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HomeMy WebLinkAbout2011-03-21FINANCE AND CORPORATE SERVICES COMMITTEE MARCH 21, 2011 CITY OF KITCHENER The Finance and Corporate Services Committee met this date commencing at 12:45 p.m. Present: Councillor J. Gazzola - Chair Mayor C. Zehr and Councillors S. Davey, B. Vrbanovic, Y. Fernandes, K. Galloway, P. Singh, B. Ioannidis, F. Etherington and D. Glenn-Graham. Staff: C. Ladd, Chief Administrative Officer J. Evans, Acting Deputy CAO, Finance & Corporate Services J. Willmer, Deputy CAO, Community Services H. Gross, Acting Deputy CAO, Infrastructure Services C. Smith, Director of Financial Planning R. Regier, Executive Director, Economic Development R. Gosse, Director, Legislated Services & City Clerk J. Witmer, Director of Operations S. Turner, Director, By-law Enforcement C. Fletcher, Director, Facilities Management G. Murphy, Director of Engineering J. McBride, Director of Transportation Planning K. Baulk, Director of Enterprise R. Bunn, Director, Information Technology / Chief Information Officer L. Baillargeon, Manager, Asset Optimization R. Hagey, Manager, Financial Planning D. Murray, Manager of Client Services S. Brisbane, Supervisor, Financial Reporting J. Billett, Committee Administrator FCS-11-046 - REQUEST FOR LIQUOR LICENCE 1. HOLY SPIRIT FESTIVAL ASSOCIATION OF KITCHENER-WATERLOO - - 1548 FISCHER-HALLMAN ROAD EAST - JUNE 10-12, 2011 The Committee considered Finance and Corporate Services Department report FCS-11-046, dated February 28, 2011 concerning a liquor licence application for a special event. On motion by Councillor Y. Fernandes - it was resolved: “That the City of Kitchener has no objection to a liquor licence being issued to the Holy Spirit Festival Association of Kitchener-Waterloo for an event to be held on June 10-12, 2011 at 1548 Fischer-Hallman Road East, Kitchener; and further, That this event be declared a “Community Festival” for the purpose of applying for a liquor licence, since this is a traditional Portuguese celebration of their heritage and promotes unity and understanding within our community.” INS-11-023 - NATURAL GAS RATES 2. The Committee considered Infrastructure Services Department report INS-11-023, dated March 16, 2011 concerning changes to natural gas rates. Ms. L. Baillargeon provided background information related to the three components that make up the natural gas rates, including supply, transportation and delivery. It was noted that Kitchener Utilities has provided some of the lowest prices in Ontario through disciplined purchasing policies that provide for stable, low risk pricing for its customers. Ms. Baillargeon added that in 2008 during the financial crisis when gas prices plummeted, the City was unable to reduce pricing immediately because of its practice of bulk purchasing but has instead introduced a gradual reduction with a 20% drop in 2010 and a 15% drop in 2011. The City has currently contracted for 60% of its gas purchases at a fixed rate, leaving 40% open to market pricing at time of purchase. The overall impact of the proposed change in rates is expected to achieve a 7% decrease, or $75. per year, for the average residential customer. Mayor C. Zehr questioned how the proposed rates compare to what was predicted in budget estimates, particularly as it relates to costs per household. Ms. Baillargeon advised that at time of budget, a $30 decrease per average residential customer was estimated, which has FINANCE AND CORPORATE SERVICES COMMITTEE MARCH 21, 2011 - 88 - CITY OF KITCHENER INS-11-023 - NATURAL GAS RATES (CONT’D) 2. since been refined through assistance of a newly contracted Consultant to a $75 decrease. Mayor Zehr requested that the chart showing final figures displayed on budget day be updated to reflect the new figures for the Gas Utility and the revised chart be provided for information at the March 28 Council meeting. At the request of Councillor Y. Fernandes, Ms. Baillargeon also agreed to provide costs associated with hiring of the Consultant. In response to Councillor J. Gazzola, Ms. Baillargeon explained how fixed rates are derived in keeping with Union Gas rates and advised that fixed rates are to rise by approximately $1.00 per month. Councillor Gazzola inquired as to the impact of a decrease in supply rates to the budget. Ms. Baillargeon advised that a deficit will not result, noting that legislation does not permit a deficit position and while revenues will be lower, it is expected this will be off-set by lower costs. Ms. C. Ladd added that she was informed by Mr. D. Chapman, Deputy CAO, Finance & Corporate Services that supply is a flow through cost in a not-for-profit enterprise and it has no effect on the budget. Ms. Ladd agreed to have Mr. Chapman provide further detail to Council prior to its March 18 meeting. It was further noted that staff in consultation with the Consultant will be reviewing the City’s purchasing strategy to determine if it remains viable and if change is desirable, a report will come forward for Council’s consideration at a later date. Councillor J. Gazzola questioned if there is possibility that rates will need to be changed again in the fall of 2011. Ms. Baillargeon advised that as a general rule the City purchases once a year and rates would not change again until April 2012; however, a number of factors are monitored over the course of the year which could give rise to consideration of a further change in rates later in the year. Councillor Gazzola requested that staff provide a comparison of the City’s rates with Union Gas rates. Ms. Baillargeon advised that the City is continuing to work toward closing the gap in rates, noting that if approved, the City’s supply rate will be 33 reduced to 21.2¢ / m in comparison to Union Gas at 14¢ / m. On motion by Mayor C. Zehr - it was resolved: “That the supply component of the natural gas rates be decreased to 21.2 cents per cubic meter from 25.0 cents per cubic meter for system gas customers of the City of Kitchener effective April 1, 2011; and, That the transportation component of the natural gas rate remain at 6.182 cents per cubic meter; and further, That the delivery components of the natural gas rates be changed as proposed in Infrastructure Services Department report INS-11-023 - Appendix A for all Kitchener delivery customers effective April 1, 2011.” FCS-11-050 - CORPORATE DESKTOP SOFTWARE STRATEGY 3. The Committee considered Finance and Corporate Services Department report FCS-11-050, dated March 14, 2011 which provides an overview of considerations made in the choice of a standardized Microsoft software platform and responds to questions raised during recent budget deliberations concerning use of open source software products. Mr. D. Murray provided an overview of the City’s strategy for upgrading desktop operating systems which is typically based on a 5 year plan. It was noted that the current software platform is 7 years old, having been deployed in 2003. The proposed upgrade to Windows 7 / Office 2010 is expected to take two years to complete at which time the City’s software platform will be 9 years old. Mr. Murray advised that Microsoft currently holds 90% of the market share in desktop operating systems, with Linux just over 1%, and this is expected to remain so for the foreseeable future. It was noted that Microsoft software products are heavily integrated with the City’s applications, and of the City’s 450 applications only 6% (26) is compatible with Linux. Mr. Murray further noted that many software companies originally moving to design products in support of Linux have since ceased to do so; returning their focus to delivering products for the Windows platform. He pointed out that City staff is fluent in use of the existing technology and considerable investment has been made in training support FINANCE AND CORPORATE SERVICES COMMITTEE MARCH 21, 2011 - 89 - CITY OF KITCHENER FCS-11-050 - CORPORATE DESKTOP SOFTWARE STRATEGY (CONT’D) 3. staff. Any change in software platforms would require significant investment in retaining support staff, together with a considerable learning curve for all City staff to become effective users of a new technology. Mr. Murray pointed out that open source software, such as Linux, is currently used for specific applications, which are primarily web based, and IT is open to using such software where feasible. Mr. Murray advised that the Ministry of Government Services has responsibility for negotiating master business agreements with Microsoft on behalf of the Broader Public Sector (BPS) entities across the Province. These agreements are to be renewed on April 1, 2011 and it is known that software licensing costs are to rise by 15% with the new agreements due to a move to standardize pricing across all Provinces. Mr. Murray advised that a tender recommendation is to come forward at the March 28 Council meeting. The timing provides for completion of the purchase prior to April 1, which would allow the City to lock in over the next 3 years at the lower licensing costs and thereby, achieve 15% in savings. Mr. Murray responded to questions, providing further explanation of the breakdown of costs for each component of the upgrade; the general timeframe for replacement of PC units / laptops; and proposed financing of the upgrade, together with future licensing maintenance costs beyond the 3 year contract, from within existing budgets. FCS-11-051 - DECEMBER 2010 INTERNAL FINANCIAL STATEMENTS 4. The Committee considered Finance and Corporate Services Department report FCS-11-051, dated March 9, 2011 Ms. S. Brisbane highlighted City expenditures and revenues compared to the 2010 budget for the year end December 31, 2010 and provided explanation of significant variances. It was noted that an operating year end deficit of $2.5M was projected but due to budget controls put in place and other mitigating circumstances, an operating surplus of approximately $875,000 was realized. The surplus was transferred to the Tax Stabilization Reserve Fund in accordance with City policy. Mitigating factors included: capital close-outs, policies to control discretionary spending, higher than budgeted supplementary taxes, higher Planning revenues and a modest surplus in Operations. Negative variances included: gapping target not met; lower investment income; FM overages in arena and pool maintenance, adjustments to salaries resulting from job evaluation, and shortfalls in project management fees due to the large number of ISF projects; and, higher outside legal fees, as well as salary adjustments in Legal Services resulting from job evaluation. The Building Enterprise ended with a net revenue of $1.4M which was transferred to the Building Enterprise Reserve Fund to fund capital projects and to mitigate any future deficits. The Golf Courses had a combined shortfall of $814,000 due to adverse economic conditions and action is being taken to address this issue. The Gas Utility ended in a positive variance of $2.5M, while budgeted surpluses in the Water and Sanitary Utilities fell short. After transfer of capital close-outs, the Water Utility ended with a surplus of approximately $885,000 and the Sanitary Sewer Utility with a surplus of $2.6M, which has reduced the accumulated deficit by approximately $865,000. Mayor C. Zehr questioned if there is any significant difference in the year end figures from st what was known on budget day, March 1. Ms. Brisbane advised that the figures remain essentially the same, with only one difference being the adjustment to the Gas Utility supply program to bring it back toward a break-even position. Mayor Zehr questioned if the upward trend shown in pre-sales under Cemeteries will continue in 2011. Mr. K. Baulk advised that there is no indication at this time the trend will continue and the budget has been set accordingly. Councillor D. Glenn-Graham requested clarification regarding the Water and Sanitary Sewer Utility deficit. Ms. Brisbane advised that it is expected the Utilities will achieve a surplus position in 2011. She added that the City had made a conscious decision in years past to go into a deficit position, choosing to take a stepped approach to increasing rates rather than do so all at once to limit the impact to citizens. FINANCE AND CORPORATE SERVICES COMMITTEE MARCH 21, 2011 - 90 - CITY OF KITCHENER FCS-11-051 - DECEMBER 2010 INTERNAL FINANCIAL STATEMENTS (CONT’D) 4. Councillor B. Vrbanovic requested explanation of the decrease in By-law Enforcement revenues. Mr. S. Turner advised that this is attributable to a decrease of approximately 40% in parking ticket activity on private property by private officers authorized to issue tickets under City by-law. Councillor Vrbanovic questioned if it was because the entire ticket revenues go to the City rather than a portion being returned to the private authority; or, if private properties are now relying more on the City to ticket for them. Mr. Turner advised that the City is not seeing an increase in requests from the private sector to ticket on their behalf and he was not certain if legislation would permit a portion of the revenues to be given back to a private authority but would investigate what may be permissible. He also agreed to make contact with the private sector to determine what may be driving the decrease in parking ticket activity on private property; adding that there appears to be direct correlation to the start of the decreased activity and the 2009 price increase. Councillor Vrbanovic questioned the feasibility of revisiting LED technology for street lighting. Mr. J. McBride advised that staff is working with Kitchener-Wilmot Hydro to determine suitability of LED technology for street lighting and a report is to come forward at a later date. He added that the intent is to start using LED technology in newer subdivisions and then follow with retrofitting of other street lighting. Councillor Y. Fernandes requested clarification of the FM Building Maintenance deficit. Ms. C. Fletcher advised that the Division had a backlog of salary reviews to be undertaken through the job evaluation process, which cannot be pre-budgeted as the outcome cannot be pre- determined; and also experienced an increase in costs for use of aquatic and arena facilities related to the number of hours actually worked. Councillor Fernandes also requested clarification regarding a deficit in Operations Administration. Mr. Witmer advised this relates to equipment repairs, noting that Operations is the primary user of the majority of Fleet vehicles and the deficit has been partially off-set by a multi-year recovery adjustment. Mr. Witmer also addressed questions concerning the Sign Shop, noting that this line item is being addressed as part of an ongoing budget correction process and will more closely reflect actual figures in next year’s budget. Councillor J. Gazzola raised concerns with the number of negative variances related to salary reviews under the job evaluation process and questioned how many reviews were completed in 2010. Ms. C. Ladd advised that reviews under the job evaluation system are activated based on a variety of factors, such as a departmental re-organization, the addition of new duties, or deletion of existing duties, that would have impact to a position such that a re- evaluation is required. She added that the City’s policy provides that all positions be reviewed every 5 years; however, there is currently a substantial backlog for which a contract staff person has been hired to help address and there may also be some impact in 2011. Ms. Ladd agreed to provide additional information in regard to this matter. At the request of Councillor J. Gazzola, Ms. J. Evans agreed to provide additional information concerning Local Improvement revenues. On motion by Councillor K. Galloway - it was resolved: “That the internal financial report for the year ended December 31, 2010 be received for information.” SWM BILLING SYSTEM 5. Councillor B. Vrbanovic conveyed concerns relayed from Condominium property owners who do not normally receive a bill from Kitchener Utilities but are now receiving monthly bills for SWM rates applying to their unit. The concern is that the associated costs to the City to produce the monthly bills essentially equates to the amounts being billed which range at about $4.20 per month. He asked that staff report back to the May 2, 2011 Finance & Corporate Services meeting as to the feasibility of applying a different billing cycle for all property owners who are subject to being billed only for SWM rates. FINANCE AND CORPORATE SERVICES COMMITTEE MARCH 21, 2011 - 91 - CITY OF KITCHENER SWM BILLING SYSTEM (CONT’D) 5. Ms. J. Evans advised that staff have also received similar complaints, explaining that in a condominium setting billing for gas usage is tied to a single metre and billed to the Condominium Corporation, with the costs recovered through condominium fees; whereas, the SWM rates are tied to individual property owners and every condominium owner shown is billed separately. She stated that staff has already begun a review of this matter and a report will come forward to the May 2 Committee meeting with various options to consider for those who receive only a bill for SWM rates. ADJOURNMENT 6. On motion, the meeting adjourned at 2:40 p.m. J. Billett Committee Administrator