Report to/Rapport au :
Health, Recreation and Social Services Committee
Comité de la santé, des loisirs et
des services sociaux
4 November / le 4 novembre 2005
Submitted by/Soumis par : Steve
Kanellakos, Deputy City Manager/Directeur municipal adjoint,
Community and Protective
Services/Services communautaires et de protection
Contact Person/Personne ressource : Russell
Mawby, Director of Housing
Housing/Logement
(613) 580-2424 x44162, russell.mawby@ottawa.ca
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SUBJECT: |
Implementation of provincial Benchmarking
in Social housing portfolio |
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OBJET : |
MISE EN ŒUVRE D’ANALYSES COMPARATIVES
PROVINCIALES CONCERNANT LE PORTEFEUILLE DU LOGEMENT SOCIAL |
REPORT RECOMMENDATION
That the Health, Recreation and Social Services Committee receive this report for information.
RECOMMANDATION DU
RAPPORT
Que le Comité de la
santé, des loisirs et des services sociaux prenne connaissance du présent
rapport.
In late 2000, the Province enacted the Social Housing Reform Act (SHRA), which downloaded social housing funding and administration to the municipal level of government. As part of this download process, the provincial government also intended to reform certain aspects of social housing funding and administration. A significant component of this reform was to be a new funding model for those social housing projects that were previously administered under provincial unilateral programs. The funding model defines how much subsidy is to be paid by municipalities to housing providers. While delayed, the province has now completed the benchmarking exercise, which was necessary in order to transition to this new funding model, that is scheduled to take effect starting January 1st, 2006. This report is intended to provide information regarding the benchmarking process and highlight impacts of this provincial legislation on both the City as a prescribed service manager and sole funder of these social housing subsidies as well as for the local housing providers for whom this new funding model will apply.
À la fin de 2000, la Province a promulgué la Loi sur la réforme du
logement social (LRLS), qui transférait la responsabilité du financement et
de l’administration des logements sociaux à l’administration municipale. Dans
le cadre de ce processus, le gouvernement provincial entendait aussi revoir
certains aspects du financement et de l’administration des logements sociaux.
L’un des éléments importants de cette réforme devait être un nouveau modèle de
financement des projets de logement social autrefois administrés en vertu de
programmes provinciaux unilatéraux. Ce modèle fixe le niveau des subventions
versées par les municipalités aux fournisseurs de logements. Après un délai, la
Province a maintenant achevé l’exercice d’analyse comparative, nécessaire pour
permettre la transition vers le nouveau modèle de financement, dont l’entrée en
vigueur est prévue pour le 1er janvier 2006. Ce rapport fournit de
l’information sur le processus d’analyse comparative et met en lumière les
incidences de la loi provinciale pour la Ville, en tant que gestionnaire de
service désigné et seul bailleur de fonds des subventions de logement social,
et pour les fournisseurs de logements locaux, à qui s’applique le nouveau
modèle de financement.
Under the SHRA legislation, the process of benchmarking is a necessary prerequisite to implementation of a new funding model. The intent of the Province at the time of enacting the SHRA was to provide a more predictable, fair and consistent funding relationship between municipalities as service managers and non-profit housing providers who operate projects under certain legacy social housing programs. Experience has shown however, there are clear challenges in making this legislative transition operational.
In the City of Ottawa, the benchmarking process applies to 117 social housing projects operated by 43 prescribed housing providers. This change in funding model affects only about 30% of the units in the social housing portfolio, but is financially significant since funding to this component of the portfolio accounts for roughly half of the current gross subsidy paid to providers. Under the SHRA, this portion of subsidy payable is required to be funded 100% from municipal sources.
After significant delays in implementing the benchmarking process, the Ministry of Municipal Affairs and Housing (MMAH) announced the launch of an intensive process in June of 2004 to move the process forward. The process has rolled out in three main phases; information validation, preliminary benchmark review, and final benchmark issuance. Benchmarks are expected to take effect as of January 1st, 2006 in accordance with the respective financial year end for each affected provider.
Through the fall of 2004, MMAH collected data from service managers to verify existing and past cost elements (e.g. maintenance costs, utility costs, insurance, rental charges, etc.) for affected housing providers. As a result of this process, cost and rental factors were established by MMAH. A Benchmark Advisory Team (BAT) was also established by the Province with representation from a number of service managers as well as sector organizations and the Social Housing Services Corporation (SHSC). The BAT tabled a number of issues regarding the methodological approach being proposed by MMAH. In addition to raising these and related benchmarking issues, the team provided advice and feedback which was considered by MMAH in development of benchmarks.
Subsequently, MMAH issued draft benchmarks templates and supporting material to all affected providers at the end of January 2005. Regional training sessions were held by MMAH in February to assist service managers in better understanding the templates they would be required to populate to calculate benchmarks. At that time, MMAH also rolled-out a business case process which enabled service managers to seek alternate benchmarks on an exception basis where it was clear there were errors in data or where methodological outcomes were inconsistent due to case-specific conditions.
Housing Branch staff held local information sessions for affected providers in early March 2005. Staff subsequently met individually with all housing providers affected by benchmarking to review the benchmark process, confirm data and review calculated benchmarks, including discussion of how the proposed benchmarks compared to the subsidies that would have been required under the previous funding formula. Where a business case was being proposed by City staff to address methodological anomalies, the issues, rationale and impacts associated with these business cases were discussed with each affected provider. Staff then submitted required MMAH templates, business cases and associated material to the Ministry through the spring and early summer of 2005.
Having received and assessed material submitted from service managers, the Ministry issued final benchmarks through the summer of 2005. In late summer of 2005, MMAH established a "provider change request" process which enables the Minister to re-consider the issued benchmark as approved in accordance with S.104 and S.107 of the SHRA. The change request process is intended to provide the opportunity for providers to make a case for revisions to their benchmarks, based on errors or methodological anomalies arising from case-specific issues not otherwise addressed by service managers. All providers have the opportunity to seek such a review, and must make submission requesting a review in accordance with prescribed deadlines (October 31st, 2005 or January 31st, 2006, depending on the provider's fiscal year end). Independent review panels will evaluate each request on a case-by-case basis and make recommendations to MMAH regarding changes (if any). Final decisions by MMAH are expected within 90 days from date of submission for change requests. Where decisions are contrary to benchmarks as currently issued, the financial impact to the service manager could change. Staff will continue to monitor change requests and provide feedback to MMAH in response to requests for change.
CONSULTATION
Through the benchmarking process, MMAH has utilized a Benchmark Advisory Team (BAT) to foster feedback on the implementation process. Housing Branch staff participated in this team to provide additional service manager perspectives, given that municipalities are the primary funders of this program. Sector organizations and SHSC staff also participated on the Team to provide stakeholder perspectives to Ministry staff.
Locally, Housing Branch staff provided information regularly to all affected providers and the Housing Stakeholders Advisory Group. In March of this year, in concert with sector organization sessions, staff held information meetings regarding process details and plans for local benchmark implementation. Following these sessions, staff reviewed MMAH proposed benchmarks with each housing provider individually, identifying impacts as compared to old funding model. Staff also confirmed modifications which would be pursued via business case by the service manager due to data anomalies, corrections or provider-specific issues. Providers were furnished with a copy of all final documentation submitted to MMAH in support of the benchmark setting process.
Staff continue to participate in the BAT as a representative service manager in order to address lingering implementation issues which are outstanding. The work of this group is expected to conclude by spring of 2006.
FINANCIAL IMPLICATIONS
As a result of the MMAH issued benchmarks, staff expect that net required subsidy costs to the City as service manager will increase by $1.48M in fiscal 2006 as compared to what would have been required to be paid under the old funding model. Under this new scenario, roughly $1.2 M would be directly attributable to MMAH benchmark methodology. The increase is largely attributable to adjusted rental revenue expectations as well as increased utility and insurance cost allowances within the new model as compared to the old model. The balance of the increase ($215,000) would be attributable to error corrections and business case adjustments deemed necessary by City staff. These include accounting for well water monitoring costs or corrections to geographic stratifiers where they were inappropriately addressed in the benchmarking model.
Most providers will see a modest increase in net subsidy flow from the service manager under the new model as compared to the old model. Eight providers will see a net reduction in subsidy as compared to what they may have expected for 2006, six of which have material changes. To assist in bridging these providers to the new funding model, staff are implementing a step-in strategy whereby a one year phase-in at 50% of impact would be implemented. Staff estimate that an additional $100,000 would be required to phase-in those 6 providers who were materially affected and will receive less subsidy as compared to the old funding model. This one year phase-in would bring the total 2006 fiscal implementation impact on the City to $1.58M or about $234 per unit. Should MMAH revise benchmarks in response to requests from providers, this impact could increase.
In looking forward, the benchmarking process can be characterized as transitioning to a new Provincially-legislated funding base for social housing providers in the affected program. Annual subsidy costs in the future (i.e. 2007 and beyond) are projected to increase in terms of net subsidy costs to the City as was the case in the previous funding model, subject to revenue and/or costs factors that will be set annually, per legislation. Benchmarks were intended to provide more stability and predictability in terms of funding obligations. However, the sustainability for the funding model and the cost factor indicators that have yet to be established will ultimately have a bearing on the true impact to the City and other municipal service managers going forward.
Net subsidy cost increases arising from implementation of provincial benchmarking in social housing have been incorporated into the City's 2006 draft operating estimates.
DISPOSITION
Housing Branch staff to implement new funding model starting January 2006 in accordance with legislation and MMAH-issued benchmarks.
Housing Branch staff to continue monitoring the implementation process and adjust for material impacts based on any MMAH changes that may arise from the provider change request process.