HomeMy WebLinkAboutFIN-19-030 - Long-Term Financial Plan Project Scope and TimelineREPORT TO:Finance and Corporate Services Committee
DATE OF MEETING:April 15, 2019
SUBMITTED BY:Jonathan Lautenbach, Chief Financial Officer, 519-741-2200 x 7334
PREPARED BY:Jonathan Lautenbach, Chief Financial Officer, 519-741-2200 x 7334
WARD (S) INVOLVED:All
DATE OF REPORT:March 29, 2019
REPORT NO.:FIN-19-030
SUBJECT:Long-Term Financial Plan: Project Scope and Timeline
_________________________________________________________________________________________
RECOMMENDATION:
That staff be directed to develop a Long-Term Financial Planbased on the proposed scope and
timeline as outlined in this report.
BACKGROUND:
A Long-Term Financial Plan (LTFP) is a key strategic document which outlines a
comprehensive financial framework for the municipality. It is
Plan and includes guiding principles, financial priorities and strategies, as well as financial
forecasting and modelling. Its purpose is to help Council and staff in the decision-making
process by formalizing the financial policies and practices of the municipality and by
Every year, Council approves an annual operating budget and a 10-year capital budget. The
budget proces
operational needs. However, as municipalities continue to face mounting financial challenges
such as infrastructure deficits, impacts from climate change, economic uncertainty, legislative
pressures, and increased expectations from residents related to the delivery of service, there is
a need for a long-term financial planning approach that goes beyond the annual budget
process. Long-term financial planning is considered an industry best practice and one that
many municipalities in Ontario have adopted as part of their strategic planning process.
The development of a Long-Term Financial Planhas been identified and included as a
strategicitem in the 2019 Business Plan and this work is expected to be completedin 2019.
The overall scopeand timeline related to theLTFP are outlined further in this report.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
5 - 1
REPORT:
Goals and Objectives:
ALTFP should be viewed as a financial roadmapfor themunicipality. Itwill guide the City
moving forwardfrom a financial perspective, highlighting where we want to go, while
considering multiple optionsand approachesto help us get there.It is not intended to replace
the existing budget process, but rather will support the process by ensuring proper
consideration is given to all financial areas, supportingthe overall financial health of the
municipality.
engage in long-term financial
willprovidea high-level overview of the
, looking
short-and long-term financial needs.
The overall goal of the LTFP is to strengthen the Citrall financial position. Specific
objectives will be to:
Develop a financial framework to support the strategic decision-making process
Establish financial priorities,strategies, and policies supported by Council
Align financial policies and processes with industry best practices
Consider different funding approa
Develop a strategic priorities
Integrate policy decisionsinto modelling to understand potential financial impacts
Provide a relevant, easily understood document for the public
Achieve better alignment between the budget and year-end process
Use asset management data to support financialforecasts and modelling
Project Scope:
environment, revenue and expense forecasts, debt position and affordability analysis,
strategies for achieving and maintaining financial balance, and plan monitoring mechanisms
that the LTFP will include the following components:
1.cial condition
2.A financial framework that outlines financial priorities and strategies
3.Financial forecasts for a 10-year timeframe (Operating, Capital, and Reserves)
5 - 2
4.A summaryof financial policies
5.Key financial indicators
financial condition will include socio-economic indicators and
(SORP-4) for assessing financial condition, considering indicators related to sustainability,
flexibility, and vulnerability. The municipal BMA study will also be referenced as part of this
municipalities. This current assessment will be used to form a baseline in ordertoestablish
The development of a financial framework will create an action plan forthe City to follow. It will
identify strategic areas of focus from a financial perspective and include recommended actions
tobe implemented over the term of Council. It is expected that the LTFP will be updated each
term of Council to ensure that it aligns with the overall strategic direction of the organization. It
is proposed that the LTFP financial framework be developed based on threeguiding principles.
Theseprinciples will provide the proper financial lens for priority-setting and decision-making
and will be incorporated into our strategic planning process.
The LTFP willhelp to enable a responsible, flexible, and sustainable government.
5 - 3
Under each of these themes, financial priorities will be outlined along with recommended
strategies and action items.
Financial forecasts and modelling included in the LTFP will be based on the 2019 Operating,
Capital, and Reserve forecasts incorporating new assumptions and strategies that are
supported as part of the LTFP consultation process. The forecasts will also incorporate
information from other existing plans such as master plans, WIP, Asset Management Plans,
etc.The forecasts will be for a ten-year timeframe for the years 2020-2029.
The financial policies intended to be reviewed/developed as part of the LTFP include:
Specific PoliciesScope of Review
Reserve & Reserve FundsPolicy(existing)Reconfirm min/max targets,consider consolidation of
reserve funds, identify potential need for new reserve
funds
InvestmentsPolicy(existing)Review new prudentinvestor regulations,consider
potential changes to overall investment strategy,
review letter of credit requirements for development
Capital Financing and Debt Policy (new)Include long-and short-term financing optionsfor
capital works,including debtand internal borrowing
Dividend Policy (new)Documentcurrent practicesrelated to Gas Utility,
Golf, and Parking dividend
Budget Control Policy (new)Review and documentvariance reporting process for
operating, development of capital project reporting
framework
In addition to the review and development of these financial policies, it is expected that three
specific issues willbe addressed through the LTFP:
Specific IssuesScope of Issue
Infrastructure FundingFocus onfacility infrastructure needs, considering
various funding strategies andoptions
Operating Budget Room(Expiring Debt)EDIF Debt starts coming off the books in 2020,
creating operating budget capacity. A strategy is
needed related to this additional budget room
Investment IncomeChoose a consistent approach related to the amount
of investment income to include in the budget every
year.
5 - 4
Staff will be engaging with Council on these specific issues during two strategic sessions (May,
August) as outlined in thetimeline included in this report.
Other areas of interest that have been identified by Council through discussionsand as part of
the 2019 budget process include:
Use of a 3-year CPI average as a method of comparison related to tax rate increases
Consideration related to moving to a multi-year budget
Affordability and other measures that can be used to assess the impactof increases
It is expected that the LTFP will look at these issues and/or address them through
recommendations to complete additional work as an action item as part of the LTFP.
Timeline:
The overall project includes 3 specific phases as shown in the table below:
Research approach taken by other municipalities and review relevant documents
Review GFOA, PSAB, and industry best practices related to long-term financial
planning
Review the City's existing financial policies and procedures
Review forecasting and modelling and identify any gaps
Phase 1
Initial engagement with CLT and Council regarding the overall financial framework
Identify financial strategies and key action items to be included in LTFP
Develop 10 year financial forecasts for operating, capital, and reserves
Determine policy objectives to be acheived as part of the LTFP
Determine assumptions to be included in the financial models (economic, legislative,
Phase 2
level of service, lifecycle funding)
Develop draft LTFP for review by CLT, Staff, and Council
Engage the public on the LTFP (open houses, drop-in session, etc.)
Finalize the LTFP to bring forward for final approval
Incoporate the LTFP into existing plans and processes
Phase 3
5 - 5
Work has already been completed under phase 1andstaff arenow entering phase 2 of the
projectwith all phases expected to be completed by October 2019. The overall timeline related
to the development of the LTFP is shown in the following:
Major MilestonesDate
FCSCommittee MeetingOverview of LTFP Project Scope and TimelineApr15, 2019
Council StratSession Infrastructure Funding & Operating Budget RoomMay 27, 2019
Council Strat SessionInvestment Income & Review Draft PoliciesAug 26, 2019
FCSCommittee Meeting Draft LTFP for ReviewSep 9, 2019
FCSCommittee Meeting Final LTFP for ApprovalOct21, 2019
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Strategic Priority:Effective and Efficient City Services
Strategy:5.4 Ensure the responsible stewardship of public funds within a supportive policy
framework
Strategic Action:#CS09 Long Term Financial Plan
FINANCIAL IMPLICATIONS:
The LTFP is being completed using internal resources.It is expected that,when completed,
the plan
financial position, ensuringthat the City can continue to deliver expected programsand
services for the communityboth now and in the future.
COMMUNITY ENGAGEMENT:
INFORM
council / committee meeting.
ACKNOWLEDGED BY: Dan Chapman, Chief Administrative Officer, Office of the CAO
5 - 6