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Home My WebLink AboutFCS-16-002 - 2016 Final Budget REPORT TO:Finance and Corporate Services Committee DATE OF MEETING:January 18, 2016 SUBMITTED BY:Ryan Hagey, Director of Financial Planning, 519-741-2200 x 7353 PREPARED BY:RyanHagey, Director of Financial Planning, 519-741-2200 x 7353 WARD(S) INVOLVED:All DATE OF REPORT:December 7, 2015 REPORT NO.:FCS-16-002 SUBJECT:2016 Final Budget ___________________________________________________________________________ RECOMMENDATION: For Discussion BACKGROUND: Detailedreports and presentations on the Operating and Capital budgets were considered by Committee in November 2015. This final budget day package supplements the information provided previously and is primarily meant to: Provide updates on the Operating and Capital Budgets Provide information required by the Municipal Act REPORT: Tax Supported Operating Budget The proposed tax rate increase for 2016 is 1.50%. There are no proposals to be considered by Councilon final budget day that would have a major impact on the tax rate increase. There are a few minor items (i.e. the impact of any single item would change the tax rate by less than 0.10%) for Council to considerbased on the issue papers which staff were asked to prepare. These items were discussed duringor subsequent tothe operating budget with direction to consider them as part of Final Budget Day: Additional, unbudgeted assessment growth revenue Decreasing the licensing feefor Temporary Retail Markets Creating a new permanent part-time constituency assistant to support Council Making an ongoingcontribution to replenish the Tax Stabilization Reserve Fund Implementing the School Zone Parking Strategy As part of Final Budget deliberations, Council will consider each of these items and decide whether they will be included as part of the 2016 tax supported operating budget.A summary of the budget by division is included at the end of this report. *** Thisinformation is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. FINAL - 1 Enterprise Operating Budgets The City enterprises are stand-alone business lines that are self-funding through their own rates (i.e. are not funded through property taxes). They include: Golf, Building, Parking, Natural Gas, Water, Sanitary Sewer, and Stormwater. The projected financial yearend results in 2015 have been updated for each of the enterprises. Unlike previous years, the updated projected results for many of the enterprises are materiallydifferent than the original projections based on recent activity. As well, budgets for Parking and Waterhave been updated based on new information. Changes to the enterprise projected actuals or budget forecastare highlightedbelow. Golf – Projection is consistent withpreviousprojectionand budget is unchanged. Building – Projection is $431,000 better than originally forecast. Revenues are higher than forecast due to increased permit activity at the end of the year for both residential and non-residential building types.The 2016-2020 budgets have not been adjusted because building activity is projected to staystrong for the foreseeable future. Parking – Projection is $244,000 better than originally forecast. Expenses are lower than forecast due tosavings in accrued property taxes for the Civic District parking garage,whichhas recently been assessed by MPAC.Revenues are also higher than forecast due to increased demand.The 2016-2020 budgets have been adjusted to reflect the lower property taxes on the Civic Districtgarage. GasDelivery – Projection is $1.2M worsethan originally forecast. Revenues are considerably lower than projected due to mild weather in the last quarter of the year. GasSupply and Transportation – Supply projection is $416,000 better than original presentationandTransportation projection is $122,000 better.Warm weather in the last quarter of the year has resulted in decreased sales and lower cost of goods sold.The 2016-2020 budgets for Gas Delivery, Supply, and Transportation have not been adjusted as these forecasts are based on a multi-year average and not just on a single year’s experience. Water – Projection is $182,000 better than originally forecast. Revenues are higher than forecast due to increased water consumption in October and November.The 2016-2020 budget has been adjusted to incorporate the final wholesale water rate adopted by the Region. Despite these changes, the water utility stabilization reserve continues to be in a significant deficit until 2019. Sanitary – Projection is $748,000M better than originally forecast. Revenues are higher than forecast due to increased water consumption in October and November. As well, expenses are lower than forecast due to decreased processing and maintenance costs. The 2016-2020 budgets have not been adjusted as these forecasts are based on a multi-year average and not just on a single year’s experience. Stormwater – Projection is consistent withpreviousprojectionand budget is unchanged. FINAL - 2 Capital Budget and Forecast There are only twochangesto the capital budgetand forecast originally presented to Council. Since the majority of the capital budget remains unchanged, a new capital project listing has not been prepared. 1. The Fleet Replacement Equipment line(page C-127 of the capital package)has been increased by $3.9M over the 10 years of the capital budget and forecast as a result of the 2015 Annual Equipment Review. Thisannual process reviews equipment that is near the end of its useful life to determine its need for replacement. The revised budget has increased in the final years of the 10 year forecast based on expected replacement costs and timing fromthis detailed review. This account is funded completely by the Fleet reserve. 2. The Neighbourhood Festival Development line (page C-119 of the capital package) has been increased by $180,000 over the 10 years of the capital budget and forecast as a result of Council’s direction around grants. Council increased the grant from $21,000 per year to $30,000 in 2016, and then gave direction for a further increase to $40,000 per year for 2017 and all subsequent years.This account is funded by an offsettingdecreaseinother grantsas approved by Council. Information Required by the Municipal Act Regulation 284/09 of the Municipal Act titled “Budget Matters – Expenses” requires that before Council adopts the annual budget, it must first receive a report about “excluded expenses” and adopt that report by resolution. This resolution is included as part of the Final Budget Day resolution. Public Sector Accounting Board (PSAB) changes effective in 2009 require the annual Consolidated Financial Statements to be prepared using full accrual accounting. As a result, certain expenses are included in the financial statements that are not included in the budget. For the City of Kitchener these include amortization expense on tangible capital assets and post-employment benefit expense. Amortization expense on tangible capital assets of $39.6million was recorded in the 2014consolidated financial statements. This expense is meant to represent the rate at which the City is using up its assets (based on historical cost). It can therefore be used as a rough indication of what should be budgeted for replacement. Post-employment benefit expense, which includes sick leave, workplace safety and insurance benefits, and post-employment benefits in the 2014consolidated financial statements,was $3.2M ($34.9M– $31.7M) If these expenses were excluded in the financial statements, the 2014accumulated surplus would increase by $42.8M (the combined amount of amortization expense and post-employment benefit expense). There is no impact on future tangible capital asset funding requirements based on the exclusion of these expenses. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the city’s strategic vision through the delivery of core service. FINAL - 3 FINANCIAL IMPLICATIONS: The financial impacts on the average homeowner are shown in the chart below. Impact on Homeowner Change 20152016$% Taxes $1,050$1,066$161.50% Storm Water $125$137$129.20% Water $386$415$297.60% Sanitary $434$481$4710.80% Subtotal (pre Gas) $1,995$2,099$1045.21% Gas $841$681$ (160)-19.02% Total $2,836$2,780$(56)-1.97% Assumptions : City Taxes: Current Assessed Value (CVA) of $280,000 Storm Water: property classified as Residential Single Detached Medium 3 Water & Sanitary: water consumption of 204m(reflects regional average water consumption) 3 Natural Gas: gas consumption of 2,100m COMMUNITY ENGAGEMENT: Citizens have an opportunity to provide input about priority areas of the budget through different processes. Their input comes through public consultation efforts for comprehensive master plans (e.g. Leisure Facilities Master Plan), strategies (e.g. Neighbourhood Strategy), or specific projects (e.g. Kiwanis Park Pool). As part of those processes, staff considers the feedback received from the public as they make their recommendations and share it with Council when those recommendations are presented for approval. The budget is the process whereby Council affirms the various approved priorities and allocates funds to bring concepts into reality. For the 2016 budget process, staff haveemployeda suite of traditional and electronic engagement methods in an effort to effectively inform and consult citizens. Staff have proactively provided information about the budget process via media outreach, the city’s website and through Your Kitchener. Citizens have beenencouraged to provide their input by: •Writing, emailing or phoning City Hall •Attending the public input session onJanuary 12, 2016 •Responding to the City’s Facebook/Twitter posts about the budget •Contacting their ward councillor FINAL - 4 PREVIOUS CONSIDERATION OF THIS MATTER: The 2016 budget has been discussed in detail by Council during previous meetings set aside exclusively to consider the budget. This includes: FCS-15-164, 2016Operating Budget (November 23, 2015) FCS-15-165, 2016 Capital Budget and 10-Year Forecast (November 30, 2015) As well, the City hosts a stand-alone public input meeting on January 12, 2016 regarding the 2016 budget. ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services) FINAL - 5 FINAL - 50 FINAL - 51 FINAL - 52 FINAL - 53 · · · FINAL - 54 FINAL - 55 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: BD04 Accelerate Funding for Amenities at South Kitchener District Park FUND: Capital DEPARTMENT: Infrastructure Services - Operations PREPARER: Ryan Hagey, Director of Financial Planning BUDGET IMPACT: None BACKGROUND: During Capital budget discussions on November 30, staff was directed to provide information on whether the costs of the playground and splash pad planned foKitchener District Park (SKDP) phase 2 (2021-2022) could be accelerated into phase 1 (2017-2019) of the project. RATIONALE / ANALYSIS: The potential to accelerate the construction of these amenities into phase 1 has been evalua againstthe capacity of staff, site servicing, and financesbelow: Staff Capacity The phase 1 work plan for SKDPincludes the design of the playground and splash pad which are currently budgeted to be completed during phase 2 of the project. Operations staff have indicated they have staff capacity to accommodate the earlier construction of these amenities. Site Servicing Capacity Advancing the construction of the splash pad requires the availa of a water supply and a sanitary outlet. There is an existingwatermain located on Huron Road, along the frontage of the SKDP site, but the sanitary outlet for the SKDP site runs through developer-owned lands that are mostly draft approved, but do not have any infrastructu installed at this time. The developers who own these lands are interested in constructing the sanitary sewer and roadway (Strasburg Road extension) that are n and have initiated discussions with staff about a credit/refund infrastructure being in place on the developer-owned lands, there would be no sanitary sewer outlet for the SKDP, and therefore the splash pad could not be operated. In the best case scenario, a sanitary sewer outlet could be constructed by the ye2019. Financial Capacity The total costs for the SKDP playground and splash pad are $750,000. These funds are already included in the SKDP budget, but are included in phase 2 of the project. There is no financial capacity within the phase 1 SKDP budget to fund these works, however if other capital projects of similar value in 2017-2019 could be deferred, it would provide the opportunity to swap funding and timing. This is explored in more detail below in the Financial Implications section. FINANCIAL IMPLICATIONS: Funds from the Southend Library, which is in the same geographic vicinity as th potentially be reallocated to SKDP and then repaid at a later date. There is $10M budgeted for this project between 2019-2024. $750,000 of the Library budget could be shifted from the Library to SKDPphase 1 in 2019. A corresponding amount would then be shifted from SKDP phase 2 to the Library in 2021. The tables below show the impacts on both the projects. The ward councilor raised this scenario for discussion with the Libr which time the Library Board indicated their position with Motion 15-83 as follows: FINAL - 56 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER On motion by Ms. Erin Rudland and seconded by Mr. Tim Blundon, it was RESOLVED to support a one-time ask by City Council in order to advance community amenities Kitchener District Park by approving, the reallocation of $750,000 from Kitchener Public Librarys Sout funding to the South Kitchener District Park project in the year and that the $750,000 be reallocated to the Southwest Community L 2021, and that there be no reduction in the overall budget for the Sout CARRIED Table 1 Southend Library Budget (2016 Capital Budget, page C-98) 2016201720182019202020212022202320242025Total Original - - - 5,258 936 954 974 993 885 - 10,000 Adjust - - - (750) - 750 - - - - - Revised - - - 4,508 936 1,704 974 993 885 - 10,000 Table 2 South District ParkBudget (2016 Capital Budget, page C-131) 2016201720182019202020212022202320242025Total Original - 4,350 3,050 700 - 5,955 249 - - 3,239 17,543 Adjust - - - 750 - (750) - - - - - Revised - 4,350 3,050 1,450 - 5,205 249 - - 3,239 17,543 RECOMMENDATION: For Council direction. FINAL - 57 FINAL - 58 FINAL - 59 FINAL - 60 FINAL - 61 Summary of the Tax Stabilization Reserve Fund 2015 2011 2012 2013 2014 Projected Ending Balance $3,596,967 $1,695,198 $317,944 $338,611 $681,400* Target Balance (Minimum) $4,749,802 $4,951,223 $5,104,543 $5,222,519 $5,402,760 FINAL - 62 . FINAL - 63 FINAL - 64 FINAL - 65 · · · FINAL - 66 · · FINAL - 67 FINAL - 68 FINAL - 69