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HomeMy WebLinkAboutFCS Agenda - 2020-01-20 - Final Budget1 Special Finance & Corporate Services Committee Agenda E'aTcHENER Office of the City Clerk 2020 Final Budget Day Kitchener City Hall 200 King St. W. - Floor Monday, January 20 2020 Kitchener ON N2G 4G7 ye a � s 9:30 a.m. - 4:30 p.m. Council Chamber Page 1 Chair - Councillor S. Davey Vice -Chair - Councillor J. Gazzola Discussion Items 1. FIN -20-001 - 2020 Final Budget • Overview • Boards ➢ Kitchener Public Library ➢ Centre in the Square • Enterprise Operating Budgets ➢ Building ➢ Golf ➢ Parking ➢ Gas ➢ Water ➢ Sanitary Utility ➢ Stormwater Utility • Capital Budget • Tax Supported Operating Budget • Resolutions NOTE: Members are encouraged to bring previously circulated budget materials for use as reference for this meeting. Any recommendations from the Committee regarding the above matters will be considered at a special Council meeting to be held immediately following this meeting. The Committee will recess for lunch at 12:00 noon. Jeff Bunn Manager, Council & Committee Services/Deputy City Clerk ** Accessible formats and communication supports are available upon request. If you require assistance to take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994 ** 2020 Final Budget Day Table of Contents The major sections of the budget are noted in the table below. Enterprise Operating Budgets 25 • Building 27 • Golf 28 ■ Parking 29 ..e ■ Gas 1 34 1 Water 39 • Sanitary • Stormwater Capital Budget • Strategic Items ($3.5M in Capital) Operating Budget 40 Staff Report l Comparative Budget by Division r Strategic Items ($360K in Operating Opening Remarks from the CFO 8 Overview 16 52 Boards 54 20 61 • Kitchener Public Library (KPL) 63 21 65 • Centre in the Square (CITS) 67 24 Enterprise Operating Budgets 25 • Building 27 • Golf 28 ■ Parking 29 ..e ■ Gas 1 34 1 Water 39 • Sanitary • Stormwater Capital Budget • Strategic Items ($3.5M in Capital) Operating Budget 40 14 42 45 57 r Strategic Items ($360K in Operating 60 Resolutions 72 In addition to the major sections noted above, the budget document also includes issue papers (IPs) that provide information on notable topics. They can be found in the budget document as noted below. Issue Paper-1MWW Page BD 01— Additional Staffing at Kitchener Public Library 22 BD 02 — Increase to the Parking Dividend 30 BD 03 — Private Property Tree Planting 36� BD 04 — Operating Budget Impact of the Capital Budget Transfer ! 46 BD 05 — Continued Support for Resident -Led Neighbourhood Projects (trove My Hood.) ! 47 BD 06a — Implementing the City's Corporate Climate Action Plan (CorCAP) 50 BD 06b — Implementing the City's Corporate Climate Action Plan: Follow-up 52 BD 07 — Continue Participatory Budgeting Community Engagement Process 54 BD 08 — Community Grant Funding (Tier 1 & Tier 2) 61 BD 09 — Sustainable Urban Forestry Strategy Implementation Options 63 BD 10 — Affordable Housing Options (Amended) 65 BD 11a — Expand Leisure Access to Neighbourhood Association Programs 67 BD 1116— Financial Support for Neighbourhood Associations 70 l Staff Report K u Financia! Services Department www.kitchener.ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: January 20, 2020 SUBMITTED BY: Ryan Hagey, Director of Financial Planning, 519-741-2200 x 7353 PREPARED BY: Ryan Hagey, Director of Financial Planning, 519-741-2200 x 7353 WARD (S) INVOLVED: All DATE OF REPORT: December 3, 2019 REPORT NO.: FIN -20-001 SUBJECT: 2020 Final Budget RECOMMENDATION: For Discussion BACKGROUND: The budget is the City of Kitchener's annual financial plan, and is the primary basis of financial decision making. The budget process allows Council to prioritize the programs and services delivered by the City and sets direction for the work to be completed over the upcoming year as well as future years referenced in the budget forecast. The impact of the 2020 budget on the average homeowner is summarized in the graphic below. In addition to continuing to fund core services, the 2020 budget also includes flexibility and options for Council to invest in priority areas that help advance work articulated in the City's Strategic Plan, and other areas of interest to Council and the community. This final budget day report and supporting information is purposely short as detailed reports and presentations on the Operating and Capital budgets were already considered and discussed by Committee in November/December 2019. This final budget day package is meant to supplement those more thorough budget documents and is primarily meant to provide updates on the Operating and Capital Budgets as well as information required by the Municipal Act. REPORT: Operating Budget Summary The proposed tax rate increase is 2.2%, which equates to an additional $24 per year for the average Kitchener home. The final tax rate increase will be decided as part of the Final Budget Day deliberations. The Water Utilities (water, sanitary, and stormwater) and Gas utility rate increases have already been approved by Council in separate reports. Included in the proposed tax rate increase of 2.2% is $360,000 of unallocated funding for Council's direction. The four potential areas of investment are Community Grants, Sustainable Urban Forest, Affordable Housing, and Leisure Access. More details about each of these areas, as well as other supplemental information requested during operating budget review, are included in the Final Budget Day package in the form of an issue paper. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. FINAL - 1 Capital Budget Summary The proposed Capital Budget includes more than 500 projects with a total cost over the 10 years of roughly $1.413. In addition to the proposed capital budget, Council was provided with three areas of potential investment for up to $3.5M of available capital funding (Love My Hood, Corporate Climate Action Plan, and Participatory Budgeting). To assist with final decisions on how to invest available funds, a small number of capital follow up issue papers were requested during the Capital budget review and are included as part of this Final Budget Day package. 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 $47.9M was recorded in the 2018 consolidated 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 consolidated financial statements, was $3.2M ($49.1 - $45.9M). If these expenses were excluded in the financial statements, the 2018 accumulated surplus would increase by $51.1 M (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. FINANCIAL IMPLICATIONS: The financial impacts on the average homeowner of services provided to citizens by the City of Kitchener are shown in the table below. FINAL - 2 Taxes Storm Water Water Sanitary 'dotal 2,961 $ 3,042 $ Ak81 2.75% Assumptions: City Taxes: Current Assessed Value (CVA) of $318,000 Storm Water: property classified as Residential Single Detached Medium Water & Sanitary: water consumption of 175m3 Natural Gas: gas consumption of 2,100m3 COMMUNITY ENGAGEMENT: Citizens have an opportunity to provide input about priority areas of the budget through a number of processes. Their input comes through public consultation efforts for comprehensive master plans (e.g. Leisure Facilities Master Plan), strategies (e.g. Urban Forestry Strategy, Customer Service Strategy), or specific issues (e.g. City Hall Outdoor Spaces). 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 approved priorities and allocates funds to bring these concepts into reality. For the 2020 budget process, staff will continue to employ a suite of traditional and electronic engagement methods in an effort to effectively inform and consult citizens. Staff will proactively provide information about the budget process via media outreach and the City's website. Citizens are encouraged to provide their input by: • Writing, emailing or phoning City Hall • Attending the public input session planned for January 13, 2020 • Responding to the City's Face book/Twitter posts about the budget Utilizing Engage Kitchener online budget survey Providing feedback on the 2020 budget options using the online budget allocation tool Contacting their ward councillor FINAL - 3 Change 2019 2020 $ % $ 1,113 $ 1,137 $ 24 2.20% $ 175 $ 185 $ 10 5.00% $ 435 $ 450 $ 15 2.90% 3 543 $ 568 S 25 3.30% 'dotal 2,961 $ 3,042 $ Ak81 2.75% Assumptions: City Taxes: Current Assessed Value (CVA) of $318,000 Storm Water: property classified as Residential Single Detached Medium Water & Sanitary: water consumption of 175m3 Natural Gas: gas consumption of 2,100m3 COMMUNITY ENGAGEMENT: Citizens have an opportunity to provide input about priority areas of the budget through a number of processes. Their input comes through public consultation efforts for comprehensive master plans (e.g. Leisure Facilities Master Plan), strategies (e.g. Urban Forestry Strategy, Customer Service Strategy), or specific issues (e.g. City Hall Outdoor Spaces). 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 approved priorities and allocates funds to bring these concepts into reality. For the 2020 budget process, staff will continue to employ a suite of traditional and electronic engagement methods in an effort to effectively inform and consult citizens. Staff will proactively provide information about the budget process via media outreach and the City's website. Citizens are encouraged to provide their input by: • Writing, emailing or phoning City Hall • Attending the public input session planned for January 13, 2020 • Responding to the City's Face book/Twitter posts about the budget Utilizing Engage Kitchener online budget survey Providing feedback on the 2020 budget options using the online budget allocation tool Contacting their ward councillor FINAL - 3 PREVIOUS CONSIDERATION OF THIS MATTER: The 2020 budget has been discussed in detail by Council during previous meetings set aside exclusively to consider the budget. The reports and meeting dates are: • FIN -19-085, 2020 Operating Budget (November 25, 2019) • FIN -19-086, 2020 Capital Budget and 10 -Year Forecast (December 2, 2019) As well, the City hosted a stand-alone public input meeting on January 13, 2019 regarding the budget. ACKNOWLEDGED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services FINAL - 4 d ( '6 ma C C d i d E O E EZ U o Z N , to i N ! 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Q G% v> N v v U oC x � N (a t= E Uj i W O W O Q W U a 0 W d d w W X OC W Z T- 04 Q Z LL CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 01- Additional Staffing at Kitchener Public Library FUND: Operating DEPARTMENT: Kitchener Public Library PREPARER: Mary Chevreau, CEO BUDGET IMPACT: $146,000 annual increase During the Operating budget review session, Library staff was directed to complete an issue paper regarding the addition of two full-time positions for the Central Library. Through the support of Council and the citizens of Kitchener, the Kitchener Public Library has been able to offer innovative programs and services throughout the system — seeing incredible growth both online and in-person each year (just over 3 million visits to the library in 2019). We are open more hours than any other facility in the City —16,788 hours/year, employing 116 FTEs. Most of the growth is at our flagship Central Library, a cultural hub and destination for many. We are considered leaders in library service and programs throughout Canada and the USA and in fact, were recently featured in Public Library Magazine — a US trade journal with circulation in the thousands — on our innovative approach to embedding outreach workers within our staff. But more importantly, we are viewed as one of the most important cultural hubs by our citizens. As we continue to develop unique and meaningful programs and services - whether that's teaching kids to code in virtual or augmented realities, helping job seekers and new Canadians develop basic computer skills to complete online forms to seek meaningful employment, or helping our most vulnerable citizens find housing, medical assistance or other services — we are finding that interactions are requiring more specialized skills and longer (often one-to-one) sessions. Through analysis, staff believe adding two full-time positions to Central will allow front-line staff to support the increased interest and need for library services. Currently staff are not able to effectively deliver the caliber of services expected by them or our customers. By increasing staff positions, the Library will be able to continue the level of service to support our core strategic goals of fostering belonging, igniting community conversations, providing bold leadership and working together. Additional operating funding to increase staff by two full-time positions, starting in September 2020 and continuing through 2021 forward. FINAL - 22 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER September — December 2020 financial impact: $48,000 adding two positions for a period of four months. January 2021— December 2021 financial impact: $146,000 for two positions on an annual basis. The incremental impact from September 2020 implementation is $98,000. The Library is asking Council to consider increasing our operating budget in 2020 and 2021 to support two additional full-time positions. These net new positions will allow the library to hire the kind of diverse talent needed in our library, as well as offer additional services when working with our customers. 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In addition, staff was directed to provide a return on investment calculation using the value of the City's paid parking assets. In 2019, the Parking enterprise is expecting a greater than anticipated revenue due primarily to negotiated short-term monthly parking arrangements as a result of major repairs on privately owned parking structures and major construction projects. It is worth noting that these agreements are short term in nature and are not a sustainable, reliable source of revenue. The proposed budget, noted in the table below, shows Parking at a breakeven position in the Net Revenue (Expense) line for 2020 and 2021, before anticipated surpluses of nearly $200,000 in 2022-2024. This means that any increase to the dividend paid to the City, whether ongoing or one-time, will create a deficit to the Parking enterprise. Typically budgeted deficits are to be avoided, but where there have been some in recent years (Building, Gas), it has been to reduce/hold flat user rates or fund increased capital programs. It has not been done to increase a benefit to a different user base (property tax payers versus enterprise customers). Net Revenue (Expense) (132) 623 0 1 195 182 197 " Transfer (to)/from Stabilization Reserve (0) (1) (195) (182) (197) Dverall Enterprise Result (132) 623 - - - STABILIZATION RESERVE FUND Budget Projected Budget Budget Budget Budget Budget (009s) 2019 2019 2020 2021 2022 2023 2024 REVENUE (132) 623 0 1 195 182 197 Net Profit before Dividend 1,768 2,523 1,900 1,901 2,095 2,082 2,097 Dividend Transfer to City 1,900 1,900 1,900 1,900 1,900 1,900 1,900 Net Revenue (Expense) (132) 623 0 1 195 182 197 " Transfer (to)/from Stabilization Reserve (0) (1) (195) (182) (197) Dverall Enterprise Result (132) 623 - - - STABILIZATION RESERVE FUND Opening Balance 1,647 1,647 1,273 1,278 1,300 1,311 1,320 Add: Transfer (to)/from Enterprise (132) 623 0 1 195 182 197 Add: Interest Revenue (Expense) 43 43 33 33 34 34 34 Deduct: Transfer to Capital Reserve Fund (1,040) (28) (13) (218) (207) (208) Closing Balance 1,558 1,273 1,278 1,300 1,311 1,320 1,343 Minimum Benchmark (10% of total revenue) 739 849 852 867 874 880 895 Maximum Benchmark (15% of total revenue) 1,109 1,273 1,278 1,300 1,311 1,320 1,343 FINAL - 30 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Further, the Parking Enterprise is responsible for funding all of its operating and capital expenditures. The current 5 -year projection shows this will be possible, but the financial condition of Parking contains less upside potential for ongoing, increasing revenue generation and more downside risk in the form of: • Increased capital costs due to aging parking infrastructure • Funding requirements for increased cycling infrastructure • Potential loss of surface parking lots due to redevelopment • Monthly rates that are greater than local competitors Finally, the net book value of the City's Parking Enterprise assets included in the 2018 financial statements is $32.1M. A dividend payment of $1.9M represents a return on assets of 5.9%. This rate of return is planned to be reviewed as part of the development of a Dividend Policy as articulated in action 5.3 of the City's Long Term Financial Plan. Any change to the dividend now pre-empts the policy work, which will comprehensively review the rationale for enterprise dividends and determine appropriate amounts. For the reasons noted above, staff does not recommend increasing the dividend paid by Parking to the City's tax base. However, a one-time special dividend (for one-time capital expenditures) based on strong operating results is strongly preferred over an ongoing dividend increase. Council's request for additional information includes 1) a permanent increase to the annual dividend or 2) a one-time increase in the dividend. These two scenarios are explored below. Scenario 1: Permanent Increase A permanent increase to the dividend amount means there would be ongoing funding available to the tax based budget. This could be used for the operating budget, or an ongoing capital program. The two options requested by Council are modelled below. A. $50,000 Permanent Increase to Dividend Budget Projected Budget Budget Budget Budget Budget (000's) 2019 2019 2020 2021 2022 2023 2024 REVENUE Net Profit before Dividend 1,768 2,523 1,900 1,901 2,095 2,082 2,097 Dividend Transfer to City 1,900 1,900 1,900 1,900 1,900 1,900 1,900 Additional Dividend Transfer 50 50 50 50 50 Net Revenue (Expense) (132) 623 (50) (49) 145 132 147 Transfer (to)/from Stabilization Reserve 50 49 (145) (132) (147) Dverall Enterprise Result (132) 623 - - - - - STABILIZATION RESERVE FUND Opening Balance 1,647 1,647 1,273 1,256 1,240 1,311 1,320 Add: Transfer (to)/from Enterprise (132) 623 (50) (49) 145 132 147 Add: Interest Revenue (Expense) 43 43 33 33 32 34 34 Deduct: Transfer to Capital Reserve Fund (1,040) - - (107) (157) (158) Closing Balance 1,558 1,273 1,256 1,240 1,311 1,320 1,343 Minimum Benchmark (10% of total revenue) 739 849 852 867 874 880 895 Maximum Benchmark (15% of total revenue) 1,109 1,273 1,278 1,300 1,311 1,320 1,343 FINAL - 31 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER $100,000 Permanent Increase to Dividend 2,095 2,082 Budget Projected Budget (000's) 2019 2019 2020 REVENUE 100 100 Net Profit before Dividend 1,768 2,523 1,900 Dividend Transfer to City 1,900 1,900 1,900 Additional Dividend Transfer 623 100 Budget Budget Budget Budget 2021 2022 2023 2024 1,901 2,095 2,082 2,097 1,900 1,900 1,900 1,900 100 100 100 100 Net Revenue (Expense) (132) 623 (100) (99) 95 82 97 Transfer (to)/from Stabilization Reserve 100 99 (95) (82) (97) Overall Enterprise Result 132 623 - - - - - STABILIZATION RESERVE FUND Budget Projected Budget (009s) 2019 2019 2020 Opening Balance 1,647 1,647 1,273 1,206 1,139 1,264 1,320 Add: Transfer (to)/from Enterprise (132) 623 (100) (99) 95 82 97 Add: Interest Revenue (Expense) 43 43 33 31 30 33 34 Deduct: Transfer to Capital Reserve Fund (1,040) - - - (59) (108) Closing Balance 1,558 1,273 1,206 1,139 1,264 1,320 1,343 Minimum Benchmark (10% of total revenue) 739 849 852 867 874 880 895 Maximum Benchmark (15% of total revenue) 1,109 1,273 1,278 1,300 1,311 1,320 1,343 Scenario 2: One -Time Increase A one-time increase to the dividend amount means there would be a single infusion of funding available to the tax based budget. This funding would not be replenished, and therefore should only be used for one-time capital expenditures, not ongoing operating or capital programs. The two options requested by Council are modelled below. B. $250.000 One -Time Increase to Dividend Budget Budget Budget Budget 2021 2022 2023 2024 1,901 2,095 2,082 2,097 1,900 1,900 1,900 1,900 Net Revenue (Expense) (132) 623 (260) 1 196 182 197 Transfer (to)/from Stabilization Reserve 260 (1) (196) (182) (197) Overall Enterprise Result 132 623 - - - - - STABILIZATION RESERVE FUND Budget Projected Budget (009s) 2019 2019 2020 REVENUE 1,647 1,647 1,273 Net Profit before Dividend 1,768 2,523 1,900 Dividend Transfer to City 1,900 1,900 1,900 Additional Dividend Transfer 195 182 250 Budget Budget Budget Budget 2021 2022 2023 2024 1,901 2,095 2,082 2,097 1,900 1,900 1,900 1,900 Net Revenue (Expense) (132) 623 (260) 1 196 182 197 Transfer (to)/from Stabilization Reserve 260 (1) (196) (182) (197) Overall Enterprise Result 132 623 - - - - - STABILIZATION RESERVE FUND Opening Balance 1,647 1,647 1,273 1,056 1,085 1,309 1,320 Add: Transfer (to)/from Enterprise (132) 623 (250) 1 195 182 197 Add: Interest Revenue (Expense) 43 43 33 28 28 34 34 Deduct: Transfer to Capital Reserve Fund (1,040) - - - (205) (208) Closing Balance 1,668 1,273 1,066 1,086 1,309 1,320 1,343 Minimum Benchmark (10% of total revenue) 739 849 852 867 874 880 895 Maximum Benchmark (15% of total revenue) 1,109 1,273 1,278 1,300 1,311 1,320 1,343 FINAL - 32 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER C. Reauested Proiection (One Time increase in 2020 - 5500.000 to dividend Budget 2024 2,097 1,900 Net Revenue (Expense) (132) 623 (500) 1 195 182 197 * Transfer (to)/from Stabilization Reserve 500 (1) (195) (182) (197) Overall Enterprise Result 132 623 - - - - - STABILIZATION RESERVE FUND Budget Projected Budget Budget Budget Budget (000's) 2019 2019 2020 2021 2022 2023 REVENUE 1,255 * Add: Transfer (to)/from Enterprise (132) 623 (500) 1 Net Profit before Dividend 1,768 2,523 1,900 1,901 2,095 2,082 Dividend Transfer to City 1,900 1,900 1,900 1,900 1,900 1,900 Additional Dividend Transfer - - 500 (142) Closing Balance 1,558 Budget 2024 2,097 1,900 Net Revenue (Expense) (132) 623 (500) 1 195 182 197 * Transfer (to)/from Stabilization Reserve 500 (1) (195) (182) (197) Overall Enterprise Result 132 623 - - - - - STABILIZATION RESERVE FUND Opening Balance 1,647 1,647 1,273 806 829 1,045 1,255 * Add: Transfer (to)/from Enterprise (132) 623 (500) 1 195 182 197 Add: Interest Revenue (Expense) 43 43 33 21 22 27 33 Deduct: Transfer to Capital Reserve Fund (1,040) - - - - (142) Closing Balance 1,558 1,273 806 829 1,045 1,255 1,343 Minimum Benchmark (10% of total revenue) 739 849 852 867 874 880 895 Maximum Benchmark (15% of total revenue) 1,109 1,273 1,278 1,300 1,311 1,320 1,343 Any additional dividend amount, whether it is ongoing or simply one-time, will result in a deficit in 2020 for the Parking Enterprise. As noted earlier in the issue paper, creating a deficit in Parking to benefit the tax supported budget instead of reducing Parking rates that are already at the top end of local comparators could be deemed unfair by Parking customers. In addition, a higher dividend puts the Parking Enterprise at increased financial risk and preempts a comprehensive review of dividend amounts paid to the City by applicable enterprises. That the dividend paid by Parking to the City's tax base remain at $1.9M. 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M M M O 00 M m n OA N 00 C71 M M N r -I r 'a O N N N m �T r-1 n O n O M M O O C -a M C71 Ln N Ln N 00 N r -I Ln u n N Ll1 00 Ln r1 M O lD M rw }0)� `1 O N ri c -I M M �T -i c 01 �Q M M v V N a O C71 0) O m r -I N M C71 O C Ln u a a O 00 O -1 00 00 M M 0) p0 � 00 O N N N N1:3- i --I c -a O r4 M 3 N vv > C: C: Laj N > OJ > N 0 i N 0 C +, 0 ate+ C a �0 S N m W X 0 0 i E E N o S] C O7of f0 O a O -iO C C� LA \ i i 0 s EE 0 >a C CL 0) LJ E > S a, £ aa a c N U 0 U C: U U C C y 00) i f0 — C t m ai v21 C C M f0 a-+ — 00 00 G CL 7 an O7 N L U Y 00H m E E N C CL c c — = c 'E t3 a uo =3 E E ++ a Ln > a m N�+ Lu N 0 X 0 m= O7 >(0 0- to f C7 Z * 0 Q 0 v C7 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 03 — Private Property Tree Planting FUND: Capital and Operating DEPARTMENT: Infrastructure Services — Gas & Water Utility PREPARER: Greg St. Louis, Director Gas & Water Utilities BUDGET IMPACT: Transfers fundine from one budeet to another During the Capital budget review session, staff was directed to explore whether the Gas Utility could fund the private property tree -planting program being operated through Reep Green Solutions (REEP). There was also question as to whether this would provide any 'carbon credit' against greenhouse gas emissions. In 2018, Council directed staff to enter into an agreement with REEP to support a tree -planting program on private properties. The agreement provided $40,000 annually in 2019, 2020 and 2021 as pilot/seed funding to BEEP, which is currently funded through the Parks & Cemeteries capital budget for Tree Planting. The program provides a member of the community with: • Expert support in assessing their property and desires from a tree; • Soil and site suitability review; • Help in selecting and purchasing a good quality locally sourced tree; • Support for homeowners to plant the tree; and • Maintenance and care tips and hints. These services would be subsidized to the homeowner; REEP would fund approximately 50% of the costs and the homeowner the remaining portion. In addition, REEP would provide community education support activities and training sessions to help facilitate further tree plantings within communities. In 2019, 50 supported projects were available through the program in Kitchener, against which more than 250 applications were submitted. By the end of 2019, almost 50 properties and owners had been supported in planting trees. Under current Provincial legislation, the gas rates charged by Kitchener Utilities (KU) are not regulated by the Ontario Energy Board (OEB), but are set by City Council. An important ratemaking principle to which the City has adhered to over the years is that there should not be ongoing cross -subsidization between the services provided by KU and other City departments. It has also been supported by the City's external auditors and reflected in the presentation of segmented utility financial information to demonstrate to readers that operating costs subsidies do not exist. Based on this principle staff has reviewed the various programs offered by KU to look for suitable funding sources. There is currently no legislated requirement for the City's Gas Utility to purchase carbon offsets or plant trees, so any venture into this space could be seen as subsidizing a program that should otherwise be funded by the tax base. The current greenhouse gases (GHG) reduction program is the federal government's carbon pollution pricing program, which a carbon charge applies to natural gas sold in Ontario. The FINAL - 36 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER carbon charge is collected by the gas utility and remitted monthly to Canada Revenue Agency and the City does not retain any of the funds. The next stage of the federal government's plan to reduce GHG is the implementation of a Clean Fuel Standard (CFS). The CFS will be a performance-based approach designed to incent the innovation and adoption of clean technologies in the oil and gas sector and the development and use of low -carbon fuels throughout the economy. The Clean Fuel Standard regulations will cover all fossil fuels used in Canada, but will set separate requirements for liquid, gaseous and solid fossil fuels. These policies work in concert to reduce emissions across the economy, and create incentives for innovation and clean growth. For natural gas, the CFS is expected to come into force January 1, 2023. At that time, Kitchener Utilities may have to incorporate renewable natural gas in the gas portfolio or invest in technology to reduce GHG emissions. Once the draft regulations are developed in 2021 a strategy will need to be developed. Staff evaluated potential program budgets from the gas utility to support the tree planting while there are no programs that are directly related, two program areas are described below. Council is cautioned that removing a project from a tax funded capital account and funding it from a Gas Utility capital or operating account is premature and could be interpreted as subsidizing property taxes. Demand Side Management capital account The Demand Side Management (DSM) capital account is used to fund rebates to KU gas customers who make investments in new technology to reduce their gas consumption. These rebates are applied to residential, industrial, commercial and institutional customers. In addition, this account is used to fund the City's portion of REEP's operating costs ($31,370 for 2020). The DSM budget is underfunded in relation to other energy utilities and it is difficult to compete and match competitive offerings. There is an expectation from residential and business customers that the gas utility will deliver programs that will help achieve GHG reductions, and meet targets that are set in the broader Community Climate Action Plan. This year, Kitchener Utilities delivered a furnace rebate program but had to suspend the program, as funding was exhausted. Gas Marketing operating account The Gas Marketing operating budget is used to communicate Kitchener Utilities programs and services. KU works with strategic partners such as TSSA, Kitchener Fire and the Region of Waterloo on promoting safety related items such as carbon monoxide safety, sewer safety and call before you dig. In addition, KU provides funding to the Low-income Energy Assistance Program (LEAP) to assist with customers who need emergency financial help to pay their gas bill. Further, this budget is used to provide sponsorship of community events, website updates/design, advertising for rates, promotions, and conservation programs. The marketing FINAL - 37 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER budget is also utilized for business development, customer research, marketing, radio and other media advertisement to increase sales. The private property tree -planting pilot is funded from the Tree Planting capital account in Parks & Cemeteries in the amount of $40,000/year for 2020 and 2021. Staff does not recommend the funding of a tree -planting program from the Gas Utility to ensure adherence to the ratemaking principle that there should not be cross -subsidization between the Gas Utility and other City services. 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As noted during the Capital budget presentation and Committee discussion, the $3.51VI available for Capital Strategic Initiatives is funded from two reserves; the Tax Capital reserve, and the Gas Utility Investment reserve. The Tax Capital reserve does not have a consistent and predictable funding source, as it is funded by capital closeouts (monies left over in a capital project after tendering and/or once it has been totally completed). Funding from capital closeouts vary significantly from year to year, so they are not a good funding source for ongoing costs such as the operating budget or an continuing capital program. The Gas Utility Investment reserve is funded every year through a dividend payment from the City's Gas Utility, meaning it has a consistent and predictable funding source. Each year a portion of the total dividend ($14.9M in 2020) is used to fund the operating budget ($8.9M in 2020), with the remaining amount available to fund the capital budget ($6.OM in 2020). If Council wants to divert some of the $3.51VI capacity in capital over to the operating budget, the most appropriate action would be to increase funding from the Gas Utility Investment reserve to the operating budget, given funding for this reserve and the operating budget are both ongoing. This would decrease the City's future funding flexibility though, since it would make the tax supported operating budget more dependent on the Gas Utility dividend. Any adjustment to the $3.51VI available in capital would have to be split across the 10 -year capital forecast, meaning the impact would be 1/10' of the amount reduced. For illustrative purposes, a reduction of $1M will be used. A $1M reduction to the funding pool of the 10 -year capital forecast capital would equate to a $100,000 reduction to the net tax levy ($100,000 = $11VI/10) or less than $1/year to the average homeowner. This would leave $2.51VI available to be allocated to capital priorities as part of the 2020 budget. If a different amount were considered, it would simply need to be divided by 10 to calculate the ongoing reduction to the net tax levy. Under any scenario, the unallocated amount from the Gas Utility Investment reserve would remain in the reserve and be available to fund capital priorities in the future. For information. FINAL - 46 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 05 - Continued Support for Resident -Led Neighbourhood Projects (Love My Hood) FUND: Capital DEPARTMENT: Community Services —Admin - Neighbourhood Development Office PREPARER: Josh Joseph, Supervisor, Neighbourhood Development Office BUDGET IMPACT: For Council's Direction STRAT PLAN: Core Service In 2017, following one of the most extensive community engagement processes in the City's history, Council approved Love My Hood as the City's guiding document for planning, building and supporting great neighbourhoods. At that time Council approved a three year schedule (2017 — 2019) for implementing the strategy's 32 recommended actions. 81% of those actions will have been completed by the end of 2019, with the remaining scheduled for completion in 2020. In order to fund the implementation of the strategy, City Council also approved the creation of a new Neighbourhood Development Reserve. As planned, funding in that reserve is projected to be fully spent or committed by the end of 2019. In September 2019, staff presented City Council with a report (CSD -19-020) that summarized the work that has been done over the past three years to implement Love My Hood and to increase the City's ability to support resident -led neighbourhood projects. That report also identified the operating and capital funding needed to continue the program beyond 2019. At that time City Council referred the financial impacts of continuing Love My Hood to the 2020 budget process. Over the past three years the City has supported 90 different resident -led #LoveMyHood projects, with more than 400 residents investing over 8,500 hours of volunteer time into their community. These resident -led projects have positively impacted thousands of residents across the City. Examples include: 9 new community gardens 3 new neighbourhood7 greening initiatives markets 6 traffic calming projects 5 public seating initiatives 7 neighbourhood art projects 4 community signage 4 tree planting initiatives 65 neighbourhood events projects Between 2017 and 2019 the number of resident groups accessing Love My Hood supports (financial, resources and staffing) has steadily increased: • Resident -led projects supported each year has increased from 13 in 2017 to 33 in 2019. • By the end of 2019, Love My Hood will have supported 110 unique neighbourhoods groups in 46 different neighbourhoods across the city. • The amount of financial support provided to resident groups is projected to more than double from $58,595 in 2017 to $122,140 in 2019. FINAL - 47 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Financial Support (Grants) for Resident -Led Projects: Over the past three years the number of resident groups accessing financial support for their resident -led project through a City grant has steadily increased. During that time period, the City has spent or committed a total of $330,985 in financial support to 78 different resident -led projects (as of October 31, 2019) through its Neighbourhood Matching Grant, Placemaking Grant and Community Garden Grant. In September 2019, City Council agreed to consolidate those three grants into a single Neighbourhood Matching Grant, subject to the 2020 budget process. Between 2017 and 2019, residents submitted 161 applications for Love My Hood grant funding totaling more than $1.2 million in requests for financial support — more than triple the amount of grant funding actually awarded. 64% of the grant applications received from residents were deemed eligible for a Love My Hood grant, but 37 of those projects were denied due to a lack of available funding. Those 37 projects had a total value of $439,126. 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Available Grant Funds vs. Funds Requested from 2017-2019 Grant Funds Awarded Funds Requested ■ Awarded ■ Eligible ■ Ineligible As demonstrated by the chart above, over the past three years residents have demonstrated a significant demand for financial support for their resident -led projects that has far outweighed the funding available. Given the significant interest residents have demonstrated for financial support through Love My Hood, staff believe it would be appropriate to increase the amount of funding the City provides to resident -led project through its Neighbourhood Matching Grant. In September 2019, City Council directed staff to bring forward options to increase Love My Hood grant funding as a part of the 2020 budget process. FINAL - 48 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER 1. Option #1— $1.5 million/ $150,000 per year for 10 years (2020 — 2029) 2. Option #2 — $1.75 million/ $175,000 per year for 10 years (2020 — 2029) 3. Option #3 — $2.0 million/ $200,000 per year for 10 years (2020 — 2029) In order to continue the #LoveMyHood program, as identified in CSD -19-020, two temporary positions within the City's Neighbourhood Development Office will need to be converted to permanent FTEs. In addition, in order to provide more proactive and strategic support to neighbourhoods across the city, the City's 4 current part-time Neighbourhood Liaison positions will need to be converted to full-time FTEs. The funding for these staffing changes has been built into staff's proposed operating budget and the request for FTEs is included in issue paper Op 06. For Council's direction. FINAL - 49 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 06a Implementing the City's Corporate Climate Action Plan (CorCAP) FUND: Capital DEPARTMENT: Development Services Department PREPARER: Claire Bennett, Corporate Sustainability Officer BUDGET IMPACT: For Council's Direction STRAT PLAN: Environmental Leadership BACKGROUND: In 2017, Council approved an 8% absolute Greenhouse Gas (GHG) reduction target to be achieved by 2026. The implementation plan (CorCAP), approved in 2019, contains a set of actions in the areas of City facilities, fleet, outdoor lighting and waste to meet the target. Using 2016 as a baseline, the City's corporate GHG target is ambitious yet achievable with strategic investments in facilities, fleet and outdoor lighting. The recent declaration by Council of a climate emergency has further emphasized the commitment to implementing the City's climate action goals. In 2018 the City's corporate annual GHG production was 10,256 tonnes of carbon emissions (tCO2e) with a 2026 target of 9,375 tCO2e. As the City expands (addition of new facilities and fleet to service growth) there will be additional GHGs added to the inventory. This means that the City will need to do better than its target in the years leading up to 2026 to accommodate growth. The primary goal of the CorCAP is to complete projects that achieve meaningful carbon reductions within City facilities, fleet and outdoor lighting. In addition to carbon reductions, the projects proposed below also help to implement the City's capital plans and align with asset renewal needs. Staff have identified a number of projects that could be implemented in 2020. Depending on Councils desired level of investment, all or some of the below projects would move forward and achieve carbon reductions and associated operating savings. The projects are ranked based on savings/cost (-) per tonne of GHG reduction, which considers capital cost, energy reduction and lifecycle of the asset; the projects are aligned with asset renewal and user and service improvements. FINAL - 50 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Option A This option includes projects 1, 2, and 3 and requires additional capital funding of $207,000 with an annual operating savings of $27,050. This set of projects would result in a reduction of 149 tCO2e annually. Appropriate energy savings from these projects will be directed to the energy reserve. Option B This option includes projects 1, 2, 3, 4a, and 5 and requires additional capital funding of $472,000 with an annual operating savings of $49,850. This set of projects would result in a reduction of 218 tCO2e annually. Appropriate energy savings from these projects will be directed to the energy reserve. Option C This option includes projects 1, 2, 3, 4b, and 5 and requires additional capital funding of $957,000 with an annual operating savings of $99,050. This set of projects would result in a reduction of 331 tCO2e annually. Appropriate energy savings from these projects will be directed to the energy reserve. For Council's direction. FINAL - 51 Annual Savings Annual Payback GHG pertonne Rank Project M Savings Period Reduction of GHG Notes M (years) (CO2e) Reduction ($) Hybrid mid-size SUV (5) $25,000 $6,250 4 14 $186 Aligns with asset replacement 1 (Incremental cost) schedule. Electric vehicles — (3) $42,000 $6,800 6 16 $115 Aligns with asset replacement 2 (Incremental cost) schedule De -stratification fans to $140,000 $14,000 10 119 $3 Improves user comfort in 3 reduce heating load addition to efficiency. (indoor pools) Battery idle -reduction $150,000 $17,800 10 41 $0 Uses battery or solar energy system (25 vehicles) to maintain safety and 4a operating equipment while Solar idle -reduction $35,000 system (5 vehicles) completing fieldwork rather than running the engine for power. Battery idle -reduction $600,000 $67,000 10 154 $0 Uses battery or solar energy system (100 vehicles) to maintain safety and 4b operating equipment while Solar idle -reduction $70,000 completing fieldwork rather system (10 vehicles) than running the engine. Solar wall to leverage $80,000 $5,000 16 28 $-44 A more innovative project 5 passive heating at that improves asset Forest Heights Pool performance. Option A This option includes projects 1, 2, and 3 and requires additional capital funding of $207,000 with an annual operating savings of $27,050. This set of projects would result in a reduction of 149 tCO2e annually. Appropriate energy savings from these projects will be directed to the energy reserve. Option B This option includes projects 1, 2, 3, 4a, and 5 and requires additional capital funding of $472,000 with an annual operating savings of $49,850. This set of projects would result in a reduction of 218 tCO2e annually. Appropriate energy savings from these projects will be directed to the energy reserve. Option C This option includes projects 1, 2, 3, 4b, and 5 and requires additional capital funding of $957,000 with an annual operating savings of $99,050. This set of projects would result in a reduction of 331 tCO2e annually. Appropriate energy savings from these projects will be directed to the energy reserve. For Council's direction. FINAL - 51 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 06b Implementing the Corporate Climate Action Plan: Follow-up FUND: Capital DEPARTMENT: Development Services Department PREPARER: Claire Bennett, Corporate Sustainability Officer BUDGET IMPACT: For Council's Direction STRAT PLAN: Environmental Leadership BACKGROUND: During the Capital budget review session, staff was directed to provide follow up information related to issue paper 'Cap 04 Implementing the Corporate Climate Action Plan' outlining the following: a) An alternate funding model for hybrid fleet conversions. Explore funding by operating savings as opposed to upfront capital contribution. b) Additional projects that could be completed if funding above Option C noted in Issue Paper Cap 04 was approved. c) Additional projects that could be completed if this project received $300,000 per year in 2021-2023. A) Fleet Funding Model The funding model for all of the investment opportunities listed in issue paper Cap 04 is an upfront capital investment, with operating savings paying back the original investment and then being available to be reinvested in other energy saving opportunities. For fleet investments, it was suggested to pay for them from an existing reserve which would then be paid back through operating savings over time. The problems staff see with this alternative are: • It treats fleet investments differently from other Corporate Climate Action Plan (CorCAP) investments; and • Operating savings will simply pay back the reserve without creating capacity to undertake other CorCAP investments Staff recommend using the original funding model articulated in issue paper Cap 04 for incremental hybrid and electric fleet costs in order to build a CorCAP program of ongoing work and to capture these paybacks to replenish the appropriate reserves. B & C) Additional Projects for Additional Funding With the assumption that Council supports Option C in Issue Paper Cap 04, staff have followed up with a series of additional project opportunities that support proposed capital renewal and existing capital plans for 2020. Depending on Council's desired level of investment, all or some of the below projects would move forward and achieve carbon reductions and operating savings. The projects are ranked based on savings/cost (-) per tonne of GHG reduction as well as alignment to asset renewal needs and plans. It is important to note projects that include fuel switching from natural gas to hydro -power have a higher capital cost and lower operating savings (but a larger carbon reduction), resulting in a higher cost per carbon reduction. Due to resourcing constraints, in order to deliver on the additional projects, a project management fee of 12% has been built into the capital cost. As well, since information about the projects is still fairly high level a contingency of 30% has been included for each project. Finally, available incentives have not been included in the project calculations. FINAL - 52 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Additional Opportunities 2020 Capital Projects Annual Payback Annual GHG Savings / Cost Ranking Project Capital Savings / Period Reduction (-) per Tonne Notes Cost Costs (-) (years) (CO2e) of GHG Reduction ($) KOF geothermal $100,000 -$10,000 NA 100-150 -11 Further improve functionality and hydronic reduce GHGs of a planned project. 1 improvements The cost per GHG reduction is due to application of a renewable technology involving fuel -switching Grand River Arena $140,000 $16,500 8 25 84 Exterior LED lighting, water de - upgrades aeration, variable speed pump, 2 condensing hot water heaters — expanding on facility Infrastructure Gap Investments for 2020 Breithaupt Centre $280,000 $15,000 18 10 -160 HVAC controls, exterior LED 3 upgrades lighting, heat recovery - expanding on facility Infrastructure Gap Investments for 2020 Centreville Chicopee $180,000 $7,000 25 25 -240 HVAC controls, interior and exterior Centre upgrades LED lighting/ controls, heat pump 4 system (renewable, fuel -switch) - expanding on facility Infrastructure Gap Investments for 2020 Energy Reserve Fund — $200,000 TBD TBD TBD TBD Top up the depleted fund to allow 5 one-time contribution the City to be `project -ready' for external funding opportunities Total $900,000 Alternatively, should Council wish to invest $300,000 of funding over three years beginning in 2021, it is recommended that the funding going to the energy reserve to use for efficiency projects that align with facilities capital replacement schedules in those years. The projects above are aligned with facilities work planned for 2020 and it would not be economical to go back to do additional work at these locations in future years. These additional opportunities (C+) present a set of additional projects with capital costs up to $900,000 that would result in further GHG reductions of up to 185 tCO2e. Further investments made to the energy reserve would see additional GHG reductions which does not include the savings and reductions from the energy reserve opportunities. For Council's direction. FINAL - 53 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 07 — Continue Participatory Budgeting Community Engagement Process FUND: Capital DEPARTMENT: Community Services — Neighbourhood Programs & Services PREPARER: Josh Joseph, Supervisor, Neighbourhood Development Office BUDGET IMPACT: For Council's Direction STRAT PLAN: Core Service Participatory budgeting is a process of engaging the community where residents are given control over a portion of the City's budget. It differs from traditional public engagement/consultation in that residents identify multiple priority projects and then decide which of the projects are funded. The ultimate decision by residents as to where and how funding will be spent is determined through some form of a vote. In 2017, the City partnered with the University of Waterloo to pilot participatory budgeting on two park redevelopment projects (Elmsdale and Sandhills). In June 2019 City staff and the University of Waterloo presented Council with the results of those pilots (FIN -19-050) which highlighted the successes of the pilot projects, as well as a number of lessons learned and changes that should be made to the program if it is going to continue. At that time Council directed staff to report back through the 2020 budget process on the "staffing and funding requirements for a permanent participatory budgeting solution." Findings from City's 2017 Participatory Budgeting Pilot: 1. The number of residents engaged through participatory budgeting was higher, and the quality of the engagement (in terms of idea generation, community dialogue and outcomes) was better than utilizing traditional engagement methods. Staff estimate approximately 25- 100 individuals get involved in a park redevelopment project through traditional engagement methods (e.g. town hall meeting, paper and online survey). By comparison, through the three rounds of engagement there were over 200 residents involved in the Elmsdale participatory budgeting process and over 200 residents in Sandhills. 2. The amenities residents chose through participatory budgeting for Elmsdale and Sandhills were not those that are commonly selected through the City's traditional community engagement approach when redeveloping a park. Given that the amenities chosen for the parks were ideas generated by residents themselves (and not City staff), we can be confident that the redeveloped park better reflects the desires of residents that live close to, and use the parks — meaning the City's financial investment into redevelopment of the parks will provide greater value to the community. 3. Future participatory budgeting processes should not be limited to park redevelopment projects because that limits the number and diversity of residents who may be interested/willing to engage in the process (e.g. people who use parks regularly are more likely to get involved while those who do not use them are less likely). Opening up the process FINAL - 54 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER to allow for resident -generated project ideas beyond parks would allow for ideas related to other community priorities (e.g. social, environmental). 4. Formal internal City processes and procedures are required to ensure the full coordination and cooperation of staff from many different areas of the City in order to effectively support residents engaging in participatory budgeting. This is especially important in order to ensure the outcome chosen by residents is achievable and doable. Processes and procedures developed to support resident -led neighbourhood projects through Love My Hood could be utilized to better support participatory budgeting and ensure a smooth and positive experience for residents. 5. The participatory budgeting process, which goes beyond the City's traditional engagement techniques, takes longer to complete and requires dedicated staffing to ensure the engagement process is truly effective. This is especially important given the binding nature of the community vote on how municipal funding is spent. The process of supporting residents engaging in participatory budgeting is very similar to the staff supports provided to resident - led neighbourhood projects through Love My Hood and the Neighbourhood Development Office. 6. Clear and dedicated staff leadership and support of the participatory budgeting process is required to manage the overall process, ensure residents receive necessary supports and public expectations are managed within the approved budget (to avoid going over budget). The City's existing Neighbourhood Development Office are well positioned to play that corporate leadership role. Proposal for Future Participatory Budgeting Process Understanding the lessons learned from the two 2017 participatory budgeting pilot projects and the City's three years of experience supporting similar types of resident -led projects through Love My Hood, the following is an overview of staff's recommended approach to participatory budgeting going forward: • Staff within the Neighbourhood Development Office should take the lead in administering the participatory budgeting process and be accountable for the program's success. They would also be accountable for ensuring projects are on budget. • Members of the City's Neighbourhood Liaison team should serve as primary supports to residents participating in the process and ensure effective engagement of all eligible residents. • The internal circulation process, created to support resident -led neighbourhood projects as part of Love My Hood, should be utilized to ensure full coordination between many different parts of the organization — which includes supporting residents in idea generation and testing to ensure they are achievable and doable. • The scope of participating budgeting should be expanded beyond park redevelopment to include other types of projects identified by residents, and it should be targeted to different areas of the City each year to ensure the financial investment makes a meaningful improvement versus diluting the funds across too large an area or population. FINAL - 55 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER • This revised participatory budgeting program should be run for the next three years (2020 — 2022) to allow the City to continue to work with the University of Waterloo, and continue to gain experience with this form of community engagement. Following that three year period, staff should report back to Council with a comprehensive review the program (including recommendations on next steps). This approach is similar to how Love My Hood was run from 2017 — 2019. If Council agrees to continue participatory budgeting beyond the two pilot projects already completed, a full staff report would be brought forward to Council in the first half of 2020 to provide further details on the proposed changes to the program to seek their detailed direction and approval to proceed. The budgeted amount for each of the two participatory budget pilot projects was $150,000. The actual amount spent was approximately $175,000 for Sandhills and $200,000 for Elmsdale / Chandler Mowat. The following are three options City Council could consider as part of the capital budget if it wishes to continue the participatory budgeting program. Staff believe taking a measured approach related to participatory budgeting would be appropriate and have suggested two options that secure funding for an additional three years. This would allow the City to test the modified approach outlined above before making any permanent funding commitments. If Council wishes to make participatory budgeting a permanent program, the final option funding for all 10 years of the capital forecast. 1. Option #1— $900,000 / $300,000 per year for three years (2020 — 2022) 2. Option #2 — $1.2 million/ $400,000 per year for three years (2020 — 2022) 3. Option #3 — $3.0 million/ $300,000 per year for 10 years (2020 — 2029) Staff believe all three options identified above can likely be supported by the additional staffing that has been built into the proposed operating budget for the #lovemyhood program. If Council should choose to make a larger annual capital investment in participatory budgeting than outlined above, additional staffing would be required to support the program. For Council's direction. FINAL - 56 11 - Lf) LA 00-1--k O buoCL O Q OAC ate-+ 00-Ift% Ln O Q N E 0 U a co O a O 0 00-Ift% 00 O CL .• O CL C�0 0 m 0 0L— cc m 00-Ift% (10 Ln O CL .l •• O Q Q X a 0 m Q LU 0 .� 00 bA O 0-0 I CO I .. E to z 0 0 0 Wo 0 4_j r -I (3) O - 1 s E u E 0 0 0 z U 0 z 00-1--k O buoCL O Q OAC ate-+ 00-Ift% Ln O Q N E 0 U a co O a O 0 00-Ift% 00 O CL .• O CL C�0 0 m 0 0L— cc m 00-Ift% (10 Ln O CL .l •• O Q Q X a 0 m Q LU 0 Ln w E •V b-0 Q) i c% 7 oYJ '•7 rf b-0 L O i C: W � � E L _ V � O •O Ca +� 0 Q M -0 � V N cr L 0 Ln w E •V b-0 Q) i c% 7 oYJ '•7 t OVA T � O m � (N rl qj)- -U). T � O (N 0 (N rl qj)- -U). O 0 Cf CL Lr) 0 }+ O Q z 0 CL Lr) 0 N CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 08 — Community Grant Funding (Tier 1 & Tier 2) FUND: Operating DEPARTMENT: Community Services Department —Administration PREPARER: Carrie Kozlowski, Executive Assistant, Community Services Department BUDGET IMPACT: For Council's Direction STRAT PLAN: Core Service The City's 'Community Grants' program includes two primary types of grants: Tier 1: These grants fund longstanding organizations. To be eligible for Tier 1 funding, organizations must have been funded by the City for at least 5 years through Tier 2. In 2019, Tier 1 grant funding was provided to 87 different organizations, ranging $204 to $240,720. The average grant was $16,174. Tier 2: These grants typically fund new or emerging community organizations, events, and/or initiatives. The proposed services must be in the areas of arts and culture, special events, sports and recreation or community development. In 2019, Tier 2 grant funding was provided to 46 different organizations, ranging from $750 to $10,000. The average grant was $3,763. The following charts provide historical information on the level of grant funding provided over the past five years: Year Tier 1 Funding Approved # $ 2019 88 $1,423,308 2018 87 $1,395,477 * 2017 87 $2,136,004 * 2016 81 $2,098,350 2015 67 $1,817,080 AVG 82 $1,774,044 Year Tier 2 Applications Received Tier 2 Funding Approved pp # F $ # $ 2019 57 $453,436 46 $173,081 2018 54 $336,512 46 $179,134 2017 59 $362,784 45 $161,736 2016 67 $360,554 50 $164,147 2015 61 $422,425 51 $192,165 AVG 60 $387,142 48 $174,053 *Important Note: In 2017, funding for three key cultural institutions (THEMUSEUM, Kitchener - Waterloo Symphony and Kitchener—Waterloo Art Gallery) was moved from the Tier 1 grant budget to the Economic Development operating budget. This change resulted in the significant reduction to the Tier 1 budget shown above between 2017 and 2018. The proposed 2020 budget includes $1,450,758 for Tier 1 grants and $176,240 for Tier 2. FINAL - 61 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Community Grants Review As it has been 10 years since the Community Investment Strategy was approved by City Council, staff have begun a review of the community grant program to identify opportunities for improvement. One area of focus for that review will be to examine effective methods to ensure long-term funding sustainability for the grants program. As part of that review staff will be engaging City Council in a discussion in 2020. While recognizing a review of the grants program is now underway, in April 2019 Council directed staff to develop options to increase the amount of funding available for community grants. The proposed 2020 budget already includes an inflationary increase of 1.9% to the total grant allocation — an additional $30,488. Should Council wish to increase grant funding further, here are two options to consider that reflect direction provided in the City's Council approved Community Investment Strategy: 1. Option #1—$22,000/ additional funding to account for population growth 2. Option #2 —$38,509/ additional funding to account for population growth and a "community complexity factor" Should Council choose to increase the community grant budget beyond the inflationary increase already included in the proposed budget, staff recommends that additional funded be directed to Tier 2. For Council's direction. FINAL - 62 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 09 — Sustainable Urban Forestry Strategy Implementation Options FUND: Operating DEPARTMENT: Infrastructure Services — Parks and Cemeteries PREPARER: Niall Lobley, Director BUDGET IMPACT: For Council's Direction STRAT PLAN: Environmental Leadership BACKGROUND: In April, 2019, Council approved Kitchener's first Sustainable Urban Forest Strategy (SUFS). Alongside the Strategy, Council endorsed an iterative and phased approach to implementation, prioritizing investment in key areas highlighted within the strategy. The 2019 budget approval supported delivery of: • Eliminating the 2018 tree planting backlog by the end of 2022 • Establishing a tree canopy target by the end of 2020 Managing our urban trees and forests is a long-term objective; making incremental improvements with a focus on the customer and a strong foundation of planning and management will be key to achieve the goals established by the community in the Sustainable Urban Forest Strategy. Alongside the approval of the strategy, Council provided feedback on areas for focused activity in the early implementation of the SUFS. Council indicated that the following areas are important for early phases of implementation: • Tree Planting (City led and Community) • Tree Pruning/Proactive Management • Risk Mitigation & Inspection • Conserve and Protect • Develop an Emergency Response Plan Staff are proposing a conservative and iterative approach to funding the delivery of the Sustainable Urban Forest Strategy respecting the broad range of pressures that existing across the municipality and that focusses on key areas of delivery for Council. Immediate staff resource pressures are recommended to be addressed through two additional forestry positions in 2020 (see Issue Paper Op 06) and continued support for managing risk within our tree canopy embedded within base operating budgets. Staff have provided options for the investment in the implementation of the SUFS that range between $50,000 to $200,000 in operating funding to support priorities identified by Council. These options advance programs aimed at increasing the health and resiliency of Kitchener's urban forest and implementing protective measures. This request does not reflect full implementation of the Sustainable Urban Forest Strategy, but is considered a prudent initial investment. Staff look to Council to provide guidance and support as to where they would most like to invest in the Urban through the following three options. FINAL - 63 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Note: Tree planting to meet strategic plan targets is embedded within the existing capital program in 2020 and 2021. Through the development of a tree canopy target, a long-term tree planting strategy will be developed and various funding mechanisms considered. Therefore, further enhancements to tree planting are not recommended at this time. Option A — Conserve and Protect- $50,000 In addition to existing planned work to evaluate tree protection policies, by-laws and incentives, this option would further protect the urban forest canopy through the development of woodland management plans that would incorporate invasive plant management strategies. Option B — Risk Mitigation & Inspection - $100,000 1 A tree risk management program would formalize practices and allow for an inventory to be completed every 7 years and an enhanced level of inspections would be undertaken over the course of 10 years. Inspections are an important maintenance practice to actively monitor and respond to tree risk related concerns and issues and mitigate potential damages and liabilities. The City's current inspection program is complaint -based and does not provide a systematic method of inventory and inspection of the urban forest. Option C —Tree Pruning/Proactive Maintenance - $200,000 Pruning is a key urban forest management activity that should occur routinely throughout a trees life to increase resiliency of the urban forest canopy. In the early years of a trees life cycle, pruning establishes healthy growth and manages later issues (such as stem co -dominance, a significant risk factor in mature trees); as trees mature, pruning removes deadwood, lifts the canopy and proactively addresses risk issues. The City does not currently have a proactive pruning program; pruning is complaint driven. The most significant area of public concern in respect to City owned tree related issues is associated with a lack of pruning. One of the recommendations of the Sustainable Urban Forest Strategy is to implement a proactive maintenance and pruning program. An annual investment of $200,000 would support a minimal investment into proactive maintenance or pruning. Over time, staff would be able to establish a desired service level associated with pruning to inform future budget requests. Options are provided that range between investments in a sustainable urban forest of $50,000; $100,000; $200,000 in operating funding. For Council's direction. FINAL - 64 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD10 — Affordable Housing Options (AMENDED) FUND: Operating DEPARTMENT: Development Services Department PREPARER: Karen Cooper, Manager Strategic and Business Planning BUDGET IMPACT: For Council's Direction STRAT PLAN: Caring Communitv The City is preparing an affordable housing strategy to better position itself to find solutions to growing unaffordability. The strategy is to be completed by the end of 2020. While the strategy is being developed there are emerging opportunities to make progress on housing and there will likely be quick wins identified in 2020. There are three opportunities outlined within this issue paper that merit funding in advance of the development of the affordable housing strategy. 1. Allin202O Homelessness & Housing Umbrella Group (HHUG) in partnership with Wellbeing Waterloo Region (WWR) is running an ALL IN 2020 campaign. The campaign is seeking to raise community, awareness and resources to end chronic homelessness in Waterloo region by November 2020 — 5 years ahead of the provincial government goal. The campaign is seeking to raise $700,000 to help end chronic homelessness. To date about $120,000 has been raised. Funds are being used to address a number of barriers that prevent people from accessing and staying housed. A contribution from the City would help raise the profile for the funding campaign and help address homelessness challenges. Recent communication from Allin202O indicates that they as they are assessing later in Q1 of 2020 exactly how the funds will be used, funding from the City and others could wait until that clarity is confirmed. 2. Ray of Hope/Region/City — Daytime programming partnership The Region is currently facilitating a co-ordinated process to collaboratively address social challenges across the Region's urban cores and has been meeting with stakeholders, providers, and staff to understand the issues and possible solutions. One challenge is that because some of the people who are homeless or who use the shelter system do not have housing they spend time outside. They do not have places to go where they feel welcome during the daytime when shelters or other programs are not open. People are continually being asked to move on and don't have access to facilities. Arising from discussion with downtown stakeholders, Ray of Hope developed a proposal to provide extended afternoon and weekend daytime hours at their facility which will improve the current situation and address an identified gap by providing a welcoming gathering space. Ray of Hope is proposing to provide a variety of needed homelessness support services such as laundry and shower support, employment services and support, counselling, as well as community programing such as computer classes, and recreation programming. A $160,000 pilot project is proposed for an 8 month period starting in January that would be undertaken by Ray of Hope and administered by the Region. The Region has indicated it can FINAL - 65 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER provide funding to cover 50% of the cost and has asked the City if it would be prepared to fund the other 50% ($80,000). A contribution from the City toward community programming for the pilot would help address homelessness challenges and help the city be more inclusive. Should the City fund less than the $80,000 ask, the pilot period would likely be shortened. Although the Region is responsible for funding the shelter system and homelessness supports, it can be argued that this proposal also provides a daytime community programming investment, similar to City investments geared towards target populations (e.g. seniors centre). As a pilot initiative, participation by the City does not bind the corporation to an ongoing role or investment. 3. Quick Wins As the City of Kitchener develops its Affordable Housing Strategy there will likely be 'quick wins' identified. Currently there is only funding allocated towards the development of the strategy, with no money allocated towards new programs or services related to affordable housing. In the spring of 2020, staff anticipate that Council will be presented with issues and options. Should 'quick wins' be identified, there will be no funding available to implement them until the 2021 budget year. Allocation of operating dollars now towards 'quick wins' will help advance delivery on the affordable housing strategy earlier than waiting for the advancement of the full strategy. Council will be consulted and would approve distribution of the funds in 2020. Three funding level options for establishing an ongoing operating fund for affordable housing initiatives are proposed for Council's consideration. The provision is made within the operating budget given the nature of the costs and the desire to have an ongoing funding source for housing initiatives. The options are: Option A - $75,000 annual contribution Option B - $125,000 annual contribution Option C - $200,000 annual contribution With Council direction on establishing an ongoing operating fund for housing and a preferred level of funding, Council then needs to specify initiatives that would be funded in 2020 within that allocation. Suggested uses of the funding include: • An $80,000 one-time contribution in 2020 for implementing the daytime programming proposal pilot in partnership with the Region and Ray of Hope. This would be an upset limit and the City would fund 50% of direct costs up to this amount. • A one-time contribution in 2020 for ALL IN 2020, in an amount as determined by Council. As noted above, Council could approve a general allocation and defer consideration of this specific ask until Q1 2020. • An allocation in 2020 for other Quick Wins, in an amount as determined by Council. Future funding would be allocated based on the findings of the affordable housing strategy. For Council's direction. FINAL - 66 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 11a Expand Leisure Access to Neighbourhood Association Programs FUND: Operating DEPARTMENT: Community Services — Neighbourhood Programs & Services PREPARER: Lori Palubeski, Manager, Program & Resource Services BUDGET IMPACT: For Council Direction STRAT PLAN: Core Service The City's Leisure Access (LA) program currently provides financial assistance to residents living on low incomes who are accessing direct City of Kitchener programs (e.g. March Break and summer camps, swimming/skating tickets, golf lessons/passes, Kitchener Market classes, older adult programming). Currently, LA funding cannot be applied to programs provided by affiliated organizations, such as Neighbourhood Association and Minor Sports groups. In an effort to provide greater flexibility in the use of LA funding, in 2018 and 2019, changes were made to allow users to access their entire annual funding allotment at any time throughout the year (previously, users were limited to spending one quarter of their annual funding per season). These changes have substantially increased LA use for camps (March break/summer) and aquatics (swim lessons/memberships/three month passes). In 2017, approximately $45,000 of subsidy was applied to these programs compared to approximately $86,000 in 2018 and a projected $195,000 for 2019. In addition to this change, as part of the 2019 budget, City Council increased the annual LA subsidy for an individual by $50 to $300 (children/youth) and $265 (adults/seniors) per year. On June 24, 2019, City Council directed staff to explore the expansion of the Leisure Access (LA) program to cover Neighbourhood Associations program fees. Programing at City of Kitchener community centres is a shared responsibility between Neighbourhood Associations (NA), the City and other community partners. In 2018, the City provided 1,200 direct programs out of our community centres while Neighbourhood Associations provided 2,200 programs (approximately 65% of total community centre programs). Many affiliated NAs already provide fee assistance to individuals living on a low income. If LA is expanded to cover NA programs, it is highly likely that these NA fee subsidy programs will no longer be offered as there would be little incentive for an NA to continue to provide this financial support when the City is already doing so. The following 14 NAs currently provide eligible residents with fee assistance ranging from discounted rates to free programming: FINAL - 67 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Centreville Chicopee Cherry Park Country Hills Downtown Doon Pioneer Park Forest Heights North 6 Stanley Park Victoria Hills Williamsburg Huron Kingsdale Bridgeport Mill Courtland specific NAs that offer programs. When a resident requires additional fee assistance, beyond these programs, City staff work closely to access other financial community supports such as the Canadian Tire JumpStart Foundation, House of Friendship, KidSport and grant opportunities through foundations. The following chart outlines the benefits and risks associated with expanding LA to provide fee assistance to NA programming: BENEFITS RISKS NAs that have the financial ability to provide Increase the number of residents that use LA, support to residents living on a low income as it would cover more programs. will shut down their fee assistance programs, shifting costs from the user base (program revenues) to the tax base. Increase the City's financial support to the Affiliated minor sport groups will likely want specific NAs that offer programs. the City to extend LA to cover their programs (which can be much more expensive). Significant expansion of LA will require additional staff time to support applicants and users (e.g. following up with applicants to confirm information, complete applications). The program improvements made to LA in 2018 and 2019 (see Background section) have been successful in increasing program usage and expenditures significantly through an increase in the number of users accessing a higher percentage of their annual allotment. In order to fund these increases moving forward, staff have already built an additional $100,000 into the proposed 2020 budget. It is important to note that it is difficult to forecast the financial impact of expanding LA to NA programming as there is no way to forecast how usage would increase as a result. We anticipate that such a change would come at a significant cost to the City. Given the City's commitment to not turn -away any LA customer due to lack of budget, an expansion would pose a significant financial risk to the City. Recognizing that risk, based on historic usage and a comparison of how LA is accessed for direct City program, staff estimate an additional $143,000 would be required FINAL - 68 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER should Council wish to expand LA to cover NA programs — although that may be an under- estimate. Given the significant impact we are already experiencing as a result of the changes made to LA over the past two years, the fee assistance programs currently offered by many NAs, and the risks identified in the chart above, staff do not believe this is the right time to expand LA to cover NA programming. For Council direction as per Council motion —June 24, 2019. FINAL - 69 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER ISSUE: BD 11b — Financial Support for Neighbourhood Associations FUND: Operating DEPARTMENT: Community Services — Neighbourhood Programs and Services PREPARER: Mark Hildebrand, Director Neighbourhood Programs and Services BUDGET IMPACT: For Council's Direction During the Operating budget review session, staff were directed to prepare an issue paper outlining options to provide funding to Neighbourhood Associations that require additional financial support. This direction came as a result of discussions associated with Issue Paper Op 05, which considered expanding the City's Leisure Access program to cover programs offered by Neighbourhood Associations. As part of their workplan in 2019, Neighbourhood Programs and Services staff have been reviewing the Neighbourhood Association Affiliation Policy, and the Community Centre Use of Space Policy. A major finding from this work (report CSD -19-016) shows that there are inequities that are felt by Neighbourhood Associations across the City that, if left unchecked, will perpetuate a growing gap between programs, supports and amenities available in different neighbourhoods. A major contributing factor to these inequities was available access to resources. Specifically, staff found the following: • That the City provides support to 28 different Neighbourhood Associations. However the type of City support varies significantly between Associations, from providing free Neighbourhood Association access to a community centre and the associated support of staff, to providing only a few hours of staff time for support (e.g. attendance at a meeting). • That some Neighbourhood Associations have a greater ability than others to generate revenue through programming, due to access to community centre space, demographics of neighbourhoods, and/or size of area they serve etc. • That half (15) of the Neighbourhood Associations make less than $15,000 per year through programming at a community centre, and 10 of the 28 do not generate any revenue at all through programming at a community centre. • That Neighbourhood Associations that can generate revenue direct it back into their neighbourhoods for programs, events and/or other amenities in their communities. Although this is beneficial for the community, this further compounds the inequities between neighbourh000ds and Neighbourhood Associations who have access to resources to leverage and those who do not. Staff believe there would be significant benefit to providing financial support to Neighbourhood Associations that have a limited ability to generate revenues on their own. These funds could be used by targeted Neighbourhood Associations to support a wide -variety of initiatives that would benefit the community, such as additional programing, new or enhanced events, or the creation of a subsidy program for individual Association programs where one does not already exist. FINAL - 70 CITY OF KITCHENER 2020 BUDGET ISSUE PAPER Should Council chose to allocate funding to support Neighbourhood Associations in this manner, staff will prepare a report for Council approval in the first half of 2020 that outlines the details of how the funds would be utilized (e.g. eligibility criteria, application process, reporting mechanisms). Given the provision of direct financial support to targeted Neighbourhood Associations is a new approach for the City, staff believe it would be reasonable to start out with an allocation of $25,000 in 2020 and look at growing the program over time if it proves successful. Any amount above $25,000 may be difficult to deliver to Neighbourhood Associations in 2020. There may also be an opportunity to encourage Neighbourhood Associations that have the financial capacity to contribute funding to this program to augment the City funding. For Council direction. 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