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2020-10-21 Finance Committee Agenda Packet - Open Session Finance Committee Meeting Open Session September 15, 2020 MINUTES OPEN SESSION FINANCE COMMITTEE MEETING SEPTEMBER 15, 2020 AT 5:00 PM MEETING CONDUCTED BY ELECTRONIC PARTICIPATION Present: Mayor D. Darling Councillor D. Merrithew Councillor S. Casey Councillor D. Reardon Councillor G. Sullivan Absent: Councillor G. Norton Also Present: City Manager J. Collin Commissioner of Finance and Treasurer K. Fudge City Solicitor J. Nugent Solicitor M. Tompkins Commissioner Growth & Community Development J. Hamilton Commissioner Transportation & Environment M. Hugenholtz Commissioner Saint John Water B. McGovern Deputy Commissioner Transportation & Environment J. Hussey Senior Financial Manager C. Lavigne Senior Financial Manager D. Arbour Senior Financial Manager T. Fawcett Director of Strategic Affairs Ian Fogan Fire Chief K. Clifford Communications Officer N. Moar Administrative Officer R. Evans Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. 1.1 Approval of Minutes 1.1.1 Minutes of July 23, 2020 Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the minutes of July 23, 2020 be approved. MOTION CARRIED. 1.1.2 Minutes of August 13, 2020 Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the minutes of August 13, 2020 be approved. MOTION CARRIED. 1 Finance Committee Meeting Open Session September 15, 2020 1.2 Safe Clean Drinking Water Financial Update Mr. McGovern noted that an important milestone has been reached with regard to the Safe Clean Drinking Water project, the largest infrastructure project in the history of New Brunswick, with the issuance of the Final Completion certificate. All deficiencies have been addressed and documents turned over to the City, which have been reviewed for accuracies and corrections. The budget for the project was just over $183M. The total capital cost is expected to be just under $182M, a surplus of approximately $1M. Moved by Councillor Sullivan, seconded by Councillor Reardon: be brought forward to the next meeting of Common Council; and further that the report be received for information. MOTION CARRIED. 1.3 General Fund COVID-19 Financial Impact Update Ms. -19 Financial Impact Update-19 on the , including a forecast for year-end. Revenues are expected to be down $4.1M compared to budget, however revenue loss has been mitigated with cost savings, largely due to restructuring efforts and diminished spending. 2020 is the final year of provincial financial assistance; any savings realized this year from operations will reduce this funding. Premier Higgs has committed verbally to fund the operating deficits of transit Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the General Fund COVID-19 Financial Impact Update, be received for information. MOTION CARRIED. 1.4 Procure to Pay Project The Ernst & Young operational review identified a number of opportunities in procurement. The successful implementation of a Procure to Pay software system will streamline processes and identify opportunities. This system will also enable digitization of accounting and financial records, identified as a best practiIn addition to implementing best finance, accounting and procurement practices, the project will maximize value for taxpayers, reduce costs and streamline the expense management process. Moved by Mayor Darling, seconded by Councillor Casey: for information. MOTION CARRIED. Adjournment Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the Finance Committee meeting be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on September 15, 2020 was adjourned at 5:45 p.m. 2 FINANCE COMMITTEE REPORT Report Date October 13, 2020 Meeting Date October 21, 2020 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: 2021 General Fund Operating Budget OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Craig Lavigne Kevin Fudge John Collin RECOMMENDATION It is recommended that the Finance Committee endorse the following resolutions and the 2021 General Fund Operating Budget and submit to Common Council at its next meeting for approval. RESOLVED by the Finance Committee at its meeting on October 21st, 2020; 1. That the sum of $157,331,557 be the total Operating Budget of the City of Saint John for 2021; 2. That the sum of $125,990,634 be the Warrant of the City of Saint John for 2021; 3. That the tax rate for the City of Saint John be $1.785; 4. That Common Council orders and directs the levying by the Minister of Environment and Local Government of said amount on real property liable to taxation under the Assessment Act within the Municipality of Saint John; 5. That Common Council authorizes the Commissioner of Finance and Administrative Services to disburse, at a time acceptable to him, to the named Commissions, Agencies and Committees, the approved funds as contained in the 2021 budget. 6. That Common Council approves the 2021 Establishment of Permanent Positions at 572; 7. That Common Council approve $605,000 to the Capital Reserve Fund to fund infrastructure deficit; 8. That Common Council approve $377,484 to the Operating Reserve Fund to mitigate potential impacts of COVID 19 and other one-time emergencies that may arise in the future; - 2 - EXECUTIVE SUMMARY th On October 6, the Province released the property assessment and unconditional grant information. The draft operating budget approved by Common Council on st August 31 had an estimated tax assessment increase of 1.5%. The tax assessment increase for 2021 is 0.12% and the lower than expected increase can be largely contributed to the impact of COVID 19 on commercial properties. There is an increase in the unconditional grant of $1,024,646 compared to the draft budget that was approved. Overall there is a decrease in revenue of $715,339 when compared to the approved draft budget. The 2021 draft budget included the flexibility to allow for the decrease in revenue without any further impact to service areas. There were additional staff reductions and the balance of the shortfall will be adjusted through transfer to to mitigate potential impacts of COVID 19 and other one-time emergencies. PREVIOUS RESOLUTION M&C 2020-218 2021 General Fund Operating Budget STRATEGIC ALIGNMENT The 2021 General Fund Budget aligns with Councils priority of being fiscally responsible as well as the principles, policies and goals of the long term financial plan. The 2021 budget has been the result of Council and Staff being successful in dealing with barriers, implementing sustainability initiatives, and continuing to REPORT The 2021 draft General Operating Budget was approved by Common Council on st August 31. The 2021 budget was presented as a historical financial reset for the City. The estimated $10 million structural deficit was eliminated; the budget included no short term provincial funding and was also the earliest approval of an operating budget. th On October 6, the Province released the property assessment and unconditional grant information. The draft operating budget approved by Common Council on st August 31 had an estimated tax assessment increase of 1.5%. The tax assessment increase for 2021 is approximately $8.3 million or 0.12% and is lower than expected largely contributed to the impact of COVID 19 on commercial properties. Exhibit 1 below illustrates the tax base change for the City between the years 2020 and 2021: - 3 - Exhibit 1 Saint John Assessment20212020Tax Base IncreaseTax Base % Residential$ 4,306,877,700 $ 4,275,036,840 $ 31,840,860 0.74% Non Residential$ 2,754,598,104 $ 2,777,648,100 -$ 23,049,996 -0.83% PILT Adjustment-$ 3,176,985-$ 2,658,368-$ 518,617 Total$ 7,058,298,819 $ 7,050,026,572 $ 8,272,2470.12% Due to the lower tax base increase, Saint John was the recipient of a higher unconditional grant by $1,024,646 compared to the draft budget that was approved. Between the lower than expected tax base contained in the August draft budget and the increase in the unconditional grant, the overall revenue impact to the City is a decrease in revenue of $715,339 when compared to the approved draft budget. When comparing the 2021 operating budget to the 2020 operating budget which had short term Provincial financial assistance, total revenue for the City in 2021 is approximately $9.4 million less; the revenue decline The 2021 draft budget tabled in August included the flexibility to adapt to changes in tax base growth from the base assumption of 1.5% without any further impact to service areas. There were additional staff reductions and the balance of the operating reserves still has the flexibility to mitigate potential impacts of COVID 19 and other one-time emergencies. Conclusion The 2021 General Fund Budget is a historical budget for the City of Saint John. The budget includes the elimination of a $10 million structural deficit. This is the first strategies, and policies embedded in the long term financial have been met or exceeded in this budget. The budget includes money for reserves, addresses the structural deficit, addresses wage escalation, reduction of debt, increasing pay as you go and keeping a stable tax rate. The budget sets the City on the path of long term financial stability. This budget ensures the City increases it flexibility, reduces its vulnerability, and ensures This will also be the first budget that will be monitored using the budget monitoring policy passed by Common Council in May, 2020. One of the significant changes of this policy is the separation of personnel and non-personal budgets. This change will mean surpluses or deficits in wages and benefits cannot be offset - 4 - by surpluses or deficits in goods and services. This policy is also intended to allow for more budget transparency and performance management, allow for better budgeting accuracy, provide enhanced fiscal oversight and more financial flexibility by integration of reserve strategies. This budget is another step in long term financial plan of the City. There will be continued efforts to work with the Province on more sustainable items such as fair taxation, addressing collective bargaining issues, SJ Energy revenue options and SERVICE AND FINANCIAL OUTCOMES See enclosed 2021 General Fund Operating Budget INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS The budget was established in collaboration with the all service areas and members of Finance Committee and Common Council. ATTACHMENTS A 2021 General Fund Operating Budget ŷĻ /źƷǤ ƚŅ {ğźƓƷ WƚŷƓ ЋЉЋЊ DĻƓĻƩğƌ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЋЉЋЊЋЉЋЉ .ǒķŭĻƷ.ǒķŭĻƷ υυ wĻǝĻƓǒĻƭ Property Taxes 125,990,634 125,842,974 PILT Adjustment - 1,185 Equalization & Unconditional Grant 18,229,402 17,204,756 Financial Assistance - 9,293,235 Growth & Community Services 3,768,545 4,968,607 Public Works & Transportation Services 3,773,749 4,094,853 Public Safety Services 2,451,188 1,975,300 Utilities & Infrastructure Services 332,039 192,514 Strategic Services 2,786,000 3,135,000 ƚƷğƌ wĻǝĻƓǒĻƭ ЊЎАͲЌЌЊͲЎЎА ЊЏЏͲАЉБͲЍЋЍ 9ǣƦĻƓķźƷǒƩĻƭ Growth & Community Services 15,508,648 17,874,246 Public Works & Transportation Services 38,487,021 41,887,339 Public Safety Services 54,563,096 57,425,302 Utilities & Infrastructure Services 5,600,504 4,019,478 Strategic Services 8,412,771 8,771,129 Corporate Services 4,896,048 4,810,712 Other Charges 29,863,469 31,920,218 ƚƷğƌ 9ǣƦĻƓķźƷǒƩĻƭ ЊЎАͲЌЌЊͲЎЎА ЊЏЏͲАЉБͲЍЋЍ {ǒƩƦƌǒƭ Λ5ĻŅźĭźƷΜ Ώ Ώ Њ ŷĻ /źƷǤ ƚŅ {ğźƓƷ WƚŷƓ ЋЉЋЊ DĻƓĻƩğƌ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЋЉЋЊЋЉЋЉ .ǒķŭĻƷ.ǒķŭĻƷ υυ wĻǝĻƓǒĻƭ Property Taxes 125,990,634 125,842,974 PILT Adjustment - 1,185 Equalization & Unconditional Grant 18,229,402 17,204,756 Financial Assistance - 9,293,235 Growth & Community Development Services 3,768,545 4,968,607 Transportation & Environment Services 3,773,749 4,094,853 Public Safety Services 2,451,188 1,975,300 Utilities & Infrastructure 332,039 192,514 Finance & Administrative Services 2,786,000 3,135,000 ƚƷğƌ wĻǝĻƓǒĻƭ ЊЎАͲЌЌЊͲЎЎА ЊЏЏͲАЉБͲЍЋЍ 9ǣƦĻƓķźƷǒƩĻƭ DƩƚǞƷŷ ε /ƚƒƒǒƓźƷǤ {ĻƩǝźĭĻƭ Growth & Community Planning Services 1,612,509 1,716,242 Development Services 102,884 121,345 Development Engineering 362,645 625,296 Community Development 473,101 259,186 Animal Control 91,244 91,244 Dangerous and Vacant Building Program 472,032 501,524 Minimum Property Standards 297,895 285,085 Heritage Conservation Service 195,630 194,358 Cultural Affairs 126,031 124,110 Other By-Laws 425,278 413,596 Permitting & Inspection Services 1,040,806 1,061,368 Regional Economic Development - 475,000 Destination Marketing (Tourism) - 2,018,608 Develop Saint John - 838,727 Regional Economic Development Agency 2,175,000 Market Square 2,250,000 2,488,248 Saint John Trade & Convention Centre 572,270 586,193 Imperial Theatre 344,165 367,285 Saint John Aquatic Centre 400,000 625,821 Saint John Arts Centre 152,920 139,471 TD Station 564,810 602,519 Library 472,892 497,892 City Market 1,047,824 1,012,480 Arts & Culture Board 70,000 70,000 Public Art Maintenance & Repair 16,000 16,000 Remembrance Day 1,500 1,500 Ћ ŷĻ /źƷǤ ƚŅ {ğźƓƷ WƚŷƓ ЋЉЋЊ DĻƓĻƩğƌ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЋЉЋЊЋЉЋЉ .ǒķŭĻƷ.ǒķŭĻƷ υυ DƩƚǞƷŷ ε {ĻƩǝźĭĻƭ Λ/ƚƓƷźƓǒĻķΜ New Year/Canada Day Celebrations 15,000 15,000 Acadian Games - 19,750 PRO Kids 19,163 124,940 Succeed & Stay 205,863 200,343 Local Immigration Partnership 89,863 Carleton Community Center 182,700 190,211 Loch Lomond Community Center 45,000 45,000 North End Community Center 169,589 167,083 Recreation Programming 544,953 663,842 Neighbourhood Development 152,000 152,000 YMCA-FGCC/MCC - Contracted Services 137,661 135,627 Boys and Girls Club - Contracted Services 139,950 137,882 Unspecified Grants 184,000 184,000 Lifeguards 181,000 181,000 Play SJ 15,000 15,000 Lord Beaverbrook Rink 159,470 159,470 Growth Reserve - 350,000 ƚƷğƌ DƩƚǞƷŷ ε /ƚƒƒǒƓźƷǤ {ĻƩǝźĭĻƭ ЊЎͲЎЉБͲЏЍБ ЊАͲБАЍͲЋЍЏ tǒĬƌźĭ {ğŅĻƷǤ {ĻƩǝźĭĻƭ CźƩĻ ε 9ƒĻƩŭĻƓĭǤ ağƓğŭĻƒĻƓƷ {ĻƩǝźĭĻƭ Fire Rescue and Suppression Service 22,124,187 23,776,029 Fire Training 1,000 1,359 Medical First Responders - 17,830 Technical Rescue Response 46,256 75,850 Hazardous Materials 72,626 103,312 Fire Prevention 856,920 866,034 Fire Investigation 61,647 70,931 Emergency Management Services 341,535 336,152 Water Supply and Hydrants 2,500,000 2,500,000 Street Lighting 959,982 999,159 ƚƷğƌ CźƩĻ ε 9ƒĻƩŭĻƓĭǤ ağƓğŭĻƒĻƓƷ {ĻƩǝźĭĻƭ ЋЏͲВЏЍͲЊЎЌ ЋБͲАЍЏͲЏЎЏ Public Safety Communications Center 2,505,681 2,583,013 Police Services 25,093,262 26,095,633 ƚƷğƌ tǒĬƌźĭ {ğŅĻƷǤ {ĻƩǝźĭĻƭ ЎЍͲЎЏЌͲЉВЏ ЎАͲЍЋЎͲЌЉЋ Ќ ŷĻ /źƷǤ ƚŅ {ğźƓƷ WƚŷƓ ЋЉЋЊ DĻƓĻƩğƌ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЋЉЋЊЋЉЋЉ .ǒķŭĻƷ.ǒķŭĻƷ υυ tǒĬƌźĭ ƚƩƉƭ ε ƩğƓƭƦƚƩƷğƷźƚƓ {ĻƩǝźĭĻƭ Snow Control Streets 5,327,402 5,700,022 Street Cleaning 1,671,894 1,556,365 Utility Cuts 710,263 727,403 Street Services - Surface Maintenance 8,448,368 7,122,040 Snow Control Sidewalk 910,718 1,101,593 Sidewalk Maintenance 580,965 793,399 Pedestrian & Traffic Management Service 1,979,926 2,241,753 Stormwater Management - 3,643,330 Solid Waste Management 3,759,606 3,781,035 Regional Services Commission 20,000 20,000 Landscape - Parks & Open Spaces 2,047,995 2,310,698 Rockwood Park 407,788 571,447 Urban Forestry 313,445 313,565 Mispec - 5,000 Saint John Horticultural Association 40,000 40,000 Arena Operation & Maintenance 1,168,546 1,568,144 Sportsfield Operation & Maintenance 1,195,592 1,393,873 Other Facilities Operation & Maintenance 406,222 449,103 Parking Administration 581,470 616,756 Transit Debt 1,961,195 2,037,026 Transit Subsidy 5,044,787 5,894,787 Fleet Stockroom 219,495 Stormwater Rural 1,691,345 - ƚƷğƌ tǒĬƌźĭ ƚƩƉƭ ε ƩğƓƭƦƚƩƷğƷźƚƓ {ĻƩǝźĭĻƭ ЌБͲЍБАͲЉЋЊ ЍЊͲББАͲЌЌВ ƷźƌźƷźĻƭ ε LƓŅƩğƭƷƩǒĭƷǒƩĻ {ĻƩǝźĭĻƭ Engineering 914,136 572,934 Carpenter Shop 324,231 324,236 Facilities Management 1,408,663 1,476,376 City Hall Building 1,014,587 1,225,211 GIS 376,224 420,721 Stockroom 269,413 - Stormwater Urban 1,293,250 - ƚƷğƌ ƷźƌźƷźĻƭ ε LƓŅƩğƭƷƩǒĭƷǒƩĻ {ĻƩǝźĭĻƭ ЎͲЏЉЉͲЎЉЍ ЍͲЉЊВͲЍАБ Ѝ ŷĻ /źƷǤ ƚŅ {ğźƓƷ WƚŷƓ ЋЉЋЊ DĻƓĻƩğƌ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЋЉЋЊЋЉЋЉ .ǒķŭĻƷ.ǒķŭĻƷ υυ {ƷƩğƷĻŭźĭ {ĻƩǝźĭĻƭ Finance 1,176,140 1,640,459 Assessment 1,388,221 1,367,705 Supply Chain Management 399,446 1,207,895 Information Technology 3,073,774 2,966,799 Corporate Planning 311,448 503,224 Corporate Communications 573,001 573,547 Insurance 272,932 171,500 Liability Insurance 340,000 340,000 Customer Service 877,809 - ƚƷğƌ {ƷƩğƷĻŭźĭ {ĻƩǝźĭĻƭ БͲЍЊЋͲААЊ БͲААЊͲЊЋВ /ƚƩƦƚƩğƷĻ {ĻƩǝźĭĻƭ City Manager's Office 625,173 800,584 Mayor's Office 216,333 218,130 Common Council 519,902 549,067 Common Clerk 594,499 605,438 Human Resources 1,826,083 1,565,654 Legal Department 936,521 795,948 Real Estate 177,537 275,891 ƚƷğƌ /ƚƩƦƚƩğƷĻ {ĻƩǝźĭĻƭ ЍͲБВЏͲЉЍБ ЍͲБЊЉͲАЊЋ hƷŷĻƩ /ŷğƩŭĻƭ Fiscal Charges 15,941,014 16,650,273 Deficit 2nd Previous Year 214,971 119,915 Landfill Closure 300,000 300,000 Special Pension Contributions 8,875,000 9,575,000 Long-Term Disability 550,000 661,572 Restructuring - 2,040,000 Transfers to Operating Reserves 377,484 Transfers to Capital Reserves 605,000 550,000 Other Charges - 23,458 Capital from Operating 3,000,000 2,000,000 ƚƷğƌ hƷŷĻƩ /ŷğƩŭĻƭ ЋВͲБЏЌͲЍЏВ ЌЊͲВЋЉͲЋЊБ ƚƷğƌ 9ǣƦĻƓķźƷǒƩĻƭ ЊЎАͲЌЌЊͲЎЎА ЊЏЏͲАЉБͲЍЋЍ {ǒƩƦƌǒƭ Λ5ĻŅźĭźƷΜ Ώ Ώ Ў FINANCE COMMITTEE REPORT Report Date October 16, 2020 Meeting Date October 21, 2020 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: 2021 Utility Fund Operating Budget OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Craig Lavigne J. Brent McGovern John Collin RECOMMENDATION It is recommended that the Finance Committee approve the 2021 Utility Fund Operating budget as presented and submit to Common Council for receive and file once the Industrial Raw Water Budgets have been approved by the Finance Committee. EXECUTIVE SUMMARY The 2021 Utility Fund Operating Budget will represent the third year in a row that will see no rate increase for ratepayers that use both water and sewer services. These ratepayers include both flat rate customers which will see the annual cost remain the same at $1,428 per year and metered customers will see no change in the cost per cubic meter and meter charge. The budget being presented does not include Industrial users of raw water. The Utility has been aggressive in reducing costs in 2020 through staffing reductions, lower or no wage increases and with savings associated with lower interest cost on refinanced debentures. It is critical that rate stabilization continues to be high priority in light of the global pandemic, COVID 19, and due to the fact that rates have increased significantly over several years due to mega projects - Safe Clean Drinking Water and Harbour Clean-up. The Utility still is facing pressure on shrinking revenues. Flat rate customers declined again in 2020 over previous year to 15,815 accounts. Also with the closure of Saputo at the end of the year, the revenue loss from this one account is approximately $225k. The impacts of reduced meter revenue due to COVID 19 - 2 - will likely continue into 2021 and the budget has included an estimate for this loss in revenue. Rate stabilization will continue to challenging if the Utility does not experience growth in both residential and commercial customer base. PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT The proposed 2021 Utility Fund Operating Budget is aligned with Council priorities in taking a strategic approach to financial management of the Utility by continuing to contribute capital funding from operating, finding other revenue sources, improving the allocation of costs among ratepayers and continuing to find cost reductions and savings through continuous improvement initiatives. REPORT The 2021 Utility Fund Operating Budget will represent the third year in a row that will see no rate increase for ratepayers that use both water and sewer services. These ratepayers include both flat rate customers which will see the annual cost remain the same at $1,428 per year and metered customers will see no change in the cost per cubic meter and meter charges. Revenue Overall revenue for 2021 has been budgeted at $41,949,000 (2020- $43,154,000). The Utility saw a minor decrease in flat rate customers over the 2020 budget resulting in a decline of 20 accounts. Since 2017 the number of flat rate accounts has declined by a total of 415 accounts. Some of the decline relates to customers having to switch to meter per by-law requirements, a large number relate to demolished buildings and a number of properties were bought and demolished as a result of the Irving Oil butane leak. The biggest reduction in revenue is the meter customers ($980k), which are largely commercial, manufacturing, malls, schools, restaurants, hotels and apartment buildings. COVID 19 will likely continue to have negative impact on many of these businesses and revenue has been adjusted downward to account for this impact. Another significant impact to revenue for 2021 will be the closure of Saputo at the end of 2020. This customer represents approximately $225k in revenue for the Utility. The Utility would have to add 157.5 new flat rate accounts in order to make up this revenue. The balance of revenue includes the fire protection levy, storm sewer levy, interest revenue, other revenue and prior year surplus which is much less than previous years. - 3 - Expenditures The Utility has undergone significant reduction in its workforce in order to balance the budget, stabilize rates and move toward operational optimization. The Utility has eliminated 10 positions and reduced salary and benefits by over $1.05 million for 2021. This is the first budget that includes the wage escalation policy. Two of the three work groups will see 0% increases with the last group in its final year of its contract. This restructuring is key in creating the stability needed to allow the Utility to better plan and stabilize its future rates. The Utility has also been able to save additional interest expense on debentures due to lower interest rates on debentures that have been refinanced in 2020. There continues to be a focused approach in reducing debt which will have a balance of $81.9 million at the end of 2021 from over $107.4 million at the end of 2017 which is a 23.71% reduction in 5 years. The budget includes $4.8 million in pay as you go (capital from operating) capital funding. This will allow the Utility to complete its 2021 capital program without any additional borrowing. There continues to be a very strong effort to seek any capital funding available to offset the Utilities cost of infrastructure renewal. The Utility is currently straddled with over $300 million infrastructure deficit and the capital renewal programs are seriously underfunded. The operating budget also includes for the first time, $625k for an operating reserve. The Utility has very few levers available to deal with events such as COVID 19 and the impact events can have on revenues. This operating reserve will allow the Utility to build some flexibility and better positon itself to stabilize rates moving forward. Conclusion The 3rd rate freeze for 2021 is a positive note for ratepayers after having experienced several years of increases during Habour Clean-u and the Safe, Clean Drinking Water Project. The Utility has continued to focus on cost reductions, continuous improvement, finding effiencies, and process to improvements 2020, as well as debt management, leveraging of funds from other levels of Government and pay as you go for all capital expenditures. The Utility will continue to focus on the various cost control initiatives. However a major issue the Utility cannot control is the growth of its revenue base. There continues to be a steady decline in flat rate accounts and meter consumption and in order to be able to continue to stabilize rates, the Utility needs to start seeing flat rate accounts and meter consumption increase. The Utility will be completing its 10 year long term financial plan in 2021 and this document will provide the financial road map for the Utility. - 4 - SERVICE AND FINANCIAL OUTCOMES See enclosed 2021 Utility Fund Operating Budget INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS ATTACHMENTS Appendix A 2021 Saint John Water Operating Budget ŷĻ /źƷǤ ƚŅ {ğźƓƷ WƚŷƓ ЋЉЋЊ ƷźƌźƷǤ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЋЉЋЊЋЉЋЉ .ǒķŭĻƷ.ǒķŭĻƷ υυ 9ǣƦĻƓķźƷǒƩĻƭ 5ƩźƓƉźƓŭ ğƷĻƩ {ĻƩǝźĭĻ Watershed Management 360,000 260,000 Water Treatment 8,340,000 8,404,000 Water Pumping & Storage 1,160,000 1,312,000 Transmission & Distribution 4,790,000 4,919,000 Customer Metering 694,000 763,000 Internal Charges 467,500 455,000 Other Charges 605,000 700,000 Debt Servicing 4,260,000 4,397,000 Transfer to Operating Reserves 625,000 Capital from Operating 2,836,000 3,724,000 ƚƷğƌ 5ƩźƓƉźƓŭ ğƷĻƩ {ĻƩǝźĭĻ ЋЍͲЊЌАͲЎЉЉ ЋЍͲВЌЍͲЉЉЉ ğƭƷĻǞğƷĻƩ {ĻƩǝźĭĻ Wastewater Pumping 3,078,000 3,027,000 Wastewater Collection 2,927,000 3,209,000 Wastewater Treatment 4,758,000 4,947,000 Internal Charges 467,500 455,000 Other Charges 605,000 700,000 Debt Servicing 3,291,000 3,513,000 Capital from Operating 1,965,000 1,547,000 ƚƷğƌ ğƭƷĻǞğƷĻƩ {ĻƩǝźĭĻ ЊАͲЉВЊͲЎЉЉ ЊАͲЌВБͲЉЉЉ Infrastructure Management Engineering Services АЋЉͲЉЉЉ БЋЋͲЉЉЉ ƚƷğƌ 9ǣƦĻƓķźƷǒƩĻƭ ЍЊͲВЍВͲЉЉЉ ЍЌͲЊЎЍͲЉЉЉ wĻǝĻƓǒĻƭ Flat Rate Accounts 22,530,000 22,600,000 Meter Rate Accounts 14,670,000 15,650,000 Fire Protection Levy 2,500,000 2,500,000 Storm Sewer Levy 950,000 950,000 Other Revenues 924,000 968,000 Previous Year's Surplus 375,000 486,000 ƚƷğƌ wĻǝĻƓǒĻƭ ЍЊͲВЍВͲЉЉЉ ЍЌͲЊЎЍͲЉЉЉ Annual Flat Rate - Water and Sewerage $1,428 Meter Rates:/Cu.m. Block 1 - First 100$1.9944 Block 2 - Excess of 100$1.2700 NOTE: Sewer Surcharge 80.35% of Water Charge Њ 1 | October 21, 2020 Finance Committee Meeting 2021 Utility Fund Operating Budget . amendments. Law - to Common Council for to Finance Committee reading of By nd and 2 st Utility Operating Budget law amendment. for 1 - and reading of By 2021 Utility Fund Budget Context rd October 21: Draft Utility Operating Budget with recommendation to approve and submit to Common CouncilNovember 18: Draft Industrial Water Budgets to Finance Committee with recommendation to approve and submit to Common Council.November 23: Draft Utility Operating Budget to Common Council for approval December 7: Draft 3 •••• Outside Workers) – $4,801,000 - straight Year) rd perating budget o ater customer for flat rate customers or metered customers w aw aggressive pay down and once again no new debt r – continues to decline 2021 Utility Fund Budget Context 2021 budget being presented is potable water customers and does not include Industrial Revenue COVID 19 will continue to have an impact on 2021 revenuesNo proposed increaseOngoing focus on significant cost reductions is leading to rate stabilization2021 Flat Rate $1,428 per year (3Debt Reduction proposed for 20212021 capital funded from First budget to include wage escalation policy (Local 18 ••••••••• 15,815 Fall 2020 2020 15,818 Spring Need Growth 15,835 – Fall 2019 2019 Spring 15,896 Rate Billings NO INCREASE 15,994 Fall 2018 2018 16,031 Spring Number of Flat 16,132 Fall 2017 2017 16,230 Spring 2021 Revenue Budget Overview Flat Rate to be held at $1,428 Rate Stabilization However, continued pressure on Potable customers. Flat Rate customer decrease continues but has slowed in 2020. 16,30016,20016,10016,00015,90015,80015,70015,600 •• 2021 Budget 5,039,000 19 - ($225K impact) – Budget Actual consumption estimated to be 5,120,000 2020 5,450,000 Consumption 2019 5,179,519 Meter - rate stability for Commercial users – 2018 5,344,768 Non Industrial 2017 5,586,842 2021 Revenue Budget Overview 5,800,0005,600,0005,400,0005,200,0005,000,0004,800,0004,600,000 No increase in meter rates Meter consumption likely to be impacted by COVIDClosure of Saputo (Baxter's Dairy end of 2020) ••• $4,801,000 - continued efforts to pay down debt – secure funding from other levels of government - projects 2021 Utility Fund Budget Overview No new debt for 2021 Fund capital from operating budget Capital Infrastrure deficit risk for utility ~ $300M (vs General Fund ~ $100M) •••• 2,732,772 ($1.052M) – Interest on Debt 3,157,531 2021 9,584,948 2020 10,636,906 Salaries and Benefits 2021 Utility Fund Budget Overview Continued focus on expense reductionsSignificant salary reductions Benefit of lower interest rates on refinanced debentures ($425K) 9,000,0007,000,0005,000,0003,000,0001,000,000 ••• 13,000,00011,000,000 Millidgeville Uptown & – term financial plan to be - directional flushing program) 2021 Utility Fund Budget Initiatives - 10 year longundertaken and completedContinue to bring programs in house (i.e. uniFocus on securing funding for Capital renewal to address linear asset infra. deficitExpanding leak detection strategies to improve operational efficiencyFire Hydrant Inspection & Painting Program (repaint approx. 35% of the 2,100 in inventory). Focus Procure a valve maintenance trailer and commence valve exercising program –––––– Initiatives media at repairs, biofilter 2021 Utility Fund Budget Replacing the the Eastern Wastewater Treatment Facility (first replacement since 2012 facility opening)Acquisition of sewer camera trailer for trenchless avoids replacement of a truck and further reduces fleetCleaning, inspection and maintenance on two water storage reservoirs Continuation of sewer video inspection and flushing program. Inspect another 65kms in 2021. –––– Continuous – ) etc Holding or lowering a lot of costs (wage freeze, staffing reductions, CI projects, optimizing operational costs, Continuing to look for savings Improvement initiatives Not borrowing for Capital workFocusing on asset replacement as opposed to new assets (i.e. attacking the infrastructure deficit)Seeking to leverage every dollar (capital and operating budget) to get maximum benefit for ratepayersTendering capital projects early Tackling the fiscal challenge from all angles 1.2.3.4.5.6. from operating capital extending the life of - debt retires as ) Asset Management existing assets (lining, repairing as opposed to replacing, enhancing preventative maintenance, etcFocusing on increasing contribution Need infill vacant lots to generate new revenue from existing infrastructure (without adding new expense or expanding infrastructure)Looking for and actively pursuing revenue opportunitiesEstablishing an Operating Reserve to stabilize rates Tackling the fiscal challenge from all angles 7.8.9.10.11. to . Replacing Eg Operating Reserve 19 and unforeseen financial events - Utility Operating Budget – 2021 Utility budget to include funding for an st 1mitigate impacts of COVIDwhich will help create more rate stability ($625K)Loss of revenue has a negative impact on rates. Saputo revenue equates to 157.5 new flat rate accounts.Rate Stability achievable due to Wage Escalation Policy (0% increases for management and Local 18 followed by wage escalation) & staffing reductionsStaff will continue to identify cost savings and alternative revenue sources. 2021 Utility Fund Budget Conclusion •••• Utility Fund Operating submit and Next Steps Recommendation Return to Finance Committee on November 18 with draft Industrial Water Budgets Budget to Council for receive and file on November 23. 2021 Utility Fund Budget Conclusion •“Finance Committee approve the 2021 Utility Fund Operating budget as presented and submit to Common Council for receive and file once the Industrial Raw Water Budgets have been approved by the Finance Committee.” Operational Audit Saint John Transit: Presented to Finance Committee October 21, 2020 Overview of Final Report Completed by Stantec Inc. Transit’s and operations. of changes required to in the City’s subsidy for consultant to complete an a offerings Sustainability reduction Sustainability: Audit RFP Engage operational audit of Saint John service Identification the Transit operations to incorporate best practices and to have the capacity to increase ridership in an effort to support the City of Saint John’s growth agenda.The goal is maintain and/or improve service offerings, while receiving up to a Transit operations. 2 Roach, Project Manager - Donna Reardon, Board Member Trish Ellsworth, Board ChairCouncillorMarc Dionne, Acting General ManagerCharles Freake, ManagerKevin Fudge, Commissioner of FinanceTim O’Reilly, Director of Parks & Recreation / Traffic EngineerKen Melanson, Manager of Community PlanningStephanie RackleyJill Good, Project SupportHolly Young, Project Support 3 Steering Committee Saint John Transit Commission••••City of Saint John•••Project Management••• Task 1: Project KickoffTask 2: Background ReviewTask 3: Stakeholder EngagementTask 4: Visioning, Strategy, and ObjectivesTask 5: Service Delivery EvaluationTask 6: Internal Operations EvaluationTask 7: Structural AssessmentTask 8: Operating Cost ModelingTask 9: Final Report Feb 2020 Aug 2020 4 Stantec Deliverables time - pandemic - COVID19 Stantec completed the deliverables outlined in their proposal based on predata (e.g., revenue, ridership, routes and frequency, onperformance) Service enhancements/impacts and recommendations within the report need to be further evaluated to determine a path forward considering impacts Scope of Work •• 5 . service that focused - goals, and encourages . the return on the brand and service sustainability and economic Saint John connected... Transit Build a transit system that provides access to where people want to go.Foster prosperityIncrease awareness.Optimize investment in transit. Vision & Objectives Keep provides a safe, reliable, affordable, and customercontributes to growth, advances sustainability everyone to choose transit•••• 6 and operations pandemic; supporting - rganizational structure AdministrationOScheduling, planning, and dispatchService Operation maintenance storage facilities Analysis based on data and term vision of Saint John Transit ••••• - System Design Internal Operations Review 7 Stantec Analysis••Note: operations prelong ConsistencyEfficiencyAlternative delivery modelGrowth and accessBest practices Network Considerations••••• 8 - network. organization. SJT . Structure KPIs Term Recommendations - routes. services. route revisions as per the final preferred Make Begin/continue collecting the noted Develop and implement operating contract for paratransit and onrequest Adjust roles and responsibilities within the Shift bus stop infrastructure and accessibility amenities to align with the proposed Simplify the fare structure. Stantec Short Service Planning 1.2.Administration and Organizational 3.4.Operations 5.6. 9 . network Structure . service Term Recommendations - Bus - Handi operational efficiencies Make the noted enhancements to the Rebrand Expand charter and ferry tours businessesInvest in scheduling/dispatch and customer information software to exploit Stantec Long Service Planning 7.Administration and Organizational 8.9.Scheduling, Planning and Dispatch 10. 10 ) OMSF fleet it SJT office layout efforts OMSF Term Recommendations structure - amenities customer experience , Maintenance, and Storage Facility ( Undertake a thorough review of the Redesign and expand Invest in a fare collection system to reduce operational costs and improve Simplify the fare Develop a fare evasion plan and enforce Improve bus stop infrastructure and customer comfort and accessibility Bolster public marketing Stantec Long Operations 11.12.13.14.15.Operating 16.17. 11 service adding Bus - request - changes in Handi cost of oncost required for Savings of $850,000 – Cost savings gained system designAdditional Additional labour resourcesRevenue reduction associated with fare parity between service and conventional service Stantec Projects Financial Impact ••••Note: Revenue from increased ridership from service improvements and technology investments not factored in 12 Term Capital Plann - term planning - Continue review and due diligence of the analysis and recommendations of StantecPrepare public awareness camping to communicate serv improvements and changesIntegrate recommended investments for transit into th City’s LongCommission working on shortterm actions for 2021 with a f on long Next Steps•••• 13 Operational Audit Saint John Transit: Presented to Finance Committee October 21, 2020 Overview of Final Report Completed by Stantec Inc. City of Saint John October 21, 2020 2021 Assessment Base ; th Agenda Share 2021 Tax Base Results and Relevant Benchmarks;Share information received from Service New Brunswick in staff follow up meetings that occurred on October 16 1.2. 2021 Tax Base Results and Benchmarks 2021 Residential Tax Base Benchmarks Residential Tax Base Benchmarks - 2021 Non 5 Year Tax Base Benchmark Assistant Manager Regional Manager Assistant Manager Executive Director – – – – Director of Regional Operations - October 16, 2020 Lisa Dionne Mick O’Kane Loretta Munn Robin Caldwell Property Assessment Services 2021 Assessment Base Stéphane Melanson : Approx. 1,800 - cities, towns, villages, – 19 Impact on Base: - COVIDproperties will be reviewed for January 470,000 property assessment accounts340 taxing authorities LSD’s, etc.$67.2 Billion Assessment Base value (Post COVID)$1.1 Billion (1.6%) increase over 2020 Base (0.84% NC & 0.79% market) 2021 New Brunswick statistics••••• , ) at Act 1st of Market New Brunswick Assessment ( : assessed True January are Assessment Real & Taxation Year. As per the PropertiestheirValue as of each Our mandate* 1 2 0 2 - 1 9 9 1 Overall Growth Provincial Assessment Base for us to have site; visited, or a very foundation; as possible to make sure cutoff cutoff added, such as a the permits up to this date were picked up and - visited as close to was portion 30th othing significant when the assessor September 4th was the absolute everything in the system for base.June recorded for 2021 if something was on July August inspections picked up no value add as no nminor Assessors nothing was missed; Key Assessment Dates •••• tenancies have been - by COVID International Property Tax Institute Impacted Adjustment in Saint John Covid only those office buildings having multi (<$500,000 in assessment value) have been excluded. and consultation with – Types include hotels, motels, resorts, bed and breakfast, Inns and lodges. – where passenger travel has been impacted the most. – included. $49 Million Analyses completed.specific property types will be impacted.multiple accounts receiving notice in January (to acquire more market evidence). Impact •••• Covid Property 1. Hospitality 2. Office Complex 3. Shopping Centres and strip malls were included.4. Restaurants, fast food outlets and taverns/lounges were included.5. Airports t r a h C h t w o r G e s a B t n e m s s e s s A will show up in – had 144.9M in permit value st , only show 65.9M building value st permit values totaled $23.6M Can only assess what has been constructed, regardless of building permit value;Need at least a foundation;Timing Issues in Saint John on Big Developments the base next year;Cut off end of June (impact) for New ConstructionUp to the end of June, Numbers as of October 1receivedBy comparison, Moncton October 1Fredericton had 105.6M in permit value submitted to act upon Building Permit versus Assessment •••••••• - completed only $175K worth of permits – 10% – ; 7% th – 7% Vacant Land Revaluation was – inspection completed: - Residential - 15% Increase from $96M to $110MGothic Arches Telegraph Building Rocca Building (foundation) Wellington Row Permit was $8M but nothing came in after July 1$200M Port Authority Development as of September 15 •••••• JDI Re Non$18M adjustmentNotable Properties: Saint John Information ••• s t a t S l a p i c i n u M – e s a B t n e m s s e s s A 16 Q & A Update to Finance Committee – Insurance Procurement 2021 designed to optimize costs, - City Adopted a Risk Management approach and Cost of Risk Savings (all costs, not just premiums) Cost of Risk (premiums + Claims + Dpt. costs) reached Program was re –--– 2014 Council policy.2015 a peak of close to 1.9 mil.2015 premiums and deductibles2016 decreased by $500,000 2 History (slide 1 of 2) •••• 2020 2,836,291 2019 2,301,979 $2.8 mil - 2018 1,659,077 Cost Avoidance 2017 957,610 2016 Accumulated 501,847 0 500,000 3,000,0002,500,0002,000,0001,500,0001,000,000 2020 2019 2018 2017 2016 2015 Total Cost of Risk 2014 2013 2020 Cost of Risk projected at 1.4 mil (2.5 months left.Total accumulated savings since program change over 5 years. 800,000 2,000,0001,800,0001,600,0001,400,0001,200,0001,000,000 3 History (slide 2 of 2) •• being declined – not seen since 2001 – More demand for insurance than there is availableCapital withdrawal from the marketSome Lloyds’ syndicates exiting the business(e.g. AIG only assuming 40% exposure on property in North America) •••• Hard Market Pressure on new business Underwriting taking a lot longer on risks (seen on water project renewal)All risks being closely examinedSome insurers not willing to assume all the exposure 4 What’s happening now in the industry ••••• 3% - 40% ($94,500). - 80% increase, we expect 30 - Normally we “go to market” every 5 years (for 2021), recommending we renew with current insurer for at least 1 year. (procurement policy)Liability premiums likely to have moderate increase (2on $460,000 in premium).Auto rates ($350,000) are regulated, what the EUB approves, is what we receive for increase.Property premium ($270,000) in stressed, some in NB are experiencing 75 5 What we are doing for 2021 •••• may cause us to – worst case could be much – we will be considered new – Could be declined coverage business where there is limited capacity to take on new businessStricter underwriting could force infrastructure spending not budgeted to obtain coverageUncertain when we would have terms extend our current policy Best case scenario is likely same premium or similar to renewing with current insurer more expensive 6 Risks if we “go to market” •••• the City following Sole Source – a Special Circumstance exists, or Common Council and replaced with negotiations by Competitive Purchases Manager and Materials Management under the - where requirement for competitive Bid Solicitation for Goods, Services ii. • a) The and Construction may be waived under the authority of the Manager Division circumstances: • 5.11 Non • Procurement policy allows for situations like this:Recommend Receive and File this report 7 Recommendation ••