City in positive financial position

BMA assessment of Guelph’s financial condition released

Guelph, ON, September 25, 2015 – On Monday evening, City Council heard highlights from the 2014-15 Financial Condition Assessment report which evaluates the City’s financial health and identifies future challenges and opportunities. The assessment was conducted by BMA Management Consulting Inc.

“By proactively seeking this assessment from BMA, City Council, administration and the community receive an objective third-party view of our current and future financial state. This is especially helpful as Council approaches the end of its first year in office, and considers the 2016 budget,” says Janice Sheehy, city treasurer.

The BMA assessment concludes that the City’s overall financial condition is favourable and trending upward. However, like other municipalities, the City is facing a number of challenges that need to be considered as part of a long-term financial plan.

“The assessment confirms the health and stability of our water and wastewater reserves and reinforces the need to address the state of our stabilization and capital reserves and reserve funds to ensure they are at sufficient levels to support unexpected or large scale projects,” continues Sheehy.

BMA noted that Guelph is not unique in its infrastructure challenge. The City’s challenge is to maintain, replace and build roads, pipes, parks, buildings and other infrastructure in a way that is affordable.

“In the coming weeks, the 2016 proposed budget will be presented to City Council that reflects the recommendations of the assessment including the creation of an asset management program to identify and address the City’s infrastructure gap,” says Sheehy.

The City will also present as set of recommendations to enhance the municipality’s long-term financial sustainability to the Corporate Services Committee on November 9.

2014-15 Financial Condition Assessment summary

According to the 2014-15 BMA Financial Condition Assessment, the City of Guelph is in a positive financial position, with a number of socio-economic indicators being reflective of a strong local economy. The assessment notes that, through planned and prudent reserve policies, the City has been able to significantly improve the state of its water and wastewater reserves and reserve funds. BMA anticipates that balances will continue to increase and remain aligned to the capital projects required for future replacement. It is noted that the City has a comprehensive debt management policy that contributes to a relatively low level of debt which ensures the City has capacity to borrow funds in a fiscally responsible manner.

Guelph’s positive socio-economic indicators:

  • high employment rate/low unemployment
  • modest population growth
  • strong construction activity which offers a good mix of residential and non-residential activity
  • strong assessment increases which are above the average of peer municipalities
  • average household income that is above the peer median, which is a measure of the community’s ability to pay for these services
  • low taxes receivable

Infrastructure gap and reserves

Like many Ontario municipalities, Guelph is facing a growing infrastructure gap. If allowed to continue, the gap may lead to increased maintenance costs and affect service levels.

As Guelph’s population ages, the assessment recommends evaluating the infrastructure and services provided by the City to prepare to meet the changing needs of the community.

The assessment identifies a downward trend in the level of funding within City reserves and reserve funds. Stabilization reserves are a critical component of long-term financial stability; they ensure funding is available to address unusual or unexpected events (rainy day accounts). While Guelph’s reserve policy states stabilization funds and reserves should be equal to 8 to 10 per cent of the City’s own source revenue, current stabilization funds and reserves are much lower—2.5 per cent of the City’s own source revenue. Further, Guelph uses a decentralized approach to manage its capital reserves; 33 different accounts are used to fund specific departmental capital needs or projects. This can limit the organization’s ability to respond corporately to high-risk, urgent infrastructure projects if necessary. The downward trend continues on these reserves despite an increase in the value of City assets.

The BMA assessment concludes with a few recommendations including:

  • consolidate stabilization reserves to provide the flexibility to manage risk,
  • create a comprehensive asset management plan to drive future budgets, and
  • ensure reserves are adequately funded.

The 2014-15 Financial Condition Assessment presentation is available on guelph.ca/budget. The full report will be available in the coming weeks.

For more information

Janice Sheehy
General Manager, Finance/City Treasurer
City of Guelph
519-822-1260 extension 2289
janice.sheehy@guelph.ca