City of Toronto: Issuer Presentation

2018 RBC Green Bond Conference, April 10

Presentation Highlights

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1. City of Toronto Economic Profile

2. Fiscal Overview

3. Regulatory Environment

4. Additional Credit Strengths

5. Capital Borrowing Program

6. Green Debenture Program

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CITY OF TORONTO – ECONOMIC PROFILE

Canadian Head Offices

by Metropolitan Area

Toronto 690

Montreal 381

Vancouver 233

Calgary 210

Edmonton 112

Winnipeg 87

Ottawa 69

Quebec City 57

Centre for Commerce

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180 million

people within

750 mile radius

135 million

people

within a 500 mile

radius

Broad and Diversified Economy

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Large diversified economy that helps shield City from slowdown

City of Toronto – Estimated Share of GDP by Industry Group - 2016

Source: Statistics Canada; Economic Development & Culture

Financial Services 20%Real Estate, Rental & Leasing 14%Business Services 11%Manufacturing 9%Information, Culture,

Entertainment & Hospitality 8%Health Care 7%Public Administration 6%Education 5%Wholesale 5%Construction 4%Retail 4%Transportation & Warehousing 3%Personal Services 2%Primary and Utilities 2%

• Toronto ranks first in high-rise buildings under construction in North America (159)

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Major Economic Development Activity

(continued)

# of High-Rise Buildings under Construction

FISCAL OVERVIEW

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2018 Tax and Rate-Supported Operating Budget

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Where the Money Comes from ($Millions) Where the Money Goes ($Millions)

Housing Market and Property Tax

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• Property tax revenue not sensitive to changes in values

• Property taxes take priority over other charges including 1st

mortgages

• Tax Sale process

2018-2027 Tax and Rate-Supported Capital Plan

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Tax-Supported - $26.0B Rate-Supported - $13.8B

$39.8B

Where the Money Comes from

($Millions)

Where the Money Goes

($Millions)

REGULATORY BACKGROUND

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Financial Regulatory Background

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Legislative Safeguards for Investors (Ontario Municipal Act)

• City’s debentures rank equally

• City annual budget must be sufficient to pay interest and sinking

fund contributions to retire debt

• Annual budget must provide that estimated revenues are equal to

estimated expenditures (Balanced Budget)

• Proceeds from the sale of a debenture issue cannot be applied

towards the payment of current expenditures

• Debenture by-law cannot be repealed

(Continued on slide 17)

ADDITIONAL CREDIT STRENGTHS

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Very Low Residential Property Taxes

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2017 Residential Property Tax Rates

• Toronto has unique tax-raising ability providing greater

flexibility than most other Canadian municipalities

City of Toronto Act/Ability to Levy New Taxes

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Taxation Options Adopted

Municipal Land Transfer Tax

Personal Vehicle Tax

3rd Party Sign Tax

City Building Levy

Hotel & Short-term Accommodation Tax

Road Toll Tax

Alcoholic Beverage Tax

Entertainment & Amusement Tax

Parking Levy

Parking Sales Tax

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• Toronto civic worker pensions managed by an arms-length corporation

– Ontario Municipal Employee Retirement System (OMERS)

• OMERS handles pensions for almost 1,000 Ontario public-sector

employers including municipalities, school boards, libraries, fire &

police departments and other local agencies

• OMERS has a AAA rating from Dominion Bond Rating Service and

AA+ from Standard & Poors

• The funded ratio has increased for 5th year in a row and reached 95%

in 2017 - on track to reaching 100% by 2025

• In 2017, OMERS had a 11.5% return on net investments as assets

grew by nearly $10B to $95B

Limited Pension Liability Risk

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Ownership of Large Enterprises

Toronto Parking Authority

CreateTO

“The ratings are supported by Toronto’s large and

dynamic economic structure as the leading

commercial centre in Canada, its relatively low

debt burden and considerable base of liquidity and

reserves to manage unforeseen events.”

DBRS, August 10, 2017

“The City of Toronto's Aa1 rating benefits from a

low debt burden, a healthy liquidity profile

evidenced by a net cash position, a large and

diversified economic base as well as a track

record of consolidated surpluses since 2008…

The rating also reflects the city's additional unique

taxation powers, which allow it to access

additional revenue sources besides property taxes

and user charges for environmental services.”

Moody’s Investors Service, July 12, 2017

“The stable outlook reflects our expectation that in

the next two years Toronto’s broad economy will

continue to expand, supporting revenue

growth…We believe the city’s economic depth and

diversity limits volatility, bolstering our assessment

of its economy”

Standard & Poor’s, October 20, 2017

Strong and Stable Credit Ratings

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• The City of Toronto maintains strong

debt credit ratings from three credit

rating agencies:

o Moody’s – Aa1 (Stable) (2002-Present)

o S&P – AA (Stable) (2001-Present)

o DBRS – AA (Stable) (2002-Present)

• The City’s ratings reports point to key

strengths:

o wealthy & diversified economy

o low debt burden

o strong liquidity

o strong financial management

o Emphasis on long-term financial

planning

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New Regulation (effective Jan. 1

2018) provides opportunity to invest

in broader range of instruments

Long-term investments must be

made through independent

Investment Board

Board to "exercise the care, skill,

diligence and judgement that a

prudent investor would exercise" in

making investment decisions

Board’s investment activities

directed by City’s Investment Policy

Policy on Asset Mix -

Previous Mix vs. New Target Mix

Previous City New City Target

Asset Mix Asset Mix

Bonds 100% 70%

Canadian Equity 0% 4%

US Equity 0% 10%

International Equity 0% 3%

Emerging Market Equity 0% 3%

Real Assets 0% 10%

Expected Return 1.90% 3.40%

Expected Volatility 7.00% 5.80%

New City of Toronto Investment Policy

CAPITAL BORROWING PROGRAM

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Capital Borrowing Requirements

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• Key priority is State-of-Good-Repair of key infrastructure

• Debt requirement for next three years is approximately $2.65B

• Borrowing of $950M per year over next 2 years and $750M forecasted for 2020

• Re-opened and issued $300M of the 10-year sinking fund debenture on Mar 20

which brings the total debenture size to $700M

o $650M left to issue in 2018

Tax & Rate Supported Debt Issuance

Capital Borrowing Requirements

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• Build benchmark-sized offerings

o re-open deals to enhance liquidity

• Terms of 10, 20 & 30 years favoured by the City of Toronto

• Bullet maturity

• Sinking Fund debentures

• Annual contributions to the sinking funds are not used to

"sink" the current outstanding bonds, rather they are held in

an investment fund for repayment of the original amount of

the debt at maturity

• Typically 2-3 issues/year

Green Debenture Program

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• City commencing a Green Debenture Program in 2018 with debt

issuance up to $300 million

• Same financial and legal characteristics of other City debentures

but net proceeds will be used to fund projects supporting City’s

environmental sustainability strategies

• Green debentures will rank equally with all other debentures

issued by the City

Green Debenture Program (continued)

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• The City has an ambitious goal of reducing greenhouse

gas (GHG) emissions by 80% by 2050

• Renewed investment into the City's core urban systems –

buildings, energy supply, transportation, natural

environment and waste management – will be necessary

to realize its low-carbon future

• The program framework has received a positive

independent opinion from Sustainalytics, a leading Green

Bond and Debenture second-party opinion provider

“The City of Toronto Green Debenture is credible and impactful,

and aligns with the four pillars of the Green Bond Principals 2017.”

Opinion of Sustainalytics

Green Debenture Framework

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The Framework defines eligibility criteria in eight areas:

1) Renewable energy

2) Energy efficiency

3) Pollution prevention & control and utilizing waste as a resource

4) Sustainable clean transportation

5) Sustainable water and waste water management

6) Climate change adaption and resilience

7) Eco-efficient and/or circular economy principles integration

8) Green buildings

Green Debenture Framework

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Selection Process of Eligible Projects

• Corporate Finance Division (CFD) responsible for selection of

eligible projects in consultation with internal and external expert

stakeholders

• CFD to verify suitability and eligibility in collaboration with the

Environment & Energy Division

• Eligible projects must be included in the council-approved capital

budgets and verified by external legal

Management of Proceeds

• Majority of capital projects funded by debenture have been

completed or are substantially complete

• Debenture proceeds applied directly to project to repay

temporary funding for the project

• Debenture by-law includes schedule listing capital projects to be

financed by the debenture

• In the rare cases, where substantial completion not met, funds

will be held in a City account

Green Debenture Framework (continued)

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Transparency and Reporting

• Debenture by-law outlining the specific projects and amounts

funded by green debentures to be posted on the City’s website

• Annual newsletter on the City’s website addressing both

funding allocation & sustainability impact reporting

Green Debenture Framework (continued)

Contacts / Website

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Robert Hatton

Acting Executive Director Corporate Finance

(416) 392-9149

Robert.Hatton@toronto.ca

Joe Farag

Acting Chief Financial Officer

(416) 392-8108

Joe.Farag@toronto.ca

City of Toronto

100 Queen Street West, East Tower

Toronto, Ontario, Canada M4H 2N2

Contacts: Finance Website:

https://www.toronto.ca/city-

government/budget-finances/city-

finance/investor-relations/.

Contains updated information

including:

• Financial Reports

• Budget

• Capital Financing

• Investments

• Development Charges

• Long-Term Financial Plan

• Property Tax Policy

• Green Debenture Program