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Kawartha Lakes plans for longer term financial needs; considers strategies to manage debt

Kawartha Lakes – At the April 5, 2022 Committee of the Whole, Jennifer Stover, Director of Corporate Services presented to Council the progress to date on the strategies that will form the basis of the updated Long Term Financial Plan (LTFP).

The first Long Term Financial Plan was created in 2017 and is being updated to reflect changes in costs, market conditions and City growth over the last five years. Although the plan consists of four strategies – revenue, reserves, people and debt - Stover focused the bulk of the discussion with Council on the debt strategy.

The Debt Strategy

The total value of all City buildings, land, roads, fleet and equipment is $3 billion. To ensure these assets are maintained and replaced as needed and to ensure we have the infrastructure to meet the community’s growing requirements, staff forecast the capital requirement at $1 billion over the next 10 years. This amount includes the capital needed to build affordable housing through Kawartha Lakes Haliburton Housing Corp (KLHHC).

The City’s capital needs are funded by reserves, grants, 1.5% infrastructure levy introduced in 2022 and debt. Debt makes up 35% of total funding for the City’s capital needs.

Stover outlined that the LTFP offers the opportunity for Council to transition from a ‘first come, first served’ current debt approach to a longer term view. This would allow Council to make more informed decisions about how and when to use debt, and to ensure there is sufficient revenue to support the debt servicing costs.

The process would stay within the overall debt servicing ratio of 10% set by Council. Within that limit there would be limits for each of the three major programs: Tax Supported Capital, Water-wastewater Capital and KLH Housing Corporation.

Stover discussed with Council that the 10% debt servicing ratio could be divided up in different ways and posed a number of options for Council to consider, such as if the 10% ratio includes or excludes KLHHC debt, direction on the types of debt and percentage the City can borrow in each. Staff will build the LTFP according to Council direction to target an annual 3% Operating Tax Levy.

“We need a realistic strategy to look ahead at what we need to fund and how we’re going to pay for it. Future Councils will always have the opportunity to adapt the strategy as conditions change, needs change, what’s working and what isn’t,” commented Mayor Letham.

Next steps

  • Staff will report back to Council with a Debt Policy, Reserve Policy and final LRFP by June 30. At this time, a report will also go to Council on the 2021 surplus with recommendations on consolidating various reserves.
  • The City will also develop a Development Charge (DC) debt strategy through a DC Update coming by the fall.
  • Watch the presentation on YouTube.
  • Subscribe to the Council Calendar to be kept abreast of upcoming meeting agendas.

Figure: Forecasted Capital Expenses over 10 years.

 10 year capital expenditures chart

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