Durham Region – Financial Position Highlights May 2014 cope491:djk Durham Region – Financial Overview The Region of Durham is a large upper tier municipality in the Greater Toronto Area (GTA). This rapidly growing area has a strong and diverse economy with a historic industrial base and large public sector employers. The Region is made up of the constituent municipalities of Ajax, Brock, Clarington, the Mississuagas of Scugog Island, Oshawa, Pickering, Scugog, Uxbridge, and Whitby. Home to over 600,000 residents, there has been an 8.4% increase from the 2006 census to 2011. The median age of the population is 39.2 years of age, slightly lower than the national 40.6 years of age. i Services, Staffing, and Detailed Financial Position The Region’s 2014 budget was approved in February (of 2014). The approximately, $1 billion plan will see residents pay an average of 1.5% for the Region’s services on top of their base municipal tax charge. This means homeowners will pay about $36 on a home assessed at $329,900. Highlights of the plan include: • • • • Road and bridge improvements; Funding for a new ambulance station; Completion of Fairview Lodge long-term care home; Money to address various service improvements, such as emergency response. ii The 2014 Regional budget presentation presented information, which echoes from across the provincial economic analysis – the climate remains challenging, but not dire. For example, the Oshawa Census Metropolitan Area (CMA) benchmark is expected to outpace both national and provincial economic growth figures – Oshawa’s economy is expected to grow by 2.8%. A second encouraging factor is that the Region’s full time job growth is more than double that of part-time job growth – 6,100 full-time jobs versus 3,000 part-time jobs. The challenges which remain are high household debt (although this is a national trend) and a slowing of housing starts and construction permits in the Region, indicating slower growth on items such as the tax base. However, the aforementioned should not be taken as news, which will necessarily trump the positive developments. iii Other key indicators of the Region’s economic situation from the 2014 budget include: • Development charge income may face a gap between current projections and the Region’s Official Plan projections. It is not clear how this will effect revenue projections, although a decrease of 100 single detached homes would negatively impact the budget by $1 million. • OW caseloads are below key comparators, such as Hamilton, London, and Niagara, as well as the provincial average. • The debt forecast – the amount the Region will pay on new and existing debt – will peak in 2018 ($420 million in payments) and trail off. In the bargaining context this could be considered when crafting a settlement package. iv Page 2 of 5 Some of the items the budget will pay for and CUPE members will be delivering are: • • • • • • • • 387,000 paramedic hours 6,755 food safety inspections 5,121 family home visits from public health An average of 9,500 cases a month and 34,000 intakes for social assistance Operate and support seven child care facilities and 220 child care programs Provide 16,000 hours of counselling Take care of 847 residents in long-term care Administer housing and homeless programsv The Region generated total revenue of $1,221,104,675 in 2012. Of this, $549,511,681 was generated from the property tax and about 18%, or 230,475,331 from user fees and service charges. When the just over $1 billion of total expenses is subtracted, the Region was in a surplus position of almost $200 million ($195,833,182). As expected given the high number of home owners, the property tax is driven by residences, with commercial and industrial taxes only amounting to $97,846,814, or 17.8% of the property tax. vi The Region is also home to a sturdy base of large public and private taxpayers, which are also large employers. The private sector employers include General Motors, Loblaw’s, St. Mary’s Cement, Enbridge, Gerdau AmeriSteel, LaFarge, Sobeys, Canada Trust, Picov Farms, and Alfa Hoteliers. The large public sector employers include, Ontario Power Generation, Hydro One, and post-secondary and health care institutions. vii Credit Analysis The multinational credit bond rating agencies evaluate municipalities on their financial health in Canada; the Region of Durham has been examined by Moody’s Investor Service and Standard & Poor’s (S&P) Ratings Services. These ratings are: Moody’s Aaa Outlook stable S&P AAA Outlook stable The Region of Durham is in an enviable position – financially healthy and liquid. The credit rating agencies are authorities of the evaluation of financial data and they point to a number of strengths the Region has, such as: • • • • effective long-term planning; financials ahead of its peers; good stable governance; proximity to markets; Page 3 of 5 • • • an expanding tax base (100,000 more people since 2002); acceptable debt costs and low debt servicing amounts; and a diversified economy. Even the Region’s cautions on its positive position could be viewed as strengths. For example, the increased capital spending planned, which will add to debt, will not significantly increase a negative financial position and transit and water systems will improve. Of special note to the bargaining context is that employee benefit and vacation liabilities are viewed as acceptable to S&P and were not citied as a major issue. Durham Region is one of only 8 municipalities with the AAA rating. The following are highlights from the Moody’s report: • The Region’s financial position is described as having a low-debt burden, sizable reserves, and sound planning. • Investments and cash reserves are equal to almost 5-times (4.8) the Regions net direct and indirect debt. This means that Durham could cover its debt obligations 5 times over. • The Region is noted to have a large and affluent tax base. • The Region’s increased population was responsible for a 3.5% or about $28.5 million increase in property tax revenue in 2012. Property tax makes up almost half of all revenue, with government grants accounting for 20.6% and user fees (including water) accounting for 14.7%. • Debt servicing costs to the Region are low at 1.9%; again the Region is ahead of its comparators. viii The following are highlights from the S&P report: • The agency views the Region’s financial position in an affirming way, describing the “very positive liquidity position, strong economy, and strong budgetary performance”. • Unemployment has been lowering and Gross Domestic Product (GDP) has been rising. • S&P expects the history of strong budget performance to continue through at least the next two cycles. • Despite increased capital funding and responsibilities, interest payments remained at 0.8% of operating revenue. S&P also notes that the increases debt from capital spending is manageable and should not result in further risk of downgrade. • S&P views the employee benefit program liability, including sick leave and vacation as a modest liability. The aforementioned was paired with landfill postclosure costs and represents $174 million or approximately 18% of 2012 revenue. ix Page 4 of 5 Durham Region Awards The following awards have been bestowed on the Region over the past years: • The Government Finance Officers Association (GFOA) Canadian Award for Financial Reporting, 2011. • The GFOA Distinguished Budget Presentation Award, 2012. x • Excellence Canada’s Level 4 certification and the Canada Awards for Excellence Gold Trophy for the Region’s Social Services Department, in 2012. xi • The Region’s Commissioner of Works for the Region of Durham, was presented with the Ontario Public Works Association's (OPWA) 2011 Public Works Leader of the Year Award in 2012. xii • The Economic Development and Tourism department won two Merit Awards from the Economic Developers Council of Ontario (EDCO) in 2012. xiii • Solid Waste Association of North America’s (SWANA) Gold Excellence Award in the Special Waste category and the SWANA Bronze Excellence Award in the Public Education category, in 2013. xiv • Fairview Lodge achieved, Accreditation Canada’s award with Exemplary Standing in 2014. xv i Statistics Canada. 2012. Durham, Ontario (Code 3518) and Canada (Code 01) (table). Census Profile. 2011 Census. Statistics Canada Catalogue no. 98-316-XWE. Ottawa. Released October 24, 2012. http://www12.statcan.gc.ca/census-recensement/2011/dp-pd/prof/index.cfm?Lang=E (accessed May 5, 2014). ii News Release. The Regional Municipality of Durham. Regional Council approves 2014 Business Plans and Budgets and related Property Tax Rates. Whitby, Ontario; February 12, 2014. http://www.durham.ca. iii Region of Durham. 2014 Business Plans & Budget. Presentation to Finance & Administration Committee. February 4, 2014. iv Region of Durham. 2014 Business Plans & Budget. Presentation to Finance & Administration Committee. February 4, 2014. v Durham Region. Regional Services & Property Tax 2013 Update. vi Province of Ontario, Ministry of Municipal Affairs and Housing. 2012 Financial Information Return, Durham Region. January 30, 2014. vii Region of Durham. 2012 Annual Report. viii Moody’s Investors Service. Credit Analysis Durham, Regional Municipality of. January 20, 2014. ix Standard & Poor’s Ratings Services. RatingsDirect. Summary: Durham (Regional Municipality of). March 31, 2014. x The Regional Municipality of Durham. 2012 Annual Report. xi http://www.durham.ca/social.asp?nr=/departments/social/awards.htm&setFooter=/includes/socialFooter.inc xii http://www.durham.ca/print.asp?nr=dnews/2012/jan2712.htm xiii http://www.durham.ca/departments/planed/edo/newsletters/2012Q1.pdf xiv http://www.durham.ca/print.asp?nr=dnews/2013/oct1613a.htm xv http://www.durham.ca/news.asp?health=no&type=NR&nr=dnews/2014/mar0514a.htm Page 5 of 5