Item - 2023.EX10.11

The Executive Committee:

1.  Received the report (November 20, 2023) from the Chief Financial Officer and Treasurer for information.

The City of Toronto (City) receives monies from external parties and is obligated to set these monies aside for specific purposes outlined in Provincial legislation or third party agreements. These monies may also be set aside for goods and services that will be provided in the future. In both instances, the receipt of these monies creates obligations for the City that must be settled at a future date. An example of such an obligation is the collection of development charges when building permits are issued. These development charges will contribute to the cost of growth-related infrastructure required to provide municipal services that support new development. When these monies are received, they are recognized on the City's Statement of Financial Position as a liability called Deferred Revenue. The deferred revenue amounts are recognized as earned revenue only when the committed investment is completed, and expenditures are recognized as tangible capital assets in the Statement of Financial Position or as operating expenses in the Statement of Operations and Accumulated Surplus. This report provides an update of deferred revenue balances at September 30, 2023, and earned revenue for the period ended September 30, 2023, which is included in the City's Statement of Operations and Accumulated Surplus.

As at September 30, 2023, the City recognized $7,402.8 million in deferred revenues, increased by $1,910.5 million in monies received and reduced by $131.6 million in earned revenues as compared to the December 31, 2022 balance of $5,623.9 million. This balance represents accumulated deferred revenue balances, which reflect obligated investments not yet completed to support growth, or goods and/or service commitments that the City must deliver to third parties, not yet earned and recognized as revenue. Deferred revenues are fully committed based on contractual obligations to support growth-related infrastructure investments in the community, or other service or operational performance obligations. In particular, the City estimates that $22.7 billion of deferred revenues have been committed over the 2023-2032 period – this indicates that the City’s commitments are 3.1 times greater than the amount of deferred revenues recognized as at September 30, 2023.

Future deferred revenue funds received and recognized earned revenues from Development Charges may be impacted by provincial legislation, including Bill 23, the More Homes Built Faster Act. For instance, Bill 23 is currently estimated to result in a $2.3 billion revenue loss to the City’s growth funding tools over a 10-year period (i.e., 2022-2031), including development charges ($2.0 billion) and parkland dedication ($0.3 billion). The complete financial impact to the City remains uncertain.  While the Province has committed to making the City whole, this is pending the completion of a provincial audit. The results of the provincial have not yet been shared with the City.