Expiry of Operating Agreements

May 2013

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