Ontario Mortgage and Housing Corporation
Statement of Financial Position as at March 31, 2018

  March 31, 2018
($ 000)		 March 31, 2017
($ 000)
Liabilities - -
Accounts payable and accrued liabilities (Note 6) 6,270 8,373
Long-term debt (Note 7) 217,513 275,654
Long-Term Environmental Remediation (Note 3) 43,683 44,433
  267,466 328,460
Financial Assets - -
Cash (Note 4) 1,714 1,560
Accrued interest from Universities and Colleges 44 60
Due from Province of Ontario 6,160 8,248
Investments in student housing properties (Note 5) 2,440 3,301
  10,358 13,169
Net Debt and Accumulated Deficit (257,108) (315,291)
Contingent Liabilities (Note 8)    

The accompanying notes are an integral part of these financial statements.

On behalf of the Board:

Janet Hope, Chair
Keith Extance, Chief Executive Officer

Statement of Operations ENG - insert after Statement of Financial Position (was omitted)

Ontario Mortgage and Housing Corporation
Statement of Operations for the year ended March 31, 2018

  Budget
(k$)		 2018
(k$)		 2017
(k$)
Revenue - - -
Subsidies from Province of Ontario: Debt service obligations 73,100 73,061 81,632
Subsidies from Province of Ontario: Environmental remediation (Note 3) 11,500 2,500 9,871
Affordable Home Ownership Program (AHP) mortgages –  113 85
Interest received from student housing 200 191 245
Miscellaneous 10 39 32
Total revenues 84,810 75,904 91,865
Expenses - - -
Debentures interest: Devolved properties 15,800 15,781 20,115
Debentures interest: Student housing 200 191 245
Environmental remediation (Note 3) 400 1,748 321
Miscellaneous 10 1 1
Total expenses 16,410 17,721 20,682
Excess of Revenues over Expenses (Note 9) 68,400 58,183 71,183

The accompanying notes are an integral part of these financial statements.

Ontario Mortgage and Housing Corporation
Statement of Net Debt and Accumulated Deficit for the year ended March 31, 2018

  Budget
($ 000)		 2018
($ 000)		 2017
($ 000)
Net Debt and Accumulated Deficit
beginning of year		 (315,291) (315,291) (386,474)
Excess of Revenues over Expenses (Note 9) 68,400 58,183 71,183
Net Debt and Accumulated Deficit
end of year 		(246,891) (257,108) (315,291)

The accompanying notes are an integral part of these financial statements.

Ontario Mortgage and Housing Corporation
Statement of Cash Flows for the year ended March 31, 2018

  2018
($ 000)		 2017
($ 000)
Operating transactions - -
Excess of Revenue over Expenses 58,183 71,183
Changes in non-cash working capital: Decrease in Accounts Payable and Accrued Liabilities (2,103) (3,489)
Changes in non-cash working capital: Decrease in Long-Term Environmental Remediation (750) (9,550)
Changes in non-cash working capital: Decrease in Accrued Interest from Universities and Colleges 16 10
Changes in non-cash working capital: Increase in Due from Canada Mortgage and Housing Corporation - 6
Changes in non-cash working capital: Decrease in Due from the Province of Ontario 2,088 3,432
Cash provided by operating transactions 57,434 61,592
Financing Transactions - -

Long-Term Debt Repayment – Province of Ontario

 (6,067) (6,602)

Long-Term Debt Repayment – Canada Mortgage and Housing Corporation

 (52,074) (55,721)
Cash applied to financing transactions (58,141) (62,323)
Investing Transactions - -
Collection of Ontario Student Housing Long-Term Debt 861 806
Increase in Cash 154 75
Cash Balance at Beginning of Year 1,560 1,485
Cash Balance at End of Year 1,714 1,560

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements for the year ended March 31, 2018

1. Nature of operations

The Ontario Mortgage and Housing Corporation, formerly the Ontario Housing Corporation, was established without share capital in 2006 under the Ontario Mortgage and Housing Corporation Act (OMHCA), as a provincial government agency. The Corporation’s responsibilities include maintaining debt retirement obligations, debt service administration and satisfying obligations related to former public housing. The Corporation also carries out any other duties assigned by the Minister of Housing in respect of matters under the OMHCA.

In addition, the Corporation has the authority to manage, administer and deliver the Affordable Home Ownership Program, set out in the Canada-Ontario Affordable Housing Program Agreement, and to manage, administer and deliver other prescribed programs.

Under the Social Housing Reform Act, 2000, the Corporation transferred, for no consideration, ownership of public housing units to Local Housing Corporations (LHCs) which are controlled by Municipal Service Managers. The Corporation retained its Investment in Student Housing and certain other assets, and responsibility for administering the Corporation’s debts, and contingent liabilities. The Ontario Ministry of Municipal Affairs and Housing provides the Corporation with subsidies to cover its debt service payments and other expenses.

The Corporation is also responsible for managing the marketable and forgivable loans and mortgages that were owned by Ontario Mortgage Corporation prior to its dissolution and that were transferred to the Corporation on April 1, 2015.

As an agent of Her Majesty in right of Ontario, the OMHC is exempted from federal and provincial income taxes under the Income Tax Act and the Taxation Act.

2. Significant accounting policies

Significant accounting policies followed by the Corporation are summarized below:

A. Basis of accounting

These financial statements are prepared by management in accordance with Canadian public sector accounting standards for provincial reporting entities established by the Canadian Public Sector Accounting Board.

B. Revenues

Subsidies from the Province of Ontario (the Province) are accounted for as revenue when received, which is when the related expenses are incurred and when the environmental remediation liability is settled.

C. Expenses

Expenses are reported on an accrual basis as incurred. These expenses include debt servicing cost such as interest expenses.

D. Financial instruments

The Corporation’s financial assets and liabilities are accounted for as follows:

  • Cash is subject to insignificant risk of change in value so the carrying value approximates fair value.
  • Accrued Interest from Universities and Colleges, due from the Province, Investments in Student Housing Properties (note 5) and Interest Receivable are measured at amortized cost.
  • Long-Term Debt, which consists of loans from the Province and Canada Mortgage and Housing Corporation debentures (note 7), is measured at amortized cost.
  • Accounts Payable and Accrued Liabilities (note 6) are measured at cost.

E. Accumulated deficit

The Accumulated Deficit that resulted from the transfer of properties to LHCs for no consideration is reduced each year by an amount equal to the portion of the subsidy from the Province required to cover principal payments on the Corporation’s long-term debt. The Accumulated Deficit is also reduced by the revenues provided by the Province to settle the Corporation’s Long-Term Environmental Remediation liability.

F. Use of estimates

Preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts. Actual results could differ from those estimates. Significant estimates include Long-Term Environmental Remediation Liability and Contingent Liabilities for Contaminated Sites.

3. Long-term environmental remediation

The balance in the Liability for contaminated sites as at March 31, 2018 is $43.7 million.

The liability is management’s best estimate based on environmental investigations performed by independent experts and reflects the costs required to remediate the sites. Remediation is expected to occur within the next six years.

There are two commitments as at March 31, 2018 - the multi-year Regent Park redevelopment project and the Alexandra Park redevelopment.

Regent Park, formerly owned by the Corporation, is being re-developed by the Toronto Community Housing Corporation (TCHC). The site has soil contamination as a result of historical industrial uses. Based on the redevelopment plan prepared by TCHC, it is expected that phases 2 and 3 will be completed by 2020-2021 after which phases 4 and 5 will start. Current cost estimates, based on site testing reports, to complete phases 2 and 3 are $12.0 million and, for phases 4 and 5 are $29 million.

In June 2013, TCHC advised that an Environmental Site Assessment (ESA) identified soil and groundwater contamination on the Alexandra Park site. In March 2014, TCHC requested that the Corporation provide financial assistance for soil remediation work. Cost estimates to remediate the contamination total $3.7 million.

The Long-Term Environmental Remediation liability balance is comprised of the following:

  ($ 000)
April 1, 2017 Opening Balance 44,433
Increase: Revised Estimate 1,750
Decrease: Subsidy from Province for Remediation (2,500)
Balance as at March 31, 2018 43,683

Cumulative costs for site remediation to March 31, 2018 are $35.1 million (2017 – $32.6 million).

4. Cash

The cash balance is made up of the following:

  March 31, 2018
($ 000)		 March 31, 2017
($ 000)
Cash 542 500
Internally Restricted Cash 1,172 1,060
Total Cash Balance 1,714 1,560

The internally restricted cash includes monies received from the Affordable Housing Program (AHP) which are to be used under the OMHCA for housing purposes only.

5. Investments in student housing properties

The Corporation’s investments in student housing properties represents funds advanced to universities and colleges to cover building costs for student accommodation projects. Each advance is associated with a specific long-term debt obligation of the Corporation and each educational institution makes semi-annual payments to the Corporation equal to the payments on the Corporation’s corresponding long-term debt. When the debt is fully repaid, any related encumbrances in favour of the Corporation on the properties are discharged.

  March 31, 2018
($ 000)		 March 31, 2017
($ 000)
Original Cost 35,115 35,115
Less: Accumulated Capital Repayments 32,675 31,814
Total 2,440 3,301

6. Accounts payable and accrued liabilities

Most of the Accounts Payable and Accrued Liabilities balance is comprised of accrued interest payable on the Corporation’s Long-Term Debt and amounts owing for environmental remediation costs incurred prior to year end.

7. Long term debt

Long term debt is comprised of the following:

  March 31, 2018
($ 000)		 March 31, 2017
($ 000)
Canada Mortgage and Housing Corporation 194,867 246,941
Loans Repayable to the Province 22,646 28,713
Total 217,513 275,654

The Corporation borrowed funds from the Canada Mortgage and Housing Corporation (CMHC) and received capital funds from the Province to finance investments in real property – now devolved to the LHCs. The capital funds provided by the Province are Loans Repayable to the Province, with interest and principal payments being made to the Ontario Ministry of Finance.

Interest on both the CMHC debt and the Loans Repayable to the Province are payable at various rates based on individual agreements – the average rates are 5.69% and 6.70% respectively (2017 – 5.93% and 6.81% respectively). Interest expense for year ended March 31, 2018 totaled $16.0 million; (2017 – $20.4 million), $1.9 million (2017 – $2.4 million) of which was paid to the Province.

The interest expense is included in Debentures Interest in the Statement of Operations and is off-set by the subsidy from the Ministry.

Scheduled payments over the next five years and thereafter are as follows:

  Gross Payments
($ 000)		 Principal Payments
($ 000)
2019 63,858 53,192
2020 41,483 34,604
2021 31,410 26,799
2022 22,327 19,381
2023 15,064 13,321
Thereafter 16,250 14,764

8. Contingent liabilities

(A) Guaranteed debt

The Corporation previously entered into loan insurance agreements with CMHC pertaining to mortgage loans on projects funded under various provincially-funded non-profit housing programs administered by the Ministry. Under these agreements, CMHC has insured mortgage loans made by lenders approved under the National Housing Act for the purpose of purchasing, improving, constructing or altering housing units. While the insurance is provided by CMHC, the Corporation is liable to CMHC for any net costs, including any environmental liabilities, incurred as a result of the loan defaults.

The Corporation would request that the Ministry reimburse any costs incurred by the Corporation. As of March 31, 2018, there were $4.1 billion (2017 – $4.2 billion) of mortgage loans outstanding on provincially funded projects. To date, there have been no claims for defaults on the insured mortgage loans.

(B) Contaminated sites

The Corporation retains potential liability for cleaning up environmental contaminants of former public housing properties under the Environmental Protection Act, as noted in the former Social Housing Reform Act, 2000 and maintained in the Housing Services Act, 2011. The Ministry reimburses the Corporation for costs incurred.

The Ministry completed its review in 2014-15 of the more than 1,500 former OMHC sites in order to better refine potential liabilities for environmental contamination. The potential liability is for soil and groundwater contaminants as defined under the Environmental Protection Act. Estimates were developed using a risk-based approach that analyzed current and historical land uses, local redevelopment potential, construction date and building type to assess potential environmental risk. A total of 50 sites were identified as having a high degree of risk for potential contamination. These 50 sites represent a potential contingent liability of approximately $295 million. The need for remediation would be confirmed if and when a Municipal Service Manager has identified a site for redevelopment.

9. Excess of revenues over expenses

The Corporation derives its revenues from two subsidies from the Province: the debt service obligation subsidy and the environmental remediation subsidy. The debt service obligation subsidy covers the interest on long-term debt included in Corporation’s expenses, and the remaining portion represents the excess of revenues over expenses that is applied to the principal payments on the long-term debt.

Similarly, the environmental remediation subsidy covers the environmental remediation costs included in the Corporation’s expenses, and the remaining portion represents the excess of revenues over expenses that is applied to offset the site remediation costs that are accounted for in the Long-Term Environmental Remediation obligation as described in note 3.

10. Related party transactions

The Corporation is controlled by the Province and is therefore a related party to other organizations that are controlled by or subject to significant influence by the Province. Transactions with related parties were:

(A) Loans to Ontario colleges

As of March 31, 2018, the outstanding balance due from colleges with respect to loans for Student Housing Properties (Note 5) was $446,000 (2017 - $518,000). Total interest and principal payments received from colleges were $108,000 (2017 - $108,000).

(B) Administrative expenses

The Ministry provides administrative, financial, and program services to the Corporation at no charge. The cost for these services amounted to $150,000 (2017 - $150,000). All Board members are senior civil servants and support services are provided by staff of the Ministry in the normal course of their duties.

11. Risk management

The Corporation is not exposed to significant credit risk as amounts classified as loans and receivables are due primarily from the Province and publicly-funded Ontario colleges and universities. The Corporation is also not exposed to significant liquidity risk or interest rate risk. These risks are borne by the Province.