5. DISPOSITION OF 2009 TAX SUPPORTED
OPERATING DEFICIT
RÈGLEMENT DU
DÉFICIT DE 2009 DES OPÉRATIONS FINANCÉES PAR LES RECETTES FISCALES
That Council approve the following
transfers from reserve funds:
1.
That the deficit of $17.4 million, after adjustments made under
delegated authority, in the tax supported operations be funded by:
a)
a transfer from the City Wide Capital Reserve Fund of $5.3 million;
b)
a transfer from the Corporate Fleet Reserve Fund of $11.9 million, to
be repaid in future years capital budgets; and
c)
a transfer from the Library Capital Reserve Fund of $0.152 million;
2. That $5 million in 2009
budgeted land sales from the Ottawa Lands Development Corporation be funded
from 2010 land sale proceeds; and
3. That
the report be forwarded to Council with the REVISED Document 2.
Que le Conseil
approuve les transferts suivants des fonds de réserve:
1.
pour financer le déficit de 17,4
millions de dollars, après rajustements faits par délégation de pouvoirs, des
opérations financées par les recettes fiscales :
a)
un transfert de 5,3 millions de
dollars provenant du Fonds général de réserve pour immobilisations;
b)
un transfert de 11,9 millions de
dollars provenant du Fonds de réserve pour immobilisations du Parc automobile,
à rembourser dans les budgets futurs d'immobilisation; et
c)
un transfert de 0,152 million de
dollars provenant du Fonds de réserve pour immobilisations de la Bibliothèque;
2.
pour
combler le déficit des ventes budgétées en 2009 pour la Société d'aménagement
de terrains d'Ottawa, un transfert de 5 millions de dollars sur le produit des ventes de terrains en 2010;
et
3. que le rapport soit transmis au
Conseil avec le Document 2 MODIFIÉ.
Documentation
1. City Treasurer’s report dated 12 April 2010 (ACS2010-CMR-FIN-0020).
2. Extract of Draft Minute, 20 April 2010.
Report to/Rapport au :
Audit,
Budget and Finance Committee
Comite de la vérification, du budget et des finances
and / et au Conseil
12 April 2010 /
le 12 avril 2010
Submitted by/Soumis par :
Marian Simulik, City Treasurer/Trésorière municipale
Contact
Person/Personne ressource : Mona Monkman, Deputy City Treasurer- Corporate
Finance/ Trésorière municipale adjoint -
Finances municipales
Finance Department/Service des
finances
(613)
580-2424 x41723,
mona.monkman@ottawa.ca
SUBJECT:
|
|
|
|
|
OBJET :
|
RÈGLEMENT DU DÉFICIT DE 2009 DES
OPÉRATIONS FINANCÉES PAR LES RECETTES FISCALES |
That the Audit,
Budget and Finance Committee recommend Council approve the following transfers
from reserve funds:
2.
That the deficit of $17.4 million, after adjustments made under
delegated authority, in the tax supported operations be funded by:
a)
a transfer from the City Wide Capital Reserve Fund of $5.3 million;
b) a transfer from the
Corporate Fleet Reserve Fund of $11.9 million, to be repaid in future years
capital budgets; and
c)
a transfer from the Library Capital Reserve Fund of $0.152 million;
and
2. That $5 million in 2009 budgeted land sales
from the Ottawa Lands Development Corporation be funded from 2010 land sale
proceeds.
Que le Comité de la vérification, du budget et
des finances recommande au Conseil d'approuver les transferts suivants des
fonds de réserve:
3.
pour financer le déficit de 17,4
millions de dollars, après rajustements faits par délégation de pouvoirs, des
opérations financées par les recettes fiscales :
d)
un transfert de 5,3 millions de
dollars provenant du Fonds général de réserve pour immobilisations;
e)
un transfert de 11,9 millions de
dollars provenant du Fonds de réserve pour immobilisations du Parc automobile,
à rembourser dans les budgets futurs d'immobilisation; et
f)
un transfert de 0,152 million de
dollars provenant du Fonds de réserve pour immobilisations de la Bibliothèque;
et
4. pour combler le déficit des ventes budgétées en
2009 pour la Société d'aménagement de terrains d'Ottawa, un transfert de 5 millions de dollars sur le
produit des ventes de terrains en 2010.
As part of the finalization of 2009 operations, and in conjunction with the preparation of the financial statements, it is necessary to obtain Council approval of the funding of any operating deficit from the capital reserve funds. This report provides an analysis of the final results of the 2009 tax-supported operations and the disposition of surpluses or deficits, including those transfers to/from reserves made in accordance with various reserve fund by-laws as well as those made under delegated authority or Council direction.
The 2009 Rate-supported water and wastewater program year-end results are discussed in a separate report submitted to the Planning and Environment Committee.
Year-End Results
The City ended the year with a $17.4 million deficit in the tax supported program area equivalent to approximately 0.8% of the City’s $2.2 billion in annual spending on tax supported operations. The $17.4 million deficit is discussed in this report with Document 1 presenting a summary of the year-end results by department and Document 2 providing a variance analysis of the major results.
The year-end deficit position is comparable to previous projections, including the forecasts used during the development of the 2010 tax-supported operating budget. Where year-end positions differ from amounts previously forecasted, these have been highlighted in Document 2.
The year-end results and their causes are consistent with information previously provided. Key points are:
1. Asset rationalization and technology improvement targets - $6.9 M
2. Fire Services efficiencies were deferred until the opening of a new station - $1.8 M.
Departmental efficiency targets that remain to be achieved are reflected in the 2010 budget. The Service Excellence Program, in conjunction with the 2010 capital investment for that initiative, will generate future efficiency savings along with service improvements.
·
Several revenue line items in the City’s budget were
higher than projected. These include:
1. Hydro Dividend in excess of amount budgeted – $3.2 M surplus
2. Sale of surplus lands in excess of amounts budgeted – $1.8 M surplus
3. Waste Diversion Ontario funding and recycling revenues – $1.7 M surplus
4. Tax Rebates and Remissions – $1.3 M surplus
5. Child Care Fee Program – $1.0 M surplus
These were partially off-set by lower-than-anticipated Payments in Lieu of Taxation ($3.5M) and shortfall in Provincial Offences Act revenue ($2.3M). This led to a net positive variance of $3.2M.
Other Key highlights:
In September of 2009, the City paid $35.0 M (excluding taxes) in settlement of litigation with respect to light rail transit. The payment for the settlement was drawn from the City Wide Capital Reserve Fund. The 2010 Budget, as approved by Council, replenishes the reserve fund through contributions from taxation. As this reserve fund is normally used for capital infrastructure, the settlement will affect the amount of funds available for future capital programs.
Disposition of
Deficit
The year-end deficit for
City operations and agencies, as shown in Document 1, is $17.4 M. This net deficit includes program surpluses,
which under Council by-laws, are contributed to various reserve funds. These include surpluses in the parking, solid
waste, transit, housing and child care program areas. When these surpluses are transferred to the
various reserves, in accordance with Council policy, the remaining deficit that
must be funded through Council authority in this report totals $22.4 M. Staff recommends the disposition of this
deficit as follows:
|
$000 |
Total |
City Wide |
Transit |
Police |
Library |
|
Deficit - per Document 1 |
(17,470) |
(17,242) |
9 |
(85) |
(152) |
|
1) Program surpluses to
reserve funds under delegated authority: |
|
|
|
|
|
|
Parking
surplus not included in Document 1 |
611 |
611 |
- |
- |
- |
|
Transfer
to Parking Reserve |
(611) |
(611) |
- |
- |
- |
|
Transfer
to Solid Waste Reserve |
(1,843) |
(1,843) |
- |
- |
- |
|
Transfer
to Transit Reserve |
(9) |
- |
(9) |
- |
- |
|
Transfer
to Housing Reserve |
(2,096) |
(2,096) |
- |
- |
- |
|
Transfer
to Child Care Reserve |
(932) |
(932) |
- |
- |
- |
|
|
(4,880) |
(4,871) |
(9) |
- |
- |
|
Deficit after adjustments
made under delegated authority |
(22,350) |
(22,113) |
- |
(85) |
(152) |
|
2) Deficit Disposition
Recommendations |
|
|
|
|
|
|
City
Wide |
5,306 |
5,221 |
- |
85 |
- |
|
Corporate
Fleet |
11,892 |
11,892 |
- |
- |
- |
|
Library |
152 |
- |
- |
- |
152 |
|
Deficit Disposition
Recommendations |
17,350 |
17,113 |
- |
85 |
152 |
|
Balance - 2010 Land Sales |
(5,000) |
(5,000) |
- |
- |
- |
Continuity
of Reserves and Reserve Funds
Document 3
presents a continuity schedule of the City’s reserve funds. The schedule shows the impact on reserve
balances of the recommendations for surplus disposition that are included in
this report. A net amount of $12.0 M is
being withdrawn from the reserves as recommended by this report. The schedule also shows the 2010 opening
negative balance in the City Wide Capital Reserve Fund due to the September
2009 payment for the Light Rail litigation settlement. These funds are repaid during 2010 through
contributions from taxation, as approved by Council in the 2010 budget.
This continuity schedule excludes the water and waste water reserve
funds, which are included in the 2009 Year-end Rate supported disposition
report, which will be submitted to the Planning and Environment Committee. It also excludes gas tax revenues and
development charge revenues on hand for use in future periods (deferred
revenues), as well as various operating and self insurance reserves.
Year-End Results compared to
Previous Forecasts
Council previously received year-end forecast updates based on June 30
results, and again throughout the budget process, based on third quarter
results. As of June 30, staff forecasted
a $12.0 to $18.0 M deficit, dependent on the eventual disposition of revenues
from Payments-in-lieu of property taxes lost through government property
privatization. During the budget
process, the forecast was established at a net of $15.0 M, excluding the $35.0
M light rail litigation settlement.
The $17.4 M year-end deficit position is consistent with both previous
forecasts. The most significant change
from the forecast is in investment income.
Previous forecasts had identified a $4.5 M shortfall in investment income
due to the low interest environment. The
actual year-end position was a $7.7 M shortfall. During the last half of the year, funds
available for investment were reduced due to increased spending on some major
capital projects, including infrastructure stimulus projects and new police and
transit facilities.
During the year, adjustments to budgets are
made to better reflect the alignment of budget authority with spending
needs. These transfers are made either
through the delegated authority given to the City Treasurer or through
Council-approved reports. Document 4
shows the changes in budgets processed throughout the year. Council policy requires the reporting of
these transactions for information purposes.
The purpose of this report is administrative in nature and therefore no public consultation is required.
The transfers outlined in the recommendations require Council approval. There are no legal or risk management impediments to implementing the recommendation in this Report.
Financial implications are outlined in this report.
RURAL IMPLICATIONS
N/A
Document 1 – 2009 Operating Results Summary– Tax Supported Programs
Document 2 – Variance Analysis – 2009 Operating Results – Tax Supported Programs
Document 3 - Reserve Continuities – Tax Supported
The Finance Department will make the necessary accounting adjustments.
Variance Analysis
City Manager’s Office – Surplus results from reduced
requests for translation services in French Language Services. Activities
requiring translation delayed and/or deferred due to the corporate
reorganization and in response to the projected 2009 corporate operating
deficit.
Financial Services – Staffing/spending requests were
delayed and/or deferred in response to the projected 2009 corporate operating
deficit resulting in a small surplus.
City Clerk & Solicitor – Deficit primarily the result of
increased cost of external legal services with respect to contracts (i.e. Pay
and Display, Ottawa Congress Centre, Plasco Energy, Source Separated Organics,
etc.) partially offset by increased mailroom and print shop recoveries and
increased revenues resulting from the delay in the provincial upload of birth
registrations.
City Operations
Variance Analysis
Organizational Development & Performance – Staffing/spending initiatives delayed as a result of corporate
reorganization from which the ODP Department was created.
Emergency & Protective Services –
As reported in the 2009 Corporate tax
Supported status report – q2 the primary reason for the deficit was the delayed savings
in productivity targets in Fire Services. The
savings productivity targets are
unrealized as they are tied to the strategic redeployment of fire staff to the
new Ottawa South fire station, which is not slated to open until late 2011.
Management mitigation decisions to delay staffing/spending initiatives reduced
the projected deficit from the $2.3M forecast in Q2.
Community
& Social Services – Favourable mortgage renewal rates in
Housing, lower fee subsidies and increased parental contributions due to
legislated changes to income testing in Child Care and savings in Employment
and Financial assistance as a result of provincial implementation of the
Ontario Child Benefit were the primary drivers of the surplus. These positive
variances were partially offset by increased expenditures for Workers Safety
Insurance Board costs (WSIB) in Long Term Care. Permanent savings of $1.3M
associated with the Ontario Child Benefit were accounted for through the 2010
budget process.
Ottawa
Public Health – The increased expenditures and revenues are
a result of H1N1. All City costs associated with the emergency measures
initiative have been accumulated in Public Health Department. Revenues include
a receivable for incremental costs of $3.7M.
The claim has been submitted as per Ministry of Health directives and
the City is anticipating payment.
Parks,
Recreation & Cultural Services – Increased compensation of
as a result of the cost of living adjustment settlements at 2.5% versus budget
adjustment of 1% and increased participation in recreation programs along with
increased operating costs at Centerpointe Theatre resulted in the over spending
on expenditures. Revenues offset the increased operating cost at Centrepointe
and partially offset the recreation program participation increase. The cost of
living settlement shortfall and the increase in expenditures and revenues at
Centerpointe are both permanent variances and have been accounted for by
adjusting budgets in 2010.
Although
revenues appear to match budget they should be in surplus based on the over
spending identified above for increased program participation and Centerpointe
Theatre. The increased revenues for program participation and admissions were
offset by revenue losses in hall rentals due to loss of market share based on
negative reaction to pricing and arena rentals resulting from unplanned arena
closures for repairs and maintenance.
Public
Works - As reported in the 2009 Corporate tax Supported status report – q2 at
June 30 Public Works projected a $2 M deficit, primarily due to winter
maintenance costs. Management mitigation measures in combination with savings in
the later part of the year due to lower snow volumes enabled the Department to
limit the deficit. The primary driver of the remaining deficit
is the shortfall in the compensation cost of living adjustment of 2.5% versus
1% identified in the Q2 report
Infrastructure Services and Community
Sustainability
Planning and Growth Management – The downturn in the economy has
adversely impacted planning processing revenues by $3.2 M. Expenditures were reduced to partially offset
the shortfall in revenues. The 2010 budget was adjusted downward by $1 M to
reflect an expected continuation of lower processing fee revenues.
Building Code Services – Continued high levels of activity in the
building sector and savings from delayed staffing activities generated a
surplus in this program. In accordance
with Provincial legislation, the surplus in this program area is contributed to
the building code reserve funds.
Solid
Waste Services –
The solid waste services program includes the recycling and diversion program
which is funded from taxation, and the solid waste collection and disposal
program which is funded through separate fees based on usage. Tipping fees at the Trail Road landfill were below budget due to lower
commercial and industrial activity.
Staff mitigated this revenue shortfall by directing less municipal solid
waste to the Moose Creek Landfill. Waste
Diversion Ontario funding exceeded budget and forecasts mainly due to the new
Household Hazardous Waste Funding Program.
Recycling material markets improved significantly over the last quarter,
resulting in a year-end surplus. Per
household fee revenues exceeded budget due to stronger growth in the number of
households served, than planned for in the budget estimates. Expenditures for Plasco tipping fee costs
were lower than budgeted, due to the delay in start up of the facility.
In accordance with Council by-laws, any surplus in
the solid waste collection program, is to be transferred to the Solid Waste
reserve. $1.8 M of the solid waste
services program surplus is being transferred to the solid waste reserve.
Transit
Services - Transit services ended the year in a break
even position. Compensation costs
exceeded budget due mainly to bus maintenance requirements during the service
reinstatement period following the bus strike in early 2009. These costs were offset by savings in fuel
costs, a reimbursement for fuel costs,
and other operational efficiencies. Para Transpo passenger revenues
exceeded planned revenues due to an increase in passenger trips. These additional trips were possible as a
result of scheduling efficiencies and the use of external contractors. The budget for transit services was adjusted
at the beginning of the year to reflect the lower revenues and cost changes
associated with the transit strike.
Funding from the Transit reserve was used to offset the impacts of the
strike.
As Transit is an area-rated levy it is maintained as
its own fund. For purposes of year-end
accounting the transit levy taxation has been included in the revenue column
for Transit Services. Also in accordance
with Council by-law, the surplus in the program is to be transferred to the Transit
reserve.
Corporate Efficiency Savings Targets
Planned savings through procurement initiatives are being realized. Results reflect the City’s aggressive approach to taking all vendor early payment discounts, and it’s approach to negotiating value for service contracted. Planned savings through Asset Rationalization and Technology Investments were not achieved. These planned savings have been incorporated into the 2010 budget as new targets for Procurement Savings. Integrating the purchasing function into the beginning of the design of a project will allow the City to progress on its procurement savings objectives.
Technology
savings objectives are integral to the approved 2010 budget and will be
reflected in various departmental savings targets that are associated with the
Service Excellence Program. Asset
Rationalization targets have been reduced in response to Council’s direction on
the disposition of City assets.
Corporate Benefit
Provisions
The
surplus in this program is results from sick leave bank cash payouts during the
year being less than amounts budgeted for average year. In accordance with past practice, the savings
in this account are only transferred to a reserve for future sick leave bank
payments in the year where there is an overall City surplus. Due to the overall deficit this transfer was
not made for 2009.
Capital Formation
Costs
Surplus land sales are not budgeted for on an annual basis since the land available for sale will vary widely from year to year.
The Ottawa Lands Development Corporation
was established by City Council to promote the sale of excess City lands. The Ottawa Lands Corporation recently
approved sale agreements that will generate sufficient proceeds to meet the
2009 and 2010 budgetary requirements during 2010. The
$5 M in 2009 budgeted land sales (net of costs) are not funded in the 2009
disposition since these sales are expected to be confirmed during 2010.
Corporate Common Expenditures and Revenues
Self Insurance Expenditures
These expenditures represent the portion the City
pays up to the deductible for insurance claims.
Claim levels will vary from year to year. Because the City had an overall deficit, the
surplus was not transferred to the self insurance reserve.
Financial Charges Expenditures and Other Miscellaneous Revenue: $35 M Settlement of Light Rail
Litigation
In September of 2009, the City paid $35 million (excluding taxes) in settlement of litigation with respect to light rail transit. The payment for the settlement was drawn from the City Wide reserve (other miscellaneous revenue). The 2010 Council approved budget replenishes these reserves through contributions from taxation to the City wide reserve. As these reserve funds are normally used for capital infrastructure, the settlement will affect the amount of funds available for future capital programs.
Financial Charges Expenditures and Miscellaneous Revenue (excluding
LRT settlement)
The financial charge expenditure account provides
for expenditures relating to the daily cash management of the City’s operations
and costs associated with issuing long term debt; provisions for doubtful
accounts and other sundry financial charges that may occur during the year such
as commodity tax adjustments and special audit fees.
During 2009, costs arising from commodity tax audits
caused a negative variance in this account.
Credit card processing fee budgets were overspent. The 2010 budget has been adjusted to reflect
the recent increase in merchant discount rates and the growth in use of credit
card payments for City programs.
Investment Income
Previous forecasts had anticipated a $4.5 M
deficit in investment income for the year.
The actual year-end position was a $7.7 M shortfall. During the last half of the year, funds
available for investment were reduced due to increased spending on some major
capital projects, including infrastructure stimulus projects and new police and
transit facilities. The 2010 budget has
been adjusted by $4.5M to reflect the continued low interest rate environment
through to mid year 2010.
Hydro Ottawa Dividends
The City receives an annual payment from Hydro
Ottawa equal to the greater of $14 M or 60% of Hydro Ottawa’s net income as
outlined in the Council-adopted dividend policy.
The 2009 dividend received is reflective of Hydro
Ottawa’s earnings that are in excess of the minimum required by the City under
the dividend policy.
Provincial Offences Act Revenues
The dollar value of tickets issued was lower than
anticipated. Ticket issuance volume was also down by 11% in 2009. Budgets have not been adjusted in 2010.
Taxation Related Revenues and Expenditures
Payments In Lieu of Taxation
The City receives payments in lieu of property taxes
from senior governments. Under existing
provincial legislation, the education share of those taxes is retained by the
City. When senior governments privatize
their property holdings, the resulting education share of the taxes is
distributed to the province, as is required in the property collection
process. In 2008, the City recorded an
outstanding amount receivable of $4 M for the education share of payments in
lieu of property taxes that were lost through privatization. The City had petitioned the Province’s Minister
of Finance to restore this long-standing revenue source to the
municipality. Since negotiations with
the Province have not result in positive movement on this file, the City has
reversed the amount receivable from prior years.
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Table 1 – Budget Adjustments and
Transfers |
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|
Nature of Budget Adjustment |
Amount
($Millions) |
Funding Source |
Net Effect on Budget Revenues and Expenditures |
|
Reflects completion of one-time operating projects and the return of the unspent portion of funding to City Wide Reserve ACS2009-CMR-FIN-0016 Document 6 (Various Departments) |
0.225 |
City Wide Reserve |
Decrease in Revenue and Expenditure |
|
Establish Ontario Funding Agreement Immigration Web Portal (Organizational Development & Performance) |
0.163 |
Provincial Funding |
Increase in Revenue and Expenditure |
|
Reduction in Provincial Enhancement funding for the Working City initiative that ended (Employment & Financial Assistance) |
0.618 |
Provincial Funding |
Decrease in Revenue and Expenditure |
|
Increase in Fee Subsidies for Children Services (Child Care Services) |
0.660 |
Revenues |
Increase in Revenue and Expenditure |
|
Establish Ministry of Health for Long Term Care funding (Long Term Care) |
0.466 |
Provincial Funding |
Increase in Revenue and Expenditure |
|
Establish Canadian Heritage contribution Agreement – French Heritage Grant (City Manager’s Office) |
0.180 |
Provincial Funding |
Increase in Revenue and Expenditure |
|
Establish Hostels to Homes funding (Social Services) |
0.200 |
Provincial Funding |
Increase in Revenue and Expenditure |
|
Establish one FTE in Communicable Disease Control & Outbreak Management Unit (Ottawa Public Health) |
0.080 |
Provincial Funding |
Increase in Revenue and Expenditure |
|
Increase in Corporate Portfolio tax payments funded by revenues (Real Estate Partnerships & Development) |
0.150 |
Revenues |
Increase in Revenue and Expenditure |
|
Establish one-time funding to implement a promotional campaign for BIAs affected by infrastructure restoration, economic recession & Transit Strike (Communication & Customer Service) |
0.211 |
Transit Reserve |
Increase in Revenue and Expenditure |
|
Table 2 – Inter & Intra-departmental Budget Adjustments & Transfers |
|
|
|
$Millions |
|
Human Resources Occupational Health & Safety 3 new FTE’s from all Department’s WSIB to Human Resources to reduce lost time because of accidents and injuries. |
0.240 |
|
Transferring fuel savings from clients to Snow Removal per ACS2209-CMR-FIN-0020 |
0.587 |
|
Transfer Para Transpo Fuel from Fleet to Transit as a result of the 4Refuel Pilot Program |
2.181 |
|
Establishing secondary allocations for Parking Program Support in accordance with the Parking Funding Model from various departments to Parking |
2.250 |
|
Functionalizing Parking Debt from Non Departmental to Parking in accordance with the Parking Funding Model |
1.647 |
|
Establish a Parking Reserve in accordance with the Parking Funding Model from the City Wide PAYG to Parking |
5.081 |
|
Functionalizing Solid Waste Reserve & Debt from Non Departmental to Solid Waste Services |
3.921 |
DISPOSITION OF 2009 TAX SUPPORTED
OPERATING DEFICIT
RÈGLEMENT DU DÉFICIT DE 2009 DES OPÉRATIONS FINANCÉES PAR LES RECETTES
FISCALES
ACS2010-CMR-FIN-0020 city-wide / À l’Échelle de la ville
Ms. Marian Simulik, City Treasurer, spoke to a
PowerPoint presentation, which served to provide Committee with an overview of
the report. A copy of his presentation
is held on file with the City Clerk.
Councillor McRae referenced recommendation 2,
which proposed taking $5M from land sales proceeds from the Lands Development
Corporation (LDC). She indicated she had
been unaware that such funds were available through the Corporation and she
asked for an update on its status and who was running it.
Vice-Chair Harder advised that the LDC Board
had recently held its first meeting and that she had been chosen to chair
it. She wondered if the City Manager was
prepared to speak to the matter, indicating that she had questions with respect
to protecting the City against estimating when sales would go through. Mr. Kent Kirkpatrick, City Manager, confirmed
that the LDC Board had recently held its first meeting. As for the funds referenced in recommendation
two of the report, he reported having met with Mr. MacNair and Mr. Donaldson
and having looked at the sales that were about to close, what could be
anticipated to close in 2010 and looking forward to 2011. He expressed confidence in those revenue
projections and offered to provide a memo to members of Council on the status
of the Corporation and the land sales.
He re-iterated his belief that Committee did not need to be concerned
about the reliability of the revenue forecasts.
He acknowledged that there had been an issue the previous year because,
although sales were made, there was a question of closing dates. He maintained this would not be a problem
this year, nor did he think it would be a problem in 2011.
Councillor McRae expressed a desire to receive
this information sooner rather than later as she was not aware that there had
been a meeting and she felt a message should go out as soon as possible to
indicate who was overseeing it and where it was going.
Councillor Harder referenced another Board,
which had also had its first meeting, the Manotick Mill Quarter. She suggested members of Council should have
a discussion about Boards of Directors in general.
Councillor McRae believed members of Council
should receive an IPD about these bigger issues.
Responding to a question from Councillor
El-Chantiry, Mr. Steve Kanellakos, Deputy City Manager of City Operations,
confirmed that Council had approved $23M as the first part of an investment to
introduce technology within the organization to ultimately find almost $40M in
efficiencies over the next three to four years.
He indicated staff would be bringing forward a report to the IT
Sub-Committee and the Corporate Services and Economic Development Committee in
late May or early June to outline the project structure, the status of the
tendering process and other related items in terms of how staff was setting the
project up to move forward.
Councillor El-Chantiry believed everyone
understood that the investment would not yield returns in the first year,
particularly since it was an investment in IT.
However, he felt it was important to keep members of Council
updated. Mr. Kanellakos concurred,
adding that there were nine projects, each one having an investment requirement
and a return on investment. He advised
that a target had been set for 2010 but the big savings would come in 2011 and
2012, noting Council would be able to see how staff had done. He added that the City Treasurer would be
reporting, that the money would be out of the budget and staff would be
generating savings to meet their budget targets.
In response to a follow-up question from the
Councillor, Mr. Kanellakos advised that the first report coming forward would
be on project structure and a recap of how staff had set-up each project and
what would be done to find the savings.
He was concerned that the upcoming election would affect staff’s ability
to bring forward reports through Committee.
However, he assured members that there would definitely be some
reporting going into the next budget process to show the results achieved in
2010 and the expectations for 2011.
Councillor Jellett noted that the $8.7M
efficiency target that was not achieved had been added to the 2010 targets and
he asked whether staff would achieve the 2010 targets. Mr. Kanellakos indicated there was a $28M
efficiencies target for 2010, including the $8.7M that had been carried
forward, and he advised that staff was on track to find these efficiencies.
Looking at the reasons why the City was $17M
short, Councillor Deans noted some of it was attributed to the economic times
and she questioned the planning for this.
Ms. Simulik indicated the two items in particular that happened were
that the interest rates declined and the number of planning applications was
down. In terms of the interest rates,
she explained that when Council set the 2009 budget, the process had been
started in mid-2008 when interest rates were higher and there was no expectation
as to what was going to happen to the economy.
Therefore, the expectation was that interest rates would continue as
they had been the previous year. Late in
2008, interest rates started moving down to the point where the City was
getting an average of 1% earnings in 2009 whereas it typically got 2% to 3%
earnings. In terms of planning
applications, she explained this was dependent upon what builders saw happening
in the market and she maintained staff could not predict what the development
industry would or would not do. As it
turned out, there was a slowdown in applications, which could not have been
predicted when Council set the 2009 budget in 2008.
Councillor Deans noted compensation costs had
ended up being higher than anticipated and she wondered why there would not
have been some buffer built into the budget for this. Ms. Simulik confirmed that there had
previously been such a buffer in previous years’ budget but that in 2009 this
was not the case. She advised there was
a very small buffer in the 2010 budget, which could absorb additional
compensation pressures in2010. However,
she noted the City had entered 2010 with all its contracts settled.
Councillor Deans asked why there was not a
buffer in 2009. Ms. Simulik recalled
that Council took this risk in order to reduce the overall tax
requirement.
Councillor Deans referenced the $8.7M shortfall
in efficiency savings and asked whether this was reflected in Managers’
performance pay. Mr. Kirkpatrick
explained that the City’s performance pay regime for management staff involved
an Individual Contribution Agreement (ICA) in that, at the beginning of the
cycle, outcomes were agreed upon between the employee and their manager. These objectives were set out at the
beginning of the year and, at the end of the year, performance was measured
against those objectives and this was the basis of the performance pay. He confirmed that there was a section on
budgetary management and part of it was to achieve targets that were built into
the budget. Therefore, he confirmed that
this was part of a broader issue.
At this juncture, Committee voted on the following motion.
Moved by Councillor E. El-Chantiry
That the Audit, Budget and Finance Committee approve
the report with the REVISED Document 2 and forward same to Council.
CARRIED
Committee then voted on the item as amended.
That the Audit, Budget and Finance Committee recommend Council approve
the following transfers from reserve funds:
1.
That the deficit of $17.4 million, after
adjustments made under delegated authority, in the tax supported operations be
funded by:
a)
a transfer from the City Wide Capital Reserve
Fund of $5.3 million;
b)
a transfer from the Corporate Fleet Reserve
Fund of $11.9 million, to be repaid in future years capital budgets; and
c)
a transfer from the Library Capital Reserve
Fund of $0.152 million;
2.
That $5 million in 2009 budgeted land sales
from the Ottawa Lands Development Corporation be funded from 2010 land sale
proceeds; and
3.
That the report be forwarded to Council with
the REVISED Document 2.
CARRIED
as amended