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2016-08-16 Finance Committee Open Session AgendaCity of Saint John Finance Committee Meeting - Open Session AGENDA Tuesday, August 16, 2016 5:15 pm 11th Floor Boardroom, City Hall Pages 1. Call to Order 1.1 Appointment of Chair and Vice -Chair 1.2 Approval of Agenda 1.3 Approval of Minutes 1.3.1 Minutes of March 15, 2016 1 - 2 1.4 Review and Approval of Terms of Reference for the Finance Committee 3 - 5 1.5 2016 Year End Forecast Reports for General and Utility Operating Budgets 6-12 1.6 Deloitte Presentation of Year End Consolidated Audit Results 13-25 1.7 Approval of the 2015 Consolidated Audited Financial Statements 26-105 1.8 Review and Approval of the July Accounts Receivables 106-107 1.9 Community Grants Evaluation Committee 108-108 1 Poeta By:1 City of Saint John Finance Committee Meeting Tuesday August 16, 2016 Closed Session 1. Call to Order Si vous avez besoin des services en fran�ais pour une r6union de Conseil communal, veuillez contacter le bureau du greffier communal au 658-2862. Each of the following items, either in whole or in part, is able to be discussed in private pursuant to the provisions of subsection 10.2(4) of the Municipalities Act and Council / Committee will make a decision(s) in that respect in Open Session: 5:15 p.m. 11th Floor Boardroom City Hall 1.1 Approval of Minutes 10.2(4) K MINUTES - OPEN SESSION FINANCE COMMITTEE MEETING MARCH 15, 2016 AT 5:30 PM 11th FLOOR BOARDROOM, CITY HALL Present: Councillor D. Merrithew Councillor D. Reardon Councillor R. Strowbridge Regrets: Councillor J. MacKenzie Councillor G. Lowe Also Present: Commissioner of Finance and Treasurer K. Fudge Commissioner Saint John Water B. McGovern Comptroller C. Graham Assistant Comptroller H. Nguyen Assistant Comptroller C. Lavigne Common Clerk J. Taylor Adminstrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. 1.1 Approval of Agenda Moved by Councillor Reardon, seconded by Councillor Strowbridge: RESOLVED that the agenda of March 15, 2016, be approved. MOTION CARRIED 1.2 Approval of Minutes — November 12, 2015 Moved by Councillor Reardon, seconded by Councillor Strowbridge: RESOLVED that the minutes of the Finance Committee meeting of November 12, 2015, be approved. MOTION CARRIED 1.3 Preliminary 2015 Yearend Operating Results Saint John Water Mr. Fudge commented on the preliminary 2015 year end operating results for Saint John Water. The results are unaudited and there could be some minor adjustments as a result of the $667,000 for 2015, representing a variance of 1.57%. The surplus is due to a combination of a positive variance in the operating expenses of approximately $1,100,000 and a shortfall in revenues of approximately $438,000. Moved by Councillor Strowbridge, seconded by Councillor Reardon: RESOLVED that the submitted report entitled 2015 Preliminary Year End Results for Saint John Water, be received for information. MOTION CARRIED 1.4 Water and Sewerage Accounts Receivable Update Mr. Lavigne reported that there is a receivable of approximately $12,200,000, however $9,600,000 of that is current and not yet due. Since October 31St, approximately $8,100,000 has been collected and an additional 470 payment plans have been set up for approximately $400,000 in arrears. Moved by Councillor Reardon, seconded by Councillor Strowbridge: RESOLVED that the submitted report entitled Water and Sewerage Accounts Receivable Update, be received for information. LTA [0000114L1:k]kIif07 Adjournment Moved by Councillor Reardon, seconded by Councillor Strowbridge: RESOLVED that the Finance Committee open session meeting held on Tuesday, March 15, 2016 be adjourned. MOTION CARRIED The Finance Committee meeting held on March 15, 2016 was adjourned at 5:45 p.m. City of Saint John Finance Committee Terms of Reference 1. MANDATE Common Council has established a Finance Committee and has given the Committee the administrative powers and duties set out herein. The mandate of the Finance Committee includes review of financial reporting, audit, accounting systems, and internal controls for purposes of making recommendations. Common Council has directed the City Manager to establish an expanded mandate for the Finance Committee as a 6 month pilot project, commencing September 2016. The expanded mandate of the Finance Committee includes budget development, forecasting, fiscal management, resource allocation, open data, information management and continuous Improvement. 2. MEMBERSHIP a. The Finance Committee will be comprised of a Chair, Vice Chair, and 3 other members. (All Council Members); b. The Mayor sits as an ex -officio and non-voting member; c. The Chair of the Finance Committee shall be selected by the Committee; d. Common Council shall make appointments to the Committee with rotating membership every two years; e. Where a member of the Finance Committee fails to attend three consecutive meetings of the Finance Committee without approval of the Committee, the member can be struck from the Committee membership and replaced by an appointment of Council; f In the event that any member ceases to be a member of the Finance Committee before the expiration of their term, Council may appoint another person to be a member for the un -expired portion of the term; g. In all other respects, the rules of procedure for the Committee shall be governed by the City's Council Procedures Bylaw insofar as it may be applicable; and h. The Chairperson will act as a liaison between the Committee and City Council. K3 3. MEETINGS a. The Finance Committee shall meet monthly and/or as required at the call of the Committee Chair; b. Finance Committee meetings will be open to the public in accordance with the requirements of Section 10.2 of the Municipalities Act. The public may be excluded only in the circumstances identified therein; c. Meetings shall be set for 1 to 2 hours in duration, but can extend beyond 2 hours at the discretion of the Committee; d. All decisions of the Committee shall be in the form of resolutions duly passed by a majority of its members present. The Committee shall strive to reach consensus on issues, and shall forward recommendations in the form of Finance Committee resolutions to the Council; e. Quorum for any meeting will be at least fifty (50) percent of the number of members of the Committee; f Finance Committee meetings shall be attended by the City Manager, the Commissioner of Finance, the Deputy City Manager and a representative from the External Auditors. In the event of the Commissioner of Finance's inability to attend, a person designated by him or her for that purpose shall do so; g. The Commissioner of Finance or the City Manager may have other employees attend with them provided the Committee consents; and h. The External Auditors shall have free and confidential access to the Finance Committee. 4. ADMINISTRATIVE POWER AND DUTIES It will be the work of the Committee to review the financial information respecting the City's activities, monitor the audit process, make budget recommendations to Common Council, monitor continuous improvement initiatives, and assess the existence and adequacy of systems of corporate control and management of business risk. As a consequence of performing that work the Committee will report in writing to Council and/or provide written policy recommendations to Council with respect to: a. The independence, professional qualifications and audit scope and approach used by auditors; b. The planned activity and results of the external audit; c. Assessment of business risk and internal controls; d. The results of the annual financial audit and recommendation of approval of the financial statements; e. The General Operating and Capital Budgets; f The Utility Operating and Capital Budgets; C! g. Property Tax Rates and Utility rates; h. Proposals for tendering for External Audit services; i. Long Term Financial Plans; j. Continuous Improvement initiatives; and k. Other matters as the Committee believes are relevant to the financial management of the City's affairs or as referred to them by Common Council. 5. REPORTING a. The Finance Committee will be provided with secretarial support by the Common Clerk's Office; b. The Common Clerk will ensure that as soon as practicable after each meeting, minutes of that meeting including the names and titles of all persons present and a record of all decisions reached, are prepared and distributed to all Members; and c. The Committee Chair shall report to Common Council at least annually on the activities of the Committee and a copy of the minutes of each meeting of the Committee will be made available to members of Common Council. 61 FINANCE COMMITTEE REPORT M&C No. M&C 2016 - Report Date August 04, 2016 Meeting Date August 17, 2016 Service Area Finance and Administrative Services Members of the Finance Committee Finance Chair and Members of Council SUBJECT: 2016 Year -End Projections OPEN OR CLOSED SESSION This matter is to be discussed in open session of the Finance Committee AUTHORIZATION Primary Author Commissioner/Dept. HeadL4 City Manager Hilary Nguyen Kevin Fudge m I Jeff Trail RECOMMENDATION It is recommended that this report be received and filed EXECUTIVE SUMMARY The Purpose of this report is to provide the Finance Committee with the City of Saint John 2016 year-end projections as of June 30th, 2016 for the General and Water & Sewerage Utility Operating Funds. PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT The report provides an update on the Economic Health of the City of Saint John. REPORT GENERAL OPERATING FUND Based on the June year to date results and projections reviewed with service areas, the General Operating Fund is presently projected to be in a surplus position at year-end of approximately $1.48 million or 0.98% of the total budget. C.1 -2 - Based on a General Operating Budget of approximately $151 million, a variance of 0.98% would be widely considered as being on budget. It should be understood that the following projection is based on departmental best estimates as at June 30, 2016. While there are no significant events that have come to the attention of staff to require modification of these estimates at this time, actual year-end results may differ depending on weather conditions as well as other unexpected events. Appendix 1 (attached) represents year-end projections by service areas for the General Fund. Overall revenues are trending towards a positive variance of approximately $380K, or 0.25% of budget, which includes: 1. Protective services revenue is tracking ($74K) under budget mostly due to less than anticipated revenues in the Fire service; 2. Sports and Recreation is currently projected to be approximately ($23K) under budget due to a lesser increase in sports field user rates than budgeted; 3. Administrative support revenue is projected to be under budget by approximately ($99K), however it is primarily due to a reclassification issue as legal costs recovered from Saint John Water were budgeted as a revenue but the recovery was netted against legal expenses (overall no impact to the budget); 4. Permits & licenses revenues are projected to exceed budget by approximately $27K due to higher than expected plumbing and excavation permit revenues; 5. Parking & dangerous building revenues are expected to be under budget by approximately ($99K) due to less traffic and the success of the hotspot application reducing parking meter and parking ticket revenues. In addition, there have been fewer building demolitions than expected, resulting in less revenue from the Province than originally estimated; 6. Rentals revenues are trending under budget by ($23K) due to lower City Market rental revenues mostly due to the closure of a market tenant.- 7. enant; 7. Other revenues forecasted exceed budget by approximately $671K due to projected revenues to the General Fund from Saint John Water for doing Utility Cuts in-house, as well as the receipt of insurance proceeds not budgeted in 2016. Overall expenses are projected to be in a surplus position of approximately $1.1 Mil or 0.73% of budget by the end of the year: r� -3- 1. Growth & Community Development Services are projected to be $136K or 1.4% under budget due to fewer demolitions than expected, staff vacancies and other small positive variances; 2. Public Safety Services are projected to be $8K under budget, or 0.01% variance, which is essentially on budget. 3. Transportation and Environment Services are anticipating a negative variance of ($57K) or 0.14% of budget. Salaries and Benefits are forecasted to be $226K over budget because budgeted retirements have not yet occurred and there have been additional staffing costs associated with bringing the Utility Cut program in-house. Asphalt is also over budget by $91K due to the new Utility Cut program. Transit Commission is anticipating a deficit of $182K due to higher maintenance costs and additional salary and benefit expenses not budgeted for in 2016 budget. However these costs are projected to be offset by number of projected surpluses. Vehicle rental is expected to be $79K under budget mostly due to anticipating fewer trucks rentals to haul snow. Fleet fuel is forecasted to be $195K under budget assuming favorable weather conditions and lower fuel costs. Property taxes are trending under budget by $53K as some anticipated increases have not taken effect in 2016. Insurance is estimated to be underspent by approximately $34K due to lower insurance costs. Other offsets include small positive variances relating to expenses such as telephone, advertising, other general services, overtime meals, gas & oil and parts. 4. Finance & Administrative services are anticipating a positive variance of $264K or 1.96% of the total budget mostly due to savings from fleet parts as fewer repairs are anticipated. 5. Corporate Services are anticipating a positive variance of $72K or 1.28% of the total budget and includes small surpluses in areas such as advertising, travel, memberships, training, translation, other general services, etc. 6. Other charges are projected to have a positive variance of $682K or 2.3% of the total budget. Fiscal charges are under budget by $425K due to borrowing less than expected due to timing as well as a lower than expected interest and discount rates. Pension expenses are expected to be $257K under budget mostly because the remaining balance of the deferred pension was fully expensed in 2015. The above budget projections are based on staff's best estimates as of June results. Staff will continue to monitor the results of operations for the balance of the year and report back to the Finance Committee at a later date. E:3 -4 - SAINT JOHN WATER Appendix 2 (attached) represents year-end projections by service areas for Saint John Water. Based on the June year to date results and projections reviewed with service areas, Saint John Water is presently projected to be in a surplus position at year- end of approximately $317K or 0.72% of the annual budget. Saint John Water revenues are trending towards a negative variance of approximately ($52K), or 0.12% of budget, which includes: 1. Flat rate residential is forecasted to end the year in a negative variance to budget by approximately ($110K), or 0.56% of budget due to variances in budgeted flat rate billings and actual flat rate billings stemming from property transfers. 2. Meter revenues based on information year to date are projected to be over budget resulting in a positive variance of $22K. Meter revenue can vary significantly period over period and there is higher risk predicting year end results compared to flat rate. 3. Other revenues are anticipated to be over budget by $36K due to interest & rebate revenues. Overall expenses are projected to be in a surplus position of approximately $369K or 0.84% of budget by the end of the year: 1. Drinking water is anticipated to be in a positive variance of $426K due to several factors. Staff vacancies, lower purchased goods such as meters, along with a milder winter resulting in less electricity costs are contributing the positive variance. 2. Industrial Water is anticipated to be in a positive variance of $104K due to several factors. The majority of the variance is reduced repairs, maintenance and other operating expenses due to capital upgrades on equipment. However, the Musquash pump station is online earlier in 2016 given there has been less accumulation of snow this past winter and it is anticipated that electrical cost and water supply expenses could rise in 2016 depending on Industrial demand. 3. Wastewater is anticipated to be over budget by ($545K). There have been major unexpected expenditures that have occurred at some lift stations requiring major repair work, resulting in increased overtime, professional services, equipment rentals and repairs and maintenance. -5- 4. Fiscal and other charges are anticipated to be under budget by $411k by the end of the year. The City secured lower interest rates and debenture cost from its recent debentures than budgeted for. The Utility also has much lower interest cost that is paid to the General fund for having more cash on hand. SERVICE AND FINANCIAL OUTCOMES N/A INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input has been received from all Service Areas Respectfully submitted, Kevin Fudge, CPA, CA Commissioner of Finance & Administrative Services Attachments: Appendix 1— Budget to Projected Variance Report, December 31St, 2016 Appendix 2 — Water & Sewerage Utility Fund 2016 Projected Results ito] The City of Saint John Appendix 1 Budget to Projected Variance Report For the Year Ended December 31, 2016 2015 2016 2016 Year-end City of Saint John Approved Approved Projection 2016 Budget Service -based Service -based Service -based Difference REVENUES Property taxes 118,325,922 120,141,178 120,141,178 - Federal Payment in Lieu of Taxes (PILT) 120,729 41,244 41,244 - Equalization & Unconditional Grant 20,935,308 19,923,206 19,923,206 - Surplus 2nd previous year 567,702 - - - Protective services 1,350,200 1,270,200 1,196,702 (73,498) Sports and Recreation (Arenas, Sports fields & 27,830,679 29,129,088 28,446,855 682,233 Leisure) 900,027 992,027 968,311 (23,716) Emergency Dispatch 943,662 961,168 961,168 - Administrative Support (0 2,209,000 2,110,000 (99,000) Permits & Licences 00 991,700 1,018,976 27,276 Parking �#6,",00 2,891,900 2,792,497 (99,403) Rentals 845,504 1,031,561 1,008,399 (23,162) Other 923,900 1,089,000 1,760,346 671,346 TOTAL REVENUES 151,143,354 151,542,184 151,922,027 379,843 EXPENDITURES Growth & Community Development Services 9,716,396 9,647,828 9,511,579 136,249 Public Safety Services 52,307,664 52,075,100 52,067,291 7,809 Transportation & Environment Services 41,627,316 41,534,638 41,592,094 (57,456) Finance & Administrative Services 13,554,309 13,521,532 13,256,796 264,736 Corporate Services 6,106,990 5,633,998 5,561,834 72,164 Other Charges 27,830,679 29,129,088 28,446,855 682,233 TOTAL EXPENDITURES 151,143,354 151,542,184 150,436,449 1,105,735 General Fund Surplus (Deficit) - - 1,485,578 1,485,578 1 11 Appendix 2 Water & Sewerage Utility Fund 2016 2016 Approved Year End 2016 Projected Results Budget Projection Variance Revenues Flat Rate Residential 19,759,000 19,649,248 -109,752 Metered Accounts 19,213,000 19,235,000 22,000 Fire Protection 2,400,000 2,400,000 0 Storm Sewer 995,000 995,000 0 Previous Years Surplus 1,014,000 1,014,000 0 Other 566,000 601,802 35,802 Total Revenues 43,947,000 43,895,050 (51,950) Expenditures Drinking Water 9,690,000 9,264,250 425,750 Industrial Water 1,634,000 1,529,763 104,237 Wastewater 10,132,000 10,676,717 -544,717 Infastructure Management 1,278,000 1,305,511 -27,511 Other Charges 21,213,000 20,801,829 411,171 Total Expenditures 43,947,000 43,578,070 368,930 Saint John Water Surplus - 316,980 316,980 12 � \ ' \ \� } �, � �/ (TI3 .............. 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Head City Manager Hilary Nguyen Kevin Fudge Jeff Trail RECOMMENDATION It is recommended that the Finance Committee approve this report and that the Chair of the Finance Committee submits a report to Common Council recommending approval of the 2015 Consolidated Financial Statements and the 2015 Trust Fund Statements. EXECUTIVE SUMMARY Deloitte has completed an audit of the Consolidated Financial Statements of the City of Saint John for the Year ending December 31, 2015 and has expressed a clean audit opinion that the statements present fairly, in all material respects, the consolidated financial position and results of operations of the City of Saint John. Under PSA standards, municipal reporting requirements include: • Consolidated Statement of Financial Position • Consolidated Statement of Operations and Accumulated Surplus • Consolidated Statement of Changes in Net Debt • Consolidated Statement of Cash Flows • Notes to the Consolidated Financial Statements There are 17 entities under the control of the City of Saint John (see note 2 to the Consolidated Financial Statements). Deloitte has also completed an audit of the 2015 Trust Fund Statements and have expressed a clean audit opinion. 41-1 -2 - PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT The report provides an update on the Economic Health of the City of Saint John. REPORT 2015 CONSOLIDATED FINANCIAL STATEMENTS The Commissioner of Municipal Affairs prescribes, pursuant to Section 8 of the Control of Municipalities Act, Chapter C-20 of the R.S.N.B. 1973, a revised Municipal Financial Reporting Manual to be applicable to municipalities in the Province of New Brunswick, according to which Financial statements should be prepared in accordance with Canadian Generally Accepted Accounting Principles for local governments as outlined in the Public Sector Accounting (PSA) Handbook starting January 1, 2012. Deloitte has completed an audit of the Consolidated Financial Statements of the City of Saint John for the Year ending December 31, 2015 and has expressed a clean audit opinion that the Consolidated Financial Statements present fairly, in all material respects, the consolidated financial position and results of operations of the City of Saint John. Under PSA standards, municipal reporting requirements include: 1. Consolidated Statement of Financial Position 2. Consolidated Statement of Operations and Accumulated Surplus 3. Consolidated Statement of Changes in Net Debt 4. Consolidated Statement of Cash Flows 5. Notes to the Consolidated Financial Statements There are 17 entities under the control of the City of Saint John (see note 2 to the Consolidated Financial Statements). Change in Accounting Policy Effective January 1, 2015, the City elected to change its accounting policy for the City of Saint John Shared Risk Pension Plan (CSJ SRP). The City is accounting for the CSJ SRP as a joint defined benefit plan pursuant to the Public Sector Accounting Standard 3250. The City had previously accounted for the CSJ SRP as a defined contribution plan. Saint John Energy accounts for the Saint John Energy Shared Risk Plan (SJE SRP) as a defined contribution plan, and as a result, has received a qualified audit opinion from its auditor. Effective January 1, 2015, in consolidating the Saint John Energy results in its financial statements, the City elected to change its accounting policy to comply with the requirements for defined benefit plans under International Financial Reporting Standard IAS 19 — Employee Benefits. AXI -3 - Due to the change in the accounting policy, prior year figures have been adjusted for comparative purposes (see Note 3 to the Consolidated Financial Statements). 1. Consolidated Statement of Financial Position: Financial Assets: Assets are economic resources controlled by the organization as a result of past transactions or events and from which future economic benefits are expected to be obtained. Economic resources can be financial in nature (for example, cash, accounts receivable, investment); or non-financial in nature (for example, inventory, prepaid items, tangible capital assets). The City ended the year with financial assets totaling $103.6 Mil. This represents an increase of 11.2 % compared to prior year: • Cash and cash equivalents totaled $28.9 Mil, an increase of 116% from 2014. This was mainly due to an increase in cash flow from operating transactions. • Accounts receivable totaled $15.9 Mil at the end of 2015 (2014: $26.8). Details of the accounts receivable can be found in Notes 6, 7 and 8 to the Consolidated Financial Statements. • Investment in Energy services represents the City's equity in Saint John Energy, which totaled $50.8 at the end of 2015 (2014: $44.9 Mil). • Other investments consist mostly of Canada Games Foundation investments as well as other small investments (see Note 10 to the Consolidated Financial Statements). Non -Financial Assets: Tangible capital assets represent the net book value of all assets owned by the City of Saint John and its controlled entities, which totaled $928.3 Mil at the end of 2015 (2014: $928.8 Mil). Note 22 to the Consolidated Financial Statements disclosed total assets by asset classes. The City's major asset categories are water and wastewater networks and transportation, which includes roads, sidewalks, storm sewer networks, traffic signals, etc. The City and its controlled entities own a significant number of buildings, which include the Market Square, Harbor Station, Aquatic Centre, Police headquarters, Transit building, etc. Many buildings are quite old and need significant repairs and upgrade. Building historical costs totaled $230 Mil, of which 47% ($108 Mil) have been amortized at the end of 2015. Vehicles account for 3.2% of the total assets with total historical costs of $49 Mil. 55% of the vehicle costs have been amortized at the end of 2015. Due to lack of funding to fleet, many vehicles have passed their normal useful lives. K-11 -4 - Financial Liabilities: Financial liabilities are present obligations of the organization to others arising from past transactions or events, the settlement of which is expected to result in the future sacrifice of economic benefits. At the end of 2015, financial liabilities totaled $377.6 Mil. This represents a decrease of 3.4% or $13.5 Mil compared to 2014: • Accounts payable and accrued liabilities totaled $29.5 Mil at the end of 2015 (2014: $29.2 Mil). Details of the accounts payable and accrued liabilities can be found in Note 11 to the Consolidated Financial Statements. • Post -employment benefits and compensated absences represent liabilities associated with the City's benefit programs including retirement allowances; sick leave; heart & lung pension; disability benefits; contractual top -up agreements; and the CSJ SRP based on actuarial valuations (see Note 14 to the Consolidated Financial Statements). • Long term debt includes debenture debt and mortgages totaling $221.4 Mil at the end of 2015 (2014: $225.6 Mil) (see Note 13 to the Consolidated Financial Statements). 2. Consolidated Statement of Operations and Accumulated Surplus: This statement accounts for the operating revenues and expenditures of the City of Saint John and its controlled entities. The statement has been prepared in accordance with the Public Sector Accounting Standards; therefore it is different from the fund -based Statement in that the expenditures include amortization of tangible capital assets rather than principal repayment. Revenues for the year ended December 31, 2015 totaled $221.5 Mil, which is 1.8% more than prior year (2014: $217.7 Mil). Expenses for the year totaled $198.8 Mil, which is 4.4% less than prior year (2014: $208 Mil). The overall result of operations was a surplus of $22.7 Mil (2014: $9.7 Mil). A detailed listing of revenues and expenses can be found in Note 27 to the Consolidated Financial Statements. 3. Consolidated Statement of Changes in Net Debt: Net financial assets (net debt) position is a key indicator of the City's overall financial health and is calculated by deducting the City's financial assets from its financial liabilities. If the financial assets are greater than the liabilities then it is called net financial assets. If the financial assets are less than the liabilities then it is called net debt. A net debt balance represents a lien against future operations while a net financial assets balance means the City has resources available for future operations. Compared to 2014, net debt at December 31, 2015 has decreased from $298 Mil to $274 Mil, which is equivalent to 8% reduction. This represents an improvement in the net debt position of the City. We%] -5- 4. Consolidated Statement of Cash Flows: The Consolidated Statement of Cash Flow reports on the change in cash and cash equivalents during the year from operating, capital, financing and investing activities. The City generates cash to finance its operating activities, acquire tangible capital assets and meet its obligations by raising revenues, issuing debts or converting other financial assets into cash. The City's primary source of cash is from its operating activities. The Consolidated Statement of Cash Flow indicates that during the year, the City has generated sufficient cash to maintain its programs and services, finance its capital expenditures, meet its debt service requirements as well as make new investments. As at December 31, 2015, Cash and cash equivalents totaled $28.9 Mil (2014: $13.4 Mil). This represents an increase of 116% or $15.5 Mil over 2014. 2015 TRUST FUND STATEMENTS The City's Trust Fund Financial Statements consist of funds held in trust by the City that are restricted for a particular purpose. Deloitte has completed an audit of the 2015 Trust Fund Statements and has expressed a clean audit opinion. SERVICE AND FINANCIAL OUTCOMES N/A INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input has been received from all Service Areas ATTACHMENTS: 1. City of Saint John Consolidated Financial Statements, December 31st 2015 2. City of Saint John Trust Funds, December 31st, 2015 091 12 El c� tibnLn tiu CU0 L- .� V 4- 0 Ln r -I O N r -I M AV W V H m H H (A Q f0 V f0 i LL oc Ln ri 0 oc 1i 4 O r -I N O M 0 a Ln w a� c� a m a� CL E O U O fC H G1 O a� 41 a� O Q. 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LL O 1 c a -J a -J a -J z v O U ,A 0 0 0 0 0 0 0 � � 0 0 0 0 0 r14 0 r14 IIIIIIIIII ,A 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0Lr)0 0 00 0 M M N N c -I rl LO 4-J -a u 4-J 4-J 4-J 0 4-J 0 0 E cc 4- E 0 0 4--J 0 m Ln (1) u Lf) 07 V) 0 0-00 U < L! ------------ LO 1;l I-, 12 (Y) LO The City of Saint John Consolidated Financial Statements December 31, 2015 6'i! The City of Saint John December 31, 2015 CONTENTS 6191 Page Consolidated Financial Statements Independent Auditor's Report 1 -2 Consolidated Statement of Financial Position 3 Consolidated Statement of Operations and Accumulated Surplus 4 Consolidated Statement of Changes in Net Debt 5 Consolidated Statement of Cash Flow 6 Notes to the Consolidated Financial Statements 7-44 6191 Auditors' Report THIS IS A PLACEHOLDER. REPLACE WITH REAL AUDITORS' REPORT. 67� Auditors' Report THIS IS A PLACEHOLDER. REPLACE WITH REAL AUDITORS' REPORT. 61FA The City of Saint John Consolidated Statement of Financial Position As at December 31, 2015 Financial assets Cash and cash equivalents (Note 5) Accounts receivable (Note 6), (Note 7) and (Note 8) December 31, December 31, 2015 2014 Restated (Note 3) 28,879,337 13,354,780 15,934,185 26,804,419 Investment in Energy Services 50,833,600 44,916,864 Other investments (Note 10) 7,913,047 8,055,710 Financial liabilities Accounts payable and accrued liabilities (Note 11) Deferred revenue 103,560,169 93,131,773 29,484,048 29,246,800 1,801,578 1,805,470 Deferred government transfers (Note 12) 1,098,153 2,933,087 Post employment benefits and compensated absences (Note 14) 123,690,809 131,374,900 Bank loan payable (Note 4) 108,582 156,715 Long term debt (Note 13) 221,444,436 225,595,284 377,627,606 391,112,256 Net debt (274,067,437) (297,980,483) Non-financial assets Inventory Prepaids Tanaible capital assets 1,469,832 1,399,249 1,098,292 1,837,789 8,272,092 928,831,425 930,840,216 932,068,463 Accumulated surplus 656,772,779 634,087,980 Contingencies (Note 15) Commitments (Note 16) Approved by: Don Darling, Mayor , Chair of Finance Committee The accompanying notes are an integral part of these consolidated financial statements. 3 6'1:3 The City of Saint John Consolidated Statement of Operations and Accumulated Surplus For the year ended December 31, 2015 2015 Budget 2015 2014 (Unaudited) Restated (Note 2) (Note 3) Revenues 207,983,809 221,541,279 217,672,911 Property taxes 118,325,922 118,325,922 117,667,569 Unconditional grant 21,250,308 21,033,980 19,701,031 Other revenue from own sources (Note 27) 28,054,550 25,125,562 26,181,451 Water & sewer revenue (Note 18) 38,897,400 37,745,373 38,472,819 Miscellaneous revenue 705,629 1,472,481 1,836,991 Contributions from others (Note 27) 750,000 11,921,225 11,943,607 Income from energy services - 5,916,736 1,869,443 209,991,005 198,856,480 208,011,989 Annual surplus (2,007,196) 22,684,799 9,660,922 Accumulated surplus, beginning of year - 634,087,980 624,427,058 Accumulated surplus, end of year (2,007,196) 656,772,779 634,087,980 The accompanying notes are an integral part of these consolidated financial statements. 4 6'1%] 207,983,809 221,541,279 217,672,911 Expenses General Government Services (Note 27) 42,513,756 32,062,629 33,599,156 Protective services (Note 27) 50,748,257 48,947,307 49,611,875 Transportation services (Note 27) 38,006,934 49,906,075 48,666,391 Water and sewer services (Note 27) 42,371,000 34,612,882 33,729,452 Environmental health services (Note 27) 3,546,103 3,262,654 3,350,209 Environmental development services (Note 27) 22,356,046 20,030,186 20,216,693 Recreational and cultural services (Note 27) 10,448,909 10,034,747 10,365,013 Loss from energy services - - 8,473,200 209,991,005 198,856,480 208,011,989 Annual surplus (2,007,196) 22,684,799 9,660,922 Accumulated surplus, beginning of year - 634,087,980 624,427,058 Accumulated surplus, end of year (2,007,196) 656,772,779 634,087,980 The accompanying notes are an integral part of these consolidated financial statements. 4 6'1%] The City of Saint John Consolidated Statement of Changes in Net Debt For the year ended December 31, 2015 2015 2014 Annual surplus 22,684,799 9,660,922 Acquisition of tangible capital assets (Note 22) (39,412,548) (44,902,563) Disposal of tangible capital assets (Note 22) 2,917,437 2,425,533 Amortization of tangible capital assets (Note 22) 37,054,444 35,738,236 (Increase) decrease in inventory (70,583) 9,021 Increase (decrease) in prepaids 739,497 (703,025) Increase (decrease) in net assets Net debt, beginning of year 1.228.247 (7.432.7 (297,980,483) (300,208,607) Net debt, end of the year (274,067,437) (297,980,483) The accompanying notes are an integral part of these consolidated financial statements. 5 Ais] The City of Saint John Consolidated Statement of Cash Flow For the year ended December 31, 2015 2015 2014 Operating transactions Annual surplus 22,684,799 9,660,922 Items not involving cash Amortization of tangible capital assets (Note 22) 37,054,444 35,738,236 Loss on disposal of tangible capital assets 2,646,875 2,011,483 Investment in Energy Services (5,916,736) 6,603,757 Change in non-cash assets and liabilities Accounts receivable 10,870,234 (8,247,578) Inventory (70,583) 9,021 Prepaids 739,497 (703,025) Accounts payable and accrued liabilities 237,248 (3,224,381) Deferred revenue (3,892) 64,220 Deferred government transfers (1,834,934) (2,596,531) Other post employment liabilities (7,684,091) (7,926,900) 58,722,861 31,389,224 Capital transactions Acquisitions of tangible capital assets (Note 22) (39,412,548) (44,902,563) Proceeds on sale of tangible capital assets 270,562 414,050 (39,141,986) (44,488,513) Financing transactions Repayment of long term debt (18,150,848) (25,277,942) Proceeds from long term debt 14,000,000 37,900,000 Repayment of bank loan (48,133) (44,444) (4,198,981) 12,577,614 Investing transactions Investments (Note 10) 142,663 (470,527) Net increase (decrease) in cash and cash equivalents 15,524,557 (992,202) Cash and cash equivalents, beginning of year 13,354,780 14,346,982 Cash and cash equivalents, end of year 28,879,337 13,354,780 The accompanying notes are an integral part of these consolidated financial statements. 0 AI The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 1. Purpose of the organization The City of Saint John (the "City") was incorporated by royal charter in 1785. As a municipality, the City is exempt from income taxes under Section 149(1)(c) of the Canadian Income Tax Act. The City has the following vision statement, "We are energized, engaged people committed to working together to provide services that are responsive to Community needs and delivered in a sustainable, cost effective way." 2. Summary of significant accounting policies The consolidated financial statements of the City are the representations of the City's management prepared in accordance with Canadian generally accepted accounting principles for local governments, as recommended by the Chartered Professional Accountants of Canada Public Sector Accounting Board ("PSAB"). Significant aspects of the accounting policies adopted by the City are as follows: Reporting entity The consolidated financial statements reflect the assets, liabilities, revenues, expenditures, and changes in net debt and cash flows of the reporting entity. The reporting entity is comprised of all organizations and enterprises accountable for the administration of their affairs and resources to the City and which are owned or controlled by the City. Interdepartmental and organizational transactions and balances are eliminated. The focus of PSAB financial statements is on the financial position of the City and the changes thereto. The Consolidated Statement of Financial Position includes all of the assets and liabilities of the City. The entities included in the consolidated financial statements are as follows: The City of Saint John General Operating Fund The City of Saint John Capital and Loan Fund 3. The City of Saint John Water and Sewerage Utility Operating Fund 4. The City of Saint John Water and Sewerage Utility — Capital and Loan Fund 5. Saint John Parking Commission 6. Saint John Transit Commission 7. Saint John Non Profit Housing Inc. 8. Saint John Development Corporation 9. Saint John Industrial Parks Inc. 10. Harbour Station Commission 11. Saint John Aquatic Centre Commission 12. Saint John Trade and Convention Centre 13. Saint John Energy 14. Lord Beaverbrook Rink 15. Saint John Police Commission 16. Saint John Free Public Library 7 I' The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 2. Summary of significant accounting policies [Cont'd] Reporting entity [Cont'd] 17. Saint John Jeux Canada Games Foundation, Inc. Investment in Energy Services The City's investment in Saint John Energy is accounted for on a modified equity basis, consistent with generally accepted accounting principles as recommended by Public Sector Accounting Standards for government business enterprises. Under the modified equity basis of accounting, the business enterprise's accounting principles are not adjusted to conform with those of the City and inter -organizational transactions and balances are not eliminated. The City recognizes its equity interest in the annual income or loss of Saint John Energy in its consolidated statement of operations with a corresponding increase or decrease in its investment asset account. Budget The budget figures contained in these financial statements were approved by Council on December 22, 2014 and the Minister of Local Government on February 26th, 2015. The budget is unaudited and does not include elimination of inter -organizational revenues and expenses with controlled entities. Revenue recognition Unrestricted revenue and other sources of revenue are recorded on an accrual basis and is recognized when collection is reasonably assured. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Other revenue is recorded when it is earned. Property taxes, which are authorized by Council, are recognized as revenues in the period for which the taxes are levied. Government transfers Government transfers are recognized in the consolidated financial statements as revenues in the period in which events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met, except to the extent that transfer stipulations give rise to an obligation that meets the definition of a liability and reasonable estimates of the amounts can be made. Transfers are recognized as deferred revenue when amounts have been received but not all eligibility criteria have been met. Expenses Expenses are recorded on an accrual basis. The cost of all goods consumed and services received during the year is expensed. Measurement uncertainty The preparation of the consolidated financial statements in accordance with Canadian PSAS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the year. Key components of the consolidated financial statements requiring 8 W The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 2. Summary of significant accounting policies [Cont'd] Measurement uncertainty [Cont'd] management to make estimates include: the useful life of capital assets, impairment of tangible capital assets, rates for amortization, allowance for doubtful accounts in respect of receivables and estimates for pension liabilities. Estimates are based on the best information available at the time of preparation of the financial statements and are reviewed annually to reflect new information as it becomes available. Measurement uncertainty exists in these financial statements. Actual results could differ from those estimates. Financial instruments The City's financial instruments consist of cash and cash equivalents, accounts receivable, investment in Energy Services, other investments, accounts payable and accrued liabilities, bank loan payable, and long term debt recorded at amortized cost or fair value. Unless otherwise noted, it is management's opinion that the City is not exposed to significant interest, currency or credit risk arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted. The City is subject to credit risk through accounts receivable. The City minimizes credit risk through ongoing credit management. Cash and cash equivalents Cash and cash equivalents include cash on hand, balances with banks and short term deposits with original maturities of three months or less. Tangible capital assets Tangible capital assets are non-financial assets having a physical substance that: - Are held for use by the City in the production or supply of goods and services, for rentals to others, for administrative purposes or for the development, construction, maintenance or repair of other tangible assets; - Have useful lives extending beyond one year and are intended to be used on a continual basis; - Have a minimum value of $5,000 for individual assets; or $25,000 for pooled assets; and - Are not intended for sale in the ordinary course of operations. 0 AEII The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 2. Summary of significant accounting policies [Cont'd] Tangible capital assets [Cont'd] Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. Assets that fall below the threshold amounts are expensed for accounting purposes. The cost of the tangible capital asset is amortized on a straight line over the estimated useful life as follows: Asset Type Years Equipment and light machinery 3-25 Furniture and office equipment 5-15 Information technology equipment and software 1-15 Land N/A Land improvements 5-100 Leasehold improvements Term of lease Municipal buildings 10-70 Transportation 5-50 Motor vehicles and mobile equipment 5-20 Water and wastewater networks 5-100 In the year of acquisition and the year of disposal, one half of the annual amortization expense is recognized. Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets are written down when conditions indicate that there is impairment in the value of the assets and the reduction in the value can be objectively estimated and it is expected to be permanent. The net write-downs are accounted for as expenses in the statement of operations. Donated or contributed assets are recorded at fair market value at the date of construction or donation. In some circumstances, replacement cost may be used. Segmented information The City provides a wide range of services to its residents. For management reporting purposes, operations and activities are organized and reported by function. This presentation was created for the purpose of recording specific activities to attain certain objectives in accordance with special regulations, restrictions or limitations. Municipal services are provided by service areas as follows: General government services This segment is responsible for the overall governance and financial administration of the City. This includes Council functions, general and financial management, legal matters and compliance with legislation as well as civic relations. 10 ARI The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 2. Summary of significant accounting policies [Cont'd] Segmented information [Cont'd] Protective services This segment is responsible for the provision of policing services, fire protection, emergency measures, animal control and other protective measures. Transportation services This segment is responsible for common services, roads and streets maintenance, street lighting, traffic services, parking and other transportation related functions. Water and sewer services This segment is responsible for the provision of water and sewer services including the maintenance and operation of the underground networks, treatment plants, reservoirs and lagoons. Environmental health services This segment is responsible for the provision of waste collection and disposal. Environmental development services This segment is responsible for planning and zoning, community development, tourism and other municipal development and promotion services. Recreation and cultural services This segment is responsible for the maintenance and operation of recreational and cultural facilities, including the swimming pool, arenas, parks and playgrounds and other recreational and cultural facilities. Energy services This segment comprises a non -generating distribution utility that supplies electricity to municipal, residential, general service and industrial customers through 12 interconnection supply points and substations located in the City of Saint John. It also provides street lighting, area lighting and water heater rental services. Inventory Inventory is valued at the lower of cost and net replacement cost with cost being determined on the first in, first out basis. 11 C�� The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 2. Summary of significant accounting policies [Cont'd] Post employment benefits The City recognizes its obligations under post -employment benefit plans and the related costs, as disclosed in Note 14. Where appropriate, the City has undertaken actuarial valuations. 3. Change in accounting policy City of Saint John Shared Risk Plan Effective January 1, 2015, the City elected to change its accounting policy for the City of Saint John Shared Risk Plan (CSJ SRP or the Plan) as described in Note. 14 in order to comply with the Public Sector Accounting Standard 3250. The City had previously accounted for the Plan in accordance with the requirements for defined contribution plans under the same accounting standard. As a result of the change in policy, the City's share of the excess or deficit in the Plan, as calculated in accordance with the standard, is recorded in the City's Consolidated Statement of Financial Position. The City is accounting for its SRP using a joint defined benefit plan. Pension related expenses, different from actual contributions being made to the Plan by the City, will be recorded in the Statement of Operations, in accordance with the standard. The change in policy has been applied using a retroactive basis with a transition date of January 1, 2014. At the beginning of the current: fiscal year, as a result of the change in policy, an accrued benefit liability (asset) of $110.9M and unamortized experience gains (losses) of $7.OM were recorded in the financial statements. The City shares the significant risks of the Plan on an equitable basis with the Plan members. Funding contributions are shared at 55.9% by the City and 44.1% by employees, before taking into account the additional temporary contribution of 17% of earnings. Commencing April 1, 2013, the City of Saint John is required to make temporary contributions to the Shared Risk Pension Plan of 17% of earnings of all employees who are members of the Plan that will cease on March 31, 2028 or when the Plan achieves an open group funded ratio, as defined by the Pension Benefits Act, of 150%, if earlier, provided that such temporary contributions shall not cease before March 31, 2023, subject to the income tax act. If the Income Tax Act requires the cessation of the temporary contributions prior to March 31, 2023, once such contributions are again permissible under the Income Tax Act, they will re -commence until an equivalent of 10 years of such temporary contributions have been made in total. In order to determine the appropriate share of the Plan that is assigned to the City, the accrued benefit obligation (ABO) for the Plan is split into two portions: the portion that will be funded solely by the City through temporary contributions, and the portion that is cost shared at 55.9% by the City. The accrued pension liability at the transition date is equal to the full portion of the ABO related to the temporary contributions funded solely by the City, and 55.9% of the remaining portion of the ABO net of Plan assets. Current period benefit cost, interest cost, past service costs, and experience gains/losses, as applicable, are apportioned similarly. The plan assets are valued at fair market value with experience gains and losses being amortized over Expected Average Remaining Service Life (EARSL). 12 AYA The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 3. Change in accounting policy [Cont'd] Saint John Energy Shared Risk Plan On June 1, 2013, The Power Commission of the City of Saint John Superannuation Fund, a defined benefit pension plan, was converted to the Saint John Energy Shared Risk Plan (SJE SRP), in accordance with the Pension Benefits Act of New Brunswick. The primary purpose of the SJE SRP is to provide retirement benefits to eligible employees in the form of periodic payments to pensioners after retirement and until death in respect of their service as employees. A further purpose of the SJE SRP is to provide secure benefits to members without an absolute guarantee but with a risk -focused management approach delivering a high degree of certainty that base benefits will be payable in the vast majority of potential future economic scenarios. As a shared risk plan, all future cost of living adjustments for current and future retirees and other ancillary benefits under the SJE SRP shall be provided only to the extent that funds are available for such benefits as determined by the Board of Trustees of the SJE SRP in accordance with applicable laws and the funding policy. Saint John Energy ("SJE") and the members of the SJE SRP contribute each 9% of pensionable earnings, and SJE contributes an additional 8.5% of pensionable earnings on a temporary basis until 2028, or earlier if the SJE SRP is able to meet certain risk management goals under the Funding Policy. The SJE and member contribution rates may each increase or decrease by up to 2% of pensionable earnings provided certain financial measures and risk management goals are met. A 2% of pensionable earnings increase or decrease in contribution rate is the maximum cumulative change in the contribution rate for the SJE. Due to the nature of a shared risk plan, benefits are no longer guaranteed by SJE. For pensionable service before the conversion date, the base benefits (prior to any adjustments for adverse or better than anticipated investment returns) are equal to the member's years of pensionable service to a maximum of 35 years times 2% of the member's best three year average annual pensionable earnings. Post conversion date pension benefits are equal to 2% of the employee's annual base earnings (career average). The SJE financial statements account for the SJE SRP as a defined contribution plan, and as a result has received a qualified opinion from its auditors. Effective January 1, 2015, in consolidating the SJE results in its financial statements, the City elected to change its accounting policy in accordance with the requirements for defined benefit plans under International Financial Reporting Standard ("IFRS") IAS 19 — Employee Benefits. As a result of the change in the accounting policy, the differences between the calculated total defined benefit cost under IAS 19 using defined benefit plan accounting treatment, and actual SJE pension contributions being made to the SJE SRP in accordance with defined contribution accounting treatment as recorded in the SJE financial statements, are calculated as follows: 13 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 3. Change in accounting policy [Cont'd] SJE SRP Actuarial Valuations Actuarial valuations for the SJE SRP are conducted 'annually by the Board of Trustees for regulatory purposes. The most recent actuarial valuations for regulatory purposes were prepared as at January 1, 2014 and January 1, 2015. The actuarial valuations for defined benefit accounting purposes were based on the membership data used to conduct those regulatory valuations, but using best estimate assumptions as outlined below. The defined benefit obligation as at January 1, 2014 and service cost for the following year are based on an actuarial valuation conducted as at the same date. The defined benefit obligation as at December 31, 2014 and service cost for the following year are based on an actuarial valuation conducted as at December 31, 2014. The defined benefit obligation as at December 31, 2015 and service cost for the following year are based on an actuarial valuation conducted as at December 31, 2014 and extrapolated to December 31, 2015, using assumptions effective for December 31, 2015. Actuarial valuations are based on a number of assumptions about future events, such as inflation rates, interest rates, salary increases, employee turnover and mortality. The assumptions used reflect management's best estimates. The following summarizes the major assumptions in the defined benefit accounting valuations and extrapolations at the various effective dates: December December January 1, 31,2015 31,2014 2014 Discount rate 2015 2014 4.70% Inflation rate 2.25% Adjustment to pension benefit cost 2.25% Service cost 1,457,700 1,001,700 Interest cost 1,032,400 835,900 Remeasurements of the net defined benefit liability (assets) (2,560,700) 7,839,500 Minus 3.50% Mortality: CPM 2014 General mortality using scale CPM -B Employer contributions (1,241,200) (1,203,900) Adjustment in Consolidated Statement of Operations and Accumulated Surplus (1,311,800) 8,473,200 Equity in Saint John Energy at end of year, as previously reported - 53,390,064 Equity in Saint John Energy at end of year, as restated - 44,916,864 SJE SRP Actuarial Valuations Actuarial valuations for the SJE SRP are conducted 'annually by the Board of Trustees for regulatory purposes. The most recent actuarial valuations for regulatory purposes were prepared as at January 1, 2014 and January 1, 2015. The actuarial valuations for defined benefit accounting purposes were based on the membership data used to conduct those regulatory valuations, but using best estimate assumptions as outlined below. The defined benefit obligation as at January 1, 2014 and service cost for the following year are based on an actuarial valuation conducted as at the same date. The defined benefit obligation as at December 31, 2014 and service cost for the following year are based on an actuarial valuation conducted as at December 31, 2014. The defined benefit obligation as at December 31, 2015 and service cost for the following year are based on an actuarial valuation conducted as at December 31, 2014 and extrapolated to December 31, 2015, using assumptions effective for December 31, 2015. Actuarial valuations are based on a number of assumptions about future events, such as inflation rates, interest rates, salary increases, employee turnover and mortality. The assumptions used reflect management's best estimates. The following summarizes the major assumptions in the defined benefit accounting valuations and extrapolations at the various effective dates: December December January 1, 31,2015 31,2014 2014 Discount rate 3.95% 3.85% 4.70% Inflation rate 2.25% 2.25% 2.25% 75.1 % of 76.1% of 76.7% of Cost -of -living adjustment inflation inflation inflation Salary increase 3.50% 3.50% 3.50% Mortality: CPM 2014 General mortality using scale CPM -B 14 C:1'] The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 3. Change in accounting policy [Cont'd] Prior Year Adjustments The December 31, 2014 figures presented for comparative purposes have been restated from those previously reported. The following adjustments were made to the prior periods: 2014 Adjustments to annual surplus (deficit) Annual surplus, as previously reported in the Consolidated Statement of Operations and Accumulated Surplus 11,734,122 Adjustment to Pension expense (2,073,200) Annual surplus, as restated 9,660,922 Adjustments to opening accumulated surplus As previously reported 753,461,180 Investment in Energy Services (8,473,200) Unamortized actuarial gain (7,000,000) Accrued pension liability (103,900,000) Total adjustments to accumulated surplus (119,373,200) Opening accumulated surplus, as restated 634,087,980 4. Bank loan payable The City has credit facilities with the Bank of Nova Scotia. According to the terms and conditions of the commitment letter signed between the City and the Bank of Nova Scotia, the City can borrow up to $5.5 million to fund general operations and $25 million to assist in financing capital expenditures pending fall -in of long term financing. The interest rate for the credit facilities is the Bank's prime lending rate less 0.5% per annum with interest payable monthly. As at December 31, 2015, the balance of the bridge financing credit facility was zero (2014 - zero) and the balance of the operating line of credit was zero (2014 - zero). 15 rL17 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 5. Cash and cash equivalents Cash and cash equivalents consists of the following: Unrestricted cash Restricted cash Reserve for capital purchase Airspace 2049 fund Land sub -division fund Saint John Non Profit Housing future development fund Deposits on contracts Gas Tax Saint John Non Profit Housing replacement reserve Saint John Non Profit Housing subsidy surplus, reserve December 31, December 31, 2015 2014 21,191,635 6,850,810 2,830,000 2,783,500 20,766 13,046 58,961 58,375 50,457 49,955 532,370 610,524 1,098,152 - 3,045,345 2,937,468 51,651 51,102 28,879,337 13,354,780 6. Accounts receivable Accounts receivable consist of the following: December 31, December 31, 16 71 2015 2014 Water and sewer charges to ratepayers 7,913,606 10,068,747 Other 5,624,309 6,503,350 Due from the Federal Government and its agencies (Note 7) 2,376,281 8,245,156 Due from the Province of New Brunswick 1,847,604 3,503,274 Allowance for doubtful accounts (1,827,615) (1,516,108) 15,934,185 26,804,419 16 71 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 7. Due from the Federal Government and its agencies Amounts due from the Federal Government and its agencies consist of the following: December 31, December 31, 17 2015 2014 Canada Revenue Agency HST receivable 1,545,373 773,305 ACOA 665,939 - Other 164,969 114,936 Gas Tax Fund - 4,696,915 Harbour Cleanup Fund - 2,660,000 2,376,281 8,245,156 8. Due from the Province of New Brunswick Amounts due from the Province of New Brunswick consists of the following: December 31, December 31, 2015 2014 Regional Development Corporation - Barge terminal 884,901 - Other 829,202 1,628,192 Dept. of Public Safety - Hurricane Arthur 133,501 133,501 Safe Clean Drinking Water Project - 1,741,581 1,847,604 3,503,274 9. Investment in energy services Change in equity in Saint John Energy: 2015 2014 Equity at beginning of year 44,916,864 51,520,621 Net earnings (loss) 5,916,736 (6,603,757) Equity at end of year 50,833,600 44,916,864 17 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 10. Other investments Other investments consist of the following: December 31, December 31, 2015 2014 Canada Games Foundation investments 6,943,151 6,937,275 Other investments 969,896 1,118,435 Total other investments 7,913,047 8,055,710 The investments of the Canada Games Foundation (the "Foundation") are held in the custody of Scotiatrust and CIBC Melon. The Foundation's investment strategy is to hold high quality corporate or Government bonds and liquid equity investments which bear no unusual credit or interest rate risk. Fair values of investments in fixed income securities and equities are determined using year end quoted market prices. 11. Accounts payable and accrued liabilities Accounts payable and accrued liabilities consist of the following: December 31, 2015 December 31, 2014 Trade payables 21,717,142 20,738,008 Payroll 5,190,743 5,776,687 Deposits 906,006 974,396 Interest payable 738,700 667,835 Conferences and holdings 610,973 626,491 Other 158,522 160,260 Due to (from) Pension Fund 137,052 322,701 Canada Revenue Agency 24,910 (19,578) 29,484,048 29,246,800 18 rKj The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 12. Deferred government transfers Deferred government transfers consist of the following: Gas tax funding December 31, December 31, 2015 2014 1,098,153 2,933,087 Funding received as part of the Gas Tax Funding program is recorded as revenue in the year during which related expenditures are incurred. Amounts that have not been spent are recorded as deferred government transfers on the Consolidated Statement of Financial Position. 19 rLl The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 13. Longterm debt Debentures consist of the following Year of Issue Interest Rate % Term (Years) Annual Payment $ 2015 $ 2014 $ New Brunswick Municipal Finance Corporation Debentures 2005 3.750 to 4.375 10 473,000 - 2,843,000 2005 3.750 to 4.375 10 175,000 1,925,000 2005 3.750 to 4.375 10 40,000 240,000 2006 4.150 to 4.450 10 733,000 4,403,000 5,136,000 2006 4.150 to 4.450 10 400,000 4,400,000 4,800,000 2006 4.300 to 4.450 10 60,000 360,000 420,000 2007 4.450 to 4.850 10 380,000 2,660,000 3,040,000 2007 4.450 to 4.850 10 350,000 4,200,000 4,550,000 2007 4.450 to 4.850 10 33,000 236,000 269,000 2008 3.300 to 4.850 10 567,000 4,531,000 5,098,000 2008 3.300 to 4.850 10 125,000 1,625,000 1,750,000 2008 2.100 to 5.550 15 367,000 2,931,000 3,298,000 2008 2.100 to 5.550 15 175,000 2,275,000 2,450,000 2008 2.100 to 5.550 15 100,000 800,000 900,000 2009 0.950 to 5.000 10 933,000 8,402,000 9,335,000 2009 1.000 to 4.500 10 75,000 1,050,000 1,125,000 2009 0.950 to 5.000 10 100,000 900,000 1,000,000 2009 1.000 to 4.500 10 567,000 5,098,000 5,665,000 2009 0.950 to 5.000 10 250,000 3,500,000 3,750,000 2009 1.000 to 4.500 10 333,000 3,002,000 3,335,000 2010 1.500 to 4.550 10 1,000,000 10,000,000 11,000,000 2010 1.500 to 4.550 10 250,000 3,750,000 4,000,000 2011 1.650 to 4.250 10 1,667,000 20,332,000 21,999,000 2011 1.650 to 4.250 10 700,000 11,200,000 11,900,000 2011 1.350 to 3.450 10 300,000 3,300,000 3,600,000 2011 1.350 to 3.450 10 350,000 5,600,000 5,950,000 2011 2.060 20 200,000 3,200,000 3,400,000 2012 1.350 to 3.550 15 767,000 9,199,000 9,966,000 2012 1.350 to 3.550 15 425,000 7,225,000 7,650,000 2012 1.350 to 3.550 15 300,000 3,600,000 3,900,000 2013 1.350 to 3.700 15 687,000 8,926,000 9,613,000 2013 1.350 to 4.000 20 550,000 9,900,000 10,450,000 2013 1.350 to 4.000 20 360,000 8,280,000 8,640,000 2014 2.000 20 500,000 9,500,000 10,000,000 2014 1.150 to 3.900 15 707,000 9,893,000 10,600,000 2014 1.200 to 3.700 15 1,055,000 6,885,000 7,940,000 20 1191 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 13. Long term debt [Cont'd] Annual Interest Rate Term Payment 2015 2014 Year of Issue % (Years) $ $ $ 2014 1.200 to 3.700 20 668,000 8,012,000 8,680,000 2014 1.150 to 3.900 15 27,000 373,000 400,000 2014 1.200 to 2.150 5 56,000 224,000 280,000 2015 0.950 to 3.250 15 7,500,000 - 2015 1.050 to 3.650 15 4,370,000 2015 0.950 to 3.500 20 3,500,000 2015 1.050 to 3.150 20 1,750,000 2015 1.050 to 3.650 15 1,200,000 16,805,000 208,092,000 210,897,000 OTHER DEBENTURES Canada Mortgage and Housing Debentures 2009 3.97 15 87,869 965,626 1,053,494 Total debentures 16,892,869 209,057,626 211,950,494 21 01.1 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 13. Long term debt [Cont'd] Mortgages and other long term debt consist of the following: Canada Mortgage and Housing Corporation mortgages Bicentennial Court Rotary Admiral Beatty Main and Rodney Projects North End Project West Side Project Harbourside South End Project 105 Queen Street 46 St. James Street 147 Queen Street 28 Taylor Avenue Other mortgages CIBC - Rotary Court Manulife Financial - Leinster Street Bank of Nova Scotia - Broadview Avenue Bank of Nova Scotia - 289 Turnbull Date of Interest Maturity Rate Payment 2015 2014 April 1, 2021 1.80 Apr 1, 2021 1.80 Jun 1, 2026 2.26 Jan 1, 2024 2.11 Oct 1, 2024 2.65 Aug 1, 2019 1.82 Dec 1, 2022 1.67 May 1, 2025 1.04 Feb 1, 2023 1.62 Aug 1, 2028 2.35 Nov 1, 2029 1.12 May 1, 2019 4.067 August 1, 2018 4.70 April 1, 2017 2.34 Sep. 2018 4.00 Family and Community Services Affordable Rental Housing Program Forgivable loan - 40-46 Main Street Forgivable loan - Leinster Street Forgivable loan - Broadview Avenue Forgivable loan - 183 - 185 Wentworth Forgivable loan - 2 Newman Street New Brunswick Housing Corporation Promissory note payable -Rotary Admiral Beatty Com 52,837 298,365 351,202 313,406 1,769,738 2,083,144 41,775 500,304 542,079 45,599 405,927 451,526 42,208 399,103 441,311 282,893 1,082,481 1,365,374 74,776 559,764 634,540 20,603 217,414 238,017 32,671 250,243 282,914 9,180 136,901 146,081 12,022 185,591 197,613 21,339 134,818 7,357 13,454 387,346 3,778,261 76,387 227,610 408,685 3,913,079 83,744 241,064 May 1, 2026 4.45 7,000 72,333 79,333 Jul 1, 2028 4.45 45,500 568,750 614,250 Jul 1, 2027 4.80 5,000 57,500 62,500 Jun 1, 2025 5.30 7,000 65,917 72,917 April 2031 3.10 13,542 203,125 216,667 April 1,2031 4.30 75,000 1,143,750 1,218,750 NO 1,257,980 12,386,810 13,644,790 22 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 13. Long term debt [Cont'd] In total, long term debt consists of: December 31, December 31, 2015 2014 Debentures 209,057,626 211,950,494 Mortgages 12,386,810 13,644,790 Total long term debt 221,444,436 225,595,284 Mortgages with Canada Mortgage and Housing Corporation are secured by specific rental properties situated in Saint John and, in some instances, a general assignment of rental income. Forgivable loans from the Family and Community Services Affordable Rental Housing Program and the promissory note payable to New Brunswick Housing Corporation are forgiven over a period of twenty years from the first day of the month following project interest adjustment date, provided certain conditions are continuously met. Should a loan become payable as a result of default, the remaining unforgiven balance will bear interest at the rate shown in the table. The forgivable loans are secured by specific rental properties situated in the City of Saint John. During the year, $78,042 was forgiven by the Family and Community Services Affordable Rental Housing Program (December 31, 2014 - $79,333). During the year, $75,000 of the promissory note from New Brunswick Housing Corporation was forgiven (December 31, 2014 - $75,000). The aggregate amount of principal repayments required in each of the next five years and thereafter to meet provisions of long term debt, assuming maturity debt is renewed at terms comparable to those currently in effect, is as follows: 2016 27,025,178 2017 23,461,333 2018 21,238,335 2019 29,315,938 2020 20,617,210 Thereafter 99,786,442 23 M-11 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 14. Post employment benefits and compensated absences City of Saint John Shared Risk Plan The City of Saint John Pension Plan (Former CSJ Plan) was converted to the City of Saint John Shared Risk Plan effective January 1, 2013 (the conversion date). The purpose of the CSJ SRP is to provide secure benefits to members of the plan without an absolute guarantee but with a risk focused management approach delivering a high degree of certainty that base benefits can be met in the vast majority of potential future economic scenarios. These objectives are achieved through the development of a risk management framework that adheres to the legislated criteria, results in a low probability that base benefits will be reduced, and sets out the specific steps to be taken should the Plan's funded ratio fall below, or exceed, specified thresholds. These steps, when the Plan is underfunded, include the cessation of indexation of benefits, increasing contribution rates (to a predetermined maximum), reducing certain ancillary benefits, and ultimately reducing base benefits. When the Plan has excess funding, previous benefit reductions can be reversed, indexing is fully implemented, and various other potential increases can be implemented, including a decrease in contribution rates (to a predetermined maximum). Shared risk plans are legislated under the provincial Pension Benefits Act (PBA) which contains a number of requirements that must be met in order to qualify for registration by the Office of the Superintendent of Pensions. The Plan is also subject to the Income Tax Act. The Plan is administered by a Board of Trustees which includes 4 individuals nominated by the City and 4 individuals nominated by each of the four unions. The assets of the Plan are held by RBC Investor and Treasury Services which acts as custodian of the Plan. The assets of the Plan are managed by various investment managers who have discretionary investment authority within the investment mandates given to them by the Plan's Board of Trustees. The performance of the Plan relative to its benchmarks is measured on a regular basis. For service prior to the conversion date, the Plan provides for pensions at the rate of 2% per year of service times the average of the three consecutive years of service having the highest salary at the time of conversion. For service after the conversion date, the pension accrual for each year of service is 1.8% times the salary (excluding overtime pay) earned during the relevant year to a certain maximum salary that is indexed every year ($128,383 in 2015). Pension benefits accrued before the conversion date are payable without reduction when the member's age and service equal at least 85 (or at age 65, if earlier). Pension benefits accrued after the conversion date are payable without reduction at age 60 for employees in the International Association of Fire Fighters and Saint John Police Association and at age 65 for all other employees. Pension benefits can be paid as early as age 55 with a reduction. Shared risk plans extinguish all accrued rights to automatic future indexing. These automatic adjustments have been replaced by indexing as permitted by the Plan's funding policy, which is contingent on the SRP performance. 24 0611 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 14. Post employment benefits and compensated absences [Cont'd] City of Saint John Shared Risk Plan [Cont'd] The initial required employee contributions are equal to 12% of earnings for employees in the International Association of Fire Fighters and Saint John Police Association and employee contributions of 9% of earnings for other employees. Members in public safety occupations who accept a non-union position will have a one-time opportunity to elect to continue to contribute at the higher rate. The City makes initial required employer contributions of 15.2% and 11.4% of earnings (representing about 126.7% of employee contribution rates) for each of these groups. The initial contribution rates for both the employees and the City is subject to change as a result of the triggering mechanism and limitations imposed by the Plan's funding policy. Also, since April 1, 2013, the City is required to make contributions of 17% of earnings for a period of 15 years, or when the Plan achieves a minimum funded ratio of 150% (as calculated under the legislation) using a 15 -year open group method (no less than 10 years of payment must be made). The City has no other financial obligation other than to make contributions at the above rates, and within the limits found under the Plan's funding policy. In the event of a wind-up of the Plan in the five years following the conversion date, the Plan would be wound up under the provisions of the Former CSJ Plan. All assumptions relating to the CSJ SRP have been made on the basis of an on-going Plan and the City does not foresee a wind-up of the Plan. Actuarial valuations Actuarial valuations for the Plan are conducted annually by the Board of Trustees for regulatory purposes. In turn, the actuarial valuations for accounting purposes are based on these figures (with adjustments). The most recent actuarial valuations were prepared as at January 1, 2014 and 'January 1, 2015. The actuarial valuations for accounting purposes are based on a number of assumptions about future events, such as inflation rates, interest rates, salary increases, employee turnover and mortality. The accrued benefit obligation as at January 1, 2014 and current period benefit cost for the following year are based on an actuarial valuation conducted as at the same date. The accrued benefit obligation as at December 31, 2014 and current period benefit cost for the following year are based on an actuarial valuation conducted as at December 31, 2014. The accrued benefit obligation as at December 31, 2015 and current period benefit cost for the following year are based on an actuarial valuation conducted as at December 31, 2014 and extrapolated to December 31, 2015, using assumptions effective for December 31, 2015. The assumptions used reflect management's best estimates. The following summarizes the major assumptions in the accounting valuations and extrapolations at the various effective dates: January 1, December 31, December 31, 2014 2014 2015 Discount Rate Inflation rate Salary increase Mortality: CPM -2014 mortality table with adjustments factors The Expected Average Remaining Service Life (EARSL) is 13 years contributions of $18,349,337 (2014 - $18,160,690). E:ii] 6.40% 6.30% 6.10% 2.25% 2.25% 2.25% 3.00% 3.00% 3.00% During the year, the City made pension 25 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 14. Post employment benefits and compensated absences [Cont'd] City of Saint John Shared Risk Plan [Cont'd] The following table reflects the City's share of the accrued benefit liability, which equals to the full portion of the ABO related to the temporary contributions and 55.9% of the remaining portion of the ABO net of Plan asests as explained in Note 3. 2015 2014 City share of accrued benefit liability, beginning of year 103,900,000 117,300,000 City share of current period benefit cost 5,000,000 4,800,000 Interest cost 6,100,000 7,000,000 Less City contributions (18,300,000) (18,200,000) Actuarial loss/(gain) 17,400,000 (7,000,000) City share of accrued benefit liability, end of year 114,100,000 103,900,000 Unamortized actuarial (loss)/gain (11,000,000) 7,000,000 Pension liability, end of year 103,100,000 110,900,000 The following table reflects the City share of pension related expenses: Current period benefit cost 5,000,000 4,800,000 Interest cost 6,100,000 7,000,000 Amortization of City share of actuarial loss/(gain) (600,000) - 10,500,000 11,800,000 Other employee future benefits The City provides for the payment of retirement allowances to retiring employees in accordance with the terms of the various collective agreements and Municipal policy. The retirement allowance is based on the member's final annual salary and years of service at retirement. Employees upon retirement from the City are entitled to a retirement allowance equal to one month's pay, to a maximum of six months, for every five years of service. The program has been amended to provide certain employees with a payout option prior to retirement. Accepting the early payout option eliminates further accumulation of retirement allowance entitlement for those employees. The City also provides for employee sick leave. Unused sick leave accumulates to a maximum number of hours which varies by employment agreement. Under this program, employees are not entitled to a cash payment in lieu of sick leave when they leave the City's employment except as described below with respect to the retirement both outside workers (local 18) and firefighters (local 771). 26 E -11I The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 14. Post employment benefits and compensated absences [Cont'd] Other employee future benefits [Cont'd] Upon retirement, members of Local 18 and 771 will be eligible to receive 10% of their regular rate of pay for accumulated sick leave credits in excess of 1,760 hours or 2,280 hours respectively. For employees of the City of Saint John Fire department, who are unable to work due to heart disease or permanent injury to the lungs, the City pays certain amounts to disabled firefighters or their survivor spouse as a result of the provisions of an Act of the Legislature, known as the Act respecting the Saint John Firefighters's Association. As at January 1, 2013, the City's pension plan was converted to a shared risk model. As part of the conversion, the City assumed the obligation for paying existing disability pensions, that had been granted under the old plan, until disabled members reach the age of 65. On a go forward basis, disability coverage is now provided for employees through a long term disability program administered by an insurance carrier. Finally there are specific agreements that obligate the City to pay top up pensions to certain individuals. During the year, the City made payments of $61,670 (2014 - $47,472) related thereto. Valuation techniques and assumptions Actuarial valuations of the above benefits are completed for accounting purposes using the projected benefit method prorated on services. The last actuarial valuation of the post -employment benefit plans was conducted as at December 31, 2015. Previous to that, an actuarial valuation was performed as at December 31, 2014. The above benefit plans are unfunded and as such, there are no applicable assets. Benefits are paid out of general revenue as they become due. A reconciliation of the accrued benefit obligation for these plans, along with the main assumptions used for disclosure and expense calculations are as follows: 2015 2014 Accrued benefit obligation, beginning of year 23,675,400 22,779,800 Current period benefit cost 748,900 647,800 Past service improvement costs, plan amendments 1,720,509 583,200 Benefit payments (3,346,400) (3,790,300) Interest cost 776,500 950,100 Actuarial loss 3,005,400 2,504,800 Other employee future benefits, end of year 26,580,309 23,675,400 27 E:3A The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 14. Post employment benefits and compensated absences [Cont'd] Main assumptions used for these plans: Discount rate Salary increase EARSL 2015 2014 3.51% 3.00% Range from 10 to 24 3.47% 3.00% Range from 13 to 25 These benefit plans require no contributions from employees. The benefit liability as at December 31, 2015 includes the following components: December 31, December 31, 2015 2014 Accrued benefit obligation (carrying value) Retirement allowances 3,916,200 3,750,300 Sick leave 7,832,000 5,563,600 Heart and lung pension 4,763,700 3,445,700 Disability benefits 7,997,200 8,970,000 Contractual top up agreements 1,152,009 1,073,500 Sick leave - Saint John Transit Commission 919,200 872,300 26,580,309 23,675,400 Unamortized actuarial losses (5,989,500) (3,200,500) 20,590,809 20,474,900 The unamortized actuarial losses will be amortized over the expected average remaining service life ("EARSL") of the related employee groups starting in the next fiscal year. EARSL is determined separately for each benefit program. 28 E:ic] The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 14. Post employment benefits and compensated absences [Cont'd] The total expense related to other employee benefits described above includes the following components: 2015 2014 Current period benefit cost 748,900 647,800 Amortization of actuarial loss 216,400 82,300 965,300 730,100 Other employee benefit interest expense 776,500 950,100 Total expense related to other employee future benefits 1,741,800 1,680,200 15. Contingencies In accordance with the Clean Environment Act, the City is also liable for a pro rata share of the debentures and other long term debt issued on behalf of the Fundy Solid Waste Commission ("Commission"). The portion attributable to the City is determined on the basis of its percentage of total population within all participating municipalities and unincorporated areas. The total of such debt outstanding at December 31, 2015 amounted to $1,200,000 (2014 — $1,790,000). Based on 2003 population figures, the City is liable for approximately 55% of the Commission's debt. The City is, from time to time, subject to various investigations, claims, and legal proceedings covering matters that arise in the ordinary course of its business activities. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the consolidated financial position or operating results of the City. Legal proceedings were filed against the City of Saint John, the Saint John Police Commission and the Saint John Police Department in December 2013 related to the alleged activity of a former employee. The relief sought has not been quantified in the documents filed with the court and therefore the City is not in a position to estimate the amount of potential liability, if any, in this matter. 16. Commitments Greater Saint John Regional Facilities Commission During 1998, the Greater Saint John Regional Facilities Commission ("Regional Facilities Commission") was created by an Act of the Legislative Assembly of New Brunswick. Under the provisions of the Act, the Regional Facilities Commission has the authority to determine the annual amount of total municipal contribution to be made towards the operation of five regional facilities: the Saint John Aquatic Centre Commission, Harbour Station Commission, the Saint John Trade and Convention Centre, the Imperial Theatre and the Saint John Arts Centre. Under the provisions of the Act, the City's contribution is its pro rata share of the Regional Facilities Commission's operating budget based on the tax bases of the participating municipalities of the Town of Quispamsis, the Town of Rothesay, the Town of Grand Bay -Westfield and the City of Saint John. The City's contribution is 67.81 % in 2015 (2014: 68.14%). 29 E:il The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 17. Short-term borrowings compliance Inter -fund borrowing The Municipal Financial Reporting Manual requires that short-term inter -fund borrowings be repaid in the next year unless the borrowing is for a capital project. The amounts payable between Funds are in compliance with the requirements. Operating borrowing As prescribed in the Municipalities Act, borrowing to finance General Fund operations is limited to 4% of the City's operating budget. Borrowing to finance Utility Fund operations is limited to 50% of the operating budget for the year. In 2015, the City has complied with these limitations. 18. Water and Sewer fund surplus/deficit The Municipalities Act requires Water and Sewer Fund surplus/deficit amounts to be absorbed into one or more of four Operating Budgets commencing with the second ensuing year; the balance of the surplus/deficit at the end of the year consists of: 2015 2014 2015 surplus 644,449 - 2014 surplus 2,030,633 2,030,633 2013 surplus 2012 surplus 2011 surplus 2010 surplus 19. Water cost transfer 1,106,347 1,475,129 252,552 378,827 10,792 21,585 - 54,278 4,044,773 3,960,452 The City's water cost transfer for fire protection is within the maximum allowable by Regulation 81-195 under the Municipalities Act, based upon the applicable percentage of water system expenditures for the population. 20. Funds held intrust Funds administered by the City for the benefit of external parties are not included in the consolidated financial statements. The amount administered as at December 31, 2015 was $476,797 (2014 - $472,901). KE E:1'1 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 21. Funds and reserves The City received funding from the Canada — New Brunswick Municipal Rural Infrastructure Program between 2001 and 2006 to assist with the cost of construction of water and sewerage assets. The agreements require the City to maintain replacement reserve funds, which can only be used to pay for the cost of replacement of specified capital items, unless otherwise approved by the Minister of Environment and Local Government. On November 24, 2014, Common Council passed a resolution to authorize the establishment of a capital reserve fund for the Water and Sewerage Utility. In 2015, the Water and Sewerage Utility Operating Fund contributed $ Nil to the reserve fund (2014: $2.5 Mil). 31 E:11.1 Water & Sewer Capital 2015 2014 Reserve Total Total Assets Cash 2,830,000 2,830,000 2,783,500 Accumulated surplus 2,830,000 2,830,000 2,783,500 Revenue Transfers from Water and Sewerage Utility Operating Fund 21,448 21,448 2,521,392 Interest 25,052 25,052 3,108 Annual surplus 46,500 46,500 2,524,500 Balance, beginning of Year 2,783,500 2,783,500 259,000 Balance, end of Year 2,830,000 2,830,000 2,783,500 The City received funding from the Canada — New Brunswick Municipal Rural Infrastructure Program between 2001 and 2006 to assist with the cost of construction of water and sewerage assets. The agreements require the City to maintain replacement reserve funds, which can only be used to pay for the cost of replacement of specified capital items, unless otherwise approved by the Minister of Environment and Local Government. On November 24, 2014, Common Council passed a resolution to authorize the establishment of a capital reserve fund for the Water and Sewerage Utility. 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Reconciliation of funding deficit upon adoption of PSAS Deferred Pension Expense Special Top - up Heart and Retirement Agreements Lung Allowances Liabilities at December 31, 2014 as calculated on adoption of PSAS 1,250,000 1,073,500 3,445,700 3,750,300 Amount of December 31, 2014 liabilities funded in current year (1,250,000) (21,700) 1,318,000 165,900 Balance to be funded in future years - 1,051,800 4,763,700 3,916,200 37 My The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support 750,000 11,921,225 11,943,607 EXPENDITURES General government services Legislative Mayor's Office 178,893 151,239 176,276 Common Council 422,150 405,537 355,246 2015 2015 2014 Budget City Manager (Unaudited) City Manager 859,613 508,043 816,687 REVENUE 471,177 344,381 324,584 Other revenues from own sources - - 62,584 General Government Services 3,489,491 1,725,470 1,657,853 Protective services 3,330,362 3,009,669 3,853,646 Transportation services 10,109,256 9,872,260 9,788,001 Water and sewer services - 950 - Environmental health services - - 21,680 Environmental development services 9,404,255 9,161,114 9,590,713 Recreational and cultural services 1,721,186 1,356,099 1,269,558 28,054,550 25,125,562 26,181,451 Contributions from others General Government Services - 145,914 106,805 Protective services - - 1,000,000 Transportation services 230,000 5,354,085 6,309,064 Water and sewer services - 2,120,301 3,481,846 Environmental development services 520,000 4,255,124 543,496 Recreational and cultural services - 45,801 502,396 750,000 11,921,225 11,943,607 EXPENDITURES General government services Legislative Mayor's Office 178,893 151,239 176,276 Common Council 422,150 405,537 355,246 KE 019] 601,043 556,776 531,522 City Manager City Manager 859,613 508,043 816,687 Corporate Planning 471,177 344,381 324,584 Intergovernmental Affairs - - 62,584 Corporate Communications 540,385 474,608 490,140 KE 019] The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support [Cont'd] KE 0LI 2015 2015 2014 Budget (Unaudited) 1,871,175 1,327,032 1,693,995 Common services City Hall Building 1,824,110 1,644,784 1,813,861 Property Assessment 1,286,007 1,286,007 1,278,852 Public Liability Insurance 650,000 650,678 616,557 3,760,117 3,581,469 3,709,270 Other Common Clerk 662,296 653,864 653,094 Human Resources 1,570,024 1,328,698 1,433,756 Finance 1,873,663 2,384,112 2,241,322 City Solicitor 751,815 614,262 711,441 Materials Management 1,061,631 1,074,103 1,027,119 Information Systems and Support 2,222,368 2,399,676 2,255,698 Insurance 267,860 260,345 216,573 Debt Charges 27,830,679 7,462,095 7,223,441 Amortization - 6,760,846 6,364,613 Other - 3,618,266 5,484,086 Regional Services Commission 41,085 41,085 53,226 36,281,421 26,597,352 27,664,369 Total general government 42,513,756 32,062,629 33,599,156 Protective services Police protection Police Operations 13,704,810 13,520,928 12,920,814 Support Services 2,130,541 1,811,955 2,186,008 Administration 1,917,589 1,991,525 1,865,473 Stations and Buildings 1,066,268 1,019,278 963,700 Criminal Investigation 4,054,508 4,604,536 4,930,820 Detention Services 540,000 332,341 532,491 Automotive 856,043 426,923 517,453 24,269,759 23,707,486 23,916,759 KE 0LI The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support [Cont'd] Fire protection Fire Operations Fire Investigation Fire Prevention Fire Training 2015 2015 2014 Budget (Unaudited) 20,666,397 19,867,945 20,233,725 73,166 61,459 60,346 979,472 927,635 921,039 7,500 434 - 4,751,963 4,382,348 4,480,006 Total protective services 50,748,257 48,947,307 49,611,875 40 OR 21,726,535 20,857,473 21,215,110 Other protective services Inspection Services 995,755 942,421 1,018,565 Enforcement Services 191,692 191,638 190,884 Minimum Standards 290,356 261,724 261,265 Dangerous Buildings 409,530 335,936 520,595 Animal Control 83,260 83,260 82,743 Emergency Measures 292,601 267,860 132,576 Emergency Dispatch Centre 2,488,769 2,299,509 2,273,378 4,751,963 4,382,348 4,480,006 Total protective services 50,748,257 48,947,307 49,611,875 40 OR The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support [Cont'd] 18,359,114 30,391,096 28,707,173 Fleet Maintenance and Repair 1,190,274 1,365,609 1,098,974 Fleet Administration - 371,874 312,759 1,190,274 1,737,483 1,411,733 General engineering Transportation Traffic Engineering and Systems Parking administration Parking Administration External controlled entities Saint John Transit Commission Saint John Parking Commission 484,575 214,740 259,202 2,352,228 1,916,187 1,967,679 2,836,803 2,130,927 2,226,881 560,379 460,815 480,892 560,379 460,815 480,892 11,890,748 12,292,944 12,920,014 3,169,616 2,892,810 2,919,698 15,060,364 15,185,754 15,839,712 Total transportation services 38,006,934 49,906,075 48,666,391 41 2015 Budget (Unaudited) 2015 2014 Transportation services Public works Roads and Sidewalks 14,485,144 14,598,373 13,084,877 Other Drainage Services 2,411,692 2,075,798 2,023,091 Street Lighting 1,030,000 984,480 1,028,511 Municipal Operations 432,278 387,036 331,664 Amortization -Transportation - 12,345,409 12,105,530 Hurricane Arthur - - 133,500 18,359,114 30,391,096 28,707,173 Fleet Maintenance and Repair 1,190,274 1,365,609 1,098,974 Fleet Administration - 371,874 312,759 1,190,274 1,737,483 1,411,733 General engineering Transportation Traffic Engineering and Systems Parking administration Parking Administration External controlled entities Saint John Transit Commission Saint John Parking Commission 484,575 214,740 259,202 2,352,228 1,916,187 1,967,679 2,836,803 2,130,927 2,226,881 560,379 460,815 480,892 560,379 460,815 480,892 11,890,748 12,292,944 12,920,014 3,169,616 2,892,810 2,919,698 15,060,364 15,185,754 15,839,712 Total transportation services 38,006,934 49,906,075 48,666,391 41 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support [Cont'd] 1,660,164 1,464,046 1,333,586 Administration and geographic information systems (GIS) GIS 326,379 273,120 308,950 Carpenter Shop 419,205 378,034 305,370 745,584 651,154 614,320 Economic development 2015 2015 2014 Market Square Common Area Budget Regional Economic Development 475,000 475,000 475,000 Regional Facilities (Unaudited) Saint John Industrial Parks 270,000 - - Water and sewer services Saint John water & wastewater Drinking Water 9,379,000 7,750,061 7,166,561 Industrial Water 1,622,000 890,143 878,422 Wastewater 9,548,000 8,451,057 8,244,433 Infrastructure Management 1,357,000 613,615 582,971 Internal Charges 614,000 244,969 519,193 Fiscal Charges 19,851,000 4,203,961 4,384,742 Amortization - 12,459,076 11,953,130 Total water and sewer services 42,371,000 34,612,882 33,729,452 Environmental health services Sanitary Service 3,546,103 3,262,654 3,350,209 Total environmental health services 3,546,103 3,262,654 3,350,209 Environmental development services Research and planning Community Planning 1,262,568 1,149,514 1,060,270 Plan SJ 397,596 314,532 273,316 1,660,164 1,464,046 1,333,586 Administration and geographic information systems (GIS) GIS 326,379 273,120 308,950 Carpenter Shop 419,205 378,034 305,370 745,584 651,154 614,320 Economic development Growth Strategy - - - Market Square Common Area 2,333,116 2,148,960 2,153,712 Regional Economic Development 475,000 475,000 475,000 Regional Facilities 1,929,784 714,951 712,635 Saint John Industrial Parks 270,000 - - 5,007,900 3,338,911 3,341,347 Otl 42 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support [Cont'd] Real estate management Property Management Real Estate 2015 2015 2014 Budget (Unaudited) 1,150,203 949,820 1,201,703 330,415 268,245 296,496 External controlled entities Saint John Development Corporation Harbour Station Commission Aquatic Centre Commission Trade and Convention Centre Non Profit Housing Saint John Industrial Parks 157,537 2,193,887 2,069,386 731,875 1,480,618 1,218,065 1,498,199 3,215,423 3,361,754 2,540,807 2,571,782 Other environmental development services 830,783 773,552 858,985 City Market 952,194 1,013,744 938,362 Tourism 1,000,000 993,324 918,411 Community Development 205,343 186,819 212,613 External controlled entities Saint John Development Corporation Harbour Station Commission Aquatic Centre Commission Trade and Convention Centre Non Profit Housing Saint John Industrial Parks 157,537 2,193,887 2,069,386 731,875 1,848,651 1,869,085 3,263,888 3,215,423 3,361,754 2,540,807 2,571,782 2,367,131 830,783 773,552 858,985 3,478,490 2,478,577 2,627,726 458,400 276,138 275,174 11,304,243 11,164,123 11,359,855 Total environmental development services 22,356,046 20,030,186 20,216,693 Recreational and cultural services Cultural grants Other Cultural Grants 1,962,219 1,240,841 1,462,133 1,962,219 1,240,841 1,462,133 Parks Rockwood Park 549,422 482,964 488,344 Parks General Services 1,991,233 1,658,772 1,795,450 2,540,655 2,141,736 2,283,794 43 The City of Saint John Notes to the Consolidated Financial Statements For the year ended December 31, 2015 27. Revenue and expense support [Cont'd] Total energy services - - 8,473,200 TOTAL EXPENDITURES 209,991,005 198,856,480 208,011,989 44 061 2015 2015 2014 Budget (Unaudited) Community services Parks and playgrounds 279,515 196,737 240,888 Recreation and parks 329,116 314,819 248,460 Pro Kids 112,078 94,927 92,242 720,709 606,483 581,590 Other recreational and culture services Sports and Recreation 3,165,138 3,054,002 3,104,104 Community Centres 974,984 844,554 859,778 Cultural Affairs 118,960 103,390 113,036 Amortization - Recreation - 1,090,781 990,646 4,259,082 5,092,727 5,067,564 External controlled entities Lord Beaverbrook 392,881 390,845 396,265 Saint John Free Public Library 573,363 562,115 573,667 966,244 952,960 969,932 Total recreational and cultural services 10,448,909 10,034,747 10,365,013 Energy services Energy services - - 8,473,200 Total energy services - - 8,473,200 TOTAL EXPENDITURES 209,991,005 198,856,480 208,011,989 44 061 Financial Statements The City of Saint John Trust Funds December 31, 2015 �I N m N M l� 609, C.� ISI Ir�II V � � M O M w N W O �I N m N �z M N O H W Z i. Ei M W Z �I W W O � N M i. rn W A O � H � Hew �z M N O M �z M N O STATEMENT OF CASH FLOW 2015 2014 Operating activities Excess (deficiency) of revenue over expenditure 4,744 5,655 Changes in non-cash working capital: Term Deposits (12) (23) Accounts Payable - - Investment activities Contributions to other entities (977) (1,120) Net cash increase in cash and cash equivalents 3,755 4,512 Cash and cash equivalents, beginning of year 471,313 466,801 Cash and cash equivalents, end of year 475,068 471,313 The accompanying notes are an integral part of these financial statements il `DIV The City of Saint John - Reserve and Trust Funds Notes to the financial statements For the year ended December 31, 2015 1. SIGNIFICANT ACCOUNTING POLICIES Revenue Investment income is recognized on an accrual basis. Expenses Expenses are recorded on an accrual basis. Cash and cash equivalents Cash and cash equivalents include cash on hand, balances with banks and short term deposits with original maturities. Financial Instruments The Trust Fund's financial instruments consist of cash and cash equivalents, accounts payable, term deposits and marketable securities. Financial instruments are recorded at fair value when acquired. Financial assets with actively traded markets are reported at fair value, with any unrealized gains or losses reported in excess (deficiency) of revenue over expenditure. Financial instruments are tested for impairment at each reporting date. The Reserve and Trust Funds are exposed to interest rate risk in that the value of the marketable securities can be adversely affected by a change in interest rates. 2. TRUST FUNDS Tucker Fund By an Act of the Legislature enacted on April 20, 1927, securities with a par value of $10,000 were vested with the City of Saint John. This Act provided that the income and a portion of the principal from this Trust, with the approval of Common Council, should be used for the maintenance and improvement of Tucker Park. k, `[9L'! The City of Saint John - Reserve and Trust Funds Notes to the financial statements For the year ended December 31, 2015 2. TRUST FUNDS (continued) Stockford Memorial Fund This fund was established on December 28, 1939 as a result of a bequest of $3,000 from Fannie M. Stockford of Boston, Massachusetts. This amount was to be invested and the annual income was to be used towards the upkeep and maintenance of King Square. O'Connell Fund This fund was established on March 22, 1939 with a contribution of $2,000 from J.D. O'Connell. The contribution was to be invested and the income distributed among the orphanages of the City on the prorata basis of the children cared for by each, to be given by way of a Christmas gift to each child. In October 2004, this agreement was amended to allow the Trustees to disburse the income arising from the trust investments yearly to the Empty Stocking Fund. L.R. Ross Fund This fund was established in 1921 through the gift of $1,250 and the "Ross Memorial Cup". The Cup was to be competed for annually by amateur single scullers, aged twenty-one years or under who are residents of the Maritime Provinces. The income from this Trust was to be used to provide a duplicate cup for the winner of each race held. Changes to the Trust in 1986 now allow for the funds to be used to promote the sport of rowing within the City of Saint John and its suburban communities, provided that an amount of $4,000 remains in the fund to enable the "Ross Memorial Cup" to be duplicated when necessary. A. Carle Smith Fund Established in September 1976, funds were received from the estate of A. Carle Smith. These funds are to be used for the maintenance of a wildlife sanctuary in the South Bay area. Bi -Centennial Funds These funds are to be used for ceremonies marking the 2001h anniversary of Canada in the year 2067. D `Wee FINANCE COMMITTEE REPORT M&C No. N/A Report Date August 02, 2016 Meeting Date August 17, 2016 Service Area Finance and Administrative Services Members of the Finance Committee SUBJECT: Water and Sewerage Accounts Receivables —July 2016 OPEN OR CLOSED SESSION This matter is to be discussed in open session of the Finance Committee meeting. AUTHORIZATION Primary Author Commissioner/Dept. HeadL4 City Manager Craig Lavigne Kevin Fudge m I Jeff Trail RECOMMENDATION It is recommended that this report be received and filed EXECUTIVE SUMMARY Saint John Water bills customers based on two types; Meter customer and Flat Rate customers. Meter customers are typically commercial and small industrial consumers of water and water charges are based on actually consumption and fixed charge based on meter size. These customers would include restaurants, apartment buildings, schools, and hospitals. Billing for these customers is done every two months and results in approximately 3,100 bills each period. Flat rate customers are the single to three unit dwellings and are billed based on a fixed charge. Billings for these customers are done twice a year, in late February and late August with approximately 14,020 bills each period. All bills are due 30 days after the billing date. Saint John Water can take collection action 15 days after the due date. There are currently over 5,000 customers currently set up on Pre Authorized debit (PAD) plans. It is important to note when reviewing aged receivables, a large number of PAD customers will have balances over 30 days due to the timing and payment of the billings. For clarification, in 2016 flat rate customers received the first bill this year with a due date of April 5t"; however these customers pay equal monthly installments until August to pay that bill in full just before the next billing is sent out. Therefore a large portion of the balances in the over 30 and 60 days relate to customer set up on equalized PAD plans depending on the date of the aged receivables. `191-1 -2 - PREVIOUS RESOLUTION M&C 2015-147 — In its July 20, 2015 meeting, Common Council adopted the following resolution "the Finance Committee provide updates with respect with Water and Sewerage Accounts Receivable to Council on a quarterly basis." STRATEGIC ALIGNMENT N/A REPORT As of July 31, 2016, Water and Sewerage Account Receivable balances were as follows: Current: $2,232,891 Over 30: $6,343 Over 60: $1,387,415 Over 180: $1,528,771 Total: $5,155,420 • Meter rate billing totaling $2,245,377 was just billed July 25, 2016 with a due date of August 29, 2016 • Flat rate billing totaling $9,835,161 was billed on February 29, 2016, with a due date of April 5, 2016. Next billing is set to occur on August 31St • There is currently $878,021 in pending payments on customer accounts that are set up on pre authorized payments plans. Staff does not consider these accounts (5,032) in arrears. • There is currently $678,487 (558 accounts) in receivables that staff has negotiated payment arrangements on to clear up outstanding balances. SERVICE AND FINANCIAL OUTCOMES N/A INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS N/A ATTACHMENTS N/A `[9tl ce 2gr August 15, 2016 Members of the Finance Committee Subject: Community Grants Evaluation Committee The Nominating Committee met on August 10, 2016 and recommended that no further Council appointments be made to the Community Grants Evaluation committee and that discussion on the matter of appointments be referred to the Finance Committee for discussion. Sincerely, Jonathan Taylor Common Clerk ... ..... ......................... ....... . . . . . . ............ . .......... 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