2011-07-18 Finance Committee Minutes FINANCE COMMITTEE
CITY �F SAlNT JOHN
MINUTES
MONDAY, JULY 98, 20'11 - 2:00 p.m.
Present:
Mayor Ivan Court
Deputy Mayor Chase
Councillor Court
Councillor Sullivan
Greg Yeomans
Cathy Graham
Kevin Fudge
Also present— Barbara Mahaffy, Recording Secretary
1. Approval of Minutes
On motion of Councillor Sullivan
Seconded by Councillor Court
RESOLVED that the minutes of the November 24, 2010
meeting be approved.
Question being taken, the motion was carried.
2. Presentation of interim
General Fund
Revenues
The Committee was given the results actual to the end of April 2011. There are no
projections to the end of the year. Mr. Yeomans noted that on the revenue side, the
revenues will be on budget, with the question becoming expenses. The projection, after
t�e April results, is risky at best. He will elaborate as he goes through his presentation.
On page 1 of the Generai Fund analysis, he noted that Property tax and the unconditional
grant represent over 82% of our total reven�ae. He passed aut the numbers from last
year's budget which contain the non-tax revenues which are quite vast, most of which are
relatively insignificant.
Mr. Yeomans reviewed the major items of variance on page 1 of the General Fund
Analysis. Secondments and Extra duty — other relate to the Po�ice Force. The Police do
not budget for seconded wages or for this recovery. They should be building them into
their budget, as well as budgeting for recovery. He suggested that the Police Commission,
starting in 2012, create their own audited financial statements. He wiil discuss this with
Chief Reid and lef the Finance Committee know the results of that discussion. Extra duty
refers to police providing security for events at Harbour Station, for e.g. They will be bilfed
for the cost and time of thase officers, paid to us. It will be shown as a General Fund
recovery for the Police.
Marketing Square Parking — are only working with two months in #he actuals. The money
comes through CanPark, then through the Saint John Development Corp. and then to the
City. It is a timing issue. When we look at the real results to the end of April, we are about
$5,000 behind year to date. The same applies to the Parking Meters. They are optimistic
that they will be very close to b�dget. They did budget in a rate increas� which hasn't
materiafized as it hasn't gone before Council as yet. Miscelianeaus includes tax
recoveries, e.g. HST, etc. HST will come aff capital in the summer months. Mr. Yeomans
noted that both Market Square and the Parking Commission shouid be on budget at year
end. They are frending very strong.
Quesfion: Historically, are these figures where they are typically?
Response: Yes. Our revenues for parking have been on target, if nat slightly higher.
This year, the Sea Dogs playoffs had a positive effect; whereas, the canstruction gaing on
in the uptown area is definitely having an effect on parking meter revenues, but it will not
be far off on the revenue side. Our economy is slower but not significantly different.
Expenditures
Under expenditures, total expenditures do not include the Police Commission, Transit
Commission, Fiscal charges and Fire Service. These four make up 50% of the budget. In
April, the Police Commission is showing $70,307 behind budget, but when the
secondments are brought back in, they are slightly ahead of budget. The Transit
Commission is $400,000 behind and is not trending well. There could be a $700-900,oaa
shortfalf by year end. Significant analysis has been done and Mr. Yeomans will meet with
Frank to discuss this once he's back. The City is required to fund any shortfalis #hey have.
Question: Has the Transit Commission been told to take corrective action and make
some cuts to avoid this shortfall at year end? Cut services or incr�ase fares?
Response: They had over a 10% increase in their operating costs in 2011. They have
hired five new drivers over the last 24 months; they have hired a manager to replace Frank
once he retires (second manager as first one left after two years). Mr. Yeomans and Mrs.
Graham will meet with Mr. McCarey to discuss.
Common eouncil has fo direct the Transit Commission to ratchet down their costs. They
were directed by Council to have a 1% increase in their budget. They have been asked to
track the costs of the Comex separately but have not done so. They are tracking the
Comex revenue separately, but not the operating costs. Under legislation, Common
Council has to cover or fund any deficits. Saint John Transit report fio a Commission
appointed by Council. Council needs to talk to John Nugent about how to hold the Transit
Commission accountable. Deputy Mayor Chase noted that the Commission is aware of
this and are Jooking at cuts.
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There was some discussion about the managerial and office staffing at Saint Jahn Transit
in response to Mayor Court's comment that they may be "top heavy". Mr. Yeomans noted
that they do not have an over abundance of peopfe in their office.
Quesfion: Can Common Council send them a letter stating that if they are $700,000 short
fhis year, they wil!be $700,000 short on their 2092 budget?
Response: Mr. Yeomans responded that there wouid have to be a conversation with Mr.
Nugent as legislation stipulates that Councii funds any deficits.
Deputy Mayor Chase askeci that Mr. Yeomans put this information to paper for the Transit
Commiss+on. Mr. Yeomans wants to have a conversation with Mr. McCarey first to get the
proper facts, but is willing to send a report to the Transit Commission with this information.
He would like to evaluate the facts first and send the correct information. This is a
significant threat to the 2011 budget. The deficit goes into the general fund and affects the
20�3 budget. Mr. Yeomans and Mr. Fudge wilf ineet with Mr. McCarey on this when he is
back.
The other area that we are behind year to date, April 30/11, is snow control due to our bad
winter. We are running about $600,000 behind. A good October, November and
December this year will mitigate some of this. At the end of April, we are $900,Q00 to the
good on regular salaries, but we are about $274,000 behind on overtime. Over $200,000
of that overtime is Local 18. Mr. Yeomans noted that we are iooking at about 16-18
vacancies a month. He noted that the vacancies in several positions affect this.
Question: Is Saint John Transit being run efficienfly?
Response: Sa+nt John only gets 3% of CPI. We need a 4% growtt� in the tax rate just to
keep current. Our transit system is one of the best for a community of this size, based on
ridership (value judgment). They are not doing a bad job in terms of other transits, but it is
a matter of what we can afford as a community.
It was noted that we need to look at how much accountability control Council has with
Commissions who spend an excess amount of money. Council needs to be able to re-
evafuate the goafs of the Transit Commission in light of the current financial situation. This
is a policy decision that needs to be made by Council. Common Council has tried to give
direction to Commissions but has been told their advice and direction does not have to be
followed. They can set policy. Council also has the authority to appoint the Commission
members and ensure that the Cammission members follow the mandate set by Councii.
Mr. Yeomans reviewed the fiiscal charges and fire service, notfng that Fire is ahead of
budget, partfy because of the vacancy of a Fire Chief.
Solid Waste is ahead of the game quite substantially.
Water and Sewerage Utilit_v
Revenues are tracking on budget for the year. This is being monitored as the year goes
on.
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Question: Deputy Mayor Chase noted that the ur;�lry, since 9993, always brings in a
surplus. This could mean one of two things— we are overcharging or we are not delivering
the services as charged. Why is fhe Ufility always in a surplus situation?
Response: Mr. Yeomans noted that we have budgeted bigger capital projects than we
have been able to achieve. In 2010, they had a surplus of approximately $1.8 million, with
$800,000 of that beir�g fiscal charges. Every year, debt service and principal is built into
the budget based on the capital budget as submitted. The interest rate spread aiso plays
a part in it as well. We also build in short-term interest.
Question: Mayor Court asked why the flat rate residentia! component has received 50%
of the projection and fhe mefered accounts have only received one-eighth?
Response: Mr. Fudge responded thaf this was a timing issue. There has been only two
invoicing periods going through the GL right now and there is an accrual issue — it depends
on when the billing period is and wt�en they go out. Everyone is paying their bilfed
amounts. It should be on target at year end.
Question: Cauncillor Sullivan asked if the money, where the budget is caming in under
budget in some areas, can be used in another area where it's needed, for e.g., asphalt.
Response: Mr. Yeomans responded that we would need to have a better feel for what the
capital is. Municipal Operations will spend their budget and wil! certainly do what they can.
Mr. Yeomans makes sure that they don't overspend it. Road work would fall under general
fund capitai. They can only move money around when it is general fund operating funds.
Any money going unused by the end of September, Council wants to spend it on roads.
3. 2070 Audit Status
Mr. Yeomans and Mr. Woods met with the Deputy Minister of Local Government a couple
of weeks ago. The City must pay the pension amount. They asked for a ten-year
amortization of that expense against the budget. It is now about $5.4 million that, if we pay
it which we have to do, it will be charged against 2012. They requested that it be deferred,
which woufd put our payments to $540,000 a year. The audit cannot be finalized until this
issue is settled. If we don't pay the $8.7 million by the end of July, the government wifi
order us to pay. The auditors, whether we pay it or not, will make us reflect it as a
payment in 2Q10 unless we get the deferral.
Two things have changed the bottom line from two weeks ago. In 2008, when the City
Manager was given a package, and Council agreed to a top-up of his pension, and in
discussions with the actuary, we neec! to reflect that top up as a current expense and draw
that down. It will show as a $40Q,000 expense in 2010 to reflect the fong-term liability
based on the actuarial assumptions of how long he's going to live and draw this extra
pension.
The other issue is about hydra poles (from 2006). The building inspector made a deal with
Saint John Energy that there are certain poles that we were paying a $20,000 monthly
rental fee for. They sold the poles to the City in theory. It was treated like a loan and
once paid off, the poles belonged to the City. The City Solicitor said that you cannot buy
from yourself. This has been sitting as a prepaid for about five years. We neec! to reflect
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that $400,000 on the operating budget, as welf as how we fund those poles. The addition
of these iwo issues affects the bottom line of the operating budget.
4. Engagement of Auditors
Ernst & Young were appointed auditors nine years ago for five years, with a five-year
renewal. This current renewal ends next year. In the last two months, several members of
their team who toak part in our audit have resigned and moved on to other positions in
other firms. There will be a whole new team who we have to train. Rather than do that,
Mr. Yeomans asked the Committee if they want to send out an expression of interest once
the 2010 audit is done. Ernst & Young are also having problems finding locaf people to do
our audit and do we want peapfe coming in from all over the place to do our audit. The
Committee needs to think about whether or not to do an audit proposal early. The City has
a 30-day notice ciause in the agreement ta withdraw before the five-year contract is up that
would allow us to do this. Mr. Yeomans woufd like to hold off making a decision on this
�antil the year-end audit meeting with the Committee.
5. Other Business
Mr. Yeomans will talk to Chief Reid about the Police Commission having their own audit
and he will report back to the Finance Committee with the results of this talk.
The Transit deficit will be the first charge on the 2013 budget. Mr. Yeomans and Mr.
Fudge will meet with Mr. McCarey and report back to the Finance Committee with the
results of that meeting. Mr. Fudge will look up the minutes of the Transit Commission
meeting where the Transit Commission was asked to appear before Common Council,
prior to meeting with Mr. McCarey. They will then be asked to appear.
Mr. Yeamans reviewed fihe pension issue in answer to a question about borrowing. He
noted that it is the Pension Board's obligation to pursue payment. He reviewed various
scenarios that could happen if this payment is not made.
The meeting adjourned afi 3:05 p.m.
Chairperson
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