HomeMy WebLinkAboutFCS-15-135 - 2016 Budget Process Staff Report
rTC.�r R finance and Corporate Services Department www.kitchener.ca
REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: September 21, 2015
SUBMITTED BY: Ryan Hagey, Director of Financial Planning 519-741-2200 x 7353
PREPARED BY: Ryan Hagey, Director of Financial Planning 519-741-2200 x 7353
WARD(S) INVOLVED: All
DATE OF REPORT: September 4, 2015
REPORT NO.: FCS-15-135
SUBJECT: 2016 Budget Process
RECOMMENDATION:
For information
BACKGROUND:
Each year Council articulates a financial plan for the City through the adoption of a
budget. This includes the operating budget, which encompasses day-to-day
expenses, as well as the capital budget, which provides for the creation and renewal of
City assets.
Operating and capital budget information is presented to Council during dedicated
budget meetings, meaning the only topic on the agenda is the budget. These are public
meetings which are broadcast on the City's website and open for citizens to attend in-
person. Before making any final decisions on the budget, Council offers citizens an
opportunity be heard through a variety of channels, including a public input night
dedicated to the proposed budget.
This report provides summary information related to the 2016 budget process in each of
the following areas:
• Link to new strategic plan
• Rate changes
• Public engagement
• Budget schedule
***This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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REPORT:
Link to New Strategic Plan
At the Planning and Strategic Initiatives Committee meeting on August 10, 2015,
Council received report CAO-15-015 Recommended 2015-2018 Strategic Plan which
was formally approved by Council on August 24, 2015. The second recommendation of
the report states:
That staff be directed to prepare a budget and four-year business plan that
identifies specific actions and the allocation of resources to effectively execute
the approved strategies.
The 2016 budget will be the first opportunity to reflect the priorities approved by Council
as part of the 2015-2018 Strategic Plan. In some cases, the ability to move forward with
initiatives identified in the Strategic Plan will depend on the new investments approved
by Council through budget deliberations. If these investments are not approved, certain
initiatives will see minimal progress over the next few years.
Rate Changes
One of the main areas of focus for the annual budget process is the change in various
rates (e.g. tax rate, utility rates, etc.). Proposed rate changes for 2016 have not been
finalized, as internal budget review meetings have not been completed, but there is
sufficient information available to provide some indication of the proposed rate
increases for the 2016 budget. The rate increases for the major budget areas are
outlined below.
Tax Rate
Long-standing direction for the City's tax rate has come from the City's Strategic Plan,
which states that the City will "provide citizens with competitive, rational, and affordable
taxation levels" This is established by considering:
• Kitchener's taxation levels relative to other municipalities
• Kitchener's tax rate increases compared to inflation
• Citizen preferences for tax rate increases versus changes to service levels
Each of these three areas are discussed below, but the persistent consensus amongst
citizens and the past practice of Council is to have tax rate increases that maintain
existing service levels around the rate of inflation. Following this strategy of consistent
and moderate tax rate increases for a number of years has resulted in Kitchener having
amongst the lowest property taxes amongst large cities in Ontario.
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Comparison to Other Municipalities
In an independent study conducted annually by BMA Management Consulting Inc.
comparing taxation levels across large Ontario municipalities, Kitchener has
consistently ranked amongst the most affordable municipalities. In 2014, Kitchener
taxes on a comparative bungalow property were third lowest of all Ontario cities with a
population over 100,000.
Comparison to Inflation
For the past number of budgets, considerable attention has been paid by Council to
inflation as measured by the Consumer Price Index (CPI) when setting the tax rate
increase. In setting most of the recent budgets, Council has approved a tax rate
increase that is less than the CPI figure for the current year. For instance, the 2015 tax
rate increase of 1.91%, while CPI for 2014 was 2.4%.
Citizen Preferences for Tax Rate Increases versus Changes to Service Levels
In a statistically significant city-wide survey conducted by Environics in 2013, the
majority of residents polled said they preferred tax rate increases at the rate of inflation
that maintain current service levels. This is consistent with the results of two similar
previous studies.
To align with the strategic directions outlined above, the proposed tax rate increase will
necessarily yield a largely "status quo" budget that approximates the rate of inflation.
The main items that will put pressure on the tax rate to increase by more than the rate
of inflation are all items that Council pre-approved for the 2016 budget either during the
2015 budget or in subsequent meetings. These items and their impact on the 2016
budget are summarized in the table below:
Preapproved 2016 Budget Items
Item $ Amount Tax Rate Impact
Fully funding staff approved in 2015 budget $104,000 0.10%
Waterloo Regional Economic Development $120,000 0.11%
Corporation
Centre in the Square additional funding $350,000 0.32%
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Utility Rates (Water, Sanitary, Storm Water, Natural Gas)
During a Strategic Session on August 24, 2015, Council received report INS-15-075
(State of the Infrastructure Update). The report and related presentation focused on the
need to replace more of the City's water, sanitary and storm water infrastructure. The
conclusion of the report stated:
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A realistic and strategic approach to funding both capital replacement and
preventative maintenance activities will ensure the reliability, safety and
sustainability of existing and future assets for the City of Kitchener. To ensure a
go-forward strategy to address the backlog and on-going replacement,
substantial annual rate increases for both replacement and maintenance
activities for an extended period of time will be required.
The recommended rate increases for these utilities as noted in the presentation were-
Utility Rate Increases
Utility Rate Increase
Sanitary 10.8%
Water 7.6%
Storm Water 9.2%
The natural gas rates are set by Council outside of the budget process. Kitchener
Utilities staff will be bringing forward recommendations about the 2016 natural gas rates
in a separate report in the fall of 2015 although based on recent market trends it is
anticipated that there will be a net reduction in the overall gas rate.
Enterprise Rates (Building. Parking. Golf)
During the 2015 budget process, the projected 2016 rate increases for these City
enterprises were inflationary or less. It is anticipated that the proposed rate increases
for these City enterprises will be within those parameters.
User Fees
Other than outlined above, it is anticipated that user fees will generally be increasing at
rates approximating the rate of inflation, between 1% and 2%.
Public Engagement
Giving consideration to the budget priorities of the public is an important part of the
annual budget process. Much of this input happens through other channels such as the
consultations that inform City strategies and masterplans. Further, broad-based
Strategic Plan engagement (e.g., Environics survey, Your Kitchener Your Say, etc.) is
helpful in identifying community priorities for the budget. Staff work diligently to
synthesize the results of these initiatives into the budget submission to Council.
Within the annual budget process itself, the City has employed a number of different
engagement techniques for the last number of years. These have included traditional
methods (e.g. mail, phone, public input session) as well as electronic methods (e.g.
email, Facebook/Twitter posts, interactive budget web page). For the 2016 budget, a
number of these methods will again be employed.
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In addition to the methods mentioned above, Finance staff are investigating the
expansion of the budget engagement process in two ways, although not for the 2016
budget. The two ways being considered are 1) additional online engagement and; 2)
participatory budgeting.
Additional online engagement could take many forms, and will be informed based on
the expertise of the new engagement resource that Council approved during the 2015
budget related to e-participation as part of open government. Council approved this
staff resource to be hired in the second half of 2015, which does not allow sufficient time
to develop new e-participation initiatives for the 2016 budget process, but will potentially
allow for additional electronic engagement methods for future budget.
Participatory budgeting is a democratic process in which community members directly
decide how to spend part of a public budget. The Neighbourhood Strategy which has
recently been launched will provide a strong platform from which to engage the
community in making financial decisions which directly impact local quality of life. This
has been identified as a future phase of work and staff are excited about the prospects
of piloting a participatory budget approach as support builds around the Neighbourhood
Strategy within the community.
Budget Schedule
The initial 2016 budget presentations by staff have been scheduled by Council for
November 2015, with public input and final budget deliberations planned for January
2016. The table below outlines the meeting dates.
2016 Bud et Dates
Date Topic
November 2, 2015 2016 User Fees
November 23, 2015 2016 Operating Budget
November 30, 2015 2016 Capital Budget & Forecast
January 2016 (date to be determined) Public Input on 2016 Budget
January 2016 (date to be determined) 1 2016 Final Budget Approval
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The recommendation of this report supports the achievement of the city's strategic
vision through the delivery of core service.
FINANCIAL IMPLICATIONS:
There are no financial implications as part of this report. Decisions resulting in financial
impacts will be made by Council as part of upcoming budget meetings.
COMMUNITY ENGAGEMENT:
INFORM - Information about upcoming engagement as part of the 2016 budget process
is outlined above in the Public Engagement section of the report.
ACKNOWLEDGED BY: Dan Chapman, Deputy CAO, Finance and Corporate Services
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