To understand the baseline

• To anticipate future operating, capital and reserve requirements

• To reasonably predict tax rates and debt requirements far enough in advance to make decisions in an appropriate time frame with as broad a consultation process as Council wishes

• To develop targets for services with clear links between costs, services and financial capacity

A four phased approach called "Taking Care of Business" was presented to Council in September 1998. The strategy included the articulation of a healthy financial position for the Halifax Regional Municipality, a plan for implementation and a time frame.

The first phase of the strategy began by reviewing the five year financial trends of HRM and its predecessor units and highlighting two significant trends. First, services were getting squeezed as a result of generally flat revenues and continually increasing non-discretionary expenditures. Second, capital expenditures financed by debt were continuing to increase. Debt additions rose from $35 million per year in the years 1993/94 to 1996/97, to $51 million in 1997/98 and $65 million in 1998/99.

As part of the second phase, HRM’s financial characteristics were benchmarked against eight other Canadian municipalities. Four significant trends emerged. First, HRM had the highest reliance on debt to fund capital expenditures at 82%. Second, of the nine municipalities, only HRM’s debt was increasing in the years 1993 to 1997. All other municipalities were decreasing their debt levels. Third, HRM had low levels of reserves compared to other municipalities. Fourth, HRM had a higher than average reliance on taxation to fund expenditures.

To develop a basis for financial responsibility in future decision-making, Council unanimously adopted nine Principles of Financial Management in December 1998. The Principles provide a framework for business planning, operational effectiveness and discipline and restraint in spending and funding. They are:

1. Adhere to generally accepted accounting principles, the Province of Nova Scotia’s Municipal Accounting Handbook and the Objectives of Financial Statements as recommended by the Public Sector Accounting and Auditing Board.

2. Make decisions based on sound business planning and a full understanding of the financial implications of operating each service.

   Each service shall develop a Business Plan that includes a forecast of operating and capital requirements for the period of at least the next three fiscal years. The plans will be rolled out into a comprehensive municipal plan as part of the Multi-Year Financial Strategy (MYFS). These Business Plans will be updated annually.

   Business cases for changes to services and major capital projects will state the impact on the MYFS Base Model (Tax increase, fee for service, budget reduction, operating impact, etc.).

3. Set budgets which are based upon reasonable, supportable and complete assumptions that Council and management believe reflect the most probable set of economic conditions and planned courses of actions. To be reasonable, these assumptions need to be consistent with the business plans of the service.


4. HRM will take a double entry approach to additional expenditures in any budget year. To add an expenditure, another budgeted expenditure has to be removed. Expenditures arising during the year, but not provided for in the approved budget, must either have a positive or zero net effect on HRM’s annual financial outcome.


5. HRM must continually seek to improve the efficiency and effectiveness of its services.

   Each Service’s Business Plan shall reflect the ongoing obligation of HRM to assess its service delivery mechanisms and look for internal efficiencies and improved ways to deliver particular services.

   Wherever possible HRM should benchmark its service delivery against other appropriate municipalities and industry.

6. Council and Management will develop and adopt a sustainable plan for reducing debt servicing.

   Develop five year upper and lower limits consistent with the goals established for debt servicing and operate within these limits, which will be reviewed annually.

   Review the Debt Servicing Plan every year.



7. Council and Management will develop and adopt a plan for enhancing and sustaining reserves.

   Reserves must be budgeted for in operating budgets.

   A portion of the debt servicing savings will be redirected to reserves.

   HRM will pursue methods to enhance externally funded reserves.

8. Council will adopt a priorized multi-year capital budget, recognizing that individual communities have differing needs.

9. Capital items should have a minimum life expectancy of 10 years to be funded by capital debt.

   Items must be financed over a period no longer than the items expected life

   Regularly scheduled life cycle maintenance must come directly from operating funding and be included in the operating budget in the year the project is completed.

Council unanimously adopted a Reserves Policy which provided for Reserve Business Cases, annual budgeting and reporting, and the centralization of administration. Council have also unanimously adopted two Capital Policies, a Capital Spending Policy which provides for long-term budgeting, Capital Project Business Cases, and restrictions on capital spending financed by debt; and a Capital Debt Policy which provides for a framework to reduce the debt of HRM by restricting Capital funded by debt and introducing a Debt Servicing Plan.

To ensure the integration of the Principles into business decision making in HRM, Council endorsed a new Business Planning Process which provides for gradual improvement of the Business Planning Process throughout HRM. It also provided the resources to support improved planning and process review, including a Service Improvement Reserve to provide loans for HRM business redesign projects that require seed capital.

As well as provide a framework for business decision-making, the Strategy needed to provide a mechanism for predicting future revenue and expenditure patterns. A computer model has been developed. By setting a series of economic and demographic assumptions, detailing 27 cost drivers, 30 service drivers, and 137 services, and incorporating assumptions regarding tax rates, reserves, capital debt and other fiscal factors, the model is able to estimate future revenues and expenditures. Since the adoption of the Multi-Year Strategy in June 1999, the model has been used periodically to assist in predicting future financial choices that Council may have.

The implications of adopting a Multi-year Financial Strategy require a focus on continuing work plans that will integrate financial factors into HRM decision making.