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New Brunswick Non-Profit Housing Association 2013 Conference May 10th 2013
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Outline for the day Expiry of Operating Agreement
- Overview of Federal and Provincial Statistics - Operating differences before and after Expiry
- Discuss & determine steps to be taken - Quick Reminder of the EOA Tool - Importance of the Replacement Reserve
- Demonstration of the Replacement Reserve Planning Tool
As cited by Steve Pomeroy, Is Emperor Nero Fiddling as Rome Burns? Assessing Risk when Federal Subsidies End (2011)
On the National Level
On the Provincial Level
2000-2012 2013-2014 2015-2016 2017-2018 2019-2020 2021-2022 2023-2024 2025-2026 2027-2028 2029-2030
1911
3123
60
36
63
74
57
21
Number of Expired Agreements
2000-2012 2013-2014 2015-2016 2017-2018 2019-2020 2021-2022 2023-2024 2025-2026 2027-2028 2029-2030
130 125
451
547
971
726
663
1140
461
158
Number of units involved
* Includes Non-profits, Co-ops and Skigin-Elnoog Projects only
What Does EXPIRY Mean?
– After Expiry, Projects no longer have:
- Federal & Provincial Agreements (Sections 26, 27, 95)- Subsidies- Mortgage Payments
– After Expiry, Projects continue to be governed by:- Rules of Operations- Letter Patents- By Laws, Policies- Other Agreements, Obligations
Provincial Property Tax Exemption
Our proposal..The exemption will remain available after Expiry conditional
upon projects providing the following…
- Confirmation of non-profit status- Annual Financial information - Attestation of rents being charged - SD will advise at Expiry (particulars / deadlines)
Things to Consider
Continue to:
- Operate as a Non Profit – Provincial Property Tax Exemption
- Be Affordable - targeting low to moderate income clients
- Be Viable - ensuring sufficient revenues for maintenance & repairs(Replacement Reserve)
- Be Accountable – tenants, communities, lenders
Challenges after Expiry
- Limited ability to house Low Income Seniors / Families
- Financial Expertise
- Technical Support
- Access to programs such as Projects in Difficulty (forgivable loans,..)
Financial & Technical Preparation
Checklist:
- Physical condition of the building- Financial capacities- Viability- Management capabilities- Review the needs of the project on a regular basis
Suggestions to Remain Viable
• Increase rent• Less Income testing• Rent spaces – Commercial• Rethink Clients’ needs (looking at aging in place)• Amalgamate several small projects (cut operating costs)• Engage municipalities – possibility of lowering taxes or
service costs• Engage Local MPs and MLAs • Evaluate the Replacement Reserve• Engage Staff and Tenants
Quick reminder about the importance of using the Expiry of Operating Agreement (EOA) Tool
- Provides a quick and simple picture of where your project would be after Expiry
- Indicates… • if your project remains viable after Expiry and• if your project has a sufficient amount in the
Replacement Reserve
Replacement Reserve Fund
– Kept in a separate interest bearing bank account
– Used for replacement of Capital Items when needed
– Pre-determined annual allocation
– Requires Departmental pre-approval
Replacement Reserve Fund
Eligible Capital Items (approved at commitment) include ..
– Fridge / Stoves– Roof– Windows / Doors– Flooring– Counters– Siding– ….
Replacement Reserve
Before Expiry After Expiry
Current Process
Capital Item Fails:
Determine Need for Replacement (Inspection)
Obtain 3 Quotes
Submit Request to PM Officer
Receive Written Approval
Purchase Item
Recommended Practice
Adopt Policy to maintain RR that includes:
• List of items• # of quotes to obtain• Board approval / discussion
Develop Replacement Reserve Plan
Introduction of the Replacement Reserve Tool
You will need …
Life Expectancy of Capital Items
Remaining Life Expectancy of Capital Items in your Project
Where to find the Tools…
Replacement Reserve Planning Tool..
http://www.nbnpha-alsblnb.ca/en/index.php/member-resources/replacement-reserve
Expiry of Operating Agreements Assessment Tool…
http://www.nbnpha-alsblnb.ca/en/index.php/news
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