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City by the Numbers
Our Financial Situation
The City of Hamilton’s financial management involves planning, directing, monitoring, organizing, and controlling financial resources in an efficient and effective manner. As resources become scarcer, long-term financial planning becomes increasingly important.
Our community’s needs and expectations change as new technologies and trends challenge the status quo. Recently financial planning has included input from the Corporate Leadership Team, Council, and community stakeholders.
As municipal councils increasingly utilize a strategic approach to governance, long-term financial planning and disciplined financial management will be critical to achieving successful outcomes.
Key financial objectives for the City of Hamilton include:
- Maintain the City's ‘AA+’ credit rating
- Grow the non-residential property assessment base and maintain competitive residential property taxes (compared to other Ontario municipalities)
- Maintain competitive water, wastewater and stormwater residential rates (compared to other Ontario municipalities)
- Management of debt
- Management of discretionary reserves and obligatory reserve funds
- Maintain infrastructure assets to Council-directed service levels
- Management of liabilities
Maintain Credit Rating
The City of Hamilton’s credit rating is one of the highest of comparator municipalities in Ontario (as rated by Standard and Poor’s Global Rating Service).
A credit rating of ‘AA’ or higher generally indicates favourable ratings in most of the rating categories of institutional framework, economy, financial management, budgetary flexibility, budgetary performance, liquidity, debt burden and contingent liabilities.
| Report Date | Credit Rating | Outlook |
|---|---|---|
| November 2018 | AA+ | Stable |
| November 2017 | AA+ | Stable |
| June 2017 | AA+ | Stable |
| July 2016 | AA | Positive |
| June 2015 | AA | Stable |
Grow the Non-Residential Property Assessment Base and Maintain Competitive Residential Property Taxes
The City of Hamilton’s non-residential property assessment as a percentage of total assessment was 12% in 2018. Growth in the non-residential property assessment base will assist in controlling residential property taxes and future property tax increases. Property taxes contributed 57% of the City’s 2018 gross tax supported operating budget of $1.5 billion.
Trends
- Declining non-residential property assessment as a % of total assessment
- Assessment growth: Positive growth in the last 5 years (Between 0.7% and 1.6%)
- Residential property tax increases: Low
City Council approved a 1.9% property tax increase for 2018. This is low compared to other municipalities (Guelph 3.0%, Peel/Mississauga 2.7%, London 2.8%, Halton/Burlington 2.5%, Toronto 2.9%, Haldimand 2.5%*, Kingston 2.5%, Ottawa 2.0%). -
Tax Competitiveness: Hamilton’s tax competitiveness has improved since 2011; residential property taxes are currently 6% above the average, versus 11 %.
Maintain Competitive Water, Wastewater and Stormwater Residential Rates
The City of Hamilton’s non-residential users consume 52% of the city’s water and residential users consume 48%. Recent growth in the non-residential consumption assists in controlling residential rates and future rate increases.
- Water, Wastewater and Storm water Residential Rate Increases: Above inflation, slight upward trend
- Water, Wastewater and Storm water Residential Rates: Below Comparators
The average household in Hamilton paid $690 in 2018 for water consumption. This is the second lowest of our comparators with the exception of Peel Region ($567 in 2018). Hamilton water residential rates are lower than Toronto, Halton, Durham, St. Catharines, Brantford, Guelph, West Lincoln, London Cambridge, Waterloo, Haldimand, Norfolk and Kitchener.
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Management of Debt
Debt partially finances the City of Hamilton’s ongoing investments in capital. The City’s current Debt Management Policy was approved by City Council in 2013 (Report FCS13074).
The main objectives of the Debt Management Policy are:
- Ensure long-term financial flexibility and sustainability.
- Limit financial risk exposure.
- Maintain the credit rating.
- Minimize long-term cost of financing.
- Comply with statutory requirements including monitoring and reporting.
To achieve these objectives, the Policy outlines internal goals for the City on debt levels and statutory limits.
Internal Goals on Debt Levels:
- Total tax and rate-supported debt as a percentage of City own-source revenue - not to exceed 60%, unless approved by Council.
- Own source revenue is defined as revenue raised or generated by the City from property taxation, user fees, service charges, licenses, permits, fines, penalties and interest income. It excludes revenue from Ontario Grants, Canada Grants, gain/loss on sale of land and capital assets, donated tangible capital assets and increase/decrease in Government Business Enterprise Equity (Hamilton Utilities Corporation, Hamilton Renewable Power Inc.)
- Total Development Charge (DC) supported debt as a percentage of the total DC Eligible Costs for the forecast period of the latest DC Background Study not to exceed 25%, unless approved by Council.
Statutory Limits:
- The annual debt and financial obligation limit for the City is calculated in accordance with section 3 of Ontario Regulation 403/02 as amended.
- Outstanding variable interest rate bank loan agreements and variable interest rate debentures, in total, cannot exceed 15% of the total outstanding debt of the City (per Ont. Reg. 276/02 s(2)).
Key Trends and Why They Matter
The City’s annual debt charges are well below the annual debt and financial obligation limit of 25% of City own-source revenue.
The City of Hamilton’s most recent annual debt and financial obligation limit is $266M, which would give the City the capacity to undertake up to $2.76B in additional long term borrowing. Debt was $418M in 2017 and forecasted to be $476M in 2018. However, increasing the debt levels and the corresponding repayment amounts would impact the property taxes and user/water rates charged to residents and businesses.
- Total Municipal Debt to Own Source Revenue: (31.3% for 2017)
- Municipal DC Debt to DC Eligible Costs: (2% for 2017)
- Ratio of Total Municipal Debt to Reserves and Obligatory Reserve Funds: (0.42 for 2017)
- Total Municipal Debt Service Charges per Capita: ($120.86 for 2017)
- Total Municipal Debt Service Charges per Own Source Revenue: (5.1% for 2017)
- Debt levels are expected to increase as investments in capital infrastructure are required to affect the City’s infrastructure deficit estimated at $3.7 billion and to service lands for economic prosperity and growth.
| 2014 | 2015 | 2016 | 2017 | 2018f |
|---|---|---|---|---|
| $803 | $710 | $850 | $742 | $833 |
Management of Discretionary Reserves and Obligatory Reserve Funds
Reserves and reserve funds are comprised of funds set aside for specific purposes by Council and funds set aside for specific purposes by legislation, regulation or agreement. Reserves provide flexibility to manage the financial needs of the corporation.
The City’s discretionary reserves are comprised of tax supported reserves, rate supported reserves and Hamilton Future Fund Reserves. The Hamilton Future Fund Reserves were created from a special dividend from Hamilton Utilities Corporation upon restructuring of the electrical industry in 2002. The Hamilton Future Fund Board of Governors have oversight on the funds to be used on projects that create and protect a permanent legacy for current and future generations of Hamiltonians to enjoy economic prosperity and improved quality of life.
The City’s obligatory reserve funds are comprised of development charges reserves, federal gas tax reserve, provincial gas tax reserve, parkland dedication reserve and building permit fees reserve.
Reserve balances are projected to decrease in 2018 as previously approved usage of reserves for capital expenditures (including growth related infrastructure, lifecycle infrastructure renewal including roads, vehicles and equipment) are expected to occur.
Note: Figures reported represent City of Hamilton municipal operations including police, library and farmers market and excluding City Housing Hamilton.
Balances in the Rate Supported Reserves are projected to decrease in 2018 and beyond as funding received (and deposited to reserves) from the Provincial Government of $100 million and program reserves of $45 million are expended for Clean Harbour wastewater treatment plant upgrades.
Discretionary Reserves and Obligatory Reserve Funds Chart
| Tax Supported Reserves (Discretionary) | Rate Supported Reserves (Discretionary) | Obligatory Reserves | Hamilton Future Fund Reserves (Discretionary) | Reserves Closed in Prior Years | Total Reserves and Obligatory Reserve Funds | |
|---|---|---|---|---|---|---|
| Balance Dec 31, 2014 | $412,760,656 | $223,891,744 | $194,840,365 | $46,435,735 | $877,928,500 | |
| Balance Dec 31, 2015 | $423,170,229 | $237,615,260 | $226,210,428 | $37,710,677 | $924,706,594 | |
| Balance Dec 31, 2016 | $405,046,562 | $241,494,037 | $213,162,115 | $43,079,382 | $713,525 | $903,495,621 |
| Balance Dec 31, 2017 | $436,977,023 | $260,982,698 | $252,126,423 | $44,322,301 | $994,408,445 | |
| Forecast Dec 31, 2018 | $373,993,789 | $199,003,834 | $201,363,562 | $47,657,998 | $822,019,183 | |
| Forecast Dec 31, 2019 | $378,898,786 | $142,472,904 | $170,101,325 | $53,044,865 | $744,517,880 | |
| Forecast Dec 31, 2020 | $392,968,053 | $92,229,287 | $180,044,079 | $58,034,707 | $723,276,126 |
Note: Figures reported represent City of Hamilton municipal operations including police, library and farmers market and excluding City Housing Hamilton.
Source: FCS17004, FCS17070, FCS18064
Reserve balances are projected to decrease in 2018 as previously approved usage of reserves for capital expenditures (including growth related infrastructure, lifecycle infrastructure renewal including roads, vehicles and equipment) are expected to occur.
Balances in the Rate Supported Reserves are projected to decrease in 2018 and beyond as funding received (and deposited to reserves) from the Provincial Government and program reserves are expended for Clean Harbour wastewater treatment plant upgrades.
Maintain Infrastructure Assets
The City of Hamilton owns and operates over $20 billion (replacement value) in core infrastructure and other assets, which service the needs of residents, local businesses and visitors to the city.
The City’s Asset Management Plan sets out a strategic framework for:
- Managing these assets
- Aligning core infrastructure with service objectives
- Documenting core practices and activities
- Guiding the action and investment needed to meet key business goals
Learn more about the City's Asset Management Plan
The City’s asset management strategies are responsive and support the provision of quality municipal services. Balancing the City’s requirements to provide infrastructure assets (including transportation, water, waste management, health, recreation, culture, connectivity and administrative services) with the ability of the residents and businesses to pay through property taxes, user fees and rates is a challenge.
The City of Hamilton maintains its infrastructure utilizing a combination of resources including reserves, long-term debt financing, federal gas tax funds, property tax revenues, rate revenues and grants from senior levels of government. Development charges fund a majority of growth-related capital infrastructure projects.
The City’s gross 2019 tax-supported capital budget and rate supported capital budget was $510 million.
- Gross Capital Budget: Consistent - $445 to $510 million annually from 2014 to 2019
- Infrastructure Asset Ratings: Declining
Our Infrastructure Assets
Our most recent State of the Infrastructure Report provides details on the types of assets that the City of Hamilton has.
The infrastructure “report card” on assets is part of an on-going improvement process for the management of the City of Hamilton’s public works infrastructure. It reviews the current state and condition of City infrastructure assets essential for the delivery of public services to citizens. The ratings are from 2016.
The report’s objectives are to measure and report the effectiveness of the City’s management practices as they impact:
- The physical condition of the infrastructure.
- The capacity of the infrastructure to service peak demands.
- The availability of funding to address infrastructure investment needs.
- Projections of the state of these assets in 2020 and 2050 should the status quo be maintained.
- The Asset Rating criterion include: Condition and Performance, Capacity vs. Need, Funding vs. Need.
Asset Value and Rating Chart
| Asset Class | Value (millions) | Rating | Trend |
|---|---|---|---|
| Water | $3,222 | C | Stable trend |
| Wastewater | $5,393 | C+ | Decreasing trend |
| Stormwater | $1,459 | C+ | Decreasing trend |
| Roads and Bridges | $6,034 | C | Decreasing trend |
| Facilities | $1,443 | C | Decreasing trend |
| Other Various Assets | $1,953 | Range of C- to B | Varies by Category |
| TOTAL | $19,504 |
Management of Liabilities
The City of Hamilton has obligations for post-employment and retirement benefits, and closed landfill sites representing $392 million of the City’s total liabilities. Financial strategies continue to evolve to address the budget impact in future years.
These liabilities include:
- Sick leave benefit plan
- Long term disability
- Workplace safety and insurance board (WSIB) liabilities
- Retirement benefits
- Vacation benefits
- Pension benefit plans
- Solid waste landfill liabilities
Independent Assessments
There are three significant independent assessments that are regularly conducted to independently assess the City of Hamilton’s financial operations:
- Periodic assessments of the City of Hamilton’s credit and debt ratings by external credit rating agency Standard and Poor’s (S&P). (described above)
- Internal Audits conducted by the City’s independent Audit Services Division on an ongoing basis.
- The annual independent external financial statement audit that is required to be conducted over the City’s financial statements. The current external auditor for the City of Hamilton is KPMG LLP.
Annual External Financial Statement Audit
The City of Hamilton’s external auditor, KPMG LLP, conducted an annual financial statement audit for the period January to December 2017. View the most recent audited financial statements
For this audit, the audit opinion was that the City of Hamilton’s consolidated financial statements present fairly, in all material respects, the consolidated financial position as at December 31, 2017, and its consolidated results of operations, its consolidated changes in net financial assets and its consolidated cash flows for the year then ended in accordance with Canadian public sector accounting standards. This was released in June 2018 by KPMG LLP in the independent auditor’s report (PDF, 130kb).
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