HomeMy WebLinkAboutFinance & Admin - 1993-06-07 SFAC\1993 -06 -07 -S P E
SPECIAL FINANCE AND ADMINISTRATION COMMITTEE MINUTES
JUNE 7, 1993
The Finance and Administration Committee met this date, commencing at 1:05 p.m., under the
Chairmanship of Alderman C. Zehr with the following members present: Mayor D.V. Cardillo, Aldermen
B. Stortz, T. Galloway, G. Lorentz, M. Wagner, C. Weylie, G. Leadston, J. Ziegler and J. Smola.
Others present: Messrs. T. McKay, J. Gazzola, L. Ryan, O. den Ouden, R. Freeborn, F.S. Graham, S.
Klapman, J. Hancock, R.W. Pritchard, D. Suzuki, J. Wallace, J. Webster, R. Arnot, D. Snow, G. Sosnoski,
Ms. V. Gibaut and Ms. R. Upfold.
Mr. L. Matthews was in attendance on behalf of the Kitchener Public Library Board.
Alderman Zehr introduced members of the delegation from Windhoek, Namibia who were also in
attendance this date.
REVIEW OF 1993 BUDGET
Alderman Zehr explained that the purpose of the meeting was to discuss the City budget in light of
the funding reductions announced by the Provincial government. Mr. McKay added that the staff
recommendations address reductions as a result of the Province's Expenditure Control Plan as
well as the immediate effect of the recent budget. He pointed out that staff are recommending a
combination of measures to absorb reductions of approximately $1,000,000.00 without tax
increases or staff layoffs and which would have a minimum impact on service delivery. He advised
that the City administration, including representatives of the Kitchener Public Library and The
Centre In The Square, have been involved in identifying sustainable cost cutting measures. Mr.
McKay acknowledged the efforts of Mr. J. Gazzola and other City staff and extended his thanks.
Alderman J. Ziegler entered the meeting at this time.
Mr. McKay stated that formal approval of the staff recommendation is being requested this date
and if approved these measures will be implemented in the budget. He added that a similar
presentation had been made to Union representatives who were reasonably supportive of the
proposal. Mr. Gazzola noted that Management Committee had also reviewed and endorsed the
proposal.
Alderman J. Smola entered the meeting at this time.
Mr. Gazzola then gave a formal presentation and circulated hard copies of the video screens. He
referred to several charts illustrating the financial history of the Province of Ontario and comparing
its revenue and expenditure growth to the City of Kitchener and the Consumer Price Index. He
noted that though Provincial revenues had remained relatively constant there has been a 49%
cumulative increase in expenditures since 1987. He referred to the serious deficits accumulated
by both the Provincial and Federal governments, noting that local governments are required to
balance their budgets and are not permitted to accumulate deficits. Mr. Gazzola advised that
though there has not been a considerable reduction in transfer payments from the Federal to the
Provincial level, transfers from the Province to local governments in the form of unconditional
grants have decreased dramatically.
Mr. Gazzola outlined the Provincial Deficit Reduction Program and the impact on the various local
government sectors. He pointed out that the first phase, being the Expenditure Control Plan, has
resulted in reductions of conditional and unconditional grants to municipalities totalling
$66,000,000.00 and $110,000,000.00 respectively. He noted that the second phase, referred to
as the "Social Contract" is likely to result in a further 29% reduction though the outcome of this
proposal is not known at this time.
Mr. Gazzola advised that the anticipated and combined impact of the Expenditure Control Plan,
the "Social Contract" and further costs relating to changes in application of the Provincial Sales
Tax are estimated at $2,790,000.00 in 1993 and $3,130, 000.00 in 1994. This translates into an
impact on ratepayers of approximately 5%.
FINANCE AND ADMINISTRATION
COMMITTEE MINUTES
1. REVIEW OF 1993 BUDGET (cont.)
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Mr. Gazzola outlined a number of alternatives for dealing with the grant reductions and increased
costs. He indicated that the City could do nothing and incur a deficit which would eliminate any
surplus in 1993 and accordingly have a negative impact on the 1994 mill rate. The municipality
could also pursue any of the following either singly or in combination: adjust programs and service
levels; increase user fees; adjust transfers from the reserve funds; adjust the capital expenditure
program; adjust the capital funding policy or adjust the general portion of the tax levy. He pointed
out that staff are recommending a combination involving the adjustment of programs and service
levels, increases in user fees and adjustments in the capital program.
In response to a question from Alderman Galloway, Mr. Gazzola explained that it has been the
practice of the City to accumulate a surplus of approximately $1,000,000.00 in any given year, with
anything over this amount being transferred to the Tax Stabilization Reserve Fund. He also noted
that traditionally the majority of the surplus derives from investment income earnings and
supplementary taxes, areas which are substantially related to economic growth.
Mr. Gazzola referred to the actions taken by staff, including the Kitchener Public Library, The
Centre In The Square and the enterprises, to address the impact of the Expenditure Control Plan
and the Provincial Sales Tax. In combination these two items have an impact of $965,000.00 in
1993 and $1,305,000.00 in 1994. Mr. Gazzola outlined the staff recommendation whereby these
amounts would be offset by general reductions totalling $665,000.00 and $705,000.00
respectively. He explained that these would occur as a result of changes in various sales tax
items, and adjustments to the budgeted inflation rate, equipment reserve charges and capital
expenditures. With respect to the latter, he pointed out that staff are recommending a cut of
$235,000.00 in 1993 and $658,000.00 in 1994.
Mr. Gazzola advised that the annualized impact of changes to the sales tax announced in the
recent Provincial budget is at present approximately $500,000.00 per year. He also noted that the
Fuel Tax Rebate has been eliminated and a significant capital outlay is now required to obtain a
comparable rebate. He noted that staff have discovered a number of these items to date after
examining the Provincial budget in detail. He added that there may be others that none of these
have been included in the budget calculations.
Alderman Ziegler questioned whether the City's group insurance policy includes out-of-country
insurance as was found to be the case in the Region of Waterloo. If so he asked whether any cost
savings could be realized by deleting this item. Alderman Ziegler indicated his willingness to put
forward a motion in this regard and Alderman Zehr asked that it be held in abeyance until later in
the meeting.
Mr. Gazzola pointed out that staff are suggesting that 1994 grant allocations be reduced by
approximately 1%. It was suggested that the organizations affected be placed on notice and
Alderman Stortz indicated that in his opinion it was incumbent upon Members of Council to
approach the Boards they sit on and advise them of the proposed reduction.
Mr. Gazzola reviewed the impact on municipal enterprises and outlined the suggested reductions
in individual department budgets using annualized figures for 1994. With respect to the Mayor
and Council budget, Alderman Wagner noted that the $1,000.00 reduction to the advertising
budget of the Local Architectural Conservation Advisory Committee is not sustainable and is
required to fulfil their mandate. Alderman Weylie also expressed concern over the proposed
reduction in the promotions budget of the Environmental Committee. It was agreed that Alderman
Wagner, Alderman Weylie and Alderman Zehr would indicate appropriate areas of reduction in the
Mayor and Council budget.
Alderman Lorentz inquired as to the dollar amount of tax arrears to date. Mr. Gazzola replied that
arrears presently total approximately $14,000,000.00 which translates to a 7-8% delinquency rate.
He stressed that his principal concern in assessing arrears is whether or not the debt is secured,
and as regards residential properties he expressed the
1. REVIEW OF 1993 BUDGET (cont.)
opinion that these are 100% collectible. Alderman Lorentz expressed concern over the
delinquency rate and suggested there is a need for creative solutions to facilitate the payment of
taxes given the present economic climate. In response to a question from Alderman Ziegler, Mr.
Gazzola advised that the present delinquency rate is slightly worse than the last recession but
FINANCE AND ADMINISTRATION
COMMITTEE MINUTES - 42 -
compares favourably to other municipalities.
JUNE 7, 1993
Mr. Gazzola then reviewed the adjustments proposed for each Department/Board budget and the
respective Department Head elaborated on the specific items.
Alderman Lorentz asked staff to report on the amount of overtime paid by each department over
the course of a year, and Mr. Gazzola agreed to obtain this information.
Alderman Wagner expressed concern over the possible adverse impact of the cuts involving the
infrastructure and service levels. Mr. McKay acknowledged that the cuts will be painful and may
be costly in the long run, however, each department was required to absorb its share of the
reductions and had little choice.
In reviewing the reductions proposed for the Parks and Recreation Department, Mr. Graham
referred to the closing of Wilson Pool in 1994. Alderman Ziegler indicated that if this action is
taken appropriate advance notice should be given to affected ratepayers. Mr. Graham also put
the Committee on notice as to an anticipated revenue shortfall of $50,000.00 due to the expiry of
an agreement with the City of Waterloo relative to use of the Breithaupt Centre facility. He also
noted that operating costs for the Kiwanis Pool are likely to be between $25,000.00 and
$30,000.00.
Alderman Ziegler requested further discussion on the proposed closing of Wilson Pool. He also
suggested that it may be an option to delay the opening of the ice rink at the new City Hall given
the anticipated operating cost of $83,000.00. Mayor Cardillo stated that he would not support the
closing of Wilson Pool. Alderman Wagner indicated he is uncomfortable with any proposal to
close the pool which is based solely on use statistics. He suggested that any such initiative should
be looked at in the context of overall service delivery and for this reason would not support the
closing. Alderman Zehr reminded the Committee that this option was mentioned in a recent
comprehensive report from Mr. P. Beaudry. Alderman Lorentz asked whether Wilson Pool is
profitable and Mr. Graham replied that no pool makes money, noting that the facility in question is
both old and small. Alderman Leadston asked whether staff had looked at the option of reducing
the hours of operation at other community pools in order to avoid closing any one facility.
Alderman Stortz asked that the report of Mr. Beaudry previously referred to be re-circulated to
Council.
A brief discussion took place concerning the Parking Enterprise deficit. Mr. Snow indicated that he
would be submitting a full report for consideration at the July 5, 1993 meeting of the Public Works
and Transportation Committee. The report will include a re-budgeting of the entire system and will
assess the impact of the Provincial Sales Tax.
Mr. L. Matthews outlined the proposed reductions relative to the Kitchener Public Library including
the elimination of one staff position due to retirement, and various other items. He advised that as
a result there will be a slight reduction in public service. Mr. Matthews also noted that the Province
has given verbal confirmation that the Library's per household subsidy may also be reduced. Mr.
McKay responded that if the Library suffers a further reduction in its conditional grant this amount
will be absorbed by the municipal corporation as a whole.
Alderman Zehr suggested that no specific action be taken at this time concerning grants and
contract services, pending the Province's response to the failure of "Social Contract" talks.
REVIEW OF 1993 BUDGET (cont.)
Alderman Wagner congratulated staff on their efforts in identifying areas for reduction and for their
willingness to shoulder the major impact of the cuts. He questioned the appropriateness of
Council's stated goal of a 0% tax increase in 1994 given the Provincial cutbacks. Alderman Zehr
replied that this remains his own personal goal and that he hopes it is still shared by other
Members of Council. Mr. McKay commented that the present circumstances have made the goal
harder to attain by approximately $500,000.00. Mr. Gazzola added that it will first be necessary to
assess the "Social Contract" costs before addressing the 1994 Pro Forma Budget.
On a motion by Alderman B. Stortz -
FINANCE AND ADMINISTRATION
COMMITTEE MINUTES
It was resolved:
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JUNE 7, 1993
"That Council adopt the staff recommendations outlined in the presentation to
the Finance and Administration Committee on June 7, 1993 regarding budget
modifications necessary to offset the grant reductions imposed under the
Province's Expenditure Control Plan and changes in the Ontario Sales Tax."
On a motion by Alderman J. Ziegler-
It was resolved:
"That staff of the Administrative Services Department investigate and identify
the potential cost savings to the municipality of excluding out-of-province
and/or out-of-country insurance from its group policy and report back to the
Finance and Administration Committee."
Alderman Zehr extended his thanks to Mr. McKay, the Department Heads and other City staff for
their efforts in addressing the grant reductions and related Provincial budget costs.
Committee members were also provided this date with the Consolidated Financial Statement for
the four month period ending April 30, 1993 as appended to the covering letter of Mr. J. Gazzola
dated June 7, 1993.
2. ADJOURNMENT
On motion, the meeting adjourned at 4:20 p.m.
G. Sosnoski
Manager of Corporate
Records/Assistant City Clerk
