Administration has been working on an approach to create a long term sustainable funding source for the Social Development Reserve (SDR), which in turn, funds the Housing Incentives Policy (HIP) capital grant programs. The balance of the SDR will be well below what is required to fund the HIP’s capital grant programs in 2021.
In the past, the City of Regina (City) used a combination of revenue from Saskatchewan Housing Corporation land sales and transfers from other City reserves to fund the current annual contribution to the HIP of $2.5 million annually. As there has not been one identified source of funding, it has made budgeting each year somewhat of a challenge.
This report provides an overview of the purpose of the SDR and Administration’s proposed funding approach over the short and long term. Funding for the SDR in 2021 will be considered through the 2021 budget process.
Financial Impact
Current SDR Balance
As illustrated in the table below, when taking into consideration the City’s funding commitments and in anticipation of committing another $2.5 million towards 2020 capital grant applications, the remaining balance of the SDR will be $259,227 by the end of 2020.
Social Development Reserve Balance | $5,409,227 |
Existing/Projected Funding Commitments | ($5,150,000) |
Remaining Balance | $259,227 |
Preferred Long Term, Sustainable SDR Funding Source
Administration has identified general tax revenues as the most reliable and sustainable source of funding for the SDR. The preferred budgetary approach is to establish a dedicated mill rate increase of 0.25 per cent for four consecutive years, which would generate approximately $2.65 million in year four.
A similar funding model has been used by the City for the Stadium Project and Residential Roads Renewal Program.
The above was the preferred long-term funding solution Administration was going to bring forward to Mayor’s Housing Commission and City Council prior to COVID-19. To limit additional financial strain for Regina residents impacted by the economic fallout of the COVID-19, Administration is not recommending a mill rate increase to support the SDR in 2021.
To ensure that there is adequate funding to continue to implement the HIP in 2021, Administration will identify interim funding sources through the 2021 budget process, which may include transfers from other reserves or other found savings. Administration will bring the dedicated mill rate discussion to City Council for the 2022 budget process.
Under this scenario from years 2022 to 2024, some funds may be needed to ensure the SDR balance is above $2.5 million. There is a risk that these funds will have to be taken from reserves when the City’s reserves are low. This is mitigated somewhat by the fact that the recommended option would only require reserve funding for three years. As discussed in Appendix A, the dedicated mill rate increase would be offset by the expiration of property tax exemptions approved under the HIP.
A dedicated mill rate would establish a sustainable, long-term funding source for the SDR, providing greater certainty to local stakeholders that the programs funded by the SDR will be stable into the future. Again, this is just one example of a long-term funding source and Administration will come forward with a recommendation at a future date.
Policy/Strategic Impact
Direction for the City’s contributions towards affordable housing is provided in Design Regina: The Official Community Bylaw No. 2013-48 (OCP) and the Comprehensive Housing Strategy (CHS).
Goal 2(a) of the CHS calls on the City to “dedicate a portion of the increase in value/proceeds of any sales from City owned lands (such as the South East lands purchased from Saskatchewan Housing Corporation and CP lands, etc.) to addressing the issue of rental and affordable housing supply”.
- Administration’s response – As discussed in the Options section of this report, with the upfront capital costs required to develop and service the City owned lands in the south east and rail lands combined with a slowdown in new housing construction, the City is not anticipated to be in a surplus position from land sales revenue for several years.
Administration is beginning work on an update to the CHS beginning in 2021. The housing situation in Regina has changed considerably since the CHS was approved by City Council in 2013 and review is required to update the goals and objectives of the Strategy to reflect current housing conditions.
The update will include an evaluation of the City’s current financial contributions towards supporting affordable housing.
In considering potential long term funding source for the SDR, Administration considered the following options:
1. Funding is Requested through the Annual Budget Process
Under this option, Administration would request $2.5 million to be allocated annually in the City’s operational budget beginning in 2022. While this option would fully fund the SDR in coming years, this option is not recommended as using a dedicated mill rate as a funding tool for the City’s investment in affordable housing is similar to other specific, high priority, strategic expenditures like the Stadium Project and Residential Roads Renewal Program.
2. Revenue from Municipal Land Sales
With the upfront capital costs required to develop and service the City owned lands in the south east and rail lands combined with a slowdown in new housing construction, the City is not anticipated to be in a surplus position from land sales revenue for several years; therefore, this option is not recommended as it is not currently viable.
Note that because revenue from land sales can fluctuate year by year, there are additional challenges in using land sales as the SDR’s long term funding source. This issue would be addressed through the identified funding sources.
3. Transfers from other Reserves Above their Maximums
This option was not recommended as transfers from reserves would only provide a one-time funding source; therefore, would not be sustainable over the long term. In addition, most reserves are currently below their maximum limits.
None with respect to this report.
The SDR is under the minimum threshold required to implement the HIP capital grant programs in 2021 and requires a long-term funding source.
Background
Under the HIP, the City’s annual $2.5 million maximum commitment to its affordable housing capital grant programs is funded from the SDR.
Historically, the SDR was established to meet the City’s obligation to the Saskatchewan Housing Corporation (SHC), who provided a funding source for the City from the development of land by SHC. Since SHC is no longer involved in the land development business, a new source of funding for the SDR is required.
Social Development Reserve Funding
Administration had identified general tax revenues as the most reliable and sustainable source of funding for the SDR; however, due to financial pressures resulting from COVID-19, Administration is recommending that the SDR be funded through transfers from other reserves and/or other savings for 2021 instead of a mill rate increase. Administration will bring forward a recommendation on a long term funding source discussed in the Financial Impact section of this report through the 2022 budget process.
None with respect to this report.
Respectfully submitted, Respectfully submitted,
Director, Parks, Recreation & Cultural Services Executive Director, City Planning & Community Development
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