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HomeMy WebLinkAboutFCS-12-186 - 2013 Operating Budget961 Wl Office of the City Clerk Kitchener City Hall 200 King St.W. - 2 "d Floor Kitchener ON N2G 4G7 Page 1 Consent Items Finance & Corporate Services Committee Special Meeting Agenda Thursday, December 6, 2012 9:00 am - 4:00 pm Council Chamber Chair - Councillor S. Davey Vice -Chair - Councillor P. Singh All matters listed under this section are considered not to require debate by the Committee and should be approved by one motion in accordance with the recommendation contained in each staff report. • Nil Delegations Pursuant to Council's Procedural By -law, delegations are permitted to address the Committee for a maximum of 5 minutes. • Nil Discussion Items 1. FCS -12 -186 - 2013 Operating Budget • General Overview • Budget Summary • Tax Supported Operating Budget • Funding Requests from Boards • Enterprise Operating Budgets • Potential Reductions • Next Steps Information Items ** The Committee will recess for lunch at 12:00 noon. Janet Billett, AMCT Committee Administrator (6 hrs) Staff Report KI Finance and Corporate Services Department REPORT TO: 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 December 6, 2012 Dan Chapman, Deputy CAO Ryan Hagey, Director of Financial Planning All November 7, 2012 FCS -12 -186 2013 Operating Budget www.kitchenerca 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 operating budget funds the day -to- day costs of the municipality such as salaries, utilities, and supplies. The original tax rate increase forecasted for 2013 was 5.87% based on known budget pressures. In light of the City's strategic directions for financial management (which have regard for consumer and municipal inflation, comparison to other municipalities and citizen preferences when setting tax rates) staff did not consider this level of increase to be a viable starting point for budget discussions and committed to reducing the increase by 3% through an aggressive program of deferrals and base budget reductions. During initial 2013 budget discussions this past May, Council provided direction that the overall 2013 tax rate increase should not exceed 2.87% and directed staff to develop potential reduction options that could reduce the tax rate increase by up to a further 1 %. In August, Council provided additional input about the potential reduction options by directing staff to consider 20 service areas for reduction. The proposed 2013 tax supported operating budget meets Council's direction by delivering a tax rate increase of 2.87% as well as a list of potential tax rate reductions that totals 1 %. The attached operating budget information consists of: • presentation slides, which highlight key information about the 2013 operating budget • potential reduction issue papers, which describe reduction options based on the direction provided by Council summary of budget changes by division issue papers, which include additional details on specific subjects or budget information previously requested by Council o none of the issue papers have an additional budget impact as they are either already included in the budget, or are for information only OP - 1 Staff Report ITCxnT Finance and Corporate Services Department www1itchener ca The remainder of the report summarizes the highlights of the 2013 operating budgets for tax supported and enterprise operations. REPORT: Tax Supported Operating Budget 1) Reduction to the Original Tax Rate Increase Proiection As outlined in the background section of this report, the proposed tax rate increase for 2013 has already been substantially reduced from the initial forecast of 5.87 %. To reduce the forecasted increase by 3 %, staff engaged in a detailed review process over the past six months, utilizing a number of strategies. The main strategies employed were: • deferring items into 2014 where feasible • eliminating the capacity for any service improvements or additional staff • continuing to press for efficiencies within existing base budgets through the setting of divisional /departmental targets The chart below summarizes the adjustments required to reduce the 2013 tax rate increase from 5.87% to 2.87 %. OP- 2 Deferred some costs related to the Main Funding delayed one year and will Branch Library expansion based on the -0.30% impact the 2014 budget with a anticipated date of opening 0.30% levy impact. A portion of the additional costs can Reduced the provision for the third and final -0.59% be borne within existing fringe rates mandated OMERS pension premium increase based on adjustments made to date to the fringe rate. Reserve will be depleted in 2013, so Maintained existing transfer from Tax -0.45% $955k transfer to operating will need Stabilization Reserve Fund to be eliminated fully in 2014 budget (estimated 0.91% levy impact). Eliminated the allowance for Strategic -0.50% No new services or staff included in Initiatives 2013 budget. Budget target only allowed for increases to compensation (i.e., in Reduced funding for Base Budget -1.03% accordance with collective adjustments agreements) and utilities. All other inflationary increases are offset by efficiency reductions. Budget includes the final cost Reduced funding required for special -0.13% required to balance EDIF over 10 Economic Development Investment Fund levy years. Lower interest rates have fielded some savings. OP- 2 Staff Report DITCH I�TE Finance and Corporate Services Department www1itchener ca While a number of different areas were targeted for reduction as outlined above, the largest area of reduction was within the base budget. In setting budget targets, only expenses related to staff compensation and utility costs were allowed any increase. All other expenses were held at 2012 levels, meaning staff were required to continue finding efficiency savings in order to run existing programs and services while staying within budget targets. As an example, in many cases, costs are covered under contracts that provide for inflationary increases annually, although no allowance was made for this in divisional budget targets which means that offsetting efficiency reductions were required. This was achieved through an extensive review of existing budgets, historic trends of actual results, and looking for alternate ways to deliver current programs and services at a lower cost to the tax payer. Through this extensive review, staff: • reallocated budgets from areas of traditional surplus to areas of traditional deficit • reduced controllable budgets to fund inflationary increases in non - controllable budgets that were not provided an increase in the budget targets • downgraded or defunded staff positions • increased revenue projections based on past trends and /or fee increases 2) Operating Budget Pressures Much like individuals experience the effects of inflation on their own personal costs when they buy groceries, fill up their car with gas, or renew their insurance; the City experiences inflation on the goods and services it needs to operate. For an individual, inflation is measured by the Consumer Price Index (CPI). For a municipality, a different measure, called a Municipal Price Index (MPI) is widely used since the mix of goods and services used by a municipality are different than an individual. Generally, the MPI is higher than CPI, given the different weighting of costs in the two "baskets of goods ". This trend holds true for 2012, as the annual average for Ontario CPI at the end of September is 1.6 %, while MPI is 1.8 %. The proposed tax rate increase for 2013 is 2.87 %, but this amount includes the final year of the Economic Development Investment Fund (EDIF) levy which was approved in 2004 as a 10 -year investment strategy which was to be added on top of the typical MPI inflationary pressures on the City's operating budget. For 2013, the EDIF levy accounts for 1.07% of the 2.87% tax rate increase. This means the general tax levy increase of 1.80% is consistent with the City's MPI value at the end of September as shown in the chart below. Total Tax Rate Increase 2.87% Less: EDIF Levy Increase 1.07% Municipal Price Index (as of September) 1.80% 3) Potential Reductions As mentioned in the background section of this report, Council has provided some direction to staff regarding potential reduction options by identifying 20 service areas to consider when preparing a list of options. Based on Council's direction, staff have developed options that could reduce the potential tax rate increase by 1 %. In preparing options, staff considered all of the 20 OP- 3 Staff Report KI R Finance and Corporate Services Department www1itchener ca areas identified by Council in August, and have proposed reductions in ten of those areas. Some additional reductions have already been included in the base budget to achieve the 2.87% target (and are therefore not shown on the list), and reductions in other areas were not feasible based on recent service level reviews, internal audits or ongoing operating budget deficits. All of the options below are feasible, although they each carry some risk or impact on existing service levels. Below, the list of potential reduction options are reconciled to the priority service areas identified by Council. Detailed issue papers for each option were included as part of the November 5th Budget Overview and are also included as part of this budget package. 1 CAO Administration 2 Market _ 3 Information Technology 4 Human Resources Consolidate Onpoint Tools Enhanced Sick Leave Claims Management 5 Operations Administrative Support Eliminate Infra -Red Asphalt Program 6 Centre in the Square Reduce CITS Box Office Hours i 7 Capital out of Current 8 Legal 9 Fire Suppression 10 Community Centres (FM) 11 Fire Administration 12 Legislated Services Administration 13 FCS Administration Reduce Fire Department Staff Through Attrition Implement Fire Insurance Recoveries Adjust Utility Billing Postage Charges 14 Downtown Development Remove Downtown Bulk Garbage Bins 15 Winter Maintenance - Roads 16 Grants 17 Mayor & Council 18 Alarm Monitoring 19 Winter Maintenance- Sidewalks Total EXPLANATION OF COMMENTS Limit Grant Funding Increase to 1% in 2013 Reduce Council Technology & Home Office Budget A A (29,000) B (19,359) (11,000) B B A Budget reduction included in base budget to achieve overall tax rate increase target of 2.87% B No reduction proposed as service area is already subject to deficits or has minimal opportunities for reduction C No reduction proposed based on recent service review 4) Budget Sustainability During the August variance report, staff identified the ongoing nature of operating deficits within tax supported operations. 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 Capital Closeouts - $3.74M - $0.48M - $0.24M -1.42M OP -4 Staff Report DITCH I�TE Finance and Corporate Services Department www1itchener ca 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 on average amounting to $1.5M annually. This chronic shortfall must be addressed in order to ensure the City maintains a balanced budget in substance as required by Provincial legislation. Staff have partially corrected areas of chronic or projected deficit by right- sizing expenditure budgets in select areas of the proposed 2013 operating budget, while still submitting a budget that complies with Council's tax rate increase guideline. The increased funding for deficit corrections is made possible by assessment growth in excess of the forecast of 1 %. Final assessment growth numbers will not be available until mid - December, but at the time of preparing the operating budget package, staff are projecting assessment growth of 1.60% for 2013. The chart below shows the additional assessment revenue projected for 2013 has been used to fund: • Council identified service expansion priorities • Ongoing sources of deficit A Additional Assessment Growth Council Service Expansion Priorities Wages for Open Air Burning Bylaw Enforcement Webcasting of Council & Committee Meetings B Subtotal Council Service Expansion Priorities Ongoing Sources of Deficit Budd Park Taxes Vacancy — Tax Rebates Planning Sign Revenues (net of vacant position) Water Electricity Bylaw Enforcement Fine Revenues Operations C Subtotal Ongoing Sources of Deficit - $594,065 100% - $594,065 $29,000 100% $29,000 $10,000 100% $10,000 $39,000 100% $39,000 $50,000 100% $50,000 $40,000 100% $40,000 $43,565 100% $43,565 $175,000 49% $85,200 $450,000 49% $219,300 $240,000 49% $117,000 $500,000 0% 0 $1,498,565 37% $555,065 Addressing chronic deficits is a key financial action to be taken in the near term as the Tax Rate Stabilization Reserve Fund is all but depleted, meaning the primary source for funding a tax supported operating deficit will be gone as of the end of 2013. By addressing the areas shown above, the City will mitigate the potential for a deficit in 2013. Some further corrections will be required in 2014 to fully address the issue. OP- 5 Staff Report DITCH I�TE Finance and Corporate Services Department www1itchener ca Enterprise Operating Budgets The City operates the following enterprises, which are self- sufficient and are not supported by property taxes: City of Kitchener -. - • Golf • Gas • Building • Water • Parking • Sanitary Sewer • Storm Water Rates for the enterprises listed on the left have already been considered by Council as part of the annual User Fee review. The enterprises listed on the right are considered to be utilities and do not have their utility rates set until Final Budget Day (with the exception of Gas which happens mid - year). For utility rates, the City - controlled portion of the rates has been held to an inflationary -type increase, but this would not include the impact of pass- through rate increases from other sources, (e.g. for Regional water /sewer charges) which can account for a significant portion of the overall rate. Three of the City's enterprises (Golf, Parking, and Storm Water) are projected to be in a deficit position at the end of 2013. These deficits need to be addressed and the stabilization reserve funds built up to deal with unforeseen future events and avoid spikes in enterprise rates. 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: As outlined in this report and related attachments. 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 including the interactive budget tool • Responses to upcoming Facebook and Twitter postings, including an "Ask the Expert" session planned for Facebook on December 10 • 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) OP- 6 INVIEW L..� � �V 0 v M = r � O = CN ML AW N TOM O N t0 L Ja <.i a� D 1 a O a) o i � � � y m N � �V 0 v M = r � O = CN ML AW N TOM O N t0 L Ja <.i a� D 1 a O � i i � � o. 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U O Q a Ff Q CY) U O a) � � O � � m ti C6 C6 CID D m ---) m ---) I 1 a O Potential Reduction Issue Paper (IP) Index � Issue Paper Title PR01 Consolidate Onpoint Tools PR02 Enhanced Sick Leave Claims Management PR03 Eliminate Infra -Red Asphalt Program PR04 Reduce CITS Box Office Hours PR05 Reduce Fire Department Staff Through Attrition PR06 Implement Fire Insurance Recoveries PR07 Adjust Utility Billing Postage Charges PR08 Remove Downtown Bulk Garbage Bins PR09 Limit Grant Funding Increase to 1% in 2013 PR10 Reduce Council Technology & Home Office Budget W� --nF (10,175) (50,000) (128,500) (24,000) (480,000) (200,000) (60,000) (29,000) (19,359) (11,000) OP - 68 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. 2012 -10 -30 OP - 69 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 2012 -10 -30 OP - 70 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 $1.81M. 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. 2012 -10 -30 OP - 71 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. 2012 -10 -30 OP - 72 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 6 pm 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. Confidential OP - 73 ALTERNATIVE PROPOSAL FOR THE CITS NET BUDGET: The CITS proposes a multi -year funding arrangement with the City of Kitchener (CoK) at $1.4M per annum for a 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. • 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. • 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. • 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 a multi -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. Confidential OP - 74 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 $- O O N C p] OJ ut 7 Y bA C t C7 O Y j ; -6 t Y m (p 7 2 in U > O V m t F- 2012-10-30 OP - 75 Operating Cost of Fire Service/ $1000 of Property Assessment $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $- O7 0) C) C : M m C 6 Ln F 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 4th 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) 5 Year History of Retirements (2008 — 2012) 2013 0 0 2008 1 2012- 10 -'Ir� OP - 76 2012- 10 -'Ir� OP - 76 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 90th percentile) increase for these situations was 13 seconds. 2012 -10 -V OP - 77 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. 2012 -10 -30 OP - 78 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. 2012 -10 -30 OP - 79 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. 2012 -10 -30 OP - 80 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. 2012 -10 -3G OP - 81 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. 2012-1 0-'V OP - 82 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. 2012 -10 -30 OP - 83 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 Skills 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 services, and respond to governance and /or legislative changes. As well, a decrease to the grant funding provided by the City of Kitchener would not keep pace with user fees being charged to many of the City's grant recipients. 2012 -10 -30 OP - 84 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 $11,000. RISKS /IMPACTS ASSOCIATED WITH REDUCTION: Generally, the cost of technology is decreasing and there was a surplus in 2011 and a projected surplus in 2012. 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J Z Z W co a' D X m U U fn z W `� Z W W U U W c2$ O w a z � W LU w m ��= w LL . O O a w~ X w z O z e O� co O w W w J � W a w N a-+ Q U w z Q U U w w O co Z W CJ 2 J a �' Cn W z Q Q Z W a Q LU Z z �wa���z� >Q Q Z LU -)>- T'c " W Q U Z 2 a 00 a Z O H ��Lu LU< �Q�O H O W X Q(Dcn -i a U m 0 CD�UOCDDUU��a� O Cn W Cn C/) w E > w � w C~i)z� w w w O z w w O � z LL w U LL (n W O `� W Z Z Z J Q U U 0 z~ > W LU Z Z z < J Z Q 00 00 � O LU Q H H D p LU Q z w> w 0 0::D z a U U co ~ 0 C� Issue Parser (IP) Index IP # Description Included in Proposed Budget? OP 01 Operating Budget Impact of the Central Library Project Yes OP 02 Operational Impacts Regarding Staffing Reduction and Overtime Budgets in Fire Suppression Division N/A OP 03 Conference Costs N/A OP 04 Impact of Salary Freeze - Council Salaries N/A OP 05 Impact of Salary Freeze - Senior Management N/A OP 06 Use of Overtime and Absenteeism/ Paid Sick Time N/A OP 07 Work Related Injuries /Illness /Lost Time Claims N/A OP 08 Mileage and Per Diem Rates N/A OP - 89 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 01 - Operating Budget Impact of the Central Library Project FUND: Operating DEPARTMENT: Kitchener Public Library PREPARER: Sonia Lewis, CEO, Kitchener Public Library BUDGET IMPACT: $306,000 already included in proposed 2013 budget $511,000 to be included in the proposed 2014 budget BACKGROUND: The central library expansion and renovation project is scheduled for completion in 2013. As identified in the business case presented to City Council in September 2004, additional funds are required to run a larger facility. While there are additional costs in running a larger facility, there are also increased benefits to the community — more technology and resources, added space for studying, reading and programs, and dedicated staff to respond to the public's information needs. RATIONALE / ANALYSIS: A number of factors contribute to the need for additional operating funds. The size of the facility is increasing by 30 %. Our use of technology will be greater in the expanded library. Based on the experience of other libraries, we will experience growth in the number of people visiting the library and in the number of items being borrowed. Lastly, licensing changes mean City Security can no longer provide security services to third parties such as KPL. Added Space Maintaining a building that is 30% larger impacts a number of budget lines including: • Facilities staffing and associated benefits (.5 FTE) • Business expenses (insurance) • Facilities expenses for building contracts, repairs, janitorial services and supplies • Utilities Greater Use of Technology In the renewed central library we will make greater use of technology. The number of public computers will increase by 60 %, bandwidth and the wireless network will be expanded and additional user licences, meeting room hardware and photocopiers will be required. All of these incur ongoing operating costs and will put more pressure on Information Technology staff. To address these needs funding is required for: IT staffing and associated benefits (1 FTE) Technology service contracts and network expenses Equipment maintenance Increased Number of Visits and Circulation A larger, renovated facility will attract more visitors and place greater demands on library collections. This will result in higher circulation of library resources and more items to reshelve. It also impacts the staffing levels needed at information and circulation service points. 2012 -11 -16 OP - 90 In the first year Whitby's new central library experienced 66% growth in visits. At Winnipeg's expanded and renovated central library visits doubled in the first six months. Based on the experience of other libraries, in our 2004 business case we projected visits would increase to 800,000 in the first year and to one million by year five. For purposes of establishing the resources budget for the new central library, we have assumed circulation will increase by 5% over pre construction levels (2010). We will need 2500 additional items (books, DVDs and magazines) per year to satisfy this additional demand. More visitors and greater demand on service points and collections impacts: • Resource materials and Processing • Public Service staffing and associated costs for benefits and training. Staffing in Information Services and Children's and Teen Services will expand by 5.5 FTE to handle increased demands for information, readers' advisory, literacy and children's services. To handle an increased volume of materials shelving staff will be increased by 1 FTE. Due to budget limitations in recent years, circulation staffing has been cut by 4.5 FTE. To manage the increase in service demands associated with the renewed central library 1 FTE will be added in circulation. Private Security and Investigative Services Act Operating a public building means KPL staff deals with cases of public mischief, public disturbance, theft and public injuries. As there is no security staff on site, until recently, we called upon City Security for assistance. Due to licensing changes, City of Kitchener staff can monitor KPL alarm systems and buildings but cannot provide security services to KPL staff or any other third party. Our only recourse now is to call police whose response time varies significantly and often our need is for immediate assistance. A larger facility will attract more visitors and we will likely experience an increase in incidents involving the public. Clearing the building at closing will be more complex given the larger facility and variety of access points to the underground garage. There is also a growing safety consideration. We are asking information desk staff who are not trained security guards to intervene in situations involving public disturbances. The number of incidents, safety concerns, no longer having the assistance of City Security and the size of the facility necessitate contracting for security services. FINANCIAL IMPLICATIONS: An additional $817,000 in funding is required to operate the expanded and renovated central library. Of this total, $306,000 is requested for 2013 and the remaining $511,000 will be included in the 2014 operating budget. RECOMMENDATION: The Kitchener Public Library Board recommends that $306,000 be allocated to KPL in 2013 to operate the expanded and renovated central library, and a further $511,000 be added to the 2014 operating budget. 2012 -11 -16 OP - 91 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 02 — Operational Impacts Regarding Staffing Reduction and Overtime Budgets in Fire Suppression Division FUND: Operating DEPARTMENT: CSD - Fire PREPARER: Tim Beckett, Fire Chief BUDGET IMPACT: None BACKGROUND: During the 2012 budget process, City Council reduced the Fire Department's overtime budget by $204,000 (0.7 %) and reduced the minimum staffing level before additional fire fighters are to be called in on overtime from 37 to 35. When staffing levels drop below 37 fire fighters on any given shift, a pumper unit is removed from service. On these occasions, an aerial unit is moved from Station 4 (Fairway and King) to Station 6 (Pioneer and Homer Watson) and a pumper unit to be removed from service at Station 6. Originally a pumper was taken out of service from Station 7 (Huron and Fischer Hallman), but this was adjusted in June 2012. The Fire Department implemented these changes on February 1, 2012. The operational impacts of these changes for the period of February 1 to August 31, 2012 are outlined below: Staffing levels dropped below 37 staff a total of 29 times during this timeframe. This is approximately 14% of the time that a pumper was taken out of service. During City Council's 2012 budget deliberations staff anticipated this would occur 20% of the time. 2. The total response time for Station 6 and Station 7 when the aerial was in place as a result of this change 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. 3. 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 90th percentile) increase for these situations was 13 seconds in this station area. To put this increase in response times in perspective, in 2004/05 the Fire Department invested approximately $100,000 in technology upgrades to lower response times by 10 -15 seconds. 4. The Fire Department's standard effective response force objective is to have 15 staff on location within 12 minutes (an industry standard) in order to achieve the necessary tactics to combat an emergency situation. This is for both public safety and fire fighter safety. The sampling size of the effective response force response times for the February 1 to August 31 timeframe was too small to provide sufficient data. Anecdotally, we can say that with the reduction of one first response unit we will see an increase in our effective response force response times. 5. There were documented situations in which having the aerial in service at Station 4 provided the necessary coverage with positive outcomes that were originally designed. The most prominent was the structure fire on Manitoulin Crescent on July 1, 2012. Aerial 4 had a quick response to a working structure fire. With the additional staffing on scene quickly, crews were able to secure a water supply and conduct a quick interior search and rescue to 2012-11-16 OP - 92 ensure that there were no occupants inside. If the aerial had not been available crews would not have been able to conduct the rapid search until another unit was on scene and the timing of this would have likely meant forgoing the search and only conducting exterior fire operations due to the size and magnitude of the fire. The response modeling conducted in the late 90's has allowed for the optimum fire response coverage to the citizens. This is constantly being challenged by increasing call volumes, increase in traffic volume (including traffic calming measures) and the light weight construction methods used to build new homes and interior fire load composition (the fire is burning hotter and faster and the structures have a faster chance of failure or collapse). FINANCIAL IMPLICATIONS: City Council's decision to reduce the minimum staffing level before additional fire fighters are called in on overtime avoided approximately $100,000 in overtime costs. However, as the above information outlines, this change also resulted in reduced service levels and longer response times. RECOMMENDATION: For information only. 2012 -11 -16 OP - 93 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 03 - Conference Costs FUND: Operating DEPARTMENT: All PREPARER: Michael Goldrup, Director of Human Resources Tami Turner, Manager of Employee Strategies BUDGET IMPACT: None BACKGROUND: At the August 13th, 2012 Finance and Corporate Services Committee meeting, Council directed staff to provide further information on conference costs. RATIONALE / ANALYSIS: The conference and seminar cost summary for staff and members of Council (2011 actuals) is as follows: General Expense (Amanda /SAP /Cityworks) $11,393 CAO's Office (excluding Office of Mayor & Council) 25,133 Office of the Mayor & Council 37,490 Community Services 69,156 Infrastructure Services 65,481 Finance & Corporate Services 48,507 Enterprise (Golf, Utility, Parking, Fleet) 56,679 Total ConferencelSeminar Costs $313,839 Average Conference /Seminar Costs: Per employee (excluding Mayor & Council) $ 157 Per Mayor & Council $3,408 Total Learning Expenditure Per Employee: Canadian Organizational Average $ 787 City of Kitchener $351 (Source: Conference Board of Canada Learning & Development Outlook 2011: Are Organizations Ready for Learning 2. 0, October 2011) Note: Organizational conference and seminar costs represented 50% of the total organizational learning expenditures (which includes health and safety certification and internal training programs). On total learning expenditure, the City of Kitchener spent 44.6% of the average Canadian organization. Total Learning Expenditure as a Percentage of Payroll: Canadian Organizational Average 1.5% City of Kitchener 0.6% (Source: Globe & Mail, "Training Costs, Less is More'; Wallace Immen, August 23, 2012) An organization's learning culture can have a significant impact on organizational performance through its emphasis on building employee skills, knowledge, and abilities. To flourish, learning culture is dependent on the support of senior management from both a monetary and attitudinal perspective. Learning culture is composed of key factors that address the degree to which organizations prioritize learning, align learning with organizational objectives, and promote/ support delivery of diverse learning opportunities Our People Plan states: 'Growing staff isn't just about ensuring we have the skills we need to do 2012-11-16 OP - 94 our jobs effectively. That's just one piece of the equation. We also grow staff because it is our job to position our city for the future. We have a civic responsibility to take personal and professional development, and creating opportunities for advancement, very seriously. It is imperative we continue our commitment to learning so we are always ready to adapt and shift gears in the face of a rapidly and constantly changing municipal environment.' Deloitte was engaged to lead the City through a comprehensive learning and development needs assessment in 2011. They stated in their final report that there is a strong and visible commitment to learning and development by the organization and the senior leadership team. In spite of the fact that we are an organization that enthusiastically supports a culture of learning, total learning expenditures per employee when grouped by a learning culture index of weak $575, moderate $732 and strong $1548, the City of Kitchener ranks lower than the weak scale average at $351 per employee per annum. (Source: Conference Board of Canada Learning & Development Outlook 2011: Are Organizations Ready for Learning 2.0, October 2011) FINANCIAL IMPLICATIONS: That training and learning budgets be in range of Canadian benchmarks. This financial commitment will allow us to better support and develop employees so that they can meet the needs of the community and the organization and thus fulfill our mandate in the People Plan. RECOMMENDATION: For information only. 2012 -11 -16 OP - 95 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 04 — Impact of Salary Freeze — Council Salaries FUND: Operating DEPARTMENT: CAO's Office /Office of the Mayor & Council PREPARER: Michael Goldrup, Director, Human Resources BUDGET IMPACT: None BACKGROUND: At the August 13th, 2012 Finance and Corporate Services Committee meeting, Council directed staff to provide further information on the impact of a potential freeze in salaries for members of City Council. RATIONAL /ANALYSIS: Annual economic increases for Mayor and Council mirrored the annual economic increases awarded to the management group from 2004 to 2008 per Council Compensation policy. Council salaries have been frozen three times in the last four years, first in 2009, and again in 2011 and 2012. FINANCIAL IMPLICATIONS: Potential savings achieved through freezing Council salaries are: $10,552 ($9,175 in wages, and $1,377 in fringe). RECOMMENDATION: For information only. 2012 -11 -16 OP - 96 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 05 — Impact of Salary Freeze - Senior Management FUND: Operating DEPARTMENT: Department — Human Resources PREPARER: Michael Goldrup, Director, Human Resources BUDGET IMPACT: None BACKGROUND: At the August 13th, 2012 Finance and Corporate Services Committee meeting, Council directed staff to provide further information on the impact of a potential freeze in salaries for senior management at the City of Kitchener. RATIONALE / ANALYSIS: The following information provides some context for compensation trends in 2013: • The City has access to the results of a national compensation survey of over 500 Canadian organizations conducted by the global management consulting firm, the Hay Group. In a recent survey forecasting 2013 salary increases, they are projecting an average 2.9% salary increase, an increase over the 2.8% projected in 2012. Government organizations are projected to see lower than average increases at 2.3 per cent, while private sector organizations such as the oil and gas sector are expected to see a 3.9% increase, followed by mining at 3.6% increase. • As of the last Cl BC Canadian Metropolitan Economic Activity Index, released in January 2012, Kitchener ranked third behind Toronto and Edmonton on the list of the best performing Canadian metropolitan economies. According to that report, "The City of Kitchener continues to show positive momentum and is currently ranked third in our momentum index, largely reflecting a strong population growth, a relatively high quality of employment, strong growth in construction activity and low levels of business and consumer bankruptcies." Below is the specific impact to the City of Kitchener Senior Management (Grades 12 and above) if a salary freeze is implemented. Historically, economic increases for senior management (Grades 12 and above) have been recommended to Council at the time of the approval of the CUPE Local 791 contract ratification to be consistent with the 791 negotiated wage settlement. These increases have mirrored increases negotiated through the CUPE 791 since the mid- 1990's with the exceptions of 2004 when senior management saw a 0.5% reduction; 2010 when senior management saw a 1% reduction to the economic increase and 2011 when the economic increase was eliminated. The CUPE 791 increase effective April 1, 2013 is 2.0 %. In considering the option of reducing the cost of living adjustment for senior management for a third time in four years, members of city council should be aware of the following impacts to the city's ability to attract and retain skilled, knowledgeable and experienced management staff: Salary Compression: Continuing to increase management salaries at a lower rate than salaries of unionized staff will narrow the gap between the salaries paid to non - management and management positions. This compression will make it difficult to encourage current skilled, non - management staff to apply for management positions. The relatively small increase in salary can be seen as not enough to offset the increased responsibility as well as loss of paid overtime and union seniority protection. It is also not enough to compensate for the expectation that Management staff work beyond 35 2012-11-16 OP - 97 hours per week without paid overtime or banking extra hours. Compression can also cause situations where frontline staff earn more than their direct supervisor, especially relevant where significant amounts of overtime are incurred (e.g. fire department and operations division). This situation is more prevalent where the positions in Grades 12 and above are not eligible for overtime. Examples in 2011 show Grade 19 and 20 supervisors earning within $2 -5,000 of the annual income of their Grade 12 managers when overtime is calculated in. Reduced Market Competitiveness: The City's salary comparison study in 2006 concluded that staff are paid well below the market rate for similar positions in other municipalities and corporations and confirmed significant challenges recruiting qualified employees in many positions, especially in senior management positions. The gains achieved through the market adjustment implemented from 2008 to 2010 to help alleviate this differential will become eroded if the cost of living adjustment for senior management is reduced for third time in four years. In addition, the risk of a significant correction when the next study is completed is increased. Compounding this is the fact that 35% of the current City of Kitchener's senior leaders are eligible to retire within the next 5 years. The City needs to position itself in a competitive market position to attract and retain the future leaders of the organization. The pressures on public sector wages and a delay in completing the creation of updated job descriptions for all City jobs has prompted a delay in the regular cycle for a market review of compensation. Staff Morale: Continuing to award adjustments to senior management that are inconsistent with market or other city staff can affect morale, conveying a message, even if unintentional, that the contributions of these employees are not equally valued and that it is acceptable to award below- market increases to this group. FINANCIAL IMPLICATIONS: Total potential savings achieved through freezing senior management salaries are: $133,459 ($103,297 in wages, and $30,163 in fringe). Total savings to the tax base would be $106,295 (79.6 %). RECOMMENDATION: For information only. 2012 -11 -16 OP - 98 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 06 — Use of Overtime and Absenteeism /Paid Sick Time FUND: Operating DEPARTMENT: All Department PREPARER: Michael Goldrup, Director of Human Resources BUDGET IMPACT: None BACKGROUND: At the August 13th, 2012 Finance and Corporate Services Committee meeting, Council directed staff to provide further information on overtime and absenteeism. This issue paper provides information on overtime use and paid sick time, with relevant benchmarks where available. RATIONAL /ANALYSIS: Overtime A comparison of total overtime pay in 2010 and 2011 shows that spending on overtime has remained steady at $2.49M for both years. The 2010 budget for overtime was $1.55M (3.03% of total payroll) and the 2011 Budget for overtime was $1.52M (3.17% of total payroll). Overtime is monitored by management within divisions and corporately by the Corporate Leadership Team. The need for overtime is difficult to predict as seasonal demands on programs is the main driver, in addition to the pressure on staff to meet increasing service demands with no addition of staff in many parts of the organization over many years. The following table shows the number of City staff FTEs (full -time equivalents) per 1,000 population. The number of City of Kitchener FTEs versus the population has remained relatively steady, with a slight decline. The staffing numbers below are based on a calculation that includes: core complement (permanent FTEs); contract employees; temporary employees, and; part- time /seasonal positions. It is reasonable to infer from this trend that service demand does impact workload. Year Population Full -Time Equivalents (FTEs) FTEs / 1,000 Population 2007 213,900 1,454 6.8 2008 220,600 1,478 6.7 2009 224,100 1,481 6.6 2010 229,400 1,494 6.5 2011 234,300 1,446 6.2 Management continues to make efforts to manage the use of overtime, and ensure that they are tied to valued service outcomes. 2012 -11 -16 OP - 99 Absenteeism /Paid Sick Time Paid sick time is trending well below the municipal average that is sourced from the Human Resources Benchmarking Network annual survey. The survey does not include Fire so we do not have an average for this employee group; Fire is shown separately below. Paid Sick Days Per Eligible Employee (Based on 7hr day) 2010 Municipal Average City of Kitchener Hours 2010 2011 2010 2011 Days 10 days 9 days 8 days 8 days Hours 69.2 61.9 57.2 58.2 Cost $1,729,945 $1,811,983 Fire — Paid Sick Hours Per Eligible Employee 2010 2011 Area Hours Area Hours S ression 85.6 Suppression 75.6 Non - Suppression 15.8 Non - Suppression 25.9 FINANCIAL IMPLICATIONS: None. RECOMMENDATION: For information only. 2012 -11 -16 OP - 100 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 07 - Work Related Injuries /Illness /Lost Time Claims FUND: WSIB Reserve DEPARTMENT: All PREPARER: Michael Goldrup, Director, Human Resources BUDGET IMPACT: None BACKGROUND: At the August 13th, 2012 Finance and Corporate Services Committee meeting, Council directed staff to provide further information on work - related injuries, illness and lost time claims. This issue paper provides information on work - related injury /illness claims and how injury prevention programs can positively impact our claims experience, compliance with legislation and financial impact on both the employee and employer. RATIONAL /ANALYSIS: In 2010 the City of Kitchener had the following approved WSIB claims: - 45 lost time claims - 568 days lost from work - 45 health care claims The costs associated with these lost days and health care was $237,162. Compared to the Human Resources Benchmarking Network Survey Results: Workers Compensation Lost Time Incident Rate: 2010 Municipal Average: 2.82% 2010 City of Kitchener Average: 2.52% Workers Compensation Lost Work Hours Per Employee: 2010 Municipal Average: 3.11 2010 City of Kitchener Average: 2.55 (568 days lost x 8 hrs./ # average employee count, lost time hours up to date of return to work) In 2011 The City had the following approved WSIB claims: - 33 lost time claims - 349 days lost from work - 49 health care claims The costs associated with the lost days and health care was $93,674. Compared to the Human Resources Benchmarking Network Survey Results Workers Compensation Lost Time Incident Rate 2011 Municipal Average: 3.52% 2011 City of Kitchener Average: 1.87% Workers Compensation Lost Work Hours Per Employee 2011 Municipal Average: 3.44 2011 City of Kitchener Average: 1.58 (349 days lost x 8 hrs. /# average employee count, lost time hours up to date of return to work) Based on municipal sector benchmarks, the City of Kitchener is trending below average for lost time incidents and lost time work hours, as well as showing a decline in both rates in recent years. 2012 -11 -16 OP - 101 The City currently has several types of programs in place to help mitigate its occupational health care and lost time cost. The programs are designed to educate, inform and support employees both at work and in their personal lives, and are intended to: • improve employee knowledge, competency and morale • prevent accidents and injuries • return employees back to work early and safe therefore reducing financial impacts to the employee and the employer • reduce unexpected cost in overtime, loss of productivity, work re- assignment, turnover • help move the city towards a culture of safety excellence The following injury /illness prevention programs /resources are currently in place: • Early and Safe Return to Work and Work Accommodation • Driver /equipment operator training and evaluation • Safety training • Learning and Development Training • Wellness Sessions • Monthly workplace inspections • Hazard identification reporting and correction • Hearing tests • Flu clinics • Respiratory fit testing • Office Ergonomics Guidebook • Corporate Health and Safety Strategy 2011 -2014 FINANCIAL IMPLICATIONS: Between 2010 and 2011 the City's lost time and health care costs reduced by $143,488, and are below municipal benchmarks. Continuing to develop and support injury/illness prevention programs will result in workers suffering fewer injuries and illnesses. In addition, the city will improve its compliance with existing regulations, and will experience many of the financial benefits of a safer and healthier workplace including reductions in workers' compensation costs. RECOMMENDATION: For information only. 2012 -11 -16 OP - 102 CITY OF KITCHENER 2013 BUDGET ISSUE PAPER ISSUE: OP 08 — Mileage and Per Diem Rates FUND: Operating DEPARTMENT: Finance & Corporate Services, Financial Planning PREPARER: Bonnie Saunderson, Senior Financial Analyst BUDGET IMPACT: None BACKGROUND: To provide a comparison of the current mileage and per diem rates used by local municipalities. RATIONALE / ANALYSIS: Mileage Rate The following is a comparison of current mileage rates utilized by local municipalities to reimburse employees who use their personal vehicle for business purposes. Municipality Rate /km City of Kitchener $0.45 First 5,000 kms Salvage Value $0.40 Over 5,000 kms Depreciation, over 5 years $0.46 For Non -Union employees City of Cambridge $0.51 First 5,000 kms for Union employees Fuel Consumption $0.46 Over 5,000 kms for Union employees City of Waterloo $0.46 Fuel Price (per L) Region of Waterloo $0.50 First 5,000 kms $ $0.47 Over 5,000 kms The current tax exempt allowance rates as prescribed by the Department of Finance are $0.53/km for the first 5,000 kms driven, and $0.47/km for each additional kilometre. The following is a summary of the calculated cost/km to own and operate a vehicle. Assumptions & Calculation of Annual Operatina Costs Assumptions Capital Cost $ 28,872 Salvage Value $ 4,808 Depreciation, over 5 years $ 4,813 Kilometres Per Year $ 24,000 Fuel Consumption 9.2L / 100km Annual Fuel Consumption (L) Vehicle License 2,208 Fuel Price (per L) $ 1.262 Insurance $ 1,684 Average annual interest, at 6.2% $ 952 Repair Allowance $ 1,123 Annual Operating Costs Depreciation $ 4,813 Fuel $ 2,786 Insurance $ 1,684 Interest $ 952 Repairs $ 1,123 Vehicle License $ 82 $ 11,440 Cost Per Kilometre $ 0.48 2012 -11 -16 OP - 103 Per Diem Rates The following is a comparison of current per diem rates utilized by local municipalities. Municipality Breakfast Lunch Dinner Incidentals Total City of Kitchener $ 10 $ 15 $ 25 $ 14 $ 64 City of Cambridge $ 25 $ 30 $ 45 $ 20 $ 120 City of Waterloo $ 15 $ 25 $ 35 $ - $ 75 Region of Waterloo $ 12 $ 16 $ 30 $ 10 $ 68 FINANCIAL IMPLICATIONS: Based on current usage, increasing the current mileage rate by 3 cents would increase the City's annual costs by $11,931, while increasing the per diem rates to match the Region of Waterloo would increase the City's annual costs by $705. As the overall impact of these changes is relatively small, would be spread amongst a number of different divisions, and is based on actual use which may vary from year to year, no adjustment to the budget is proposed. RECOMMENDATION: That the City of Kitchener's rate per kilometer be increased to $0.48/km for the first 5,000 kilometres driven, and $0.43 for each additional kilometre. That the City of Kitchener's per diem rates be increased to $68 /day to match the Region of Waterloo ($12 for breakfast, $16 for lunch, $30 for dinner, and $10 for incidentals). 2012 -11 -16 OP - 104