Loading...
HomeMy WebLinkAboutFin & Corp Svcs - 2008-02-04 SFINANCE & CORPORATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 CITY OF KITCHENER The Finance and Corporate Services Committee met in special session this date commencing at 10:11 a.m. Present: Councillor B. Urbanovic -Chair Mayor C. Zehr and Councillors J. Smola, G. Lorentz, J. Gazzola, K. Galloway and C. Weylie. Staff: C. Ladd, Chief Administrative Officer P. Houston, General Manager, Financial Services & City Treasurer T. Speck, General Manager, Corporate Services R. Browning, General Manager, Development & Technical Services A. Pappert, General Manager, Community Services T. Beckett, Fire Chief R. Gosse, Director of Legislated Services & City Clerk D. Chapman, Director of Financial Planning & Reporting J. Witmer, Director of Operations J. Willmer, Director of Planning R. Regier, Executive Director of Economic Development M. May, Director of Communications /Marketing S. Turner, Director of By-law Enforcement J. Evens, Director of Revenue S. Adams, Director of Community & Corporate Planning D. Paterson, Director of Human Resources ~. Proulx, Director of Facilities Management R. Upfold, Director of Accounting M. Selling, Director of Building M. Grummett, Director of Information Technology G. Murphy, Director of Engineering D. Keelan, Interim Director of Aquatics & Athletics H. Gross, Director of Project Administration & Economic Investment L. Gordon, Director of Purchasing G. Hummel, Manager, Park Planning, Development & Operations D. Locke, Manager, Operational Support & Analysis G. Hastings, Manager, Golf Courses R. ~eBrun, Manager, Financial Planning & Reporting ~. Palubeski, Manager of Program & Resource Services S. Wright, Manager of Downtown Community Development C. Solcan, Senior Financial Analyst D. Gilchrist, Supervisor of Legislated Services C. Goodeve, Committee Administrator The purpose of this special meeting was to give final consideration to the 2008 Operating and Capital Budgets and the 14-Year Capital Forecast 2008-2017. It was noted in the agenda that any recommendations from the Committee this date would be considered at the special Council meeting to be held immediately following this meeting. 1. FIN-07-012 - 2008 FINAL BUDGET DAY The Committee was in receipt of Financial Services Department report FIN-08-012, dated January 22, 2008, concerning the City's 2008 Operating and Capital budgets, together with budget issue papers for specific items. In addition, the Committee was in receipt of a Supplemental 2008 Budget Day Package prepared in response to specific budget reduction suggestions advanced by members of Council when previously reviewing the Operating Budget. Councillor B. Urbanovic advised that on his behalf the Committee's Vice-Chair, Councillor J. Smola will bring forward recommendations to adjust the tax levy to a rate between the Consumer Price Index (CPI) and the Municipal Price Index ~MPI). He added that a recommendation will also be brought forward for the creation of a Special Committee, to be made up of Council's Standing Committee Chairs and the City's General Managers, to review and bring forward recommendations to make cuts to low priority programs and services; thereby enabling the 2008 base budget to be reduced by $220,000. Councillor Vrbanovic commented that over the years staff and Council have done a good job at targeting FINANCE & C~RP~RATE SERVICES C4MMITI'EE MINUTES FEBRUARY 4, 2008 - 32 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY investment in key priority areas that the community has identified. He added that those investments have gone a long way to building and strengthen the quality of life here in Kitchener. He noted that now staff and Council need to redouble their efforts to find financial savings through cutting programs and services that may have outlived their usefulness and are simply no longer a priority for the community. Councillor J. Gazzola stated that he was pleased to hear that the members decided to take a closer look at reducing the budget than they appeared to take in January. He noted that he would prefer to see the City's tax rate reduced close or equal too the rate of inflation. Mayor C. Zehr agreed that the proposed tax levy increase needs to be reduced, but cautioned against decisions being made to benefit the short-term, which could have negative long-term implications. Ms. P. Houston then provided an overview of the approach undertaken thus far in the preparation of the budget including: strategic directions, key strategies and initiatives to increase efficiency and reduce costs. A comparison of Household CPI vs. City MPI was reviewed, showing an increase of 2.3% and 3.7% respectively. Councillor J. Gazzola inquired as to why the City's wage settlements were higher than the CPI and was advised that the difference relates to progression and re-evaluation of some jobs. Ms. Houston noted that several job ratings have increased due to the complex nature of the work now being undertaken. A graph showing a comparison of Household CPI and City MPI vs. the tax rate increases over a ten year trend (1997-2007) was reviewed, which demonstrated the gap between the City MPI and the various tax rate increases. A chart entitled "Typical Residential Property Taxes" was provided which offers a comparison of properly tax rates among various municipalities with populations greater than 100,000 for the years 2003 to 2007. Ms. P. Houston pointed out that in 2003 Kitchener taxes were 8t" lowest among this group and moved to 4t" lowest by 2007. She noted that the City of Waterloo was not included on this chard as they did not meet the minimum population requirements. A chart showing assessment growth over a ten year trend (1998-2008) was reviewed, which indicated a final assessment growth figure of 2.03% for 2008. Ms. Houston advised that resultant to changes put forward at the January 14, 2008 meeting of the Finance and Corporate Services Committee, the projected tax levy was adjusted from 6.37% to 5.94%. She noted that this change to the City's rate equates to a properly tax increase of $52.27 per average household. She stated that the Regional Municipality of Waterloo has approved a 2.72% property tax increase for 2008. She added that with the Provincial government maintaining the Education rate at its existing level, the projected total 2008 property tax increase would be 3.20%, which would mean an $88.47 increase per average household. Ms. Houston noted that the Region was able to keep their rate low due to new funding being provided to them by the Provincial government. Mayor C. Zehr commented that he has raised the issue of disproportionate funding provided to upper tier and single tier municipalities with the Provincial Minister of Finance. Ms. P. Houston then reviewed a chart showing a summary of core complement FTE counts over a four year trend (2005-2008) with a comparison to population. She noted that the chart does not provide a break down between core (permanent full-time staff) and total complement (full-time, part-time and contract staff). She added that 14.5 FTEs are included on the list of proposed new initiative for total or 37.61 new FTEs. In response to questions, Ms. Houston pointed out that the City has a number of employees who are currently working on special projects, which would have otherwise been undertaken by consultants at a higher cost. The ten-year tax rate impact projections for years 2009 to 2018 were reviewed, ranging from 4.39% in 2009 to 1.96% in 2018. Ms. P. Houston highlighted the Williamsburg Community Centre item, noting that it was added as a result of a recommendation made at the January 14, 2008 meeting of the Finance and Corporate Services Committee. Councillor J. Gazzola requested clarification as to the proposed 2011 increase for a new main library and was advised that the projected increases relate to operating and staffing needs due to the expanded size of the facility. Councillor Gazzola inquired as to when the City would realize a larger rate of return on its Economic Development Investment Fund (EDIF) investments and FINANCE & C~RP~RATE SERVICES C4MMITI'EE MINUTES FEBRUARY 4, 2008 - 33 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY was advised that the majority of projects funded through EDIF have long-term implications. It was noted that EDIF can also be viewed as catalyst funding which serves to protect the City's properly tax base for the future. Mr. Chapman reviewed changes that have been made to the 10 year Capital Forecast (2008- 2017) subsequent to the Committee's review of the forecast on December 10, 2007: an expenditure of $2.241 M for the Centre In the Square; additional funds of $8.265M for increased land sales related to the Consolidated Maintenance Facility; additional $15,000 in funds because of the reduced cost of the ward boundary review. Mr. Chapman then reviewed the Capital Pool Availability as outlined in the agenda package. He advised that the Hydro Capital Investment Reserve Fund amount of $8.4M in 2009 is an adjustment for the Kingsdale Community Centre, and the allocations from the Gas Capital Investment Reserve Fund in 2008 and 2009 even out these transfers from year to year. There followed a discussion concerning the cost of the Gaukle Street remediation and construction. Mr. J. Witmer advised that the total cost for these works was $29.7M and the portion of the total cost associated with the remediation was $18M. It was noted that $6.1 M toward these costs came from the Tax Stabilization Reserve Fund, as approved by Council. Councilor Vrbanovic noted that this cost was paid without impact on the tax levy and without debt financing. Mr. Chapman then reviewed the proposed 2008 Debenture Issues, the Hydro Capital Investment Reserve Fund Projection and the Economic Development Investment Fund 10 year forecast from 2004 - 2013. He noted that full funding for King Street is included in this forecast, but it may be reduced if the City has a successful application to the Municipal Infrastructure Investment Initiative. Councillor Gazzola questioned whether the funding for Wilfrid Laurier University will ever cease. Mr. Regier advised that the agreement with Wilfrid Laurier University included their ability to purchase parking spaces at the then current rate for an undetermined time. Ms. Ladd advised that the City is in discussions with the University concerning a reduced rate for parking or a partnership arrangement. Mr. Chapman then reviewed the Development Charges Projections including Engineering Projects, Non-Engineering Projects and projects that will receive front-end financing from the developers. Mr. Chapman spoke of the Federal gas tax revenues, noting that these grant dollars are allocated to infrastructure projects. He noted that in the 2007 Federal Budget there was a commitment to this program until 2013. Staff has assumed, in the 10 Year Capital Forecast (2008-2017) that this program will continue after 2013 at an increase of 2% per year. Further discussion will be required if this program ends in 2013 or if the 2% per year increase is not realized. Councillor Vrbanovic noted that the Building Canada Fund requires the provinces to agree, and questioned whether the Province of Ontario has entered into such an agreement. Mayor Zehr noted his understanding that the province has not entered an agreement at this time because of a dispute with the federal government. Mr. D. Chapman reviewed the Enterprise and Tax Supported Operating budgets, as outlined in the package attached to report FIN-08-012. He noted that during the Operating Budget review several questions were raised regarding the differences between the figures outlined in the budgeted amount and the projected actual amounts with respect to the transfer to the Building Reserve. He advised that those figures were re-examined and it was confirmed that the transfers to the Building Reserve equal the transfers from the Building Reserve. In response to questions regarding the Gasworks Utility, Ms. P. Houston advised that projecting gross margin for the delivery program is complex and can fluctuate dramatically depending on weather and economic /market conditions. She stated that for 2008, it is estimated that based on reductions in industrial customer volumes, net growth at 1 % and a FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 34 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY slight decline in transportation benefit, the delivery revenues will decrease. She added that while residential growth has increased so too has the use of more energy efficient appliances, which has contributed to the decrease in revenues. She noted that the 2007 gas inventories and year end operating results would be finalized by early March 2008 and staff anticipates bringing a report forward by late March /early April 2008. Mr. D. Chapman reviewed the combined water 1 sanitary rate increase, which has been set at 12.6% for 2008 - 2011. He noted that this rate is a result of the Regional water rate increase and the 2004 implementation of the Accelerated Infrastructure Renewal Program to replace the City's aging watermains, sewers and roads. Councillor J. Gazzola expressed concern with the City adjusting its rate to cover costs past on to it by the Region and estimated that it would be possible for the City to recoup those costs without having to increase the water /sanitary rate to 12.6%. Mr. Chapman advised that in addition to covering the Regional water rate increase, the proposed rate would also serve to draw down the City's accumulated water / sanitary deficits. He added that the Accelerated Infrastructure Renewal Program has targeted the replacement of linear infrastructure that is greater than 80 years old by 2032. He stated that to achieve this target, significant rate increases were projected based on a formula portioning reconstruction cost between water /sewer rates and the tax base. Mr. D. Chapman then reviewed the Reserve Fund projections and the status of the new initiative items brought forward for consideration on September 17, 2007 and January 14, 2008, as outlined in report FIN-08-012 and the Supplemental Budget Day package. Boards Mr. D. Chapman presented the proposed Operating budgets for the Centre in the Square (CITS) and the Kitchener Public Library (KPH) at 3% and 4.2% respectively. He outlined that KP~'s proposed budget exceeds the inflationary guidelines by 1.3%. It was noted that KP~'s operating budget of $8,395,000. does not include the additional $20,750 to accommodate the 0.5 FTE for the Forest Heights Library. A motion by Councillor J. Smola recommending a decrease to KPL`s Operating budget by $20,000, reducing it from $8,395,000 to $8,375,000 and a decrease to the CITS Operating budget by $5,000, reducing it from $1,319,000 to $1,314,000, was brought forward for consideration. Councillor J. Gazzola advised that he would not support more than an increase equivalent to the rate of inflation, expressing the opinion that the proposed decrease is minor and should have no major impact on services. Mr. J. Grant, General Manager, CITS and Ms. Sonya Lewis, CEO, KPL, were in attendance to support their respective budget requests. Mr. Grant advised that approximately $15,000 of the proposed funding increase relates to PSAB requirements. Ms. Lewis advised that if their funding request is not approved, cuts to resource materials and / or salary budgets will have to be considered by the library Board and may have an impact to service delivery. On motion by Councillor J. Smola - itwas resolved: "That the 2008 Operating Budgets for the Kitchener Public library in the amount of $8,375,000 be approved." On motion by Councillor J. Smola - itwas resolved: "That the 2008 Operating Budgets for the Centre in the Square in the amount of $1,314,000 be approved." The Committee then recessed at 12:13 p.m. and reconvened at 1:07 p.m. with the following members present: Mayor C. Zehr and Councillors C. Weylie, K. Galloway, B. Urbanovic, J. Smola, G. Lorentz and J. Gazzola. FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 35 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY The Committee then reviewed the issue papers included in the agenda package for this meeting and in the addendum to the agenda. At the request of some members, Councillor Urbanovic agreed that any of these issue papers could again be reviewed at the end of this meeting. It was generally agreed that Issue Papers 29, 29.1 and 29.2 concerning Investment Income, would be the last ones to be considered. Issue Paper #2.1 Adult Crossing Guard -Williamsburg Public School The Committee first considered Issue Paper # 2.1 -Adult Crossing Guard -Williamsburg Public School. It was noted in the issue paper that a lunch hour crossing guard service is not required; consequently, staff recommend a reduction in this budget line from $8,500 to $6,678 i n 2008. Councillor Smola put forward a motion to adopt the staff recommendation. Councillor Galloway directed that staff re-evaluated the need for a lunch time crossing guard service at Williamsburg Public School at the time of preparing the 2009 budget. On Motion by Councillor J. Smola - itwas resolved: "That the proposed budgeted cost for one additional Adult Crossing Guard for the intersection of Max Becker Drive and Isabella Street be reduced from $8,500 to $6,678 i n 2008." Issue Paoer #14.1 (Enerav Management Program The Committee reviewed Issue Paper #14.1 -Energy Management Program, addressing Council's direction of January 14, 2008, to provide additional details on the Energy Management Fund. In this issue paper staff advised that this fund will be in a deficit position by 2008, and they recommend that $83,615 in wages and benefits be transferred from this fund to the Operating Budget. In response to questions form the Committee, Ms. Houston advised that the 2007 year end balance for this fund is not yet available. She noted that if this full-time equivalent ~FTE) continues to be paid from the fund, the fund will be in a deficit position in 2008, and it will be difficult to sustain this expenditure from the fund beyond 2008. With respect to debt charges, Ms. Houston reminded the Committee that in approximately 2000-2001 the City debt financed a substantial number of energy efficiency projects. Ms. Proulx responded to questions from the Committee advising that recoveries beyond 2007 are reduced because the savings reflect the projects which have been undertaken, and some are more lucrative than others. With respect to the proposed projects for 2008, Mr. Proulx advised that not all of these projects will be undertaken. Mayor Zehr directed that staff review the proposed energy efficiency projects for 2008 to see which are actually warranted. In response to a question from Mayor Zehr, Ms. Houston advised that these energy savings are adjusted in the Department Operating Budgets. On motion by Councilor J. Smola - itwas resolved: "That in 2008 the energy management labour and benefits cost of $83,615 remain in the Energy Management Fund; and further, That the Energy Management program be reviewed in time for the 2009 Budget deliberations." FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 36 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY Issue Paper #19.1 Addition of Junior Buyer~ The Committee then considered Issue Paper #19.1 -Addition of Junior Buyer -Purchasing Division. On motion by Councillor K. Galloway - itwas resolved: "That the tax-based budgets for the photocopier contract, blackberry charges and cell phones be reduced by $15,000, $21,000 and $12,000 respectively in 2008, for a total savings of $48,000, to partially offset the cost of the proposed new junior buyer, being $55,000." Councillor Gazzola then questioned the actual earnings in Investment Income for 2007. Ms. Houston advised that the figure has not been finalized but is estimated at $3M to $3.4M. Issue Paper #31 - Golf Rounds and Administrative Expenses The Committee considered the information concerning Golf Rounds and Administrative Expenses, contained in Issue Paper #31, as had been requested by them on January 14, 2008. Issue Paper #32 Gasworks Delivery Revenues and Gross Margin Staff presented Issue Paper #32 -Gasworks Delivery Revenues and Gross Margin, in response to Council's direction of January 14, 2008, to provide a history of gross margins for the delivery program as well as an explanation for projected decreases in revenues for 2008. It also responds to Council's question respecting when 2007 gas inventories and year end operating results will be finalized. Ms. Houston explained what the delivery and transportation costs are and advised that staff is anticipating a cut in the gross 2007 prediction of 1 %. Issue Paper #33 Water and Wastewater Rate History The Committee reviewed Issue Paper #33 -Water and Wastewater Rate History, as requested by Council on January 14, 2008. Councilor Gazzola stated his opinion that the rate increases are excessive, and that the increase should be 8% overall. An 8% increase would still provide money for infrastructure and the deficit. He stated that staff is trying to correct things too quickly. Councillor Gazzola then stated that we are paying a lot of money for the treatment of storm water through the sewage treatment system and questioned whether any thing has been done to stop this. Mr. Murphy advised that there are a variety of programs in place, such as sump pump disconnect, chemical sealing of sewer pipes, and an overall replacement program; however, the percentage decrease is not available. Mayor Zehr noted that there continues to be more stringent regulations in Ontario with respect to water treatment, and these regulations require upgrades to the system. The additional costs are between $400M and $500M, and Doon has to be replaced over the next few years. He stated that to reduce the water charges to 7% and the sewer charges to 8% will make the bottom line deficits even greater and it would spread the deficit out over future years. This would make the situation worse in 2009 than what is currently being projected. He affirmed the Committee's previous decision with respect to water and sewer rates for 2008. Councillor Gazzola commented on Mayor Zehr's statement by stating that the proposal is over aggressive and that he wants the combined water and sewer rates to increase by no more than 8%. FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 37 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY Issue Paper #34 ~System Maintenance Costs The Committee considered Issue Paper #34 -System Maintenance Costs, and Ms. Houston noted the importance of these maintenance costs which relate to the City's proposed new Delta System. Issue Paper #35 and 35.1 Winter Control Costs The Committee next considered Issue Paper #35 and 35.1 -Winter Control Costs, and was advised by staff that the final figures of 2007 may change as there are invoices still to come for such things as salt, and the suppliers have 60 days to submit these invoices. Issue Paper #36 Corporate Strategic Directions -Financial Management) and Issue Paper #37 ~FTE Summary) The Committee next considered Issue Paper #36 -Corporate Strategic Directions -Financial Management and Issue Paper #37 - FTE Summary Information, as previously requested by Council. Issue Paper #38 Annual and Minor Sports Grants Issue Paper #38 -Annual and Minor Sports Grants was next considered by the Committee. Members questioned the grant to ASAP for 2008 and the fact that no grant had been awarded to this group in 2007, and staff advised that this group had not applied for a grant in 2007. They had applied for and received a grant in 2005, and the proposed 2008 grant is 2% over their 2005 grant. On motion by Councillor K. Galloway - itwas resolved: "That the following grants be eliminated from the 2008 operating budget for a net levy savings of approximately 0.02%: Kitchener Citizens Beautification Committee - $2,305, Waterloo County Quilt Festival - $2,706, Festival of Trees - $5,610, and K-W Opera - $7,803, for a total savings of $18,424." Issue Paoer #39 (Expenditure Reductions Staff reviewed Issue Paper #39 -Expenditure Reduction, which had been prepared in response to comments from some members of Council that they are interested in across-the- board expense reductions as a strategy to reduce the potential impact on the levy. Ms. Houston questioned whether it was Council's intension to achieve these budget cuts through a reduction in service levels, as staff can not continue to do more with less. Mayor Zehr reiterated his comment from the beginning of the meeting that there has to be a reduction. He noted that Council has to be involved and has to look at programs and services that members believe could be cut. Mayor Zehr stated that he does not want the message to go out to staff that Council does not believe them, and he does not want staff to pad the budget because they know Council will cut back. Councillor Urbanovic stated there should be a Councillstaff working group in this regard. Councillor Gazzola stated that he is pleased to see some reductions but he thinks there should be further reductions. Further, he does not want to see service reductions. He stated that staff needs to distinguish between needs and wants. He stated that there are so many times when reports come to Council stating there will be no financial impact. This is not an issue for staff, as they have done all they need to do. Council has to make decisions. It looks like we are into a recession and we have to take a closer look at things. Ms. Houston stated that with regard to tenders, projects come forward because that is the way it is; staff show over expenditures, then re-evaluate other projects. Further, over the past 3 years staff has not added any increases to what could be considered discretionary FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 38 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY expenditures. Mr. D. Chapman advised that the budget inflation factors for discretionary spending have been held constant for the past 3 years. He noted that discretionary lines include some non- discretionary items such as bad debts expenses, postage, vehicle, computer and equipment maintenance etc. He stated that the initial departmental increases were 3.9%, which were reduced by 1 % or approximately $1 M. A motion by Councillor J. Smola was brought forward for consideration recommending the creation of a special committee composed of the Chairs of Council's Standing Committees and the City's General Managers, to identify and bring forward recommendations to make cuts to low priority programs and services; thereby allowing for an across-the-board expense reduction in the 2008 base budget in the amount of $220,000. Councillor G. Lorentz stated that he would support the proposed $220,000. across-the-board expense reduction, adding that he is committed to working with staff to reach that level of cost savings. He commented that the City is trying to keep-up with a growing population and needs to re-evaluate the services it is offering. The following motion was carried on a recorded vote, with Mayor C. Zehr and Councillors B. Urbanovic, J. Smola, G. Lorentz, K. Galloway and C. Weylie voting in favour and Councillor J. Gazzola voting in opposition. On motion by Councillor J. Smola - itwas resolved: "That a special committee be established composed of the Chairs of Council's Standing Committees and the City's General Managers, to identify and bring forward recommendations to make cuts to low priority programs and services; and further, That an across-the-board expense reduction in the 2008 base budget in the amount of $220,000. be set as the target of this initiative." Issue Paper #40 (Kitchener Power Corporation Dividend Staff reviewed Issue Paper #40 -Kitchener Power Corporation Dividend, which had been prepared to provide additional information on how the Hydro Utility owned by the City might enable tax rate increase relief in 2008. Councillor J. Gazzola inquired into why no recommendation had been put forward with this Issue Paper, adding that the Committee should indicate to the Board of Directors of the Kitchener Power Corporation that the City is interested in having the dividend rate increased. Mr. D. Chapman advised that it is anticipated that the Kitchener Power Corporation would be presenting the dividend payment on the 2007 financial results in March 2008. He noted that as outlined in the Issue Paper, the City may not be able to effect change to the dividend rate at this time and suggested that this issue be referred back to the Board. Mayor C. Zehr agreed that while the issue of increasing the dividend rate should be examined, additional information would be required before proceeding with a recommendation. He suggested that as Councillors G. Lorentz and C. Weylie sit on the Board of Directors, they could raise this issue at their next meeting. Issue Paper #42 Computer Reserve Fund The Committee next considered Issue Paper #42 -Computer Reserve Fund. In response to questions, Mr. M. Grummett estimated that the Fund should be sustainable if it was reduced by $25,000, noting that this is one of the funding sources for the DELTA project. Councillor J. Gazzola questioned if the Fund had been adjusted due to the decreasing cost of computers and was advised that while that cost of computers has decreased over the years, there is now more computers being funded. FINANCE & C~RP~RATE SERVICES C4MMITI'EE MINUTES FEBRUARY 4, 2008 - 39 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY On motion by Councillor K. Galloway - itwas resolved: "That the Computer Reserve Fund be reduced by $25,000." Issue Paoer #43 (Telephone Reserve Fund The Committee next considered Issue Paper #43 -Telephone Reserve Fund. Councillor Gazzola commented that it appears the City is levying taxes to fill-up a reserve fund. He put forward a motion to reduce this fund by an additional $35,000 in 2008. Mr. Grummett explained that this reserve fund is to be used to replace the City's entire telephone system, the first phase of which is the Corporate Contact Centre. After the final steps have been taken for the Corporate Contact Centre, the entire phone system will be changed. He stated that the cost of a new phone system varies greatly depending on the need and at this time he has no way of knowing whether the loss of $35,000 will have a substantial impact. On motion by Councilor J. Gazzola - itwas resolved: "That the Telephone Reserve Fund be reduced by $35,000. Issue Paoer #44 (Equioment Reserve Fund The Committee reviewed Issue Paper #44 -Equipment Reserve Fund, which had been prepared at Council's request, to determine if there is any excess capacity which could be used to reduce equipment charges or be transferred to the Tax Stabilization Reserve Fund. Councillor Gazzola put forward a motion to reduce this fund by $150,000 in 2008. Ms. Houston noted that this fund needs to go in the opposite direction from that being recommended by Councillor Gazzola, noting that the fund should be at $19M. Mayor Zehr stated that because of the size of the fund, it appears as though it could be reduced; however, it is decreasing by its general operation. He stated that he could not support Councilor Gazzola's motion. Following a brief discussion on this reserve fund, Councillor Gazzola's motion was voted on and lost. Issue Paoer #45 - (Working Capital Reserve Fund The Committee reviewed Issue Paper #45 -Working Capital Reserve Fund, in which staff recommends elimination of the fund and transfer of the balance of this fund to the Tax Stabilization Reserve Fund. Staff also recommended that there must be consideration of the lost investment income from the closure of this fund. Councillor Vrbanovic stated that this will be considered at the end of this meeting in conjunction with the Issue Papers which have been presented on investment income. Mr. Chapman advised that this reserve fund was established sometime ago and it allows the municipality to have operating funds prior to the first tax bills of the year being paid. This is a common fund in municipalities. Since this fund was established two things have changed: the equal billing plan for property tax payment provides a regular cash flow, and it is much easier for municipalities to obtain a line of credit. FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 40 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY On motion by Councillor G. Lorentz - itwas resolved: "That Council Policy I-770 -Reserve Fund -Working be repealed and the Working Capital Reserve Fund be eliminated; and further, That the balance of $4,704,750 in the Working Capital Reserve Fund be transferred to the Tax Stabilization Reserve Fund." Carried Unanimously. New Initiatives The Committee considered new initiatives, outlined in the agenda package, consideration of which had been deferred to this meeting. Mayor Zehr put forward a motion to provide the Small Business Centre with additional funding of $12,500, being half of their request. He noted that this amount is being recommended because of the agreed funding split between the Cities of Cambridge, Waterloo and Kitchener and the Region of Waterloo. This funding is also in line with the 1 /3 - 2l3 split with the City of Waterloo which is exercised in joint funding of most projects with them. Councillor Gazzola stated that the city already spends enough money on the Small Business Centre and he would like to see those who benefit from this facility pay something towards the cost. Councillor Lorentz spoke in support of the Mayor's motion and advised staff to bring forward a report for next year's budget deliberations providing statistics on the success rate of the Small Business Centre on such matters as how many new businesses have opened in the City of Kitchener. On motion by Mayor C. Zehr - itwas resolved: "That the Small Business Enterprise Centre be approved additional funding of $12,500 i n 2008." Councillor Weylie recommended that funding of $12,500 be approved for the Seasonal Downtown Ambassadors, instead of the requested $25,000; as the Kitchener Downtown Business Association is prepared to pay half the cost. On motion by Councillor C. Weylie - itwas resolved: "That a 2008 budget allocation of $12,500 be approved for Seasonal Downtown Ambassadors." Issue Paoer #46 - (Capital Transfers The Committee then considered Issue Paper #46 -Capital Transfers. Councillor C. Weylie moved the recommendation in the staff report. Mayor Zehr noted that leaving the $267,000 allocation for Cultural Capitals of Canada in the year 2009 of the 10 year Capital Forecast is an important part of leveraging funding from the private sector. Councillor Gazzola recommended removing the $267,000 from the forecast, and putting an amount back into the budget if and when it is required. He put this suggestion forward as a motion. Ms. Papper~ advised that the cultural community is coming together, and the private sector is in discussions which will come to a conclusion in 6 to 8 months. The private sector needs to FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 41 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY know that the City is willing to provide some funding before they are willing to do the same. Mayor Zehr commented that taking the money out to the capital forecast will jeopardize this opportunity. The private sector is preparing to come forward with some funding and if we remove this funding from the capital forecast we will be sending a signal that will jeopardize these discussions. Councillor Gazzola's motion to remove the 2009 allocation for Cultural Capitals of Canada in the 10 year capital forecast was voted on and lost. On motion by Councillor C. Weylie - itwas resolved: "That the 2007 and 2008 Cultural Capitals of Canada allocations in the amount of $400,000 be closed out to capital surplus in 2008; and, That capital surplus in the amount of $852,000 be transferred to the Tax Stabilization Reserve Fund in 2008; and further, That the 2009 capital budget allocation for Cultural Capitals of Canada be maintained to enable the cultural community to further discuss alternative partnerships that would result in a major cultural event in 2009." Staff was directed to show this amount of money as a special line in the Capital Budget - Cultural Projects Uncommitted, and identify it for next year's budget deliberations. Salary Market Survey The Committee then reviewed some of the budget items they had considered in previous meetings. With respect to the salary market survey, Mayor Zehr stated that he is convinced there is an issue with positions in the City of Kitchener that are not ranked where they should be; however, the amount of money to be included in the budget for this purpose should be discussed. To say "no" to staff is a very poor idea; however, there should be a partnership between Council and staff. Mayor Zehr recommended that Council commit to the program but only include $360,000 in the budget for 2008. Councillor Lorentz stated that he could support such a motion. He noted that it has been 20 years since market comparisons were considered, and remarked that staff should have brought this issue forward sooner. He suggested that a market survey should be conducted every 5 years. Councillor Gazzola stated that he will not support the Mayor's recommendation at this time because sufficient information has not been provided. He noted this is a substantial figure, and there is a process with our bargaining units who come to the City to negotiate. He recommended turning this issue back to the bargaining units. Councillor Galloway spoke in support of the Mayor's motion stating this is a big issue and more information is required. Further, we need a long term plan beyond 4 years. Mayor Zehr stated that $360,000 opens the door to discussions. Further, a delay in implementation allows time for discussion, and a $360,000 allocation commits Council to dealing with the issue. Councillor Urbanovic offered his support for the Mayor's motion, noting this sets aside some money for the process. He noted that if the City's salaries are not competitive it will be harder to recruit staff and we also want to look at keeping high quality staff. The following motion was carried on a recorded vote, with Mayor C. Zehr and Councillors G. Lorentz, J. Smola, B. Urbanovic, K. Galloway and C. Weylie voting in favour and Councillor J. Gazzola voting in opposition. FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 42 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY On motion by Mayor C. Zehr - itwas resolved: "That $360,000 be set aside in 2008 for the potential implementation of salary adjustment, with any recommended adjustments to be brought forward to Council at the appropriate time in 2008." Homer Watson House and Gallery - 2008 Operatingq Grant The Committee next reviewed its motion of January 14, 2008, respecting the grant for the Homer Watson House and Gallery (HWHG). This motion approved an additional $5,700 for the HWHG for their 2008 operating grant, representing a 3% increase in wage equity. Councilor Gazzola put forward a motion to approve additional funding of only $3,000. When questioned, Ms. Ladd advised that over the last number of years the HWHG has received a 68% increase in their operating grant. Councillor Gazzola's motion did not receive a seconder; consequently, the motion failed. Issue Papers 29, 29.1 & 29.2 (Investment Income The Committee now turned its attention to Issue Papers 29, 29.1 and 29.2 -Investment Income. Mayor Zehr noted that it is likely that interest rates will drop but to what level is unknown. He stated that the interest factor of $188,000 lost revenue from closing the Working Capital Reserve Fund should be revised to $150,000. He noted that staff suggests increasing the budget by $150,000 but he has difficulty with this amount, as interest will be less in 2008. He suggested that $100,000 may be more reasonable. Mr. Chapman referred to Issue Paper #29.2 noting the 2006 and 2007 history which had a significant increase in investment return; however, interest rates are currently more volatile. He stated his concern that if we budget for an optimistic level, we could be in a deficit position. Councillor Gazzola put forward a motion to increase investment income by $680,000 in 2008. Mayor Zehr commented that $680,000 is an impossible target for 2008, and if this motion is adopted we will be building a shortfall into the budget. Interest rates will never provide this income, and this motion would be inviting a deficit. Councillor Gazzola stated that it is important to review actual vs. budgeted investment income over the past few years, as every year the earnings are higher than we budget for. Mr. Chapman advised that the investment income form the Working Capital Reserve Fund has always been transferred to the Operating Budget. He noted that in 2008, interest rates will be volatile, and there will be a significant decline. Councillor Gazzola's motion was voted on and lost. On motion by Mayor C. Zehr - itwas resolved: "That the 2008 budget for investment income be approved at $2.2M." Issue Paper #41 Tax Stabilization Reserve Fund Options The Committee reviewed Issue Paper #41 -Tax Stabilization Reserve Fund Options, addressing the potential to transfer amount from capital accounts and reserve funds into the Tax Stabilization Reserve Fund in order to mitigate the property tax increase for 2008. It was noted that transfers to the operating budget have been reduced from $5.1 M in 2004 to $1.8M (projected) in 2007, primarily as a result of the rationalization of transfers in 2005 and the move to budget for supplementary taxes starting in 2007. A further reduction of $458,500 each year is currently recommended starting in 2008 to avoid a deficit in the fund. FINANCE & C~RP~RATE SERVICES COMMITTEE MINUTES FEBRUARY 4, 2008 - 43 - CITY 4F KITCHENER 1. FIN-07-012 - 2008 FINAL BUDGET DAY On motion by Councillor G. Lorentz - itwas resolved: "That the reduction of reliance on the Tax Stabilization Reserve Fund be deferred by one year, resulting in a net levy savings of $458,500 in 2008." A motion by Councillor J. Gazzola to transfer $1.2M from the Tax Stabilization Reserve Fund to further reduce the tax levy to a rate of 3% was brought forward for consideration. Councillor B. Vrbanovic inquired if a transfer of $1.2M was financial viable and was advised it would not be recommended as it would not leave sufficient funds to address a major snow event, community emergency (e.g., flu pandemic, flood, ice storm, etc), economic downturn (low supplementary taxes, high write-offs), environmental issue, etc. Mayor C. Zehr advised that he would not be supporting Councillor Gazzola's recommendation as it could expose the City to greater risk in the areas identified above. He noted that if Councillor Gazzola's motion were to be lost he would bring forward a recommendation to transfer $420,000 from the Tax Stabilization Reserve Fund. Following a brief discussion, Councillor Gazzola's motion was voted on and lost. Mayor Zehr put forward a motion that $420,000 be transferred from the Tax Stabilization Reserve Fund to the 2008 Operating Budget, which was also voted on and lost. On motion by Councillor G. Lorentz - itwas resolved: "That $600,000 be transferred from the Tax Stabilization Reserve Fund to the 2008 Operating Budget." It was noted that the decisions made at this meeting have resulted in a tax levy of 3.71 %, for 2008, which includes 0.7% for the Economic Development Investment Fund. Councillor Vrbanovic thanked all staff and particularly Financial Services staff for the 1,000's of hours of time spent on preparation of the 2008 Budget. He advised that a process still needs to take place where service levels are reviewed and cuts are made where services are not warranted. Council wanted a tax rate increase that is affordable for the community and today tried to get to a point that is reasonable, but it is not complete yet. He state that the City's tax rate increase will be 3.71 %, but the Region's is the largest portion, and the overall increase is 2.5% which in keeping with the Consumer Price Index. Councillor Gazzola stated that he is not going to support a 3.71 % tax increase as he believes it is still possible to get the increase down below 3%. He spoke against the Economic Development Investment Fund stating that our City Hall was built without such a fund, and we should be able to do the same kind of thing again. 2. ADJOURNMENT On motion, the meeting adjourned at 4:08 p.m. C. Goodeve Committee Administrator D. Gilchrist Committee Administrator