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HomeMy WebLinkAbout2011-06-20FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 CITY OF KITCHENER The Finance and Corporate Services Committee met this date commencing at 11:45 a.m. Present: Councillor J. Gazzola - Chair Mayor C. Zehr and Councillors S. Davey, B. Vrbanovic, Y. Fernandes, K. Galloway, B. Ioannidis, Z. Janecki, F. Etherington and D. Glenn-Graham. Staff: C. Ladd, Chief Administrative Officer D. Chapman, Deputy CAO, Finance & Corporate Services J. Willmer, Deputy CAO, Community Services P. Houston, Deputy CAO, Infrastructure Services R. Gosse, Director, Legislated Services & City Clerk R. Regier, Executive Director, Economic Development S. Adams, Director, Community & Corporate Planning G. Murphy, Director of Engineering J. Evans, Director of Revenue J. Witmer, Director of Operations S. Turner, Director of By-law Enforcement K. Baulk, Director of Enterprise R. Hagey, Manager/Interim Director of Financial Planning P. Harris, Manager of Licensing S. Brisbane, Supervisor of Financial Reporting J. Sonser, Revenue Analyst J. Billett, Committee Administrator FCS-11-114 - OKTOBERFEST 1. The Committee considered Finance and Corporate Services Department report FCS-11-114, dated June 10, 2011 concerning declaration of Oktoberfest as a Civic Celebration and issuance of a Temporary Retail Market Licence. On motion by Councillor K. Galloway - it was resolved: “That in conjunction with K-W Oktoberfest and its associated activities, the period October 7-15, 2011 inclusive, be declared a Civic Celebration; and further, That K-W Oktoberfest Inc. be granted a Temporary Retail Market Licence, provided that the necessary licence, including Health and Fire approvals, is obtained.” FCS-11-130 - REQUEST FOR MIDWAY - RIBFEST - VICTORIA PARK - JULY 15-17, 2011 2. The Committee considered Finance and Corporate Services Department report FCS-11-130, dated June 10, 2011 concerning a request to operate a Midway. On motion by Councillor K. Galloway - it was resolved: “That GTA Midways Inc. be granted permission to operate a Midway in Victoria Park, during Ribfest from July 15-17, 2011 subject to the following: Hours of operation: Date Start Close Friday, July 15 5:00 p.m. 10:00 p.m. Saturday, July 16 Noon 10:00 p.m. Sunday, July 17 Noon 6:00 p.m. ; and, That the music at the Midway be turned down at 8:00 p.m. ; and, That the music be turned off one hour before closing time; and further, That the required licence be obtained prior to operating the Midway.” FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 111 - CITY OF KITCHENER FCS-11-131 - REPEAL AND REPLACE CHAPTER 586 (REFRESHMENT VEHICLES) OF 3. THE MUNICIPAL CODE The Committee considered Finance and Corporate Services Department report FCS-11-131, dated June 10, 2011 concerning changes to Chapter 586 (Refreshment Vehicles) of the Municipal Code. On motion by Councillor K. Galloway - it was resolved: “That Chapter 586 (Refreshment Vehicles) of the City of Kitchener Municipal Code be repealed and replaced and a by-law be prepared for Council’s consideration on June 27, 2011.” FCS-11-132 - FEASIBILITY OF ESTABLISHING A FINANCIAL ASSISTANCE PROGRAM 4. FOR HOME DIALYSIS The Committee considered Finance and Corporate Services Department report FCS-11-132, dated June 14, 2011 concerning a request to the Ministry of Health to fund incremental utility costs as a direct expense for patients receiving home dialysis. Mr. J. Sonser advised that the Ministry of Health and Long Term Care statistics show approximately 10,000 Ontarians currently receiving dialysis treatment, of which approximately 2,400 are being treated through home dialysis and it is the Ministry’s objective to have 35% of dialysis patients Province-wide being treated at home by 2013. It was noted that the Province pays $10,000 to $25,000 less per home dialysis patient versus in-hospital treatments which can range up to $75,000 per year. In the Region, there are 22 patients on home dialysis of which 10 patients are in the Kitchener-Waterloo area. Mr. Sonser advised that the cost of home dialysis in the first year is about $35,000., and ongoing maintenance and supplies range from $18,000 to $35,000 per year depending on the type of treatment required. The added utility costs for water and electricity consumption for home dialysis is an out-of-pocket expense to the patient and range from about $535. to $1800. per year. A patient’s only recourse to recoup direct costs for utilities is through tax deductions as an allowable medical expense. Mr. Sonser advised that the only known municipality in Ontario that has a grant program for home dialysis patients is the City of Ottawa, allowing for a grant of up to $500. per year dependent on consumption levels. He advised that the impact of a full financial assistance program in Kitchener for incremental water and sewer costs at the current level of home dialysis patients would range between $5,000 to $18,000 per year and could potentially reach $7,000 to $26,000 if the Province achieves their 35% target by 2013. Councillor D. Glenn-Graham questioned if staff have discussed with Regional staff the potential for the Region of Waterloo to participate in provision of financial assistance and Mr. Sonser advised that no discussion with the Region has taken place at this time. Mayor C. Zehr pointed out that the Region of Waterloo has responsibility for community health care as opposed to primary health care which is a Provincial responsibility and suggested the recommendation is appropriate in requesting the Province to take action to fund utility costs for home dialysis patients. Councillor J. Gazzola questioned the cost of providing financial assistance based on the grant limit of $500 established by the City of Ottawa. Mr. Sonser advised that based on the 10 patients currently in the Kitchener-Waterloo area the cost to Kitchener would be approximately $5,000 per year. Councillor Z. Janecki inquired if the Cities of Waterloo and Cambridge had been approached. Mr. Sonser advised they had not; however, he pointed out that the Kidney Foundation has indicated their intent to bring this issue to the forefront of the next election. It was further clarified that the staff recommendation does provide for circulation to the other area municipalities. On motion by Councillor Y. Fernandes - it was resolved: “WHEREAS kidney dialysis is a provincial health-care responsibility; and, WHEREAS the Province has established an objective to have at least 35% of dialysis patients treated at home by 2013; and, FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 112 - CITY OF KITCHENER FCS-11-132 - FEASIBILITY OF ESTABLISHING A FINANCIAL ASSISTANCE PROGRAM 4. FOR HOME DIALYSIS (CONT’D) WHEREAS home dialysis is a less expensive treatment than dialysis in the hospital; and, WHEREAS home dialysis imposes increased hydro, water, sewer utility costs on the patients’ household; THEREFORE BE IT RESOLVED that the City of Kitchener requests that the Ministry of Health fund the incremental utility costs as a direct expense for patients receiving home dialysis; and further, BE IT FINALLY RESOLVED that this resolution be shared with the Regional Municipality of Waterloo which provides water treatment and waste-water treatment services, local municipalities within the Region, the 4 local MPP’s and the Association of Municipalities of Ontario.” FCS-11-109 - HOMER WATSON HOUSE FOUNDATION COMMUNITY LOAN 5. The Committee considered Finance and Corporate Services Department report FCS-11-109, dated May 31, 2011 concerning a request to forgive an outstanding loan balance. Mr. D. Chapman advised that the community loan to the Homer Watson House Foundation relates to purchase of 1762 Old Mill Road, adjacent to the Homer Watson House and Gallery, initiated by request of the Lower Doon Neighbourhood Group. The loan to the Foundation was to be repaid over 5 years through fundraising efforts of the Neighbourhood Group. The Neighbourhood Group has advised that they have exhausted all potential to raise funds for this initiative and the Foundation has advised that they do not have financial means to accept responsibility for the outstanding balance. The outstanding loan amounts to $36,700. plus interest accrued at $16,018. Mr. Chapman advised that the Community Loans Program will be permanently reduced from $857,500 to $820,799 to accommodate forgiveness of the loan and the interest accrued has been included in the allowance for doubtful accounts and therefore, has no financial impact in being written off. Councillor K. Galloway questioned the significance of the adjacent lands that brought about the request for purchase. Mr. Chapman stated that he believed the lands at that time were slated for redevelopment and there was concern plans for the property would not be consistent with the historic character of the neighbourhood and Homer Watson House. Councillor K. Galloway requested clarification as to the amount raised through fundraising versus the total amount contributed by the City together with the outstanding loan to be forgiven. Mr. Chapman advised that the amount of the loan requested was slightly in excess of $150,000 of which the City agreed to contribute $50,000 to the purchase price, leaving $100,000. to be raised by the Neighbourhood Group. The outstanding balance of $36,000 suggests approximately $64,000 has been raised in repayment of the loan. Mayor C. Zehr noted that the original purchase price was approximately $204,000 and Mr. Chapman advised that a portion of the purchase price had already been covered by community donations prior to the request for a loan. Mayor Zehr noted that the City’s contribution plus the outstanding loan amount as deducted from the original purchase price would indicate the community has contributed approximately $114,000 to the purchase of the property. Councillor Y. Fernandes spoke in support of the recommendation, commenting that a final decision on forgiveness of the loan had been deferred pending completion of a strategic plan for the Homer Watson House and Gallery, and the Foundation has done significant work in moving forward with a plan to build the heritage facility and to reduce the outstanding loan. On motion by Mayor C. Zehr - it was resolved: “That the balance of the community loan outstanding to the Homer Watson House Foundation of $36,700.87 with respect to 1762 Old Mill Road be forgiven; and further, FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 113 - CITY OF KITCHENER FCS-11-109 - HOMER WATSON HOUSE FOUNDATION COMMUNITY LOAN (CONT’D) 5. That the accrued interest on outstanding payments of $16,018.96 as of December 31, 2010 be written off against the allowance for doubtful accounts.” This meeting recessed at 12:02 p.m. and reconvened at 12:30 p.m., Chaired by Councillor J. Gazzola with the following members present: Councillors D. Glenn-Graham, B. Ioannidis, Z. Janecki, Y. Fernandes, K. Galloway, S. Davey, B. Vrbanovic, F. Etherington and P. Singh. FCS-11-125 - APRIL 2011 INTERIM INTERNAL FINANCIAL STATEMENTS 6. The Committee considered Finance and Corporate Services Department report FCS-11-125, dated June 7, 2011 which provides an update on City expenditures and revenues compared to the 2011 budget and explains significant variances as at April 30, 2011. Mr. D. Chapman advised that staff have indentified a potential year-end deficit of $2.86M, representing a negative variance of 1.9% on a $148M annual operating budget. Key variances include: a projected over-expenditure in Operations of $1.68M primarily resulting from the harsh winter experienced in early 2011; higher than budgeted fuel costs resulting in a projected deficit of $0.5M in Fleet; anticipated shortfall in parking fine revenues of $175,000; and a projected deficit of $110,000 in Engineering due to higher than budgeted electricity costs for street lighting. Other areas impacting year-end estimates that require close monitoring include: supplementary taxes and tax rebates / refunds / reductions which occur late in the year; impact of potential change in interest rates to investment income; and a projected deficit of $200,000 in the budget for gapping. Mr. Chapman pointed out that in finalizing the 2011 Operating budget a transfer was made from the Tax Stabilization Reserve Fund to effect a reduction in the tax levy and there is not sufficient funds remaining in the Reserve to off-set a large deficit at year-end. Mr. Chapman advised that staff will continue to take action to mitigate the amount of the projected deficit through similar policies established in 2009-2010, as well as undertake review to determine potential close-out of unexpended capital balances and potential transfers from reserve fund balances. Ms. S. Brisbane provided an overview of activities related to: Building Enterprise; Golf Courses; Parking Enterprise; Water and Sanitary Sewer Utilities; Storm Sewer Utility; Gas Utility; and Investment Income, as outlined in Schedules 2 to 9 of report FCS-11-125. Ms. Brisbane advised that the next Interim Internal Financial Statements will be prepared based on account balances as at August month-end. Councillor Z. Janecki questioned if the projected deficit stems from Council’s actions in approving the 2011 budget or from unexpected variances. Mr. Chapman responded that it is in part a result of both circumstances, noting that winter maintenance is budgeted on an average winter which can result in a surplus or deficit dependent upon actual weather conditions; and during budget deliberations staff had identified the need to reduce the gapping budget to a sustainable level, whereas Council chose to increase that particular budget. Councillor Janecki questioned if quarterly reports are sufficient in the event a serious concern develops in the interim. Mr. Chapman advised that the intent is to next provide an update on mitigated results to the end of August and time is needed to complete an analysis. He suggested that it would be appropriate to next provide a status report in the fall of 2011. Councillor Z. Janecki requested clarification of the shortfall in the Sanitary Sewer Utility as a result of lower water billings, questioning if promotion of water conservation is having an adverse impact in this instance. Mr. Chapman responded that growth has flat lined in respect to sewer surcharge requirements and more efficient materials are being used in installations for underground services that have contributed to a decline in revenues; however, the cost of sewer surcharge processing increased due to higher inflow / infiltration levels than in previous years resulting from a wet spring. Councillor K. Galloway questioned how the City is trending in this first quarter in comparison to the past 5 years. Mr. Chapman advised that this is the second largest deficit projected in recent years, noting that 2 years ago a significant deficit was also projected due to a harsh winter season. He noted that currently the budget is trending close to the line leaving little opportunity to generate a surplus and with the Tax Stabilization Reserve Fund virtually depleted there is no option to fund the deficit except from within the existing budget. Mr. FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 114 - CITY OF KITCHENER FCS-11-125 - APRIL 2011 INTERIM INTERNAL FINANCIAL STATEMENTS (CONT’D) 6. Chapman also noted that there is no tax supported funding of road construction in 2011 as all are being funded through the water and sewer Utilities. He added that capital close-outs while initially a substantial amount in 2009, declined in 2010 and will again be less this year. Councillor Y. Fernandes asked that the line item for “administration” across the board be broken down into more detail to bring an understanding of what this budget item entails, noting that in a number of situations this line item has increased above budget and she would like an understanding as to why. Mr. Chapman advised that in all cases this is the group in each Department responsible for administration and would include staffing costs, as well as such things as equipment and office supplies. Mr. Chapman advised that a more detailed breakdown would be provided in the draft 2012 budget materials. Mr. Chapman further agreed to provide additional details as to the variances in the operating budgets for the Economic Development Division and the Market. Councillor J. Gazzola commented that a deficit was projected in 2010 yet the year ended in a surplus position and questioned the feasibility of a similar situation occurring this year. Mr. Chapman responded that the City experienced a better winter in 2010 and a record year in respect to supplementary tax revenues. He stated that at this time it is too early to predict that the projected deficit will improve but staff should have a better indication following review at the end of August. Councillor Gazzola requested clarification as to why earlier indications cannot be made concerning supplementary taxes and / or percentage of growth. Mr. Chapman advised that growth patterns are determinable and can be reported in the next update; however, supplementary taxes are generated from the Municipal Property Assessment Corporation (MPAC) and staff is unable to determine what will be picked up and / or how far back they will go until the information is received from MPAC. Councillor Gazzola questioned the feasibility of providing Council with monthly financial statements. Mr. Chapman advised that this has never been a practice and to his knowledge there is no other municipality that has the resources to do proper analysis for release of monthly statements. He stated that notwithstanding, staff is working to improve the frequency of reporting through improvements to the budgeting system. Councillor Gazzola requested clarification of the projected shortfall in parking fine revenue. Mr. S. Turner advised that this is directly related to a significant drop in tickets issued by private property officers, who are authorized by the City to issue tickets on private property, such as a mall. He pointed out, however, that the number of tickets issued by City staff remains consistent over the past 5 year period. Councillor Gazzola requested clarification of the projected deficit in the winter maintenance budget. Mr. J. Witmer advised that the winter season primarily consists of the months January to March and November-December in a given year. He noted that winter conditions did not really get started until mid-January in 2011 but once started, the City experienced as much snow, ice and cold weather in the two and half months as it would in a normal 5 month winter season. The number of storms increased with 8 in total and in between, wet weather resulting in flash freezing necessitated time by crews to clear the sheen from bus routes and residential streets. Councillor Gazzola suggested that given a large deficit is projected in this area a report with more detail on winter maintenance activities should be provided. Mr. Witmer suggested that in part the variance relates to the mechanics of the budget system in how funds are deposited incrementally; wherein, the expenditures are ahead of allocation of the source funding. It was agreed that staff would report back with more detail in respect to the variances in the winter maintenance budget. Councillor K. Galloway questioned what Operations had received in increased budget funds for 2011 compared to what they had requested. Mr. Witmer advised that a 2 year plan was introduced in 2009 to achieve funding based on a 5 year historical average for winter maintenance. In order to achieve that level $750,000 was requested but only $235,000 was approved, leaving a difference of $500,000. Councillor K. Galloway suggested that it was known then at time of budget deliberations that a deficit would be projected because the service was not being funded properly. Ms. C. Ladd added that staff has advised over a number of years that Operations is chronically underfunded and suggested that even if the City had experienced a normal winter season the budget would still end in a deficit position. Councillor B. Vrbanovic requested that the report to come back provide detail on the Fleet portion of the winter maintenance budget to understand its impact in respect to regular staffing, overtime and required materials. Ms. P. Houston added that the budget has not kept pace FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 115 - CITY OF KITCHENER FCS-11-125 - APRIL 2011 INTERIM INTERNAL FINANCIAL STATEMENTS (CONT’D) 6. with growth in the City over the past 5 to 10 years and agreed that even with an average winter, the budget would still be overspent by approximately $700,000. Councillor Y. Fernades raised concerns that roads continue to be built notwithstanding the City does not have sufficient funds for maintenance and suggested that road construction should either cease or monies be shifted from other areas to provide the funds necessary for maintenance. Mr. Chapman stated that the report provided this date identifies that management staff recognize accountability to manage the budget and to finds ways to reduce deficits; however, he pointed out that currently there is no capacity to mitigate without incurring a service level impact. He advised that staff is undertaking to carefully monitor such things as overtime expenditures, noting that a conscious decision has been made not to incur overtime for turf maintenance notwithstanding it will have a service level impact. In response to further questions from Councillor J. Gazzola, staff provided additional clarification concerning variances related to street lighting; the Kitchener Operations Facility (formerly known as the Consolidated Maintenance Facility); statement of Revenue / Expenses / Accumulated Net Revenue; and water purchases trending lower than expected in comparison to water consumption. Ms. Brisbane agreed to provide statistics on water consumption volumes. Mr. Chapman also noted that in part the Water Utility profits are skewed as a result of a one time rebate from the Region of Waterloo related to the Breslau water main leak. Councillor J. Gazzola questioned if the City is taking steps to address inflow / infiltration levels related to sewer surcharge processing costs. Mr. G. Murphy advised that steps are being taken as part of the City’s Infrastructure Renewal Program, to replace aging pipes and sewers with more efficient materials that help in decreasing the amount of inflow / infiltration that can enter into the sewer system. He added that a sanitary sewer capacity study will be presented in the fall which will bring a better understanding of potential problems in the system and help in addressing this issue. Mr. Murphy further advised that approximately 15% of the amount of sewage being treated can be attributed to inflow / infiltration into the system which the City is attempting to decrease through infrastructure renewal projects; however, he pointed out that no system can be perfectly sealed and there will always be a certain amount of inflow / infiltration to handle. FCS-11-117 - 2012 BUDGET DEVELOPMENT GUIDELINES 7. The Committee considered Finance and Corporate Services Department report FCS-11-117, dated June 14, 2011 outlining proposed budget development guidelines for 2012. Mr. D. Chapman advised that the proposed guidelines will set direction for staff in development of the 2012 budget. He noted that during orientation in December 2010, Council learned that the budget is the most significant policy document, encompassing operational plans, citizen engagement and long term financial planning. He stated that it is also important in respect to setting budget targets to link to the financial management directions in the City’s Strategic Plan which provide that regard shall be given to: comparison to other municipalities; inflationary factors, including those unique to municipalities; and balance of service levels versus affordability. Mr. R. Hagey presented an overview of municipal property tax comparators among populations greater than 100,000, with Kitchener residential property taxes consistently ranking below the th Ontario average at 6 lowest in the study. A comparison of inflationary factors over the past 10 years was provided showing cumulative increases in the Municipal Price Index (MPI), Consumer Price Index (CPI) and property taxes. It was noted that the cumulative property tax increase, excluding allocation for the Economic Development Investment Fund (EDIF), has approximated the CPI. Results of the 2009 Citizen Survey undertaken by Environics show that the City is headed in the right direction, indicating that citizens are satisfied with their government and services provided, and they value a high service level over low taxes. A Financial Condition report was presented earlier to Council to update on reserve levels and debt load. The debt to reserve ratio is targeted at 1:1, whereas the City is set to peak in excess of 12:1 by 2012 and in order to mitigate this trend, it is necessary to rebuild reserves and not take on additional debt beyond what is already planned in the 10 Year Capital Forecast. Other financial pressures were reviewed including: annualization of new facilities; costs to service growth; increased OMERS contributions; EDIF; ongoing sources of budget FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 116 - CITY OF KITCHENER FCS-11-117 - 2012 BUDGET DEVELOPMENT GUIDELINES (CONT’D) 7. deficits; new initiatives; and capital budget funding shortfalls. A 10 Year Tax Rate Impact Projection shows an amended net tax rate impact, including EDIF, of 3.9% versus the original projection at 6.5%. Mr. Hagey advised that the targeted tax rate as developed, addresses all aspects of the Strategic Plan directions but is aggressive and is not without risks associated with: a depleted Tax Stabilization Reserve Fund; ability to achieve phasing in the dividend reduction in the Parking Enterprise; unaddressed ongoing budget deficits; capital budget shortfalls; and a high levy increase projected in 2013. Mr. D. Chapman commented that there is no ongoing source of funding into the Tax Stabilization Reserve Fund and it will be essentially depleted over the next 2 years leaving no reserve to fund deficits. He pointed out that it is still unclear if the Parking Enterprise dividend can accommodate the new TDM and Cycling initiatives given preliminary 2011 operating results show a deficit. Budgets for gapping, Operations and fuel are anticipated to contribute to a deficit in 2011 and a shortfall in the Development Charges Reserve Fund will necessitate extensive deferral of capital projects to maintain a balanced position in the fund. Mr. Chapman advised that staff have worked extensively to reduce the tax rate impact and given associated risks, recommend no further reductions. He hoped the case for replenishing reserves has been made, commenting that deferrals are not a long term solution and there is no public appetite for service level reductions. He suggested that to artificially reduce the tax levy further would ensure future deficits with no contingency fund with which to mitigate. Mr. Chapman stated that the budget as developed is well-rounded, rationale and addresses the principles of a competitive and affordable budget in keeping with citizens desire to maintain the existing quality of services. Councillor B. Vrbanovic referred to the issue of ongoing budget deficits, suggesting that further investigation of Fleet management practices be undertaken from an operational point of view and in particular, the use of hybrid vehicles. Ms. P. Houston agreed to provide a report at budget time but noted that many of the heavier vehicles are diesel and because of their size hybrids are not an option. She added that where light duty vehicles are used hybrids are investigated to determine cost and environmental benefits but it must be kept in mind that these vehicles must be serviceable. Councillor Vrbanovic then referred to the projected deficit in the Development Charges (DC) Reserve Fund, noting that a surplus is forecast by 2014. He recalled that the City has allowed the reserve to carry a negative balance previously when there is evidence of a plan to achieve a future surplus position and requested clarification of the issue regarding the reserve. Mr. Chapman advised that it was his understanding a deficit has only been allowed to occur in regard to reserves set aside for specified projects, citing an example of Fire Station No.7. In this instance, however, the deficit is related to developer contributions which have not met the projected forecast in the DC study and existing reserve funds are not sufficient to off-set a deficit. Councillor Vrbanovic questioned how consideration of deferral of DC projects is proposed to take place. Mr. Chapman agreed that due to the sensitive nature of this issue it could be separated out and dealt with in interim steps, including a consultative process with interested stakeholders, prior to consideration of the Capital Budget. Councillor B. Vrbanovic questioned the appropriate timing of giving direction to staff to prepare a list of potential reductions that would provide opportunity for dialogue to determine areas where there may be a will to reduce funding in some areas in favour of increasing funding in others. Mr. Chapman advised that such direction should be given early in the process but reiterated that there is risk involved in further reductions to the proposed 2012 budget. Councillor K. Galloway requested clarification as to how the DC reserve has already reached a deficit position when the study has only been recently completed. Mr. Chapman advised that to the extent that revenues have not achieved target, population targets set by the Regional Growth Plan in the short term have not been realized. He added that in some cases, project expenditures have exceeded estimates, citing an example of the Homer Watson Pumping Station, which has placed greater strain on the reserves. Mr. Chapman pointed out that even in 2009, the study assumed some deficit on the premise that strategies would be developed in the intervening years to address any deficit. He suggested that all of these factors have worked against the Reserve Fund giving rise to the projected deficit. Councillor K. Galloway asked if completion of the Official Plan for Southwest Kitchener has contributed to the deficit and Mr. J. Willmer advised that it has to the extent that any time new development is approved FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 117 - CITY OF KITCHENER FCS-11-117 - 2012 BUDGET DEVELOPMENT GUIDELINES (CONT’D) 7. it requires extensive, new capital investment. Councillor K. Galloway asked if any consideration had been given to working toward an increase in the Operating winter maintenance budget in development of the 3.9% tax rate. Mr. Chapman advised that the proposed tax rate does not include increased funding for winter maintenance but does provide a small allocation to Operations for costs to service growth. In response to Councillor Z. Janecki, Mr. Chapman provided clarification on matters concerning user fees, SWM rates, municipal property tax comparators and assessment values. Councillor Janecki questioned if inflation has been factored into the capital works program. Mr. Chapman advised that the 2012 budget as proposed does not provide for enhancements to the 10 Year Capital Forecast, but rather only maintains the Forecast as it is currently approved. He added that a base inflation rate is included across the Forecast, at 2.23% in 2012. Councillor Janecki inquired if the 1% per capita approved for the arts and culture sector in 2011 is reflected in the proposed 2.9% general tax levy. Mr. Chapman advised that it is reflected in the financial statement for EDIF, noting that the arts and culture funding, as well as funding for the Physician and Specialist Recruitment Programs, was approved in 2011 to be funded from EDIF rather than through the tax base. Mr. Chapman pointed out that there are sufficient funds in EDIF to continue to support these initiatives in 2012 - 2013, and if they are to be continued beyond that on a permanent basis, they would then have to be funded from the tax base beginning in 2014. Councillor Y. Fernandes questioned how many new staff positions already approved in 2011 is to be funded. Mr. Chapman advised that approved positions relate to staffing of 4 new Community Centres, as well as two positions to support TDM and Cycling initiatives. He added that while budget guidelines specify no staffing increases unless previously approved and budgeted, staff is still at liberty to bring forward requests for new staffing during budget deliberations and present their case in support of more staffing where it is deemed to be needed. Councillor Fernandes questioned if development charges are collected on infill projects. Mr. Chapman advised that development charges apply City-wide; however, downtown infill is exempt as approved by Council. Councillor Fernandes raised concerns that given a deficit in the DC reserve, monies would still be spent on consultant studies for road construction when there is no funding to build the roads, citing an example of Strasburg Road. Mr. J. Willmer advised that studies are often done well in advance of actual road construction due to the complexities in the development and design process, citing an example of the Province’s Highway 7 project. He stated that the same applies to Strasburg Road, which has unique circumstances not only to address traffic capacity for the Doon South Phase II project but also to provide alignment for future development which cannot be serviced until the road alignment is defined. Mr. Willmer suggested that even if the road is not immediately built the studies are important to identify appropriate alignments and if not undertaken will create a backlog in the development system. Councillor Fernandes asked that more detailed information be provided in regard to increases in Departmental costs, and in particular as it relates to administrative costs; and in addition, requested a list of capital projects that might be considered in respect to deferral of DC projects. Councillor P. Singh asked that costs attributed to the downtown development charge exemption be provided for 2009-2010. Mr. Chapman advised that these figures are included in the financial statement for EDIF under Downtown Incentives and in 2010 was modest at $25,000; but will rise to approximately $500,000 in 2011 - 2012. Mr. Chapman confirmed that this would include the City Centre block project. Councillor J. Gazzola questioned if the exemption policy could be changed. Mr. Chapman advised that this would require an interpretation of the DC by-law, noting that this is a policy adopted by Council and wording has been included in the DC by-law concerning the exemption. He suggested that a new background study may have to be completed in order to effect such a change. Councillor Singh suggested that this issue should be left open for consideration, noting that notwithstanding the need to further stimulate redevelopment in the Downtown, the Region’s Light Rail Transit (LRT) project may provide a catalyst to facilitate a change in policy. Mr. Chapman agreed to follow up on this matter prior to commencing a new background study required in 2014. Councillor Singh also asked that a comparison of SWM rates charged by other municipalities who also operate a SWM Utility be provided. FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 118 - CITY OF KITCHENER FCS-11-117 - 2012 BUDGET DEVELOPMENT GUIDELINES (CONT’D) 7. Councillor J. Gazzola inquired if a projected impact of the LRT has been included in the Capital Forecast. Ms. C. Ladd advised that Regional staff is still working on agreements that will specify what lower tier municipal responsibility will be; however, it was her understanding that where a City does not have capital works already in their 10 Year Forecast for areas affected by the LRT, the Region will be responsible for full costs and where a City does have capital works in their Forecast that corresponds to the LRT project, the City will take steps to move the work to coincide, the end result of which will have no net cost effect but will require a timing adjustment. Councillor Gazzola requested clarification of the proposed tax rate in context of the amount of funding related to the Capital Forecast. Mr. Chapman advised that the Capital Out of Current account represents capital expenditures funded through the tax base and in 2011 was only $720,000. He stated that this is a result of moving capital projects over time to Enterprise funding models. Councillor Gazzola questioned the feasibility of effecting change in the Capital Forecast to reduce the tax base. Mr. Chapman responded that while this could be done there is a deficit that would firstly have to be addressed before any reductions could be made and it would be staff’s recommendation that transfers from capital be used to re-build reserves. Councillor Gazzola asked if Enterprise projections would be known prior to budget deliberations and Mr. Chapman advised that staff would be in a better position at the end of August to understand how Enterprises are trending. A motion by Councillor B. Vrbanovic was brought forward for consideration to provide that Finance & Corporate Services Department report FCS-11-117 (2012 Budget Development Guidelines) be received for information; and in addition to the targets and principles outlined in report FCS-11-117, staff be directed to identify tax supported budget reductions ranging from 0% to 1.8% as part of the Operating budget submission. Councillor Vrbanovic commented that the list of reductions could potentially reduce the projected tax rate to 1.9%, plus 1% for EDIF, at a total of 2.9% rather than the proposed 3.9%; and is intended to provide options to consider those areas where there may be a will to either make reductions or divert funding from one area in favour of adding additional dollars elsewhere. A motion by Councillor K. Galloway to amend Councillor Vrbanovic’s motion was brought forward for consideration to provide that staff be directed to report on options to increase the winter maintenance budget through the budget process, working toward a funding level of the average winter season which will allow it to be prioritized with all other budget issues. Councillor K. Galloway commented that this is an area that requires consideration given the substantial deficit projected and would like to see Council commit to giving it due consideration. Mr. Chapman added that staff is not recommending any service level enhancements and in this regard, it is important for Council to give formal direction. Councillor K. Galloway emphasized that this is a request for options to be provided given this is an area consistently under-funded and while it has potential to become a service level enhancement it is her intent that it be prioritized against all other budget considerations. At the request of Councillor Vrbanovic, Councillor Galloway agreed to have her motion dealt with separately rather than as an amendment to his motion. Councillor Y. Fernandes questioned if there will be a similar opportunity to consider capital budget reductions. Mr. Chapman reminded that staff has agreed to undertake a separate process for consideration of adjustments to capital projects and pointed out that there will be a number of other occasions in which to have dialogue on capital projects as Council moves through the schedule of budget meetings leading to final consideration of the 2012 budget in early January 2012. Councillor J. Gazzola questioned if capital account balances could be provided in consideration of the Capital Forecast and Mr. Chapman agreed to report back on this matter, noting that the financial system may not be able to generate that type of reporting. Councillor J. Gazzola inquired if staff will be providing a prioritized listing of the capital projects in the Forecast from which Council can then make a decision to add or reduce. Mr. Chapman commented that in setting budget target reductions it is important for staff to know Council’s preferences from which staff can then focus on and attempt to facilitate. He suggested that it would be a major undertaking for staff to prioritize the entire Forecast, noting that to do a FINANCE AND CORPORATE SERVICES COMMITTEE JUNE 20, 2011 - 119 - CITY OF KITCHENER FCS-11-117 - 2012 BUDGET DEVELOPMENT GUIDELINES (CONT’D) 7. credible job it would involve many layers, including public consultation and detailed analyses, which would create an issue of timing. Councillor B. Vrbanovic requested that the schedule of budget meetings be revisited in early September as he may have conflicting schedules with some of the dates established. Mr. Chapman pointed out that Council approved the budget meeting schedule and asked that Councillor Vrbanovic advise him of any conflicting dates he may have so a report can be brought back to Council for consideration of a change in scheduling. Councillor Z. Janecki asked that information pertaining to the dollar amount to be requested for infrastructure work be included in the budget information. Mr. Chapman agreed to report back, noting that the majority of related costs are not tax supported expenditures as they are now a function of the SWM Utility. At the request of Councillor J. Gazzola, Councillor B. Vrbanovic agreed to modify his motion to provide that a list of tax supported budget reductions ranging from 0% to 2% be compiled as opposed to a range of 0% to 1.8%. On motion by Councillor B. Vrbanovic - it was resolved: “That Finance and Corporate Services Department report FCS-11-117 (2012 Budget Development Guidelines) be received for information; and further, That in addition to the targets and principles outlined in report FCS-11-117, staff be directed to identify tax-supported budget reductions ranging from 0% to 2% as part of the Operating budget submission.” On motion by Councillor K. Galloway - it was resolved: “That staff be directed to bring forward a report with options to increase the winter maintenance budget, through the budget process, working toward a funding level of the average winter season which will allow it to be prioritized with other issues.” ADJOURNMENT 8. On motion, the meeting adjourned at 2:50 p.m. J. Billett, AMCT Committee Administrator