As part of the Development Charges Act, 1997 the Treasurer is to report annually on the funds received and dispersed as shown in the attached schedules.

Once received by Council a copy of this report will be forwarded to the Ministry of Municipal Affairs and Housing as required by the Development Charges Act, 1997.

Enclosed are the statistics for the twelve (12) months ended December 31, 2008.

FINANCIAL CONSIDERATIONS:

The December 31, 2008 closing balance of the Development Charge Reserve Accounts, before capital commitments, was $101,667,798 (Schedule A). This balance represents the cash, letter of credit and receivable balances in the reserves, and does not take into account commitments for approved capital projects. Approved capital commitments against the reserves as at December 31, 2008 totalled $94,421,937 (of which $53.7M is earmarked for the East Markham Community Centre [EMCC]). Although $94,421,937 is committed to existing capital projects, the cash flow associated with this commitment spans the next 4 years. It is expected that the actual cash requirements would be 29% in 2009, 23% in 2010, 33% in 2011 and 16% in 2012.

The net reduction in the reserve fund, before capital commitments, from January 1, 2008 ($103,258,278) to December 31, 2008 ($101,667,798) was $1,590,480 as seen in Schedule B.

The net amount transferred to capital projects in 2008 was $16,141,978 which is broken down into two components – transfer to capital and transfer from capital – as seen in Schedule B. These two components of the transfer include $25,834,889 of growth-related projects (Schedule C) funded from development charges as well as net transfers to development charges of $9,692,911 resulting mainly from the closure of capital projects.

A summary of the Development Charges (DC) activity for the year is detailed as follows:

January 1, 2008 opening balance $ 103,258,278

Development Charges received $ 11,593,536

Interest earned (Schedule E) $ 2,957,962

Net amount transferred to capital projects $ (16,141,978)

Balance as at December 31, 2008 $ 101,667,798

Schedule D provides information on the service-in-lieu agreements and indicates that the Town has an obligation in the amount of $4,015,497 to be offset from development charges payable when the respective developers execute their agreements.

COMPONENT CATEGORIES

The balance of the Reserve Fund is made up of the following major categories:

Town Wide Soft $ 74,044,789

Town Wide Hard $ 14,476,544

Area Specific $ 13,146,465

Total $101,667,798

Schedule F (attached) provides the year end balance of each reserve for 2006 through 2008 along with the percentage change over the three year period.

The chart below summarizes the year end DC reserve balances by component category:

* Does not take into account DC revenues in years subsequent to 2008 and future growth-related capital projects.

The reduction of the Area Specific reserves is primarily due to the acquisition of property and the construction of major road projects; both in advance of development. Capital commitments from 2006 to 2008 have increased by 65% primarily due to the addition of funding for the EMCC; this has contributed to the reduction in the uncommitted DC funds to $7.2M in 2008. A significant amount of these capital commitments are expected to span several years (e.g. EMCC where the major costs are expected in 2011) and will therefore not immediately impact the cash available for growth-related capital projects in the short term. A preliminary cash flow projection (based on past trends and current expectations) to establish a timeline in which the committed ($94.4M) DC funding may be required indicates that the funds may be utilized as follows: 29% in 2009, 23% in 2010, 33% in 2011 and 16% in 2012 as indicated in the chart above.

A preliminary DC cash flow forecast was done taking into consideration (1) reduced building activity and (2) increased funding requirements and initial indications are that the reserves will be sufficient to fund capital commitments through to mid-2011. A detailed DC cash flow forecast and financing options will be brought forward in Q4 in 2009.

Development Charges Committed to Approved Projects

Growth-related projects that are approved as part of the annual budgets generally denote development charges as the major funding source, but the actual cash funding is not transferred to the project until required. This process retains cash within the Development Charge Reserve Fund to earn as much interest as possible for the reserve. Due to approval of the budget however, a portion of the funds remaining in the Development Charge Reserve Fund are considered to be committed. As an enhancement to this report, staff will indicate the portion of funds retained in the Development Charge Reserve Fund that are actually committed to projects underway, or about to start, and identify the amount of funds left to fund future (currently unbudgeted) projects as at December 2008.

Major capital infrastructure works being planned in the near future, coupled with a slow down in new development has negatively impacted the development charge reserves. As the following chart shows, the reserve balance for the year ended December 2008 is significantly lower when capital commitments of $94,421,937 are taken into account, leaving the adjusted (uncommitted) reserve balance at $7,245,861. The timing of capital projects along with other variables (i.e. future collections and 2010 capital commitments) will be assessed to determine when the Town may be required to borrow to finance its growth-related projects.

Further details on the specific Town Wide Soft reserves with commitments are shown in Schedule A.

RECOMMENDED

BY: ________________________ ________________________

Barb Cribbett, Treasurer Andy Taylor, Commissioner

Corporate Services

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