HomeMy WebLinkAboutFCS-12-178 - 2013 Budget Overview1
KITC~iv~R.
REPORT TO:
Staff Re cart
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Finance and Corporate Services Department
DATE OF MEETING:
SUBMITTED BY:
PREPARED BY:
WARD(S) INVOLVED:
DATE OF REPORT:
REPORT NO.:
SUBJECT:
RECOMMENDATION:
For information only.
Finance and Corporate Services Committee
November 5, 2012
Dan Chapman, Deputy CAO
Ryan Hagey, Director of Financial Planning
All
October 26, 2012
FCS-12-178
2013 Budget Overview
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BACKGROUND:
The budget is the City of Kitchener's annual financial plan, and is the primary basis of financial
decision making. The budget process allows Council to prioritize the programs and services
delivered by the City and sets direction for the work to be completed over the upcoming year as
well as future years referenced in the budget forecast.
The budget establishes the financial boundaries in which the municipality operates. The budget
has an operating component, which funds the day-to-day costs of the municipality (e.g. salaries,
utilities, supplies) and a capital component, which funds investment in infrastructure that
provides long-term benefits to the community (e.g. roads, sewers, arenas). And unlike other
levels of government, a municipality is not allowed to budget for a deficit, so projected
expenditures cannot exceed projected revenues. The budget includes a significant amount of
numerical information, but to be effective it must also include links to operational plans, have
opportunities for community engagement, and have a long term focus.
Operational plans outline not only the services the City provides, but also the levels to which
those services will be provided. Operational plans are developed based on the Council
approved City-wide strategic plan, departmental business plans, as well as various master plans
and studies completed for specific programs, services, or projects. The budget provides the
financial resources to implement these plans, and it is essential funding levels and service level
expectations are aligned to avoid delays, deferrals, or variances from budget.
The budget process can be used as an opportunity to engage the community and gather
opinions about City programs, current service levels, and finding the balance between provision
of service and affordability for rate payers. Community engagement has already been a
significant focus of the 2013 budget process, with a report being approved by Council in August.
By approving the recommendations of the report, Council has directed staff to maintain the
existing engagement activities already in place and to incorporate additional engagement
opportunities into the 2013 budget process. To that end, an interactive budget website will be
operational starting in November, and staff will be hosting a social media event in December
OVERVIEW 2 - 1
where citizens contact staff directly regarding the 2013 budget. These additional engagement
opportunities will provide new ways for the public to better understand the budget and let their
opinions be known.
Finally, the budget is a long term planning tool. The budget can help shape a community's
future by ensuring that funding is in place to provide the programs, services and projects
required to achieve the goals of its long term strategic plan. By having along-term focus,
Council can make incremental steps through the budget process towards achieving those goals,
without focusing too heavily on the immediate circumstances.
In advance of more detailed presentations on the operating and capital budgets, Finance staff
provide a brief budget overview for Council. The attached presentation is divided into three
sections which are also highlighted in this report. The sections are:
• Current Financial Environment
• 2013 Budget Highlights
• Next Steps
REPORT:
Current Financial Environment
While the federal and provincial economies are continuing to slowly emerge from the global
recession, the local economy is faring much better. Unemployment levels at the end of
September in the Kitchener-Waterloo area (6.4%) are considerably better than the comparators
for the province (7.9%) and the nation as a whole (7.4%). While there have been some
significant job losses in specific companies, those being laid off are generally finding work
somewhere else and the overall local employment market remains strong.
Budgets passed earlier this year by the Federal and Provincial governments focused largely on
expenditure reductions. As was reported to Council in May (report FCS-12-078), these drastic
reductions were required in order to reduce, but not eliminate the deficits budgeted at those
levels of government. The City of Kitchener is in much better financial shape as municipalities
are required to have balanced budgets and are not permitted to pass deficit budgets. In
addition, out of these three levels of government, only the City of Kitchener has a positive
financial position per capita, meaning that the Federal and Provincial governments do not have
adequate cash and investments to cover their liabilities. Details are shown in the chart below.
-. .. ~ ~ ~
Kitchener $700 $661
Ontario -$14,813 -$16,238
Canada -$17,069 -$17,890
While the City of Kitchener enjoys a more solid financial footing than the Federal and Provincial
levels of government, there are three causes for concern that must be addressed through
upcoming budgets.
The first area to be addressed is the City's debt levels. Debt levels have been increasing the
past number of years, largely due to the Economic Development Investment Fund (EDIF) and
just last year due to the expansion of the Auditorium. Debt levels are planned to decrease over
the next decade to coincide with the City's targets, but this assumes no new debt other than
planned debt for the existing capital program is issued.
OVERVIEW 2 - 2
The second area to be addressed is the City's reserve levels. Reserve levels have been
decreasing the past number of years, largely due to reductions in the balances of the Tax
Stabilization and Development Charges reserve funds. Earlier this year, Council approved a
consolidated reserve fund policy, which included fundamental concepts such as:
• Reserve funds will only be used for the specific or intended use for which they were
established
• Individual reserve funds should not have a negative balance
• Minimum and maximum target levels will be established for each individual reserve fund
and for reserve funds as a collective
By following its approved Reserve Fund policy, Council can build reserves towards minimum
target levels and ensure that sufficient funding exists to meet future liabilities, replace existing
infrastructure, while maintaining financial flexibility and minimize the potential of rate spikes in
future years.
The third area to be addressed is the City's annual operating deficit. The City has experienced
tax supported deficits (before applying funds from capital closeouts) for each of the past three
years (2009-2011) and is projecting a deficit for 2012 as shown in the chart below.
Deficit Before _$3.74N1 -$Q.48M -$0.24M -$1.42M
Capital Closeouts
These deficits have occurred through varying weather conditions and economic cycles, which
leads staff to conclude that there is a chronic shortfall in funding for the expected service levels
delivered by the City. The deficit can be addressed by increasing funding for services, or by
decreasing the service level expectation to align with current funding levels.
The proposed 2013 budget was prepared in light of the factors identified above and balances
the often competing priorities of affordability and sustainability. In terms of affordability, staff
identified early in the process that a 5.87% tax rate increase in the current economy was not a
viable starting point, so the proposed budget will begin at a tax rate increase of 2.87% with
options to reduce the increase by another 1 %. sustainability will be addressed by making
budget corrections, to the extent possible, to areas of ongoing deficits while still remaining within
Council's direction regarding tax rate increases. Prudent use of debt and reserve balances is
also a significant consideration in ensuring the municipality's financial sustainability.
2013 Budget Highlights
1) Capital Budget
The capital budget is largely similar to the 2012 version, although there are some significant
additions to address:
• Emerald Ash Borer -removal of affected trees only
• LRT Construction -replacement of gas infrastructure within the LRT corridor
• Gas Pipelines -replacement costs for gas infrastructure throughout the city
2) User fees and City-run Utility Rates
Increases to user fees across the City are generally 3%, although fees were reviewed on a
program by program basis, so individual fees may be increasing (or decreasing) by a rate other
OVERVIEW 2 - 3
than 3%. As well, the City operates a number of utilities (Gas, Water, Sanitary, and Storm
water). The rate increases for City-controlled portions (i.e. does not include the impact of rate
increases for Regional water/sewer charges) of these utilities is expected to be inflationary.
3) Operating Budget
Staff will be presenting the 2013 operating budget tax rate increase which meets Council's
direction of 2.87% as well as a 1% potential tax rate reduction list. In order to achieve a 2.87%
budget increase, staff propose to defer some budget impacts to 2014, eliminate capacity for any
service improvements or additional staff, and continue to press for efficiencies within existing
base budgets.
Based on Council's direction, staff developed options that could reduce the potential tax rate
increase by 1%. In preparing options, staff considered all of the 20 areas identified by Council
in August, and have proposed reductions in many of those areas. Some reductions were
included in the base budget to achieve the 2.87% target, and reductions in other areas were not
feasible based on recent service level reviews or ongoing operating budget deficits. In the end,
staff are proposing 10 potential reductions from the 20 priority areas identified by Council. All of
the options are feasible, although they each carry some risk or impact on existing service levels.
The list of potential reduction options are shown in the chart below, and detailed issue papers
are included as part of this budget package.
PR01 Consolidate Onpoint Tools [$10,175
PR02 Enhanced Sick Leave Claims Management [$50,000)
PR03 Eliminate Infra-Red Asphalt Program [$128,500)
PR04 Reduce CITS Box Office Hours [$24,000)
PR05 Reduce Eire Department Staff Through Attrition {$480,000]
PROF Implement Fire Insurance Recoveries [$200,000)
PR07 Adjust lJtility Billing Postage Charges [$60,0{a4~
PR08 Remove Downtown bulk Garbage Bins [$29 000
PR09 Limit Grant Pandang Increase to 1% in 2013 [$19 359
PRIG Reduce Ccuncii Technology & Horne Office Budget [$11,000)
Next Steps
A number of public budget meetings are already scheduled in the upcoming months. The table
below summarizes the budget meetings with Council:
November 8 Capital Budget
December 6 Operating Budget
January 7 Public Input
January 17 Budget Approval
OVERVIEW 2 - 4
1
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To prepare for these meetings, Council will receive budget information approximately two weeks
in advance of the meeting dates to allow time for review. At the meetings, Council can request
additional information be provided to them for consideration of final budget approval.
The public are welcome to attend any of the meetings listed above, and are encouraged to
address Council directly as part of the public input session. In addition, as described earlier in
the background section of the report, the public will be able to provide their input as part of the
interactive budget website, and will be able to engage staff through a social media event,
focused solely on the 2013 budget.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Foundation: Efficient and Effective Government
Goal: Financial Management
Strategic Direction: Strive for competitive, rational and affordable taxation levels
FINANCIAL IMPLICATIONS:
None.
COMMUNITY ENGAGEMENT:
Budget information is available on the City of Kitchener website
(www.kitchener.ca/2013budget). Feedback is welcomed using the following methods:
• Public meeting planned for January 7, 2013 in the Council Chambers
• Budget webpage
• Responses to upcoming Facebook and Twitter postings
• Regular mail at: 2013 Budget, c/o Corporate Communications, Kitchener City Hall, PO
Box 1118, 200 King St. W. 2nd Floor, Kitchener, ON N2G 4G7
• Hard copies of budget information are available by calling 519-741-2602 and leaving a
message with mailing address.
ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services)
OVERVIEW 2 - 5
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CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR01 -Consolidate OnPoint Tools
FUND: Capital
DEPARTMENT: Finance & Corporate Services -Information Technology
PREPARER: Dan Murray, Interim Director of Information Technology
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
Information Technology currently maintains two versions of the OnPoint GIS Mapping and
Information Tool. One version runs internally and is available to authorized internal staff and a
second version of the product is available through the Internet for the public to access.
Information Technology staff propose consolidating the two separate versions of the product,
allowing both the internal and external needs to be delivered from one internal server. This
consolidation was not possible to achieve in the past due to technology limitations. With a
firewall technology upgrade performed in 2011, staff can now leverage that technology to
consolidate the versions and thereby realize a financial savings for the corporation.
The public OnPoint GIS mapping tool on the Internet is used by residents and businesses to
locate properties and related information as well as access to the digital imagery of the City. It
is also used to communicate road construction details, planning information, registered building
permits as well as spatially locate a variety of other information useful to outside interests. The
external OnPoint mapping system is used on average of 1500 times per month.
BUDGET REDUCTION:
A reduction of $10,175 to the Infrastructure Maintenance capital account can be realized by
avoiding paying software maintenance on the second instance of the OnPoint mapping tool.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
By consolidating the two OnPoint GIS Mapping versions onto one physical server, there are a
few risks that Information Technology staff will have to address:
• Data Security -the consolidation of the two OnPoint versions is completely dependent
on the ability of the software to be able to have separate security models for each
version due to the difference in the information required in the two versions. At the time
of writing of this issue paper, staff believes this can be done.
• Performance - it is possible that having multiple OnPoint instances on one physical
server may introduce performance issues with either the internal version or the external
Internet version. Information Technology staff do not feel that this is high risk.
OVERVIEW 2 - 36
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR02 -Enhanced Sick Leave Claims Management
FUND: Operating
DEPARTMENT: All
PREPARER: Michael Goldrup, Director of Human Resources
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
Staff propose the implementation of Sun Life's Salary Continuance Program to manage sick
leave claims currently administered in-house. Staff estimate this will result in financial gains
sufficient to off-set the cost of the service, and generate an additional savings of approximately
$50,000 per year.
Currently sick leave claims are managed in-house. Claims management is carried out by the
WSIB/Accommodation Administrator, and the appropriate supervisor with intervention of the
Manager, Employee Relations, as required. Management of sick leave claims for Fire staff was
handled in-house as well by their Attendance Management/Return to Work Coordinator,
although this position has recently been eliminated. Long Term Disability claims are managed
and adjudicated by Sun Life.
Sun Life's short term disability (sick leave) duration management is among the most successful
in the industry according to independent surveys. Of the 40,000 employees they have supported
during their return to work in 2010, sixty-three per cent of the short term disability cases were
resolved in less than 8 weeks. By case managing the absences, Sun Life can triage and
intervene as soon as possible, all employees are managed consistently and equitably, privacy
concerns are avoided and the City gets the full benefit of the case managers' expertise.
The City will have to establish rules which will determine at what point sick leave cases are sent
to Sun Life, for example, any sick leave claims greater than 4 days. Once Sun Life receives the
claims, they will then begin their case management which includes initial assessment of the
absence right through to its resolution of return to work, transition to another job, or transition to
Long Term Disability. Sun Life will communicate regularly with the City to facilitate return to work
planning allowing the Accommodation Administrator to increase their focus on the early and
safe return to work of the employees, the monitoring and managing of workplace
accommodation plans, attendance issues, and improved management training on injury
prevention, attendance support etc. which would mitigate the current cost associated with sick
leave claims. Another advantage to moving the claims management to Sun Life is that the City
can expect improvement in absence resolutions when Sun Life is managing both the short term
and long term plans.
In conjunction with Sun Life's management of sick leave claims, the City will be working with
Sun Life's wellness partner, Buffett, to conduct an integrated data analysis which will analyze
past, present and anticipated future claims. Information analyzed includes absenteeism
statistics, WSIB claims, prescription drug claims, long and short term disability claims. Once the
data is analyzed, the City will be able to project future wellness opportunities based on the
organization's current profile and forecast future health risks and associated costs. A set of
recommendations will be provided so that the City can plan for the future. The needs and
interests of departments, and employee groups will be addressed through these
recommendations.
With these programs in place, the City will be able to enhance employees' health and wellbeing,
job satisfaction, engagement and productivity. Staff currently involved with managing sick leave
OVERVIEW 2 - 37
claims would instead be able to focus their efforts on helping affected employees return to work
as soon and as safely as possible. In doing so, the City would be taking a proactive and
preventative approach to address current situations that if left unattended, could escalate into
future disease and disability claims.
BUDGET REDUCTION:
In 2010, the Corporation paid $1.73M in sick leave usage; this benefit increased in 2011 to
$1.81 M. Using a comparable municipality as a benchmark with an average of 267 cases per
year, the cost of having Sun life manage these cases is approximately $124,000, based on Sun
Life's fee of $465 per case.
In moving the adjudication of sick leave to Sun Life, HR staff anticipate that, both through case
management and through the deterrence impact of having to anticipate meeting the medical
evidence test to have claims approved, there will be a drop in sick leave usage. Staff estimate
this decrease will result in financial gains sufficient to off-set the cost of the service from Sun
Life and generate an additional savings of approximately $50,000 per year.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
As per Sun Life's experience, the return on investment varies from client to client as it depends
on how sick leave absences have been managed prior to moving to Sun Life's product. The City
will only be able to determine the return on investment once it has had a few years of
experience. What Sun Life can definitely advise, is that the City can expect gains in duration
management, which means that the duration period between the time employee goes on sick
leave to the time they return to work, is shortened.
OVERVIEW 2 - 38
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR03 -Eliminate Infra-Red Asphalt Program
FUND: Operating
DEPARTMENT: Infrastructure Services, Operations
PREPARER: Dan Locke, Manager of Sewers, Traffic & Operational Support
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
Included in the 2013 tax supported budget is funding for infra-red road repair. The Operations
Division is responsible for maintaining roughly 1400 lane kms of road for the City of Kitchener.
The infra-red unit is used to perform seamless asphalt repairs whereby the existing asphalt is
recycled by heating and a small amount of additional asphalt is added. The asphalt is then
raked and rolled producing a seamless repair. This repair is a more permanent repair than
placing hot asphalt directly on the existing cold surface which can cause raised structures that
the plows may hit in the winter, potentially causing damage to the structure and the equipment.
The Infra-red Asphalt Program was added to the Operations division budget as part of its annual
growth allocation. Due to staff resources, this activity has not been able to be utilized since
2010.
BUDGET REDUCTION:
Funding provided for this function in the 2013 budget is $128,500.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
Meeting Minimum Maintenance Standards (MMS) legislation in relation to maintenance of
asphalt road surfaces is achieved through crews assigned to the road repair and utility cut
activities on a daily basis. The infra-red road repair activity is an additional resource that can be
utilized to efficiently correct minor asphalt maintenance issues that may not be deficiencies
according to MMS, but which may still affect operational maintenance activities such as snow
plowing or quality of ride issues related to raised structures.
OVERVIEW 2 - 39
CITY OF KITCHENER
2013 BUDGET ISSUE PAPER
ISSUE: PR04 -CENTRE IN THE SQUARE OPERATING GRANT AND
POTENTIAL NET BUDGET REDUCTION
FUND: OPERATING
DEPARTMENT: CENTRE IN THE SQUARE
PREPARER: SANDRA BENDER, CEO
DESCRIPTION OF CITS NET BUDGET:
The operating grant for The Centre In The Square (CITS) was $1,420,079 in FY2011 and
$1,371,449 in FY2012.
The projected operating grant for FY2013 is $1,394,763 based on the FY2012 base amount
plus 1.7% (annual inflation rate).
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
Based on a potential budget reduction of $24,000, the potential operating grant for FY 2013
would be $1,370,763.
BUDGET REDUCTION:
To respond to this potential reduction, CITS would -
• Reduce Box Office hours and services
• Implement staff layoffs
Reduction in Box Office Hours and Services -The CITS would reduce the hours of the box
office to 12 noon to 6pm Mon-Sat (versus 10am to 8pm Mon-Fri and 10 am to 6pm Sat).
Staff Layoffs -Ticketing and Box Office staff would be laid off to meet the operating budget
requirements.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
Reduction in Box Office Hours and Services -Currently, the CITS provides ticketing services for
the Kitchener Memorial Auditorium, Registry Theatre, Grand Philharmonic, Elmira Theatre
Company and KW Little Theatre.
Ticket transactions by phone and the box office window between 12 noon and 6pm represent
approximately 58-60%. This is followed by the 10 am to 12 noon hours of operation (32-33%).
• The reduction in hours will reduce service levels and convenience for patrons.
• Lack of convenience could result in reduced sales.
• Reducing services will limit growth for regional ticketing services provided by the CITS,
which is an income generator for CITS to meet its annual operating budget.
Staff Layoffs -Layoffs will result from the reduced hours of operation and to balance the CITS
operating budget.
• Layoffs will require one-off termination and severance payments, having further short-
term financial impacts on the CITS overall budget.
• Impact on the overall staff morale, employment confidence and productivity for
remaining staff.
OVERVIEW 2 - 40
ALTERNATIVE PROPOSAL FOR THE CITS NET BUDGET:
The CITS proposes amulti-year funding arrangement with the City of Kitchener (CoK) at $1.4M
per annum fora 4-year period, starting 1 January 2013.
Based on the FY2012 base amount plus 1.7% (annual inflation rate), the projected operating
grant for FY2013 is $1,394,763.
This proposal represents an increase of $5,236 to cap the operating grant at $1.4M. Over the 4-
year term, based on a projected yearly inflation rate of 2%, the CoK would see a savings of
$148,666.
Having recently recruited a new CEO, the CITS is undergoing a full review of its systems and
processes, as part of the overall strategic planning process. This process is intended to
reposition the CITS and its engagement with the local community, as well as review its internal
business operations to ensure maximum effectiveness, efficiency and sustainability across
operations and administration.
• During the multi-year agreement, the CITS will not request any inflationary increase or
one-off funding initiatives to implement the required structure and system.
• This proposal stabilizes the yearly operating grant and ensures a consistent level of
investment for the CITS to make long-range plans and commitments to manage its
yearly operating costs.
• It equally enables CITS to support a number of local arts organizations that receive
services through CITS. For example, KWAG's tenancy at the Centre. KWAG currently
covers 70% of the actual operating costs. The remaining 30% is supported by the CITS
through its own operating funds and earned revenue.
RISKS/IMPACTS ASSOCIATED WITH PROPOSAL:
• The operating grant for the CITS will be frozen during the period of this proposal.
o CITS will need to meet the staffing and production requirements while
implementing new sustainable directions for the CITS.
^ CITS will need to manage any one-time costs associated with staffing and
new systems, as an outcome of the current strategic planning process.
o CITS earns the majority of its operating budget.
^ The arts and entertainment market is soft throughout the region and
industry, as a whole, which may impact the capacity of the CITS to
implement new systems and processes over the short-term.
o CITS does not currently receive additional operating or project grants from
provincial or federal art councils, the Creative Enterprise Initiative or the region.
Despite these potential risks, the lack of stable funds over this period of change and
development is perceived as the greatest risk for the CITS.
• With amulti-year operating grant of $1.4M, the CITS board and management can work
through aspects of the business over the longer-term, and not on a year-to-year basis.
• Stable operating funds will support the implementation of a new strategic plan and
position the CITS for future growth and successful outcomes for the surrounding
community.
OVERVIEW 2 - 41
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR05 -Reduce Fire Department Staff Through Attrition
FUND: Operating
DEPARTMENT: Community Services -Fire
PREPARER: Michael May, Deputy Chief Administrative Officer,
Community Services
BACKGROUND:
As directed by City Council on August 13, 2012, staff has reviewed several options to reduce
the annual operating budget of the Fire Department.
As approximately 96% of the Fire Department's annual operating budget is comprised of staffing
related costs (salaries and wages, benefits, overtime and lieu day payout), so any substantial
and sustainable budget reductions within the Fire Department will have to have an impact on
staffing levels. This issue paper outlines the budgetary and public/firefighter safety risks of
reducing staffing levels within the Department, and provides one option City Council could
consider for making such a change.
The Fire Department's net annual operating budget for 2012 was $29,333,721 and its capital
budget was $1,267,000. On an annual basis, the Fire Department generally makes up 29% of
the city's budget. Over the past 5 years, staffing related costs within the Fire Department have
grown by 25% or approximately $5.9M. During that same timeframe, a number of other areas
within the Department's budget have been reduced and revenues from Direct Detect have
increased to offset some of the growth in staffing costs. As a result of these adjustments, the
Department's overall budget has grown by approximately $5.5M or 22%.
To assist in putting these figures into context, the following information is provided from data
gathered through the Ontario Government's Municipal Performance Measurement Program:
Operating Cost of Fire Service/Household
$500
$400 -
$300 -
$200 --
$100 °°
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OVERVIEW 2 - 42
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$lQaQ of Property Assessrnent
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In addition to the above information, according to a survey of 20 Ontario municipalities that was
recently conducted by Brantford's Fire Department, Kitchener's Fire Department had the 4tn
lowest ratio of firefighters to population at 1:1,223 and the lowest of the three municipalities
surveyed in Waterloo Region.
REPORT:
One option City Council may consider to reduce the Fire Department's annual operating budget
is to achieve staffing reductions through attrition within the suppression division -meaning
positions would not be filled as retirements occur. There are currently 8 members of the Fire
Department who are eligible to retire (over 30 years of service and over 50 years old). However,
as the chart below indicates, there are zero firefighters scheduled for retirement in 2013. To
provide some context, a 5 year history of fire fighter retirements is also found below:
Scheduled Retirements (2013 - 2017)
2013 0
2014 3
2015 3
2016 3
2017 2
5 Year History of Retirements (2008 - 2012)
2012 4
2011 7
2010 5
2009 7
2008 1
OVERVIEW 2 - 43
With no scheduled retirements in 2013, there is no guarantee staffing levels can actually be
reduced through attrition next year. However, City Council may wish to reduce the Fire
Department's budget to reflect a reduction of four positions (one firefighter per platoon), and
should those retirements not occur, staff would look to find alternative corporate funding sources
to fund those salaries on an interim basis (e.g. gapping, capital accounts, tax stabilization
reserve fund, operational surpluses in other areas of the corporation). Under this scenario,
failure to find an alternate source of funding would mean the Fire Department would run a deficit
in 2013.
BUDGET REDUCTION:
Assuming all four individuals are 1st Class Firefighters, the budget savings of not replacing the
next four retirees from the Fire Department's suppression division would be $480,000. Given all
of these retirements will not occur on January 1, 2013, budgeting for this reduction next year will
likely result in a negative variance within the Fire Department in 2013. The exact amount of this
variance cannot be quantified as the timing of retirements is not known.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
It is important to note that for reasons of public and fire fighter safety (outlined below),
the Fire Chief and his management staff do not support this potential reduction and
continue to recommend the current levels of service as outlined in the City Council
approved Standards of Cover.
Reduction in Service Levels:
As the next four retirements occur within suppression, the staff complement on each platoon
would be reduced by one individual. This reduction in available suppression staff would increase
the likelihood and frequency staffing levels on any given shift would fall below 37 firefighters.
When this occurs, an aerial unit is moved from Station 4 (Fairway and King) to Station 6
(Pioneer and Homer Watson) and a pumper unit is removed from service at Station 6. (Note:
aerials units have a crew of two fire fighters and a pumper unit has a crew of four).
Between February 1 and August 31, 2012 staffing levels dropped below 37 staff a total of 29
times. This is approximately 14% of the time that a pumper unit was taken out of service. During
City Council's 2012 budget deliberations staff anticipated this would occur 20% of the time.
When these changes were made and a pumper unit was removed from service at Station 6
during the timeframe noted above, the following operational impacts were experienced:
1. The total response time for Station 6 and 7 increased by 43 seconds (based on the 90tH
percentile calculations). This is based on 81 calls that the two stations responded to when
the aerial was in service versus the remaining calls when the regular unit was in service.
2. At Station 4, first on scene unit reliability dropped by 15% when the aerial unit was
reassigned due to these staffing changes. When the aerial is not assigned to Station 4,
other apparatus from other districts must respond to cover off incidents if the pumper is
already engaged at an incident. There were 42 calls that had lengthier response times due
to aerial 4 being reassigned to another station. The response time (at the 90t" percentile)
increase for these situations was 13 seconds.
OVERVIEW 2 - 44
3. The Department's standard effective response force objective is to have 15 staff on location
within 12 minutes (an industry standard). This is for both public safety and fire fighter safety.
The sampling size of the effective response force response times was too small to provide
sufficient data. Anecdotally, it is known that with the reduction of one first response unit,
there will be an increase in the effective response force response times.
Budgetary Risks:
There are two budgetary risks associated with this potential staffing reduction:
The reduction of one firefighter on each platoon will increase the likelihood and frequency
staffing levels on any given shift fall below 35 firefighters, requiring additional personnel to
be called in on overtime. This would negatively impact the Department's overtime budget.
There are no scheduled retirements in 2013. If retirements do not occur within the
Department, a source of interim funding would be required until such time as they do occur,
or the Fire Department would run a deficit.
OVERVIEW 2 - 45
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR06 -Implement Fire Insurance Recoveries
FUND: Operating
DEPARTMENT: Community Services -Fire
PREPARER: Tim Beckett, Fire Chief
BACKGROUND:
Many insurance companies have policies that provide coverage for fire department charges
when a fire department is called to save or protect property. The level of insurance coverage
provided can range from $1,000 to $25,000 per occurrence depending on the scale of the
response and the municipal resources deployed. Charges can be made directly to the insurance
company on a claim that is already being made.
To date, the City of Kitchener has not charged insurance companies to recover these expenses
despite clauses that already exist -and have been priced into -many insurance policies that
would allow for a charge.
REPORT:
The concept of municipalities charging insurance companies to cover certain eligible Fire
Department costs is relatively new. To date, staff is aware of eight (8) smaller municipalities (all
with volunteer fire departments) that have begun to charge insurance companies to cover these
expenses. As one example, the Municipality of Meaford is using the revenue generated from
insurance company fees to fund fire prevention and public education programs, equipment
purchases and training of fire fighters.
Given the City of Kitchener has not traditionally charged insurance companies for these
expenses, staff has no in-house knowledge or expertise to effectively administer these complex
charges. Should Council wish to proceed in charging insurance companies to cover these costs,
staff would conduct a competitive request for proposal process to identify a third party company
to administer these charges on behalf of the City. The company would retain a percentage of
the funds recovered for their work and the City would recover the balance of the funds.
Engaging an outside company would benefit the City by:
• Immediately providing the City with the knowledge and expertise required to administer this
complex system of charges (e.g. comparing each individual fire incident report to specific
insurance policies on a case-by-case basis to identify, applying for and securing funds from
the insurance company).
• Utilizing the company's expert knowledge and experience to ensure the City is securing the
maximum amount of eligible revenue from the insurance companies under this coverage.
This requires an expert knowledge and understanding of an array of insurance policies.
• Ensuring these charges can begin to be collected in 2013 instead of attempting to build in-
house expertise, knowledge and processes within the City which would require significantly
more time to develop and implement with no guarantee of success.
• Eliminating the need for addition staff within the Fire Department to attempt to develop an in-
house system to recover these charges and then administer the program.
OVERVIEW 2 - 46
Staff is aware of at least one third party company that could process these charges on behalf of
the City. That company conducted a preliminary review of the Fire Department's 2011 incident
responses and estimated the City could have been entitled to charge insurance companies for
up to $300,000 in that year alone.
To charge these fees to insurance companies, a change would be required to the City's fees
and charges schedule. These fees would be charged through the third party to insurance
companies that provide coverage for Fire Department responses.
BUDGET REDUCTION:
According to preliminary estimates, beginning to charge insurance companies to cover Fire
Department expenses could eventually generate up to $300,000 in revenue each year. Staff
estimates it would take several months (following final budget day) to complete a competitive
RFP process and finalize the necessary legal agreements. As a result, it would be prudent to
budget an increase in revenues within the Fire Department of $200,000 in 2013. An additional
increase to the Department's revenue could be made as part of the 2014 budget process once
the City has had some experience charging these fees and have a more reliable estimate of
revenues generated.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
The risks associated with beginning to charge insurance companies for these costs include:
The program is not tested in larger municipalities, but has a handful of smaller volunteer
departments that have seen successful reimbursements.
2. If Fire related call volume drops, so will revenues due to less claims available.
3. There may be `push back' from insurance companies as this is something the City has not
charged for in the past -although this has not been the experience of municipalities already
charging for these costs.
OVERVIEW 2 - 47
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR07 -Adjust Utility Billing Postage Charges
FUND: Operating
DEPARTMENT: Finance & Corporate Services -Revenue Division
PREPARER: Saleh Saleh, Supervisor of Collections and Payment Processing
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
The Revenue Division is responsible, among other things, for meter reading, billing, collections,
and customer service on behalf of the utility enterprises (gas, water, sewer and storm). This
issue paper identifies potential net budget reductions amounting to $60,000 within these
functions resulting from operating efficiencies and increased revenue forecasts.
The following budget reductions are put forward for Council consideration based on a review of
operating efficiencies and revenue forecasts:
• Reduce the budget for envelopes and printed forms by $5,000. The increase in the use of
e-post has reduced the volume of printed bills and envelopes. Additionally, the City has
recently changed its process such that accounts paid through online or telephone banking
are flagged and no longer receive return envelopes with their bills. Reducing this budget
assumes that the trend towards electronic commerce will continue.
• Reduce the staff overtime budget by $5,000 (approximately 50%). Overtime hours have
been strictly limited in recent years. There is also a preference by staff to receive lieu time
off instead of overtime pay.
• Reduce the budget for debit card fees by $5,000 to reflect the increased use of other
payment methods such as online or telephone banking. This assumes that the trend
towards other methods of payment will continue.
• Increase the Utility Account Administration Revenue budget by $45,000. Revenues have
been increasing in this budget line over the past two years. Building this full revenue
stream into budget presumes that the current annual volume of tenant and owner "moves"
is sustainable.
Staff have also reviewed postage charges currently incurred through the mail room. The mail
room currently processes utility bills that need to be weighed and an appropriate postage
applied as they are not standard mail-outs. Examples include customers who receive multiple
bills in one envelope or customers who have mailing addresses located outside of Canada. As
the cost of mailing these bills is directly related to the utility enterprises, staff are recommending
that the full cost be borne by the enterprises. Presently, 28% of Mail Room costs are recovered
from outside the tax base. It is recommended that this be increased by $60,000 to 43% to
ensure that the allocation more closely reflects the true cost of providing the mail room service
to the enterprise units.
BUDGET REDUCTION:
Savings in this area would normally accrue back to the utility enterprises. However, the benefit
of these savings can be realized within the 2013 tax-based budget because of an opportunity to
also improve the allocation of postage costs between the tax-based budget and the utility
budgets based on a detailed review. The end result is a $60,000 reduction to the tax-based
budget and no impact to the utility budget.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
Assumptions have been made for each of the potential reductions, as outlined above. If any of
these assumptions are not actualized e.g. trends do not continue, the ability to achieve the full
extent of budget reductions may be impacted, and the amounts may not be fully realized.
OVERVIEW 2 - 48
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR08 -Remove Downtown Bulk Garbage Bins
FUND: Operating
DEPARTMENT: Infrastructure Services, Operations
PREPARER: Scott Berry, Interim Director of Operations
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
The Operations Division currently has 44 bulk bins being administered through the operating
budget. These bins are all located at city facilities and provide waste management containers
for the facility with the exception of the six bins defined below.
The core area of the downtown currently has six bulk bins which receive six day per week
collection and are being used by users other than city facilities and are located as follows:
• Halls Lane behind 22 Water St S (behind Professional Building/The Honest Lawyer)
• Halls Lane behind 141 King St E (behind K-W Labour Association)
• Halls Lane behind 183/185 King St E (behind Dream Hair Salon)
• Goudies Lane behind 30 King St E (behind The Stag Shop)
• Forsyth Parking Lot behind 150 King St W
• Bell Lane beside 12 Water St N (adjacent to Money Mart)
These bins are being used exclusively by businesses or residents in the downtown and have no
connection to any city facility. Some of these bin locations are being abused to the point that
Operations staff are responding on a daily basis to pick up refuse that is left beside the bin.
In 2003/2004 there were an additional 9 bulk bins in the core that were being used by other than
city facilities and were removed as part of a rationalization of the service through discussions
with Economic Development staff and the Downtown BIA. The rationale at the time was to
remove 9 of the 15 bins and to look at the remaining 6 bins at a later date. Operations has had
preliminary discussions with Economic Development and plan to meet with Downtown BIA
representatives to discuss options including the removal of these bins or to have those
businesses/residences take over the cost involved in retaining the bins.
Other options for businesses/residents include use of the four deep well garbage receptacles in
the core, use of the approximate 40 streetscape deep well garbage receptacles in the core,
seven day per week King Street curbside collection for smaller items and utilizing the Region of
Waterloo Landfill for larger items.
BUDGET REDUCTION:
The potential reduction to Operations Division operating budget expenditures is $4,800 per bin
per year or approximately $29,000 per year for all six bins in addition to tipping fees. Current
annual expenditures for tipping fees are approximately $130,000 for approximately 64 locations
(either bulk bins or deep well garbage receptacles).
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
The removal of the bulk bins from downtown could cause increased incidents of unseemly
garbage buildup if downtown businesses did not find an alternate garbage disposal option.
OVERVIEW 2 - 49
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR09 -Limit Grant Funding Increase to 1% in 2013
FUND: Operating
DEPARTMENT: General Expenses
PREPARER: Ryan Hagey, Director of Financial Planning
Renate Willms, Supervisor, Administration, CSD
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
In developing the 2013 budget, staff included a 1.7% increase to community grants and
economic development grants. The proposed reduction would reduce the level of increase to
1.0%. A brief description of the grants is provided below.
Community Grants:
The City of Kitchener's operating budget includes an allocation of grant funding provided to not-
for-profit organizations. These are more commonly known as Tiers 1, 2, and 3, travel assistance
and in kind facility grants. These grants are used to provide funding and support for programs
and opportunities that benefit Kitchener residents in the areas of arts and culture/special events,
community support and development, and sports and recreation.
The budget process sets the overall funding available to be distributed. There is a completely
separate process for recommending how much funding specific organizations receive through
Tiers 1, 2 and 3 grants, which is ultimately approved by Council. In kind facility and travel
assistance grants are reviewed and processed by staff upon receipt. Since Council considers
and approves Tier 1 grants prior to the other grants, the Tier 2 grant allocation varies annually
as the amount allotted to this funding source is the balance remaining after the other grant
sources have been allocated their amounts.
Economic Development Grants:
The Economic Development budget includes an allocation of grant funding provided to partner
organizations to help foster economic growth within Kitchener. The majority of the funding is
provided to CTT, Communitech and the Small Business Centre, with minor amounts provided to
other organizations.
BUDGET REDUCTION:
Reducing the increase for grant funding from 1.7% to 1.0% would result in a savings of $19,359
as shown in the following table.
OVERVIEW 2 - 50
Community Grants 2012
Budget
1.70%
1.00%
Savings
Tier 1 -Minor Sports (foundational funding) $749,747 $12,746 $7,497 $5,248
Tier 1 -Community Groups (foundational funding) $1,529,440 $26,000 $15,294 $10,706
Tier 2 (projects, events and programming for new and
$134,216
$2,282
$1,342
$940
emerging groups)
Tier 3 (seed funding for innovative projects in
$10,737
$183
$107
$75
collaboration with other local funders)
Travel Assistance/In Kind Facility (travel grants for
Kitchener athletes 18 years and under; in kind facility $7,517 $128 $75 $53
grants for events at Kitchener facilities)
Creative Enterprise Enabling Organization $56,000 $952 $560 $392
Total Community Grants $2,487,657 $42,290 $24,877 $17,414
Economic Development Grants 2012
Budget 1.70% 1.00% Savings
SI<ills Canada $5,417 $92 $54 $38
Business & Education Partnership $5,417 $92 $54 $38
Junior Achievement $5,311 $90 $53 $37
Communitech $30,000 $510 $300 $210
CTT $155,192 $2,638 $1,552 $1,086
Small Business Centre $76,575 $1,302 $766 $536
Total Economic Development Grants $277,912 $4,725 $2,779 $1,945
Combined Total $2,765,569 $47,015 $27,656 $19,359
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
If grant increases are reduced, it may be difficult for organizations to keep up with inflationary
increases, continue and/or expand their core servic es, and respond to governance and/or
legislative changes. As well, a decrease to the grant funding prov ided by the City of Kitchener
would not keep pace with user fees being charged to many of the City's grant recipients .
OVERVIEW 2 - 51
CITY OF KITCHENER
2013 BUDGET POTENTIAL REDUCTIONS ISSUE PAPER
ISSUE: PR10 -Reduce Council Technology & Home Office Budget
FUND: Operating
DEPARTMENT: CAO, Office of Mayor and Council
PREPARER: Dorothy McCabe, Chief of Staff
DESCRIPTION OF POTENTIAL NET BUDGET REDUCTION:
Since 2010, the Office of Mayor and Council has reduced its budget through the elimination of
an FTE, 2 years of council salary freezes, reduction in the Home and Tech Operating Budget
and through other cost containment efforts.
As per Council's directive to explore potential areas for budget reductions, the Technology and
Home Office Expense budget was reviewed. Based on the 2011 surplus of $18,214 and a
projected similar surplus for 2012, funding allocated for this area could be reduced by $1,000
per council member per year for total annualized savings of $11,000.
As per policy 1-47, Technology and Home Office Expenses, the Mayor and each member of
council are provided an allocation of a maximum of $5,300 per year for each year of Council's
four year term to be used for technology and home office expenses such as: a cell phone,
BlackBerry, computer and related equipment, and a dedicated home office telephone line.
BUDGET REDUCTION:
The Technology and Home Office Expenses budget allocation could be reduced by $1,000 per
year per member of council for ongoing annualized savings of $11,000.
RISKS/IMPACTS ASSOCIATED WITH REDUCTION:
Generally, the cost of technology is decreasing and there was a surplus in 2011 and a projected
surplus in 2012. However, it is important to ensure there are sufficient funds for the annual
ongoing operating expenses (data plans, the cost of telephone lines, Internet connections and
others) as well as sufficient funds for future capital items in future terms in office.
OVERVIEW 2 - 52