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SPECIAL FINANCE & ADMINISTRATION COMMITTEE MINUTES
JULY 11, 1994
CITY OF KITCHENER
The Finance and Administration Committee met this date, commencing at 4:15 p.m., under the
Chairmanship of Councillor C. Zehr, with the following Members present: Mayor D.V. Cardillo,
Councillors B. Stortz, J. Ziegler, T. Galloway, C. Weylie, G. Leadston, G. Lorentz, M. Wagner and M.
Yantzi.
Others present: Messrs. T. McKay, J. Gazzola, L. Ryan, T. Clancy, R. Arnot and G. Sosnoski. Ms. P.
Walshe was in attendance on behalf of the Kitchener Public Library.
1995 PRO FORMA BUDGET
Mr. Gazzola presented the 1995 Pro Forma Budget and indicated that one percentage point has a
value of $575,000.00, with a tax impact on the average household of approximately $5.00. He
referred to the factors affecting mill rates, cumulative mill rate growth as well as annualization
factors totalling $455,000.00. With respect to new factors, he noted a proposed 1% increase
($410,000.00) to the fringe benefit rate. Mr. Gazzola pointed out that the rate has not been
adjusted for the past seven years and that there have been a number of increases in such areas
as OHIP premiums and Unemployment Insurance rates which have created a negative position.
Mr. Gazzola also noted that supplementary assessment charges in 1995 resulting from recent
Provincial legislation have been estimated at approximately $500,000.00. Councillor Galloway
noted that the City could potentially chargeback some of these costs to the property owner, and
asked whether this has been taken into account. Mr. Gazzola replied that the figure does not
reflect any chargebacks and Mr. McKay added that there is some doubt as to whether there is
legislation which would allow the City to bill property owners for supplementary assessment
charges. He also questioned whether it would be right to charge an owner to have property
assessed for tax purposes.
Councillor B. Stortz entered the meeting at this time.
Mr. Gazzola referred to Council's earlier consideration involving a reduction in the 15% tax arrears
interest rate, and noted that the $250,000.00 amount budgeted under new factors reflects a
reduction of 3%. Mr. Gazzola advised that the Tax Stabilization Reserve Fund which is
traditionally budgeted at $1,750,000.00 presently has a $350,000.00 shortfall. Mr. Gazzola also
referred to a post Social Contract impact involving the Transit operation which would have a
negative effect of approximately $300,000.00. He explained that this is the only area of the City
where compensation is presently being made through wage concessions, with few opportunities
for staff reduction. He also stated that this situation would have a double impact in 1996. In
response to a question from Councillor Stortz, Mr. Gazzola advised that during the term of the
Social Contract staff in this area are not being paid for lunch breaks. With regard to the closing
surplus, Mr. Gazzola noted an anticipated shortfall of approximately $300,000.00 based on the
1994 cost of supplementary assessment and an overage in the winter control budget. Mr. Gazzola
then reviewed the revenue and expenditure worksheets, noting that there has been no inflationary
increase budgeted for wages or salaries, including boards and contracts. It was also noted that
there has been no increase forecasted relative to Provincial grants, assessment growth has been
budgeted at .75% and that an inflationary increase of 1.8% has been calculated relative to user
fees, transit fees, transfers from enterprises and sundry income. In summary Mr. Gazzola stated
that a net levy increase of $2,824,000.00 has been projected, with a corresponding mill rate
increase of 4.91%. Mr. Gazzola also referred to a tentative schedule wherein Council would adopt
both the Capital and Operating Budgets on January 20, 1995.
Councillor Zehr questioned whether it is advisable for the Finance and Administration Committee
to consider the Operating Budget in December. Mr. McKay commented that a delay in this review
may be necessary, since there will be a minimum of three new Council members requiring
orientation. Councillor Stortz indicated that he was in favour of delaying the review for this reason.
Councillor Wagner suggested that the learning curve for new Council members will be steep
regardless of the budget process and suggested that this is not an appropriate rationale for delay.
Councillor Ziegler suggested that the matter be raised with the new Council and that
arrangements be made to double book the Council Chamber for two sets of budget meetings
covering December, 1994 to February, 1995.
SPECIAL FINANCE & ADMINISTRATION COMMITTEE MINUTES
JULY 11, 1994
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CITY OF KITCHENER
1. 1995 PRO FORMA BUDGET (cont'd.)
On motion by Councillor G. Lorentz -
it was resolved:
"That the tentative 1995 Budget schedule presented to the Finance and Administration
Committee on July 11, 1994 as part of the Pro Forma Budget be accepted as proposed."
Mr. Gazzola also indicated that he would develop an alternate schedule that would have the
impact of delaying the entire process for approximately one month.
The Committee then considered the preliminary percentages set out in the Revenue Worksheet.
Mr. McKay noted that the general inflation rate is a separate issue relative to both revenues and
expenditures. He pointed out that past practice has indicated it is best to budget small,
incremental inflationary increases as opposed to implementing larger catchup increases at a later
date. He also suggested that transit fees should not be increased in 1995.
Committee members then substituted various revenue percentages and reviewed the
corresponding mill rate impacts. Mr. McKay recommended a general 2% increase in user fees,
with no increase in transit fees. He added that the Transit Division will bring forward a report to the
August 15, 1994 Finance and Administration Committee meeting relative to past increases in cash
fares and passes. Councillor Galloway inquired whether the Transit Division is projecting an
increase or a decrease in ridership, and Mr. McKay replied that no increase in ridership is forecast
in the Pro Forma Budget figures. Councillor Wagner suggested that any movement in transit fees
should be related to the strategies under development by the Division.
In response to a question from Councillor Yantzi concerning the percentage of transfers from the
municipal enterprises, Mr. Gazzola pointed out that these were increased in 1994 by 5%, which is
approximately 3 percentage points higher than the inflation rate. Mr. McKay suggested that for
consistency the projected transfers from enterprises should be increased from 1.8% to 2%, and
that sundry income be budgeted at 5.5%. Councillor Ziegler inquired as to the impact on
investment income in the event interest rates remain at their current levels, and Mr. Gazzola
suggested that income would increase by approximately 3%. Councillor Ziegler asked that sundry
income be increased from 1.8% to 3%. Councillor Galloway requested an historical perspective
on assessment growth and Mr. Gazzola advised that there has been no growth over the past two
or three years, but that over a ten year period growth has averaged 2%.
The Committee then reviewed the expenditure worksheet. Councillor Zehr inquired as to the
origin of the 1.8% inflation figure used for capital and other expenses. Mr. Gazzola replied that
this had been selected on the basis of an informal survey of economists and brokerage houses
which produced a general inflation consensus of between 1.6 and 2%. Councillor Ziegler
suggested a guideline of 0% inflation for all department budgets. Councillor Weylie cautioned that
it may not be wise to set the inflation rate at 0 given the recent increase in interest rates.
Mr. McKay asked whether it would be possible to phase in the proposed fringe benefit rate
increase over two years. Mr. Gazzola replied that staff had considered phasing the increase, but
have concerns that if the Unemployment Insurance rate increases again, this could be
problematic. He noted that an annual assessment is begun each summer, and that staff will be in
a better position at the end of the year to evaluate the possibility of a phase-in.
Mr. McKay noted that the $500,000.00 budgeted amount relative to supplementary assessments
appears to assume a sharp increase. Mr. Gazzola clarified that approximately 3,000 such
assessments were undertaken last year, and if the number remains the same, the budget
implication would be $350,000.00. Mr. McKay suggested that the $500,000.00 budget figure be
reduced to $350,000.00. Councillor Galloway pointed out that this budget amount assumes that
no revenue is generated and that the Association of Municipalities of Ontario are unsuccessful in
reversing the Province's position. Mr. McKay advised that staff would determine whether the City
can legally charge a fee for supplementary assessments, and repeated his earlier comment
1. 1995 PRO FORMA BUDGET (cont'd.)
SPECIAL FINANCE & ADMINISTRATION COMMITTEE MINUTES
JULY 11, 1994 - 69 -
CITY OF KITCHENER
that in his opinion such a charge is basically unfair. Councillor Galloway clarified that there may
be some items, such as an assessment to change school support, where a charge may be
appropriate. Councillor Zehr referred to communication taxes and Mr. Gazzola explained that the
Pro Forma Budget does not reflect a further erosion of telephone/telegraph taxes which could
occur at a future date.
The Committee then considered the proposed reduction in the arrears interest rate from 15% to
12%. Councillor Yantzi offered the opinion that the budget should reflect existing policy, and that if
Council changes its position in this regard the proposed reduction can be incorporated into the
budget at a later date. Councillor Ziegler stated that it was his understanding Council had
instructed that this item be added to the 1995 budget, but that at minimum it should be highlighted
for consideration later in the process.
On motion by Councillor J. Ziegler -
it was resolved:
"That notwithstanding any subsequent change in policy, the $250,000.00 amount relative to
a reduction in the interest charge on tax arrears, remain in the 1995 Pro Forma Budget."
Mr. McKay indicated that staff would submit a report on the Tax Stabilization Reserve Fund after
financial statements are prepared, and will recommend a method to rejuvenate the Fund to at least
1997. On this basis, Mr. McKay recommended that the Pro Forma Budget be amended to indicate
that the balance available would be $1,750,000.00 rather than $1,400,000.00.
Mr. McKay also referred to a proposal which would eliminate the Parking Enterprise deficit, and
the annual parking grant made to the Enterprise by the City. This would have a positive impact of
$100,000.00. Councillor Zehr indicated that a report in this regard would be available in August.
The Committee then considered the post Social Contract item relative to the Transit Division. Mr.
McKay explained that staff are considering union negotiations relative to the possible hiring of as
many as 25 part-time bus drivers. This would be on the basis that part-time positions would never
exceed a fixed percentage of the total driver pool. Such an arrangement would eliminate the
Social Contract obligation on a sustainable basis. Mr. Gazzola added that this item was included
in 1995 Pro Forma Budget to draw Council's attention to a potential problem in 1996. Councillor
Ziegler responded that if the problem relates to the 1996 budget, it should not be included in the
1995 Pro Forma. Councillor Yantzi suggested that the budget line be left in with no corresponding
amount. Councillor Stortz agreed that the item should be removed entirely and dealt with on a
City-wide basis, since funds are not being set aside for other employee groups.
On motion by Councillor J. Ziegler -
it was resolved:
"That the budget line and amount relative to the post Social Contract impact involving the
Transit Division be deleted from the 1995 Pro Forma Budget."
Councillor Galloway referred to the projected $300,000.00 shortfall in the closing surplus, and
asked whether any contingency plan had been developed for the balance of the fiscal year which
would offset this amount on a one time basis. Mr. Gazzola reminded the Committee that each
year staff have to attain a $1,100,000.00 surplus, and Mr. McKay noted that in 1994 attaining the
first $800,000.00 is a challenge. He noted various initiatives underway to reduce expenditures,
including the elimination of the Capital Contingency and the Administrative Review of job
vacancies, and suggested that similar expenditure reduction measures have not been
demonstrated by Council in the first six months of this year. He referred specifically to the area of
grant requests. Mr. McKay noted that City departments have operated for the past two years
1995 PRO FORMA BUDGET (cont'd.)
without any inflationary increases and staff have been reduced through early retirement incentives,
all of which makes it more difficult to further reduce expenditures. He stated that staff will continue
to work on expenditure reduction, and if possible, will meet the $1,100,000.00 target.
Moved by Councillor J. Ziegler -
SPECIAL FINANCE & ADMINISTRATION COMMITTEE MINUTES
JULY 11, 1994
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CITY OF KITCHENER
"That notwithstanding the 1995 Pro Forma Budget and the changes made at the July 11,
1994 meeting of the Finance and Administration Committee, Council establish an overall
1995 target/goal of a 0% increase in the mill rate."
Mayor Cardillo indicated that in his opinion a 1% increase is realistic, and he would not support a
0% target. Councillor Yantzi noted that in the past the City has generally kept its mill rate
increases at or near the rate of inflation and that arbitrarily specifying a 0% target is not advised.
He indicated that he would be more willing to support a range of percentages as opposed to a
single figure. Councillor Wagner offered the opinion that the intent of the motion is good but that a
0% increase should not be forced before examining the broad range of related issues and budget
areas. Councillor Ziegler clarified that the intent of the motion is to establish a target which would
allow departments to bring their budgets within range of 0%. Councillor Wagner indicated that he
could support the motion on the basis that its intent is to establish a general goal or target.
The previous motion by Councillor Ziegler to establish an overall 1995 goal of a 0% increase in
the mill rate was voted on and CARRIED.
By general consent, it was agreed that the recommendation relative to the mill rate target would be
brought before Council later this date for ratification. It was noted that as a result of the following
changes made this date the percentage mill rate increase required had been reduced to 1.46%.
Item From To
New Factors - Fringe Benefit Rates +1% ($410,000.) -> +.5%
($2O5,OOO.)
- Supplementary Assessment
Charge $500,000. -> $350,000.
Other Factors-
Balance available (Tax
Stabilization Reserve Fund)
- Parking Grant
$1,400,000. -> $1,750,000.
0 -> (SI00,000.)
Revenue Worksheet
potential
interest
- User Fees, transfer from
Enterprises 1.8% -> 2%
- Transit Fees 1.8% -> 0%
- Sundry Income 1.8% -> 2%
increase
income)
(plus
in
Expenditure Worksheet - Inflation, other expenses
and capital expenses
1.8% -> 0%
Mr. McKay also asked that another line be added to indicate that targeted budget adjustments total
$842,000.00.
ADJOURNMENT
On motion, the meeting adjourned at 6:00 p.m.
SPECIAL FINANCE & ADMINISTRATION COMMITTEE MINUTES
JULY 11, 1994
-71 -
CITY OF KITCHENER
G. Sosnoski
Manager of Corporate
Records/Assistant City Clerk
