Invoices from Province for Social Housing

The Strategic Policies and Priorities Committee recommends the adoption of the report (September 14, 1998) from the Chief Administrative Officer:

Purpose:

To request authority to pay bills submitted to City by the Province for City share of social housing costs

To outline how the Province determined the amounts of the bills.

Financial Implications:

The City has received invoices from the province for social housing costs totalling $106,117,704.99. This report recommends payment of the total amount on or before September 30, 1998. Interest penalty charges apply beginning October 1, 1998.

Recommendations:

It is recommended that Council

(1)authorize the City Treasurer to pay invoices for social housing totallingling $106,117,704.99 for the period January to June 1998 by September 30, 1998, subject to successful resolution of the issue on interest lost due to the delay in the assessment roll; and

(2)request that staff report back on resources required by the City to undertake analysis of costs of social housing providers, in anticipation of devolution of management to the City.

Council Reference/Background:

The billing process and costs are discussed in this section of the report under the following headings:

Billing Process

Equalized Billing

Budget Status

(1)Billing Process

The Social Housing Funding Act, 1997, provides legislative authority for the province to pass on its share of the cost of social housing to municipalities. Starting January 1, 1998, the City of Toronto became responsible for paying an equalized share of the total social housing costs for the Greater Toronto Area.

City staff have had two meetings with ministry officials about the two social housing bills received to date (see appendix A), and are in receipt of a ministry guide Ontario Social Housing Billing Process, August 1998, and a binder of presentation materials on the subject. The following description of the billing process is based on those meetings and documentation provided.

The social housing bill is based on three different social housing program areas: Non-Profit housing programs (includes private, municipal and co-operative non-profits), Public housing (Metro Toronto Housing Authority), and Rent Supplement Programs (agreements with private landlords to house tenants receiving a rent subsidy). All payments made to housing providers in each of the three program areas (net of the share paid by the Federal government under various cost-sharing agreements) are paid initially by the province, and then recovered from the municipal level.

Typical costs incurred by a non-profit or public housing provider include mortgage/debenture payments, property taxes, utilities, capital repairs/reserve fund and manageable costs (property management costs). For the rent supplement program, the cost amount is the difference between the rent paid by the tenant which is geared to their household income, and the market rent for the unit they occupy; the private landlord's operating and financing costs are not passed on.

Some program costs are not included in the bill. These are the ministry's internal program administration costs (although MTHA administration costs are included), costs incurred before January 1, 1998 and year-end reconciliation amounts for non-profit corporations related to budget years before 1998.

Costs set out on the monthly bills reflect monthly payments made by the ministry to housing providers. Each bill comprises a mix of actual costs, estimated costs and adjustments, depending upon the timing of payments to the housing provider in each program area. Payments for rent supplement are made in advance (paid first of the month to cover the entire month - the way rent is usually paid). Payments to non-profit housing providers are made in arrears (paid at the first of the month to cover costs for the previous month - like the way that mortgage payments are usually made). For public housing, payments are made at different times each month depending upon the type of cost (budget item) and, therefore, payments made before the 11^th day of the month will be reflected in the bill for the previous month.

Where costs have been estimated in one month, the following month's bill is adjusted when the actual payments are known. This method of "rolling reconciliation" ensures that reconciliation occurs monthly, rather than at year-end, thereby minimizing year end adjustments. Also, delays between payment of funds to the housing provider and receiving reimbursement for the expenditure from the City are minimized (minimizing carrying costs and interest loss).

For the non-profit and rent supplement programs, reconciliation adjustments will usually be relatively small, as the payments to housing providers tend to be the same from month to month. For the public housing program, expenditures can vary widely between months, leading to relatively large reconciliation adjustments in some months. For example, capital work carried out by non-profit housing providers is paid for through their individual capital reserve funds. The reserves are funded through subsidy payments at about the same level every month. Public housing capital work is paid for through operating funds. That means that the flow of funding is irregular; and becomes higher during the summer construction season. The largest expense for public housing are payments on debentures, which are made annually in arrears. Therefore, the January 1998 debenture payment has not been passed on to municipalities since it covered financing costs for 1997; 1998 financing costs for public housing, however, will be passed through in January 1999.

As mentioned earlier, the municipality will be billed monthly. The exception to monthly billing is the first bill, dated June 15, 1998, which covered three months This "transitional" bill was based on actual costs incurred in all three program areas because actual costs were known at the time the bill was sent.

(2)Equalized Billing

The GTA is unique from other parts of the province in that social housing costs are shared throughout the five "calculation areas" (also called Consolidated Municipal Service Managers, these are Peel, Halton, Durham, York and Toronto). In other areas, each calculation area pays for its own costs.

In calculating the bill, the Ministry sums all social housing costs in all program areas for the entire GTA for the billing period. For example, total GTA costs for July 1998 were calculated at $35,320,704.00. Next, this total is allocated among the five municipalities based on weighted assessment.

Toronto's weighted assessment, relative to the four regional municipalities, is 52.2424 per cent. For example, Toronto's bill for July 1998 will be:

52.2424 per cent x $35,320,704.22 = $18,452,349.00

(3)Budget Status

The City's share of the total estimated 1998 cost for social housing in the GTA represents just over 52 per cent (total GTA cost estimate by province as of May 1998 is $509,697,881.00; City's share is $266,278,406.00; based on a May 1998 release of data by the Ministry); about 74 per cent of all GTA social housing is located within the City. The cost passed on to the City is net of federal funding provided through cost-sharing arrangements for specific social housing program types.

On June 12, 1998, the Province announced that it would no longer require municipalities to assume the costs for dedicated supportive housing. For Toronto, this means that the previous cost estimate for social housing has been reduced, retroactive to January 1, 1998, by $11,784,329.00 according to a provincial estimate, and after being adjusted by GTA pooling. The actual of savings, before equalization, would have been about $19,695,185.00 (based on analysis of May 1998 data from province), which reflects the higher amount of supportive housing provided in the City as compared to the rest of the GTA.

After a review of social housing portfolios in Toronto, staff identified four supportive housing providers which might also fit the definition of dedicated supportive. The province has since advised that one of the groups identified does fit the definition and, therefore, the social housing costs for the group will not be passed on to the City. Based on data from the Ministry (May 1998), the total 1998 municipal cost for this group was estimated at $465,660.00; therefore, equalized share of additional savings to be realized by the City will be approximately $ 242,143.00 (52 per cent x $465,660.00).

Earlier this year, Council approved $266,600,000.00, within the 1998 Operating Budget, to cover anticipated social housing costs for 1998. Since that time, the province has "uploaded" the cost for some supportive housing projects retroactive to January 1998. The City's 1998 social housing costs may, therefore, be reduced by $11,784,329.00 and $242,143.00 to $254,573,528.00 which would reflect a reduction in total provincial downloading. A report is forthcoming in the next meeting of Council as an update on the provincial downloading impact to the City of Toronto..

Conclusion:

Finance and Community and Neighbourhood Services are satisfied with the method used to calculate the costs, but cannot comment on the accuracy of the costs themselves. City staff do not presently have the expertise or data available to make such an assessment, or to do much analysis. However, the Chief Financial Officer/Treasurer and Commissioner of Community and Neighbourhood Services have met with the Assistant Deputy Minister, Housing Operations Division, Ministry of Municipal Affairs and Housing, and have been provided with details about the bills.

We need to become more familiar with the social housing program in preparation for devolution, and have recommended that we report back on the resources that will be required. For more information about social housing devolution, refer to Response to Discussion Paper on Social Housing Reform, Commissioner of Community and Neighbourhood Services, September 1, 1998.

In the meantime, bills received to date from the province total $106,117,704.99, and this report recommends Council authorize payment of these bills by September 30, 1998, subject to successful resolution of the issue on interest due to the delay in the assessment roll, so that interest/penalty charges are not incurred (interest accrues on the outstanding amount beginning October 1, 1998).

Contact Names:

Joanne CampbellTrevor Houghting

General Manager, Shelter, Housing & SupportManager, Accounting Services

Community & Neighbourhood ServicesFinance

Phone: 392-7885Phone: 396-7240

Fax: 392-0548 Fax: 396-5677

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Appendix A:Summary of Social Housing Bills received to Date

Total of all four bills is due September 1, 1998. Interest charges (penalty) start accruing October 1, 1998. Subsequent bills will be issued the month following the billing period, and interest charges will begin to accrue 30 days later. For example:

Billing period:September

Invoice sent:End of October

Payment due:Before Nov.30

Penalty Charges apply:After Nov.30