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HomeMy WebLinkAboutFin & Corp Svcs - 2010-01-18 SFINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18, 2010 CITY OF KITCHENER The Finance and Corporate Services Committee met in special session this date commencing at 9:10 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 J. Willmer, Interim General Manager, Development & Technical Services P. Houston, General Manager, Community Services R. Upfold, Director of Accounting J. Evans, Director of Revenue R. Regier, Executive Director, Economic Development H. Gross, Director, Project Administration & Economic Investment R. Gosse, Director, Legislated Services & City Clerk J. Witmer, Director of Operations S. Adams, Director, Community & Corporate Planning T. Hare Connell, Executive Director, People Services S. Turner, Director, By-law Enforcement M . Hildebrand, Director, Community Programs C. Fletcher, Director, Facilities Management M . Selling, Director of Building M . Grummett, Director, Information Technology G. Murphy, Director of Engineering J. McBride, Director of Transportation Planning K. Kugler, Interim Director of Enterprise T. Beckett, Fire Chief L. Gordon, Chief Purchasing Officer R. LeBrun, Manager of Financial Planning G. Hastings, Manager, Golf Courses L. Baillargeon, Manager, Asset Optimization L. Bansen, Manager of Human Resources G. McTaggert, Manager, Infrastructure Asset Planning L. Palubeski, Manager, Program & Resource Services D. Keelan, Manager, Aquatics & Athletics B. Campbell, Manager, Community Resource Centres B. Wagner, Supervisor, Salary Administration C. Goodeve, Committee Administrator J. Billett, Committee Administrator The purpose of this special meeting was to give final consideration to the 2010 Operating and Capital Budgets and the 10-Year Capital Forecast 2010-2019. It was noted in the agenda that any recommendations from the Committee this date would be considered at the special Council meeting to be held immediately following this meeting. FIN-10-009 - 2010 FINAL BUDGET DAY The Committee was in receipt of Financial Services Department report FIN-10-009, dated January 11, 2010 concerning the City's 2010 Operating and Capital budgets, together with budget issue papers for specific items. The Committee also received supplemental information, including: Development & Technical Services Department reports DTS-10-015 (Victoria Park Lake -Implementation of Class EA Study, dated January 4, 2010); DTS-10-016 (Storm Water Utility and Rate Implementation, dated January 4, 2010); and DTS-10-023 (Victoria Park Lake EA and Storm Water Rate Implementation -Follow-up, dated January 14, 2010). DELEGATIONS Mr. Ed Redgwell, resident, attended to speak to the 2010 budget raising concerns that budgets as adopted by this Council over the past several years have produced tax levy increases at higher than the rate of inflation and suggesting substantial dollars are being FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 17 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D wasted on projects related to the Economic Development Investment Fund (EDIF), like the King Street streetscape and the Centre Block. He alleged that this has been compounded by interest on secret debenturing, issued fora 15 year period, related to EDIF. He suggested that monies to be spent on a new parking garage in the downtown is not needed in this recessionary time; adding that monies being spent on the new Consolidated Maintenance Facility are also wasteful as it was his opinion the facility would be obsolete in 10 years time. Mr. Redgwell further suggested that there is an absence of compassion for the less fortunate, noting the rising cost of water and sanity sewer, as well as recreational fees which will make recreational programming unaffordable for many. Mr. Bob Sharpe, Victoria Park Working Group, attended in respect to reports DTS-10-015, DTS-10-016 and DTS-10-023, dealing with implementation of the Victoria Park Lake Class EA Study and proposed Storm Water Management (SWM) Utility and Rate implementation. Mr. Sharpe advised that the addendum report, DTS-10-023, had been helpful in providing additional information as to the City's rationale in recommending the SWM Tiered Flat Rate (SWM-TFR) and the funding constraints for 2010. He advised that the group would still like to see direction to staff to continue to seek funding for commencement of the design phase in 2010 and fully supports the proposed SWM Utility and Rate implementation program. He noted, however, that the group is not supportive of the proposed SWM-TFR and asked that further consideration be given to implementing the SWM Single Family Unit rate (SWM-SFU) as early as possible. Mr. Sharpe advised that the group would like to see the recommendations as outlined on page 49 of the budget package amended to reflect specific references to Victoria Park, as proposed in a January 15 letter from Mayor Zehr to the group. He added that the Working Group and the Victoria Park Neighbourhood Association would also like assurance that they will continue to be made aware of matters concerning the Victoria Park Lake EA and have opportunity to provide input, as they remain committed to working with the City to see the EA recommendations implemented in a timely manner. Mayor C. Zehr referred to the recommendations contained in report DTS-10-016, advising that he planned to request modifications to include specific reference to the Victoria Park Lake project as a priority project in terms of the SWM Utility program funding. Mr. Sharpe was agreeable to adding specific definition, suggesting reference to Victoria Park Lake be added to the first several paragraphs. Mayor Zehr suggested that a separate paragraph be added specific to Victoria Park to be tied in with the other paragraphs, and Mr. Sharpe concurred with this approach. Councillor J. Gazzola requested clarification of the difference between the SWM-TFR and the SWM-SFU models. Mr. G. Murphy advised that the study presented in October 2009 identified the SWM-SFU as the preferred model, which considers the amount of impervious area (ie. surfaces resistant to water penetration) on a property as opposed to the current method of apportioning storm water funding based on property assessment values for eligible taxpayers. Mr. Murphy noted that many properties are also currently tax exempt. The basis of the SWM-SFU is that the more impervious area on an individual property, the greater the demand on the City's SWM system, either for flood control or water quality treatment purposes. Mr. Murphy advised that the degree of precision required will result in implementation costs for the initial programming of GIS software applications and incorporating GIS property information; ongoing administrative support and billing costs for the program; retooling of the existing water and gas utility billing format; and a one time implementation cost of $250,000. to upload the rate structure into the existing water meter billing system. Mr. Murphy advised that in comparison, the SWM-TFR is based on four tiers, consisting of single family, multi-family, non-residential and tax exempt non-residential and the fee for each is determined based on overall impervious area contribution as determined in the study. The principle is that if a property is served by the local water utility through a water meter, the amount of storm water service being charged would be based on land parcel usage. He stated that this model offers lower administrative costs, enabling the City to move forward more quickly with an implementation solution and can be more effectively communicated to the public. The rate charged would be itemized as a separate charge on the monthly water bill for Kitchener Utilities customers as storm water management service. Staff is recommending FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 18 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D this simpler approach as it enables the program to be more quickly implemented and could be transitioned to the SWM-SFU over time. Councillor Gazzola questioned how the rates would be collected and Mr. Murphy advised that collection would be through the City's water billing system. Councillor Gazzola suggested that the only difference between the two models is the mechanics of setting one or the other up. Mr. Murphy stated that the SWM-SFU has ongoing administrative costs, citing an example of a property with SWM facilities that would require monitoring by the City to ensure no changes have been made and that it is operating appropriately. He added that this rate structure will also require work to compose governing by-laws and policies. Mr. Murphy advised that staff is recommending establishing the SWM-FTR as a starting point and the more sophisticated approach could then be investigated over time. Mr. J. Willmer added that it is important to have the SWM program implemented in early 2011 to meet the proposed earlier start to the Victoria Park Lake project, which he suggested could only be done if the simpler funding model is approved for implementation. Mayor Zehr suggested that the wording of the third paragraph of the recommendation could be modified to provide that the recommended rate structure be approved as the initial rate model for implementation of the SWM Utility program. Mayor Zehr questioned if the delegation would still be satisfied if the SWM-SFU was approved and as a result commencement of the Victoria Park Lake project was further delayed due to the consequence of no funding availability from the SWM program in 2011. Mr. Sharpe responded that he was supportive of the proposed change to the recommendation to make specific reference to the Victoria Park Lake project as a priority and would not like to see any further delays in commencement of the project. BUDGET OVERVIEW Councillor B. Vrbanovic commented that the global economic downturn has had significant impact to citizens and the City's budget has also seen challenges in respect to reduced investment income, lower assessment growth, reduced building permit activity, and other like constraints. He noted that the City has dealt with a significant deficit in 2009 and the proposed 2010 budget strives to strike a balance between limited impact on core public services, careful management of organizational impacts and a reasonable levy increase. He stated that Kitchener has consistently ranked between 4t" and 6t" lowest among municipalities with populations of over 100,000 in respect to tax rates and a recent survey by Environics indicates a majority of citizens are satisfied with the current municipal government and services. It was noted that the City undertook to mitigate the current economic climate by implementing such policies as freezing discretionary spending, not adding any new staff unless already budgeted and/or required by legislation, no program expansions and most significantly by invoking a $2.5M reduction to the 2009 base budget while not compromising the long term financial stability of the City. Councillor Vrbanovic asked Committee members to keep in mind that if the proposed budget of 3% is to be reduced further, any items on the budget reduction list that are added back in will require other monies to be found to effect an appropriate reduction level. Councillor J. Gazzola advised that he was not prepared to support the majority of what is proposed this date, noting that the 3% tax increase is above the rate of inflation which currently sits at less than 0.5%. He cited EDIF as a contributing factor, suggesting it was not necessary to separate EDIF and it should be dealt with in the overall context of the budget. He also cited employee wages as a contributing factor, suggesting that they should be frozen at this time as they have risen over the past 5 years in excess of the inflation rate in each year. He noted that it is not uncommon for senior governments to impose a wage freeze; however, acknowledged that no action in this regard has yet been taken. He commented that the approved budget should achieve a tax levy increase below 1%, and senior governments should be petitioned to invoke a wage freeze for a period of time to allow municipalities to avoid cutting services. Mayor C. Zehr commented that it is important to note that statements made by the first delegation, which suggest the City had "secretly" debentured funds related to EDIF, is false. He noted that records exist to prove otherwise and that he had previously read these into the record in a public meeting; and accordingly, the statement of the delegation should not be FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 19 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D accepted as fact. Mayor Zehr added that it has been known since its inception in 2004, that EDIF would be dealt with separately as an add on to the budget. He stated that no one prefers to see a tax increase and pointed out that a number of prominent Cities having approved 0% increases over a number of years are now regretting those decisions as it has eroded their tax base to a point where they are struggling to provide required services. He acknowledged that wages are a significant portion of the operating budget; however, he pointed out that due to contractual obligations the City is not in a position to make changes. He added that this issue has been raised at the Provincial level but to date no action has been taken in regard to invoking a wage freeze. Mayor Zehr commented that at the same time wages have increased, the City has also experienced significant growth and a higher level of public expectation in services that the same level of staff have had to deal with. He noted that the City's workforce has also been impacted by legislated changes, requiring significant non- discretionary funding to be built into the City's budget as shown in Budget Issue Paper #42. Mr. D. Chapman then presented an overview of the 2010 budget, including national and local economic trends; impact of economic downturn on the Corporation; staff's approach to striking a balanced budget; and mitigating measures taken in response to the challenge of economic downturn, including $2.5M in reductions to the 2009 base budget. Councillor J. Gazzola questioned if there has been any indication as to what might happen with interest rates in 2010 and beyond. Mr. R. LeBrun advised that the Bank of Canada overnight rate is targeted at 0.25%, which is expected to remain for the first half of the year and beyond that, no additional information is available at this time. A comparison of typical residential property taxes was provided which compares 2009 property taxes among municipalities with populations greater than 100,000. Kitchener is ranked 6t" lowest with an average $2,737. per household in comparison to the average median of $3,206. The comparison also ranks Kitchener in the middle range between Waterloo and Cambridge in respect to average household costs. Councillor J. Gazzola suggested that benefits accrued from owning its own Gas Utility should result in Kitchener having the lowest ranking among municipalities for property tax. Mr. Chapman acknowledged this as one argument; however, he suggested it could also be viewed in the context that the Utility enables Kitchener to provide a higher quality of life for its citizens. Councillor Gazzola questioned why the total service costs are higher for Kitchener than compared to Waterloo and Cambridge. Mr. Chapman advised that this relates to hydro, gas and water services. In respect to water service, he noted that Kitchener implemented higher rates sooner than the other cities who are now catching up and hydro rates are lower than the other cities. In respect to gas service, he pointed out that the City's rates are not as flexible to change as Union Gas rates. Mayor C. Zehr questioned if there will be a substantial drop in natural gas rates when they are re-assessed in April 2010 given the decline in oil and gas prices. Mr. Chapman noted that rates are sometimes lower or higher than the other two cities due to the City's policy of providing stabilized rates through advantageous gas purchasing practices, but which leaves the City's rates less flexible. He acknowledged that the gas purchase price is falling which will lower the cost of inventory; however, he pointed out that a deficit is being incurred as a result of the current rates and a substantial drop in rates may not be feasible in order to return to a surplus position. He stated that it is too early to commit to a decline in rates and an indication as to what might occur with rates will not be known until interim statements are available. Mr. Chapman advised that the budget guideline as set by Council was 1.79% for general property tax and 1.2% to fund the Economic Development Investment Fund (EDIF). He noted that the proposed tax levy is currently at 1.83% before EDIF and 3% with EDIF included. A chart showing the number of full time employees (FTE's) was provided and Mr. Chapman advised that 3 FTE's are being added to meet regulatory changes, being: a Quality Management System Specialist (QMS); Utilities Engineer; and QMS/Engineering Support position. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 20 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) Councillor G. Lorentz asked if an FTE comparison to similar sized municipalities was available. Mr. Chapman advised that he was not aware of any available benchmarks but would investigate further. Mr. Chapman then reviewed the 10 year tax rate impact projections, commenting that the City will still be faced with budget challenges in 2011 and over the next several years. Councillor J. Gazzola questioned that given the proposed SWM Utility and Rate implementation is likely to be approved, if that will result in no tax increase in 2011 and what impact it will have over the 10 year forecast. Mr. Chapman advised that a one time transfer of existing SWM funds will occur in 2011 if the decision is made to move from a tax based system to the proposed user system, the impact of which is dependent on the decisions to be made in May 2010 in respect to a phased-in approach or full implementation. BOARDS Centre In The Square Mr. Chapman reviewed the 2010 budget for the Centre in the Square, noting a 2.75% base budget reduction. The following motion was Carried Unanimously. On motion by Councillor G. Lorentz - it was resolved: "That the 2010 appropriation for the Centre in the Square be approved at $1,336,000." Kitchener Public Librarv (KPL Mr. Chapman reviewed the 2010 budget for the Kitchener Public Library Board, noting a 2.75% base budget reduction and inclusion of funding for the second phase of the Library's Radio Frequency Identification project. The following motion was Carried Unanimously. On motion by Councillor J. Gazzola - it was resolved: "That the 2010 appropriation for the Kitchener Public Library be approved at $8,674,000." Councillor J. Gazzola commented that the Boards had achieved a budget increase of less than the inflation rate. Councillor K. Galloway commented that notwithstanding, it was important to note that substantial cuts in resources and staffing had to be made, resulting in reductions in service levels, in order for the Boards to meet the budget call. 2010 CAPITAL BUDGET AND 10 YEAR CAPITAL FORECAST 2010-2019 Mr. D. Chapman advised that the Capital Pool is fully committed in 2010 and full details of the program were presented at the November 23, 2009 capital budget meeting. He noted that the transfer from the Gas Capital Investment Reserve to the tax supported operating budget includes the proposed increase of $750,000. as recommended by the Committee on December 7, 2009. He commented that the impact of the increase will substantially deplete this account in 2010 and while a risk, staff believes there is enough funding capacity in the reserve to manage the risk. Mayor Zehr questioned why the projected transfer in 2011 is higher. Mr. Chapman advised that this relates to historic factors used in attempting to standardize across the forecast and is similar to the Hydro Capital Investment Reserve Fund. Mayor Zehr requested clarification of the impact to both reserves as a result of an impending financial study. Mr. Chapman advised FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 21 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D that a long term financial planning study is to be undertaken and as part of that, a review of reserve targets will be a high priority. In addition, the study will review the method of calculating the transfer from the Gas Utility to the tax supported operating budget. Mr. Chapman noted that changes in legislation related to installation of auto meter reading units may also impact these reserves as such installation will require significant capital outlay. Councillor Gazzola suggested that more could be transferred to reduce the capital out of current. Mr. Chapman advised that only to the extent of the impact a permanent reduction would have to the base budget. He suggested that there is no more capacity and the risk is too great to do more in 2010. Councillor Gazzola commented the transfer from the Gas Works Utility at $3M is the lowest in the schedule and questioned the accuracy of the figure, suggesting it is likely that more dollars are coming that could be transferred through. Mr. Chapman advised that he did not anticipate substantial upset but could not fully comment until the 2009 budget is reconciled. Councillor B. Vrbanovic requested clarification of the chart for 2010 debenture issue. Mr. Chapman advised that $8.9M for the KPL expansion is related to EDIF and the remainder of debentures issued for capital projects is on an annualized basis in accordance with capital policy. Mr. Chapman advised that 5 year projections for the Hydro Capital Investment Reserve Fund includes an increase in the transfer to operating by $250,000., for a total transfer of $1 M in 2010 and beyond, as recommended by the Committee on December 7, 2009. Mr. Chapman advised that the impact shows depletion of this reserve in 2011. Councillor Gazzola commented that the hydro dividend is tied to the interest rate on the long term debt, asking if it is a fixed rate and what the rate is at this time. Mr. Chapman advised that it is a fixed rate, currently at 6%. Councillor Gazzola suggested that the City as a majority shareholder could make change in this instance. Mr. Chapman advised that the Ontario Energy Board sets the rate per capita leaving limited ability for the City to make change. He advised that he would inquire further with Hydro in respect to 2010 figures but suggested that the $1.7M projected dividend in the forecast is not likely to change. Mayor Zehr added that he had lobbied the Board to increase the dividend in 2010; however, their decision is being impacted by issues related to installation of smart meters which as noted prior requires significant capital outlay. In regard to the EDIF projection, Mr. Chapman advised that the parking subsidy for Wilfrid Laurier University (WLU) has now been revised to reflect actual costs. Councillor Gazzola requested clarification of the arrangements made with WLU for parking, questioning if it was really to be in perpetuity. Ms. C. Ladd advised that the agreement with WLU had no end date nor did it clearly state it was to be in perpetuity. She added that staff has been in discussions with WLU in regard to this issue and hope through negotiation to transition the City out of providing the parking subsidy. Mr. Chapman reviewed Development Charge (DC) projections, noting that engineering projects have been generally scheduled in accordance with the DC background study. He noted a significant deficit is projected in 2010 due to economic downturn and an aggressive capital program. It was noted that cash flow adjustments have been made as recommended by the Committee on November 23, 2009 and Budget Issue Paper #51 has been provided for consideration this date which proposes additional DC project deferrals. Councillor Gazzola requested clarification of the DC projections which show a deficit across the forecast. Mr. Chapman advised that the timing for recovery of the deficit for soft services is within 10 years; whereas, hard services will not be fully recovered until 2032. He added that DC rates can be adjusted in the next 5 year review and the current project schedule is managed each year to avoid a deficit. Mr. Chapman advised that in respect to non-engineering DC's, a deficit was incurred in 2007 as a result of construction of Fire Station No.7 and the Activa Sportsplex; however, full recovery is anticipated within the term of the existing DC by-law. He noted that no parking FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 22 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D revenues or costs for the Charles/Benton parking garage have been included in the forecast pending resolution of an Ontario Municipal Board hearing. In addition, revenue associated with Phase 2 of the Williamsburg Cemetery is not included pending an amendment to the Cemeteries By-law to come forward in 2010. DTS-10-015 -VICTORIA PARK LAKE -IMPLEMENTATION OF CLASS EA STUDY DTS-10-016 -STORM WATER UTILITY AND RATE IMPLEMENTATION DTS-10-023 -VICTORIA PARK LAKE EA AND STORM WATER RATE IMPLEMENTATION FOLLOW-U P The Committee then considered the above noted reports, together with Budget Issue Paper #44, dealing with implementation of the Victoria Park Lake Environmental Assessment (EA) Study recommendations and proposed establishment of a Storm Water Utility and Rate program. Mr. G. Murphy advised that staff was asked to respond to the following questions conveyed to the Committee by the Victoria Park Working Group on January 11, 2009: • What other projects can be re-prioritized, freeing up existing tax funds, in order to complete the construction of the Victoria Park Lake projects? • Can staff resources be made available in 2010 to begin detailed engineering design work related to the Victoria Park Lake dredging and forebay construction? • What other funding applications can be accessed to expedite the Victoria Park Lake projects? • What rationale does staff provide for recommending the "tiered flat fee" method be implemented instead of the "tiered single family unit rate" method as the preferred rate stormwater rate structure? Mr. Murphy advised that there are no projects from an engineering risk perspective that can be prioritized lower than Victoria Park Lake dredging. All projects in the 2010 and 2011 capital program represent the most urgent infrastructure work in the 10 year forecast and are the "worst of the worst". Accordingly, staff is not recommending that design work for Victoria Park Lake begin until early 2011. Mr. Murphy noted that a delegate had put forward alternate funding sources on January 11, which included: the Federation of Canadian Municipalities Green Municipal Fund; the City's Community Environmental Improvement Grant Program; Park Trust Fund; Heritage Program funding; Local Environmental Action Fund (LEAF); and EDIF. Mr. Murphy advised that all were reviewed and the results are as outlined in report DTS-10-023; adding that it was generally found that the Victoria Park Lake project either did not meet program criteria or the funds to be accrued were insufficient for the magnitude of the project. Mr. Murphy advised that the rationale for recommending the SWM-FTR was discussed earlier but reiterated that this approach allows the City to move forward with implementation expeditiously and will result in securing of funding for a multitude of City-wide priorities, which would include the Victoria Park Lake project. He stated that the study determined that the City has fallen short on many of its storm water management practices and implementation of a storm water fee will allow improvements in service levels to meet Federal and Provincial legislated requirements. Mr. Murphy added that the Victoria Park lake project is a tangible example of this need and puts into perspective future challenges that the City will be faced with in order to deliver a sustainable service level for storm water management. Mr. Murphy advised that based on direction today, staff is ready to begin work on the SWM Utility program in tandem with the City of Waterloo to ensure a consistent approach and will enter into consultation with all interested stakeholders prior to reporting in May 2010 on a ten year operating and capital forecast, and a rate implementation phase-in schedule. Mayor C. Zehr requested clarification as to when the physical work would begin. He noted that staff have indicated that even if design work for the Victoria Park Lake project began in the fall of 2010, dredging of the lake must occur in the winter months. The design work would not be completed in time to proceed with the physical work in the winter of 2011 but rather would commence in the early winter months of 2012 and Mr. Murphy concurred with these remarks. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 23 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D Councillor Gazzola questioned as to the reasons it is not possible to proceed with design in 2010. Mr. Murphy advised that staff is already committed to a number of high priority infrastructure projects including those subject to Federal / Provincial stimulus funding timelines. He stated that it is not practical or possible to commence the work now; adding that, as the existing work program progresses, should there be opportunity to start the design work it would not be until late 2010 and given the design process will take 6 to 8 months to complete, bringing it into April 2011, staff question the need to start now when the project would not be able to proceed from a construction standpoint. Mr. Murphy recommended that staff be allowed to take appropriate time to complete the design work and commence the physical work in 2011. Councillor Gazzola inquired as to the feasibility of paying for the design work with stimulus funding. Mr. Murphy referred to the Federal Community Adjustment Fund (CAF) application to be considered at a special Council meeting this date, commenting that Council could decide not to include renovations for 48 Ontario Street (Legion Building) in the application and replace it with the Victoria Park Lake project; however, it is not certain if the design work would be eligible under this program and does not resolve impact to existing capital projects to which staff resources are already committed. Councillor Gazzola questioned if approved under the stimulus program, if a consultant could be hired to do the work. Mr. Murphy stated that if funding is received under the program staff would have to evaluate how to deliver on the project at that time. Councillor C. Weylie questioned the feasibility of proceeding with construction of the forebay in 2011 to eliminate further silt infiltration. Mr. Murphy reiterated that construction would not start until late 2011 and into the spring 2012 and it is intended to tender the dredging and forebay work together to take advantage of potential cost savings in a single contract. He added that the amount of sediment annually is minimal relative to build-up over the past 15 years. Mayor Zehr asked for clarification as to the feasibility of having the design work proceed with hiring of a consultant should funding be received under CAF. Mr. Murphy advised that if funding is received the earliest the work could begin would be in September-October 2010 and would take 6 to 8 months to complete. He added that even with a consultant, there would still be impact to Engineering staff in overseeing the project and would still require a review of the existing work program to determine if an earlier start is viable. Councillor B. Vrbanovic questioned that given the overall workload in Engineering to deal with the Accelerated Infrastructure program and stimulus funding projects, if it was fair to say the Division is operating at over capacity and any additions into the upcoming construction season could jeopardize the stimulus funding projects. Mr. Murphy confirmed this to be the case. Councillor Vrbanovic questioned if CAF funding was received and a consultant hired, if staff would be in a position to manage the design work carefully so as to minimize any risk and Mr. Murphy suggested it may be possible. Councillor Vrbanovic questioned what was intended by long term transitioning from the recommended SWM-TFR to a SWM-SFU. Mr. Murphy stated that this would be a point of discussion in May 2010, with options outlined in the report to come forward at that time. He added, however, that he did not anticipate a shift in models for at least a 5 year period as it will take time to transition from the current tax base system to a rate system. Councillor Gazzola requested clarification as to what is to be considered in May 2010. Mr. Murphy advised that more details on implementation of the rate methodology will be provided, including a 10 year operating and capital forecast, rate schedule and associated policies and by-laws. Councillor Gazzola suggested that the Committee only need to agree in principle this date in regard to a new way of funding storm water management and the details could be worked out in May as to which model is to be approved. He further suggested that the Victoria Park Lake project should be separate, with a decision concerning that today centering on whether or not to apply for funding to start the design work under CAF. Mr. Murphy responded that direction is needed in order to move forward with development of a rate structure for the SWM Utility, which will have impact to the Victoria Park Lake project. He suggested that given details of the rate methodology have already been provided, direction is needed now on what FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 24 - CITY OF KITCHENER FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D is appropriate at this time and discussion centering on transitioning to a more sophisticated model could take place in May. Councillor Vrbanovic referred to the staff recommendations in report DTS-10-016, questioning the feasibility of approving paragraphs 1, 2 and 4, and amending paragraph 3 to request a report between now and May on what the proposed transitioning between the two models would look like. Mr. Murphy responded that this would be challenging as with every report requested there is impact on staff's ability to deliver a final report in May and reiterated that the SWM-TFR is the best approach at this time from staff's perspective. Councillor Vrbanovic questioned that if the Committee is not comfortable if it would be better to have an intermediary report and Mr. Murphy advised that this would be a decision of the Committee. Councillor Gazzola questioned the possibility of staff requesting more than $9.9M for the storm water management program when they report back in May. Mr. Murphy advised that this is the reason behind his point of giving direction this date so that staff has a target to work toward in bringing back a rate schedule that will satisfy the defined level of funding. A motion by Mayor C. Zehr was brought forward to amend paragraph 3 of the staff recommendation to provide that the SWM-TFR be adopted as the initial rate model for implementation and that staff continue to update Council on the various rate methodology options prior to May 31, 2010; and to add two additional paragraphs to provide that the Victoria Park Lake and associated upstream works be considered as a priority for funding from the storm water management utility and that staff initiate a consultation process with currently tax exempt properties related to a storm water management utility. Mayor Zehr commented that it is important to make clear that the Victoria Park Lake project is a high priority and at the same time, ensure that it is understood the SWM Utility is intended to increase service levels City-wide, not just for Victoria Park Lake. He also noted that it is important to make clear for the Victoria Park Working Group and Neighbourhood Association that even if design work begins in 2010 the actual physical work will not commence until 2011. He expressed the opinion that the 2010 target is unrealistic and given the complexity of this project it should not be rushed. He suggested that the added paragraph to the motion concerning Victoria Park should provide assurance that this remains a high priority project for the City. Mayor Zehr advised that while this Council has no control over a future Council's decisions, amending the capital forecast to include this project when further considered in May 2010 would indicate to a future Council a very strong commitment to this project. He suggested that this, together with continued participation of interested stakeholders would make it very difficult for a future Council to change direction. Mayor Zehr stated that the amendment to paragraph 3 is in recognition of the concerns raised regarding the SWM-TFR and suggested that while the recommended model may not be the fairest approach it is impossible to establish aSWM-SFU and have it in place for 2011. He pointed out that if a system is not in place in early 2011 there will be no funding source available to commence work on Victoria Park Lake. Mayor Zehr added that it is uncertain if the design work will qualify under CAF and if funding is approved, the work will still be dependent on the existing workload and ability to start the work later in 2010, and stressed that projects subject to stimulus funding cannot be jeopardized. The Committee recessed at 11:30 a.m. to allow the motion to be provided in written format and then reconvened at 11:46 a.m. with all members present. Mayor C. Zehr circulated his motion regarding the Storm Water Utility proposal. Councillor B. Vrbanovic suggested, and it was accepted by Mayor Zehr, that paragraph 5 of the motion be changed so that the Victoria Park Lake project is the 1St priority. He also requested clarification regarding the fee model being proposed. Mayor Zehr advised that he is putting forward that staff report in May 2010 on implementing aSWM-TFR model and then phase-in of the SWM-SFU rate model. Councillor G. Lorentz suggested that staff need to provide information on the user rate model sooner to allow property owners the opportunity to make changes to reduce their impact on the SWM system, therefore reducing their costs. He also suggested that it is very important FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 25 - CITY OF KITCHENER FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) that a communication and education plan be developed to inform property owners of this important change. Mr. Murphy advised that having a user fee developed for January 1, 2011 may not be feasible due to the significant work involved, which is the reason that a phased in approach is being recommended. He added that information on transitioning to a user rate can be made available over the next few weeks. Councillor J. Gazzola suggested that the main question to be answered is whether or not the City adopts establishment of a Storm Water Management Utility program at the service level proposed. In regard to the motion, he advised that he could support the majority of it, however, he could not support the proposed tiered flat rate fee as it does not take into account current measures undertaken by property owners to mitigate their impact on the SWM system. He requested that each clause of the motion be dealt with separately and each by a recorded vote. Councillor B. Vrbanovic advised that there is an issue regarding the recommended models and suggested that clause 4 should include all fee and phasing in options. He further suggested that staff report on the outcome should direction be given to move directly to the user rate model. Councillor J. Smola advised that phasing from one fee model to another is too confusing and suggested that one model be selected and the program start with that model without any phasing in. Mayor Zehr suggested more information on the impact of the various fee models is required and he could only support the user rate model as long as it does not further delay funding for the Victoria Park Lake project. Mr. Murphy advised that information on the impact of the various models is contained in the feasibility study which could be summarized and reported on within the next few weeks. Mayor Zehr amended clause 3 of his motion to read: "That staff present a report to the February 8, 2010 Development and Technical Services Committee, on the various rate models and their impact under the proposed Strom Water Utility program.". Mayor Zehr also accepted an amendment to clause 4 to provide that the phrase "options for" be inserted prior to "a storm water rate" and by deleting the word "a" before "phased-in rate". The motion, as amended, was then voted on clause by clause, by recorded votes, with clauses 1, 2, 4, 5 and 6 Carried Unanimously and clause 3 Carried, with Mayor C. Zehr and Councillors G. Lorentz, J. Smola, B. Vrbanovic, K. Galloway and C. Weylie voting in favour and Councillor J. Gazzola voting in opposition. On motion by Mayor C. Zehr - it was resolved: "That a sustainable level of service of $9.9M (2007 dollars) for Storm Water Management be annually funded as outlined in Department and Technical Services Department report DTS-09-042; and, That the principle of shifting the storm water program from a property tax supported program to a user rate funded program be approved; and, That staff report to the February 8, 2010 Development and Technical Services Committee on the various rate models and their impact under the proposed Storm Water Utility program; and, That a ten (10) year capital and operating forecast, options for a storm water rate schedule and phased-in rate implementation schedule, be presented to Council for consideration on or before May 31, 2010; and, FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 26 - CITY OF KITCHENER FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) That the Victoria Park Lake and associated upstream works be considered as a first priority for new funding from the Storm Water Management Utility as noted above; and further, That staff initiate a consultation process with currently tax exempt properties related to a Storm Water Management Utility." On motion by Councillor G. Lorentz - it was resolved: "That staff prepare a public communication and education program regarding the proposed Storm Water Utilities Program." Councillor B. Vrbanovic then advised that there were questions raised earlier regarding the "Confidential Items" listed on the Base Budget Reductions List included in the budget package and asked if it was the Committee's wish to move into in-camera session to further discuss this matter. Councillor J. Gazzola raised concerns that this particular matter has been discussed previously in-camera and suggested that it should now be dealt with in public session. Ms. C. Ladd advised that the matter deals with identifiable persons and labour relations, and therefore, in her opinion discussion would be appropriate in-camera. On motion by Councillor J. Smola - it was resolved: "That an in-camera meeting of the Finance and Corporate Services Committee be held at 1:00 p.m. this date to consider a personal and labour relations matter." The Committee then recessed at 12:24 p.m. for a special Council meeting, as noted on the Committee's agenda, and reconvened at 1:21 p.m., with all members present. Issue Paper #28 - Caaital Close-outs and Caaital Account Balances Listin This issue paper provides a detailed breakdown of $13M in capital close-outs and a listing of capital account balances as of December 10, 2009. Councillor Gazzola requested clarification of the close-out valued at $62,056. related to a barrier free elevator. Ms. C. Fletcher advised that this relates to the Duke /Ontario Parking garage, wherein it was determined that the number of elevators required could be reduced by one. Councillor Gazzola requested clarification of the close-out valued at $55,000. related to the Hwy. 401 Pedestrian Bridge. Mr. G. Murphy advised that some of the close-outs relate to projects completed in late 2008 that had residual funds which were not captured back into the capital pool in 2008 because of timing and which have now been returned. Councillor Gazzola suggested that too much is being retained in capital project accounts. Councillor Vrbanovic pointed out that Council has directed that staff undertake to determine more accurate estimates while at the same time safeguard against any shortfall in funding. Councillor Gazzola suggested that when larger amounts are set aside it becomes too easy to use the funds for wants versus needs, noting that $13M in close-outs was found indicating more is in the capital budget than is required. Mr. D. Chapman pointed out that typically any residual funds are returned to the capital pool; however, in 2010 a portion of the residual funds is being applied to the 2010 operating budget to effect a tax savings. He noted that a conscious decision was made in 2009 to close-out $4M related to the Engineering Uncommitted Account and if not for this one time close-out, the total close-out amount would be significantly less. Issue Paper #29 -Enhancements to Tax /Utility System (CIS) This issue paper provides further explanation of capital costs associated with improvements to the City's CIS system which provides an integrated data base of customer, utility, tax and FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 27 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D property assessment information. Councillor Gazzola requested clarification of costs noted in the report as being 90% staffing and 10% equipment /miscellaneous. Mr. M. Grummett advised that 13 FTE's are dedicated to this program and have specialized knowledge /expertise in this field. Councillor B. Vrbanovic noted that the cost of administering the system is approximately 0.33% of the revenue generated on an annual basis and questioned how this compares to other cities and/or the private sector. Mr. Chapman advised that a full review of the CIS system is currently underway, which will look at cities and other systems, and suggested that any action in respect to this matter await results of the study. Issue Paper #30 -Fire Fleet Information is provided concerning the Fire fleet capital projections and capital costs for Fire vehicles. Mayor Zehr referred to the statement in the staff report which reads "the balance forecasted in this fund is conservative over the next 10 years", questioning whether that means the balance is on the high or low end. Fire Chief Beckett advised that staff have reviewed the forecast and made assumptions that have moved the balances toward a lower end estimate; adding that in past years large surpluses have been seen that would suggest the budget is more liberal than necessary. He added that staff will continue to monitor this forecast to ensure more accurate estimates. Councillor Vrbanovic questioned the exchange rate being used for the American dollar, suggesting there may be capacity to make further adjustments. Mr. D. Chapman agreed to investigate and provide an answer prior to adjourning the meeting. Councillor J. Gazzola requested clarification as to why this is not on the list of reserve funds. Mr. Chapman advised that this has been historically dealt with through the capital budget and while it is intended to be a reserve it has never been formally established as a reserve. He suggested that the question of formally establishing it as reserve could be dealt with in 2011. Issue Paper #31 -Street Lighting Capital and Alternative Street Lights Information is provided in respect to group lamp replacement and alternate lighting technologies. Mayor Zehr inquired as to the payback on LED lights at this time compared to existing standard lighting. Mr. J. McBride advised that LED lights are three times the cost of standard lighting with a payback of greater than 5 years which is not considered reasonable at this time. He added that prices for LED lighting has begun to drop and staff will continue to monitor product pricing. Issue Paper #32 - E ui ment Reserve Fund This issue papers provides analysis of the Equipment Reserve, including funding sources and explanation of additions and upgrades of Fleet equipment. Councillor K. Galloway questioned the impact of not proceeding with the contributions from gas over 2010 to 2014. Mr. D. Chapman advised that this would have substantial impact on City operations and ability to maintain service levels. He added that the reserve balance in this fund is already well below the required funding level and with overall reserves under- funded, reductions in this reserve will further increase the gap. Mayor Zehr questioned if the purchase of the out front tri-deck mower will allow staff to maintain the level of service desired for grass cutting. Mr. J. Witmer advised that the additional mower will help staff come closer to the timeframe preferred; however, achieving the desired standard still remains an issue of staff resources as identified earlier. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 28 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) Councillor Gazzola requested clarification of $3M under expenses related to `equipment approved in prior year'. Mr. Chapman advised that this relates to equipment approvals in 2009 that have not yet been purchased. Councillor Gazzola inquired if this could be moved to 2011 and Mr. Chapman advised that the equipment has already been tendered and awarding of some of the contracts is pending this date. Issue Paper #33 -Impact of Reduction to Specific Facilities Management Capital Budget Lines An analysis and impact of reducing the capital budget by $50,000. per year for Facilities Management is provided. Mayor Zehr inquired as to any risks involved in respect to replacement items such as roof replacements. Ms. Fletcher advised that she could not say if any would be in jeopardy at this time; however, she noted that over the 10 year forecast the result of the reduction has significant impact to staff's ability to maintain the City's targeted replacement cycles for major building components and related program updates. She added that Community Services is also impacted in that their ability to respond to needs of other City departments is limited; and as well, there is risk in project over-runs that may then require additional funding. Councillor J. Gazzola suggested that the amount for Outdoor Fountains as adjusted in the forecast from $319,000. to $269,000. still seems high and Ms. Fletcher agreed to investigate further in respect to this line item. On motion by Councillor G. Lorentz - it was resolved: "That a reduction of $50,000. per year from 2010 to 2019, for a total of $500,000., be approved to the overall Facilities Management capital budget." Issue Paper #34 -Automated External Defibrillator (AED) Units for City Facilities Information is provided in respect to the supply and maintenance of AED units in City facilities Councillor Gazzola inquired if the Heart and Stroke Foundation will provide funding for units in 2010. Ms. D. Keelan advised that announcements concerning the Foundation's grant program will be made in March 2010 and was confident funding will be provided. Issue Paper #35 -Victoria Park Funding It is proposed that $600,000. of capital improvements to Victoria Park related to lake edge improvements be deferred to align with the timing of the Victoria Park Lake rehabilitation project. Mr. J. Witmer advised that this is a separate budget for other capital improvements to Victoria Park but is tied to the lake rehabilitation project. As such, it is proposed to defer works under this budget to the timing of the lake rehabilitation project to optimize construction costs and minimize disruption to the park. Issue Paper #36 -Parks Buildings General Provision $26,000. annually is allocated to Parks Buildings General Provision account to address site maintenance at the Chandler Operations Centre, which is not currently part of Facilities Management's responsibility for the main building. These funds are proposed to be transferred to Facilities Management's General Provision account once the Chandler operation moves to the Consolidated Maintenance Facility (CMF). Councillor J. Gazzola suggested that these funds could be removed as they should not be required once the Chandler operation is closed. Ms. P. Houston advised that in respect to the CMF, Facilities Management currently has provision only for the main building and does not include site maintenance such as lot resurfacing, fencing or major repairs to outbuildings. She advised that these funds will be required for that purpose and should continue to be included. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 29 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D A motion by Councillor J. Gazzola to provide that the Parks Buildings General Provision account be removed from Community Services -Operations 2010 capital budget to effect an annual savings of $26,000. was voted on and LOST. Issue Paper #37 -Implications of Increasing Funding Related to Parks Master Plan Additional information is provided in respect to increasing parks funding to the Parks Master Plan level for the 2010 budget year, to a total increase of $691,000., in three priority areas including: Community Trail Development ($218,000.), General Park Development ($248,000.) and Park Rehabilitation ($225,000.). The funding is proposed to be derived from transfer of funds from the following sources: Environmental Remediation General Provision ($400,000.), Traffic Calming ($130,000.) and Road Resurfacing ($161,000.). The new funding will increase the City's investments in parks, trails, naturalized areas and sportsfields to $37M over the next 10 years. Councillor K. Galloway inquired as to when a plan for funding beyond 2010 will come forward. Ms. P. Houston advised that in the spring 2010 the Parks Master Plan will come forward for approval in principle and will look at a 2011 forecast to determine how parks will be funded in that year. Councillor J. Gazzola raised concerns that not enough research has been done as to how this will be funded and sustained in future years. He had concerns with removing dollars from road resurfacing and in particular, traffic calming, suggesting that more investigation of other funding sources needs to be investigated. Councillor G. Lorentz agreed that these are two categories that should remain untouched and more time be taken to see what other opportunities there may be for funding the deficit in parks. Mayor C. Zehr commented that firstly a decision needs to be made as to a commitment to increase funding levels for parks, noting that the City is years behind an acceptable level of funding that will take substantial time to recoup; and if committed, then secondly, a decision is needed on how the increased level is to be funded. Councillor B. Vrbanovic agreed with the concerns regarding traffic calming and road resurfacing, questioning what staff might recommend in terms of other funding sources. Mr. D. Chapman advised that direction to staff was to find sustainable funding. He expressed the opinion based on staff's review that there really is no good option and what has been put forward is the best of what is available. He suggested that if the Committee is not comfortable with all of the proposed funding sources that at least the Environmental Remediation funding source be approved and direction given to staff to report back on how to increase funding levels beyond that for parks. Councillor Vrbanovic questioned the feasibility of transferring funds from the Equipment Reserve to fund the difference. Mr. Chapman strongly cautioned against further depletion of the City's reserves, reiterating that on a per capita, per household basis Kitchener is well below the median and should not deplete its reserves any further to accommodate increased funding for parks. Councillor Gazzola acknowledged staff's viewpoint; however, advised that he was of the opinion that there is room in the Equipment Reserve to help in the short term to move forward with this matter. Mayor Zehr suggested that the $291,000. be included as an amount to come out of other capital source funding, failing which the Equipment Reserve could be looked at as a last alternative; and that staff provide a report in the near future to outline options for funding this additional amount. A motion by Councillor K. Galloway was brought forward for consideration to approve increased capital funding for parks and trails to the Parks Master Plan level for the 2010 budget year, to be funded in part by $400,000. from the Environmental Remediation General Provision account and the remainder to be determined by staff; and that staff report in the spring of 2010 to the Finance and Corporate Services Committee meeting with options to implement increased levels of funding for parks and trails over the course of 10 years. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 30 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) Mayor Zehr requested, and it was accepted, that the motion be amended to include the $291,000. as an amount to be funded from other capital funding sources, and a staff report to come forward include options as to how this additional amount will be funded. The following motion was voted on in two separate parts, with both clauses Carried, Unanimously. On motion by Councillor K. Galloway - it was resolved: "That capital funding be increased for Parks and Trails to the Parks Master Plan level for the 2010 budget year (an increase of $691,000.), to be derived from a transfer of $400,000. from the Environmental Remediation General Provision capital account to parks and from $291,000. other capital source funding to be determined; and further, That staff report to the Finance and Corporate Services Committee in the spring of 2010 with options to fund the $291,000. other capital source funding in 2010 and with an implementation plan for increased levels of funding for Parks and Trails over the course of 10 years as recommended in the Parks Master Plan." Issue Paper #38 - Williamsbura Phase II Develoament Information is provided concerning funding in the 2010 Capital Forecast to proceed with completion of zoning, geotechnical /hydrological surveys and overall site design /engineering for Phase II of the Williamsburg Cemetery development. Issue Paper #39 -Automated Meter Reading (AMR) Information is provided in respect to available AMR technologies; company suppliers of AMR; current AMR deployment; and plans for a pilot program in 2010. Councillor J. Gazzola commented that he would like to see collaboration with the two cities in the Region in regard to the pilot program. Mr. W. Malcolm agreed to pursue interest of the Cities of Waterloo and Cambridge in participating but cautioned that the cost of installation will not change regardless of who participates. On motion by Councillor G. Lorentz - it was resolved: "That Kitchener Utilities staff be directed to commence an automated water meter reading (AMR) pilot program in 2010 utilizing Kitchener-Wilmot Hydro's current Advanced Metering Infrastructure (AMI) network; and further, That Kitchener Utilities staff report to a future Finance and Corporate Services Committee meeting on the feasibility and operation of AMR technology for water and gas meters on completion of the pilot program." Issue Paper #40 -Centre in the Sauare (CITSI Capital Expenditures Histor For information, a listing of capital expenditures for the Centre in the Square and Kitchener's contributions, is provided from 1998 to 2008. Issue Paper #51 -Potential Develoament Charae (DCl Project Deferrals A review of proposed timing of Engineering DC funded projects against cash flow projections within the DC Reserve Fund was undertaken and changes in timing for various capital projects within the 10 year forecast is proposed. Mayor Zehr questioned if any of the proposed deferrals impact development in areas currently subject to Ontario Municipal Board hearings and Mr. Murphy advised that was not the case. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 31 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) Councillor K. Galloway questioned how firm 2011 is for the start of the Huron Road project, noting that it is in need of improvements. Mr. Murphy gave assurances that staff is serious as to the 2011 start date. On motion by Councillor J. Gazzola - it was resolved: "That Development Charge (DC) project deferrals, as outlined in Budget Issue Paper #51 attached to Financial Services Department report FIN-10-009, be approved to effect a reduction in the projected deficit in the DC Reserve Fund in 2010 by approximately $6.6M, resulting in a projected deficit for the overall DC Reserve Fund of $1.1 M." ENTERPRISE OPERATING BUDGETS Golf Courses -Doon Vallev and Rockwa Mr. Chapman reviewed the projection for Doon Valley Golf Course and advised that since the December 7, 2009 Budget meeting, lower interest costs in operations are forecasted over the next five years. This is primarily due to debenture financing secured late in 2009 with a favourable interest rate that has reduced the carrying cost over the five year balance of the projection. In addition, administrative expenses have been reduced based on refined projections and with these revisions the Doon Valley Golf Course is forecasted to return to a surplus by 2013; which is earlier than what was originally estimated in the Expansion Business Case. Mr. Chapman advised that Rockway Golf Course was more significantly impacted by economic factors compared to Doon, which is reflected in its projections. He stated that course operations revenue is down due to poor weather as well as economic factors. He stated that full junior memberships have decreased by $35,000. and tournaments are down by $40,000.; but similar to Doon, Rockway is projected to return to a surplus by 2013. Councillor Gazzola questioned why the administrative costs are lower for Doon compared to Rockway, and was advised that with the expansion there are more areas for efficiencies and an ability to spread the operating costs over a larger revenue base. Mr. Chapman clarified that the projection presented for Doon this date was different from the one included with the agenda and agreed to circulate the revised projections electronically to all members. On motion by Councillor G. Lorentz - it was resolved: "That the 2010 operating budgets for the Doon Valley and Rockway Golf Course Enterprises be approved, as outlined in Financial Services Department report FIN-10- 009." Building Proiection Mr. Chapman advised that at the time of preparing the staff report, building permit revenue was forecasted to be approximately 98% of budget; however, there was some significant uptake in permit activity in December as developers tried to avoid the increase in the non- residential rate. He stated that this increased activity should result in a positive variance of approximately 15% over budget for revenue in 2009. Interest revenue is expected to be down, which is primarily a result of lower investment yields. Further, direct costs are also anticipated to be lower due to deficit mitigation as a number of staff positions were not filled in 2009 when they became vacant. He outlined that for 2010, the budget for the Building Enterprise is expected to increase as construction activity is expected to pick up and building permit fees will be increasing by 5.2%. Overall, there should be sufficient capacity within the Building Enterprise Reserve to weather the impact of the economic downturn. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 32 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D In response to questions, Mr. M. Selling advised that there are presently no legislated guidelines governing what a municipality does with its Building Enterprise Reserve balance. He stated that some large municipalities with populations over 100,000 implemented changes to their reserves prior to the downturn in the economy; and therefore, had the advantage of higher fees and balances. He added that staff anticipates bringing forward a report in the near future on an appropriate reserve fund balance. He noted that as part of a review conducted by staff, three economic downturns have occurred over the last 28 years which have traditionally lasted three to four years. This recent downturn did not have an impact until September 2008; however, up until March 2009 there was a significant decrease in building permit activity. He reiterated that the permit activity witnessed in November /December 2009 can be attributed to the Development Charges fee increase, which came into effect on January 1, 2010. On motion by Councillor K. Galloway - it was resolved: "That the 2010 operating budget for the Building Enterprise be approved, as outlined in Financial Services Department report FIN-10-009." Gas Works Utilit Mr. Chapman advised that current projections anticipate that gas delivery will exceed the 2009 budget, while projections for gas supply and other programs will be basically on target. Supply operation is currently in a deficit position, but this is projected to be eliminated by the end of 2010. He reminded the Committee that supply is to be revenue neutral over a period of time, adding that delivery and supply inventory calculations have yet to be finalized for 2009. Councillor J. Gazzola questioned the accuracy of the 2010 figures, suggesting they are too conservative. Referencing Budget Issue Paper #50, Mr. Chapman advised that various factors have contributed to the variance in 2009, stating that excluding the credit from Union Gas, the gross profit percentage is lowered to 49.91 % as compared to the 2009 budgeted gross profit of 46.78%. In addition, the delivery rate is set by the City based on the transportation rate established by the National Energy Board for the TransCanada Pipeline which increased in 2009. He noted that it is uncertain as to what the transportation rate may be in 2010, which will directly impact the City's rate. He commented that there is significant volatility in delivery operations and just as there is the potential for a positive variance in 2009, over the past ten years gross margins have been as low as 37%. Given this uncertainty, the forecast has been based on the best information available to date. He added that a policy is in place regarding the retained earnings within the Gas Utility, which stipulates that a surplus is to be retained to address any variances that may occur during the year. In order to maintain a surplus, there is no capacity within the Gas Utility for an additional transfer in 2010. Water Utility /Sanitary Sewer Utility /Water & Sanitary Rates Mr. Chapman advised that the Water Utility is projected to have a favourable variance at the end of 2009, primarily as a result of the capital close-outs. However, water consumption is down for 2009 resulting in lost revenue, but the purchase of treated water from the Region is also down; therefore, the impact on gross profits is negligible. Overall, revenues are projected to increase in 2010, as consumption is anticipated to return to normal levels. He noted that the deficit for the Water Utility was eliminated in 2009. Councillor Gazzola expressed concern with the projected rate increase of 8.5%, commenting that the City's rate does not necessarily have to correspond with the increase in the Regional wholesale rate. He suggested that based on projected revenue, the City could accommodate a rate increase closer to 4% and still maintain the same gross profit. Mr. Chapman advised that the rate increase for water is actually 6.9%, with the 8.5% representing a blend with the sanitary sewer rates. He stated that the rate increase is required to support the Region's rate which is going up 6.9%; and, to support capital costs, which have experienced cost increases over the past several years. He outlined the limited areas available to reduce this water /sewer budget, noting that one possible area could be capital replacements. He noted that only 5.3 kilometres are currently set to be replaced in 2010 and FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 33 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) under the Accelerated Infrastructure Program the City should be targeting a replacement rate of 8.67 kilometres per year. He cautioned that reducing the current rate of replacement would further compound the existing infrastructure backlog. He advised that the impact of reducing the water rate from 6.9% to 4% would equate to removing approximately $900,000. to $1,000,000. from the budget. Mayor C. Zehr stated that as the Water Utility is projected to break even in 2010, the proposed reduction to 4% would need to come from the Sanitary Sewer Utility. He commented that when future sustainability is taken into account it is difficult to justify not passing through the Regional wholesale rate; otherwise, the City would end up subsidizing the Regional rate increase. He noted that if $1 M were to be removed from the sanitary sewer budget it would leave only $200,000. in the sanitary sewer reserve in 2010. Mr. Chapman advised against reducing the rate when operating a deficit in the Sanitary Sewer Utility. He stated that the projected actual gross margin in 2009 for the sanitary sewer is 49% against a budget of 55%. He added that the City has not attained its gross margin for a number of years as infill and infiltration has exceeded budget estimates. He indicated that while the deficit in the Sanitary Sewer Utility is projected to be eliminated in 2010, this is based on a gross margin target of 57%. He commented that these are ambitious gross margin targets, especially given that the prospect of recovering from the deficit in the Sanitary Sewer Utility may not materialize this quickly. Councillor B. Vrbanovic added that the City has taken steps to address its water and sewer infrastructure deficit as well as create a sustainable funding model that complies with current legislation. He noted that additional Federal regulations are anticipated to come forward in the near future, which will require even more of an investment by the City. The following motion was Carried, on a recorded vote, with Mayor C. Zehr and Councillors B. Vrbanovic, K. Galloway, C. Weylie, J. Smola, and G. Lorentz voting in favour and Councillor J. Gazzola voting in opposition. On motion by Mayor C. Zehr - it was resolved: "That, effective March 1, 2010, the water rate be increased to $1.5271 per cubic metre and the sanitary sewer rate be increased to $1.7295 per cubic metre; and, That the minimum charge for water and sanitary sewer be calculated as 1/10 m3 per day; and further, That, effective March 1, 2010, the flat rate sewer charge for residential properties not connected to the municipal water system be based on average annual residential consumption of 250 m3 at the current approved sanitary sewer rate ($1.7295 per cubic metre effective March 1, 2010), billed quarterly." The Committee then recessed at 3:30 p.m. and reconvened at 3:43 p.m. with all members present. 2010 TAX SUPPORTED OPERATING BUDGET Mr. D. Chapman advised that at the beginning of today's meeting the tax levy was at 1.83% before EDIF, and 3% with EDIF included. It was noted that the tax levy with EDIF included now sits at 2.95%. A motion by Councillor J. Gazzola was brought forward to provide that pay structure adjustments be removed in 2010 for all staff positions. Ms. B. Wagner advised that a significant portion of the pay structure adjustments are subject to negotiated labour contracts to which the City is obligated to honour. She added that there are some non-union positions included in the M1 - M4 grades that are not management positions but have specialized skills to warrant higher grading. Ms. Wagner stated that removing the pay adjustment from management positions may create problems in respect to FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 34 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D recruitment and retention, noting that this was to be a 3 year plan to align with market competitive rates. Ms. C. Ladd added that waiving of pay adjustments in 2010 has already been included for some senior management positions and as proposed, the motion would have impact to the planned compression of grades in 2010. Ms. Wagner added that once comprehension is completed there will be inequity among positions in the newly configured job grading system if the pay adjustments are not proceeded with as planned. Mayor Zehr advised that he could not support the motion from the perspective of an employer, noting that this plan was approved and a change in this respect would impact Council's credibility and place any future labour negotiations in jeopardy. He suggested that this issue should not be looked at singularly but rather in the context of the overall good of the plan to the Corporation in the long term. Councillor Gazzola amended his motion to provide that pay structure adjustments be removed in 2010 for all staff positions not subject to negotiated labour contracts. Councillor Gazzola's motion, as amended, was then voted on and LOST, on a recorded vote, with Councillor Gazzola voting in favour, and Mayor C. Zehr and Councillors G. Lorentz, J. Smola, B. Vrbanovic, K. Galloway and C. Weylie voting in opposition. BASE BUDGET REDUCTIONS LIST Mr. D. Chapman advised that the only change in the list from the December 7, 2009 Committee meeting is removal of funds associated with Youth Drop In Programs which the Committee directed to remain in the base budget. Councillor J. Gazzola advised that he did not agree with part of the "Confidential Items" or the proposed closing of the Rockway Senior Centre and questioned how these could be dealt with. Councillor Vrbanovic advised that an issue paper has been provided relative to the Rockway Senior Centre and the matter would be dealt with at the time the issue paper comes forward for consideration. In respect to the "Confidential Items", Councillor Vrbanovic advised that these had been discussed in-camera and it had been suggested that any additions and/or reductions to that list be such that the dollar amount would still remain the same. He suggested that if Councillor Gazzola had a particular position in respect to adding dollars back into the base budget relative to the "Confidential Items" he bring forward a motion. Councillor Gazzola advised that his concerns relate to one of the items which he considers a reduction in service levels. He stated that he had, and still does question, the need to discuss the matter in-camera and noted that he had not taken part in the in-camera discussion as it was his opinion it should be discussed in public. In response to Councillor B. Vrbanovic, Councillor Gazzola acknowledged that he was present for the in-camera discussion, but did not agree to speaking of it now in veiled references as he maintained the public has a right to know what is being spoken of. Mayor C. Zehr acknowledged that the Committee was speaking of the matter in veiled reference and advised he would make no apology for doing so as Council is charged with protecting the assets of the Corporation and which should be done in a respectful manner. He pointed out that the matter involves a personal and labour relations matter that involves an identifiable individual and other staff in general which is not a matter to be discussed in public. Mayor Zehr advised that should Councillor Gazzola choose to put forward a motion to add dollars back in to the base budget relative to the "Confidential Items" then he would also put forward a motion to add dollars to the "Confidential Items" that will result in the existing dollar savings remaining the same. On motion by Councillor J. Gazzola - it was resolved: "That the item forming part of the "Confidential Items" on the 2010 Base Budget Reductions List having a value of $94,000. be removed." FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 35 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) The following motion was Carried, Unanimously. On motion by Mayor C. Zehr - it was resolved: "That the remaining item of the "Confidential Items" on the 2010 Base Budget Reductions List be increased by $100,000. for a total base budget reduction of $200,000." Issue Paper #41 -Historical Budaet by Department and Division Information is provided as to 2008 actual and budget balances by Department; 2009 actual and budget balances by Department as of September 2009; 2010 projected budget balances by Department; and 2010 budget by cost grouping. Issue Paper #42 -Legislative Changes A summary of the impact legislative changes have had to the tax base and enterprise budgets from 2000 to 2009 was provided. Issue Paper #43 -EDIF Funding and Options for Levy Reduction A review of the impact of amending the EDIF special levy in 2010 was undertaken. It was determined that a reduction would compromise the City's ability to meet its debt service obligations under the program, which would potentially jeopardize commitments to significant projects within EDIF, and result in an even greater cash flow deficit in the program. It was strongly recommended that no further reduction in the level of funding into EDIF in 2010 be approved unless significant permanent reductions are made to the scope of the program. Issue Paper #44 -Victoria Park Lake -Implementation of Class EA Study It was noted that this matter was dealt with earlier in this meeting. Issue Paper #45 -Youth Drop-In Program Information was provided on external funding in support of the Youth Drop-In Program. Issue Paper #46.1 -Kitchener in Bloom Program Issue Paper #46.2 -Athletic Awards Proaram Sponsorship Opportunities Information was provided in respect to opportunities for sponsorship funding to support both of the above noted programs. In regard to Kitchener in Bloom, it was noted that initial contact with local businesses to explore sponsorships have not been responded to and in the current economic climate it may be difficult to obtain commitment for 2010. It was further noted that the City does not have sufficient resource capacity to launch asponsorship /donation program above the current level and accordingly, same would become the responsibility of the volunteer committee members to pursue. In regard to the Athletic Awards Program, interest has been shown by several organizations in sponsoring the Banquet and further information will come forward in January. On motion by Councillor J. Gazzola - it was resolved: "That the line item "Athletics Award Reception" on the 2010 Base Budget Reductions List having a value of $7,000. be removed to effect continued support of the program in conjunction with sponsorship funding." A motion by Councillor G. Lorentz was brought forward for consideration to reduce the line item "Kitchener in Bloom Program" on the 2010 Base Budget Reductions List having a value of $14,000. to $7,000. to effect continued support of the program at a reduced budget level. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 36 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) Councillor G. Lorentz commented that staff has proposed that the budget could be cut by $8,000. and still maintain support of the program. He suggested that this is a small amount that should not be given up as the program contributes to building neighbourhood community. Mayor Zehr questioned if the Kitchener in Bloom program is primarily a form of recognition for a job well done in beautifying a property or if it proactively is encouraging property owners to do more than they otherwise would. Staff advised that it is primarily an award of recognition but also promotes community building. Mayor Zehr questioned that, this being the case, if the program should continue or be reduced to $6,000., which is what the balance of the budget would be if reduced by $8,000. Councillor Lorentz maintained that the program should continue for one more year at the level of funding he has proposed and the newly elected Council could review the program again in 2011. On motion by Councillor G. Lorentz - it was resolved: "That the line item "Kitchener in Bloom Program" on the 2010 Base Budget Reductions List having a value of $14,000. be reduced to $7,000. to effect continued support of the program at a reduced budget level." Issue Paper #47 -Outdoor Pools Bather Load Statistics 2008-2009 A summary demonstrating usage of the City's 4 outdoor pool facilities in June for 2008 and 2009 was provided. It is proposed to delay opening of Idlewood Pool in 2010 for a savings of $8,000. over the month of June. Councillor J. Gazzola raised concerns that those affected were not fully aware of this proposal. Councillor B. Vrbanovic suggested that all pool openings be delayed to the 2nd or 3rd week to be consistent rather than closing one pool based on one bad season. Ms. D. Keelan advised that staff is attempting to reduce costs in the best manner without impacting all pools in the month of June. She added that staff could look at a different arrangement; however, she pointed out that if June is a hot month, staff will open all pools as the cost will be off-set by higher revenues. Ms. Keelan cautioned that this would be dependent on the weather. Councillor K. Galloway questioned if the pool is opened sooner given a hot June if staff is taking a risk removing the funds now and Ms. Keelan concurred that it is a risk but noted that revenues will be used to off-set the proposed reduction. Councillor J. Smola assumed the Chair at this time. On motion by Councillor B. Vrbanovic - it was resolved: "That the line item "Pools -Idlewood Opening" on the 2010 Base Budget Reductions List having a value of $6,500. be removed, to effect opening of all 4 outdoor pool facilities in June 2010, with the issue of potential closing of an outdoor pool facility during the month of June to be reviewed again by staff in 2011." Councillor B. Vrbanovic then assumed the Chair Issue Paper #48 -Leisure Access - 2009 Financial Overview A summary of the financial overview of the 2009 Leisure Access fee subsidy program was provided. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 37 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D Councillor J. Gazzola expressed surprise at the 20% increase in the number of subsidies issued over 2008. Ms. L. Palubeski advised that the City was fortunate to secure funding from the Canadian Tire Jump Start Foundation to off-set the budget deficit. She added that a commitment in 2010 from the Foundation has not yet been made. Councillor Gazzola requested clarification of the proposed reduction in the 2010 budget for this program. Ms. Palubeski advised that an increase of $60,000. over 3 years was approved, with $20,000. to be added in each of the 3 years. In 2010, it is proposed to split the final $20,000. over 2 years with $10,000. to be added in 2010 and $10,000. in 2011. Staff is of the opinion this is a viable option in light of the Foundation grant program. Councillor Gazzola questioned who decides how the monies are spent. Ms. Palubeski advised that seasonal allotments to a specified dollar amount is given to the client for use in any City recreational facility and how it is spent is at the discretion of the client. Councillor J. Gazzola requested that staff provide amid-year report on the financial status of this program. Issue Paper #49 -Winter Maintenance Funding Funding in the amount of $235,000. is requested to continue to address the identified shortfall in the winter maintenance budget to enable required services to meet the City's minimum maintenance standards and address expectations related to service standards. Councillor J. Gazzola questioned how the 2009 shortfall was funded. Mr. J. Witmer advised that the shortfall was addressed through transfer of funds from other Departments and from the Tax Stabilization Reserve Fund. Councillor Gazzola inquired as to the total 2010 budget proposed and Mr. Witmer advised it is $4.2M. Mr. Witmer advised that the budget is based on a 5 year average and would be short $770,000. again, with the additional funds requested to reduce the gap. Councillor Gazzola commented that he would like to see the $235,000. saved to help keep the Rockway Seniors Centre open, suggesting this would be viable given the milder weather this winter. Mr. D. Chapman pointed out that the winter maintenance budget has run a deficit 5 out of the past 6 years and there is no more capacity to fund a winter maintenance deficit from the Tax Stabilization Reserve Fund. He noted that the budget is 3/a below the 5 year average and even with the milder winter the budget is no where close to a stable amount. He suggested that it is important to increase this budget closer to the historical average. Councillor Gazzola disagreed, commenting that costs should be lower this year given the milder weather and regardless of budget this work is still done. Mayor Zehr acknowledged the milder weather at this time but cautioned that the winter season carries into the end of the year as well, and some of the City's worst storms have happened in November and December. He expressed the opinion that it would be too great a risk not to work toward bringing this budget up to the average median given the depletion of reserves going forward. Councillor Gazzola inquired as to the total transfer of capital close-outs found to off-set a deficit in 2009. Mr. Chapman advised that approximately $4.5M was transferred; however, he stressed that the majority of capital close-outs are a one time occurrence that will not be seen in future budget years. Councillor G. Lorentz questioned activities of the winter maintenance crew in milder winters. Mr. J. Witmer advised that crews are deployed to address other projects under the Winter Control Program and agreed to provide an update on Winter Works activities. Councillor B. Vrbanovic questioned the impact of decreasing the requested amount to $150,000. Mr. J. Witmer advised that a deficit is projected again this year and the budget is no where close to the average median, suggesting it would take 2 to 3 years of under expended budgets to bring the budget any where close to where it should be. Ms. P. Houston added that the $235,000. was originally allocated to Operations to Service Growth and on transfer to winter maintenance, leaves no allocation for such things as new parks and roads FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 38 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) and no new staffing to accommodate growth areas. In this respect, she suggested that there is high potential for over-expenditures or not meeting service standard levels. Issue Paper #50 -Gasworks - Delivery Revenues Information is provided regarding 2009 projected actuals versus 2009 budget and 2010 budget projections for the Gasworks Enterprise. Issue Paper #52 - 1 % Reduction in Capital out of Current (C/C) for Projects Greater than $100,000. Information is provided on the impact of a 1% reduction in C/C contribution for projects greater than $100,000. across the 10 year forecast. On motion by Councillor J. Smola - it was resolved: "That a reduction of 1% in the capital accounts identified in Appendix `A' to Budget Issue Paper #52, attached to Financial Services Department report FIN-10-009, be approved to effect a savings of $69,740. or 0.075% of the 2010 tax levy." Issue Paper #53 - Rockway Seniors Centre This Issue Paper provides an outline of operating budget options in respect to the potential closing of Rockway Seniors Centre, including: close Rockway in 2010 to recognize savings in 2010; defer impacts to 2011 with closing Rockway in 2011 and not budget for the opening of the Kingsdale Community Centre in 2010; or close Rockway in 2010, budget 6 months of operation of Kingsdale in 2010 and recognize savings in 2011. Ms. P. Houston advised that staff is recommending Option 1 which is currently in the 2010 levy projection. She also advised that due to issues regarding the scope and budget of the Kingsdale project, the opening of the community centre will be delayed until 2011. Mayor C. Zehr suggested that considering the fact that Kingsdale will be delayed until 2011, the additional operating budget for the centre in the amount of $139,000. should be removed as it will not be expended until 2011. He added that although Kingsdale and Rockway are not tied together, and the fact that Council will not be making a final decision on Rockway until March 2010, eliminating the Kingsdale operating budget in 2010 could impact on how Rockway is dealt with. Mr. D. Chapman advised that by eliminating the Kingsdale operating budget as suggested and adding back into the budget the proposed savings resulting from the closure of Rockway, approximately $116,000. will have to be found in order to meet the target of a 3% tax increase. On motion by Mayor C. Zehr - it was resolved: "That the $139,000. additional operating funds for the new Kingsdale Community Centre, as shown in Budget Issue Paper #53 attached to Financial Services Department report FIN-10-009, be removed from the 2010 operating budget." Councillor K. Galloway inquired as to the amount that would have to be added to the 2010 budget at this time in order to keep the Rockway Seniors Centre open until a final decision is made on the future of the centre. Ms. Houston advised that $254,957. will be required in the 2010 operating budget. Councillor G. Lorentz suggested that it was never intended to remove any Rockway operating funds based on closing the facility until a final decision on the future of the centre was made. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 39 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D) On motion by Councillor J. Gazzola - it was resolved: "That the $254,957. estimated annual operating budget savings related to the proposed closure of the Rockway Senior Centre, as shown in Budget Issue Paper #53 attached to Financial Services Department report FIN-10-009, be added to the 2010 operating budget." WATERLOO REGION CHILDREN'S MUSEUM -FUNDING REQUEST Ms. P. Houston advised that the request for additional funding from the Waterloo Region Children's Museum was deferred to the meeting this date pending dialogue with the Region of Waterloo and Cities of Cambridge and Waterloo as to their intent respecting this funding request, and for staff to provide a report on funding options. Ms. Houston advised that the Museum is requesting $600,000. from among the 4 municipalities, plus the $105,000. in-kind grant they already receive from Kitchener. Ms. Houston advised that the other municipalities have yet to consider the funding request, with the Region set to consider it in February 2010. Ms. Houston advised that to date the only sustainable source of funding staff could recommend would be the funds which are currently being considered for allocation to the Prosperity Council. She added that the Prosperity Council is aware of the issue surrounding their proposed allocation and do have some concerns. Ms. Houston asked that this issue be further deferred pending consideration of the Museum's funding request by the Region of Waterloo. On motion by Councillor G. Lorentz - it was resolved: "That consideration of the request of the Waterloo Region Children's Museum for additional funding be deferred to a future Finance and Corporate Services Committee meeting, pending consideration of this matter by the Regional Municipality of Waterloo in February 2010." RESERVE FUND PROJECTIONS Mr. D. Chapman advised that the City's reserve funds have declined over several years and are currently well below the benchmark averages, which is of notable risk to the City. He reviewed reserve fund balances, noting that as part of a long term financial planning exercise, a strategy to deal with the decline in reserves will be formulated in 2010. Councillor J. Gazzola asked that staff provide a summary of line items coming in and out of the reserve accounts to understand how the balances have been derived. Mr. Chapman agreed to provide same to Council. Mayor C. Zehr requested explanation of the Asset Management reserve which shows a deficit and Mr. Chapman advised that the funds in this reserve relate to proceeds from land sales and are used for acquisition of lands or land sale process. Mayor Zehr inquired how this ties in to the Business Parks reserve. Mr. Chapman advised that the Business Parks reserve, also showing a deficit, relates to the CMF funding strategy. He advised that Council authorized a transfer of $2.1 M from this reserve and basically, lands fronting Wabanaki Drive are being held as an asset in the reserve and in 5 years time, staff will determine if the lands should be funded by the CMF or redeveloped and sold by the City. It was also noted that the Maple Leaf lands are included in this reserve. Mayor Zehr referred to the Sick Leave and WSIB reserves and Mr. Chapman advised that both reserves are pending year end financial statements and based on actuarials will be reviewed in respect to benefits and liabilities and staff will be seeking guidance in respect to future reserve targets for these two reserves. Councillor Gazzola referred to the large deficit projected in the DC reserve fund and questioned if the figure for year end 2009 is the actual amount. Mr. Chapman advised that the FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 40 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D figure is a projected year end for 2009 and is based on the best information staff have available at this time. Councillor Gazzola stated that the 2010 budget shows a deficit and Mr. Chapman advised that this ties in to earlier discussion this date but does not include additional deferrals made this date. Mr. Chapman acknowledged that the latter changes the final figure. Councillor Gazzola questioned the year end balance for the Equipment Reserve and Mr. Chapman advised that this includes equipment approvals in 2009 that have not yet been purchased. Councillor B. Vrbanovic advised that he had consulted with staff concerning the item forming part of the "Confidential Items" which was removed earlier from the Base Budget Reductions List, and confirmed that as the matter has now been dealt with and has been removed from the reduction list, it can be raised publicly. Mr. T. Speck advised that the item relates to a proposed reduction of one Property Standards Officer in the By-law Enforcement Division. Mayor C. Zehr questioned what is currently proposed to be budgeted for supplementary taxes. Mr. D. Chapman noted that in 2004-2006 the City was seeing approximately $1.5M in revenues from supplementary taxes; however, more recently actuals have been just above the $500,000. range. He advised that the 2010 budget is proposed at $700,000. which is lower than in 2007-2008 but still higher than the historic average of $500,000. Mayor Zehr inquired as to what was received in 2009. Mr. Chapman advised that 2009 actuals have not been finalized yet; however, staff anticipate the figure will be close to the 2010 budget forecast but will not reach 2004-2006 levels. Mayor Zehr commented that there appears to be a turn around and suggested that an adjustment of $100,000., fora total of $800,000. for supplementary taxes, would be reasonable. A motion by Mayor C. Zehr was brought forward for consideration to provide that the 2010 budget for supplementary taxes be increased by $100,000., for a total budget of $800,000. Councillor J. Gazzola stated that he could support the motion to assist in bringing the tax levy down; however, he suggested that projections for supplementary taxes could be managed better given the initial forecast was zero yet the 2009 year end now shows $700,000. He questioned that as housing starts are up if there would not be more dollars available from supplementary tax revenue. Mr. Chapman stated that while not tied to supplementary taxes, it was proposed in 2009 to reduce the budget for investment income to $1.5M. He noted that the last time staff looked at allocations it appeared investment income will not reach $1 M for 2009 which is a significant negative variance in that budget line and while some correction based on positive news for supplementary taxes in 2009 could be made, it was his opinion the budget does not go far enough to come to where the City is looking in terms of reasonable averages and forecasts for 2010. Mr. R. LeBrun addressed a question raised earlier by Councillor Vrbanovic in regard to Fire Fleet (Issue Paper #30) concerning capacity to make further adjustments as it relates to the exchange rate being used for the American dollar. Mr. R. LeBrun advised that the Fire Fleet 10 year forecast in 2008 was $18.3M overall, or equal to 1.8M per year. In 2009 the forecast was reduced to $13M overall, equating to a $500,000. reduction in each year, based on recent history pertaining to vehicle purchases, a favourable exchange rate for U.S. dollars and projections in pricing of new vehicles purchases. In 2010 the $1.3M per year budget figure has been reduced to $1.2M and the overall forecast has been reduced by 1/3 over 2008-2010. Mr. LeBrun stated that in respect to any further room to move on a U.S. exchange component, it was his opinion the rate is indicative of what rates are today and if rates increase over time the budget would be in serious jeopardy, reiterating that this budget has been reduced by $5M over the last 3 years. A motion by Councillor J. Gazzola was brought forward for consideration to provide that an additional $1.8M transfer from the Gas Utility to the tax supported operating budget in 2010 be approved to lower the tax levy below 1 %. FINANCE & CORPORATE SERVICES COMMITTEE MINUTES JANUARY 18. 2010 - 41 - CITY OF KITCHENER 1. FIN-10-009 - 2010 FINAL BUDGET DAY (CONT'D Mayor C. Zehr requested clarification of the impact this has in 2011 and beyond, suggesting that there would be only $2.6M in reserves left over. Mr. D. Chapman concurred with this dollar amount and reminded the Committee that in accordance with policy staff has tried to retain a surplus in the gas delivery company of $6M. He noted that volatility in gas pricing is anticipated which has been seen in the past several years and the proposed transfer would compromise the financial flexibility of the Gas Utility to provide contingency for their own operations. He added that if the transfer is to be made by an increase in the operating dividend it would erode the transfer to capital pool and again, stated that this would be of significant concern as it is not sustainable for operation of the Utility. Mayor Zehr stated that he could not support the motion as what is proposed is not sustainable and therefore, would not be a prudent thing to do. He also reminded the Committee that an additional transfer of $750,000. has already been made to the 2010 tax supported operating budget. Councillor Gazzola pointed out that a surplus of $9.5M is showing for 2010. He acknowledged that sustainability is important and should be heeded; however, as 2010 is a tough year it was his opinion Council has to set aside some sustainability to achieve a lower tax levy. He suggested that should his proposal for an additional transfer be approved, staff could still deal with operation of the Gas Works Utility and keep the City afloat. Mr. D. Chapman asked that in making this decision the Committee consider the potential costs associated with automated meter readers which will have to be either debt financed or funds used from the Gas Works. In addition, he reminded the Committee that reserve balances are at a record low and if anything, he would rather see these monies transferred to the WSIB reserve to address the deficit in that fund. Councillor Gazzola's motion to transfer an additional $1.8M from the Gas Utility to the tax supported operating budget in 2010 was then voted on and LOST. On motion by Councillor J. Smola - it was resolved: "That the 2010 department operating budget, resulting in a 2010 levy for general purposes of $88,292,988 be approved." - and - "That an increase in the 2010 tax rate, excluding tax policy changes, be approved at an estimate of 1.73%." - and - "That a special capital levy of $7,435,409, which results in a 1.17% increase in the 2010 tax rate to be allocated to the Economic Development Investment Fund, be approved with the understanding that this levy represents the seventh year of the 10-year investment program as per the projection included in the budget day presentation to Council." ADJOURNMENT On motion, the meeting adjourned at 6:07 p.m. J. Billett Committee Administrator