Loading...
HomeMy WebLinkAbout2015-11-23 - Special FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 CITY OF KITCHENER The Finance and Corporate Services Committee met this date commencing at 9:05 a.m. Present: Councillor S. Davey - Chair Mayor B. Vrbanovic and Councillors F. Etherington, Y. Fernandes, K. Galloway- Sealock, J. Gazzola, B. Ioannidis, Z. Janecki, S. Marsh, D. Schnider and P. Singh. Staff: J. Willmer, Chief Administrative Officer D. Chapman, Deputy CAO, Finance & Corporate Services M. May, Deputy CAO, Community Services J. Miller, Executive Director, Office of the CAO R. Hagey, Director, Financial Planning M. Seiling, Director, Building C. Fletcher, Director, Facilities Management H. Gross, Director, Engineering W. Malcom, Director, Utilities J. Readman, Director, Transportation Services K. Kugler, Director, Enterprise D. Fagerdahl, Manager, Financial Planning S. Allen, Manager, Engineer Design & Approvals N. Gollan, Manager, Stormwater Utility P. McCormick, Manager, Parking Enterprise T. Gaber, Manager, Utilities Operations C. Goodeve, Committee Administrator D. Saunderson, Committee Administrator FCS-15-164 - 2016 OPERATING BUDGET 1. The Committee considered Finance and Corporate Services Department report FCS-15-164, dated November 3, 2015, concerning the City’s 2016 Operating Budget proposing a tax levy increase of 1.5%, together with Operating Budget Issue Papers. In addition the Committee was in receipt this date of a brief video regarding how the City of Kitchener builds its annual budget, which can be viewed on the City’s Budget webpage and is accessible via the following link:https://www.kitchener.ca/en/insidecityhall/BudgetsAndFinanceReports.asp 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 three key issues will be brought forward, including: tax supported City services are being held at status quo, increased investments proposed for arm’s length organizations as well as utility infrastructure. He advised that a total tax rate increase of 1.5% is bring proposed for 2016, noting the City’s share of this increase is less than 1%, and the remaining amount is attributed to the increased investments in organizations not directly controlled by the City. He compared 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. Mr. Chapman addressed themes of affordability and sustainability within the context of the budget. He advised that Kitchener has one of the lowest tax burdens of large cities and has the lowest total tax burden in the Region of Waterloo. He indicated while Kitchener has been fairing very well in terms of affordability, the City faces deficiencies with respect to sustainability. He stated chronic deficits, which have been consistently identified in recent years have previously been funding through the Tax Stabilization Reserve Fund (TSRF). He further advised at the end of 2015 there will be no funding left in that Reserve Fund for year- end deficits, noting any deficits identified would have to be funded through a tax rate increase in the following year. He stated when preparing the 2016 Operating Budget, staff assumed an assessment growth rate of 1.25%. He added the actual assessment growth is now projected at 1.29%, resulting in additional assessment revenue of $40,000., which has not been accounted for as part of the proposed budget. He stated the additional funding will be carried forward to Final Budget Day, January 18, 2016, where consideration could be given to applying it toward unfunded initiatives or to reduce the projected tax levy increase. FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 - 72 - CITY OF KITCHENER FCS-15-164 - 2016 OPERATING BUDGET (CONT’D) 1. Responding to questions, Mr. Chapman agreed to provide information as to the portion of the total tax levy for the Region of Waterloo which is derived from the City of Kitchener. Additionally, he agreed to report back on the amount of capital closeouts netted against the year-end deficit for the past five years. He indicated at this point staff are projecting a negative variance of approximately $150,000. on net supplementary taxes, noting this is not the final amount as all write-offs have yet to be processed. He confirmed that the final number for supplementary taxes could be provided prior to January 18, 2016. Responding to questions regarding the reduction target across all divisions, Mr. Chapman indicated that staff would have to follow-up as those targets were unique to each division and dependent on the various cost objects within the budgets. He confirmed the proposed reductions do not have an impact on service levels, but represent a continued push for divisions to find efficiencies within their respective budgets. Mr. R. Hagey estimated the overall reduction targets at 0.25%. He stated this equates to approximately $275,000. in savings divisions were able to identify, which assisted in achieving the proposed tax rate increase of 1.5%. He noted without those savings, the proposed tax rate increase would have been 1.75%. Questions were raised as to the possible impact of a significant inflationary increase and/or deflation on the City’s current approach to establishing its annual budget. Mr. Chapman indicated a challenge with the current approach is that at present inflation figures are only available to the end of October and a final year-end CPI is not available by the time Council approves the Final Budget. Accordingly, this ambiguity makes planning for the final number very difficult. He noted some municipalities utilize a historic average, adding it is anticipated that staff will bring forward a report in 2016 examining the City’s tax rate policy. In response to questions regarding the TSRF, Mr. Chapman agreed to provide an updated version of the 2015 Issue Paper on that matter as part of the Final Budget Day agenda package. BOARDS Centre in the Square (CITS) Messrs. Bruce Gordon and Rob Sonoda and Ms. Deb Daub, Centre in the Square (CITS), were in attendance and responded to questions regarding the organization’s proposed 2016 operating grant from the City, as outlined in Issue Paper Op-01 (CITS 2016 Transitional Costs). It was identified that in addition to the ongoing $1,750,000. operating grant provided by the City, an additional $250,000. in transitional funding is proposed to be provided to CITS in 2016 through the TSRF. Questions were raised as to the impact of only receiving $200,000. in transitional funding, as opposed to the proposed $250,000. Mr. Gordon advised it is difficult at this time to speculate as to the exact amount of revenue that will be generated next year, as they are still in the process of identifying the available dates with the KW Symphony. He stated that without the transitional funding CITS would need to identify where further cuts could be made to expenses or they would incur a larger then projected deficit. He noted CITS’ 2016 budget was prepared with an expectation that the Centre would receive a total of $2M from the City of Kitchener. He estimated it would not be known until late fall of 2016 as to whether the extra $50,000. of transitional funding is needed. It was requested that an Issue Paper be provided for Final Budget Day outlining options on the details and logistics of the transitional funding; such as, if the total $250,000. is not required would it be transferred back to the City. Additionally, it should include information on how the transitional funding would be required for more than the current year. Mr. Chapman confirmed that the proposed Issue Paper could be prepared in time for the CITS Board to review it at its December 9, 2015 meeting. FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 - 73 - CITY OF KITCHENER FCS-15-164 - 2016 OPERATING BUDGET (CONT’D) 1. Kitchener Public Library (KPL) , Ms. Mary Chevreau Kitchener Public Library (KPL), was in attendance to respond to questions from the Committee. She reviewed some new factors that are impacting the KPL’s budget; such as, the additional fees being charged to libraries to obtain and circulate e-books. Mayor B. Vrbanovic advised he would work with Councillors Galloway-Sealock and Marsh to develop a motion for Council’s consideration to encourage the Large Urban Mayors Caucus of Ontario (LUMCO) to consider the issue of the e-book fees being charged to libraries. The Committee recessed at 10:26 a.m. and reconvened at 10:33 a.m. chaired by Councillor S. Davey with all members present except for Councillor P. Singh. TAX SUPPORTED OPERATING BUDGET Mr. R. Hagey gave an overview of the net expenditure by Department, which remains a consistent annual allocation from 2015. He reviewed the tax levy change detail and 10-year projection, advising that projected growth for 2016 is 1.29% which is in line with the trend of under 2%. Mr. Hagey advised that the 2015 total City property tax levy of $108M plus additional assessment growth of 1.25% equates to a total 2016 tax levy base of $109M. He noted that a 1% levy increase or decrease amounts to just over $1M in the budget, or an impact of $10.50 annually to the average household. Mayor B. Vrbanovic left the meeting at this time. At the request of the Committee, Mr. Hagey agreed to include Issue Paper Op-08 (Permanent Part-Time Constituency Assistant) as part of the agenda package for Final Budget Day. Responding to questions regarding Issue Paper Op-08, Ms. J. Miller advised staff are not recommending the creation of the part-time constituency assistant position. She suggested that it may be premature to hire for this position, noting at present there is an opportunity to review the mandate of the Office of the Mayor and Council to better define its role within the Corporation. Questions were raised regarding the status of the City’s Emerald Ash Borer (EAB) program. Mr. Chapman agreed to have an update provided on the EAB as part of the Capital Budget deliberations on November 30, 2015. ENTERPRISE OPERATING BUDGETS Mr. Hagey gave an overview of the financial positions of the City’s enterprises, advising five of the seven enterprises are projected to be in a deficit position at the end of 2015. He stated the 5-year budget models for these enterprises reflect a commitment and plan to return them to a break-even position. He added three City enterprises are allowed to, and do, pay a dividend to the City, being Gas, Golf and Parking. He noted two of these three enterprises are in a deficit, and subsequently continue to pay a dividend to the property tax base even though they have an accumulated loss. He acknowledged that while the dividends continue, it is recommended that they not be increased. Golf Mr. Hagey provided an overview of the Golf enterprise, noting it does pay a dividend to the City. He advised the dividend amount represents property and income tax payments as outlined in the Level Playing Field agreement with the Golf industry. He stated Golf is expected to remain in deficit through the forecast, and will begin making progress once a portion of the existing debt is paid off in 2020. Responding to questions, Mr. Hagey agreed to report back on the assessed value of the City’s golf courses. FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 - 74 - CITY OF KITCHENER FCS-15-164 - 2016 OPERATING BUDGET (CONT’D) 1. Ms. K. Kugler was in attendance and responded to questions from the Committee. She advised that the prices being charged and quality of the City’s golf courses compare favourably to other local area courses. She indicated the golf passes provided to Councillors for charitable events are tracked, but their value is not currently costed against the dividend paid to the City. Councillor P. Singh entered the meeting at this time. In response to questions, Mr. Chapman agreed to provide further details, not necessarily through the budget process, on the Level Playing Field agreement and possible opportunities to reduce the dividend currently being paid by the Golf enterprise in light of its existing deficit. Councillor S. Davey suggested that for future budgets, information should be provided as part of the Golf enterprise overview to clarify the expiration date of the debt charges. Building Responding to questions, Mr. M. Seiling confirmed the Building enterprise experienced some savings in expenses in 2015 as a result of several staff vacancies. He added staff will endeavour to fill most of those vacancies in 2016 to ensure the Division is adequately resourced to meet provincially legislated timeframes for permit decisions and inspections. Councillor S. Davey suggested that for future budgets, a reference should be included to identify the minimum and maximum value permitted for the Building Reserve Fund. Parking Mr. Hagey provided an overview of the Parking enterprise, indicating a surplus is anticipated for 2016. He advised the Parking stabilization reserve is currently in a substantial deficit position, which is forecasted to continue until 2017; accordingly, it is not recommended that the dividend be increased. Councillor J. Gazzola left the meeting at this time. Mayor B. Vrbanovic re-entered the meeting at this time. Messrs. J. Readman and P. McCormick were in attendance and responded to questions from the Committee. Responding to questions, Mr. Hagey agreed to circulate the 2015 decision to fund the Transportation Demand Management (TDM) program from the tax supported capital program. The Committee recessed at 12:05 p.m., and reconvened at 1:10 p.m., chaired by Councillor S. Davey with all members present except for Mayor B. Vrbanovic. Gas Works Utility Mr. Hagey presented an overview of the Gas Works Utility, advising that the Gas rates have already been set 2016. He added the dividend represents the maximum allowable return based on the Ontario Energy Board approved rate structure. He indicated four full time Gas Distribution Technician positions are being recommended as part of the 2016 Gas Utility Budget, as outlined in Issue Paper OP-02 (Insourcing: Public Building Gas Leak Survey & Gas Service). Mayor B. Vrbanovic re-entered the meeting at this time. Water, Sanitary and Stormwater Utilities Mr. Hagey provided an overview on the Water, Sanitary and Stormwater Utilities, noting that the proposed rates are consistent with the increases presented during the State of the Infrastructure Update at the August 25, 2015 Strategic Session. He outlined the proposed FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 - 75 - CITY OF KITCHENER FCS-15-164 - 2016 OPERATING BUDGET (CONT’D) 1. increases are as follows: 7.6% for water; 10.8% for sanitary; and, 9.2% for Stormwater. He noted any changes in the proposed rate for one Utility would subsequently adjust the proposed rates for other Utilities, as the rates are an interconnected funding source for the Accelerated Infrastructure Replacement Program (AIRP). Mr. Hagey reviewed the two issue papers that have been prepared as part of the 2016 Water Utility budget, being: OP-03 (Water utility Operating Maintenance Increase), and OP-04 (Insourcing: Water Service Leaks & Frozen Services). He indicated they include a justification for the proposed operating budget increase as well as a proposal to hire a Water Distribution Technician to assist with repairs of water service leaks and the thawing of frozen services. He noted that there are no financial implications to the budget as a result of this new position as the cost is being recovered by external charges to homeowners. Mr. W. Malcom was in attendance to respond to questions regarding the Water Utility. Mr. Hagey reviewed the two issue papers that have been prepared as part of the 2016 Sanitary Utility budget, being: OP-05 (Sanitary Utility Operating Maintenance Increase), and OP-06 (Insourcing: Sewer Utility Locates). He indicated they include justification for ongoing maintenance increases as well as a proposal to hire a full-time equivalent to perform sanitary sewer locates. He noted the position is currently a temporary position that will be transitioned to permanent status. He further advised that there is not budget impact for the staffing increase, indicating funding is provided evenly from the Sanitary and Stormwater Utilities. Mr. H. Gross was in attendance and responded to questions from the Committee regarding the Sanitary Utility. In response to questions raised regarding funding from the Federal Gas Tax program, Mr. Chapman advised staff previously provided a summary of all the programs currently receiving funding from the Gas Tax, and it was agreed that information would be recirculated. Councillor P. Singh proposed that an Issue Paper be provided for Final Budget Day outlining projections for the Water Utility assuming a 6.6% and 5.6% water rate increase instead of the proposed 7.6%. Responding to questions, Mr. Gross indicated that there would be a significant amount of work required to review a rate change decrease of 1% or 2% in the Water Utility. The Committee agreed that a formal motion would be required to for that request. On motion by Councillor P. Singh - it was resolved: “That staff be directed to provide an Issue Paper for Final Budget Day outlining projections for the Water Utility assuming a 6.6% and 5.6% water rate increase instead of the proposed 7.6%.” Councillor J. Gazzola left the meeting at this time. In response to questions regarding the Stormwater Rebate Program, Mr. N. Gollan advised that staff are currently reviewing the program as part of the development of the Stormwater Master Plan. He noted that staff anticipates bringing a report forward for consideration on the Master Plan in spring 2016. Questions were raised regarding the possibility of a summary being provided, prior to Final Budget Day, of the budget allocation for Stormwater Management prior to the creation of the Stormwater Utility. Mr. Chapman advised that likely the background reports are still posted on the City’s website and can be recirculated for information. Councillor J. Gazzola re-entered the meeting at this time. RESOLUTION FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 - 76 - CITY OF KITCHENER FCS-15-164 - 2016 OPERATING BUDGET (CONT’D) 1. Mr. Hagey advised that Capital Budget deliberations are scheduled to take place on November 30, 2015, adding a public budget consultation session will be held on January 12, 2016. He noted that Final Budget Day has been scheduled for January 18, 2016. 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 November 23, 2015 special Finance and Corporate Services Committee meeting relative to the 2016 Operating Budget, as outlined in the chart below: DivisionTopicAction Provide information as to the portion of the Regional Tax Levy total tax levy for the Region of Waterloo which is derived from the City of Kitchener. Provide the amount of capital closeouts Capital Closeouts netted against the year-end deficit for the past 5 years. FINANCIAL PLANNING SupplementaryProvide the final amount for supplementary Taxes taxes (net of write-offs) for 2015. Provide an updated version of the 2015 Tax Stabilization Issue Paper on the Tax Stabilization Reserve Fund Reserve Fund Provide an Issue Paper outlining options on the details and logistics of the transitional funding; such as, if the total $250,000. is not required would it be transferred back to the City. Include information on whether the CENTRE IN THE Transitional Coststransitional funding would be required for SQUARE more than the current year. Issue Paper to be prepared by December 5, 2015 to enable review at the December 9, 2015 CITS Board meeting. Include Issue Paper Op-08 (Permanent CAO Office of the Mayor Part-Time Constituency Assistant) as part ADMINISTRATION & Councilof the agenda package for Final Budget Day. Provide an Issue Paper on the status of the Emerald Ash Borer (EAB) program for the OPERATIONS Emerald Ash Borer 2016 Capital Budget meeting on November 30, 2015. Report back on assessed value of the City’s golf courses. Provide details, does not need to be through the 2016 Budget process, on the Golf Level Playing Field agreement and possible opportunities to reduce the dividend ENTERPRISE currently paid by the Golf enterprise in light of its existing deficit. Circulate the 2015 decision to fund the Transportation Demand Management Parking (TDM) program from tax supported capital program. FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23, 2015 - 77 - CITY OF KITCHENER FCS-15-164 - 2016 OPERATING BUDGET (CONT’D) 1. Recirculate the background financial ENGINEERING Stormwater Utility information related to the creation of the Stormwater Utility. ADJOURNMENT 2. On motion, this meeting adjourned at 3:19 p.m. C. Goodeve D. Saunderson Committee Administrator Committee Administrator