Capital Budget 101

This page explains what a capital budget is, how it works and how the City plans and funds major infrastructure projects.

What is a Municipal Capital Budget?

Municipal budgets have two parts: operating and capital. These components are interdependent, meaning decisions in one affect the other. Capital budget decisions can affect the operating budget and, in some cases, the reverse.

The capital budget plans for the acquisition and replacement of tangible capital assets. These are significant expenditures that support municipal services for more than one year.

Under the City’s Tangible Capital Asset Policy, the capital budget does not include repair and maintenance costs. These are part of the operating budget.

How the Capital Budget is Developed

The capital budget is presented as an annual list of projects, along with a funding strategy, for Council’s review and approval.

The budget is guided by the City’s Asset Management Plan and informed by several plans and studies, including:

• Strategic Plan
• Transportation Master Plan
• Roads Needs Study
• Wet Weather Master Plan
• Parks and Recreation Master Plan
• Infrastructure Phasing Strategy
• Development Charges Background Study

Proposed capital projects are evaluated based on:

• Public safety and legislation
• Service levels
• Strategic initiatives
• Financial implications
• Economic and growth impacts
• Community support
• Other factors, such as timing and project readiness

The City also considers key budget pressures, which may lead to deferring lower-priority projects:

• Non-discretionary pressures and inflation
• Debt levels
• Availability of reserves and reserve funds
• Staff and project management capacity
• Infrastructure gap and future needs
• Third-party or community partner obligations

The capital budget is typically developed and approved in the year before it is implemented, in line with the City’s Budget and Financial Controls Policy.

Subsequent Reporting

Once approved, departments begin spending in accordance with the City’s Purchasing Policy.

Tangible capital assets are reported in the City’s audited financial statements and appear on the statement of financial position.

The City also reports on these assets through its annual Financial Information Return to the Ministry of Municipal Affairs and Housing.

In addition to budgeted assets, the City includes contributed assets. These often come from new subdivisions, where infrastructure such as roads, streetlights and water pipes is transferred to the City. These assets are added to the Asset Management Plan for future maintenance, rehabilitation or replacement.

Legislative Requirements

Municipal Act

Under the Municipal Act, 2001, the City must balance its budget each year. In simple terms, revenues must equal expenditures.

To balance the capital budget, the City may:

• Increase contributions to capital reserve funds through property taxes or user rates
• Use application-based grant programs, where available
• Defer projects to future years
• Reduce capital spending by adjusting programs or services
• Issue debt

Asset Management

The City continues to improve capital planning to better serve the community and meet the requirements of Ontario Regulation 588/17 on asset management.

In 2024, Council approved an updated Asset Management Plan. The plan focuses on the condition of core infrastructure, service levels and required strategies. It also includes a financial plan to address the City’s infrastructure funding gap, a challenge shared by municipalities across Ontario.

Funding Sources

Capital funding varies each year based on approved projects. Primary funding sources include:

• Discretionary Reserves and Reserve Funds – Funds set aside for specific purposes, as approved by Council and guided by City policies. Contributions typically come from the operating budget, including property taxes, user rates and other revenues.
• Development Charges – Fees collected mainly from developers when building permits are issued. These funds support capital and some operating costs needed to accommodate growth.
• Other Obligatory Reserve Funds – Annual funding through the Canada Community Building Fund (formerly the federal Gas Tax) and annual provincial Gas Tax funding, restricted to transit.
• Grants and Subsidies – Annual provincial funding through the Ontario Community Infrastructure Fund and application-based, project-specific grants.
• Debt – Used to address funding gaps as approved by Council. Debt repayments are limited by the Annual Repayment Limit and the City’s internal policy.

Historical Capital Budgets

Detailed capital budgets are available on the Budget and Financial Reports webpage.