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Long Range Financial Plan

The Projections The

The Projections The model is highly integrated, and changes in one area will impact other areas. For example, some reserve targets are based on specific expenditure levels. As the expenditure levels change, so do the reserve targets. Changes in the capital program result in different debt requirements and/or draws from reserves (resulting in changes in reserve balances). As a result, although the following projections have been broken down into revenues, capital, reserves and reserve funds and operating, the projections must be considered as one entire package. Any changes to assumptions in one component may have an impact in some or all other components of the projections. Revenue Forecasts Current revenue forecasts assume very little change in this area. A standard inflation rate of 2% has been applied to all revenue categories. No changes in revenue sources have been assumed for the next 10 years. The federal government announced new federal infrastructure funding in its 2016 budget. No details have been released regarding specific guidelines around this anticipated funding, so no assumptions have been made with respect to potential federal infrastructure funding levels. Based on these assumptions, revenues are not anticipated to keep pace with expenditure growth (Figure 29). The proportion of revenue to total gross expenditures (excluding contributions to and from reserves) will be steadily declining unless new sources of revenue are identified. This trend would not be able to be sustained without increasing property taxes to compensate. Figure 29 - Revenue as % of Gross Expenditures (excluding transfers from Reserves) Revenue forecasts have been identified as a focus for additional scrutiny in future iterations of the model and the LRFP. In addition, staff is actively researching the potential for new revenue streams that would assist the City’s financial position. 51

Capital Budget The ten-year detailed capital program information used in the model is based on the 2016-2025 approved capital budget as a starting point. The 2017-2026 budget is currently being developed and will not be available until November 2016. Adjustments to the program have been made for forecasting purposes. Capital Program The 2016-2025 forecast identified approximately $800 million in unfunded capital projects for the ten-year period. The 2017 budget guidelines have been modified to ensure there are no unfunded projects in the first nine years of the 2017-2026 plan. The model assumes that approximately half of the currently identified unfunded projects ($400 million) will be included in the 2017-2026 plan, beginning in 2020. The model further assumes that 75% ($300M) of these expenditures would be funded from capital reserves, and 25% ($100M) would be funded through debt. The interest and repayment costs of this additional debt are reflected in future operating budget estimates. Figure 30 depicts the size of the annual capital budget for the next ten years, based on these assumptions. Figure 30 – Ten-Year Capital Program Projection ($000s) 52