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HomeMy WebLinkAboutFIN-06-054 - Public Consultation - 2007 Budget ) db KITCHENER Financial Services ~ Report To: Date of Meeting: Submitted By: Prepared By: Ward(s) Involved: Date of Report: Report No.: Subject: Councillor Berry Vrbanovic, Chair, and Members of the Finance and Corporate Services Committee December 11 , 2006 Pauline Houston, General Manager of Financial Services & Treasurer Dan Chapman, Director of Financial Planning & Reporting Shelley Adams, Director of Community & Corporate Planning ALL December 5, 2006 FIN-06-054 RECOMMENDATION: Public Consultation - 2007 Budget THAT the approach outlined in Financial Services Department Report FIN-06-054 be approved as the basis for public consultation on the 2007 Budget; and further THAT the following budget meeting dates be confirmed and approved: Capital Budget and Forecast Water and Sewer Budgets and Rates Grants Day Preliminary Results of Public Consultation Operating Budget December 31, 2006 Financial Report Budget Day BACKGROUND: January 15, 2007 January 29,2007 February 5, 2007 February 5, 2007 February 26, 2007 March 5, 2007 March 19, 2007 In early 2005, Compass Kitchener and the City engaged Environics Research Group to complete a survey of residents. In April and May of that year, a combined postal and internet survey achieved a 20 percent higher response rate than anticipated, for a margin of error less than 2.8 percent. Over 300 questions were included, covering satisfaction with city programs and services, vision for the future, personal values and demographics. The results achieved a highly representative sample of Kitchener residents as confirmed by the 2001 census profile. On October 3, 2005, Environics and Compass Kitchener presented their results to Council and shared plans to use the survey findings as the basis for an extensive public consultation in 2006, known as Who Are You Kitchener? (WAYK). This consultation aimed to reach as many citizens as possible and include a wider diversity of people and viewpoints than previous, and more traditional, community consultations. WAYK was also seen as a springboard for two subsequent engagement exercises, the first to aid the development of a financial plan to guide Council's next term of office and the second to inform growth management. On June 16, 2006, Council approved "A Plan for a Healthy Kitchener (2007 - 2027)" as the Community's Strategic Plan for the City. This plan unifies the work of Compass Kitchener and the Healthy Community Plan Working Group and provides a single strategic approach to delivering results in key areas that are essential to the health and vitality of the City. It highlights priorities identified in consultation with the community - quality of life, leadership and community engagement, diversity, downtown, development, and the environment. And it organizes the recommendations resulting from the Healthy Community Working Group review under each of the priority areas as most appropriate. Upon approving "A Plan for a Healthy Kitchener (2007 - 2027)", City Council directed staff to prepare an implementation plan in 2007. It will not be possible to develop a detailed multi-year budget projection until the implementation plan is complete and outlines initiatives and time frames. However, the current budget cycle presents an opportunity to focus on immediate community priorities as well as high level principles to guide the development of future financial plans. This report has been prepared to recommend an approach to engaging the public in 2007 as the City prepares the budget and begins to develop a financial plan to align budget resources with priorities, and "make them happen". REPORT: It is well established that governments that are most effective at incorporating citizens into the budget process are those that: · Use a strategic plan as the basis for budgeting and consultation; · Engage citizens early in the process, at multiple times and in multiple ways; and · Seek to build community through inclusion and the building of trust These three success factors are present in the proposed consultation for the City's 2007 budget. This initiative will support "A Plan for a Healthy Kitchener (2007 - 2027)", which has articulated community priorities for the City of Kitchener. In order to build awareness, the City's consultation will provide information with respect to the City's current financial condition as well as information about the City's future financial prospects. In order to gather input and to assist Council's resource allocation decisions, the process will also seek feedback with respect to the public appetite for funding initiatives in support of "A Plan for a Healthy Kitchener (2007 - 2027)" along other strategies to balance desired service levels with the willingness of the public to pay for those services. Aooroach to Consultation In an effort to vary input mechanisms, this consultation is proposed to consist of a combination of public meetings as well as a structured education and feedback tool. The public meetings are proposed for the following dates and times: · City Hall Rotunda - Tuesday, January 9,2007,7-9 p.m. · KMAC Subscribers Lounge - Wednesday, January 17, 2007, 7-9 p.m. The agendas for these meetings are proposed to include the following: · Overview - Mayor and/or FCSC Chair (5 minutes) · Discussion of City's approach to strategic planning- Chief Administrator (5 minutes) · Overview of City finances and budget - City Treasurer (15 minutes) · Structured discussion on budget priorities aligned with the strategic plan and community input - Director of Community & Corporate Planning / Director of Financial Planning & Reporting (35 minutes) · Discussion / question and answer time - members of the public (60 minutes) Staff also propose to be in attendance at the Market on January 13, 2007 to distribute copies of the budget work book and engage citizens in dialogue about the City's budget consultation. In an effort to provide members of the public with a meaningful budget summary and feedback tool, a "Budget in Brief" document has been prepared, a draft of which is attached. This summary will be distributed at the two public meetings and will be made available at City facilities. In addition, the content will be included in the January/February edition of "Your Kitchener" (delivered December 28, 2006) and will be made available on the City's website. This document will provide citizens with information about City finances, feedback received to date, and the priorities identified in "A Plan for a Healthy Kitchener (2007 - 2027)". In addition to some open questions, the workbook will include a structured budget exercise to obtain an indication as to what mix of program changes is supported by members of the public. In view of the tight budget timeframes, staff recommends that the deadline for feedback be January 19, 2007. This will provide sufficient time for staff to assess the results prior to reporting back to Council with preliminary findings on February 5, 2007. Budaet Meetina Dates The following Finance and Corporate Services Committee meeting dates are recommended for the 2007 budget process, consistent with the budget plan report tabled at Finance and Corporate Services Committee on July 26,2006 and Council's approved schedule of meetings: Capital Budget and Forecast Water and Sewer Budgets and Rates Grants Day Preliminary Results of Public Consultation Operating Budget December 31, 2006 Financial Report Budget Day January 15, 2007 January 29,2007 February 5, 2007 February 5, 2007 February 26, 2007 March 5, 2007 March 19, 2007 FINANCIAL IMPLICATIONS: The estimated costs associated with this consultation include: Content published in "Your Kitchener" Printing of workbooks Room rentals and refreshments Total $ 3,950 250 250 $ 4,450 These costs can be accommodated within the 2006 capital budget for Corporate Plan Development (Index 170050) which has an unexpended balance of $35,029 as of the date of this report. COMMUNICATIONS: Public meeting information and the "Budget in Brief" document will be made available to members of the public through the January/February edition of "Your Kitchener" as well as the City's website. The "Budget in Brief" document will also be available to members of the public at City facilities. The budget exercise will be shared with Compass Kitchener at the committee's regular meeting on January 3, 2007 as a "pilot" public presentation of the content. CONCLUSION: Staff recommends that Council endorse the approach outlined in this report as the basis for public consultation on the development of 2007 budget. Pauline Houston, CA General Manager of Financial Services & City Treasurer Dan Chapman, CA Director of Financial Planning & Reporting Shelley Adams Director of Community & Corporate Planning Your Guide to the City of Kitchener's 2007 Budget The and You The City's budget is about much more than just dollars and cents. It is a document that lays out what is required - people, supplies, buildings, roads, and so on - to meet the needs of the community. Every time you visit the library, time at the park, or have your streets and plowed, you are witnessing your City budget at work. Over the past two years, the City has heard from more than 3,000 citizens through programs like the Environics survey of residents and "Who Are You Kitchener?" process. That input formed the basis of our community plan, A Plan for a Healthy Kitchener (2007-2027), which City Council has adopted. Now, as City staff prepares the 2007 budget, we are looking for your input and ideas. Through the previous consultations, we heard about your priorities; now we want to explore how the City should begin to allocate resources among them. This guide will provide some background on the City's overall financial position and the process for building the City budget, and give you an opportunity to provide your input. There are many ways to get involved: Attend a public meeting. Please take the time to share your opinions and have your questions answered at one of two public meetings: · Tuesday, January 9 from 7 to 9 p.m. in the Kitchener City Hall Rotunda · Wednesday, January 17 from 7 to 9 p.m. at the Auditorium in the Subscriber's Lounge. Fill out the questionnaire at the back of this booklet. Visit our web site at www.kitchener.ca to fi II out and submit a questionnaire online. Come to a Council meeting. For a list of dates when Council will consider the 2007 budget, please see "Important Dates" at right. Council and committee meetings are open to the public. Your input will be submitted to City Council, as one of the factors Council members will take into account as they establish the 2007 budget. Thank you for taking the time to provide your thoughts on the City's budget! Dates: Tuesday, January 9 First public meeting, 7 to 9 p.m., Kitchener City Hall Rotunda Wednesday, January 17 Second public meeting, 7 to 9 p.m., The Aud - Subscriber's Lounge Friday, January 19 Deadline to submit comments Monday, February 5 Public comments will be presented to Council's Finance and Corporate Services Committee Other Finance and Corporate Services Committee Meetings: Capital Budget and Forecast January 15, 2007 Water and Sewer Budgets and Rates January 29, 2007 Grants February 2007 Operating Budget February 26, 2007 December 31, 2006 Financial Report March 5, 2007 Council Meeting to Finalize Budget (Budget Day) March 19, 2007 Each year in the Spring, planning for the next year's budget begins. With the help of the Finance department, each department reviews its existing budget, calculates changes, and identifies new initiatives. Some of the things that staff take into consideration are: · inflation costs · new tax revenue (e.g. from new residents and businesses) · new infrastructure to be built · increased operating costs related to growth (e.g. more roads to plow) Staff also update the forecast of capital projects, which prioritizes projects such as new roads, arenas and parks over the next ten years. The budget is reviewed in detail by the Finance department and the management to find savings, efficiencies, revenues in order to achieve Council's budget targets. In addition, through the Performance Measurement and Internal Audit Division, the City reviews the efficiency and effectiveness of its services on an ongoing basis. City Council's Finance and Corporate Services Committee meets a number of times to consider various parts of the City's overall budget, including: · fees and charges (e.g. swimming rates) · capital projects (e.g. addition to a community centre) · water and sewer rates · grants to community groups · the operating budget (i.e. the day-to-day cost of running the City) The entire budget is then considered for Council's approval on Budget Day. The Finance and Corporate Services Committee and Council meetings are all open to the public, and the information provided to Council is also available to the public. City vs. Regional Responsibilities Kitchener is part of the Regional Municipality of Waterloo, which means that some services are the responsibility of the City and some are the responsibility of the Region. Residents pay taxes to both orders of government, and both the City and the Region have Councils that set their respective budgets. Who Does What? The following chart outlines some of the key areas of responsibility for the City of Kitchener and the Region of Waterloo. Cit of Kitchener Re ion of Waterloo By-law Enforcement Parking, Lawn Watering, Property Standards, Tree Cutting, Land Use Issues, Roadside Dumping, Noise Weed Inspections Emergency Services Fire Department Police, Ambulance Licensing Business, Lottery Taxis, Limousines, Salvage Yards Roads Municipal - Blue Signs Regional- Green Signs {maintenance, winter (maintenance, winter control, construction) control, construction) Housing Social Housing - Regional Housing - Kitchener Housing Tenant Placement & Services Vital Statistics New Birth, Death Registrations, Marriage Licences Immunization, Communicable Disease, Dental Waste Management Sewage Collection, Landfill Sites, Leaf Collection Recycling & Garbage Collection Water Water Supply and Wastewater Treatment Other Community Services - Transit, Public Health, parks, arenas, Social Services community centres, (Ontario Works) trails Approximately one third of your property tax bill funds City programs. The rest is allocated to the Region of Waterloo and to the Province of Ontario for education. Here is how residential property taxes are split between these three governments in 2006: The following information is extracted from the City's 2005 Annual Report to Citizens which is available on the City's website at www.kitchener.ca Total Expenditures Total actual operating and capital expenditures amounted to the following in fiscal 2005: Operating expenditures: $196,864,000 Capital expenditures: $53,559,000 Total: $250,423,000 Sources of Revenue In addition to taxes and user fees, the City of Kitchener's sources of revenue included natural gas rates from our community-owned utility, and grants from the Province of Ontario. Value for Your Tax Dollar Here is a snapshot of how the City portion of the property tax on an household was spent in a typical month in $14.33 $10.08 $8.41 $7.58 $7.25 $1.91 $0.58 compare? Here is how 2006 tax and utility costs per household in Kitchener compare to those neighbouring municipalities: Property Taxes Kitchener Waterloo Cambridge City Region Education Total Taxes Services Water & sewer Hyd ro Natural Gas Total Services Total Costs $5,292 Debt Levels Kitchener has a capital investment philosophy that is based on the belief that the City must balance the increasing needs of the community with its ability to pay. This means that capital projects must be prioritized to fit the funding available and that, on an annual basis, debt charges do not grow faster than the rate of assessment growth. There are two exceptions: · Projects that have a business plan that shows they will generate revenue to cover their cost over a reasonable "pay back period" can be financed through debt. · The City's $110 million Economic Development Investment Fund (EDIF) is funded through a combination of special levies and a strategic, controlled increase in debt levels over a ten- year period. EDIF was approved by City Council in 2004 after extensive public consultation. It funds projects that will modernize, strengthen and diversify Kitchener's economy. What is Kitchener's debt level per capita? Total debt burden per capita - $195 Total debt burden per capita, excluding EDIF - $111 The Provi nce considers $150 to $380 per capita to be a "moderate" debt load. With EDIF included, Kitchener's debt burden per capita is well within the "moderate" range as defined by the Province. When EDIF is excluded, Kitchener's debt load is in the "low" range. Reserve Fund levels As part of prudent financial planning, the City maintains reserve funds that may be used for such purposes as tax stabilization, equipment purchases, sick leave costs, and so on. Kitchener's reserve funds are very close to the median level for similar municipalities. Investment in Hydro and Gas Utilities In addition to the reserve funds described at left, Kitchener owns 92.25 per cent of Kitchener Power Corporation and is one of only two municipalities in Ontario to own its local natural gas utility. Community ownership of these utilities helps to ensure reasonable, stable rates and provides a return on investment for the City to fund community priorities. While some municipalities may be able to claim they are debt-free, many have achieved this position through the sale of these types of assets. Kitchener has a balanced approach, with revenue-generating investment in local utilities as well as the careful use of debt as a financing tool. Annual Budget Surplus or Deficit The budget represents the City's best forecast of revenue and expenses for any given year. But forecasts are not perfect; inevitably, there are changes during the year. For example, a major snowstorm could cause additional If more revenue comes in than this results in a surplus; additional expenses result a deficit. Over the past ten years, these amounts have from a surplus of $3.4 million to a deficit of million. If the City did not maintain a Tax Stabilization Reserve Fund, it would have to raise taxes to cover any deficits. Growth vs. Assessment Recent surpluses have arisen due to assessment growth - that is, new and businesses who are new taxpayers in the city. This should not be confused with adjustments to the market value assessment of existing properties by the Municipal Property Assessment Corporation (MPAC). Adjustments to market value assessment do not provide any new revenue for the City; the City still raises the same total amount of tax revenue from the pool of existing property taxpayers. the Kitchener is fortunate to have a strong and growing economy and a solid financial position. However, like many municipalities, Kitchener also faces a number of significant challenges. Inflation, legislative changes, downloading, aging infrastructure and growth create pressures in the budget. Inflation vs. Tax Rate Increases Over the past decade, inflation (as measured by the Provincial Consumer Price Index) has risen more quickly than City of Kitchener property taxes. That means that, over time, the cost of gasoline, housing and other necessities gone up faster than your property taxes. The City's rate of inflation - called the Municipal Price Index - tends to go up faster than the consumer rate of inflation. This is because the City's main expenses are things like construction, equipment, and staff, which increase in cost faster than the consumer "basket" of goods. For example, in 2006 the increase in the Municipal Price Index is expected to be 3.3 per cent, while the Provincial Consumer Price Index increase is expected to be 1.9 per cent. legislative Changes Legislative changes made by the Federal and Provincial governments can create additional expenses at the municipal level. For example, legislated processing times for permits may necessitate the hiring of additional staff. In 2006, legislative changes are responsible for $790,000 of proposed additions to the tax-supported operating budget and 1 O-year capital forecast. Downloading In the late 1990s, many services that had been carried out by the provincial level of government were downloaded to municipalities, as part of a process called "local service realignment." While local service realignment was touted as being revenue neutral, it has created a higher burden on the property tax base. Compounding the problem is the fact that municipalities are not legally permitted to access sources of funding normally employed by other levels of government, such as income taxes and sales taxes. While recent initiatives from the Federal and Provincial governments, including a GST rebate and sharing of gas tax revenues, have helped the situation, much more is required if the fiscal imbalance is to be corrected. Today, municipal governments deliver an increasingly complex range of services with limited sources of revenue. Infrastructure From 1961 to 2002, municipal governments' responsibility for infrastructure has steadily increased, while their share of total tax revenue has decreased. This means that municipalities have a greater share of public infrastructure- roads, buildings, water systems, wastewater networks and so on - to maintain, but a reduced share of tax revenue to pay for it. Often referred to as the "infrastructure deficit," this situation has forced municipalities to do more with less. Share of Capital Infrastructure by percentage 1961 . 2002 50% 52% 1 . 31% 25% 24% i . Federal Provincial Municipal Source: Statistics Canada, "Public Infrastructure and the performance of the Canadian economy" November 12, 2003 Share of Tax Revenue by percentage 1961 . 2002 50% 25% Federal Provincial Municipal Source: The Fraser Institute Foundation. Tax Facts 13. 2004 Priorities Every year, City Council strives to set a budget that reflects the needs and priorities of the community. Social Trends The City monitors a number of trends when setting priorities so that services continue to meet the needs in the community and reflect the unique characteristics of the population. For instance, the Kitchener Census Metropolitan Area (CMA) - which includes Kitchener, Waterloo, Cambridge, North Dumfries and Woolwich - is one of the fastest growing areas in Canada, and it is projected to grow by nearly 12 per cent over the next ten years. With a median age of 35 (2001), the Kitchener CMA is the youngest area in Ontario and third in Canada, but it has a large, aging "baby boomer" population. An increased diversity of ethnic groups has emerged, with 22 per cent of the region's population being foreign-born citizens. The Kitchener CMA enjoys strong employment growth and typically has one of the lowest unemployment rates in Ontario. However, the manufacturing sector has had some recent challenges and plant closures have had an impact on the community. Community Priorities: What We Heard Extensive public consultations - including the Environics survey of citizens and the "Who Are You Kitchener?" campaign - provided some valuable insights on community priorities. Environics The Environics survey asked citizens how satisfied they are with various services, and whether they support spending more or less on those services. The results were plotted on the diagram on the following page. As the diagram illustrates, among the services that residents are satisfied with, there are some that they do not support higher spending on, and others that they would like to see further investments in. Similarly, among the items that they are dissatisfied with, they support increased spending for some but not for others. We can infer from these results that residents are generally happy with items in the lower right quadrant, and do not see these as priorities 6 for enhanced investment. Services in the top left quadrant, for which there is low satisfaction and high support for spending, can be considered higher priorities. Items in the bottom left quadrant, for which there is low satisfaction and low support for spending, could be opportunities for service reductions or fee increases. Items in the top right, which have high satisfaction and support for spending, would not be good candidates for budget cuts, and may be areas for program expansion. It should be noted that many items fall near the middle of the diagram, suggesting that most respondents did not have strong feelings about satisfaction or spending for these services. These results will continue to be explored as the City develops capital priorities, operating budgets, and the implementation plan for A Plan for a Healthy Kitchener (2007-2027). Who Are You Kitchener? The "Who Are You Kitchener?" process included an exercise that asked respondents to allocate a budget of $100 among a list of City services or priorities. The responses can be grouped to the outlined in A Plan for a as shown below. Two priorities - diversity and leadership/community engagement - were not part of the exercises, but respondents indicated support for these priorities in other questions. The "Who Are You Kitchener?" workbook also asked respondents how the City should pay for new initiatives and priorities. The results suggest a balanced approach, with 31 per cent more revenue generation, 31 per suggesting spending reductions, and 25 per cent suggesting increased taxes. More Dl C ~ C CD a. '" Less and Satisfaction Road/sidewalk Maintenance. Downtown planning. High Have Your 2007 Budget The following chart provides a list of proposed additions to the tax-supported operating budget and ten-year capital forecast. Items are grouped according to priorities identified in A Plan for a Healthy Kitchener (2007-2027). It should be noted that there is some overlap between the categories. Other budget impacts are also identified so that, at the end, you can see the total value of all proposed budget changes and their impact on your property tax bill. There are important differences between operating budget items and capital budget items. Think of your household budget, where you have operating expenses such as groceries and the cable bill, and capital expenses such as roof replacement or a new vehicle. In the same way, the has an operating budget to fund ongoing like salaries and road maintenance, and a capital budget for things like infrastructure and equipment. The operating budget is one-year. The amounts you see on the chart will be spent in 2007. The capital budget is balanced over a ten-year period. In order to include new projects, lower- priority projects have to be removed, deferred or reduced. On this chart, we are looking for your input on additions to the operating budget - items for which funds will be spent in 2007. Please indicate your level of support for each addition using the scale provided. ..... L.. fa ..c u ..... cu a" "C ~ a:I """ o o N ~ ~ ~ ~ ~ ~ ~ ~ ~ c:i ~ c:i c:i c:i ~ ~ S ::; cu ~ c '.j:i c o ~ ..... L.. fa ..c u ..... cu a" "C ~ a:I """ o o N 10 ;::: <:t ~ ~ ~ '" ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ c:i c:i c:i c:i <:t ~ c:i c:i ~ 9: E ~ ::; cu ~ c '.j:i c o ~ ..... L.. fa ..c u ..... cu a" "C ~ a:I """ o o N 11 <:t <:t <:t ~ ~ 5l ~ ~ 5l E ~ ~ ~ ~ ~ ci ~ ~ ci ~ ~ ~ ~ ~ ~ ::; cu ~ c '.j:i c 0 ~ l< ..... II! L.. :>. fa cu ..c CI. u 0 ..... CI. cu s: a" 0 "C ~ II! a:I J """ 0 cu 0 .i: N 0 ~ Ii d d ~ ~ E ~ a ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ rvi c:i c:i ~ r-J r-J LA ~~ g Financial Plan Your input on the following questions will be useful as the City begins to develop a longer- term financial strategy in conjunction with the implementation plan for A Plan for a Healthy Kitchener (2007-2027). 1. The Municipal Price Index, commonly referred to as the" City's rate of inflation," measu res the rate at which the expenses increase every year (please see page for more information). Would you favour a policy that states that annual property tax increases should be set at the City's rate of inflation? DYes DNo D I don't know Comments: 2. As new residents and businesses come to Kitchener, they add to Kitchener's tax base. This "assessment growth" adds to the City's revenues, and helps to pay for growth-related expenses such as additional roads to plow and maintain. How do you think the City should use assessment growth revenues (in addition to funding growth-related expenses)? D ~~r~i:f:: t~n a~~n~UeSi~:~:~sgrams and D To reduce the property tax rate D Both of the above D I don't know Comments: 13 3. Please indicate three areas where you think the City should look for opportunities for service enhancement, service reductions and fee increases. For some ideas about the different services the City provides, you may want to review the diagram on page 7. Opportunities for service enhancement: 1 : 2: 3: Opportunities for service reductions: 1 : 2: 3: Opportunities for increases in fees: 1 : 2: 3: 4. As we move forward with developing the four- year financial strategy and the implementation plan for A Plan for a Healthy Kitchener (2007-2027), we will be asking for further public input. What are the best ways for the City to involve citizens in this process? (Please check all that apply.) D Paper surveys D D D D Web-based surveys Telephone surveys Paper comment sheets or workbooks (where you can provide open-ended comments) Web-based comment sheets or workbooks (where you can submit open-ended comments) D Public meetings D D D Focus groups Citizen advisory committees such as Compass Kitchener Meetings with community groups such as Neighbourhood Associations D An e-mail address you can send comments to D A telephone line where you can leave messages D Web pages where you can post your comments D Other 5. Please share any other comments or advice you have related to the 2007 Budget: 14 Thank you for taking the time to be involved in the City's 2007 budget process! Your views are important and will be presented to Council as part of the draft budget submission. All responses will be kept completely confidential and anonymous. If you would like to be on our mailing list in order to receive updates and invitations to future public consultations, you can up online at www.kitchener.ca or public meetings. If you have any questions about the 2007 or A Plan for a please contact: Dan Chapman, Director Financial Planning & Reporting dan .cha pma n@kitchener.ca (519) 741-2347 Shelley Adams, Director Community & Corporate Planning she Iley.ad a ms@kitchener.ca (519) 741-2476