Province of Ontario Presentation · 2020-06-15 · Ontario’s Fiscal Plan 2 • The Province is projecting a deficit of $9.2 billion in 2019–20 which represents an improvement

Province of Ontario Presentation

July 27, 2020

Ontario Financing Authority

http://www.ofina.on.ca


www.ofina.on.ca

March 2020 Economic and Fiscal Update

• The COVID-19 pandemic is currently having an adverse impact on the global financial markets

and economy, including the Province’s economy:

• In response, the Provincial government implemented an action plan and revised forecasts.

The Province released its March 2020 Economic and Fiscal Update on March 25, 2020,

which due to the prevailing economic uncertainty presents a one-year outlook based on the

best information available. The government will release a multi-year provincial Budget by

November 15, 2020.

• In addition to negatively impacting the near-term global and Ontario economic growth

outlooks, the COVID-19 pandemic has made it difficult to quantify the uncertainties

stemming from the pandemic.

• This significant uncertainty makes forecasting more difficult and the economic planning

assumptions underlying such forecasts may be quickly out of date due to rapidly changing

circumstances.

• The spread of COVID-19 and the measures taken to contain its spread may continue to

have adverse impacts on the Province’s revenues and economy.

• The March 2020 Economic and Fiscal Update includes Ontario’s Action Plan: Responding to

COVID-19 that will increase resources for the health care system, support people and jobs,

and improve cash flows for people and businesses.

1

Ontario’s Fiscal Plan

2

• The Province is projecting a deficit of $9.2 billion in 2019–20 which represents an improvement of

$1.1 billion relative to the 2019 Budget.

• As a result of the response to the COVID-19 outbreak, the government is planning for a deficit of

$20.5 billion in 2020–21.

• The fiscal plan also includes higher than usual reserve and contingency funds as a measure of

prudence to protect against additional unforeseen adverse changes to revenue and expense.

Fiscal Summary

($ Billions)

Actual Interim1 Plan

2018–19 2019–20 2020–21

Revenue 153.7 156.7 156.3

Expense

Programs 148.8 153.1 161.1

Interest on Debt 12.4 12.6 13.2

Total Expense 161.1 165.7 174.3

Surplus/(Deficit) Before Reserve (7.4) (9.0) (18.0)

Reserve – 0.2 2.5

Surplus/(Deficit) (7.4) (9.2) (20.5)

Net Debt as a Per Cent of GDP 39.5 39.9 41.7

Accumulated Deficit as a Per Cent of GDP 25.3 25.3 26.8

1 Interim represents the March 2020 Economic and Fiscal Update projection for the 2019–20 fiscal year.

Note: Numbers may not add due to rounding.

Source: Ontario Ministry of Finance and Treasury Board Secretariat.

3

Ontario’s Action Plan: Responding to COVID-19

$17 Billion in New Support in 2020–21

4

Support for Health Care

Hospitals

• $935 million for the hospital sector,

including:

– $594 million to accelerate progress

on addressing capacity issues

– $341 million to provide additional

acute care and critical care beds,

and more assessment centres

• $124 million to support the delivery of

more than 90 transitional care

projects to free up hospital capacity

Long-Term Care

• $243 million to provide

emergency capacity in the

long-term care sector and virus

containment measures

• Approx. $80 million to

improve and maintain the

quality of care in long-term

care homes

• Approx. $23 million to

support the ongoing repair

and modernization of facilities

• Ontario’s Action Plan includes $3.3 billion in additional

resources for health care, including $2.1 billion in new

outbreak response measures.

5

Support for Health Care

• Ontario’s Action Plan includes $3.3 billion in additional

resources for health care, including $2.1 billion in new

outbreak response measures.

Additional Investments

• $1.0 billion for a dedicated COVID-19

response health sector contingency fund for

emerging needs

• $75 million to supply personal protective

equipment and supplies to front-line staff

• $120 million to increase home and

community care capacity

• $62 million to provide more physicians,

nurses, and personal support workers

• A new website, Ontario Together, to help

redirect resources towards the production of

essential equipment, such as ventilators

Public Health

• $160 million in increased

funding for public health

to support COVID-19

monitoring, surveillance

and laboratory and home

testing, including

investments in virtual care

and Telehealth Ontario

• $61 million for publicly

funded vaccines to

support the province’s

immunization program

6

Support for People and Jobs

Seniors

• Proposing to double the

Guaranteed Annual Income

System (GAINS) payment for low-

income seniors for six months

• Coordinating subsidized deliveries

of meals, medicines and other

essentials

• The government is investing $3.7 billion in direct

support for people and to protect jobs.

Parents

• Providing emergency child care

options for front-line workers

• Providing one-time payments for

additional costs while schools are

closed

Students

• Suspending Ontario Student

Assistant Program (OSAP) loan

repayments for six months

Workers

• Providing job-protected leave to

employees in isolation, quarantine or

caring for children

• Committing $100 million for skills

training programs for workers

affected by COVID-19

• Working with the federal government to

find ways to support apprentices

7


Indigenous Peoples and Communities

• Providing $26 million in additional

supports to Indigenous peoples and

communities, including

– Emergency assistance for urban

Indigenous people, and

– Supporting costs of transporting

health care workers and supplies

Vulnerable People

• Investing $52 million to expand

access to the emergency assistance

for people facing economic hardship

• Providing $148 million to

municipalities and district social service

providers to support charitable and

not-for-profit service providers

• Supplying personal protective

equipment and supplies to first

responders and front-line staff in the

justice sector



8


Employer Health Tax

• Proposing a temporary increase to the

Employer Health Tax (EHT) exemption

– Would cut taxes by $355 million for

approx. 57,000 employers in 2020

– About 30,000 more employers would not

pay any EHT for 2020

Regional Opportunities Investment Tax Credit

• Proposing a new Regional Opportunities

Investment Tax Credit, a new 10 per cent

refundable Corporate Income Tax credit to

support business investment in regions where

employment growth has lagged

Electricity Relief

• Setting time-of-use prices

at the lowest rate for 45

days

• Expanding eligibility for the

Low income Energy

Assistance Program

(LEAP), ensuring no

disconnections for

nonpayment

• Providing $5.6 billion for

electricity cost relief

programs in 2020–21, an

increase of $1.5 billion



9

Support People and Businesses to Improve Cash Flows

• Providing interest and penalty

relief of five months for

businesses to file and make

payments for most provincially

administered taxes

– This measure provides

$6 billion in relief to

support the cash flow

needs of Ontario

businesses, and

complements federal

Corporate Income Tax

measures

• Deferring property tax payments

municipalities make to school boards by

90 days.

– This deferral will provide

municipalities with the flexibility to, in

turn, provide over $1.8 billion in

property tax deferrals to residents

and businesses.

• Allowing deferral of Workplace Safety

and Insurance Board (WSIB) premium

payments for up to six months, providing

$1.9 billion in financial relief to

employers

• Ontario is making $10 billion available through tax

and other deferrals to improve cash flows for people

and businesses over the coming months.

10

Ontario’s Economic Planning Projection

Sources: Statistics Canada and Ontario Ministry of Finance.

p = Ontario Ministry of Finance planning projection.

Summary of Ontario’s Economic Outlook

(Per Cent)2018 2019 2020p 2021p

Real GDP Growth 2.2 1.6 0.0 2.0

Nominal GDP Growth 3.7 3.9 2.0 4.0

Employment Growth 1.6 2.9 0.5 1.0

Unemployment Rate 5.6 5.6 6.6 6.6

• For planning purposes, in the March 2020 Economic and Fiscal Update,

the Ministry of Finance assumed Ontario’s real GDP would be

unchanged on an annual basis in 2020 and advance by 2.0 per cent in

2021.

Primary2% Utilities

2% Construction7%

Manufacturing12%

Wholesale & Retail Trade

11%

Transportation & Warehousing

4%

Information & Cultural

3%

Finance & Insurance

9%

Real Estate & Renting & Leasing1

13%

Professional & Scientific

7%

Health & Education

13%

Public Administration

7%

Other Services2

10%

• Ontario has a diverse economy, with extensive financial and business services, manufacturing and a smaller

primary sector compared to the rest of Canada

Structure of the Ontario Economy, 2018 (Per Cent Share of Nominal GDP)

Ontario’s Diverse Economy

11

1 Includes estimate of imputed rental income from owner occupied dwellings.2 Other services include: management of companies and enterprises; administrative and support, waste management and remediation

services; arts, entertainment and recreation; accommodation and food services; and other services.

Source: Statistics Canada.


Services (77% of GDP)

Goods (23% of GDP)

12

2.6

(3.5)(4.0)

(3.0)

(2.0)

(1.0)

0.0

1.0

2.0

3.0

2019–20 2020–21

Estimated Revenue Impact of the COVID-19 Outbreak

Change in Revenue since the 2019 Budget

($ Billions)

Higher Base

New Tax Relief

$5.8 billion impact

due to revised

economic outlook

as a result of the

COVID-19

outbreak

Note: Numbers may not add due to rounding

Source: Ontario Ministry of Finance

Composition of Revenue 2020–21

13

Revenue $156.3 Billion

Personal Income Tax

$37.3B23.9%

Government of Canada Transfers

$26.3B16.9%

Income from Govt.

Business Enterprises

$4.1B2.7%

Other Non-Tax Revenue$17.6B11.3%

Corporations Tax

$15.2B9.7%

Sales Tax$29.1B18.6%

Other Taxes$26.6B17.0%

• Revenue sources are diversified.

• Taxation revenues account for 69.2 per cent

of total revenues.

• Government of Canada transfers including

the Canada Health Transfer and Canada

Social Transfer account for 16.9 per cent of

total revenues.

• Net Income from Government Business

Enterprises (Liquor Control Board of

Ontario, Ontario Lottery and Gaming

Corporation, Hydro One Ltd, Ontario Power

Generation Inc. and Ontario Cannabis

Store) accounts for 2.7 per cent of total

revenues.

• Other Non-Tax Revenues such as Fees,

Donations and Other Revenues from the

broader public sector, Vehicle and Driver

Registration fees, and Sales and Rentals,

account for 11.3 per cent of total revenues.

Source: Ontario Ministry of Finance.

Composition of Total Expense 2020–21

14

Expense $174.3 Billion1

Health Sector$67.8B38.9%

Education Sector2

$30.3B17.4%

Postsecondary Education

Sector$10.7B6.1%

Children's and Social Services

Sector$17.7B10.2%

Justice Sector$4.5B2.6%

Other Programs$30.1B17.3%

Interest on Debt$13.2B7.6%

1 Sector expenses have been restated for reclassification and program transfer changes. These changes are fiscally neutral.2 Excludes Teachers’ Pension Plan. Teachers’ Pension Plan expense is included in Other Programs.

Source: Ontario Ministry of Finance and Treasury Board Secretariat.

• The largest expense is the Health Sector

at $67.8 billion, accounting for about 39

per cent of total expense.

• Interest on Debt, included as part of total

expense, is $13.2 billion, or 7.6 per cent

of total expense.

Ontario Bonds

• Bond Offerings

Wide range of offerings provide extensive investment and trading

opportunities across the yield curve.

• Liquid

Strong liquidity in secondary markets and large benchmark issues.

• Attractive Spreads

Ontario spreads give investors opportunities to enhance their returns.

• Safe

A diverse economy with direct taxation powers and stable growth.

• Borrowing Program

Diverse program investor base continues to develop in size and diversification.

15

16

Ontario’s Borrowing Outlook

1 Pre-borrowing in 2019–20 was projected at $4.1 billion, and the total long-term public borrowing was $36.0 billion in 2019–20 and $43.6 billion in 2020–21 at the time of

the March 2020 Economic and Fiscal Update. These amounts have been updated to reflect long-term borrowing completed to March 31, 2020.2 Excludes 2019–20 pre-borrowing.


Source: Ontario Financing Authority.

($ Billions)

2019 Budget In-Year Change

Interim Adjusted

to March 31,

20201

Plan

2019–20 2019–20 2019–20 2020–21

Deficit/(Surplus) 10.3 (1.1) 9.2 20.5

Investment in Capital Assets 11.6 0.0 11.6 10.4

Non-Cash Adjustments (7.7) 0.7 (7.0) (9.2)

Loans to Infrastructure Ontario 0.2 (0.0) 0.2 0.3

Other Net Loans/Investments 0.7 (0.3) 0.3 1.2

Debt Maturities/ Redemptions 27.5 (0.1) 27.4 26.6

Total Funding Requirement 42.5 (0.8) 41.7 49.7

Decrease/(Increase) in Short-Term Borrowing (1.2) (1.8) (3.0) (2.0)

Increase/(Decrease) in Cash and Cash Equivalents2 (5.3) (1.5) (6.8)–

Pre-Borrowing from 2019–20 – 7.6 7.6 (7.6)

Total Long-Term Public Borrowing 36.0 3.5 39.5 40.1

Canadian Dollar Syndicated

Bonds$26.7B

67%

Green Bonds $1.3B

3%Canadian Dollar Bond

Auction$1.0B

3%

U.S. Dollar Bonds$10.3B

26%

Australian Dollar Bonds$0.3B

1%

2019–20 Borrowing Program

17Note: As of March 31, 2020. Numbers may not add due to rounding.

Canadian

Dollar

$28.9B

73%

Foreign

Currencies

$10.6B

27%

$39.5Billion Issued

Canadian Dollar Syndicated Bonds

$17.1B75%

U.S. Dollar Bond$2.4B11%

Euro Bonds$1.6B

7%

Pound Sterling Bond$1.7B

7%

2020–21 Borrowing Program

18Note: As of July 27, 2020. Numbers may not add due to rounding.

Canadian

Dollar

$17.1B

75%

Foreign

Currencies

$5.8B

25%

$22.8Billion Issued

Domestic and International Borrowing

Note: Numbers may not add due to rounding.19

As of July 27, 2020

Total Long-Term Borrowing

($ Billions)

Foreign 14% 34% 51% 41% 19% 28% 18% 21% 19% 26% 38% 23% 27% 25%

Domestic 86% 66% 49% 59% 81% 72% 82% 79% 81% 74% 62% 77% 73% 75%

Weighted-

Average

Term12.1 8.6 8.1 12.8 13.0 12.4 13.6 14.1 14.2 13.9 12.1 12.9 14.5 11.0

15.419.0

21.423.5

28.426.4

29.431.4

25.8

19.9 21.1

30.6 28.9

17.1

2.6

9.7

22.4 16.4 6.5 10.26.6

8.4

6.3

7.1

12.8

9.0 10.6

5.8

17.3

18.0

28.7

43.8

39.9

34.936.6 36.0

39.9

32.1

27.0

33.9

39.6 39.5 40.1

0

5

10

15

20

25

30

35

40

45

2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17 2017–18 2018–19 2019–20 2020–21

Canadian Dollar Foreign Currencies 2020–21 Borrowing Remaining

Weighted-Average Term of Borrowings

20

12.1

8.68.1

12.8 13.012.4

13.614.1 14.2 13.9

12.112.9

14.5

11.010.7 10.49.7 10.0 10.1 10.1 10.4 10.7 10.9 10.9 10.7 10.7 10.8

0

2

4

6

8

10

12

14

16

2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17 2017–18 2018–19 2019–20 2020–21

Weighted Borrowing Average Term Debt Portfolio Average Term

• Going back to the beginning of fiscal 2010–11, Ontario has issued $96.4 billion of

bonds 30 years or longer to lock in low interest rates.

Average Term

(Years)

Note: Debt Portfolio Average Term for 2019-20 as of March 25, 2020.

As of July 27, 2020

Domestic Borrowing Program

21

Canadian dollar Benchmark Bonds

(As of July 27, 2020)

Term Ontario Canada

5 yr (old) 2.30% September 8, 2024 $2.75B 1.25% March 1, 2025 $17.30B

5 yr (new) 1.75% September 8, 2025 $9.05B 0.50% September 1, 2025 $32.50B

10 yr (old) 2.70% June 2, 2029 $9.325B 2.25% June 1, 2029 $12.30B

10 yr (new) 2.05% June 2, 2030 $8.65B 1.25% June 1, 2030 $24.20B

Long (old) 2.90% June 2, 2049 $13.25B 2.75% December 1, 2048 $14.90B

Long (new) 2.65% December 2, 2050 $14.10B 2.00% December 1, 2051 $18.80B

1 Investment Industry Regulatory Organization of Canada (IIROC) Market Trade Reporting System - Provincial Bond Total Trading. 2 PC Bond, as of December 31, 2019.

• Ontario bonds accounted for 67.2 per cent of Canadian provincial bond trading in 2019.1

• Ontario accounts for 14.6 per cent of the FTSE TMX Universe Bond Index, 16.5 per cent of the FTSE TMX

Mid Bond Index and 20.6 per cent of the FTSE TMX Long Bond Index.2

• Large and diverse domestic underwriting syndicate of 12 dealers make active markets in Ontario bonds.

• Regular issuance of 5-year, 10-year and 30-year issues, which are re-opened to achieve benchmark size.

• Large Order Procedure (carve-outs) to accommodate large investors (11 issues totalling $5.2 billion so far

in 2020–21).

Sources: Bloomberg, Ontario Financing Authority.

U.S. Dollar Borrowing

22

Term Issue Date Amount (U.S.$) Coupon

7 year May 14, 2020 1.75 billion 1.05%

3 year January 16, 2020 3.00 billion 1.75%

10 year September 25, 2019 1.25 billion 2.00%

7 years June 13, 2019 1.75 billion 2.30%

3 years April 17, 2019 1.75 billion 2.55%

5 years January 29, 2019 2.50 billion 3.05%

5 years October 10, 2018 2.50 billion 3.40%

3 years February 6, 2018 3.00 billion 2.55%

5 years September 26, 2017 2.00 billion 2.20%

Recently Issued U.S. Dollar Bonds

• Fixed Global Bonds in 3, 5, 7 and 10 years, with benchmark size of U.S.$1.0B plus.

• Total U.S. denominated bonds of C$44.7B outstanding as of March 31, 2020.

• U.S. commercial paper (1-270 days), with about C$3.6B outstanding as of July 27, 2020.

• Global Bonds are offered in SEC-registered format.

• Ontario bonds are included in a number of bond market indices and sub-indices including BofA

Merrill Lynch, Citi, and Barclays Capital.

Canada16%

United States40%

Europe18%

Asia Pacific16%

Middle East / Africa

2%

Other8%

• Core market with annual issuance since 1991.

• Right-sized bond issues to meet demand.

• U.S. dollar investors diversified both geographically and by type.

USD by Geography USD by Investor Type

Note: Data for USD by Geography and Investor Type since 2010.

Source: Ontario Financing Authority.

Asset Managers

22%

Central Banks14%

Banks / Trust

Companies32%

Insurance Companies /

Pension Funds8%

Government Agencies /

Supranationals16%

Mutual Funds / Fund Managers

3%

Other5%

U.S. Dollar Market

23

($ Billions)Average Unrestricted Liquid Reserve Levels

Liquidity and Short-Term Borrowing Capacity

*Regular issuance of 3M, 6M and 1Y T-Bills

Note: As of July 27, 2020. Numbers may not add due to rounding.

8.3

14.4

19.4 20.2

23.324.9

23.621.7 21.1

30.1

32.7 32.3

0

5

10

15

20

25

30

35

($ Billions)

C$ T-Bill

Program

U.S.$

Commercial

Paper

Program

Total

Currency Canadian

Dollars

U.S. Dollars –

Maturity 1 day-3

years*

1-270 day(s) –

Authorized C$46.0 C$15.0 C$61.0

Outstanding C$24.4 C$3.6 C$28.0

Available C$21.6 C$11.4 C$33.0

• The Province has large liquid reserve levels to withstand periods of financial market volatility,

such as currently being experienced.

• Ontario treasury bills and U.S. commercial paper are very well received in the money markets

and provide additional borrowing capacity if required.

• Large capacity for short term borrowing: $61.0 billion authorized, $28.0 billion outstanding,

and $33.0 billion available.

• As of July 24, 2020, liquid reserve levels were $44.6 billion.

24

Effective Interest Rate (Weighted Average) on Total Debt

25

* As of February 28, 2020.

Sources: Public Accounts of Ontario (1990–1991 to 2018–2019), and Ontario Financing Authority.

10.910.7

10.1

9.59.8

9.49.0 9.0

8.68.4

8.2

7.67.2

6.76.4

6.1 6.05.8

5.2

4.6 4.5 4.44.1 3.9

3.7 3.6 3.5 3.6 3.6 3.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Per Cent

Average Annual Ontario Borrowing Rates

26

3.383.27

3.42

3.07

2.50

2.93

2.67

2.25

2.09

2.31

2.81

3.44

3.73

2.17

2.71

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Actuals and 2019 Budget Forecast* 2020 Forecast**Per Cent

*2019–20 and 2020–21 are 2019 Budget forecasts.

**2019–20 actual cost of borrowing is as of February 28, 2020.

Sources: Public Accounts of Ontario and Ontario Financing Authority.

Note: Excludes Ontario Electricity Financial Corporation debt.

Exposure Policy Limit

Foreign Exchange 0.2% 3.0%

Net Interest Rate Resetting 10.4% 35.0%

Risk Management

27

Of outstanding debt, as of June 30, 2020

• Monitor and manage debt maturity profile to limit refinancing risk.

• Maintain a high level of liquid reserves and short term borrowing capacity.

• Enforce strict credit limits for financial and investment counterparties.

• Have collateralized swap agreements in place for most swap counterparties.

Credit Ratings

28

Rating Agencies Long-term Rating

A+

Aa3

AA-

AA (low)

Short-term Rating

A-1

P-1

F1+

R-1 (mid)

stable

Outlook

stable

stable

stable

Visit www.ofina.on.ca & subscribe to our email alert service to receive the latest province of Ontario updates

Investor Relations


1 Dundas Street West, Suite 1200

Toronto, Ontario M5G 1Z3

Canada

Telephone: (416) 325-8000

Legal Notice

This presentation was compiled by the Ontario Financing Authority. This information is intended for general information purposes only and does not constitute an offer to sell or a solicitation of offers to purchase any security in

any jurisdiction. It has not been approved by any securities regulatory authority and it is not sufficient for the purpose of deciding to purchase securities. It may have errors or omissions resulting from electronic conversion,

downloading or unauthorized modifications. Statements in this presentation may be “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements

involve uncertainties, risks, and other factors which could cause the state of Ontario’s economy to differ materially from the forecasts and economic outlook contained expressly or implicitly in such statements. The province of

Ontario undertakes no obligation to update forward-looking statements to reflect new information, future events or otherwise, except as may be required under applicable laws and regulations. No warranty is made as to the

accuracy or completeness of information contained herein as of any date other than the date it was posted or released.

Documents

Province of Ontario Presentation · 2020-06-15 · Ontario’s Fiscal Plan 2 • The Province is projecting a deficit of $9.2 billion in 2019–20 which represents an improvement