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HomeMy WebLinkAboutFIN-09-171 - 2010 Operating Budget j dib KITCHENER Financial Services Report To: Date of Meeting: Submitted By: Prepared By: Ward(s) Involved: Date of Report: Report No.: Subject: Councillor B. Vrbanovic, Chair, and Members of the Finance and Corporate Services Committee December 7,2009 Dan Chapman, General Manager of Financial Services Roger LeBrun, Manager of Financial Planning ALL November 27, 2009 FI N-09-171 2010 Operating Budget RECOMMENDATION: For discussion BACKGROUND: On Monday, December 7, 2009 the Finance and Corporate Services Committee will review the 2010 Operating Budget. This report and related attachments provide budget detail. REPORT: Consistent with the City's past approach to presenting budget information, the proposed agenda for 2010 Operating Budget discussion follows an issue-based City-wide format. The following information is attached for review and reference: . Hard copy of PowerPoint presentation . Budget Issue Papers FINANCIAL IMPLICATIONS: As detailed in the attached information COMMUNICA TIONS: Notice of budget meetings and an invitation for public input has been advertised through Your Kitchener and via the City's website. A public input session is scheduled for January 11, 2010. 1 ATTACHMENTS: Budget Presentation Budget I ssue Papers ACKNOWLEDGED BY: Dan Chapman, General Manager of Financial Services & Treasurer 2 """'" ..... "t"""" Q) tn C) Q) u -c .- c: ~ aJ Q) 0) en 0 C) Q) Q) 0 N ...... Q) r:: e...... n .- ...... t-- ..... o .- L- ea c..E Q) .... o E .c Q) o 0 E C. ~O Q) 0 u Q) Q) Q u C c: ~ co Q c: .- N LL C\I """'" 0) 0) 0) 0 0 0) 0 0 0 0) ~ ~ ........... 0 ........... ........... 0 ........... ........... C") CD CD ........... ~ CO ........... N I'-- I'-- N N ~ ~ . . ~ . . > U . . s..... +-' +-' C C - U U 0 (]) ::J CO CO ....., 0 0 Z 0 ....., ....., en - co s..... s..... 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"""'" r:: 0 0 ~o .- tn ~ ea~ tn 0 Co Q) N .....N en ~ Q) ~ ..... ~ C)oo ~ ~ -c~ c. ~ ~ ~ r:: aJ ea ea (.) ~ ea ~ r:: r:: .- r:: .c ea ea .- .., LL .., ~ D.. ;- I ....,""If; ~~,' ,. . ....---... .- - - -- .- ~,~...-.;. \., ii . - 2010 Operating Budget Issue Papers Issue Potential Paper Description BudQet Cut 1 Corporate Base Budget Adjustments 504,808 2 Employer Paid Parking 300,000 3 2010 M-Grid Adjustment Proposal 102,784 4 9000 Series Wage Adjustment - 2010 126,000 5 Staff Voluntary Leaving Early Retirement Plan 316,480 6 Mileage Rate 7 I nvestment Income 8 Supplementary Taxes 9 Reduction of Reliance on Tax Stabilization Transfer 10 KPL and CITS Base Budget Adjustments 274,753 11 Customer Service Manager 80,000 12 Food Service in City Hall Cafeteria 47,000 13 Transfer of Site Plan Staff to Parks & Trails 114,410 14 Kitchener in Bloom Program 14,000 15 Athletics Award Reception 7,000 16 Pools - Hours of Operation 19,000 17 Pools - Idlewood Opening 6,500 18 Youth Drop In Programs 27,207 19 Leisure Access Card 10,000 20 Winter Control 21 Operations to Service Growth 22 Mayor and Council Staffing 17,500 23 Staff Support for DWQMS and DSIMP (Utilities) 24 Corporate Contact Centre Budget for 2010 25 Gas Capital Investment Reserve Fund 26 Hydro Capital Investment Reserve Fund 27 Transfer to Gas Capital Investment Reserve Confidential Items 448,957 Total 2,416,399 2.75% Budget Cut Target 2,525,687 Surplus/(Shortfall) (109,288) CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #1 - Corporate Base Budget Adjustments OPERATING All Dan Chapman, General Manager of Financial Services BACKGROUND: Council's 2010 budget guidelines established the allowable tax-supported budget increase and included a base budget cut target of 2.75% to bring the overall levy increase below 3% in 2010. This issue paper identifies several tax-supported base budget reductions with minimal external service level impacts which assist in achieving the aggressive base cut target. A number of other base budget cuts are already included in the operating budget submission and the amounts outlined in this issue paper represent additional reductions identified subsequent to the close of the budget system and administrative review. RA TIONALE I ANALYSIS: Additional tax-supported base reductions of $504,808 have been identified and are recommended in the following areas: Waoes ($25,330) . Modest reductions in part-time wages in Community/Corporate Planning and Community Programs & Services (mobile skateboard parks) . Entry level wage rates due to staff turnover in Community Programs & Services . 50% reduction in Accounting overtime budget Traininq ($126,150) . Reductions to conference and training budgets in Internal Audit, Community Programs & Services, Financial Services (administration and financial systems) . Reduced funding for safety programs in HR . Reduced annual transfer to general training reserve from $261 k to $200k (will limit future programming options) Materials and Supplies ($151 , 623) . Additional savings in the print shop due to the introduction of new technology . Supplies reductions in Human Resources, Economic Development, Revenue and Accounting (discontinued printing of payroll stubs) . Reduced rental equipment and outside repairs and maintenance in Fleet . Eliminated tax due date advertising twice per year Revenue Adiustments ($141,705) . Budget adjustment for summer playground programs based on strong attendance in 2009 . Proiectino to secure sponsorships for neiohbourhood winter rinks in 2010 2009-11-27 . Budget adjustment for enforcement revenue in partnership with Conestoga College . Budget adjustment for winter overnight parking enforcement . Budget adjustment for increased NSF fees . Increase to internal recoveries from the Waterloo Region Municipalities Insurance Pool based on updated analysis EnerQY ($60,000) . Postpone revolving energy recovery from 5 years to 7 years (Infrastructure projects are consuming staff's attention so there will not be an immediate impact on other energy management projects contemplated in the forecast) . Implement temporary energy management settings to reduce Utility costs A number of reductions have been already built into the base budgets for Utilities to achieve a similar level of reduction. These amount to $322,000 and affect budget lines such as advertising and publicity, training, customer satisfaction survey along with increases to revenue lines for the implementation of an administrative fee for utility moves and shut-off notice delivery. FINANCIAL IMPLICATIONS: These $504,808 of additional tax-supported base reductions assist in achieving Council's base budget cut target of 2.75% ($2.5 million). Additional cuts to Enterprise and Capital budgets will also yield considerable savings in 2010. RECOMMENDA TION: That additional base budget reductions amounting to $504,808 in the tax-based operating budget be approved to assist in achieving the 2.75% base budget cut target as outlined in 2010 budget issue paper #1. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #2 - Employer Paid Parking Operating Budget All Carla Ladd, CAO BACKGROUND: The issue of employer paid parking is one which the city has wrestled with for many years. On a number of occasions senior management have heard from staff who have a variety of opinions on whether or not we should continue to subsidize parking in full or in part for some of our employees. In the past we have heard from staff who believe our current process for paying for employee parking is unfair and inequitable. We have also heard from staff who believe that in today's environmentally conscious world the corporation should not be encouraging staff to drive their cars to work by paying for some or all of their parking. Most recently we have also heard from staff who believe the elimination of employer paid parking is one good way to help respond to the financial challenges the city is facing as part of our 2010 budget. Added to this, we have recently been advised by CRA that employer paid parking is a taxable benefit and the City must change their practices and ensure that they treat this as a taxable benefit. This change which will have a direct financial impact on those staff who receive this benefit, save and except for those staff which require their vehicle for work 3 days or more each week. RA TIONALE I ANALYSIS: When we consider all of the issues related to employer paid parking, Senior management have decided that it would be appropriate to discontinue the practice of employee paid parking as of December 31,2009. Once the provision of paid or partially subsidized parking is eliminated, staff will be encouraged to consider the following options: 1) Opt for alternative forms of transportation such as a bus or car-pool; 2) Reclaim some or all their parking expenses based on the requirement to use their vehicles for work; 3) Choose to park at a lot that has a lesser cost; or 4) Continue to park where they currently park because that has value for them. The city is also currently in the process of developing a comprehensive transportation demand management strategy. That strategy will consider a number of environmental options aimed at encouraging staff to leave their cars at home and use more environmentally friendly ways of getting to work. For those employees who require their vehicle for work purposes, a process will be put in place starting in the new year to use the mileage expense claims to reimburse them a daily parking rate on those days. 2009-11-27 FINANCIAL IMPLICATIONS: Discontinuing the practice of employer paid parking will result in a $300,000 annual sustainable savings to the Operating Budget. RECOMMENDATION: That the practice of Employer Paid Parking be discontinued and those employees who require their car for business purposes be reimbursed for parking costs in direct relation to the frequency of travel and parking use. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #3 - 2010 M Grid Adjustment Proposal OPERA TING/CAPITAL All Tracey Hare Connell, Executive Director, People Services BACKGROUND: To help address budget challenges in 2010, a review of the 2010 salary increases for positions in the M Grid (M1 to M4) salary range was undertaken. MGrid positions represent management staff including all Directors, most Managers and some non-union staff positions. RA TIONALE I ANALYSIS: A reduction to the approved 3% economic increase for MGrid positions in 2010 will achieve the savings outlined below. The proposed reductions will be isolated to non-union/management positions in the M Grid. For pay equity purposes, non-union and management positions Grades 20 and below must mirror the C.U.P.E. 791 rates given that they have the same value in the City of Kitchener job evaluation system. FINANCIAL IMPLICATIONS: Projected cost in 2010 for the 3% economic Increase, including fringe, scheduled for April 1,2010 is approximately $308,353 (annualized $411,138). Reduction of the April 1, 2010 economic increase from the approved 3% level will have the following impact: . Reduction to 2% - savings of $102,784 with fringe (annualized $137,046) RECOMMENDATION: That a $102,784 budget reduction be entered in 2010 as a result of a proposed 2% economic increase for the MGrid positions. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #4 - 9000 Series Wage Adjustment - 2010 OPERA TING/CAPITAL All Tracey Hare Connell, Executive Director, People Services BACKGROUND: To help address budget challenges in 2010 and meet minimum wage requirements, a review of wages for the 9000 Series Classification was undertaken. The 9000 Series classification schedule is used to assign rates for positions not associated with any Collective Agreement, for employees who are typically required for summer or part-time employment. RA TIONALE I ANALYSIS: A report outlining the 2008 wage review for the 9000 Series classification was presented to Council on February 23, 2009. At that time Council was advised that the 9000 Series classification schedule's rates were fair in comparison with our local market. Positions in the 9000 Series received a 1 % increase in 2008 and 2009 with the exception of the lower ranked positions which received a higher rate to keep the pay structure aligned with minimum wage requirements. On March 31, 2010, minimum wage in Ontario will increase by $.75 to $10.25 per hour. The City of Kitchener can maintain compliance with minimum wage, maintain competitiveness of wage schedules and address budget challenges. The lowest ranked positions in the 9000 Series schedule currently have hourly rates of $9.68 to $10.37. To reach minimum wage, staff will eliminate Step 1 ($9.68) and add 2.5% to Steps 2 and 3, bringing the rates to $10.29 and $10.63 respectively. The next lowest ranked positions will also require an increase of 2.5% to meet minimum wage and eliminate wage compression. There are approximately 13 employees at Step 1 out of approximately 110 employees in the lowest ranked positions (Event Attendant and Clubhouse Helper) The remaining positions will receive a 1 % increase on March 31, 2010. These positions in the 9000 Series schedule are currently compensated well in comparison with our local comparators as depicted on the attached pay trend comparison. A 1 % increase will ensure these positions, on average, continue to be compensated at or above our local competitors. FINANCIAL IMPLICATIONS: A 3% increase was budgeted by operating departments for these positions. The projected cost in 2010 for a 3% economic increase, including fringe is $141,750 ($189,000 annualized) (assuming all dollars are non-enterprise). Reduction of the March 31, 2010 economic increase for 9000 Series will have the following projected savings: y 1% increase: - savings of approximately $94,500 with fringe ($126,000 annualized) RECOMMENDATION: That a 2010 budget reduction be entered for $126,000 as a result of a 1% economic increase for the 9000 Series Classification on March 31,2010 with adjustments to the two lowest bands to ensure compliance with minimum wage legislation. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #5 - Staff Voluntary Leaving Early Retirement Plan Operating Fund All Tracey Hare Connell, Executive Director, People Services BACKGROUND: To help address budget challenges in 2010, a Voluntary Early Leaving/Retirement Incentive was introduced to staff at the City of Kitchener on October 14, 2009. RA TIONALE I ANALYSIS: For those staff who applied and met the following pre-determined criteria, an incentive of 6 months wage equivalent was made available through the early leaving/retirement incentive plan. Those who met the eligibility criteria were invited to apply for consideration of the incentive. Criteria: ./ Must be a full time permanent City of Kitchener employee. The Plan was open to both unionized and non-unionized staff. ./ Must have been continuously employed by the City of Kitchener in a full time role for a minimum of 6 years immediately preceding the date of your application. ./ Must be eligible for 'early' or 'normal' retirement under OMERS. ./ Exit must create sustainable savings for the Corporation, e.g. full elimination/redundancy of the position or of a position within the replacement chain. ./ Must be able and willing to exit on or before December 31, 2009. ./ Must complete and sign an application and submit it to Human Resources not later than October 30, 2009. Three applications that met all six criteria were approved for the incentive. FINANCIAL IMPLICATIONS: The ongoing annualized savings associated with the approved applications is $316,480 (with fringe). The one-time cost of the 6 month incentive payment is $144,906 and has been accrued in 2009. RECOMMENDATION: That a 2010 budget reduction be entered for $316,480 as a result of the Voluntary Early Leaving/Retirement Incentive. 2009-11-27 ISSUE: FUND: DEPARTM ENT: PREPARER: CITY OF KITCHENER 2010 BUDGET ISSUE PAPER #6 - Mileage Rate Operating Financial Services - Financial Planning Michelle Fardy, Senior Financial Analyst BACKGROUND: As part of the annual budget process, staff reviews the rate per kilometre paid to employees for using their vehicles for business purposes. The rate is currently $0.44 per kilometre for the first 5,000 kilometres, and $0.39 per kilometre thereafter. RA TIONALE I ANALYSIS: The cost to operate a vehicle is estimated to remain at $0.44 per km (calculations on following page). The following table provides a comparison of mileage rates provided by municipalities: Comparison of Municipalities $ per KM City of Kitchener 0.44 First 5,000 km 0.39 Over 5,000 km 0.44 0.45 0.51 First 5,000 km 0.46 Over 5,000 km 0.45 First 5,000 km 0.39 Over 5,000 km 0.52 First 5,000 km 0.46 Over 5,000 km *will be adjusted to the 2010 tax exempt allowance rate once published by Department of Finance City of Waterloo Region of Waterloo City of Cambridge City of Guelph City of Hamilton* The tax exempt allowance rates are as follows: 2007 - $0.50 first 5,000 km and $0.44 over 5,000 km 2008 - $0.52 first 5,000 km and $0.46 over 5,000 km 2009 - $0.52 first 5,000 km and $0.46 over 5,000 km FINANCIAL IMPLICATIONS: N/A RECOMMENDATION: That the City of Kitchener's rate per kilometre remains at $0.44 for the first 5,000 kilometres, and $0.39 for each additional kilometre. 2009-11-27 ISSUE: Rate per Kilometre Assumptions & Calculation of Annual OperatinQ Costs for 2010 Assumptions Capital Cost 24,500 5,000 3,900 1,607 784 Salvage Value Depreciation, over 5 years Insurance Average annual interest, at 6.0% Kilometres Per Year 24,000 7.5 km per litre Fuel Consumption Annual Fuel Consumption Repair Allowance Fuel Cost ($ per litre) 3,200 Annual OperatinQ Costs Depreciation Insurance Interest Licence Repairs Fuel 1,000 0.96 3,900 1,607 784 80 1,000 3,072 10,443 Cost Per Kilometre 0.44 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #7 -Investment Income Operating General Revenue Saleh Saleh, Senior Financial Analyst BACKGROUND: In the past, Council has requested details on the actual and projected operating fund investment income. Due to the impacts of current economic uncertainty and the global financial crisis, this paper will update Council on projected investment income for 2010. RA TIONALE I ANALYSIS: Due to legacy of the sub-prime mortgage meltdown in the United States, and the ensuing global financial and liquidity crisis, interest rates have been very volatile during the year and have continued to fall since September 2007. The City's short term rates were approximately 2.40% at the beginning of 2009 and have fallen to approximately 0.75% currently. In 2010, the Bank of Canada is expecting overnight interest rates to be at 0.25% through the first 6 months of the year. As existing investments mature at higher yields, the blended yield that the City will earn going forward will continue to decline with projections estimated to be approximately .50%. Table 1 demonstrates the 2 year history of the City's short term yields earned. In view of the fluctuations experienced by the City over the past several years (both in terms of rates and balances) staff recommends that the budget for investment income be reduced to a more sustainable level of $1,500,000. It would be inappropriate to maintain the current budget for investment income given it would result in a large deficit in 2010 at a time when the City does not have the ability to withstand the deficit in the tax stabilization reserve fund. Although actual interest earnings will likely still be somewhat lower than the proposed budget, the City's ability to reduce the investment income budget by an additional amount is constrained by the budget guidelines in place for 2010. In 2009, operating fund investment income is projected to be approximately $967,000. The investment income that has been earned and allocated to the operating fund over the last five years is shown in the chart below. The figure for 2009 represents an estimate and the figure for 2010 is the budgeted amount. 2004 2005 2006 2007 2008 2009 2010 Budget 1,100,000 1,100,000 1,500,365 2,196,576 2,347,473 2,347,473 1,500,000 Actual 1,221,908 1,948,271 3,141,373 3,148,914 3,460,425 967,473 * * Actual for 2009 is an estimate FINANCIAL IMPLICATIONS: The 2010 base budget for investment income will be reduced to $1,500,000 to reduce the prospect of a deficit in 2010 which cannot be sustained in the tax stabilization reserve fund. 2009-11-27 IRECOMMENDA TION: That the 2010 Budget for operating fund investment income be set at $1,500,000 I Table 1 Table of City's Short Term Yields 5 4.5 4 3.5 3 I Percent 2.5 2 1.5 0.5 0 00 ~ ..c >- Q) >- - ..... ..... ..... ..... 0) ~ ..c >- Q) >- - ..... ..... 0 t) 'C ell C "S CJ) Q) Q) Q) Q) 0 ~ 'C ell C "S CJ) Q) Q) ell C. ::J .0 .0 .0 .0 ell C. ::J .0 .0 0 ..... ~ ::J 0 ~ ::J N ::J ell c:( -, -, Ol E 0 E E N ::J ell c:( -, -, Ol E 0 ..... ::J - ..... ::J - ~ .0 ~ c:( Q) t) Q) Q) ~ .0 ~ c:( Q) t) Q) 15.. 0 6 t) Q) 15.. 0 ell U. Q) ell U. ::J Q) Z 0 ::J Q) C C/) C C/) ell ell -, -, 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #8 - Supplementary Taxes OPERATING General Revenue Roger LeBrun, Manager of Financial Planning BACKGROUND: Historically, the City did not budget for net supplementary taxes. Any net supplementary taxes earned in a given year would become part of the City's operating surplus, which by Council Policy was then transferred to the tax stabilization reserve fund to stabilize tax rate impacts in future years. In 2007, the mechanics of this transfer were amended in order to budget for $1,500,000 in net supplementary taxes while simultaneously reducing the transfer from the Tax Stabilization Reserve Fund by the same amount, resulting in no net levy impact. This change was prompted by Council's concerns surrounding a perceived lack of transparency and ease of understanding in relation to the practice of not budgeting for supplementary taxes which was the approach recommended by staff in order to maintain maximum financial flexibility. RA TIONALE I ANALYSIS: Since 2007 where net supplementary taxes have been budget, the City has seen reduced levels of growth in assessment along with increased tax write-offs since that time. The net effect of these two issues has resulted in the City falling significantly short of the budgeted target of $1,500,000 for 2007, 2008 and a projected shortfall for 2009. Table #1 shows the history of net supplementary taxes since 1996. Due to recent economic conditions, reduced investment income and other factors contributing to operating deficits, it is appropriate to amend the budget for net supplementary taxes to a level that would provide greater long-term financial stability. It would be inappropriate to budget an amount that would knowingly result in deficits, especially in light of the depleted condition of the Tax Stabilization Reserve Fund. The net supplementary budget for 2010 has been reduced from $1,500,000 down to $700,000. This proposed reduction is intended to strike a balance between a reasonable tax levy increase, minimal impacts on City services and sustainable operating budgets. FINANCIAL IMPLICATIONS: The recommended approach outlined above, results in more precision in budgeting and requires a budgeted reduction of $800,000 to the tax-supported operating budget. RECOMMENDATION: In order to achieve a more realistic level of precision in budgeting, net supplementary taxes should be budgeted at $700,000. 2009-11-27 2,500,000 2,000,000 1,500,000 1,000,000 500,000 -500,000 -1,000,000 -1,500,000 -2,000,000 2009-11-27 o -Net Supplementary Taxes -Current Budget -Proposed Budget -Average Table #1 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #9 - Reduction of Reliance on Tax Stabilization Transfer Operating General Revenue Roger LeBrun, Manager of Financial Planning BACKGROUND: The City has faced tax-supported operating deficits in 2007, 2008 and a modest deficit is currently projected for 2009 after taking into consideration considerable deficit mitigation efforts. As per Council Policy, any operating deficit must be funded by the Tax Stabilization Reserve Fund. In addition, each year, there is a budgeted transfer from the Tax Stabilization Reserve Fund (TSRF) to the operating budget to fund the City's operations and minimize the need for a tax levy increase. With a depleted balance in the TSRF, and no reasonable anticipation of significant surpluses in the near future, further reductions on the reliance of this transfer are necessary. RA TIONALE I ANALYSIS: The annual budgeted transfer from the Tax Stabilization Reserve Fund to the operating fund in 2009 is $1,997,000. Each year, there has been a targeted decrease in that amount in order to completely eliminate any reliance by 2013. In order to do so, a reduction of approximately $487,000 per year is required. This equates to approximately 0.52% on the tax levy. The table below indicates that the TSRF is currently anticipated to be in a deficit position by 2011. If operating surpluses are not realized in the near term, there may be a need to accelerate the reduction of reliance or augment the funding into this account from other sources, the options for which are limited. Proj 2009 2010 2011 2012 2013 2014 Balance, beginning of year 3,938 1,674 214 (803) (1,313) (1,353) Interest 118 50 6 (24) (39) (41 ) Operating surplus (deficit) (385) Transfer to operating (1,997) (1,510) (1,023) (487) 0 0 Balance, end of year 1,674 214 (803) (1,313) (1,353) (1,393) FINANCIAL IMPLICATIONS: As discussed above. RECOMMENDATION: That the 2010 Budget for the operating fund TSRF transfer be set at $1,510,000. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #10 - KPL and CITS Base Budget Adjustments OPERATING Boards Saleh Saleh, Senior Financial Analyst BACKGROUND: Council's 2010 budget guidelines established the allowable tax-supported budget increase and included a base budget cut target of 2.75% for the Kitchener Public Library and The Centre in the Square. The purpose of this issue paper is to identify the areas where adjustments have been made to the base budget to meet Council approved budget targets. RA TIONALE I ANALYSIS: Kitchener Public Librarv (KPU The Kitchener Public Library was given a base reduction target of 2.75% or $237,952. To achieve this level of reduction the library is proposing to implement the following measures for 2010: . Limiting COLA increases to 1 % . Increasing Gapping targets . Reducing Staff training by $10,000 . Reducing Resources budget by $136,186 . Reducing Other expenses by $15,800 Centre in the Square (CITS) The Centre in the Square was given a base reduction target of 2.75% of $36,801. To achieve this level of reduction, the CITS is proposing to increase both their fundraising and sponsorship targets. FINANCIAL IMPLICATIONS: The combined base reductions of $274,753 (KPL $237,952, CITS $36,801) will help in achieving Council's base budget cut target of 2.75% ($2.5 million). RECOMMENDATION: That the proposed base budget reductions in the amount of $237,952 for the Kitchener Public Library and $36,801 for the Centre in the Square be approved to assist in achieving the 2.75% base budget cut target as outlined in 2010 budget issue paper #10. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #11 - Customer Service Manager (vacant) OPERATING CAO - Administration Carla Ladd, CAO BACKGROUND: In 2005, a new Customer Service Manager position was created to support the new Customer Service Strategy and funded in the amount of $100,000. That position has been filled on a seconded basis to assist in the implementation of the customer service strategy since that time. Recently, the supervisor of the Kitchener Utilities Call Centre/Corporate Contact Centre has retired and the seconded position has assumed the responsibilities for this work. It would now be appropriate to review the staffing of the Corporate Contact Centre and determine the operation, administration and management of this function and its potential impact on funding. RA TIONALE I ANALYSIS: The Supervisor of the Kitchener Utilities Call Centre/Corporate Contact Centre is currently funded 50% from within the Kitchener Utilities Call Centre/Corporate Contact Centre and 50% from the Customer Service Manager budget in the CAO's Office. Having observed the operations of the Kitchener Utilities Call Centre/Corporate Contact Centre over the past year, it would appear that a single Manager can realistically oversee the operation of the Centre as well as the development and implementation of the Customer Service Strategy. As a result, it is recommended that the unused budget for the Customer Service Manager be reduced in the CAO's office. As a result, the Manager of the Corporate Contact Centre will become a fulltime position (as opposed to the halftime under the joint model). Funding for the remaining portion of the management salary for the Kitchener Utilities Call Centre/Corporate Contact Centre has been determined to be $44,000, of which $24,000 will be obtained through charge backs to Enterprise functions leaving $20,000 to be funded from tax base operations. Therefore a savings of $80,000 from the original budget set aside for the Customer Service Manager can be used to reduce operating costs and reduce the impact on the tax levy. FINANCIAL IMPLICATIONS: A savings of $80,000 will be used to reduce the operating budget and tax levy impact. RECOMMENDATION: That the operation of the Kitchener Utilities Call Centre/Corporate Contact Centre and future development and implementation of the Customer Service Strategy be combined into a single Manager position to provide a savings to the operating budget. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #12 - FOOD SERVICE IN CITY HALL CAFETERIA OPERATING COMMUNITY SERVICES - ENTERPRISE DIVISION KIM KUGLER, INTERIM DIRECTOR ENTERPRISE BACKGROUND: The Enterprise unit oversees the operation of the cafeteria. Hours of operation are approximately Monday to Friday from 8:00 am to 2:00 pm. The customers serviced by the cafeteria are primarily city staff with the addition of students from St. Louis. Annually the cafeteria has operated in a deficit and has been overspent. To balance and attempt to reduce the budget, hours were reduced and pricing was increased but the operation never achieved a break-even position. RA TIONALE I ANALYSIS: Currently, the cafeteria has an operating budget of $27,000 in addition to energy costs of $20,000 for a total budget of $47,000. Closing the food service in the cafeteria will have a positive impact on the operating budgets. Should the cafeteria close, staff and patrons would still have a selection of businesses in the downtown who provide food and beverage services. It is anticipated that the cafeteria space would remain available as a staff lunch and meeting space with the possibility of vending machine service. FINANCIAL IMPLICATIONS: Eliminating food service in the cafeteria will reduce the operating budget annually by $47,000. RECOMMENDA TION: That food service in the City Hall cafeteria be eliminated in the spring of 2010. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: #13 - Transfer of Site Plan Staff to Parks & Trails Operating & Capital Development & Technical Services (Planning), & Community Services (Operations) Jeff Willmer, Interim GM, Development & Technical Services & Pauline Houston, GM, Community Services PREPARER: BACKGROUND: Overcoming the backlog in development of parks and trails is a key priority for the community, Council and staff. With the maturation of the site plan approval function in the Planning Division and the current economic slowdown it is feasible to transfer a staff resource (i.e., one FTE) to CS Operations to increase staffing capacity in order to help overcome this backlog more quickly. RA TIONALE I ANALYSIS: The backlog in development of parks and community trails is one of the top priorities identified in the Parks Master Plan which requires both capital resources and staff resources to implement. Additional staff resources can be assigned to the parks and trails projects from within the organization. The incumbent Supervisor of Site Development (Planning Division) has directly related experience in park and trail development in Kitchener, as he took on the role of Landscape Architect in park development for two separate one-year contracts. The Supervisor of Site Development position was created approximately 6 years ago in order to improve the level of customer service to applicants for site plan approval ("Development" as a Community Priority, "Customer Service" as an element of Effective & Efficient Government), to give improved supervision ("A Culture of Learning" - People Plan) to staff involved in reviewing and approving detailed implementation plans such as landscape, irrigation and site lighting, and to better balance the workload of the Manager of Design & Development (now Manager of Development Review). The primary responsibilities of the position include giving oversight and priority to the site plan approval function, mentoring and providing guidance in the development of staff in the areas of landscape architecture, urban design and signage, and chairing the City's Site Plan Review Committee. The Supervisor has succeeded in mentoring the 3 Urban Designers to the point that all three have a strong degree of experience and proficiency in their day-to-day roles. The need for mentoring and guidance is significantly reduced compared to 3-6 years ago. These incumbents already chair SPRC in the absence of the Supervisor. With the transfer of the Supervisor to the Operations Division the Site Development team (currently one Supervisor and 5 direct reports) is expected to be able to manage its workload during the current economic slowdown. FINANCIAL IMPLICATIONS: This transfer will result in a net reduction of $114,410 in the operating budget. An equivalent provision has been made in the capital forecast under parks and trails development for this positon. 2009-11-27 RECOMMENDA TION: That the incumbent Supervisor of Site Development be transferred from Development & Technical Services - Planning to Community Services - Operations, Parks Design and Development to provide project management capacity for overcoming the backlog in park and trail development. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: DIVISION: #14 - Kitchener in Bloom Program Capital CSD Community Programs and Services and Operations BACKGROUND: In 1995, the City of Kitchener became involved in National Communities in Bloom program, a non-profit Canadian organization that is committed to fostering civic pride by encouraging municipalities to promote civic beautification. The National Program continues to be active in more than 500 communities across the country. Kitchener in Bloom is an initiative that branched from the National program. The National Program included registration fees as well as costs, time and resources associated with hosting judges (outside of the cost of promoting and supporting the program itself). In 2003, the Kitchener in Bloom committee decided to keep the program at a local level and to focus all resources and funds on community initiatives that would continue to achieve the goals and objectives of the National Program, namely community pride and community beautification. The Kitchener in Bloom committee is comprised of citizens, municipal staff, a member of regional council and members of associations, businesses and organizations interested in horticulture, heritage and improving community life. The objective of this committee is to encourage and celebrate residents and businesses that take pride in Kitchener and beautify our community. RA TIONALE I ANALYSIS: City staff provides support, guidance and resources to the Kitchener in Bloom committee. Support includes chairing the committee, design and advertising support, through Marketing and Communications, as well as clerical support. Other resources provided by the City of Kitchener include meeting space, postage and photocopying as well as funding to cover costs of all marketing and promotion materials, printing, awards and prizes, the Bloom Bus tour, and the final celebration. Option 1 - Elimination of the Program The Kitchener in Bloom committee believes that there is still value in recognizing and celebrating the efforts of citizens in beautifying their properties. There are also other positive impacts of the program such as raising awareness and educating the community on positive environmental practices. However, the committee also recognizes that many property owners see the value of beautifying their property already and we may not necessarily need an "award" program to motivate them. If the City of Kitchener was to eliminate this program there would be a yearly capital budget savings of $14,000. Option 2 - Reduce budget of the Kitchener in Bloom Program Nominations across the last three years have been relatively stable, however staff has been able to decrease the dollars spent on this event since 2007. In 2009 approximately $6,500 was expended on Kitchener In Bloom which supported the costs associated with 184 residential property nominations, 25 business nominations, the bus tour, and the finale celebration that was attended by approximately 65 people. In 2008, approximately $10,000 was expended which supported the costs associated with 186 residential nominations, 25 business nominations, the bus tour and the finale celebration that was attended by 75 people. In 2007, $14,000 was expended and supported the costs associated with 2009-11-27 197 residential nominations, the bus tour and the finale celebration. Staff has been able to reduce the costs of the program largely by reducing the amount of resources that are placed into marketing and advertising. In 2009, marketing and promotional costs included: $1,176 - Community News advertising $1,200 - CKWR radio ads: $ 200 - Posters (for community centres, libraries, gardening centres) $ 500 - Flyer-Nomination cards (smaller in size; black and white print on coloured paper) Free marketing and promotional opportunities were used as much as possible, including the City of Kitchener web-site, Your Kitchener May/June and July/August articles and local free web-sites and community calendar postings. Community News also gave a complimentary ad in September in connection with the earlier buy. Comparatively, in 2008 amounts spent on marketing and promotion included: $3000+ -- KW Record ads $1200 -- CKWR radio spots $2800 -- printing of colour Flyer-Nomination cards and posters FINANCIAL IMPLICATIONS: Staff would realize a savings of $14,000 by completely eliminating the Kitchener in Bloom program. Staff could reduce the Kitchener In Bloom budget by $8,000 and maintain support to the program at its current size. This would reduce a large part of the marketing and advertising budget. However, staff would continue to search out no-cost or low cost methods of marketing the program. RECOMMENDATION: That staff eliminate the Kitchener In Bloom program capital budget by $14,000 in the 10 year Capital forecast and reduce the c/c transfer to achieve levy reduction in 2010. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: DIVISION: #15 - Athletics Award Reception Operating Community Services Community Programs and Services - Aquatics and Athletics BACKGROUND: For over 40 years the City of Kitchener has recognized the sports community with a full banquet and award reception for athletes and coaches who achieve provincial, national and international top placement in their particular sport. This civic event is attended by Mayor and Council to serve as their opportunity to congratulate and recognize these achievements. The cost of this event is based on a number of factors such as number of athletes eligible per year, venue and dinner costs, and gift selected to represent the award. Both Kitchener and Waterloo athletes are recognized. Waterloo does not currently have an event similar in nature to this. Provincial and National recognition in Waterloo is celebrated at their council meetings throughout the year. In addition, at each of the Minor sport Annual General meetings athletes are recognized their achievements in their sport. Currently the Athletic Award Banquet is a catered event held at a venue such as Bingeman's or the Delta Hotel. Athletes and their families enjoy a formal sit down meal, followed by a Guest Speaker and award presentations. Total costs in 2009 for this type of event included: Revenue -$3,420 Award $4,261 Catering $9,154 Guest Speaker $ 485 Total Costs $10,480 The 2009 budget for this event is $12,361. RA TIONALlANAL YSIS: The 2010 base budget submission reflects Athletic Awards - reception style. Staff believes that this change in format will reduce the costs without significantly reducing the benefits of the event. This reception format would still include guest speeches, award presentations and opportunities to socialize. Cost savings would be found by hosting the event at a city of Kitchener facility and reducing the catering from a full meal to light hors d'oeuvres and refreshments. The submitted budget is: Food A ward Other Total Costs $3,500 $3,000 $500 $7,000 In discussions with a number of sports teams and parents it was found that individuals felt that the sit down dinner format could be nicely transformed to a reception format and achieve the same results. This report is recommending that a further step be taken to eliminate the event entirely and 2009-11-27 replace it with letters of recognition to Athletes from Council, which could be implemented with a minimal budget. The rationale for this recommendation is twofold: 1. it would eliminate the duplication that already exists with the Minor Sports group recognition and City recognition. 2. it would eliminate the current inequity and confusion for athletes, given that Kitchener currently has an event that recognizes both Waterloo and Kitchener athletes, whereas Waterloo does not. FINANCIAL IMPLICATIONS: Elimination of the Athletic Awards Reception as shown now in the 2010 budget, would result in total savings of $7,000. RECOMMENDATION: That the Athletic Awards event be eliminated for a total operating budget savings of $7,000. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: DIVISION: #16 - Pools - Hours of Operations Operating Community Services Community Programs and Services - Aquatics and Athletics BACKGROUND: City of Kitchener indoor pools operate 7 days a week, opening as early as 5:30am and closing as late as 10:30pm, depending on the pool and its specific programming. The 4 indoor pools offer adult drop-in programming such as Aquafit or lane swims in the later evening time slots. In an attempt to reduce costs associated with operating these facilities staff examined possible ways of reducing the hours of operation with as little disruption to service as possible. RA TIONALlANAL YSIS: A drop in lane swim is currently offered on both Monday and Wednesday evenings at each of the 4 indoor pools. Lyle Hallman offers this drop in from 9:00-10:15pm, Cameron Heights 8:00- 9:30pm, Breithaupt Centre 8:00-9:00pm and Forest Heights 9:00-10:00pm. Staff is suggesting that we eliminate one of the lane swims per evening and close the associated facility one hour and a half hours earlier. In this instance, patrons would have 3 alternate choices of a lane swim location on both Monday and Wednesday evenings. Staff will look for similar duplication of programming on Tuesday, Thursday and Friday and make similar program adjustments to allow one facility to close earlier while allowing citizens to attend one of the other pools for their program. The impact of closing one pool for the last program hour, thereby shifting those swimmers to another pool would impact an average of 12-18 swimmers per evening. Based on current recorded batherloads - swimmers at one pool, could be accommodated at any of the alternate open pools. Each of the pools we operate have a capacity of 30 - 40 for a manageable lane swim. ( Lyle Hallman would be the exception, at 24 max) Currently the peak lane swim drop in number in the last month is 18 swimmers. Based on our current swim totals the capacity would not be reached if 12 -20 swimmers moved to another pool. If implemented, there would be up to $19,000 in savings realized by decreasing costs associated with lifeguard and administrative staff. Staff would ensure that the eliminated swim was at the pool with the lowest attendance statistics. The disadvantages of implementing this cost reduction strategy include: o Patrons would not necessarily be able to swim at the pool of choice and may have to travel further than what they are accustomed; o Patrons may stop participating if they felt they had to travel too far; o Growth areas such as Forest Heights are continually seeing new customers arrive with growing expectations for programs and services; o Retention of guard staff is currently an issue, loss of earnings for part time staff may encourage them to look for work elsewhere for employment; o Cameron Heights has limited accessibility and may not be able to accommodate older adults or disabled swimmers looking for an alternate location. 2009-11-27 FINANCIAL IMPLICATIONS: Reduction in Part time wages would be as follows: Closure of one pool one day per week 1.5 hours less for 50 weeks: Closure of one pool two days per week 1.5 hours less for 50 weeks: Closure of one pool 3 days per week for 1.5 hours less for 50 weeks: Closure of one pool 4 days per week for 1.5 hours less for 50 weeks: Closure of one poolS days per week for 1.5 hours less for 50 weeks: $ 3,800 $ 7,600 $11,400 $15,200 $19,000 RECOMMENDATION: That staff develop a rotating schedule of early closure for the indoor pools,S days per week, at a cost savings of $19,000. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: DIVISION: #17 - Pools - Idlewood Pool Opening Operating Community Services Community Programs and Services - Aquatics and Athletics BACKGROUND: Idlewood is one of 4 outdoor pools located in the City of Kitchener that are typically scheduled to open June 1st and run through to the end of August. The past 2 years have seen low attendance during the June opening month due to cool/rainy weather conditions. Although staff adjustments are made as required, reflecting low bather-load at each facility, a minimal staff contingent is necessary to open and operate the facility regardless of the low attendance. RA TIONALlANAL YSIS: Staff investigated delaying the opening of all outdoor pools by 4 weeks as a possible cost saving measure. However that was not pursued since the summer season pass, which allows an individual to swim at all 4 indoor and 4 outdoor pools, is effective June 1 of each year. A significant selling feature of the summer pass is the accessibility to the City's outdoor pools and as such, delaying the opening of all outdoor pools would negatively impact these revenues. It is felt, however, that delaying the opening of one outdoor pool would have minimal impact on summer pass sales since there will still be an option, from those who wish, to utilize an outdoor pool. Resulting from a review of staff costs and swimmer statistics, of the 4 outdoor pools in inventory, staff is suggesting that delaying the opening of Idlewood would have the least service impact on citizens. It would most likely impact neighborhood swimmers, and possibly reduces potential rentals. However, rentals and swimmers would still have the choice to swim at Harry Class Pool, Kiwanis Park or an indoor facility. Also to be considered is the weather. In the event of another cool and rainy June, there will be likely little impact on users. However, in the event of a hot June, it is likely that the impact felt by families and groups will be more acute. FINANCIAL IMPLICATIONS: Part time Aquatic Staff reduction Loss of revenue Total savings $8,000 $1.500 $6,500 RECOMMENDATION: That staff delay the opening of Idlewood pool to June 25th, 2010 to realize a potential savings of $6,500. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: #18 - Youth Drop-In Programs Operating Community Services - Community Programs & Services - Program & Resource Services Lori Palubeski, Manager, Program & Resource Services PREPARER: BACKGROUND: The summer Youth Drop-In program is an evening program designed for 12 to 17 year olds. There are ten programs offered at various community centres and the duration of the program is six weeks. The program goal is to design and deliver fun and challenging youth-centered recreational and leisure activities that improve young people's quality of life, increase their chances for achievement and promote healthy relationships. As importantly, the program provides opportunities for the Corporation to employ approximately 35 young people, consequently providing leadership and skill building opportunities, meaningful employment and training. In order to remove financial barriers and ensure participation, the program does not generate revenue nor charge user fees. Responding to the direction to investigate potential budget reductions, this paper proposes to eliminate three youth drop in programs for 2010. While the details of this proposal are explained below, it is important to note that reductions to the Program and Resource Services budget equate to decreases in program and service provision. ANAL YSIS: The proposal to eliminate three youth programs for 2010 is outlined below: Downtown Community Centre: Rationale: The attendance at this program has been relatively low and program participants travel to this site from other areas of the city. There is currently a program at KCI on Thursday evenings that would serve as an option for youth in the downtown. Impact: Although attendance is low, there is a diversity of youth who attend this program that staff does not see at other sites (youth with support workers, youth with disabilities and youth who identify as LGBTQ). Additionally, the elimination of the program would decrease programming available in the downtown. Country Hills Community Centre: Rationale: While the attendance did increase in 2009, prior statistics indicated low participation. Previous program participants have also attended the program at Chandler Mowat and are therefore able to travel. Impact: The Chandler Mowat program operated at capacity in 2009. A closure of the CHCC program would put further strain on the CMCC program and essentially leaving youth in the CHCC area underserved. Kingsdale Community Centre: Rationale: This site has experienced the lowest attendance in recent years and currently has limited programming space. House of Friendship could be encouraged to offer summer youth programming should this program be eliminated (NOTE: staff do not know if they have the budget or capacity to do this). Impact: There are minimal programs and services for youth in this community and access to 2009-11-27 transportation is a challenge. There is a higher density of subsidized housing and a relatively high proportion of lower income families suggesting the need for continued support for youth. In addition, the proposed program cuts will result in the loss of nine summer youth employment positions. It is important for the Corporation to be mindful of the larger impact youth program cuts may have. The research is well documented, and our experiences in various neighbourhoods confirm, that when we choose to invest in the delivery of safe, supported and engaging community-based programs for youth we provide positive alternatives and options and help to ensure a healthy and vibrant community. FINANCIAL IMPLICATIONS: 6 leader positions: 3 supervisor positions: Program supplies: Total budget cost savings: RECOMMENDA TION: That staff eliminate 3 Summer Youth programs including those located at the Downtown Community Centre, Country Hills Community Centre and Kingsdale Community Centre. $14,382 $11,625 $ 1 .200 $27,207 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: #19 Leisure Access Card - Third Year Phase-In to Fee Subsidy Budget Operating Community Services - Program & Resource Services Lori Palubeski, Manager, Program & Resource Services FUND: DEPARTM ENT: PREPARER: BACKGROUND: In 2004, Council directed staff to undertake a detailed long term review of the Leisure Access Service and to develop a sustainable service delivery strategy. The review of the service was completed in August 2006. Staff presented an update to Community Services Committee in June 2007 (CSD-07-023) and received approval to proceed with the recommendations that did not have specific budget implications. Those recommendations with budget implications were referred to 2008 budget discussions. During 2008 budget deliberations, staff recommended a $60,000 increase to the fee subsidy base budget to be phased in over three years ($20,000 per year starting in 2008 and ending in 2010). The rationale for this request was to address the increasing gap between the fixed fee subsidy budget and the annual inflationary rate increases to program user fees. Every year, our direct programs become financially less accessible for many families in our community. To date, Council has approved a $20,000 increase to the budget in 2008 and in 2009 respectively. This budget issue paper addresses the 2010 request. RA TIONALE I ANALYSIS: The Leisure Access Service experienced significant demand in 2009. The realities of the economy coupled with the 6% increase to program fees resulted in an unprecedented uptake in this service. To date, there is a 20% increase in the number of subsidies issued from 2008 to 2009. The 2009 allocated budget for the service is $85,000 and as of November 19th, 2009 the current amount of subsidies granted totals $105,600. Staff has been fortunate to secure funding from the Canadian Tire Jump Start foundation in order to offset the budget overage. As outlined in the Leisure Access Strategy, 2010 is proposed to be the final year for an increase to the subsidy base budget. Responding to the current budget limitations and attempting to balance and support the demand for the service, staff are suggesting that the proposed $20,000 increase for 2010 be phased in over two years. As such, staff recommend a $10,000 increase for 2010. Given the approved 5.2% increase to program user fees in 2010 it is predicted that this budget will experience further strain. Should staff be unsuccessful at securing external funding to support the service, Council will be consulted for further direction. Access to quality recreation and leisure programs is an important determinant in the health of our community. Generally, our 2009 programs did experience an increase in attendance suggesting how important access to public recreation and leisure is in times of economic challenges. Removing the economic barrier to program participation helps to improve access, equity and inclusion resulting in positive community impacts and quality of life. 2009-11-27 FINANCIAL IMPLICATIONS: Operating funding requested. Approved 2009 Proposed 2010 Total Increase Budget Budget Requested Fee Subsidy 85,000 95,000 10,000 Total Annual Budget 85,000 95,000 RECOMMENDATION: That $10,000 be designated to the 2010 Leisure Access operating budget; and, That a further $10,000 to the Leisure Access operating budget be deferred to 2011 budget deliberations. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: DIVISION: # 20 - Winter Control Operating Community Services Operations BACKGROUND: In August 2008, Council approved a series of recommendations contained within the Winter Maintenance Report CSD-08-066. The winter maintenance report was written to identify process improvements, staffing requirements, contracting options and then funding realities to ensure that the winter maintenance program can be efficient and effective. In that report, the following recommendation was presented: "That the principle of budgeting for winter maintenance based on a 5 year rolling historical average cost be maintained, and the necessary adjustments to budget be referred to the 2009 Operating Budget Process." Historically the Operations Division has had insufficient funds allocated toward winter maintenance purposes. Given the uncertainty of the winter weather this shortfall can become significant when winter conditions are then above the norm. The previous 5 years had identified that based on the actual activity experienced we have had on average a $420,000 annual shortfall. RA TIONALE I ANALYSIS: The analysis had concluded that on average there has been an annual funding shortfall of $420,000 associated with winter maintenance. The $420,000 shortfall was allocated throughout the following four categories: 1. wages and benefits - $115,000 2. equipment reserve charges - $115,000 3. materials - $70,000 4. contract services - $120,000 Total Cost: $420,000 During the 2009 budget process not all of the $420,000 allocation could be provided for at once. At that time Council was presented with three options and chose the option which included only the contract services and materials representing $190,000 in 2009. The balance for the wages and benefits and equipment reserve charges of $230,000 was deferred to the 2010 budget. FINANCIAL IMPLICATIONS: Adjusted for inflation, $235,000 is required to bring the annual operating budget closer to the actual historic expenditures experienced when addressing winter maintenance in the City of Kitchener. RECOMMENDATION: That Council approves the allocation of "operations to service growth" funding of $235,000 identified as the shortfall in the winter maintenance budget to ensure that the services that are required to be delivered can be provided within the annual operating budget to meet our minimum maintenance standards and address Council and constituent expectations related to service standards. CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: DIVISION: # 21 - Operations to Service Growth Operating Community Services Operations BACKGROUND: As a result of the growth of the City of Kitchener, Operations has had to utilize its staff and equipment that were historically assigned to work for others to maintain the current service levels in areas which have not yet been fully funded due to financial constraints. The functions identified last year that required additional resources were in the winter maintenance and turf areas. Since 2004, Operations has attempted to minimize the reliance on work for others by additional funding. Without this additional funding, Operations would rely on revenues from work for others to offset this funding shortfall or would simply have an over expenditure. In order to bring the rolling 5 year average for winter maintenance in line with actual expenditures $420,000 was requested. Also, the turf area identified $135,000 in staff and equipment costs to effectively respond to the significant increase in new turf parcels that have come on line. Through the 2009 budget deliberation process an allocation of ($190,000) was applied to winter maintenance and ($50,000) to turf. These allocations did assist the division to retain additional staff and material to undertake this work, however the net result was that we were still over budget in winter maintenance and we were behind in our turf response times especially in the growth flush period in early summer as there was still a deficiency of $85,000 in the turf budget. RA TIONALE I ANALYSIS: In an effort to meet corporate budget target requirements, $235,000 previously earmarked for growth has been allocated to bring up the winter maintenance budget to the 5 year average (see issue paper on Winter Maintenance). As a result, there is no allocation available this year to service growth related areas. This will result again in a reduced level of service for turf maintenance of 4+ weeks instead of the desired 3 week turnaround and an over expenditure or reduced maintenance for McLennan Park. These issues will be deferred for future consideration in the 2011 budget. FINANCIAL IMPLICATIONS: . Increase in funding for Winter Maintenance to top up required budget = $235,000 . Details of remaining funding deficiencies include: o 2009 deficiency in budget for Turf Labour and Equipment Reserve Charges = $85,000 o 2010 deficiency for additional new Turf Labour and Equipment Reserve Charges = $85,000 o 2010 deficiency for new Labour for McLennan Park maintenance = $25,000 RECOMMENDA TION: For information CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #22 - Mayor and Council Staffing Operating Budget Corporate Services (temporarily CAO's Office) Carla Ladd, CAO BACKGROUND: In preparation for the increased size of Council in 2010 from 6 Councillors to 10 Councillors, provision had been made in the 2010 operating budget for an additional staff resource in the Mayor and Council office. Staff in the Mayor and Council office, together with the CAO, reviewed in detail the work related to supporting Council under the Constituency model to determine if additional staff resources were in fact necessary and felt that with efficiency improvements in the management and daily operations of the office, that the existing staff compliment could support the increased size of Council. RA TIONALE I ANALYSIS: The Constituency Model for the Mayor and Council office was first introduced in 2003 and since that time, operational implementation has been ongoing and it has been refined on a continual basis. In preparing for the increased size of Council, it was believed that an additional staff resource would be required to support the new Council based on the current operations and business processes. In order to ensure that Council support operations were as efficient as possible a detailed review of business practices and processes was undertaken to better understand resourcing. Through this review it became evident that through the refinement of some practices and the introduction of new technology, support for the new Council could be managed within the existing staff compliment. One such improvement that will assist in more efficient operations is the introduction of the ACR system in the Mayor and Council offices. This system allows staff to document constituency concerns and direct them to the proper functional area in the organization. If the concern goes unattended for a defined period of time (ie. 24 hours), the call is immediately elevated to the management in that area for response. This frees up significant time for the staff in the Mayor and Council offices since they do not need to continuously follow up on requests for action. Another significant improvement can be realized through the introduction of standardized business practices that will be common to all Councillors including standardized forms and reporting procedures. Through the new Council orientation, Councillors will be trained in the new business practices so work flow can be effectively managed. We believe that the new Council can be well supported with these improvements. Historically, a Council of 11 has been supported by a small staffing compliment ranging from 2 and growing to 4 successfully. Therefore, with advancements in technology and business practices, we believe that this approach will continue to be successful. We will closely monitor operations in the Mayor and Council offices during the first full year of operation, from December 2010 to December of 2011 to assess the situation prior to the 2011 budget. Should workload become an issue in 2010, resources from elsewhere in the organization will be used to help support the staff in the Mayor and Council offices. 2009-11-27 FINANCIAL IMPLICATIONS: A savings of $17,500 in the Operating budget will be realized in 2010 by eliminating the proposed additional Constituency Assistant in the Mayor and Council offices. RECOMMENDATION: That the proposed Constituency Assistant position be eliminated from the 2010 operating budget. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #23 - Staff Support for DWQMS and DSIMP (Utilities) Operating and Capital Financial Services Department - Utilities Barry Musselman BACKGROUND: In the early part of the decade, three separate incidents occurred in Ontario that lead to the deaths of sixteen people and left thousands of others critically ill, some of those permanently debilitated. An incident involving the water system in the Town of Walkerton along with natural gas incidents in the Cities of Toronto and Windsor lead to inquests and public inquiries. The Walkerton inquiry, headed by Justice Dennis O'Connor, made ninety three recommendations on ways to mitigate the chances of a similar situation happening to the water system in the future. Similar recommendations arose form the inquests into the natural gas incidents. The Provincial government has acted on these recommendations by enacting a plethora of Acts and Regulations over the past seven years with additional regulations in draft form. The two most prevalent Acts affecting Kitchener Utilities is the Safe Drinking Water Act and the Technical Standards and Safety Authority Act. The latest of the O'Connor recommendations to be adopted by the Province is to, "implement a Quality Management System". A similar recommendation from the Toronto coroner's inquest was also made and adopted for the natural gas industry. These recommendations lead to the creation of the Drinking Water Quality Management System (DWQMS) and the Distribution System Integrity Management Program (DSIMP). These quality management initiatives work on a fundamental template of plan, do, monitor and improve. Said another way, operating standards and plans need to be documented and implemented and then must be constantly monitored and measured to ensure we "do what we say" and to explore ways to find improvements in our methods and the success of said process changes. The two management systems referenced above have resulted in significant additional and specialized resource requirements within the Utilities Division for which capacity does not currently exist. RA TIONALE I ANALYSIS: The types of steps to be taken, under both the Safe Drinking Water Act (0 Reg 170) and the Technical Standards and Safety Authority Act (CSA Z662 and B149) are detailed and time consuming. Such steps include but are not limited to: . A safety and loss management system (risk assessment) . A process for the management of resources, including the establishment of competency requirements and an effective training program . A communication plan that supports the effective implementation and operation of the safety and loss management system . A document and records manaqement process for the effective operation of the safety 2009-11-27 and loss management system . Development of standard operating procedures for hazard identification and risk management, design and material selection, construction, and operations and maintenance . Quality assurance of infrastructure data (new and changes to) . A management of change process . A continual improvement process . Performance monitoring for the ongoing assessment of conformance with the requirements of the safety and loss management system . Development of measurable objectives and targets and periodic audits and reviews to evaluate the effectiveness of the safety and loss management . An essential supplies and services inventory . An infrastructure maintenance, rehabilitation and renewal program audit . A sampling, testing and monitoring program audit . A measurement and recording equipment calibration and maintenance program audit . An emergency response plan and management thereof . Incident reviews and follow up on the execution of recommendations The fundamental responsibility of a Utility is to operate and maintain their pipeline systems in accordance with documented procedures that meet the requirements of applicable Regulations. This responsibility includes: . Keeping records necessary to administer such procedures properly and to modify such procedures from time to time as experience dictates and as changes in operating conditions require. . Ensuring regulatory compliance within the capital renewal program (Accelerated I nfrastructure Program) as it pertains to 0 Reg 170 of the Safe Drinking Water Act, 0 Regs 210, 212, 220 of the Technical Standards and Safety Authority Act, and parts Z662 and B149 of the Canadian Standard Association. The Utility currently has only two Engineers (one gas and one water) which is insufficient to address the volume of capital projects and regulatory requirements currently faced. As a result of changes in the regulatory environment, the Utility has identified the need for the following three positions: . Quality Management System Specialist - to support regulatory compliance, efficient and effective operating procedures and mitigate possible corporate liability arising out of failure to comply with legally required systems. This position would be funded from existing capital budgets. The Utilities Engineer (water) has performed this role in addition to her normal duties which is not sustainable, exposing the corporation to risk. . Utilities Engineer - to support regulatory compliance requirements in the planning and execution of Council approved capital projects. This position will also provide a backup to the two existing Utilities Engineer positions which currently have no designates. . QMS/Engineering Administrative Support - to support work order management for programs such as hydrant checks, gas and water leak surveys, etc.; record, track and reconcile out of service fire hydrants; coordinate site inspections of new developments; audit subdivision inspection files; obtain ministry of labour trench numbers for all excavations; coordinate fire flow tests; data entry of completed training and certification; etc. This position will also relieve Supervisors from performing these admininstrative tasks which is currently detracting from their ability to monitor compliance with the Occupational Health & Safety Act and the Highway Traffic Act as they are spending a disproportionate amount of time in the office vs. in the field. 2009-11-27 FINANCIAL IMPLICATIONS: Estimated annual costs (salaries, benefits) associated with the QMS Specialist are $85,000.00 and are included in the gas and water operating budgets. Estimated annual costs (salaries, benefits) associated with the Utilities Engineer position are $100,000.00 and would be funded through reconstruction projects in the capital budget. This position would not have any material affect on the Utilities Division operating budget. Estimated annual costs (salaries, benefits) associated with the Administrative Support position are $50,000.00 and are funded 75% from capital projects and 25% from the gas operating budget. RECOMMENDATION: That the addition of a Quality Management System Specialist, Utilities Engineer, and Administrative Support position be approved within the Utilities Division for 2010 to ensure compliance with gas and water Quality Management System regulations introduced by the Province. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTMENT: PREPARER: #24 - CORPORA TE CONTACT CENTRE BUDGET FOR 2010 OPERATING FINANCIAL SERVICES/UTILITIES RUTH-ANNE GOETZ, SENIOR FINANCIAL ANALYST BACKGROUND: Council has requested details on the Corporate Contact Centre's budget for 2010. This issue paper is to address this request. RA TIONALE / ANAL YSIS: The Corporate Contact Centre (including the City's Welcome Centre) was established in 2008, as a way to expand the services of the already existing Utilities Dispatch Centre. As 2009 is the first full year of operations, and call tracking software is in place, the 2010 budget more accurately reflects the volume of phone calls, and the divisions/areas to which they relate. FINANCIAL IMPLICATIONS: Throughout 2009, it was noted that overall call volumes were higher than originally anticipated. The 2010 budget was based on similar call volumes as were experienced in 2009. CONTACT CENTRE 2010 Budget 2009 Budget Internal Recoveries (1,128,354) (815,506) External Recoveries (City of Waterloo) (22,279) (22,279) Total Revenue (1,150,633) (837,785) Salaries & Benefits 122,747 57,838 Wages & Benefits 990,733 766,886 Traininq 4,090 3,090 Software 2,627 2,627 Miscellaneous Expense 1,545 1,545 Internal Charges 5,030 0 Telephone and Computer Reserve Charges 23,861 5,799 Total Expense 1,150,633 837,785 NET 0 0 As noted above, Salaries and benefits have increased substantially from the previous year's budget. The 2010 budget includes 50% of the Supervisor of Support Services, as well as a small portion of the salary for a data entry clerk, whereas the 2009 budget includes only the Welcome Centre associate's salary and benefits. This was done to more accurately reflect the true cost of the Call Centre. The Wages and benefits have also increased substantially over the 2009 budget. The Call Centre has now experienced a full year of operations and higher than originally anticipated call volumes during that time. Therefore, the 2010 budget includes more part time hours in order to have enough staff on hand to meet the increased demand. Telephone and computer reserve charges have increased to more accurately reflect the telephone and computer services provided to the Call Centre. 2009-11-27 Based on call volumes for each area, the following table shows the allocation of the Contact Centre costs in 2010, as compared to 2009. DEPARTMENTAL ALLOCA TIONS 2010 Budget 2009 Budget Utilities (Gas and Water) 577,791 480,835 Operations 94,684 82,368 Sewer 38,202 78,540 Clerks 63,047 60,856 General Expense 186,985 97,635 ByLaw Enforcement 167,645 0 Recoverable from City of Waterloo 22,279 22,279 Facilities Management 0 10,181 Community Services Admin 0 5,091 TOTAL ALLOCATION 1,150,633 837,785 In the previous year, amounts were allocated to Facilities Management and Community Services Admin - these amounts are now included in the General Expense allocation (which includes the cost of "cold transfers") as no calls have been separately identified for these areas in the call tracking software. Bylaw Enforcement is now being allocated a portion of the Call Centre costs. This allocation is based on call volumes as tabulated by the call tracking software. RECOMMENDATION: N/A (for information purposes only) 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #25 - Gas Capital Investment Reserve Fund Capital and Operating Financial Services/Utilities Ruth-Anne Goetz, Senior Financial Analyst BACKGROUND: In the past, Council has requested staff to investigate ways in which to reduce the tax rate by increasing the transfer from the Gas Capital Investment Reserve Fund (GCIRF). This issue paper will explore the viability of this option for 2010 in anticipation of this discussion. RA TIONALE / ANAL YSIS: The City's reserve fund balances are declining and are well below benchmark averages. The Gas Capital Investment Reserve Fund represents one of the few remaining reserves set aside to fund additional capital requirements such as matching investments for Federal infrastructure initiatives or emergency funding for various projects. Since 2000, the gross margin percentage for Gas Delivery has ranged from 37% to 52% on an annual basis. Given the potential for significant fluctuations in gross margin and the likelihood of additional regulatory or program changes which will require funding (thereby reducing the transfer into the GCIRF) it would be prudent to maintain a balance in the GCIRF to avoid compromising funding for projects in the City's capital forecast. There is also the potential that unforeseen capital costs will be incurred due to rebuilding of meter stations or expansion of pipeline infrastructure, and these would represent a draw on the source of funds coming into the reserve. According to the sensitivity analysis completed last year and presented to Council on final budget day, should gross margins decline to the lowest level in recent years (37%), the GCIRF would run into a deficit within the next five years. Based on the latest projections from the Gas Utility, there appears to be sufficient capacity to increase the transfer to the Capital Pool by up to approximately $750,000, on a sustainable basis. This, in turn, will reduce the capital out of current funding that will be required from the tax-supported operating budget as both represent funding sources for the City's capital pool. FINANCIAL IMPLICATIONS: The existing GCIRF projection is as follows: 2009 2009 2010 2011 2012 2013 2014 Budget Projected Revenues Contribution from Gas 4,764 7,669 3,402 10,988 5,442 7,837 5,551 I nterest Income 138 71 36 125 248 334 425 4,902 7,740 3,438 11,113 5,690 8,171 5,976 Expenditures Transfer to Capital 9,600 9,600 4,000 4,500 4,000 4,000 4,000 9,600 9,600 4,000 4,500 4,000 4,000 4,000 Net Revenue (4,698) (1,860) ( 562) 6,613 1,690 4,171 1,976 2009-11-27 (Expense) Balance, beginning 3,344 3,344 1,484 922 7,535 9,225 13,396 Balance, end (1,354) 1,484 922 7,535 9,225 13,396 15,372 If the Transfer to Capital line were to be increased by $750,000 in 2010 and beyond, the GCIRF projection would look as follows: 2009 2009 2010 2011 2012 2013 2014 Budget Projected Revenues Contribution from Gas 4,764 7,669 3,402 10,98 5,442 7,837 5,551 8 I nterest Income 138 71 24 91 190 252 318 4,902 7,740 3,426 11,07 5,632 8,089 5,869 9 Expenditures Transfer to Capital 9,600 9,600 4,750 5,250 4,750 4,750 4,750 9,600 9,600 4,750 5,250 4,750 4,750 4,750 Net Revenue (4,698) (1,860) (1,324) 5,829 882 3,339 1,119 (Expense) Balance, beQinninQ 3,344 3,344 1,484 160 5,989 6,871 10,210 Balance, end (1,354) 1,484 160 5,989 6,871 10,210 11,329 RECOMMENDATION: For discussion. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #26 - Hydro Capital Investment Reserve Fund Operating and Capital General Revenue Ruth-Anne Goetz, Senior Financial Analyst BACKGROUND: In the past, Council has requested staff to investigate ways in which to reduce the tax rate by increasing the transfer from the Hydro Capital Investment Reserve Fund (HCIRF). This issue paper will explore the viability of this option for 2010 in anticipation of this discussion. RA TIONALE I ANAL YSIS: It is important to maintain a positive balance in the HCIRF, to ensure that the City has a contingency in the event of: . A reduced dividend from Hydro resulting from adverse financial results within Kitchener Power Corporation; . Reduced interest income should the interest rate on long-term debt be reduced; and . The need to fund emergency or high-priority initiatives on a one-time basis (e.g., LEAF), or fund a deficit in the operating budget for which there is insufficient capacity in the Tax Stabilization Reserve Fund. Given the current balance in the reserve, an increase in the transfer to operating from the HCIRF could be considered to reduce the variance between Council's budget target and the current staff submission. That said, current projections for the Tax Stabilization Reserve Fund indicate that it will be depleted prior to eliminating reliance on it as a source of annual operating revenue. As such, it will be important to maintain other reserve balances to compensate for this projected shortfall as well as the declining balances in other City reserve funds. Based on the forecast as presented to FCSC on November 23, the HCIRF can withstand an increase in the transfer to operating to a maximum of $250,000 per year on a sustainable basis. FINANCIAL IMPLICATIONS: Original HCIRF forecast, as supplied at the November 23 FCSC meeting: 2009 2009 2010 2011 2012 2013 2014 Budget Projected Revenues KPC Dividend 1,710 1,937 1,710 1,710 1,710 1,710 1,710 I nterest on L T Debt 4,259 4,260 4,259 4,259 4,259 4,259 4,259 I nterest Income 86 68 26 19 24 43 63 6,055 6,265 5,995 5,988 5,993 6,012 6,032 Expenditures Transfer to Operating 750 750 750 750 750 750 750 Transfer to Capital 8,085 8,085 5,500 5,500 4,600 4,600 4,600 8,835 8,835 6,250 6,250 5,350 5,350 5,350 Net Revenue (2,780) (2,570) ( 255) ( 262) 643 662 682 (Expense) Balance, beginning 3,583 3,583 1,013 758 496 1,139 1,801 Balance, end 803 1,013 758 496 1,139 1,801 2,483 2009-11-27 Should the Transfer to Operating line be increased by $250,000 from 2010 to 2014, the HCIRF forecast would look as follows: 2009 2009 2010 2011 2012 2013 2014 Budget Projected Revenues KPC Dividend 1,710 1,937 1,710 1,710 1,710 1,710 1,710 I nterest on L T Debt 4,259 4,260 4,259 4,259 4,259 4,259 4,259 I nterest Income 86 68 22 7 5 16 28 6,055 6,265 5,991 5,976 5,974 5,985 5,997 Expenditures Transfer to Operating 750 750 1,000 1,000 1,000 1,000 1,000 Transfer to Capital 8,085 8,085 5,500 5,500 4,600 4,600 4,600 8,835 8,835 6,500 6,500 5,600 5,600 5,600 Net Revenue (2,780) (2,570) ( 509) ( 524) 374 385 397 (Expense) Balance, beginning 3,583 3,583 1,013 504 ( 20) 354 739 Balance, end 803 1,013 504 ( 20) 354 739 1,136 RECOMMENDA TION: For discussion. 2009-11-27 CITY OF KITCHENER 2010 BUDGET ISSUE PAPER ISSUE: FUND: DEPARTM ENT: PREPARER: #27 - Transfer to Gas Capital Investment Reserve Operating Fi nance/Uti I ities Ruth-Anne Goetz, Senior Financial Analyst BACKGROUND: At the November 23, 2009 Finance and Corporate Services Committee meeting, Council directed staff to prepare an issue paper outlining how the transfer to the Gas Capital Investment Reserve Fund (GCIRF) is calculated. RA TIONALE / ANAL YSIS: The annual transfer from the Gasworks operating account to the GCIRF is based on the requirement that the Delivery Operation in Gasworks is to maintain an accumulated net revenue position of 50% of the prior year's net revenue. If net revenues in the Utility are stable, the transfer to the GCIRF is stable. Unfortunately, volatility in the Utility (due to site remediation and inventory write-downs) in recent years has resulted in significant fluctuations in the transfer to the reserve. That said, a sufficient balance has been maintained within the reserve to accommodate these fluctuations in cash flow. The following table illustrates how the transfer to the Gas Capital Investment Reserve is calculated: 2009 Projected 2010 Budget Delivery Program Net Revenue 22,273,907 16,971,982 Other Programs Net Revenue 2,476,032 2,439,685 Transfer to Gasworks Capital (5,776,124) (6,949,000) Net Revenue, Delivery Operation 18,973,815 * 12,462,667 ** Accumulated Revenue, Beginning 1,327,379 *** 6,607,575 Net Revenue, Delivery Operation * 18,973,815 **12,462,667 Transfer to City Revenue Fund (6,025,114) (6,181,767) Transfer to GCIRF (7.668505) (3 401.568) Accumulated Revenue, Ending (50% of previous year's 6,607,575 *** 9,486,908 Net Revenue, Delivery Operation amount) As noted above, the 2010 budgeted ending Accumulated Revenue for the Delivery Operation is 50% of the 2009 Projected actual Net Revenue, Delivery Operation. Therefore, the Transfer to GCIRF is the amount required to obtain the desired ending Accumulated Revenue amount. An increase of $1,000,000 in Delivery Operation Net Revenue in any given year results in a $1,000,000 increase in the transfer to the GCIRF for that year and a $500,000 reduction in the transfer in the following year. In the 3rd year, there is a corresponding increase in the transfer to the GCIRF of $500,000. Conversely, a reduction to net revenue results in an equal reduction to the transfer to the GCIRF in the current year and a 50% increase in the transfer in the following year, with a reduction in the transfer in the third year, equal to the 50% increase in the previous year. 2009-11-27 The net effect is that over a 3 year period, the GCIRF will increase by the $1,000,000, despite the offsetting corrections in the second and third year. Given the complexity of the transfer calculation and the volatility experienced in recent years, staff plan to review the method of transfer calculation in 2010 and will report to Council with respect to alternatives. FINANCIAL IMPLICATIONS: n/a RECOMMENDATION: For information 2009-11-27