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HomeMy WebLinkAboutFin & Corp Svcs - 2009-11-23 SSPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 CITY OF KITCHENER The Finance and Corporate Services Committee met this date to consider the Capital Budget and Forecast for Year 2010-2019, commencing at 9:05 a.m. Present: Councillor B. Vrbanovic, Chair Mayor C. Zehr and Councillors J. Smola, G. Lorentz, J. Gazzola, K. Galloway and C. Weylie. Staff: C. Ladd, Chief Administrative Officer D. Chapman, General Manager, Financial Services & City Treasurer T. Speck, General Manager, Corporate Services P. Houston, General Manager, Community Services J. UVillmer, Interim General Manager, Development & Technical Services R. Regier, Executive-Director, Economic Development J. UVitmer, Director of Operations G. Murphy, Director of Engineering C. Fletcher, Director, Facilities Management M . Hildebrand, Director, Community Programs A. Pinard, Interim Director of Planning J. Evans, Director of Revenue vV. Malcolm, Director of Utilities M . Grummett, Director, Information Services & Technology K. Kugler, Interim Director of Enterprise T. Beckett, Fire Chief R. LeBrun, Manager, Financial Planning & Reporting G. Hummel, Manager, Park Planning, Development & Operations G. McTaggart, Manager, Infrastructure Asset Planning D. Ritz, Supervisor, Design & Development S. Saleh, Senior Financial Analyst J. Billett, Committee Administrator D. Gilchrist, Committee Administrator The purpose of this special meeting was to discuss the proposed Capital Budget and 10 Year Capital Forecast 2010-2019. The Committee was in receipt of Financial Services Department report FIN-09- 154, dated November 6, 2009, and attached line by line listing of all projects in the Capital Forecast by Department 1 Division. 1. KITCHENER PUBLIC LIBRARY REPORT -CENTRAL LIBRARY FUNDING PLAN The Committee considered a report from the Kitchener Public Library Board (KPL), dated November 11, 2009 recommending a reduction in the fundraising contribution to the Central Library renovation and expansion project from $4M to $500,000., and the reduction to be off- set by an increase in the development charges allocation to the project from $528,000. to $4, 028, 000. Messrs. Dan Carli, Chair and Mike Farwell, 1St Vice-Chair, KPL Board and Ms. Sonia Lewis, CEO -KPL, attended in support of recommendations contained in the KPL report. Mr. Carli stated that the KPL is not requesting further dollars for the project but rather a revision to the funding strategy. He advised that a preliminary capital budget of $39.8M was established in 2008 for this project, of which $4M was to be funded through a fundraising campaign hosted by KPL. The amount of fundraising was derived from a feasibility study undertaken in 2005 based on a measure of support for a new library on the Centre Block. In 2009, a second study was undertaken in light of the current economic climate and changes in scope of the project to a renovation /expansion project. The study concluded that a $4M fundraising campaign is not realistic in today's economy and recommends a target of $500,000. to be raised over 5 years. Mr. Carli added that it is hoped that this fundraising campaign will establish a culture of charitable fundraising for KPL and be an ongoing source of funding for KPL after this project is completed. Mr. Mike Farwell commented that notable challenges in achieving the original fundraising target relate to the current economic downturn and the difficulty in public acceptance of KPL asking for donations given the perception that the Library is a government responsibility. He noted that as part of the original funding strategy, $528,000. in development charges was included; however, the 2009 Development Charges Background Study indicates a higher SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -168 - CITY OF KITCHENER 1. KITCHENER PUBLIC LIBRARY REPORT -CENTRAL LIBRARY FUNDING PLAN (CONT'DI funding envelope is available. The Board now proposes $4,028,000. in development charges be allocated to the Central Llibrary project and notwithstanding, there will still remain an appropriate development charges funding level for the proposed Southwest Branch. Mr. Farwell advised that one change is also being proposed to the 2009 capital budget related to the $270,000. allocated for replacement of the oldest sections of the Central Library roof. The architects for the Central Library project have advised that the 2009 roofing plans may potentially conflict with the ability to achieve LEED Gold for the project. Accordingly, $3,600. in emergency patching of the roof was undertaken and the remainder of the work deferred. The Board proposes that the remaining $266,000. be transferred to the Central Library project but that the funds will still be used for their original purpose at the appropriate time. Mr. Farwell noted that the designs for the Central Library project have recently been shared publicly in various forums and the recommendations proposed this date, if approved, will help to move the project forward. Mayor C. Zehr questioned the Board's level of confidence in the new fundraising target. Mr. Farwell advised that the project team is currently working on a strategy around the fundraising campaign and based on the consultants review it is expected that the $500,000. per year will be achievable. Mayor Zehr requested clarification of the transfer from the roofing budget. Mr. Farwell advised that roof improvements are an important part of plans to achieve LEED Gold and the transfer of the unspent dollars for roofing will help achieve the LEED target. Mr. Farwell added that the intent is to remain within the original $39.8 M budget for this project and all work undertaken to date is to enable the project to stay in line with that budget. Councillor J. Gazzola questioned where the target to achieve LEED Gold originated and Mr. Carli advised that this is in keeping with City initiatives. Ms. Lewis added that the target of LEED Gold adds an approximate 7.5% premium to the project costs. Councillor Gazzola requested clarification of the amounts set aside in the Development Charges Background Study for the library. Mr. D. Chapman advised that the total funding envelope for all library projects (2010-2019) is $11.4M. The Central Library project is to be funded from within this envelope together with the Southwest Branch. Councillor B. Vrbanovic advised that the recommendations contained in the KPL report would be dealt with in conjunction with the remainder of the KPL's capital budget, to be considered later this date. 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 Mr. D. Chapman introduced the 10 Year Capital Forecast (2010-2019} advising that in June 2009 Council set the funding guideline for preparation of the budget and capital priorities have been defined through strategic planning processes. It was noted that $6M has since been added to the 10 Year Capital Forecast relative to the Parks Open Space Master Plan to enhance parks, open space and trails; and $5M for Phase II of the vVilliamsburg Cemetery and Mausoleum expansion. Specific resolutions were also approved in support of new initiatives during consideration of Departmental Capital Project Referrals discussed by this Committee at its meeting held October 26, 2009. It was noted that during the Administrative Review process, original Departmental capital project submissions reached $59M over target; however, through substantive review has been scaled back to a balanced Capital Forecast. Mr. Chapman reviewed the capital funding by source, noting that the level of the capital pool has declined from $286,546,000. in 2009 to an estimated $257,026,000. in 2010, due in part to another year of contributions from the Economic Development Investment Fund (EDIF} falling off; lower debt capacity with less room for debt financing; and less transfers from Enterprises, particularly as it relates to Gas and Hydro Capital Investment Reserve contributions. Development Charges have doubled which reflects the projected growth increase in the Development Charges Background Study and grants have also increased significantly, from $1.2M to $25M, largely due to infrastructure stimulus funds for specified stimulus projects. Mr. Chapman advised that in keeping with Capital Policy the impact to the taxpayer each year cannot be greater than the rate of inflation, with increases in debt charges limited to the rate of assessment growth. Further, increases in debt charges and Capital out of Current (cc) is limited to the rate of assessment growth plus inflation, and specific projects to be funded by debt must be approved by Council before the debt is issued. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -169 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'D Councillor J. Gazzola requested a breakdown of the gas tax reserve fund and Mr. Chapman agreed to bring back further details in regard to this item. Mr. Chapman reviewed the Gas and Hydro Capital Investment Reserve Fund projections and the 2009 General City Capital Close-outs. He stressed the importance of maintaining a healthy reserve for the Gas Utility to deal with significant fluctuations in gas revenue. Councillor Gazzola requested clarification of the differences between the 2009 budgeted revenue for the Gas Utility at $4.7M versus the projected 2009 figure of $7.7M. Mr. Chapman advised that this relates to a corrective measure for 2010 to stabilize the reserve and an issue paper on this matter will be presented at the Operating Budget meeting on December 7, 2009. Mayor Zehr questioned if consideration has been given to a review of the formula used for the Gas transfers. Mr. Chapman advised that a review has been discussed but was not undertaken in 2009. He noted that staff is preparing an issue paper on the mechanics of the Gas Capital Investment Reserve Fund transfer for Operating Budget deliberations, and will outline a work plan for review of the transferformula in 2010. Councillor Gazzola requested clarification of the Hydro dividend. Mr. Chapman advised that the amount of the dividend is at the discretion of the Hydro Board and $1.7M has been established as what can be reasonably projected annually. Mr. Chapman agreed to provide an issue paper for final budget day regarding unexpended balances in capital accounts and details of the 2009 capital close-outs. It was noted that capital close-outs are transferred to the operating budget to assist with deficit mitigation as per policy established for 2009. Mr. Chapman reviewed the Economic Development Investment Fund (EDIF) projections advising that they remain relatively unchanged, with the exception of timing adjustments related to the Centre Block Lands and underground parking garage. He noted that development charge revenue for parking solutions has not yet been included in the projection and will off set the deficit shown in 2013. Mayor Zehr requested explanation of $300,000. related to Downtown Residential Incentives and was advised that this pertains to the Upper Storey Program. The program consists of a combination of grants and/or loans and the loan portion which was previously not built in, is now reflected in this line item. Mayor Zehr requested that prior to final budget day, staff provide a comprehensive report on EDIF, outlining where expenditures have been made, the accomplishments achieved and the impact of this investment, both publicly and from within the private sector. Ms. C. Ladd advised that Mr. R. Regier is currently preparing a comprehensive report on EDIF that will come forward early in 2010 and would ensure it is presented priortofinal budget day. Councillor J. Gazzola requested an update on the issue of parking subsidies for the Wilfrid Laurier University (WLU). Ms. C. Ladd advised that the original agreement with WLU was to be in perpetuity; however, the City is monitoring the use of the spaces to more closely determine actual needs and is close to an agreement on a change provision that would see a significant decrease in the number of spots allotted to WLU. The effect will be a decrease in the value of the subsidy and Ms. Ladd agreed to follow-up on when this report will come forward. At the request of Councillor Gazzola, Ms. Ladd also agreed to provide documented information in respect to the original agreement with WLU. Councillor Gazzola requested explanation of the monies allotted to Victoria Park improvements, commenting that it was his understanding all was complete with the exception of storm water management. Ms. P. Houston advised that these monies cover the full span of the Victoria Park Master Plan, which is being completed in a phased approach. Ms. Houston agreed to follow-upon details of the work planned for 2010. Councillor Gazzola inquired as to the effect of removing $1 M from Capital out of Current in 2010 to reduce the tax levy. Mr. Chapman advised that a reduction of this nature would not be sustainable unless the reduction was made in each year of the 10 Year Capital Forecast; equating to a total reduction of $10M. Mayor Zehr agreed that a $1 M reduction now would effect the base budget and would require injection of an automatic equivalent $1 M, plus SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -170 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'DI inflation, to return to proper base level in 2011. Mr. Chapman advised that an issue paper is being prepared on this issue and will come forward for discussion during the final budget deliberations. Mr. Chapman responded to questions concerning the Capital Pool availability, advising that the projected surplus in 2009 has been impacted by the increased funding for parks 1 trails, Phase II of the Uvilliamsburg Cemetery expansion, Engineering projects and a scaling back of transfers from the Gas and Hydro Investment Reserve Funds. He then reviewed Development Charges (DC) for engineering and non-engineering services, advising that the City's 2009 Development Charges By-law is under appeal with apre-hearing expected to take place in February 2010. It was noted that future deficit projections in the DC Reserve Fund suggests that debt financing will be required. Mr. Chapman advised that the City has not typically debentured within the DC Reserve Funds and debt service costs may not be recoverable if forecast growth does not materialize. Therefore, it is proposed to manage the 2010 projected deficit through cash flow adjustments for hard services and continued internal borrowing for soft services. Mr. Chapman advised that the DC Reserve Fund has been impacted by a substantive change in the capital program that has resulted in more immediate need to fund hard services. Mr. G. Murphy added that staff is working to identify projects that are necessary to move forward and is undertaking more detailed analysis of cost estimates. He stated that there has been a substantial increase in sewer related projects since the 2004 DC Background Study that will have impact on projections over the next 10 to 20 years. Mr. Chapman commented that the City does have option through credit /refund agreements that would see the developer front- end costs and he will maintain priority focus on this option as a means to alleviate debt financing for the City. Mayor Zehr requested clarification of the cash flow adjustments to manage the DC deficit. Mr. Chapman advised that adjustments would be made wherein projects may be deferred to balance the fund but added that the developer could still opt tofront-end costs through a credit /refund agreement. Mayor Zehr referred to the 2031 break-even point relative to projections, questioning that if no more development occurs beyond 2031 if the deficit would fall to zero. Mr. Chapman concurred based on current projections. Mayor Zehr questioned that as long as there is development there will be some deficit unless costs are front-ended by the developer. Mr. Chapman concurred, advising that in 2004 there was no deficit due to higher growth but the opposite is now true. Mayor Zehr inquired as to what could be done during this budget process in respect to giving direction that would lead to elimination of the deficit. Mr. Chapman advised that a report from Engineering Services is to be considered this date concerning deferral of projects to help mitigate the deficit. He then provided further explanation of the overall DC Reserve Fund, advising that 2 factors will further impact the projected deficit in 2010, being the rate of indexing charges which assumed a 2% increase per year but will actually be a 5% reduction in 2010, and a decline in development activity, the full impact of which will not be seen until 2010. Mr. Chapman advised that if a 50% decline in growth forecast is realized in 2010, the Engineering deficit could increase overall by an additional $7M. Mr. D. Chapman discussed the significant Engineering projects identified for 2010. A number are related to sewer improvement projects, including upgrades to the Pioneer Tower Pumping Station and Freeport Pumping Station; as well as, road improvements, including those on Block Line Road, Wabanaki Drive, Strasburg Road and Huron Road. Councillor G. Lorentz raised concerns in respect to DC revenue projections in the context of depleting greenfield development opportunities, rising land costs and the uncertainty of uptake within the development industry toward infill development. Mr. J. Uvillmer advised that the 10 Year Capital Forecast builds on the concept of outward growth and does not envision a change in focus to infill development within the next 10 years. He concurred that greenfield development is expensive requiring significant capital expenditures and is the reason for the deficit position. He advised that the Kitchener Growth Management Plan (KGMP) is a 22 year program to 2031 and at that time, it will be the Council of the day's decision to either hold or allow development to go beyond the established countryside line. Mr. Willmer added that infill SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -171 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'D development will still require some capital expenditures but has the advantage of existing infrastructure which will in turn lessen costs to the City. Mr. D. Chapman advised that a number of Engineering projects are being recommended for deferral to mitigate the 2010 DC deficit. The Committee then considered Development and Technical Services Department report DTS-09-167 (C. Hoeger), dated November 4, 2009 concerning DC capital project timing adjustments to the 10 Year Capital Forecast to reduce the projected 2010 Engineering Services Reserve Fund deficit. Mayor Zehr requested clarification of the proposed adjustments, particularly in regard to sewer related projects and roadwork improvements for Block Line Road. Mr. G. Murphy advised that a list of the deferral projects, together with rationale for each project, is as outlined in the appendices to report DTS-09-167 and is intended to shift cash flow constraints in 2010. He noted that for this project, $5M in capital costs would be deferred from 2010 to 2011. In respect to Block Line Road, Mr. Murphy advised that this project requires a significant bridge structure over an existing railway and is impacted by the Region of vvaterloo's plan to route the Light Rail Transit (LRT) along this corridor. The Region has not yet defined the type of LRT station or configuration which will have impact on the location of the bridge and road intersection. The City can proceed with preliminary development of a detailed design but will not be in position to proceed with construction until the final details of the Regional LRT is known. Accordingly, it is being recommended that the Block Line Road project be adjusted to 2011. Mayor Zehr noted that this project is long standing and questioned if 2011 is considered a firm timeline. Mr. Murphy advised that it is anticipated that the LRT project will take a number of years to complete and at this time, 2011 is the best projection staff have for the Block Line Road improvements to proceed. Mayor Zehr referred to the Freeport Pumping Station upgrades, questioning if there is any concerns of safety regarding deferral of this project. Mr. Murphy advised that no safety concerns are evident at this time. He noted that the City has completed an analysis of the infrastructure and sewer capacity and is currently undertaking an Environmental Assessment, with the design work to be completed in 2010. Mr. Murphy noted that in discussions with the development industry, it is apparent that imminent development in the area is questionable and accordingly, this work is being recommended for deferral to 2011. Councillor G. Lorentz questioned if funding has been approved for the Regional LRT. Mayor Zehr advised that the Region has received commitment from the Province for 2/3 of the cost and notional commitment from the Federal Government; however, specific dollar figures have not yet been ascertained. He advised that some detailed design has been done and approval has been given to an accelerated Environmental Assessment process, with a further report to be presented to Regional Council in early 2010. Councillor Lorentz questioned the feasibility of proceeding with the Block Line Road improvements notwithstanding the LRT, raising concerns of the impact of potential delays in the LRT project. Mr. Murphy advised that Engineering staff is in discussion with Regional staff regarding the infrastructure proposed and believe there will be sufficient information provided in 2010 that will allow the road improvement project to proceed. He added that the Region is moving ahead with the LRT EA process and suggested that a re-evaluation of the road improvement project wait for next year's budget cycle. Councillor Gazzola raised similar concerns with respect to the proposed delay of the Block Line Road improvements. Mr. Murphy advised that the intent is to provide opportunity to determine an optimal design, which requires knowledge of the LRT routing and station configuration. He added that it is staff's desire to ensure that whatever design is ultimately approved is the right one so as to avoid any future problems in that area. Mr. D. Chapman advised that notwithstanding the proposed adjustments, the DC Engineering Reserve Fund will still have a residual shortfall of at least $2.5M and staff is seeking direction this date in respect to making the adjustments proposed in report DTS-09-167. Mr. Chapman referred to the non-Engineering DC Reserve Fund, advising that a return to a surplus position is expected within the term of the 2009 DC By-law. He noted that parking SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -172 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'D revenues 1 expenditures are not included pending resolution of an appeal to the 2009 DC By- law. In addition, it was noted that costs for cemetery services is included in anticipation of an amendment to the Cemeteries By-law relative to Phase II of the Williamsburg Cemetery expansion. Mr. Chapman advised that the deficit occurred in 2007 due primarily to construction of Fire Station No.7 and the Activa Sportsplex. Mr. Chapman then reviewed major changes in the capital program since 2009, highlighting repairs to the Duke /Ontario Parking Garage, the funding for which has been eliminated in 2012 due to anticipated savings and the funding proposed for 2010 deferred to 2011; and, a reduction of $500,000. per year in Fleet equipment replacement based on the outcome of an equipment review. Mayor Zehr referred to the Accelerated Infrastructure Program, questioning if it is realistic to assume the backlog of kms/year will be addressed sufficiently to allow the City to reach its goal by 2032. Mr. Chapman advised that the proposed change is to reduce the kms/year starting in 2011 due to cash flow constraints and phase out the reduction over time. Mr. Murphy added that pipe costs spiked from approximately $1,800.1 metre in 2004 to approximately $3,400. in 2007 but have begun to stabilize at approximately $2,900./metre in 2008-2009. He stated that there will be inflationary increases in future; however, the sooner the infrastructure replacements can be completed the better to reduce the City's risk of a catastrophic pipe failure and associated concerns with sewer back-ups. Mayor Zehr requested an update on problems related to sewer back-ups in the Claremont Avenue area. Mr. Murphy advised that the project is included in the capital budget, with pre-design to be undertaken in 2012 and construction in 2014. Councillor B. Vrbanovic raised concerns with respect to continuation of the Federal gas tax funding. Mr. Chapman advised that it is currently a 5 year commitment; however, the capital forecast anticipates that this will continue in perpetuity. Councillor Vrbanovic advised that at a meeting of the Federation of Canadian Municipalities (FCM) members were urged to continue to lobby in regard to the gas tax despite no indication of a cut back to ensure it does not become a targeted reduction. Councillor Vrbanovic inquired as to the impact of removing the funds set aside for environmental remediation in 2010. Mr. J. Willmer commented that this amount is essentially forecast for projects wherein unknown circumstances may require environmental remediation to be undertaken. Mr. Chapman provided examples of the Joseph / Gaukel Street road re- construction and Guelph Street park improvements. Mr. D. Chapman commented that the 2010-2019 Capital Forecast is currently in a balanced position, with all new projects and increases in excess of $50,000. referred to the Forecast by previous resolution of Council. GENERAL EXPENSES Councillor J. Gazzola advised that he would like to be apprised of funds already in capital accounts that have not yet been expended. Mr. Chapman agreed to provide a report for final budget deliberations. Councillor Gazzola requested further clarification of the funds set aside for Environmental Remediation. Mr. J. Witmer advised that in part the funds will be used for a number of studies planned to investigate and identify any issues of concern relative to park lands; and a detailed analysis of City-owned lands on Elmsdale Drive and Chandler Drive is required in respect to the potential sale of the lands. Mayor Zehr requested clarification of the $38,000. under funding sources for Grants (Other). Mr. Chapman advised that it was his understanding this is related to replacement of the Auto Defibrillator Equipment, scheduled for each 5 year period, the costs of which are off-set by contributions from the Heart and Stroke Foundation. Councillor C. Weylie questioned why funding for the Corporate Accessibility Fund does not carry forward beyond 2011. Mr. Chapman advised that initially this was a 6 year program and SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -173 - CITY OF KITCHENER acknowledged that a long term plan is needed. He advised that staff has not come to a determination yet as to whether this should be a Corporate allocation or be introduced into Departmental operating budgets and a report will come forward in respect to this issue at a later date. The General Expenses Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval. CENTRE IN THE SQUARE Mr. Jamie Grant and Ms. Sharon McMorran, Centre In The Square, attended to answer questions regarding the Centre's capital budget. Mr. J. Grant agreed to resend information on the amount spent for capital improvements over the last 25 years to Councillor Gazzola. Councillor Gazzola requested clarification as to what the current amount is to be used for. Mr. Grant responded that the funds are to be used to keep the Centre facility in the same state that it is now, with the focus to be on addressing issues required to maintain the building. The Centre In The Square Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval. KITCHENER PUBLIC LIBRARY ~KPL~ Ms. Sonia Lewis, CEO-KPL, responded to questions, advising that the funds set aside in 2019 for Radio Frequency Technology relate to implementation of self check-in, while the funds in 2010-2011 is a continuation of the first phase to implement self check-out and tagging of inventory. She added that the check-in portion of RFT benefits the user through enhancing KPL's ability to return reading materials more quickly to the shelves. Ms. Lewis further advised that the Central Library renovation project is currently in the detailed design phase, with tenders expected to be sent out in the spring of 2010 and project completion by 2012. Ms. Lewis asked that the recommendations contained in the report introduced earlier by Messrs. Dan Carli, Chair and Mr. Mike Farwell, Vice-Chair, dealing with changes in the funding strategy for the Central Library renovation project, be considered. Mr. D. Chapman advised that Financial Services staff will ensure that the detailed recommendations with respect to Development Charges funding put forward by the KPL concerning the Central Library projectwill be included in final budget deliberations. The Kitchener Public Library Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval. A line by line review of Departmental capital budgets was then undertaken and comments were advanced as follows: MAYOR AND COUNCIL /CHIEF ADMINISTRATOR'S OFFICE The Capital Budgets and 10 Year Capital Forecasts 2010-2019 of the Office of the Mayor and Council and the Office of the Chief Administrator were accepted, subject to final budget approval. FINANCIAL SERVICES Councillor J. Gazzola requested clarification of the new item related to a Long Term Financial Plan. Mr. Chapman advised that this plan will integrate and expand on existing financial strategies beyond the current 10 year window and will provide a higher level conceptual growth management planning and benchmarking model. Councillor Gazzola questioned the impact of not hiring a consultant for this work. Mr. Chapman advised that the project would have to be delayed as there is no internal capacity to undertake the work, noting that the Director of Financial Planning position is currently vacant. He added that with the complexities of the financial models it would be more efficient to use the services of a consultant experienced in this field. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -174 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'D Councillor B. Vrbanovic inquired if it was intended to revisit the notion of activity based budgeting as part of the long term financial plan. Mr. D. Chapman advised that this has been considered in the past and a decision was made not to pursue it; however, he agreed that staff could look again at this model. He advised that the terms of reference for the Long Term Financial Plan will come to Council for approval at which time Council could give direction to include investigation of an activity based model, if desired. He added that activity based budgeting is currently used on a case by case basis, citing an example of legislated changes impacting fees and charges for the Building Enterprise. Councillor Vrbanovic referred to proposed enhancements to the tax utility system, questioning the impact of removing at minimum $50,000. in each year. Mr. Chapman advised that this is a significant operating system for the gas, water and sewer utilities. He added that a review of the CIS system is currently underway and a report is to come forward in March 2010. Mr. Chapman suggested that consideration of a reduction to this budget line be set aside until the report can be presented to allow a decision to be made based on complete information. Councillor Vrbanovic requested that an issue paper be provided for final budget deliberations in respect to reducing the budget for enhancements to the tax utility system. Councillor G. Lorentz raised concerns with respect to the funds set aside for Itron Meter Reading Equipment, questioning why the City is not further ahead in investing in newer technologies, such as the smart meters. Ms. J. Evans advised that existing equipment requires upgrading to off-set high maintenance costs and is required to remain functional until such time as new technology is in place. Mr. W. Malcolm added that the City is undertaking a pilot program in 2010 in partnership with Kitchener-Wilmot Hydro and other local utilities to determine opportunities for smart meter use for gas and water services. Councillor Gazzola raised similar concerns with respect to meter reading equipment, suggesting that as the City owns the Enterprise it could make transfers as it sees fit. He questioned the feasibility of transferring $50,000. from Capital out of Current and making up these funds from the Enterprise. Mr. Chapman cautioned that the City must be careful in respect to governing regulations pertaining to the issue of subsidization and the City's practices will be under increased scrutiny with new Provincial financial planning requirements coming into effect in 2010. Mr. Chapman agreed to provide an issue paper for final budget deliberations on meter reading technologies in respect to what is being done in other municipalities and within the industry, and what the pilot project planned for 2010 will entail. Councillor G. Lorentz requested an update on the ability of Utility customers to pay their bills electronically. Ms. C. Ladd advised that the City is currently in the process of re-defining a Customer Service Strategy, in tandem with a Corporate Information Technology Strategy. Together, the intent is in part to enhance e-services for any form of business conducted by the City; however, the studies are not yet complete. Ms. J. Evans added that the Utility does provide E-Post which allows those who sign on to receive their utility bills electronically. She noted, however, that the up-take has been slow. Councillor Gazzola suggested that similar to Kitchener-Wilmot Hydro, the City may have to consider incentives to encourage take-up on e- billing. Mayor C. Zehr questioned if staff is attempting to level Fleet equipment replacements in order to eliminate spikes in any given year that may have an impact on the tax levy. Mr. Chapman advised that the funding is stabilized by virtue of the Fleet Reserve fund and annual contributions are based on amortization. Mayor Zehr requested explanation as to how the annual transfer to the Fleet Reserve and the source of funding for equipment upgrades translates to the tax levy. Mr. Chapman agreed to provide an issue paper for final budget day to explain the Fleet upgrades, as well as options to reduce the annual transfer into the Fleet Reserve or the funding for the upgrades. The Financial Services Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval and report back on the issues as raised by the Committee this date. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -175 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'DI CORPORATE SERVICES Councillor J. Gazzola inquired as to the latest cost figure for the Consolidated Maintenance Facility (CMF) and was advised by Ms. P. Houston that the total cost is approximately $64M. Councillor B. Vrbanovic questioned the impact of combining all Facilities Management (FM} maintenance funds into one budget line and reducing the total amount by $50,000. in each year of the 10 Year Capital Forecast. Ms. C. Fletcher advised that it would be similar to the situation of Engineering Services wherein some planned maintenance would have to be deferred. Councillor Vrbanovic commented that he would like to have a sense of any capital close-outs from the FM capital accounts. Ms. Fletcher advised that some projects were closed out for 2010 and most were based on increased workload due to infrastructure stimulus projects requiring deferral of those projects to a later budget year. Mr. D. Chapman agreed to provide an issue paper for final budget day on the impact of reducing the FM budget by $50,000. over the 10 Year Capital Forecast. Councillor Gazzola suggested that direction should be given to staff to reduce the FM budget by at least $50,000. this date to ensure a reduction is achieved. Councillor Vrbanovic suggested that it would be preferable to wait for the issue paper so the Committee has full information on which to base a decision. Councillor K. Galloway inquired if the Guelph Street storage facility will be retained after completion of the CMF. Ms. Fletcher advised that staff is undertaking a comprehensive review of all storage facilities and disposition of the Guelph Street storage facility is pending outcome of this review. Councillor Gazzola requested clarification of the line item for City Hall Lighting. Ms. Fletcher advised that this is part of the infrastructure stimulus projects and entails upgrades to the exterior lighting around all sides of City Hall; and also includes upgrades for lighting at the Civic Square. It was noted that City Hall exterior lighting is 15 years old and the upgrades will provide more energy efficient lighting and improve the environment from a perspective of safety. Mr. R. Regier added that the underground infrastructure for City Hall lighting improvements is currently being installed and the enhancements support extension of the King Street improvements. Mayor Zehr requested clarification of the line item for Replacement Site Components. Ms. Fletcher advised that an analysis was completed with Community Services (CS) in respect to site components for CS facilities and FM has agreed to assume responsibility for maintenance of parking surfaces at all Community Centres which is reflected in this line item. Mayor Zehr requested a comparison of the total FM budget, save and except unusual items such as the CMF and infrastructure stimulus projects. Mr. Chapman undertook a calculation, advising that the amount would equate to approximately $2,483,000. Councillor K. Galloway requested clarification of the line item for the Corporate Website. Mr. M. Grummet advised that this funding supports the cost of the Contact Centre ACR system for tracking calls, other existing tools for the website; and as well, as part of planned redevelopment of the site, introduction of new functionalities. Mr. Grummet noted that this budget line has already been reduced by 50% in the last 3 years. Councillor Vrbanovic questioned if it was appropriate for the Contract Centre ACR system to be funded from the website account. Mr. Grummet expressed the opinion it was, noting that this product was introduced 4 years ago in partnership with the City of Markham and has historically been allocated from the website account. Councillor Vrbanovic requested an update on the status of calls going to the Contact Centre. Mr. Grummet advised that currently they have taken on calls from By-law Enforcement, Legislated Services and Operations and it was his understanding the Mayor's Office calls were to follow next. Ms. C. Ladd advised that the ACR system is used for all functions of the Contact Centre, including escalation procedures and after the first year of operation of the Centre, it has been SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -176 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'D determined that some refinement to the system is required. It was noted that use of the ACR System is based on frequency of standardized calls and development of escalation procedures and Information Technology staff is working to determine if the ACR system is appropriate to take on the calls received in the Mayor's Office and Chief Administrator's Office. Ms. Ladd advised that as early as possible in the new year it is intended to undertake a pilot project in these two staffing areas. Councillor Gazzola requested clarification of the line item for Computer Infrastructure. Mr. Grummet advised that this funding relates to maintenance contracts for hardware /software and the fees paid to obtain upgrades. He noted that it is also planned to proceed with acquisition of the new Microsoft Windows 7. Councillor Gazzola questioned why the funding for replacement of desktop computers is not included in the capital budget. Mr. Grummet advised that these funds are covered in the Computer Reserve and have historically been reviewed during Operating Budget deliberations. Councillor Gazzola suggested that there should be ability to reduce the fund given a decline in retail pricing. Mr. Grummet advised that as new units are acquired there is still need to fund maintenance costs. Mr. T. Speck added that there is an expectation to increase /introduce new technologies to do business and major projects are planned to enhance the City's technological systems, such as the proposed upgrades to the Amanda system and the ACR system. He stated that with each application new technology is required and the funds are necessary to meet the volume of increasing reliance on technology. Councillor Vrbanovic added that this funding has also already been decreased through a reduction in charge backs to Departments over the last 2 years. Councillor G. Lorentz requested that a status report on activities of the Contact Centre be provided. Ms. C. Ladd advised that staff is currently preparing a report which will come forward in the first quarter of 2010 and agreed to confirm timing for presentation of this report. The Corporate Services Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval and report back on the issues as raised by the Committee this date. The meeting then recessed at 11:55 a.m. and reconvened at 12:51 p.m. with the following members present: Mayor C. Zehr and Councillors B. Vrbanovic, K. Galloway, C. Weylie, J. Smola, G. Lorentz and J. Gazzola. COMMUNITY SERVICES DEPARTMENT With respect to the Master Plans/Feasibility Studies included in the 10 Year Capital Forecast, commencing in 2012, Ms. Houston advised 2 years ago, staff started setting aside money in the Capital Forecast for large plans and studies. The funds set out in 2012 of the forecast will be used to conduct a comprehensive User Fee Review. Mayor Zehr questioned the 10 Year Capital Forecast for Cemeteries; particularly the amount of time between the design study to be conducted in 2010 for the Williamsburg Cemetery and the actual expansion to be undertaken in 2015. He questioned whether another study could be financed in 2010. Ms. Houston responded that the design study needs to be started in 2010 in case the expansion needs to be accelerated. Councillor Vrbanovic directed Ms. Houston to determine if there are smaller projects that could be moved forward to 2010 in the Capital Forecast if the Williamsburg design work is moved to 2011. Councillor Gazzola questioned the $40,000. in the year 2010 of the Cemeteries 10 Year Capital Forecast for land acquisition. Ms. Houston responded that this sum of money will allow staff to explore opportunities with the City of Waterloo. The Committee next considered the Capital Forecast for Industrial Artifacts, noting that there is an amount of money proposed in each year, even though this program may be assumed by the Region of Waterloo. Ms. Houston responded that discussions have not taken place with the Region as yet, and funds may still be required. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -177 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'D Councillor Lorentz spoke to the Mill Courtland Community Centre addition itemized in the Community Development portion of the 10 Year Capital Forecast. He noted that it is a very active community centre but there is a problem in that they have no more space. He questioned whether land could be acquired from Madison Steel Company, a neighbouring property. He commented that their use is not the best to be located in a residential area. Mr. Hildebrand advised that discussions of this nature will take place in conjunction with the business plan preparation. Councillor Lorentz stated that this is the type of use we would like to relocate from the inner city. Mr. Willmer advised that staff will be bringing forward 2 items in the near future: a comprehensive report on employment lands, in early 2010; and, an Official Plan review which will be completed in 2011. The Committee next considered the 10 Year Capital Forecast 2010 - 2019 for Programs and Services, with regard to the Safe City Committee. Mr. Hildebrand advised that capital funds have been used by Graffiti Busters and have also been used to partially fund an outreach worker in co-operation with The Working Centre. Councillor Galloway commented on AED Units in the Capital Forecast for Aquatics and Athletics and directed that staff report on the possibility of putting these units in all City facilities. Ms. Kugler then reviewed the KMAC and Arenas 10 Year Capital Forecast and responded to questions from the Committee. Councillor Lorentz referred to the Capital Forecast for the Cenotaph in downtown Kitchener. He noted that the Kitchener Memorial Auditorium was built as a memorial to the war dead and the Cenotaph should be moved there. He questioned whether there have been any discussions with the veterans clubs. Mayor Zehr responded that discussions have taken place with the Legions and the military; however, nothing about a move has been contemplated and they did not see the current situation as a problem. There are a couple of possibilities to move the Cenotaph; however, what will be happening with an arena expansion at KMAC has not yet been decided: a lot more will be known by 2013. Councillor Gazzola questioned what the $150,000. in the 10 Year Capital Forecast 2010 - 2019for the cenotaph will be used for and Mr. Ritz advised that it is basically to refurbish the site, as it deteriorates over time. The Committee next reviewed the 10 Year Capital Forecast for Environmental Services. With respect to Natural Area Stewardship, Mr. Ritz advised that the money is used for education and stewardship programs and a co-ordinator for these programs. It is also used for naturalization plans, and tree and shrub planting in parks. Councillor Weylie questioned the tree inventory in the Forecast and was advised that the street tree inventory has been completed, and this funding is to inventory individual trees in the City's parks. Once the inventory has been completed management plans will be prepared. Mr. Ritz advised that the City needs to understand its assets and this inventory will also help with things like pest control. Councillor Gazzola then questioned staff regarding the Parks Buildings -General Provision in the Facilities Maintenance Capital Forecast. Mr. Hummel advised that most of the money for building maintenance has been moved to the Facilities Management budget; however, some money was held back to deal with day to day operations of Chandler. He stated that staff makes every effort not to spend it. Mr. Witmer advised that his account will be switched over to the CMF when staff moves there. Ms. Houston advised that staff will bring forward a report for budget day in this regard. The Committee next reviewed the 10 Year Capital Forecast for Sportsfields, Trails, Parks & Sites. Ms. Houston advised that $6.8M has been included in the capital forecast to start addressing the needs identified in the Parks Master Plan. Ms. Houston also advised that time SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -178 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'DI is needed to review what is needed and whether there may be partnerships that could be developed. Councillor Galloway stated that implementing the Parks Master Plan should be a priority and should be fully funded within the 10 Year Capital Forecast. Councillor Galloway then questioned whether there will be 2 more skateboard parks in the City and was advised that there will be, although the locations are not known at this time. Discussion took place concerning skateboarding at McLennan Park. Mr. Chapman advised that it will be complete by March 2011 and has been done this way at the direction of Council. Councillor Galloway then spoke of the Huron Natural Area, stating that as the Master plan has been completed, the Capital Budget should include a separate line for expenditures for this Area. If the Huron Natural Area becomes a separate line item in the forecast, it cannot be forgotten. On motion by Councillor K. Galloway - itwas resolved: "That staff alter the Capital Budget and 10 Year Capital Forecast 2010 - 2019 by including the Huron Natural Area as a separate line item." Mayor Zehr addressed the matter of the Parks Master Plan and the necessity of creating a substantial number of community trails and parks. He stated that there does not seem to be enough money in the Capital Budget and 10 Year Capital Forecast to catch up on the backlog of community trails and general parks that are still required. He advised of his hope that these trails and parks would be completed within the 10 year forecast. Mr. Witmer advised that the recommendations of the consultant will cost $2.18M and staff have only included $1.16M in the capital forecast because of constraints in the budget. He also advised that in 2009, the budget for community trails was $292,000. and $372,000. was for general park development. Mayor Zehr commented that he recognizes the constraint; however, he thought more money would be included in this forecast as the amount included does not put a dent in the number of trails and parks required. Councillor Gazzola questioned the capital forecast for synthetic turf, commenting that he was not convinced that it was worth the cost. Mr. Hummel explained that a natural grass field is operable from May to October and each field can be used for 450 hours, at a cost of approximately $30,000. Each field will ultimately have to be re-seeded or re-sodded and shutdown for a period of time to give it a rest. Synthetic fields can operate from March to December which allows 2,000 hours of booking time, and there are no maintenance costs. The only thing required is to drag the field once per month. Synthetic fields are also designed to drain large amounts of rain water. Councillor Vrbanovic spoke of the budget allocations for community trails and parks stating that he is disappointed not to see more money allocated for development in the earlier years of the capital forecast. Regarding synthetic turf, Councillor Vrbanovic suggested that it needs to be moved forward in the capital forecast. Councillor Galloway put forward a motion that staff be directed to put more money into the earlier years of the capital forecast for community trails and parks; and, that more money be included overall in the capital forecast for community trails and parks. Mayor Zehr agreed with Councillor Galloway but stated that staff should provide an issue paper in this regard for Budget Day or before. Councillor Gazzola spoke in opposition to this motion stating that the City is at a crossroads and it will be difficult to find any additional funds over the next 2-3 years. He stated that the City needs to cut back on spending to get to a reasonable tax rate increase. Councillor Galloway responded that not all the funds required to implement the parks master plan have been included in the forecast, and to do so will probably require a shift in priority. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -179 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'DI The following motion was voted on and Carried, on a recorded vote, with Mayor C. Zehr and Councillor's K. Galloway, C. Weylie, J. Smola, G. Lorentz and B. Vrbanovic voting in favour and Councillor J. Gazzola voting in opposition. On motion by Councillor K. Galloway - itwas resolved: "That staff submit an issue paper, for final budget day or earlier, on increasing the funding through-out the 10 Year Capital Forecast 2010-2019, for community trails and parks with a substantial increase in the earlier years of the capital forecast." The Community Services Department Capital Budget and 10 year Capital Forecast 2010-2019 was accepted, subject to final budget approval and receipt of reports and issue papers as required by the Committee this date. DEVELOPMENT AND TECHNICAL SERVICES DEPARTMENT The Committee next considered the Capital Budget and 10 Year Capital Forecast 2010 - 2019 for the Development and Technical Services Department. Discussion took place on the capital forecast for fire trucks and equipment, and staff was directed to bring forward a report on the assumptions underlying the Fire fleet projection. The Committee also discussed the opticom system. Mr. Becket advised that staff is in discussions with the Region on this system; as they are trying to include ambulances, and staff will present a report in this regard early in 2010. The Committee then reviewed the sanitary sewer projects, and storm drain and creek improvements. Councilor Uveylie noted the 2019 allocation of $500,000. for the Victoria Park Lake Rehabilitation, and the fact that the Environmental Assessment had been completed this year. Mr. Murphy stated that the decision was based on availability of funds; as the cost could be $16M and the City has many competing interests. He advised that the Environmental Assessment will be in good standing for 10 years. Mayor Zehr questioned whether any interim work could be taken to improve the water quality in the near future; as it does not seem right to take another 10 years to do something. Mr. Murphy responded that over the last 2 years we have had very wet summers. No doubt there are activities that could be undertaken, but they are expensive. He advised that undertaking rehabilitation of Victoria Park Lake will require a very significant investment and staff will shift priorities if that is Council's direction. He advised that the Environmental Assessment would still be valid if the City undertakes some work within 10 years time. Mr. Murphy stated that the $500,000. included in the forecast in 2019 will allow for a portion of the design for the lake itself. The upstream work will not be commenced until 2020 - 2021. Councillor Lorentz questioned full monitoring of sanitary sewers and infiltration and inflow. Mr. McTaggart advised that aCity-wide servicing study will identify problems in that area. Councillor Lorentz then questioned whether there are a set of projects underway such as the sump pump program. Staff was directed to provide a report on sump pump connections: what was done in the past and where we are going in the future. Concerning the capital budget and forecast for Huron Road improvements and upgrades, Councillor Galloway directed staff to provide a comprehensive figure. Mr. G. McTaggart, advised that when street re-surfacing is tendered, this provides the amount of street re-surfacing that can be completed within budget and the selection of which streets to resurface is based on criteria used in determining priorities. He added that the street priority list will be provided to Council. Councillor B. Vrbanovic advised that in regard to project 701206016 (Str. Light. GRP lamp replacements) there have been advances in the technology used for street lights and currently a pilot project on the use of LED lights is underway. He requested that an Issue Paper be submitted on the future use of LED street lights and whether or not it would be more cost efficient to utilize this type of lighting in context of long-term savings. SPECIAL FINANCE AND CORPORATE SERVICES COMMITTEE NOVEMBER 23.2009 -180 - CITY OF KITCHENER 2. CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 (CONT'DI The Committee considered Development & Technical Services report DTS-09-167, dated November 4, 2009, regarding Development Charges -Engineering Services cash flow adjustments. Councillor J. Gazzola pointed out that the proposed adjustments shown in Table 1 will only defer projects and will not eliminate the projected deficit. Mr. Chapman advised that deferring projects has been utilized in the past in order to deal with cash flow issues and reduce the need for debt financing. On motion by Mayor C. Zehr- itwas resolved: "That the Development Charges capital project timing adjustments outline in Table 1 of Development and Technical Services Department report DTS-09-167, dated November 4, 2009, be made to the 2010-2019 Capital Forecast to reduce the projected 2010 Engineering Services reserve fund deficit, subject to final budget deliberations." The Development and Technical Services Department Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval and receipt of reports and issue papers as required by the Committee this date. l 1T11 ITI FS The Committee considered the Capital Budget and 10 Year Capital Forecast 2010-2019 for Utilities. In response to questions from Mayor Zehr, Mr. Malcolm advised that he will get information from the Region on the exact portions of Victoria Street South and Frederick Street that will be subject to the watermain replacement. The Utilities Capital Budget and 10 Year Capital Forecast 2010-2019 was accepted, subject to final budget approval and receipt of reports and issue papers as required by the Committee this date. Councillor Vrbanovic noted that there are a number of reports and issue papers to be provided to this Committee by Final Budget Day, or by the time the Operating Budget is discussed if the reports/issue papers affect the Operating Budget. 3. ADJOURNMENT On motion, the meeting adjourned at 3:16 p.m. Janet Billett Dianne Gilchrist Committee Administrator Committee Administrator