APPENDIX 6

 

 

Supplementary Information Associated with the 2007 Budget

 

This appendix contains supplementary information on a number of topics that are key to the 2007 budget deliberations.  This material is presented as background information on topics that relate to significant items in the 2007 budget; or to policy discussions that typically take place as part the budget deliberations process.  There are nine (9) key themes that are covered in this appendix:

 

1.      Compensation information including discussions on staffing levels, City salaries, benefits, and the budget for gapping;

2.      The City's energy costs;

3.      The gap in funding associated with provincial cost-shared programs;

4.      The relationship between population growth projections and the 2007 Operating and Capital Budgets;

5.      Council's policy surrounding increases to user fees;

6.      Council's policies on ridership growth and the ratio of transit fees to operating costs

7.      Current and proposed waste diversion policies;

8.      Proposed 2007 utility rate increases with discussion of the administrative costs of rate supported services; and

9.      Recreation programs offered by the City of Ottawa.

 

The Budget for Compensation

 

Compensation costs represent the single largest component of the City’s operating budget. Managing compensation costs is one of the most challenging issues for Ottawa and other large Canadian municipalities for a number of reasons:

 

•  A highly unionized workforce and collective bargaining settlements that are often beyond the rate of inflation put real pressure on municipal budgets.

•  Unions continue to negotiate for stronger benefits packages, while the City is grappling to pay for increases in the cost of providing existing benefits that far exceed the Consumer Price Index.

•  Wage settlements are heavily influenced by settlements across Ontario, particularly in the Toronto area. Increases in compensation costs may also be influenced by settlements imposed by provincial arbitrators.

•  The City of Ottawa is the second largest employer in the city, after the federal government, and must compete against other levels of government and the private sector for resources in the same talent pool. Attracting employees with similar education and work experience requires that salaries and benefits packages remain competitive.

 

In 2006, the overall compensation budget for the City was slightly over $1 billion and was the largest component of the operating budget. 

 

Not all compensation costs are paid through property taxes

 

While the total compensation budget is slightly over $1 billion, it includes compensation for the police, building services and elected officials; and therefore the amount that is associated with Council controlled programs and services provided to residents and business in Ottawa is much less.  The pPolice have a separate tax increase on the property tax bill.  The budget for the Building Services bBranch is self-funded through building permit fees according to provincial legislation and therefore is not funded by property tax. . The Mayor and the other members of Council set the budgets for their offices separately from the rest of City sServices, and would not be normally be part of attributed with the cost of providing City sServices.

 

Further, employees providing rate-supported programs are funded through the utility bill for water and sewer accounts, rather than through taxes.  Rate-supported compensation totals approximately $41.1 million.

 

Finally, Pprovincially mandated programs, are cost-shared between the Province and the City and account for just over $173.5 million. While there is a contribution by the City to these programs, the provision of theses these services and the service levels are mandated by the Province, and the City is obliged to contribute its portion of the cost of these services.

 

Compensation costs paid through taxation

When all other funding sources are removed, there remains $611.9 million in the compensation budget for programs and services that are fully funded by property tax - about 61% of the compensation budget.  Further, revenues from users fees (such as transit fares, recreation fees) bring this figure down to 52% percent of the overall compensation budget for 2006. 

 

Composition of total compensation costs

There are approximately 33 sub-components that make up the overall compensation budget, and these which are divided into four categories:

 

 

Table  1XX

Base Compensation 2006

 

 

 

Table XX2

Base Benefits 2006

 

 

 and

 

Table XX3

Supplementary Benefits

 

 

The budget for compensation also includes occasional items such as:

 

 

The components that make up compensation are presented in Appendix X. The appendix also breaks out the costs of these components between rate-supported programs, provincially mandated programs, and tax-supported programs.

 

Staffing Levels

 

Staffing at the City of Ottawa is budgeted in terms of numbers of Full-Time Equivalent positions (FTEs).  The number of  FTEs at the City changes in response to increased demand for services from a growing population, implementation of new programs by Council or changes to provincial legislation. For example, the City had 12,755, 13,139, and 13,473 FTEs for 2004, 2005 and 2006, respectively.  These numbers include the Ottawa Police Service and the Ottawa Public Library and represent positions, not employees.

 

A single FTE can represent more than one position if the positionss are casual or part-time. For example, a part-time position in the Parks and Recreation branch may be equivalent to 0.08 FTEs; a seasonal position in the Public Works department (e.g., involving the operation of snow-clearing equipment) could equate to 0.4 FTEs; and a full-time public health nurse would be 1 FTE. Therefore, multiple employees can be associated with one FTE.

 

The City manages scheduling and payment of wage employees on an hourly basis. For budget purposes, the yearly total of wage employee hours, or wage pool, is converted to FTEs. However, the type of work performed and the associated hourly rates vary seasonally and annually, especially during changeovers in the spring and fall.

 

Each summer, there is a significant increase in the number of employees due to the student employment program. The total number of employees is also influenced by factors such as resignations, retirements and completion of temporary work terms. These variations mean that the total number of employees is much higher than the total FTE count, and more importantly, that the number is not static.

 

On average, 17,000 employees work for the City during the course of a year. In 2006, the total number of employees varied from a low of 16,135 in January to a high of 17,675 in July. The number of FTEs remained relatively constant over that period.

 

Council’s Delegated Authority By-law places strict controls on the number of FTEs at the City. Council must approve any increase to the total number of FTEs for both full- and part-time work. Monthly reports showing current FTEs and the total number of employees at the City allow Council to track changes.

 

Several major factors have influenced staffing level changes since amalgamation. Reductions in staffing levels have occurred because of amalgamation savings and the 2004 Universal Program Review, while legislated and mandated changes and population growth have increased staffing levels. 

 

Prior to amalgamation, the 12 former municipalities’ total FTE count was 12,786. Since then, Ottawa has reduced the number of FTEs in all program areas. FTE savings attributed to amal­gamation took place primarily within a three-year period, and yielded a reduction of 665 FTEs, or 5.2% of the original number of FTEs of the amalgamated city. 

 

In 2004, the Universal Program Review and corporate reorganization resulted in an additional reduction of 483 FTEs, or 3.8% of the original number of employees. A similar exercise in 2006 yielded a further reduction of 88 FTEs. In total, X 101 full-time positions have been eliminated since 2001.

 

From 2001 to mid-2006, provincially and federally funded programming, as well as legislated and mandated changes, increased the number of FTEs by 586, or 4.6% of the original workforce. Major changes included the provincial downloading of paramedic services (388 FTEs) and provincially funded housing, long-term care and public health programs (108 FTEs).

 

The City of Ottawa has also experienced significant growth in population and infrastructure since amalgamation. As a result, 1,332 FTEs have been added, or 10.4% of the original workforce. Key contributors include growth in public transportation affecting transit services and fleet services (376 FTEs) and the Police Services Strategic Staffing Initiative (310 FTEs).

 

The net effect of these changes is an overall Council-approved increase in FTEs since amalgamation of 682 (which includes 306 additional Ottawa Police Service FTEs), or 5.3% of the 2000 year-end complement.

 

The graph below reflects the effect of these changes. While staffing levels have risen slightly over the period, there has been an overall decline in staffing levels per thousand residents since 2000. In 2000, there were approximately 16.2 FTEs for every thousand residents; in 2006 there are 15.5 FTEs for every thousand residents.

 

Table 41

Staffing Levels

 

The increase of 682 FTEs since amalgamation includes 306 FTEs for Police Services. If the police increases are removed, the remaining increase of 376 FTEs can be split into administrative and operational positions. Overall, there were 743 operational positions created and 367 administrative positions eliminated over the 2001 to 2006 time period.

 

The graph below represents the changes in operational and administrative FTEs since amalgamation, excluding police.

 

Table 52

Change in the FTEs per year, operational vs administrative

(as of August 15, 2006)

 

 

 

In 2005, the City of Ottawa’s first Human Resources (HR) Plan was tabled with Council.
The Plan reported on FTE allocations and forecast future requirements based on operational needs. The update to this HR Plan is being tabled at the same time as the 2007 budget.

 

Salary Levels

 

An analysis of the City’s payroll in 2006 showed that the average salary for City employees was about $58,726, or $71,952 when benefit costs are taken into account. 

 

In 2005, an analysis was done on the increases in the average compensation cost per FTE between the years 2001 and — 2005 in response to a statement by the Ottawa Chamber of Commerce that compensation costs per FTE had risen by 41% since 2000. Analysis by City Financial Services staff showed that between 2001 – 2005 average compensation costs per FTE increased by 28.7%. 

 

The breakdown of this increase included:

 

Unionized salary levels

 

About ninety-five (95) percent of the City’s employees are unionized. Pay scales for unionized positions are set through collective agreement(s) and the job evaluation process. Changes to a position’s base salary range are negotiated as part of collective bargaining. Annual increases at the City of Ottawa are comparable to those in other large municipalities. The table below compares wage settlements for the City of Ottawa’s unionized groups with wages in a selection of other municipalities for each municipality’s largest union.

 

Table 63

Economic Increases, by municipality

(largest union) 2001-2005

 

A number of factors influence salaries paid to City employees:

 

 

The City monitors salaries and benefits and compares them to similar positions at public and private sector organizations in Ontario and across Canada. Overall, results for Ottawa compare favourably to other municipalities.

 

Management salary levels

 

The City has a policy that management salaries should be within the 75th percentile when benchmarked against other major Canadian cities, including Brampton, Mississauga, Hamilton, London, Windsor, Calgary, Edmonton, and the Regions of Durham, Halton, Niagara, Peel, Waterloo and York. Management salaries were at the 75th percentile by 2002. The City is awaiting 2006 Mercer survey results for current data on management salaries.

 

In 2005, Council set a policy to limit pay increases for the management and professional exempt group to increases in the Ottawa Consumer Price Index. The intent was to send a clear message to residents and City unions that Council was concerned about budget pressures associated with compensation costs.

 

Current and past surveys and studies conducted by local and national compensation specialists, such as Mercer Human Resources Consulting, indicate that unionized City positions tend to pay the same as or slightly better than those in the private sector. However, the surveys also show that some specialized technical positions, as well as many management positions, are compensated below the median rates paid in the public and private sectors. This trend becomes more pronounced at more senior levels within the organization.

 

In 2006, the City conducted a study of how its management positions compare to 11 twelve (12)  large Ontario municipalities from a span of control perspective. 

 

Span of control refers to the ratio of the average number of employees that report to a manager either directly or through supervisors.  The chart below shows a breakdown of management level positions at the City is shown in the chart below for the years 2005 and 2006.

 

Table 74

Changes in Number of Employees (2005-2006)

 

 

The ratio of staff to managers is shown in the chart below and is compared to the ratios found in the peer group of municipalities. The data shows that Ottawa’s ratio of staff to managers is very higher than the  in comparison to average of the peer municipalities - above the 75th percentile.

 

Table 85

Ratio of Staff to Managers

2005 and 2006

 

 

Employee Services also compared the ratios of staff to senior executive positions at the City to data provided by the Conference Board of Canada for organizations with more than 4,000 employees.  The comparison shows that the ratio of employees to directors at the City is about one (1) director for 504 employees, whereas the Conference Board data shows this average is less than half for other organizations at a ratio of one (1) director for 198 employees.

 

Collective agreements

 

The majority of employees at the City of Ottawa work in unionized positions.  Amalgamation reduced the number of collective agreements inherited from the former municipalities from over 50 to 11, not including the Ottawa Police Service.

 

Ottawa’s largest bargaining agent is the Canadian Union of Public Employees (CUPE), which represents six groups for a total of more than 8,000 City employees:

 

·        CUPE Local 503 – Inside/Outside workers - 5,804 membe

·        CUPE Local 503 – Library – 675 members

·        CUPE Local 503 – Part-time (Recreation and Culture) – 2,889 members

·        CUPE Local 5500 –  130 members

o       Transit Fleet MaintenanceCUPE Local 5500 –

o       Transit Supervisor

o       Transit Security

 

The other five bargaining agents include:

 

·        Amalgamated Transit Union (ATU) Local 279 – 1,912 members

·        Amalgamated Transit Union, Local 1760 – 189 members

·        Civic Institute of Professional Personnel (CIPP) – 1,464 members

·        Ottawa Professional Fire Fighters Association (OPFFA) – 926 members, and

·        International Alliance of Theatrical Stage Employees (IATSE), Local 471 – 2 members and hiring hall

 

There are collective agreements in place for all of these groups, covering terms from one to three years, with staggered expiry dates. Therefore, the City is almost always in active collective bargaining with one or more of these groups.

 

Each collective agreement covers three areas:

·        Wages

·        Benefits

·        Working conditions

 

City Council approves the negotiating mandate prior to any discussions regarding monetary issues in the collective bargaining process. While the City makes every effort to negotiate an agreement at the bargaining table, there are instances when this cannot be achieved. Most of the bargaining groups at the City have binding arbitration as the dispute resolution mechanism. The exceptions to this include ATU 279, CUPE 5500 and CUPE 503 Library, which have strike provisions in their collective agreements.

 

Binding arbitration preserves the operation of City services if the parties cannot reach a new agreement, and prevents work stoppages that could result if a strike provision were included in these collective agreements.

 

The City’s experience shows that arbitration does not necessarily produce higher settlements than those negotiated at the collective bargaining table or through strike action. In general, wage settlements at the City are comparable to those in other large Ontario municipalities.

 

Like other Ontario municipalities, Ottawa must often accept wage decisions made by arbitrators where it is clear that the amount of the increase is directly related to awards made in the Greater Toronto Area. The significant costs that result for the City from this practice are particularly evident in agreements for fire, police and ambulance workers across Ontario.

 

Employee benefits

 

Employee benefits are the second major compensation cost for the City. The City has taken several steps since amalgamation to control the escalating costs of providing and administering benefits, including:

 

•  Consolidating benefits with fewer providers to reduce administrative overhead and administrative costs;

•  Implementing self-insured long-term disability coverage rather than using an external provider, to reduce annual costs;

•  Externally administering self-insured benefits to lower administration costs;

•  Negotiating similar benefits in collective agreements to reduce the complexity and cost of providing benefits;

•  Minimizing the number of additional benefits negotiated into collective agreements.

 

Despite gains from these measures, all employers across Ontario have experienced hyper-inflationary increases in the cost of providing benefits. At the time of amalgamation in Ottawa, the average cost of providing employee benefits was about 15% of base salaries. This cost has increased to nearly 23.5%, primarily to cover increases in basic premiums. Specific pay­ments such as long-term disability costs have increased by 42% during this period.

 

Benefit costs also include the employer’s share of the Ontario Municipal Employee Retirement System (OMERS) pension plan. At the time of amalgamation, a contribution holiday was in effect for both employers and employees. Premiums were later reintroduced and the OMERS Board approved an increase to the current level of 6.5% for earnings up to the yearly maximum pensionable earnings (currently $42,100) and 9.6% on earnings above that threshold for employees with a normal retirement age of 65. Employers must match the employees’ premiums.

 

The decision to move to a self-insured model for long-term disability was a direct result of the significant cost increase in providing this benefit through an external insurance carrier between 2005 and 2006.

 

Employee turnover

Throughout the normal course of a year, the City of Ottawa experiences a significant amount of turnover in positions. Ignoring for the moment, seasonal and summer student hiring, there were in excess of 4700 staff changes at the City last year. Changes in staffing included:

 

 

In these cases, an employee will move into another position either permanently or on a temporary basis, depending on the circumstances.  Seasonal employment and the summer student program represent additional staffing changes.

 

In 2006, 2715 people terminated their employment with the City. The table below attributes the reasons for this turnover.

 

Table 9

Normal Attrition as at 31 December 2006

 

Reason for Action

Employees

Deceased

34

Early Retirement - Reduced

34

Early Retirement - Unreduced

121

End of Term

1,349

Involuntary Termination

57

Lack of Work

17

Normal Retirement

72

Redundancy

5

Resignation

781

Unavailable for work

245

Total

2,715

 

Collective agreements stipulate that unfilled positions be staffed through internal competition prior to being advertised externally. Therefore, there are many movements that take place when internal candidates fill positions that are vacated by employees leaving the organization. 

 

There are also a large number of staffing actions that accommodate such things as maternity and parental leave, backfilling to deal with long term illness, temporary secondments and acting assignments, extended leave without pay, etc. The seasonal programs and summer student program at the City also contribute to the large number of staffing transactions that occur each year. 

 

In 2006, for example, 2,715 employees left the employment of the City. The headcount in 2006 varied from a low of 16,136 employees in January 2006, to a high of 17,675 employees in July 2006.

 

At the City, employees are assigned permanently to vacant positions through competition or appointment, and are subsequently termed the incumbent or “owner” of the position. This means that the position becomes his/her substantive position within the organization until the employee wins a competition for a different position, is placed in another position on a permanent basis, or voluntarily or involuntarily terminates employment with the City.

 

While on a month-by-month basis the number of vacancies at the City changes, the overall FTE count does not change unless Council approves a report that includes a change to the total number of FTEs.  The headcount – the number of employees on the payroll – changes significantly from month to month due to the seasonal nature of many positions, and the net of the number of people who leave employment with the City versus those who start their employment with the City in that month.  As well, the total number of vacant positions changes each month, as do the types of positions that will be vacant. 

 

A large number of “vacancies” result from statutory requirements such as parental and maternity leave, extended absence due to long term disability, and approved leaves of absences.  In these cases, the position appears as a vacancy within the system, but the position remains the substantive position of its owner.  Under normal circumstances, someone is assigned to a temporary position to backfill the vacant position and the temporary backfill is linked to the vacant FTE.  The position being backfilled is still listed as vacant because there is a substantive “owner” of the position.

 

Furthermore, where many positions make up one FTE, any of these positions could be vacant within the system.  

 

Gapping provision

Gapping is a concept that recognizes that an organization the size of the City will experience employee turnover over the normal course of the year and the process of filling positions leaves “gaps” between the time an incumbent leaves a position and the time a new incumbent enters the position.  Because there is the potential for compensation savings each time there is a gap, and because the City does not want to overtax for compensation, a dollar value for these gaps is included in the budgets for City operations.  This recognition is called a “gapping provision”.

 

Forecasting, assessing and managing gapping provisions is a complicated process due to the number of factors that can influence the amount of gapping that can reasonably be achieved over the course of the fiscal year.  Specifically:

 

  1. There may be the need for overtime by other staff to cover-off the duties normally performed in the vacated position;
  2. Managers may need to assign a short term temporary back-fill to the position while a competition is underway;
  3. Managers may choose to backfill a vacancy with a temporary, lower-level position which generates gapping due to the difference in compensation between the two positions;
  4. Managers may need to keep a position vacant the entire year where the turnover rate is very low in order to achieve their gapping provision;
  5. Managers can also hold a position vacant and create a temporary position in another area to deal with workload issues elsewhere in their unit;
  6. There are strict requirements within the collective agreements around posting vacant positions;
  7. There may be a requirement to conduct an external competition once an internal competition fails to result in a suitable candidate;
  8. Market conditions that can influence how long it takes to fill certain positions;
  9. Unusually high numbers of vacancies result in delays in the staffing process; and
  10. There may be little or no turnover in the work group resulting in little or no gapping.

 

Budgeting for gapping means that the overall compensation requirement in the budget is reduced. However, it also requires more work by the manager and careful scrutiny of vacancies in order to ensure that service levels to the public are not impacted, because gapping also removes the normal cushion of flexibility within the compensation budget to deal with the unforeseen.  It should be noted that the City has not traditionally assigned gapping targets to its 24/7 operations, as these savings are very difficult to achieve because of the unpredictability of workload. This is particularly true because employees in wage positions routinely move between positions depending on workload requirements.

 

The 2006 gapping provision at the City, exclusive of the police was about $13.5 million based on an average annual salary.  Each day a position remains vacant generates $250.  The City must generate about $50,000 in gapping, on average, each business day, throughout the year.

 

Energy

 

Natural gas

The City of Ottawa consumes about 18.5 million m3 of natural gas per year. The 2007

budget is just under $7 million. Through effective planning and timely purchasing of

natural gas the City has saved substantial amount of money from this important budget

item.

 

The City purchases the majority of its natural gas requirements as a member of a consortium of public sector organization made up the City, a university, a college, all the local school boards and several smaller public organizations.   Being part of this purchasing group permits the City to:

 

·        Obtain the best price for gas and thereby reduce costs;

·        Lock in costs at the most opportune time to ensure price stability;

·        Better forecast gas costs over an extended period of time; and

·        Utilize the expertise of more than one group.

 

In addition to buying a portion of its portfolio from the spot market, the consortium purchases gas in packets. These packets can be short term, less than a year, or as long as three years.  Each packet is for a fixed amount of natural gas that is delivered on a daily basis. Currently, the consortium holds several contracts.  

 

This building block approach provides price stability and a means to reduce costs.  This occurs because the only alternative is to purchase gas directly from Enbridge.  By law, Enbridge cannot make or lose money on the cost of natural gas. As a result they have no incentive to find ways to reduce the cost of gas for their customers. By buying in blocks, the average cost of gas is reduced. By buying in the future at fixed prices, there is a built-in savings due to the inflation factor.

 

For the year 2006, the City of Ottawa, through the consortium, saved just under $700,000, compared to what it would have cost purchasing natural gas direct from Enbridge. In the last four years as a member of the consortium, the City of Ottawa has saved over $2.3 million, an average of $575,000 per year.

 

Electricity

The City of Ottawa consumed 295 million kWh of electricity in 2006 at a cost of $29. 8 million.    One third of the cost of electricity is at delivery and regulatory rates are set by the Ontario Energy Board.

 

The balance of the cost of the electricity commodity is set at the Regulated Price Plan (RPP).  This rate is set by the Ontario Energy Board. This is a stable price that only changes every six months. The Regulated Price Plan provides rate stability and predictability.  

 

The City is in the process of developing long-term strategies to purchase electricity.  These strategies will be necessary within the next year and a half because many of our large facilities will no longer be eligible for the RPP. The Ontario government is moving away from fixed rates to rates that will be set by time of day utilization of power. Smart meters are one way of tracking these costs.

 

Diesel Fuel and Gasoline

The City of Ottawa consumes roughly 40 million litres of diesel fuel per year to run the bus fleet and another 10 million litres of fuel (gasoline, diesel and propane) to run the municipal fleet.  In 2006 the fleet fuel budgets totaled over $41 million.

 

In the past two years the price of diesel and gasoline has fluctuated wildly in the market in response to world conditions with price hikes of over 20% in a one-month period.  As the City cannot adjust the fuel budget every time there is a price hike, the City has entered into a series of fixed-price future contracts for the purchase of diesel fuel to minimize its exposure.  Prior to this the City had been purchasing diesel fuel on the spot market, which meant paying the price as of that day.  While the use of forward contracts removes the volatility of fuel prices, and therefore reduces the risk of being over budget, it also eliminates the possibility of budget surpluses should prices drop below those on which the budget was built.  This strategy of trying to lock-in diesel prices at the budgeted amount saved the City millions of dollars in 2006 when compared to prices on the spot market.

 

Provincial Cost-Shared Programs

 

Ontario is the only province in Canada that funds social programs like housing and public health from property taxes. While the Province mandates the standards and overall costs of these programs, they are funded from a combination of property taxes and provincial subsidy. This means that Council has limited authority to alter costs and must fund the remainder of the costs of these services from property taxes.

 

In Ottawa, the projected cost associated with the delivery of these social programs over the next four years will result in a property tax increase of approximately 0.7 percent annually, or an additional $6 to $8 million increase per year.

 

If the Province were to fund all of its mandated cost-shared programs, the average urban residential household in Ottawa would pay $670 less in property taxes per year. Ontario cities have argued that social programs should not be on the property tax bill and are clearly within provincial jurisdiction, as is the case in the rest of Canada.

 

Table 10

Comparison of provincially mandated programs, per household

 

Toronto, unlike Ottawa, benefits from a provincially imposed greater Toronto Area Equalization Formula.  This formula allows Toronto to pool costs and funds from surrounding municipalities. It has resulted in a savings for Toronto taxpayers.

 

Ottawa is not included in this type of income pooling.

 

Ever since the Ontario government downloaded social programs to municipalities, the level of funding for these programs has been a point of debate. Ottawa continues to argue that there are significant funding gaps in many provincially legislated cost-shared programs. This means that the level of funding Ottawa receives from the Province does not accurately reflect the cost-sharing agreement.  This year, the difference between what the Province has agreed to pay for mandated, cost-shared programs and the anticipated amount to be received from the Province, will result in a $13 million shortfall or funding gap for the City of Ottawa. City taxpayers fund this gap to maintain service at the mandated levels.

 

In 2006, the Province took positive steps to address cost-sharing arrangements between the City and the Province through increased paramedic funding and Ontario Municipal Partnership Funding. The remaining shortfall is included in the 2007 budget and discussions with the Province will be undertaken to ensure this amount is recovered.

 

There are also several service areas, such as childcare and long term care, where Council direction has approved a service level above the provincial standard.

 

Recently the Province made a revision to the Social Program Grant component of the Ontario Municipal Partnership Fund. This revision recognized that income transfer programs, such as welfare, should not be funded from property taxes and will result in an additional $6 million grant for Ottawa in 2006.

 

In addition, this past summer Ontario introduced the Provincial-Municipal Fiscal and Service Delivery Review to improve how it funds provincially mandated services. The City of Ottawa will be working alongside other Ontario municipalities to improve the delivery and funding of services for Ontarians. This review is expected to be released in  spring 2008 and could provide new powers and more flexibility to municipalities when the Municipal Statute Law Amendment Act is passed.

 

 

Costs Associated with Growth

 

Population projections

Council adopted current population projections in 2001 as part of the development of the new City of Ottawa’s first Official Plan. The projections detail a 2021 population of 1.2 million, an increase of 50% over 2001 population levels. Population projections are determined by using a variety of information sources, including an annual review of building and demolition permit records, vacancy rates, adjusted household size, and Statistics Canada’s Census information, which is updated every five years.

 

Population projections will be adjusted in 2007 following the release of 2006 Census data. The updated projections will be used to inform the new Official Plan in 2008, as well as the 2009 Development Charges By-law.

 

Actual population levels

The 2003 Official Plan projected a population of 897,500 residents in 2006, which meant 11.3% growth between 2001 and 2006. Actual population was 870,254 residents in 2006. This reflects actual growth of 7.9% between 2001 and 2006. Projections were exceeded in the city’s central areas and Stittsville, but lagged in most rural and inner-city areas, most notably in Riverside South, Leitrim and Kanata. City staff continue to monitor the difference between population projections and actual growth.

 

Updating Growth Projections

Revised projections will be undertaken after release of 2006 Census data in July 2007. New projections are scheduled to go to Committee in early fall. The new projections will form the basis for the 2008 review of the Official Plan and related documents. Transit growth plans will also be based on up-to-date information on building permits and average household occupancies, along with existing ridership levels.

 

Growth and the Operating Budget

Growth is built into the operating budget as follows:

 

It is important to note that growth identified in the operating budget is not related to population projections.  Population projections have more of a direct impact on the Capital Budget through the collection of development charges.

 

Growth and the Capital Budget

Population growth projections are part of the Official Plan, Growth Management Plans,

Development Charges By-law, and LRFP I, LRFP II and LRFP III.  These plans determine projected allocations for revenues and expenses in the Capital Budget. For example, population growth projections shape Development Charge (DC) rate calculations and the related capital projects forecast.

 

The capital budget is adjusted annually based on availability of DC revenues, infrastructure funding requirements, and the priorities and needs of new communities:

 

 

User Fees

 

The City also receives annual revenues from user fees.  The user fees principle refects the fact that not all residents within the City of Ottawa have access to all City services, or choose not to utilize the services.  The Municipal Act gives cities the authority to charge fees for activities or services they provide. However, the Municipal Act also limits these charges to a cost-recovery basis  – in other words, municipalities cannot charge more than the costs incurred to provide these services.

 

In Ottawa, user fees primarily consist of transit fares, water rates, sewer surcharges, as well as registration and entry fees for recreation programs and facilities. These fees partially fund the cost of delivering the service. Currently, user fees are well below the cost to the City for the delivery of these services.

 

Since 2004, user fees have increased annually according to Council policy as the City strives to maintain a constant cost-to-user fee ratio. By increasing user fees, the City can take pressure off the residential property tax bill and better target charges and fees to those individuals who take advantage of the service.

 

Table 11

Comparison of user fees and charges, per household

 

 

Comparisons of city spending are based on financial reporting to the Province between Ottawa, Toronto and a seven-city average of Ontario municipalities (Peel, York, Halton, Niagara, Durham, Hamilton and London).

 

Transit Fares and Ridership

 

Ottawa has the second highest transit ridership levels in the province. In 2006, system-wide ridership increased by 2.6 percent to an all-time high of 91.8 million customer trips.

City staff are working to achieve a further three percent ridership increase in 2007, which would bring annual ridership to 94.5 million customer trips and improve Ottawa’s transit modal split.

 

The City currently has a transit modal split of about 17%.  Modal split is the percentage of motorized trips people make during peak hours by using transit. A higher modal split is better for the environment, and reduces congestion on roads. The City’s Official Plan and Transportation Master Plan identify the improvement of transit’s modal split as a key priority in the development of a green, liveable community.

 

Meeting Transit Growth

Ridership on Ottawa’s current transit network continues to grow very rapidly, but is not consistent across the whole City.  Some routes have higher rates of growth because they serve areas that are experiencing rapid residential development, employment increases, or commuter traffic congestion. 

 

Growth of the city affects the transit system by requiring:

 

·        New transit routes to service new areas;

·        More bus trips along busy routes as ridership increases; and

·        The extension of Rapid Transit service to areas that are increasing in population density such as Barrhaven, Riverside South, Kanata West and Orléans.

 

Council has approved service standards to ensure that resources are allocated on an equitable basis across the community and has also set financial performance standards to ensure that resources are not wasted.

 

Consistent standards are applied to peak period service to ensure that additional trips are added to the routes with the most crowding. The Council-approved policies ensure that, through the operation of a base route network, 95% of the population is within a five-minute walk of transit service in peak periods and within a 10-minute walk at other times.

 

Transit Operation Costs

In 2005, 49.9% of the City’s transit operating costs were recovered from passenger fares and advertising revenues, with the remainder funded by development charges, property taxes, and gas tax funds from the provincial government. The City sets user fees based on a policy direction given by Council. In the case of transit fares, the rate reflects  a balance between Council’s desire to increase ridership and the target cost recovery ratio.

 

In 2005, Council adopted a policy to increase this ratio to a target of 55% recovery of direct transit expenditures from users and advertising revenue, which would bring Ottawa closer to the provincial average. Ottawa is not unique, as all Ontario municipalities have had to increase their transit user fees due to economic factors, such as higher gas prices, higher wage costs and increased maintenance costs. The City is looking at ways to continue to move towards a revenue to cost ratio of 55% without jeopardizing Council’s public transit objectives. 

 

 

Table 12

How much of transit services costs is recovered through transit fares?

 

This graph, from the 2006 Ontario Municipal Benchmarking Initiative (OMBI), shows that Ottawa’s cost recovery ratio is at the median among OMBI municipalities. OMBI compares 15 Ontario municipalities and analyzes their performance in a wide range of service areas.

 

Council approved a 7.5 percent fare increase to begin July 2007 and a route reduction plan of $360,000, both of which are incorporated in the 2007 Draft Budget.  However, these changes result in a 49.9% revenue-cost ratio well below Council’s goal of 55%.

 

To increase the revenue-cost ratio to 52% consistent with council direction to get to 55%, revenues could be raised by:

 

 

Achieving the City’s target ridership goals is a balance between ensuring service levels, controlling operating costs and fare increases. Finding the best balance to achieve Council’s target is an important factor in transit budget planning.

 

The 2007 Draft Budget, proposes to move approximately $9.5 million in provincial gas tax revenue to the operating budget to offset transit operating costs. Previously, the gas tax was allocated to the capital budget to fund transit capital projects such as acquiring buses, light rail or building transitways. The 2007 Draft Budget recommends using debt, which can be paid for by using future federal gas tax revenues, to pay for capital strategic initiatives transit projects.

 

Improving transit services

The following are some of the initiatives underway to improve transit services in Ottawa:

 

 

Solid Waste

 

The City of Ottawa manages solid waste from residential households and some small non-residential establishments through a combination of public and public/private partnerships. In 2005, there was approximately 1,017,000 tonnes of commercial and household waste generated in Ottawa. Approximately, 32.3% of that waste was diverted away from landfill sites with most of the remainder heading towards landfill sites within the City’s borders. A small portion was sent to the Lafleche Landfill in Moose Creek. The City is working to meet the provincial target of 60% solid waste diversion from landfills by 2008.

 

Currently, the City provides the following diversion services to residents; 

 

·        Blue and black box recycling;

·        Leaf and yard waste pickup;

·        Take-it-Back Program;

·        Household Hazardous Waste;

·        Compost Plus organics pilot project;

·        Yellow Bag program for small businesses;

·        Rethink Garbage information; and

·         Plasco plasma gasification pilot project.

 

Diverting waste benefits the environment and municipal taxpayers by reducing greenhouse gases, reducing demands for natural resources, and generating revenue.

 

The City has also been planning for the future. Under the direction of Council, staff is investigating and exploring new methods and technologies that could ease the burden that future tonnes of household and commercial garbage represent for local landfills. This includes searching for new ways to divert commercial and industrial waste, as well as improving household diversion through current recycling and municipal compost programs.

 

The Province controls industrial, commercial and institutional (ICI) waste, which represents the majority of waste going to landfills. City staff is working with the Province to identify new ways to divert ICI waste from landfills and exploring how alternative technologies could be employed.

 

There are four (4) landfills situated within Ottawa’s boundaries, two of which, Trail Road and Springhill, are owned by the City. The availability of landfill capacity in and around Ottawa has kept the solid waste disposal tipping fee low. The cost per tonne for disposal of solid waste in Ottawa is 16% lower than the median set by 2006 Ontario Municipal Benchmarking Initiative.

 

The 2007 Draft Budget puts forward the option of diverting 30,000 tonnes of residential waste to the Moose Creek Landfill, at a tipping fee of $42 per tonne. This will create an opportunity at the Trail Road Landfill to accept the equivalent amount of Ottawa’s industrial, commercial and institutional waste (ICI). Trail Road currently has a $75 tipping fee for all incoming waste. By diverting residential waste to Moose Creek and replacing it with ICI, the City could generate a net revenue of $850,000 per year.  In summary, additional revenues generated from the approval of moving 30,000 tonnes of residential waste to Moose Creek and accepting a corresponding tonnage and additional ICI waste to Trail Road would reduce the user fee for solid waste from 6.3% to 1.6% in 2007.

 

The City also has the option of increasing revenues by accepting additional tonnes of ICI waste at Trail Road Landfill. Part of the 2007 Draft Budget recommendations includes an increase in ICI waste of up to 13,500 tonnes per year that would generate approximately $1.5 million dollars in new revenue. 

 

At the current household waste diversion rate of 32%, the Trail Road Landfill has approximately 25 years of remaining capacity. The City is working to improve household waste diversion rates, find new technologies and work with the Province to improve diversion rates for ICI at source.

 

Water and Sewer

 

The City of Ottawa provides safe, reliable, clean water and sewer services that citizens rely upon every day. The City is committed to continuously improving Ottawa’s water and sewer system. Since much of this infrastructure was installed shortly after World War II, it requires ongoing rehabilitation or replacement to maintain current standards.

 

Water and sewer operations are funded through a utility bill paid only by residents and businesses that use this City service and is not part of the property tax bill.  This is done, in part, because not all residents within the City of Ottawa have access to all City services.  This utility bill is based on the water residents and business use, plus their share, of the costs to maintain and repair the infrastructure, and the daily cost to deliver safe, clean water to residents and return that water to the environment after use.

 

The water and sewer rate has been developed to cover the full cost of drinking water and wastewater treatment service delivery. Development charges are intended to cover the cost of expanding the system into new areas. The current water and wastewater rate, however, is insufficient to fund the operating and capital requirements over the next decade.

 

Increasing the water and sewer rate

The City of Ottawa is proposing a water rate increase of approximately $63 per household in 2007 to cover the cost of rehabilitating and replacing aging infrastructure to ensure safe, clean drinking water, and to keep pace with higher inflation on chemical and power costs. It also covers the costs of modifications to the City's water treatment and distribution systems in accordance with new provincial water regulations and City Council directions.

 

Key issues impacting the cost of water services in the City of Ottawa include:

 

 

According to the most recent Ontario Municipal Benchmarking Initiative report, Ottawa’s operating costs for treatment and distribution of drinking water services is approximately 10 to 15 percent below OMBI municipalities. Additionally, the staff who operate the water purification and wastewater plants have been recognized by the Ontario Municipal Benchmarking Initiative as leaders in energy management - saving the City $2.78 million annually in energy costs and reducing the impact on our environment.

 

Planned investments in water and sewer projects

The City of Ottawa is expanding the Lemieux Island Water Purification Plant in order to comply with new provincial regulations on wastewater.

 

Council has also directed the City to maintain an annual $20 million reserve fund to address any unforeseen problems in the water and sewer system.

 

On July 11, 2006, Council approved a pilot proactive Lead Service Replacement program for 2007 with a cost of $8.7 million.

 

Council directed staff to ensure that the 2007 Capital Budget address the backlog in damaged sewer laterals, the pipe that connects a home to the City’s sewer main.  This initiative adds an additional $6.2 million to the 2007 budget pressures.

 

Water and Sewer Administrative Costs

The City has a policy to ensure that the total costs of water and sewer services are covered by user fees and not subsidized through the tax bill. Occasionally questions arise as to the administration fees within the water and sewer utility bill.

 

The term “administrative” covers more than administrative costs. They include:

1.      Administrative services that can be measured by volume (invoices, bills, claims, etc.);

2.      Administrative services provided by other branches in support of the water and sewers such as planning, design, construction and maintenance; and

3.      Administrative functions for the services provided.

 

The City’s Finance Department has used three different methods to calculate the administrative costs to ensure that the current rate is accurate.  These include:

 

1)      A formula used by the former Regional government;

2)      A method determined by OMBI;

3)      A calculation based on a percentage of expenditures in water and sewer services.

 

The cost difference between these methods is not significant enough to warrant an adjustment to the current administrative costs calculations.  Financial Services branch will continue to review this calculation on a regular basis to advise Council if an adjustment is required in either direction. In future budgets, Financial Services is working to make the administrative charge more understandable and transparent.

 

What else is the City doing to improve water services?

The City is undertaking a number of key initiatives to improve water services. These include:

 

Recreational Services

 

User fees for recreational services totaled $35 million in 2005, representing 35 percent of total expenditures for the service. Property taxes cover 65 percent of the existing cost of recreational services,

 

Ottawa collects more user fees for recreation services than Toronto and the seven-city average on a per capita basis: $100 per household for recreational fees compared to $66 for the Ontario seven-city average and $37 for Toronto.   However this high household contribution is attributable to Ottawa’s high participation rates and not to the cost of individual recreation programs as highlighted in the chart below.

 

 

Table 13

How much are residents using registered sports and recreation programming?

 

The City has ensured that low-income families are not priced out of recreational programs by increasing the amount of subsidy by an amount equivalent to any user fee increase.

 

Ottawa has the highest rate of participation in sports and recreation programs as repored through OMBI and strengthens the health and well-being of Ottawa residents. The City of Ottawa is committed to developing a healthy and active city by delivering recreation programs in arenas, pools, recreation, community, and senior centres that are reasonably priced and accessible.

 

The proposed 2007 recreation fee increases are based on extensive benchmarking with the local public and private sector, with other Ontario municipalities, and with other Canadian municipalities.  The main comparator was the five-City average based on five Ontario municipalities similar to Ottawa (London, Hamilton, Toronto, Mississauga, and Kingston). 

 

The results of the benchmarking helped to determine the magnitude of the fee increases in a variety of categories including sports-fields, arenas, registered programs, halls, summer camps, aquatics, fitness, etc.  Where the City of Ottawa was significantly below average levels, fees were increased to meet the benchmarked average.  Where fees were comparable to the averages the fees were increased by inflation (2%) only.

 

Certain activities remain free of charge including outdoor rinks, wading pools, Park-ticipate, youth on the move, beaches, parks, skateboard parks, municipal tennis courts, etc.  Other activities remain very low cost including public swimming and public skating.

 

Improving sports and recreation services

In accordance with Council direction, in 2007 the City will be reviewing access to basic recreation services as part of a larger process to consolidate and update recreation policy and planning with the context of a Recreation Master Plan.