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2019-11-20 Finance Committee Agenda Packet - Open Session MINUTES OPEN SESSION FINANCE COMMITTEE MEETING OCTOBER 23, 2019 AT 5:15 PM th 8 FLOOR COMMON COUNCIL CHAMBER (LUDLOW ROOM), CITY HALL Present: Mayor D. Darling Councillor D. Merrithew Councillor S. Casey Councillor D. Reardon Councillor G. Sullivan Absent: Councillor G. Norton Also Present: City Manager J. Collin Deputy City Manager N. Jacobsen Commissioner of Finance and Treasurer K. Fudge Comptroller Finance C. Graham City Solicitor J. Nugent Commissioner Saint John Water B. McGovern Commissioner Transportation & Environment Services M. Hugenholtz Deputy Commissioner Administrative Services I. Fogan Deputy Commissioner Saint John Water K. Mason Senior Financial Manager J. Forgie Senior Financial Manager C. Lavigne Senior Financial Manager D. Arbour Fire Chief K. Clifford Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. 1.1.1 Approval of Minutes July 18, 2019 Moved by Councillor Sullivan, seconded by Mayor Darling: RESOLVED that the minutes of July 18, 2019 be approved. MOTION CARRIED. 1.1.2 Approval of Minutes September 18, 2019 Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the minutes of September 18, 2019 be approved. MOTION CARRIED. Mr. E. Keyes, Saint John Board of Police Commissioners, presented a request to transfer money from the 2019 Police Force budget to a reserve account for the purchase of four Ford Explorer Interceptors. In addition, a request was made to pre-approve funds from the 2020 Police Force budget for the purchase of five marked vehicles. The vehicles are not being manufactured until January of 2020. It is necessary to update the current fleet of vehicles and the force is moving away from Dodge Chargers due to exceptional maintenance costs. Staff has been very diligent and looking for savings where possible. Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the Finance Committee recommend to Common Council that it approve the purchase of four (4) marked 2020 Ford Explorer Police Interceptors in the amount of $297,339 out of the 2019 Saint John Police Force budget and that this amount be put in a reserve account for the purchase of the vehicles which will take place in 2020. MOTION CARRIED. Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the Finance Committee recommend to Common Council that it pre-approve $371,675 from the 2020 Saint John Police Force budget for the purchase of five (5) marked 2020 Ford Explorer Police Interceptors. MOTION CARRIED. 1.3 Universal Metering Analysis Mr. McGovern stated that a Universal Metering Analysis was undertaken by Hemson priorities, fiscal responsibility, prompted the study to investigate options to allocate water cost among rate payers. Mr. Andrew Mirabella, Hemson Consulting, reviewed the submitted report and commented on the advantages and disadvantages of universal metering, rate structure considerations, the impact on a typical user, differing metering approaches, implementation options and the cost of universal metering. Universal metering involves installing water meters on every residential property and measuring water consumption. It is a user-pay approach rather than the current flat-rate structure approach. Mr. McGovern commented on financial options, noting that Common Council stated in 2017 that the utility would no longer borrow money for capital and instead fund capital from the operating budget. That being said, the following options could be considered: The utility could borrow money and finance it over 20 years. This would add to the debt load of the utility and cause additional upward pressure on rates by approximately $20 per year. The City could use capital from operating to fund universal metering. This would reduce re-investment into the infrastructure deficit and impact extreme risk category assets. It ability to deliver reliable service and meet regulatory requirements. There are benefits to universal metering but there is also a need to balance the infrastructure renewal needs of the community while balancing the pressure on rates. Common Council could revisit the concept of universal metering in approximately five years, once more investment has been made to the extreme category of infrastructure. In response to a question, staff noted that grant opportunities to support universal metering may be available, but it would require The committee discussed the pros and cons of universal metering and suggested staff explore the potential for infrastructure funding programs to help subsidize the cost of universal metering. The committee was reluctant to wait five years to address Universal Metering. Moved by Councillor Sullivan, seconded by Councillor Reardon: RESOLVED that the Finance Committee direct staff, having considered feedback provided at the rd Finance Committee meeting of October 23, report back on Universal Metering in early 2020, on recommended models for implementation and the consideration of grant opportunities and/or alternative funding models. MOTION CARRIED. 1.4 New Solid Waste Model Business Case Mr. Hugenholtz stated that the material handling process under the current solid waste model is challenging and there have been a number of physical injuries to workers, resulting in many days of work lost to injury on the job. The frequency and severity of claims within this workgroup is considerably higher than other employee groups. Staff has been researching options to address this challenge. Staff is recommending a pilot program which consists of a mechanized cart collection system and moving away from the material handling aspect of the current solid waste service. The process is expected to achieve additional savings and generate revenue opportunities, and also allow staff to gather data that could support a larger roll-out of the program. By imposing a cap on solid waste pickup to what can fit in the cart, and by adding charges for additional bags, the City can incentivize recycling and other waste diversion. The resulting savings and additional revenue can allow the City to potentially offer curbside recycling pickup. Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the Finance Committee recommend that Common Council approve the addition th of the cart purchase to the 2020 General Fund Capital Budget and submit to the November 4 Common Council meeting for approval. MOTION CARRIED. 1.5 Community Awareness Emergency Response (CAER) Initiative Chief Clifford stated that the proposals under consideration address gaps in emergency preparedness, employee safety and the ability to protect the community. One of the proposals will help address emergency response challenges before they occur. The Fire Department is asking that the Fire Service 2019 budget surplus be re-directed to address these proposals. Referring to the submitted report Fire Chief Clifford commented on the Community Awareness Emergency Response (CAER) initiative. The latest budget surplus is projected to be in the range of $360 to $370K. The Fire Department has suspended a number of items from its goods and services budget with an aim of supporting the requests. The budget impact of both proposals is $290,744. Mr. Collin noted that the CAER initiative is expected to generate revenue opportunities, but the amount has not yet been quantified. This study is expected to occur in the sustainability initiatives/revenue generation opportunities currently being investigated. Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the Finance Committee make the following recommendation to Common Council: Given the projected 2019 operating budget surplus of $326,000 within the Fire Service, the Finance Committee recommends to Common Council to approve the transfer of $195,244 from the purpose of advancing the Community Awareness Emergency Response (CAER) Level 1 initiative; and further support the associated relocation of Fire Prevention and Investigation division. MOTION CARRIED. 1.6 Industrial Hygiene Firefighter Training Centre Initiative Chief Clifford stated that there is an opportunity to advance safety of the Fire services operation and to support revenue at the training academy through a Firefighter Hygiene program. The proposal includes the lease-to-own of an Alantra Trailer which would be connected to the existing training facility at Grandview Avenue. It would allow dirty bunker gear to be stored in a separate location away from the firefighters. The lease-to-own option of Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the Finance Committee make the following recommendation to Common Council: Given the projected 2019 operating budget surplus of $326,000 within the Fire Service, the Finance Committee recommends to Common Council to approve the transfer of $95,500 from surplus to a Capital Budget reserve account for the purpose of supporting the Industrial Hygiene Firefighter Training Centre Initiative; and, support the City entering into an agreement with CanLease for the lease-to-own of a custom built Alantra Unit, on terms and conditions acceptable to the City Solicitor or his designate. MOTION CARRIED. Adjournment Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the open session meeting of the Finance Committee be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on October 23, 2019 was adjourned at 7:45 p.m. FINANCE COMMITTEE REPORT Report Date November 18, 2019 Meeting Date November 20, 2019 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: 2020 Utility Fund Operating Budget OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Craig Lavigne Brent McGovern John Collin RECOMMENDATION It is recommended that the Finance Committee approve the 2020 Utility Fund nd Operating Budget and submit to Common Council for the Decmber 2 meeting for approval along with first and second reading to the amendment to the Water and Sewerage By-Law, By-Law No. M-16. EXECUTIVE SUMMARY The 2020 Utility Fund Operating Budget is based upon the new rate structures for both potable and industrial users. A complete rate review of the Utility was undertaken by the consulting firm, Hemson, and was based on how the Utility now provides different services to potable and industrial users due to the separation of potable and raw water between the different classes of users. There have been considerable pressures on the ratepayers and the Utility over the last 10-15 years due to transformational projects (Harbour Cleanup and Safe Clean Drinking Water). Flat rates have consistently risen by $72 per year over a number of years and last year the rate increase was reduced to $60 as a result of numerous expenditure reductions that were implemented and revenue increases that were realized due to by-law changes. The Utility is proposing to keep the flat rate for water and sewer customers at $1,428 per year for customers in 2020, which represents no increase from 2019 rates. Increases for customers will vary depending on whether they are water only or sewer only customers. Rates for water only have gone up significantly due to the investments in the Safe, Clean Drinking Water Project, while sewer - 2 - costs have gone down significantly as a percentage of water cost. Sewerage costs will now be 80.35% of the water cost, compared to 122% of water cost in the past. Industrial rates have been set based on the use of raw water only, cost of providing the service and the management and replacement of industrial water assets. PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT The proposed 2020 Utility Fund Operating Budget is aligned with Council priorities in taking a strategic approach to financial management of the Utility by continuing to contribute capital funding from operating, finding other revenue sources, improving the allocation of costs among ratepayers and continuing to find efficiencies and savings through continuous improvement initiatives. REPORT The proposed 2020 Utility Fund Operating Budget has been prepared using the Hemson Consulting Ltd. The rate structure reports are being presented to Council for both Potable users and Industrial users to establish the appropriate costs per user group so that the corresponding revenue can be collected. Revenue Overall revenue for 2020 has been budgeted at $48,702,000 (2019- $48,286,000). The flat rate being proposed remains at $1,428 per year therefore no increase for ratepayers. The allocation of sewer charges as a percentage has changed significantly as a result of the rate study. Sewer charges will now be 80.35% of a water charge versus 122% in the past. Flat rate customers (166) that are water only will see and significant increase, where flat rate sewer only customers (146) will see a significant decrease. The main reason for the shift is related to the additional cost of providing safe, clean drinking water. Customers on a meter will see a negligible adjustment in their bill if consumption is the same amount in 2020 versus 2019. Meter water only customers (106) will see a large increase in there water bills as the cost of water has risen, where sewer only customers will see a significant reduction (3). Industrial revenue is budgeted at $5,537,000 which will cover the cost of providing raw water, contributions to asset replacement, rate stabilization reserve and previous debt associated with the system prior to the switch over to a raw water only system. - 3 - The balance of revenue includes the fire protection levy, storm sewer levy, interest revenue, other revenue and prior year surplus which is much less than previous years. Expenditures Overall expenditures for 2020 have been budgeted at $48,702,000 (2019- $48,286,000). Based on the recent rate study and to ensure proper allocation of expenses, all debt, internal charges, capital from operating, post-employment benefits and other charges will be allocated across the three cost centres which are; Potable Water, Industrial Water and Wastewater Treatment in accordance with the cost of service. Saint John Water has continued to reduce staffing levels through 2019 (decreased by 6 FTEs) as the Safe, Clean Drinking Water Project has ramped down and is approaching final completion. Saint John Water has several budget initiatives that are planned to be undertaken in 2020. Improvements to safety and security are planned in 2020 by making workplace improvements at various underground vaults and chambers and improving fencing, security and access at various water and wastewater facilities. There is key replacement of electronic equipment at 30 water and 32 wastewater facilities as well as replacement of eight key communications links to and from various water and wastewater facilities. As well, the replacement of 133 communication radios will be completed. All this replacement is key in allowing the Utility to monitor activity at its water and wastewater facilities while also ensuring service reliability and efficient use of equipment. Cleaning, inspection and maintenance on two water storage reservoirs, along with repainting 800 out of the 2,100 fire hydrants in inventory will be achieved in 2020. Other initiatives include; key watermain transmission interconnection for further drinking water system reliability, inspection of dams and protecting the environment through the addition of containment around an electrical transformer. Under wastewater there is planned dredging of cell one and two at the Lancaster Lagoon for improved operational efficiencies, concrete maintenance and upgrades at the Easter Wastewater Treatment Facility and the continuation of the newly established video inspection and flushing program. These are just some of the planned expenditures the Utility is planning to undertake in 2020 to increase water and wastewater system reliability, effiency, and effectiveness and to ensure the needs are being met. Conclusion The rate freeze for 2020 is a positive note for ratepayers after several years of increases. The rate studies for potable and industrial rate payers have now been - 4 - completed and this will lay the foundation for the long-term planning the Utility must undertake in 2020. The Utility will continue to focus on continuous improvement, finding effiencies, and process to improvements in 2020, as well as debt management, leveraging of funds from other levels of Government and pay as you go for all capital expenditures. This focus will continue to guide some of the financial decisions as the Utility deals with a very large infrastructure deficit and ongoing pressures of rate increases and expenditure increases over the next several years. SERVICE AND FINANCIAL OUTCOMES See enclosed 2020 Utility Fund Operating Budget INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS ATTACHMENTS Appendix A 2020 Saint John Water Operating Budget 2020 Utility Fund Operating Budget Presentation APPENDIX "A" 2020 SAINT JOHN WATER OPERATING BUDGET 20192020 2020 ExpendituresBudgetForecast Drinking Water Watershed Management202,000260,000 Water Treatment10,035,0008,404,000 Water Pumping & Storage1,222,0001,312,000 Transmission & Distribution4,976,0004,919,000 Customer Metering714,000763,000 Internal Charges455,000 Other Charges700,000 Debt servicing4,397,000 Capital from Operating3,724,000 Industrial Water Watershed Management615,000608,000 Water Pumping & Transmission1,835,0001,710,000 Customer Metering133,000124,000 Debt servicing1,654,000 Transfer to Capital Reserve818,000 Transfer to Operating Reserve405,000 Capital from Operating 229,000 Wastewater Wastewater Pumping3,086,0003,027,000 Wastewater Collection3,158,0003,209,000 WasteWater Treatment4,810,0004,947,000 Internal Charges455,000 Other Charges700,000 Debt servicing3,513,000 Capital from Operating1,547,000 Infrastructure Management Municipal Engineering820,000822,000 Other Internal Charges905,000 Additional Post Employment Benefits1,322,000 33,833,00048,702,000 Fiscal Charges Debt servicing9,753,000 Capital from Operating4,700,000 Total Fiscal Charges14,453,000 Total Expenditures 48,286,00048,702,000 20192020 2020 RevenuesBudgetForecast Potable Water Revenue22,673,00022,091,000 Sewerage Treatement Revenue15,744,00016,107,000 Industrial Revenue4,600,0005,548,000 Fire Protection Levy2,600,0002,500,000 Storm Sewer Levy940,000950,000 Other revenues748,0001,020,000 Previous Year's Surplus981,000486,000 Total Revenues48,286,00048,702,000 Flat Rate - Water & Sewerage$1,428$1,428 4.39%0.00% Meter Rates: /Cu.m. Block 1 - First 100$1.6123$2.0030 Block 2 - Excess of 100$1.0267$1.2754 Block 3 - Eliminated for 2020$0.3623 /ƚƓƭǒƒƦƷźƚƓ ĬğƭĻķ ƚƓ .źΏƒƚƓƷŷƌǤ ĬźƌƌźƓŭ NOTE: Sewer Surcharge 80.35% of Water Charge Industrial Raw Water Rates: /Cu.m. East Industrial Irving Oil$0.2780 Irving Paper$0.0479 West Industrial Irving Pulp and Paper$0.0740 NB Power (Coleson Cove)$0.2639 - Law - reading of rd reading of By reading of By nd nd and 2 st and 2 st and 1 for approval 20: Draft Utility Budget with recommendation to Utility Budget to Common Council for 3 2020 Utility Budget Context amendment. law amendment. - November send to Council for approval and 1amendment. Dec 2: Draft Utility Budget to Common Council with recommendation Law Dec 16: By $5,120,350 17.78% - 41.49% 2020 Flat Rate proposed for 2020 ewer charge, 80.35% of water charge (122% s 2020 Utility Budget Context This Finance Committee/Council began fiscally prudent practice in 2018 No new debt Utility debt balance by end of 2020 ($88,347,000) reduction from end of 2017 peak ($107,451,000)Debt projections for end of 2024 ($62,875,000) reduction in 7 years from end of 2017 peak in Utility debt. 2020 Operating budget based on new Potable Water rate structure and East and West Industrial rate structures.No proposed increase for flat rate customers $1,428 per year.Major shift in under old rate model) Continued focus on Debt Reduction2020 capital funded from 2020 Operating Budget Fall 2019 15,835 Need Growth 15,896 Spring 2019 ($564,060) 15,994 Fall 2018 years Rate Billings NO INCREASE 16,031 in last 3 Spring 2018 Number of Flat 16,132 Fall 2017 16,230 flat rate customers 2020 Revenue Budget Overview Spring 2017 Flat Rate to be held at $1,428 However, continued pressure on Potable users. Flat Rate customers continue to fall, decrease of 395 16,30016,20016,10016,00015,90015,80015,70015,600 Est. 5,450,000 2019 Consumption 2018 5,344,768 Meter - 2017 Non Industrial 5,586,842 2020 Revenue Budget Overview Flat Rate decrease not being made up in Meter consumption. 5,700,0005,600,0005,500,0005,400,0005,300,0005,200,000 2020 Budget Initiatives Workplace improvements (fall arrest) at various underground vaults and chambers.Improvement in fencing, security and access at various water and wastewater facilities.Replace key electronic equipment at 30 water facilities and 32 wastewater facilities.Replace 8 key communication links to and from various water and wastewater facilities and replace 133 communication radios at water and wastewater facilities throughout the City. Safety and Security Instrumentation and Electrical Uptown - . 2020 Budget Initiatives Potable Water Millidgeville Cleaning, inspection and maintenance on 2 of 10 water storage reservoirs.Fire Hydrant Painting Program (repaint approx. 800 of the 2,100 in inventory) Focus area and Key water transmission main interconnections for further improvements in water system reliability.Inspection of dams in accordance with Canadian Dam Safety Association Guidelines.Protection of the environment through the addition of containment around electrical transformer.Water bottle filling station as part of the sea can container that is being constructed and support deployment at various events. 2020 Budget Initiatives Wastewater Dredging cells 1 and 2 at the Lancaster Lagoon to improve operational efficiency and effectiveness.Concrete maintenance and electrical upgrades at the Eastern Wastewater Treatment FacilityContinuatio n of newly established video inspection and flushing program. Video inspection will inspect another 65kms (15% of inventory) meeting nd Recommendation 2020 Utility Budget Finance Committee endorse the 2020 Draft Utility Budget and submit to the December 2of Common Council for receive and file. FINANCE COMMITTEE REPORT Report Date November 15, 2019 Meeting Date November 20, 2019 His Worship Mayor Darling and Members of Common Council SUBJECT: Goods and Services Budget for Mayor and Common Council OPEN OR CLOSED SESSION This matter is to be discussed in open session of the Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Jonathan Taylor John Collin RECOMMENDATION The Finance Committee provide feedback on a possible reduction to the Goods and Services budget for the Mayor and Common Council, and that the report be received for information. EXECUTIVE SUMMARY The City Manager was directed to provide a recommendation with respect to Council. PREVIOUS RESOLUTION On October 21, 2019 Common Council made the following recommendation: RESOLVED that the Goods and Services Budget for Mayor and Common Council be referred to the City Manager (Finance Committee) to report back to Council with a recommendation to reduce the Goods and Services budgets of the . STRATEGIC ALIGNMENT riority of fiscal responsibility. REPORT Goods and Services budget of 10%, 15% and 20% are illustrated. - 2 - Goods and Services budget of 20% and 25% are illustrated. SERVICE AND FINANCIAL OUTCOMES n/a INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS n/a ATTACHMENTS . Common Council budget reflecting reductions of 20% and 25%. ($6130) ($9195) ($12,260) 110-0601-421-10-02 Salaries Non 88,000 Union 110-0601-421-10-10 Salaries - Temp 56,143 110-0601-421-12-04 Allowances 0 110-0601-421-14-04 Fringe Benefits 12,687 ƚƷğƌ ‘ğŭĻƭ ε ЊЎЏͲБЌЉ .ĻƓĻŅźƷƭ 110-0601-421-20-04 Postage 140 110-0601-421-20-06 Freight 0 110-0601-421-20-08 Telephone 3,762 110-0601-421-20-10 Advertising 3125 -1500 -1565 -1630 110-0601-421-20-12 Travel 4000 110-0601-421-20-14 Conferences 1000 110-0601-421-20-24 Receptions 7700 -1500 -1500 -1500 110-0601-421-20-30 Other General 10,000 -3000 Services 110-0601-421-22-04 Vehicle Insurance 330 110-0601-421-22-06 Fire 107 110-0601-421-32-06 Vehicles/Heavy 2000 Equipment 110-0601-421-40-02 Meals 5000 -1500 -1500 -1500 110-0601-421-40-14 Office Supplies 1000 110-0601-421-40-15 Books/Periodicals 200 -200 -200 -200 110-0601-421-40-50 Other Goods 10000 -1430 -4430 -4430 110-0601-421-70-02 Fleet Usage 0 110-0601-421-70-04 Fleet Fuel 1944 110-0601-421-70-06 Carpenter Shop 1000 110-0601-421-70-20 Computers 4956 110-0601-421-70-22 Fleet - 2436 Depreciation 110-0601-421-70-23 Fleet Labour 1600 110-0601-421-70-24 Fleet - Parts 1000 ƚƷğƌ Dƚƚķƭ ε υЏЊͲЌЉЉ υЎЎͲЊАЉ υЎЋͲЊЉЎ υЍВͲЉЍЉ {ĻƩǝźĭĻƭ ($36,565) ($45,706) 110-0605-422-10-02 Salaries Non-336,000 Union 110-0605-422-12-04 Allowances 0 110-0605-422-14-04 Fringe Benefits 30,240 ƚƷğƌ ‘ğŭĻƭ ε ЌЏЏͲЋЍЉ .ĻƓĻŅźƷƭ 110-0605-422-20-06 Freight 300 110-0605-422-20-08 Telephone 4912 110-0605-422-20-12 Travel 10,000 -10,000 -10,000 110-0605-422-20-14 Conferences 3500 -3500 -3500 110-0605-422-20-22 Memberships 51,000 110-0605-422-20-24 Receptions 19,000 -7500 -10000 110-0605-422-20-30 Other General 245,000 -8000 -10000 Services 110-0605-422-22-06 Fire 63 110-0605-422-26-10 Photography 5000 110-0605-422-26-19 Translation 31,000 -3565 -4000 110-0605-422-26-20 Interpretation 0 110-0605-422-26-30 Other 9000 -2000 -2000 Purchased Services 110-0605-422-40-02 Meals 13,000 -2000 -4000 110-0605-422-40-14 Office Supplies 2500 -706 110-0605-422-40-50 Other Goods 5000 -1000 110-0605-422-60-01 Grants 0 110-0605-422-70-06 Carpenter Shop 2000 -500 110-0605-422-70-20 Computers 6552 110-0605-422-70-28 Pooled Vehicles 0 ƚƷğƌ Dƚƚķƭ ε 407,827 υЊЍЏͲЋЏЋ υЊЌАͲЊЋЊ {ĻƩǝźĭĻƭ 225,000 = υЊБЋͲБЋА bƚǝĻƒĬĻƩ ЋЉͲ ЋЉЊВ 2020 Tax Base Assessment