HomeMy WebLinkAbout2012-03-19FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES
MARCH 19, 2012 CITY OF KITCHENER
The Finance and Corporate Services Committee met this date commencing at 11:06 a.m.
Present: Councillor S. Davey - Chair
Mayor C. Zehr and Councillors J. Gazzola, Y. Fernandes, K. Galloway, B. Ioannidis, Z.
Janecki and D. Glenn-Graham.
Staff: D. Chapman, Deputy CAO, Finance & Corporate Services
J. Willmer, Deputy CAO, Community Services
C. Fletcher, Acting Deputy CAO, Infrastructure Service
R. Gosse, Director, Legislated Services & City Clerk
S. Adams, Director, Community & Corporate Planning
M. Seiling, Director of Building
J. Witmer, Director of Operations
R. Hagey, Director, Financial Planning
L. Baillargeon, Manager, Asset Optimization
A. Ahkoon, Manager, ERP Business Transformation
D. Saunderson, Committee Administrator
FCS-12-041 - OCTOBERFEST 2012 - DECLARATION AS A CIVIC CELEBRATION
1.
The Committee considered Finance and Corporate Services Department report FCS-12-041,
dated March 5, 2012, regarding Oktoberfest 2012 and its associated activities being declared a
Civic Celebration and that K-W Oktoberfest Inc. be granted a Temporary Retail Market
Licence.
On motion by Councillor B. Ioannidis -
it was resolved:
“That in conjunction with K-W Oktoberfest and its associated activities, the period
October 5-13, 2012 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-12-040 - CUSTOMER INFORMATION SYSTEM (CIS) REPLACEMENT
2.
The Committee considered Finance and Corporate Services Department report FCS-12-041,
dated March 13, 2012, regarding replacement the existing Customer Information System (CIS)
billing program it is recommended that an Expression of Interest be issued for the business
requirements of the SAP Customer Relationship & Billing (CR&B) as a replacement solution.
Mr. D. Chapman gave a brief overview on the background of the CIS program and the work
already completed by staff. He advised that the City retained Prior and Prior Associates Ltd. In
2009 to undertake an evaluation of the CIS system, to propose potential solutions for the billing
system going forward. He advised that staff presented an initial report in September 2010, and
in accordance with the CIS assessment, Council recommended that staff continue with their
due diligence to pursue the acquisition of the SAP tax and utility system to replace CIS. He
further advised that since September 2010 staff have completed additional research into the
SAP Customer Relationship & Billing (CR&B) solution and are proposing the next steps to
implementing a solution.
Ms. Norah Prior, Prior and Prior Associates Ltd. presented an overview on the work conducted
by her company, highlighting both the strengths and weaknesses of the CIS billing system,
including their proposed options going forward. She advised that the CIS currently supports
billing for water, wastewater, stormwater, taxes and gas, and that it is a critical application for
the majority of the City’s revenue billing. She stated that the system was initially purchased 14
years ago from Sierra Systems who decided not to continue supporting the software. She
indicated since then the City has been managing the program through our IT Division to
continuously enhance the system over time to accommodate Council direction and any new
legislative regulations. Ms. Prior advised that through their review they have identified three
possible options: continue with the current CIS System; buy an off-the-shelf replacement; or,
redevelop (re-architect) CIS to a more sustainable architecture and technology. Through the
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2.
evaluation of functionality, implementation considerations, staff satisfaction, risks,
maintenance, and costs, there was a clearly demonstrated advantage for pursuing an off the
self-solution.
Mr. A. Ahkoon gave a further presentation on the CIS System highlighting key points within the
staff report as well as the research that has been conducted by staff since 2011. He stated
that during the course of their research they have contacted a number of utilities and
municipalities that have already, or are considering, implementing the CR&B system. He
advised that the CR&B system for utilities billing has been identified as a well proven solution
run by more than 2000 utility companies worldwide. In considering the program in relation to
property taxes there is an opportunity to take advantage of the SAP CR&B flexibility to design
and configure the City’s property tax requirements into the program; a solution that has already
been adopted by two other municipalities. Mr. Ahkoon further advised that through the initial
research phase the implementation costs have varied considerably from the initial estimate
provided by Prior and Prior compared to a second estimate received by SJH Consulting. The
initial implementation estimate was projected at $4.6M, whereas SJH Consulting projected an
implementation cost of $16.4M. The primary reasons for such a significant cost difference is in
relation to: the customer base; the number and type of utility services; the number of users;
and, the category of systems integrator. Mr. Ahkoon stated that although there is significant
difference in implementation costs, the additional research, conducted through staff’s research,
SAP CR&B is still considered to be the preferred option for replacing the CIS system. Staff is
requesting at this time to issue an Expression of Interest for a business requirement discovery
and solution scoping engagement, to deliver a detailed business design document and the
technical specifications to establish a more detailed budget for the implementation. Following
the Expression of Interest staff will be able to provide a more definitive recommendation
regarding the implementation of the CR&B program.
Councillor B. Ioannidis questioned whether consideration had been given to partnering with a
local technology firm to configure billing software that would accommodate the needs of the
City, and could potentially be advertised to other municipalities as a means of reducing the
cost. Mr. Ahkoon advised that although there would be some advantages to creating software
specific for the City the advantages of going with a larger company like SAP would outweigh
those benefits. He noted that SAP is a large company that spends approximately 14% of their
annual revenues on software research and enhancements, and their expertise and user base
would be far more significant than obtaining software with a smaller user pool.
In response to questions, Mr. Chapman advised that the annual maintenance cost for CIS
includes: internal staff maintenance time; any required server upgrades; previous consultant
requirements; and, any required development testing. Councillor J. Gazzola requested
clarification on the cost estimates and whether they were strictly for implementation. Ms. Prior
advised that the cost estimates provided include all costs, maintenance, and licensing for the
life of the program.
In response to questions, Mr. Chapman advised that the SAP Program was installed in 2008 in
conjunction with the Cityworks program and the total implementation of both programs cost
$7M.
Councillor J. Gazzola questioned whether there will be significant benefit between the SAP
CR&B and the current SAP program. Mr. Chapman advised that the City will have substantial
benefits to using the CR&B system as the billing system is a module of the SAP program
currently in use.
In response to questions, Mr. Akhoon advised that the City could opt to continue using the CIS
program but the older the program gets the greater the risk that the system will no longer be
able support any future enhancements that maybe required.
Councillor J. Gazzola questioned whether there had been any consideration to outsourcing the
gas billing portion of the utility bill to another company.Mr. Chapman advised that there has
been some consideration to outsourcing; however, Council has always identified the
preference to have a one-stop-shop for customers to make one call for the majority of their
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FCS-12-040 - CUSTOMER INFORMATION SYSTEM (CIS) REPLACEMENT (CONT’D)
2.
utility services. Councillor Gazzola stated that with the challenges regarding the gas industry
and obtaining a vendor willing to support the gas billing portion of the system, it may be
something Council should consider at this time.
Councillor J. Gazzola questioned whether staff had contacted the City of Waterloo and the City
of Cambridge to determine their need and willingness to implement a new billing system; and
whether a solution could be found to benefit all three municipalities. Mr. Akhoon advised that
both the City of Waterloo and the City of Cambridge have recently implemented the Vailtech
system for their property tax billing. The City’s system requirements are more complex due to
the integrated utility billing that is required. Currently Customer Service Representatives have
the opportunity to complete a “move in / move out” service that is a one step process to
disconnect: taxes, sewer, water, gas, stormwater and rental water heater billing and reconnect
the resident to their new address if it is still within the City. If two separate billing systems were
implemented there would be a loss of synergy in that business process.
In response to questions, Mr. Chapman advised that staff is looking for Council’s endorsement
for the release of an Expression of Interest. He indicated that a more detailed specification is
required to determine the overall implementation, maintenance and licensing costs of the
program. He commented that the initial estimates had significant variations in the costs and
overall requirements to be able to provide Council a definitive recommendation.
Councillor D. Glenn-Graham questioned whether there was a large enough pool of system
integrators to make a competitive tender process. Mr. Akhoon advised that there are 5 to 6
potential companies that would likely be eligible to bid through the tender process.
In response to questions, Mr. Akhoon advised that the cost to maintain the SAP program
annually is approximately $90,000.
Councillor Y. Fernandes requested clarification on the number of modules that the City would
require for the CR&B billing system and who would ultimately decide which modules were
required. Mr. Akhoon stated that any proposed adjustments to the billing program would
require approval from the CIS Steering Committee prior to implementation.
In response to questions, Mr. Akhoon advised that the approximate timeline for implementation
would likely be around 22 months for a complete transfer of information from CIS to SAP
CR&B system.
Councillor Y. Fernandes questioned whether there were any significant requirement changes
between the initial implementation estimate from Prior and Prior in comparison to the second
estimate received from SJH Consulting. Mr. Akhoon advised that the difficulties in London
were factored into the higher estimate. London Hydro in considering their execution strategy
they chose initially not to purchase the Customer Response Module which created a significant
impact on customer service by increasing their customer call durations from 4.5 minutes to 7.5
minutes. He stated that the initial implementation estimate from Prior and Prior did not include
the purchase of this module; however, research has proven its success and it was added in as
an item for consideration in the second estimate.
Councillor Y. Fernandes questioned whether the implementation of the CR&B system would
potentially have an impact on staffing requirements. Mr. Akhoon advised that there is only
one resource currently allocated to support the SAP program. It is likely that the
implementation would cause a reallocation of resources to ensure that all software systems
are sufficiently supported. Mr. Chapman further advised that the CR&B system will have a
number of new functions currently not supported by CIS, including e-services, which will also
require support staff.
In response to questions, Mr. Chapman advised that staff are proposing an Expression of
Interest rather than a tender to receive responses from vendors that have had significant
experience and resources to implement a program of this size, rather than simply trying to
obtain the lowest bidder.
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FCS-12-040 - CUSTOMER INFORMATION SYSTEM (CIS) REPLACEMENT (CONT’D)
2.
In response to questions, Mr. Akhoon stated that the gas utility billing is the most complex
portion of the City’s billing system. If the system did not require that function then the program
requirements would be significantly different.
Mayor C. Zehr requested clarification on the initial estimates and whether the figures were
comparable to what is currently being spent to maintain the CIS program, recognizing that
there would be some initial upfront costs for implementation. Mr. Chapman advised that a
more refined cost for the purchase of the program and implementation would be required to
confirm whether that would be the case.
On motion by Mayor C. Zehr, the recommendation contained in report FCS-12-040 was
brought forward for the Committee’s consideration.
Councillor J. Gazzola questioned whether the Expression of Interest was also to be used to
select a system integrator and the potential for one vendor to do both. Mr. Chapman advised
that staff will have to adhere to the requirements of the Purchasing By-law and in considering
selection for the Expressions of Interests be careful to ensure that there is no conflict in
respect to selection of the system integrator.
In response to questions, Mr. Ahkoon advised that it would likely be another year before staff
would be in a position to begin implementing a replacement for CIS, with execution anticipated
for 2015. Mr. Chapman further advised that the Expression of Interest process will take about
6 to 8 weeks and the business case will be finalized in 2013 to be considered for the 2013
budget process.
Councillor J. Gazzola requested clarification on the recommendation and whether it was also
approving the use of the SAP CR&B system. Mr. Chapman advised that Council already
approved perusal of the SAP program and staff are trying to ensure that there is a complete
understanding of the program, its uses and its overall cost. Once everything has been fully
identified staff will report back to Council to provide a more definitive recommendation if SAP
CR&B is the best option for replacing the CIS system.
Councillor S. Davey questioned what type of billing system was being used by Kitchener
Wilmot Hydro. Mr. Ahkoon advised that the system they are using is an in house billing
program that has recently been customized to accommodate their time of use billing
requirements. He stated that staff had spoken to Hydro and they have no interest in helping to
support our billing needs.
In response to questions, Mr. Akhoon advised that the ownership of the modules and any
customizations built into them to support the City’s billing needs will be retained by SAP. Mr.
Chapman further advised that it is staffs intention to limit the amount of customizing required
by purchasing an off-the-shelf system.
On motion by Mayor C. Zehr -
it was resolved:
“That staff be directed to continue to pursue the acquisition of the SAP Customer
Relationship & Billing (CR&B) solution to replace the existing Customer Information
System (CIS); and further,
That staff be directed to issue an Expression of Interest for a business requirements
discovery and solution scoping engagement to deliver a detailed business design
document and the technical specifications of an SAP CR&B solution that meets the
City’s requirements, and to establish a detailed budget for implementation.”
The Committee then recessed at 1:00 p.m. and reconvened at 1:46 p.m. with Councillor S. Davey –
Chair, Mayor C. Zehr and Councillors J. Gazzola, Y. Fernandes, K. Galloway, P. Singh, B. Ioannidis,
Z. Janecki, and D. Glenn-Graham present.
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CAO-12-012 - WATERLOO REGION SMALL BUSINESS CENTRE
3.
The Committee considered Chief Administrator’s Office report CAO-12-012, dated February
28, 2012, regarding the Waterloo Region Small Business Centre (WRSBC) including their
achievements for 2011 and their goals for 2012.
Ms. C. Farrell advised that the Small Business Centre serves all industry sector small business
clients from pre-start up, through to five years of business. She stated that they have an office
located in the Kitchener City Hall and one each in the City of Waterloo and the City of
Cambridge. She commented that the Business Centre functions as a one-stop-shop providing
a wide array of business services essential to aspiring entrepreneurs and small businesses,
regardless of industry sector or stage of business development. Ms. Farrell advised that in
2011 the WRSBC developed a strategic plan that outlined five major areas of focus to ensure
the future success of the organization and strengthen the local economy. She outlined the five
areas of focus including: Start-up City, to be the first stop for business start-up ideas; Skills
Development; Collaborate, to build upon business to business networks and partnerships;
Flexible Programs; and, Innovation. Ms. Farrell further advised that for 2012 the WRSBC has
identified emerging needs and will be offering new programs to support those growing needs,
referencing a list of new programs outlined in the report. In summary she advised that the
Business Centres strategic imperatives will continue to focus on program flexibility, brand
development and diligent fiscal operations management.
Councillor J. Gazzola requested that Ms. Farrell provide a financial summary report for the
WRSBC operations for the past three years.
In response to questions, Ms. Farrell advised that the WRSBC has aligned with the City of
Kitchener’s Economic Development Strategy. She noted that aligning with similar strategies
within the City of Waterloo and the City of Cambridge has likely already been achieved as the
small business needs are similar in each of the municipalities.
Councillor P. Singh questioned whether the WRSBC also assists businesses that are currently
in operation in addition to new businesses. Ms. Farrell advised that 80% of their inquiries
come from businesses that have been operating for less than 2 years. She noted that the
remaining 20% are from businesses that are currently in operation seeking additional advice.
Councillor Singh questioned whether assistance to currently operating businesses was a
service lacking at the Centre. Ms. Farrell advised that the real need of the WRSBC is to assist
with business start-ups.
Councillor D. Glenn-Graham questioned whether the Small Business Centre has entered into
partnerships with the local universities and colleges to promote small business start-up. Ms.
Farrell stated that the WRSBC is active in both the University of Waterloo and Conestoga
College doing presentations and encouraging young entrepreneurs to establish their own
businesses.
FCS-12-039 - 2011 YEAR END VARIANCE REPORT
4.
The Committee considered Finance and Corporate Services Department report FCS-12-039,
dated March 1, 2012, regarding the City’s financial performance versus the 2011 budget. The
report includes information on: the tax supported services; rate supported enterprises/utilities;
and, supplementary information related to investment income. Mr. R. Hagey reviewed the
report, noting that the overall results of the review were positive.
Mr. H. Drewitz raised concerns with the capital reserve close-outs being transferred into tax
reserve funds to help establish a balanced budget. He expressed the view that if funds were
identified for the Capital Budget and there is an identified surplus, the surplus should be used
on future capital projects, rather than transferring the funds to the Operating Budget to achieve
a balanced budget. He further advised that there were several areas in the financial statement
where significant changes have been identified, since the August 2011 projections, noting:
operations administration; gapping; and, stormwater rebates as areas of concern. Mr. Drewitz
suggested that Council should be reviewing financial variance reports on a quarterly basis to
ensure there is a zero balance at the end of each financial year.
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FCS-12-039 - 2011 YEAR END VARIANCE REPORT (CONT’D)
4.
Councillor D. Glenn-Graham requested clarification from the delegation on whether he has
spoken to staff prior to this meeting regarding his concerns. Mr. Drewitz indicated that he had
spoken to staff regarding the projected differences in gapping specifically and was advised that
an in depth review in the compensation packages for municipal staff identified surpluses not
initially projected.
In response to questions, Mr. Drewitz expressed the opinion, that the Capital and Operating
Budgets need to be dealt with and maintained separately. He stated that if there are surpluses
identified within the Capital budget specifically at the end of each year, the surpluses should be
maintained in the Capital Budget. He commented that some members of Council have
continually stated that our infrastructure is declining and if the surplus funds were maintained
within the Capital Budget it could help in addressing infrastructure deficiencies.
In response to questions, Mr. Drewitz advised that the Operations Administration variance
doubled from what was initially projected in August 2011 and the comment for the increased
variance indicates: supervisor costs at the KOF, harsh winter at the beginning of the year;
additional fleet costs; and, loss of work completed for the Region. He questioned why some of
these factors were not identified in August 2011 when Council received their last financial
summary report.
Mayor C. Zehr requested clarification from staff on the Operations Administration Budget. Mr.
D. Chapman advised that a more detailed breakdown of the Operation Administration budget
was not available at this time; however, staff would be able to follow up with the information
prior to March 26, 2012 Council meeting. Mayor Zehr requested clarification on the capital
close-outs and whether the entire year’s budget surpluses within enterprise accounts (i.e. golf,
sewer, water, etc.) are transferred into the tax stabilization account. Mr. R. Hagey advised that
when there are budget surpluses in those accounts, the surpluses go back into the respective
enterprise budget and are not transferred to the tax base.
Mayor C. Zehr raised concerns that if yearly deficits are not mitigated by Capital close-outs it
will have impact to the next year’s budget as it is his understanding any remaining deficit would
become the first order of business to address and would have to be funded out of the tax levy.
Mr. Chapman confirmed that the Capital close-out funds come from the Capital out of Current
pool, which has not been historically done; however, there has been insufficient funds in the
tax stabilization reserve to address deficit positions. He stated that using Capital close-outs is
not viable long term and would be better used to fund Capital programs but have become the
first draw to support funding year end deficits.
Mayor C. Zehr requested clarification on the differentials identified in gapping. Mr. Hagey
advised that there were three components to the changes in gapping: an increase in gapping
for three senior management positions that were vacant for the majority of the year, not initially
projected; higher than typical gapping in Fire; and, higher than typical gapping from a detailed
year-end review of compensation accounts.
Councillor J. Gazzola requested clarification on the loss of work completed for the Region
under the Operations Administration budget and what those works include. Mr. J. Witmer
advised that this relates to write-offs for 2008 and 2009, specifically relating to winter
maintenance and transit shelter maintenance.He further advised that staff is currently
reviewing practises relating to bus shelter maintenance to determine if the City will continue to
do this work for the Region.
Councillor J. Gazzola questioned the reported surplus in the Building Enterprise Division and
the loss of revenue from what was initially projected in August 2011. Mr. M. Seiling advised
that staff anticipated the receipt of a large permit application prior to year end, that wasn’t
submitted.
Councillor J. Gazzola expressed concerns with final budget figures posted for water revenues.
He stated that there was a 4% different between the figures provided on Final Budget Day,
than reflected in the year end variance report. He advised that a 4% difference could have
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FCS-12-039 - 2011 YEAR END VARIANCE REPORT (CONT’D)
4.
meant a potential reduction in water rates for 2012. In response, Mr. Chapman advised that
the actual difference between what was projected versus the year end result was a difference
of $65,000. equating to a variation of 0.02%, making overall projections almost on target.
Councillor J. Gazzola requested clarification on the increased revenues in the gasworks,
noting that the actual revenues were significantly higher than what was forecasted for 2011.
Ms. L. Baillargeon advised that winter is when the City normally experiences high
consumption; however, winter conditions have been unnaturally mild and the gasworks is
already approximately 11% behind in consumption rates resulting in less revenue. She noted
that due to these variances, staff would normally consider doing a rate adjustment in April;
however, review of the rates has been delayed until July.
Councillor J. Gazzola questioned the adjustment in the stormwater charge and whether there
was a potential savings in this category. Mr. Hagey advised that due to a mild start to the
winter staff were able to complete additional maintenance work on the storm system prior to
the end of 2011; and could not confirm whether any additional savings were achieved.
Councillor J. Gazzola requested clarification on the difference in capital close-outs referenced
in the final budget package in comparison to the variance report received this date. Mr. Hagey
advised that there were a number of initiatives not considered in the budget process that had
capital close-out money applied to them, indicating the boathouse as one of those initiatives.
In response to questions, Mr. Hagey advised that the difference identified in the enterprise
division was due to the increase rental revenues achieved through the Auditorium and arenas.
Councillor J. Gazzola questioned the significant difference in the Operations sidewalk repairs
account. In response, Mr. Witmer advised that the initial sidewalk expenses are forecasted as
part of the operations budget and any additional expenses are recovered from a capital
account through the Engineering Division. The surplus is the balance remaining from that
expenditure.
In response to questions, Mr. Hagey advised that in the event the Centre in the Square has a
deficit the City will cover half of the deficit amount; and conversely, if there is a surplus
identified than the City will receive half the surplus amount.
Councillor Y. Fernandes requested clarification on the difference between turf maintenance
and sports field maintenance, noting that there was a deficit in the sports field account and a
surplus in the turf account. Mr. J. Witmer advised that they are two separate categories, with
sports fields specifically referring to outdoor facilities and both have a different service level.
Councillor Y. Fernandes questioned whether the surplus in the turf category would allow for a
reduction in the 2012 budget. Mr. Hagey advised that operating budgets are set for the entire
year and the 2011 surplus for turf was transferred to the tax stabilization reserve. In general,
surpluses are not used to decrease budgets and if the surplus had not been transferred to
reduce the 2011 deficit the overall deficit would have increased to $500,000. instead of
$238,000.; which in his opinion is not prudent to do.
In response to questions, Mr. Hagey advised that stormwater rebates when approved by
Council were retroactive to January 1, 2011. He indicated that although the funds will be paid
out in 2012, the 2011 budget was charged for that year’s portion of the rebates.
Councillor Y. Fernandes questioned whether Council could be provided financial reports on a
quarterly basis to provide a greater understanding on the annual budget process and identify
deficits and surpluses earlier in the fiscal year. Mr. Chapman advised that staff currently
update Council on the City’s financial status three times annually, noting that a fourth quarter
update is a challenge due to Council’s summer break.
Councillor J. Gazzola requested that Council be provided with a monthly status report to
ensure that Council is more informed on the fiscal budget. In response, Mayor C. Zehr
advised that more frequent reports will create confusion as they are less reliable for reporting
and he did not want to see Committee time being taken up every month to address what is
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4.
likely to amount to the same questions being repeatedly asked. He reminded that Council’s
responsibility is that of governance, not management and in his opinion, the 2011 variance
report demonstrates staffs ability to project and monitor the budget.
Councillor J. Gazzola put forward a motion for consideration to require staff to provide monthly
financial reports to Council.
Mr. Chapman advised that a financial report requires analysis and explanation to fully
understand what has transpired and without will not provide an accurate summary of the
budget. He noted that currently there is no municipality that reports to Council monthly on the
status of their budget.
Councillor P. Singh questioned if the intent of the motion was to have the status report as a
monthly agenda item. Councillor J. Gazzola clarified that it was still his intention to receive
three annual updates at Committee and that monthly summary reports simply be circulated to
Council.
Councillors K. Galloway, B, Ioannidis and S. Davey did not support receiving monthly
statements, raising concerns that appropriate explanations of accruals would be absent
leading to misinterpretation and inaccurate assumptions.
Lost
Councillor Gazzola’s motion was then voted on by a recorded vote and , with Councillors
J. Gazzola, D. Glenn-Graham, Y. Fernandes and Z. Janecki voting in favour; and, Mayor C.
Zehr and Councillors S. Davey. K. Galloway, P. Singh, B. Ioannidis voting in opposition.
Councillors B. Vrbanovic and F. Etherington were absent and accordingly did not vote.
ADJOURNMENT
5.
On motion, the meeting adjourned at 3:18 p.m.
D. Saunderson
Committee Administrator