Legislative History: Enacted June 13, 2017 (By-law No. CPOL.-45-241); Amended July 24, 2018 (By-law No. CPOL.-45(a)-374); Amended August 10, 2021 (By-law No. CPOL.-45(b)-239); Amended July 25, 2023 (By-law No. CPOL.-45(c)-209)
Last Review Date: July 25, 2023
Service Area Lead: Director, Financial Planning & Business Support
1. Policy Statement
Purpose
The purpose of the Multi-Year Budget policy is to define the approach to be used for multi-year budgeting and associated Council approvals.
Authority
Municipal Act, 2001, Section 291(1) authorizes a municipality to prepare and adopt a budget covering a period of two to five years in the first year to which the budget applies or in the year immediately preceding the first year to which the budget applies. The process for preparing and adopting a multi-year budget and the requirements for a municipality’s budget are prescribed in the Municipal Act, 2001.
If a municipality chooses to adopt a multi-year budget, establishing an annual review process is mandatory as outlined in section 291(4) of the Municipal Act, 2001. The annual review process requires Council to readopt the budget for that year and subsequent years that the budget applies in order to ensure the municipality has sufficient funds to pay all debts, amounts required for sinking funds or retirement funds, and amounts required for boards, commissions or other bodies. Also, pursuant to section 290(6) of the Municipal Act, 2001 the passing of a multi-year budget does not limit the power of a municipality to amend or revoke a budget adopted under section 290 nor does it remove the obligation of a municipality to levy taxes/rates in each year.
2. Definitions
2.1 Capital Budget – A budget that funds new infrastructure projects as well as expands and maintains existing infrastructure. Some of the expenses could include: A new arena, widening roads, and roof replacement on an existing community centre.
2.2 City of London – The Corporation of the City of London
2.3 City Treasurer – The individual appointed by the municipality as treasurer.
2.4 Civic Service Areas – Service Areas that operate within the Corporation.
2.5 Boards and Commissions – Groups outside the Corporation, typically (although not always) funded by the municipal tax base, that provide specific and/or specialized services to the London community.
2.6 Budget – An estimated financial plan of revenue and expenditure for a set period of time.
2.7 Multi-Year Budget – Approval of a four year operating and capital budget.
2.8 Multi-Year Budget Policy – Refers to this policy.
2.9 Municipal Act – Refers to legislation that governs municipalities in Ontario.
2.10 Net Budget – The net budget is the cost to deliver the City of London’s programs and services, after accounting for all non-tax/non-rate revenues and subsidies received. This is the portion of the budget that is paid for through property taxes or utility rates. This may be referred to as Tax Levy Revenue/Rate Revenue where applicable.
2.11 Operating Budget – A budget that funds the day to day operations of the municipality. Some of the expenses could include personnel, utilities, and reserve fund contributions.
3. Applicability
The scope of multi-year budgeting, including both operating and capital, extends to all City of London Service Areas, boards, and commissions and applies to both the property tax supported as well as water and wastewater & treatment rate supported budgets.
4. The Policy
4.1 Approvals / Adjustments to Multi-Year Budget:
4.1.1 A Multi-Year Budget is developed covering a four year time period beginning in the second year of a new Council term. Annual updates for years two and three will be brought forward for Council consideration during the remaining Council term. The first year of a new Council term will reconfirm the fourth year of the Multi-Year Budget.
4.1.2 Early in a new Council term, Council will develop its Strategic Plan. Following that, Council will approve a Multi-Year Budget that includes a four year average annual tax levy adjustment from rates and four year water and wastewater rates that address municipal inflationary pressures and funding for additional investments that are aligned with Council’s Strategic Plan.
4.1.3 After Council approves the Strategic Plan and the Multi-Year Budget, Civic Administration will prepare corporate business plans that clearly outline the current state and future direction of each service. The business plans will identify the strategies and priorities that are driving the strategic direction of the service. All strategies and priorities must be aligned with the Council’s Strategic Plan and the funding approved through the Multi-Year Budget. Throughout the Multi-Year Budget process, business plans will be modified for material changes that result from any material amendments through annual updates.
4.1.4 Civic Administration will present to Council a budget that is in compliance with the Municipal Act, 2001. The budget will contain adjustments to reflect inflationary pressures and additional investments or disinvestments that would further adjust the budget requirement. Each additional investment or disinvestment submitted for Council consideration shall be supported with a comprehensive business case.
4.1.5 In the first year of a budget cycle, the Civic Administration will be seeking approval of a Multi-Year Budget for a four year period. Commencing in the second year and in each subsequent year of the multi-year budget, Council is required by the Municipal Act, 2001 to review and readopt the budget for that year. As part of the review process, Council is required to make changes that are required for the purpose of making the budget compliant with the provisions of the Act which include ensuring that the municipality has sufficient funds to pay all debts, amounts required for sinking funds or retirement funds and amounts required for boards, commissions or other bodies. As such, Council will have the opportunity to make other amendments to the budget annually. In addition to the matters required to be addressed by the Municipal Act, 2001, the scope of annual budget changes may include, but are not limited to, the following:
a) New or Changed Regulation – A new or changed legislation or regulation with a financial impact to the municipality.
b) New Council Direction – A new Council direction that has transpired after the approval of the Multi-Year Budget.
c) Cost or Revenue Driver – A corporate or service area budget adjustment as a result of changes in economic conditions.
Proposed changes to future years’ operating budgets should only be brought forward and approved once per year. Adjustments are limited to once per year, during the annual update period, to ensure that all requests are considered together.
4.1.6 The City Treasurer or designate is authorized to make adjustments considered “housekeeping” in nature including operating and capital budget transfers made by a service that do not change the net budget.
4.1.7 The City Treasurer or designate would be authorized to release budget funds prior to a new Multi-Year Budget or annual budget update approval up to a prorated amount based on the previous fiscal year’s approved budget. Such authorization will continue for a reasonable period of time until budget approval of a new Multi-Year Budget or Annual Budget Update.