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HomeMy WebLinkAbout2013-01-17 - Budget Day - FCS MinutesSPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 CITY OF KITCHENER Present: Councillor S. Davey - Chair Mayor C. Zehr and Councillors J. Gazzola, D. Glenn-Graham, B. Ioannidis, Z. Janecki, Y. Fernandes, K. Galloway, B. Vrbanovic, F. Etherington and P. Singh. Staff: J. Willmer, Chief Administrative Officer D. Chapman, Deputy CAO, Finance & Corporate Services M. May, Deputy CAO, Community Services J. Witmer, Acting Deputy CAO, Infrastructure Services R. Hagey, Director of Financial Planning R. Regier, Executive Director, Economic Development H. Gross, Director, Project Administration & Economic Investment S. Berry, Director of Operations L. Johnston, Director, Corporate Communications & Customer Services S. Turner, Director, By-law Enforcement M. Hildebrand, Director, Community Programs & Services C. Fletcher, Director, Facilities Management M. Seiling, Director of Building B. Robinson, Director of Engineering A. Pinard, Director of Planning W. Malcolm, Director of Utilities K. Kugler, Director of Enterprise T. Beckett, Fire Chief M. Goldrup, Director of Human Resources L. Palubeski, Manager, Program and Resource Services P. McCormick, Manager of Parking Enterprise N. Gollan, Manager, Stormwater Utility D. Keelan, Manager, Acquatics & Athletics D. Locke, Manager, Operations Support & Analysis G. Hummel, Manager, Park Planning, Development & Operations J. Young, Manager, Special Events D. Ritz, Supervisor, Design / Development J. Billett, Committee Administrator C. Goodeve, Committee Administrator D. Livingstone, Committee Administrator The purpose of this special meeting was to give final consideration to the 2013 Operating and Capital Budgets and the 10-Year Capital Forecast 2013-2022. It was noted that any recommendations from the Committee this date would be considered at the special Council meeting to be held immediately following this meeting. FCS-13-001 - 2013 FINAL BUDGET DAY 1. The Committee considered Finance and Corporate Services Department report FCS-13-001, dated January 8, 2013, concerning the City’s 2013 Operating and Capital Budgets, together with budget issue papers for specific items and a list of potential budget reductions that could affect a further 1% reduction to the tax levy. Councillor S. Davey acknowledged the work of staff in reducing the original 2013 Budget estimate of 5.87% to 2.87% prior to presenting to Council and subsequent adjustments at the direction of Council to reach today’s starting point of 2.49%. DELEGATIONS Mr. H. Drewitz addressed the Committee, expressing concerns regarding the $1M deficit still to be addressed as noted in Issue Paper OP-15 and on page Final-19 of today’s staff presentation to the Committee. He stated that even though only three out of 14 delegates at the public information session on the budget had spoken to reducing the tax rate, he did not consider this to be a significant analysis as the three presenter’s represent the larger portion of the tax supported budget in that 76.5% of the tax base is supported by residents versus 23.5% supported by business interests. He maintained that those who represented residents deserve to be listened to. Mr. Drewitz further noted that statistics show that Waterloo Region has in rdth one year’s time dropped from 3 to 15 on strongest economies which he suggested SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 7 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. should be taken into consideration during deliberations this date. He added that he had not proposed where to cut when he had been asked, but had noted issues with salt spreading as it relates to winter maintenance. BUDGET OVERVIEW Mr. D. Chapman presented a budget overview, noting that the 2013 budget package has been streamlined to focus on two key themes, being: updates to information previously presented and follow-up issue papers in response to questions of Council on the operating and capital budget presentations. Mr. Chapman highlighted some of the methods used to address contrasting themes of affordability and sustainability, including: a 3% reduction in the original 2013 budget estimate prior to presentation to Council; provision of an additional list of ten potential reduction options to effect a further 1% reduction; additional options that came to light since presentation of the Operating budget that have reduced the projected tax rate further; and some corrections to items that have traditionally caused deficits but still leaves approximately $1M unaddressed which if not corrected in 2013 will have to be addressed in subsequent years. Mr. Chapman reviewed a range of tax rate increase from 1.5% to 2.5% which is representative of the need for multiple values to be considered in setting the tax rate. Councillor Z. Janecki requested clarification of the $1M deficit remaining to be addressed. Mr. D. Chapman advised that staff have raised the issue each year through budget presentations and noted the cause such as: energy costs, street lighting and winter control expenses. He stated that staff have addressed approximately $500,000. in the 2013 Budget, equating to one third of the problem, but not all could be addressed under the target set by Council; which leaves the remainder as a challenge to be addressed in future budgets. He added that staff will look to address the shortfall in 2014, noting that the implication would be that if the City were to experience a normal winter, a $1M deficit could be foreseen; however, the winter this year has been mild to date and therefore, the deficit is not as large as it has been in the past. TAX SUPPORTED OPERATING Mr. R. Hagey advised that at time of initial discussions on the Operating budget, the tax rate increase was projected at 2.87%, equating to 1.8% for the general levy and 1.07% for the Economic Development Investment Fund (EDIF). 2 items as identified in today’s presentation, plus an additional third item, have since caused further reduction in the projected tax rate increase, being: solar roof revenues (0.30%); additional assessment growth (0.08%) and in- camera direction recently given to effect a reduction of 0.13%. Mr. Hagey advised that today’s starting point is now at 2.36%, with EDIF remaining at 1.07% and the general levy at 1.29%. He added that the list of potential reduction items remains the same which could reduce the projected tax rate increase by another 1% and pointed out that Council also referred decisions on certain grants that could have impact to the 2013 Budget if reduced from the original amounts requested. Councillor P. Singh inquired if actual solar panel revenues for 2012 are known. Mr. Hagey advised that the net revenue for 2012 is between $375,000. to $400,000. Councillor Singh indicated that he had interest in seeing actual revenues from the installation of the roof in April 2011 to end of 2012. Councillor J. Gazzola questioned if a statement could be given for understanding of the public concerning the in-camera direction resulting in further reduction of the tax rate increase. Mayor C. Zehr agreed that a generic statement could be given, advising that the matter has to do with compensation. BOARDS Kitchener Public Library (KPL) and Issue Paper BD02 Ms. Sonia Lewis, CEO, KPL and Mr. Dan Carli, Chair, KPL Board responded to questions, advising that KPL’s budget has over the past three years experienced approximately $170,000. in reductions, of which approximately $150,000. relate to resources. Councillor K. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 8 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Galloway-Sealock commented that this equates to significant reductions in KPL’s budget over the previous three years. Mr. Carli advised that the reduction from the original estimate of operating expenses related to the new expanded library facility was accomplished through efficiencies in design of the building and how it is to be staffed. Councillor J. Gazzola inquired if the reduction in FTEs is sustainable and Mr. Carli concurred. Carried Unanimously The following motion was on a recorded vote. On motion by Councillor B. Vrbanovic - it was resolved: “That the 2013 appropriation for the Kitchener Public Library, in the amount of $9,453,379., be approved; and, That the City of Kitchener provide an extension of the current security service to include monitoring the interior of the Main Branch facility, a regular presence at the facility and assistance in defined situations; and further, That the City of Kitchener retains the current status of Employer of Security personnel rather than a Separate Business Agency.” Centre In The Square (CITS) Councillor Z. Janecki questioned that if the proposed flat $1.4M over the next four years is approved what the impact might be to box office hours, other services and/or lay-offs. Ms. Sandra Bender, CITS, advised that CITS will look at overall operation service levels for options to save, and savings would be tied to hours of operations, i.e. service levels and/or to contracts for certain services, citing an example of recent outsourcing of telephones/computers that has achieved efficiencies. Councillor P. Singh referred to the CITS financial statements (Issue Paper BD01), noting that the amount for Expenses - Admin & General is increasing from $374,000. in 2012 to $475,000. in 2013. He requested clarification of what is involved in the growth amount. Ms. Bender advised that this is related to the hiring of a marketing contractor; stakeholder and fundraising development, funds for which previously resided in the Capital budget, but have been moved to more appropriately reside in the Operating budget; and to operations issues such as outsourcing of computers. Councillor Z. Janecki questioned if the funding proposal for the four year period can be approved given the timeframe extends beyond the current term of Council. Mr. D. Chapman stated that unless a formal agreement is entered into there is nothing contractual to bind the City to that, but would reflect Council’s intent to maintain the $1.4M over a four year period which staff would reinforce each budget year. He noted that it is not anticipated that CITS would deviate from this arrangement. A motion was brought forward for consideration by Councillor Z. Janecki to approve a 2013 appropriation to CITS of $1.4M and that the funding commitment be fixed at this amount for a four year term (2013-2016). It was noted that based on the proposed motion, Potential Reduction PR04 (Reduce CITS box office hours for savings of $24,000.) is now excluded as an item for consideration. Mayor C. Zehr spoke in support of the proposed motion, which adds approximately $5,200. to CITS’ budget. He added that when Council has gone beyond its term for a commitment there is nothing legally binding; however, he was not aware of any instance where a subsequent Council has not honoured the intent of such an agreement. Carried The following motion was then voted on by a recorded vote and , with Mayor C. Zehr, and Councillors J. Gazzola, D. Glenn-Graham, B. Ioannidis, Y. Fernandes, S. Davey, Z. Janecki, B. Vrbanovic, P. Singh and F. Etherington voting in favour; and Councillor K. Galloway-Sealock, voting in opposition. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 9 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. On motion by Councillor Z. Janecki - it was resolved: “That the 2013 appropriation for the Centre in the Square, in the amount of $1,400,000., be approved; and further, That the funding commitment to the Centre in the Square be fixed at this amount for a four year term (2013-2016).” ENTERPRISES Mr. Hagey advised that no significant changes have occurred to Enterprise budgets, with year- end 2012 projections having been updated based on November data effecting minor changes. Golf Enterprises Mr. Hagey advised that no changes have been made to the previously presented 2013 budget projections for this Enterprise. In response to Councillor J. Gazzola, Mr. Hagey advised that if the golf courses were privately held and required to pay property tax the amount would be the equivalent of the dividend paid to the City at approximately $130,000. Councillor Gazzola noted that in 2012 there is a gross profit of 20.8% yet 19.9% is projected in 2013, questioning why the difference given that if the same figure was used it would add more revenue. Ms. K. Kugler advised that the revenues projected for the Enterprise is higher because now that there is more stability, staff can: do more work on marketing strategies; increase play on the academy and skills area due to opportunities to enter into partnerships; and, also do more with leagues. Councillor Gazzola agreed reiterating that the gross profit should be 20.8% and revenue therefore would be improved by approximately $25,000. He also noted that in 2014 the gross profit returns to 20.7%, questioning why it is not consistent in 2013. Ms. Kugler advised that this relates to a combination of how much room there is in fees, noting that adjustments were made in some of the cart registration fees and there is inflationary increases for the contracts related to pro services. As well, the amount being put back into capital is slowly being increased, noting that they have started increasing expenditures for capital replacements to ensure there are funds for such things as cart replacements and clubhouse maintenance. Carried Unanimously The following motion was on a recorded vote. On motion by Councillor J. Gazzola - it was resolved: “That the 2013 budget for the Golf Enterprise as presented be approved.” Building Enterprise and Issue Paper BD10 (Building - FTE Historical Analysis) Mr. Hagey advised that the year-end projection for the Building Enterprise improved slightly and the stabilization reserve is within target for 2013; although projected to dip below target in 2014-2017 if a projected slowdown actually occurs. Mayor C. Zehr referred to fluctuations in the direct expenses across years 2012 to 2017, requesting clarification as to why. Mr. M. Seiling advised that the difference between the 2012 budget and 2012 projected actual is approximately $239,000., which the majority of equates to a savings in salaries, as well as savings in other sundry operating expenses. Mr. Seiling added that when activity decreases the Division goes into a cost savings mode and based on December permit numbers, he anticipates that the projected $3.3M of direct expense in 2013 will come under budget because of cost saving measures. He also noted that the 2013 budget is 1% higher than direct cost of the 2012 budget. Mayor Zehr commented that the fact building permit revenue is roughly the same he would expect direct expenses to be less; however, he suggested it is almost a moot point because it is an operational reaction to the market place and simply reduces the deficit. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 10 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor J. Gazzola requested clarification as to why when revenues are projected to decrease, expenses are not also decreased. Mr. Seiling advised that staff is confident in budget projections for 2013, but going forward, projections are based on historical data dating back about 33 years, various trends, as well as what the Province may be planning in terms of potential projects; and therefore, staff is not as confident in its projections for 2014 onward, with revenues purely being forecast. Councillor Gazzola referred to Issue Paper BD10, requesting clarification of requirements to meet certain meeting dates and timelines. Mr. Seiling advised that the Building Code stipulates that they must make timeframe decisions, firstly, that on receipt of a complete application it must be reviewed entirely and all reasons provided as to why the permit was being denied, or issue the permit; and secondly, on notice that a project is ready for inspection, Building staff must inspect within two business days and if not, the contractor is allowed to carry on with construction which could result in parts of the construction being covered up that staff cannot then validate. He added that this places the City at risk if something is covered up that should have been corrected and could result in a substantive claim against the City. Councillor Gazzola requested clarification of 3.5 FTEs that have become direct versus indirect. Mr. Seiling advised that as part of an administrative staff review the Building Enterprise has taken on salaries equivalent to 3.5 FTEs that previously were part of the tax base. Councillor Y. Fernandes requested clarification of the closing balance for the Stabilization Reserve Fund in 2013 at $4.6M, questioning if it is possible not to have such a large reserve and the reasons for the significant drop in projected balances in years 2014 to 2017. Mr. Seiling advised that legislation provides for the Enterprise to have a reserve and is intended to address economic slow-down. Having no reserve in slow periods would result in lay-off of staff wherein the City would lose this cultivated knowledge and expertise. He added that the reserve has no impact on the tax base and the industry has indicated a preference for incremental permit fee increases versus substantial one time increases in slow periods. Mr. Seiling advised that staff have been fiscally responsible in minimizing fee increases to within 2% to 3% per year in an effort to encourage application for building permits. Councillor Fernandes questioned the impact of reducing the reserve by $100,000. Mr. M. May reiterated that legislation provides for the Enterprise to have a reserve and the regulations governing the reserve do not permit transfer of reserve funds to the tax supported Operating budget. Carried Unanimously The following motion was on a recorded vote. On motion by Mayor C. Zehr - it was resolved: “That the 2013 budget for the Building Enterprise as presented be approved.” Parking Enterprise Mr. Hagey explained that there have been no significant changes from the original projection. He noted that the Parking Enterprise is expected to be in a deficit position until 2016 and therefore, no additional dividend can be transferred to the tax base. Councillor J. Gazzola questioned why hourly parking increases are not in line with the 10% increase to monthly parking. Mr. P. McCormick advised that hourly parking has increased by 2% to 3% to cover additional operating expenses, adding that there has been a reduction in revenues as a result of the loss of hourly parking in some surface lots due to construction. Mr. R. Regier added that in fact, hourly rates are at approximately $4.80 per day which equates to three times the going rate for monthly parking; and therefore, is currently more expensive. Councillor Gazzola requested clarification of the general expense increase. Mr. McCormick advised that this relates to additional operating costs for Bramm Street and phase II of the Civic parking garage. Councillor P. Singh questioned if the 2013 budget for revenues is too conservative given opening of the Charles / Benton parking garage and imminent opening of the new Courthouse. Mr. McCormick pointed out that while the Charles / Benton site will bring in revenues, there will also be loss of revenues from the Centre Block site once construction begins. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 11 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor Y. Fernandes questioned the feasibility of allowing free parking on Monday to Wednesday evenings when activity is slower in the Downtown core, to encourage activity at those times. Mr. McCormick commented that it may present some confusion to the public with varying times of free versus paid parking and suggested that a study would have to be conducted to determine averages over a seven day period. He added that this would take into consideration patrons coming to the core Thursdays to Saturdays for evening entertainment. Councillor B. Vrbanovic comment that the City is still trying to maximize revenue potential and is not at a point where it can charge significantly for parking outside business hours as it is still trying to nurture after hours spending. He stated that he would not support a move to do so at this time, particularly without any dialogue with the Downtown Business Improvement Association and the public. Councillor J. Gazzola supported the direction staff has proposed but suggested some dialogue is needed regarding the discontinuation of certain parking subsidies; such as, those provided to Wilfrid Laurier University (WLU). Mr. J. Willmer agreed that this is an issue Council should be more aware of, adding that staff is planning to return with a report, not only in consideration of WLU, but in regard to subsidies in general. Carried Unanimously The following motion was on a recorded vote. On motion by Councillor B. Vrbanovic - it was resolved: “That the 2013 budget for the Parking Enterprise as presented be approved.” Gas Works Utility and Issue Paper BD11 (Gas Transfers to the Tax Stabilization Reserve Fund) Mr. Hagey advised that projections have decreased since the Operating budget was presented due to milder winter conditions; however, the stabilization reserves remain within the target range for all years of the forecast. Councillor J. Gazzola questioned the difference under gas delivery for ‘other programs’ gross profit percentages as to why they are not consistent. Mr. W. Malcolm advised that ‘other programs’ includes the water heater rentals and appliance service financing. He noted that the rates for the water heater rentals do not occur annually, but rather every two to three years in keeping with customer preference. He added that the financing program is decreasing due to ceasing of grants from the Province. Mr. Malcolm further noted that the increase in the gross profit percentage in 2015 is due to the timing of the next water heater rental rate increase. Mr. Malcolm provided explanation to Councillor K. Galloway-Sealock as to why the projected revenues under gas delivery for 2013 is approximately $5M less than in 2014, equating the difference to the ‘made in Kitchener’ rate analysis conducted in the fall of 2012 at which time staff separated transportation from the delivery component. Councillor Galloway-Sealock requested clarification of the stabilization fund transfer to the gas investment reserve. Mr. Malcolm advised that the transfer is being fixed at $13M plus inflationary increase. Mr. Hagey added that of the $13M, $7.5M plus inflation is forecast going forward for transfer into operating and $5.5M into the capital pool to fund capital projects. In response to Councillor Y. Fernandes, Mr. Hagey advised that the projected 2012 year-end balance for the gas investment reserve is approximately $6.4M. He added that the Council approved reserve policy would generally preclude transferring funds from this reserve into the Tax Stabilization Reserve Fund (TSRF), noting the reserve funds are set up for specific purpose with target ranges, and the policy discourages transfer between reserves. Mayor C. Zehr requested clarification regarding the stabilization reserve fund balances as they relate to the benchmark percentages of total revenues. Mr. D. Chapman advised that this relates to the last of the transportation benefit prior to implementing the new rate model. The amount is an assumption based on projected activity from January to July when new rates will SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 12 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. be adopted and is purely conjecture as to whether or not it will materialize higher or lower. He referred to the Issue Paper, advising that dividends are received from both the hydro and gas utilities to fund operating and capital programs and there is potential for the gas transportation to be over target given staff is seeing a steep decline on the long term debt rate for hydro that may result in a $7M shortfall. He commented that if this is not addressed, it would have to flow through as an operating and/or capital reduction and recommended exercising caution in depleting the gas reserve based on what is known relative to the hydro reserve. A motion by Mayor C. Zehr was brought forward for consideration to approve the Gas Utility 2013 budget as presented. Councillor Y. Fernandes advised that she would prefer to defer consideration to the afternoon session pending the additional information to be provided by staff of the schedules for the continuity of the gas investment reserve and the TSRF. She questioned the possibility of making an exemption to the reserve policy to allow a transfer of $500,000. to the TSRF and if in the coming year it is determined not to be needed if there is ability to move it back into the gas reserve. Mr. Chapman suggested that the impact of the proposed transfer be dealt with in the afternoon session at time the additional information is provided. In regard to the ability to move the funding back into the gas reserve if not needed, he stated that this would be inconsistent with the policy respecting the use of the TSRF; however, technically there is nothing to preclude Council from transferring the funds. Councillor S. Davey questioned if it would be better to leave the funds in the TSRF if not needed than effect a transfer back to the gas reserve. Mr. Chapman agreed that would be a better approach, and gave assurance that if left in the TSRF nothing would happen with those funds without direction from Council. Mayor C. Zehr withdrew his motion at this time to allow the additional information to be received. Water Utility Mr. R. Hagey advised that Water Utility projections have decreased since the Operating budget was presented due to lower revenue at year-end; however, the stabilization reserve fund remains within target for all years of the forecast. Councillor J. Gazzola requested clarification of the 3% differential in gross profit percentage. Mr. Hagey advised that the sale of water is increasing by 5% under this projection and supply by 6.9%, resulting in a disconnect between the amount charged versus the revenue increases which erodes profitability. Mr. Chapman further explained that the City had its best year for low unaccounted for water in 2012; however, projections are based on an historic average rather than best years and on declining trends which is reflected in the average. Councillor Y. Fernandes raised concerns with the proposed 5% increase in water rates. Mr. Chapman explained that the rates under Council’s control are proposed to increase by 2% which is in line with inflationary costs. He added that the Region has increased rates at substantially more than the rate of inflation over the past number of years, with Regional rates at 6.9% for 2013. Mayor C. Zehr commented that as lower conservation takes place the rates are counter intuitive to costs that will continue to rise due to new regulatory standards; and, on the capital side, the sourcing and treating of water which is giving rise to significant increases at the wholesale level at the Region. He suggested that there is risk if rates are reduced at this time, noting that in 2013, the water utility would go into deficit; and beyond, the rates are proposed to drop because the Region wholesale rates are starting to drop as well because of the major capital costs being injected into the system. He stated that to decrease the proposed water rate increase now would be subsidizing the rate change that the Region is charging through to the City and the City would have insufficient funds to cover its costs. He suggested that it could be considered in future years based on the projected figures and levelling of the stabilization fund. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 13 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor S. Davey commented that this Council should focus on what it can control and not put itself in position of subsidizing what is passed down from the Region; therefore, he would not support a reduction in the proposed rate increase. A motion was brought forward by Councillor J. Gazzola to approve the 2013 Water Utility budget with a 3% rate increase rather than 5%. Councillor Gazzola commented that in 2012, the rate was reduced to 3.5% and the Utility still ended with a surplus of $1.9M compared to budget at $748,000. He stated that over the last 10 years rates have more than doubled, suggesting ratepayers need some relief in 2013. He stated that the reserves have improved, noting that it will have $6M over and above the $12M put into the Accelerated Infrastructure Replacement Program, and is still achieving a surplus of $2M. Mayor Zehr questioned that if a 3% rate increase is approved, representing a reduction of 2% or $700,000. less revenue in 2013, what the effect of future years will be. Mr. Hagey advised that it would have a compounded effect as the rates for 2014 and beyond assume the rate increase proposed for 2013 will be approved. Mayor Zehr commented that if a $700,000. reduction is taken, the first five years beyond will alone equate to $3.5M, leaving a balance of only $2.5M in the reserve in 2017. He added that from a financial standpoint there is greater risk in not having the resources needed to address unforeseen events that impact the City. A motion was brought forward by Councillor Y. Fernandes to amend Councillor Gazzola’s motion to provide that the 2013 Water Utility budget be approved with a 4% rate increase. Councillor Fernandes suggested that a 4% increase would still allow for increased revenues. She expressed the view that her proposed rate increase is reasonable given the due diligence of staff and no proposals to reduce staff in those areas. Councillor Davey questioned the portion of the proposed 5% rate increase that is passed on by the Region and Mr. Hagey identified it as being approximately 3.5%. Councillor Z. Janecki asked for clarification on the Regional water rate of 6.9%. Mr. D. Chapman explained that the total budget for the sale of water is $35M in 2013; and, it would take a 5% rate increase to generate this amount. He indicated that the water supply purchased from the Region of Waterloo accounts for 60% of the total budget for water. He added that the majority of the rate increase is to cover the Regional increase of 6.9%. He clarified that the City is increasing costs by an inflationary amount which averages to a rate increase of 5%. Mr. Chapman further responded that the Water Utility budget is balanced, assuming an increase of 5%, and that any significant reduction would result in a deficit for 2013. He stated that the objective has been to maintain a stabilization reserve and a reserve for capital replacement costs for water and sewer. Councillor Janecki commented that he recognizes the standard of care and responsibility held by the municipality and believes staff are capable of due diligence. He stated that he would be in support of Councillor Gazzola’s motion to limit the increase to 3%. Mayor Zehr stated that he would not support Councillor Gazzola’s motion as the 3% increase would be a reduction in the City’s portion of the water utility rate and would not be reasonable or sustainable. Councillor Gazzola then modified his original motion to provide for a rate increase of 3.5%. Lost, Councillor Fernandes’ amendment was then voted on by a recorded vote and with Councillors J. Gazzola, Y. Fernandes, Z. Janecki, and D. Glenn-Graham voting in favour; and Mayor C. Zehr and Councillors B. Vrbanovic, K. Galloway-Sealock, B. Ioannidis, F. Etherington, P. Singh and S. Davey voting in opposition. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 14 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Lost Councillor Gazzola’s motion, as modified, was then voted on by a recorded vote and , with Councillors J. Gazzola, Y. Fernandes, Z. Janecki, and D. Glenn-Graham voting in favour; and Mayor C. Zehr and Councillors B. Vrbanovic, K. Galloway-Sealock, B. Ioannidis, F. Etherington, P. Singh and S. Davey voting in opposition. A motion by Mayor C. Zehr was brought forward to increase Water Utility rates by 5%. Lost Mayor C. Zehr’s motion was then voted on by a recorded vote and , with Mayor C. Zehr and Councillor F. Etherington voting in favour; and Councillors B. Vrbanovic, K. Galloway- Sealock, B. Ioannidis, P. Singh, S. Davey, J. Gazzola, Y. Fernandes, Z. Janecki, and D. Glenn-Graham voting in opposition. A motion was brought forward by Councillor K. Galloway-Sealock to set the 2013 Water Utility budget with a 4.75% rate increase. Carried, The following motion was voted on by a recorded vote and with Mayor C. Zehr and Councillor’s K. Galloway-Sealock, P. Singh, S. Davey, B. Ioannidis, F. Etherington and B. Vrbanovic voting in favour; and Councillors J. Gazzola, Y. Fernandes, D. Glenn-Graham and Z. Janecki voting in opposition. On motion by Councillor K. Galloway-Sealock - it was resolved: “That the 2013 Water Utility budget be approved with a 4.75% rate increase.” Sanitary Utility Mr. Hagey advised that the Region of Waterloo’s share of the Sanitary rate increase is 4% and the City’s share is 1%. He stated that if the rationale utilized to approve the rate increase for the Water Utility follows, the inflationary increase would be 1.75%. He added that the Sanitary Utility Stabilization Reserve is anticipated to remain within the benchmark range for the forecast years. Councillor J. Gazzola questioned the amount of the $8.869M allocated to the Accelerated Infrastructure Replacement Program (AIRP) was used in 2012. Mr. J. Willmer agreed to provide detail on the expenditures and projected shortfall attributed to the AIRP, and responded that replacing aging infrastructure is a major concern facing municipalities across Canada. He encouraged Council to take a long-term view when considering water, sanitary and stormwater. Mr. Hagey noted that there was not a significant surplus or backlog of AIRP work. A motion by Councillor J. Gazzola was brought forward for consideration to limit the Sanitary rate to 4% in 2013. Councillor P. Singh requested further information describing the impact of failing to replace aging infrastructure. He added that the response should specify the impact, in terms of property damage and economic loss, which he anticipates being more than just a deficit in infrastructure funding. Mayor C. Zehr spoke against the motion, commenting that the AIRP and capital programs are planned over a 10-year forecast, and although the funds may not be fully expended in one year, the program should be examined in continuity rather than one year in isolation. He stated he would not support a reduction to 4%, as the reduced revenue would have a long- term impact on the overall capital program. Councillor Y. Fernandes commented that the transfers to Capital total $19M, indicating that the budget was in a surplus position of $7.7M, which suggests that the funds are being allocated faster than expended. She stated she would support the rate being set at 4%, as this would pass savings to customers while ensuring the Utility would not be in a deficit position. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 15 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor Gazzola’s motion to limit the sanitary rate to 4% was then voted on by a recorded Lost vote and , with Councillors J. Gazzola, D. Glenn-Graham, Z. Janecki and Y. Fernandes voting in favour; and Mayor C. Zehr and Councillors B. Ioannidis, S. Davey, K. Galloway- Sealock, B. Vrbanovic, F. Etherington and P. Singh voting in opposition. A motion was brought forward by Councillor P. Singh to set the Sanitary rates at 4.75%, which he noted was in keeping with the inflationary rate of the Municipal Price Index (MPI). Carried The following motion was voted on by a recorded vote and , with Mayor C. Zehr and Councillors D. Glenn-Graham, B. Ioannidis, S. Davey, K. Galloway-Sealock, B. Vrbanovic, F. Etherington and P. Singh voting in favour; and Councillors J. Gazzola, Z. Janecki and Y. Fernandes voting in opposition. On motion by Councillor P. Singh – it was resolved: “That the 2013 Sanitary Utility budget be approved with a 4.75% rate increase.” Stormwater Utility Mr. R. Hagey advised that projections for the Stormwater Utility are 2% higher than were projected in the Operating Budget due to lower maintenance costs. He indicated however, that the Stormwater Utility is still expected to be in a deficit position until 2016. Councillor P. Singh advised that he would not be in support of the proposed 3% increase. He referred to the incremental 3% recovery for three years, which gave users a 10% reduction in 2011, stating that Council has chosen to invest in storm water management over a 30 year period at a cost of approximately $120. for an average homeowner. He explained that charging the user an additional 3% does not seem fair and suggested that the timeframe for the capital expenditure could be expanded to reduce the impact on taxpayers. Councillor Y. Fernandes referred to the Storm Water Credit Program and questioned the uptake given the proposed budget of $627,000. is budgeted. Mr. N. Gollan responded that credits have been applied through the utility billing program to 2500 residents, totalling approximately $150,000. He added that the total number of participants in the program has not been confirmed as the final date for issuing retroactive credits is March 31, 2013. Councillor Fernandes questioned what would happen to the balance of the funds allocated to the program should the payments not total the budgetary amount. Mr. Gollan responded that the objective is to re-evaluate the program upon completion and report back to Council. A motion was brought forward by Councillor P. Singh to limit the Stormwater Utility rate to a 0% increase for 2013. Councillor J. Gazzola questioned the 7% increase in the Utility’s operating expenses. Mr. Gollan responded that, as was presented in the Operating Budget presentation, infrastructure repairs, street sweeping, and the establishment of contra-accounts related to the debt owing from the school boards are included in this increase. Mr. Chapman clarified that the debt regarding school boards is related to a conflict in legislation between the Education Act and Municipal Act. He advised that this is a debt owed to the municipality and collection is being pursued. He stated that a contra-account is required for the $640,000. in accumulated utility charges until the conflict in legislation is remedied. Mayor C. Zehr advised that approving a rate at less than the proposed increase would have a compounding effect on the capital program. He commented that 3% was built into the projects long-term; and he would, therefore, be in support of the proposed increase. He indicated that should Councillor Singh’s motion fail, he would propose a 3% increase in the Stormwater Utility rates. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 16 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. A motion was brought forward by Councillor B. Vrbanovic to amend Councillor Singh’s motion to increase the storm water utility by 1.7% in keeping with the inflationary increase of the MPI. Councillor Singh brought forward an amendment to Councillor Vrbanovic’s motion to set the Stormwater Utility rate at 1.5%. Carried The following motion was then voted on by recorded vote and , with Councillors P. Singh, J. Gazzola, S. Davey, D. Glenn-Graham, Z. Janecki and Y. Fernandes voting in favour; and Mayor C. Zehr and Councillors B. Ioannidis, K. Galloway-Sealock, B. Vrbanovic and F. Etherington voting in opposition. On motion by Councillor P. Singh - It was resolved: “That the 2013 Storm Water Utility budget be approved with a 1.5% rate increase.” The Committee then recessed at 12:05 p.m. and reconvened at 12:37 p.m. Chaired by Councillor S. Davey, with all members present except Mayor C. Zehr and Councillor J. Gazzola. 2013 CAPITAL BUDGET Additions Since Capital Presentation CarriedUnanimously The following motion was on a recorded vote by all members present. On motion by Councillor F. Etherington - it was resolved: “That the following capital projects be funded, as outlined on page Final-38 of the 2013 Final Budget Day package, as follows: CIIF: Trail Upgrades in the amount of $500,000. (50/50 Grant/Reserve); CIIF: Victoria Park Washrooms in the amount of $400,000. (50/50 Grant/Reserve); and, Strasburg Road in the amount of $146,000. (Development Charges).” Mayor C. Zehr and Councillor J. Gazzola entered the meeting at this time. Capital Issue Papers The Committee then reviewed Capital Issue papers BD20 to BD28, as listed in the agenda package. BD20 - Existing Balances: Corporate Plan and Safe & Healthy Community Advisory Committee Questions were raised with respect to the $24,900. close out to capital surplus from the Corporate Plan capital account. Mr. J. Willmer advised that the close out was for this year only. He confirmed that $54,000. in capital funding is allocated annually for the Corporate Plan along with an additional $28,000. for Compass Kitchener. He cautioned against implementing a permanent reduction to this funding allocation in accordance with the amount that was closed out to capital. He advised that the Strategic Plan and Corporate Plan are fundamental to moving the City’s agenda forward and reducing the funding by that amount would severely jeopardize the program. He indicated that going forward it is anticipated that this will be a more ambitious program and if the recommended funding was reduced, staff would have to report back as to the specific impact this could have on the future of this program. BD21 - Alternate Emergency Communications Centre Clarification was requested regarding the proposed allocation for an Alternative Fire Emergency Communication Centre. Fire Chief T. Beckett advised that those funds have been SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 17 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. requested for the development of a back-up site for Fire’s emergency dispatch services. He stated that it is required for business continuity purposes to ensure that services would continue to be provided should there be an emergency situation in which the primary communications centre can no longer be used. He stated that the Direct Detect program would be accommodated through the Alternative Communication Centre, adding that it would help to ensure response times for those areas of the City where development was subject to the installation of the Direct Detect system. Fire Chief Beckett indicated that the establishment of the Alternative Communication Centre has been included in the Fire Services Business Plan for the past two to three years and if approved, Phases I and II would be implemented by March 2013. He stated that moving forward with Phase III is partially predicated on a decision being made with respect to the proposed regional emergency communications project. He noted that the regional communications project is not anticipated to be resolved for approximately five years and consideration would need to be given as to how its various components could be integrated into this project prior to implementing Phase III. BD22 - Fire Fleet Details Fire Chief Beckett responded to questions, indicating that with respect to the tenders for the replacement pumper trucks, which was referred to this date from the January 14, 2013 Council meeting, this does not represent a new funding request. He added that the proposed replacement vehicles would be accommodated through the existing balance within the equipment reserve and would not impact the 2013 tax rate. He indicated that a vehicle purchase plan was developed, with the assistance of Financial Planning staff, to spread-out the timing of when these kinds of allocations are brought forward for consideration. He stated that this was done to avoid instances where a large number of vehicles are proposed to be purchased in any given year. He added that in accordance with this plan, it is proposed that two new pumper trucks be purchased every three years, which will allow for a consistent replacement cycle. BD23 - Environmental Remediation Clarification was requested as to the application of the Environmental Remediation Capital account. Mr. H. Gross advised that maintaining a balance in this account is necessary to address unforeseen environmental issues related to the clean-up of City owned properties. He indicated that the disposal of contaminants at the Centre Block was identified as part of the site review and would be undertaken during the construction of the underground parking facility. He stated that as part of the sale of that property it was agreed that the City would be responsible for the removal and disposal of the contaminants. He confirmed that the Chandler Drive remediation was agreed to as part of the sale of that property to the Region of Waterloo. He noted that the Elmsdale property is currently under conditional sale and the proposed allocation is an allowance to assist with any remediation work if necessary to facilitate the sale of the property. Mr. J. Witmer responded to further questions, advising that revenues from potential future land sales have not been included in this account. BD24 - Surface Reconstruction Road Works Councillor Y. Fernandes proposed that $500,000. of the $3M currently identified to be used toward road resurfacing should be reallocated toward expanding the City’s trail infrastructure. She suggested that as trails are being used by commuters, then it is appropriate to fund a portion of their development through the City’s Federal Gas Tax allocation. She added that while a funding increase is proposed for trails, it is not scheduled to take effect until 2015 and she would prefer to see the City complete the initiatives proposed in the Trails Master Plan as soon as possible. Mr. D. Chapman advised that in 2013, $253,000. is already proposed to be allocated toward trails. He added that in Issue Paper BD29 (Allocation of LEAF Funds) it is recommended that a total of $500,000. be allocated from the Federal Gas Tax Reserve to implementing the Trails Master Plan, without impacting existing commitments in the roads works budget. He added that the recommended timing for this funding allocation matches the timing proposed in the Trails Master Plan; and therefore, the additional transfer out of the Surface Reconstruction Roads Works budget would exceed the level of funding put forward in the Master Plan. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 18 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Mr. Gross clarified that the total 2013 roads works budget is approximately $5.89M, of which $1.4M is dedicated toward the Block Line Road project. He stated that when the funding for other specific projects is removed, only $2.2M remains for the resurfacing of roads. He added that the proposed transfer to trails would reduce the City’s roads resurfacing program by almost 25%. Mr. D. Ritz offered further clarification, indicating that staff are recommending an acceleration of the Community Trails budget to achieve the same ten-year total capital investment of $11M as per the Trails Master Plan. He added that approximately $2M is proposed to be allocated from LEAF, as well as $500,000. from the CIIF grant and Recreational land Reserve. He noted that this is in addition to the previously mentioned $500,000. available in the Federal Gas Tax Reserve. He confirmed that the accelerated ten-year capital investment was scheduled to begin with an allocation of $75,000. in 2015. Councillor Fernandes proposed that the timing of the allocation toward community trails be advanced from 2015 to 2013, through the use of a portion of the Federal Gas Tax. Accordingly, it was agreed that as a portion of the funding to accelerate the Community Trails budget was proposed to be allocated through LEAF, Capital Issue Paper BD24 would be considered in conjunction with BD29. BD26 - Park Programs (Capital & General Provision) Councillor P. Singh questioned the work that was pending for McLennan Park. Mr. Ritz provided an overview of the projects outlined in the McLennan Park Master Plan that have yet to be completed. He estimated that in total it would cost approximately $2.2M to undertake the remaining work, which has not been provided for in 2013-2022 Capital Forecast. He acknowledged that some items should receive priority consideration; such as applying a final coat of asphalt on the trails and parking lot, which if left uncompleted could result in the deterioration of the existing base coat. Councillor K. Galloway expressed concern that Victoria Park, McLennan Park and Huron Natural Area (HNA), being are three major City-wide parks have to compete for funds from the Parks Capital Program. She stated that each of these three major parks have uncompleted work as identified in their associated master plans, adding that this work would be best accommodated through the establishment of individual general provision accounts. Councillor F. Etherington questioned the amount of unfunded work that remained for Victoria Park. Mr. Ritz advised that it has been identified that approximately $2.9M would be needed over the next ten years to complete the unfunded work for Victoria Park. Councillor B. Vrbanovic requested clarification regarding the amounts invested in Victoria Park, McLennan Park as well as the Huron Natural Area within the last few years. Mr. Ritz advised that approximately $4M to $5M was spent to re-develop McLennan Park, adding that the development at the HNA commenced in 2003 as part of Super Build funding. He noted that work in Victoria Park was completed partly through an allocation from EDIF, which is set to expire as of 2013. Mr. Witmer estimated that $2.7-$3M was allocated toward the restoration of Victoria Park. Clarification was requested with respect to how improvements are funded at Kiwanis Park. Mr. Ritz advised that Kiwanis Park Master Plan was created with two separate components, with the City being responsible for one portion and the Kiwanis Club being responsible for the other portion. He added that the City completed its required work; however, the Kiwanis Club recused itself from operating the Park and a majority of their work remains unrealized. Ms. D. Keelan advised that due to its aquatic program, Kiwanis Park is unique in that its operations and capital funding is derived from a general provision account. Mr. M. Hildebrand advised that at this time, any of the components that remain outstanding in the Kiwanis Park Master Plan would need to be re-evaluated by staff to determine if they were still relevant to the needs of the Park. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 19 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Mr. Chapman responded to questions, clarifying that parks projects are not eligible to receive an allocation from the Federal Gas Tax funding. He commented that one option might be to allocate the Gas Tax funding to community trails and shift a portion of the funds remaining in LEAF proposed for trails, to the City’s Parks Program. He suggested that direction could then be given to have staff report back as part of Council’s 2014 budget deliberations as to possible means of allocating additional funding to the Parks Program as well as the Trails Master Plan. Councillor Davey indicated that given this items connection to the disposition of the funds remaining in LEAF, it was agreed that BD26 would also be considered in conjunction with BD29. BD27 - Conservation of the Schoerg Barn Foundation Mr. Chapman responded to questions, advising that Muirtec Inc. was retained to undertake a physical assessment of the Schoerg Barn foundation and provide an estimate for conservation. He confirmed that staff are recommending the implementation of Option ‘A’, which proposes a basic restoration in the amount of $300,000. He added that this Option is currently provided for in the budget and if no action is taken by the Committee than this is what will be approved as part of the Capital Forecast. He noted that as this project is proposed to be funded through the Park Reserve, there would be no impact on the tax base. Questions were raised regarding the restoration work proposed for the Schoerg Barn foundation and the incorporation of that heritage feature into a future City park. Mr. Ritz indicated that the foundation is a designated heritage resource, noting that the requested funds would be used to ensure its future preservation. He explained that the consultant’s report concluded that if the restoration work was not undertaken within the next four years the condition of the foundation would deteriorate to a point where it could no longer be used. He added that if the work is not pursued in 2013, then the site would need to be covered with a tarp to slow its deterioration as proposed in Option ‘B’. Mr. Witmer responded to further questions, advising that costs may increase if the project were to be spread over more than one year. He added that if a contractor is requested to do this project over two years, than they would budget according to that timeframe. He noted that with inflation, this could result in a higher overall cost for the project. Councillor Z. Janecki advised that he is in support of Option ‘A’, expressing concern with the possible degradation of the foundation if a temporary solution is applied. He suggested that the City should move forward with the preservation of this historic site. BD28 - Debt to Reserve Ratio Councillor Singh inquired as to whether the City would be considered as being in a sound fiscal position with respect to its debt to reserve ratio, and if it was reasonable to exclude Economic Development Investment Fund (EDIF) and the Kitchener memorial Auditorium debt from this ratio. Mr. Chapman advised that showing the debt to reserve ratio with and without EDIF is an internal distinction and as it forms part of the City’s overall debt. He stated that the City does have a fairly high debt to reserve ratio; however, the financial position per household, which includes such things as the City’s hydro investment, is at the average level. He added that holistically, the City’s financial position is sound even though it has a high debt to reserve ratio. He acknowledged that as an extreme measure, the City’s assets could be sold to offset the impact of an unexpected financial burden. He confirmed that that debt levels will moderate over time, which will take a commitment to maintain discipline to allow the EDIF debt to mature and not replace it. He added that if there were opportunities to build reserves and/or not take on new debt, this would help to improve the City’s debt to reserve ratio. He stated that he could not recall a previous incident where a lump sum was applied to the City’s debt. He indicated that the City cannot pay down debentures once they are issued, but could reduce its future obligations by issuing fewer long-term debentures. At the request of Councillor Fernandes, it was agreed that BD21 - Alternate Emergency Communications Centre, would be voted on separately. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 20 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Carried Unanimously The following motion was on a recorded vote. On motion by Councillor B. Ioannidis - it was resolved: “That the following Capital Issue papers, be approved: BD20 - Existing Balances: Corporate Plan and Safe & Healthy Community Advisory Committee; BD22 - Fire Fleet Details; BD23 - Environmental Remediation; BD25 - Earth Week Program; BD27 - Conservation of the Schoerg Barn Foundation; and, BD28 - Debt to Reserve Ratio.” Carried The following motion was then voted on by a recorded vote and , with Mayor C. Zehr and Councillors J. Gazzola, D. Glenn-Graham, S. Davey, K. Galloway-Sealock, B. Vrbanovic, B. Ioannidis, P. Singh and F. Etherington voting in favour; and Councillors Y. Fernandes and Z. Janecki voting in opposition. On motion by Councillor B. Ioannidis - it was resolved: “That Capital Issue BD21 - Alternate Emergency Communications Centre, be approved.” BD29 - Allocation of Local Environmental Action Fund (LEAF) Funds (Community Trails & Emerald Ash Borer [EAB]) Councillor Vrbanovic questioned if it would be possible to allocate $600,000. from LEAF to the City’s three major parks and within a five year timeframe recoup those funds intended for community trails through the Federal Gas Tax Reserve. Mr. Chapman advised that $500,000. is available in the Federal Gas Tax Reserve and the Committee could decide to reallocate a portion of the remaining LEAF funding to parks; and replace those funds by advancing the allocation from Federal Gas Tax Reserve to trails. Questions were raised as to the possibility of using a transfer from the Gas Utility Reserve to accommodate the proposed additional allocation to the City’s major parks. The schedules for the Hydro Investment Reserve, Hydro Capital Investment Reserve, Gas Utility Investment Reserve and the Tax Stabilization Reserve were then circulated for the Committee’s reference. Mr. Chapman reviewed the circulated schedules, advising that with respect to Hydro, the City currently has a debt rate of 5.87%. He indicated that when this forecast was created it was assumed that when Hydro resets their rates the Ontario Energy Board (OEB) would mandate a rate of 5.48%. Accordingly, revenues are projected to decline as of 2014, with a new rate of interest being established as of 2015. He added that earlier this week, the OEB released a new rate of 4.03%, which when applied to the modeling shows that the Reserve will be in a deficit position as of 2015. He noted that this represents a move toward a market rate of return. He further advised that the Gas Reserve projection has been updated with current actuals, which shows a fairly stable surplus. However, as this is used in tandem with the Hydro Capital Reserve any surplus in this account would be offset by a deficit in Hydro. He stated that if this account is drawn down that there would not be enough remaining to pay the operating dividend or the current capital commitments. He noted that this does not take into account the projected surplus in Gas Transportation, which can be considered as being hypothetical at this point, as it is based on activity from January 2013 to the mid-point of next year. He noted that if the Committee was willing to accept the risk, then funding could be reallocated out of the Gas Transportation surplus. Councillor Vrbanovic proposed that instead of allocating $2M remaining in LEAF to community trails, that $1.4M be applied to trails and $600,000. to the Parks Program; of which only SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 21 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. $250,000. would go forward in 2013. He suggested that an allocation of $250,000. could be made from the Gas Transportation surplus to trails, with staff being directed to report back with a multi-year plan as to how to recoup the remaining $350,000. originally identified for community trails. He noted that under his proposal, $820,000. of the remaining LEAF funds would continue to be applied toward the Emerald Ash Borer (EAB). Mr. Chapman suggested that the proposed allocation of $250,000. to community trails be funded through the Federal Gas Tax Reserve as opposed to the Gas Transportation surplus. He stated that staff could report back by mid-year, once final results have been received on the projected surplus and how this might be applied to fund community trails in the future. Councillor Galloway-Sealock suggested that of the $600,000. identified for parks, be allocated equally between Victoria Park, McLennan Park and the Huron Natural Area. She agreed with the proposal that staff should report back with information as to how the funding could be restored to community trails over a five-year period. Councillor Fernandes suggested the following allocations for the remaining LEAF funding: $320,000. to the EAB in 2013; $600,000. for Parks; and, $400,000. towards community trails along with a transfer of $100,000. from the Federal Gas Tax Reserve. She also proposed that the remaining $1M in the LEAF account could be applied to the City’s debt. Councillor Singh proposed to allocate the funds remaining in the LEAF account as follows: $500,000. to debt; $700,000. to EAB; $1.35M to community trails; and $250,000. to Parks along with a transfer of $250,000. from the Gas Utility. Councillor B. Ioanndis commented that he could not support the notion of using remaining LEAF funds toward the debt. In respect to using $600,000. for major parks, he expressed a preference, given significant investment in larger parks already, to utilize those funds to support smaller parks to encourage neighbourhood recreational activities and achieve more value for the dollars spent. Mr. D. Ritz advised that approximately $450,000. in 2013 is proposed to fund general park development. He noted that the budget to address a deficit in neighbourhood parks has slowly been increasing over the past number of years and is now at a sustainable level. In respect to the Huron Natural Area, $2.9M has been identified over a 10 year program to bring to fruition the Master Plan for that park, being essentially $300,000. annually required to complete the development. Councillor Ioannidis questioned if Councillor Galloway-Sealock would accept allocating the funds to the Huron Natural Area as part of her proposal. Councillor K. Galloway- Sealock commented that while she agrees funding for the Huron Natural Area is important, the other major parks are also of importance to the community and she preferred to keep with the original intent to apply the $600,000. to the major parks so they all have some benefit. Councillor B. Ioannidis stated that it would be his preference to allocate $200,000. of the $600,000. toward other parks and $400,000. to the Huron Natural Area. Mayor C. Zehr stated that of all proposals he believed that of Councillor Galloway-Sealock to be the best. He suggested that the $820,000. for the EAB be left in total for the five years; trails be changed to $1.4M; $600,000. be included for parks with a report to come back on how it will be allocated, and proviso be made that $600,000. to make up trails to $2M will come back in a report as to funding from gas tax and/or gas reserves to move the $600,000. forward. In regard to using a portion of the funds toward debt reduction, he stated that this would not be in keeping with the principle of LEAF in that it would have nothing to do with environmental initiatives; and would serve to undermine the Trails Master Plan over the next five years, with a net effect of only $10,000. to the tax supported operating budget which overall, is immaterial. Mayor Zehr suggested that Councillor Galloway-Sealock’s proposal best captures the intent and keeps faith with the principles of LEAF. Councillor F. Etherington expressed support for Councillor Galloway-Sealock’s proposal and notwithstanding he shares the concerns raised by Councillor Singh concerning debt. He commented that he was prepared to support the proposed $600,000. for major parks, noting that it is not about who’s Ward the parks reside in as they are enjoyed by the entire City. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 22 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor J. Gazzola stated that his main concern relates to repayment of debt, suggesting that the trails Master Plan sets out long-term initiatives to be addressed over time. He expressed a preference to allocate $320,000. toward the EAB; $400,000. toward parks, noting that the parks plan over the 10 year program has a shortfall of $580,000.; $100,000. toward trails, noting that with the capital allocation of $378,000. this will provide overall an extra $178,000. beyond what the plan calls for at $700,000.; in 2014, allocate $400,000. from the Federal Gas Tax Reserve which would give another $781,000, covering the first two years of the program and then see how much of an impact this has had and revisit over the next eight to nine years. Councillor Gazzola reiterated previous comments concerning funding for potential purchase of Hidden Valley lands and that he was satisfied to set this aside given indication that this would be pursued when the timing is right. He then expressed an interest to use the balance of $2M to pay down the debt in 2013, suggesting it sends a message that the City is trying to get back on track in terms of debt. Councillor Gazzola referred to the concerns raised that this would not be in keeping with the principles of LEAF, suggesting that given the monies originally came from EDIF it would be similar to putting the funds back into EDIF albeit to the debt; and therefore, it is connected. Councillor D. Glenn-Graham expressed preference to allocate $1.4M to trails as all have said this is a priority for the community; $600,000. to parks as they are under-funded; $320,000. to the EAB to address some replacement of trees; and $500,000. toward debt reduction to signal that Council has heard the concerns of its citizens. Councillor P. Singh commented that it would appear there is a common thread in respect to a desire to invest in trails, parks and the EAB, and some have a desire to address debt reduction. He suggested that a motion be voted on separately to deal with the notion of debt reduction so it can be removed from the equation and if approved, the balance of funding then be addressed. In this regard, Councillor Singh advised that he wished to change his preference to just introduce a motion to provide that $500,000. of the LEAF funds be allocated toward debt reduction. Councillor P. Singh assumed the Chair at this time to allow Councillor S. Davey opportunity to ask questions and comment. Councillor Davey questioned if there was an opportunity at this time to pursue a trails sponsorship revenue stream with the private sector. Mr. M. May advised that staff do not anticipate returning with a report on development of a Corporate Sponsorship Program until following the 2013 summer break. Councillor Davey commented that when the multi-trails plan was approved there was no expectation that all would be done right away, but rather addressed year to year. He noted that Kiwanis Park was not included in the list of major parks and given the shortfall relative to the Kiwanis Club, he requested that Kiwanis Park be included in the allocation of the proposed $600,000. to major parks. Councillor Galloway-Sealock accepted Councillor Davey’s suggestion as friendly to her proposal. Councillor Davey commented that while he is supportive of debt reduction he was cognizant of the comments having been made and was leaning toward support of Councillor Galloway-Sealock’s proposal. Councillor S. Davey resumed the Chair at this time. Councillor Z. Janecki expressed support for a portion of the funding being used for debt reduction, noting a need to eliminate the debt. He then requested clarification of the amounts proposed by Councillor Vrbanovic as the Chair has indicated he would return to Councillor Vrbanovic for a formal motion. Councillor B. Vrbanovic advised that in light of the discussions that have taken place, he was supportive of Councillor Galloway-Sealock’s proposal and would defer making a motion to her. A motion by Councillor K. Galloway-Sealock was brought forward for consideration to allocate remaining LEAF funds as follows: $820,000. to deal with the EAB; $1.4M for trails, with staff to SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 23 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. report on funding mechanisms for an additional $600,000. in future years; and $600,000. toward major parks, being: McLennan Park, Kiwanis Park, Victoria Park and Huron Natural Area. Councillor Galloway-Sealock commented that while she does not disagree with addressing debt reduction, it was her view that this is not the appropriate venue to use given the principles of LEAF. Councillor B. Vrbanovic spoke of the importance of continuing to put focus on trail development, urging support for the proposed allocation with a report to return on an additional $600,000. in future years. In regard to debt reduction, he spoke against using LEAF funds for this purpose given the program is recognized as a leading step forward in terms of a pro-active approach to the environment and while not as successful as desired, it was his opinion allocation of the remaining funds should stay true to the principles of LEAF. Councillor Vrbanovic referred to comments concerning EDIF, noting that there is a payback scheme for EDIF that has been conveyed to the community numerous times and in budget discussions. He suggested that if $500,000. is taken out in its final year it would jeopardize critical investments and be short sighted at a time when interest rates for borrowing are at an all-time low. Councillor Y. Fernandes viewed the suggestion of allocating $500,000. toward debt reduction as a positive step, suggesting that it would send a message to residents that Council recognizes the need to address debt. She stated that she would continue to support increased funding for parks and trails, as well as the EAB, expressing the view that there is still opportunity to achieve a revenue stream within the logging industry in respect to removal of trees affected by the EAB and opportunity for development of partnerships to effect replanting of trees; but, would also like to see a portion of the funds go toward debt reduction. Councillor K. Galloway-Sealock suggested that given there is support for the majority of what she has proposed with the exception of the allocation toward the EAB, that the EAB allocation be voted on separately and those who have an interest could propose amendments. Councillor P. Singh advised that he would like to propose that the funding allocations be reduced by $100,000. for the EAB; $100,000. for trails; and $200,000. for parks; to provide for a remainder of $400,000. to be used toward debt reduction. He suggested that this will provide opportunity to limit the debt impact in 2013. Councillor B. Ioannidis provided comparison of the City’s debt to household debt, suggesting that any household would be pleased to have similar numbers. Accordingly, he could not support allocation of funding toward debt reduction, in that, the remaining funds could go a long way toward improving trails and parks to the benefit of the community. Councillor Gazzola maintained preference for his proposal to provide $320,000. toward the EAB; $100,000. toward trails plus $400,000. in 2014 to come from the Federal Gas Tax Reserve to provide for the first two years and then move forward; $400,000. toward parks; and the balance of $2M toward debt reduction. Councillor D. Glenn-Graham acknowledged the vision of LEAF as established; however, there has been change in terms of economic slowdown since that time and a recent survey has illustrated a concern regarding ongoing tax increases. He pointed out that his proposal allows 80% to be allocated toward the visionary goal while providing for 20% reduction in debt and reiterated his preference to reduce the amount allocated to the EAB to $320,000. and provide $500,000. toward debt reduction. Mayor C. Zehr expressed concerns in not keeping faith with the commitment made to the environment in establishing LEAF. He added that if there is desire to reduce the debt then collectively Council should find a different means to do so rather than break commitment with the principles of LEAF. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 24 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor F. Etherington expressed support for the motion as proposed, commenting that it meets some of the community’s desire for trails and parks development, and allows Council to address the EAB. He noted regret for not being able to totally support Compass Kitchener’s recommendations with respect to LEAF and expressed appreciation for the work undertaken by that Committee. Councillor K. Galloway-Sealock’s motion was then voted on in separate parts by recorded votes, as follows: “That the funding remaining within the Local Environmental Action Fund (LEAF) account be allocated as follows: $1,400,000. for trails, with staff to report on funding mechanisms for an additional $600,000. in future years In favour : Mayor C. Zehr and Councillors D. Glenn-Graham, Y. Fernandes, K. Galloway-Sealock, B. Vrbanovic, F. Etherington and S. Davey. Contra : Councillors J. Gazzola, B. Ionannidis, Z. Janecki and P. Singh Motion Carried $600,000. toward major parks, being: McLennan Park, Kiwanis Park, Victoria Park and Huron Natural Area In favour : Mayor C. Zehr and Councillors D. Glenn-Graham, Y. Fernandes, K. Galloway-Sealock, B. Vrbanovic, F. Etherington and S. Davey. Contra : Councillors J. Gazzola, B. Ionannidis, Z. Janecki and P. Singh Motion Carried $820,000. to deal with Emerald Ash Borer In favour : Mayor C. Zehr and Councillors B. Ioannidis, K. Galloway-Sealock, and B. Vrbanovic Contra: Councillors J. Gazzola, D. Glenn-Graham, Z. Janecki, Y. Fernandes, F. Etherington, P. Singh and S. Davey Motion Lost A subsequent motion was then brought forward for consideration by Councillor P. Singh to provide that $320,000. be allocated to deal with the EAB and $500,000. be allocated toward reducing debt. Carried Councillor P. Singh’s motion was voted on by recorded vote and , with Councillors J. Gazzola, D. Glenn-Graham, Z. Janecki, Y. Fernandes, F. Etherington, P. Singh and S. Davey voting in favour; and Mayor C. Zehr and Councillors B. Ioannidis, K. Galloway-Sealock and B. Vrbanovic voting in opposition. On motion by Councillor K. Galloway-Sealock - it was resolved: “That the funding remaining within the Local Environmental Action Fund (LEAF) account be allocated as follows: $320,000. to deal with Emerald Ash Borer; $1,400,000. for trails, with staff to report on funding mechanisms for an additional $600,000. in future years; SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 25 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. $600,000. toward major parks, being: McLennan Park, Kiwanis Park, Victoria Park and Huron Natural Area; and, $500,000. to the 15 year debenture issue in 2013.” This meeting temporarily recessed at 4:07 p.m. and reconvened at 4:15 p.m. Chaired by Councillor S. Davey with all members present. BD08 - Deferred / Referred Grant Issues and PR09 - Limit Grant funding Increase to 1% in 2013 A motion by Councillor B. Ioannidis was brought forward for consideration to approve the following: annual allocation to the Community Environmental Initiative Grant (CEIG) program be permanently reduced from $10,000. to $5,000.; an allocation of $147,790. in 2013 be made to the Tier 2 Community Grants; and, an operating grant in the amount of $56,000. in 2013 be made to the Creative Enterprise Initiative (CEI). Mr. D. Chapman clarified that the three issues staff is requesting direction for relate to: a previous motion by Councillor K. Galloway-Sealock to permanently reduce the annual allocation to the CEIG program from $10,000. to $5,000., which was deferred to this date; the amount to be allocated for Tier 2 Grants, the total available amount of which has since been reduced by $3,000. in accordance with Council’s decision to allocate the $3,000. to the tri- Pride Community Association Inc.; and in regard to CEI, he advised that there is two parts to their funding, being: the $1. per capita for arts groups and the operating grant under consideration at this time which is to support CEI’s administration. Councillor Galloway-Sealock spoke in support of her proposal to reduce the annual allocation for the CEIG program as referred to this date, noting that a significant amount of money had built up in that budget account. Accordingly, she had difficulty in maintaining the level of grant funding to CEIG, given that it has not disbursed the full amount of those funds over the last several years. Councillor F. Etherington questioned if there is an obligation to approve the $56,000. allocation proposed to the CEI. Mr. J. Willmer advised that indication has been previously given that the allocation would be ongoing; however, there is no contractual agreement and therefore, Council is not obligated to approve the allocation. Councillor Etherington commented that he would like to look at reducing and/or not providing the allocation to the CEI, raising concerns that the organization has not met its fundraising goals in private industry donations, nor demonstrated they can attract high tech organizations. He added that there has been little evidence given of meaningful support to local, smaller arts / culture groups, suggesting that CEI is taking away donations that would otherwise go directly to local theatre groups and another means should be found to support them directly. He expressed the view that the allocation will only be used to support internal operations of CEI, and he considered this to be a failed experiment such that until it is shown they can meet expectations support to this group should be reduced. A motion to amend was brought forward for consideration by Councillor F. Etherington to reduce the operating grant in 2013 to the CEI from $56,000. to $25,000. Mr. M. May pointed out that PR09 (Limit Grant funding Increase to 1% in 2013) relative to Tier 2 Grants should also be considered at this time and if the potential reduction is accepted, the amount identified on Final-61 should be reduced by that amount. Councillor Y. Fernandes raised concerns with the proposed reduction in annual allocation to the CEIG program, suggesting it leaves little opportunity for support of environmental initiatives, particularly now that LEAF has been discontinued. She suggested that with the removal of LEAF there will be more up-take on the $10,000. grant funding. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 26 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor J. Gazzola expressed support for Councillor Etherington’s proposed reduction in operating grant to the CEI and advised he would like to see the difference in funding go to the Tier 2 Grants for community groups. He expressed the view that CEI has been given a fair opportunity but Council is not seeing the results expected. He suggested that the proposed grant still provides opportunity for the group to carry on but there is need to prove themselves further. Councillor Etherington agreed to accept Councillor Gazzola’s suggestion to add the difference in funding to the Tier 2 Grants as a friendly amendment. Councillor J. Gazzola further commented that he agreed that the $10,000. allocation to the CEIG program should remain due to the disbanding of LEAF. Mayor C. Zehr expressed support for the reduced allocation to the CEIG program and advised he would not support the proposed amendment to add funding to the Tier 2 Grants. He referred to PR09, noting that presumably those who would vote in favour of adding the $31,000. difference from CEI to the Tier 2 Grants would then not vote in favour of the proposed savings to be achieved under PR09. Mayor Zehr spoke against further reduction in grants, noting that most organizations are small operations within the community which would be placed in greater jeopardy than any positive net effect of applying the $19,000. to the base levy. In regard to CEI, he suggested that the initial targets were set up for failure, being too ambitious for a one year period. He stated that this year there is a greater climate for success and suggested that funding not be reduced at this time, but allow this year to be one of accountability for CEI to show more results and that they can take this initiative in the desired direction. He added that it is not just the business industry that has an interest, citing an example of an individual who has invested significantly and challenged others to do so as well. He noted that regardless of the outcome of the vote this date, CEI should be invited back to report to Council in September / October of this year to discuss activities of the group outside the pressure of budget deliberations. Councillor Z. Janecki spoke in support of retaining the original $10,000. allocation for the CEIG program and while he would like to see no funding to CEI, he would support the proposed reduction with the difference to go to the Tier 2 Grants. Councillor Janecki declared a pecuniary interest with respect to the Tier 2 Grants proposed relative to the Kitchener-Waterloo Community Orchestra Association as he is a member of the Board of Directors. Subsequently, Mr. M. May advised that the proposed reduction option relates to Tier 2 Grants and as Councillor Janecki’s affiliation with the stated organization actually falls under Tier 1 Grants there is no pecuniary interest in this instance to be declared. Councillor D. Glenn-Graham spoke in opposition to reducing the annual allocation to the CEIG program given the disbanding of LEAF and overall it equates to a small amount. He supported the amount recommended for Tier 2 Grants and maintaining the $56,000. operating grant to CEI given the three year commitment, which can be revisited if expectations are not met. He added that he would not support limiting Tier 2 Grants to 1% as proposed in PR09. Councillor B. Vrbanovic spoke in support of maintaining the $10,000. allocation to the CEIG program; no further cuts to the Tier 2 Grants; and honouring the three year commitment to CEI pending further review. Councillor S. Davey advised that as no one had brought forward a motion to reduce the increase for grant funding from 1.7% to 1%, that this option as outlined in PR09 was now considered off the table. Councillor B. Ioannidis’ motion was then voted on in three separate parts by recorded votes, as follows: that an annual allocation to the Community Environmental Initiative Grant (CEIG program be permanently reduced from $10,000. to $5,000. In favour : Mayor C. Zehr and Councillors B. Ioannidis, K. Galloway-Sealock, F. Etherington, P. Singh and S. Davey SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 27 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Contra : Councillors J. Gazzola, D. Glenn-Graham, Z. Janecki, Y. Fernandes and B. Vrbanovic Motion Carried A subsequent motion by Councillor Y. Fernandes to amend the above motion to provide that $10,000. be allocated to the CEIG program was ruled out of order as it is essentially a rejection of the original motion. that an allocation of $147,790. in 2013 be approved to the Tier 2 Community Grants Carried Unanimously that an operating grant in the amount of $56,000. in 2013 be approved to the Creative Enterprise Initiative (CEI) A motion by Councillor F. Etherington to amend the above motion to provide that the operating grant to the Creative Enterprise Initiative in 2013 be reduced from $56,000. to $25,000. and the balance of funds be added to the Tier 2 Grants, was voted on by Lost recorded vote and , with Councillors F. Etherington, J. Gazzola, Y. Fernandes and Z. Janecki voting in favour; and Mayor C. Zehr and Councillors B. Vrbanovic, B. Ioannidis, D. Glenn-Graham, K. Galloway-Sealock, P. Singh and S. Davey voting in opposition. The original motion was then voted on by recorded vote as follows: In favour : Mayor C. Zehr and Councillors D. Glenn-Graham, B. Ioannidis, K. Galloway-Sealock, B. Vrbanovic, P. Singh and S. Davey Contra : Councillors J. Gazzola, Z. Janecki, Y. Fernandes and F. Etherington Motion Carried On motion by Councillor B. Ioannidis - it was resolved: “That an annual allocation to the Community Environmental Initiative Grant (CEIG program be permanently reduced from $10,000. to $5,000.; and, That an allocation of $147,790. in 2013 be approved to the Tier 2 Community Grants; and further, That an operating grant in the amount of $56,000. in 2013 be approved to the Creative Enterprise Initiative (CEI).” Mayor C. Zehr referred to BD07 (Base Budget Adjustments to Accomplish 3% Reduction), noting that this is in response to Council’s request for information as to how staff had reduced the budget estimate target of 5.87% by 3% to arrive at 2.87% prior to Council’s consideration of the budget. He spoke to a minor point included in the 1.03% at the bottom of Final-59 and in turn, in the 0.39% at the top of Final-60, which has to do with the employee recognition program. He stated that he is in agreement with the proposal which is due to come forward in a report in the next two weeks and he wanted Council to be aware of the matter. Mr. J. Willmer explained that the 1.03% includes efficiency reductions in general and some of which is broken out in detail on the subsequent page, equating to $390,000. He stated that a report is to come forward in the near term on the long service employee recognition program that will primarily seek to make the program more relevant in today’s terms of recognizing long term employees; and as a by-product, will serve to reduce the program budget from approximately $24,000. to $10,000. to achieve an approximate $13,000. efficiency which has been included in the 1.03%. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 28 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. 1% Potential Tax Supported Reductions and Related Issue Papers PR05 - Reduce Fire Department Staff Through Attrition Mayor Zehr thanked the Kitchener Professional Fire Fighter Association (KPFFA) for not taking the same stance as their colleagues have in Toronto’s budget discussions, pointing out that KPFFA while strongly presenting their position on this potential reduction have done so in a respectful and thoughtful manner. Mayor Zehr reiterated comments he had made in December concerning a day of reckoning in respect to budgets of emergency services due to unsustainable increases that are not in sync with today’s economy, other settlements in other Departments as well as other labour settlements outside the municipal realm. He commented that while he understood how it was arrived at, he did not agree with it, noting that it has to do with the comparator system used. He stated that it is not the fault of KPFFA and individual Fire Fighters as they are doing what they would do in any unionized environment which is to obtain the best for their members. He stated that change is needed at the Provincial level; both with the Ontario Provincial Fire Fighters Association to take the lead in realistic negotiations and at Queen’s Park in dealing with the current arbitration system and the criteria used. Mayor Zehr advised that today a message needs to be sent through the system and in this regard, he was prepared to support the proposed reduction. A motion was brought forward by Mayor C. Zehr to reduce the Fire Services 2013 Operating budget by $480,000., as outlined in PR05 (Reduce Fire Department Staff Through Attrition). Mayor Zehr stated that while not likely to be a popular decision, he believed the risk level to be acceptable, pointing out that no lay-offs are occurring; but rather, reductions will be achieved through attrition over the next four retirements. He acknowledged that the Fire Chief is not supportive of the potential reduction. He stated that while he did not like to do so, it was his opinion it is necessary from the standpoint of indicating to the system that current actions are not sustainable and change is needed which he hoped Provincial organizations and governments will take note. Mayor Zehr noted calculations, that demonstrate a stark difference between what a Fire Fighter will make at the end of 30 years in comparison to a CUPE employee who has the same basic starting salary; and, while not diminishing the value of Fire Fighters, it was made clear to him the potential for municipalities to become bankrupt and/or tax rates to rise to an unacceptable level and he wants to avoid that day of reckoning. He stated that while he believes the proposed reduction to be an acceptable risk for 2013, he did not envision making such reductions year after year and suggested that municipalities need to be part of discussions with senior governments for the purpose of advocating change. Councillor B. Ioannidis indicated that he does not support the reduction in Fire Services operating costs, stating that the message is being sent that the City is willing to sacrifice safety by decreasing emergency services. He agreed that change should take place at a higher level without the City reducing services that increase public risk. In response to questions, Mr. M. May acknowledged that Fire Chief Beckett clarified during the Operating Budget presentations that he was not in support of the proposed reduction. He stated, however, that if Council is supportive of controlling costs within Fire Services, the Senior Leadership Team (SLT) has evaluated the option of operating cost reduction through scheduled retirement and believe it is viable. Councillor Y. Fernandes inquired if the two staff members from Fire Prevention who retired in 2012 could be attributed towards the reduction in FTE’s. Fire Chief Beckett responded that the proposed cuts are designed around the Fire Suppression component and may be attributed to the reduction, but this cannot be confirmed at this time. In response to further questions, Mr. May confirmed that should costs savings be achieved through the proposed Fire Insurance Recoveries and with the reduction of four FTE’s, the Fire Services budget would only increase by approximately $100,000., or 0.3% in 2013. Councillor F. Etherington stated that municipal councils have consistently asked for assistance from the Province during fire service and police arbitration processes and remain unassisted. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 29 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. He added that in his opinion, Kitchener and other municipalities have reached the point of making unpalatable, but necessary decisions, to regulate out of control costs attained by arbitration. Fire Chief Beckett responded to questions related to the impact that the reduction of staff would have on community servicing by referring to Issue Paper OP-02, which was addressed during the 2012 Operating Budget presentation. He advised that at that time, Council had examined reducing the minimum staffing levels from 37 to 35. He stated it was anticipated that the fire complement would likely drop below 35 staff only 20% of the time, noting that during 2012 staffing was below 35, 14% of the time. He elaborated that when the staff reduction occurred an aerial truck was reallocated from Station 4 to Station 6 resulting in a 43 second increase in response time; largely attributed to the large manoeuvrability of the aerial truck. He indicated that call reliability at Station 4 dropped 15% with the overall result having an impact on the 15 personnel in 12 minutes response time, depending on call location. Chief Beckett stated that the reduction would equate to one reduced position on each platoon equating to 46 staff on each. He noted that this would likely lead to operating below 37 staff and having to use the aerial truck more often, which requires on-site operational changes. Councillor B. Vrbanovic inquired if the Fire Department had undertaken other methods to reduce operating costs. Fire Chief Becket responded that measures were implemented to significantly reduce overtime over the past three years, stating that the overtime budget in 2010 was $361,000. with an actual cost of $866,000., demonstrating a deficit of $504,000. Similarly, the overtime budget in 2011 was $372,000., and actual costs were $545,000. However, in 2012 the budgeted amount was $226,000., with the actual overtime expenditures being $192,700.; thereby resulting in a surplus of $32,000. He added that the surplus demonstrates a willingness to reign in operating costs. He attributed the reduction in overtime to an aggressive attendance management program; extensive effort from staff to improve attendance; as well as, Council’s decision in 2012 to lower minimum staffing, which had an impact of approximately $100,000. Questions were raised regarding how the proposed 3% increase to Fire Services compared to other City Departments. Mr. Chapman responded that Departmental increases are outlined on the Summary of Budget Changes by Division schedules on pages Final 56-58, adding that Fire Services accounts for approximately one-third of the tax levy. He added that Fire Services was identified as an area of potential reduction, upon Council’s request. Councillor Vrbanovic thanked staff for fulfilling the request, noting that the magnitude of the Fire Services’ budget makes it an area for potential change rather than the percentage increase. He then indicated he would not be in support of the reduction as he finds it unconscionable. He agreed with the sentiments expressed by the Mayor related to overall cost issues; however, he feels Kitchener is a growing City and minimizing services is a greater issue. He encouraged members and staff to examine the way business is conducted and noted that strategies detailed in the upcoming Fire Master Plan may help; as well as, maintaining pressure on the Province to change the arbitration processes to manage costs without reducing the quality of fire service. Councillor P. Singh commented that the proposed reduction is the least impactful way to manage unsustainable wage increases. He stated that he believes taxpayers want fair negotiation processes, and pointed out that other municipalities have faced bankruptcy when unable to manage compensation. He indicated that it is understandable to consider reduction to the budgetary item attributed to one-third of the tax levy and would be in support the reduction. Councillor J. Gazzola commented that he reluctantly supports the reduction and encouraged examination of current practices to further manage costs. He suggested that outsourcing fire suppression may be an option and encouraged members to keep an open-mind when considering services. Councillor Z. Janecki indicated he would support the proposed reduction, but pointed out that the reduction is proposed through scheduled retirement. He noted that at this time, no retirements have been scheduled and he feels that the positions will continue in 2013. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 30 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor K. Galloway-Sealock commented that although she agrees a message needs to be sent to the Province that the arbitration processes need to be changed; she is not in support of the proposed reduction. She expressed concern related to reduced fire services and pointed out that the role of Fire Services is not limited to fighting fires. She pointed out that the Committee had just agreed to allocate $1.4M to trails, and yet Fire Services may not be available to attend to an emergency on those trails. Councillor S. Davey spoke in support of the motion, commenting that he is upset that municipal councils are placed in the position of having to reduce fire services due to unsustainable wage increases. He acknowledged that KPFFA have been very respectful during this deliberation, and noted that the reduction is not a preferred solution to managing the delta created by arbitration between fire services and other CUPE employees. Carried The following motion was voted on by a recorded vote and , with Mayor C. Zehr and Councillors P. Singh, J. Gazzola, S. Davey, D. Glenn-Graham, F. Etherington, Z. Janecki and Y. Fernandes voting in favour; and Councillors B. Ioannidis, K. Galloway-Sealock and B. Vrbanovic voting in opposition. On motion by Mayor C. Zehr - it was resolved: “That the 2013 Operating budget for Fire Services be reduced by $480,000., as outlined in Potential Reduction paper PR05 (Reduce Fire Department Staff Through Attrition).” PR01, PR02, PR03, PR07 - Various A motion by Councillor J. Gazzola was brought forward to consider the following reduction items: consolidate OnPoint Tools (PR01); enhanced sick leave claims management (PR02); eliminate infra-red asphalt program (PR03); and, adjust utility billing postage charges (PR07). Councillor B. Vrbanovic requested clarification on the proposed elimination of the infra-red asphalt program as this initiative would save maintenance costs. Mr. D. Locke responded that while a cost analysis has not been completed, savings would be realized through limited damage to structures during maintenance. Mr. J. Witmer clarified that although City has had the equipment for over 10 years; however, staffing levels are such that there has been no physical ability to undertake this program during the past two years. Councillor B. Ioannidis left the meeting at this time. CarriedUnanimously The following motion was voted on and on a recorded vote by all members present. On motion by Councillor J. Gazzola - it was resolved: “That the following reductions be approved: Consolidate Onpoint Tools for a savings of $10,175. (PR01); Enhanced Sick Leave Claims Management for a savings of $50,000. (PR02); Eliminate Infra-Red Asphalt Program for a savings of $128,500. (PR03); and, Adjust Utility Billing Postage Charges for a savings of $60,000. (PR07).” PR06 - Implement Fire Insurance Recoveries CarriedUnanimously The following motion was voted on and on a recorded vote by all members present. On motion by Councillor B. Vrbanovic - it was resolved: SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 31 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. “That implementation of fire insurance recoveries be approved for a savings of $200,000., as outlined in Potential Reduction paper PR06.” PR10 – Reduce Council Technology & Home Office Budget Councillor B. Ioannidis re-entered the meeting at this time. Councillor F. Etherington brought forward the following motion for consideration, which proposes a further reduction to the Council technology and home office budget: “WHEREAS the Mayor and each Councillor are currently allowed $5,300. a year for home-office technology expenses (operating and capital); and, WHEREAS Council’s home-office technology budget experienced an $18,214. surplus in 2011 and a similar surplus in 2012; and further, WHEREAS the general costs of technology are decreasing; THEREFORE BE IT RESOLVED That the currently allowance of $3,675. a year for a Councillor’s home-office operating expenses be reduced to $3,000. In addition, the annual capital allowance of $1,625. be reduced to $1,050 for the Mayor and each Councillor. This means that the yearly $5,300. currently allowed to the Mayor and members of Council is reduced by $1,250. resulting in a total annual savings of $13,750.” Councillor Etherington advised that the surplus in 2011 and 2012 of approximately $18,214 per year indicates that the current budgeted amount is not warranted. He explained that the expenses are not justifiable, and Council should do their part by trimming expenditures. Councillor D. Glenn-Graham commented that he would support the reduction in the home- office technology budget. He noted that although it is a symbolic amount, Council needs to be sensitive to the economic position of its residents and recognize reductions are required. A motion by Councillor Vrbanovic was brought forward to amend Councillor Etherington’s motion to reduce the home office and technology annual allotment to $5000., which was the amount originally set in 2000 without the inflationary increases; thereby resulting in a total reduction of $3600. per member of Council. Councillor B. Ioannidis advised that he would support the amendment put forth by Councillor Vrbanovic as he pledged to be accessible to the residents of Kitchener and relies on technology to do so. Councillor P. Singh commented that he agrees with the sentiment of the motion, but cannot support it as the surplus in the home-office technology budget demonstrates restraint by Council. He noted that the unused allocation offsets the capital closeouts and does not place the home-office technology account in an accumulating surplus position. Mayor C. Zehr commented that he cannot support the full reduction of $13,750. per annum as the amount required can fluctuate yearly depending on technological needs. Councillor Z. Janecki commented that the home-office and technology amount was set at the beginning of the term of Council and should remain constant through the duration. He added that technology helps to ensure that citizens will receive a timely response to their concerns. Councillor Vrbanovic’s amending motion to reduce the home-office and technology budget to Lost $5000. per member of Council was voted on by a recorded vote and , with Mayor C. Zehr and Councillors B. Vrbanovic, B. Ioannidis, J. Gazzola, and P. Singh voting in favour; and Councillors Y. Fernandes, Z. Janecki, D. Glenn-Graham, S. Davey, F. Etherington and K. Galloway-Sealock voting in opposition. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 32 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Councillor F. Etherington modified his original motion to reduce the annual home office and technology budget by only $11,000. Mayor Zehr indicated that while he agreed with the comments justifying the proposed reduction, he could not agree with the amount as it would be restrictive given technological advancements and suggested a reduction of $6,000. Councillor Etherington accepted Mayor Zehr’s suggestion as friendly and agreed to modify his motion to reduce the home-office and technology budget by $6,000. Carried, The following motion was voted on by a recorded vote and with Mayor C. Zehr and Councillors F. Etherington, Y. Fernandes, J. Gazzola, P. Singh, D. Glenn-Graham, and S. Davey voting in favour; and Councillors B. Ioannidis, Z. Janecki, K. Galloway-Sealock and B. Vrbanovic voting in opposition. On motion by Councillor F. Etherington – it was resolved: “That the Mayor and Councillor’s Home Office and Technology budget be reduced by $6,000. per year.” PR08 - Infrastructure Services - Remove Downtown Bulk Garbage Bins (Phase out option) Councillor B. Ioannidis declared a pecuniary interest and did not participate in discussion or voting regarding this matter as his family owns property in the subject area. Mr. D. Chapman advised that the proposed phase-in of the removal of the bulk garbage bins in the Downtown would result in a savings of $15,000. in 2013 and $29,000. in future years. A motion was brought forward by Councillor D. Glenn-Graham to phase-in the removal of the six Downtown bulk garbage bins. Councillor J. Gazzola indicated he would not support the phased-in removal of the bins as this would represent a subsidy for garbage disposal in Downtown. Mr. S. Berry advised that there were 15 bins in the downtown core, of which nine were removed in 2003. He stated that the remaining six bins are the subject of an initiative by the Downtown Kitchener Business Improvement Area to transfer responsibility of the bulk garbage bins to the businesses / residents that use them. Councillor F. Etherington commented that the City has invested in the vitality and enhancement of the Downtown and should protect its investment. He pointed out that the concerns surrounding the removal of these particular bulk garbage bins differs from commercial areas outside of the Downtown core; given the numerous festivals hosted by the City. He then expressed support of the phase-in option for the removal of the bins. A motion was brought forward by Councillor J. Gazzola to amend Councillor D. Glenn- Graham’s motion to immediately remove the six bulk garbage bins, resulting in a savings of $29,000. for 2013. Lost Councillor Gazzola’s amending motion was voted on by a recorded vote and , with Councillors Z. Janecki, J. Gazzola and Y. Fernandes voting in favour; and Mayor C. Zehr and Councillors F. Etherington, P. Singh, D. Glenn-Graham, S. Davey, K. Galloway-Sealock and B. Vrbanovic voting in opposition. Councillor B. Ioannidis previously disclosed a pecuniary interest and did not participate in discussion or voting regarding this matter as his family owns property in the subject area. Carried, The following motion was then voted on by a recorded vote and with Mayor C. Zehr and Councillors Z. Janecki, J. Gazzola, Y. Fernandes, F. Etherington, P. Singh, D. Glenn- . Graham, S. Davey, K. Galloway-Sealock and B. Vrbanovic voting in favourCouncillor B. Ioannidis previously disclosed a pecuniary interest and did not participate in discussion or voting regarding this matter as his family owns property in the subject area. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 33 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. On motion by Councillor D. Glenn-Graham - it was resolved: “That the phase-in option for removal of the six bulk garbage bins located downtown be approved for a savings of $15,000. in 2013.” Truck Tender - Fire Fleet - Pumper Trucks Carried The following motion was voted on by a recorded vote and , with Mayor C. Zehr and Councillors F. Etherington, J. Gazzola, B. Ioannidis, Z. Janecki, K. Galloway-Sealock, B. Vrbanovic, P. Singh, D. Glenn-Graham, and S. Davey voting in favour; and Councillor Y. Fernandes voting in opposition. On motion by Mayor C. Zehr - it was resolved: “That Tender T12-001 - Two (2) Triple Combination Fire Pumpers, be awarded to Dependable Emergency Vehicles, Brampton, Ontario, at their tendered price of $1,083,500., plus H.S.T. of $140,855., for a total of $1,224,355.” Leisure Access Subsidy Program A motion by Councillor F. Etherington was brought forward for consideration to increase the allocation to the Leisure Access Card Program from $107,100. to a total of $122,100. in 2013. Councillor Etherington commented that the number of individuals reliant on the Leisure Access Card Program is increasing. He added that the closure of factories such as Maple Leaf Foods places greater responsibility on the municipality to provide access to recreational programs. Mayor C. Zehr inquired as to the historical shortfall experienced by the program. Ms. L. Palubeski responded that the historical shortfall has been as follows: in 2009 the program was $29,000. over-spent; 2010 it was 46,000. over-spent; in 2011 it was $18,000. over-spent, but an additional $11,000. was approved in that year; and, in 2012 the program was $38,000. over its budgetary allotment. Councillor Y. Fernandes inquired if the Safe and Healthy Community Advisory Committee account close-out funds, as detailed in BD20, could be allocated to fund the increase to the Leisure Access Card Program. Mr. D. Chapman responded affirmatively stating, unfortunately such a transfer would only provide relief to this program for one year. Councillor K. Galloway-Sealock commented on the importance of the program to provide access to recreational programs for all citizens in Kitchener. She added that the historical variance demonstrates the likelihood of overspending in 2013; and, she would support the recommendation as it is fiscally prudent to cover anticipated expenditures. Councillor D. Glenn-Graham commented that the community is defined by how people are treated. He indicated support for the motion, noting that the budgetary goal of an inflationary increase of 1.5% has been met, and that the increase to the Leisure Access Card Program would only represent an additional .01%. CarriedUnanimously The following motion was voted on and on a recorded vote. On motion by Councillor F. Etherington - it was resolved: “WHEREAS demand for Kitchener’s Leisure Access Card Program that provides financial subsidies for children, seniors, single mothers and other adults who cannot afford Kitchener’s recreation programs has been steadily increasing in recent years; and, SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 34 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. WHEREAS the program serving low-income and newcomer families experienced a $38,200. shortfall in 2012 after its $107,100. budget was exhausted assisting 1,754 people; and further, WHEREAS financial support from generous private funders like Canadian Tire becomes increasingly precarious in an economy where an estimated 20,000 Kitchener people are unemployed; THEREFORE BE IT RESOLVED that the $107,100. provided for the leisure access subsidy program be increased by $15,000., providing a total of $122,100. to help off-set predicted 2013 costs.” Reduction Item – Compensation Adjustment - Confidential A motion was brought forward by Councillor J. Gazzola to effect a reduction in compensation as considered by Council at the January 14, 2013 in-camera meeting. CarriedUnanimously The following motion was voted on and on a recorded vote. On motion by Councillor J. Gazzola - it was resolved: “That a compensation adjustment in the amount of $130,000., arising from the January 14, 2013 in-camera meeting of Council, be approved.” Additional Items Councillor S. Davey advised that Councillors Y. Fernandes and J. Gazzola wished to bring forward additional recommendations for consideration. Councillor Fernandes inquired about the number of staff members who attend conferences annually from each Department. She suggested that there is an opportunity to audit this practice in order to find possible reductions and requested a report be brought back on this matter. Councillor K. Galloway-Sealock commented on conference costs (BD05), indicating that she does not see any reason to adjust the per diem conference allotment of $64. and would suggest the amount remain as proposed. Councillor Gazzola inquired if staff lay-offs take place during the winter season if there is a minimal amount of snow. He requested that an information report be provided detailing the City’s philosophy regarding lay-offs Mayor C. Zehr indicated that he is in agreement with the request by Councillor Gazzola for an information report on the lay-off philosophy as it is a policy issue. However, he stated that the request for details on conference attendance is an administrative matter and is not a concern of Council. Therefore, he would not support the request of Councillor Fernandes. Councillor B. Vrbanovic agreed with the request by Councillor Gazzola and suggested a perspective on winter operations be included in the report. He further commented that the conference allotment is approved by Council and it is management staff that determines who may participate in professional development; and therefore, he would not support the request for additional information related to conference attendance. Councillor Fernandes clarified the rationale of her request, advising that she is not suggesting Council participate in deciding who should attend conferences. She stated that conferences represent a $300,000. budget item and should be an area examined for potential future reductions. She affirmed that the request is limited to the details as to the number of staff per Department that attend conferences on an annual basis, noting that she is not proposing any reductions at this time. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 35 - CITY OF KITCHENER FCS-13-001 - 2013 FINAL BUDGET DAY (CONT’D) 1. Mr. D. Chapman advised that no tracking is currently undertaken as to the number of staff who attend conferences; however, this could be tabulated for consideration during Council’s 2014 budget deliberations. Councillor Fernandes agreed that staff should undertake tracking the number of staff who attend conferences from each Department in 2013 and report back as part of next year’s Council deliberations process. CarriedUnanimously. The following motion was voted on by a recorded vote and On motion by Councillor J. Gazzola - it was resolved: “That staff be directed to report back with information outlining the City’s philosophy on lay-offs related to servicing and seasonal demands.” Carried The following motion was voted on by a recorded vote and , with Councillors Y. Fernandes, J. Gazzola, D. Glenn-Graham, F. Etherington, P. Singh and S. Davey voting in favour; and, Mayor C. Zehr and Councillors B. Ioannidis, Z. Janecki, K. Galloway-Sealock, and B. Vrbanovic voting in opposition. On motion by Councillor Y. Fernandes - it was resolved: “That staff be directed to report back as part of the 2014 budget deliberation process with information outlining the number of employees per department who attended conferences in 2013.” Gas Works Utility The Committee then dealt with the Gas Utility that was tabled earlier this date. Carried The following motion was voted on by a recorded vote and , with Mayor C. Zehr and Councillors F. Etherington, Y. Fernandes, B. Ioannidis, Z. Janecki, K. Galloway-Sealock, B. Vrbanovic, P. Singh, D. Glenn-Graham and S. Davey voting in favour; and Councillor J. Gazzola voting in opposition. On motion by Councillor K. Galloway-Sealock - it was resolved: “That the 2013 Budget for Gasworks Utility, be approved.” FINAL RECOMMENDATIONS - 2013 BUDGET The Committee agreed to advance its recommendations pertaining to the 2013 Budget, based on decisions made this date, for Council’s consideration at its special Council meeting to be held immediately following this meeting; and, from which the end result is summarized in brief below: a 2013 department operating budget, resulting in a 2013 levy for general purposes of $92,001,221; and, an increase in the 2013 tax rate, excluding tax policy changes, of approximately .32%; and further, a special capital levy of $10,089,636., which results in approximately a 1.07% increase in the 2013 tax rate to be allocated to the Economic Development Investment Fund, be approved with the understanding that this levy represents the tenth year of the 10-year investment program. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 17, 2013 - 36 - CITY OF KITCHENER ADJOURNMENT 2. On motion, this meeting adjourned at 7:24 p.m. D. Livingstone C. Goodeve J. Billett Committee Administrator Committee Administrator Committee Administrator