Partnering to modernize Ontario’s public assets 1

Infrastructure LendingAffordable financing in support of infrastructure renewal

Partnering to modernize Ontario’s public assets 2

▶ Agency of the Ontario government responsible for building, managing, financing, and enhancing the value of Ontario public assets

▶ Provides a range of services that support the Ontario government’s initiatives to modernize and maximize the value of public infrastructure and realty

▶ Upholds Ontario’s commitment to renew public services, in partnership with the private sector

Infrastructure Ontario (IO)

Partnering to modernize Ontario’s public assets 3

Providing municipalities access to capital markets

Capital Market Bonds

CAPITAL MARKETS

Short /Long-Term Money

$$$

Eligible Borrowing Pool (Municipalities, non-profit long-term care, universities etc.)

Partnering to modernize Ontario’s public assets 4

Loan Program timeline

March 2003 July 2011

2004 2005 2006 2007 2008 2009 2010 2011

2006

Loan Program

expanded: municipal corporations,

non-profit long-term care homes

and hospices

2004

Loan Program expanded:

municipal social housing

and long-term care homes

2005

Loan Program expanded:

universities

2005

Infrastructure Ontario

(IO) is incorporated

2006

IO and OSIFA

merged2004

OSIFA is

established

2005

Loan Program expanded:

municipal culture, tourism

and recreation

2008

Loan Program expanded:

non-profit arts training

institutes and Local Services Board's

2003

OMEIFA is

established

2008

Loan Program expanded:

non-profit social, affordable and

supportive housing providers

2011

Loan Program expanded:

community health and social services hubs

aboriginal health access centres

non-profit sports and recreation organizations

2011

IO & ORC merged

▶ Since 2003, the government has broadened the Loan Program several times to include other broader public sector groups

– The government sets the policy for all sectors; IO administers the Loan Program on behalf of the government

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▶ The following broader public sector organizations are eligible for Loan Program financing:

– Municipalities

– Municipal corporations (electricity distribution, power generation, transit)

– Universities and affiliated colleges

– Local services boards

– Housing providers (social, affordable, co-operative, supportive)

– Long-term care homes (non-profit)

– Other not-for-profit organizations such as aboriginal healthaccess centres, community health and social service hubs, hospices, professional arts training facilities, and sports and recreation organizations

Eligible applicants

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▶ Most depreciable capital expenditures are eligible for affordable, long-term financing, including:

– New construction, renovations and retrofits

– Water, wastewater and waste management

– Roads, bridges and public transportation

– Housing, hospice and long-term care projects

– Ambulances, fire trucks, transit vehicles, snow ploughs, garbage trucks and other rolling stock

– Accessibility and energy efficiency projects

– Local police, fire, Admin and recreation facilities

– Equipment, systems and asset management tools

– Land and facility acquisition

Eligible projects

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▶ IO has advanced over $8.3 billion in affordable long-term financing to public sector clients throughout Ontario

– Represents 381 clients and 2,351 infrastructure renewal projects with a total project value of more than $14.7 billion

▶ Municipalities, municipal corporations, and housing providers about 90% of the loan volume (by value)

Loan Program portfolio

As of March 31, 2017

Partnering to modernize Ontario’s public assets 8

▶ Offered in both a short-term flexible (construction) rate and long-term fixed rate terms up to 30 years

▶ Extra long terms are typically not available from traditional lenders or capital markets

– Terms are designed to match useful life of the asset

– Rates are the same for all borrowers, within each client sector

▶ No additional fees and no need to renegotiate

▶ Borrowing “pool” aggregates the infrastructure needs of many borrowers, from “unrated” to “AAA”

▶ Ready to build, or already building?

– Our construction financing is the most affordable way to manage your short-term cash needs

▶ Two kinds of long-term rates – Serial and Amortizer

Flexible terms and affordable rates

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Loan process

MarketingEducation, awareness and outreach

Customer RelationsEducation, business case review, facilitator

UnderwritingBusiness case review, loan structuring, Term Sheet

Legal Financing Agreement and security documents

Loan ApprovalFinancial Transactions Committee (FTC)

Loan OperationsAll documentation, flow of short and long-term funds

TreasuryRaises the funds

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▶ There are two fundamental ways that the broader public sector can fund infrastructure:

Infrastructure funding strategies

Loan financingFull cost

“Pay as you go”

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▶ Assuming manageable debt

– Current and future tax-payers share the benefits over the life of the asset

▶ Projects financed over extended periods of time

– Match finance term to asset life (5 to 40 years)

– User fees

– Development charges

▶ Apply for senior government assistancewhen it is available

Funding strategies: loan financing

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▶ The traditional approach to building and renewing infrastructure

▶ Can only undertake projects that are fully-funded using finite sources:

– Reserves

– Development charges

– Tax increases

▶ Apply for senior government assistance when it is available

Funding strategies: pay as you go

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▶ Cost of deferring the project

– Rise in operations and maintenance costs– Lost opportunity costs

▶ May limit the opportunity for growth

– Will population or industrial growth be limited without the new infrastructure?

▶ Project financing

– Time to raise or save the required capital– Ability and cost of servicing loans

▶ Impact of construction cost increases

▶ Uncertain economic conditions

Funding considerations

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▶ Rates are the same for all borrowers, within each sector

▶ All capital expenditures are eligible

▶ Hassle-free access to capital markets

– No need to be rated, no minimum / no maximum

▶ Affordable all-in blended rates

– No additional transaction fees or commissions

▶ Longer terms than generally available elsewhere

– One month construction loans and 5 to 30 year take-out financing

▶ Online application

– Dedicated knowledgeable staff

Loan Program summary

Partnering to modernize Ontario’s public assets 15

Indicative Lending Rates as of November 24th, 2017

Term Construction Serial Amortizer

1 Month 1.90% - -

5 Year - 2.37% 2.37%

10 Year - 2.75% 2.76%

15 Year - 2.99% 3.02%

20 Year - 3.15% 3.19%

25 Year - 3.26% 3.30%

30 Year - 3.32% 3.37%

Long Term Care Indicative Lending Rates

Indicative Lending Rates as of 24/11/2017