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2016-12-08 Finance Committee Minutes Open SessionFinance Committee Meeting Open Session December 8, 2016 MINUTES - OPEN SESSION FINANCE COMMITTEE MEETING DECEMBER 8, 2016 AT 4:30 PM 8t" 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 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. LTA [00417►[4L1:k]k]11191 1.1 2016 Year End Forecast for the General and Utility 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 balance, infrastructure challenges and risk related to the unconditional grant. The unconditional grant increased by $300,000 this year, which means that the City is more reliant on the grant than before. A Finance Committee Meeting Open Session December 8, 2016 reduction in this grant would significantly impact the City's ability to fund its current services. In terms 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. MOTION CARRIED. 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. Moved by Councillor Reardon, seconded by Mayor Darling: RESOLVED that the Finance Committee recommend to Common Council that $500,000 of the projected surplus be transferred to the Safe Clean Drinking Water reserve fund in 2016, in addition to the $2,355,000 approved in the 2016 Utility Operating Budget. MOTION CARRIED. Adjournment Moved by Councillor Norton, seconded by Councillor Sullivan: RESOLVED that the Finance Committee open session meeting held on Thursday, December 8, 2016 be adjourned. The Finance Committee meeting held on December 8, 2016 was adjourned at 6:05 p.m.