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2013-06-27 Finance Committee MinutesFINANCE COMMITTEE CITY OF SAINT JOHN MINUTES THURSDAY, JUNE 27, 2013 - 4:00 p.m. Present: Councillor Merrithew Councillor Strowbridge Councillor Reardon Councillor MacKenzie Greg Yeomans Cathy Graham Kevin Fudge Hilary Nguyen Emily Dipaolo — Deloitte Also present — Barbara Mahaffy, Recording Secretary Ms. Graham opened the meeting and reviewed the agenda. Approval of Minutes — January 16, 2013 Moved by Councillor MacKenzie Seconded by Councillor Reardon THAT the minutes of the January 16, 2013 meeting be approved as circulated. ,x_1:7:11411 Review of 2012 Operating Results (before audit completion) Ms. Graham noted that the results may change slightly before completion of the audit. She noted that the results are positive so far this year. The General Fund is showing a surplus of $962,000 at year end Dec. 31/12 and Saint John Water is showing a surplus of $499,000. However, a surplus could mean that we did not do things we were supposed to do. She did provide the Committee members with a high -level synopsis. Councillor Merrithew asked where the surplus goes. Ms. Graham responded that the Water & Sewerage gets flattened over a number of years; the Operating surplus comes in to the second following year (2014). Councillor MacKenzie asked how much money we would spend in hiring specialty services as opposed to training our own people to perform the service. E.g. HVAC cleaning training for Local 18. Ms. Graham noted that this was done when the review of garbage collection took place. It is not a simple exercise to pull this information. We can tell him what we spend on contract services but it is more difficult to tell about training costs. Ms. Graham noted that the Core Service Review is trying to identify these costs and how to do things more economically. Mr. Yeomans noted that the building permit revenue is substantially under budget. Accordingly, the tax base growth will trend down — this is a challenge for next year's budget. Revenue in parking and in recreation is also down. This is indicative of a slow economy. As well as looking at budget vs. actual, the Committee should also look at actual vs. actual from 2011, 2012 & 2013. Review of April 2013 Operating Results General Fund Ms. Graham noted that, so far, the results are positive. She pointed out a couple of significant areas that may not stay as positive as the year goes on. Fleet charges a base rate for their vehicles. They absorb the charge if these vehicles need repairs. If the vehicles stay within the normal maintenance budget, all is well. If they have major technical issues, it can skew their results. She noted that the City is also suffering from a number of vacancies — 35 or so. This could account for the positive results in some areas. Ninety -two percent of the revenue is unconditional grant and the tax base. In order to have a tax base increase, the City needs revenue from permits, etc. Mr. Yeomans stated that the weather plays a huge factor — if the winter is bad, the surplus can evaporate quickly due to fleet charges, snow removal, salt budget, etc. He suggested that the various departments come in and speak to their own areas. He asked the Committee members to give this some thought for future meetings. Councillor MacKenzie asked if the City had a contract for fuel — do we pay a consistent price or does it fluctuate depending on the market. Mr. Yeomans responded that the City does a proposal call. Irving is the provider at this point in time. They do supply us with a rate below what the pump rate is; however, it does fluctuate with the change in the price of gas. We do not get a guaranteed price. Ms. Graham noted that the City is borrowing less at a lower rate which boosts our fiscal charges and allows us a little more flexibility. Ms. Nguyen stated that we issued debentures in June at a very low rate — 15 years at 3.1 %. Water & Sewerage Utility Mr. Fudge reported that there is an expected $240,000 surplus in Water. With respect to revenues, the flat rate and metered accounts should be on budget by the end of the year. They are expecting to be $200,000 above budget — customer revenues. 2 On the expense side, drinking water is expected to be in a negative variance of $245,000 because of unexpected main breaks. Mr. Fudge will follow up on the problem on Rothesay Avenue to confirm who is responsible for the costs. Industrial water is expected to $160,000 over budget associated with more pumping from Musquash than was expected. The over - expenditures are being mitigated by the debt servicing and the expected surplus of $171,000 associated with less borrowing and lower interest rates. Ms. Graham asked what the Committee is looking for at their meetings — at what level would they like Finance to report. She suggested that the Committee have a department head come into the meetings to speak to their area. Mr. Yeomans noted that the departments would be presenting from a financial perspective as opposed to an operational perspective. Councillor MacKenzie asked that a quarterly financial report be prepared for Council. Councillor Merrithew felt that this would be too difficult what with the current workload taking place in Finance due to Public Sector Accounting (PSA). It would be something to look at down the road when things "normalize ". Mr. Yeomans noted that they report in April, August and September (business cycle) at a high level which the Committee decided was sufficient. Update on Public Sector Accounting (PSA) Ms. Graham reported that the City is about a year behind. She noted that the hiring freeze and the elimination of positions — two of which were PSA team members — had an impact. We need the departments' cooperation but they are being pulled in many directions and don't have staff available to dedicate to Tangible Capital Assets (TCA) and PSA. We have struggled with the collection and updating of asset information, as a result. TCA for 2010 is done and has been reviewed by the auditors. We are finishing off 2011; however, there was a problem with water infrastructure and had to be redone. Ms. Nguyen has reconciled 2011 except for Water, which she is working on now. Tomorrow is the deadline for departments to finish up their collection of 2012 TCA information. TCA, although far behind, is looking good. We need to consolidate the Agencies, Boards and Commissions (ABCs) into the City's statements. The ABCs have been met with and we are working with them to collect the necessary information. Ms. Graham noted that we have borrowed one employee from Police to assist with PSA. The PSA staff member hired to work on PSA has only started to work on PSA within the last month, due to staffing issues within the Finance department. Councillor MacKenzie asked what needs to be done to get where we need to be and how do we solve it. Ms. Graham responded the staffing issues need to be resolved. Councillor MacKenzie suggested that may be contracting items out or hiring someone would help to alleviate these staffing issues. Mr. Yeomans will look at this situation when he is back full time next week. Ms. Graham noted that a sizeable amount of the gas tax funding goes to the water utility. She always stressed to the Water staff that their infrastructure capital is in jeopardy if PSA 3 statements are not completed. PSA will be on -going from now on. Mr. Yeomans will put something together — it may involve contracting out for a couple of years until we are caught up. Ms. Graham praised the TCA team for all their hard work in collecting the assets — huge undertaking. This will be on -going — it does not end with the completion of the 2012 PSA statements. Mr. Yeomans noted that the financial statements will look very different under PSA. We need to do fund -based budgets as well as PSA statements. Ms. Graham explained that we are completing a template in Caseware to use on a go- forward basis in an attempt to automate PSA consolidation. Ms. Nguyen noted that we are going into the operating budget cycle, and all that it entails, soon for next year which will require the involvement of all four of the Finance Management team. Councillor Reardon offered the assistance and support of the four councillors on this Committee for Finance as they understand the magnitude of the shift in the way we do things under PSA. Mr. Yeomans will come back with a plan to do this, brief the Finance Committee, get their approval and go from there. Ms. Graham noted that the goal for completion is October 31 S` for the 2012 PSA Consolidated Audited Statements. The deadlines need to met and staffed accordingly to make this happen. Mr. Fudge noted that there is a lot of reliance on other departments in providing the various inputs needed. Councillor Merrithew noted that Finance will supply some high level information for 2012 & 2013 and will come to the Committee with a game plan. The meeting adjourned at 5:05 p.m. Chairperson 0