HomeMy WebLinkAboutFIN-08-073 - Program and Service Level Reduction Committee ReportREPORT
Report To: Councillor Berry Vrbanovic, Chair, and Members of the
Finance and Corporate Services Committee
Date of Meeting: June 9, 2008
Submitted By: Program and Service Level Review Committee
Prepared By: Dan Chapman, General Manager of Financial Services
Wards}Involved: ALL
Date of Report: May 26, 2008
Report No.: FIN-08-073
Subject: PROGRAM AND SERVICE LEVEL REDUCTION
COMMITTEE REPORT
RECOMMENDATION:
THAT the budget shortfall of $220,000 associated with the provision for program and service
level reductions be funded in 2008 through a transfer from the fire fleet capital account in the
amount of $220,000;
THAT a permanent budget reduction of $220,000 be funded as of 2009 as follows:
Increase sign shop revenues - $10,000
Reduce staffing costs for sports field maintenance - $50,000
Reduce staffing and material costs for print shop - $75,000
Reduce funding for fire fleet capital account - $85,000
AND FURTHER THAT the Chair of the Finance and Corporate Services Committee be
authorized to reconvene the Program and Service Level Reduction Committee to review
potential program and service level reduction options if they are identified as part of the 2009
budget development process
BACKGROUND:
Council included a $220,000 provision in the 2008 budget for savings arising from future
program and service level reductions. This decision was made by Council in an effort to limit
the overall property tax increase for 2008. A committee of Standing Committee Chairs and
General Managers was charged with the responsibility of identifying options to achieve this total.
The Committee met two times and has prepared this report to present its findings and a
recommendation for consideration by Council.
REPORT:
Committee Mandate
In approving the 2008 budget on February 4, 2008, Council passed the following resolution:
"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"
In response to this Council direction, an ad hoc Committee was established with the three
Standing Committee Chairs and four General Managers, with support from the following
individuals:
• Director of Financial Planning & Reporting
• Performance Measurement and Internal Auditor
• Director of Corporate Communications and Marketing
• Executive Assistant, Financial Services (Secretary}
The Chair of the Finance and Corporate Services Committee served as Chair for the Program
and Service Level Reduction Committee.
General Approach
The Committee met on two occasions and adopted the following approach to the identification
of program and service level reductions:
• Meeting 1 March 31 }
o Approve terms of reference
o Define objectives
o Review background materials ~e.g., survey and focus group results, detailed
service listing, etc.}
o Identify multiple areas for preliminary evaluation topics -detailed services,
financial results, staffing levels, performance targets etc.)
• Staff prepare reports for areas of interest
• Meeting 2 May 5}
o Review initial reports
o Identify specific priorities for program and/or service reduction
• Prepared detailed analysis on targeted areas
• Meeting 3 May 26)
o Review detailed analysis and prepare recommendation to Council
o This meeting was not required as the draft report was circulated and approved
electronically
• Prepare report to Council
• Present report to Council June 9}
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Findin s
During the first meeting, Committee members spent a considerable amount of time reviewing
background material related to previous service level consultations as well as a detailed list of
City services. Out of that meeting, the Committee identified twelve areas warranting analysis as
potential areas for budget reduction. Not all options were program or service level reductions as
originally mandated by Council. In fact, four were revenue increase options, four were efficiency
gains and four were program or service level reductions. Following the meeting, staff prepared
detailed reports on each option for discussion at the next meeting.
On May 5, the Committee met a second time to review the twelve reports as well as the 2008
winter control deficit mitigation options report, as it presented potential sources of permanent
program or service level reduction. Out of that discussion, the following net revenue increase
was supported:
• Sign shop external recoveries -the City recovers approximately $70,000 annually from
the sale of signs to other public sector entities. This revenue is based on cost recovery
plus 50% for overhead. In reviewing the price of Kitchener signs relative to private sign
shops, it was observed that Kitchener pricing is generally 10% to 29% lower than private
sector pricing. In view of this, it was recommended that the overhead recovery rate be
increased from 50% to 65%, which will generate approximately $10,000 of additional
annual revenue forthe City.
In addition, the following two efficiencies were identified:
• Print shop technology change -the print shop is in the process of implementing new
digital technology that will result in savings in both staff and material costs. The 2008
winter control deficit mitigation report identified potential savings for 2008 in the amount
of $75,000. While this amount cannot be double counted in 2008 for both deficit
mitigation and budget reduction targets, it remains available for permanent budget
reduction in 2009. Communications staff will prepare a more refined estimate of savings
as part of the 2009 budget process after they have had the opportunity to actually use
the equipment.
• Sports field maintenance -through yearly area review and by making changes in the
approach to work, there is an opportunity to reduce the number of temporary labourers
and summer students in the sports field maintenance area. These changes will result in
the elimination of at least one temporary position and three student positions in 2009 for
a savings of approximately $50,000.
Given the fact that sign shop revenues could only be increased for part of 2008 and the other
savings cannot be realized until 2009, it is recommended that these changes be implemented
for 2009. This would result in a need to still fund the full $220,000 shortfall in 2008 and the
balance of $85,000 for 2009.
Subsequent to the second meeting, the Corporate Management Team reviewed potential
options to fund the shortfalls identified above. In the absence of general Committee support for
specific program or service level reductions, staff identified a reduction in funding for fire fleet
purchases as a feasible alternative to offset the shortfalls. The City currently budgets
approximately $1.7 million annually for fire fleet replacements. This annual expenditure is
required to fund vehicle and equipment purchases in accordance with the lifecycle replacement
program using historical replacement costs. A reduction in funding is supported at this time
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given that many fire vehicles are purchased from the United States and exchange rates have
improved significantly over the past several years (in excess of 10% over the past two years
alone}. As such, the Committee recommends that Council reduce fire fleet funding levels as a
result of this expectation of improved pricing. The 2008 shortfall of $220,000 would be funded
through cone-time transfer out of the fire fleet account and a permanent reduction in the
transfer amount of $85,000 (5% of total funding} would be implemented as of January 1, 2009.
Staff will refine the projections for fire fleet purchases as part of the 2009 budget process and
may propose further adjustments depending on the outcome of the more detailed review.
FINANCIAL IMPLICATIONS:
The recommendation will provide revenue in 2008 and budget reductions in 2009 sufficient to
fund the $220,000 program and service level reduction target established through the 2008
budget.
CONCLUSION:
The Program and Service Level Reduction Committee has been successful in identifying
options to fund the $220,000 savings target included in the 2008 budget. However, throughout
the discussions, it was clear that the Committee was challenged to find supportable program
and service level reductions, which is reflected in a recommendation comprised of efficiencies
and revenue increases. As a supplementary recommendation, the Committee is supportive of
extending its mandate to the end of the current budget cycle in the event that it would be a
useful forum to deliberate on potential new program or service level reductions. Any meetings
would be at the call of the Chair.
Dan Chapman, CA MPA
General Manager of Financial Services
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