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HomeMy WebLinkAboutFCS Minutes - 2017-11-20 - 2018 Operating BudgetFINANCE &CORPORATE SERVICES COMMITTEEMINUTES NOVEMBER 20, 2017 CITY OF KITCHENER The Finance and Corporate Services Committee met this date commencing at 9:09 a.m. Present: Councillor S. Davey - Chair Mayor B. Vrbanovic and Councillors F. Etherington, Y. Fernandes, K. Galloway- Sealock, J. Gazzola, B. Ioannidis, Z. Janecki, S. Marsh and D. Schnider. Staff: D. Chapman, Chief Administrative Officer M. May, Deputy CAO, Community Services M. Goldrup, Interim Deputy CAO, Finance & Corporate Services C. Fletcher, Interim Executive Director, Infrastructure Services J. Readman, Interim Executive Director, Infrastructure Services J. Miller, Executive Director, Office of the CAO C. Bluhm, Executive Director Economic Development R. Hagey, Director, Financial Planning J. Evans, Director, Revenue/Deputy City Treasurer H. Gross, Director, Engineering K. Kugler, Director, Enterprise D. McGoldrick, Director, Operations Environmental Services G. St. Louis, Director, Utilities K. Carmichael, Interim Director, Transportation Services D. Fagerdahl, Manager, Financial Planning P. McCormick, Manager, Parking Enterprise T. Gaber, Manager, Operations (Utilities) D. Persaud, Manager, Gas Supply Operations & Regulations R. Hamilton, Senior Financial Analyst J. Bunn, Manager, Council and Committee Services/Deputy City Clerk D. Saunderson, Committee Administrator 1. FCS-17-188 - 2018 OPERATING BUDGET The Committee considered Finance and Corporate Services Department report FCS-17-188, dated October 16, 20178 Operating Budget proposing a tax levy increase of 1.7%, together with nine Operating Budget Issue Papers. Councillor J. Gazzola brought forward a motion to allow members of the Committee to introduce motions related to the 2018 Operating Budget prior to Final Budget Day, which was voted on and LOST on a recorded vote, with Councillors J. Gazzola, Y. Fernandes and Z. Janecki voting in favour; and, Mayor B. Vrbanovic and Councillors B. Ioannidis, D. Schnider, S. Davey, S. Marsh, K. Galloway-Sealock and F. Etherington voting in opposition. Councillor P. Singh was absent and accordingly did not vote. Councillor Y. Fernandes brought forward a motion to take recorded votes on all actions taken by the Committee this date, which was voted and was Carried on a recorded vote, with Mayor B. Vrbanovic and Councillors B. Ioannidis, S. Davey, S. Marsh, K. Galloway-Sealock, F. Etherington, J. Gazzola, Y. Fernandes and Z. Janecki voting in favour; and, Councillor D. Schnider voting in opposition. Councillor P. Singh was absent and accordingly did not vote. GENERAL OVERVIEW Mr. D. Chapman presented a general overview of the Operating Budget, advising staff are proposing a tax rate increase that is at the rate of inflation, as well as a recommended combined utility rate increase substantially lower than previously forecasted. Mr. R. Hagey advised the 2018 Operating Budget highlights include: affordability and sustainability; investing in infrastructure; and, creating community. It was noted the proposed tax rate increase of 1.7% is at the rate of CPI inflation, and the proposed utility rate increase of 6.5% is the lowest sustainable option Council discussed as part of the Water Infrastructure Program review in September 2017. BOARDS FINANCE & CORPORATE SERVICES COMMITTEEMINUTES NOVEMBER 20, 2017 - 46 - CITY OF KITCHENER 1. FCS-17-188 - 2018 OPERATING BUDGET Kitchener Public Library (KPL) Ms. Mary Chevreau, Kitchener Public Library (KPL), was in attendance to respond to questions from the Committee. Centre in the Square (CITS) Messrs. Bruce Gordon, Rob Sonoda and Ms. Deb Daub, Centre in the Square (CITS), were in attendance and responded to questions from the Committee. Mr. Gordon advised the CITS anticipates needing additional transition funding in the amount of $182,870 from the City in 2018 noting Issue Paper Op-1 (Continuing Transitional Funding for Centre In The Square) outlines further an explanation of that request. TAX SUPPORTED OPERATING BUDGET Mr. Hagey advised in relation to the updated 2015-2018 strategic plan directive for competitive, rational and affordable taxation levels, staff have taken the following into consideration when setting the 2018 tax rates: comparison to other municipalities; inflationary factors, including ability to pay. Responding to questions, Mr. Hagey advised staff would email the Committee members the average Consumer Price Index (CPI) and average Municipal Price Index (MPI) for the past 10 years. He further explained while growth and development contributes positively to the tax supported operating budget, there are capital expenditures associated with growth, such as building community centres, that cannot be fully funded by development charges. In response to questions, Mr. M. Goldrup explained Bill 148, Fair Workplaces, Better Jobs Act, 2017, e legislation provides for a three-stage implementation of the minimum wage increase from $14 per hour on January 1, 2018 to $15 on January 1, 2019, followed by annual increase at the rate of inflation. Councillor S. Marsh requested staff provide information about the minimum wage impact for Cambridge and Waterloo. Councillor B. Ioannidis requested staff provide information about how the minimum wage changes will impact contractors the City uses/hires to complete work. Members had questions with respect to Issue Paper Op-02 (Increasing Support for Parks & Trails, Neighbourhoods and Active Transportation). Responding to questions, Ms. D. McGoldrick explained the Landscape Architect FTE position would be funded by existing park & trail capital budgets and would not result in an increase in the 2018 Operating or Capital Budget. Mr. K. Carmichael advised the creation of the Active Transportation Planning Project Manager FTE would replace one temporary student position. He further explained funding for the position would be provided through the Transportation Demand Management capital account. Responding to concerns, Mr. M. May indicated the creation of the Neighbourhood Liaison Coordinator/Project Manager, identified in Issue Paper Op-02 (Increasing Support for Parks & Trails, Neighbourhoods and Active Transportation), would assist in moving neighbourhood explained funding for the position would be reallocated from lower priority areas within the Community Services Department operating budget. At the request of Councillor Y. Fernandes, staff agreed to prepare an issue paper utilizing a part-time staff supplemented by co-op students for the Active Transportation position instead of making this a full-time position. Councillor S. Marsh requested staff estimate the amount of additional tax revenue the Region will receive if the City fully recovers the costs of the two new assessment positions. FINANCE & CORPORATE SERVICES COMMITTEEMINUTES NOVEMBER 20, 2017 - 47 - CITY OF KITCHENER 1. FCS-17-188 - 2018 OPERATING BUDGET Councillor S. Davey left the meeting at this time and Councillor D. Schnider became the Chair. COMMUNITY GRANTS Mr. Hagey advised as directed through a motion at a Council meeting on August 28, 2017, there will be some changes to the appeal process for community grants this year. He indicated this year a Committee of staff, made up of the CAO, DCAO for Community Services and the Executive Director to the CAO will hear all Tier 1 and Tier 2 grant appeals and render decisions on those appeals. He stated after the appeals Committee has made its decisions, Council will approve the specific amounts for each individual Tier 1 group as part of Final Budget Day. He further advised, Council will be requested to approve the specific amounts for each individual Tier 2 grant recipients through a staff report in March 2018. At the request of Councillor K. Galloway-Sealock, staff agreed to include consideration in the issue paper related to the additional assessment growth for use in the Tier 2 Community Grant budget. ENTERPRISE OPERATING BUDGETS Mr. Hagey gave an overview of the financial positions of the Cfour of the seven enterprises are projected to have a positive stabilization reserve at the end of 2017. He added three City enterprises are allowed to, and do, pay a dividend to the City, being Gas, Golf and Parking, and those dividends are consistent with prior years. Building Mr. Hagey provided an overview of the Building enterprise, noting revenues for 2017 were lower than anticipated. He indicated the Building Stabilization reserve fund remains healthy and was the reason building permit fees were reduced by 5% for 2017 and are planned to be held flat until 2021. He further advised Building is not allowed to pay a dividend to the City as per legislation. Mr. M. Seiling was in attendance and responded to questions from the Committee. Councillor S. Davey re-entered the meeting at this time and resumed the Chair. Golf Mr. Hagey provided an overview of the Golf enterprise, noting financial results in 2017 are lower than budgeted due to poor weather during the golf season. He indicated Golf does pay a dividend to the City based on the Level Playing Field agreement with the Golf industry. He indicated Golf is expected to remain in deficit through the forecast, and will begin making progress at eliminating the deficit once a portion of the existing debt is paid off in 2020. Ms. K. Kugler was in attendance and responded to questions from the Committee. Parking Mr. Hagey provided an overview of the Parking enterprise, indicating the enterprise is projecting a positive result at the end of the year, stating monthly parking revenues have been better than budgeted. He advised one area of concern is the Parking stabilization reserve, noting it is currently in a surplus position but is forecasted to decrease each year after 2019 and into the foreseeable future as the cost of Cycling and/or Transportation Demand Management (TDM) programs are returned and permanently funded from the Parking Enterprise. Mr. P. McCormick was in attendance and responded to questions from the Committee. Gas Works Utility Mr. Hagey advised Gas Delivery is performing worse than expected in 2017, as revenues were unfavourably impacted by warmer than normal weather and increased expenses associated with the T3 Union contract. He indicated although net revenue is still expected for 2017, the Gas stabilization reserve fund is lower than its minimum bench mark, and is continually FINANCE & CORPORATE SERVICES COMMITTEEMINUTES NOVEMBER 20, 2017 - 48 - CITY OF KITCHENER 1. FCS-17-188 - 2018 OPERATING BUDGET improving and will bring the reserve out of its deficit. He stated Gas Delivery does pay a dividend to the City, which is the maximum allowed under the rate model set by the Ontario Energy Board (OEB). He further advised Council has already approved Gas rates, and these rates are reflected in all of the Gas budget figures. Mr. Hagey indicated for 2018, Gas Delivery is expecting a net revenue of nearly $1.1M which will help move the reserve balance to be close to its minimum target, stating for future years of the forecast see modest improvements to the reserve. Messrs. G. St. Louis and D. Persaud were in attendance and responded to questions from the Committee. Mr. Hagey provided an overview on Gas Supply and Transportation which are flow-through rates to customers, and are not meant to generate a profit for the City and cannot be used to pay a dividend to the tax base. He indicated as part of setting gas rates, Council approved combining both of these gas lines into Gas Supply. Mr. Hagey finalized the Gas Works Utility advising the Ontario Cap and Trade program, which is provincially legislated, which started January 1, 2017. He indicated Council has approved a Cap and Trade rate of just over 3.8 cents for 2018. The Committee recessed at 1:21 p.m. and reconvened at 2:18 p.m., Chaired by Councillor S. Davey with all members present except for Councillor P. Singh. Water, Sanitary and Stormwater Utilities Mr. Hagey advised that water, sanitary and stormwater budgets are linked together during the budget and as to similar process reviews including the Water Infrastructure Program (WIP) from this past fall. He stated nearly half of the combined utility bill is used to pay the Region for their treatment of water and sewage. He indicated investments in capital make up nearly 1/3 of the costs, followed by 13% for maintenance programs, and less than 10% for everything else. He commented during the WIP review, presented to Council through Infrastructure Services Department report INS-17-070, Council was provided with three viable scenarios for capital replacement. He advised all of the options had different costs, accomplishment targets, and levels of risk, noting Council endorse the staff recommendation to fund this gap over a 5-year phase-in. Mr. Hagey further advised the 2018 utility budgets have been prepared to meet Water Utility Mr. Hagey provided an overview of the Water Utility advising the results in 2017 are better than budgeted due to one-time revenue recoveries from the Region, and lower than normal watermain break repairs. He indicated the net revenues help to move the stabilization reserve to the positive where it remains throughout the forecast. Mr. Hagey noted there are three Issue Papers related to the Water Utility; Issue Paper Op-06 (Protecting the Water System from Cross Contamination), Issue Paper Op-07 (Locating Underground Infrastructure), and Issue Paper Op-08 (Reducing the Backlog of Maintenance of the Watermain Distribution System) outlining additional maintenance funding for 2018. Sanitary Utility Mr. Hagey presented the Sanitary Utility, indicating results in 2017 are worse than budgeted due to a very wet year. He commented the wet weather leads to significant inflow/infiltration to the sanitary system, meaning we are sending sewage flows to the Region that we are not billing our customers, since the water coming into the system is unmetered. He further advised this causes the stabilization reserve to be negative in 2017, but will improve through future budget years. Stormwater Utility Mr. Hagey advised for the Stormwater Utility results in 2017 are worse than budgeted due to high maintenance costs. He indicated this causes the stabilization reserve to remain negative in 2017 instead of becoming positive as originally budgeted. He noted there is one Issue Paper FINANCE & CORPORATE SERVICES COMMITTEEMINUTES NOVEMBER 20, 2017 - 49 - CITY OF KITCHENER 1. FCS-17-188 - 2018 OPERATING BUDGET Op-09 (Increasing Stormwater Maintenance Program) that outlines how the additional maintenance funding for 2018 will be used for Stormwater. Ms. D. McGoldrick and Mr. T. Gaber were in attendance and responded to questions from the Committee. RESOLUTION Mr. Hagey advised that Capital Budget deliberations are scheduled to take place on November 27, 2017, adding a public budget consultation session will be held on January 15, 2018. He noted Final Budget Day has been scheduled for January 22, 2018. The Committee then undertook a review of the action items arising from this meeting. It was suggested and agreed that the Issue Paper outlining options for the additional Assessment Growth would also include consideration for the Kitchener Public Library, tree canopy and maintenance, and for the Tax Stabilization Reserve Fund (TSRF). The following motion was voted on and was Carried on a recorded vote, with Mayor B. Vrbanovic and Councillors B. Ioannidis, D. Schnider, Z. Janecki, S. Davey, S. Marsh, K. Galloway-Sealock, Y. Fernandes and F. Etherington voting in favour; and, Councillor J. Gazzola voting in opposition. Councillor P. Singh was absent and accordingly did not vote. On motion by Councillor B. Ioannidis - it was resolved: staff be directed to report and/or take appropriate action on the following matters arising from the November 20, 2017 Special Finance and Corporate Services Committee meeting relative to the 2018 Operating Budget, as outlined in the chart below: Division/Area Topic Action Municipal Price Provide Municipal Price Index and Index and Consumer Price Index information for the Consumer Price last 10 years. FINANCIAL Index PLANNING Impacts on the Provide more information on the Change Tax Levy related in Net Tax Levy related to increases in to salary and salary and wages. wages Minimum Wage Provide information about the minimum Increase wage impact for Cambridge and Waterloo. HUMAN Minimum wage Provide information about how the RESOURCES increase and use minimum wage changes will impact of outside contractors we use/hire to do work. contractors Prepare issue paper to provide recommendation regarding allocation of the additional assessment growth. Additional Options could include: Tier 2 Grants; GENERAL Assessment Active Transportation project REVENUE Growth manager/student; WSIB; KPL for wage impacts related to minimum wage increase; Tax stabilization reserve fund; and, Tree canopy and maintenance. Active Prepare Issue paper utilizing a part-time TRANSPORTATION Transportation staff supplemented by co-op students for SERVICES Full-Time the active Transportation position instead Equivalent (FTE) of making this a full-time position. FINANCE & CORPORATE SERVICES COMMITTEEMINUTES NOVEMBER 20, 2017 - 50 - CITY OF KITCHENER Tax revenue Estimate the amount of additional tax related to new revenue the Region will receive if the City REVENUE assessment fully recovers the costs of the two new positions assessment positions. 2. ADJOURNMENT On motion, this meeting adjourned at 3:09 p.m. J. Bunn D. Saunderson Manager, Council and Committee Committee Administrator Services/Deputy City Clerk