2015 TCHC Budget: Investing for Success

Investing in our Residents

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Developing the budget: a thorough, exhaustive process

2015: Investing for success

April 2015 budget process begins

June 27 Discussion of 2015 budget principles with CAAC

September 23 Discussion of 2015 budget principles with CAAC

October 9 Preliminary discussion with full TCHC Board

November 10 Presentation to joint meeting of BIC / CAAC

November 27 Presentation to Joint meeting of BIC / CAAC

December 16 Presentation to full TCHC Board for approval

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In 2015, we will improve our buildings and services

• We will deliver a $175 M capital budget to fix major building systems

such as roofs, heating, elevators, boilers

• We will make significant increases for local repairs and upgrades

– Resident-identified in-suite/common areas/exterior repairs: $19 M (27%

increase from 2014)

– Participatory Budgeting: $8 M (60% increase from 2014)

– Accessibility upgrades (common areas): $3.5M (114% increase from 2014)

– Accessibility upgrades (in suite): $3 M (230% increase from 2014)

– Addressing the backlog of MLS repairs: $6 M (114% increase from 2014)

– New security cameras and upgrades: $3 M (50% increase from 2014)

• We will add approximately 60 front-line staff to improve service delivery

to all tenants and supports for vulnerable residents

2015: Investing for success

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In 2015, our Revitalization activity will be unprecedented

• $251 M of real estate activity (all new buildings)

• $431 M in land contracts in place (vs. about $60 M in 2012)

• A total of 1,771 rental replacement units under design or construction

• A total of 3,800 market condominium units under design or construction

• Projects are underway in seven communities

• Successful market condominium unit sales in place

• Financial risk to TCHC has been managed to near zero

• Regent Park project will be at full stride

2015: Investing for success

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In 2015, strong, disciplined metrics will emerge

• Avoided costs through better procurement

• Reduced capital project management costs

• Better tracking of arrears to support successful tenancies

• Implement a resident feedback loop to track vendor performance

• Establish an enterprise risk management framework

• Metrics will be required for all divisional plans in 2015

2015: Investing for success

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We are a stable company entering 2015

• What we have done in 2014 and continue to do:

– Initiated procurement of executive search firm for permanent CEO

– Conducted employee engagement survey; now actioning results

– Created and implemented structured collaboration among business units

– Strengthened our relationship with City Hall

– Completed 80% of all Ombudsman and Auditor General recommendations

– Established Office of the Commissioner of Housing Equity

– Working smarter through better use of office space and unit consolidations

– Completing a first-ever analysis of TCHC’s economic impact

– Building relationships with all levels of government

2015: Positioned for improvement

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Our 2015 Budget moves our company forward

• Positions us to deliver on two large-scale, accelerated capital programs

• A majority of additional costs are non-discretionary/fixed costs

• Some additional costs are investments to increase services and support

an expanded capital program (representing a 2.6% increase over 2014)

• Addresses a capital budget that has tripled in all areas since 2013

• Early benchmarks show staffing levels are within industry norms

2015: Positioned for growth

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2015: Efficiency benchmark

Sources for Places for People, UK and New York City Housing Authority:

http://www.placesforpeople.co.uk/media/477142/financial_statements_2014_web_2.pdf

http://www.nyc.gov/html/nycha/downloads/pdf/nycha-2012-annual-report.pdf

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36.5

0 5 10 15 20 25 30 35 40

New York City Housing Authority

Places for People, UK

Toronto Community Housing

Number of units per employee

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2015: Raising funds for capital repairs

10-year Capital Financing Plan

• The approved City of Toronto plan secures one-third of the

$2.6 billion we need to fix all our aging buildings

Raised $156 M at no increase in debt service costs and at a

30-year fixed rate guaranteed by the City

Projected to raise $65 Million by end of 2016 through sale of

council approved standalone houses

Through Revitalization/redevelopment, we are avoiding

$215 M in capital repair costs

Through efficiencies, working smarter and better

procurement, in 2014 we have avoided some $20 M in costs

• Despite these efforts, without federal and provincial

investment the money will run out in late 2016

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2015: Support needed from other governments

Our Ask of Ottawa and Queen’s Park: Invest an average of about

$125 M per year between 2016 and 2022 in TCHC capital repairs

Requires investment from federal and provincial governments

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2015 Capital Budget

Impacts

• Without funding from the provincial and

federal governments, the money raised

with the City will start to run out in 2016

and we will have to shut down our

accelerated capital repair program

• With funding from the provincial and

federal governments, we can complete

our 10-year plan and go forward with a

much-lower annual capital need

• This is a one-time investment of $50,000

per unit in repairs compared with new

replacement housing costs of $200,000 to

$300,000 per unit

Before

After

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2015: Financial target check─strategic plan

Target Outcome

Invest $12.5 M from the State of Good

Repair Fund for necessary in-unit and

common area repairs by 2014.

$9 M spent in 2013 and $7 M spent in 2014 up to

end of Q2 2014; both years totalling $16 M.

Provide $5 M per year for Participatory

Budgeting.

$5 M reflected in both the 2013 and 2014 budgets,

and $8 M in 2015.

Increase commercial revenue by 3%

per year.

Target achieved in 2013 and 2014.

5% increase budgeted in 2015.

Grow the State of Good Repair Fund by

at least $200 M by 2016 through

refinancing mortgages and the

approved sale of properties.

With completed mortgage refinancings, sale of

homes, education tax savings and development

charge recoveries to date, target will be achieved

in 2014, two years ahead of schedule.

We are meeting the financial targets in our three-year strategic plan

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Procurement impacts in 2014

• Winner of the 2014 Canadian Public Procurement Council’s

Summit Award for “Leadership in Public Procurement”

• RFx Project Cost Avoidance of $20.1 M (18%) after 3 quarters

• Issued 238 RFxs in 11 months, a 57% increase over FY2013

• Operating Budget cost savings of $4.82 M annually (16%) on 13

projects and $16.8 M over the life of the contracts

• Completed of 62 of 80 AG recommendations in 2013/2014

• Implemented online purchase order approval system

• Launched “unit price” contracts for bulk repairs, demand general

repairs, and emergency repairs

• Launched “Procurement Pipeline” tracking system to support

capital projects planning and procurement

2014 Winner

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Budget 2015: Sources of funds

Residential rent $294.3 32%

Subsidies $229.8 25%Restricted capital fund $109.5

12%

Bank Loan $133.0 14%

Grants for rental development $30.5 3%

Proceeds from mortgage refinancing $29.0 3%

Parking, laundry and cable fees$18.2 2%

Commercial rent $14.1 2%

Investment income $7.1 1%

Other $4.6 1%

Proceeds from land sale$10.2 1%

Profit distribution from condo sales $28.1 2%

Gain on sale of housing projects $18.0 2%

Budget 2015 Sources of Fund $926.4 million($ million)

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Budget 2015: Uses of all funds

Building capital$175.0 19%

Housing development capital $127.2 14%

Energy/RPEI capital$5.0 1%

IT capital $8.1 1%

Corporate capital $4.0 1%

Contribution to restricted capital fund $64.2 6%

Mortgage & loan P&I$124.2 13%

Corporate services $30.5 3%Resident services $11.6 1%

Tenancy management $27.2 2%

Human resources $12.0 1%

Information technology$10.9 1%

Community safety services$15.5 1%

Operating and maintenance$267.0 29%

Rent supplement program $25.1 3%

Municipal taxes $15.7 2%

RPEI operating expenditure$2.9 1%

Guaranteed equity housing project$0.3 1%

Budget 2015 Expenditures $926.4 million($ million)

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2015 Capital deployment growth

We are ramping up our capital spend with the dollars we have

$6 M

$16 M $17 M

$60 M

$88 M

$127 M

$62 M

$128 M

$175 M

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Actual 2013 Budget 2014 Budget 2015

(Amounts in $millions)

Other Development capital Building capital

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$864M

Infrastructure Ontario and City refinancings

• Since 2013, we have raised $265 M in gross proceeds on financing

transactions and $156 M in new funds for capital repairs

• City Council unanimously approved and guaranteed these transactions

• The new debt does not require increased debt service

• With a city guarantee on the 2014 IO deal, TCHC able to lock in at a fixed

interest rate of 3.68% over 30 years (less than 4.31% rate on previous debt)

• Post closings: financial leverage remains at below average levels at 22%

2015 Budget: Building capital funding

$93,000,000 (2013)

$30,000,000 (2014)

$33,000,000 (2014)

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Capital “nest eggs”: 20122015 year-end positions

$75 M

$58 M

$38 M

$33 M

$16 M$12 M

$9 M

$3 M

$19 M

$58 M

$78 M

$69 M

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

2012 2013 2014 2015

(Amounts in $millions)

Infrastructure Ontario reserve City capital fund IO provincially held reserve State of good repair fund

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2015 Capital Budget

Addressing building capital risk

Units in critical disrepair

Today: 500

Estimated in five years: 4,000

Estimated by 2023: 12,000

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2015 Capital Budget

Base building capital, $175.0

IT Capital, $8.1

Base energy capital, $5.0

Corporate capital, $4.0

Development capital, $127.2

Capital Budget 2015Total $319.3 Million

(Amounts in $ MIllions)

Base building capital, $128.0

IT Capital, $6.3

Base energy capital, $5.4

Corporate capital, $4.2

Development capital,

$88.3

Capital Budget 2014Total $232.2 Million

(Amounts in $ MIllions)

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2015 Capital Budget

2015 Capital Budget by type

(Amounts in thousands) 2015 Budget 2014 Budget

New base building capital spend * $ 113,518 $ 128,000

Information technology and corporate capital 12,122 10,525

RPEI and energy management capital 4,962 5,414

New development capital projects 19,258 43,699

Total new capital budgeted for board approval 149,860 187,638

Previously approved building capital spend * 61,482 44,595

Previously approved development capital projects 107,938 -

Total 2015 capital budgeted 319,280 232,233

* Base Building Capital Budget = $175 M

2015 Building Capital Budget

Actual Budget Budget

Building Major Discipline 2013 2014 2015 Total 3 Yr

(in millions) (in millions) (in millions) (in millions)

Parking Garages 0.2 7.6 7.8 15.6

Life Safety 6.1 5.7 13.9 25.7

Structural 5.5 7.9 10.0 23.4

Building Envelope 2.7 10.2 26.1 39.0

Mechanical Systems 10.3 26.2 33.7 70.2

Roofing 4.9 10.8 5.3 21.0

Electrical 3.0 1.1 0.9 5.0

Interiors 23.0 36.3 54.4 113.7

Equipment 0.6 1.9 1.9 4.4

Elevators 1.4 3.9 2.6 7.9

Grounds 2.2 6.9 5.7 14.8

Capital Category Totals 60.0 118.5 162.4 340.8

Project Management Costs 7.8 9.5 12.6 29.9

- as a % of Total Capital Deployed 13.0% 8.0% 7.8%

Overall Totals 67.8 128.0 175.0 370.7

TCHC Investment by Category

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2015 Building Capital Budget

Highlights

• Planned capital

– Building components $90 M (40% increase from $66 M)

– Participatory Budgeting $8 M (60% increase from $5 M)

– Accessibility (common area) $3.5 M (119% increase from $1.6 M)

• Demand capital

– Resident-identified in-suite/common areas/exterior repairs $19 M (27%

increase from $15 M)

– Addressing the backlog of MLS repairs $6 M (114% increase from $2.8 M)

– In-suite accessibility upgrades $3 M (230% increase from $0.8 M)

• Project management

– $11.6 M (increase front line staff to deliver ramped-up capital program)

– $1.0 M (completion of Building Condition Audits)

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2015 Capital Budget

• Leveraging the value of our land to

fund replacement housing and

contribute to repairs

• Combined land sale value of over

$431.8 M to date

• We are partnering with private

developers to create this

incremental value in our assets

• This work applies to 10-12% of the

units in our portfolio

• Reduced our 10-year capital repair

need by $215 M (to $2.6 B)

Revitalization

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2015 Development Capital Budget

Highlights

• $116 M for new RGI buildings and $11 M for market buildings

• $251 M of real estate development in 2014

– $116 M in brand new TCHC rental replacement buildings for tenants

– $135 M in new market buildings at virtually no cost to TCHC

• Improves the mixed income demographics in TCHC communities

• Self-funded through condo sales (makes profit), land sales, construction

financing, and minimal equity

• New replacement RGI housing (1,199 units) being built in Regent

Park (291 units in Phase 2; 614 units in Phase 3), Lawrence Heights

(254 units in Phase 1) and Alexandra Park (40 townhome units)

• New market condominium buildings being built in Regent Park,

Railway Lands, Allenbury Gardens, Alexandra Park, 250 Davenport

and Lawrence Heights (no TCHC funds)

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2015 Operating Budget

2015 revenues: $658.8 M

2015 expenses: $640.3 M

2015 surplus: $ 18.5 M

Three-Year Comparison

2015 2014 2013

Revenues $658.8 M $661.9 M $625.1 M

Expenses $640.3 M $583.7 M $570.5 M

Surplus $18.5 M $78.2 M $54.6 M

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2015 Operating Budget(Amounts in $000's) Change due to:

Non- Growth

Change discretionary due to Increase in

Budget Budget from Operating Capital Service Actual

2015 2014 Budget Pressure Deployment Level 2013

Revenue

Subsidies 229,779 224,771 5,008 5,008 - - 231,035

Rent

Residential 294,288 291,536 2,752 2,752 - - 287,141

Commercial 14,186 14,083 103 103 - - 14,340

Amortization of deferred capital contributions 46,282 45,263 1,019 1,019 - - 45,908

Parking, laundry and cable fees 18,184 16,952 1,232 1,232 - - 16,792

Investment income 7,317 6,955 362 362 - - 10,051

External sales - - - - - - 1,398

Joint venture income 16,973 20,197 (3,224) (3,224) - - 622

Gain on easement - - - - - - 700

Gain on sale of housing projects 18,000 30,000 (12,000) (12,000) - - 12,324

Gain on sale of land 9,216 8,300 916 916 - - -

Gain on sale of capital assets - - - - - - 51

Other 4,590 3,886 704 704 - - 4,784

658,815 661,943 (3,128) (3,128) - - 625,146

Expenses

Operating and maintenance 280,697 252,629 28,068 24,313 - 3,755 248,691

Depreciation 134,476 126,630 7,846 7,846 - - 128,930

Interest 71,348 70,211 1,137 1,137 - - 66,792

Rent supplement program 25,129 24,600 529 529 - - 25,271

Tenancy management 27,236 23,137 4,099 1,413 - 2,686 22,978

Corporate services 32,076 27,528 4,548 2,364 1,092 1,092 25,310

Municipal taxes 15,675 13,664 2,011 2,011 - - 15,071

Community safety services 15,522 13,963 1,559 244 - 1,315 13,765

Residential services 11,639 10,669 970 351 - 619 8,917

Human resources 12,026 9,323 2,703 87 1,308 1,308 6,974

Information technology 10,930 8,768 2,162 334 914 914 5,925

Plant 2,932 2,215 717 717 - - 1,494

Loss from guaranteed equity housing project 571 417 154 154 - - 402

640,257 583,754 56,503 41,500 3,314 11,689 570,520

Excess of revenue over expenses 18,558 78,189 (59,631) (44,628) (3,314) (11,689) 54,626

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2015 Operating Budget

A budget increase of $56.5 M in expenses from 2014

• This is a 9.7% increase over 2014 expenses

• $41.5 M in non-discretionary costs (7.1% over 2014 total expenses)

• $15.0 M in discretionary increases (2.6% over 2014 total expenses)

• $ 3.3 M to add resources to support capital program growth

• $11.7 M to increase services to residents and make business

improvements

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2015 Operating Budget

Non-discretionary/fixed costs

Amounts in millions

Fixed

pressure

(labour)

Fixed

pressure (non-

labour)

Total fixed

operating

pressure

Operating & maintenance (labour: wage contracts; non-

labour: demand maintenance and waste pickup) 2.4 8.7 11.1

Utilities 13.1 13.1

Depreciation 7.9 7.9

Corporate services (labour: std wage increase; non-

labour: compliance and pension) 1.1 1.3 2.4

Tenancy management 1.4 - 1.4

Human resources 0.1 - 0.1

Information technology 0.3 - 0.3

Municipal taxes 2.0 2.0

Community safety services 0.2 - 0.2

Other expenses 1.4 1.4

Interest expense 1.2 1.1

Total $5.90 $35.6 $41.5

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2015 Operating Budget

Support growth of capital program

Add capacity in human resources for increased recruitment and staff

training/tools, and improve compensation framework $1.3 M

Add capacity in corporate services to address enterprise risk management,

increased volume of procurement, contingencies, and improve internal controls $1.1 M

Investments in IT infrastructure and systems to support the deployment of an

expanded capital program $0.9 M

$3.3 M

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2015 Operating Budget

Increased service and business improvementsAdd 25 cleaners and 5 maintenance staff to improve cleaning and on-demand maintenance services in

the buildings ($2.1 M); enhance fleet management and pest management services, and enhance

insurance coverage to reduce risk ($1.7 M)

$3.8 M

Add 20 staff in Operating Unit offices to improve tenancy management administration ($1.6 M); add

staff in the Client Care Centre to improve call volumes and dispatch ($0.6 M); add 6 superintendents to

staff new buildings and improve services in scattered houses and Lawrence Heights ($0.5 M) $2.7 M

Add staff in Human Resources to strengthen recruitment, compliance, employee training, and payroll

and benefits administration ($0.7 M); improve compensation framework ($0.6 M) $1.3 M

Add 7 staff to CSU to support parking enforcement and dispatch ($0.5 M); increase private security

services ($0.8 M) to improve safety and security in our communities $1.3 M

Add capacity to monitor financial effectiveness and efficiency of operational processes; maintain and

improve support processes; and deliver key departmental objectives to meet strategic goals $1.1 M

Investments to ensure IT infrastructure remains effective so that staff can provide continuous and

reliable services to residents $0.9 M

Add 6 staff to better connect vulnerable residents to appropriate health and community supports; build

capacity to facilitate resident engagement; maintain community programs for youth $0.6 M

$11.7 M

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Metrics for success

Additional 25 cleaners and 5 building staff

• Will improve building cleanliness and delivery of maintenance services

– Cleaning requests reduced by 1,500 service requests (20% of 2014 levels)

Additional 20 staff in OU offices

• Will handle low-skilled administrative tasks, freeing Tenant Services

Coordinators to spend more time on tenancy management

– Target arrears reduction of $1 M for vulnerable tenants moving forward

Additional 6 staff in Client Care Centre

• Will improve responsiveness of Client Care Centre and dispatch

– 10% increase in number of resident calls answered within target response time

2015 TCHC Budget: Investing for Success

Investing in our Residents