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2017-01-30 Finance Committee Agenda Packet - Open SessionCity of Saint John Finance Committee - Open Session AGENDA Monday, January 30, 2017 4:30 pm 8th Floor Boardroom, City Hall 1. Call to Order Pages 1.1 Approval of Minutes 1.1.1 Minutes of November 17, 2016 1 -3 1.1.2 Minutes of December 8, 2016 4 - 5 1.2 Asset Management Update 6-24 1.3 Long -Term Financial Planning 25-46 1.4 Continuous Improvement Update 47-62 1.5 Water and Sewerage Accounts Receivables Update -December 2016 63-64 1 Poeta Sy:1 rIN. m MINUTES - OPEN SESSION FINANCE COMMITTEE MEETING NOVEMBER 17, 2016 AT 4:30 PM Stn FLOOR BOARDROOM, CITY HALL Present: Mayor D. Darling Councillor D. Merrithew Councillor D. Reardon Councillor G. Sullivan Councillor G. Norton Councillor S. Casey Also Present: City Manager J. Trail Commissioner of Finance and Treasurer K. Fudge Comptroller C. Graham Senior Manager Financial Planning H. Nguyen Commissioner of Transportation & Environment Services M. Hugenholtz Commissioner Saint John Water B. McGovern Commissioner Growth and Community Development J. Hamilton Deputy Fire Chief J. Armstrong Administrative Officer R. Nichol Assistant Comptroller Finance C. Lavigne Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. Moved by Councillor Reardon, seconded by Councillor Norton: RESOLVED that the agenda for the open session meeting of the Finance Committee be approved. MOTION CARRIED. 1.1 Approval of Minutes — November 8, 2016 Moved by Mayor Darling, seconded by Councillor Reardon: RESOLVED that the minutes of November 8, 2016 be approved. MOTION CARRIED. 1.2 Service Audit Plan presented by Deloitte (Mr. J. Cochrane and Mr. J. Maillais entered the meeting) approach and the scope of the audit for 2016. The audit is conducted on the consolidated statements in accordance with public sector accounting standards. Mr. Cochrane asked that if anyone is aware of any fraudulent activity, to bring it forward to the auditors. Responding to a comment regarding the utilization of one firm for all audits in order to reduce costs and drive efficiencies, Mr. Fudge commented that the competitive bidding process comes into play as well as the fact that the ABCs have the autonomy to choose their own auditors. The possibility of seeking voluntary compliance with the ABCs and tendering the audit process as a single package was discussed. Moved by Councillor Reardon, seconded by Mayor Darling: RESOLVED that the submitted report by Deloitte LLP entitled, "2016 Audit Service Plan", be received for information. (Mr. Cochrane and Mr. Maillais withdrew from the meeting) 1.3 2nd Draft General Operating Budget to Finance Committee (Recommend the 2nd Draft Budget to Council for Information on November 28th) Mr. Fudge provided an overview of the operating budget and responded to questions. The provincial tax information is not yet available but staff is recommending that the budget be sent to Council for review at the next Council meeting. This will be Council's first formal opportunity to review the material and provide feedback. The budget is a 0.96% increase over the 2016 budget and the 9th straight budget without a property tax rate increase. It consists of flat revenue growth and expenditure cuts to goods and services. The budget was framed in context to Council's priorities. The budget includes $12,519,000 in revenue which is an increase of 9Y2% over the 2016 budget primarily due to building permit revenue. Salaries and benefits account for approximately 58% of the overall budget. (Councillor Casey entered the meeting) Mr. Trail, responding to a comment, stated that there has been considerable scrutiny put into the budget. All service areas were challenged on their 2017 budget submissions. Referring to service levels, Mr. Fudge commented that moving from a one year budget projection to a five year outlook and long-term financial planning will help facilitate discussions of service levels and assist in dealing with some of the systemic issues. Ms. Nguyen noted that the budget does not include potential increases in salaries for Mayor and council members. The Hay Consulting Group is expected to address Council in open session on November 28tH Responding to a comment regarding the procurement process, Mr. Trail stated that there is a process underway with Saint John, Moncton and Fredericton to identify common areas and a review of contracts and vendors to identify opportunities for savings. Moved by Councillor Sullivan, seconded by Councillor Reardon: RESOLVED that the Finance Committee recommend the 2017 General Operating Budget be referred to Common Council at the meeting of November 28, 2016 with a recommendation to receive for information. MOTION CARRIED. Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the request from the Imperial Theatre, referred by Council on September 6th, be added to the agenda as item 1.4.3. MOTION CARRIED. 1.4 Grant Reauests Moved by Councillor Norton, seconded by Councillor Reardon: RESOLVED that the requests from the Saint John Community Arts Board, Ellipsis Productions, and Imperial Theatre be referred to the Community Grants Evaluation Committee. It was noted that the Arts and Cultural board is currently being recommended for $35,000 in funding in the operating budget, outside of the budget for grants. The mover and seconder agreed to withdraw the original motion in order to consider this request at the Finance committee level. Moved by Councillor Sullivan, seconded by Councillor Reardon: RESOLVED that the requests from Ellipsis Productions and the Imperial Theatre be referred to the Community Grants Evaluation committee for consideration. MA relffeWN Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the Finance Committee recommends that the allotment given to the Saint John Community Arts Board be increased from $35,000 to the requested $70,000 and that staff be directed to recommend an offsetting adjustment in the operating budget. AR •► 1.5 Capital Budget Referring to the capital budget, Mr. Fudge noted that adjustments were made to the deferred list as a result of feedback from Council. Moved by Councillor Reardon, seconded by Mayor Darling: RESOLVED that the Finance Committee approve the 2017 General Fund Capital Budget and recommend for approval at the November 28th Council meeting. MOTION CARRIED with Councillor Sullivan voting nay. 1.6 Pavment in Lieu of Tax (PIL Ms. Graham commented on the PILT program. The City receives funding from the federal government for the property it owns within the municipality, based on the property tax rate. The federal government has its own assessors but the assessed value is in the vincinty of 99% of the value assessed by SNB. Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the verbal update regarding Payment in Lieu of Tax (PILT), be received for information. MOTION CARRIED. Adjournment Moved by Councillor Sullivan, seconded by Councillor Reardon: RESOLVED that the Finance Committee open session meeting held on Thursday, November 17, 2016 be adjourned. MOTION CARRIED. The Finance Committee meeting held on November 17, 2016 was adjourned at 6:50 p.m. rIN. m MINUTES - OPEN SESSION FINANCE COMMITTEE MEETING DECEMBER 8, 2016 AT 4:30 PM Stn FLOOR BOARDROOM, CITY HALL Present: Mayor D. Darling Councillor D. Merrithew Councillor D. Reardon Councillor G. Sullivan Councillor G. Norton Councillor S. Casey Also Present: City Manager J. Trail Deputy City Manager N. Jacobsen Commissioner of Finance and Treasurer K. Fudge Comptroller C. Graham Senior Manager Financial Planning H. Nguyen Commissioner of Transportation & Environment Services M. Hugenholtz Commissioner Saint John Water B. McGovern Commissioner Growth and Community Development J. Hamilton City Solicitor J. Nugent Fire Chief K. Clifford Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. Moved by Councillor Reardon, seconded by Mayor Darling: RESOLVED that the agenda for the open session meeting of the Finance Committee be approved. MOTION CARRIED. 1.1 2016 Year End Forecast for the General and Utilitv Operating Funds Mr. Fudge stated that as of October 31, 2016 there is a projected surplus for the general operating fund and the utility operating fund. There is a high degree of variability in many of the surplus areas which are vulnerable to unforeseen events, unknown risks, and inclement weather. Mr. Fudge commented on the sustainability of the surpluses, mitigation strategies and variability with respect to long term fiscal stability. Projections could change prior to year end depending on weather or other unforeseen events. The forecasted surplus in the general operating fund is approximately $2.9M which represents a budget variance of 1.9%. There are risks in the budget including stagnant growth, variability of interest rates, significant debt of long term financial health and sustainability, there is need for more revenue from the City's own sources and growth in the tax base. The grant is not a guaranteed revenue source for the City of Saint John. Mr. Fudge commented on the "Reserve Fund Regulation" which allows a municipality, by resolution of Council, to contribute to a general operating reserve for operating expenses, the amount of which cannot exceed 5% of the total operating budget. The reserve is managed by Council and used to mitigate unexpected fluctuations in the budget. Staff is recommending that of the $2.9M projected surplus, that an operating reserve be established of $2M. Moved by Councillor Reardon, seconded by Councillor Sullivan: RESOLVED that the Finance Committee recommend to Common Council that it establish a General Operating Reserve Fund and authorize the transfer of $2M from the projected General Operating Fund surpluses to the Reserve Fund. MA relffeWN Ms. Graham reviewed the submitted presentation entitled, "2016 Year End Projections Saint John Water". As of October 31St, there is a projected surplus of approximately $808,000. A surplus associated to fiscal charges accounts for approximately $700,000 of the overall projected surplus. The surplus is not sustainable and can be negatively impacted by increased interest rates, increased debt balances, infrastructure deficits, unforeseen weather events and consumption by industrial commercial users. Ms. Graham noted that there is a reserve in place for the safe clean drinking water project to help offset the upcoming substantial completion payment. The City can only fund a portion of that through other government sources and over $40M will be required in borrowing, even after an estimated $18M in the reserve fund is accounted for. Commenting on the Reserve Fund Regulation, Ms. Graham explained that Saint John Water is not restricted by the 5% of budget rule that can be put into the reserve. Staff is recommending that $500,000 of the approximately $800,000 projected surplus, be allocated to a reserve fund, in addition to the $2.3M that is in the 2016 utility operating budget. 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O O O O O OLn O O O0 2 O 2 +-j N 2 v O +-+ O L O }' O N U N Ur. I a FINANCE COMMITTEE REPORT Report Date January 17, 2017 Meeting Date January 30, 2017 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: Water and Sewerage Accounts Receivables — December 2016 OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. HeadCity Manager Cathy Graham Kevin Fudge Jeff Trail RECOMMENDATION It is recommended that this report be received and filed. EXECUTIVE SUMMARY The purpose of this report is to provide the Finance Committee with the aged accounts receivable balances for Saint John Water meter and flat rate customers as of December 31St PREVIOUS RESOLUTION At the Finance Committee meeting of November 8t" 2016, the Water and Sewerage Accounts Receivable as of October 31St 2016 was received for information. STRATEGIC ALIGNMENT This report aligns with being fiscally responsible by reporting to the Finance Committee the aging of receivables for Saint John Water accounts in a timely manner. It allows Finance to report on the management of the collection efforts, that money is being received in a timely fashion and provides an opportunity to provide the Finance Committee updated performance metrics. W -2 - REPORT As of December 31St, 2016, Water and Sewerage account receivable balances were as follows: Current: $16,989 Over 30: $489,835 Over 60: $1,953,145 Over 180: $1,325,360 Total: $3,785,329 • Meter rate billing totaling $2,268,290 was billed November 21St with a due date of December 23rd • Flat rate billing totaling $9,885,317 was billed on August 31St, with a due date of October 5th • Of this balance, there are currently $1,177,496 in pending payments for 4,845 customer accounts that are set up on pre authorized payments plans. This represents 31% of the outstanding balance. • Of this balance, there are currently 523 accounts that have a negotiated payment plan for a total of $291,852. • Accounts with balance over 180 days represent 3.02% of the 2016 operating budget ($43,947,000). • Account Receivable Balance for December 31St, 2016 is approximately 441K less than it was December 31St, 2015. SERVICE AND FINANCIAL OUTCOMES N/A INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS N/A ATTACHMENTS N/A AElI