2018-2022 Financial Plan

APPENDIX C: INFRASTRUCTURE FUNDING STRATEGY

Some DCC projects may require other funding sources, in addition to DCCs. Consideration must also be given to whether these sources have the capacity to fund their portion. In addition, the added cost of a sustainability provision and maintenance program should be considered as new infrastructure is built. Financial Sustainability Policy 12.0 6 directs full life-cycle cost consideration prior to capital project approval. Is this the right time to borrow? In the lead-up to the 2010 Olympics, the District may be paying a premium to get projects done. Is now the right time to move other projects forward? While interest costs are low right now, construction costs are high and increasing and we would be paying a premium to compete with other major projects in the region. Following 2010, excess capacity may exist that could more than offset a rise in interest costs. CONCLUSION: In order to sustain our current infrastructure, we should use time to our advantage. Allocating a cumulative 1% of taxation each year to asset renewal will put us on the right path toward correcting the shortfall. To limit further exposure, a portion of annual tax revenue derived from growth in the tax base should be dedicated toward sustaining the expansion of our asset base. Furthermore, if actual growth exceeds that in the Financial Plan, a determination should be made to allocate it either to growth in services or infrastructure sustainability. In addition, although water and sewer have independent sources of funding, they should be subject to the same review process to ensure adequate replacement funds are available when required, with a fair distribution of costs among current and future users of the services. Debt should be approached with caution, with a full understanding of the implications of locking in future taxpayer dollars for today’s projects. Projects that would be difficult to fund within the annual funding allotment, or where revenue sources will be realized over time, are examples of where debt financing may be suitable. Projects funded by debt should be subject to business case evaluation with consideration of whether we have the internal capacity to implement them; they should also be subject to performance reporting and should be in alignment with Council’s strategic direction. Using debt for DCC projects may be of limited use, since covering the interest component can only be done in very specific circumstances that may not address the roads component where the bulk of our debt capacity exists at this point. The DCC bylaw should be regularly amended to update project costs, to ensure our rates will drive the revenue necessary to pay for the projects.

In addition, the funding strategy should be revisited annually with each business planning cycle to ensure that the assumptions, financial climate and overall approach remain relevant.

Achieving greater sustainability in infrastructure management requires greater vigilance and ongoing oversight of the related policies, practices and business initiatives. Integrating management oversight into a corporate position with responsibility for coordination among the various departments involved may be a prudent step in the infrastructure management program.

Prepared by:

Laura Benson, CMA Policy Analyst

Concurrence:

Jeff Scherban Director of Development Engineering

Approved by:

Paul Gill, BBA, CGA General Manager: Corporate & Financial Services

6 Financial Sustainability Plan Policy 5.52 contains thirteen policies to guide the District’s Financial Planning activities. Financial Sustainability Policies (FSPs) referenced in this document can be found in Appendix 5.

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