Item - 2019.EX11.1

City Council considered Items EX11.1 and EX11.26 together.

The Executive Committee recommends that:  

1.  City Council receive this report for information

The City Manager and the Chief Financial Officer and Treasurer gave a presentation on State of the City and Value-Based Outcomes Review.

The Executive Committee considered Items EX11.1 and EX11.26 together.

This report transmits the findings of the recently completed Value-Based Outcomes Review, conducted on behalf of the City of Toronto. The Value-Based Outcomes Review analysis and findings will inform the City's strategy for modernizing our financial decision-making to achieve Council's priorities and long-term financial sustainability.

Toronto plays a pivotal role in the region, province and country. The City is a magnet for immigration and economic growth. It delivers key services that provide enormous regional and national economic and social benefit. Toronto is the fastest growing city in North America and part of the second fastest growing region -- the City grew by 77,000 residents in the last year, and nearly 400,000 over the past 10 years. The Toronto Census Metropolitan Area's Gross Domestic Product is comparable to each of the provinces of Alberta and Quebec and represents 18.5 percent of national Gross Domestic Product. Within Ontario, Toronto and the surrounding area have been responsible for substantially all job growth dating back to 2003.

Over successive terms, the City's finances have been heavily relied upon to meet this growth and accompanying regional demand for services such as public housing, transit and transportation, and social services. As the Value-Based Outcomes Review highlights, the City does so without contributions towards operating expenses from a regional tax or rate base. This creates a significant pressure on the City to manage. The solutions to the City's unique pressures will require partnerships with other governments, including approaches to fairly fund city services and infrastructure which provide regional benefits.

The Value-Based Outcomes Review analysed actual spending by City divisions and major agencies from 2015 to 2018 with the goal of finding service delivery efficiencies, improving the value of services, and addressing long-standing challenges that have hindered previous transformation efforts. Funding for the Value-Based Outcomes Review was supported by the Province's Audit and Accountability Fund. Consistent with the Fund's requirements, the Value-Based Outcomes Review was used to explore efficiencies while preserving service levels.

In addition to new analysis, the review also validates a number of structural financial risks identified by previous City Managers and Chief Financial Officers. The City has developed a roadmap to address many of these risks through its financial management and operations modernization strategy, while planning for additional, intentional management to achieve progress over the next several years.

Key risks identified in the Value-Based Outcomes Review:

- Assessment of financial information has been made assuming service levels are maintained.

- The current capital plan is based on a set of assumptions which need to be reviewed. These assumptions include the estimates and timing of capital expenditures in addition to the funding requirements.

- The City must address financial challenges surrounding its 10-year capital plan

- Based on the current state of the capital plan the City faces immediate financial challenges.

- The City's capital plan must address its achievability and affordability. This is driven by assumptions about the amount of capital work the City is able to deliver in a given year and the forecasted cash flow required to fund the capital plan.

- The municipal costs associated with the growth of 170,000 residents from 2015 to 2018 have been managed largely through efficiencies.

- The Value-Based Outcomes Review identifies transformation opportunities that will contribute to funding growth in the future.
 

Opportunities identified in the Value-Based Outcomes Review related to moving the City towards financial sustainability include:

- Budgets and systems which create a true multi-year financial view focused on outcomes,

- Amended accountability for the fiscal plan including ownership of corporate savings and the capital plan,

- Clarity in the roles and responsibilities of City Council, the City's leadership, divisions and agencies,

- Changes which allow the City's leadership to adjust headcount to achieve outcomes within budget,

- Allocating savings to be used for transformation projects,

- Reengineering business processes to maximize the value of investments, and

- Mandated corporate programs across all divisions and agencies to better realize efficiencies and savings.

- In addition, there are opportunities to achieve efficiencies and improve value of services. These opportunities have been categorized by the consultant as: collection and enforcement; productivity; workforce optimization; alternative business models; and, infrastructure and asset management.
 

Undertaking the Value-Based Outcomes Review provided the City with additional insights and data. The findings of the review will support the Senior Leadership's commitment to achieve City Council's priorities and directions over the next several years, informed by sound, transparent and accountable financial management.

Actions currently underway to address the City's financial sustainability have been confirmed by the Value-Based Outcomes Review recommendations, such as modernizing the budget process, transforming financial systems, improving capital asset management, improving capital planning, exploring alternative service delivery, and improving procurement.

The Senior Leadership will bring forward opportunities identified in the Value-Based Outcomes Review that require Council authority in the 2020 budget process or later in the Council term as appropriate.