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HomeMy WebLinkAboutFCS Minutes - 2019-01-07 - 2019 Operating BudgetSPECIAL FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 7, 2019 CITY OF KITCHENER The Special Finance and Corporate Services Committee met this date, commencing at 9:30 a.m. Present: Councillor S. Davey - Chair Mayor B. Vrbanovic and Councillors D. Chapman, K. Galloway-Sealock, J. Gazzola, B. Ioannidis, M. Johnston, S. Marsh, C. Michaud, D. Schnider and P. Singh. Staff: D. Chapman, Chief Administrative Officer M. May, Deputy CAO & General Manager, Community Services V. Raab, General Manager, Corporate Services J. Readman, General Manager, Development Services J. Lautenbach, Chief Financial Officer, Financial Services D. McGoldrick, General Manager, Infrastructure Services R. Hagey, Director, Financial Planning M. Seiling, Director, Building K. Kugler, Director, Enterprise G. St. Louis, Director, Utilities N. Lobley, Director, Parks and Cemeteries B. Cronkite, Director, Transportation Services R. Lusk, Director, Operations, Roads and Traffic D. Fagerdahl, Manager, Financial Planning P. McCormick, Manager, Parking Enterprise J. Bunn, Manager, Council and Committee Services/Deputy City Clerk J. Rodrigues, Committee Administrator D. Saunderson, Committee Administrator 1. FIN-19-001 - 2019 OPERATING BUDGET The Committee considered Financial Services Department report FIN-19-001, dated December 3, 2018a tax levy increase of 2.3%, together with nine Operating Budget Issue Papers. Councillor J. Gazzola brought forward a motion to allow members of the Committee to introduce motions related to the 2019 Operating Budget prior to Final Budget Day, which was voted on and LOST on a recorded vote, with Councillor J. Gazzola voting in favour; and, Mayor B. Vrbanovic and Councillors S. Davey, B. Ioannidis, M. Johnston, D. Schnider, D. Chapman, S. Marsh, K. Galloway-Sealock and C. Michaud voting in opposition. Councillor P. Singh was absent and accordingly did not vote. GENERAL OVERVIEW Mr. D. Chapman presented a general overview of the Operating Budget and advised the 2019 Budget priority investments include: road safety and cycling; environmental sustainability; improving customer service; and, maintaining and investing in infrastructure. He further advised all tilities would have positive balances at the end of 2019. Councillor P. Singh entered the meeting at this time. Mr. J. Lautenbach advised the 2019 Operating Budget highlights include maintaining current service levels and making strategic investments in community priorities. In addition to reviewing economic and other drivers outside of the Ct was noted the proposed tax rate increase of 2.3% is below the rate of inflation and aligns with citizen feedback. Councillor D. Chapman requested staff provide information on the historical and current cost of living index for the City of Kitchener. BOARDS Kitchener Public Library (KPL) Ms. M. Chevreau, Kitchener Public Library (KPL), and responded to questions from the Committee. SPECIAL FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 7, 2019 - 2 - CITY OF KITCHENER 1. FIN-19-001 - 2019 OPERATING BUDGET Centre in the Square (CITS) Messrs. P. Salvini and R. Sonoda, and Ms. D. Daub, Centre in the Square (CITS), were in attendance and responded to questions from the Committee. Mr. Salvini advised the CITS anticipates needing transition funding in the amount of $146,527. from the City in 2019, noting Issue Paper Op-01 (Continuing Transitional Funding for Centre In The Square) further outlines an explanation of that request. TAX SUPPORTED OPERATING BUDGET Mr. Hagey advised in relation to the updated 2015-2019 Strategic Plan directive for competitive, rational and affordable taxation levels, staff have considered the following when setting the 2019 tax rates: comparison to other municipalities; inflationary factors, including those unique to municipalities; and, He advised comparatively, the City of Kitchener has the lowest overall cost of services provided in the Region. The Committee recessed at 11:44 a.m. and reconvened at 12:53 p.m., Chaired by Councillor S. Davey with all members present. Mr. Hagey advised the overall tax-supported operating budget is balanced and is projected to result in minor surpluses. He stated the City is in a relatively good financial position and it is be economic uncertainty in the Province. 2.53% Assessment Growth, noting growth is well above the 10-year average. Mr. Hagey stated for information that a 1% change in the tax levy equals approximately $11. to the average homeowner, and approximately Mr. Hagey noted staff prepared six Issue Papers related to the Tax Support Operating Budget; Issue Paper Op-02 (Clearing Snow in Bike Lanes), Issue Paper Op-03 ( Environmental Sustainability), Issue Paper Op-04 (Increasing the City's Use of Alternate Fuel), Issue Paper Op-05 (Implementing First Stage of Urban Forest Strategy), Issue Paper Op-06 () and Issue Paper Op-07 (Supporting Service and Growth). Councillor K. Galloway-Sealock requested an Issue Paper for Final Budget Day on the possibility of increasing the projected Assessment Growth from 1.25% to 1.5% for the next five years and the impacts of that increase. In response to questions, Ms. R. Lusk advised she would confirm whether an Issue Paper could be completed for Final Budget day related to the sidewalk repair program, specifically related to full sidewalk repairs versus tar repairs. In response to questions regarding Issue Paper Op-05 (Implementing First Stage of Urban Forest Strategy), Mr. N. Lobley agreed to provide additional information on what funding would be available to private property owners for tree planting. Councillor S. Davey left the meeting at this time and Councillor P. Singh assumed the Chair. Questions were raised regarding Issue Paper Op-07 (Supporting Service and Growth) and staff agreed to provide additional details on cost centres requesting growth related additional staff, including current versus the previous year budget. Councillor S. Davey re-entered the meeting at this time and reassumed the Chair. COMMUNITY GRANTS Mr. Hagey advised as directed at the August 28, 2017 Council meeting, there were changes to the appeal process for community grants. He indicated this year a Committee of staff will hear all Tier 1 and Tier 2 grant appeals and renderdecisions on those appeals.He stated after the appeals Committee has made its decisions, Council will approve the specific amounts for each SPECIAL FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 7, 2019 - 3 - CITY OF KITCHENER 1. FIN-19-001 - 2019 OPERATING BUDGET individual Tier 1 group as part of Final Budget Day. He further advised, Council will be requested to approve the specific amounts for each individual Tier 2 grant recipients through a future staff report in 2019. In response to questions, staff agreed to recirculate information related to the Tier 1 Grants for Ice Users who also receive reduced ice rental rates. ENTERPRISE OPERATING BUDGETS Mr. Hagey gave an overview of the financial positions of the five of the seven enterprises are projected to have a positive stabilization reserve at the end of 2018. He added three City enterprises are allowed to, and do, pay a dividend to the City, being Gas, Golf, and Parking, and those dividends are consistent with prior years. Building Mr. Hagey provided an overview of the Building enterprise, noting revenues for 2018 were lower than anticipated due to reduced building permit revenues. He indicated there are high permit activities projected for 2019 due to the Downtown Development Charge exemption, which is due to expire in February 2019. He stated after 2019, revenues are forecasted to slow down based on a number of different factors, noting the slow down will draw down the balance in the Stabilization Reserve Fund, which is currently above its maximum benchmark. He further advised Building is not allowed to pay a dividend to the City as per legislation. Mr. M. Seiling was in attendance and responded to questions from the Committee. The Committee recessed at 2:53 p.m. and reconvened at 3:00 p.m., Chaired by Councillor S. Davey with all members present. Golf Mr. Hagey provided an overview of the Golf enterprise, noting financial results in 2018 are as projected based on its business model and modest growth in programming. He indicated Golf is projected to have small projected surpluses for the next few years. He stated the stabilization reserve has a negative balance, but this will start to decrease once some of its debt commitments are paid off. He further advised the Golf Enterprise does pay an annual dividend to the City. Ms. K. Kugler was in attendance and responded to questions from the Committee. Parking Mr. Hagey provided an overview of the Parking enterprise, indicating the enterprise is projecting a positive surplus at the end of the year due to increasing demand. He advised parking is projecting deficits in the next few years based on increased capital costs, including Traffic Demand Management and Cycling Programs, as well as contributions to the City Hall Outdoor Spaces Project. He indicated the deficits can be managed through the positive balance in the stabilization reserve. Messrs. P. McCormick and B. Cronkite were in attendance and responded to questions from the Committee. Councillor P. Singh requested an Issue Paper on the impacts of increasing the Parking Dividend to the City by an additional $50,000. and further requested that the Issue Paper include additional information related to the decrease in revenue for 2019. In response to questions, Mr. B. Cronkite advised staff are currently working with Parking Staff to determine feasible space within the Duke and Ontario parking garage as well as the Kitchener Market parking garage to install secure bicycle facilities, noting the facilities would be installed in 2019. Gas Works Utility Mr. Hagey advised Gas Delivery performed better than expected in 2018 due to the weather conditions.He stated Gas Delivery paysa dividend to the City, which is the maximum allowed SPECIAL FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 7, 2019 - 4 - CITY OF KITCHENER 1. FIN-19-001 - 2019 OPERATING BUDGET under the rate model set by the Ontario Energy Board (OEB). He noted the graph provided in the agenda package was for Gas in its entirety, the graph presented to the Committee this date is demonstrating the expenses and revenues for Gas Delivery only. He stated Gas Delivery is expecting to have a surplus over $1.6M in 2018, but then very modest positive results across the rest of the forecast. He further advised the stabilization reserve is expected to have a balance of approximately $4M, which will help mitigate any unforeseen negative results, likely caused by weather. Mr. D. Chapman advised owning a natural gas utility is unique within the Province, noting the City is one of two municipalities that own a natural gas utility. He indicated gas utilities are heavily regulated by the Ontario Energy Board (OEB) and are subject to direct regulation. He stated for rate regulation the City has approval from the Province for Council to make rate decisions. He commented the City has always followed a model, which include principals from the OEB specifically related to the dividend paid to the City by the Gas Utility. He further advised Council in the past has asked questions about the possibility of increasing the dividend. Mr. Chapman stated staff continue to follow the principals of the model previously approved by Council, which includes a yearly increase to the dividend by an inflationary rate of 2% and recommended Council not adjust the dividend outside that model as it may jeopardize the status with the Province. In response to questions, Mr. G. St. Louis advised gas rates were previously approved and will remain unchanged until the fall of 2019. Water, Sanitary and Stormwater Utilities Mr. Hagey provided highlights of the Water Infrastructure Program (WIP) review, advising Council was provided with three viable scenarios for capital replacement in 2017. He stated all of the scenarios provided had different costs, accomplishment targets, and levels of risk, noting Council endorsed the staff recommendation to fund this gap over a 5-year phase-in, which is reflected in the proposed 2019 operating budget. Mr. Hagey stated Council endorsed moving ahead with the 5-Year Rate option during the WIP review, which indicated a rate increase of 6.5% proposed in 2019. He advised the City of Kitchener is experiencing rate pressures due to the difference in timing of rate increases by the Region of Waterloo. He stated starting in 2019, the Region is increasing their rate for water and sanitary on January 1, noting the City is changing its rate on March 1, which means we are already paying higher prices than the Region, but not recouping those costs until March. He advised to remedy this discrepancy, the City is planning to change its rates on January 1 beginning in 2020. He further stated the second issue effecting the City is the Regional rate increase for sanitary processing. He advised the actual rate is 1% higher than the forecast that was presented during the WIP modelling, noting this means the City is paying more to the Region than originally anticipated at the time of preparing the 5-year rate forecast for the WIP review. He indicated the impact of these two rate pressures is 0.6% on the combined increase of 6.5%, stating staff believe it is important to maintain the WIP forecast rate increase at 6.5% and reduce spending in other areas to compensate for the Regional impacts. Water Utility Mr. Hagey noted there is one Issue Paper Op-09 (Maintaining Water Stormwater and Sanitary Infrastructure), which outlines the creation of four full-time construction and maintenance operators to address additional maintenance activities and to assist in meeting the new regulatory requirements. Mr. St. Louis was in attendance to answer questions from the Committee. Councillor P. Singh left the meeting at this time Councillor K. Galloway-Sealock requested staff provide updated operating expenses for the Water Utility prior to Final Budget Day. SPECIAL FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 7, 2019 - 5 - CITY OF KITCHENER 1. FIN-19-001 - 2019 OPERATING BUDGET Sanitary Utility Mr. Hagey presented the Sanitary Utility, indicating results in 2018 are favourable compared to the budgeted amount as revenues have increased due to higher water usage and expenses have decreased because of maintenance activities. He advised the projection for sanitary includes surpluses and deficits, which can be attributed in part to the 1% Regional rate increase for sewage processing. He noted the stabilization reserve remains positive in all forecasted years. Mr. Hagey provided an overview of the expenses and revenues pertaining to sanitary utility, indicating the main expenses are materials and capital transfers to the Sanitary Capital Program and contribution to relevant corporate projects and the revenues are generated from user fees based on water consumption. Stormwater Utility Mr. Hagey advised the Stormwater Utility results in 2018 are worse than budgeted due to the increase in maintenance costs. He indicated as of 2019, the stabilization reserve is in a positive position and is projecting small surpluses in stormwater. He provided an overview of the expenses and revenues related to stormwater utility, stating capital costs account for two-thirds of the budgeted expenses and the revenues are generated from user fees. Councillor P. Singh re-entered the meeting at this time. RESOLUTION At the request of Councillor S. Marsh, staff agreed to prepare an Issue Paper that includes resource options -term planning goals, including but not limited to moving forward with a long-term affordable housing program. Councillor Marsh also requested an Issue Paper outlining the impact of increasing the value of a Leisure Access Card (LAC) limit per person. It was suggested and agreed that the Issue Paper outlining the LAC limit also include information regarding the checks and balances involved in getting a card. At the request of Councillor K. Galloway-Sealock, staff agreed to prepare an Issue Paper on whether the request to hire 14 new Full Time Equivalent (FTEs) that staff recommended in the operating budget can be delayed and the impact of the hiring delays. Councillor D. Chapman requested a summarized list of all the City grants that are eligible through application process. On motion by Councillor P. Singh - it was resolved: arising from the January 7, 2019 Special Finance and Corporate Services Committee meeting relative to the 2019 Operating Budget, as outlined in the chart below: Division/Area Topic Action Provide details on cost centres requesting Service Growth growth related additional staff (noted in issue Related Staffing paper OP 07 Supporting Service & Growth). Include current versus prior year budget. FINANCIAL What would the impact of increasing the Assessment Growth PLANNING assumption for assessment growth from Projection 1.25% to 1.50% for the next few years. Full Time Equivalent Information on the impacts of delaying any of (FTE) Positions the 14 FTE positions being requested. SPECIAL FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 7, 2019 - 6 - CITY OF KITCHENER 1. FIN-19-001 - 2019 OPERATING BUDGET Tier 2 Grant Recirculate information regarding Kitchener Information Minor Hockey grant funding. Provide information about the grants available All eligible City grants COMMUNITY to the community. SERVICES Information regarding increasing the LAC limit Leisure Access Card per person, and what Leisure Access Card (LAC) checks and balances are in place to ensure people applying for the LAC truly qualify. OPERATIONS Information regarding the City's progress on - ROADS Sidewalk Repair sidewalk repairs including information about AND Program patching versus full repairs. TRAFFIC More information about the additional funding PARKS AND Tree Planting regarding tree planting activity on privately CEMETERIES owned property. Impact of increasing the dividend paid to the City by $50,000 and provide more details PARKING Dividend Transfer related to the decreased parking revenues from 2018 to 2019. Look at options of how the City could be PLANNING Affordable Housing resourced for moving forward with long term Planning goals, including affordable housing. 2. ADJOURNMENT On motion, this meeting adjourned at 4:21 p.m. D. Saunderson J. Bunn Committee Administrator Manager, Council and Committee Services/Deputy City Clerk J. Rodrigues Committee Administrator