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Infrastructure Ontario’s Loan Program
Affordable financing in support of infrastructure renewal
www.infrastructureontario.ca
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Infrastructure
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Ontario
title style
• Crown agency of the Ontario government, created in 2005
• Focused on modernizing and financing the renewal of public
infrastructure, maximizing the value of public real estate and managing
government facilities
• Four lines of business:
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Buildings: landlord to the Ontario Public Service
Lands: managing the Province’s property portfolio
Corporate Development: optimizing Provincial assets
Major Projects: delivering Ontario’s larger and more complex public sector
infrastructure
– Loans: lending to broader public sector entities in Ontario through the
Province’s access to the capital markets
www.infrastructureontario.ca
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The Loan Program
Affordable long-term financing to help
renew public infrastructure and deliver
value to customers and residents
across Ontario
www.infrastructureontario.ca
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Ontario
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– Infrastructure
Master title Snapshot
style
•
The Association of Municipalities of Ontario (AMO) estimates an infrastructure gap
of at least $60 Billion that will take 10 years to close, leaving municipal
governments with a bill of $6 Billion each year
•
Almost half of this gap exists within road and bridge infrastructure, with the
remaining amounts occurring in other core infrastructure categories such as
drinking water, wastewater, storm water, public transit and solid waste
70% of Toronto’s road network is over 30 years old
20% of Ottawa's roads are between 20 to 40 years old,
and 15% are more than 40 years old
50% of Toronto’s sanitary sewer system is over 50 years
old
27% of Ottawa’s piped infrastructure is over 40 years of
age; 50% is between 20 and 40 years old
50% of Toronto’s watermains are over 55 years old
30% of City facilities are over 40 years old, and 40% are
between 20 and 40 years old
Accumulated state of good repair backlog in 2012 is $1.7
Billion.
Ottawa’s municipal infrastructure assets are valued at
$32 Billion
Source: Association of Municipalities of Ontario, The State of Municipal Infrastructure - Regional Snapshots (Federation of Canadian Municipalities - September 2012)
www.infrastructureontario.ca
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Infrastructure
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Funding
titleStrategies
style
Loan
Financing
Full Cost
“Pay as you go”
There are two fundamental ways that the broader
public sector can fund infrastructure
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Funding
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Strategies:
Master Pay
titleas
style
You Go
• The traditional approach to building and
renewing infrastructure
• Can only undertake projects that are
fully-funded using finite sources:
– Reserves
– Development charges
– Tax increases
• Apply for senior government assistance
when it is available
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Funding
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Strategies:
Master Loan
title style
Financing
• Assuming manageable debt
– Current and future tax-payers share the benefits over the life of the asset
• Projects financed over extended periods of time
– Match finance term to asset life (5 to 40 years)
– User fees
– Development charges
• Apply for senior government assistance
when it is available
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Funding
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Considerations
Master title style
• Cost of deferring the project
– Rise in operations and maintenance costs
– Lost opportunity costs
• May limit the opportunity for growth
– Will population or industrial growth be limited
without the new infrastructure?
• Project financing
– Time to raise or save the required capital
– Ability and cost of servicing loans
• Impact of construction cost increases
• Uncertain economic conditions
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Funding
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Example
Master title style
Project cost = $1.0M
Annual construction cost increase = 7.5%
FULL COST DEVELOPMENT
LOAN FINANCED DEVELOPMENT
Assume 4 yrs. to save at $250,000/yr.
plus 3.5% interest
Construct Project in 2012 = $1.0M
Finance $1.0M such that principle + interest =
or < $1.30M
2014 Project Cost = $1.33M
Accumulated Interest = $26,500
Net 2016 Project Costs = $1.30M
Additional Considerations:
- Existing asset = increased O&M cost
- Greenfield = price of lost opportunity
www.infrastructureontario.ca
10 yr. Term Amortized @ 2.74%
Total Cost = $1.15M
Additional Benefits:
- Use of the asset today
- Reduced O&M cost
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Providing
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Access
Master
to Capital
title style
Markets
CAPITAL MARKETS
Short /Long-Term Money
Infrastructure Renewal Bonds
INFRASTRUCTURE ONTARIO
Rating
Agencies
$$$
Eligible Borrowing Pool
(Municipalities, non-profit long-term care, universities etc.)
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How to
is IO
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Different
Master From
title style
a Bank?
Infrastructure Ontario
Bank Financing
Rating Fee
None
None
Advisory and Other Professional
None
50-75 basis points
Legal Costs
None
Varies with transaction
size and complexity
Moderate
Moderate
Markets + Cost of
providing the service
Directly related to credit
worthiness of borrower
Up to 40 years
5 to 10 years
Refinancing Risk
No
Yes
Interest Rate Risk
No
Yes
Needed Knowledge/Experience
Low - Moderate
Moderate - High
Amount
$0 – 150 Million
Typically to $10 or $20 Million
Access to Funds
Continuous
Continuous
Debt Structure
Flexible
Flexible
Ease of Application Process
Interest Rate
Term
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Who to
is Eligible?
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•
•
•
•
Aboriginal health access centres
Community health and social service hubs
Hospices
Housing providers
– Social, affordable, co-operative, supportive
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•
•
Local services boards
Long-term care homes (non-profit)
Municipal corporations
– Electricity distribution, power generation, transit
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•
•
•
Municipalities
Professional arts training facilities (non-profit)
Sports and recreation organizations (non-profit)
Universities and affiliated colleges
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Eligible
to Municipal
edit MasterProjects
title style
• Most depreciable capital expenditures are eligible for
affordable, long-term financing, including:
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–
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New construction, renovations and retrofits
Water, wastewater and waste management
Roads, bridges and public transportation
Municipal housing projects
Ambulances, fire trucks, transit vehicles, snow ploughs,
garbage trucks and other rolling stock
Accessibility and energy efficiency projects
Local police, fire, admin and recreation facilities (arenas)
Equipment, systems and asset management tools
Land and facility acquisition
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Oxford
to County
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– South
titleWest
styleOxford
• South-West Oxford partnered with IO to help finance its LED street lighting
retrofit project. The project involves the conversion of 432 existing High
Pressure Sodium street light fixtures to new, energy efficient LED fixtures.
ENERGY SAVINGS
HPS Lights
74,500 KW
LED Lights
47%
39,650 KW
Loan Amount
$348,000
@ 2.67% over 10 yrs
ENERGY SAVINGS
$34,153.00
@ $ 0.98/KW
(Estimated Annual)
LOAN PAYMENT
$40,112.13
(Estimated Annual)
Reduced energy and maintenance costs will help finance the cost of the project
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Success
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of the
Master
Loan title
Program
style
• Since 2003 the Loan Program has
received over $7.5 billion in loans
from public sector clients all over
Ontario
– Supporting over 1,900 infrastructure
renewal projects
– Over $5.4 billion in affordable
financing has been advanced
Loan Clients - As of Aug 2012
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Loan to
Program
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Portfolio
title style
• Total Loans Approved – $6.3 Billion
Universities, $273.6
Municipal Corps,
$733.8
Local Services
Boards, $2.7
Non-Profit Arts
Training, $147.9
Municipalities,
$4,458.4
Non-Profit Housing,
$506.0
Non-Profit LTC,
$226.8
Non-Profit Sports &
Rec, $3.8
Aboriginal Health
Access Centres, $7.1
Approved and Executed - As of April 2013
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Municipal
to editLoans
Master
Breakdown
title style
• Total Approved & Executed Municipal Loans – $4,458.4 M
$1,200.0
Sewage
$1,024.6
$1,000.0
Water
$986.8
Millions
$800.0
Other
$689.3
Roads
$635.9
$600.0
$400.0
Rec
$355.1
Long-term
Care
$257.7
Waste
$202.7
$200.0
Transit
$117.0
Bridges
$84.8
Culture
$60.0
Social
Housing
$13.7
Tourism
$6.4
$0.0
Municipal Category
As of April 2013
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Flexible
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Terms
Master title style
• Offered in both a short-term
construction rate and long-term
debentures (up to 40-years)
• Extra long terms are typically not
available from traditional lenders or
capital markets
• Terms are designed to match useful
life of the asset
• Rates are the same for all
borrowers, within each sector
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Serialto&edit
Amortizer
MasterLoans
title style
• Serial Loans: Constructed to pay
Savings
equal principal amounts every 6
months with interest computed on
the declining balance
• Amortizer Loans: Constructed to
pay equal total payments every 6
months, interest component
decreases while principal component
increases over the term
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Affordable
to editRates
Master title style
• Affordable long-term rates
• No additional fees and no need to renegotiate
• Borrowing “pool” aggregates the infrastructure
needs of many borrowers, from “unrated” to “AAA”
• Ready to build, or already building?
– Our construction financing is the most affordable way
to manage your short-term cash needs
• Two kinds of long-term rates – Serial and Amortizer
Visit our website today for
current lending rates!
www.infrastructureontario.ca
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Today’s
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RatesMaster title style
www.infrastructureontario.ca
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Client
Resources
Available
Online
www.infrastructureontario.ca
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Municipal
to editLoan
Master
Model
title style
• Clients can download the
municipal loan model from the
IO website located in the
Resources section at the
bottom of the Municipal
webpage
www.infrastructureontario.ca
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Loan to
Payment
edit Master
Calculator
title style
• Available on our website, this
tool allows users to enter loan
amount, interest rate and
length of loan to help
determine monthly payment
amount, payment schedule and
amount of interest paid.
• The payment schedule is
created in a PDF format which
easy to save and print for use at
council meetings.
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Loan to
Program
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Benefits
title style
• Provide both short-term construction loans and long-term take-out
financing
• Rates are all-in blended rates so there are no additional transaction fees
or commissions
• Cost of capital is very low
• Rates are the same for all borrowers, within each sector
• Rates apply for the full length of the term
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Loan to
Program
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Summary
title style
• All capital expenditures eligible
• Hassle-free access to capital markets
– No need to be rated, no minimum / no maximum
• Affordable market rates
– No extra fees or commissions
• Longer terms than generally available elsewhere
– One month construction loans and 5- to 40-year debentures
• Online application
– Dedicated knowledgeable staff
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Whattoour
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clients
Master
aretitle
saying…
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•
•
•
•
95% of clients say they will work with IO again
95% agree that IO’s rates are preferable in comparison to other sources
85% of clients rate the loan process highly
97% of loan clients would recommend working with IO
“My experience with Infrastructure Ontario and the Loan Program
have been exceptional and Timmins will definitely apply to the
program for future capital funding.”
Joe Torlone, CAO, City of Timmins
Survey results from 2010-11 Infrastructure Ontario’s Client Survey, Dec. 2010
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Loan to
Clients
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in the North
title style
East
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