Financial Report 2019 The Corporation of the City of London This document is available in alternate formats upon request. For more information about obtaining an alternate format, please contact [email protected] london.ca THE CORPORATION OF THE CITY OF LONDON Consolidated Financial Report Year ended December 31, 2019 Page Contents 2019 City of London at a Glance 5 Message from the City Treasurer 7 Financial Reporting 9 External Audit 9 Accounting and Financial Reporting Requirements 9 Consolidated Financial Statements Overview 9 Consolidated Statement of Financial Position 10 Consolidated Statement of Operations and Accumulated Surplus 10 Consolidated Statement of Net Financial Assets 11 Budgetary Process 12 Financial Management 13 Capital Financing Policies 13 Investment Policy 13 Property Taxation Policy 13 Future Tax Policy 14 Credit Rating provided by Moody’s Investors Services 15 Economic Overview 16 Employment Perspective 17 Investment Outlook 19 Local Outlook 20 Rebound for construction in 2020 23 2019 Financial Results 26 Financial Results Summary 26 Net Financial Assets 26 Total Revenues 26 Revenue Budget Variance 26 Total Expenses 27 Expense Budget Variance 27 Financing Sources for Municipal Operations 28 Property Tax Rates and Assessment Growth 28 Capital Additions and Disposals 30 Annual Surplus and Accumulated Surplus 30 Analysis of Debenture Issuance and Net Long-term Debt ($000’s) 31 Future Balances on Existing Debt and Long-term Liabilities 33 Reserves and Reserve Funds 34 Five Year Review and General Statistics 35 Five Year Review ($000’s) 35 General Statistics and Indicators 36 Definitions 37 Endnotes 39 1 2 THE CORPORATION OF THE CITY OF LONDON Consolidated Financial Report Year ended December 31, 2019 Contents (continued) Page Consolidated Financial Statements of The Corporation of The City of London 41 Introduction 43 Independent Auditors’ Report 45 Consolidated Statement of Financial Position 53 Consolidated Statement of Operations 54 Consolidated Statement of Change in Net Financial Assets 55 Consolidated Statement of Cash Flows 56 Notes to the Consolidated Financial Statements 57 Consolidated Schedule of Segment Disclosure – Operating Revenues 119 Consolidated Schedule of Segment Disclosure – Operating Expenses 120 3 4 THE CORPORATION OF THE CITY OF LONDON Consolidated Financial Report Year ended December 31, 2019 2019 City of London at a Glance City of London… At a Glance 3,721 397, 885 423.43 km2 At a Glance Lane KM of Population Land Area Paved Road 59.4% 5.5% Aaa 2019 Labour Participation Rate 2019 Unemployment Rate 2019 Credit Rating v (Canada’s Rate is 65.7%)v (Canada Rate is 5.7%) Provided by Moody’s Investors london.ca 5 6 THE CORPORATION OF THE CITY OF LONDON Consolidated Financial Report Year ended December 31, 2019 Message from the City Treasurer Photo 1: City Treasurer, Anna Lisa Barbon His Worship Mayor Ed Holder, Members of London City Council, Inhabitants and Ratepayers of the City of London. I am pleased to present the Annual Financial Report of The Corporation of the City of London (the City) for the year ended December 31, 2019. The financial statements have been prepared in accordance with Canadian Public Sector accounting standards as defined in the Chartered Professional Accountants (CPA) Public Sector Handbook – Accounting. The provincial financial information return has been calculated using accounting policies and practices prescribed for Ontario Municipalities by the Ministry of Municipal Affairs. The Consolidated Financial Statements and the Financial Statements of Local Boards and Commissions have been audited by the firm of KPMG LLP. This annual financial report serves as an opportunity to communicate to stakeholders, residents and local businesses regarding the Municipality’s 2019 financial performance. This report also highlights the City’s significant financial policies, budget process and provides additional details about the City’s financial results in the past year. The 2019 results continue London’s history of strong financial control framework, financial leadership in business planning and long-term financial management. We are committed to providing high standards of fiscal excellence at the City of London. My appreciation is extended to the staff of Finance, Service Areas, and Boards and Commissions for their assistance and cooperation in the preparation of this report as well as to the partners and staff of KPMG for their advice and professional approach demonstrated during the audit. Sincerely, Anna Lisa Barbon, CPA, CGA Managing Director, Corporate Services and City Treasurer, Chief Financial Officer 7 8 THE CORPORATION OF THE CITY OF LONDON Consolidated Financial Report Year ended December 31, 2019 Financial Reporting management is responsible for the preparation of External Audit the financial statements and the integrity and objectivity of the financial information contained The City is required under the Municipal Act, within them. 2001 to engage independent auditors to express an opinion as to whether the financial statements Accounting and Financial Reporting of the City are free from material misstatements. Requirements The auditors have full access to all the records and materials within the City. Staff periodically The City’s financial statements are prepared on a met with the auditors to discuss any matters that full accrual accounting basis; the same basis of occur during the audit process. At the end of the accounting used by the federal and provincial year end audit, the City will receive a governments. The City continues to account for Management Letter which outlines any audit tangible capital assets, which was adopted in findings. Although the financial statements are 2009, which provides information for audited by an independent third party, the City’s accountability and stewardship and provides critical information on the City’s significant investment in assets. Consolidated Financial Statements Overview The Consolidated Financial Statements include the following individual statements: Name Purpose Consolidated Statement of Financial Position Provides a summary of the City’s assets (financial and non-financial), and financial liabilities as at December 31, 2019. Consolidated Statement of Operations Outlines revenues, expenses, surplus for the year and accumulated surplus at year end. This statement reflects the combined operations of the operating, capital, reserve and reserve funds for the City and its consolidated entities and provides the calculation of the City’s accumulated surplus at year end. Consolidated Statement of Change in Net Outlines the changes in net financial assets as a Financial Assets result of annual operations, tangible capital asset transactions, as well as changes in other non- financial assets. Consolidated Statement of Cash Flows Summarizes the City’s cash position and changes during the year by outlining the City’s sources and uses of cash. 9 THE CORPORATION OF THE CITY OF LONDON Consolidated Financial Report Year ended December 31, 2019 Financial Reporting (continued) received (such as public transit funding) are not Consolidated Financial Statements Overview recognized as revenues until such time as the (continued) projects are constructed. These restricted funds are included in liabilities as "Deferred Revenue" The Consolidated Financial Statements combine and not in the accumulated surplus. A breakdown the financial results of the City’s service areas of the City’s deferred revenue obligatory reserve with the financial results of the boards and funds can be found in Note 7 to the Consolidated commissions, and government business Financial Statements. enterprises that the City effectively controls. There are 20 entities that are directly included in As a result of the significant investment in the financial statements and these are listed in tangible capital assets, there is a large Note 1 to the Consolidated Financial Statements. accumulated surplus. While there is a large The notes to the statements provide further detail accumulated surplus, this occurs at the same about the City’s financial results and are an time that the City has a net financial asset integral part of the statements. position which assists in financing future unfunded liabilities and expenses. Although Consolidated Statement of Financial Position tangible capital asset balances are considerable for municipalities – much larger on a percentage – The Consolidated Statement of Financial Position basis than any other level of government they is the municipal equivalent of the private sector’s do not provide liquidity, and are not typically balance sheet. This statement includes the net available for sale, the proceeds of which could be book value of the City’s tangible capital assets. used for other purposes. It is for this purpose that This statement focuses on the City’s assets tangible capital assets are not included in the (financial and non-financial) and liabilities. The calculation of net financial assets position, difference between the liabilities and financial arguably the most important financial statistic for assets is the City’s net financial assets, which governments. represents the net amount that must be financed from future budgets. Consolidated Statement of Operations and Accumulated Surplus Note 15 to the Consolidated Financial Statements details the breakdown of the accumulated The Consolidated Statement of Operations and surplus, including all of its components: amount Accumulated Surplus are considered to