Investor Presentation - Q4 2021 - Municipal Finance Authority
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Investor Presentation Q4 2021
D I SC L A IMER
This presentation, including the accompanying slides and subsequent discussion, contains
certain forward-looking information, forecasts, projections, goals and strategies (the “forward-
looking information”) with respect to revenues, funding, expenses, the financial condition, and
results of operations. This forward-looking information represents the Municipal Finance
Authority of British Columbia’s expectations or beliefs concerning future events and involves
known and unknown risks and uncertainty that could cause actual results, performance or events
to differ materially from those expressed or implied in such statements. This material is for
information purposes only.
2
INTRODUCTION
• Formed in 1970 under the Municipal Finance Authority of British Columbia Act
• BCMFA is the only Public Sector Regional Infrastructure Agency in the world that
has direct and unfettered taxation powers
• Long term debt ratings of AAA/Aaa/AAA by S&P/Moody’s/Fitch
• Infrastructure financing to local government in the Province of British Columbia
- Access to stable and lowest cost funding for sewer, water, roads, public
works, parks, etc.
• Provide competitive investment alternatives and quality financial education
• We have consistently been profitable from operations and benefit from direct
taxation power and a stable and large capital base to support our lending.
• Our borrowing program emphasizes predictable and large public offerings:
BCMFA is the benchmark municipal issuer in Canada - offering the highest credit
quality and most liquid bonds in the sector
3
LINES OF BUSINESS
MFA Line of
Strategic Fit Description Market Positioning
Business
Long-Term Core Business MFA’s core business activity No competitors. By legislation, all
Financing is providing long-term long-term borrowing by
financing to local municipalities and regional districts
governments. in British Columbia must be
provided by MFA.
Short-Term Secondary revenue MFA provides optional short- Low competition. MFA is able to
Financing stream (non-core) term financing to local offer highly competitive short-term
governments. lending rates to BC local
governments.
Pooled Secondary revenue MFA provides optional Highly competitive. However, MFA is
Investment stream (non-core) investment products to local able to provide local governments
Products governments through its with broad exposure to different
pooled fund offerings. asset classes (vs. strict limitations
set out in the Community Charter).
4
GOVERNANCE
• 28 Regional Governments made up of
British Columbia – Local Government
municipalities, cities, towns & villages
• 39 Members appointed by local government
Board of Directors
• Responsible for reviewing loans, electing trustees
• Trustees responsible for overseeing operations and
10 Trustees management
• Authorize debt issuance
• Manage loans, debt and investments
MFA Employees • Balance sheet of $10.1bn
• Complement of 17 professionals
5
L E G I S L ATI V E C R E D I T S T R E N G T H S
Taxation Authority
Equally applied to all taxable land and improvements in BC
• Annual operational tax levied every year
• Unlimited taxation authority to replenish Debt Reserve Fund
• BCMFA must increase taxes to replenish Debt Reserve Fund in certain circumstances
• Senior-level government approval not required – Trustees of BCMFA approve
• Property values assessed of approximately $1.8 trillion
Joint Liability
Borrowers’ long-term debt with BCMFA is a Regional District liability
• Borrowers guarantee each other’s debt in event of default
• Joint and several guarantees never been applied (zero losses)
Investments
Sinking Fund Methodology
• Semi-annual billing of interest to match debenture coupons
• Annual billing of principal for debt retirement
• $4.5 billion in investments (52% of gross long-term debt)
6
RISK CAPITAL MANAGEMENT
• BCMFA has over $200 million of immediately available on balance sheet capital, yet has exhibited no
credit losses in its 50-year history
• In 2019 BCMFA adopted a policy and framework outlining a target for on-balance sheet risk capital, the
retention of operating surplus, and the ongoing management of capital
The Strategic Retention Fund ($96 million) and Debt Reserve Fund ($120 million) collectively
comprise total capital ($216 million as at December 31, 2020).
The MFA has self imposed the following requirements on itself. The Capital Adequacy Model targets
a capital level for the greater of a non-risk capital assessment ($202M) and a risk-based capital
assessment ($171M):
7BC LOCAL GOVERNMENT LEGISLATIVE COMPLIANCE
Balanced Budgets
• Under provincial legislation, municipalities may not plan for a deficit
Transparency and Disclosure
• Audited financial statements - PSAB, by May 15
• Annual Report - presented to residents, by June 30
Long-Term Capital and Financial Planning
• Five year financial plans - public consultation, by May 15
8BC LOCAL GOVERNMENT BORROWING FRAMEWORK
Debt Limits Only 25% of recurring revenues eligible to service debt costs
Taxpayer All long-term municipal debt in BC requires a public approval process
Legislation requires the Provincial Inspector to verify:
• Borrowings are legal and within debt limits
Province of BC
• Municipalities have the financial ability to service debt
Regional District Long-term debt is approved by the Regional District
• Oversight and review
• Due diligence and statutory reviews
• Management credit review
MFA
• Trustees and Members review loan requests
• Members authorize the sale of securities
9BRITISH COLUMBI A’S DIVERSE ECONOMY
Educational
Services
Natural Resources 5.2%
Real Estate, Rental
5.7% & Leasing
17.6%
Public Administration
5.7%
Finance & Insurance
5.8%
Transportation & Other
Warehousing 14.5%
6.4%
Professional,
Scientific &
Technical Services
6.5%
Wholesale & Retail
Trade
Manufacturing 9.5%
6.8%
Health Care & Social Construction
Assistance 8.9%
7.4%
Note: 2019 figures shown
Source: British Columbia Financial and Economic Review – 80th Ed. (September 2020) 10MFA’ S ESG APPROACH
• Since inception in 1970, MFA’s main mandate of providing low-cost lending for
local government capital projects has provided tremendous benefits to
communities and citizens across British Columbia
• MFA has recently committed to increasing its efforts on collecting,
standardizing and disseminating more granular data on its lending activities to
assist the investment community
• MFA will now provide “Use of Proceeds” disclosure in conjunction with all future
bond issues and in our annual report every year
• MFA’s initial approach will be to map its use of proceeds to UN SDG’s, Green
Bond Principles and Social Bond Principles
• Management is committed to helping improve both local government and
MFA’s disclosures over time - in conjunction with expected improvements of
global ESG reporting standards
• MFA currently has no intention of issuing certified labeled bonds. The pooled
nature of our borrowing supports multiple loans to numerous Members for any
given single bond issue. While we are fully committed to mapping our borrowing
to specific “Uses of Proceeds” and UN PRI categories, the ‘impact’ of that lending
along ESG categories is challenging due to lack of standardization and/or capacity
of our smaller Members to report back on comparable Key Performance Indicators
11MFA’ S LENDING MEETS ESG CRITERIA
2021 Issuance Split by Purpose ($1.975bn) 2021 Issuance Split by UN SDG ($1.975bn)
MFABC was created to increase the ability of local governments to enhance societal benefits across BC
BC’s local governments have a long tradition of focusing on sustainability and social equity
Almost half the proceeds from MFA’s 2021 borrowing program were used to support regional water
related and sewer/drainage infrastructure.
12R E C E N T LO N G - T E R M DE B T I S S U A N C E
C$mm Date Term • Typically issue new 10-year in
$350 Sept 14, 2021 20 spring (April) and fall (September)
$475 May 12, 2021 5 - Will often issue a 10.5-year
$500 May 12, 2021 10 and re-open in 6 months
$450 March 30, 2021 5
$200 March 30, 2021 10 • New 5-year issues are typically
completed “off-cycle” and are
$125 Sep 22, 2020 5 aligned with existing debt
$615 May 20, 2020 5 maturities
$280 March 26, 2020 5
$235 Sep 25, 2019 10 • Focused on building benchmark
$800 May 21, 2019 5 issues over $500mm
$170 April 1, 2019 10.5 - Currently 9 outstanding
issues >$500mm
$605 Nov 16, 2018 5
- Well defined curve out to
$555 Sep 12, 2018 10
2031
$410 April 10, 2018 5
$170 April 10, 2018 10.5
$500 Nov 21, 2017 5
13ANTI CIPATE D BORROWI NGS
Year 2022 2021
• $450mm completed in March
2021.
5 Year ($mm) $650 $950
• $475mm completed in May
2021.
• New $200mm 10 year completed
$675 $800 in March 2021.
10 / 20 Year
to to • Reopened MFA 2.30% April 15,
($mm)
$1,125 $1,200 2031 bonds for an additional
$500mm May 2021.
• New $350mm 20 year completed
Sept 2021.
$1,325 $1,750
Total ($mm) to to
$1,775 $2,150 • Funding now complete for 2021
14MUNICI PA L BOND SECOND A RY TRADI NG VOLUME
2020 MUNICIPAL SECONDARY TRADING VOLUME ($ billions)
$15.1
$12.2
$6.8
$2.0
$1.4
$0.7 $0.7 $0.6 $0.6 $0.5 $0.2 $0.1 $0.0
BCMFA Muni A Muni B Muni C Muni D Muni E Muni F Muni G Muni H Muni I Muni J Muni K Muni L
2019 MUNICIPAL SECONDARY TRADING VOLUME ($ billions)
$10.1
$9.4
$5.0
$2.6
$0.9 $0.5 $0.5 $0.5 $0.5 $0.5 $0.2 $0.2 $0.1
BCMFA Muni A Muni B Muni C Muni D Muni I Muni H Muni G Muni F Muni J Muni E Muni K Muni L
Note: The 12 unnamed municipalities shown above include: First Nations Finance Authority, Halton, Montreal, Ottawa, Peel, Quebec, TransLink, Toronto, Vancouver, Winnipeg,
Waterloo and York, with combined trading volume of $31.1bn in 2019 and $41.1bn in 2020. Total Canadian municipal trading volume per IIROC in 2019 of $36.0bn and in 2020 of
$45.8bn includes primary issuance of unrated municipal debt.
Source: BMO Capital Markets, Scotia Capital, Casgrain Capital Markets, CIBC World Markets, Laurentian Bank Securities, National Bank Financial, RBC Capital Markets, TD Securities
and IIROC MTRS 2.0 Reporting.
15IMPLIED PROVINCIAL BOND SECONDARY TRADING VOLUME
(1)
2020 PROVINCIAL SECONDARY TRADING VOLUME ($ billions)
(2)
$939.3
$315.8
$71.8
$46.3
$23.5 $15.1 $14.1 $11.2 $9.9 $8.7 $1.2
Ontario Quebec Alberta BC Manitoba BCMFA Saskatchewan New Newfoundland Nova PEI
Brunswick Scotia
(1)
2019 PROVINCIAL SECONDARY TRADING VOLUME ($ billions)
(2)
$744.3
$255.8
$48.9
$30.7
$19.9
$10.7 $10.1 $9.9 $7.5 $7.4 $1.1
Ontario Quebec Alberta BC Manitoba Saskatchewan BCMFA New Nova Newfoundland PEI
Brunswick Scotia
Note: (1) IIROC provides specific secondary trading volume figures for Alberta, BC, Ontario, and Quebec and a consolidated figure for “Total Provinces”. Secondary trading
volumes shown in the charts above for Manitoba, New Brunswick, Newfoundland, Nova Scotia, PEI and Saskatchewan are estimates based on their respective outstanding debt
weighted pro-rata share of the “Total Provinces” category. (2) Ontario trading volume on chart is not shown to scale.
Source: Bloomberg, BMO Capital Markets, Scotia Capital, Casgrain Capital Markets, CIBC World Markets, Laurentian Bank Securities, National Bank Financial, RBC Capital Markets,
TD Securities and IIROC MTRS 2.0 Reporting.
16(1)
M FA B C B O N D L I Q U I D I T Y: S E C O N D A R Y T R A D I N G T U R N O V E R
$2,835
4.0x
Outstanding Bond Size ($ millions)
2020 Secondary Trading Volume ($ millions)
Secondary Trading Turnover (ratio)
$1,971
3.8x
$1,501
1.9x $1,441
3.5x
$1,256
$1,176 3.5x
2.4x
$1,031
1.7x
$800
$745 $725
$710 1.5x $670
$605 $610
$522 $485
$515 $500 $497
$474 1.3x
2.6x $410 1.5x $410 $405
$377
$339 $335 $359
$290 $295 0.5x $282
1.2x $264
0.4x 0.4x 0.7x
$181
(2) (2)
4.45% (2) 1.65% 4.15% 3.35% 2.15% 2.60% 3.75% 2.80% 2.15% 2.95% 1.10% 2.65% 2.50% 4.95% 3.05% 2.55%
01-Jun-2020 19-Apr-2021 01-Jun-2021 01-Jun-2022 01-Dec-2022 23-Apr-2023 26-Sep-2023 03-Dec-2023 03-Jun-2024 14-Oct-2024 01-Jun-2025 02-Oct-2025 19-Apr-2026 01-Dec-2027 23-Oct-2028 09-Oct-2029
Throughout 2020, the outstanding stock of MFABC bonds turned over
1.9x, with large benchmark issues turning over up to 4.0x
Notes: (1) Includes MFA bonds with a time-weighted average outstanding balance >$150mm for the calendar year 2020.
(2) Indicates outstanding bond size was adjusted for maturity or new-issuance/re-opening part way through the calendar year 2020.
Source: BMO Capital Markets, Scotia Capital, Casgrain Capital Markets, CIBC World Markets, Laurentian Bank Securities, National Bank Financial, RBC Capital Markets, and TD
Securities. 17MFABC LONG-TERM DEBT DISTRIBU T ION
2020 2021
By Investor
Type:
Germany 2% Sw itzerland 1%
Norw ay 4%
England 5%
United
States 7%
By
Geography:
Canada 81%
18COMMERCIAL PAPER ACTIVI T Y
• $700 million approved program size
• Rated A-1+ / P-1 by S&P/Moody’s
• Strong dealer network of 7 banks
• Typically priced around 4 to 6 basis points back of provincial issuance
levels
• Issued every Wednesday in 1-month and 3-month terms
19COMMERCIAL PAPER DISTRI B U TION
2019 2020 2021
Corporates Corporates Government Government
Government
1% 3% 2% 6%
7%
Pension
Investment Asset Investment
By Investor Type: Managers Managers Investment Pension
Managers
26% 37% 53%
Managers Asset
Pension 58% Managers
Asset 41%
Managers
65%
Manitoba Manitoba Quebec Saskatchewan
International 4% International 2% 7%
International 3%
8% 9%
10%
Alberta Ontario
Quebec 29% Quebec 31% Ontario
10% 13% 36%
By Geography: British
Columbia
10%
British
Ontario
Columbia
22%
19%
British
Columbia Alberta Alberta
27% 26% 34%
Note: All figures shown as at February 28 20LONG-TERM LOAN PORTFOLIO DIVERSIFICATION
Northeast
Net Loans: $162mm (3%)
Property Value: $17bn (1%)
Population: 0.07mm
Net Loans Per Capita: $2,262
Interior
North Coast Net Loans: $91mm (2%)
Net Loans: $68mm (1%)
Property Value: $25bn (1%)
Property Value: $14bn (1%)
Population: 0.17mm
Population: 0.10mm
Net Loans Per Capita: $538
Net Loans Per Capita: $696
Central Interior
Net Loans: $738mm (15%)
Property Value: $146bn (8%)
Vancouver Island Population: 0.60mm
Net Loans: $890mm (19%) Net Loans Per Capita: $1,233
Property Value: $241bn (14%)
Population: 0.87mm
Net Loans Per Capita: $1,022
Metro Vancouver Southeast
Net Loans: $2,696mm (56%) Net Loans: $158mm (3%)
Property Value: $1,297bn (73%) Property Value: $37bn (1%)
Population: 3.10mm Population: 0.16mm
Net Loans Per Capita: $869 Net Loans Per Capita: $977
21LONG-TERM LOAN PORTFOLIO COMPOSITION
LOAN SPLIT BY REGION LOAN SPLIT BY BORROWING TYPE
100% 1% 2% 2% 1% 1% 1% 100%
3% 3% 3% 3% 3% 3%
3% 3% 3% 2% 2% 2% 13% 12% 13%
4% 3% 16% 15% 15%
90% 5% 4% 4% 4% 90%
15% 15%
80% 16% 16% 15% 16% 80% 15% 11% 10%
19% 17% 12%
70% 70%
11%
Loan Split by Type (%)
19% 19% 9%
8% 20% 23%
Loan Split by Region (%)
17% 17% 18% 18% 18%
60% 60%
50% 50% 24% 23%
23%
20% 19% 18%
40% 40%
30% 30%
55% 55% 54% 55% 55% 56%
20% 20% 38%
37% 37% 35% 34%
34%
10% 10%
0% 0%
2015A 2016A 2017A 2018A 2019A 2020A 2015A 2016A 2017A 2018A 2019A 2020A
Metro Vancouver Island Central Interior Property Tax Water Sewer Transit Hospital
Northeast Interior Southeast
North Coast
22BC LOCAL GOVERNMENT LOAN SERVICING ABILITY
Revenue (C$Bn) - LHS Interest Expense as % of Reserves - RHS
Expenses (C$Bn) - LHS Interest Expense as % of Revenue - RHS
Reserves (C$Bn) - LHS
$18.0 14.0%
$16.1
$16.0 $15.5
12.0%
$14.2 $14.2
$14.0 $13.7
$12.6 $12.5 10.0%
$12.1 $11.8$12.1
$12.0 $11.3
$10.4 $10.8 $10.7
$10.1
$9.7 8.0%
Percent (%)
$10.0
C$ Billions
$8.1
$8.0 $7.2
6.0%
$6.0 3.8%
3.3% 4.0%
$4.0 2.7%
2.4%
2.0% 1.7%
2.0%
$2.0 2.2% 2.1% 1.9% 1.8% 1.6% 1.5%
-- 0.0%
2014A 2015A 2016A 2017A 2018A 2019A
23CREDI T RATI NGS
Long-Term Ratings
Agency Rating Outlook Date
S&P AAA Stable May 15, 2020
Moody’s Aaa Stable Feb 2, 2021
Fitch AAA Stable April 26, 2021
Short-Term Ratings
Agency Rating Outlook Date
S&P A-1+ Stable May 15, 2020
Moody’s P-1 Stable Feb 2, 2021
24Peter Urbanc
peter@mfa.bc.ca (250) 419-4760
Chief Executive Officer
Matt O’Rae
matt@mfa.bc.ca (250) 419-4761
Chef Financial Officer
Shelley Hahn
shelley@mfa.bc.ca (250) 419-4763
Chief Services Officer
217 – 3680 Uptown Boulevard
Victoria, British Columbia
Canada, V8Z 0B9
www.mfa.bc.ca
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