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GFOA Newsletter

Winter 2009/2010 | VOLUME 10, ISSUE 2

In Memory of Karen Utterback

This newsletter is dedicated to the memory of Karen Utterback who regretfully passed away on August 18, 2009. Karen was the editor of Canadian Finance Matters, the GFOA Canadian Newsletter. In addition, Karen was the editor of the GFOA Newsletter and associate editor of the Government Finance Review. Karen began her career at GFOA in 1985 and was a valued colleague for those who had the pleasure to work with her. The Committee on Canadian Issues and GFOA staff express their deepest condolences and will continue to strive to meet the high standards established by Karen as lead editor of Canadian Finance Matters.

Committee on Canadian Issues (CCI) | Highlights
Seattle, Washington ◆ June 27, 2009

Co-chairs Len Brittain and Eric Sawyer welcomed the committee to Seattle for the twenty-second meeting since the committee’s inception in San Francisco in 1998. GFOA president Paul Macklem also visited with the committee to contribute to the early discussions.

Most notably the committee was notified that Len Brittain will be the GFOA’s new president-elect. The president of GFOA approved John Martin to succeed Len Brittain as the co-chair of the CCI.

New Committee Members

The committee is pleased to have the following new members: Carl Bird, Robert Bishop, and Jim Rusnak. Carl Bird is the Director of Corporate Services for the City of Yellowknife. Robert Bishop is the Director of Finance and City Treasurer for the City of St. John’s. Jim Rusnak is the Chief Financial Officer for Metro Vancouver.

Standards Task Force

Diana Lokken and Bruce Fisher, the co-chairs of the Standards Task Force, circulated a report to the committee on the task force’s six month work plan. The task force continued its examination of GFOA’s best practices for their applicability in Canada. The committee approved the ten best practices listed near the bottom of this newsletter. These, along with previously approved best practices, can also be accessed in the Canadian section of GFOA's website, Another major focus of the task force will be the establishment of a strategic plan for developing Canadian specific best practices. In the future, the task force will focus on best practices that directly relate to the top 10 issues facing municipal finance officers that was generated by the CCI.

GFOA staff for the Committee on Governmental Budgeting and Fiscal Policy updated the CCI on the progress in the development of the best practice on the drawbacks of governmental entities using the consumer price index and the possible alternatives. The committee members provided further suggestions to enhance the usefulness of this potential best practice.

Professional Development Task Force

John Martin, the co-chair of the Professional Development Task Force along with fellow co-chair Christina Parkins, distributed an outline on the task force’s recent activities. John Martin discussed with the committee the Canadian speakers presenting at the GFOA annual conference, along with the Canadian specific session and the Canadian Government Networking. The Canadian specific session at the GFOA annual conference was Exploring New Approaches to Generating Local Revenue: A Canadian Initiative. The speakers for the session were committee members Mark Gilbert and Bruce Fisher. The Canadian Government Networking covered the top ten issues facing municipal finance officers in Canada and also educating finance officers. Committee members Len Brittain, Eric Sawyer and Mark Gilbert were discussion leaders for the Canadian Government Networking. The task force will examine increasing the number of Canadian speakers at the GFOA annual conference and will develop a new topic for the Canadian specific session at the next GFOA annual conference in Atlanta.

The committee discussed enhancing the education process for future and current finance officers. The committee members brought forward suggestions and shared current opportunities provided to students in regards to education programs and internships. The committee also discussed additional training opportunities for current government workers. The CCI will examine this further at its next winter meeting in Toronto.

Advocacy & Communications Task Force

Lori Craig and Ed Hankins, the co-chairs of the Advocacy & Communications Task Force, updated the committee on the activities and focus of the task force. The committee was briefed on the significant links with the prominent provincial associations throughout Canada and the key staff contacts to the provincial associations. Dean Screpnek, the Alberta GFOA President, is a recent member of the committee. The task force will continue to enhance the working relationships with the provincial associations.

A major focus of the Advocacy & Communications Task Force is the GFOA’s Canadian Newsletter, the Canadian Finance Matters. The winter issue of the newsletter will include an article by Paul Macklem on his experiences as president of GFOA. Also, the newsletter will include articles on the role of the CFO. The committee acknowledged the efforts of Betty Holsten Boyer who successfully recruited contributors for the articles in GFOA’s Canadian Newsletter. Esther Lee will be the new coordinator for the Canadian Finance Matters.

Other Business

Kerry Tarasoff will join with Diana Lokken as the co-chairs of the Standards Task Force. Ron Kaufman will be the new co-chair of the Professional Development Task Force and will partner with current co-chair Chris Parkins.

The co-chairs of the CCI, on behalf the committee, presented Ken Rust, the GFOA’s Past President, a letter of gratitude for participating in the Western Canadian GFOA Conference in Victoria.

Acknowledgement of Members

Len Brittain was nominated as the president-elect of GFOA and therefore will no longer serve on the committee. Len Brittain has been an outstanding committee member and a significant contributor to the development of the committee. He has been a member of the Committee on Canadian Issues since 2002. Bruce Fisher has completed his final term and will no longer serve on the CCI. Bruce Fisher has had a major impact in the approval process of best practices as the co-chair of the Standards Task Force. The Committee thanked Len and Bruce for their outstanding contributions to the CCI.


There being no further business before the committee, the meeting was adjourned. The next CCI meeting is scheduled to take place on Friday, January 22 and Saturday, January 23, 2010 in Toronto.

My Half-Year As GFOA President

Paul Macklem, General Manager, Corporate Sustainability, City of Kelowna

Is it as interesting, challenging and rewarding as it’s cracked up to be? Absolutely, and a whole lot more. To be handed the GFOA presidency in the same year as another left-handed president was elected is monumental, but only in my mind!

Being the first Canadian president since Jack Pickard in 1992, it is a great honor/honour (having grown up across from Detroit, I’m fully bilingual) to represent my Canadian colleagues as well as the Association. I have had the privilege of attending state conferences in Washington, Florida, North Carolina and Texas; provincial conferences in British Columbia and Ontario (MFOA); and the Institute of Municipal Finance Officers (IMFO) conference in Johannesburg, South Africa.

The professionalism and dedication in every association is strikingly similar, but all have their own traditions and approaches. There have been great dinners, lively dancing and stimulating discussions and presentations that you can really learn from (how many words can you get on a PowerPoint slide anyway?). I’ve toured a baseball stadium, a football stadium and what was once the world’s largest gold mine employing 30,000 workers, and have seen wild animals in their natural habitat. I’ve seen where the ultra-rich live in North America and the tin shacks of Soweto in South Africa. The one constant that I have seen is the pride people have in their countries; in their Cities, Towns, and regions; and in their organizations.

It was a thrill to attend the IMFO conference and come away with an appreciation for the emergence of the ‘new’ South Africa. The conference was likely an ‘all white’ affair a mere 15 years ago. In 2009, I estimate 80% of delegates were people of colour/color (there it is again!). It is a country that reveres Nelson Mandela, whose leadership was unwavering in choosing reconciliation over retribution. While there are many problems still to be resolved, there is now hope for all where there had been none. All races are working together to build the country, with the FIFA 2010 World Cup becoming their rallying point. I hope that my future includes the opportunity to go back to SA to help train those employed by financially strapped local governments. The trail has been blazed previously by people like Mark Gilbert and Penny Bruin.

I have been resolute in focusing my presentations on the topic that the nominating committee believed was relevant for this year of service – development of the emerging generation of public finance leaders. It’s clear that local governments globally must prepare to equip our successors. The question is: can we get there fast enough for our new leaders to be confident in steering a local government finance department in an increasingly complex world? Every one of them needs a mentor. We can help make the difference between ‘excellence’ and ‘good enough’.

I must admit, I haven’t made a lot of progress in forming a deep understanding of GASB, FASB and FAF, although I know what the acronyms stand for. However, it was never an expectation of the GFOA staff that I carry messages targeted to US members, and I’m the first to say that credibility would be compromised were I to feign expertise. I’ll leave that for Len Brittain!

The New Year has more opportunities than I have time for (my real job, although I love it, is quite an impediment at the moment). Meetings in Washington, DC, and Tucson, along with travel to conferences in Israel, California, Pennsylvania, New York State and Alaska will keep me on the move. It’s a sweet deal, and despite the fact that I continue to be baffled as to “why me?”, I will do my very best to continue to represent the GFOA of the United States and Canada membership over the next six months.

The City of Calgary’s Long-Range Financial Planning

Eric Sawyer, Chief Financial Officer, City of Calgary

Calgary has recently made changes to the position of Chief Financial Officer (CFO) to strengthen strategic leadership, oversight and governance of The City’s financial assets, and support for long-term financial sustainability. The CFO’s role will position the organization to respond to fiscal challenges through enhanced cost management and productivity and to seek new and innovative ways to deliver services to citizens in a financially sustainable manner. Calgary’s recently updated Long Range Financial Plan (LRFP), which is discussed below, speaks directly to these challenges. For The City of Calgary, financial sustainability is based on a set of goals and strategies that include not only the required balancing of funding and expenditures in the long term, but also elements such as effective financial planning, diversity of revenue, adequate contingencies, stakeholder confidence and flexibility that make it possible to adapt to challenging conditions. Our financial goals and strategies are summarized in the following chart:

Financial planning is a cornerstone of financial sustainability, highlighting the financial status and prospects of the organization as well as identifying the resources for implementing services and infrastructure, and strategies to support and sustain financial goals. The basic planning element is the three-year business planning and budgeting process. Calgary’s City Council approved its first multi-year operating business plans and budgets for the years 2006-2008, and has followed up by approving both operating and capital business plans and budgets for 2009-2011. Following initial approval, the plans and budgets are reviewed and adjusted each November based on economic changes and requirements of Council.

After increasing the business planning and budgeting horizon to three years, the City produced a 10-year Long Range Financial Plan (LRFP) in 2007. The LRFP development included broad consultation involving management and financial staff throughout the organization. The final report included:

  • 10-year projections of funding and expenditure demand for both operating and capital that highlighted continuing funding gaps
  • a projection of the statement of financial position over the 10 years
  • tests of the sensitivity of the projections to different population growth and inflation assumptions
  • scenarios reflecting the impacts of increases in asset maintenance and municipal property tax rates
  • identification of The City’s financial goals along with strategies to improve financial sustainability

The projections were based on assumptions such as the approved, budgeted level of resources applied to each service in the final year of the budget, and forecasts of population growth, inflation by category and individual revenue streams.

Financial planning is not done in isolation, as illustrated in the diagram from the LRFP 2009 Update shown above. The finance function of the organization is a partner in providing services and infrastructure to citizens, and financial goals affect and are affected by the goals of all City departments.

In recent years, The City of Calgary has been improving its planning processes in many areas such as transportation, land use, and asset management as well as finance. To encourage interaction and improve consistency among the plans, representatives of long-term planning projects meet periodically. This has led to an agreement that all projects will use the 10-year capital plan as a common data base. Also, Calgary’s new municipal development plan refers to the LRFP in its growth chapter and emphasizes that financial sustainability must be considered in land use planning.

The LRFP has been updated twice since the original plan was presented to Council. The most recent version (November 2009) includes a section containing significant accomplishments as well as benchmarks that can be used in the future to evaluate progress toward improving long-term financial sustainability. The 2009 update is available through The City of Calgary website, (search for “long range financial plan”, choose the first recommended item and follow the links).

Periodically updating the LRFP has served to remind Council, management and staff of the long-term financial challenges faced by the municipality and the need to act on the strategies required to improve long-term financial sustainability.

The Vancouver Services Review

Patrice Impey, Chief Financial Officer, City of Vancouver

The global recession has forced many organizations to take a tough look at their finances and to re-prioritize their services, spending and financial plans. The City of Vancouver is addressing the pressures of this economic downturn by focusing on a proactive and extensive review of its services—with the goals of continuing to provide innovative and effective service to our public while keeping our financial house in order, and maintaining a reasonable level of taxation.

In late 2008 the City experienced dramatically changing economic conditions. Most significantly, development revenues declined with the City’s 2009 revenue projection down $15.7 million. At the same time, rising fixed costs, including a 4% compensation increase, and new programs coming on line created a projected budget gap of $42 million.

To respond in a short timeframe, City Council approved a series of short-term measures, including project deferrals and an unprecedented hiring freeze, along with a 5.89% tax increase for 2009. Given these measures were short-term, a longer-term strategy was needed. In February 2009, Council directed the City Manager to review the City’s businesses, service delivery practices and general operations in order to mitigate future burdens on residential and business taxpayers.

The Vancouver Services Review (VSR) project team was established to address Council’s direction and involved over 30 city staff from all Departments and Agencies, including Police, Fire, Library and Parks. Working with external consultants over a short and intensive period from June to September of 2009, the team completed a review of core services and developed recommendations for implementation of shared services and business transformation. At its core, the project was an enabler of transformational change at the City. The VSR team guided the City through a comprehensive corporate priority-setting and improvement program that accomplished two key goals:

  1. It focused the Corporate Management Team’s (CMT’s) discussion of service priorities—‘WHAT’ we do.
  2. It identified opportunities for changing the way that services are delivered—‘HOW’ we do it.

“WHAT WE DO”—The Core Service Review

One of the important results of the VSR project came from the core service review methodology which required the organization to prioritize services across all departments.

Each manager was asked to review their area’s services and then to rank services according to their alignment with public need and interest under the following themes:

  • Basic needs that are essential to the City’s functioning,
  • Real needs that the are services the public requires, and finally
  • Elective or added value services that, while not essential or part of the core mandate for City services, are valued by citizens and businesses.

Services included both existing and proposed new services. Each department ranked their services in order of priority based on a continuum of basic requirement, real need, and elective/added value. Subsequently, the Corporate Management Team ranked all services collectively to describe a Corporate continuum.

“HOW WE DO IT”—Business Transformation

The VSR team received and reviewed over 1000 suggestions (844 unique ideas) from employees across the organization and incorporated the best ideas for business transformation into a small number of priority projects. (The opportunity log is on the City of Vancouver website.) The remaining ideas have been saved as a rich resource for future process improvements and efficiency opportunities.

By September, the VSR team had developed business cases for 20 of the transformational opportunities, 15 of which were approved by the Corporate Management Team for implementation.

Recommendations include implementing a shared service model that will cut across all agencies and departments of the City in the following areas:

  • Finance
  • Supply Chain
  • IT
  • Facilities Management

The benefits of shared services include creating economies of scale, finding synergies leading to reduced costs and redundancies, and focusing on improving accountability while being aware of and respectful of each business unit’s needs.

Other Projects will implement leading practices across all Departments and Agencies in the following areas:

  • Capital Planning and Budgeting
  • Attendance Management Processes
  • Pay Notice Payroll Processes
  • Service Rationalization: Phase 1 - Garbage Collection
  • Permits and Licensing

Estimated annual savings of $10 million in 2010 and up to $28 million by 2012 are expected from all these initiatives.

2010 Budget

The 2010 annual budget plan identified $60M cost pressure (equivalent to an 11.2% tax increase), of which the largest component was a further 4% compensation increase. In working to address this gap, the VSR process guided a number of decisions:

  • The efficiencies identified from the 15 businesses cases were used to reduce the Operating Budget by $10 million
  • The Corporate Prioritization exercise provided a tool to identify what services needed to be adjusted (both increased or decreased) to align with a balanced budget and a minimal property tax increase set by Council.

In the end the Budget was balanced with a 2.2% tax increase. This could not have been achieved without the VSR.

Moving Forward

The VSR project has moved into its implementation phase with the establishment of a Program Management Office with full-time Project Management, Finance, Change Management and Communications expertise to support the changes that will occur throughout the organization. The Corporate Management Team continues as the Steering Committee for the VSR program focused on implementing the initial opportunities as well as other suggestions from the opportunity log.

The Vancouver Service Review is transformative for the City. It allows clearer focus on the priorities of the organization across all departments and provides better and more effective services to our public. Ultimately the VSR will be a catalyst to improve the best practices of our current organization while creating a more nimble, creative and fiscally responsible organization to serve the citizens of Vancouver.

Chief Financial Officer: The Caledon Story

Ron Kaufman, CA, Deputy CAO/CFO, Town of Caledon

The MFOA’s 2009 recently released book entitled Serving to Your Potential: Enhancing Strategic Influence in the Treasurer’s Office states, “The Treasurer must move beyond tactical backroom roles and expectations and move into the strategic roles of strategist and catalyst for improvement in the organization.”

In September 2009, Caledon took that advice and the new role of Chief Financial Officer was established at the Town. A new Asset Management Division was added to the Chief Financial Officer’s responsibilities. At that same time, a new arena, funded by the Federal Government’s Community Adjustment Fund for $7.0 M, was announced, and the term “Accountineer” (OMBI-developed phrase as part of PSAB 3150) was embraced as the Chief Financial Officer assumed leadership and management of that capital project.

Approach to the New Role

The Deputy Treasurer was promoted to Treasurer. The Treasurer is responsible for all the statutory responsibilities of that position and managing the day-to-day operations of the Finance Department.

The Chief Financial Officer’s main focus will be to shape the long-term plans of the Town of Caledon by:

Top Five Issues Facing Municipal Finance Officers

The top five most significant issues facing municipal officers throughout Canada as based on a recent survey of the committee members of the Committee on Canadian Issues are as follows:

Caledon’s Approach to Managing These Challenges

Strategic plans

Caledon Long-term Strategic Financial Plan (approved by Council, September 2009)

In order to successfully achieve an improved and strengthened long-term financial health for the Town, it is important that overall guiding principles be used to assist in resolving and balancing financial challenges. Caledon’s guiding principles are as follows:

Community-Based Strategic Plan

Council embarked on its first ever Community Based Strategic Plan exercise in October 2009. The CFO is the co-leader on this corporate project.

Five-year Capital Plan
A five-year capital plan was introduced in the 2010 budget process. A development charge study and by-law was passed in 2009 for 10 years of growth-related capital projects. In 2010, a ten- to fifteen-year capital plan will be initiated as part of the 2011 budget process

Implementation of PSAB requirements allows for the collection and utilization of valuable information to aid in long-term planning and asset replacement. Caledon has been able to take advantage of vacancies and restructuring to build teams that include staff with professional designations and municipal experience in finance, procurement and asset management to deal with PSAB implementation issues.

Revamped 2010 Budget Process
Emphasis on cost controls, efficiencies and corporate procurement to deal with the economic downturn, which reduced many municipal revenue projections for 2010. The new budget process was designed to provide Council with better information and budget decision choices. In 2010, the plan is to move to a four-year operating budget projection as part of the 2011 budget process.

Succession Planning
Succession planning is very much on Caledon’s radar screen. The plan is to spend more time and effort on this corporate initiative in 2010. The Town has encouraged and is developing a corporate co-op program with the intent to hire students in specific disciplines with the hope of attracting them to the municipal field and eventual full-time employment.

Now the Hard Work Begins

Warren Lovely, Senior Economist & Executive Director, CIBC, Toronto

For Canadian households, businesses and governments, 2009 was a year to forget. The country sustained a sharp drop in real economic output and suffered an unprecedented decline in nominal GDP. Notwithstanding year-end hiring, total employment fell more than 300,000 below 2008’s pre-crisis peak, pushing the jobless rate up more than 2%-pts. Corporate profits cratered. And for export-oriented producers, another sizeable leg of currency appreciation accentuated damage wrought by crumbling demand from key trading partners and creeping protectionism.

Turning the Lights Back On

As bad as it was, the economy flickered back to life in the final months of the year. The country’s recession was extinguished in the third quarter, with the economy finding a higher gear in Q4—welcome momentum to start the new decade.

Activity in Canada’s housing market, having sidestepped US-style weakness, has been quick to reaccelerate. A resumption of hiring supports personal income, which alongside an equity market recovery, buoys confidence. Having been shielded from a devastating hit to personal wealth, and armed with a healthier banking system—itself bolstered by successful government support programs—Canadians have taken advantage of what remain rock bottom interest rates. Domestic demand is not a problem.

So 2010 will be a year of recovery, but make no mistake, downside risks linger and uncertainty abounds. The currency’s drag remains, while an enfeebled US consumer and capacity overhangs blunt America’s near-term growth prospects.

Governments Pick Up the Tab

What began as a financial sector meltdown, and then morphed into the Great Recession, has mutated into a legitimate public sector crisis across much of the globe. It will be some time before today’s intense pressure on public sector finances abates.

Echoing a theme in the banking sector, the relative strength of Canada’s government sector has become increasingly evident. Canadian governments can cheer a resumption of growth and take comfort in their international standing, but a quick fiscal recovery will likely elude leaders at both the federal and provincial levels. Indeed, public sector stress will remain an overarching theme in the year ahead, and the following highlights a number of related economic and financial market expectations for the year ahead.

A 2010 Recovery Risks Disappointing — Whether your perspective is global or local, the balance of risks points to only a lukewarm recovery in 2010. Our expectation for Canadian real GDP growth, at just over 2%, resides more than half a percentage point below the current consensus, and is even further removed from the more optimistic outlook at the Bank of Canada (BoC).

Overnight Interest Rates Will Be Lower for Longer — By delaying inflation’s return, a disappointing recovery could force a re-think of monetary policy at central banks. Indeed, a return of lukewarm US demand and the ongoing drag from a strong C$ suggests the first hike (from the Fed and the BoC) might not arrive until 2011—well beyond the conditional pledge from Mark Carney and Co. to hold rates steady through mid-2010.

But Longer-term Yields Rising — Out the curve, however, yields are backing up as economic healing gradually takes root. That selloff will slow if, as we expect, growth expectations prove too optimistic. Still, the lows for interest rates are in the rear view mirror. A steep yield curve may leave issuance down the curve looking attractive, but expect many issuers to covet long-duration trades in an effort to lock in what are still historically attractive rates.

Canadas Will Outperform Treasuries — Supply matters, and the sheer magnitude of the bond issuance required to fund the US budget deficit dwarfs the relative supply of Canadas. With America racking up debt at roughly three times the pace of Canada, Canadian yields are poised to trade further through US Treasuries.

Need for Government Support Fades — While Japan ushers in another round of stimulus, Ireland adopts a new guarantee scheme for its beleaguered banks, Greece edges closer to an IMF bailout and the US considers whether additional funding is needed to support job creation, Canadian governments are plotting exit strategies. Although committed to existing fiscal stimulus programs, new programs won’t be forthcoming and where possible, unused allocations will be used to trim deficits. Elsewhere, credit the federal government’s extraordinary financing framework for helping Canadian banks successfully navigate a liquidity crisis. But as financial conditions normalize, the need for special support programs (most notably the Insured Mortgage Purchase Plan) has evaporated.

Debt Service a Growing Concern — Debt burdens, while generally shy of past recession peaks, have shot higher. Debt service has nonetheless remained highly affordable in an ultra-low interest rate environment. But interest charges will eat up a larger share of revenue once rates move decisively higher. Similarly, a recent doubling in the aggregate stock of provincial t-bills means elevated interest rate reset risk, posing a threat once monetary tightening begins in earnest.

Credit Ratings Remain Under Pressure — Canada’s sovereign rating is as rock solid as it gets, and provincial governments entered the downturn with unprecedented ratings strength. Still, in some provinces, a fiscal deterioration has triggered ratings downgrades. A slower recovery, coupled with a failure to deliver a credible action plan, could lead to further action on credit ratings.

2010 Budgets the Most Important in 15 Years — Expectations are high for the coming year’s budgets. More than simply weaning the economy off stimulus, taxpayers, rating agencies and investors need to see a legitimate plan for deficit eradication. Program spending must be put on a sustainable track, one consistent with a structural deceleration in trend revenue growth. Smaller government will be the result. In some cases, extraordinary revenue measures, such as asset sales, are on the table. In the end, while there may be little near-term progress on deficits, most jurisdictions will legitimately position themselves for a return to balance within five years. Resource-rich provinces could dig themselves out sooner, particularly if a more forceful global recovery translates into resurgent revenue growth starting in 2011/12.

Budgets Will Incorporate Extra Caution — Governments can be forgiven for underestimating the magnitude of the 2009 financial and economic crisis. Very few economists saw it coming. But last year’s extremely bumpy road demonstrated the value of fiscal shock absorbers. Owing to ongoing economic uncertainty, the coming year’s budgets could incorporate extra caution, with growth forecasts set well below consensus and reserve funds/contingencies providing further cushioning. Cautious forecasting implies asymmetric risks to economic and fiscal borrowing programs, limiting downside threats.

2010/11 Borrowing Programs Will Be Just as Large…if Not Larger — Despite the nascent economic recovery, still-large deficits and ongoing infrastructure stimulus will keep government bond supply elevated. Gross provincial funding requirements are tracking towards $80 billion for 2010/11, more than double the pre-crisis steady state and just as large, if not larger, than the current year’s tally. With no real relief ahead, expect provincial borrowers to, where possible, aggressively pre-fund in the final months of fiscal 2009/10. With so much to do, getting a head start can be a big advantage.

Manageable Competition from Other Sectors — In spread markets, provincial and municipal governments compete with corporate issuers for the attention of investors. On that score, controlled refinancings will likely hold the supply of corporate bonds below the demand from an investor base with still-ample cash holdings. A prospective recovery in the Maple bond market could restore a former competitive threat, however, as a number of past Maple issuers were sovereigns or quasi-sovereigns of similar (or better) credit quality to Canadian provinces. On balance, we view the competitive threat to government issuers as quite manageable.

International Markets Courted— While there’s hardly evidence of crowding out in the Canadian bond market, provincial government issuers keen to defend their domestic spreads will see international markets as a critical source of liquidity. So far this fiscal year, nearly 40% of provincial bonds have been issued abroad, with Ontario leading the charge. Ontario is the sole province to issue in the US dollar market since Spring 2008, but a growing number of issuers could head south, assuming swap markets allow that funding to be achieved not far from domestic levels.

Regional Tensions Remain— Although united in their desire to restore growth and address fiscal shortfalls, provinces differ in their approach to fiscal stimulus and restraint, securities regulation, pension reform and climate change. Tensions have flared in Atlantic Canada over the proposed sale of NB Power to Hydro-Québec, and despite some progress, barriers to interprovincial trade and labour mobility remain. While federal transfers are being protected, Ontario’s increasing equalization entitlement poses a threat to other ‘have not’ provinces, although one-time protection has dulled the impact for 2010/11.

Changing Political Fortunes— Ottawa has operated with a minority government since 2004. And while minorities can provide important checks and balances, transformative fiscal plans are often more successfully enacted with a majority government. At the provincial level, New Brunswickers go to the polls in the Fall, serving as a preview of what will be a very active political season in 2011. Fortunes ebb and flow, but recent polling hints at the possibility of a shifting political landscape in more than a few provinces, which could ultimately see fiscal planning and key policy priorities altered.

When all is said and done, Canada can look forward to 2010 with cautious optimism, confident in the relative health of its household finances, its financial institutions and its government sector. But for governments in particular, recovery won’t come easy. The hard work has only just begun.

Links to Recommended Practices approved by the CCI on June 27, 2009:

Become A GFOA Member Today

For more than a century, the GFOA has promoted the highest standards of financial management for local, provincial, and state governments. The association’s 17,600 members rely upon the GFOA to provide timely information, practical educational opportunities, high-quality professional publications, and the latest information on best practices on a variety of public finance topics. Check out GFOA’s extensive collection of best practices for Canadian governments.

In addition, a special standing committee the Committee on Canadian Issues (CCI) exists exclusively to serve the special needs of the association’s Canadian members.

For complete information on GFOA membership, visit Questions? E-mail membership

Register Now for GFOA’s Annual Conference

GFOA’s current President is Paul A. Macklem, General Manager, Corporate Sustainability, City of Kelowna, British Columbia. We are happy to announce that Len Brittain, Director of Corporate Finance for the City of Toronto, Ontario, will become President of the GFOA at the 104th Annual Conference, June 6-9, 2010, in Atlanta, Georgia. It is unprecedented for GFOA to have back to back presidents from Canada.

President-elect Brittain is just one of more than 300 public-sector Canadian finance professionals who rely on the GFOA to stay current with the latest developments in public finance, to sharpen their technical skills, and to network with colleagues from across North America.

This year’s conference will feature dozens of concurrent sessions covering a rich range of technical topics. For more details on sessions and to register, visit GFOA’s Web site at Questions? E-mail annual conference.

Take Advantage of Training Without the Travel

Visit GFOA’s Web site to check out our latest Internet offerings. Keep a watch on the Web site for upcoming courses to be announced. Register to participate at Questions? E-mail training.