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2020-11-26 Finance Committee Agenda Packet - Open Session Finance Committee Meeting Open Session October 21, 2020 MINUTES OPEN SESSION FINANCE COMMITTEE MEETING OCTOBER 21, 2020 AT 5:00 PM MEETING CONDUCTED BY ELECTRONIC PARTICIPATION Present: Mayor D. Darling Councillor D. Merrithew Councillor G. Norton Councillor D. Reardon Councillor G. Sullivan Councillor S. Casey Also Present: City Manager J. Collin Commissioner of Finance and Treasurer K. Fudge General Counsel M. Tompkins Commissioner Growth & Community Services J. Hamilton Commissioner Transportation & Environment M. Hugenholtz Commissioner Saint John Water B. McGovern Manager Human Resources S. Hossack Director Corporate Performance S. Rackley-Roach 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 I. Fogan Fire Chief K. Clifford CEO Transit & Parking Commission M. Dionne Communications Officer N. Moar Deputy Commissioner Saint John Water K. Mason Insurance & Claims Coordinator S. Keyes CEO Transit & Parking Commission M. Dionne Chair Transit & Parking Commission P. Ellsworth 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 September 15, 2020 Moved by Councillor Reardon, seconded by Councillor Norton: RESOLVED that the minutes of September 15, 2020 be approved. MOTION CARRIED. 1 Finance Committee Meeting Open Session October 21, 2020 2. Consent Items 2.1 2021 General Fund Operating Budget (Recommendation in Report) Moved by Councillor Norton, seconded by Councillor Casey: RESOLVED that as recommended by the City Manager in the submitted report 2021 General Fund Operating Budget, 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: 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; MOTION CARRIED. 3. Business Matters 3.1 2021 Utility Fund Operating Budget Mr. McGovern stated that the 2021 Utility Fund Operating Budget represents the third consecutive year without a rate increase for ratepayers that use both water and sewer services. The annual cost for flat rate customers will remain at $1429 per year; the cost for metered customers will also remain unchanged. The Utility reduced costs in 2020 through workforce reductions, low/no wage increases, and savings due to lower interest cost on refinanced debentures. Rate stabilization continues to be a high priority. Rates have increased significantly over several years due to large-scale projects such as the Safe Clean Drinking Water and Harbour Clean-up. Reduced revenues is problematic for the Utility. The number of flat rate customers has declined again in 2020. In addition, the closure of Saputa at the end of the year will reduce revenue by approximately $225k. The impacts of reduced meter revenue due to COVID 19 will likely continue into 2021; the budget has included an estimate for the loss in revenue. Rate stabilization will continue to challenging if the Utility does not have growth in both the residential and commercial customer base. It is critically important to get more users into the system. (Mr. Collin withdrew from the meeting) Moved by Mayor Darling, seconded by Councillor Casey: RESOLVED that as recommended by the City Manager in the submitted report 2021 Utility Fund Operating Budget, 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. MOTION CARRIED. 2 Finance Committee Meeting Open Session October 21, 2020 3.2 Transit Operations Audit cluded an operational audit of Saint John Transit, which has been completed by Stantec. The report will be released to the public with the accompanying recommendations once the Transit Commission has finalized its review. Ms. Rackley-Roach reviewed the submitted report, Saint John Transit Operational Audit. As , an option under consideration is to decrease the subsidy provided to SJ Transit for its operations. The Stantec operational audit includes recommendations to ensure the sustainability of the transit service long-term. There were challenges in the preparation of the report including limited data, the impact of COVID-19, the data provided was pre-COVID data, and the fact that Stantec did not have local knowledge or the ability to travel to Saint John due to COVID. Much of the information and recommendations are based on best practices. Overall, 17 recommendations, both short-term and long-term, were identified within the report under the umbrella of Service Planning; Administration and Organizational Structure; Operations; Scheduling, Planning and Dispatching; and Operating, Maintenance and Storage Facility. The Transit Commission is finalizing its review of the audit, focusing on next steps and due diligence. A detailed report will be provided in the coming weeks. Moved by Councillor Reardon, seconded by Councillor Casey: RESOLVED that the submitted report Saint John Transit: Operational Audit be received for information. MOTION CARRIED. 3.3 City of Saint John: 2021 Assessment Base Mr. Fudge stated that the province recently released its annual municipal assessment base. The City of Saint John achieved 0.12% tax base increase, which has been integrated into the 2021 general operating budget. COVID-19 has had a significant impact on the assessment base across the province. There have been a number of questions regarding the manner in which assessments are made, and the low tax base increase given the high profile development projects that are currently underway in Saint John. Mr. Fudge reviewed the tax base results, comparisons with relevant benchmark cities, as well as information received from Service New Brunswick on the manner in which assessments are determined. The committee commented on the need for comprehensive tax reform within the Province of New Brunswick. (Councillor Norton withdrew from the meeting) Moved by Mayor Darling, seconded by Councillor Reardon: RESOLVED that the submitted report City of Saint John 2021: Assessment Base be received for information. MOTION CARRIED. 3.4 2021 Risk Management Insurance Procurement 2021 process for 2021. Under pre-pandemic conditions, the City w years it is recommended that the City renew with its current insurer for at least one year. The market is restricted due to COVID-19 3 Finance Committee Meeting Open Session October 21, 2020 with limited capacity for new business. The procurement policy allows for these types of scenarios restricted market due to the pandemic. The best-case scenario in going to market is likely obtaining the same or similar premium of the cost of renewal with the current provider. The worst-case scenario is that it could be more expensive than renewing. It is within the City ity to approve this renewal. Moved by Mayor Darling, seconded by Councillor Casey: RESOLVED that the submitted report Insurance Procurement 2021 be received for information. MOTION CARRIED. Adjournment Moved by Mayor Darling, seconded by Councillor Reardon: RESOLVED that the Finance Committee meeting be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on October 21, 2020 was adjourned at 6:40 p.m. 4 FINANCE COMMITTEE REPORT Report Date November 10, 2020 Meeting Date November 18, 2020 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: Budget Monitoring Policy 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 approve the 2021 General Fund Operating Budget as presented, in order to separate personnel and non-personnel costs to adhere to the Budget Monitoring Policy and forward to Common Council EXECUTIVE SUMMARY th On October May 25, 2020, Common Council approved a budget monitoring st policy that would be effective January 1, 2021. The General Fund Operating th budget was approved by Council on October 26, 2020 and the total budget is $157,331,557. The purpose of this report is to provide some highlights of the budget monitoring policy and present the 2021 budget, separating the personnel cost and non- personnel cost to ensure the policy can be adhered to. PREVIOUS RESOLUTION M&C 2020-127 Budget Monitoring Policy STRATEGIC ALIGNMENT The budget monitoring policy aligns with Councils priority of being fiscally responsible. - 2 - REPORT th Common Council approved the budget monitoring policy on May 25, 2020 and th the 2021 General Fund Operating Budget on October 26, 2020. One of the key policy objectives is to report and manage personnel and non-personnel budgets separately. Other objectives of the policy are; Therefor staff is looking to have the Finance Committee approve the 2021 budget as presented that separated the personnel and non-personnel budgets by service area. The application of the policy will ensure that personnel budgets do not subsidize non-personnel budgets and that non-personnel budgets do not subsidize - 3 - personnel budgets. Any surpluses shall not be reallocated to fund deficits in either budget unless supported by a business case and approved by the City Manager and Chief Financial Officer. Surpluses in either personnel or non-personnel budgets shall be transferred to Operating Reserves until the Operating Reserve is fully financed in accordance FAS-003- Operating and Capital Reserves Policy; all surpluses thereafter will be All departmental and service area surplus and deficit positions shall be analysed annually to determine if permanent budget adjustments for the following year are necessary. As part of the annual operating budget process, service areas will identify one time operating expenditures and submit proposals for the one time expenditures through the use of Reserve Funds as per FAS-003 Operating and Capital Reserves Policy. The City Manager and Chief Financial Officer shall make any recommendations respecting the use of Reserve Funds as part of the Annual Operating Budget Process. In conclusion that budget monitoring policy is another tool that will be used to ensure various financial policies are being followed, financial health is continually being monitored and reported on and to ensure goals and strategies of the long term financial plan are being met such as long term rate reduction while increasing reserve funding. 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 ЋЉЋЊЋЉЋЊ .ǒķŭĻƷ.ǒķŭĻƷ tĻƩƭƚƓƓĻƌbƚƓ tĻƩƭƚƓƓĻƌ 9ǣƦĻƓķźƷǒƩĻƭ Growth & Community Services 4,823,871 10,684,777 Public Works & Transportation Services 15,498,979 22,988,042 Public Safety Services 44,828,948 9,734,148 Utilities & Infrastructure Services 2,827,813 2,772,691 Strategic Services 5,030,637 3,382,134 Corporate Services 3,693,948 1,202,100 Other Charges 9,425,000 20,438,469 Total Expenditures БЏͲЊЋВͲЊВЏ АЊͲЋЉЋͲЌЏЊ ЋЉЋЊ DĻƓĻƩğƌ CǒƓķ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ЊЎАͲЌЌЊͲЎЎА Њ , 2020 th Operating Budget Finance Committee 2021 General Fund November 18 – Budget Monitoring Policy May 25, 2020 – personnel budgets shall be reported and managed - January 1, 2021 – Budget Monitoring Policy ncreased budgeting accuracy and financial control Personnel and nonseparatelyIncreased budget transparency and performance management IEnhanced fiscal oversight and supports a strategic corporate lens though out each fiscal yearIncreased financial flexibility ••••• 2 Policy Adopted by Common Council Policy effective date Financial reporting will look much different in 2021 due to policy objectives ••• ; not be reallocated to offset deficits in budgets shall Policy Application until such time a permanent adjustment in the annual budget is made to reflect Benefits budgets unless supported by a business case and approved by both the occurring in Goods and Services Reserve Surpluses occurring in Wages and Benefit budgets shall not be reallocated to offset deficits in Goods and Services budgets unless supported by a business case and approved by both the City Manager and the Chief Financial Officer;Surpluses Wages and City Manager and the Chief Financial Officer; •• 3 Recognize in principle that all surpluses and deficits are non recurring and one time in nature;Operating Budget surpluses for Wages and Benefits are not intended to subsidize Goods and Services;Operating Budget surpluses for Goods and Services are not intended to subsidize Wages and Benefits;Operating Budget surpluses for Wages and Benefits is appropriate to reallocate to Goods and Services when a staff vacancy generating the surplus is replaced with a third party contractTo increase the City’s financial flexibility, annual surpluses in wages and benefits will fund the Operating a more accurate wage and benefit budget; 1.2.3.4.5. ; Operating – 003 - be analysed annually to Policy; shall ; adjustments for the following year are necessary Operating and Capital Reserves – 003 - Policy Application per FAS permanent budget departmental and service area surplus and deficit positions part of the annual operating budget process, service areas will identify one time operating the event the Operating Reserve is fully funded in accordance with FAS To increase the City’s financial flexibility, annual surpluses in goods and services will fund the Operating Reserve until such time a permanent adjustment in the annual budget is made to reflect a more accurate goods and services budgetIn and Capital Reserves Policy; surpluses thereafter will be applied fifty percent to the Capital Reserve and fifty percent to Debt Reduction;All determine if As expenditures and submit proposals to fund the one time expenditure through the use of Reserve Funds as The City Manager and Chief Financial Officer shall make any and all recommendations respecting the use of Reserve Funds as part of the Annual Operating Budget Process and shall be in accordance with the Long Term Financial Plan. 4 6.7.8.9.10. Example 5 Staff vacancies creating a wage and benefit surplus of $400,000 in TES budget;One time and significant unanticipated fuel spike due to global economic conditions with no change in service outcomes causes a $100,000 deficit in the TES budgetEnd of year recommendation to transfer $400,000 surplus in the TES wage and benefit to the Operating reserve;End of year recommendation to fund $100,000 deficit in TES budget due to unanticipated and one time spike in fuel prices due to global economic conditions from Operating Reserve.Net Transfer to Operating Reserve = $300,000Staff Vacancies in the Finance Department will be analyzed to determine if a permanent budget adjustment is required for the following year;Fuel prices will be monitored to see if the fuel price increase is a permanent increase to determine if the fuel budget needs to be adjusted in the following year. Scenario I--Application----- $8,412,771$4,896,048$5,600,504 $27,598,943$26,964,153$38,487,021$15,508,648$29,863,469 Total Budget $157,331,557 Personnel - $3,843,716$5,890,432$3,382,134$1,202,100$2,772,691 $22,988,042$10,684,777$20,438,469 $71,202,361 Non Personnel $5,030,637$4,823,871$3,693,948$2,827,813$9,425,000 $21,073,721$15,498,979 $23,755,227$86,129,196 Services Services Management Budget Transportation Services Services Area 2021 Operating Budget by Service Area 6 Service Police and Public Safety Communication ServicesFire and EmergencyServicesPublic Works &ServicesStrategicGrowth & CommunityCorporateUtilities and InfrastructureOther Charges Total Operating Personnel costs in order - Recommendation Recommendation 7 In conclusion the budget monitoring policy is another tool that will be used to allow the City to continue to monitor its Financial health annually to ensure the goals and strategies of long term financial plan are being met.“Recommend the Finance Committee approve the 2021 Operating as presented separating the Personnel and Nonto adhere to the Budget Monitoring Policy and forward to Common Council for approval.” Q & A 8 FINANCE COMMITTEE REPORT Report Date November 26, 2020 Meeting Date November 26, 2020 Service Area Finance and Administrative Services Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: Safe Restart Funding Application OPEN OR CLOSED SESSION This matter is to be discussed in Finance Committee Open Session. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Kevin Fudge Kevin Fudge John Collin RECOMMENDATION It is recommended that the Finance Committee: 1. Approve the City of Saint John Safe Restart Funding Application based on the following net impact of Covid-19 in the year 2020: Add: Total of Additional Covid-19 Specific Costs - $302,310 Add: Total of Covid-19 Specific Losses - $4,781,194 Less:Total of Covid-19 Specific Operating Savings - $1,706,779 Net COVID-19 impact - $3,376,725 2. Direct the Mayor to send a letter to the Premier with a request to amend the Short Term Funding Agreement for the year 2020 to allow the City to retain any approved COVID-19 Safe Restart Funding. EXECUTIVE SUMMARY The following report provides recommendations respecting making application for Safe Restart funding based on the net impact of Covid-19 for the year 2020. PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT - 2 - REPORT On Friday, October 30, 2020 the Province of New Brunswick, collaborating with the Federal Government, announced financial support would be provided to local governments to cover COVID-19 related expenses through the Safe Restart Agreement. On November 6, 2020 the Province of New Brunswick distributed a letter from the Minister of Local Government and Governance Reform Daniel Allain that indicated local governments must submit a resolution of Council which clearly outlines the net impact of COVID-19 in 2020 to access Safe Restart funding. The letter indicated specifically the following information is required in the Council Resolution with a deadline for submission of December 31, 2020: Add: Total of Additional Covid-19 Specific Costs Add: Total of Covid-19 Specific Losses Less: Total of Covid-19 Specific Operating Savings Net COVID-19 impact Based on this formula, the City of Saint John is submitting a claim for $3,376,725. This would include Covid-19 related costs incurred such as materials and services including plexiglass, masks, sanitizer, digital solutions to work remotely, signage, and equipment. Total Covid-19 specific losses would be various municipal revenues as a direct result of Covid-19 such as lower than normal parking related revenues, water revenues, user & recreational revenues, and utility cut revenue. Covid-19 specific operating savings includes fuel, materials, casual workforce reduction (as a result of closures due to Covid-19), energy savings and reduction in overtime. Based on the conditions contained in the 2020 Short Term Provincial Funding Agreement, the City will not be able to retain funds associated with the Safe Restart program. Rather than relying on the Provincial agreement as a backstop, the City curtailed over $5 million in expenses to mitigate the financial risk of Covid-19. It is recommended that the City make a formal request to the Province to recognize ment and amend the Short Term Funding Agreement to allow the City to retain any approved Safe Restart funding. If the Province approves an amendment, the City would place the funds in a reserve to support the ves. SERVICE AND FINANCIAL OUTCOMES INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS - 3 - Click here to enter text. ATTACHMENTS Appendix A Letter from Hon. Daniel Allain to Mayor Don Darling th Appendix B November 6, 2020 Letter to Mayors from Minister of Local Government and Local Governance Reform; th Appendix C November 17, 2020 Letter from Mayor Don Darlling to Premier FINANCE COMMITTEE REPORT Report Date November 13, 2020 Meeting Date November 17, 2020 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: East and West Industrial Raw Water Rates OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Kendall Mason Brent McGovern John Collin RECOMMENDATION It is recommended that the Finance Committee approve the 2021 Industrial Raw Water Budgets as presented and submit with the 2021 Utility Fund Operating Budget to Common Council at its next meeting for approval and first and second reading of the by-law amendments. EXECUTIVE SUMMARY In 2019 Hemson Consulting Ltd. in working with City Staff completed rate studies for the two East Industrial Water Customers (Irving Paper and Irving Oil) and the two West Industrial Water Customers (NB Power Coleson Cove and Irving Pulp and Paper). Common Council on November 18, 2019 (M&C 2019-289) endorsed the East Saint John Industrial Raw Water Rate Report and the West Saint John Industrial Raw Water Rate Report. At the same meeting, Common Council supported the approach of setting all industrial raw water users rates via by-law and implement the various new industrial raw water rates via by-law effective January 1, 2020. The industrial revenue for 2021 is budgeted at $5,981,751, which will cover the cost of providing raw water, contributions to asset replacement, rate stabilization reserves and previous debt associated with the system prior to the switch over to raw water dedicated systems. - 2 - PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT Aligns with Councils priority of fiscal responsibility where it specifically states Investigate options to allocate water costs among ratepayers. REPORT Background As part of the Safe, Clean Drinking Water Project and the construction of the Loch Lomond Drinking Water Treatment Facility, separation of the potable and industrial water supply on the east system was possible. The west industrial systems were already separated and after the Safe, Clean Drinking Water Project, Industry became the sole user of the west watersheds. In 2019 Hemson Consulting Ltd. an expert in rate setting working on behalf of the City undertook comprehensive industrial water rate studies with the view of calculating new user rates as follows: 1) Raw water rate analysis for Irving Oil Ltd. and Irving Paper (at the Flume) on the East Saint John Industrial Water System; and 2) Raw water rate analysis for Irving Pulp & Paper and the NB Power Generating Station (Coleson Cove) on the West Saint John Industrial Water System. The industrial water rate analysis was completed to more accurately allocate the cost of providing water services to these raw water customers. Historically, Industrial water customers paid potable water rates or special negotiated user rates. In 2020, Industrial raw water Customers were billed the full cost of providing raw water (including contributions to: asset replacement, rate stabilization reserves, and previous debt associated to the system) via by-law rates set by Common Council. Raw water and potable water are quite different in quality and in complexity of infrastructure and servicing requirements needed to provide the different services. This results in vast differences in costs/revenue required and therefore ultimately the rates between the raw water users and the potable water system. In 2019 the costs of providing raw water services was recorded independently from the potable system. This process was implemented for the Saint John Water operating and capital budgets. As a result, the share of costs associated with providing raw water to east and west industrial systems are attributed to those systems. - 3 - In 2020 by-law rates were set to recover revenues fromeach Industrial user to cover the costs to service each Industrial Customer with raw water. Irving Oil Ltd. and Irving Paper - Raw Water Rate Analysis Irving Oil Ltd. (IOL) and Irving Paper are supplied industrial water from the Loch Lomond watershed in the east, utilizing dams, dual purpose transmission systems and transmission mains isolated from the potable distribution system. The Irving Oil Refinery is connected to a water transmission main that feeds supply water from Latimer Lake to Lakewood Heights as shown in Appendix 1. Irving Paper is supplied through a short water transmission main from Latimer Lake to Dry Lake Flume and open channel (brook) flow from Dry Lake to Little River Reservoir and into the Silver Falls Watershed as shown in Appendix 1. Consumption Allocations Of the total 12.4 million cubic metres associated with the two east industrial water users, IOL represents 76% of the total with the remaining 24% associated to Irving Paper (as shown in Table 1) and these allocations have been used for IOL and Irving Paper as they represent the benefit associated to providing raw water to these customers. Table 1. Summary of Average East Water 3 Source Water Volume (m) Share of Water Billed (%) Irving Paper (Raw) 3,040,000 24% 9,400,000 76% Irving Oil Ltd. (IOL) (Raw) Total East Industrial 12,440,000 100% Operating Expenditures Operation and maintenance costs are comprised of three key components: 1. East Watershed Management Industrial: includes costs of operating, maintenance and protection of the watershed. 2. Transmission: includes the operation and maintenance costs of transmission to provide raw water to Irving Oil Ltd. 3. East Customer Metering: includes the operation and maintenance of customer meters for the east industrial customers. A share of the above noted costs have been allocated to customers for recovery. Debt Allocations Annual infrastructure debt payments that benefit industrial customers have been incorporated and allocated to each user on a consumption basis. - 4 - Asset Management Contributions Asset management contributions have been incorporated into the calculation of East Saint John Industrial raw water rates. The assets utilized by the East Saint John Water Industrial Water System has a replacement value of $108.0 million. As shown in Table 2, of the total amount, $15.6 million is related to infrastructure which directly provides raw water service to this area; of which $11.8 million is associated with infrastructure to service IOL and $3.8 million to service Irving Paper. The remaining $92.5 million is shared city- wide assets which benefit a wider customer base. Table 2 also shows the required annual provisions to maintain the East Saint John Industrial Water System in a state of good repair which amounts to just under $1.1 million. Of this amount, $139,450 per year is required to maintain the assets providing raw water to IOL while a further $29,721 per year is needed for the assets providing water to Irving Paper. The remaining $902,662 is for the shared assets between the East Saint John Industrial Water System and the city-wide network. Table 2 East SJ Industrial Water System Asset Replacement Value and Required Annual Provision Customer Assets Replacement Annual Value Provision Irving Oil Ltd. WTP to Commerce Drive (Transmission mains) $11,752,280 $139,450 LHPS to Champlain Hts (Transmission mains) Irving Paper Little River Reservoir Dam $ 3,802,043 $ 29,721 (Flume) Little River Reservoir Culverts Latimer Lake to IP (Raw water intake) Shared East Various dams, buildings, flow meters, $92,484,715 $902,662 Industrial and transmission mains, headers and bridges City-wide Total $108,039,038 $1,071,834 bƚƷĻʹ ŷĻ ğƭƭĻƷ ƩĻƦƌğĭĻƒĻƓƷ ǝğƌǒĻ źƭ ĬğƭĻķ ƚƓ ƷŷĻ 9ğƭƷ {ğźƓƷ WƚŷƓ LƓķǒƭƷƩźğƌ wğǞ ğƷĻƩ wğƷĻ wĻƦƚƩƷͲ bƚǝĻƒĬĻƩ ЋЉЊВ ğƓķ ğķƆǒƭƷĻķ ŅƚƩ źƓŅƌğƷźƚƓ ΛЋіΜ͵ The annual provisions as noted in the table above are included in the calculation of the raw water rates. Of the total $902,662 annual contribution, about $409,537 / year is allocated to the East Saint John Water Industrial Water System based upon 45% of the share of the water produced. The $409,537 has been further allocated to IOL and Irving Paper based on shares of consumption. 76% (or $309,457) is attributed to IOL and 24% (or $100,080) attributed to Irving Paper. In Table 3, $578,708 represents the total fully calculated annual provision for all assets associated with the delivery of raw water to IOL and Irving Paper. Table 3. East Saint John Industrial Annual Asset Management Allocations Customer Direct Benefit Indirect Benefit Total Irving Oil Ltd. $139,450 $309,457 $448,907 Irving Paper (Flume) $ 29,721 $ 100,080 $129,801 Total Annual Contribution $169,171 $409,537 $578,708 - 5 - LƷ źƭ ƩĻĭƚŭƓźǩĻķ ƷŷğƷ źƒƒĻķźğƷĻƌǤ źƒƦƌĻƒĻƓƷźƓŭ Ņǒƌƌ ĭƚƭƷ ƩĻĭƚǝĻƩǤ ğƭƭĻƷ ƒğƓğŭĻƒĻƓƷ ƦƩƚǝźƭźƚƓƭ ƒğǤ ƦƌğĭĻ ǒƓķǒĻ ĬǒƩķĻƓ ƚƓ ƩğǞ ǞğƷĻƩ ĭǒƭƷƚƒĻƩƭ źƓ ƷŷĻ ƭŷƚƩƷΏƷĻƩƒ͵ ŷĻƩĻŅƚƩĻͲ ƷŷĻ ŅƚƌƌƚǞźƓŭ ƉĻǤ ğƭƭǒƒƦƷźƚƓƭ ğƩĻ ƩĻĭƚƒƒĻƓķĻķʹ 1. ŷĻ ğƭƭĻƷ ƒğƓğŭĻƒĻƓƷ ƦƩƚǝźƭźƚƓƭ ğƭƭƚĭźğƷĻķ ǞźƷŷ ƷŷƚƭĻ ğƭƭĻƷƭ Ǟŷźĭŷ ķźƩĻĭƷƌǤ ĬĻƓĻŅźƷ LƩǝźƓŭ hźƌ \[Ʒķ͵ ğƓķ LƩǝźƓŭ tğƦĻƩ ΛCƌǒƒĻΜ ğƩĻ Ʒƚ ĬĻ ЊЉЉі źƓĭƌǒķĻķ źƓ ƷŷĻ ĭğƌĭǒƌğƷźƚƓ ƚŅ ƷŷĻ ƩğǞ ǞğƷĻƩ ƩğƷĻƭ ŅƚƩ ЋЉЋЊ͵ 2. ŷĻ ğƭƭĻƷ ƒğƓğŭĻƒĻƓƷ ğƌƌƚĭğƷźƚƓƭ ğƭƭƚĭźğƷĻķ ǞźƷŷ ƷŷĻ ƭŷğƩĻķ ğƭƭĻƷƭ Ǟŷźĭŷ ğƩĻ ĭƚƓƭźķĻƩĻķ Ʒƚ ĬĻ ğƓ źƓķźƩĻĭƷ ĬĻƓĻŅźƷ Ʒƚ LƩǝźƓŭ hźƌ \[Ʒķ͵ ğƓķ LƩǝźƓŭ tğƦĻƩ ΛCƌǒƒĻΜ ŷğǝĻ ƓƚƷ ĬĻĻƓ ŅǒƌƌǤ źƓĭƌǒķĻķ źƓ ЋЉЋЊ͵ ƚ ƒğźƓƷğźƓ ĭƚƓƭźƭƷĻƓĭǤ ǞźƷŷ ƷŷĻ /źƷǤΏǞźķĻ ƦƚƷğĬƌĻ ƭǤƭƷĻƒͲ ƷŷĻƭĻ ĭƚƓƷƩźĬǒƷźƚƓƭ ŷğǝĻ ĬĻĻƓ ƦŷğƭĻķΏźƓ͵ Λğ͵Μ LƓ ЋЉЋЊͲ ƚŅ ƷŷĻ ƷƚƷğƌ źƓķźƩĻĭƷ ğƭƭĻƷ ƒğƓğŭĻƒĻƓƷ ƦƩƚǝźƭźƚƓ ƩĻƨǒźƩĻķͲ ƚƓƌǤ ЋЉі ƚŅ ƷŷĻ źƓķźƩĻĭƷ ğƭƭĻƷ ƒğƓğŭĻƒĻƓƷ ĭƚƓƷƩźĬǒƷźƚƓƭ źƭ źƓĭƌǒķĻķ źƓ ƷŷĻ LƩǝźƓŭ hźƌ \[Ʒķ͵ ğƓķ LƩǝźƓŭ tğƦĻƩ ĭğƌĭǒƌğƷźƚƓ ƚŅ ƩğǞ ǞğƷĻƩ ƩğƷĻƭ͵ Rate Stabilization Contribution Incorporates annual contributions to a rate stabilization reserve fund to offset future unanticipated operating budget variances (set equal to 2 months operational expenditures). Calculated Rates The full cost analysis reveals that: The required east raw water user rate revenue in 2021 is forecast based upon expenditures of approximately $2.95 million ($2.690M + $256k). This is the revenue that must be collected through the sale of raw water to fully recover operating costs, debt servicing costs, capital asset replacement costs and rate stabilization contributions of the East Saint John Industrial Water System assets. Of this total, the costs have been further allocated to both IOL and Irving Paper customers on a range of factors. The Table 4 below provides the net funding requirement and the calculated utility rates for both customers under the proposed rate structure. The rate structure for the east industrial users contains two components: 1) Consumption Charge levied relative to the amount of raw water consumed and is intended to fund all expenses except for the rate stabilization contribution (which is funded from the fixed charge). 2) Fixed Charge levied independently of usage and set to generate revenues equal to the annual rate stabilization contribution. - 6 - Table 4. Calculation of 2021 Raw Water Rates Description Irving Oil Irving Paper 1. Operating Costs East Watershed Mgmt Industrial $86,537 $34,082 East Transmission (IND) $675,687 $50,000 East Customer Metering $29,179 $29,179 Subtotal Operating Costs $791,403 $113,261 2. Fiscal Services (Debt) $1,566,211 $72,762 3. Asset Management Allocation $201,342 $49,737 4. Rate Stabilization Contribution $131,901 $10,543 5. Total Costs (1+2+3+4 = 5) $2,690,856 $246,303 3 6. Annual Consumption (m) 9,400,000 3,040,000 7. Calculated Rates 3 a) Consumption Charge ($/m) $0.2722 $0.0611 $21,983 b) Fixed Charge (bi-monthly) $3,424 b) New Fixed Charge (bi-monthly) $8,333 New connection only Calculated Rates for 2021 compared to Rates for 2020 The table below illustrates the difference between the newly calculated raw water consumption based rates for both Irving Paper and Irving Oil Limited compared to the raw water rates calculated in 2020 for these Customers. A bi-monthly fixed charge is levied in addition to the consumption charges noted below, however, the fixed fee represents less than 5% of the total cost recovery. Customer Current 2020 raw Calculated 2021 raw Difference water by-law rate water by-law rate 33 $/m $/m % 33 Irving Oil Ltd. $0.2637/m $0.2722/m 3.22 % 33 Irving Paper $0.0445/m $0.0611/m 37.30% The table above shows the newly calculated raw water consumption based rates for Irving Paper increased compared to the raw water rates calculated in 2020. The two main reasons for the increase are: 1) Consumption charge has increased as a result of additional debt allocated to Irving Paper not captured in the previous rate calculations (related to additional recently completed projects in 2019/2020: Robertson Lake Dam, Latimer Lake Main Dam and South Dam). 2) There is a new fixed bi-monthly charge rate included to recover $50,000 in costs the City will incur to initiate preliminary design costs for a new connection for Irving Paper. This fixed fee would only be initiated if the work is requested by the customer - Irving Paper. - 7 - Irving Pulp and Paper and NB Power (Coleson Cove) -Raw Water Rate Analysis The City of Saint John supplies Irving Pulp and Paper (IPP) and NB Power customers from the Spruce Lake and the Musquash watersheds in the west utilizing two dedicated water transmission systems isolated from the potable distribution system. The water transmission feed from Spruce Lake to NB Power is referred to as the Coleson Cove System and consists of an intake, screen building, and transmission main supplying industrial water to Coleson Cove. The second major industrial customer in the west is IPP. The water transmission feed from the Spruce Lake system consists of an intake pipe, screen building and a transmission main to the clear well at the IPP Mill. The infrastructure for both IPP and NB Power is shown in a map in Appendix 2. The Musquash system supplements the Spruce Lake/Ludgate Lake watershed by pumping and it is situated on the East Branch of the Musquash. It is interconnected to Menzies Lake by a transmission main. The lakes are defined by two earth dams and two concrete structures to maintain a water level. Consumption Allocations Of the total 39.3 million cubic metres associated with the two west industrial water users, IPP represents 98.8% of total water billed with the remaining 1.2% associated to NB Power as shown in Table 5 and these allocations have been used for IPP and NB Power. Table 5. Summary of Average West Water 33 Source Water Volume (m) Share of Water Billed (m) Irving Pulp and Paper 38,800,000 98.8% Coleson Cove 480,000 1.2% Total West Industrial 39,280,000 100% Operating Expenditures Operation and maintenance costs are comprised of three key components: 1. West Watershed Management Industrial: includes costs of operating, maintenance and protection of the watershed. 2. Transmission: includes the operation and maintenance costs of Musquash pumping and transmission as well as screening to provide raw water to both IPP and NB Power. 3. West Customer Metering: includes the operation and maintenance of customer meters for the west industrial customers. A share of the above noted costs have been allocated to customers for recovery. Debt Allocations Annual infrastructure debt payments that benefit industrial customers have been incorporated and allocated to each user on consumption basis. - 8 - Asset Management and Capital from Operating Contributions Asset management contributions have been incorporated into the calculation of West Saint John Industrial raw water rates. The report identifies a replacement value of $89.1 million for the West Saint John Industrial Water System Assets. Table 6 shows the required asset management annual provisions to maintain the West Saint John Industrial Water System in a state of good repair is $585,599 per year. Of this amount, $89,046 per year is required to maintain the assets providing raw water to NB Power while a further $144,183 per year is needed for the assets providing water to IPP. The remaining $352,369 is for the shared assets between IPP and NB Power and are allocated based on consumption allocations of 98.8% and 1.2% respectively. Note the Spruce Lake water transmission main actual replacement cost has been adjusted to reflect an amount of $10M to allow for ongoing inspections and maintenance but not the full asset replacement due to t a new means of cooling the mill (Saint John River/Bay of Fundy) or alternatively IPP would be solely responsible for the full cost of the Spruce Lake water transmission main renewal if that option were preferred at that time. Table 6 West SJ Industrial Water System Asset Replacement Value and Required Annual Provision Customer Assets Replacement Annual Value Provision NB Power $10,167,605 $ 89,046 Coleson Cove 1500mm (Coleson Cove) Transmission Intake Coleson Cove Screen Building Coleson Cove 600mm Transmission Main Irving Pulp and $15,792,006 $144,183 Spruce Lake Transmission Main Paper Spruce Lake Intake (1800mm) Spruce Lake Screen Building $28,798,125 $352,369 Musquash Pumping Station IPP and NB Transmission Main From Musquash Power Combined Menzies Lake Dams Benefit Spruce Lake Dam $54,757,736 $585,599 Total Adjusted $34,372,334 $0 Spruce Lake Transmission Spruce Lake Main (Remaining Cost) Transmission Main $89,130,070 $585,599 Total bƚƷĻʹ ŷĻ ğƭƭĻƷ ƩĻƦƌğĭĻƒĻƓƷ ǝğƌǒĻ źƭ ĬğƭĻķ ƚƓ ƷŷĻ ĻƭƷ {ğźƓƷ WƚŷƓ LƓķǒƭƷƩźğƌ wğǞ ğƷĻƩ wğƷĻ wĻƦƚƩƷͲ bƚǝĻƒĬĻƩ ЋЉЊВ ğƓķ ğķƆǒƭƷĻķ ŅƚƩ źƓŅƌğƷźƚƓ ΛЋіΜ Rate Stabilization Contribution As noted earlier, the rate stabilization contribution incorporates an annual amount to stabilize rates by offsetting unanticipated operating budget variances. (set equal to 2 months operational expenditures). Calculated Rates The full cost analysis reveals that: - 9 - The required west raw water user rate revenue in 2021 is forecast based upon expenditures of just over $3.034 million ($2.842M + $193k from Table 7). This is the revenue that must be collected through the sale of raw water to fully recover operating costs, debt servicing costs, capital asset replacement costs (with exception of Spruce Lake water transmission main) and rate stabilization contributions of the West Saint John Industrial Water System assets. Of this total, the costs have been further allocated to both IPP and NB Power customers. The table below provides the net funding requirement and the calculated utility rates for both west industrial customers under the proposed rate structure. The rate structure for the west industrial users contains two components: 1) Consumption Charge levied relative to the amount of raw water consumed and is intended to fund all expenses except for the rate stabilization contribution (which is funded from the fixed charge). 2) Fixed Charge levied independently of water usage and set to generate revenues equal to the annual rate stabilization contribution. Table 7. Calculation of 2021 Raw Water Rates Description Irving Pulp and Paper NB Power (Coleson Cove) 1. Operating Costs West Watershed Mgmt. Industrial $457,849 $5,664 West Transmission (IND) $1,066,602 $13,195 West Customer Metering $28,863 $28,863 Subtotal Operating Costs $1,553,314 $47,722 2. Fiscal Services (Debt) $311,377 $2,002 3(a). Asset Management $492,246 $93,352 3(b). Capital from Operating - Musquash $225,994 $2,796 3(c). Capital from Operating water line $0 $38,948 4. Rate Stabilization Contribution $258,886 $7,954 5. Total Costs (1+2+3 = 4) $2,841,817 $194,848 3 6. Annual Consumption (m) 38,800,000 480,000 7. Calculated Rates: 3 a) Consumption Charge ($/m) $0.0666 $0.3850 b) Fixed Charge (bi-monthly) $43,148 $1,326 Calculated Rates for 2021 compared to Rates for 2020 The table below illustrates the difference between the newly calculated raw water consumption based rates for both Irving Pulp and Paper and NB Power compared to the raw water rates calculated in 2020 for these Customers. A bi-monthly fixed charge would continue to be levied in addition to the consumption charges noted below, however, the fixed fee represents less than 10% of the total cost recovery - 10 - Customer Current 2020 raw Calculated 2021 raw Difference water by-law rate water by-law rate 33 $/m $/m % 33 Irving Pulp and Paper $0.0672/m $0.0666/m -0.89% 33 NB Power $0.2492/m $0.3850/m 54.49% The table above shows the newly calculated raw water consumption based rates for NB Power increases compared to the raw water rates calculated in 2020. The two main reasons for the increases are: 1) Capital work immediately required will occur over the next two construction seasons on the 24-inch raw water transmission main that supplies Coleson Cove with raw industrial water. 2) Reduction in billable consumption in 2020 for NB Power. For the 2021 raw water industrial rate calculation, a three year (including 2020) water usage was utilized to calculate the 2021 rate. SERVICE AND FINANCIAL OUTCOMES See 2021 Industrial Water Budget INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input was received from Finance and Water Staff as well as Hemson Consulting. ATTACHMENTS 1. Appendix 1 and 2 2. East and West Industrial Raw Water Rate Presentation 1 | Rates November 17, 2020 Finance Committee Meeting East & West Saint John Industrial Water 2021 2 Background Industrial Water Rates Full separation of the potable and industrial water supply was achieved with the completion of the Safe, Clean Drinking Water Project. Generating Station East Saint John on the 3 West Saint John Industrial Water Paper System & Irving Consulting Ltd. completed a raw water rate Oil Ltd. Pulp & Paper and the NB Power Hemson Irving Industrial Water Irving (Coleson Cove) on the System Background Industrial Water Rates In 2019 analysis for:1.2. . & Paper Paper Power 4 law for each of the following: - Industrial Raw Water Rate specific to Irving Oil LtdIndustrial Raw Water Rate specific to Irving East East West Industrial Raw Water Rate specific to Irving Pulp West Industrial Raw Water Rate specific to NB For 2020, Industrial raw water rates were set by Common Council via by 1.2.3.4. Background Industrial Water Rates 5 law rates set by Common Council. - replacement/asset management, law rates include the following: - to asset Operational Cost to provide the service,Contributions Rate stabilization reserves,New debt associated with the industrial system delivering the service, andPrevious debt associated with being a member of the water distribution system. Background Industrial Water Rates In 2020, industrial raw water customers were billed the full cost of providing raw water via byIndustrial Raw Water By1.2.3.4.5. customers consumption on based 6 repair in good infrastructure identified to benefit industrial of only benefit each industrial system (and customer) are assets allocated to each user based on consumption which have been allocated to each user debt payments hare of assets Costs have been Incorporates annual contributions to a rate stabilization reserve fund (2 months operational expenditures)annual Debt costs Recovery of west industrial renewal costs over 10 years (related to the Musquash Pumping Station and related infrastructure) Required to maintain Sincorporated into the calculations Full recovery of operating costsFiscal Services (debt): recovery of annual capital needs Provision for future asset replacement Rate Setting Approach 1.2.3. Rates calculated based on industry best practices: 34,082 49,737 $3,424$8,333 $$50,000 $29,179$72,762 $$10,543 $0.0611 $113,261$246,303 3,040,000 Irving Paper $86,537675,687 $29,179131,901 791,403$21,983 $0.2722 $$$201,342$ 9,400,000 2,690,856 Irving Oil $1,566,211 $ Raw Water Rates 7 2021 ) 3 ) 3 5) monthly) new connection only Calculation of ($/m = - monthly) - 1+2+3+4 Rates: Cost Recovery Rates Watershed Mgmt IndustrialTransmission (IND)Customer Metering East East East Description1. Operating CostsSubtotal Operating Costs2. Fiscal Services (Debt)3. Asset Management Allocation4. Rate Stabilization Contribution5. Total Costs (6. Annual Consumption (m7. Calculated a) Consumption Chargeb) Fixed Charge (bic) New Fixed Charge (bi Summary of East Industrial Costs: Full 2,002 $5,664 93,352$2,796 $1,326 $7,954 $ $13,195 $28,863 $$38,948 $0.3850 480,000 $47,722 $135,096$194,848 Power NB $0 457,849$28,863 225,994 $43,148 $0.0666 311,377 $$492,246$ $$258,886 $718,240 1,066,602 1,553,314 $ 38,800,000 $$2,841,817 IPP 8 ) ) 3 3 5) MusquashWater line -- = Calculation of 2021 Raw Water Rates ($/m from Operating monthly) - 1+2+3+4 Rates: Man./Capital Cost Recovery Rates West Watershed Mgmt IndustrialWest Transmission (IND)West Customer MeteringAsset Management Capital from Operating Capital from Operating Description1. Operating CostsSubtotal Operating Costs2. Fiscal Services (Debt)3. Asset Subtotal 4. Rate Stabilization Reserve 5. Total Costs (6. Annual Consumption (m7. Calculated a) Consumption Charge b) Fixed Charge (bi Summary of West Industrial Costs: Full law law - - 3 3 raw water by rate $0.0611/m rate $0.2722/m Calculated 2021 raw water by Calculated 2021 9 law law -- 3 3 rate $0.2637/mrate $0.0445/m Current 2020 raw water byCurrent 2020 raw water by Irving Oil Ltd. Irving Paper (Flume) Calculated Rates for 2021 compared to 2020 Rates East Industrial System East main factors: set by Common two 2020 Rates 10 monthly charge rate included to recover - increase for this customer is charge has increased as a result of additional debt The 2020. newly calculated raw water consumption based rates for Irving Consumption allocated to Irving Paper not captured in the previous rate calculations (related to additional recently completed projects in 2019/2020: Robertson Lake Dam, Latimer Lake Main Dam and South Dam.There is a new fixed bi$50,000 in costs the City would only incur to initiate preliminary design costs for a new connection for Irving Paper. This fixed fee would only be initiated if required and agreed upon with Irving Paper. The Paper increases compared to the raw water rates Council in 1.2. Calculated Rates for 2021 compared to Industrial System law law - - 3 3 $0.3850/m $0.0666/m 2020 Rates 2020 rate rate Calculated 2021 raw water by Calculated 2021 raw water by 11 law law - - 3 3 $0.0672/m $0.2492/m rate Industrial System rate Current 2020 raw water by Current 2020 raw water by Irving Pulp & PaperNB Power West Calculated Rates for 2021 compared to West two to Cove with raw 2020 Rates utilized Coleson 12 immediately required will occur over the : construction seasons on the 24 inch raw water work newly calculated raw water consumption based rates for Capital next two transmission main that supplies industrial water. Reduction in billable consumption in 2020 for NB Power. For the 2021 raw water industrial rate calculation, a three year (including 2020) water usage was calculate the 2021 rate. The NB Power increases compared to the raw water rates calculated in 2020. The increase for this customer is main factors1.2. Calculated Rates for 2021 compared to Industrial System 13 . amendments law - by is recommended that the Finance Committee Recommendations It approve the 2021 Industrial Raw Water Budgets as presented and submit with the 2021 Utility Fund Operating Budget to Common Council at its next meeting for approval and first and second reading of the FINANCECOMMITTEEREPORT Report Date November 06, 2020 Meeting Date November 17, 2020 His Worship Mayor Darling and Members of Common Council SUBJECT: Ernst & Young Operational Review: City of Saint John Implementation Plan OPEN OR CLOSED SESSION This matter is to be discussed in open session of Common Council. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Stephanie Rackley-Roach Kevin Fudge John Collin RECOMMENDATION It is recommended that the Finance Committee receive and file the Ernst & Young Operational Review: City of Saint John Implementation Plan (attached presentation). EXECUTIVE SUMMARY Ernst & Young (EY) was commissioned by the Province of New Brunswick to complete an operational audit to support the City of Saint John in addressing our financial challenges. Working with City staff, EY developed business cases to review current operations, identify challenges and areas for improvement, and to better understand the sustainability initiatives underway. This review of City operations resulted in 75 recommendations for the City to consider. Many of recommendation were informed by the sustainability efforts already underway by the City. Sixty (60) percent of these recommendations have been either completed or well underway. ecommendations and related business cases, to understand the context, have been evaluated by each service area to determine what actions the City will take. These actions have been prioritized and incorporated into a five year (2020-2024) implementation plan. The implementation plan is outlined in the attached presentation. PREVIOUS RESOLUTION RESOLVED that as recommended by the City Manager Common Council approve the Ernst & Young Operational Audit as follows: Endorse the Operational Audit completed by Ernst & Young in partnership with the Province of New Brunswick (Department of Environment and Local Government); and Direct the City Manager to develop a five (5) year implementation plan based on the recommendations outlined in the Ernst & Young Operational Audit. STRATEGIC ALIGNMENT priority of being fiscally responsible. The implementation plan has a strong focus on performance management to advance a culture of continuous improvement, a critical success factor to achieving sustainability objectives in the long-term. REPORT The Province of New Brunswick (Department of Environment and Local Government) partnered with the City of Saint John to initiate an operational review. Ernst & Young (EY) was engaged to complete the operational review with a goal of identifying opportunities for cost optimization, revenue diversification, and debt reduction. EY met with operational managers and senior leadership team to review current operations, identify challenges and areas for improvement, and to understand current sustainability initiatives being developed or implemented. A high-level benchmarking exercise was undertaken to identify opportunities for further investigation to advance sustainability objectives. EY completed the operational review over a four month period between November 2019 and March 2020. Since being released to the public in the spring, EY presented their findings and recommendations to Common Council July 20, 2020. Throughout the review process and the resulting report on-going sustainability efforts. More specifically, EY noted in the report that /źƷǤ ƒğƓğŭĻƒĻƓƷ ŷğƭ ƷğƉĻƓ ǒƩŭĻƓƷ ƒĻğƭǒƩĻƭ Ʒƚ ğƓğƌǤǩĻ ĭƚƭƷƭͲ źƒƦƩƚǝĻ ŅźƓğƓĭźğƌ ƦƚƌźĭźĻƭ ğƓķ źƒƦƌĻƒĻƓƷ ĭƚƭƷ ƩĻķǒĭƷźƚƓ ğƓķ ƦƩƚĭĻƭƭ źƒƦƩƚǝĻƒĻƓƷ źƓźƷźğƷźǝĻƭ źƓ ƒğƓǤ ğƩĻğƭ. In outlining their recommendations, EY noted that ƷŷĻ /źƷǤ ŷğƭ ğƌƩĻğķǤ ĻƒĬğƩƉĻķ ƚƓ ƭĻǝĻƩğƌ ƚŅ ƷŷĻƭĻ ƚƦƦƚƩƷǒƓźƷźĻƭ. It was also acknowledged in the report that ƷŷĻƩĻ źƭ ğ ĭƩźƷźĭğƌ ğǞğƩĻƓĻƭƭ ĬǤ ƒğƓğŭĻƒĻƓƷ ƷŷğƷ ĬğƩƩźĻƩƭ Ʒƚ ĭŷğƓŭĻ ƓĻĻķ Ʒƚ ĬĻ ğķķƩĻƭƭĻķ. - 3 - detail to identify and evaluate findings and recommendations to develop a five year implementation plan. Within the report, EY outlined seventy-five (75) recommendations that will support the City in addressing our financial challenges. While many of the recommendations relate to service delivery, inclusive (ABCs), EY presented a number of recommendations that will enable sustainability and transformational change in the long-term. Many of recommendations were informed by sustainability work the City was already undertaking as part of implementing three-pronged sustainability plan endorsed by Council May 4, 2020. Of the recommendations in the EY report, the City has already completed or started implementation approximately 60% or 46 of them. In evaluating the report, the senior leadership team noted 18 recommendations required more due diligence in terms of information gathering and analysis to determine how to best proceed. For a number of these recommendations, planning and analysis is underway. Alternative approaches to achieving sustainability or no further actions have been outlined for 11 of recommendations. The senior leadership team prioritized all planned City actions to address EY recommendations over five years (2020 through 2024). The implementation plan is organized into short, medium, and long-term intervals. The objective is to achieve planned deliverables for each recommendation within a specified time interval. The exception to the noted timelines are the sustainability enabling recommendations presented by EY. Supporting transformational change and advancing a culture of continuous improvement requires sustained efforts that will continue over the next five years and beyond. All of the EY recommendations, City planned actions, and timelines are outlined in the attached presentation. The City is committed to completing the actions outlined in the implementation plan. derations detailed below. Analysis that accurately quantifies the value of the opportunities Community support for the opportunities (e.g., sale, service changes) Requirement to retain land, building, and other assets to cost-effectively deliver service recommended for divestiture Sustainable revenue (i.e., sale of assets is a one-time revenue) What is not entirely considerations, stakeholder support) The implementation plan is high-level. Detailed plans are required to realize the sustainability benefits of the recommendations presented by EY. Ensuring accountability for results, reports on progress will be presented to both - 4 - the Finance Committee (bi-annual) and Common Council (annual). Progress reports will include clear deliverable(s), progress and/or work completed, impact on sustainability, and any required adjustments to the plan due to resource SERVICE AND FINANCIAL OUTCOMES The recommendations outlined in the attached implementation plan are -level estimates on the value of their recommendations based on debt reduction ($8,380-$9,880), cost optimization ($12,400-$17,800 annualized), and revenue ($5,300-$9,400 annualized). More detailed analysis is required to determine the potential financial benefits proposed by EY. Final financial impact will be quantified as recommendations are implemented and savings and revenue are realized. A key outcome of continuing sustainability enabling recommendations is a focus on performance management, ensuring decisions are evidence-based. Continued efforts to advance a culture of continuous improvement will support long-term financial sustainability. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Development of the of EY recommendations in the operational review has been a collaborative effort among all service areas. The Senior Leadership Team, including the Saint John Police Force, provided input into the development of the implementation plan. Service area department heads finalized the implementation plan. ATTACHMENTS Presentation - Ernst & Young Operational Review: City of Saint John Implementation Plan Finance Committee November 17, 2020 Ernst & Young Operational Review: City of Saint John Implementation Plan and five (5) year the recommendations of New Brunswick (Department develop a the Province the Operational Audit completed by Ernst & Young in the City Manager to EY Operational Audit: CSJ Implementation Plan Endorse partnership with of Environment and Local Government); Direct implementation plan based on outlined in the Ernst & Young Operational Audit. 2 Council Resolution of May 4, 2020 •• .” Page 6 term financial , implemented and process drive, with the support of cost reduction many opportunities ” Page 11 . continue to management has taken urgent measures City has already embarked on several of . Their planning has allowed them to make “City to analyze costs, improve financial policies and implement improvement initiatives in many areas“Significant efforts and commitment toproactively respond to this serious challenge are already underway by the City.” Page 7“The these opportunities as noted. The City has identified significant changes to their financial principles and policies and developed a long plan great strides towards sustainability that they should Council going - Implementation Plan CSJ owards Sustainability T Operational Audit: EY recognition of the City’s on 3 Progress EYprogress towards sustainability: 11 Alternative Further Action Approach / No 18 Planned Diligence / Further Due 46 Underway Complete / Recommendations & City Actions EY Implementation Plan EY 75 CSJ owards Sustainability T Recommendations 0 80604020 Operational Audit: EY 4 Progress Advance regional collaboration and service delivery opportunitiesExplore revenue generation opportunities Strengthen governance and reporting related to the City’s ABCs and external agencies (grants)Align strategic plans and policiesUse change management to support a culture of sustainability and continuous improvement ••••• size and divest properties - EY Operational Audit: CSJ Implementation Plan Focus on efficient operations through data analysis, shared services, staffing to demand, and optimizing equipmentRightand assets (including fleet)Focus on strategic procurement and improving processesIncrease flexibility in collective agreementsInvest in infrastructure 5 Summary of Findings••••• EY Operational Audit: CSJ Implementation Plan City should focus on a mix of large transformational projects and small incremental changes in order to change the culture of the organizationBenchmarking exercise should evaluate service levels, performance metrics, and/or municipal characteristics and be used as a guide in conducting further analysis Saint John Water surplus potential must align with priorities to address critical infrastructure rather than a dividend to the general fund 6 Further Context on Findings ••• ServicesServices Growth & Community Fire and Police Effort ServicesServices Utilities & Infrastructure Transportation Public Works & Collaborative ServicesServices Strategic Legislated EY Operational Audit: CSJ Implementation Plan Review of findings and recommendationsIdentification of actions already taken by the CityPrioritization of future actions over five years 7 Preparing the Implementation Plan••• Term - Term 20212024 Term - -- - 2022 Long 20202023 Short Medium time revenue) - Analysis that accurately quantifies the value of the opportunity Community support for the opportunity (e.g., sale, service changes)Need to retain land, building and other assets recommended for divestitureSustainable revenue (i.e., sale of assets is a oneWhat is not entirely within the City’s control (e.g., legislation, labour considerations, stakeholder support) Managing Expectations Ability to deliver on City planned actions must consider:••••• 2020 to 2021 Term Implementation Plan - EY Operational Audit: CSJ Implementation Plan Short 9 of the 2021) - committee in place Regular updatesSteeringSustainability initiative withSustainability initiative with Continuous improvement ––– – – law amendment and implementationlaw amendment and implementation; - - Plan (2020 City Actions Underway approved Long Term Financial Plan Underway and working through planning process Complete project and further efficiencies to align with Moncton, Fredericton Underway by Underway byadditional fees to be considered - Explore cost recovery Impose fees for re Manage duplication with Adjust financial plan to align as Develop a strategic plan Recommendation EY Planning: part of its sustainability plan Planning: Medical Calls: paramedic services Cost Recovery: opportunities (e.g., fire prevention, vehicle collisions, false alarms, nuisance) Cost Recovery: inspections to increase fire prevention enforcement capabilities Term Implementation - EY Operational Audit: CSJ Implementation Plan 10 Short Report Section ExecutiveSummaryExecutiveSummaryFireFire Fire ) by 2021 - going work between communication and going as opportunities - - OnNew model approved On 2020 (i.e., –– – Plan ( City Actions Complete arise as agreed to in the collective agreementtraining roles recently civilianized)Underway various stakeholders to establish a structure that will facilitate the City receiving revenue from Saint John Energy Underway Common Council July 20, 2020 (in addition to other municipalities); working on transition with the recruitment of a new CEO Accelerate Increase civilianization in Recommendation EY Civilianization: existing roles Optimize the asset and pay a dividend to the City in the range of 50 to 60 percent of net income Regionalization: implementation of a new approach to regional economic development through an innovative framework Term Implementation - EY Operational Audit: CSJ Implementation Plan 11 Short Report Section Police Saint John EnergyEconomic Development to 2021) the new NB - workforce as per efforts to promote ExpandPositions established Reviewing Reduced ––– – City Actions Underway sale of surplus lands including the City’s property match application on the website; other actions being considered Complete new collective agreement Underway through organization restructure; plandevelop processes Underway Procurement Act and updating the City’s policies Plan (2020 to Adoption of Implement spending authorities Reduce workforce and tape reduction: - Recommendation EY Consider a system for the public to proactively make offers for the sale of vacant city lands Workforce: adjust span of control (Local 18)Contract Management: best practices to reduce value leakage Red improvements to create efficiencies EY Operational Audit: CSJ Implementation Plan 12 Short Term Implementation Report Section Municipal LandsSaint John Water ProcurementProcurement 2021 - 2021) In the process Revisit and –– - ilot project ready for PApproved as part of the – – evaluate if there is an Due Diligence electing an independent consultant City Actions Underway implementation March 2021; expansion in 2022 based on pilot project results Underway sustainability plan; ready for implementation winter 2020 Further of swith fire service expertise who will complete the assessment Further Due Diligence better understand reasons for Council rejection;alternative plan Plan (2020 size - Balance day Modernize Recommendation EY Solid Waste Management: the City's Solid Waste Service through public engagement and pilot project Winter Road Maintenance: and night shifts to reduce overtime and other related costs Infrastructure & Rationalizations: Perform independent assessment of fire services to further examine the rightof fire services Review opportunities to revisit land previously presented to Council and rejected for sale EY Operational Audit: CSJ Implementation Plan Works 13 Short Term Implementation Report Section Public& Recreation Public Works & Recreation FireMunicipal Lands 2022 Term Implementation Plan - EY Operational Audit: CSJ Implementation Plan Medium 14 ) underway for light working to divest (2022 Contributions being made Actively – – Develop service level agreements Plan – City Actions Underway into a reserve since 2018 for heavy equipment; planningequipment Plan to oversee fleet and facilities Underway properties (excluding some buildings controlled and managed by commissions) that align with growth objectives; completed more than 30 building condition assessments (BCAs) on municipal facilities divest and shared services Consider Consider creating a reserve Term Implementation Recommendation - EY Fire Fleet:for fleet replacement as part of the operations budget Civilianization: for positions overseeing fleet and facilitiesExplore opportunities toperform operational assessment to create efficiencies on 19 potential buildings EY Operational Audit: CSJ Implementation Plan 15 Medium Report Section FirePolice Municipal Buildings of ) of service area to ERP will allow for drill ) project started; software Continue assessmentUpdate procurement policy;Transition ERP pay – –– Software - – to - rocure City Actions Underway City land as to highest/best use and prioritize opportunities linked to growth Underway pwill improve internal controls and create efficiencies (Underway Category Management to conduct detailed spend analysis Planned down analysis and more sophisticated reporting capabilities ( and SJW Adoption of Conduct Automate ) TCO Term Implementation Plan (2022) Recommendation - EY City coordinate to identify opportunities \[for land sale\] starting with Recreation Contract Management: invoice validation process Reduction of payment vouchers: Streamline process and increase control Category Management: category management and strategic sourcing principles to reduce Total Cost of Ownership (Category Management: detailed spend analysis to calculate the baseline to apply savings EY Operational Audit: CSJ Implementation Plan 16 Medium Report Section Municipal LandsProcurementProcurementProcurement is purpose - Sustainability initiative in Sustainability initiative in Exploration of options – –– City Actions Underway progress to implement for light trucks and heavy equipment Underway progress is focused on retaining fleet longer to offset rentals Underway complete and implementation is in progress with some multiequipment already in service purpose utilization of - types Term Implementation Plan (2022) Recommendation - EY Expand and enhance fleet pooling system into other departments and vehicleDetermine the optimal number of vehicles required for casual employees over the summer season and alternatives to renting from external providerReview multiequipment (e.g., roll on/roll off vehicles, hitch lift systems, multi attachment) EY Operational Audit: CSJ Implementation Plan 17 Medium Report Section FleetFleetFleet to location and overall - Sustainability initiativeAddressed as part of the –– Analyze necessary capital negotiations, pursue legislation – erformance management framework, City Actions Planned investments for cobusiness case for moving forward Underway continuechanges, and/or consolidate within City Underway pgrant policy, and contract managementprogram being developed Relocate / consolidate Term Implementation Plan (2022) Recommendation - EY Fleet Facility: similar fleet components with the transit garageRemove, consolidate, and renegotiate terms and funding requirements for various ABCs under the City’s umbrella.Accountability framework should be implemented for all contributions for recreation and community partnerships as well as alignment with the City's capacity to contribute EY Operational Audit: CSJ Implementation Plan 18 Medium Report Section FleetABCsABCs to data AVL Dependent on Dependent on –– call dispatch based work tasks and - Continue to use Focus on core service with – – City Actions Underway improve routeidentify opportunities for efficiencies; part of performance management framework Further Due Diligence outcomes of third party review; subject to labour considerations Underway changes in medical Further Due Diligence outcomes of third party review; subject to labour considerations Complete analysis of routes Implement a flexible staffing Implement a priority dispatch Term Implementation Plan (2022) Recommendation - EY Efficiencies:to assess and identify opportunities for efficiencies and cost savings Staffing: model and revise mandatory staffing levels Staffing: model to triage service calls and ensure Fire is allocating the right resources to incidents based on priority and severity EY Operational Audit: CSJ Implementation Plan 19 Medium Report Section Public Works & RecreationFireFire 2023 to 2024 Term Implementation Plan - EY Operational Audit: CSJ Implementation Plan Long 20 for 2024) - going analysis to - ubject to labour OnS –– City Actions Underway determine needs; longer term strategy;capital planning investmentimplementation; support from IT Underway considerations and lieu - Implement Modify shift timings to save intime; moving to an 11 hour shiftcreate capacityImprove rostering and scheduling to avoid overtime Eliminate 2.5% shift differential Recommendation EY Improve Technology: technology to improve records management and reduce duplication of work Shift Scheduling: ••• Term Implementation Plan (2023 - EY Operational Audit: CSJ Implementation Plan 21 Long Report Section PolicePolice win - City 15 in each of - - 2024) Building discussions with - and energy cost of GHG Continue Action Plan developed to Create full shared services – – Review team composition and Commence years) –– City Actions Underway further reduce 30% by 2025;Condition Assessments (10the next 3 Underway plan upon completion of ABC review Planned opportunities to expand Triprocurement opportunities Planned regional utilities to explore winopportunities Plan (2023 to manage all ABCs Implement a shared Develop more efficient Deliver water service to other standard specifications) Investigate other mechanisms city procurement (e.g., combine - Recommendation EY Efficiencies: operations and utilization of municipal buildings through operational assessments Shared Services: service model acrossspend portfolio effectively Savings: for trivolumes,Revenue: municipalities Term Implementation - EY Operational Audit: CSJ Implementation Plan John 22 Long Report Section Municipal Buildings Procurement ProcurementSaintWater and 2024) party audit) - rd labour relations Plan being developed to ) data (3 – consider Make use of enhanced – AVL City Actions Underway transition to colocation and shared resources; Planned performance measurement data (as part of the performance management framework), leverage Automatic Vehicle Locator (other mobile technologies to drive productivity improvements Plan (2023 measures Complete a productivity Consolidate \[City fleet\] with Recommendation EY Fleet: transit where possible to enhance utilization Resourcing: analysis after foreman restructuring and implement productivity Term Implementation - EY Operational Audit: CSJ Implementation Plan 23 Long Report Section FleetPublic Works & Recreation equires reform Examine Consider within R 2024) ––– - City Actions Further Due Diligence opportunities for regional response partnerships; fire service review may provide input Further Due Diligence third party review; subject to labour considerations Further Due Diligence of the Police Act to enable collaboration; some current integration (e.g., Integrated Crime Unit); subject to labour considerations Plan (2023 Reduce PNB Explore Increase collaboration or other police forces in NB for regional fire response ) RCMP Recommendation MOUs EY Regional Response: Memorandum of Understandings(Fire Prevention/Investigation: spend through implementation of wages and benefits that align with Collaboration: with to eliminate duplication of services Term Implementation - EY Operational Audit: CSJ Implementation Plan 24 Long Report Section FireFire Police cities to - Exploratory Needs further Understand 2024) ––– ; seeking funding - benefit analysis - Cost with other policing ; subject to labour – Due Diligence City Actions Further discussionsjurisdiction as all forces have their own standard equipment; currently using City procurement where applicable Further Due Diligence explorationconsiderations Underway completed; current focus is on critical infrastructure renewalopportunities Further Due Diligence benefits of Provincial model and continue working with tridetermine alignment of needs Plan (2023 law - by , MVA Conduct joint Increase civilianization in Increase purchasing Explore alternative metering Recommendation EY Standardize Procurement: procurement with other forces Civilianization: low risk policing roles (e.g., enforcement)Metering: solution Procurement: power of fleet by collaborating with the provincial government Term Implementation - EY Operational Audit: CSJ Implementation Plan 25 Long Report Section Police PoliceSaint John Water Fleet Other Actions and Decisions EY Operational Audit: CSJ Implementation Plan 26 over – in Development of Change term actions - –– ; long recommendations and medical calls reduced by Sustainability: A Three Part EY focused on both large projects and City Actions Alternative Approach a five year implementation plan as it relates to implement Plan incremental changes Alternative Approach response criteria requires additional evaluation; 68%; (2,932 in 2019 / 946 in 2020 the same period)dependent on outcome of independent review a rapid Implement Recommendation EY City and the Council are encouraged to prioritize a limited number of larger transformational changes rather than seeking to implement a large number of small changes Medical Calls:response vehicle for medical calls with reduced staffing EY Operational Audit: CSJ Implementation Plan 27 Other Actions and Decisions Report Section ExecutiveSummaryFire 2022 - initiative May Implementation – that will consider Council voted – EY term actions dependent on Approach - City Actions Alternative of reductions to address 2021deficit; longoutcome of independent review recommended by the risk profile of the community, standards, and City’s financial policies No Further Action against this sustainability4, 2020 – Reduce the number of Recommendation EY Staffing: permanent positions by 24 to 40 combination of changes in staff resourcing, closure of station, elimination of equipment Enable the City to sell the asset and invest in capital or pay down debt EY Operational Audit: CSJ Implementation Plan 28 Other Actions and Decisions Report Section FireSaint John Energy the requires establishing John valuating Council E –– Legislation – City Actions Alternative Approach approved focusing on SaintEnergy’s growth agenda and a structure that will flow revenue toCity No Further Action that the Utility operate on a full cost recover model Alternative Approach staffing requirements with recent changes and other approaches to staffing to demand; subject to labour considerations off staff - Manage staffing levels Expand revenue generation Recommendation EY Raise rates to be consistent with NB Power and potentially reduce property tax Revenue: activities and contribute to the general fund Resourcing:through a call in bases, layingwhen the work is not there to justify the current staffing levels EY Operational Audit: CSJ Implementation Plan 29 Other Actions and Decisions Report Section Saint John EnergySaint John Water Public Works & Recreation ReductionChanges to job –– reduced the number of City Actions Alternative Approach implemented as a sustainability initiative; monitor impact of permanent and casual reductions on service levels Alternative Approach descriptions as per the collective agreement;foremen in the workforce; focus on training and performance measurement - role of in union - Reduce casual workforce by Remove foreman and sub foreman - Recommendation EY Resourcing: 25% over the next two years while still maintaining service levels Staffing: foreman from the collective bargaining unit and replace with nonsuperintendents with changesub EY Operational Audit: CSJ Implementation Plan 30 Other Actions and Decisions Report Section Public Works & Recreation Public Works & Recreation EY Operational Audit: CSJ Implementation Plan 31 Sustainability Enablers Term - goinggoing -- OnOn Short Timeframe and Working with Province Negotiate to mandateContinue planning practice ––– City Actions Underway will continue to do so UnderwayUnderway - pay clause - to - WorkConsider entering Examine the landscape, term agreement, if - EY Operational Audit: CSJ Implementation Plan Recommendation 32 Labour Relations EY Binding Arbitration: collaboratively with the Province to codevelop changes Binding Arbitration: into a shorterneeded, to avoid an abilitynot being legislated (short term)Examination of the Labour Relations Environment: considering both a SWOT and a PEST analysis to support each negotiation Term - going - On Short Timeframe Continue process and Continue and strengthen –– City Actions Underway finalize 10 year labour relations strategy Underway process Develop a Inventory and EY Operational Audit: CSJ Implementation Plan Recommendation 33 Labour Relations EY Negotiation Approach: comprehensive labour relations strategy including the Identification of all constraining and limiting, or risk inherent articles in the collective agreements Negotiation Approach: pull together significant arbitration decisions that have impacted collective agreements not only in New Brunswick but in multiple jurisdictions going NA - On Timeframe with approach teams Continue with Continue with –– effective - experience and Approach City Actions Alternative current process and build required skills,competencies; ensure training is provided as required Alternative Approach current strategy to engage legal counsel as required; cost EY Operational Audit: CSJ Implementation Plan Recommendation 34 Labour Relations EY Strengthening the Bargaining Team: Conduct an independent evaluation of the negotiating teams to critically assess and understand skill gaps to improve bench strength, transfer critical knowledge or enhance negotiating strategies, and bolster the team Strengthening the Bargaining Team: Include a labour lawyer on their negotiating team Until complete Timeframe Continue with current – City Actions Underway advocacy efforts current state Prepare a EY Operational Audit: CSJ Implementation Plan Recommendation 35 Tax Reform EY Advocacy: assessment of all the key issues and the contributing factors that inhibit city growth and economic prosperity for government’s consideration Term - Complete Long Timeframe art of the Workforce as p 2021: - Addressed New Outside – – City Actions Complete Collective Agreement reduces number of positions by 43; monitor for potential further reductions Underway ABC review Work Plan Priority for 2020 agencies\] Implementation Plan CSJ view) and implementation with a focus on continuous improvement Operational Audit: EY Recommendation Enhance the City’s current corporate performance management framework (holistic 36 Performance Management & Accountability EY Significantly reduce the minimum number requirement in the collective agreementRigorous reporting and performance indicators should be implemented to ensure that the City is allocating funds towards mandates \[externalthat align with City priorities Term - Short Timeframe Complete strategic plan and – City Actions Underway assess structure to ensure objectives and efficiencies can be achieved EY Operational Audit: CSJ Implementation Plan Recommendation 37 Governance & Structure EY Align organizational structure and governance to support the strategic plan and prioritized sustainability initiatives to enhance governance and create efficiencies Term Term Term - -- Mid Mid Short Timeframe Consider Continue to – – Working with the new – Due Diligence City Actions Underway Board, support the wind down of the existing agencies and the stand up of the new organization for 2021. Facilitate approval of municipal funding agreements for the new agency by end of 2020 Further Due Diligence outcomes of other initiatives and internal capacity to determine advocacy plan Further explore opportunities and determine capacity based on restructure EY Operational Audit: CSJ Implementation Plan Recommendation 38 Regional Collaboration EY Continue the path set to establish a single regional economic development entity for the broader CMA and approved by Council July 2020Engage with the province to foster regional collaboration for specific servicesExplore other regional opportunities with neighbouring communities; namely, fire, waste, water treatment and police services goinggoing -- OnOn Timeframe cultural training: - Policy development: driving Implement leadership -- City Actions Underway accountability and raising performance expectations; crosscoaching and mentoring programs; part of performance management framework Underway development program; Champion culture change at every level of the organization: Encourage innovation: EY Operational Audit: CSJ Implementation Plan Recommendation 39 Culture EY Include culture and change management as a foundational part of the transformational plan; identify the behaviours that currently impede the City’s sustainability path and identify those it wants to permeate the organization to support change and a culture of continuous improvementAdopt leadership training and a roadmap to shift culture to successfully execute on the sustainability plan ommittee on the C Clear deliverable(s)Work completedImpact on sustainability Adjustments to plan EY Operational Audit: CSJ Implementation Plan annual report on progress to Finance - –––– Biimplementation plan inclusive of: Annual report on progress to Council 40 Measuring Results •• EY Operational Audit: CSJ Implementation Plan It is recommended that the Finance Committee receive and file. 41 Recommendation Finance Committee November 17, 2020 Ernst & Young Operational Review: City of Saint John Implementation Plan FINANCE COMMITTEE REPORT Report Date November 06, 2020 Meeting Date November 17, 2020 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: Convenience Fees for Credit Cards 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 Colllin RECOMMENDATION It is recommended that Finance Committee approve the implementation of convenience fee of no more than 1.75% for use of credit cards for both online and telephone payments for parking tickets and water and sewerage bills that would be effective January 1, 2021 and receive and file this report. EXECUTIVE SUMMARY The City has finished upgrading its telephone and online payment system for water and sewerage. The company, Paymentus, has been providing online service for parking tickets since July 2019 for the City. The Finance Committee had previously approved the implementation of a convenience fee, however due to the issues surrounding a data breach and integration of a different payment option, the fee implementation was delayed. The purpose of the report is to advise Finance Committee that the fee will be st implemented effective January 1, 2021 and a communication strategy will be rolled out well in advance of the convenience fee. PREVIOUS RESOLUTION Finance Committee Novemeber 29, 2017 It is recommended that Finance Committee more than 1.75% for use of credit cards for both online and telephone payments - 2 - STRATEGIC ALIGNMENT The recommendation aligns with Councils priority of fiscal responsibility and continuous improvement. REPORT The City of Saint John finished upgrading its online water and sewerage payment rd provider using a 3 party provider, Paymentus. The upgrade not only allowed the City to add online water and sewer payments but also telephone payments. Both services were previously done through Service NB. The City has been using Paymentus for its online parking ticket payments since July 2019, about six months after a data breach. as; Visa, MasterCard and Amex. The average cost per transaction ranges from 1.2% to 1.8% of the transaction. s merchant fees paid in 2019 for all payments with credit cards paid in person telephone and online were approximately $180,000. These payments are for parking tickets, building permits and deposits, water and sewerage payments, recreation rentals, police back ground checks, as well as other services. The annual merchant fees and service charges for accepting credit cards for online and telephone transactions are approximately $75,000. The majority of these fees are related to water and sewerage payments ($70K Water, $5K General Fund). These costs for water and sewerage payments by credit card online and telephone are born by all ratepayers; therefore ratepayers who are not paying with credit cards are subsidizing the ratepayers who are paying with credit cards. Staff undertook an analysis of other Municipalities, Universities and Utilities that would fall under the same guidelines for charging a convenience fee and results are listed below. Credit Cards Credit Cards Service Fee for Accepted In Person Accepted Online Online Credit Card Payments Saint John Energy N Y Y NB Power Y N Y NS Power (Emera) Y Y Y Service NB (Property Y Y Y Tax) Halifax Regional Y Y Y Municipality Town of Truro Y Y Y University of NB Y Y Y Dalhousie University Y N N Mount Allison Y N N University - 3 - As the chart points out, there are several different institutions that have a variety of options. It is clear that the cost of accepting credit cards should not be absorbed by all rate payers, tax payers or university students. There are a variety of other payment methods that do not have a significant cost. Therefor customers choosing to use credit cards should pay for this service. It is also very important to note that the City offers a variety of payment options that have no costs, such as paying online through a bank, payment by cheque or paying in person by debit card or cash. SERVICE AND FINANCIAL OUTCOMES The convenience fee will reduce merchant fee expenses for the City an estimated $75,000 annually. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Staff has investigated several other Municipalities, Universities, and Utilities. provider Chase Payment were also engaged. ATTACHMENTS N/A