2008/12/01 CORPORATE SERVICES COMMITTEE AGENDA
TENTH MEETING
Monday, December 1, 2008
City Hall, Council Chambers - 6:00 p.m.
1. Approval of the November 17, 2008 Corporate Services Minutes.
2. Reaorts: Staff Contact:
a) F-2008-48 Todd Harrison
2008 Financial Update
3. Budget Presentation
2009 Budget-Expenditures
4. New Business
5. Adjournment
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December 1, 2008 ~ F-2008-48
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Niagara~aIls
C 1\ 5 D 1
Councillor Victor Pietrangelo, Chair
and Members of the Corporate Services Committee
City of Niagara Falls, Ontario
Members:
Re: F-2008-48
2008 Financial Update
RECOMMENDATION:
1. That the 2008 Financial Update be received, and that the Committee recommend
additional quarterly and semi-annual financial reporting.
BACKGROUND:
In the presentation made by Staff on November 17'h, Staff highlighted the challenges
facing the Municipality in respect to revenues for the 2009 General Purposes budget.
Some of the challenges that will impact 2009 also have an effect on 2008. As a result of
the discussion that ensued, improvements are required to the formal process by which
Staff updates Council of variances between budget and actual information.
During the past year, Staff has reported to Council, on the activity and balances at year
end for Reserves, Development Charges and Capital accounts. During 2008, 5taff
implemented a new Capital Budget process that enhanced divisional spending requests
to include Staff prioritization. Likewise, Staff embarked on a review of Building Permit Fees
and Planning Fees in the DAAP process. Council continues to receive monthly accounts
of expenditures in the Municipal Accounts, quarterly reports of tax receivables and annual
reports on the capital leases held by the Corporation, Municipal Performance Measures
and the Consolidated Financial Statements.
Staff recognizes the aforementioned information is a significant volume of data to review.
However, in light of a changing economic situation, Staff believes that additional reporting
is required to provide Council with the necessary information to respond to these changes.
Staff recommends that commencing 2009, Council receive quarterly updates on the fiscal
performanceofthemunicipality. Thesequarterlyreportswillhighlightsignificantvariances
from the 2009 budget as the year progresses. Semi-annual reporting on capital projects
will be also implemented commencing in 2009.
Working Together to Serve Our Commuiziry I Corporate Services Department
Finance
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December 1, 2008 - 2- F-2008-48
2008 Financial Update
As Council is aware, fiscal performance in 2008 will impact the 2009 budget as Staff is
required to utilize any surplus in the 2008 General Fund to offset the next years' taxation
levy. For 2008 budget deliberations, the City was fortunate to have a significant surplus
from the year ending in 2007 of $2.5 million. This surplus was used to reduce the tax
increase for 2008 to 2.48%.
Alternatively, in years wherein actual expenditures may be greater than revenues, Staff
is faced with a two-fold dilemma. First, since municipalities cannot record operating
deficits, Staff must utilize reserves to offset unplanned expenditure increases or to offset
revenue deficiencies. Secondly, where the previous year does not have a surplus, there
is no opportunity to reduce the following year's tax impact.
The final operating results for 2008 are not known at this time and likely will not be known
until late January once year end postings are completed. Staff is concerned that an
operating shortfall of approximately $750,000 is possible. Staff is providing this report to
highlight the factors contributing to this shortfall.
Operating Revenues
Actual operating revenues will be higher than budget due to a variety of factors. Staff
anticipate that increases of approximately $600,000 will be realized once the final
supplemental tax bills are sent out in December. In addition an increase in revenues of
approximately $600,000 was achieved in Payments in Lieu due to one time adjustments.
Similarly, the City received revenues from the sale of lands and donations which were not
budgeted because neither revenue stream was known or predictable at the time that the
2008 budget was established.
Some revenues that are greater than budgeted are directly related to costs incurred by the
municipality. Three areas where this result has occurred are in fire code violations, in tax
registrations and in the People Mover Project. In all of these areas, revenues are
generated which increase annual revenues, however costs offset these revenues directly.
Similarly, the BIA levy is billed to each association and the matching payments are made
to each BIA based on their levy. This has the impact of inflating both revenues and
expenses. As a result, a net benefit is not generated.
Staff is predicting that certain revenue streams will be less that planned. Specifically, the
compensatory payment from OLGC was over estimated by $400,000. Likewise, revenues
from Transit garage sales both in services and in diesel fuel will be less than budgeted.
Staff are predicting that Planning revenues will be less due to the fact that review was more
lengthy than anticipated. In addition, revenues generated from arena ice rentals will be
less due to the need for a Cancellation Of Ice policy. Lastly, a decline in interest rates has
negatively impacted the investment income generated in the operating fund and the
cemetery trust funds.
The net effect is a modest increase in total revenue for 2008.
December 1, 2008 - 3- F-2008-48
Operating Expenditures
The planned 2008 operating expenditure forthe municipality is approximately $92 million.
Staff has reviewed actual versus planned expenditures. In some areas, expenses are
higher than planned, while in others, costs have not been incurred or have been
significantly reduced. Since the end of the 3rd quarter, Staff have been reviewing divisional
spending priorities to ensure cost variances are minimized.
The major variation from planned expenditures is in the area of labour. At the time of the
budget preparation, Staff were negotiating with the Fire Association and with CUPE for
Labour contracts. The negotiations with the Fire Association went to provincial arbitration
while the contract with CUPE was negotiated in the summer. In preparing for the 2008
budget, Staff estimated the expected increases, however, the amount set aside for
settlement was not sufficient. In addition, employee retirements and overtime contributed
to higher than expected costs. Staff is predicting that labour costs will be approximately
2.6% higher than budget.
Other areas where costs are greater than expected include fuel costs as the City saw
diesel costs increase sharply during the year. Materials and services which use petroleum
products like asphaltwere higherthan expected. Costs in areas such as health and safety
were higher than expected due to the Ministry of Labour increased reviews of practices of
all municipalities across the province. This led to increased remedial work and to
additional training initiatives. Further an asbestos abatement work was i~itiated that had
not been planned. Lastly, a significant repair was required in the street lights which was
not anticipated.
Staff has initiated expenditure savings that has partially offset the areas of cost increase.
Specifically, increases in staffcomplementthat had been budgeted were delayed. Savings
were achieved in debt issuance costs as debentures were not issued and new cash flow
management techniques were utilized that minimized the need to utilize operating lines of
credit. Planned amounts for animal control were not expended. Savings were achieved
in rehabilitation of city buildings particularly in pools wherein planned work has been
postponed.
The net effect is an increase in total expenditures for 2008.
Summarv
This report is intended to update Council of fiscal performance for 2008. The transactions
until the year end as well as the work required to finalize the year will impact final results.
Staff believe that the modest revenue increase will offset some of the increased operating
costs and that the initiatives to reduce spending in the final quarter may be sufficient.
Should this result not occur, Staff will review the options available to Council to offset any
potential year end deficit.
Recommended by:
Todd Harriso Director f Financial Services
Approved by: ~y/u~%GLr~s'~
Ken Burden, Executive Director of Corporate Services
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Ngagar~~c~l~`s
MINUTES OF CORPORATE SERVICES COMMITTEE
Ninth Meeting, Monday, November 17, 2008, Committee Room 2, 4:00 P.M.
PRESENT: Mayor Ted Salci, Councillor Victor Pietrangelo, Chair; Councillor Jim
Diodati, Shirley Fisher, Vince Kerrio, Bart Maves, Wayne Thomson and
Janice Wing
STAFF: Ed Dujlovic, Ken Burden, Serge Felicetti, Dean lorfida, Ken Beaman,
Denyse Morrissey, Alex Herlovitch, Todd Harrison, Geoff Holman, Karl
Dren, Jim Jessop and Lisa Wall.
PRESS: Corey Larocque, Niagara Falls Review
1. MINUTES
It was ORDERED on the motion of Mayor Salci and seconded by Councillor Diodati
that the minutes of the November 3, 2008 meeting be adopted as recorded.
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2008.
2. REPORTS:
CPS-2008-04
Water and Sewer Rate Structure Update: Puhlic Response
MOVED by Mayor Salci seconded by Councillor Maves that Committee receive the
Public Responses to the Pubiic Consultation; that the Committee recommends the
endorsement of the eight principles received in the Water and Sewer Rate Structure
Review by R.M. Loudon Ltd.; that the Committee does not recommend the
endorsement of the nine recommendations received from R.M. Loudon Ltd. for a new
water and sewer rate structure, and that the Committee directs staff to prepare
recommendations for a water and sewer rate structure that fulfils the eight principles,
considers the Region's review of water and sewer charges, and responds to the
concerns raised via the Public Consultation.
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2008.
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Council Chambers 6:15 p.m.
3. 2009 FUNDING REQUESTS
MOVED by Councillor Thomson seconded by Mayor Salci that the 2009 Budget
request from the Niagara Falls Tourism be referred to the final budget deliberations.
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2008..
MOVED by Mayor Salci seconded by Councillor Wing that the 2009 Budget request
from Niagara District Airport be received and referred to final budget deliberations.
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2008.
MOVED by Councillor Thomson seconded by Councillor Kerrio that the 2009 Budget
request from Downtown BIA 2009 Events be received and referred to final budget
deliberations.
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2Q08.
4. BUDGET PRESENTATION
MOVED by Mayor Salci, seconded by Councillor Diodati that staff report back to
Council in regards to developing an ice cancellation policy, increasing existing user
fees and to investigate the development of new fees.
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2008.
MOVED by Mayor Salci, seconded by Councillor Diodati that staff report back to
Council on the 2009 Operating Budget in respect to expenditures in a manner
wherein expenditures are categorized as high, medium and low priority
Motion: Carried Unanimously
Action: Recommendation submitted to Council November 17, 2008.
5. ADJOURNMENT:
There being no further business, the meeting adjourned at 7:27 p.m.
Motion: Carried Unanimously