HomeMy WebLinkAboutFIN-06-004 - Council Review of 2006 Operating & Capital Budgets
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Report To: Mayor Carl Zehr and Members of Council
Date of Meeting: January 30,2006
Submitted By: Pauline Houston, General Manager of Financial Services & Treasurer
Prepared By: Dan Chapman, Director of Financial Planning & Reporting (2347)
Ward(s) Involved: All
Date of Report: January 19, 2006
Report No.: FIN-06-004
Subject: Council Review of 2006 Operating and Capital Budgets
RECOMMENDATION:
For information
BACKGROUND:
On Monday, January 30, 2006 Council will review the 2006 Operating and Capital Budgets.
This report and related attachments provide Budget detail and supplementary information.
REPORT:
Attached are the following hard copy printouts that will be used for Council Budget Review on
Monday January 30, 2006:
Page #
1 Slide presentation (green)
59 Legislative Changes (1999-2006) - updated (white)
60 2006 Reserves & Reserve Funds Budget (white)
65 Proposed Council Policy Resolutions (white)
Several pieces of additional information are attached as requested:
Page #
69
71
74
75
Capital Information Papers (blue)
Capital Policies and Target
Kingsdale Community Centre
Huron Business Park
Building Division Renovations
Page #
76
78
81
82
Enterprise Information Papers (blue)
Golf Course Projections and Dividend
AMANDA System Resources
Building Division Internal Recoveries
Water and Sewer Rates
Page #
83
84
Operating Information Papers (blue)
Equipment Reserve Charges
Fringe Benefit Rates
The following information papers were not finalized at the time of preparing the Budget Day
package. They will be issued to Council members by way of addendum:
· Kitchener Public Library
· Gas Margins and Dividends
· Outstanding Grant Appeals
· Gapping
· Penalty & Interest / Investment Income
In addition to the attached, it is suggested that Members of Council bring copies of previous
budget presentations and the capital forecast on Budget Day for reference purposes.
FINANCIAL IMPLICATIONS:
As detailed in the attached information
COMMUNICATIONS:
Notice of all budget meetings and an invitation for public input has been placed on the City
website. Additionally, formal public notice of the Council's intent to pass the budget as well as
water and sewer rates on January 30, 2006 has been published in the local newspaper.
Pauline Houston, CA
General Manager of Financial
Services & City Treasurer
Dan Chapman, CA
Director of Financial Planning
& Reporting
c.c. J. Grant
S. Lewis
Kitchener-Waterloo Record
Financial Planning & Reporting Division
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COUNCIL POLICY RESOLUTION
POLICY NUMBER
DATE: JANUARY 30,2006
POLICY TYPE: FINANCIAL
SUBJECT: RESERVE FUND - BUSINESS PARKS
POLICY CONTENT:
1. That the Business Parks Reserve Fund be established subject to the
following guidelines:
(a) The fund shall finance Business Park capital projects as approved
by Council from time to time; and
(b) The fund shall be funded by capital budget contributions as well as
surplus capital balances remaining at the close-out of a business
park project.
KITCHENER
Page 1 of 1
DECEMBER 2005
COUNCIL POLICY RESOLUTION
POLICY NUMBER
DATE: JANUARY 30,2006
POLICY TYPE: FINANCIAL
SUBJECT: RESERVE FUND - FEDERAL GAS TAX
POLICY CONTENT:
1. That the Federal Gas Tax Reserve Fund be established subject to the
following guidelines:
(a) The fund shall finance capital works and other costs that meet the
"eligible projects" and "eligible costs" criteria as outlined in the
Municipal Funding Agreement for the Transfer of Federal Gas Tax
Revenues and approved by Council from time to time; and
(b) The fund shall receive funding allocations on an annual basis, in
accordance with the schedule outlined in the Municipal Funding
Agreement for the Transfer of Federal Gas Tax Revenues.
KITCHENER
Page 1 of 1
DECEMBER 2005
COUNCIL POLICY RESOLUTION
POLICY NUMBER
DATE: JANUARY 30,2006
POLICY TYPE: FINANCIAL
SUBJECT: RESERVE FUND - GAS CAPITAL INVESTMENT
POLICY CONTENT:
1. That the Gas Capital Investment Reserve Fund be established subject to
the following guidelines:
(a) The fund shall finance capital projects as approved by Council from
time to time;
(b) The fund shall be funded by annual net profit generated by the Gas
Utility in excess of 50% of the previous year's net profit after capital
expenditure; and
(c) All allocations shall be based on a five-year plan to ensure
sustainability of the fund.
KITCHENER
Page 1 of 1
DECEMBER 2005
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Capital Policies and Target
Operating and Capital
Financial Services
Financial Planning & Reporting
INFORMATION REQUESTED BY COUNCIL:
. Ten year history of long term debt interest rates and payments
. Calculation of the impact of eliminating inflationary increases in the levy transfer to capital
. Project types permitted for funding through the Federal Gas Tax program
DETAILS / ANALYSIS:
Ten Year Historv of Interest Rates and Debt Payments
Staff has reviewed the charges incurred on long term debt over the past ten years and
calculated the "implicit" interest rate in effect each year, as outlined in the following table:
Total Debt
Year Rate Principal Interest Payments
~ ----:r.72% 2,962,813 1,361,716 4,324,529
2003 5.95% 2,939,678 1 ,523,359 4,463,037
2002 5.38% 2,741,567 1,312,305 4,053,872
2001 6.04% 3,006,512 1,310,643 4,317,155
2000 6.78% 2,939,278 1 ,372,055 4,311,333
1999 7.76% 3,662,572 1,616,847 5,279,419
1998 8.46% 3,844,856 1,744,628 5,589,484
1997 9.06% 3,774,487 1,853,652 5,628,139
1996 9.60% 3,638,365 1,936,333 5,574,698
1995 9.80% 3,378,279 2,208,651 5,586,929
Note: The implicit interest rate above represents the total debt charges for the year, as a percent
of the average debt outstanding for the year. Due to more favourable long term borrowing rates in
recent years, the analysis shows that the interest rate has been declining since 1995.
continued on reverse...
2006-01-26
Elimination of the Inflationarv Increase in the Levv Transfer to Caoital
Staff has quantified the impact of removing inflationary increases in the levy transfer to capital
from the ten year capital forecast beyond 2006. The result is a reduction in available capital
funding of approximately $16 million over the forecast, as follows:
Including No
Inflation Inflation Difference
2006* 6,036 6,036
2007 6,457 6,157 300
2008 6,902 6,280 621
2009 7,371 6,406 965
2010 7,866 6,534 1,332
2011 8,389 6,665 1,725
2012 8,941 6,798 2,143
2013 9,524 6,934 2,590
2014 10,138 7,073 3,065
2015 10,786 7,214 3,572
Total 82,410 66,096 16,314
*Inflationary increase already excluded from 2006 budget submission
Proiects Permitted Under the Federal Gas Tax Prooram
The federal gas tax agreement provides the City with revenues to fund various types of projects,
provided that the projects represent investment in environmentally sustainable municipal
infrastructure that will reduce greenhouse gas emissions and provide cleaner air and cleaner
water. As such, the eligible projects include:
· Public Transit (e.g., transit buses, rapid transit, etc.)
· Water (e.g., drinking water purification and treatment systems, etc.)
· Wastewater (e.g., sanitary and combined sewer systems and storm water systems)
· Solid Waste (e.g., waste diversion, material recovery facilities, etc.)
· Community Energy Systems (e.g., cogeneration or combined heat and power projects,
district heating and cooling projects, etc.)
· Local roads, bridges and tunnels, and active transportation infrastructure (e.g., Bike
lanes) that enhance sustainability
· Capacity Building (i.e., projects and activities that strengthen the ability of the City to
develop and implement long term plans that provide direction to realize sustainability
objectives).
The City has allocated the anticipated federal gas tax funding to local road and bridge projects
in the ten year capital forecast.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Kingsdale Community Centre
Capital
Community Services
Community Programs & Services - Community Development
INFORMATION REQUESTED BY COUNCIL:
Potential options to facilitate advancement of Kingsdale Community Centre construction from
2011 to 2009.
DETAILS 1 ANALYSIS:
The 2006-2015 capital forecast currently includes a $3.7 million provision in 2011 for the
construction of a Community Centre in the Kingsdale neighbourhood, funded out of the "capital
from current" (c/c) pool. There is limited flexibility to accommodate an adjustment to project
timing given the total project cost, lack of available funding in the forecast, and commitments
made to major projects prior to 2011 (e.g., new twin pad). However, four alternatives have been
identified for consideration to potentially accommodate the Kingsdale project in 2009:
1. Reduce Brownfield Remediation Program in 2009/2010
The capital forecast currently includes $3.9 million of funding in 2009 and 2010 for
Brownfield Remediation projects. This funding could be partially reduced or deferred in
order to create capacity to fund Community Centre costs. While the work plan of the
Brownfield Committee is still being developed, it is anticipated that these funds will be
required for the evaluation of City-owned properties and the remediation of Brownfield
sites in the City inventory. It is expected that this work will necessitate a significant
ongoing budget commitment and that a reduction or deferral would compromise the
City's ability to advance the Brownfield Remediation program.
2. Defer Storm Water Management Works
The 2009 capital forecast includes $3.5 million of c/c funded storm works, including a
portion of the Schneider Creek Channel works ($1.3 million) and the first year of Grand
River Erosion Control works ($2.2 million). While a deferral of the Schneider Creek
works could be considered in order to free up funding room for the Community Centre,
the timing of the work is based on the forecast identified in the Development Charges
Background Study. As well, the Storm Water Audit identified this project as a high
priority and the Environmental Assessment, to be commenced in 2006, may lead to
revisions in scope and timing. The Grand River Erosion Control works could also be
deferred, but are likely to be tied in with Regional road construction projects (e.g.,
Bridgeport Bridge), which may in fact limit the flexibility to adjust the timing.
3. Defer a Portion of Consolidated Maintenance Facility Funding
Under this scenario, CMF c/c funding would be shifted from 2009 to 2011 to create
funding room for the Community Centre project in 2009. Corporate Services staff have
advised that the following is the most likely project timing in the event that Council
proceeds to approve construction of the CMF:
2006-01-26
· 2007 01 - final Council approval
· 2008 02 - issuance of tender and commencement of construction
· 2009 04 - construction completed
· 201001 - occupancy
Shifting funding from 2009 to 2011 is not desirable if the intention is to occupy the CMF
based on the above timeline. Moreover, a significant amount of project funding is
already included in 2011 and 2012. In the event that Council decides to approve to the
project in 2006 when the peer review is complete, advancement of project timing would
be possible which would make the deferral of funding even more problematic.
4. Increase Capital Levy or Debenture Issue
Council could consider adopting an additional capital levy to generate funding or could
issue debentures beyond the amount already identified in the forecast. This approach
would be inconsistent with the City's stated capital policy which limits increases in debt
charges and the capital levy to assessment growth plus inflation, except where a project
has a defined payback period.
Other Kinasdale Budaet Allocations
The following items related to the Kingsdale Community Centre have recently been added to the
capital forecast, as directed by Council, subject to final budget approval:
· Retention of consultant to fast-track completion of the business case in first half of 2006
as per recommendation 13 of the LFMP ($40,000); and
· 1,500 square foot addition to existing portable, subject to Council approval following
presentation of business case and its comments on interim solutions ($200,000).
Among other things, the business case will consider whether the long term needs of the
community can be addressed through alternatives other than full scale construction of a new
stand-alone facility (e.g., conversion of an existing facility). If the business case recommends
an option with occupancy prior to 2011, staff may recommend that the $200,000 expenditure be
delayed and used to advance design and development. If no near-term options are feasible,
staff will likely propose expending the $200,000 allocation to provide the additional 1,500 square
feet of space for immediate use by the community until a new facility can be developed.
Develooment Criteria and Strateaies
LFMP Recommendation 18 has not been approved by Council. However, this
recommendation proposes Development Criteria and Strategies related to the need for a
neighbourhood to prove program sustainability prior to the provision of a new facility.
Specifically, it proposes that groups seeking a centre must have:
· 5- 7 years of successful and sustainable local program delivery;
· 10-15 core committed volunteers active for 1-2 years;
· defined service area;
· utilization of other facilities prior to additions to existing centre;
· business plan completed; and
· use of portables or shared facilities for up to 5 years as pre-development and opportunity
to test demand.
2006-01-26
Staff has not brought this recommendation forward previously and is in the process of bundling
the majority of the LFMP recommendations for CSC consideration in 2006. While the criteria
recommendation could be fast-tracked, it would not be complete prior to budget approval.
If required to comment on this recommendation relative to Kingsdale, staff would argue that the
community has not had sufficient portable space to conduct the pre-development, there is no
business plan completed, transportation is an impediment to accessing some alternative spaces
and documentation about the sustainability and success of the current program is ad hoc and
not sufficiently developed. As a result, the community has not had the capacity to demonstrate
the criteria necessary to justify the development of a permanent community centre.
Summarv
As requested by Council, a range of options have been supplied to facilitate a discussion on
alternatives available to adjust the timing of construction of the Kingsdale Community Centre.
Staff continues to support the schedule proposed in the current Capital Forecast (2011) at this
time, for the following reasons:
· it is consistent with the recommendations of the LFMP;
· the Community Services Committee will be undertaking a detailed review of LFMP
recommendations in 2006, at which time Committee members will have an opportunity
to review scope and timing of all projects for prioritization in the 2007 budget process;
· the Kingsdale business plan will be completed in 2006, which will provide insight into the
most appropriate timing, location and features of the Kingsdale Community Centre; and
· the options available to advance the construction of the facility will likely have a
detrimental impact on other significant City initiatives.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Huron Business Park
Operating and Capital
General Expenses
General Expenses
INFORMATION REQUESTED BY COUNCIL:
History of City financial contribution to the project as well as current value assessment and City
share of property tax revenue.
DETAILS 1 ANALYSIS:
Huron Business Park current value assessment (2005) - $200,102,000.00.
City of Kitchener share of property taxes (2005) - $1,927,000.00.
Total City of Kitchener financial contribution for Huron Business Park is $16,195,000.00.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Building Division Renovations
Capital
Development & Technical Services
Building Enterprise
INFORMATION REQUESTED BY COUNCIL:
· Details related to proposed Building Division renovation.
· Discussion of the alignment of this initiative with the Corporate approach to
accommodating staffing increases (i.e., renovation vs. decentralization).
DETAILS / ANALYSIS:
In conjunction with Facilities Management, the Building Division is planning a large-scale
renovation of the fifth floor of City Hall to address requirements of Bill 124 (Building Code
Amendment Act), which came into effect in Ontario on January 1, 2006. The Building Division
will be adding significantly to the staff complement, thus necessitating a major modification to
the layout of the floor and associated furnishings.
The 2006 capital budget includes a $575,000 provision for Building Division office renovations,
which includes demolition, reconstruction, voice/data wiring, electrical work, mechanical work,
furniture, consultancy and other soft costs. The budget has been reduced from the original
estimate of $661,000 based on detailed design and costing recently completed by Facilities
Management. All funding is to be provided by the Building Enterprise and is independent of the
City Hall general provision renovation budget (c/c funded) which was the subject of a previous
report to Council.
Facilities Management is planning for staffing growth across all City Hall departments without
contemplating an addition to the building. Staff will be reporting on this issue on January 23,
2006. The two options under consideration are:
· Decentralization - moving groups of staff off site where possible; or
· Revise office and furniture standards - to permit greater staff density within existing City
Hall space.
The alignment of the proposed renovations in the Building Division with the general approach to
accommodating staffing increases will be dependent on the outcome of Committee deliberations
on January 23, 2006.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Golf Course Projections and Dividend
Operating
Community Services
Enterprise Services Division - Golf Courses
INFORMATION REQUESTED BY COUNCIL:
At the January 16, 2006 Finance and Corporate Services Committee meeting, staff was directed
to review the Golf Enterprise projections and bring back information with respect to how the
dividend paid to the City from the Golf Enterprise compares to notional property and income
taxes.
DETAILS / ANALYSIS:
During budget deliberations, discussion focused on 2006 budget projections compared to
projected actual revenues and expenses for 2005 in the Golf Enterprise. Based on a follow-up
staff review of the 2005 actuals, it was felt the budget for 2006 may be too aggressive for Doon
Valley Golf course and slightly conservative for Rockway Golf course.
Staff has attached the actual gross profit statements since 2002 for both golf operations below.
The statements show there has been a significant increase in revenue since 2002 for both golf
operations. It is expected the trend will continue as interest in golf and participation remains
high in the market segment served by the municipal golf courses. As a result, Golf unit and
Finance staff met to rationalize the budget projections and agreed to a principle of setting 2006
revenue targets at a 3% increase over 2005 projected actuals, being of the opinion that 2005
was a fairly representative year. The net result is a final gross profit budget recommendation of
$791,000 for Doon Valley, representing a more conservative approach when compared to the
original recommendation. Conversely, at Rockway the increase results in a slightly more
aggressive approach with a final gross profit budget recommendation of $763,000.
Doon Golf Course Pro1ections
PROJ.
BUDGET ACT.
Course Operations
Revenue 1071 1073 1142 1,188 1,155
Expenses
Canteen Operations
Revenue 413 426 470 463 463
Expenses
Miscellaneous Rev.
Total Gross Profit
2006-01-26
Rockwav Golf Proiections
PROJ.
BUDGET ACT.
Canteen Operations
Revenue
Expenses
440
458
469
475
471
Course Operations
Revenue
Expenses
Miscellaneous Rev.
Total Gross Profit
Staff was also asked to provide an estimate of the portion of the dividend payments from the
golf enterprises comprising notional property and income taxes. Finance staff have estimated
that the golf courses would be paying approximately $167,486 in property taxes and $89,704 in
income taxes (total $257,190) if they were not operated as municipal enterprises. Total
dividends to be paid to the city in 2006 are projected in the amount of $310,000.
2006-01-26
CITY OF KITCHENER
2006 OPERATING BUDGET INFORMATION PAPER
ISSUE:
Building Enterprise - Additional AMANDA System Resource
Supplemental Information Requested on January 16, 2006
Operating
Development & Technical Services
Building Enterprise
FUND:
DEPARTMENT:
DIVISION:
INFORMATION REQUESTED BY COUNCIL:
On January 16, Council members requested additional details related to the analysis that was
done to determine the current amount of staff resources dedicated to the various components of
the AMANDA system, as well as the analysis of the impact on the system (on-going
support/maintenance and implementing new initiatives), based on maintaining the status quo
versus applying additional resources.
DETAILS / ANALYSIS:
The information requested by Council had been analyzed during the initial preparation of the
business case. Based on a historical review, it was determined that the current FTE resource
dedicates 80 % of her time to the on-going support and maintenance of the system, spread
across the various Divisions, with only 20%, or one day a week, devoted to new work plan
initiatives. The desired split between the 2 components of the program has been determined to
be 50/50. After determining the existing reality, staff completed an analysis of the time involved
in completing the items currently identified on the workplan based on 2 scenarios; the impact of
maintaining the status quo compared to the impact of the proposed additional resource. The
following table outlines the comparison:
Resource allocation Timeline to complete current
workplan items
Status Quo - 20% of 1 FTE December 2010
Proposed Additional Resource - December 2008
50%+50%=100% of 1 FTE
The workplan is attached for reference. The top portion of the workplan represents those items
identified and prioritized in the fall of 2004. The analysis shows that the items are all behind
schedule. The items in the lower portion were identified after the original prioritization exercise.
It is important to understand that the items contained on the attached workplan represent critical
components required to support and enhance existing business practices and to utilize the
system to its optimum capacity. They do not merely represent a "wish list" of initiatives.
It should also be understood that the items on the workplan represent those initiatives currently
identified by staff as supporting the existing and future directions of the various user Divisions.
It does not factor in any future initiatives that may be required as a result of regulatory
requirements or resulting from currently undetermined system enhancements (i.e. Provincial
regulations relating to the Building Enterprise and new initiatives may bring new opportunities).
2006-01-26
It is anticipated that the workplan will essentially serve as a living document that will represent
the desired initiatives at any given time. Items will be completed and removed, while others will
be added.
Members of Council also asked whether a review was undertaken to determine if there was any
existing capacity with the IT Division to dedicate towards the AMANDA system. Staff advise
that there is no additional capacity.
It is clear that, without dedicating additional resources to the project, the workplan will continue
to fall further behind, with a direct impact on staff efficiencies, customer service and our ability to
meet the legislative requirements applicable to the various Divisions.
The cost of hiring of an additional AMANDA Administrator on a three (3) year contract basis is
estimated at approximately $75,000 annually. These costs are to be funded from the Building
Division Enterprise and are recoverable from the permit fees collected. The data and input of
the AMANDA system is an indirect cost associated with the enforcement of the Building Code
Act and the Building Code. This is not a corporate cost funded by the tax base.
Staff continues to recommend that an additional AMANDA Administrator be hired on a
three (3) year contract to assist in the completion of the current and future projects
identified in the AMANDA Corporate Work Plan. Additionally, staff recommends that that
a review of the position and its impact on achieving the workplan be undertaken by the
AMANDA Steering Committee prior to the end of the third year to evaluate the necessity
for continued support.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Building Division Budget
Operating
Development & Technical Services
Building Enterprise
INFORMATION REQUESTED BY COUNCIL:
On January 16, 2005 Council members reviewed the Building Enterprise projection and
requested additional information related to the potential to restate 2005 charges from tax-
supported operations using the approach adopted for 2006.
DETAILS / ANALYSIS:
The increase in internal charges from 2005 to 2006 ($237,531) relates to cost increases and
process changes which are becoming effective in 2006. As such, it would be inappropriate to
adjust 2005 allocations using the approach adopted for 2006.
The change in allocation is as a result of the following:
· 3% inflation
· increased rent due to additional floor space
· increased maintenance costs due to additional floor space
· new fire plan examination functions
· internal charges within the DTS Department
· increase of 0.6 FTE allocated from Planning
· increased charge from Communications
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Water and Sewer Rates
Operating
Financial Services / Development & Technical Services
Utilities / Sewer
INFORMATION REQUESTED BY COUNCIL:
On January 16, Council directed staff to prepare Water and Sewer projections under the
assumption that the increase in the combined water and sewer rate would be equal to the tax
rate increase (assumed to be 3%).
DETAILS / ANALYSIS:
The following is a comparison between the rate increase proposed by staff and a 3% rate
increase in 2006. As directed, staff has assumed that rates should be sufficient to arrive at the
same deficit position in 2010 under both scenarios. Staff has also provided, as a comparison,
the accumulated (deficit)/revenue that was projected when Council approved the Accelerated
Infrastructure Program in February, 2004:
Staff continues to support a combined water and sewer rate increase of 4.7% in 2006, followed
by increases of 4.9% thereafter for the following reasons:
· provides smoother rates over the forecast period
· reduces the deficit faster than the Alternative plan
· reduces interest costs to the Utilities
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Equipment Reserve Charges
Operating
Financial Services
Fleet
INFORMATION REQUESTED BY COUNCIL:
During review of the Operating Budget on January 16, Council members requested information
on the components of equipment reserve charges.
DETAILS / ANALYSIS:
Equipment reserve charges consist of the following:
· Depreciation, allocated over the life of the equipment
· Insurance and Licence
· Fuel costs
· Repair costs, including:
· Mechanics' Wages
· Vehicle Parts
· Fleet overhead, including
· Salaries
· Telephone, Computer, Office Supplies, etc
· Internal Charges
Equipment reserve charges for 2006 are $5,639,500 (2005 - $5,221,500). The majority of the
$418,000 increase is attributable to fuel cost increases of $376,000. The remaining increase is
due primarily to wage settlements and inflationary increases.
2006-01-26
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
FRINGE BENEFIT INCREASE
OPERATING
ALL
ALL
INFORMATION REQUESTED BY COUNCIL:
On January 16, 2006, staff were asked to come back more information on the cause of the
anticipated $813,000 increase in fringe benefit costs in 2006.
DETAILS / ANALYSIS:
There are various fringe benefit rates that are applied against salaries and wages, depending on
the pay group. These deductions are used to pay for various expenses incurred throughout the
year such as the Canada Pension Plan (CPP), Employment Insurance (EI), IATSE, vacation,
stats/floaters, bereavement, union affairs, jury duty, Employee Health Tax (EHT), accidental
death & dismemberment, group life, dental, extended health care, long term disability, WSIB
and sick leave.
A thorough analysis of the fringe benefit rates is conducted every two years to ensure that the
deductions are sufficient to pay for the expenditures. As part of the Pro Forma process this
year, it was identified that a 1.1 % increase to the levy would likely be required (and 0.5% in
2007).
The largest items that impact the increase would be the increasing costs of providing extended
health care (14% increase) which accounts for approximately $350,000 and the increase in
OMERS rate of 0.6% which accounts for approximately $300,000.
The latest analysis has indicated some rate changes for 2006 as follows:
Group
Salary/Non-Union
Full Time
Part-Time
Fire
Council
CITS Salary
CITS IA TSE FT
CITS IA TSE PT
CITS Reg PT
2005 Rate
27%
49%
20%
24%
10%
23%
33%
25%
16%
2006 Rate
28%
49%
24%
26%
14%
25%
34%
29%
17%
Actuarial valuations are completed once every three years with extrapolations completed for
intervening year-ends. The funding target for vested sick leave benefits is 25% of total liability.
2006-01-26
Fire Prevention New folders and reports 85 Feb 24-2005 Late
Mobile o Mar 27-2006 Delayed
Building Building Orders & Complaints 60 April 21-2005 Late
Bill 124 system chanQes & reports 70 Dec 31-2005 Late
Grading Folder Revisions o May 05-2006 Delayed
Planninq Subdivision Folder Revisions 65 Feb 3-2005 Late
Condominium Folder Revisions 20 Mar 24-2005 Late
Zone Chanqe Revisions o Jun 24-2005 Late
Official Plan Folder Revisions o Jul 25-2005 Late
Document & Attachment Viewer 10 Jan 23-2006 Delayed
By-Law Enforcement Noise Enforcement Folder o Dec 16-2005 Late
AMANDA Administration AMANDA 4.3 Upgrade (Now version 4.4) o June 3-2005 Deferred
Records Retention Plan o Jan 23-2006 Delayed
Security Audit Module Review o Jan 16-2006 Delayed
Additional Projects not yet prioritized
Building IVR Setup and testing
Permit Fee (Rebate program) procedure
Planning Report to track Planning processes
Track Heritage Property designations
Folder for Heritage Applications
Letters & Reports
Part Lot Control folder fixes
By-Law Enforcement Encroachment Folder
AMANDA Administration People Record Clean-up
Convert all existinq reports to Crystal
Direct GIS Link from AMANDA
Legal/Planning Letter of Credit Module Review
Econom ic Dev New CIP Project Area for notifications
Enqineerinq Trackinq of Future Sidewalk & Streetscape deposits
Tracking of Engineering Development Processes
SWM Billinq link with Utilities
Fire Prevention Direct Detect folder to track calls
Fire/Licensing Review of Licensing application folder
Joint Divisions Vacant Building Inventory tracking system
Buildinq, Fire, EnforcemE Shared folders for cross over complaint trackinq
PAL 4.0 Implementation or Wireless
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Gapping Status
Operating
General Expense
General Expense
INFORMATION REQUESTED BY COUNCIL:
On January 16, Council requested staff to provide a summary of the amount recovered through
gapping over the last few years.
DETAILS / ANALYSIS:
The City of Kitchener has utilized gapping as a means of tracking salary and wage savings
throughout the Corporation. These savings arise from leaves of absence, terminations,
retirements, maternity leave and sick leave.
Corporate savings due to gapping are as follows:
2002: $1,722,756
2003: $1,764,563
2004: $2,392,050
2005: $2,189,574 (estimated)
2006: $2,168,850 (budgeted)
The 2006 budget has been increased by approximately $320,000. Of this, $160,000 represents
an increase in the fringe benefits portion, which is due to an increase in the fringe rate for 2006
as well as to correct the method of allocating fringe benefits. The remaining $160,000 increase
is to reflect an expected increase in natural gapping in 2006.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Historical Margins and Dividends for Gas Utility
Operating
Finance
Utilities
INFORMATION REQUESTED BY COUNCIL:
On January 16th, Council requested that staff review the projected gross margin in the Gas
Utility in view of historical margins that are higher than those projected. Council also requested
a comparison of the Gas Utility dividends to those of similar companies in the private sector.
DETAILS 1 ANALYSIS:
Gross Margins
The historical gross margins, along with the 2005 (projected) and the 2006 (budget) margins in
the Delivery company are as follows:
ACTUAL PROJECTED BUDGET
2003 2004 2005 2006
Margin
18,034
Gross
Profit
48.7%
Gross
Margin Profit
17,442 47.4%
Gross
Margin Profit
14,362 39.6%
Delivery
Margin
17,922
Gross
Profit
49.5%
The primary source of profit for the gas enterprises is due to the difference between the retail
delivery price and the wholesale cost to provide the service. The retail margin is greatest for
heat-sensitive, small volume customers. As such, the actual margin obtained is correlated to
the extent of cold winter weather. Given the inability to control the impact of weather
conditions, the Gas Utility budgets conservatively to ensure that forecast earnings are not
overstated. A good example of this impact is being experienced this month - so far in January,
total consumption is down almost 20% relative to forecast. Given the weather expected to the
end of the month, the reduced consumption should result in a margin loss of over $500,000,
thus reducing gross margin by 1.4%. In addition, the wholesale transportation opportunities that
have supplemented the profitability of the Gas Utility in the past will be reduced significantly
going forward. The benefits from these opportunities are expected to be approximately $2
million less than they were in 2004. Given these reduced margin opportunities and the warm
January already experienced, no adjustment to the budget or gross margin percentage is
recommended.
Dividend Discussion
Return on investment for private gas companies is set by the Ontario Energy Board. It would
not be appropriate to compare the City's return to these companies because of the following
differences:
· Private utilities assume debt to pay for their infrastructure and currently have a debt to
equity ratio of about 65/35 - Kitchener's gas utility funds all infrastructure costs out of
current earnings;
· The net income of private utilities is taxable; and
· The City's Gas Utility financial statements do not contain any separately valued assets.
2006-01-26
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
Investment Income
Operating
All
All
INFORMATION REQUESTED BY COUNCIL:
On January 16th, Council requested further information on the budget for investment income.
DETAILS 1 ANALYSIS:
The following amounts of investment income have been generated in the general fund over the
past six years:
Year
2000
2001
2002
2003
2004
2005
2006*
* Budget
Actual
1,686,665
1,956,350
1,412,620
1 ,407,326
1,221,907
1,900,000
1,333,000
It should be noted that the value shown for 2005 represents an updated projection that may be
subject to change due to year-end adjustments and transfers.
The fluctuations in interest income are due to the following factors:
General Fund Balance
The fund balance can fluctuate significantly depending on the value of unexpended/unfinanced
capital projects, the timing of debt issuance, the timing of tax billing, etc. A factor contributing to
the large amount of investment income in 2005 is an unexpended capital balance of
approximately $16,000,000 (excluding EDIF). This balance has fluctuated over the last several
years with a high of over $20,000,000 in 2001 and a low of $700,000 in 2003. The variability of
capital balances has the potential to result in decreased investment income in the future.
I nterest Rates
The table on the following page demonstrates that yields in the short-term portfolio have
fluctuated significantly as a result of fluctuations in prevailing interest rates. Most economic
forecasts suggest that interest rates will rise modestly to the end of 2006 (i.e., by 50 to 75 basis
points).
2006-01-26
Historical Yields
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2006-01-26
-
KITCHENER PUBLIC LIBRARY
DATE: January 24,2006
TO: Pauline Houston, City Treasurer
Dan Chapman, Director of Financial Planning and Reporting
FROM: Sonia Lewis, Chief Executive Officer,
Secretary-Treasurer, KPL Board
SUBJECT: 2006 Operating Budget and 2005 Financial Statements
This is follow up to the January 16, 2006 operating budget discussion and subsequent requests
for information from your staff.
Upon review of the 2005 Year End Financial Statements, some opportunities to reduce the
operating budget request were identified. The Kitchener Public Library has identified changes
that would result in savings of $47,000. The savings would be achieved in the following
manner:
1) Increase fine revenue by $30,000
2) Reduce Forest Heights Community Library utilities expenditures by $2,000
3) Reduce Employment Insurance expenditures by $5,000
4) Reduce Salaries expenditures by additional gapping of $10,000
These savings would reduce the additional request of $97,525 over guidelines reflected in the
issue paper as previously submitted to $50,525.
As requested, we have attached our November and December 2005 financial statements.
Please note the December report reflects actual yearend results, not projections. Also as
requested, the Capital Book Reserve carry-over will be approximately $30,000 and the
Operating Resource Account carry-over is $9,787.34.
In regards to the capital book reserve funds, Sabina Franzen will be following up with Ruth-
Anne Goetz to discuss transferring those funds to the operating budget.
Should you require further clarification, please do not hesitate to contact to Sabina Franzen or
myself.
Thank you.
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Outstanding Grant Appeals
Operating and Capital
Community Services
Administration
INFORMATION REQUESTED BY COUNCIL:
On January 16, 2006, the Finance and Corporate Services Committee considered 2006 grant
allocations. The consideration of several appeals was deferred to final budget day on January
30, 2006, as summarized below.
DETAILS / ANALYSIS:
1. Communitech Technology Association
· A decision was deferred to budget day pending receipt of a proposal (attached)
· Economic Development staff have confirmed that the proposal addresses their
primary concerns
2. Capital Grants
· Decisions for all capital grants were deferred to budget day
· A provision for capital grants has been tentatively established in the 2006 capital
budget ($95,000), pending Council's final direction on the three specific applications
3. Annual Operating Grants
3.1 K-W Performing Arts Association/Theatre & Company
· A decision was deferred to budget day
· FCSC requested a copy of the June 30, 2005 financial statement (attached)
· Staff note that the forgiveness of a personal loan during the year has led to
the surplus unrestricted fund balance of $232,760 at year end
3.2 Kitchener-Waterloo Opera
· decision deferred to budget day to allow Council time to review information
previously submitted
3.3 CAFKA
· decision deferred to budget day
· Committee requested clarification regarding the amounts requested in each
of 2006 and 2007 and further information on the proposed expansion of the
event (attached)
2006-01-26
CITY OF KITCHENER
2006 BUDGET INFORMATION PAPER
ISSUE:
FUND:
DEPARTMENT:
DIVISION:
Penalty and Interest
Operating
Financial Services
Revenue
INFORMATION REQUESTED BY COUNCIL:
On January 16th, Council requested further information on the historical budget and actual
figures for penalties and interest on property taxes.
DETAILS / ANALYSIS:
The following table provides a summary of penalty and interest on property taxes over the past
five years, along with the budget for 2006.
Year Budget Actual Variance
2001 1,800,000 2,502,928 702,928
2002 1,854,000 2,461,796 607,796
2003 1,891,000 2,295,728 404,728
2004 1,946,000 2,457,353 511,353
2005 2,166,000 2,448,906 282,906
2006 2,231,000
While the City has received more penalty and interest revenue than budgeted in each of the
past five years, the operating budget has been increased every year and the variance from
budget to actual has declined considerably.
An additional budget increase of $69,000 would bring the budget in line with the lowest level of
the past five years and an increase of $202,000 would bring the budget in line with the five-year
average.
When considering any adjustment to the penalty and interest budget, It is important to note that
the actual amount of revenue received in the future may be lower than the historical level due to
increased attention to the collection of property tax arrears (through tax sales and normal
collection efforts).
2006-01-26
COUNCIL POLICY RESOLUTION
POLICY NUMBER
DATE: JANUARY 30,2006
POLICY TYPE: FINANCIAL
SUBJECT: RESERVE FUND - BUILDING ENTERPRISE
POLICY CONTENT:
1. That the Building Enterprise Reserve Fund be established subject to the
following guidelines:
(a) The fund shall finance Business Enterprise capital projects as
approved by Council from time to time;
(b) The fund shall finance operating deficits of the Building Enterprise;
(c) The fund shall be funded by any operating surpluses of the Building
Enterprise; and
(d) All allocations from the fund shall be based on a five-year plan to
ensure sustainability of the fund.
KITCHENER
Page 1 of 1
DECEMBER 2005