Financial Management PlanLong term financial health and sustainability

Adopted by Council March 23, 2011

Table of Contents

Financial Management Plan

Introduction...........................................................................................................................2

Vision - Long term financial health and sustainability ..........................................................3

Goals:

1. Promote economic growth.............................................................................................4

2. Support environmental sustainability.............................................................................5

3. Maintain infrastructure assets........................................................................................6

4. Manage debt..................................................................................................................7

5. Manage expenditures ....................................................................................................8

6. Ensure a sustainable revenue structure ........................................................................9

7. Support a competitive tax environment .......................................................................10

8. Ensure adequate reserves ..........................................................................................11

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The OurWinnipeg Plan requires periodic review and reporting on the

Financial Management Plan, which provides financial strategies

and targets with a view to long term financial health and sustainability.

■ What is the Financial Management Plan?

The Financial Management Plan is the City of Winnipeg’sstrategy for guiding financial decision-making, meeting long-termobligations, and improving its economic position and financialstability. The Plan sets forth the guidelines against which currentand future financial performance can be measured, and assists theCity in planning fiscal strategy with a sustainable, long-termapproach.

■ Have the goals from the previousPlan been achieved?

The first Financial Management Plan was approved by Council in1995 and an updated Plan was adopted by Council on April 25,2001. Significant achievements have been made with respect tothe goals of the previous Financial Management Plan:

� Promote Economic Growth - The City’s property assessmentbase grew by 138% since 2001.

� Support a Competitive Tax Environment - Municipalresidential property taxes (excluding school taxes) are belowthe average of other Canadian cities.

� Reduce Debt - The net external debt per capita target of $1,000was reached seven years ahead of time in 2002, largely due tothe sale of Winnipeg Hydro.

� Control Expenditures - Tax-supported operating expenditureincreases since 2001 have been consistent with inflationadjusted for population growth.

� Maintain Assets and Infrastructure - Capital investment hasincreased from $158 million in 2001 to $439 millionin 2010, an increase of 178%.

� Ensure Adequate Reserves - The StabilizationReserves target balance of 10% of tax supportedexpenditures was reached in 2006.

� Expand E-Government -An integrated EnterpriseResource Planningsystem (Finance andHuman Resources) wassuccessfully completedon time and on budget in2003.

In addition, Moody’supgraded the City’s creditrating from Aa3 in 2001 toAa1 in 2006 and confirmedthis rating in 2010 with astable outlook.

Introduction

two

Standard & Poor’s CreditRatings of Canadian Cities

– August, 2010

City Rating

Winnipeg AAVancouver AACalgary AA+Edmonton AA+Saskatoon AAARegina AA+Windsor AAHamilton AAToronto AAMississauga AAAOttawa AA+Montreal A+Halifax A+

“The City of Winnipeg’s Aa1 rating and stable outlook is supported by adisciplined fiscal plan, which has led to improving debt and debt servicingratios. Over the past several years, the city has restructured its fiscalplanning process, including the introduction of multi-year budgeting plans.These efforts have enabled Winnipeg to post a series of positive operatingoutcomes, which has helped the city improve debt ratios. The rating alsoreflects Winnipeg’s diverse economy, which provides a degree of stability tothe city’s tax base.”

“Credit Analysis”, Moody’s Investors Service, January 2010

■ Current RealityAn updated FinancialManagement Plan is requiredas a blueprint for financialdecision-making during thenext term of Council.Property taxes are now belowthe average of other Canadiancities. Expenditures havebeen managed withininflationary targets –significant spending increaseshave occurred in public safetyservices by ensuring other

publicservicesareoperatedefficientlyand byreducingcosts forinternalservices.The City’slargeunfunded

infrastructure deficit needs tobe addressed requiring astrengthened revenue structurealong with the need for moredebt. Capital investment willneed to be prioritized andenvironmental sustainabilityshould be considered as afactor in this decision-making.

■ Moving ForwardThe Financial ManagementPlan guides prudent financialdecision making in support ofCity Council’s approved plans,programs and projects. It isan integrated part of theOurWinnipeg planningframework by supporting theCity’s vision: Living andCaring Because we Plan onStaying. It also aligns withOurWinnipeg by supporting:

A city that works:The "basics" matter: publicsafety, water quality,wastewater andtransportationinfrastructure, and publicamenities and facilities arethe essentials to keepingpeople healthy. To thisend, the FinancialManagement Plan supportssound and forward-lookingfinancial management ofour assets.

A sustainable city:Sustainability is part ofhow the City does business,and is reflected in policiesand programs that respectand value the natural and

built environments,protecting our city's naturalareas and heritageresources. Our financialdecisions should be basedon understanding the long-term implications – directand indirect – of ouractivities.

Quality of life:Opportunity, vitality andcreativity are examples ofsocial aspects of ourcommunity that are criticalto our overall well-being.The City is committed tocollaborating within itsmandate with othergovernments and serviceproviders. The FinancialManagement Plan iscognizant of and responsiveto social prioritiesincluding affordability andequity.

This Financial ManagementPlan establishes theframework for the City’soverall financial planning andmanagement, and the renewedgoals are:1. Promote economic growth2. Support environmental

sustainability

3. Maintain infrastructureassets

4. Manage debt5. Manage expenditures6. Ensure a sustainable

revenue structure7. Support a competitive tax

environment8. Ensure adequate reservesEach goal is accompanied bya target and a measure. TheCity commits to reportingregularly to Winnipeg’scitizens on its progress inmeeting these goals.

Vision Long Term Financial Health & Sustainability

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The City’s ability to support the growthof its existing business community andthe community at large as well as attractnew businesses and people is key to thefuture economic prosperity for Winnipegand its citizens. Standard & Poor’sCredit Rating from March 2010 states,“The City’s well-diversified economyconfers a higher degree of protectionfrom external economic shocks.”

Winnipeg is forecast to grow by 180,000people by 2031. A growing populationprovides us with the opportunity to thinkmore strategically about ways toaccommodate residential, employment,commercial and other kindsof growth. OurWinnipegand the CompleteCommunities DirectionStrategy take a collaborative andenabling approach toguiding growth to where

it can have positive social, economic andenvironmental results.

Renewed planning policies andimplementation tools will align with and further support ongoing economicdevelopment initiatives such as:

• Emerging Neighbourhoods(ie: Waverley West, Sage Creek,Kildonan Green)

• Commercial Destinations

• CentrePort

• Rapid Transit

• Portage Avenue Action Strategy

• Heritage Tax Credits

• Downtown Residential Development Grant Program

• Canadian Museum for Human Rights

• Aboriginal Initiatives

• Football Stadium

1 Promote Economic Growth

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TARGET:Increase assessment

base

Economic Initiatives

� Partnerships• CentreVenture• Economic Development Winnipeg

• Winnipeg Convention Centre

• True North Entertainment

• Mid-Continent Trade Corridor

• The Forks North Portage Partnership

• Other levels of government

� Liaison• Business Community• Business Improvement

Zones• Film and Culture• Community-based

Organizations

� Funding• Economic Development,

Heritage and Housing RehabilitationInvestment Reserves

• Multi-Family Dwelling Reserve and home tax credit programs

MEASUREMENT: Growth in assessment

base

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Citizens look to their governments toprovide and demonstrate leadership,incorporating the values of thecommunity into all aspects of theirservice provision. ThroughOurWinnipeg and the recentSpeakUpWinnipeg initiative, the City hasheard that Winnipeggers want theirmunicipal government to be a leader,championing choices and opportunitiesto live in a sustainable way. UsingOurWinnipeg and a supporting DirectionStrategy – A Sustainable Winnipeg, theCity of Winnipeg will work to embedsustainability into internal decisions andactions.

Projects, programs and initiativessupporting environmental sustainabilityinclude:

• Development of sustainabilityindicator measurement, monitoringand reporting methodology

• Strengthen existing integrateddecision-making and planningmechanisms and build newmechanisms where required

• Sustainable Procurement CommunityNetwork

• Establish a Corporate SustainableProcurement Policy

• Green building standards for Citybuildings

• Green workplace initiative

• Green living public education andawareness campaign

• Community-wide Climate ChangeAction Plan

• Corporate Climate Change ActionPlan (further 20% reduction)

• Green Fleet Vehicle Plan

• Comprehensive integrated wastemanagement plan, includingexamination of curbside composting

• Residential toilet rebate program

• Asset Management Initiative

The local environment is the foundationfor our economic and social health, andwe need to take responsibility for it. Ouractions should contribute to theprotection of the natural environmentboth regionally and globally.

The Financial Management Plan is anintegrated part of OurWinnipeg planningframework, as is the Direction Strategy –A Sustainable Winnipeg.

The City of Winnipeg’s AssetManagement Initiative will ensuredepartments are following leadingpractices in asset management. Theinitiative includes the development of amulti-criteria approach to sustainablecapital planning. Prioritization of capitalinvestment would be based on life cyclecosting, risk management and a triplebottom line approach (i.e. considerationof environmental, social and economicsustainability). In addition,implementation of a multi-criteriaapproach to capital planning will ensureunfunded prioritized projects areidentified for new intergovernmentalfunding and other opportunities.

Support Environmental Sustainability2 TARGET:Financial decisions thatsupport environmental

sustainability

“The Government FinanceOfficers Associationrecommends that the issue ofsustainability be considered acore value in settingorganizational policy andestablishing businesspractices in all areas ofpublic finance.”

Government Finance OfficersAssociation

“To promoteenvironmentally-responsiblemanagement decisions, amulti-faceted evaluationapproach to examine the fullimpact is recommended.”

Government Finance OfficersAssociation

MEASUREMENT: Develop a multi-criteria

approach to prioritizecapital investment,

including environmentalsustainability, by 2013

3Maintaining and improving the City’sassets and infrastructure is essential inmeeting the needs of Winnipeg citizensand attracting new investment andbusiness to the City. While capitalinvestment for City infrastructure has increased 178% from 2001 to

$439 million in 2010, the cost to raisethe City’s infrastructure to an appropriatecondition is estimated at $3.5 billiongrowing to $7.4 billion over the next tenyears. The largest portion of this $7.4billion relates to existing and newunfunded road infrastructure.

Maintain Infrastructure Assets

On March 10, 2010, the City’s ExecutivePolicy Committee directed the WinnipegPublic Service to prepare an assetmanagement plan to implement an assetmanagement system that includes a triplebottom line (i.e. environmentally,socially and economically sustainable)approach to all asset managementdecisions, in accordance withOurWinnipeg. An asset managementsystem should assist the city in managinginfrastructure assets better by:

• implementing leading practices forasset management, including lifecycle costs

• reporting on the state ofinfrastructure, the condition of assetsby service area, and any funding gap

• identifying appropriate maintenancefunding to extend the life of assets

• prioritizing investment in capitalassets using a triple bottom lineapproach to ensure existing assets aremaintained and that new capitalinvestment is appropriate

• providing information and data tosupport requests for new funding

Phase 1 of the City’s of Winnipeg’sAsset Management Initiative developed anumber of short, medium and long termrecommendations based on a needsassessment. The Initiative’s Phase 2includes development of corporatepolicies, standards and leading practicesin asset management, such as reviewingservice levels, incorporating riskmanagement, multi-criteria prioritizationof capital projects, and business caseevaluation. This Initiative forms the firststep toward addressing the challenge offunding the infrastructure deficit.

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TARGET:Implement leadingpractices for asset

management

Major Capital Projects

• Water Treatment• Wastewater Treatment• Recreation and Leisure

Facilities• Inkster Boulevard• Disraeli Bridge and

Overpass• Police Stations• Rapid Transit• Chief Peguis Trail• Active Transportation• Osborne Street Bridge• Waverley West Arterial

Roads• Assiniboine Park Conservancy

• Police Headquarters• Transit Fare Collection

System• Fire Paramedic Stations• Tuxedo Yards Development

“In the next five years,Winnipeg faces significantinfrastructure renewalrequirements … namely toaddress aging roads, water,and wastewater treatmentsystems, as well as transit.”“Ratings Direct”, Standard & Poor’s,March 1, 2010

MEASUREMENT: Complete Phase 2

of Asset ManagementInitiative by end

of 2012

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The City’s previous FinancialManagement Plan set a target to reducedebt per capita to $1,000 by 2009. Thisgoal was reached ahead of schedule in2002 largely as a result of the sale ofWinnipeg Hydro.While the City hashad success relatedto its debtmanagement, itfaces a substantialinfrastructuredeficit, including itsstreet system, parks,transit, landdrainage and community facilities.

Council has been exploring innovativesolutions to address the infrastructuredeficit. The City has been increasing thepay-as-you-go component of its capital

plan, has implementeduser pay charges to set up capitalreserves, and has pursued strategicpartnership opportunities with otherlevels of government.

Regulatoryrequirements areresulting in largecapital investment inwastewater treatmentfacilities over the next several years,increasing the debt

load. This work, along with other long-term financing obligations and newapproved major projects, may increase the City’s debt per capita to $1,606 by2015 based on existing capital plans.

As the City addresses its substantialinfrastructure deficit, additional capitalinvestment will be required beyond whatis currently planned. External debt maybe utilized to finance a portion of thisnew investment. As a result, debt percapita will likely increase beyond theprojected $1,606 in the future.

Issuance of debt must consider growth inCity revenues and remain affordable tothe citizens of Winnipeg. The debtstrategy needs to balance infrastructurerenewal with the cost to service debt andmaximum debt limits should be set.

Manage Debt TARGET:A manageable level

of debt

“Smart debt recognizes thatborrowing is a valid form ofinfrastructure financing, andseeks to build consensusaround the usage of debt byemphasizing its role as partof any long-term capital plan.Smart debt realizes that “pay-as-you-go” cannotaccommodate allinfrastructure needs, norshould it.”“Delivering The Goods”,Canada West Foundation,June 2008

Depending on the interestrate environment, debtissuance may be advisablewhere a capital project is:

• Intergenerational in nature (i.e. a large project with long-term benefits)

• Benefiting the community at large

• Growth related• A major rehabilitation

and/or • Financed by a dedicated

revenue stream.

MEASUREMENT:Develop a debt strategy,including maximum debt

limits

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5City Council recognizes affordability asbeing important to the citizens ofWinnipeg. Compared to other WesternCanadian cities, Winnipeg is a low costprovider of services.

Since 2001, operating expenditures haveincreased 25.5%, consistent withinflation adjusted for population

growth. During this period, the City significantly increased spending onsafety, which is one of its top priorities.At the same time consolidation andstreamlining of support functions as wellas ongoing monitoring of otherexpenditures helped to keep overall costswithin target levels.

Manage Expenditures

The City continues to manageexpenditures while ensuring publicservices are maintained. Performancemeasures and performance informationare now available for each City service.This will ensure that service performance

can be tracked andtrends can bemonitored to assistin resourceallocation and toensureaccountability foroutcomes.

Meeting citizens’ service expectations,coupled with future general priceincreases, will continue to put pressureon expenditure levels in the future.

The City’s strategy to manageexpenditures, find efficiencies, andachieve economies of scale includes:

• rationalizing and consolidatingservices, delivery systems andfacilities

• building a smaller, more skilled andflexible workforce

• implementing alternative servicedelivery options

• partnering with other levels ofgovernment and other organizations,including service sharing and

• applying new technology to improveservice delivery and increaseefficiency

TARGET:Tax supported operating

expenditure increasesshould not exceed

inflation adjusted forgrowth, net of operational

efficiencies

“Expenditures have beenfocused on public safety,transit and infrastructure.Protection and communityservices (primarily police andfirefighting) spendingcontinues to outpace overallspending, accounting for32.9% of expenditures in2008, up from 30.8% in 2003.These pressures are beingaccommodated by reductionsin other areas. For example,over the same time, interestcosts and spending onfinance, administration andgeneral government havedeclined as a percentage ofrevenues.”

“Credit Analysis”, Moody’s Investors Service, January 2010

MEASUREMENT:Increase in tax supported

operating expendituresover prior year should notexceed inflation adjusted

for growth

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The City of Winnipeg’s main source ofrevenue is derived from property taxes, arevenue stream that has had to bereduced in order to remain competitive.The City is, therefore, falling behind inmeeting operational requirements andaddressing its infrastructure deficit. Thepressure to invest more in infrastructuremakes it very difficult to increasespending on other priorities. Sustainablefunding for operations and to enablestrategic investments must be found.

A move to a sustainable revenuestructure does not override the need tolook internally to find efficiencies,improve operations, and reduce costs.

Sustainability also requires that the useof one-time revenue for ongoingexpenditures should be discouraged.

Property tax will remain the backbone ofmunicipal finance. It is a highly stableand predictable form of taxation.However, it is inelastic given that whenthe economy grows, property valuesrarely grow as quickly as do incomesand sales. Even when property taxes dogrow, there is usually a lag betweenassessed values and market values.

Currently, 6.5% of all taxes paid byWinnipeggers go to the CityGovernment, with 93.5% going to theother levels of government.

The City of Winnipeg’s ability tointroduce new revenue sources or changeexisting taxation policies through greaterfiscal and legislative powers is subject tothe approval of the provincialgovernment. As an example, the Citywas recently successful in obtainingprovincial approval to implement a newaccommodations tax, which is beingdirected to a Destination Marketing Fundto fund organizations, projects and

special events that encourage tourists tovisit Winnipeg.

The inclusion of inflation increases ongovernment grants and more dedicatedfunding sources, such as the gas tax, arepart of the City’s ongoing discussionswith the other levels of government. TheCity will continue to pursue a largerpiece of the “tax pie”.

Ensure a Sustainable Revenue Structure TARGET:A revenue structure thatkeeps pace with inflation

adjusted for growth

“Cities in Europe, SoutheastAsia, or the US havesignificantly greater access toa wider range of taxes, andthis places them on a moresecure fiscal footing.”“Dollars and Sense II”,Canada West Foundation,September 2008

A sustainable revenuestructure should consider thefollowing:

• Adequacy• Diversification• Stability• Growth potential• Ease of administration• Appropriate cost recovery• Timing of cash flow

MEASUREMENT:Increase in operating

revenue should be, at aminimum, inflation

adjusted for growth

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7The City’s municipal residential property taxes are below the average of otherCanadian cities.

Support a Competitive Tax Environment

The 2010Operating Budgetboosts Winnipeg’scompetitivenesswith the City’s13th consecutiveproperty tax freezeor reduction.

The City has alsoreduced businesstaxes to improve itscompetitiveposition and makeWinnipeg a goodplace to invest.The business tax rate has been decreasedfrom 9.75% in 2001 to 6.39% in 2010.This rate decrease has translated into lessbusiness tax revenue being paid byWinnipeg business – a budget of $57.6million in 2010 compared to $60.1million in 2001, while the market valueof these businesses has increased.

A small businesstax credit wascreated in 2009.In 2010, thisresulted in 36%of Winnipegbusinesses nothaving to paybusiness tax.

While acompetitive taxenvironmentencourageseconomic growth,there are other

factors that are key to new development.Citizens value City services. Meetingservice expectations and maintaininginfrastructure investment must bebalanced with affordable taxation levels.

TARGET:Municipal residentialproperty taxes below the average of other

Canadian cities

Cumulative PropertyTax Change in Western Canadian Cities (1999 to 2009)

Vancouver 44%Edmonton 50%Calgary 42%Saskatoon 38%Regina 24%Winnipeg -6%

“In Winnipeg, real per capitaproperty taxes are nowconsiderably lower than in1990.”

“Dollars and Sense II”,Canada West Foundation,September 2008

MEASUREMENT:Municipal residential

property taxes below the average of other

Canadian cities

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Maintaining adequate reserves providesthe City with the ability to respond tounexpected events and extraordinarysituations, maintain stable taxes andensure sufficient funds are available formajor capital projects.

Stabilization reserves assist in fundingmajor unexpected expenses or deficitsrecorded in the General

Revenue Fund. The City’s previousFinancial Management Plan set a targetfor Stabilization Reserves to reach aminimum of 10% of tax supportedexpenditures by 2009. This goal wasreached in 2006. Any excess over 10%has been used to fund operatingexpenditures. Achievement of this goalhas contributed to improvement of theCity’s overall credit rating.

The City ofWinnipeg mustoptimize itsfinancialcapacity toensure scarceresources arebest working forcitizens. The

City's long-term financial modellinganticipates revenues and expenditurelevels to continue to be predictable,without significant volatility. Therefore a

balance between holding sufficientresources to effectively manageunplanned events and the resultingpressure on affordability for the taxpayermust be found. A combinedStabilization Reserve level of a minimumof 8% of tax supported expenditures isappropriate.

The City will continue to monitor itsreserve position against futurerequirements to ensure adequate reservebalances are maintained.

Ensure Adequate Reserves TARGET:Stabilization Reserves

maintained at a minimum of 8% of tax supported

expenditures

“Winnipeg benefits fromhealthy free cash and liquidassets …”

“In our opinion, the city’sability to maintain stable freecash balances … bolsters itsfinancial profile.”

“Ratings Direct”, Standard &Poor’s, March 1, 2010

“A jurisdiction should adopta policy to maintain aprudent level of financialresources to protect againstthe need to reduce servicelevels or raise taxes and feesdue to temporary revenueshortfalls or unpredicted one-time expenditures.”

Government Finance OfficersAssociation

MEASUREMENT:Stabilization Reserves

maintained at a minimumof 8% of tax supported

expenditures

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For more information on the City’s Financial Management Plan,

please contact:

The City of WinnipegCorporate Finance Department

Financial Planning and Review Division4th Floor, 510 Main Street

Winnipeg, ManitobaR3B 1B9

Telephone Number: 311

Toll Free: 1-877-311-4WPG (4974)

Prepared by Corporate Finance,The City of Winnipeg

City of Winnipeg website: www.winnipeg.ca