a
large gain on disposal of land that offset the 2015 expenses.
The lower Gasworks expenses compared to 2015 and budget relates to lower costs associated
with purchasing natural gas due to lower commodity prices and the milder
temperatures experienced in 2016.
1-52
E Materials and services
$9'2M ($99M)
ID]ehaentiire debt interest
$-4M ($4M)
IM Grants and other
$4M ($31v1)
0 Amortization
$43+1 ($400)
Loss/(Gain) on sale of asset
-$IM ($-aM)
Salaries,„ wages and employee
Benefits
$14711 9 ($142M)
CONSGf llID STAMMENT OF 0���IANGE IIIN NETRNANOX� ASSETS
The Statement of Change in Net Financial Assets explains the difference between a
municipality's surplus or deficit for the reporting year and its change in net financial assets in the
same reporting year. This statement provides for the reporting of the acquisition of tangible
capital assets and other significant items that impact the difference between the annual
surplus/deficit and the change in net financial assets.
CONSGfIlI)ATED STAMMENT OF CA&I Tl OW
The statement of cash flows reports changes in cash and cash equivalents resulting from
operations, capital, investing and financing activities and shows how the City financed its
activities during the year and met its cash requirements.
1-53
CANADIAN AWARD FOR FINANCIAL REPORTING
The Government Finance
Officers
Association of the United States and Canada (GFOA)
awarded a Canadian Award for
Financial Reporting to the City of
Kitchener for its annual
financial report for the
fiscal year
ended December 31, 2015.
The Canadian Award for
Financial Reporting program was established to encourage
municipal governments
throughout Canada to
publish
high quality financial reports
and to provide peer
recognition and technical
guidance
for officials preparing these reports.
In order to be awarded a Canadian Award for Financial Reporting, a government unit must
publish an easily readable and efficiently organized annual financial report, whose contents
conform to program standards. Such reports should go beyond the minimum requirements of
generally accepted accounting principles and demonstrate an effort to clearly communicate the
municipal government's financial picture, enhance an understanding of financial reporting by
municipal governments, and address user needs.
A Canadian Award for Financial Reporting is valid for a period of one year only. We believe our current
report continues to conform to the Canadian Award for Financial Reporting program requirements.
LOOKING AHEAD
Looking ahead to 2017, the City will continue to balance community priorities with affordable property
tax rates and user fees. The in-depth business planning and budgeting processes help the City to
manage these healthy pressures and make the right decisions between strategic investments and
affordable tax rates for our citizens.
Continuing to focus on building an even stronger financial position through lower debt levels and
healthier reserve balances will allow the City to be resilient and flexible in responding to growth and
change, not just in 2017 but for the years to come.
Dan Chapman, CPA, CA, MPA
Deputy CAO, Finance and Corporate Services &
City Treasurer
June 26, 2017
1-54
1L�
Government Finance Officers Association
Canadian Award
for
Financial Reporting
Presented to
City of Kitchener
Ontario
For its Annual
Financial Report
for the Year Ended
December 31, 2015
Executive Director/CEO
1-55
INDEPENDENT AUDITORS' REPORT
To the Mayor and Members of Council, Inhabitants and Ratepayers of
The Corporation of the City of Kitchener
We have audited the accompanying consolidated financial statements of the Corporation of the City of
Kitchener, which comprise the consolidated statement of financial position as at December 31, 2016,
the consolidated statements of operations, change in net financial assets and cash flows for the year
then ended, and notes, comprising a summary of significant accounting policies and other explanatory
information.
Management's Responsibility for the consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on our judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant
to the entity's preparation and fair presentation of the consolidated financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
1-56
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Corporation of the City of Kitchener as at December 31, 2016,
and its consolidated results of operations and its consolidated cash flows for the year then ended in
accordance with Canadian public sector accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
June 26, 2017
Waterloo, Canada
1-57
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Financial Position
As at December 31, 2016
2016 2015
(Restated
Note 19)
Financial assets
Cash and cash equivalents $ 38,577,079
Taxes receivable 20,598,155
Trade and other accounts receivable 28,851,877
Loans receivable (Note 4) 9,070,598
Inventory for resale 8,914,964
Investments (Note 5) 158,360,514
Investment in Kitchener Power Corporation and its affiliates (Note 6) 201,721,655
Investment in Kitchener Generation Corporation Note 7 3,251,490
Illi uu„ 469,346,332
Liabilities
Accounts payable and accrued liabilities
Deferred revenue - obligatory reserve funds (Note 9)
Deferred revenue - other
Municipal debt (Note 10)
Emolovee future benefits (Note 12)
Net financial assets
Non-financial assets
Tangible capital assets (Note 13)
Inventory of supplies
Prepaid expenses mullllll
Accumulated surplus
See accompanying notes
11111115,794,240
38,400,547
14,005,912
84,859,304
42,238,419
255,298,422
214,047,910
$ 26,731,623
19,616,794
34,138,663
10,311,403
9,752,764
139,030,212
196,196,525
3,483,759
439.261.743
72,312,929
26,265,531
14,377,402
93,535,658
38,310,362
244,801,882
194,459,861
1,065,060,311 1,033,009,510
2,568,188 2,608,281
1,327,158 1,273,716
1,068,955,657 1,036,891,507
$ 1,283,003,567 $ 1,231,351,368
1-58
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Operations
For the Year Ended December 31, 2016
Revenue
Taxation
User fees and charges
Gasworks
Water, sewer and storm water
Other
Grants
Contributions of tangible capital assets
Investment income
Penalties and interest on taxes
Development charge revenue recognized
Share of net income of Kitchener Power Corporation
and its affiliates (Note 6)
Share of net income of Kitchener Generation
Corporation (Note 7)
Other
Total revenue
2016 2016 2015
Budget (Restated
Note 19)
$ 116,095,329 $ 116,674,911 $ 113,610,395
80,176,875 74,320,186 88,530,770
55,049,109 55,173,590 45,064,711
42,722,772 46,728,761 43,008,956
10,136,075 5,830,399 10,012,836
4,404,34 4,404,349 12,459,464
6,295 7,518,318 7,175,465
3,0 6 3,250,779 3,282,870
1 60,169 10,388,476 11,044,439
9,5 78 a^9,593,078 10,120,748
- 24,480 8,529
3 77 5,899,048 2,874,721
11
6AU,191 339,806,375 347,193,904
Expenses
General government 39,544,414 38,931,568 31,272,756
Protection services lull 11" 46,034,452 45,291,230 44,727,876
Transportation services 35,771,346 35,100,204 34,566,319
Environmental services 30,632,889 30,012,049 29,194,029
Health services IIV 2,158,806 2,257,225 2,244,858
Social and familyservice)°I 2,489,661 2722141 2,752,404
Recreation and cultural serve 68,288,152 68,495,718 68,644,751
Planning and development 12,642,310 13,160,042 12,059,970
Gasworks 66,885,438 52,183,999 59,245,602
Total expenses 304,447,468 288,154,176 284,708,565
Annual surplus 43,684,723 51,652,199 62,485,339
Accumulated surplus, beginning of year 1,231,351,368 1,231,351,368 1,168,866,029
Accumulated surplus, end of year (Note 14) $ 1,275,036,091 $ 1,283,003,567 $ 1,231,351,368
See accompanying notes
1-59
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Change in Net Financial Assets
For the Year Ended December 31, 2016
See accompanying notes
1-60
2016
Budget
2016
2015
(Restated
Note 19)
Annual surplus
$ 43,684,723 $
51,652,199 $
62,485,339
Amortization of tangible capital assets
42,657,709
42,657,709
40,273,778
Acquisition of tangible capital assets
(73,293,540)
(75,104,330)
(91,158,022)
Gain on disposals of tangible capital assets
(1,812,732)
(1,812,732)
(5,364,831)
Proceeds on disposal of tangible capital assets
2,208,552
2,208,552
8,182,407
Acquisition of supplies of inventories
-
(5,828,681)
(5,961,928)
Acquisition of prepaid expenses
-Vu
(428,135)
(972,985)
Consumption of supplies inventory
5,868,774
5,972,447
Use of prepaid expenses
374,693
995,043
Change in net financial assets
13,4 12
19,588,049
14,451,248
Net financial assets, beginning of year
1 1959,861
1 11,94,459,861
180,008,613
Net financial assets, end of year
$
R4,047,910 $
194,459,861
See accompanying notes
1-60
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Cash Flow
For the Year Ended December 31, 2016
2016 2015
(Restated
Note 19)
Operating
Annual surplus $ 51,652,199 $ 62,485,339
Items not involving cash
Amortization 42,657,709 40,273,778
Gain on disposal of tangible capital assets (1,812,732) (5,364,831)
Share of net income of Kitchener Power Corporation and its affiliates (9,593,078) (10,120,748)
Share of net income of Kitchener Generation Corporation (24,480) (8,529)
C:hanna in amnlrniaa fiifiira hanafitc 3 99R 057 3 Asp nRR
Municipal debt repaid (11,057,352) (10,629,382)
Net change in cash from financing activities (8,676,352) (9,463,382)
Capital
Acquisition of tangible capital assets (70,699,981) (78,698,558)
Proceeds on disposal of tangible capital assets 2,208,552 8,182,407
Net change in cash from capital activities (68,491,429) (70,516,151)
Net change in cash and cash equivalents 11,845,456 (12,823,144)
Cash and cash equivalents, beginning of year 26,731,623 39,554,767
Cash and cash equivalents, end of year $ 38,577,079 $ 26,731,623
See accompanying notes
1-61
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
1. Summary of significant accounting policies
These consolidated financial statements of The Corporation of the City of Kitchener (the "City") have been
prepared by management in accordance with Canadian generally accepted accounting principles for local
governments as established by the Public Sector Accounting Board of the Chartered Professional Accountants
of Canada. The following is a summary of the significant accounting policies followed in the preparation of
these financial statements:
a. Basis of consolidation
i. Consolidated entities
These consolidated financial statements reflect the assets, ' ilities, reserves, surpluses/deficits,
revenues, and expenditures of those City funds and governme functions or entities which have been
determined to comprise a part of the aggregate City operati sed upon control exercised by the City
except for the City's government businesses which are u for on the modified equity basis of
accounting. The following boards, municipal enterp s and Nes have been included in the
consolidated financial statements: uillllllllllllum.
• Kitchener Public Library
• Kitchener Downtown Improvement Area
• Belmont Improvement Area Board of M,
• The Centre in the Square Inc.
• Waterworks Enterprise
• Gasworks Enterprise
• Sewer Surcharge Ente
• Storm Water Manager
• Building Enterprise
• Golf Enterprise
• Parking E
All inter -organ
ii. Governrr
nt
ctions and balances have been eliminated.
Kitchener Gene ratio n"""1iilllllllr "tion and Kitchener Power Corporation and its affiliates are not
consolidated but are acc ed for on the modified equity basis which reflects the City of Kitchener's
investment in the enterprises and its share of net income since acquisition. Under the modified
equity basis, the enterprises' accounting principles are not adjusted to conform to those of the
City, and inter -organizational transactions and balances are not eliminated.
Accounting for region and school board transactions
The taxation, other revenue, expenditures, assets and liabilities, with respect to the operations of the
school boards and the Regional Municipality of Waterloo, are not reflected in these consolidated financial
statements.
iv. Trust funds
Trust funds and their related operations administered by the City are not consolidated, but are reported
separately on the "Trust Funds Statement of Continuity and Balance Sheet" (see Note 3).
1-62
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
1. Summary of significant accounting policies (continued)
b. Basis of accounting
Accrual basis of accounting
The consolidated financial statements are prepared using the accrual basis of accounting. The accrual
basis of accounting recognizes revenues in the period in which the transactions or events occurred that
gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired
and a liability is incurred or transfers are due.
ii. Cash and cash equivalents
Cash and cash equivalents include cash on hand and highly Ii investments with original maturity of
90 days or less as at the end of the year. mullllll
iii. Trade and other accounts receivable u1711 "011llllll
Trade and other accounts receivable are reported neVIII ny allowan Irl„doubtful accounts.
�0 4iv. Loans receivable lull
Loans receivable are reported net of any allowance Ifll Iftful
accounts. Interest income is recorded as
it accrues. When the value of any loan r able is ified as impaired, an allowance is set up to
offset the carrying amount and any adjus incl in materials and services expense in the
period the impairment is recognized
v. Inventory for resale
Inventory for resale is value a
vi. Investments
Portfolio invest
men
Premiums and di
is recorded as ,i
carrying amount is
investment income in
vii. Deferred revem
net realizable value on an average cost basis.
st, net of accumulated amortization on premiums and discounts.
tiz uon a straight line basis over the term to maturity. Interest income
the value of any portfolio investment is identified as impaired, the
e estimated realizable amount and any adjustments are included in
e impairment is recognized.
Government transfers, contributions and other amounts are received from third parties pursuant to
legislation, regulation or agreement and may only be used in the conduct of certain programs, in the
completion of specific work or for the purchase of tangible capital assets. In addition, certain user
charges and fees are collected for which the related services have yet to be performed. Revenue is
recognized in the period when the related expenses are incurred, services performed or the tangible
capital assets are acquired.
viii. Employee future benefits
The contributions to a multi-employer, defined benefit pension plan are expensed when contributions are
due. The costs of post-retirement benefits are recognized when the event that obligates the City
occurs. Costs include projected future income payments, health care continuation costs and fees paid to
independent administrators of these plans, calculated on a present value basis.
1-63
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
viii. Employee future benefits (continued)
The costs of post-retirement benefits are actuarially determined using the projected benefits method
prorated on service and management's best estimate of retirement ages of employees, salary escalation,
expected health care costs and plan investment performance. Liabilities are actuarially determined using
discount rates that are consistent with the market rates of high quality debt instruments. Any gains or
losses from changes in assumptions or experience are amortized over the average remaining service
period for active employees.
ix
Contaminated sites are defined as the result of contam
sediment of a chemical, organic, or radioactive materii
standard. This Standard relates to sites that are n?"1111C
an unexpected event resulted in contamination. As(
on the statement
X.
Non-financial assets are not available to
services. They have useful lives that extei
ordinary course of operations. T an
excess of revenues over expen„ 'Kid
Tangible capital
Tangible capital
to acquisition, c
the tangible
follows: lull um„.
ing introduced in air, soil, water or
ism that exceeds an environment
d sites in productive use where
20 , there was no liability recorded
l4ac
and are held for use in the provision of
went year and are not intended for sale in the
n- ial assets during the year, together with the
consolidated change in net financial assets for the year.
Jed at cost which includes all amounts that are directly attributable
opment or betterment of the asset. The cost less residual value of
,tized on a straight-line basis over their estimated useful lives as
Land The original cost of land is not amortized
Land Improvements 15 to 100 years
Buildings & building improvements 15 to 50 years
Leasehold improvement Over the useful life of the improvement or the lease
term, whichever is shorter
Machinery & equipment 3 to 20 years
Computer hardware 5 years
Computer software 2 to 10 years
Linear assets 6 to 100 years
Vehicles 5 to 16 years
b. Contributions of tangible capital assets
Tangible capital assets received as contributions are recorded at their fair value at time of receipt
and are recorded as revenue.
1-64
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
1
2
Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
x. Non-financial assets (continued)
c. Leases
Leases are classified as capital or operating leases. Leases which transfer substantially all the risks
and benefits incidental of ownership are accounted for as capital leases. All other leases are
accounted for as operating leases and the related lease payments are charged to expenses as
incurred.
d. Inventory of supplies
Inventories held for consumption are recorded at the
e. Works of art and cultural and historic
Works of
statements
art and cultural and
xi. Government transfers
Government transfers are recognized in tl
rise to the transfer occur, providing the tra
reasonable estimates of the amounts can
Government transfers and
be recognized as revenue
capital assets are acquired.
xii. Use of estimat
Since precise minati(
preparation of .odic
approximations. Th hav
estimates. um
and replacement cost.
as assets in these financial
rs in the period in which the events giving
, any eligibility criteria have been met and
in-kind related to capital acquisitions are required to
ncial statements in the period in which the tangible
mffiW assets and liabilities is dependent upon future events, the
31 statements necessarily involves the use of estimates and
i made using careful judgments. Actual results could differ from these
Operations of school boards and the Regional Municipality of Waterloo
Further to Note 1 a) iii, the taxation, other revenues and requisitions for the school boards and the Regional
Municipality of Waterloo are comprised of the following:
School Region Total
Boards
Taxation and user charges
$ 87,885,248
$ 232,833,484
$ 320,718,732
Share of payments in lieu of taxes
592
2,447,908
2,448,500
Share of linear properties
63,432
125,040
188,472
Amounts requisitioned
$ 87,949,272
$ 235,406,432
$ 323,355,704
1-65
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
3. Trust funds
Trust funds administered by the City have not been included in the Consolidated Statement of Financial
Position, nor have their operations been included in the Consolidated Statement of Operations. The trust funds
under administration are comprised of cemetery perpetual care and prepaid interment funds totalling
$14,029,550 (2015 - $13,273,757).
4. Loans receivable
Loans receivable are made up of the following:
Major capital improvement loans receivable
Loans receivable with forgiveness provisions
Minor capital improvement and other loans receivable
2016
2015
$ 8,126,151 $
8,732,179
55,745
77,791
888,702
1,501,433
9,070,598
10,311,403
Major capital improvement loans are individual loans in"'f $500,000 when issued with no forgiveness
provision built into the loan. These loans have repayment ii,s ranging from 10 to 12 years (2015 - 10 to 12
Minor capital improvement
categories. There is a va
years (2015 - 6 month
granted to finance, buil
(2015-0.0%to 12.9%).
5. Investments
Investments are made up of the following:
receivable comprise any loan receivable not fitting into the first two
dto these loans with payment terms ranging from 6 months to 25
ajority of these loans are secured by the asset the loan was
red. The interest rates on these loans range from 0.0% to 12.9%
2016 2016 2015 2015
Cost Market Cost Market
Value Value
Guaranteed investment certificates $ 150,124,084 $ 151,937,572 $ 134,235,069 $ 137,151,429
Bonds and debentures 7,949,154 8,180,459 4,510,654 4,715,394
Common stock 287,276 468,924 284,489 421,867
$ 158,360,514 $ 160,586,955 $ 139,030,212 $ 142,288,690
1-66
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
6. Investment in Kitchener Power Corporation and its Affiliates
Under the provincial government's Electricity Competition Act (Bill 35), Kitchener Power Corporation, a holding
company, along with its wholly owned subsidiaries, including Kitchener -Wilmot Hydro Inc., was incorporated on
July 1, 2000.
On August 1, 2000, under by-laws passed by the City and the Township of Wilmot, the net assets of the former
Hydro -Electric Commission of Kitchener -Wilmot were transferred to the new corporation. The City took back a
92.25% share in the common shares of Kitchener Power Corporation and a 92.25% share in long-term notes
payable by the affiliates for the assets transferred. Certain surplus property assets and cash funds were
excluded from the transfer and turned over to the City and the Township.
The investment is comprised of the following:
Kitchener Power Corporation common shares
Kitchener -Wilmot Hydro Inc. long-term notes receivable
Share of net income and prior period adjustments due t ang
accountina policies since acquisition, net of dividends um muillll
2016 2015
$ 61,244,208 $ 61,244,208
Vi 70,997,576 70,997,576
69,479,871 63,954,741
$ 201,721,655 $ 196,196,525
Results of operations
Revenues 277,930,000 250,525,000
Expenses (267,531,000) (239,554,000)
Net income 10,399,000 10,971,000
City's share of net income - 92.25% $ 9,593,078 $ 10,120,748
1-67
The Kitchener -Wilmot Hydro Inc. notes are unse e
r °erest at the rate of 4.88%
(2015 - 4.8896).
There are no repayment terms and there is no inte o
ee a notes or the shares.
The following table provides condens na I info
ation with respect to Kitchener Power Corporation:
2016
2015
Current assets
75,614,000
74,720,000
Non-current assets Vu
225,417,000
208,638,000
Regulatory assets lull
4,487,000
4923000
Deferred taxes
141,000
280,000
Total assets
305,659,000
288,561,000
Current liabilities
39,059,000
38,904,000
Long-term debt
79,872,000
80,952,000
Regulatory liabilities
10,320,000
6,908,000
Other liabilities
34,378,000
25,756,000
Total liabilities
163,629,000
152,520,000
Net assets
142,030,000
136,041,000
Results of operations
Revenues 277,930,000 250,525,000
Expenses (267,531,000) (239,554,000)
Net income 10,399,000 10,971,000
City's share of net income - 92.25% $ 9,593,078 $ 10,120,748
1-67
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
7. Investment in Kitchener Generation Corporation
Under the Business Corporation Act (Ontario), Kitchener Generation Corporation was incorporated on
December 9, 2011.
Effective January 1, 2012, the City transferred the solar roof asset constructed on the surface of the Kitchener
Operations Facility to Kitchener Generation Corporation in exchange for 100% of its common shares and
interest bearing debt.
The investment in Kitchener Generation Corporation is comprised of the following:
Kitchener Generation Corporation common shares
Kitchener Generation Corporation long-term notes receivable
Share of net income since acquisition, net of dividends
2016 2015
$ 336,837 $ 362,513
3,031,534 3,262,609
(116,881) (141,363
$ 3.251.490 $ 3,483,759
The notes receivable are unsecured and bear intere7a<ividend
'e of 5.01%. To the extent that Kitchener
Generation Corporation has positive annual cash flows payment, the cash will be returned to
the City as repayment of the outstanding debt a etuThe proportion to which they contribute is
90% debt, 10% equity. .
The following table provides condensed financial i
Current assets
Capital assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Net assets
Results of operations
ct to Kitchener Generation Corporation:
2016
2015
$ 4,883 $
6,035
3,251,524
3,483,776
3,256,407
3,489,811
4,916
6,051
3,031,535
3,262,609
(3,036,451)
3,268,660
219,956
221,151
Revenues 433,797 416,888
Expenses (409,317) (408,359)
Net income 24,480 8,529
City's share of net income - 100% $ 24,480 $ 8,529
1-68
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
8. Insurance pool
Liabilities include an amount of $4,746,320 (2015 - $4,829,612) which represents funds belonging to the
Waterloo Region Municipalities Insurance Pool and administered by the City on behalf of the Pool's members.
The members entered an agreement in 1998 to purchase property damage and public liability insurance on a
group basis and share a retained level of risk.
The members pay an actuarially determined annual levy to fund insurance, prefund expected losses and
contribute to a surplus. The Pool has purchased insurance to fund losses above a predetermined deductible
and any losses above a predetermined total in any year.
The City's share of Pool levies is 25.72 % (2015 - 24.99%) and its share of the Pool surplus as at May 31, 2016
was $1,066,337 (2015 - $1,079,627). The City's share of the Pool 01rplus has not been included in the
Consolidated Statement of Financial Position. ullllllll�lllllllllll
9. Deferred revenue - obligatory reserve funds
"'011iiillP""
Vu
""Illillllll
5,235,033
4,689,980
Obligatory deferred revenue is comprised of the following:
III pill^
III VIII
11,347,837
6,345,666
949,398
1,467,357
III
Interest earned
2016
2015
77,343
68,143
159,137
Contributions used
(11,044,438)
(Restated
(9,001)
(23,021)
(19,600,364)
Balance, December 31, 2015
$ 10,405,624 $
Note 19)
Development charges
6,202,459
$ 26,265,531
16,552,083
10,405,624
Federal gas tax
5,749,009
3,404,675
Building
8,736,758
6252773
Recreational land
7,362,697
6,202,459
$
38,400,547
$ 26,265,531
The continuity of obligato III er
ve as follows:
De opment
Federal gas
Recreatonal
charges
111111111�
tax
Building
land
Total
Balance January 1 2016
III 10 405 624
3 404 675
6 252 773
6 202 459
26 265 >531
Collections
16,534,936
6,662,949
2,404,533
1,076,914
26,679,332
Interest earned
-
18,208
92,452
92,569
203,229
Contributions used
(10,388,477)
(4,336,823)
(13,000)
(9,245)
(14,747,545)
Balance, December 31, 2016
16,552,083
5,749,009
8,736,758
7,362,697
38,400,547
Balance, January 1, 2015
10,102,225
5,569,262
5,235,033
4,689,980
25,596,500
Collections
11,347,837
6,345,666
949,398
1,467,357
20,110,258
Interest earned
-
13,651
77,343
68,143
159,137
Contributions used
(11,044,438)
(8,523,904)
(9,001)
(23,021)
(19,600,364)
Balance, December 31, 2015
$ 10,405,624 $
3,404,675 $
6,252,773 $
6,202,459
$ 26,265,531
1-69
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
10. Municipal debt
The City has assumed responsibility for the payment of principal and interest charges on certain long-term debt
issued by other municipalities. At the end of the year, the outstanding principal amount of this liability is
$84,859,304 (2015 - $93,535,658).
The annual principal repayments are:
2017 $ 11,409,256
201810,617,151
2019 IIIIII IIIIIIIIIIIIIIIIIIIIIII Vu 10,479,884
2020 9,628,731
2021 8,717,187
2022 and thereafter 34,007,095
$ 84,859,304
The annual principal and interest payments required to s he long-term debt are within the annual debt
repayment limit prescribed by the Ontario Ministr�r,iiiig,f Municip 'airs and Housing.
The long-term liabilities carry interest rates ran 5%11111i1l 5.75% (2015 — 1.05% to 5.7096). Interest
charges for 2016 relating to municipal debt totalle 15 015 - $3,869,098).
11. Pension plan
The City makes contributions to nt Employees Retirement System (OMERS), which is a
multi-employer plan, on behalf of its he plan a defined benefit plan which specifies the amount of the
retirement benefit to be re the loyees based on the length of service and rates of pay. Employee
contributions are match y the ributions were required on account of current service in 2016
amounting to $10,095, (2015-$1 93, 2).
12. Employee future benefits um. muillll
The estimated liability for emplo ""future benefits is comprised of the following:
2016 2015
Sick leave benefit plan $ 17,714,432 $ 16,331,940
Post-retirement benefits 16,387,087 14,873,522
Future payments to WSIB 8,136,900 7,104,900
$ 42,238,419 $ 38,310,362
1-70
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
12. Employee future benefits (continued)
a. Sick leave benefit plan
Under the sick leave benefit plan, unused sick leave can accumulate and certain employees may become
entitled to cash payments when they leave the City's employment. The amount of benefits paid during the year
were $1,273,695 (2015 - $1,467,875).
A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $5,287,741 (2015
- $5,259,154).
Anticipated undiscounted payments to employees who are eligible to retire are:
2017
2018
2019
2020
2021
2022 and thereafter
The actuarial valuation of the future
3.5096). The last actuarial valuation fo„g
The expense for the current year
2
I
2,168,437
783,547
1,000,314
1,234,453
1,145,034
10,780,624
17.112.409
veassumes a discount rate of 3.50% (2015 —
leted at December 31, 2014.
$2,509,722) and is comprised of the following items:
2016 2015
Current period benefit
"""iiIIIIIIV"
$ 1,091,144 $
1,054,245
Amortization of plan imp
nts
-
(220,795)
Amortization of actuarial l0me
795,085
922,896
Sick leave benefit expense
1,886,229
1,756,346
Sick leave benefit interest expense
769,957
753,376
Total expenses related to sick leave benefits
$ 2,656,186 $
2,509,722
As at December 31, 2016, the unamortized actuarial losses were $4,417,435 (2015 — $5,212,520) and are
amortized over 10 to 13 years (2015 — 12 to 13 years).
1-71
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
12. Employee future benefits (continued)
b. Post-retirement benefits
The City pays certain health, dental and life insurance benefits on behalf of its retired employees up to the age
of 65 if they have at least ten years of service with the City. The amount of benefits paid during the year were
$1,101,539 (2015 - $1,118,127).
The City holds no reserve in accumulated surplus to meet this liability.
The actuarial valuation of the future liability for post-retirement benefits assumes a discount rate of 3.75%
(2015 — 3.7596) and inflation rates for benefit premiums of 4.0% to 7.4% (2015 — 4.0% to 7.496). The last
actuarial valuation for this liability was completed at December 31, 2014.
The expense for the year was $2,615,104 (2015 - $2,695,148) and i mprised of the following items:
2016 2015
Current period benefit cost 1 093 831 1 067 521
VIII IIS $ ,
p 111111 IIVu^ '
Amortization of actuarial losses739,764 873,787
expense p
Post-retirement benefit ex 1,833,595 1941308
III
Post-retirement benefit interest expense 781,509 753,840
Total expenses related topost-retirement benefit 2,615,104 2,695,148
As at December 31 2016 the unamo actu IPgsses were $4,683,875 2015 — $5,423,639) and are
amortized over 11 to 13 years (2015 to year
c. WSIB
The Workplace Safety and In nce rh (IIWSIB) administers injured worker benefits payments on behalf of
the City as a Schedule mount of benefits paid during the year were $668,600 (2015 -
$695, 800). lull 1111111 Vu^
A reserve fund to provild this liabil is included in accumulated surplus, in the amount of $1,463,983 (2015
- $1,314,025). II
The actuarial valuation of the 0��
liability for WSIB assumes a discount rate of 3.25% (2015 — 3.5096). The
last actuarial valuation for this liability was completed at December 31, 2014.
The expense for the current year was $1,700,600 (2015 - $1,536,000) and is comprised of the following items:
2016 2015
Current period benefit cost $ 1,216,100 $ 1,147,600
Amortization of actuarial losses 186,700 127,200
WSIB benefit expense 1,402,800 1,274,800
WSIB benefit interest expense 297,800 261,200
Total expenses related to WSIB benefits $ 1,700,600 $ 1,536,000
As at December 31, 2016, the unamortized actuarial losses were $525,300 (2015 - $522,400) and are
amortized over 13 years (2015 — 13 years).
1-72
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
13. Tangible capital assets
The continuity schedule of tangible capital assets is presented in schedule A.
Assets under construction having a value of $18,719,217 (2015 - $50,839,697) have not been amortized.
Amortization of these assets will commence when the assets are put into service.
Contributed tangible capital assets of $4,404,349 (2015 - $12,459,464) have been recognized at fair market
value at the date of contribution. The contributed assets include land right of way as well as developer created
linear assets such as water, sanitary, storm, and road assets.
The write-down of tangible capital assets during the year was $nil (2015 — $nil).
The amount of interest capitalized was $nil (2015 - $nil). mullllllu
14. Accumulated surplus
The accumulated surplus consists of individual fund surpluse„ eficits) adlftlserve funds as follows:
Surplus:
Invested in tangible capital assets
Other
Equity in Kitchener Power Corpora
Equity in Kitchener Generatio c
Employee future benefits
Total surplus
2016 2015
(Restated
Note 19)
$1,065,060,311
518,199
201,721,655
3,251,490
(42.238.419
$1,033,009,510
(13,843,612)
196,196,525
3,483,759
(38,310,362)
1.228.313.236 1.180.535.820
Reserve funds set aside'""
pecifi
urposes by Council for:
Capital
28,793,325
27,126,300
Stabilization
6,212,167
5,556,200
Program specific
10,422,750
9,651,464
Corporate
7,500,643
7,132,266
52.928.885
49.466.230
Reserve funds set aside for specific purposes by consolidated
entities:
Kitchener Public Library 381,336 381,264
Kitchener Downtown Business Improvement Area 50,000 50,000
The Centre in the Square Inc. 1,330,110 918,054
1,761,446 1,349,318
Total reserve funds 54,690,331 50,815,548
Accumulated surplus $1,283,003,567 $1,231,351,368
1-73
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
15. Contingent liabilities
a. The City has extended a line of credit not to exceed $2,000,000 to Kitchener Housing Inc. Interest is
charged on the outstanding balance at bank prime plus 1 % (rate as at December 31, 2016 was 3.70%).
b. Legal actions have been undertaken against the City relating to a number of contract disputes and other
matters. The outcome of these actions is not presently determinable. It is management's opinion that the City's
insurance will adequately cover any potential liability arising from these contract disputes and other
matters. Should any liability be determined and not covered by insurance it will be recognized in the period
when it is determined.
16. Segmented information
The City of Kitchener is a diversified municipal government instituti
its citizens, including fire, roads, water, sewer, storm sewer, gaswgt
Segmented information has been prepared by major functio
with the Consolidated Statement of Operations and provincill
For each reported segment, revenues and expenses relA
segment and amounts that are allocated on a reasonable
The accounting policies used in these segmer
consolidated financial statements as disclosed i
See Schedule B
17. Budget figures
The budget figures reflected in th
January 18, 2016. Budget fig
18. Comparative figures
Certain of the prior yea
19. Restatement of prior period
it provides a wide range of services to
raries, and community services.
of activities provided, consistent
Eements.
at are directly attributable to the
those followed in the preparation of the
U15MIN10tements are those approved by Council at a meeting on
translated to reflect Public Sector Accounting Board standards.
ures have been restated to conform to the current year's presentation.
The City has made an adjustment to the accounting treatment of capital projects that have received obligatory
reserve fund revenue. This change relates to deferring the recognition of development charge and other
obligatory reserve fund revenue until the original funds are spent, instead of when the funds are transferred to
the capital project.
As a result, the Consolidated Statement of Financial Position as at December 31, 2015 is being restated as
follows:
• Deferred revenue — obligatory was increased by $21,977,853 of which $9,813,733 was reclassified from
Deferred revenue — other (to present all obligatory reserve fund deferred revenue consistently);
• Deferred revenue — other was decreased by $9,813,733 to present all obligatory reserve fund deferred
revenue consistently on the Consolidated Statement of Financial Position; and
• Accumulated surplus was decreased by $12,163,915
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2016
19. Restatement of prior period figures (continued)
The Consolidated Statement of Operations for the year ended December 31, 2015 is being restated as follows:
Total revenue was decreased by $4,781,022 (Other user fees and charges increased by $17,685, Grant
revenue decreased by $3,222, Investment income decreased by $2,830, Development charge revenue
earned decreased by $4,283,157, and Other revenue decreased by $509,498); and
Accumulated surplus, beginning of 2015 was decreased by $7,382,895.
1-75
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78
INDEPENDENT AUDITORS' REPORT
To the Mayor and Members of Council, Inhabitants and Ratepayers of
The Corporation of the City of Kitchener
We have audited the accompanying financial statements of the Trust Funds of the Corporation of the
City of Kitchener, which comprise the balance sheet as at December 31, 2016 and the statement of
continuity for the year then ended, and notes, comprising a summary of significant accounting policies
and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
1-79
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the balance sheet of the
Trust Funds of the Corporation of the City of Kitchener as at December 31, 2016, and its results of
operations and its cash flows for the year then ended in accordance with Canadian public sector
accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
June 26, 2017
Waterloo, Canada
1-80
CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Balance Sheet
As at December 31, 2016
2016 2015
Assets
Accounts receivable
$ 257,387
$ 186,438
Interest
86,971
65,235
Investments (Note 2)
Short-term
2,832,603
4,960,568
Long-term
10,852,589
8,063,115
14,029,550
13,275,356
Liabilities
Accounts payable and accrued liabilities
Fund Balance
See accompanying notes
- 1,600
14,029,550 13,273,756
14,029,550 $13,275,356
1-81
CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Statement of Continuity
For the Year Ended December 31, 2016
2016 2015
Receipts
Perpetual care $ 419,451 $ 359,833
Interest earned 416,093 400,469
Other 194,913 220,254
1,030,457 980,556
Expenditures
Transfer to cemeteries operations 274,663 267,013
IIIID1jD" 27
Net change in fund A91L. 75
Balance, beginning of year 13,27
Balance, end of year $ „14,02
See accompanying notes
663
267,013
794
713,543
756
12,560,213
550 $
13,273,756
1-82
CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Notes to the Financial Statements
For the Year Ended December 31, 2016
1. Summary of significant accounting policies
The Financial Statements have been prepared in accordance with Canadian generally accepted accounting
principles for local government as recommended by the Public Sector Accounting Board of the Chartered
Professional Accountants of Canada. The significant accounting policies are summarized below.
a. Basis of Accounting
Sources of financing and expenditures are reported on the accrual basis of accounting. The accrual basis of
accounting recognizes receipts as they become available and measurable; expenditures are recognized as they
are incurred and measurable as a result of receipt of goods or services d the creation of a legal obligation to
pay.
1-83
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1-84
INDEPENDENT AUDITORS' REPORT
To the Members of the Belmont Improvement Area Board of Management
We have audited the accompanying financial statements of the Belmont Improvement Area Board of
Management, which comprise the statement of financial position as at December 31, 2016, the
statements of revenue and expenses and accumulated surplus and change in net financial assets for
the year then ended, and notes, comprising a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
1-85
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Belmont Improvement Area Board of Management as at December 31, 2016, and its results of
operations and its cash flows for the year then ended in accordance with Canadian public sector
accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
June 26, 2017
Waterloo, Canada
1-86
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Financial Position
As at December 31, 2016
Financial assets
Cash
Accounts receivable
2016 2015
$ 40,781 $ 31,212
- 375
40,781 31,587
Financial liabilities
Accounts payable and accrued liabilities 7,764 3,536
Net financial assets 33,017 28,051
Non-financial assets
Tangible capital assets (Note 2)
Prepaid expenses
Net assets
Accumulated Surplus
Accumulated net revenue
Invested in tangible capital assets
Total accumulated surplus
See accompanying notes
2,823 611
664 646
3,487 1,257
36,504 29,308
33,681 28,697
2,823 611
$ 36,504 $ 29,308
1-87
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Revenue and Expenses and Accumulated Surplus
For the Year Ended December 31, 2016
2016 2015
Revenue
Assessments $ 40,671 $ 39,334
Other revenue 1,508 5,872
42.179 45.206
Expenses
Streetscaping
2,320
3,925
Audit
1,808
1,808
Summer maintenance
5,267
5,040
Insurance
1,407
1,350
Winter maintenance
19,070
14,576
Advertising Vu^
489
3,374
Miscellaneous
u, 3,699
1,574
Amortization
923
1,220
34,983
32,867
Net surplus (deficit) for year VIII
7,196
12,339
Accumulated surplus, beginning of year Vu,
29,308
16,969
Accumulated surplus, end of year mulllllll
$ 36,504 $
29,308
See accompanying notes
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Change in Net Financial Assets
For the Year Ended December 31, 2016
2016 2015
Net surplus for year $ 7,197 $ 12,339
Acquisition of tangible capital assets (3,135) -
Amortization of tangible capital assets 923 1,220
Acquisition of prepaid expenses (19) (33)
Change in net financial assets 4,966 13,526
Net financial assets, beginning of year 28,051 14,525
Net financial assets, end of year $ 33,017 $ 28,051
See accompanying notes
1-89
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Notes to Financial Statements
For the Year Ended December 31, 2016
1. Summary of significant accounting policies
The financial statements of the Belmont Improvement Area Board of Management are the representation of
management and have been prepared in accordance with Canadian generally accepted accounting principles
for local governments as recommended by the Public Sector Accounting Board of the Canadian Institute of
Chartered Accountants. Since precise determination of many assets and liabilities is dependent upon future
events, the preparation of periodic financial statements necessarily involves the use of estimates and
approximations. These have been made using careful judgment. The following is a summary of the significant
accounting policies followed in the preparation of these financial statements:
a) Tangible capital assets u^
Tangible capital assets are recorded at cost which includes mounts that are directly attributable to
acquisition, construction, development or betterment of tl,l s The cost less residual value of the
tangible capital assets is amortized on a straight-line ball ver th timated useful lives as follows:
Assets ortiz n Period
Equipment 5
Annual amortization is charged in the y quisit nd in the year of disposal. Assets under
construction are not amortized until the ass s a fo °roductive use.
Tangible capital assets received tributi re recorded at their fair value at time of receipt and are
recorded as revenue.
b) Accrual basis of accounting
Revenue and expense rep nl the accrual basis of accounting. The accrual basis of accounting
recognizes revenue m vailable and measurable; expenses are recognized as they are
incurred and me,illl able as u 11 llureceipt of goods or services and the creation of a legal obligation
to pay.
2. Tangible Capital Assets
Accumulated et Book
Cost Amortization Value
Opening balance $ 6,102 $ (5,491) $ 611
Additions 3,135 - 3,135
Amortization expense - (923) 923
Disposals - - -
Ending balance $ 9,237 $ (6,414) $ 2,823
3. Statement of cash flow
A separate statement of cash flow is not presented, since cash flow from operating, investing and financing
activities are readily apparent from the other financial statements.
1-90
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying financial statements of Kitchener Downtown
Improvement Area Board of Management, which comprise the statement of
financial position as at December 31, 2016, the statements of revenue and
expenses and accumulated surplus and changes in net financial assets for the
year then ended, and notes, comprising a summary of significant accounting
policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
financial statements in accordance with Canadian public sector accounting
standards, and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that we comply with
ethical requirements and plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the
entity's preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal
control.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
1-91
An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects,
the financial position of Kitchener Downtown Improvement Area Board of
Management as at December 31, 2016, and its results of operations and its
cash flows for the year then ended in accordance with Canadian public sector
accounting standards.
&AW'6� ZVO
Chartered Professional Accountants, Licensed Public Accountants
April 26, 2017
Waterloo, Canada
1-92
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Financial Position
Year ended December 31, 2016, with comparative information for 2015
2016 2015
Financial Assets
Cash $ 84,423 $ 2,863
Term deposits (note 2) 111,594 217,029
Accounts receivable 23,065 32,435
Prepaid expenses 6,867 3,317
225,949 255,644
Financial Liabilities
Accounts payable and accrued charges 111,033 74,738
Due to the City of Kitchener (note 4) 46,560 37,360
157,593 112,098
Net financial assets 68,356 143,546
Non -Financial Assets
Tangible capital assets (note 5)
77,552 71,723
Net assets $ 145,908 $ 215,269
Accumulated Surplus
Reserve for rate stabilization
Accumulated net revenue
Invested in tangible capital assets
Total accumulated surplus
Seeccompanying notes to financial statements.
On bdhaIf of the Board:
NI
Director
Director
$ 50,000
18,356
77,552
$ 145,908
$ 50,000
93,546
71,723
$ 215,269
1-93
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Revenue and Expenses and Accumulated Surplus
Year ended December 31, 2016, with comparative information for 2015
See accompanying notes to financial statements.
1-94
Budget
Actual
Actual
2016
2016
2015
Revenue:
Assessments
$ 1,081,831
$ 1,081,831
$ 950,000
Interest
-
1,195
768
Special events income
-
-
5,500
Other income
72,000
93,733
29,562
1,153,831
1,176,759
985,830
Expenses:
Promotions and advertising
463,000
437,375
372,961
Salaries, wages and benefits
450,906
476,065
372,701
Administration
84,425
115,547
94,401
Meetings and seminars
4,500
7,696
11,686
Safety and beautification
149,000
136,265
64,158
Member relations
15,000
7,439
13,900
Amortization
10,000
19,173
14,942
1,176,831
1,199,560
944,749
Net revenue (expense) before other items
(23,000)
(22,801)
41,081
Net assessment write-offs (note 4)
34,000
46,560
37,360
Net revenue (expense)
(57,000)
(69,361)
3,721
Accumulated surplus, beginning of year
215,269
215,269
211,548
Accumulated surplus, end of year
$ 158,269
$ 145,908
$ 215,269
See accompanying notes to financial statements.
1-94
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Changes in Net Financial Assets
Year ended December 31, 2016, with comparative information for 2015
Net revenue (expense)
Acquisition of tangible capital assets
Amortization of tangible capital assets
2016 2015
$ (69,361) $ 3,721
(25,002) (53,836)
19,173 14,942
Change in net financial assets (75,190) (35,173)
Net financial assets, beginning of year 143,546 178,719
Net financial assets, end of year $ 68,356 $ 143,546
See accompanying notes to financial statements.
1-95
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Cash Flows
Year ended December 31, 2016, with comparative information for 2015
2016 2015
Cash provided by (used in):
Operating activities:
Net revenue (expense) $ (69,361) $ 3,721
Item not involving cash:
Amortization 19,173 14,942
Changes in non-cash assets and liabilities:
Accounts receivable 9,370 10,476
Prepaid expenses (3,550) (330)
Accounts payable and accrued liabilities 36,295 (18,910)
Due to/from City of Kitchener 9,200 15,162
Cash from operating activities 1,127 25,061
Investing activities:
Acquisition of tangible capital assets (25,002) (53,836)
Redemption (purchase) of investments 105,435 (150,767)
Cash used in investing activities 80,433 (204,603)
Increase (decrease) in cash
Cash, beginning of year
81,560 (179,542)
2,863 182,405
Cash, end of year $ 84,423 $ 2,863
See accompanying notes to financial statements.
1-96
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements
Year ended December 31, 2016
1. Summary of significant accounting policies:
Kitchener Downtown Improvement Area Board of Management (the "Board") is established for
the main purpose of revitalizing the Central Business District of the City of Kitchener. It is
designated as a Business Improvement Area (BIA) through the Ontario Municipal Act and a City
of Kitchener by-law enacted in 1977.
The financial statements of the Board are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadian
Professional Accountants. Since precise determination of many assets and liabilities is
dependent upon future events, the preparation of periodic financial statements necessarily
involves the use of estimates and approximations. These have been made using careful
judgment.
(a) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land and landfill sites, are
amortized on a straight-line basis over their estimated useful lives as follows:
Asset Useful Life - Years
Computers
Furniture and fixtures
Leasehold improvements
Event equipment
4 years
7 years
7 years
10 years
Annual amortization is charged in the year of acquisition and in the year of disposal. Assets
under construction are not amortized until the asset is available for productive use.
Tangible capital assets received as contributions are recorded at their fair value at the date of
receipt and also are recorded as revenue.
(b) Accrual basis of accounting:
The accrual basis of accounting recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result of
receipt of goods or services and the creation of a legal obligation to pay.
1-97
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements, page 2
Year ended December 31, 2016
2. Term deposits:
The term deposits consist of the following:
Principal Maturity Rate
$ 50,580 March 1, 2017 0.58%
10,578 March 18, 2017 0.50%
50,250 March 26, 2017 0.40%
3. Commitments:
During 2016, the Board executed a new lease agreement. The lease expires on June 30, 2021.
The Board is committed to the following minimum payments under the agreement:
2017
2018
2019
2020
2021
4. City of Kitchener:
35,538
35,538
35,538
35,538
35,538
The Board receives assessment income from the City of Kitchener for its operations. During the
year, assessment write-offs were incurred for $46,560 (2015 - $37,360). The 2015 amount was
paid to the City of Kitchener in 2016.
1-98
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1-99
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
INDEPENDENT AUDITORS' REPORT
To the members of the Kitchener Public Library Board
We have audited the accompanying financial statements of the Kitchener Public
Library, which comprise the statement of financial position as at December 31,
2016 and the statements of revenues, expenses and accumulated net revenue,
cash flows and changes in net financial assets for the year then ended, and
notes, comprising a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
financial statements in accordance with Canadian public sector accounting
standards, and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the
entity's preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial
statements.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
1-100
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the
financial position of Kitchener Public Library as at December 31, 2016, and its
results of operations and its cash flows for the year then ended in accordance
with Canadian accounting standards for not-for-profit organizations.
Chartered Professional Accountants, Licensed Public Accountants
April 19, 2017
Waterloo, Canada
1-101
KITCHENER PUBLIC LIBRARY
Statement of Financial Position
December 31, 2016, with comparative information for 2015
Assets
Cash
Accounts receivable
Investments
Due from Citv of Kitchener
Financial Liabilities
2016 2015
$ 1,266,477 $ 1,199,220
72,757 125,787
50,000 -
168,419 266,734
1,557,653 1,591,741
Accounts payable and accrued liabilities 490,457 577,009
Deferred revenue (note 2) 685,860 633,468
1,176,317 1,210,477
Net financial assets
Non -Financial Assets
Tangible capital assets
381,336 381,264
6,363,535 6,349,696
$ 6,744,871 $ 6,730,960
Accumulated Surplus
Invested in tangible capital assets 6,363,535 6,349,696
Reserves 381,336 381,264
$ 6,744,871 $ 6,730,960
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
1-102
KITCHENER PUBLIC LIBRARY
Statement of Operations and Changes in Net Assets
Year ended December 31, 2016, with comparative figures for 2015
2016
Budget 2016 2015
Revenues
8,508,675
8,499,175
8,338,803
Grants:
1,215,906
1,488,435
1,491,980
Province of Ontario
$ 286,755 $
286,755 $
286,755
City of Kitchener:
174,854
188,987
178,949
Operating
10,423,548
10,423,548
10,269,505
Capital and special (note 4)
-
1,068,083
1,194,200
Special grants (note 5)
-
128,250
671,141
Fines
210,000
227,772
216,404
Interest and miscellaneous
30,000
25,797
31,738
Partnerships
27,132
27,377
27,133
Room rental
25,000
33,896
23,407
Photocopy
30,000
35,949
30,869
special grants (note 5)
11,032,435
12,257,427
12,751,152
Expenses
Personnel costs (Schedule 1)
8,508,675
8,499,175
8,338,803
Resource materials
1,215,906
1,488,435
1,491,980
Equipment (Schedule 2)
243,850
619,634
621,045
Administrative(Schedule 3)
174,854
188,987
178,949
Facilities costs (Schedule 4)
714,600
727,277
676,221
Processing/bindery
118,200
118,469
117,757
Programs and publicity
(Schedule 5)
51,500
54,217
44,873
General library equipment
4,850
5,914
2,074
Expenditures related to capital
and special (note 4)
-
413,158
565,049
Required expenditures related to
special grants (note 5)
-
128,250
671,141
11,032,435
12,243,516
12,707,892
Net revenue - 13,911 43,260
Accumulated net revenue, beginning of year 6,730,960 6,687,700
Accumulated net revenue, end of year $ 6,744,871 $ 6,730,960
See accompanying notes to financial statements.
1-103
KITCHENER PUBLIC LIBRARY
Statement of Cash Flows
Year ended December 31, 2016, with comparative figures for 2015
2016 2015
Operating activities
Net revenue
$ 13,911
$ 43,260
Item not involving cash:
Amortization
1,525,955
1,521,193
Change in non-cash operating working capital
Accounts receivable
53,030
(12,083)
Due from City of Kitchener
98,315
(102,135)
Accounts payable and accrued liabilities
(86,552)
24,974
Deferred revenue
52,392
(303,325)
Cash flows from operating activities
1,657,051
1,171,884
Capital activities
Acquisition of tangible capital assets (1,539,794) (1,564,448)
Investing activities:
Investments (50,000) -
Increase in cash 67,257 (392,564)
Cash, beginning of year 1,199,220 1,591,784
Cash, end of year $ 1,266,477 $ 1,199,220
1-104
KITCHENER PUBLIC LIBRARY
Statement of Changes in Net Financial Assets
Year ended December 31, 2016, with comparative figures for 2015
See accompanying notes to financial statements.
1-105
2016
2015
Excess of revenue over expenses
$ 13,911
$ 43,260
Acquisition of tangible capital assets
(1,539,794)
(1,564,448)
Amortization of tangible capital assets
1,525,955
1,521,193
Change in net financial assets
72
5
Net financial assets, beginning of year
381,264
381,259
Net financial assets, end of year
$ 381,336
$ 381,264
See accompanying notes to financial statements.
1-105
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements
Year ended December 31, 2016
Kitchener Public Library (the "Board") was incorporated as a not-for-profit organization, without
share capital, under the laws of Ontario. It is a Board of the City of Kitchener (the "City") and is
dependent on the City for a significant portion of its operating and capital funding.
The Board contributes to the community as a resource and a gateway with sources of information
and works of imagination.
The financial statements of the Board are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board of the Canadian Institute of
Chartered Accountants. Since precise determination of many assets and liabilities is dependent
upon future events, the preparation of periodic financial statements necessarily involves the use of
estimates and approximations. These have been made using careful judgments. The following is a
summary of the significant accounting policies followed in the preparation of these financial
statements.
1. Significant accounting policies:
(a) Accrual basis of accounting:
The accrual basis of accounting recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result
of receipt of goods or services and the creation of a legal obligation to pay.
(b) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land are amortized on a
straight-line basis over their estimated useful lives as follows:
Furniture, fixtures and equipment
Specialty and other equipment
Computer
Books and audio visual resources
2. Deferred revenue:
10 - 30 years
8 years
3 - 10 years
2 - 10 years
Deferred revenue represents the annual Board's approval of the appropriation of unspent funds,
and are subject to external restrictions as to how the funds are disbursed. These appropriations
are included in required expenses and are subsequently charged directly to operations when
spent.
1-106
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1-107
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2016
4. Capital and special grants:
Each year, the City approves capital and special grants for the Board to purchase specific
capital items.
The capital grants approved for 2016 included $91,035 for general renovations, maintenance
and upgrading of existing facilities, $273,891 for communication infrastructure and technology
upgrades and $27,000 for KPL Accessibility Fund.
The portion of these grants and previous year grants that are included in revenue in 2016, is
$890,916 (2015 - $888,204).
5. Special grants:
In 2016, the Board received various special non-recurring grants and donations totaling
$182,235 (2015 - $376,342). The portion of these grants and previous year special grants that
are included in revenue in 2016, is $128,250 (2015 - $671,141). The remainder is included in
deferred revenue.
6. Pension plan:
The Board makes contributions to the Ontario Municipal Employees Retirement Systems
(OMERS), which is a multi-employer plan, on behalf of its staff. The plan is a defined benefit
plan which specifies the amount of the retirement benefit to be received by the employees
based on the length of service and rate of pay.
During the year, the Board incurred expenses equal to $596,969 (2015 - $584,793) for current
service on behalf of its staff.
1-108
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2016
7. Related party transactions:
The Kitchener Public Library Foundation (the "Foundation") was an independent organization
which raised funds to support the development of the Kitchener Public Library.
During 2016, the Foundation donated $nil (2015 - $221,632) to the Board to fund various
projects. In 2015 the Foundation ceased operations and all assets were transferred to the
Kitchener Public Library.
1-109
KITCHENER PUBLIC LIBRARY
Schedules of Personnel, Equipment, Administrative, Facilities and Programs and Publicity Expenses
Year ended December 31, 2016, with comparative information for 2015
1-110
2016
2015
Schedule 1 - Personnel
Personnel:
Salaries
$
6,893,901
$
6,778,894
Health benefits
450,786
427,731
Pension benefits
878,295
857,727
Employment insurance
151,142
146,774
WSIB
22,710
23,094
Sick leave reserve
66,000
66,000
Staff training
36,341
38,583
$
8,499,175
$
8,338,803
Schedule 2 - Equipment
Equipment:
Technology
$
198,069
$
208,376
Equipment maintenance
16,117
26,142
Amortization
405,448
386,527
$
619,634
$
621,045
Schedule 3 - Administrative
Administrative:
Postage and delivery
$
7,294
$
8,621
Insurance
18,466
18,204
Professional services
43,867
49,209
General business
49,096
40,188
Telephone
24,776
24,253
Stationery
45,488
38,474
$
188,987
$
178,949
Schedule 4 - Facilities
Facilities:
Facilities expenses
$
370,296
$
362,857
Country Hills building
45,055
41,684
Main utilities
262,870
221,937
Forest Heights utilities
20,174
24,248
Pioneer Park building
25,111
22,313
Grand River Stanley Park building
3,771
3,182
$
727,277
$
676,221
1-110
KITCHENER PUBLIC LIBRARY
Schedule 5 - Programs and Publicity
Year ended December 31, 2016, with comparative information for 2015
Programs and publicity:
Promotional
Public programs
2016 2015
$ 27,687 $ 26,616
26,530 18,257
$ 54,217 $ 44,873
[1-a
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J
5A3 Canada
Tel 519-747-8800
Fax 519-747-8830
INDEPENDENT AUDITORS' REPORT
To the Directors of The Centre In The Square Inc.
We have audited the accompanying financial statements of The Centre In The
Square Inc., which comprise the statement of financial position as at
December 31, 2016, the statements of operations, changes in net financial assets
and cash flows for the year then ended, and notes, comprising a summary of
significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
financial statements in accordance with Canadian public sector accounting
standards, and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform an audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control. An
audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
1-112
M I I in
IF NIA11"
Page 2
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the
financial position of The Centre In The Square Inc. as at December 31, 2016, and
its results of operations and its cash flows for the year then ended in accordance
with Canadian public sector accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
March 22, 2017
Waterloo, Canada
1-113
THE CENTRE IN THE SQUARE INC.
Statement of Financial Position
December 31, 2016, with comparative information for 2015
Net financial assets 1,052,240 702,670
Non-financial assets
Tangible capital assets (note 4)
2016
2015
Net Assets
51,494
48,558
Financial assets:
226,376
166,826
Cash
$ 3,885,724
$ 3,625,529
Due (to) from The City of Kitchener
(42,392)
122,910
Accounts receivable
163,118
57,582
Interest receivable
1,242
743
Costs to be recovered
162,429
160,419
Investments (note 2)
1,311,384
545,476
Total financial assets
5,481,505
4,512,659
Financial liabilities:
501,977
493,524
Accounts payable and accrued liabilities
1,287,942
1,031,677
Deferred revenue (note 3)
3,141,323
2,778,312
4,429,265
3,809,989
Net financial assets 1,052,240 702,670
Non-financial assets
Tangible capital assets (note 4)
8,283,205
8,520,879
Inventories (note 5)
51,494
48,558
Prepaid expenses
226,376
166,826
8,561,075
8,736,263
Net assets
$ 9,613,315
$ 9,438,933
Accumulated Surplus
Operating fund activities (note 6)
$ -
$ -
Reserves - Capital (notes 7 and 11)
765,447
424,530
Reserves - Performance Development (note 8)
-
-
Reserves - Sustainability (notes 8 and 11)
62,686
-
Reserves - Restricted (notes 9 and 11)
501,977
493,524
Invested in tangible capital assets
8,283,205
8,520,879
Accumulated surplus
$ 9,613,315
$ 9,438,933
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
THE CENTRE IN THE SQUARE INC.
Statement of Operations
Year ended December 31, 2016, with comparative information for 2015
Revenues:
Performances
Rent - Kitchener -Waterloo Symphony
Capital reserve fund surcharge (note 7)
Grants from The City of Kitchener - Operating
Grants from The City of Kitchener - Capital
Grants from other governments - Operating
Grants from other governments - Capital
Donations
Investment income
Sponsorships and memberships
Rent - Kitchener -Waterloo Art Gallery
Lottery revenue
Other
Gain on investments
(Loss) gain on sale of assets
Portion of operating (gain) loss for The City
of Kitchener
Total revenue
Budget 2016 Actual 2016 Actual 2015
$ 6,313,821
$ 6,613,377 $
5,772,441
95,000
105,855
92,015
360,000
309,753
264,082
2,000,000
2,000,000
1,400, 000
1,949,420
219,294
510,810
42,300
21,150
-
2,088,461
121,365
-
3,621
15,619
5,731
65,960
52,660
48,652
97,444
104,117
121,255
95,520
95,520
93,648
-
6,942
-
132,878
134,282
145,625
-
3,565
40,230
-
(32,975)
630
-
(62,060)
119,098
13,244,425
9,708,464
8,614,217
Expenses:
Direct:
Performances
5,509,400
5,806,354
4,631,017
Operating:
Administration
425,000
398,848
397,933
Marketing
100,000
174,263
128,814
Lottery expenses
-
6,942
-
Occupancy
879,000
706,418
631,623
Salaries and wages
2,450,932
2,905,787
3,008,331
Recoveries - performances
(559,197)
(1,004,214)
(916,367)
Amortization
700,000
500,302
687,986
Write down of tangible capital assets
612,500
30,062
30,976
Reserves expenditures (recoveries) (note 11)
15,000
9,320
9,197
Total expenses
10,132,635
9,534,082
8,609,510
Excess of revenue over expenses 3,111,790 174,382 4,707
Accumulated surplus, beginning of year 9,438,933 9,438,933 9,434,226
Accumulated surplus, end of year $ 12,550,723 $ 9,613,315 $ 9,438,933
See accompanying notes to financial statements.
1-115
THE CENTRE IN THE SQUARE INC.
Statement of Change in Net Financial Assets
Year ended December 31, 2016, with comparative information for 2015
See accompanying notes to financial statements
2016
2015
Excess of expenses over revenue
$ 174,382
$ 4,707
Acquisition of tangible capital assets
(292,690)
(348,703)
Amortization of tangible capital assets
500,302
687,986
Write-downs of tangible capital assets
30,062
30,976
412,056
374,966
Net acquisition use of supplies inventory
(2,936)
1,103
Acquisition use of prepaid expenses
(59,550)
41,454
(62,486)
42,557
Increase in net financial assets
349,570
417,523
Net financial assets, beginning of year
702,670
285,147
Net financial assets, end of year
$ 1,052,240
$ 702,670
See accompanying notes to financial statements
THE CENTRE IN THE SQUARE INC.
Statement of Cash Flows
Year ended December 31, 2016, with comparative information for 2015
2016 2015
Operating activities
Excess of expenses over revenue $ 174,382 $ 4,707
Items not involving cash:
Amortization 500,302 687,986
Write down of tangible capital assets 30,062 30,976
Change in non-cash operating working capital 614,047 1,150,648
Cash (used) provided by operating activities 1,318,793 1,874,317
Capital activities
Cash used to acquire tangible capital assets (292,690) (348,703)
Investing activities:
Investments (765,908) (45,849)
Increase in cash 260,195 1,479,765
Cash, beginning of year 3,625,529 2,145,764
Cash, end of year $ 3,885,724 $ 3,625,529
See accompanying notes to financial statements.
1-117
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements
Year ended December 31, 2016
The mission of The Centre In The Square Inc. ("The Centre"), is to create memorable experiences. It
is incorporated as a not-for-profit corporation without share capital, is exempt from income taxes
under the Income Tax Act, and is a registered charity. The Centre is a governed by a Board of
Directors and receives an operating grant from the City of Kitchener ("the City").
1. Significant accounting policies:
The financial statements of The Centre are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadian
Institute of Chartered Accountants. Since precise determination of many assets and liabilities is
dependent upon future events, the preparation of periodic financial statements necessarily
involves the use of estimates and approximations. These have been made using careful
judgment.
(a) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land, are amortized on a straight-
line basis over their estimated useful lives as follows:
Asset
Rate
Building
9 - 100 years
Equipment
4 - 50 years
Computers
5 - 14 years
Software
3 years
Site
10 - 50 years
(b) Accrual basis of accounting:
The accrual basis of accounting, recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result of
receipt of goods or services and the creation of a legal obligation to pay.
(c) Inventories:
Bar stock inventories are valued at the most recent replacement cost. Supplies inventories
are valued at the lower of cost and net realizable value on a first -in, first -out basis. Net
realizable value is defined as replacement cost.
1-118
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2016
1. Significant accounting policies (continued):
(d) Investments:
Investments are recorded at the lower of cost or market value on a fund portfolio basis.
Interest income and all expenses are fully accrued.
(e) Deferred revenue:
Performance revenue is recognized when the show occurs. Deferred gift certificate revenue
is an estimate based upon gift certificate sales during the period from July 1 to December 31
of the current year.
2. Investments:
Investments consist of:
Carrying value Market Carrying value Market
2016 2016 2015 2015
Shares $ 287,276
$ 468,924
$ 284,489
$ 421,866
Bonds 214,344
214,202
249,555
249,101
Cash 54,068
54,068
11,432
11,432
GIC 755,696
755,696
-
-
4,784
4,276
$ 1,311,384
$ 1,492,890
$ 545,476
$ 682,399
3. Deferred revenue:
Deferred revenue consists of the following:
2016 2015
Sponsorships
$ 23,750
$ 50,149
Performances
1,985,048
1,642,400
Gift certificates
46,069
47,178
Membership
2,897
11,783
Other
1,078,775
1,022,526
Lottery
4,784
4,276
$ 3,141,323
$ 2,778,312
1-119
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1-120
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2016
5. Inventories:
Inventories consist of the following:
2016 2015
Bar stock $ 50,610 $ 47,540
Supplies 884 1,018
$ 51,494 $ 48,558
6. Operating fund activities:
Budget Actual Actual
2016 2016 2015
Revenues:
Performances
$ 6,313,821
$ 6,613,377 $
5,772,441
Rent - Kitchener -Waterloo Symphony
95,000
105,855
92,015
Grants from City of Kitchener
2,000,000
2,000,000
1,400,000
Grants, other Governments and Foundations
42,300
21,150
-
Donations
-
13,403
3,520
Investment income
25,960
23,872
14,652
Sponsorships and memberships
97,444
104,117
121,255
Rent - Kitchener -Waterloo Art Gallery
95,520
95,520
93,648
Lottery revenue
-
6,942
Other
132,878
134,282
145,625
Total revenue
8,802,923
9,118,518
7,643,156
Current fund expenditures:
Direct:
Performances
5,509,400
5,806,354
4,631,017
Operating:
Administration
425,000
398,848
397,933
Marketing
100,000
174,263
128,814
Lottery expenses
-
6,942
-
Occupancy
879,000
706,418
631,624
Salaries and wages
2,450,932
2,905,787
3,008,331
Recoveries - performances
(559,197)
(1,004,214)
(916,367)
Total current fund expenditures
8,805,135
8,994,398
7,881,352
Operating fund net revenues before amortization (2,212) 124,120 (238,196)
Transfer (to) from reserve funds 2,212 (62,060) 119,098
Transfer (to) from the City of Kitchener - (62,060) 119,098
Fund balances, end of year $ - $ - $ -
1-121
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2016
7. Capital Reserve Fund Surcharge:
The Capital Reserve Fund represents the collection of a surcharge from sale of tickets.
At the direction of the Board of Directors, expenditures from the Capital Reserve Fund are made
to finance, in whole or in part, major capital items, replacements and major maintenance projects.
In 2016, the Centre's Board of Directors approved transfers out of the Capital Reserve Fund for
major capital asset projects ($292,690).
8. Performance Development and Sustainability Reserve Funds:
At the direction of the Board of Directors, transfers are made to and from the Performance
Development Reserve and Sustainability Funds, equal to one-half of the annual operating net
revenue.
In 2016, The Centre's Board of Directors approved the transfer of the funds to the Sustainability
Fund of $62,686 from the operating fund.
9. Restricted Fund:
The Restricted Fund was set up by the Board of Directors of The Centre in 2000 by a transfer of
investments from the Sustainability Reserve Fund in accordance with the Restricted Fund Policy.
Income from this fund is to be used for capital requirements, special projects and/or new
programming initiatives that help further The Centre's mandate.
10. 2016 budget:
The original budgeted figures were approved by the Board of Directors at their meeting in August
2015 and included certain expenses and offsetting recoveries on a net basis. For purposes of
presentation in these financial statements, these items have been shown as gross amounts.
1-122
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2016
11. Schedule of reserve funds:
Balance, end of year $ - $ 765,447 $ 62,686 $ 501,977 $ 1,330,110
1-123
Performance
Total
Development
Capital Sustainability
Restricted
Funds
Revenue:
Donations and sundry
$ -
$ - $ -
$ 2,216 $
2,216
Grants from The City
of Kitchener 2016
-
219,294 -
-
219,294
Grants from the
other governments
-
121,365 -
-
121,365
Ticket surcharge
-
309,753 -
-
309,753
Investment income
626
16,170 -
11,992
28,788
Gain on investments
-
- -
3,565
3,565
Loss on sale of assets
-
(32,975) -
-
(32,975)
Total Revenue
626
633,607 -
17,773
652,006
Expenses:
Professional fees
-
- -
9,320
9,320
Excess of revenue
over expenses
626
633,607 -
8,453
642,686
Transfer to accumulated
surplus - tangible
capital assets
-
(292,690) -
-
(292,690)
Other transfers
(626)
- 62,686
-
62,060
Balance, beginning of year
-
424,530 -
493,524
918,054
Balance, end of year $ - $ 765,447 $ 62,686 $ 501,977 $ 1,330,110
1-123
INDEPENDENT AUDITORS' REPORT
To the Mayor and Members of Council, Inhabitants and Ratepayers of
The Corporation of the City of Kitchener
We have audited the accompanying statement of operations and accumulated surplus of The
Corporation of the City of Kitchener Gasworks Enterprise for the year ended December 31, 2016 ("the
financial statement").
Management's Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in
accordance with Canadian public sector accounting standards relevant to preparing such a financial
statement, and for such internal control as management determines is necessary to enable the
preparation of the financial statement that is free from material misstatement, whether due to fraud or
error.
Auditors' Responsibility
Our responsibility is to express an opinion on the financial statement based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statement. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the financial statement, whether due to fraud or
error. In making those risk assessments, we consider internal control relevant to the entity's
preparation and fair presentation of the financial statement in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statement.
1-124
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statement presents fairly, in all material respects the results of operations
and accumulated surplus of The Corporation of the City of Kitchener Gasworks Enterprise for the
year ended December 31, 2016 in accordance with Canadian public sector accounting standards
relevant to preparing such a financial statement.
Chartered Professional Accountants, Licensed Public Accountants
June 26, 2017
Waterloo, Canada
1-125
THE CORPORATION OF THE CITY OF
KITCHENER GASWORKS ENTERPRISE
Statement of Operations and Accumulated Surplus
For the Year Ended December 31, 2016
Other programs
2016
2016
2015
(Customer Service, Rental Water Heaters & Financing)
Budget
8,947,187
1,464,077
DELIVERY OPERATIONS
9,239,347
9,993,685
9,844,557
Gas delivery
6,701,775A,
6,505,337
6,717,169
Revenue
$ 37,377,363
$ 42,881,159
$ 35,925,514
Expenses
17,400,328
19,514,058
17,155,633
Revenue
19,977,035
23,367,101
18,769,881
Other programs
8,895,360
7,255,795
6,248,325
(Customer Service, Rental Water Heaters & Financing)
8,947,187
8,947,187
1,464,077
Revenue
9,239,347
9,993,685
9,844,557
Expenses
6,701,775A,
6,505,337
6,717,169
Balance, end of year
2,537,W
3,488,349
3,127,388
Dispatch
7,882
(737)
17,105
Revenue
199,899
509,821
480,610
Expenses
I659
600,591
509,821
480,610
Excess of revenue over expenses
22 ,607
26,855,450
21,897,269
Accumulated Surplus - Delivery
Balance, beginning of year
12 ,948
128,979,948
120,526,554
Interest Revenue
,305
1,138
81,325
Transfer to Gas Investment Reserve
VIII ( , 5,704)
(1357955704)
(13,525,200)
Add excess of revenue over expenses
22,514,607
2658555450
21,897,269
Balance, end of year
13757005156
14250405832
128,979,948
SUPPLY OPERATIONS
Gas supply
Revenue
Vu 2357905527
1958305224
35,710,151
Expenses
29 457 209
20 571 543
28,248,619
Excess of revenue over expo
(5,666,682) (741,319) 7,461,532
Accumulated Surplus -Supply'°"°illllll ui"""
8,895,360
7,255,795
6,248,325
Balance, beginning of year
8,947,187
8,947,187
1,464,077
Interest Revenue
92,541
132,588
21,578
Add excess of revenue over expenses
(5,666,682)
(741,319)
7,461,532
Balance, end of year
3,373,046
8,338,456
8,947,187
TRANSPORTATION OPERATIONS
Gas transportation
Revenue
8,895,360
7,255,795
6,248,325
Expenses
8,695,461
8,033,563
7,475,726
Excess of revenue over expenses
199,899
(777,768)
(1,227,401)
Accumulated Surplus -Transportation
Balance, beginning of year
(49,745)
(49,745)
1,160,551
Interest Revenue
7,882
(737)
17,105
Add excess of revenue over expenses
199,899
(777,768)
(1,227,401)
Balance, end of year
$ 158,036 $
(828,250)
$ (49,745)
1-126
MANAGEMENT REPORT
Management's Responsibility for Financial Reporting
The accompanying financial statements of Kitchener Generation Corporation are the responsibility of
management and have been prepared in accordance with Canadian public sector accounting
standards. The significant accounting policies followed by Kitchener Generation Corporation are
described in the Significant Accounting Policies contained in Note 2 of the financial statements. The
preparation of financial statements necessarily involves the use of estimates based on management's
judgment, particularly when transactions affecting the current accounting period cannot be finalized
with certainty until future periods. The financial statements have been prepared within reasonable
limits of materiality and in light of information available up to June 25, 2017.
Management maintained a system of internal controls designed to provide reasonable assurance that
the assets were safeguarded and that reliable information was available on a timely basis. The
system included formal policies and procedures and an organizational structure that provided for the
appropriate delegation of authority and segregation of responsibilities.
KITCHENER GENERATION CORPORATION
On behalf of management,
)1044w4 WAne-
Dan Chapman
Deputy CAO, Finance & Corporate Services and City Treasurer
June 26, 2017
Kitchener, Canada
1-127
KITCHENER GENERATION CORPORATION
Statement of Financial Position
As at December 31, 2016
(Unaudited)
2016 2015
Financial assets
Accounts receivable $ 4,883 $ 6,035
4.883 6.035
Liabilities
Due to The Corporation of the City of Kitchener
4,916 6,051
Long-term debt (Note 3) 3,031,535 3,262,609
3,036,451 3,268,660
Net financial debt (3,031,568) (3,262,625)
Non-financial assets
Tangible capital assets (Note 4) 3,251,524 3,483,776
Total non-current assets 3,251,524 3,483,776
Accumulated surplus (Note 5) $ 219,956 $ 221,151
See accompanying notes
1-128
KITCHENER GENERATION CORPORATION
Statement of Operations
For the Year Ended December 31, 2016
(Unaudited)
2016 2016 2015
Budget
Revenue
Sale of electricity $ 415,000 $ 433,797 $ 416,888
Total revenue 415.000 433.797 416.888
Expenses
Maintenance
19,000 13,608 1,793
Amortization
232,252
232,252
232,252
Total expenses
251,252
245,860
234,045
Surplus before interest and provision for payments -
in -lieu of corporate income taxes
163,748
187,937
182,843
Interest expense
163,457
163,457
174,314
Surplus before provision for payments -in -lieu of
corporate income taxes
291
24,480
8,529
Provision for payments -in -lieu of corporate income
taxes
Annual surplus $ 291 $ 24,480 $ 8,529
See accompanying notes
1-129
KITCHENER GENERATION CORPORATION
Statement of Change in Net Financial Debt
For the Year Ended December 31, 2016
(Unaudited)
Annual surplus
2016 2015
$ 24,480 $ 8,529
Change in share capital
(25,675)
(24,079)
Amortization of tangible capital assets
232,252
232,252
Change in net financial debt
231,057
216,702
Net financial debt, beginning of year
(3,262,625)
(3,479,327)
Net financial debt, end of year
$ (3,031,568)
$ (3,262,625)
See accompanying notes
1-130
KITCHENER GENERATION CORPORATION
Statement of Cash Flow
For the Year Ended December 31, 2016
(Unaudited)
2016
2015
Operating
Annual surplus $
24,480 $
8,529
Items not involving cash
Amortization
232,252
232,252
Change in non-cash assets and liabilities
Trade and other accounts receivable
1,152
21,598
Accounts oavable and accrued liabilities
11.1351
(21.582)
Net change in cash from operating activities 256,749 240,797
Financing
Change in contributed capital (25,675) (24,079)
Change in long-term debt (231,074) (216,718)
Net change in cash from financing activities (256,749) (240,797)
Net change in cash and cash equivalents - -
Cash and cash equivalents, beginning of year - -
Cash and cash equivalents, end of year $ - $ -
See accompanying notes
1-131
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2016
(Unaudited)
1. Incorporation
On December 9, 2011 Kitchener Generation Corporation (the Company) was incorporated under the Business
Corporation Act (Ontario). Effective January 1, 2012, The Corporation of the City of Kitchener transferred the
solar roof asset constructed on the surface of the Kitchener Operations Facility to the Company in exchange for
100% of the Company's common shares and interest bearing debt.
2. Summary of significant accounting policies
a. Basis of accounting
The financial statements have been prepared by management in accordance with Canadian generally accepted
accounting principles for local governments as established by the Public Sector Accounting Board of the
Chartered Professional Accountants of Canada.
b. Tangible capital assets
Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to
acquisition, construction, development or betterment of the asset. The cost less residual value of the tangible
capital asset is amortized on a straight-line basis over its estimated useful life of nineteen years.
Revenue recognition
The Company records revenue from the sale of electricity on the basis of regular meter readings and estimates
of energy generation since the last meter reading to the end of the year.
d. Use of estimates
Since precise determination of many assets and liabilities is dependent upon future events, the preparation of
periodic financial statements necessarily involves the use of estimates and approximations. These have been
made using careful judgments. Actual results could differ from these estimates.
3. Long-term debt
Effective January 1, 2012 the Company incurred an unsecured promissory note payable to The Corporation of
the City of Kitchener. For shareholder debt, payments are made annually including interest and principal.
Interest is calculated at the fixed rate of 5.01 % per annum. Interest paid in 2016 amounted to $163,457 (2015
- $174,314).
4. Tangible capital assets
Opening balance
Additions
Amortization expense
Accumulated Net Book
Cost Amortization Value
$ 4,412,784 $ (929,008) $ 3,483,776
(232,252) (232,252)
Disposals - - -
Ending balance $ 4,412,784 $ (1,161,260) $ 3,251,524
1-132
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2016
(Unaudited)
5. Accumulated surplus
The accumulated surplus consists of the following:
2016 2015
Share capital - common shares (Note 6) $ 336,837 $ 362,513
Retained earnings (116,881) (141,362)
$ 219,956 $ 221,151
6. Share capital
Authorized
Unlimited common shares
Issued
1,000 common shares
1-133
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Kitchener Power Corporation
We have audited the accompanying consolidated financial statements of Kitchener Power
Corporation, which comprise the consolidated statement of financial position as at
December 31, 2016, the consolidated statements of comprehensive income, changes in
equity and cash flows for the year then ended, and notes, comprising a summary of
significant accounting policies and other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based
on our audit. We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on
our judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk
assessments, we consider internal control relevant to the entity's preparation and fair
presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
1-134
Page 2
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects,
the consolidated financial position of Kitchener Power Corporation as at December 31,
2016, and its consolidated financial performance and its consolidated cash flows for the
year then ended in accordance with International Financial Reporting Standards.
Chartered Professional Accountants, Licensed Public Accountants
March 24, 2017
Waterloo, Canada
1-135
KITCHENER POWER CORPORATION
Consolidated Statement of Financial Position
As at December 31, 2016, with comparative information for 2015
(Expressed in thousands of dollars)
Assets
Current assets
Cash
Accounts receivable
Unbilled revenue
Inventory
Prepaid expenses
Total current assets
Non-current assets:
Property, plant and equipment
Intangible assets
Deferred tax assets
Investment in subsidiaries and associates
Total non-current assets
Total assets
Note December 31, December 31,
2016 2015
4 $ 20,448 $
20,634
5 23,764
23,738
27,589
25,789
6 2,864
3,545
949
1,014
75,614
74,720
7 222,159
205,412
8 1,174
864
9 2,015
2,362
69
-
225,417
208,638
301,031 283,358
Regulatory deferral account debit balances 10 4,487 4,923
Deferred taxes associated with regulatory accounts 141 280
Total assets and regulatory assets $ 305,659 $ 288,561
1-136
KITCHENER POWER CORPORATION
Consolidated Statement of Financial Position
Year ended December 31, 2016, with comparative information for 2015
(Expressed in thousands of dollars)
Non-current liabilities:
Long-term debt
Note
December 31,
2016
December 31,
2015
Liabilities and Shareholders'
Equity
Long-term customer deposits
13 5,571
Current liabilities:
Deferred revenue
23,772
15,538
Accounts payable and accrued liabilities
$
28,608 $
28,576
Income taxes payable
145,612
195
366
Current portion of long-term debt
11
1,080
1,036
Current portion customer deposits
13
8,592
8,549
Current portion of deferred revenue
584
377
Total current liabilities
39,059
38,904
Non-current liabilities:
Long-term debt
11 79,872
80,952
Employee future benefits
12 5,035
4,900
Long-term customer deposits
13 5,571
5,318
Deferred revenue
23,772
15,538
Total non-current liabilities
114,250
106,708
Total liabilities
153,309
145,612
Shareholders' equity:
Share capital - common shares 14 66,389 66,389
Retained earnings 75,641 69,652
Total shareholders' equity 142,030 136,041
Total liabilities and shareholders' equity 295,339 281,653
Regulatory deferral account credit balances 10 10,320 6,908
Total a uity, liabilitiesand shareholders' equity $ 305,659 $ 288,561
The accompanying notes are an integral part of these financial statements.
n behalf of the Board:
C-
Director
Director
1-137
KITCHENER POWER CORPORATION
Consolidated Statement of Comprehensive Income
Year ended December 31, 2016, with comparative information for 2015
(Expressed in thousands of dollars)
Note 2016 2015
Energy sales $ 232,647 $ 210,496
Cost of energy sold 228,633 205,624
4,014 4,872
Other operating revenue
Distribution sales
40,600 36,295
Other income 15 2,006 1,912
Net operating revenue 46,620 43,079
Expenses:
Operations and maintenance
Customer services
Other
9,174 8,980
4,415 3,717
Administration 4,133 4,051
Amortization 8,721 7,417
26,443 24,165
Energy conservation - IESO program revenue (2,443) (1,618)
Energy conservation - IESO program expense 2,443 1,441
Net energy conservation - IESO programs - (177)
Finance income 16 (234) (204)
Finance charges 16 4,145 4,189
Net finance costs 3,911 3,985
Income before income taxes 16,266 15,106
Income tax expense 9 1,999 1,848
Income for the year before movements
in regulatory deferral account balances 14,267 13,258
Net movement in regulatory deferral account balances
related to profit or loss and the related deferred
tax movement 10 (3,868) (2,287)
Total comprehensive income for the year $ 10,399 $ 10,971
The accompanying notes are an integral part of these financial statements.
1-138
KITCHENER POWER CORPORATION
Consolidated Statement of Changes in Equity
Year ended December 31, 2016, with comparative information for 2015
(In thousands of Canadian dollars)
Net income
Other comprehensive income
Dividends
10,399
4.41
10,399
(4.410
Balance at December 31, 2016 $ 66,389 $ (245) $ 75,886 $ 142,030
The accompanying notes are an integral part of these financial statements.
1-139
Accumulated
Share capital other
Retained
Total
comprehensive
earnings
income (loss)
Balance at January 1, 2015
$ 66,389 $ (245) $
63,192 $
129,336
Net income
10,971
10,971
Other comprehensive income
-
-
-
Dividends
(4,266)
(4,266)
Balance at December 31, 2015
66,389 (245)
69,897
136,041
Net income
Other comprehensive income
Dividends
10,399
4.41
10,399
(4.410
Balance at December 31, 2016 $ 66,389 $ (245) $ 75,886 $ 142,030
The accompanying notes are an integral part of these financial statements.
1-139
KITCHENER POWER CORPORATION
Consolidated Statement of Cash Flows
Year ended December 31, 2016, with comparative information for 2015
(Expressed in thousands of dollars)
2016 2015
Cash flows from operating activities:
Total comprehensive income for the year $
10,399 $
10,971
Adjustments to reconcile net income to cash provided by (used in) operations:
Amortization
9,411
8,087
Amortization of deferred revenue
(480)
(271)
Gain on disposal of property, plant and equipment
(54)
(43)
Income tax expense
1,999
1,848
Income taxes paid
(2,209)
(1,495)
Increase decrease in employee future benefits
135
136
19,201
19,233
Change in non-cash operating working capital:
Accounts receivable
(26)
(1,730)
Unbilled revenue
(1,800)
3,393
Inventory
681
(408)
Prepaid expenses
66
71
Accounts payable and accrued liabilities
32
(329)
Other current liabilities
294
1,650
Change in regulatory assets
436
2,002
Change in regulatory liabilities
3,935
(316)
Net cash from operating activities
22,819
23,566
Cash flows from investing activities:
Proceeds on disposals of property, plant and equipment 72 66
Purchase of property, plant and equipment (25,776) (20,875)
Purchase of intangible assets (710) (544)
Net cash from investing activities (26,414) (21,353)
Cash flows from financing activities:
Net change in customer deposits 253 1,245
Investments in subsidiaries and associates (69)
Dividends paid out (4,410) (4,266)
Change in contributed capital received 8,715 9,428
Repayment of long-term debt (1,080) (1,036)
Net cash from financing activities 3,409 5,371
Change in cash and cash equivalents (186) 7,584
Cash and cash equivalents, beginning of year 20,634 13,050
Cash and cash equivalents, end of year $ 20,448 $ 20,634
The accompanying notes are an integral part of these financial statements.
1-140
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
1. Reporting entity:
Kitchener Power Corporation (the "Corporation") is a holding company for the affiliate companies,
Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the
Corporation of the City of Kitchener and the Corporation of the Township of Wilmot.
The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution
company, and Kitchener Energy Services Inc., an unregulated retail services company. The
Corporation also owns 33% of GRE Corp., a generation and renewable energy solutions company.
It is located in the City of Kitchener. The address of the Corporation's registered office is 301
Victoria Street South, Kitchener, Ontario, Canada.
The financial statements are for the Corporation as at and for the year ended December 31, 2016
2. Basis of presentation:
(a) Statement of compliance:
The Corporation's financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board
of Directors on March 24, 2017.
(b) Basis of measurement:
The financial statements have been prepared on the historical cost basis except for the
following:
(i) Where held, financial instruments at fair value through profit or loss, including those held
for trading, are measured at fair value.
(ii) Contributed assets are initially measured at fair value.
The methods used to measure fair values are discussed further in note 22.
(c) Functional and presentation currency:
These financial statements are presented in Canadian dollars, which is the Corporation's
functional currency. All financial information presented in Canadian dollars has been rounded
to the nearest thousand.
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
2. Basis of presentation (continued):
(d) Use of estimates and judgments:
The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses and disclosure of contingent
assets and liabilities. Actual results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the year in which the estimates are revised and in any
future periods affected.
Information about critical judgments in applying accounting policies that have the most
significant effect on the amounts recognized in these financial statements is included in the
following notes:
i) Note 7 — Property, plant and equipment
ii) Note 9 — Deferred tax assets
iii) Note 12 — Employee future benefits
iv) Note 17 — Commitments and contingencies
(e) Rate regulation
The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted
by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and
responsibility to approve or set rates forthe transmission and distribution of electricity, providing
continued rate protection for electricity consumers in Ontario, and ensuring that transmission
and distribution companies fulfill obligations to connect and service customers. The OEB may
also prescribe license requirements and conditions of service to local distribution companies
("LDCs"), such as the Corporation, which may include, among other things, record keeping,
regulatory accounting principles, separation of accounts for distinct businesses, and filing and
process requirements for rate setting purposes.
The Corporation is required to bill customers for the debt retirement charge set by the province.
The Corporation may file to recover uncollected debt retirement charges from Ontario
Electricity Financial Corporation ("OEFC") once each year
Rate setting:
Distribution revenue and electricity rates
The OEB sets electricity prices for low-volume consumers twice each year based on an
estimate of how much it will cost to supply the province with electricity for the next year. All low
volume customers without a contract with an energy retailer are charged the OEB mandated
rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer
rates are charged instead. All remaining consumers pay the market price for electricity. The
Corporation is billed for the cost of the electricity that its customers use and passes this cost
on to the customer at cost without a mark-up.
1-142
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
2. Basis of presentation (continued):
(e) Rate regulation (continued):
Forthe distribution revenue included in electricity sales, the Corporation files a "Cost of Service"
("COS") rate application with the OEB every four years where rates are determined through a
review of the forecasted annual amount of operating and capital expenses, debt and
shareholder's equity required to support the Corporation's business. The Corporation
estimates electricity usage and the costs to service each customer class to determine the
appropriate rates to be charged to each customer class. The COS application is reviewed by
the OEB and intervenors and rates are approved based upon this review, including any
revisions resulting from that review.
In the intervening years an Incentive Rate Mechanism application ("IRM") is filed. An IRM
application results in a formulaic adjustment to distribution rates that were set under the last
COS application. The previous year's rates are adjusted for the annual change in the Gross
Domestic Product Implicit Price Inflator for Final Domestic Demand ("GDP IPI -FDD") net of a
productivity factor and a "stretch factor" determined by the relative efficiency of an electricity
distributor.
As a licensed distributor, the Corporation is responsible for billing customers for electricity
generated by third parties and the related costs of providing electricity service, such as
transmission services and other services provided by third parties. The Corporation is required,
pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the
Corporation ultimately collects these amounts from customers.
The Corporation last filed a COS application on June 21, 2013 for rates effective January 1,
2015 to December 31, 2015. The GDP IPI -FDD for 2016 is 2.1 %, the Corporation's productivity
factor is 0% and the stretch factor is 0.15%, resulting in a net adjustment of 1.95% to the
previous year's rates.
(f) Investments
Investments in subsidiary companies, associates and other long-term investments are
accounted for by the equity method. Dividends received are recorded as a reduction of the
carrying value of these investments.
3. Significant accounting policies:
The accounting policies set out below have been applied consistently in all years presented in these
financial statements unless otherwise indicated.
1-143
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(a) Financial instruments:
All financial assets are classified as loans and receivables and all financial liabilities are
classified as other liabilities. These financial instruments are recognized initially at fair value
plus any directly attributable transaction costs. Subsequently, they are measured at amortized
cost using the effective interest method less any impairment for the financial assets as
described in note 3(f). The Corporation does not enter into derivative instruments.
Hedge accounting has not been used in the preparation of these financial statements.
Cash equivalents include short-term investments with maturities of three months or less when
purchased.
(b) Revenue recognition:
Electricity sales:
Electricity sales are recognized as the electricity is delivered to customers and includes the
amounts billed to customers for electricity, including the cost of electricity supplied, distribution,
and any other regulatory charges. Electricity revenue is recorded on the basis of regular meter
readings and estimated customer usage since the last meter reading date to the end of the
year. The related cost of power is recorded on the basis of power used.
For customer billings related to electricity generated by third parties and the related costs of
providing electricity service, such as transmission services and other services provided by third
parties, the Corporation has determined that it is acting as a principal for these electricity
charges and, therefore, has presented electricity revenue on a gross basis.
Customer billings for debt retirement charges are recorded on a net basis as the Corporation
is acting as an agent for this revenue stream.
F�EIA 11AI
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(b) Revenue recognition (continued):
Revenue from contracts with customers:
Certain customers and developers are required to contribute towards the capital cost of
construction of distribution assets in order to provide ongoing service. Cash contributions are
initially recorded as deferred revenue. When an asset other than cash is received as a capital
contribution, the asset is initially recognized at its fair value, with a corresponding amount
recognized as deferred revenue. The deferred revenue, which represents the Corporation's
obligation to continue to provide the customers access to the supply of electricity, is amortized
to income on a straight-line basis over the economic useful life of the constructed or contributed
asset, which represents the period of ongoing service to the customer.
Rendering of services:
Revenue earned from the provision of services is recognized as the service is rendered.
Government grants
Incentive payments to which the Corporation is entitled from the Independent Electricity System
Operator ("IESO") are recognized as revenue in the period when they are determined by the
IESO and the amount is communicated to the Corporation.
(c) Inventory:
Inventory, comprising material and supplies, the majority of which is consumed by the
Corporation in the provision of its services, is valued at the lower of cost and net realizable
value, with cost being determined on a weighted average cost basis, and includes expenditures
incurred in acquiring the material and supplies and other costs incurred in bringing them to their
existing location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less
estimated selling expenses.
(d) Property, plant and equipment:
Items of property, plant and equipment ("PP&E") used in rate -regulated activities and
acquired prior to January 1, 2015 are measured at deemed cost established on the transition
date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where
the item is transferred from customers, its fair value, less accumulated depreciation.
Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously
determined under Canadian GAAP as the deemed cost at January 1, 2015, the transition
date to IFRS.
1-145
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(d) Property, plant and equipment (continued):
Cost includes expenditures that are directly attributable to the acquisition of the asset. The
cost of self -constructed assets includes the cost of materials, direct labour, and any other costs
directly attributable to bringing the asset to a working condition for its intended use.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on the disposal of an item of PP&E are determined by comparing the
proceeds from disposal, if any, with the carrying amount of the item of PP&E and are
recognized net within other income in profit or loss.
Major spare parts and standby equipment are recognized as items of PP&E.
The cost of replacing a part of an item of property, plant and equipment is recognized in the
net book value of the item if it is probable that the future economic benefits embodied within
the part will flow to the Corporation and its cost can be measured reliably. In this event, the
replaced part of property, plant and equipment is written off, and the related gain or loss is
included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment
are recognized in profit or loss as incurred.
Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a
straight-line basis over the estimated useful life of each part or component of an item of
property, plant and equipment. The depreciable amount is cost. Land is not depreciated.
Construction -in -progress assets are not amortized until the projects are complete and in
service.
The estimated useful lives are as follows:
Buildings
20-60 years
Transformer station equipment
16-60 years
Distribution station equipment
16-60 years
Distribution system
26-60 years
Meters
16-26 years
SCADA equipment
16 years
Other capital assets
3-10 years
Depreciation methods, useful lives, and residual values are reviewed at each reporting date
and adjusted prospectively if appropriate.
(e) Intangible assets
(i) Computer software:
Computer software that is acquired or developed by the Corporation, including software
that is not integral to the functionality of equipment purchased which has finite useful lives,
is measured at cost less accumulated amortization and accumulated impairment losses.
1-146
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(e) Intangible assets (continued):
(ii) Land rights:
Payments to obtain rights to access land ('land rights") are classified as intangible assets.
These include payments made for easements, right of access and right of use over land
for which the Corporation does not hold title. Land rights are measured at cost less
accumulated amortization and accumulated impairment losses.
(iii) Amortization:
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful
lives of intangible assets, other than goodwill, from the date that they are available
for use. The estimated useful lives are:
Computer software 3-5 years
Land rights 100 years
Amortization methods and useful lives of all intangible assets are reviewed at each
reporting date and adjusted prospectively if appropriate.
(f) Impairment:
(i) Financial assets:
A financial asset is assessed at each reporting date to determine whether there is any
objective evidence that it is impaired. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortized cost is calculated
as the difference between its current carrying amount (using prevailing interest rates), and
the present value of the estimated future cash flows discounted at the original effective
interest rate. Interest on the impaired assets continues to be recognized through the
unwinding of the discount.
All impairment losses are recognized in profit or loss. An impairment loss is reversed if the
reversal can be related objectively to an event occurring after the impairment loss was
recognized. For financial assets measured at amortized cost the reversal is recognized in
profit or loss.
��EIA IFA
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(f) Impairment (continued):
(ii) Non-financial assets:
The carrying amounts of the Corporation's non-financial assets, other than inventories and
deferred tax assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset's recoverable amount
is estimated
For the purpose of impairment testing, assets are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are largely independent of
the cash inflows of other assets or groups of assets (the "cash -generating unit"). The
recoverable amount of an asset or cash -generating unit is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
An impairment loss is recognized if the carrying amount of an asset or its cash -generating
unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit
or loss.
An impairment loss in respect of goodwill is not reversed. For assets other than goodwill,
impairment recognized in prior periods is assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized.
(g) Provisions:
A provision is recognized if, as a result of a past event, the Corporation has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability.
1-148
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(h) Regulatory deferral accounts:
Regulatory deferral account debit balances represent costs incurred in excess of amounts
billed to the customer at OEB approved rates. These amounts have been accumulated and
deferred in anticipation of their future recovery in electricity distribution rates. Regulatory
deferral account credit balances represent amounts billed to the customer at OEB approved
rates in excess of costs incurred by the Corporation.
Regulatory deferral account debit balances are recognized if it is probable that future billings
in an amount at least equal to the capitalized cost will result from inclusion of that cost in
allowable costs for rate -making purposes. The offsetting amount is recognized in profit and
loss. The debit balance is reduced by the amount of customer billings as electricity is delivered
to the customer and the customer is billed at rates approved by the OEB for the recovery of the
capitalized costs.
Regulatory deferral account credit balances are recognized if it is probable that future billings
in an amount at least equal to the credit balance will be reduced as a result of rate -making
activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced
by the amounts returned to customers as electricity is delivered to the customer at rates
approved by the OEB for the return of the regulatory account credit balance.
The probability of recovery or repayment of the regulatory account balances are assessed
annually based upon the likelihood that the OEB will approve the change in rates to recover or
repay the balance. Any resulting impairment loss is recognized in profit and loss in the year
incurred.
Regulatory deferral accounts attract interest at OEB prescribed rates. The rates from January
to December 2016 were 1.1 % (2015 — 1.1 %).
1-149
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(i) Employee future benefits:
(i) Pension plan:
The Corporation provides a pension plan for all its full-time employees through Ontario
Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer
pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the
Fund"), and provides pensions for employees of Ontario municipalities, local boards and
public utilities. The Fund is a contributory defined benefit pension plan, which is financed
by equal contributions from participating employers and employees, and by the investment
earnings of the Fund. To the extent that the Fund finds itself in an under -funded position,
additional contribution rates may be assessed to participating employers and members.
OMERS is a defined benefit plan. However, as OMERS does not segregate its pension
asset and liability information by individual employers, there is insufficient information
available to enable the Corporation to directly account forthe plan. Consequently, the plan
has been accounted for as a defined contribution plan. Obligations for contributions to
defined contribution pension plans are recognized as an employee benefit expense in net
income when they are due.
(ii) Post -employment benefits, other than pension:
The Corporation provides some of its retired employees with life insurance and medical
benefits beyond those provided by government sponsored plans.
The cost of these benefits is expensed as earned by employees through employment
service. The accrued benefit obligations and the current service costs are actuarially
determined by applying the projected unit credit method and reflect management's best
estimate of certain underlying assumptions. Actuarial gains and losses arising from
defined benefit plans are recognized immediately in other comprehensive income and
reported in retained earnings. When the benefits of a plan are improved, the portion of the
increased benefit relating to past service by employees is recognized in net income on a
straight-line basis over the average period until the benefits become vested. In
circumstances where the benefits vest immediately, the expense is recognized
immediately in net income.
1-150
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
Q) Deferred revenue and assets transferred from customers:
Certain customers and developers are required to contribute towards the capital cost of
construction in order to provide ongoing service. When an asset is received as a capital
contribution, the asset is initially recognized at its fair value, with the corresponding amount
recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to
continue to provide customers access to the supply of electricity, and is amortized to income
on a straight-line basis over the economic useful life of the acquired or contributed asset, which
represents the period of ongoing service to the customer.
(k) Leased assets:
Leases, where the terms cause the Corporation to assume substantially all the risks and
rewards of ownership, are classified as finance leases. Upon initial recognition, the leased
asset is measured at an amount equal to the lower of its fair value and the present value of the
minimum lease payments. Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset.
All other leases are classified as operating leases and the leased assets are not recognized on
the Corporation's balance sheet. Payments made under operating leases are recognized in
profit or loss on a straight-line basis over the term of the lease.
(1) Finance income and finance costs:
Finance income is recognized as it accrues in profit or loss, using the effective interest method.
Finance income comprises interest earned on cash and cash equivalents and on regulatory
assets.
Finance charges comprise interest expense on borrowings, finance lease obligations,
regulatory liabilities and unwinding of the discount on provisions and impairment losses on
financial assets. Finance costs are recognized as an expense unless they are capitalized as
part of the cost of qualifying assets.
1-151
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(m) Income taxes:
The income tax expense comprises current and deferred tax. Income tax expense is
recognized in profit or loss except to the extent that it relates to items recognized directly in
equity, in which case, it is recognized in equity.
The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the
Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the
Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial
Corporation ("OEFC"). These payments are calculated in accordance with the rules for
computing taxable income and taxable capital and other relevant amounts contained in the
Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity
Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject
to income or capital taxes. Payments in lieu of taxes are referred to as income taxes.
Current tax is the tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is recognized using the balance sheet method. Under this method, deferred
income taxes reflect the net tax effects of temporary differences between the tax basis of assets
and liabilities and their carrying amounts for accounting purposes, as well as for tax losses
available to be carried forward to future years that are likely to be realized. Deferred tax assets
and liabilities are measured using enacted or substantively enacted tax rates, at the reporting
date, expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the year that includes the date of enactment or
substantive enactment.
1-152
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
4. Cash:
December 31, December 31,
2016 2015
Cash $ 20,448 $ 20,634
5. Accounts receivable:
December 31, December 31,
2016 2015
Customer and other trade receivables 23,695 23,465
Trade receivables from related parties $ 69 $ 273
$ 23,764 $ 23,738
6. Inventory:
The amount of inventories consumed by the Corporation and recognized as an expense during
2016 was $275 (2015 - $389).
1-153
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
7. Property, plant and equipment:
(a) Cost or deemed cost:
Land and
Distribution
Otherfixed
Construction -
buildings
equipment
assets
in -progress
Total
Balance at January 1, 2016
$
23,880
$ 181,825
$ 6,280
$ 4,672
$ 216,657
Additions
222
22,176
1,150
2,228
25,776
Transfers
-
-
-
-
-
Disposals/Retirements
1,496
499
703
-
2,698
Balance at December 31, 2016
$
22,606
$ 203,502
$ 6,727
$ 6,900
$ 239,735
Land and
Distribution
Other fixed
Construction -
buildings
equipment
assets
in -progress
Total
Balance at January 1, 2015
$
24,056
$ 163,069
$ 6,375
$ 5,172
$ 198,672
Additions
88
20,368
1,042
(499)
20,999
Transfers
(124)
-
-
-
(124)
Disposals/Retirements
139
1,613
1,136
-
2,888
Balance at December 31, 2015
$
23,881
$ 181,824
$ 6,281
$ 4,673
$ 216,659
(b) Accumulated depreciation:
Land and
Distribution
Other fixed
Construction -
buildings
equipment
assets
in -progress
Total
Balance at January 1, 2016
$
1,501
$ 9,223
$ 522
$ -
$ 11,246
Depreciation charge
824
6,978
1,209
-
9,011
Disposals/Retirements
1,496
500
685
-
2,681
Balance at December 31, 2016
$
829
$ 15,701
$ 1,046
$ -
$ 17,576
Land and
Distribution
Other fixed
Construction -
buildings
equipment
assets
in -progress
Total
Balance at January 1, 2015
$
821
$ 5,157
$ 425
$ -
$ 6,403
Depreciation charge
820
5,674
1,215
-
7,709
Disposals/Retirements
139
1,608
1,118
-
2,865
Balance at December 31, 2015
$
1,502
$ 9,223
$ 522
$ -
$ 11,247
1-154
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
7. Property, plant and equipment (continued) :
(c) Carrying amounts:
Land and Distribution Otherfixed Construction -
buildings equipment assets in -progress Total
At December 31, 2016 $ 21,777 $ 187,800 $ 5,681 $ 6,901 $ 222,159
At December 31, 2015 $ 22,379 $ 172,601 $ 5,759 $ 4,673 $ 205,412
(d) Leased plant and machinery:
The Corporation does not have leases for equipment.
(e) Security:
At December 31, 2016, the Corporation had zero properties subject to a general security
agreement.
(f) Borrowing costs:
During the year, borrowing costs of nil (2015 - nil) were capitalized as part of the cost of
property, plant and equipment.
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
7. Property, plant and equipment (continued):
Computer
Software
Land
Rights
(g) Allocation of depreciation and amortization:
Total
Balance at January 1, 2016
Additions
$
1,680
710
The depreciation of property, plant and equipment and the amortization
of
intangible
assets
has been allocated to profit or loss as follows:
$
2,390
$
8
Operations
2,398
Balance at January 1, 2015
Additions
$
1,136
544
and Customer
8
-
Energy
1,144
544
Balance at December 31, 2015
maintenance services
Administration
conservation
8
$
expense expense
expense
expense
Other
Total
December 31, 2016:
Depreciation of property,
plant and equipment $ 677 $ 6
$ -
$ 7
$ 8,311
$ 9,001
Amortization of intangible
assets - -
-
-
410
410
$ 677 $ 6
$ -
$ 7
$ 8,721
$ 9,411
December 31, 2015:
Depreciation of property,
plant and equipment $ 658 $ 4
$ 1
$ 7
$ 7,039
$ 7,709
Amortization of intangible
assets - -
-
-
378
378
$ 658 $ 4
$ 1
$ 7
$ 7,417
$ 8,087
8. Intangible assets:
(a) Cost or deemed cost:
1-156
Computer
Software
Land
Rights
Total
Balance at January 1, 2016
Additions
$
1,680
710
$
8
-
$
1,688
710
Balance at December 31, 2016
$
2,390
$
8
$
2,398
Balance at January 1, 2015
Additions
$
1,136
544
$
8
-
$
1,144
544
Balance at December 31, 2015
$
1,680
$
8
$
1,688
1-156
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
8. Intangible assets(continued):
(b) Accumulated amortization:
Computer
Land
Software
Rights
Total
Balance at January 1, 2016
$
819
$ 5
$
824
Additions in 2016
398
2
400
Balance at December 31, 2016
$
1,217
$ 7
$
1,224
Balance at January 1, 2015
$
444
$ 3
$
447
Additions in 2015
374
3
377
Balance at December 31, 2015
$
818
$ 6
$
824
(c) Carrying amounts:
Computer
Land
Software
Rights
Total
At December 31, 2016
$
1,173
$ 1
$
1,174
At December 31, 2015
$
862
$ 2
$
864
9. Income tax expense:
Current tax expense:
December 31, December 31,
2016
2015
Current period
$
2,029 $
1,848
Adjustment for prior periods
9
46
$
2,038 $
1,894
1-157
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
9. Income tax expense (continued):
Deferred tax expense:
December 31, December 31,
2016 2015
Original & reversal of temporary differences $ (36) $ (36)
Recognition of previously unrecognized tax losses (3) (10)
$ (39) $ (46)
Reconciliation of effective tax rate:
Significant components of the Corporation's deferred tax balances are as follows:
Deferred tax assets (liabilities):
Plant and equipment
Non -vested sick leave
Employee benefits
Intangible assets
Loss carry -forward
Deferred revenue - contributed capital
2016 2015
$ (6,063) $
2016
2015
Profit for the period
$ 10,399 $
10,971
Total income tax expense
1,999
1,848
Profit excluding income tax
12,398
12,819
Income tax using the Corporation's statutory tax rate of 26.5%
3,286
3,397
Temporary differences not benefitted
(1,296)
(1,595)
Under (over) provided in prior periods
9
46
$ 1,999 $
1,848
Significant components of the Corporation's deferred tax balances are as follows:
Deferred tax assets (liabilities):
Plant and equipment
Non -vested sick leave
Employee benefits
Intangible assets
Loss carry -forward
Deferred revenue - contributed capital
2016 2015
$ (6,063) $
(3,441)
167
167
1,334
1,298
7
7
116
114
6,454
4,217.00
$ 2,015 $ 2,362
1-158
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
10. Regulatory deferral account balance:
The following is a reconciliation of the carrying amount for each class of regulatory deferral
account balances:
Remaining
recovery/
Balances reversal
arising in Recovery/ period
2015 the period Reversal Other 2016 (vears)
Regulatory deferral account debit balances
Group 1 deferred accounts $ 3,505 $ (143) $ - $ - $ 3,362 Note 1
Regulatory asset reco\tery account 686 (474) 613 - 825 Note 1
Smart meter reco\tery 13 - - - 13 3
LRAM 575 - (575) - - 1
Other 144 143 - - 287 3
Total amount related to regulatory
deferral account debit balances
$ 4,923
$ (474)
$ 38
$ -
$ 4,487
Remaining
recovery/
Balances
reversal
arising in
Recovery/
period
2015
the period
Reversal
Other
2016
(years)
Regulatory deferral account credit balances
Group 1 deferred accounts
$ 5,533
$ 3,909
$ -
$ -
$ 9,442
Note 1
Deferred tax liability
1,056
(523)
-
-
533
Note 2
Other
319
26
-
-
345
3
Total amount related to regulatory
deferral account credit balances
$ 6,908
$ 3,412
$ -
$ -
$ 10,320
2016
2015
Movements in regulatory accounts
Net change in regulatory deferral
account debit and credit balances $ (3,847) $ 870
Less movement related to the balance sheet
Deferred income tax (523) (2,556)
Deferred re\tenue 502 (575)
Amounts moved to property, plant, equipment - (26)
Net movement in regulatory deferral account balances related to profit or loss
and the related deferral tax movement
$ (3,868) $ (2,287)
1-159
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
10. Regulatory deferral account balance (continued):
Note 1 The Corporation expects to be approved for the collection of these amounts in its 2017
filing for 2018 rates.
Note 2 The Corporation has not sought approval for the disposition of this amount as these
amounts as changes in underlying assumptions may reduce the amounts recorded in
the account. The Corporation may see refunds in the future.
11. Long-term debt:
Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the City
of Kitchener and the Township of Wilmot, and have an interest rate of 4.88% per annum. Interest
is payable in quarterly installments, in arrears, on March 31St, June 30th, September 30th and
December 31 st
Effective February 1, 2010, the Corporation incurred a ten year senior unsecured debenture
payable to Ontario Infrastructure Projects Corporation. An initial payable of $7,000 was received
February 1, 2010, followed by a second payment of $3 million on May 17, 2010. The debenture
has an interest rate of 4.28%, and interest is payable in equal semi-annual installments, in arrears,
on May 17th and November 17th each year commencing November 17, 2010 until maturity.
2016 2015
Senior unsecured debentures:
City of Kitchener $ 70,998 $ 70,998
Township of Wilmot 5,965 5,965
Ontario Infrastructure Projects Corporation 3,989 5,025
Senior unsecured debentures, net proceeds $ 80,952 $ 81,988
Less: current portion of long-term debt $ (1,080) $ (1,036)
Total long-term debt $ 79,872 $ 80,952
12. Employee future benefits:
The Corporation pays certain medical and life insurance benefits on behalf of some of its retired
employees. The Corporation recognizes these post-retirement costs in the period in which
employees' services were rendered. The accrued benefit liability at December 31, 2016 of $5,035
was based on an actuarial valuation completed in 2015 using a discount rate of 3.95%.
1-160
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
12. Employee future benefits (continued):
Changes in the present value of the defined benefit unfunded obligation and the accrued benefit
liability:
1-161
2016
2015
Defined benefit obligation, beginning of year
$
4,900
$
4,764
Current service cost
156
150
Interest cost
188
184
Benefits paid during the year
(209)
(198)
Actuarial loss recognized in other
-
-
comprehensive income
Accrued benefit liability, end of year
$
5,035
$
4,900
Components of net benefit expense recognized are as follows:
December 31,
December 31,
2016
2015
Current service cost
$
157
$
150
Interest cost
188
184
Net benefit expense recognized
$
345
$
334
Actuarial losses recognized in other comprehensive income:
2016
2015
Cumulative amount at January 1
-
-
Recognized during the year
-
-
Cumulative amount at December 31
-
Net benefit expense recognized
$
-
$
-
1-161
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
12. Employee future benefits (continued):
The significant actuarial assumptions used in the valuation are as follows (weighted average):
2016 2015
Accrued benefit obligation:
Discount rate 4.5% 4.5%
Benefit cost for the year: Age
Withdrawal rate 18-29
2.75%
2.75%
30-34
2.25%
2.25%
35-39
2.0%
2.0%
40-54
1.5%
1.5%
Assumed health care cost trend rates
Initial health care cost trend rate Health 6.4% 6.7%
Dental 4.6% 4.6%
The approximate effect on the accrued benefit obligation of the entire plan and the estimated net
benefit expense of the entire plan if the health care trend rate assumption was increased or
decreased by 1 %, and all other assumptions were held constant, is as follows:
Benefit Periodic
Obligation Benefit Cost
1 % increase in health care trend rate $ 185 $ 23
1 % decrease in health care trend rate $ (162) $ (20)
Historical Information
Amounts for the current and previous year, for the entire plan, are as follows:
2016 2015
Defined benefit obligation $ 5,035 $ 4,900
Experience adjustments $ - $ -
1-162
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
12. Employee future benefits (continued):
The main actuarial assumptions utilized for the valuation are as follows:
General inflation - future general inflation levels, as measured by the changes in the Consumer
Price Index, were assumed at 2% in 2016, and thereafter (2015 - 2%).
Discount (interest) rate - the discount rate used to determine the present value of future liabilities
and the expense for the year ended December 31, 2016, was 4.5% (2015 — 4.5%).
Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2015 -
3.3%) per annum.
Medical costs - medical costs were assumed to increase 6.7% for 2015, 6.4% for 2016, and 6.1 %
thereafter.
Dental costs - dental costs were assumed to increase 4.6% for 2015, 4.6% for 2016, and 4.6%
thereafter.
13. Customer and IESO deposits:
Customer deposits represent cash deposits from electricity distribution customers and retailers, as
well as construction deposits.
Deposits from electricity distribution customers are refundable to customers who demonstrate an
acceptable level of credit risk as determined by the Corporation in accordance with policies set out
by the OEB or upon termination of their electricity distribution service.
Construction deposits represent cash prepayments for the estimated cost of capital projects
recoverable from customers and developers. Upon completion of the capital project, these deposits
are transferred to deferred revenue.
The Corporation delivers conservation and demand management programs for its customers on
behalf of the IESO. Prepayments received from the IESO have been recorded and will be
transferred to revenue as programs are delivered and the revenue is earned.
The deposits comprise
2016 2015
Customer deposits $ 7,546 $ 6,986
Construction deposits 5,459 5,723
IESO deposit for energy conservation programs 1,158 1,158
Total customer deposits $ 14,163 $ 13,867
1-163
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
14. Share capital:
2016 2015
Authorized:
Unlimited number of common shares
Issued:
20,000 common shares $ 66,389 $ 66,389
Dividends:
The holders of the common shares are entitled to receive dividends as declared from time to
time.
The Corporation paid aggregate dividends in the year on common shares of $4,410 (2015 -
$4,266).
15. Other operating revenue:
Other income comprises:
2016 2015
Specific service charges $ 1,223 $ 1,247
Deferred revenue 480 271
Scrap sales 170 243
Net gain on disposal of capital assets 54 43
Retailer services 39 44
Sundry 40 64
Total other income $ 2,006 $ 1,912
16. Finance income and expense: [note excludes finance income and expense on regulatory accounts]
1-164
2016
2015
Interest income on bank deposits
$ 234 $
204
Finance income
234
204
Interest expense on long-term debt
3,957
3,999
Interest expense on BMO Letter of Credit
123
120
Interest expense on deposits
58
67
Other
7
3
4,145
4,189
Net finance costs recognized in profit or loss
$ 3,911 $
3,985
1-164
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
17. Commitments and contingencies:
Contractual Obligations
There are no contractual obligations.
General
From time to time, the Corporation is involved in various litigation matters arising in the ordinary
course of its business. The Corporation has no reason to believe that the disposition of any such
current matter could reasonably be expected to have a materially adverse impact on the
Corporation's financial position, results of operations or its ability to carry on any of its business
activities.
General Liability Insurance:
The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange
(MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario.
All members of the pool are subjected to assessment for losses experienced by the pool for the
years in which they were members, on a pro -rata basis based on the total of their respective service
revenues. As at December 31, 2016, no assessments have been made.
18. Guarantees:
Guarantees are not applicable to the Corporation.
19. Pension agreement:
The Corporation provides a pension plan for its employees through OMERS. The plan is a multi-
employer, contributory defined pension plan with equal contributions by the employer and its
employees. In 2016, the Corporation made employer contributions of $1,500 to OMERS (2015 -
$1,500). The Corporation's net benefit expense has been allocated as follows:
a. $400 (2015 - $400) capitalized as part of property, plant and equipment;
b. $1,100 (2015- $1,100) charged to net income.
The Corporation estimates that a contribution of $1,500 to OMERS will be made during the next
fiscal year
20. Employee benefits:
Salaries, wages and benefits
CPP and EI remittances
Contributions to OMERS
2016 2015
$ 18,356 $ 17,257
724 675
1,528 1,493
Expenses related to defined benefit plans 345 334
$ 20,953 $ 19,759
1-165
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
21. Related party transactions:
(a) Parent and ultimate controlling party:
The Corporation is wholly-owned by the Corporation of the City of Kitchener and the
Corporation of the Township of Wilmot. The City and the Township produce financial
statements that are available for public use.
(b) Entity with significant influence:
The Corporation of the City of Kitchener exercises significant influence over the Corporation
through its 92.25% ownership interest in the Corporation.
(c) Key management personnel:
The key management personnel of the Corporation have been defined as members of its board
of directors and executive management team members, and is summarized below.
2016 2015
Directors' fees $ 104 $ 101
Salaries and other short-term benefits 981 1,088
Post employment benefits 18 20
Other long-term benefits (OMERS) 79 91
$ 1,182 $ 1,300
(d) Transactions with parent:
During the year the Corporation paid management and business development services to its
parent in the amount of nil (2015 - nil)
(e) Transactions with entity with significant influence:
In the ordinary course of business, the Corporation delivers electricity to the Corporation of the
City of Kitchener. Electricity is billed to the City of Kitchener at prices and under terms approved
by the OEB.
(f) Transactions with ultimate parent (the City of Kitchener)
In 2016, the Corporation had the following significant transactions with its ultimate parent, a
government entity:
• construction
• streetlight maintenance services
1-166
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
22. Financial instruments and risk management:
Fair value disclosure
Cash and cash equivalents are measured at fair value. The carrying values of receivables, and
accounts payable and accrued charges approximate fair value because of the short maturity of
these instruments. The carrying value of the customer deposits approximates fair value because
the amounts are payable on demand.
The fair value of the long term debt (senior unsecured debentures issued by the shareholders (City
of Kitchener and Township of Wilmot) approximates the carrying value due to the short term nature
of the loan.
The fair value of the long term debt (senior unsecured debentures) issued by Ontario Infrastructure
Projects Corporation at December 31, 2016 is $4,000 (2015 - $5,000). The fair value is calculated
based on the present value of future principal and interest cash flows, discounted at the current
rate of interest at the reporting date. The interest rate used to calculate fair value at December 31,
2016 was 4.28% (2015 — 4.28%).
Financial risks
The Corporation understands the risks inherent in its business and defines them broadly as
anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure
to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related
mitigation strategies are discussed below.
(a) Credit risk:
Financial assets carry credit risk that a counterparty will fail to discharge an obligation which
could result in a financial loss. Financial assets held by the Corporation, such as accounts
receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of
customers located in the City of Kitchener and the Township of Wilmot. No single customer
accounts for a balance in excess of 1 % of total accounts receivable.
The carrying amount of accounts receivable is reduced through the use of an allowance for
impairment and the amount of the related impairment loss is recognized in net income.
Subsequent recoveries of receivables previously provisioned are credited to net income. The
balance of the allowance for impairment at December 31, 2016 is $250 (2015 - $250). An
impairment loss of $129 (2015 - $147) was recognized during the year.
1-167
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
22. Financial instruments and risk management (continued):
(a) Credit risk (continued):
The Corporation's credit risk associated with accounts receivable is primarily related to
payments from distribution customers. At December 31, 2016, approximately $178 (2015 - $80)
is considered 60 days past due. The Corporation has over 94 thousand customers, the majority
of whom are residential. Credit risk is managed through collection of security deposits from
customers in accordance with directions provided by the OEB. As at December 31, 2016, the
Corporation holds security deposits in the amount of $14,200 (2015 - $13,900).
(b) Market risk:
Market risks primarily refer to the risk of loss resulting from changes in commodity prices,
foreign exchange rates, and interest rates. The Corporation currently does not have any
material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in
interest rates as the regulated rate of return for the Corporation's distribution business is
derived using a complex formulaic approach which is in part based on the forecast for long-
term Government of Canada bond yields. This rate of return is approved by the OEB as part of
the approval of distribution rates.
A 1% increase in the interest rate at December 31, 2016 would have increased interest
expense on the long-term debt by $ 80 (2015 - $80), assuming all other variables remain
constant. A 1 % decrease in the interest rate would have an equal but opposite effect.
(c) Liquidity risk:
The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet
operational and investing requirements. The Corporation's objective is to ensure that sufficient
liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The
Corporation has access to a $5,000 credit facility and monitors cash balances daily to ensure
that a sufficient level of liquidity is on hand to meet financial commitments as they come due.
As at December 31, 2016, no amounts had been drawn under BMO Bank of Montreal credit
facility (2015, $0).
The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of
issuing letters of credit mainly to support the prudential requirements of the IESO, of which
$35,000 has been drawn and posted with the IESO (2015 - $35,000).
The majority of accounts payable, as reported on the balance sheet, are due within 30 days.
1-168
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
22. Financial instruments and risk management (continued):
(d) Capital disclosures:
The main objectives of the Corporation, when managing capital, are to ensure ongoing access
to funding to maintain and improve the electricity distribution system, compliance with
covenants related to its credit facilities, prudent management of its capital structure with regard
for recoveries of financing charges permitted by the OEB on its regulated electricity distribution
business, and to deliver the appropriate financial returns.
The Corporation's definition of capital includes shareholder's equity and long-term debt. As at
December 31, 2016, shareholder's equity amounts to $142,030 (2015 - $136,041) and long-
term debt amounts to $79,872 (2015 - $80,952).
23. Future accounting pronouncements
The Company is evaluating the adoption of the following new and revised standards along with
any subsequent amendments.
Revenue Recognition
The IASB has issued IFRS 15 Revenue from Contracts with Customers ("IFRS 15"). IFRS 15
replaces IAS 11 Construction Contracts, IAS 18 Revenue and various interpretations and
establishes principles regarding the nature, amount, timing and uncertainty of revenue arising
from contracts with customers. The standard requires entities to recognize revenue for the
transfer of goods or services to customers measured at the amounts an entity expects to be
entitled to in exchange for those goods or services. IFRS 15 is effective for annual periods
beginning on or after January 1, 2018. The Corporation is assessing the impact of IFRS 15 on its
results of operations, financial position and disclosures.
Financial Instruments
In July 2015, the IASB issued a new standard, IFRS 9 Financial Instruments, which will replace
IAS 39 Financial Instruments: Recognition and Measurement. The replacement of IAS 39 is a
multi -phase project with the objective of improving and simplifying the reporting for financial
instruments. The issuance of IFRS 9 is part of the first phase of this project. IFRS 9 is effective for
periods beginning on or after January 1, 2018 and must be applied retrospectively. The
Corporation is assessing the impact of IFRS 9 on its results of operations, financial position, and
disclosures.
Property, Plant and Equipment and Intangible Assets
In May 2015, the IASB issued amendments to IAS 16, Property, Plant and Equipment and IAS 38
Intangible Assets, which are effective for years beginning on or after January 1, 2016. The
amendments clarify when revenue -based depreciation methods are permitted. The Corporation
does not expect this to have an impact.
1-169
KITCHENER POWER CORPORATION - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2016
(Expressed in thousands of dollars)
23. Future accounting pronouncements (continued):
Leases
In January 2016, the IASB issued IFRS 16 to establish principles for the recognition,
measurement, presentation and disclosures of leases, with the objective of ensuring that lessees
and lessors provide relevant information that faithfully represents those transactions. IFRS 16
replaces IAS17 and it is effective for annual periods beginning on or after January 1, 2019. The
Corporation is assessing the impact of IFRS 16 on its results of operations, financial position and
disclosures.
1-170
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
1. Source: Planning, Housing and Community Services Department, Regional Municipality of Waterloo
2. Source: Statistics Canada, 2016 Census Data
Weighted Assessment Growth Cumulative Tax Rate & CPI
Final 2016:1.29% 30
Final 2015:1.51%
Final 2014:1.31% 25
% 20
5 s
4 15
3 10 a.,
2 5 a
1
0 Dui
06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16
Year Year
City Tax Rate (%) .......+uuuu..•...... Ontario CPI (%)
The 2011 tax rate increase has been restated to indicate what the tax rate increase would have been prior to the
transfer of storm water management costs to a new user rate. Without this restatement, a decrease would have
shown for 2011.
1-171
2016
2015
2014
2013
2012
1. DEMOGRAPHIC STATISTICS
Population
246,700
239,900
236,500
234,000
234,100
Households'
94,170
92,050
90,560
88,765
88,540
Area in acres2
33,802
33,802
33,802
33,802
33,802
2. TAXABLE ASSESSMENT ($000's)
Residential and farm
22,414,567
22,010,705
21,596,614
21,314,131
17,720,136
Commercial and industrial
3,390,259
3,399,805
3,359,143
3,273,998
3,040,482
Total
25,804,826
25,410,510
24,955,757
24,588,129
20,760,618
3. TAX RATES
Residential and Farm Taxable Full
City
0.36742
0.37488
0.38135
0.39217
0.40039
Region
0.61359
0.61489
0.61875
0.62784
0.62967
School Boards
0.18800
0.19500
0.20300
0.21200
0.22100
Total
1.16901
1.18477
1.20310
1.23201
1.25106
Commercial Taxable Full
City
0.71647
0.73101
0.74363
0.76474
0.78076
Region
1.19650
1.19903
1.20656
1.22429
1.22785
School Boards
1.40000
1.43000
1.46000
1.49000
1.49000
Total
3.31297
3.36004
3.41019
3.47903
3.49861
Industrial Taxable Full
City
0.71647
0.73101
0.74363
0.76474
0.78076
Region
1.19650
1.19903
1.20656
1.22429
1.22785
School Boards
1.50000
1.53000
1.56000
1.59000
1.59000
Total
3.41297
3.46004
3.51019
3.57903
3.59861
1. Source: Planning, Housing and Community Services Department, Regional Municipality of Waterloo
2. Source: Statistics Canada, 2016 Census Data
Weighted Assessment Growth Cumulative Tax Rate & CPI
Final 2016:1.29% 30
Final 2015:1.51%
Final 2014:1.31% 25
% 20
5 s
4 15
3 10 a.,
2 5 a
1
0 Dui
06 07 08 09 10 11 12 13 14 15 16 06 07 08 09 10 11 12 13 14 15 16
Year Year
City Tax Rate (%) .......+uuuu..•...... Ontario CPI (%)
The 2011 tax rate increase has been restated to indicate what the tax rate increase would have been prior to the
transfer of storm water management costs to a new user rate. Without this restatement, a decrease would have
shown for 2011.
1-171
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
($000-s)
4. COLLECTION STATISTICS
Total taxes billed
Total collections
Total collections as a % of current levy
Taxes receivable, net of allowance
Total receivable as a % of current levy
6. CONSOLIDATED REVENUE
2016 2015 2014 2013 2012
394,020
379,110
368,577
359,385
346,514
389,608
382,899
365,882
359,339
344,955
99%
101%
99%
100%
100%
20,698
19,617
22,706
20,610
21,586
6%
5%
6%
6%
6%
Taxation and user charges
292,898
290,215
291,714
280,998
273,446
Grants
6,830
10,013
6,991
4,101
11,772
Share of net income of Kitchener Power
36,100
34,566
35,328
32,908
29,508
Corporation and its affiliates
9,693
10,121
9,793
7,639
8,448
Development charge revenue recognized
10,388
11,044
8,076
6,892
6,877
Other
21,097
25,801
21,020
25,943
37,424
Total revenue
339,806
347,194
337,595
325,573
337,967
6. CONSOLIDATED EXPENSES
Expenses by Function
General government
38,932
31,273
37,797
36,033
38,010
Protection services
46,291
44,728
42,727
41,776
40,572
Transportation services
36,100
34,566
35,328
32,908
29,508
Environmental services
30,012
29,194
28,332
29,730
32,291
Health services
2,267
2,245
2,144
2,155
1,947
Social and family services
2,722
2,752
2,609
2,640
2,307
Recreation and cultural services
68,496
68,645
66,141
62,907
59,490
Planning and development
13,160
12,060
13,100
8,600
9,243
Gasworks
62,184
59,246
70,824
64,605
64,551
Total Expenses
288,164
284,709
299,002
281,354
277,919
Expenses by Object
Salaries, wages and employee benefits
147,224
141,941
138,259
133,464
128,444
Materials and services
91,996
97,908
110,106
98,719
103,261
Debenture debt interest
3,634
3,869
3,740
3,941
3,889
Grants and other
4,214
3,031
4,192
3,879
3,867
Amortization
42,668
40,274
39,646
37,355
34,299
Loss/(Gain) on sale of assets
(1,472)
(2,314)
3,059
3,996
4,159
Total Expenses
288,164
284,709
299,002
281,354
277,919
7. ANNUAL SURPLUS
61,662
62,485
38,593
44,219
60,048
1-172
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
3. The debt limit is based on the Financial Information Return from the second immediate preceding year
1-173
2016
2015
2014
2013
2012
(Restated)
8. ANALYSIS OF LONG-TERM DEBT ($000's)
Gross debt issued by the municipality
84,869
93,536
102,999
112,039
111,263
Less debt recoverable from municipal
enterprises and consolidated boards
10,121
10,629
11,125
11,607
12,077
Less debt recoverable from other sources
8,687
9,870
11,105
12,292
13,434
Net debt to be repaid from property taxes
66,161
73,037
80,770
88,140
85,752
Net debt per capita ($'s)
268
304
342
377
366
Legal debt limit ($000's)3
296,666
288,323
281,852
305,717
294,540
Interest on long-term debt as a % of
total expenditures
1.2%
1.4%
1.3%
1.4%
1.4%
9. ACCUMULATED SURPLUS ($000's)
Reserve funds including discretionary
& obligatory reserve funds
66,340
59,616
47,982
40,844
44,547
Unexpended capital financing
108,099
94,927
85,939
83,448
68,323
Accumulated surplus
1,283,004
1,231,351
1,176,249
1,137,656
1,093,437
10. NEW CONSTRUCTION
Value of construction ($000's)
739,739
565,081
573,063
331,491
418,227
Number of building permits
3,168
2,749
2,559
2,307
2,420
Number of single family dwelling starts
840
614
504
348
396
11. NET FINANCIAL ASSETS ($000's)
214,048
194,460
187,392
176,202
160,566
3. The debt limit is based on the Financial Information Return from the second immediate preceding year
1-173
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
12. PRINCIPAL CORPORATE TAXPAYERS
2016 Taxable Assessment Value ($000's)
DREWLO HOLDINGS INC
301,450
CF/REALTY HOLDINGS INC
218,778
ONTREA INC.
210,777
ONTARIO MINISTER OF ENERGY & INFRASTRUCTURE
81,757
VOISIN DEVELOPMENTS LIMITED
77,931
EUROPRO (KITCHENER) GP INC
74,656
MORGUARD NAR (ONTARIO) HOLDINGS LIMITED
73,253
KITCHENER HOUSING INC
67,167
HOMESTEAD LAND HOLDINGS LIMITED
66,312
THE INCC CORP
63,792
STAMM INVESTMENTS LIMITED
59,731
ACTIVA HOLDINGS INC
51,029
7550332 CANADA INC
49,254
STEEVES & ROZEMA ENTERPRISES LIMITED
47,811
KINGSWOOD DRIVE KITCHENER GP INC
46,252