Financial Evaluation Form

1. Financial Evaluation Form Presented by: The Municipal Training and Development Corporation

2. To Begin… • For this presentation, you will need: • A Sample Financial Evaluation Form • Part of the Municipal Budget Submission Form (pages 3, 12, and 15) • Assumption • It is 2010 • Applying for a project that will start and be completed in 2011

3. To Begin… • Before starting a Financial Evaluation, you will need: • 2010 Budget • 2008 and 2009 Audited Financial Statements • Your share of the project cost, depending on population size (i.e. 10%, 20%, 30%) • Letter from your bank • Interest rate • Monthly or yearly loan payments

4. Estimates & Actuals • Cover page of FE - Revenue and Expenditures • This refers to estimates and actuals • If your most recent year’s Financial Statements have been prepared by your auditor, use these • In this example, 2009 • If not yet prepared by auditor, use estimates • As a last resort, use your budget numbers

5. Appendix A • Project Description • Treatment Plant Please note: • In most cases, it is OK to use same FE for more than one project.

6. Appendix A • Current Debt Servicing Ratio (DSR) • Taken from your last budget • Note: this may have changed if you entered into new loans since your budget was adopted and allowances were not made for such in the budget • Assumption • That everything is in order with 2010 budget

7. Appendix A • Calculating DSR: Annual Debt Local Revenues + Municipal Operating Grant

8. Calculating DSR

9. Appendix A - DSR Annual Debt Local Revenues + Municipal Operating Grant $101,692 $416,959 + $43,233 = 22.10%

10. Calculating DSR • There is another way to calculate DSR • STEP 1: Go to Appendix C (i) • Under 2010 Budget • Add all numbers down to and including MOG • STEP 2: Go to Appendix C (ii) • Under 2010 Budget • Find ‘Debt Charges from All Sources Municipal Share’ • STEP 3: Divide the amount from Step 2 by the amount from Step 1

11. Appendix B • Municipal Statistics – you should have this info • Households • Population • Tax rate…etc. • Year:2011/12 • Approved Project • At this point, • You should have submitted your application • You know what your project cost is • You know what Council’s portion is (in most cases, it is 10% of project cost; amount is LESS the GST Rebate)

12. Appendix B • To calculate Council’s Portion of project cost: • Total project cost: $1,116,305 • Multiply by rebate fraction: .9557522 = 1,066,910.96 • @10% = $106,691.10

13. Appendix B • Amortization Period • Length of time (number of years) over which your loan is scheduled to be repaid • In our example: 10 years • Interest Rate • Get this from your financial institution • In our example: 7% • Annual Installment: $14,865

14. Back to Appendix A Proposed New Loans • From Appendix B, we know: • Loan amount: $106,691 • Annual loan payment: $14,865 • In 2011, loan payment is only $4,031. Why? • Project will be completed in 2011, but we will not have a full year of loan payments • From 2012 to 2015, inclusive, annual payments will total $14,865

15. Appendix AOperating Cost from Project • For many projects, this may be $0 • In our example – Sewage Treatment Plan • Annual operating cost: $1,144

16. Appendix AMethod of Financing New Debt • How are we going to pay for the loan? • Where will the revenue come from? • Possible revenue sources: • Tax increases • Debt retirement • New properties, etc.

17. Appendix AMethod of Financing New Debt • In Appendix B, you will see the following note: • The Town has Debt Retirement in 2011 which will recognize a savings in the amount of $4,031 in 2011 and the balance of $5,628 in 2012. • Need clarification? Turn to Appendix D.

18. Appendix AMethod of Financing New Debt • Turn to Appendix D, • Water and sewer loan for $26,500 • This loan will mature on July 15, 2011 • Annual payment: $9,659 • In 2011, making loan payments until July 15, SO • Will save $4,031 in 2011, and • $5,628 (remaining balance) will be saved for 2012 • Flip back to Appendix A – method of financing new debt…

19. Appendix AMethod of Financing New Debt Debt Retirement

20. Method of Financing New Debt Revenue from Debt Retirement is NOT enough. There is still a shortfall of $6,350 NOW WHAT??

21. Appendix BMethod of Financing New Debt • How do we deal with a shortfall of $6,350? • Answer: Increase Taxes • Mill rate increase • Water & sewer tax increase, etc. • Assessed Property Value • Taken from Municipal Statistics • $25,400,600 • Mill Rate Increase: .25 mills • Additional Revenue from Property Tax Increase: $25,400,600 @ .25 mills = $6,350

22. Appendix BMethod of Financing New Debt • Reminder: • New proposed loan for treatment plant will be acquired in 2011 • Proposed property tax increase will not occur until 2012

23. Appendix AMethod of Financing New Debt

24. Appendix AMethod of Financing New Debt • Appendix A is almost complete • We need Projected Debt Servicing Ratio • We’ll come back to this

25. Appendix DLoans • Current loans & annual payments • Obtain info from: • Notes to Financial Statements • Past Records • Bank • Proposed New Loans • Contains same info as in Appendix A • Current Loans + Proposed New Loans = Total Debt Servicing (for each year)

26. Appendix DLoans • Take these amounts and go back to Appendix C(ii) • Fiscal Services • Debt Charges from all sources, Municipal Share

27. Appendix C(ii)Expenditures • Appendix D is complete! • Enter these numbers for the projected period from 2011 to 2014

28. Appendix C(i) and C(ii)Revenues & Expenditures • 2008 Actuals • Taken directly from audited financial statements • 2009 Actuals • Taken directly from audited financial statements • 2010 Budget • Taken from 2010 Budget

29. Appendix C(ii)Expenditures • Expenditures for 2011 to 2014 • Make nominal increases, as necessary • Not restricted to these projected increases • Please note • Fiscal Services – Debt Charges from all sources Provincial Share • This is the same number entered in the Revenues Section in Appendix C(i) – Province’s Debt Charges • If unsure about this amount for future years, check with MA or your financial statements • Ensure that same amount is listed in both C(i) and C(ii) • Applies to Gas Tax as well.

30. Appendix C(ii)Expenditures • Next, determine the total for projected expenditures for each of • 2011 • 2012 • 2013 • 2014

31. Appendix C(i)Revenues • Increases projected for most revenue items, from 2011 to 2014 • May reflect: • New properties • Supplementary assessment • Assessment increases • New hook ups • New rentals, etc.

32. Appendix C(i)Revenues • Please Note: • 2012 (Property Tax) • In addition to projected increases from previous slide, this item has increased by $6,350 • This reflects the increase from Appendix A and B • Next, determine the total for projected revenues for each of • 2011 • 2012 • 2013 • 2014 For each year, Revenues should match Expenditures.

33. Appendix C(i)Revenues • Please Note: • Having a SURPLUS is OK (Revenues exceed Expenditures) • Having a DEFICIT is NOT OK (Expenditures exceed Revenues) • Solution? • Reduce expenditures, or • Increase Revenues Appendices C(i) and C(ii) are now complete!!

34. Appendix ACalculating DSR • Turn back to Appendix A • Look at Projected DSR at bottom of page • Loan payments & projected revenues will not be fully applicable until 2012 • So, use the year 2012 for the DSR calculation

35. Go to Appendix C(i) Go to 2012 Projection Add all Revenues down to and including Muncipal Operating Grant (MOG) Total: $470,498 Go to Appendix D Go to 2012 Find the Total Debt Servicing $106,898 OR, find this same amount in Appendix C(ii), year 2012 Debt Charges from all sources Municipal Share Appendix ACalculating DSR

36. Appendix A • Calculating DSR: Annual Debt Local Revenues + Municipal Operating Grant $106,898 $470,498 = 22.72%

37. Finally… • Financial Evaluation will then be submitted to MA, with necessary bank letter, resolution, and any other required documentation