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2020-08-13 Finance Committee Minutes - Open SessionFinance Committee Meeting Open Session August 13, 2020 MINUTES — OPEN SESSION FINANCE COMMITTEE MEETING AUGUST 13, 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 ManagerJ. Collin Commissioner of Finance and Treasurer K. Fudge City SolicitorJ. Nugent Commissioner Growth & Community Development J. Hamilton Senior Financial Manager C. Lavigne Commissioner Saint John Water B. McGovern Commissioner Transportation & Environment M. Hugenholtz Director Corporate Performance S. Rackley-Roach Senior Financial Manager D. Arbour Senior Financial ManagerT. Fawcett Director of Strategic Affairs I. Fogan Deputy Fire Chief M. Carr General Manager SJ Transit & Parking M. Dionne Energy Manager S. Yammine Administrative Officer R. Evans Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. 2. Consent Agenda 2.1 2021 Utility Fund Operating Budget Timelines Moved by Mayor Darling, seconded by Councillor Reardon: RESOLVED that the submitted report "2021 Utility Fund Operating Budget Timelines" be received for information. MOTION CARRIED. 3. Business Items 3.1 SJ Energy — BurchiII Wind Project Finance Committee Meeting Open Session August 13, 2020 (Mr. Robinson, Mr. Mitchell, Mr. Garrett, and Mr. Brown entered the meeting electronically) Mr. Robinson stated that Saint John Energy is requesting endorsement of the Burchill Wind Project. SJE's Board of Commissioners has provided unanimous support for the project. The project will derive value for Saint John Energy and its customers, the City and its residents, and the province as a whole. SJE is pursuing a growth strategy to ensure customers continue to reap the benefits of low rates, high reliability, high customer satisfaction as well as a commitment to innovation. Referring to the submitted presentation, Mr. Mitchell provided an overview of the project. Key highlights include: ➢ Favourable economics related to wind energy. $4M in annual savings are projected. ➢ The Burchill Wind project will be located in the Spruce Lake Industrial park. ➢ SJE's role in the project is to build, own and operate the distribution system; the wind farm will be built, owned and operated by Natural Forces. ➢ Investment will be approximately $15M for SJE and $60M for Natural Forces. ➢ SJE will buy the energy and Natural Energy will supply the energy. This is enabled in legislation. ➢ SJE will protect low rates for customers. A portion of the benefits will be reinvested to ensure that SJE continues to provide reliable service. ➢ SJE is willing to contribute to a dividend that would flow to the City (its owner), if enabled in legislation by the provincial government. It is not clear if this is permitted undercurrent legislation. ➢ Significant regional economic benefits associated with this project, including tax revenues and land royalties; over 100 jobs will be created during construction and approximately five full time jobs over the life of the project. ➢ Natural Forces plans to introduce local ownership potential by leveraging a community economic development corporation. ➢ Significant environmental benefits, which will supply up to 15% of energy requirements from a local, renewable source. The Burchill infrastructure investment is foundational and can lend itself towards future renewable energy development. ➢ The agreement ensures that the price is fixed for 25 years with a five-year extension and a renewal option at the end of the term. A construction performance security will be in place in which SJE would be compensated for every day the project extends beyond 2022. There are also penalties if the windfarm does not produce to a minimum level. This provides assurances that SJE will realize the expected benefits. Mr. Fudge stated that he has reviewed Saint John Energy's business case and financial projections, verifying that it is positive and assumptions are reasonable with respect to dividend and bottom line projections. Saint John Energy is requesting that the City support financing this project through the issuance of a ten year debenture. That application will be brought to Council in September with a recommendation to approve. Moved by Councillor Sullivan, seconded by Councillor Casey: RESOLVED that: 1. The Finance Committee endorse the Burchill Wind project; 2. The Finance Committee recommend Common Council approve the debenture application respecting Saint John Energy projects; 3. The Finance Committee recommend Common Council direct staff to enter into a debt repayment agreement with Saint John Energy to repay the City for any principal and interest payments on debentures associated with Saint John Energy projects in addition to an administration fee; 4. The Finance Committee recommend Common Council direct staff of the City of Saint John and Saint John Energy to bring forth a Dividend Agreement that reflects the flow of dividends from the growth agenda; 2 Finance Committee Meeting Open Session August 13, 2020 5. The Finance Committee recommend Common Council request the Province of New Brunswick to make necessary legislative changes to allow the City of Saint John to obtain a dividend from Saint John Energy. (Mr. Robinson, Mr. Mitchell, Mr. Garrett and Mr. Brown withdrew from the meeting) 3.3 Climate Change Adaptation Plan (Mr. Yammine, Mr. Stewart -Robinson, Ms. Brogan and Ms. McDonald joined the meeting electronically) Mr. Yammine stated that ACAP Saint John has developed a Climate Change Adaptation Plan ("AdaptSJ") forthe City. The Plan identifies gaps in legislation and planning in orderto take action toward new policy measures; assesses risks and vulnerabilities including infrastructure, residents and businesses, natural environments, coastlines, and vulnerable populations; creates and maintains resources with information on adaptation; engages and educates the community; and recommends adaptation actions to increase resiliency. Project findings will be included in revised editions of the Municipal Plan and will influence the future growth and development of City neighborhoods. Mr. Stewart -Robinson reviewed the submitted presentation. There are unique environmental, social and economic characteristics in the City that provides challenges but also great opportunity to create adaptations and create a resilient, sustainable and financially strong community. Moved by Mayor Darling, seconded by Councillor Reardon: RESOLVED that the Finance Committee approve the following 1. Adopt the climate change adaptation plan as presented by ACAP Saint John; 2. Develop a climate change committee to oversee implementation of the climate change adaptation plan; and, 3. Incorporate the Climate Change Adaptation Plan into the next iteration of the Municipal Plan or during the next comprehensive review. MOTION CARRIED. (Mr. Yammine, Mr. Stewart -Robinson, Ms. Brogan and Ms. McDonald withdrew from the meeting) 3.2 2021 Draft General Operating Budget Mr. Fudge stated that the 2021 Draft General Operating budget is a multi -year effort to address a $10M structural deficit and positions the City for future success. It is a reset of the organization to achieve the goals outlined in the long-term financial plan and is structurally balanced. The budget reduces the City's reliance on debt and supports the reduction of debt. The tax rate remains the same, with no short-term financial assistance from the province. The budget is flexible enough to absorb minor adjustments to the assumptions in the model. Assumptions include a 1.5% tax base growth and that the unconditional grant remains stable. It includes savings of $6M in workforce adjustments and $4M through sustainability initiatives. It includes continued investment in reserves to reduce the risk of unforeseen events and funding to the operating reserve with respect to uncertainty of potential COVID-19 pressures in 2021. Mr. Collin noted that an additional risk, beyond tax base growth and the unconditional grant, is the necessity of continued implementation of sustainability initiatives and continuous improvement initiatives. Moved by Councillor Reardon, seconded by Councillor Casey: 3 Finance Committee Meeting Open Session August 13, 2020 RESOLVED that the Finance Committee approve the 2021 Draft General Fund Budget as presented and submit to the next meeting of Common Council for receive and file. MOTION CARRIED. 3.4 Saint John Transit Deficit (P. Ellsworth Chair of SJ Transit Commission and General Manager M. Dionne joined the meeting electronically) Mr. Fudge commented on Saint John Transit's year-to-date deficit and projections to the end of 2020 due to COVID-19 related impacts. Cost mitigation measures have been implemented through staff layoffs and a reduction of service hours. Even with these measures, a deficit of over $500K is projected by year-end. SJ Transit was directed to provide a plan to reduce the additional deficit by a minimum of 50% and the impact of reducing that deficit. The Saint John Transit Commission is requesting additional time to complete its operational audit and determine appropriate mitigation measures. Mr. Dionne asked for time to review the recommendations from the transit evaluation report, to strategically align cost -saving efforts with the advice from experts. The report will be completed this month. Mr. Fudge discussed the risks of delaying the implementation of further mitigation measures. Key discussion points include: ➢ There is a short window of opportunity to implement changes to result in a $250K cost reduction. ➢ Uncertainty in terms of COVID-19 and if the deficit could increase further. ➢ "Safe Restart Program" for transit services - It could offer relief to transit systems but does not currently address loss of revenue as an eligible item. ➢ The operational audit addresses restructuring to implement a new business model; this is different from a short-term mitigation strategy to suppress COVID-19 financial impacts. ➢ A potential $1M impact to the City exists if the if $500K deficit is not addressed due to restrictions in the short-term provincial funding. ➢ The City permitted SJ Transit to retain a $250K reserve due to a surplus. There is potential opportunity to address $250K of this deficit with this reserve. Mr. Collin suggested that the Transit Commission be afforded the time requested with reaffirmation that it must reduce the overall additional deficit to a maximum of $250K. The motion does not prescribe how these measures are achieved; use of the reserve could be considered. Moved by Councillor Reardon, seconded by Mayor Darling: RESOLVED that that the Finance Committee support the request of the Transit Commission to present their deficit reduction measures at the September Finance Committee meeting; and that Finance Committee reaffirm that the Transit Commission must reduce their overall additional deficit to a maximum of $250K. LTA [41104I►[4L1ilk] k]11191 Adjournment The Finance Committee open session meeting held on August 13, 2020 was adjourned at 6:50 p.m. 4