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HomeMy WebLinkAbout2015-01-05 FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5.2015 CITY OF KITCHENER The Finance and Corporate Services Committee met this date commencing at 9:04 a.m. Present: Councillor S. Davey-Chair Mayor B. Vrbanovic and Councillors F. Etherington, Y. Fernandes, K. Galloway- Sealock, J. Gazzola, B. loannidis,Z. Janecki, D. Schnider and P. Singh. Staff: J. Willmer, Chief Administrative Officer D. Chapman, Deputy CAO, Finance &Corporate Services M. May, Deputy CAO, Community Services D. Tyagi, Deputy CAO, Infrastructure Services R. Regier, Executive Director of Economic Development R. Hagey, Director, Financial Planning M. Seiling, Director, Building A. Pinard, Director, Planning J. Witmer, Director, Operations H. Gross, Director, Engineering W. Malcom, Director, Utilities J. Readman, Director, Transportation Services D. Murray, Director, Technology Innovation &Services K. Kugler, Director, Enterprise N. Gollan, Manager, Stormwater Utility G. Hummel, Manager, Park Planning, Development&Operations C. Bluhm, Manager, Downtown Community Development J.Young, Manager, Special Events P. McCormick, Manager, Parking Operations T. Gerber, Manager, Operations (Utilities) D. Ritz, Supervisor, Design/Development C. Goodeve, Committee Administrator D. Livingstone, Committee Administrator D. Saunderson, Committee Administrator 1. FCS-15-001 -2015 OPERATING BUDGET The Committee considered Finance and Corporate Services Department report FCS-15-001, dated December 15, 2014, concerning the City's 2015 Operating Budget proposing a tax levy increase of 2.25%, together with Operating Budget Issue Papers and Strategic Initiatives Issue Papers. In addition, the Committee was in receipt this date of an additional slide, OP- 42b, entitled "Affordability-Water&Sanitary Bill Comparison". GENERAL OVERVIEW Mr. D. Chapman presented a general overview of the Operating Budget, advising that the budget seeks to balance affordability and sustainability, two themes within the City's Strategic Plan. He indicated that three key issues will be brought forward, including: a proposed tax increase of 2.25% which is below the rate of inflation; eight strategic initiatives to potentially improve selected services with no net budget impact; and, a proposed water and sanitary rate increase of 9.9%which is required to keep utilities viable. Mr. Chapman reviewed the proposed tax rate increase, relative to the Consumer Price Index (CPI) and Municipal Price Index (MPI) over the past ten years, stating that tax increases exclusive of the Economic Development Investment Fund (EDIF), were just below the rate of inflation. He reviewed affordability across Ontario municipalities, advising that Kitchener has one of the lowest tax burdens of large cities and has the lowest total tax burden in the Region of Waterloo at$3,236. He added that if Stormwater fees were included, Kitchener's tax burden would still be lower than that of Cambridge. He referred to water and sanitary affordability and elaborated that over the past ten years, Water/Sanitary bills in each of the local cities have increased substantially; however, Kitchener has the lowest cost and the lowest cumulative increase of all the cities in the Region of Waterloo. He referred to the 2013 Environics survey which showed that residents in the City of Kitchener preferred inflationary increases while maintaining service levels over any other option and summated that the analysis of inflation, comparisons to other municipalities, and citizen attitudes, demonstrates that the proposed Operating Budget is consistent with the strategic directions. FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -2 - CITY OF KITCHENER 1. FCS-15-001 -2015 OPERATING BUDGET(CONT'D) Mr. Chapman addressed the sustainability of the proposed Budget, advising that chronic deficits, which have been consistently identified in recent years, have been fully funded in the 2015 Operating Budget. He further advised of the status of the Tax Stabilization Reserve Fund, which is used to fund any operating deficits within the tax supported budget, was depleted at the end of 2014. He explained that to improve affordability and to keep the tax rate low during recent years, significant funds have been drawn from the Reserve that has not been replenished and noted there will be no opportunity to fund deficits in 2015 from the Tax Stabilization Reserve. He stated that when preparing the 2015 Operating Budget, staff assumed an assessment growth of 1%; whereby the actual assessment growth is 1.51%, meaning that $533,000. additional assessment revenue has not been accounted for as part of the proposed budget. He advised that staff is suggesting three options for consideration of the additional revenue, including: strategic initiatives to enhance services; lower the property tax increase to below 2.25%; or, some combination of the two. He concluded the overview by stating that the proposed Operating Budget meets the approach taken by staff to provide increases for staff compensation and utilities as required, no additional increases for administration materials and contract services, and increases for user fees. In response to questions, Mr. Chapman agreed to provide a BMA Management Consultants Inc. tax comparison for executive homes. At the request of Councillor P. Singh, Mr. Chapman agreed to circulate a link to the Financial Information Report (FIR) and reference performance measurement schedules which shows relevant data for other municipalities. BOARDS Centre in the Square (CITS) Mr. R. Hagey advised that 2015 is the third of the four-year plan approved as part of the 2013 budget which would maintain the City's contribution to CITS at$1.4M. He stated that CITS has experienced deficits in 2013 and 2014, adding the City has funded 50% of the deficit. He indicated the City is undertaking an operational review of CITS and that status quo is recommended until completion of the review, as outlined in Issue Paper Op 01 [Center In the Square (CITS)Operating Budget]. Mr. Bruce Gordon and Ms. Sandra Pender, CITS,were in attendance to respond to questions. Kitchener Public Library (KPL) Ms. S. Lewis, KPL, was in attendance to respond to questions from the Committee regarding the 1.75% increase to the Library's base budget. Ms. Lewis responded to questions regarding the status of the commitment the KPL made to Council in 2014, advising that savings generated from the Central Library project created a surplus of approximately $200,000 which was put in reserve. TAX SUPPORTED OPERATING BUDGET Mr. R. Hagey gave an overview of the Net Expenditure by Department, which remains a consistent annual allocation from 2014. He reviewed the Tax Levy Change Detail and 10-year projection, advising that projected growth for 2015 is 1.51% which is in line with the trend of under 2%. Mr. Hagey advised that the 2014 total City property tax levy of $104M plus additional assessment growth of 1.51% equates to a total 2015 tax levy base of $106M. He noted that a 1% levy increase or decrease amounts to just over $1M in the budget, or an impact of $10.26 annually to the average household. He added that within the 10-year rate projection, the physician recruitment and specialist recruitment allocation of $10,000. ends in 2015, having a net rate impact of-0.01%for 2016. In response to questions, Mr. Hagey agreed to provide a 10-year projection reflecting an assumption for growth at 1% from .75%, subject to discussions with Municipal Property Assessment Corporation (MPAC), and to examine an assumption of 2%for Base Inflation. FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -3 - CITY OF KITCHENER 1. FCS-15-001 -2015 OPERATING BUDGET(CONT'D) OPERATING ISSUE PAPERS In response to questions regarding Issue Paper OP 03 (Full-time Equivalent Staff Additions) and the benefits and salaries associated with each position, Mr. R. Regier agreed to provide specific job classifications for the full-time equivalents prior to Final Budget Day. At the request of Mayor B. Vrbanovic, Mr. J. Young agreed to report back to the Community and Infrastructure Services Committee on the methods Special Events staff can use to identify opportunities for festivals and support for neighbourhoods outside of the Downtown. In response to Councillor J. Gazzola, Mr. Hagey confirmed that 2014 Year End Actuals would be provided prior to Final Budget Day. The Committee recessed at 12:15 p.m. and reconvened at 12:50 p.m., chaired by Councillor S. Davey with all members present except Councillor S. Marsh who was absent this date. STRATEGIC INITIATIVES Mr. Hagey reviewed the Strategic Initiatives, stating that the intentions of the initiatives are: to enhance existing services; provide a new service; implementation of a master plan; or, support audit findings. He advised that the initiatives have not been included in the proposed 2015 Operating Budget, noting that staff has identified eight potential initiatives detailed in Strategic Initiative Issue Papers SI 01 to SI 08. He stated that the initiatives could be funded through additional assessment growth. In response to questions regarding SI 01 (Restoration of the Tax Stabilization Reserve Fund), Mr. Hagey agreed to provide Reserve Schedules that outline revenue and expense activities. Mr. J. Witmer responded to questions regarding SI 02 (Increased Urban Forest Maintenance), advising that the Issue Paper is requesting an additional $100,000. to be added to the base budget for additional temporary labourers to proactively deal with structural pruning and street raising. He stated that in the previous year's budget, staff had requested $250,000., which was not Council approved. He noted that the request outlined in SI 02 is supplementary in nature and there would still be deficiencies in this work even with the budget increase. Mr. Chapman responded to questions regarding SI 03 (E-Participation as a part of Open Government), advising that at Council's Strategy Session on October 28, 2013, it was identified that if Open Government was a Council priority, it would require resourcing to ensure it is done well. He further advised that he could recirculate the materials from that meeting as a follow-up from this discussion. Mr. J. Willmer responded to questions regarding SI 05 (Waterloo Regional Economic Development Corporation), advising that at the August 25, 2014 Council meeting, it was endorsed in principle to establish a new Regional Economic Development Corporation that would fill in gaps identified in the work that was being undertaken by the Canada's Technology Triangle (CTT). He noted that 2015 will be a transition year with the current arrangement with CTT moving to the new Waterloo Region Economic Development Corporation (WREDC); which is anticipated to begin operation in mid-2015 and be fully operational by January 1, 2016. He stated that the new corporation is intended to be a Regional organization that will assist in creating a more coordinated approach to economic development and will be responsible for the management of the new Regional Economic Development Strategic Plan. Upon request, Mr. Willmer agreed provide a summary of the contributions for the other area municipalities and townships to the WREDC / CTT and endeavour to obtain comments in writing from the Region on their position for solely providing any additional funding required for the WREDC. Councillor P. Singh requested additional information, prior to Final Budget Day, on the benefits of the WREDC and whether the Corporation would assist in off-setting costs for economic development for the City. FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -4- CITY OF KITCHENER 1. FCS-15-001 -2015 OPERATING BUDGET(CONT'D) Mr. M. May responded to questions regarding SI 06 (Improve the City's Ability to Engage Volunteers in the Community), stating trends are changing with regard to how people are choosing to volunteer and Kitchener is already seeing a decline in residents no longer wanting to make long-term volunteering commitments. He noted that an additional part-time employee would enhance in the City's ability to engage volunteers and evolve with the current trends to allow more flexibility for people who would like to volunteer their time. Upon request, Mr. May agreed to consult with the Safe and Healthy Community Advisory Committee regarding Issue Paper SI 06 and report back to Council with their feedback regarding this initiative. Mr. Young was in attendance to answer questions regarding SI 07 (Increased Street Level Special Events Programming). He stated that the requested funding was intended to increase special events in 2015, noting one possible event includes an end of day celebration for the Pan Am Games in June 2015. Councillor F. Etherington expressed concerns with increasing the funding for special events in the Downtown Core and requested further information on work currently being undertaken to attract and retain businesses in the Downtown. Mr. May responded to questions regarding SI 08 (Increased Funding for the Leisure Access Card), advising that the five year average for the Leisure Access Program is $148,000. The budget allocation for 2015 is proposed at $161,969., which is $14,000. beyond the five-year average. He indicated that even if the budget allocation is exhausted prior to the end of the year, staff seeks funding from other sources to continue to provide this service to those requiring assistance. At the request of Councillor J. Gazzola, staff agreed to report back on the Leisure Access Card program five-year summary with detailed statistics on the overall usage and cost of the program, as well as the rationale for the program and how it began. The Committee recessed at 2:58 p.m. and reconvened at 3:04 p.m., chaired by Councillor S. Davey with all members present except Councillor S. Marsh. In response to questions regarding snow clearing on pathways connecting to school properties, Mr. Witmer advised that staff have not put forward a further strategic initiative as this issue is more complex than City walkway maintenance. He indicated that staff will need to consult with the school boards and determine whether any capital improvements are required. He further advised that staff are currently investigating this issue and anticipate, reporting back to Council in 2015 with any recommendations. Councillor P. Singh questioned whether, as part of the 2015 Budget, consideration was being given to adding additional resources to the Office of Mayor and Council budget. He noted that the staffing complement did not increase when Council expanded from 6 Councillors to 10 Councillors. He indicated that the item was discussed in a recent Council Strategy Session, but does not appear to be part of the proposed Budget. Mr. Willmer advised that the final report on the Business Plan will be presented at the January 19, 2015 Finance and Corporate Services Committee meeting, at which time Council will have the opportunity to make any final adjustments to the Plan. Mr. Chapman advised that staffing levels in the Office of Mayor and Council was discussed, but to his knowledge it was not confirmed as an Action Item that Council was interested in pursuing at this time. He noted that the Office of Mayor and Council is scheduled for an Internal Audit in the first quarter of 2015 and staffing could potentially be explored as part of that review. ENTERPRISE OPERATING BUDGETS Mr. Hagey presented an overview of the City's Enterprises stating that Golf, Parking and Stormwater are projected to be in a deficit position at the end of 2015. He stated that the 5- year budget models for these enterprises reflect a commitment and plan to return them to a FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -5- CITY OF KITCHENER 1. FCS-15-001 -2015 OPERATING BUDGET(CONT'D) break-even position, noting that it is important that Council affirm this commitment to ensure that these enterprises are viable over the long-term. Mr. Hagey provided a summary for the Golf Enterprise, stating that the budget is expected to remain in deficit through the forecast, and will begin making progress once the existing debt is paid off in 2020. He noted that the Dividend Transfer to the City is a combination of property taxes and income taxes, and the decrease identified in the 2015 Budget is due to the decrease in the Property Tax Assessment values. Upon request, Mr. Chapman agreed to provide the dollar value of the assets held currently by the City's golf courses. Ms. K. Kugler was in attendance to respond to questions regarding the Golf Enterprise. Upon request, Ms. Kugler agreed to follow up with the amount of the original debt that was issued for the golf courses and provide a comparison of Kitchener's golf memberships in comparison to other municipal golf course memberships. Mr. P. McCormick was in attendance to respond to questions regarding the Parking Enterprise. Upon request, Mr. McCormick agreed to further investigate the property tax values for 2014 and 2015 and the reason for the decrease in the project taxes for 2014 in comparison to the actual budget amount. Mr. Hagey presented an overview of the Gas Works Utility, advising that for 2015, staff are not proposing any delivery rate changes. He added the dividend represents the maximum allowable return based on the Ontario Energy Board approved rate structure. He indicated that Gas Supply and Transportation rates are set based on the pass-through costs, noting Gas Supply revenues are anticipated to decrease by$0.03 in 2015. The Committee recessed at 4:21 p.m. and reconvened at 5:35 p.m., chaired by Councillor S. Davey with all members present except Councillor S. Marsh. Mr. Hagey continued his presentation of the Gas Works Utility and acknowledged that the opening balance of the Gas Utility (Transportation) Stabilization fund for 2015 should read $429,000. and not$1,450,000. He noted the Schedule would be adjusted to reflect the correct balances. Councillor Gazzola requested that information be provided regarding the number of tax customers in the City; similar to how those details were identified for Water and Gas customers. Councillor P. Singh left the meeting at this time. Mr. J. Witmer presented the Water / Sanitary rates, which are proposed to increase by 9.9% for 2015. He stated that while the City's population has increased, water consumption is declining. He added that not all costs for the utilities go down with deceased consumption and fixed costs must still be recovered; thereby resulting in rate increases. He advised that rate increases by the Region of Waterloo alone have been more than double the inflation rate annually over the last five years. He added that Regional rate increases represent more than half of the total cost for water and sanitary sewer charges. Councillor J. Gazzola left the meeting at this time. Mr. Witmer indicated that based on the interim financial statements both utilities are projected to have significant operating deficits in 2014, being: $4.3M for Water and $1.M for Sanitary. Additionally, 19% of the City's watermains are identified as being in either poor or very poor condition; and therefore, significant ongoing capital funding is required in order to ensure a safe water supply and sewage disposal system. He noted that Kitchener's rates are competitive compared with other larger Ontario cities; however, there is continued upward pressure on rates due to declining consumption, Regional rate increases and aging infrastructure. FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -6- CITY OF KITCHENER 1. FCS-15-001 -2015 OPERATING BUDGET(CONT'D) Mr. D. Tyagi advised that the proposed 9.9% rate increases would only address the operating deficit and does not ensure that the Water/ Sanitary infrastructure is kept in a good state of repair. He stated that in 2013, there was approximately $2M in lost revenues, which can be largely attributed to the increase in watermain breaks resulting from aging infrastructure. He added that on average over the past three years the City has only been replacing 4.7 kilometers of pipes per year; which equates to only 0.6% of the City's total inventory of pipes. He noted based on that rate, a watermain that was placed in the ground today would not be replaced for 160 years. He indicated that these pipes only last 50-60 years and therefore even with the proposed increase it does not address the deficiency that currently exists with the City's watermains. He expressed concern that not enough funding is being allocated in the Capital Budget for watermain replacement, commenting the standard is that 1.5% to 2% of a municipalities water system should be replaced annually; thereby providing for a 50-60 year replacement cycle. Councillor Fernandes requested that the same chart as the one circulated in 2014 (OP-60) be provided prior to Final Budget Day, which demonstrates the portion of the Water / Sanitary rates that are attributed to the Region of Waterloo. Councillor J. Gazzola re-entered the meeting at this time. Councillor K. Galloway-Sealock requested that information be provided by Final Budget Day as to the impacts if the Water/Sanitary rates were set below the proposed 9.9% increase. Questions were raised regarding the Stormwater Utility and it was requested that an Issue Paper be provided for Final Budget Day outlining projections for the Utility assuming 1%, 2% and 3% rate increases. NEXT STEPS Mr. Hagey advised that Capital Budget deliberations are scheduled to take place on January 12, 2015, adding a public budget consultation session will be held on February 2, 2015. He noted that Final Budget Day has been scheduled for February 23, 2015. The Committee then undertook a review of the action items arising from this meeting. Councillor K. Galloway-Sealock proposed an additional action item requesting details of the $70,000. expenditure for Downtown maintenance that is indicated as relating to increased temporary staffing wages. She further requested information on the 5 year average for Winter Control and indicate whether the current budget is adequate given the chronic deficit experienced in that area. On motion by Councillor Y. Fernandes- it was resolved: "That staff be directed to report and /or take appropriate action on the following matters arising from the January 5, 2015 special Finance and Corporate Services Committee meeting relative to the 2015 Operating Budget, as outlined in the chart below: Division Topic Action Household Provide the BMA tax comparison for Comparisons executive homes. FINANCIAL Budget Provide a link to Financial Information PLANNING comparators Return (FIR)with benchmarking data to show service comparators. Ten Year Rate Provide 10 year projection with estimated Projection Assessment Growth Represented at 1% and review Base Inflation Rate at 2%. FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -7 - CITY OF KITCHENER Reserves Provide Reserve Schedules that show FINANCIAL revenue and expense activities. PLANNING (CONT'D) Tax Customer Provide number of tax customers (similar comparison to number of water/gas customers) Provide a report to Community& Infrastructure Services Committee Special Events exploring how Special Events can support ECONOMIC Neighbourhood Associations and Groups DEVELOPMENT with festivals outside of the Downtown. Downtown Provide an update on what is happening regarding retail business attraction. • Provide a summary of the contributions of the other area Municipalities and Townships to the Waterloo Region Economic Development Corporation Waterloo Regional (WREDC) (Canadian Technology CAO Economic Triangle). ADMINISTRATION Development • Provide more information about what Corporation benefit the WREDC provides to Kitchener. • Obtain comments in writing Region's position on providing additional funding required for the WREDC. Obtain Feedback from Safe &Healthy Volunteer Communities Advisory Committee's Resources feedback regarding SI 06 (Improve the COMMUNITY City's Ability to Engage Volunteers in the PROGRAMS& Community). SERVICES Provide detailed statistics and report on the Leisure Access past 5 years Leisure Access Card Program Card Program usage, actual costs and rationale for the program. • Provide the dollar value of the assets held by the Golf courses. • Provide the amount of the original debt ENTERPRISE Golf issued for the golf courses. • Provide a comparison of Kitchener's membership to other municipal courses. • Provide how much of the water and WATER & sanitary rate increases are attributed to SANITARY Water/Sanitary the Region of Waterloo. UTILITY • Provide different rate scenarios and the associated impacts if the water/sanitary rate was set below 9.9%. Downtown Provide details of $70,000. increase for Maintenance Downtown maintenance (OP-15). OPERATIONS Provide 5 year average information and Winter Control indicate the adequacy of the current budget with status on the chronic deficit. ENGINEERING Stormwater Utility Provides stormwater projection assuming 1%or 2% rate increases instead of 3%. FINANCE AND CORPORATE SERVICES COMMITTEE JANUARY 5. 2015 -8 - CITY OF KITCHENER 2. ADJOURNMENT On motion, this meeting adjourned at 7:24 p.m. C. Goodeve D. Livingstone D. Saunderson Committee Administrator Committee Administrator Committee Administrator