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Kawartha Lakes – Council recently received the financial update from staff about the municipality's Long-Term Financial Plan (LTFP). The goal of this plan is to combine all the financial policies of the municipality into one document including strategies for revenue, debt, and reserves, as well as budget predictions. The LTFP measures the municipality’s fiscal health and predicts future needs. This plan was last updated in 2022, and a new asset management plan must be submitted to the province by June 2025.
Long-Term Financial Plan Update
To prepare for the next update to the LTFP, there are several key areas being developed. Sara Beukeboom, Director of Corporate Services, touched on some of the strategies to ensure financial sustainability and resilience in her presentation at Committee of the Whole on June 4, 2024.
Operating Update and Financial Adjustments for 2025 to 2027
A comparison of the LTFP to actual and forecasted figures for 2022 through 2024 revealed variances due to the pandemic. These included community programs and user fees below average, $12 million of deferred capital projects and annual surpluses that were not included in the LTFP.
Since the 2022 LTFP, several key financial assumptions have been adjusted to reflect pandemic impacts and current economic conditions, including:
- Tax Levy - Adjusted to reflect changes in growth projections and supplemental taxes due to growth. Forecasted draft budget increases originally at 4.5 percent now reflect an estimated 9.1 percent in 2025, and returning to 4.5 percent in 2026 and 2027. Main drivers of increases include investment in staff resources, transfers to reserves, and increased costs of contracts and services.
- User Fees - adjusted from 2 percent to 3 percent, moving toward cost recovery.
- Wages - increased from 2 percent to 3 percent to include all rate adjustments and new positions to support growth.
- Growth – Forecasted growth estimates have increased to 2 percent from 1 percent in recent years. The new growth of 6,500 homes is predominantly within the urban boundary in Lindsay and this will aid in disbursing tax increases for the entire municipality. Watch for updates related to the Special Area rates in July 2024.
- The Water-Wastewater Budget has remained stable at 3 percent increases for many years. As the City prepares for the growth Water-Wastewater projects this 3 percent will be monitored closely in the coming years.
Reserve Strategy being developed to stabilize tax rates
As of May 2024, there are $48 million in reserves that are in Council’s control. An additional $28.4 million in reserves are legislatively or regulated control, for example, the CHEST Funds, Development Charges and other reserves. Reserves will be a focus in the LTFP, including what new reserves are needed and how to build sustainable reserves over time.
New Debt Strategy will support capital projects across Kawartha Lakes
While the Municipal Act ultimately limits the amount a municipality can borrow, Council has the ability to set the debt-servicing ratio, which affects how much is paid on that debt each year. Debt is a tool used to finance capital projects, such as new buildings, roads and other infrastructure and to keep assets in good repair. Debt is to be paid over the course of the asset’s end of life. The May 2024 current long-term debt balance being carried by the tax levy is $34 million.
A new strategy to finance projects is being analyzed: The Lindsay CHEST fund, currently $19 million in value, could loan funds to the City for the multi-year Paramedic Headquarters build at a rate that would be beneficial to the CHEST investments. The CHEST Fund would earn a higher interest rate while reducing the City's borrowing cost below that of the Infrastructure Ontario rate.
Next steps include working with the Budget Committee to draft the 2025 Budget. Staff will also be working with People Services (formerly Human Resources) to develop a longer term People Strategy to inform the LTFP and proactively plan for staffing requirements. Staff will continue to monitor growth impacts on tax assessments, keeping affordability and sustainability at the forefront.
2023 Audited Financial Statement Presentation
At the June 25, 2024 Council meeting, Carolyn Daynes, Treasurer, presented to Council the highlights of the auditor’s report. Staff calculations of the 2023 Surplus were supported by the auditor, at $3.2 million. Council approved the surplus be applied as follows:
- $150,000 donation to the Kawartha Art Gallery
- $28,000 donation to the Kawartha Lakes Community Foundation
- $100,000 donation to Kawartha Lakes Healthcare Initiative (KLHCI)
- $100,000 transferred to the new Environment Disaster Recovery Reserve
- $1.1 million transferred to the Asset Management Reserve committed to Victoria Manor lifecycle extension capital improvements
- $500,000 transferred to the new Primary Care Recruitment and Retention Reserve
- $1.2 million transferred to the General Tax Stabilization Reserve
Quotes
As a reflection of the current growth boom, we’ve put in more aggressive targets for growth revenue. We’re monitoring monthly to make sure growth matches revenues and adjusting accordingly. The City is also formulating the right balance of capital investments between the State of Good Repair assets, which are those we own, and the timing of expansionary projects needed to service this new growth.
Sara Beukeboom, Director of Corporate Services
Debt sometimes has a negative connotation, but it’s simply a tool in our toolbox to finance projects that benefit residents over the life of the asset. We use taxes to pay the debt down. If we didn’t use debt, otherwise known as debenture, we’d have a significantly higher tax rate.
Carolyn Daynes, Treasurer
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