November 23, 1998

CHIEF OPERATING OFFICER:

The Board of Directors of The City of Toronto Non-Profit Housing Corporation (Cityhome) and theBoard of Directors of The Metropolitan Toronto Housing Company Limited (MTHCL) on November 23, 1998, had before them a report (November 16, 1998) from the Chief Operating Officer, advising that in July, 1998, City Council agreed that a capital revolving fund for affordable housing should be established to provide financial support to projects that demonstrate the City's role in facilitating the creation of affordable housing; stating that this is an initiative of the City and will have no anticipated financial impact on the new amalgamated Housing Company; setting out a draft set of management principles for such fund, which will be presented to City Council in December; and recommending that the Board of Directors approve the following:

(1)recommend to Council the establishment of a Capital Revolving Fund for Affordable Housing using proceeds from the Social Housing Reserve Fund which are not required by the new housing company;

(2)transfer the amount of $5,670,000.00 in the Social Housing Reserve Account to the Capital Revolving Fund when approved by City Council. Any profit earned from the sale of units in the Pooled Investment Fund on the date of transfer will also be transferred to the Capital Revolving Fund;

(3)the amount of $1,100,000.00 be retained in the Social Housing Reserve Fund account currently being managed by Cityhome to be used to subsidize budget shortfalls in future years; and

(4)transfer the interest income earned on the Social Housing Reserve Fund during the year of 1998 to revenue as approved in the 1998 Operating Budget.

The Boards of Directors recommended to the Community and Neighbourhood Services Committee, and Council, adoption of the aforementioned report.

Corporate Secretary

R. MacKenzie/in

Item No. J-5

Sent to:Community and Neighbourhood Services Committee

Chief Operating Officer

F:\MISC\HOUSING\1998\112398.BRD\LETTERS\1123-J05.WPD

(Report dated November 16, 1998, addressed to the Boards of Directors, The City of Toronto Non-Profit Housing Corporation and The Metropolitan Toronto Housing Company Limited, from the Chief Operating Officer, Toronto Housing Company.)

Recommendations:

That the Board of Directors approve the following:

(1)recommend to Council the establishment of a Capital Revolving Fund for Affordable Housing using proceeds from the Social Housing Reserve Fund which are not required by the new housing company;

(2)transfer the amount of $5,670,000.00 in the Social Housing Reserve Account to the Capital Revolving Fund when approved by City Council. Any profit earned from the sale of units in the Pooled Investment Fund on the date of transfer will also be transferred to the Capital Revolving Fund;

(3)the amount of $1,100,000.00 be retained in the Social Housing Reserve Fund account currently being managed by Cityhome to be used to subsidize budget shortfalls in future years; and

(4)transfer the interest income earned on the Social Housing Reserve Fund during the year of 1998 to revenue as approved in the 1998 Operating Budget.

Background:

In July, City Council in its meeting agreed that a capital revolving fund for affordable housing should be established to provide financial support to projects that demonstrate the City's role in facilitating the creation of affordable housing. City Council asked the Chief Financial Officer and Treasurer, the Commissioner of Corporate Services and the Commissioner of Community and Neighbourhood Services to report on options for establishing such a fund and potential funding sources. Draft management principles for Capital Revolving Fund for Affordable Housing (Appendix "A") have been prepared by staff of the Shelter Housing and Support Division, City of Toronto and a report will be presented to Council about the Fund on December 16/17, 1998.

Staff from both Cityhome and the City participated in the development of this report. One of the recommendations of this report requested the City to establish a Capital Revolving Fund for Affordable Housing and re-designate the Social Housing Reserve Fund (SHRF) of the former City of Toronto for this purpose. The SHRF are currently kept in two separate accounts, one under the City and one under Cityhome.

The funds in Cityhome were the result of City Council adopting a report in March of 1993, entitled "Plan to Restructure the Financial Relationship between the City and the City of Toronto Non-Profit Housing Corporation" (Appendix 'B'). The report authorized Cityhome to use these funds to reimburse the City of Toronto for any salary and employee benefit costs shortfall of City of Toronto Housing Department employees performing work on behalf of Cityhome that is not otherwise reimbursed through other payments to the City on an annual basis; and to provide funds for Cityhome's land acquisition wherein full cost recovery including full interest carrying costs will occur and where City Council has approved such acquisitions.

For the past 5 years, Cityhome has withdrawn approximately $1.4m annually from the SHRF to reimburse for salary expenses shortfall not funded through Provincial/Federal subsidy. The Cityhome reorganization plan adopted by the Board in 1997 substantially reduced the salary and benefits expenses of the corporation and our reliance on the SHRF. The 1998 Operating Budget approved by the Board included the use of only the interest portion of the SHRF, budgeted at $422,000.00, a substantial reduction from the $1.4m in the previous year. With the amalgamation of Cityhome and MTHCL, we anticipate that further savings can be achieved in staffing costs. Our projection indicated that the retention of $1.1m in the fund will be sufficient to provide the same budgeted contribution in 1998 of $422,000.00 over the next 3 years assuming investment return rate of7percent. Within these years, the new housing company will eliminate any further dependance on the SHRF.

The remaining balance of $5,670,000.00 in the SHRF is available to be transferred to the Capital Revolving Fund for Affordable Housing. The SHRF are currently invested in the Pooled Investment Fund with a market value about 11percent over the booked value. The exact amount available at the date of transfer will depend on the prevailing market condition. Alternatively, the new housing company could continue to manage the City's fund within the Pooled Investment Fund until withdrawals are required.

Conclusion:

It is recommended that the Board of Directors adopt the recommendations to support the housing initiative of the City since there will be no anticipated financial impact or burden on Cityhome or the new amalgamated company.

(A copy of Appendices A and B, which is referred to in the foregoing report, has been forwarded to all Members of Council with the agenda of the December 3, 1998, meeting of the Community and Neighbourhood Services Committee, and a copy thereof is also on file in the office of the City Clerk.)