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HomeMy WebLinkAbout2012-05-28FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 CITY OF KITCHENER The Finance and Corporate Services Committee met this date commencing at 2:25 p.m. Present: Councillor S. Davey - Chair Mayor C. Zehr and Councillors Y. Fernandes, K. Galloway, P. Singh, B. Ioannidis, Z. Janecki, F. Etherington and D. Glenn-Graham. Staff: J. Willmer, Chief Administrative Officer D. Chapman, Deputy CAO, Finance & Corporate Services P. Houston, Deputy CAO, Infrastructure Services R. Regier, Executive Director of Economic Development J. Evans, Director of Revenue / Deputy City Treasurer M. Goldrup, Director of Human Resources L. Gordon, Director of Supply Services R. Hagey, Director of Financial Planning S. Adams, Director of Strategic Planning & Innovation L. Bailargeon, Manager of Asset Optimization T. Boutilier, Senior Business Development Officer R. Morgan, Capital Investment Advisor C. Goodeve, Committee Administrator CAO-12-024 - ACQUISITION OF LAND FOR ROAD RECONSTRUCTION - MILL STREET 1. The Committee considered Chief Administrator’s Office report CAO-12-024, dated May 2, 2012 regarding the acquisition of three separate parcels of land located along Mill Street to facilitate an intersection realignment. On motion by Councillor B. Ioannidis - it was resolved: “That the Mayor and Clerk be authorized to execute the Agreements of Purchase and Sale and any other related documentation required to purchase three separate parcels of land located on Mill Street, more specifically described as Parts 2, 3 and 4 on Reference Plan 58R 17393; said documents to be satisfactory to the City Solicitor.” CAO-12-019 - ARTS & CULTURE ADVISORY COMMITTEE WORK PLAN UPDATE 2. The Committee considered Chief Administrator’s Office report CAO-12-019, dated April 20, 2012 providing an update on the Arts and Culture Advisory Committee’s work plan, highlighting achievements, findings and key priorities for future work. Mr. Don Bourgeois, Chair, Arts and Culture Advisory Committee attended and presented the updated work plan, which was originally approved by Council in May 2011. He advised that the Committee established four sub-committees to examine the following priorities identified in the Plan: • City’s role in regional arts and culture development; • Community needs for space for arts purposes / multi-use arts space and cluster strategy; • Identify opportunities and partnerships to advance the convergence of art and technology; and, • Youth Engagement / Audience Development, Cultural Tourism. Mr. Bourgeois acknowledged that while the Committee has not been able to achieve their previously established goal of meeting annually with each member of Council; going forward this is an identified priority. On motion by Councillor K. Galloway - it was resolved: “That the Arts and Culture Advisory Committee work plan update, as outlined in Chief Administrator’s Office report CAO-12-019, be received for information.” FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 99 - CITY OF KITCHENER INS-12-039 - NATURAL GAS RATES 3. The Committee considered Infrastructure Services Department report INS-12-039, dated May 22, 2012 recommending reductions in the Kitchener Utilities natural gas supply and delivery rates for a combined decrease of 7.8%, or approximately $72. per year for the average residential customer. Ms. L. Baillargeon presented the report, advising that it is proposed that the supply component of the natural gas rates be decreased to $0.175 per cubic meter from the current $0.212. She noted that this reduction was not originally anticipated and even though consumption has been lower than what was budgeted, the decline in purchase prices allows for the proposed reduction. She stated that with respect to the gas delivery, the daily fixed rate is proposed to be changed from $0.66 per day to $0.69. She commented that this increase was projected as part of the 2012 Budget. She indicated that the gas delivery variable rates are tiered for residential customers based on actual consumption and are proposed to be reduced by approximately 5%. She noted that while it is difficult to forecast the precise impact these reductions will have, it is anticipated that Kitchener Utilities will achieve or exceed its original 2012 Budget projections. In response to questions, Ms. Baillargeon confirmed that Kitchener Utilities does not make a profit on its natural gas supply program, which is operated at cost.She stated that to date, the Utilities’ largest customers have exceeded their forecasted consumption by 13% and residential consumption has also exceeded projections; however, mid-to-large commercial and industrial consumption has been down. She added that the rate decrease is calculated based on the overall annual consumption of natural gas. She reviewed the results of recent customer research, which indicates that 78% of respondents think stable rates are most important when thinking about natural gas supply; and, 22% preferred variable rates, where the price fluctuates up or down with the market. She noted that 95% of respondents expressed satisfaction with the City’s natural gas pricing. Questions were raised as to how the projected $72. per year natural gas savings would compare to a similar tax levy reduction. Mr. D. Chapman advised that it equated to an approximately 9% reduction in the tax rate for the average household. On motion by Councillor K. Galloway - it was resolved: “That the supply component of the natural gas rates be decreased to 17.5 cents per cubic meter from 21.2 cents per cubic meter for system gas customers of the City of Kitchener effective July 1, 2012; 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 outlined in Appendix ‘A’ of Infrastructure Service Department report INS-12-039 for all Kitchener delivery customers effective July 1, 2012.” FCS-12-105 - PROPOSED CLOSURE OF A NON-TRAVELLED LANEWAY BETWEEN 4. INDIANA STREET & EDNA STREET - AUTHORIZATION FOR ENCROACHMENT AGREEMENTS The Committee considered Finance and Corporate Services Department report FCS-12-105, dated May 18, 2012 recommending the authorization of encroachment agreements for a non- travelled laneway between Indiana Street and Edna Street. It was noted on the agenda that any recommendation from the Committee regarding this matter would be considered at the special Council meeting being held later this same date. On motion by Mayor C. Zehr - it was resolved: FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 100 - CITY OF KITCHENER FCS-12-105 - PROPOSED CLOSURE OF A NON-TRAVELLED LANEWAY BETWEEN 4. INDIANA STREET & EDNA STREET - AUTHORIZATION FOR ENCROACHMENT AGREEMENTS (CONT’D) “That the closure of the non travelled laneway running between Edna Street and Indiana Street, attached as Schedule “A” to Finance & Corporate Services Department report FCS-12-105, described as the whole of PIN 223110110, City of Kitchener, Regional Municipality of Waterloo, be approved in principle, and that Legal Services be instructed to proceed with the preparation and advertising of a by-law to close said laneway, subject to the following conditions: 1. That the non travelled laneway running between Edna Street and Indiana Street to be closed, described as the whole of PIN 223110110 in the City of Kitchener be declared surplus to the City’s needs for the purpose of conveying any easements to outside utility agencies, if necessary; and 2. That the Property Owner(s) entering into the encroachment agreement(s) contemplated in this resolution be responsible for all costs associated with the closure of said laneway, including, but not limited to, any necessary reference plans, appraisals, advertising, by-law registration, easement registrations, all Registry Office fees and disbursements, as well as costs pertaining to the encroachment agreement and the Legal Services administration fee; with advance payment of the costs to be adjusted once actual costs are known; and, That, subject to the laneway being closed, the Mayor and Clerk be authorized to execute Encroachment Agreement (s), satisfactory to the City Solicitor, with one or both of the abutting property owner(s) and any mortgagee(s) of the properties municipally known as 29 Edna Street and 26 Indiana Street, to allow one or both property owner(s) to use that portion of the laneway to be closed, as part of their respective property for general yard purposes, incorporating the area within their fenced yard with landscaping, provided no structures requiring a building permit are built, and further, That staff be directed to waive the annual encroachment fee associated with the Encroachment Agreement, as outlined in Report FCS-12-105.” PRESENTATION - EMPLOYEE CULTURE SURVEY RESULTS 5. Dr. J. Yardley, Metrics @ Work, presented the results of the City of Kitchener 2012 Employee Culture Survey. He noted the importance of the survey results, including the fact that they reflect the voice of front line work teams. He added that creating an engaged work place drives higher levels of performance and productivity. He indicated that the survey allows the City to gage its alignment with the strategic priorities outlined in Kitchener’s People Plan. He advised that the City's overall response rate was 48.4%, which represents a significant decrease compare to the previous two surveys. He stated that this was primarily due to only 25.8% of the City’s part-time workforce completing the survey, compared to 57.7% of the full- time complement. Dr. Yardley displayed a comparison of the 2009 and 2012 Employee Survey results; noting that of the 19 comparable scales, all but three drivers are above 60% and for all but one comparable measure, Kitchener was higher than the Municipal Sector Benchmarks; which consists of results compiled from 25 municipalities. He advised that there were some small gains since 2009, which is commendable considering those results were already very high. He identified that there was high variation within the City; therefore, change strategies should be focused departmentally at a minimum, divisionally or even lower in the best of circumstances. Discussions took place on some of the areas in the corporation where results were not as high as the corporate average. Dr. Yardley responded that compared to other municipalities, the City of Kitchener’s results were higher for all but one of the ranked drivers. He advised that the City was also clearly higher on those drivers for which other municipalities are most challenged. Mr. J. Willmer noted that having the survey results provides the ability to recognize the early signs of potential issues that require attention and action. In addition, it FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 101 - CITY OF KITCHENER PRESENTATION - EMPLOYEE CULTURE SURVEY RESULTS (CONT’D) 5. allows the opportunity to get out in front of any issues before they progress. He commented that if the City were to conduct a further survey of this nature it would most likely not take place for another three years. INS-12-043 - PARTNERSHIP WITH REGION OF WATERLOO 6. - SHARED CORPORATE CONTACT CENTRE SPACE AND TECHNOLOGY The Committee considered Infrastructure Services Department report INS-12-043, dated May 28, 2012 recommending a proposed shared Corporate Contact Centre space and technology agreements with the Region of Waterloo. Ms. P. Houston reviewed the report, advising that Phase 1 proposes a ten year licence agreement for space at the Kitchener Operations Facility (KOF) for the Regional Service First Call Centre (SFCC). She stated that Phase 2 consists of both parties entering into a memorandum of understanding concerning the shared use of call centre software. She added that during this phase the City would examine the potential utilization of the Region’s call centre system. She commented that capital costs might be incurred dependent upon the outcome of Phase 2, which would need to be planned and accounted for in the City’s Capital Forecast. In response to questions, Ms. Houston advised that under the memorandum of understanding, the City would have two years to complete due diligence and decide whether or not to exercise its option to use the Region’s call centre software system. She confirmed that the City would be receiving a competitive market rate for leasing this space. She noted that this collaborative partnership provides the opportunity to reduce or avoid costs by leveraging the shared use of an existing facility and technology infrastructure. On motion by Councillor P. Singh - it was resolved: “That the Mayor and Clerk be authorized to execute a Licence Agreement and Memorandum of Understanding, subject to the satisfaction of the City Solicitor, for the proposed shared Corporate Contact Centre space and technology agreements with the Regional Municipality of Waterloo, as outlined in Infrastructure Services Department report INS-12-043.” CAO-12-021 - BROWNFIELD REMEDIATION PROGRAM APPLICATION 7. - 51 BREITHAUPT STREET (CONT’D) The Committee considered Chief Administrator’s Office report CAO-12-021, dated May 4, 2012 recommending approval of the Brownfield Remediation Program Application submitted by 2184647 Ontario Ltd. (Perimeter Development Corporation) for 51 Breithaupt Street (The Breithaupt Block). Mr. R. Regier introduced the report, noting that Mr. T. Boutilier will be retiring as of June 15, 2012; and, acknowledged the instrumental role he has played in attracting over $100M in investments into Downtown Kitchener. Mr. Boutilier reviewed the subject application, advising that the Breithaupt Block is approximately 1.72 hectares situated adjacent to King Street, just north of the CNR Mainline. He stated that the site has had several former industrial uses, including auto parts manufacturers, several rubber companies and a gasoline service station.He indicated that the proponents retained Conestoga-Rovers & Associates to conduct a site assessment and estimated the eligible remediation cost at $1,559,993. He noted that this amount includes the cost of environmental assessments, site remediation, administrative costs, but not HST. He stated that the total 2011 assessment for the subject lands was $3,525,000., with the City’s portion of property taxes collected on that assessment being $27,672.75.He added that the Applicant estimated the post-project assessment value at $32,000,000., with the City’s property taxes projected at $255,936.60. He commented that contaminated lands have almost no value and in many cases, these sites have exceptional potential; but, it is difficult for a developer to obtain financing for these kinds of projects unless the lands are remediated. He stated that the Brownfield Remediation Program enables the City to work with a developer to FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 102 - CITY OF KITCHENER CAO-12-021 - BROWNFIELD REMEDIATION PROGRAM APPLICATION 7. - 51 BREITHAUPT STREET (CONT’D) obtain financial assistance for environmental assessments, site clean-up and other costs related to remediation and redevelopment. He added that the results have greatly supported the City’s environmental agenda, as well as growth management strategy; while transforming a former vacant, non-tax-paying asset into a productive redevelopment. Mr. Craig Bettie, Perimeter Development Corporation attended in support of the subject application, advising that the proposed redevelopment would provide 174,415 square feet of new loft office space in a complex of six buildings. He responded to questions that the Brownfield Remediation Program was one of the key factors taken into consideration by his organization when it was evaluating whether to proceed with this project. He added that they are currently undertaking the leasing and marketing component; the success of which will determine the overall success of the project. He acknowledged that the potential exists in the long term for a portion of the Breithaupt Block to be redeveloped for residential use; however, at present their primary focus is on attracting local businesses from the creative and/or technology sectors. In response to questions, Mr. Boutilier advised that since 2006 the Region of Waterloo has been a partner in the Tax Increment Grant (TIG) Program. He stated that the TIG Program provides developers of brownfield properties in eligible areas with an opportunity to receive grants when the project is completed to help recoup up to 100% of clean-up costs. He indicated that the TIG is based on the increase in the City and Regional tax assessment before and after remediation and redevelopment, eligible clean-up costs and any other brownfield assistance received earlier in the development process. He added that grants are paid after the completed project is reassessed by the Municipal Property Assessment Corporation (MPAC), and may last for up to 10 years or until the maximum eligible costs are recouped. He advised that the City does not provide any funds until the project is completed and estimated that the earliest this project would need to be accounted for in the Capital Forecast would be 2014. He suggested that given the success of the Program to date, going forward, the City may wish to re-evaluate the future applicability of the existing Program criteria. Several members spoke in support of the subject Brownfield Remediation Program Application, and the Committee extended its thanks to Mr. Boutilier for his many years of valuable service to the City of Kitchener. On motion by Councillor D. Glenn-Graham – it was resolved: “That the City of Kitchener approve the Brownfield Remediation Program Application, received from 2184647 Ontario Ltd. (Perimeter Development Corporation), dated March 5, 2012., subject to the following: i) That in exchange for a completed and filed Record of Site Condition for the Breithaupt Block lands (consisting of 51 Breithaupt Street, 20-24 Breithaupt Street, 2 Moore Avenue, 12 Moore Avenue, 47 Wellington Street) and completion of redevelopment plan, the City of Kitchener will provide a grant in the form of an annual rebate on City taxes in an amount equal to 100% of the City Tax Increment; ii) That the City Tax Increment is defined as the difference between the City portion of real property taxes for the 2011 Taxation Year and the new City portion of real property taxes levied as a result of a new assessment by the Municipal Property Assessment Corporation (MPAC) following completion of the project, as compensation for the remediation of the above stated lands; iii) That the annual City property tax grant is estimated to be $228,263, payable in the first and second years following re-assessment by MPAC and $142,792 in the third year; and, That the Region of Waterloo Brownfield Coordinator be advised of the decision regarding the subject Application; and further, FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 103 - CITY OF KITCHENER CAO-12-021 - BROWNFIELD REMEDIATION PROGRAM APPLICATION 7. - 51 BREITHAUPT STREET (CONT’D) That the Mayor and Clerk be authorized to execute an Agreement related to the Brownfield Remediation Program Application, with the Region of Waterloo and 2184647 Ontario Ltd, subject to the satisfaction of the City Solicitor.” FCS-12-100 - PURCHASING BY-LAW REVIEW 8. The Committee considered Finance and Corporate Services Department report FCS-12-100, dated May 18, 2012 recommending amendments to Kitchener Municipal Code Chapter 170 (Purchasing and Materials Management). Mr. L. Gordon reviewed the report, highlighting the proposed changes to the City’s policies for the procurement of goods and services. In response to questions, Mr. Gordon advised that the City’s purchasing by-laws was last reviewed in 2001, and confirmed that the proposed amendments reflect inflationary increases that have occurred since that time. He stated that a review of the authorization process determined that all contracts in excess of $125,000., once approved by Council, are reviewed by Legal Services, approved by the Director of Supply Services and signed by the Mayor and City Clerk. He added that to improve the efficiency of the process, it is proposed that the Mayor and Clerk no longer be required to sign these contracts.He noted that these agreements would still be reviewed by Legal Services staff prior to being signed by the Director of Supply Services. Mayor C. Zehr expressed support for the proposed change, confirming that currently all contracts, with the exception of field orders, are signed by both the Mayor and Clerk. Questions were raised regarding the transaction limit for purchasing cards. Mr. D. Chapman advised that the limits all correspond to those specified in the Purchasing By-law. He noted field orders currently have a limit of $2,500. and the same limit would apply to purchasing cards. Councillor Y. Fernandes requested clarification regarding the transparency of the process for establishing pre-qualified bidders. Mr. Gordon advised that if a Department or Division wishes to enter into a pre-qualification for bidders on a specific project, a report would be brought before Council outlining the background reasoning as to why pre-qualification is required in that particular instance. He added that if Council approves the pre-qualification, an Expression of Interest would be issued and once that process is completed, that list of pre-qualified bidders would also come before Council for approval. Councillor Fernandes further questioned if there was an opportunity to expand the amount of information provided to Council regarding the tendering process; particularly details as to why certain tenders may have been disqualified. Mr. Gordon advised that the information released as part of an Expression of Interest includes details on the successful bidder as well as an identifications as to whether they were or were not the low bid. He added that if for any reason a tender has been disqualified, then an explanation as to why that occurred would be included with the tender recommendation. Mayor Zehr acknowledged that while Council should receive information on why a tender was disqualified; any additional details beyond that do not need to be provided. He stated that the purpose of the Purchasing By-law is to set out the policies and procedures staff are to follow when evaluating a tender. He commented that ultimately, Council only votes on the successful tender. He added that as long as it met the specified criteria and the established policies and procedures were adhered too, then there is no need for Council to analyse the details of each tender that is brought forward for consideration. On motion by Councillor B. Ioannidis – it was resolved: “That By-law 2001-238 being a by-law to cover Purchasing and Materials Management policies and regulations, and to define authority and responsibilities, be repealed; and, FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 104 - CITY OF KITCHENER FCS-12-100 - PURCHASING BY-LAW REVIEW (CONT’D) 8. That the by-law attached as Schedule ‘1’ to Finance and Corporate Services Department report FCS-12-100, be approved; and further, That the City of Kitchener Municipal Code Chapter 170 (Purchasing and Materials Management), be amended to be consistent with the terms of the by-law attached as Schedule ‘1’ to Report FCS-12-100.” FCS-12-102 - RESERVE FUND POLICY 9. The Committee considered Finance and Corporate Services Department report FCS-12-102, dated May 17, 2012 regarding the results of a comprehensive review of the City’s reserve funds structure. Mr. R. Hagey presented the report, advising that the last comprehensive review of the reserve funds, from a policy perspective, was conducted in 1987. At that time, the City had 25 reserve funds with a total projected year-end balance of over $30M and the net tax levy was $34M. He outlined for comparison that in 2011, the City had 30 reserve funds with a balance of $35M and the net tax levy was $95M. He stated that staffs’ review found that there was no one policy governing reserve funds as a whole and identified a need to rationalize the existing reserve funds. He added that there is little consistency in documentation, with some reserve funds having policies, while others do not. Accordingly, it is recommended that a single, consolidated reserve fund policy encompassing all of the City’s reserve funds, be adopted as well as supplementary information sheets for each reserve fund. He noted that the supplementary information would outline the purpose of the reserve fund, source of funding, use of funding, and the minimum / maximum funding level targets. In response to questions, Mr. Hagey advised that staff reviewed reserve fund information from other municipalities as well as relevant third party associations that have expertise in the municipal finance sector. He added that several of those municipalities have adopted a single reserve fund policy, which provides guiding principles employed for overall reserve fund management. Questions were raised regarding the City’s debt to reserve ratio. Mr. Hagey advised that the City’s debt to reserve ratio exceeds the target established by credit rating agencies, as well as the results form comparator municipalities. He acknowledged that while this amount of debt is not expected to continue indefinitely, debt is a regular funding source for the City’s capital program, and used for special initiatives; such as, the Economic Development Investment Fund (EDIF), or the expansion of the Kitchener Memorial Auditorium Complex. He stated that minimum / maximum target balances are proposed for each reserve fund, with an overall target based on the sum of all of the reserve funds. He indicated that these individual targets were reviewed on an aggregate basis in comparison to external benchmarks; such as, debt to reserve ratios and as a percentage of operating expenses. He added that it was identified that staffs’ original minimum / maximum targets were set too high. Therefore, a further review was conducted of each fund on a category basis, with adjustments being made to some of the target balances to reflect more reasonable levels compared to other municipalities. He pointed out that at a minimum, Kitchener should strive to have a debt to reserve ratio of 1:1, with reserve fund levels of at least 20% of operating expenses. However, in 2010, the actual balance for reserve funds as a percentage of operating expenses was 7.8%. He indicated that the recommended minimum target balance for the City’s reserve funds is $65M, adding that an additional allocation of $30M would be needed to achieve that target. He stated that staff are developing strategies to improve the level of funding held in reserve, noting it could take several years to reach the minimum target levels. Responding to further questions, Mr. D. Chapman estimated that a 40% tax increase would be required if only the tax base were used to achieve the minimum target balance for the City’s reserve funds within one year. He added that the reserve fund review allowed staff to validate the proposed target balances and puts in place more a detailed framework by which to plan successive budgets to ensure that the City’s reserves are in a better position. He pointed out that no recommendation is being put forward at this time to adjust rates or increase the levy; rather, this simply helps to identify areas that need to be addressed in coming years. FINANCE AND CORPORATE SERVICES COMMITTEE MINUTES MAY 28, 2012 - 105 - CITY OF KITCHENER FCS-12-102 - RESERVE FUND POLICY (CONT’D) 9. Concerns were raised regarding the clause in the policy proposing that a reserve fund would only be used for a specific purpose, and the impact this may have on Council’s Budget deliberation process. Mr. Hagey advised that this acknowledges that when created, reserve funds typically have a specified purpose for which they should only be used. However, the policy proposes that in lieu of implementing a levy increase, temporary inter-fund borrowing would be permitted to cover a reserve fund shortfall and avoid external debt charges. He commented that the policy stipulates that this kind of borrowing should only occur where it has been determined that excess funds are available and that the use of those funds would not affect the intended purpose of the reserve.He noted that Council approval would still be required to allocate funding from reserves. Mr. Chapman pointed out that the proposed policy would serve to inform the future direction for the City’s financial planning. He drew the Committee’s attention to statements within the policy regarding not issuing debt within reserves, maintaining positive balances across all reserve funds and only using the funds for their intended purposes; and, indicated that these would affect future development charge reviews as well as budget submissions. Several members expressed support for the tenets of the policy that reserve fund balances as a whole need to be increased, noting that while the City appears to have a negative debt to reserve ratio; this does not take into consideration those assets that are unique to Kitchener. On motion by Councillor B. Ioannidis – it was resolved: “That the Reserve Fund policy, as attached to Finance and Corporate Services Department report FCS-12-102, be approved; and, That the City’s existing reserve fund policies, as summarized in Appendix ‘A’ of Report FCS-12-102, be repealed; and, That the changes to reserve funds listed in Appendix ‘B’ of Report FCS-12-102, be approved; and further, That the reserve funds listed in Appendix ‘C’, along with the associated information sheets which provide details for each reserve fund as attached to of Report FCS-12- 102, be approve.” ADJOURNMENT 10. On motion, the meeting adjourned at 6:15 p.m. C. Goodeve Committee Administrator