2013 Capital Budget – March 8, 2013

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2013 Capital Budget – March 8, 2013

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Infrastructure Background Information

• Our municipal infrastructure is vital in sustaining the economic, environmental, social and cultural life of the community.

• The quality of life enjoyed by City’s citizens is directly related to the condition of the infrastructure, such as quality of drinking water.

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Capital Budget Challenges

• Infrastructure issues are common amongst most municipalities across the country. In 2007, FCM reported municipal infrastructure deficit in Canada was $123 billion.

• City’s infrastructure deficit – two components1. Infrastructure Reserve Fund Levels2. Capital Budget Funding Levels (deferred maintenance)

• New asset creation (Council approved master plans)– New assets also require ongoing maintenance and upgrade

funding– Ongoing maintenance and upgrade funding for many new

assets has not been added to the operating budget; departments have had to absorb these increased costs

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Infrastructure Reserve Fund Deficit

• Current replacement cost of the City’s infrastructure is approximately $1.7 billion

• Based on asset replacement values Infrastructure Reserve Funds should be $500M and are only $66M

• Adequate reserves would allow the City to replace assets as they need replacing.

• It is not the City’s intent to have $500M of funding in reserves. A combination of funding sources (capital property tax levy, reserves, grants, debt and user fees for utilities) are used to fund the capital budget.

• Financial Sustainability Policy outlines a funding strategy to continue to address this deficit:– Transfer new assessment revenue to infrastructure

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Capital Budget Funding Levels(deferred maintenance)

• The capital budget needs be increased to catch up on maintenance/upgrades of existing assets.

• The Financial Sustainability Policy outlines a funding strategy to continue addressing this– Levy an annual 1.5% property tax increase

• Based on current data, if the City increases the capital budget property tax levy by 1.25% for 2013 – 2015; and 1.5% for 2016 to 2018, the additional tax levy can be discontinued in 2019.

• Increases based on current information have been built into the 20-year Capital Plan and amounts will continue to be refined as part of ongoing asset management.

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Capital Budget Funding Strategiesas per the Financial Sustainability Policy

• Levy an annual 1.5% increase in property taxes (reduced to 1.25% for 2013-2015).

• Transfer all new assessment revenue to infrastructure reserves

• Transfer annual operating budget surplus into infrastructure reserves

• Actively pursue third party funding for projects included in the 20-year capital plan

• Where possible, only add new debt in years when other debt issues are retired and/or use debt reduction reserve to minimize impact on property taxes

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Capital Budget Funding Key Points

1. Sound capital asset funding strategies are in place, e.g. increase to capital levy to address deferred maintenance, and annual increase to reserves

2. Although the funding strategies have not been consistently followed, the City has increased infrastructure funding over:a. increased the capital funding through the capital property tax levy from

$1.5M in 1999 to $10.5M in 2013b. increased annual transfer to Building and Infrastructure Reserve from

$1.5M in 1999 to $4.3M in 20133. Based on current data, if the levy increase is consistently added

(1.25% for 2013-2015 and 1.5% for 2016-2018), it can be discontinued as early as 2019.

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Capital Reserves2013

Estimated 2013 Planned ProjectedBalance Budget Expenditures/ Balance

Description 31-Dec-12 Contribution Commitments Dec 31, 2013

Equipment & Infrastructure Police Police Vehicles & Equipment 1,402,228 1,140,000 1,262,600 1,279,628 Police Emergency Response Team 218,873 218,873 City VCC Equipment and Infrastructure 280,796 215,934 64,862 City Equipment 5,010,266 1,602,500 1,750,687 4,862,079 Vehicles & Heavy Equipment * 5,033,076 1,500,000 2,453,172 4,079,904 City Buildings & Infrastructure 31,457,788 4,330,333 9,700,061 26,088,060 Parking Reserve 6,542,399 200,000 2,057,242 4,685,157 SOFMC Equipment and Infrastructure 576,771 100,000 150,000 526,771 City Recreation Facilities 933,333 - 933,333 Water Utility 1,825,488 1,435,000 3,260,488 Sewer Utility 13,434,671 400,000 13,834,671

66,715,689 10,707,833 17,589,696 59,833,826

Economic Development 725,378 - 725,378 Tax Sale Lands Fund 10,326,723 50,000 3,977,000 6,399,723 Parks and Greenways Acquisition Fund 2,241,446 500,000 1,741,446 Local Amenities Reserve 407,187 407,187 Victoria Housing Reserve ** 1,817,607 250,000 2,067,607 0- Dockside Affordable Housing 233,734 233,734 Development Cost Charges 3,984,297 301,000 3,683,297 Climate Action Reserve 253,515 90,000 - 343,515 Art in Public Places 234,205 135,000 135,000 234,205

86,939,781 11,232,833 24,570,303 73,602,311

* Approximately $5M of the planned expenditures funded from the Buildings & Infrastructure Reserve are for projects approved and started in 2012.

** Assuming pending applications for funding from the Victoria Housing Reserve are approved, the entire reserve is committed.

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Future Reserve Balances

• Planned expenditures exceed reserve fund contributions for 2013

• From 2014 onwards, reserve fund contributions exceed planned expenditures, and reserves grow by an average of $3 million per year

• The above calculations assume:– $500,000 budgeted increase to the reserve fund transfer is

implemented from 2014 through 2017– increases to the capital property tax levy is implemented as

planned

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Comparative Debt Servicing (2011)

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Draft 2013 Capital Budget

The City has a 20-year capital plan totaling over $900 million. The 2013Capital Budget outlines spending of $83M.

Council approved the following budget reduction principles which impact the 2013 to 2015 capital budgets:

Share of Budget Cuts1. Consider existing assets before adding new.2. Split the tax increase between Capital and Operating as follows:

a. Capital budget property tax levy increase 1.25%b. Operating budget property tax levy increase max 2.0%

The 2013-2015 capital budget originally included a 1.5% levy increase.Reducing this to 1.25% results in a required reduction in planned capitalprograms of $275,000 for 2013, $285,000 for 2014 and $290,000 for 2015.

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Proposed Reductions

As per the Council approved principle, the reductionswould be made to those programs that create new assets:• Pedestrian Master Plan• Bicycle Master Plan• Parks Management Plan Implementation• Park Upgrades• Greenways Plan Implementation

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Recommended Budget Reductions2013-2015

2013 2013Original Budget Reductions Budget Remaining

Bicycle Master Plan Implementation * 305,000 -25,000 280,000Pedestrian Master Plan Implementation 400,000 -25,000 375,000Local Street Rehabilitation 1,040,194 -100,000 940,194Facilities Life Cycle Replacement 1,466,450 -100,000 1,366,450Irrigation and Water Management Upgrades 100,000 -25,000 75,000

-275,000* Bicycle Master Plan includes $50,000 grant

However, reducing only those programs that create new assets maynot meet community expectations. Therefore, the proposed list ofreductions is a combination of those programs that create new assetsand those that address existing infrastructure needs:

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Recommended Budget Reductions2013-2015 continued

2015 2015Including Previous

Years' Cuts Reductions Budget RemainingBicycle Master Plan Implementation 215,302 -25,000 190,302Pedestrian Master Plan Implementation 366,160 -25,000 341,160Local Street Rehabilitation 1,230,593 -110,000 1,120,593Facilities Life Cycle Replacement 1,715,000 -100,000 1,615,000Downtown Beautificaton 234,996 -25,000 209,996Parks Infrastructure Upgrades 146,668 -5,000 141,668

-290,000

2014 2014Including 2013 Cuts Reductions Budget Remaining

Bicycle Master Plan Implementation 235,100 -25,000 210,100Pedestrian Master Plan Implementation 383,000 -25,000 358,000Local Street Rehabilitation 1,140,391 -110,000 1,030,391Downtown Beautificaton 254,898 -25,000 229,898Facilities Life Cycle Replacement 1,565,000 -100,000 1,465,000

-285,000

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2013 Capital Budget HighlightsEngineering

• Johnson Street Bridge Replacement – $40.1M: Movement of people, goods and service, alternative transportation amenities, economic vitality

• Storm Drain Upgrades - $5.3M: Environmental protection, flood prevention, capacity upgrades

• Sewer Upgrades - $4.3M: Inflow and Infiltration reduction, capacity upgrades for Downtown

• Waterworks Upgrades – $3.2M: Capacity upgrades, potable water, fire prevention

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2013 Capital Budget HighlightsParks, Recreation and Culture

• Parks Upgrades - $3.6M: Park upgrades, greenways, harbour pathway, play areas

• Recreation/Culture - $1.1M: Crystal pool, RAP, Cameron Band Shell

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Recommendations

1. That the proposed 2013-2015 Capital Budget reductions be approved

2. That the reduced 2013-2015 Capital Budget be approved in principle