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2022-03-23 Finance Committee Agenda Packet - Open Session�B City of Saint John Finance Committee - Open Session AGENDA Wednesday, March 23, 2022 4:45 pm 2nd Floor Common Council Chamber, City Hall 1. Call to Order Pages 1.1. Approval of Minutes - January 26, 2022 1 - 4 1.2. Integrated Bi-Lateral Agreement- Funding Application Capital Budget 5 - 11 1.3. Grant Policy 1.4. Internal Audit Health & Dental Recommendations 12-36 37 - 68 1.5. Intemal Audit 2022 Program 69 - 87 1.6. Transit Capital Funding Opportunity 88 - 90 1.7. Active Transportation Funding Opportunity 91 - 94 1.8. Request for adjustment to the 2022 Capital Program for Solid Waste Collection 95 - 99 Finance Committee Meeting Open Session January 26, 2022 MINUTES —OPEN SESSION FINANCE COMMITTEE MEETING JANUARY 26, 2022 AT 4:45 PM MEETING CONDUCTED THROUGH ELECTRONIC PARTICIPATION Present: Mayor D. Noade Reardon Councillor G. Sullivan Councillor P. Radwan Councillor G. Norton Councillor D. Hickey Also Present: City Manager J. Collin City Solicitor M. Tompkins Commissioner of Finance and Treasurer K. Fudge Commissioner Transportation & Environment M. Hugenholtz Commissioner Saint John Water B. McGovern Commissioner Growth & Community Services J. Hamilton Commissioner Human Resource S. Hossack Senior Financial Manager J. Forgie Senior Financial Manager C. Lavigne Director Transit and Fleet I. Fogan Manager Procurement C. Roberts Director Corporate Performance S. Rackley-Roach Manager Corporate Performance E. Hatfield IT Manager S. Ranson Operations Manager J. Mascarenhas City Clerk J. Taylor Fire Chief K. Clifford Director Saint John Water K. Mason Manager Procurement C. Roberts Mayor's Strategic Advisor K. Stevens Operations Manager K. Loughery Administrative Officer R. Evans Administrative Assistant K. Tibbits Finance Committee Meeting Open Session January 26, 2022 1. Meeting Called to Order Councillor Sullivan called the Finance Committee open session meeting to order. Moved by Councillor Hickey, seconded by Councillor Norton: RESOLVED that the agenda of January 26, 2022 be approved. MOTION CARRIED. 2. Approval of Minutes— November 24, 2021 Moved by Councillor Radwan, seconded by Mayor Noade Reardon: RESOLVED that the minutes of November 24, 2021 be approved. MOTION CARRIED. 3. Consent Agenda 3.1 Cyberattack - Restoration Costs and Recovery Estimate (Recommendation: Receive for Information) Ms. Rackley-Roach provided an update on the cost estimate regarding the cyberattack that occurred November 13, 2020. The city is on target with its estimate from March 2021. Costs are projected to be approximately 1.5% lower than the original estimate due to their ability to leverage internal talent and by leveraging maintenance and licensing agreements. It is estimated that 85% of the cost recovery will come from insurance. Moved by Councillor Radwan, seconded by Councillor Norton: RESOLVED that the report entitled Cyberattack — Restoration Costs and Recovery Estimate be received for information. MOTION CARRIED. 4. Business Matters 4.1 Fleet Relocation to Transit Business Case Mr. Fudge stated that the Capital Budget policy includes a framework which outlines how the city should prioritize capital spending. If a business case can demonstrate a positive financial impact for taxpayers, an adjustment to the capital budget can occur. After the approval of the 2022 capital budget a business case has been developed regarding fleet relocation to the transit building. An amendment to the 2022 capital budget of approximately $1.8M is recommended. The adjustment would be funded through the city's capital reserve. Mr. Hugenholtz reviewed the business case. It is proposed that the North depot services be transferred to the Rothesay Avenue facility, known as the "Barns", which currently houses part of the roadway maintenance service and the fleet services team. The fleet would then transfer to the Transit building which is currently under-utilized. The land that currently houses the North depot could be sold for development. The backbone of the financial plan is built on cost avoidance of future capital at the North depot as well as some revenue opportunity from the sale and redevelopment of that property. A $1.873M investment is required to enable a savings of over $2.9M over a 20-year period. Moved by Mayor Noade Reardon, seconded by Councillor Hickey Finance Committee Meeting Open Session January 26, 2022 RESOLVED that the Finance Committee recommend to Common Council to amend the 2022 Capital Budget to include $1.873 million investment from the Capital Reserve Fund to relocate the North Depot services to Rothesay Avenue and relocate Fleet Services to the Transit Building. MOTION CARRIED. 4.2 Performance Management Update Mr. Fudge stated that the performance management system will support the organization in developing measures to ensure that strategic goals are being met. The performance management system will deliver results and drive continuous improvement, while embedding performance management in service delivery. Ms. Rackley-Roach and Ms. Hatfield reviewed the submitted presentation and updated the progress made on the development of the performance management system, an overview of the framework for performance management and outlined the deliverables planned for 2022 and 2023. Mr. Collin noted that the City of Saint John currently does performance measurement, but every department is collecting its own data, using different methodologies in different departments. The goal is to have one methodology for the entire corporation and work towards continuous improvement that is already part of the culture. Moved by Councillor Radwan, seconded by Councillor Norton: RESOLVED that the Performance Management Update be received for information. MOTION CARRIED. 4.3 Procurement Update Mr. Fudge stated that a procurement policy is fundamental to ensure that the goods and services the City acquires are the result of a transparent, fair, unbiased, consistent, timely and cost- effective decision -making process that applies a risk -management lens. It regulates authority levels and limits, with internal controls over various forms of procurement such as tenders, requests for proposals, and appropriateness of sole source. Ms. Forgie, Senior Financial Manager, provided background context on the modernization of the policy and the path forward with respect to the milestones, legal requirements, recommendations from the operational audit, policy updates under consideration, areas requiring further research, and spending and signing authorities. Mr. Collin stated that the commitment to Council is to have the new procurement policy in place by the fourth quarter of 2022. Moved by Councillor Hickey, seconded by Mayor Noade Reardon: RESOLVED that the Procurement Update be received for information. ►� �•> t r �•� ► rya :� :� a. 4.4 Utility Fund Long Term Financial Plan Update Mr. McGovern stated that the utility has seen significant progress over recent years. It has separated industrial costs from potable water costs with industry paying by-law rates on potable water, seen the completion of the Safe Clean Drinking Water project, and stabilized water rates through a significant focus on cost reduction. This is the 4th consecutive year of stabilized rates, and the utility now has capital and operating reserves. Significant strides have been made to reduce debt by approximately 30% since its peak in 2017, despite the pressure of declining Finance Committee Meeting Open Session January 26, 2022 revenue. Although significant progress has been made to prepare the utility for the future, consideration must be taken with respect to the utility's large infrastructure deficit, universal metering, revenue opportunities, long-term affordability of rates, and the long-term sustainability of the utility. This will be the first 10-year financial plan for the utility. Mr. Lavigne reviewed the submitted report titled "Utility Fund Long Term Financial Plan Update — Kick Off." Moved by Mayor Noade Reardon, seconded by Councillor Hickey: RESOLVED that the Utility Fund Long Term Financial Plan Update be received for information. MOTION CARRIED. Adjournment Moved by Councillor Hickey, seconded by Mayor Noade Reardon: RESOLVED that the Finance Committee meeting be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on January 26, 2022, was adjourned at 6:30 p.m. -ter`_ II f{�, err I FINANCE COMMITTEE REPORT M&C No. Click here to enter text. Report Date March 18, 2022 Meeting Date March 23, 2022 Service Area Finance and Administrative Services Chairman Sullivan and Members of Finance Committee SUBJECT: Integrated Bilateral Fund AUTHORIZATION Primary Author Commissioner/Dept. He City Manager Brent McGovern/Kevin Fudge Brent McGovern/Kevin Fudge John Collin RECOMMENDATION It is recommended: 1. Finance Committee endorse the proposed application for Integrated Bilateral Agreement (IBA) funding opportunity, and 2. Direct Staff to bring back recommendations as part of the 2023 Capital Budget process. EXECUTIVE SUMMARY The allocation to Saint John under the Public Transit Infrastructure stream, based on ridership was $61.15 million. To date, Saint John has transferred and committed $24.8 million of these funds (see Exhibit A below). The remaining balance available to the City of Saint John under the Public Transit Infrastructure stream is $36.3 million. As per the agreement, the City can utilize these funds for Public Transit Infrastructure, or the City can request that any portion of the funds be transferred from the Public Transit Infrastructure stream to the Green Infrastructure stream to be utilized for projects eligible under this category. The federal funding opportunity is 40%. The Provincial funding participation is project -dependent. The Province has not provided matching funding to projects under the Public Transit Infrastructure stream. However, if the city chooses to transfer all or any portion of these funds to the Green Infrastructure stream, those projects may be eligible for 33.33% provincial funding. This would reduce the City's contribution to 26.67%, potentially making an additional $30,250,238.01 (Provincial share) available in funding from others. PREVIOUS RESOLUTION N/A 61 -2- REPORT In 2018, the Province of New Brunswick was allocated $679 million under the Integrated Bilateral Agreement (IBA) with the Federal Government. Of this, $116 million was provided for under the Public Transit infrastructure stream. The allocation to Saint John under the Public Transit Infrastructure stream, based on ridership was $61.15 million. To date, Saint John has transferred and committed $24.8 million of these funds (see Exhibit A below). The remaining balance available to the City of Saint John under the Public Transit Infrastructure stream is $36.3 million. As per the agreement, the City can utilize these funds for Public Transit Infrastructure, or the City can request that any portion of the funds be transferred from the Public Transit Infrastructure stream to the Green Infrastructure stream to be utilized for projects eligible under this category. The federal funding opportunity is 40%. The Provincial funding participation is project -dependent. The Province has not provided matching funding to projects under the Public Transit Infrastructure stream. However, if the City chooses to transfer all or any portion of these funds to the Green Infrastructure stream, those projects may be eligible for 33.33% provincial funding. This would reduce the City's contribution to 26.67%, thus potentially making an additional $30,250,238.01 (Provincial share) available in funding from others. Exhibit A City of Saint John IBA- Public Transit Infrastructure Allocation —c`? NB a ocat- on to PU13 -c —rans"t (per BA) $ 165,202.662 A ocat-on to protir-nc-a adm-n-strat-on (1.723.411) PUID -c —rans-t a ocat-on to rnun-c-ua -t-es 5 166,926.073 1 Sa-ntJohnR-dersh-p Saint John Pub -c —rans-t a ocat-on (37.4'.b) Less transfers requested by Sa'ntJohn: COV a a ocat-on (153Q 411971 - Storm sewer 2,220.054 $ 61.152.933 $ 9.269.650 15,579.422 (24,949.07 13a ante S 36.3: 5,= _6 The IBA expires March 31, 2028; however, all project construction must be complete by October 2027 and the deadline for federal approval is March 31, 2025 and therefore it is important that the City identify its funding priorities at this time. The Province must first review and approve all submissions prior to submitting to C.1 -3- Infrastructure Canada for their review and approval. This process can take anywhere between 6-12 months, depending on the complexity of the project. As a courtesy to the cities that have significant Public Transit funding available and for budget planning purposes, Regional Development Corporation (RDC) has reached out to the cities of Moncton, Saint John and Fredericton to understand what their plans are to use the available funding. Also, given that there is in excess of $100 million still available under the Public Transit Infrastructure stream, that no significant applications have been submitted for this funding, and that the deadline is looming, the federal government has started asking what the plans are for utilizing this balance. Green Infrastructure Stream If the balance of the funds within the IBA are transferred from the Public Transit Infrastructure stream to the Green Infrastructure stream to be used for projects eligible under this category it would mean the remaining $36,303,916 in the IBA — Public Transit Infrastructure fund would transition to a potential total investment opportunity of $90,759,790 when considering the Federal (40%), Provincial (33.33%) and Municipal (26.67%) contributions. The Green Infrastructure stream as a program focuses on investments through a climate lens and hence the projects put forward for consideration need to deliver green results which aligns very well with Council's new priority of Green that has a particular focus on Environmental Stewardship. In alignment with the Capital Budget Policy, staff have reviewed the Asset Management Plan needs from a risk and level of service perspective while also considering areas of the City that are seeing or are prone to see intensification through the build out of vacant lands and the outstanding infrastructure deficit. Staff have also assessed the eligibility criteria associated with the Green Infrastructure stream under this Agreement and any project put forth must meet at least one of the outcomes in the Green Infrastructure Outcomes listed below. Green Infrastructure Outcomes Climate Change Mitigation Outcomes: • Increased capacity to manage more renewable energy • Increased access to clean energy transportation • Increased energy efficiency of buildings • Increased generation of clean energy Adaptation, Resilience and Disaster Mitigation Outcomes: • Increased structural capacity and/or increased natural capacity to adapt to climate change impacts, natural disasters and/or extreme weather events Environmental Quality Outcomes: • Increased capacity to treat and/or manage wastewater and stormwater • Increased access to potable water • Increased capacity to reduce and/or remediate soil and/or air pollutants r� -4- Considering all the above, staff have arrived at a detailed list of projects that are in a table in the Appendix. Staff believe the proposed project list meet the eligibility criteria. At a higher level, the projects can be categorized into key areas as noted in the table below and as expanded upon below the table. Year Project Federal (40%) Provincial (33.33%) Municipal (26.67%) Total ($) 2023 District Energy - Master Planning & Feasibility Study $680,000 $ 566,610 $ 453,390 $ 1,700,000 2023 Fleet Transition to Electric - Sedans and SUVs $80,000 $ 66,660 $ 53,340 $ 200,000 2023 North End Combined Sewer Separation Strategy $200,000 $ 166,650 $ 133,350 $ 500,000 2023 Sewer Separation and Street Reconstruction $2,152,000 $ 1,793,154 $ 1,434,846 $ 5,380,000 2023 Renewal of Lift Stations $2,220,000 $ 1,849,815 $ 1,480,185 $ 5,550,000 2024 District Energy - Utility Development $560,000 $ 466,620 $ 373,380 $ 1,400,000 2024 Fleet Transition to Electric - Sedans and SUVs $64,000 $ 53,328 $ 42,672 $ 160,000 2024 Sewer Separation and Street Reconstruction $4,834,000 $ 4,027,931 $ 3,223,070 $ 12,085,000 2024 Renewal of Lift Stations $1,640,000 $ 1,366,530 $ 1,093,470 $ 4,100,000 2025 District Energy - Construction $4,125,249 $ 3,437,364 $ 2,750,510 $ 10,313,123 2025 Fleet Transition to Electric - Sedans and SUVs $112,000 $ 93,324 $ 74,676 $ 280,000 2025 Sewer Separation and Street Reconstruction $3,372,000 $ 2,809,719 $ 2,248,281 $ 8,430,000 2025 Renewal of Lift Stations $2,040,000 $ 1,699,830 $ 1,360,170 $ 5,100,000 2026 District Energy - Construction $4,053,333 $ 3,377,440 $ 2,702,560 $ 10,133,333 2026 Fleet Transition to Electric - Sedans and SUVs $48,000 $ 39,996 $ 32,004 $ 120,000 2026 Sewer Separation and Street Reconstruction $3,204,000 $ 2,669,733 $ 2,136,267 $ 8,010,000 2026 Renewal of Lift Stations $700,000 $ 583,275 $ 466,725 $ 1,750,000 2027 District Energy - Construction $4,053,333 $ 3,377,440 $ 2,702,560 $ 10,133,333 2027 Fleet Transition to Electric - Sedans and SUVs $96,000 $ 79,992 $ 64,008 $ 240,000 2027 Sewer Separation and Street Reconstruction $1,350,000 $ 1,124,888 $ 900,113 $ 3,375,000 2027 Renewal of Lift Stations $720,000 $ 599,940 $ 480,060 $ 1,800,000 Total $36,303,916 $ 30,250,238 $ 24,205,636 $ 90,759,790 E:3 -5- 1. District Energy System - The City of Saint John has declared a climate emergency and joined the Race to Zero. This latter initiative includes a commitment to reduce GHG emissions in line with a maximum 1.5 degrees Celsius increase in global temperatures. District energy was identified in the City of Saint John Community GHG & Energy Action Plan as the primary opportunity for income generation from local renewable energy and a significant means of impacting GHG emissions locally. To advance this initiative, a high-level conceptual budget that provides an overview of possible expenditures from 2023 to 2027 has been prepared. The project would begin with feasibility studies on both energy supply options and heat network/in-building. The study would be conducted in parallel with creation of a Saint John Buildings Database. For the current project, it is envisioned the database will be populated with Class B detailed information for 50-60 of the largest buildings in Uptown. These would be the anchor loads for a Saint John district energy system. This significant investment would allow for the build of a significant portion of the district energy system. 2. Street and Infrastructure Renewal —This infrastructure renewal is focused in the intensification areas of the PDA (primary development area) and would include the renewal of 4.815km of street reconstruction in the central peninsula and the old North End including new underground infrastructure, rebuilt streets and sidewalks and street beautification. This aligns with the Central Peninsula Neighbourhood Plan and will also support the renewal of the old North End by preparing the infrastructure for growth and development as much of the underground infrastructure in this area is approximately 100 years old. The project would improve environmental performance while making the areas more sustainable and attractive to new growth and development. 3. Green Fleet Plan (sedan/SUV) — This initiative aligns with the City's Low Carbon Migration Strategy where the plan is for the fleet to be carbon neutral by 2040. This undertaking would transition 25 sedan/SUV assets in the City fleet to fully electric. 4. Wastewater Pumping Stations —This initiative would involve the renewal of 10 wastewater lift stations across the City that are beyond the life of the assets. This will improve the ability to handle new development, to improve service continuity by having reliable infrastructure and it would improve operational efficiency through the use of new high efficiency pumps/motors and improve workplace safety for the operational staff. It is noteworthy that Saint John is very unique in comparison to other cities in that it has an inventory of lift stations that far exceeds those in Moncton, Fredericton, Riverview, Dieppe and some other municipalities combined, the reason being is Saint John's terrain. To keep up with infrastructure renewal the City should be renewing 2 to 3 lift stations every year and those investments have not been made in recent years to mitigate -6- pressure on rates. This investment would have a significant impact on addressing infrastructure deficit within the Utility. STRATEGIC ALIGNMENT This report aligns with Council's Priorities for GROW, MOVE, GREEN AND PREFORM by renewing assets at the end of their life and better preparing the City to receive the significant growth it is experiencing, by beginning the transition to green the City's fleet through electrification of vehicles, by moving a large part of the uptown building stock to a non -carbon emitting heating source and by leveraging significant Other Share funding. SERVICEAND FINANCIAL OUTCOMES As detailed above. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input has been sought from within Utilities and Infrastructure and from Strategic Services, Public Works and Transportation including Transit. 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Report Date March 15, 2022 Meeting Date March 23, 2022 Service Area Finance and Administrative Services Chairman Sullivan and Members of Finance Committee SUBJECT: FAS 023 - Grant Policy AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Kevin Fudge Kevin Fudge John Collin RECOMMENDATION It is recommended that the Finance Committee endorse FAS 023 - Grant Policy as presented and that the Chair of the Finance Committee bring forth a recommendation to Common Council for approval. EXECUTIVE SUMMARY Not for profit and community organizations play an important role as providers of programs and services to help create a healthy, creative, and resilient community. Not for profit and charitable organizations can often provide services to the community more efficiently and effectively than otherwise provided by the city. Common Council approved the City Manager work plan which included as a priority for 2022 the establishment of a Grant Policy. A Grant Policy will formalize best practices of grant oversight by including policy respecting application, eligibility, evaluation, reporting, strategic alignment, and accountability. PREVIOUS RESOLUTION N/A REPORT Not for profit and community organizations play an important role as providers of programs and services to help create a healthy, creative, and resilient community. Not for profit and charitable organizations can often provide services to the community more efficiently and effectively than otherwise provided by the city. Common Council approved the City Manager work plan which included as a priority for 2022 the establishment of a Grant Policy. The City of Saint John has 12 -2- legislative authority to issue grants pursuant to subsection 102 (1) of the Local Governance Act. The City of Saint John funds over a quarter of a million dollars in community and arts grants on an annual basis. Community grants are governed by a Council appointed Grant Committee and supported by staff in Growth and Community Services. Arts grants oversight is provided by the Saint John Community Arts Board. Both programs have been well managed and currently include many best practice processes including the establishment of eligibility and ineligibility criteria, linkages to Council priorities and evaluation criteria that correlates with critical success factors. Grants include financial or in -kind assistance provided by the City to an eligible grantee. This also includes reimbursements, discounts, and relief on existing contracts and user fees when service has already been provided by the City. It is important for the Cityto formally adopt a Grant policy with best practice principles to provide an open, fair, and transparent process for the application of grants and the use of taxpayer funds. The Grant Policy embeds accountability and transparency by requiring grant recipients to produce Outcome reports that demonstrate value for money. The policy will also ensure grants support Council's 10-year strategic plan and priorities as well as provides opportunities for the City to incorporate focus areas in any given year. Urban development grants, beautification grants, heritage grants and land for public purpose grants are not subject to the Grant policy as each of those programs have separately approved Council policies. Grants requests below $25,000 shall be evaluated by a Grant Committee and the Commissioner of Growth and Community Services shall bring forth the Committee recommendations to Common Council for approval. Larger grants will often be more complex and require a more sophisticated understanding of the City's strategy. Grants that exceed $25,000 shall be evaluated by the staff with recommendations from the City Manager to Common Council. The evaluation criteria for both processes will be informed by the Grant Policy. The Grant Policy includes policy with respect to applications, eligibility, evaluation, reporting and close-out. Accountability is enhanced with the requirement that grant recipients submit Outcome reports that includes a description of outcomes that demonstrate service to the community and alignment with Council strategic priorities, financial summary of the organization and the expenditures for which the grant was provided, and an accounting of the funds spent. A Grant Committee shall conduct a grant close out review of all outcome reports annually to ensure grant recipients comply with the policy and to determine if the recipient is eligible 13 -3- to apply for future grants or if any funds should be returned to the city. The Chair of the Grant Committee shall sign off on the outcome report to signify close out. STRATEGIC ALIGNMENT The Grant policy aligns with Council's strategic priorities of Belong and Perform. SERVICE AND FINANCIAL OUTCOMES Policy will provide the framework for which the City budgets operating grants. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input was received from Growth and Community Services. ATTACHMENTS FAS 023 — Grant Policy 14 SAINT ►0HN Title: Grant Policy Subject: Grant Policy Category: Finance and Administrative Services Policy No.: FAS-023 M&C Report No.: Effective Date: 01 January 2023 Next Review Date: 01 January 2027 Area(s) this policy applies to: Cross Corporate Office Responsible for review of this Policy: Finance and Administrative Services Related Instruments: Policy Sponsors: Chief Financial Officer Document Pages: This document consists of 7 pages. Revision History: Common Clerk's Annotation for Official Record Date of Passage of Current Framework: I certify that this Policy was adopted by Common Council as indicated above. Common Clerk Date Date Created: Common Council Approval Date: Contact: 28.05.21 Finance and Administrative Services 15 Ira:3100aWLIN1:11►NW 1. POLICY STATEMENT...................................................................................................... 2 2. PURPOSE OF GRANT POLICY.......................................................................................... 2 3. DEFINITIONS............................................................................................................................ 3 4. GRANT APPLICATION..................................................................................................... 3 5. ELIGIBILITY CRITERIA..................................................................................................... 4 6. INELIGIBILITY.................................................................................................................5 7. EVALUATION.............................................................................................................................6 8. OUTCOME REPORTS AND GRANT CLOSE OUT............................................................. 6 9. ROLES AND RESPONSIBILITIES....................................................................................... 7 City of Saint John Grant Policy SAINT JOHN 1. POLICY STATEMENT 1.1 Not for profit and charitable organizations can often provide services to the community more efficiently and effectively than otherwise provided by the city. 1.2 The City of Saint John has legislative authority to issue grants pursuant to subsection 102 (1) of the Local Governance Act. 1.3 City grants must align with Council's strategic priorities and strategic plans. 1.4 City grant eligibility criteria shall be aligned with the Grant Policy FAS-023. 1.5 City grant applications below $25,000 shall be evaluated by a Grant Committee in accordance with Grant Policy FAS-023. 1.6 The Commissioner of Growth and Community Services shall bring forth Grant Committee recommendations to Common Council for consideration. 1.7 The City Manager shall bring forth recommendations to Common Council for grants that exceed the $25,000 threshold. 1.8 City grants (including in -kind contributions) are subject to operating budget resources and shall not be funded by debt. 1.9 City grants are not transferable and must be used for the purposes outlined in the submitted application. 1.10 Grants are funded by taxpayers and therefore grant recipients shall submit an outcome report for every city approved grant. 1.11 Outcome reports shall be made available to the public on the City's website. 1.12 A grant close-out process shall be conducted annually by the Grant Committee. 1.13 Development Incentives, Heritage Grants, Land for Public Purpose Grants and Beautification Grants have separate Council policies and are exempt. 2. PURPOSE OF GRANT POLICY 2.1 To provide an open, fair and transparent process for the application, evaluation and allocation of grant funds. 17 2 City of Saint John Grant Policy SAINT JOHN 2.2 To ensure taxpayers receive value for money with transparent reported outcomes. 2.3 To ensure city grants align with the city strategic plan and Council's priorities. 2.4 To inform and guide the recommendations of the Grant Committee and City Staff. 3. DEFINITIONS 3.1 Financial Statement — Balance sheet and income statement representing the most recent fiscal year of financial results. 3.2 Grant — financial or in -kind assistance provided by the City to an eligible grantee. Discounts, reimbursements, relief on existing contracts, leases and user fees when service has already been provided are forms of financial assistance and is considered a city grant. 3.3 Grant Committee — A Committee approved by Common Council to provide oversight on city grants. 3.4 In -Kind Grant - a grant for the provision of municipal property/facilities, materials, or resources to an eligible grantee. Cash funds are not provided however it is recognized that such grants will involve either an expense or foregone revenue for the municipality. In -kind grants are estimated at fair value. 4. GRANT APPLICATION 4.1 City grant opportunities and submission deadlines shall be posted publicly on the City website. 4.2 Grant application forms shall be made available to the public on the City website. 4.3 Grant applications do not automatically roll over into future years, annual applications are required. 4.4 Grant applications forms shall include eligibility and evaluation criteria. 4.5 Grant applications forms must be signed by a signing authority who is legally authorized to act on behalf of the organization. 4.6 Grant application requires the applicant to include: 18 3 City of Saint John Grant Policy a r SAINT JOHN 4.6.1 Proof of status (non-profit number, charitable organization number, qualified donee status) 4.6.2 Clearly defined outcomes for the community (the need) aligned with Council priorities and 10-year strategic plan. 4.6.3 Experience to successfully achieve the proposed outcome 4.6.4 Measures of success 4.6.5 Amount of grant funding requested & proof of financial need 4.6.6 List of all in kind assistance being requested 4.6.7 Description of how the funds will be used 4.6.8 Organization's budget 4.6.9 Total revenue from other sources of funding 4.6.10 Governance structure including organization chart, experience, profile of senior staff, Board of Directors, and key policies in place 4.6.11 Copy of the organizations most recent financial statements 4.7 Limit of one grant award per organization. 4.8 Incomplete applications will not be considered. 4.9 The City reserves the right to incorporate focus areas in the annual grant program to build greater alignment between the outcomes of the grants and Council Priorities. Focus areas will be based on staff recommendations to Common Council. ELIGIBILITY CRITERIA 5.1 Registered non-profit, charitable organization or qualified donee holding principal activities within the geographic boundary of the City of Saint John. 5.2 Respect the Canadian Charter of Human Rights and promote equal access and opportunity for all persons. 5.3 Be in good standing with the City and have no outstanding arrears with the City or have outstanding outcome reports from previous grant awards. 5.4 Shall not be financially dependent on the City grant to sustain operations. City operational grants shall not exceed 30% of the organization's total revenue streams. 5.5 Grant recipients will acknowledge the support of the City of Saint John in written materials, and through other appropriate means. The recipient shall also display signage or a notice acknowledging the support of the City of Saint John at the recipient's principal location(s) and its significant public events (including the recipients annual meeting. 19 4 City of Saint John Grant Policy SAINT JOHN 5.6 Proposed outcomes must be in alignment with Council priorities and the City's 10- year strategic plan. 5.7 The organization must have a defined governance structure that make specific individuals accountable for the use of the grant and for the intended outcomes. 5.8 Must demonstrate a financial need for the grant. 5.9 Must benefit and be assessable to the citizens of Saint John. 6. INELIGIBILITY 6.1 For -Profit organizations, individuals, other levels of government and private clubs. 6.2 Organizations with political affiliations. 6.3 Any expenditure incurred prior to the application date. 6.4 Projects or events already taken place prior to application date. 6.5 Funding of deficits or debts. 6.6 Past grant recipients have not submitted outcome reports pursuant to this policy. 6.7 Funding of initiatives outside the city boundaries. 6.8 Grant request that exceeds 30% of the organizations total annual revenue for operational funding. No cap applies for project or event funding requests. 6.9 Outcomes proposed in grant application competes with existing City services. 6.10 The advancement of religion or partisan political activity. 6.11 Fundraising events. 6.12 Conferences or professional development. 6.13 Meals, entertainment, travel expenses, cash prizes or gifts. 20 5 City of Saint John Grant Policy Irm A SAINT JOHN EVALUATION 7.1 Grant requests below $25,000 shall be evaluated by a Grant Committee. 7.2 Grant requests that exceed $25,000 shall be evaluated and recommended by City Manager to Common Council in compliance with the Grant Policy. 7.3 A Grant Committee shall make formal recommendation to Council through the Commissioner of Growth and Community Services. 7.4 The City shall produce an evaluation matrix for the Grant Committee's use to assess each application based on requirements set forth in sections 4, 5 & 6 of this policy. 7.5 A Grant Committee may request oral presentations from grant applicants. OUTCOME REPORTS & GRANT CLOSE OUT 8.1 Successful applicants must complete and send to the City an outcome report by December 315t in the year the grant was received. 8.2 The Grant Committee shall review each outcome report and the Chair of the Grant Committee shall sign off on each report to signify close out if satisfied the report complies with this policy. 8.3 The Outcome report shall include: 8.3.1 Description of the completed outcomes to demonstrate success. 8.3.2 Financial summary of the revenues and expenditures of the organization (or a financial statement). 8.3.3 Financial report summarizing the expenditures funded by the City grant. 8.3.4 Signature of the organization's Board Chair and authorized signing authority. 8.3.5 Unused grant funds provided by the City. 8.4 Unused city grant funds shall be returned to the City or receive an approved extension from the Grant Committee. 8.5 The Grant Committee shall conduct a grant close out review of all outcome reports annually by February 15t" for the following purposes: 8.5.1 To determine compliance with this policy. 8.5.2 To determine if the organization is eligible to apply for future grant funding. 8.5.3 To determine if any funds should be returned to the City. 21 6 City of Saint John Grant Policy SAINT JOHN 8.6 Outcome reports shall be made available to the public on the City's website 9. ROLES AND RESPONSIBILITIES 9.1 Common Council shall: 9.1.1 Approve the Grant Policy and any amendments to the policy. 9.1.2 Approve grants. 9.2 The City Manager shall: 9.2.1 Ensure compliance with the Grants Policy 9.2.2 Evaluate and make recommendation to Council for grants that exceed $25,000. 9.3 The Commissioner of Growth and Community Services shall: 9.3.1 Receive recommendations from the Grant Committee 9.3.2 Bring the Grant Committee recommendations to Common Council. 9.4 The Grant Committee shall: 9.4.1 Evaluate and make recommendations to the Commissioner of Growth and Community Development grant requests that are less than $25,000 in accordance with this policy. 9.4.2 Monitor compliance with the grant policy through review of outcome reports. 9.4.3 Conduct grant close out reviews of outcome reports. 9.5 The Chief Financial Officer shall: 9.5.1 Support compliance through periodic audits. 22 00- 0 (V 0 cOv U m CT (V U C: U i � C6 LL C ry O U •O 'in O N cn (� >, 4 '" a U — ca O a 4-1— bnC O U ca cn cn a) +- U NO CLf6 ca(j f O Q EO �O a > 6 � O= " � O ca I� U a) O ++j O i C E U C6 U +., ca 00 Eca — N a) NOE cr 4n V" � Q a >N +0 MC ape O v O N� cn Ncn ca cn i bn� ro pm N ca N - O a- � O LwCCO C >i , +•a.0 cn U N> c6 c� >OO —4- c >. ++ a)� E'+ > O C6 ��W f6 (A u • — 3 iMp Uicn >. � CL4- C C6 C>, 4- 00 iQr-I LL 4- CU ��U Q f6 N cn O +-+ O'E Q'U? 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The governance of the plan contributes to the issues found. There are 6 observations and recommendations from the Q4 Health and Dental internal audit and they have been included within this report in detail along with management action plans and prioritization. The observations have been categorized and described within two themes: Internal Audit Health and Dental Q4 51 Background The City of Saint John has an Administrative Services Only (ASO) Group Benefits Plan. The Plan is governed by a Joint Management/Union Committee who reviews the financials, considers and recommends plan design changes, and communicates with all plan members. Plan members are the cardholders for the Group Benefit and employees (which includes permanent employees of the City of Saint John and Saint John Police Force) and retirees (pensioners). Plan members have the option to select a single or family plan. The premiums of the plan are cost -shared 75% by the employer and 25% by the employee for active employees. Retirees have the option upon retirement to remain a member of the plan and if so, pay 100% of the set premium. The majority of active employees are required to maintain benefit coverage at minimum for themselves with the option to include family coverage. The premium paid by the City, employees and retirees has remained the same since December 2010, with a modest increase of 4.5% implemented on January 1, 2022. C1W OF AIITTJOH snlNT )ari>U Group Benefit Plan Prerniums As of December 2010 Monthly Premiums Annual Single Family Single Family Health 585.82 5187.0,9 _ $1,029.84 $2,245.08 Dental S70.71 570.71 $848.52 8848.52 Conn ined Total Retiree 5156.53 S257.80 $1,878.36 S3,093.60 Active S39.13 S64.45 _ $469.69 5773.40 Employer 5117.40 5193.35 $1,408.77 82,320.20 Proposed Group Benefit Data Table (4.5% increase) Effective Ja -ivary 1, 2022 MONTHLY ANNUALLY Single Family Single Family Health $89.63 $195.51 $1,476.78 $2,346.11 Dental $73_89 $77.78* $336.70 $933.361 COMBINED 707AL Retiree $1.63.57 S273.29 S1,962.89 83.279- 47 Active $40.89 $68.32 5490.72 S819.87 Employer $122.68 8204.97 S1,472.16 52.459.60 *Additional increase to Family Dental 3 1 P a g e Internal Audit Health and Dental Q4 61 average across the 5 year period the gap has been approximately $300,000 per year with a significant increase of $780,000 closing out the 2021 year. Table 1: Gap between claims and contributions The short fall between the contributions and costs has been funded through the reserve balance that was in the Health and Dental plan account and has depleted it to a deficit position by the end of 2021. At the onset of the 2022 calendar year there was an opening deficit of $110,000 in comparison to a surplus of $1.1 million at the end of 2016 calendar year as shown in table 2 "Decline of the reserve balance". Table 1 Decline of the reserve balance $2,000,000 Opening Balance vs Ending Balance 2016 2017 2018 2019 2020 2021 -$2,000,000 a Opening Balance from Previous Year . Ending Balance (Surplus/Deficit) 4 1 P a g e Internal Audit Health and Dental Q4 6V Obiective of the Audit To ensure that the health and dental plan provides the most effective benefits at the most efficient cost to employees and the employer. Analyzing the benefit plan to ensure it is the right fit for the City's workforce is extremely important, it provides the employees with the means to help them stay healthy and take care of their families which ultimately helps the organization thrive. Our 2020 Annual Workforce Report highlighted the fact that the group benefit costs exceeded contributions and as such a review is required to identify the best solution to stabilize these costs going forward. The investment in reviewing the City's plan to make sure it is the right fit will help avoid unnecessary costs while ensuring the City meets an appropriate standard of care to support the most valuable asset, the people. $copE'' 1. Interviews with key stakeholders, benefit administrators, management and employees (the staff) to determine key process areas, attributes of the plans, areas of focus and any additional information that is deemed necessary by the staff. 2. Meetings with the 3rd party AON who will be assisting with the audit to identify what information they will require and their timelines. 3. Identify where areas of improvement exist in processes and where there are potential gaps. 4. Review the Union Contracts to determine the requirements and opportunities and differences. 5. Obtain the roles and responsibilities of the Benefit Steering Committee and their mandate and identify opportunities. 6. Review work performed by AON to understand the implications and recommendations. Include this information in the final audit report. 7. Present findings and recommendations to the auditee and determine if information is agreed upon and work through the management action plans. 8. Present summary of findings to Chief of Staff and CFO and City Manager. 9. Present the summary of findings to Finance Committee in Q1. Thiru rar ty K!i!AStd(1C e Upon review of the scope of work and nature of the review internal audit determined that the requirement of a specialist was required in order to provide recommendations backed by evidence and analysis. The third party assistance was provided by Aon Hewitt Inc. ("Aon Hewitt"), who specializes in valuations and actuary services which was key to this review. The areas of value that was needed by the third party was broken down into 4 phases of work as detailed: Phase 1 — Benchmarking of our group benefits plan with comparison to over 50+ cities, municipalities, and regional authorities Phase 2 — Recommending appropriate medical/dental rates and float level (premium setting) Phase 3- Large amount pooling simulation to assist us in determining the right balance of risk to adverse claims and lower costs due to better pricing 5 1 P a g e Internal Audit Health and Dental Q4 61511 Phase 4- Predictive modelling to assist us with cost projections over the next 5 years Summary of key findings In connection with the third party analysis performed to assist with the internal audit, we have identified (6) observations related to the Health and Dental Internal Audit. Title Description Prioritization 1 Health and Dental Premium The contributions to Health and Dental from High premiums set has been less then the cost of the Health and Dental plan and as such the reserve balance in the City's internal Health and Dental account has been declining over the past number of years depleting the reserve into a deficit position of over $110,000. 2 Benchmarking Analysis of the The design of the current Health and Dental Plan Medium current Health and Dental had no significant changes in over 20 years. In Plan order to ensure that the City is providing a plan that meets the needs of its workforce both in cost and in services, a benchmarking analysis was performed by a third party to obtain information in comparison to others. There was some areas of the plan that was better then others or less then others but the overall theme was that the City has a good plan that provides the right balance in service and costs. 3 Large Amount Pooling The City of Saint John currently has an individual High Simulation large amount pooling insurance in place with Managed Health Care Services Inc. through Medavie Blue Cross. The current pooling arrangement provides coverage for all drug costs per participant that exceeds $50,000 in a year. Aon Hewitt performed a cost simulation using the claims level data provided by Medavie Blue Cross for the January 1, 2020 to December 31, 2021. When reviewing the pooling charges quoted by Medavie Blue Cross for the City, the costs were higher than benchmark for the $50,000 current charge; however it was much lower quoted for the $100,000 threshold. Total potential savings are estimated in an average year at $51,000/year. 4 Five Year Predictive Based on the increases the City was seeing in the Low Modelling claim costs and the significant change required in the current year it was important to understand if the plan would stabilize or if there was a concern that costs would continue to escalate into the future at the some rate seen especially in the current year and upcoming 2022 year. For 2023 6 1 P a g e Internal Audit Health and Dental Q4 6191 Aon Hewitt has predicted that no premium adjustment is required, but onwards from 2023 they are predicting a 5% rate increase ongoing. 5 Governance of the Health and The design changes of the Health and Dental Plan Low Dental Plan are approved by agreement from the union groups and as such the Benefit Steering Committee appears to be a subset of this process. It is furthermore not clear on steps required in order to make changes to the design of the plan. The majority of the costs are born by the employer and the opportunity to leverage the plan to enhance the attraction of staff is not available to the City based on the current wording with the union contracts. When performing the analysis of costs for the plan and the contributors it was identified that the gap is not significant between the active employees and retirees but the risk is that the retirees will continue to increase the usage of the drug plan and pull more cost from this plan. Based on the current union agreements it is not clear if the premium for retirees is to be the some as the premium for active employees but the practice has been to set the premium the some for both. 6 Ongoing process for Health Without a standard process there is a missed Medium and Dental Plan reviews opportunity to ensure the plan is competitive and meets the needs of the employees, that premiums are reflected of costs, and that the costs of the plan continue to be reasonable. Prioritization of Observations Prioritization was performed for each observation based on the timing required to complete in order to mitigate or remove risk. The prioritization is important as there is a very small team managing the health and dental plan with limited time to commit to these changes. Providing a focused approach will help ensure recommendations are implemented properly with due care without creating additional risk. Internal audit recommendations on timelines based on priority: • High Priority- 60 days from date of report • Medium Priority-120 days from date of report • Low Priority- Within 1 year of date of report 7 1 P a g e Internal Audit Health and Dental Q4 67� Cooperation from Staff For any internal audit, the value is found when collaboration, transparency and acceptance is provided from the auditee. Without this an audit can potentially not achieve its objective. For the internal audit of the Health and Dental plan which was conducted with the Human Resources department it is important to recognize their continued contributions, guidance and responsibility for the inputs and outcome. We received full cooperation from the staff and they were forthcoming of any information needed to complete the analysis. The staff is eager to have the support and recommendations and it is expected that they will implement them as planned. A big thank you for your continued duty of care to meet the needs of the City employees by administering a competitive health and dental plan at an affordable rate and to look for assistance to continue to change and improve. Detailed observations, recommendations, and management action plans 1. Health and Dental Premium The contributions to Health and Dental from premiums set by the City has been less then the cost of the Health and Dental claims and as such the reserve balance in the City's internal Health and Dental account has been declining over the past number of years. The reserve in place has afforded the City the ability to maintain a consistent premium to its employees and retirees over the past 10 years. The Human Resources Manager and Finance Manager had noted the declining balance and identified opportunities within the plan design to save money and a calculation to increase the premiums to 4.5% which took effect on January 2022 which was based on historical plan experience. These changes will help the City to close the gap in contributions and costs but additional measures are required. As at the beginning of January 2022, the reserve balance has now been fully spent and is now sitting in a deficit position of $110,000 that is continuing to rise. Most notably the costs have been increasing in the past 2 years and have accelerated the issue. In order to sufficiently cover the current costs of the Health and Dental benefit plan provided to City Staff and the retirees, an adjustment to the premium set is required as soon as possible in order to avoid further unfunded Health and Dental Benefit Plan balance. The total cost of the plan is to be funded for active employees with cost sharing of 75% employer and 25% employee while the retirees are to pay 100% of the premium. To determine what the premiums should be Internal Audit called on the expertise of a third party actuary, Aon Hewitt to calculate the projected costs for the 2022 year with the current Health and Dental Plan Design, consideration of the premium increase in January 1, 2022 and with the opening deficit of $110,000. The third party provider projected a cost for the 2022 year of approximately $5.5 million dollars, this will leave the unfunded balance at the end of 2022 at just over $1 million dollars. This is a significant increase from prior years but from industry information there has been increases expected of upwards of 7% for the current year in comparison to general inflation normally realized of 5%. A large cause of the increase anticipated is due to pre -pandemic levels along with higher costs of prescription drugs and dental care. In addition to the industry increase with the fact that there has been no adjustments to the premium for many years creates a much larger increase to premium requirement. 8 1 P a g e Internal Audit Health and Dental Q4 61FA The current premiums in place based on current composition of employees and retirees would cover costs of approximately $4.5 million dollars, the projected costs of the plan are estimated to be a total of $5.5 million dollars by end of 2022. The difference in the projected costs at end of year and projected contributions is $942,000. Recommendation: Immediately communicate to union groups and benefit steering committee with 90 days notice of premium adjustments to become effective before July of 2022. The urgency to implement the change is due to the fact that the deficit will continue to grow which would create a bigger gap to fund, creating a larger increase in premiums. The current calculation of premium adjustment is based on the assumption that the adjustment will be complete before July of 2022 and that the deficit recovery (being the amount of deficit balance at July 2022 will be fully recovered by July 2023). Based on this timeline the expected deficit at July 2022 will be $581,000 but will be partially recovered by year end leaving a deficit of $219,000 at end of year 2022. The $219,000 will be fully recovered by July 2023. The table below summarizes the changes in premiums as recommended by AON Hewitt: Active Retirees Current i7ety dl-ar ge Currer-1 111eov Change Health Single $22.42 $31.61 $9.19 41 % $89.68 $126.45 $36.77 419.0 Health Family $48.88 $68.91 $20.03 41% $195.51 $275.67 $80.16 414•6 Dental Single $18.47 $20.50 $2.03 11 % $73.89 $82.02 $8.13 11 % Dental Family $19.44 $21.58 $2.14 11 % $77.78 $86.34 $8.56 11 % Combined Single $40.89 $52.11 $11.22 27% $163.57 $208.47 $44.90 27% Combined Family $58.32 $90.41) $22.17 32% $273.29 $362.01 $88-72 32% The City is required to pay 75% of the active employee portion of the premium which is estimated to be an additional $290,000 in the current year based on the projected costs of the plan for the 2022 year. As such a determination of where adjustments to budget can be made should be determined as soon as the premium is set and the actual calculation to the City is established. Consideration of other employee benefits funded by the City should be considered as a one time option, if additional budget is available for the current vear. Management Action Plan: Implement Premium rate changes in accordance with the recommendations. Based on the recommendations from AON and the internal audit team, the City Manager and Human Resources have provided the required notification to the active employee groups and the Benefit Steering Committee. Communication will be mailed directly to the Retiree group to notify of the premium change. Management Timeline: Premium increase effective May 29, 2022 ent Owner: Katherine Shannon, Senior Manager, HR 2. Benchmarking Analysis of the current Health and Dental Plan The design of the current Health and Dental Plan had no significant changes over 20 years. In order to ensure that the City is providing a plan that meets the needs of its workforce both in cost and in services, a benchmarking analysis was performed by a third party to obtain information in comparison 9 1 P a g e Internal Audit Health and Dental Q4 611:3 to others. The comparison was based on other municipal organizations and included both a cost comparison and a design comparison. For the cost comparison a portfolio of over 50 comparators, leveraging a patented system called "Greater Insight" was used. For the design comparison 27 comparators were used leveraging Aon Hewitt's proprietary database. The analysis used the median of the comparators as the benchmark. There was some areas of the plan that were better then others or less then others but the overall theme was that the City has a good plan that provides the right balance in service and costs. Both the Cost comparators and design comparators are included in more detail as an appendix to this report. A summary of the biggest differences along with tables pulled from the AON Hewitt report are noted below. Some of the positive highlights that should be recognized are as follows: Overall the plan is provided at a reasonable cost and the design of the plan is comparable to others. Supplementary information is included in Appendix A. Specifically, the following numbers are summarized: 'CategoqW . Number of items At benchmarl'c� jWviewed AL M MR39%) bove benchmark Below benc Wr '1[13 (57%) a it (63%) _ - Total annual costs of our plan (employee and employer total) per active employee ($5,178) which is much lower than our comparator group ($5,903) - Although the City plan covers retirees, it requires that they pay 100% of the premium. They have the option to participate in the plan at the time of retirement only, and based on the comparison of costs per active and retiree on extended health care and drug claims, the retirees drive more of these costs while the active employee base drive more of the dental costs - Medical ASO fees are (35yo) which is very competitive in comparison to the median of (4.745yo) - Dental ASO fees are (5%) which is competitive but slightly above median (4.88%) - Current pooling charge (5.735yo) is competitive and lower the median of our comparator groups (8.21 %) Areas suggested for further analysis are summarized below. Note this is not the complete list of potential areas for review Age Limit for dependent children 20 21 (Best practice same age as health and dental) Duration of survivor benefit (also Lifetime 24 months duration, only for Health and Dental coverage) 10.5% have a lifetime duration Scope of drugs covered Predefined list of medicines 19% have a managed Health current Plan formulary market Prevalent 101 Page Internal Audit Health and Dental Q4 611%] Accommodation costs covered I No Provide coverage for private duty Yes- 80% up to $5,000 nursing maximum per year Paramedical services covered Prosthetic devices coverage Employment type comments Dental benefits maximum Major treatment / restorative coinsurance Scaling & root planing Units Recommendation Chiropractor, Naturopath, Osteopath, Outpatient mental health / psychologist, Physical therapist / Physiotherapist, Podiatrist / chiropodist, Social worker, Speech therapist Orthopedic shoes 80% of $150 per year and orthotics custom 80% of $150 every 2 vea rs Participation is only voluntary for Police Major treatment / restorative (crowns, bridgework, dentures, implants) Basic treatment / restorative (fillings, extractions, root canals) Periodontics Preventative services Endontics: $1,000 per year for adults and children Orthodontics: $2,000 per lifetime for adults and children 70% Root planing Unlimited Majority of classes cover hospital, 62% cover private room 100% up to $25,000 per year. Only 25% have a $5,000 maximum 79% also cover massage therapist and 58% also cover acupuncture. Careful consideration as current plan could be best practice if aligned with values of plan Majority cover custom orthopedic shoes at $300 and custom orthotics at $500 Only 6% have voluntary participation Most prevalent Basic / Major maximum is $2,000 combined. However a positive differentiator is the $2,000 orthodontic coverage that includes adults as this is not the norm yet. 50% for 41% of classes 80% for 30% of classes 70% for 17% of classes 76% of classes also include scaling (in addition to root planning) this is also in line with best practice Limit of 10 units per year Careful consideration should be made to any changes that increase the costs of the plan, given the premiums are not meeting the current plan costs and a significant increase to premiums is required, it would be more diligent to look for opportunities to lower costs while providing a similar level of service to the members. It should be emphasized that there is not one plan change that would 111 Page Internal Audit Health and Dental Q4 Ais] alleviate the need to adjust the premiums and that there are small opportunities noted in the benchmarking as summarized for further consideration within the observation table. The observation table are areas that internal audit would suggest further analysis of the plan as they are a variety of plan improvement opportunities and potential for cost adjustments. These areas in addition to any other areas the Human Resource department identifies as potential areas for adjustments should be submitted to the service provider for further details and a potential quote on costs. The retirees are included on the benefit plan, a review of other options for the retirees should be considered as they will be paying 100% of the premium. Based on the current plan structure the retirees are pulling more on the health claims while the active employees more on the dental. Luckily there is not a big gap in who is pulling more from the plan but this could change in the future and there is a risk of a potential burden on active members and the employer. Determination on next steps should be made to create the ability for the City to establish a separate premium for active and retirees. The calculation of the premium can then be made based on cost of claims of each group (retiree and active). In addition when making changes to the plan the focus should be on what is most suitable for the active employee base. City of Saint John Health & Dental Combined - Retirees ■ Budgeted Rates ■Actual I Projected Cost LH $4,500,000 $4,000,000$3500000ed $3,000,000 $2,500,000 FC $2,000,000$1,500,000 d Retirees $1,000,000 $500.000 $0 2017 2013 2019 2020 2021 2022 2023 2024 2025 2025 It is internal audit's understanding that any change to the design of the plan will need to be approved by the union groups, discussions on cost containment under the existing plan would be the primary objective with consideration of helping stretch the cost spend to add value into the plan. The discussion on this information should be held with the Benefit Steering Committee. It is the responsibility of the City to manage the existing plan but any design changes are currently the responsibility of the employees. The work performed did not include an evaluation of costs and plan member experience when implementing a transition to biosimilars. Given there is an opportunity to provide additional benefit to the plan it is recommended that an evaluation of the transition to biosimilars be performed which would include an overview of group insurer trends/provincial plans. Management Action Plan: Management will share the high level results of the benchmarking with the Benefits Steering Committee and include in communication to all plan members. This review did not recommend any immediate changes but highlighted some of the benefits the Plan provides that are exceeding or average in comparison to similar plans. This is useful in our retention and recruitment policies and practices. 121Page Internal Audit Health and Dental Q4 Benchmarking is recommended to be done every five (5) years to maintain competitiveness. Pending future premium increases the Benefit Steering Committee has the option to review the current plan design and offset increases with design changes, therefore this information can be applied as needed. The action within the Governance observation will help cover the recommendation related to changes to the way the decisions are being made in relation to the plan. Specifically the discussion of separating the retiree from active employees. Management will engage an independent party to provide the review of the biosimilar transition. Management Timeline: Communication of the benchmarking for potential design changes will be provided to Benefit Steering Committee at their next meeting. Benchmarking will be conducted every 5 years. Management Owner. Katherine Shannon 3. Large Amount Pooling Simulation The City of Saint John currently has an aggregate stop loss in place with Managed Health Care Services Inc. through Medavie Blue Cross. The current pooling arrangement provides coverage for all drug costs per participant that exceeds $50,000 in a year. Aon Hewitt performed a cost simulation using the claims level data provided by Medavie Blue Cross for the January 1, 2020 to December 31, 2021. Several pooling arrangement alternatives were modelled with thresholds ranging from $60,000 to $150,000 and a total of 40,000 simulations were performed. When reviewing the pooling charges quoted by Medavie Blue Cross for the City, the costs were higher than the benchmark for the $50,000 current charge; however it was much lower quoted for the $100,000 threshold. Table below is provided in the Aon Hewitt report: Benchmarking of Proposed Pooling Charges 14% 12% 1D% 8% 6% 4% 2% �rr 'R1G (Current) S50K LAP $75K LAP 5100K LAP *CityofSaintJohn ■Uedian —Max Min Based on the chart of all simulations below, it appears as the best return for pooling arrangement would be at $100,000 which is what Aon Hewitt is recommending as the threshold. The cost is based on a quote received by Medavie Blue Cross and a change to the quote could impact the advantage of negotiating a new threshold. Total potential savings are estimated in an average year at 131Page Internal Audit Health and Dental Q4 I' $51,000/year. The table below provides information on the worst case and median case scenarios which considers the expected claims, the Aon Hewitt table below illustrates the simulation results: Average Average Average Average Average Average Likelihoods# PoolinrlArranpement Median fAll5cenariosl (Worst50%) (Worst25%) fWorst10%1 Worst (Worst I%hPooled Claims No Pooling $3,483,00D S3,499.000 S3,0B2,DCD $3,822,DUD $3,973,DD0 S4,084,OM $4,3WUDDO 11.0% [Current}$50KLAP $3.b51,UOD 53,55U,DOO $3,710,UDU 5.CDC 53,919,0GO $3,987,00D $4.121,DOD 95.2% $GOK LAP $3,559,410U 53,553,DD0 $3.723,UDO $3,827,DUU 53,934,OCO S4.CU3,DOD $4,'4D.CDC 81.6% $75KLAP $a,5W.001) 73,58U,DOO $3,723,0Dg $3,831.WD 53,941.000 54.C12,DOD 54, E2.CDC 80.9% $100K LAP 53.A99,DO.0 S3,5C5.CDO $3,577109U $3.704,DU4 $3,897.DDO 33.970,000 $4,114,DOD 88.7% $125K LAP S3,4175,000 53,503,CDO S3,OB2,00U $3,794.OUD $3,914,ODO S3,992,000 $4,'45,CDC 44.51k $150K LAP S3,494;UOO 53,5n,CU0 S3,988,UCD $3,803,00D 53,92B4000 S4,CD9,DOU $4,'.08,CDC 30.5% Lowest 53A04,300 53,5C3,CDO S3,077,DCD $3,784,CDC 53,897r,000 S3.070,3OD $4.' 14,CDC Highest S3.°59,30C S3,503,CDO S3,728,DCD $3,831,DUD 53,941,ODO S4,C12,30D $4,tEg,CDC Range S85,300 S&D,CDO s51,DCD $47,CDC S44.ODO S42,303 $E5,CDC Range % 1.8% 1 7% '..4% 1.2% 1.1% 1.136 1.3% Recommendation Based on the recommendation from Aon Hewitt and the information reviewed within the reports the consideration to adjust the threshold to $100,000 from $50,000 should be strongly considered. The review of the information provided and understanding by the City that with less coverage it creates higher potential risk from claims, which is mitigated by the simulations performed of best case and worst case. Further discussions should also be made with the provider on the opportunity to adjust the thresholds in the future as it is internal audit's understanding that once it is increased it can not be lowered. A contingency plan should be established if the increase is made to understand how it can be lowered if needed in the future. The City will need to adjust the contract very quickly in order to receive the quote of 2.07% as there is a risk it will increase if too much time lapses. Management Action Plan: Human Resources will recommend to adjust the policy with MHCSI to include an increase in the threshold for Stop Loss Insurance from $50,000 to $100,000 effective March 1, 2022. This will provide some additional savings in the 2022 calendar year. Management Timeline: Recommendation to Common Council for policy change with MHCSI effective March 1, 2022 at the April 4, 2022 meeting. Management Owner: Katherine Shannon 4. Five Year Predictive Modelling Based on the increases the City was seeing in the claim costs and the significant change required in the current year it was important to understand if the plan would stabilize or if there was a concern that costs would continue to escalate into the future at the same rate seen especially in the current year and upcoming 2022 year. A customized predictive modeling tool was built by Aon Hewitt to assist the City in understanding how its medical and dental premium rates should be evolving over the next 5 years. The following assumptions were included in the modelling: • Expected evolution of number of active (0%) vs retired employees (3%) • Expected evolution of claims experience based on expected medical & dental inflation range. (optimistic vs pessimistic) 141Page Internal Audit Health and Dental Q4 W • Aon's calculated average inflation over the past 5 years has been 4% for Health and 3% for Dental for active employees • Employer -provided medical benefit costs in Canada are forecasted to rise 7.0 percent in 2022, according to the 2022 Global Medical Trend Rates Report released by Aon • Monitoring of potential deficit/surplus to ensure premiums sustainability • Monitoring of rates adequacy and cost -sharing for active vs retired employees • Monitoring of rates adequacy for individual status vs family (dental) For 2023 Aon Hewitt has predicted that no premium adjustment is required, but onwards from 2023 they are predicting a 5% rate increase ongoing. See table below from Aon Hewitt which shows that based on the newly implemented premium and predictions made the plan will be appropriately funded by premiums. $9,000.000 $8,000,000 $7,000,000 56,000.000 $5,000,000 $4,000.000 $3,000.000 $2,000.000 51,000,000 $0 City of Saint John Health & Dental Combined -Active & Retirees Combined ■ Budgeted Rates ■Actual I Projected Cost 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Recommendation Health and Dental plans can be challenging to predict, we can see this is the case just by the unexpected spike in the 2021 year of costs however it is important to have some insight on how the plan is doing and where it is tracking based on information available. Aon Hewitt has provided the City with a model that can be used to adjust the 5 year predictions based on key inputs. The City should use the model and update annually based on known changes. Specifically assumptions that can be adjusted on an annual basis to update predictions are as follows: - Active Headcount Growth (currently set at 0%) - Retiree Headcount Growth (currently set at 3%) - Health inflation (currently set at 4% for low scenario and 8% for high scenario) - Dental inflation (currently set at 3% for low scenario and 7% for high scenario) - Premium adjustment after 2023 set to be 5% per year Once the predictions are updated, plan of action should be created as part of the annual process. If the model predicts that premiums will need to go up beyond 5% from 2023 onwards, appropriate communications should be made. Management Action Plan: The model provided allows for adjustments and easy predictions based on the previous years experience. Ensuring this model is used in the future and that individuals in both HR and Finance are familiar with it and continue to build on the actual data included. Using this model it will be essential 151Page Internal Audit Health and Dental Q4 to review and recommend premium increases if required annually. As previous year data is not available until mid February typically it is recommended that annual premium adjustments be done in May of each year as required to allow notification and analysis. Management Timeline: Predictive modelling tool to be integrated into the annual premium rate setting. Next review to be done February 2023 and annually thereafter. ement Owner: Katherine Shannon 5. Governance of the Health and Dental Plan The design changes of the Health and Dental Plan are approved by agreement from the union groups and as such the Benefit Steering Committee appears to be a subset of this process. It is furthermore not clear on steps required in order to make changes to the design of the plan. The majority of the costs are born by the employer and the opportunity to leverage the plan to enhance the attraction of staff is not available to the City based on the current wording with the union contracts. When performing the analysis of costs for the plan and the contributors it was identified that the gap is not significant between the active employees and retirees but the risk is that the retirees will continue to increase the usage of the drug plan and pull more cost from this plan. Based on the current union agreements it is not clear if the premium for retirees is to be the same as the premium for active employees but the practice has been that the premium is the same for both. Recommendation The City to continue to inform the Benefit Steering Committee and Union Groups on significant changes to premium rates and abide by the notification requirements within the union contracts. The City to create a formalized process for analysis of plan design and costs along with calculation of premium adjustments which will direct the City in their action requirements to manage the plan. The goal would be to spend scarce resources of the City who currently manage plan in an effective manner to ensure appropriate governance. The City should look at future steps to address the wording within the union contracts so that the City has the ability to make changes to the design of the plan, separate the retiree and active employees plans and to set different rates for retiree and active employees. In addition a review with assistance from the General Counsel Office should be performed to identify if current practice is in accordance with what abilities the parties have and what further modifications or improvements can be made to provide the City more strategic actions going forward. Management Action Plan: Human resources will seek a formal legal opinion on the current language in the collective agreements related to the administration of the Group Benefit Plan including plan design changes and authority, the existing Terms and Conditions of the Benefits Steering Committee and the adjustment of rates, including setting appropriate rates for the active and retiree group based on experience. Management Timeline: Information will be collected and prepared to provide to General Counsel by July 2022. Management Owner. Katherine Shannon 161 Page Internal Audit Health and Dental Q4 6. Ongoing process for Health and Dental Plan reviews The City is doing a good job in managing the benefit plan which is evidenced by the comparison to other municipalities. The City has also been able to provide a plan that has not seen a change in premiums in a very long time which has been positive for all contributors to the premium costs. The plan has had an ongoing decline in the surplus balance and costs continue to increase along with the evolving needs of the employees of the City. Without a standard process there is a missed opportunity to ensure the plan is competitive and meets the needs of the employees, that premiums are reflected of costs, and that the costs of the plan continue to be reasonable. Recommendation For the next year the City should carefully monitor the actual costs to what was projected, given the increase in projected costs from historical. Monitoring the costs will ensure that the premium is appropriate and that the balance is sufficient to cover costs but not excessive. The work performed to provide the projected costs and predictive models are not actuals and as such could be incorrect when costs are incurred. The City to perform ongoing monitoring on an annual basis: - Review of the premium compared to costs to ensure appropriate matching - Achieve a balance in a surplus position but not in access of 5% of the total cost of the plan - Predictive modelling update to provide insight on potential future costs of the plan and if design changes are required or premium adjustments - Review of costs between active and retirees to identify if there are gaps in coverage consideration of separate premium discussions Management Action Plan: Using the predictive modelling tool the Human Resources department, through the Benefit Steering Committee will review claims experience and contributions to the plan on a bi-monthly basis. Annually HR will recommend a premium rate for the upcoming year based on the predictive modelling tool and finance recommendations. Management Timeline: Immediate and will be ongoing t Owner: Katherine Shannon 171Page Internal Audit Health and Dental Q4 Appendix A Supplementary Information on Benchmarking STOW 56,000 55,0M $4,000 S3,000 $2,000 Slow $0 $5.178 City of taint Jo n (75% employer paid) -Current Annual Cast per ACAVO Ernployee NMedic.al ■Dental ■ Long Term Disability Life I n su ran ce 55,909 Am Cities, tqunicipalirties and Regional Authorities Galabase t8 % emP1wer Paid; $5,€}53 Aon Canada Uata4ase (83% employer paid) 181 Page Internal Audit Health and Dental Q4 AYA S3,000 52, 500 $2.000 51.500 $1,000 SHO $D $2, 500 $2.000 $1,5DO 51,t7DO 3500 $0 $2, 500 $2,000 $1,500 $1.00D S50D $D Extended Health Care Paid Claims per Capita &2017 r2018 ■2019 2020 2021i10mrrnrhsannualized) $2,495 $2,497 Itl AW $2.170 .. ,.. $2.196 $2 473 $2,255 $2,Q3 $1.9D4 41' Active Employees Retirees Weighted Average EHC -Drugs Pair) Claims per Capita m 2017 r 2018 ■ 2019 ■ 2020 2021 (10 months annualeed ) %2,203 52,199 $1,904 s1,96+6 $1,994 51,751 $1,8i10 $1,758 $1,752 - R. $1,671 $1,750 Active Employees Retirees Weighted Average EHC - Drugs Paid Claims per Capita ■ 2017 ■ 2018 ■ 2019 2020 2021 (10 months annualized) $2,203 52.199 $1,004 51.Eb5 $7,999 $1,756 $1,75�2 $1,671 $1,75t7 Active Employees Retirees VVeighled Average 191Page Internal Audit Health and Dental Q4 0 N O N C N N O N C ca Q U ca V) O Q O .O . X o z Cf 0 ti cV cn c E [a O 'E N : E N O E O � cc N U L � cc U O r O > L-. }' O . Q O OO v ate--+ U V) aA co O ++�- _ O ca 4 4-j \ cn 0 ' cn U O� - � O cn cu :3 .. rl O Q) O -0-0 (1) O U N Lr) c a-J M c O N.� M O O ca U E O Co 4-j — v) .. 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This internal audit will continue to work towards enhancing contract management at the City. 2 2022 Audit Plan E:1iI The internal audit will require the assistance from the General Counsel Office. Health and The objective of the Compliance $30,000- 100 September - Safety Audit review is to assess the $40,000 December 2022 (Saint John design of processes that with 50% Water) comprise the Health & charged Safety Program for Saint to John Water. Internal Audit and The review will include the other Health and Safety 50% governance activites, charged tools, systems, to the applicable policies and Saint procedures, John communications, Water training programs, and Budget incident management processes and systems. The City recognizes the importance of keeping the workforce safe on the job and values the importance of ensuring that the Health & Safety Program meets the applicable requirements. 2022 Audit Plan 82 Management We will continue to N/A N/A 40 Ongoing action plan build inventory of follow observations and up/planning/risk management action register updates plans to follow up and confirm that recommendations were implemented. The risk register will also go through continuous updates as business changes occur. 2022 Audit Plan 83 5 Performance Audits (also known as Value for Money/Operational): Evaluates operational processes to provide assurance that objectives are met and whether improvements can be made based on effectivness, efficiency and economy. 000 ..�� 0 J�8© p � �■■■ip Financial Audits: Assesses accuracy, completeness, and timeliness of financial reporting Compliance/Regulatory Audits: Ensures adherence to established regulatory requirements and policies The three categories of audits The planning process provides a disciplined approach to the identification of potential audit projects. Formal planning has several benefits. The plan is based upon the risks and priorities that exist at a certain point in time. Since we are operating in a dynamic environment, risks and priorities are constantly changing. Audits can be requested throughout the year which will be assessed and included as necessary on the audit plan. When we believe it is in the best interests of the City, an adjustment will be made to the current audit plan. Changes to the plan and progress achieved on the plan will be reported to the Finance Committee each year. The Audit Planning process is comprehensive and comprises several activities: • identification and classification of auditable areas; • evaluation of audit areas against standard criteria and risk factors; • consultation with City Councillors and Senior Management and Staff; • updating of Service Risk Profiles; • consideration of resources available and required by project type; • selection of audit projects; • presentation of our proposed audit plan to Finance Committee for recommendation to Common Council; and • communication of our final audit plan to Common Council for approval. Continue to changF Staying relevant is crucial to providing valuable information and recommendations to the City and it's stakeholders. Our goal is to consistently change. As we continue to build the Internal Audit services at the City you will start to recognize the audit plan and areas that stay constant, but you will continue to see something new in every plan going forward every year. VA 2022 Audit Plan E:11.1 AA i P - : r Y i i Aln e srR , FINANCE COMMITTEE REPORT Report Date March 17, 2022 Meeting Date March 23, 2022 Service Area Transportation and Environment Services Chairman Sullivan and Members of Finance Committee SUBJECT: Application to Zero Emission Transit Fund OPEN OR CLOSED SESSION This matter is to be discussed in Finance Committee Open Session. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Ian Fagan Michael Hugenholtz John Collin RECOMMENDATION Direct staff to submit application to Federal Zero Emission Transit Fund and refer the purchase and funding opportunity to the Capital Budgeting process. EXECUTIVE SUMMARY The City of Saint John is completing a study on decarbonization of the City fleet including transit towards a goal of being carbon neutral by 2040 in line with the City's Climate Change Action Plan. An early opportunity identified is to leverage a recently announced Federal program where grant funding is available to help switch transit vehicles to zero emission vehicles. The program can provide a 50% grant and 50% financing for the purchase of zero emission vehicles. The City is in the process of redefining the transit service and electric vehicles can reduce maintenance and operating costs which would help to modernize the transit service in the City of Saint John. This report seeks direction to proceed with the application process in order to provide clarity on the impact to the Capital Budget for transit purchases. PREVIOUS RESOLUTION N/A E:1:3 -2- STRATEGIC ALIGNMENT This initiative aligns with the Council priorities of; MOVE, by providing sustainable transportation choices and, GREEN by seeking opportunities to implement green practices within daily City operations. REPORT To reach the goal of becoming carbon neutral by 2040 as laid out in the Climate Change Action Plan, the City'sfleet, in particular Transit, must reduce the amount of Greenhouse Gas (GHG) emitting vehicles. The Federal Government has introduced the Zero Emission Transit Fund (ZETF) valued at $2.75 billion over five years, to help transit authorities switch to zero emission vehicles. An analysis was conducted to see if there was an alignment opportunity between the City's asset replacement program and the new Federal Program. Through an analysis conducted by Wood Consulting to be presented to Common Council in the coming weeks, it has been demonstrated that with a reduction in operating and maintenance cost associated with electric vehicles and the funding opportunity that currently exists, there is a cost savings overall to switch to electric transit vehicles. Using those results, Transit then undertook an evaluation of the current fleet to determine what vehicles would need to be replaced in the next five years in line with the funding opportunity. Transit would not be recommending replacement any vehicle that has not reached the end of their lifecycle within that time. Transit is developing a transformation plan which will see Transit switch to a model of some rapid line supported by an on -demand service with increased service levels by decreasing wait time on feeder lines to increase ridership. Part of that project will see Transit shift sixteen 40-foot buses to smaller, less expensive vehicles along with an overall reduction of six vehicles. The table below shows the changes in vehicle numbers and the cost. Required Current in new New Requirements Inventory model Retaining Required Cost per total Fleet Fixed or rapid routes 40foot bus 42 21 15 6 $1,000,000 $6,000,000 On -demand service 20-30foot bus 0 16 0 16 $700,000 $11,200,000 Para Transit 20-30 foot bus 7 6 4 2 $700,000 $1,400,000 Sub Total 1 49 43 19 24 $18,600,000 Covered pavillion for rapid Facilities Uptown Station charging and main hub transfers 0 1 1 $3,000,000 $3,000,000 Electrical upgrade to enable Transit Facility fleet charging at depot 0 1 1 $30,000 $30,000 Upfront tech costs $950,000 Sub Total 1 $3,980,000 Total $22,580,000 E-lue -3- Using the current model and current fleet replacement schedule replacing GHG vehicles would have a cost of $13.5 million to the City over the next five years. The ZETF provides 50% funding which, under the new Transit model, would reduce the cost to the City to $9.3 million for a direct fleet comparison savings of $4.2 million. The table above also demonstrates a one-time investment in facilities and technology cost of just under $4 million. Those costs are also eligible for funding reducing the City cost to just under $2 million. The one-time cost would support the fleet transition past the five-year program but even including the one-time cost would still produce a savings to the City of over $2 million in the next five yea rs. SERVICE AND FINANCIAL OUTCOMES None at this point. If approved, any outcome of applications and funding of the capital purchases would be considered during the Capital Budgeting process. Submitting an application does not obligate the City to spend the funds, but it does create additional options and will reduce overall costs should Council commit to these purchases as part of the budget process. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input into the report has been sought from Finance and Utilities and Infrastructure. ATTACHMENTS None 0I91 FINANCE COMMITTEE REPORT Report Date March 18, 2022 Meeting Date March 23, 2022 Service Area Finance and Administrative Services Chairman Sullivan and Members of Finance Committee SUBJECT. The Active Transportation Fund -City Submissions OPEN OR CLOSED SESSION This matter is to be discussed in Finance Committee Open Session. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Samir Yammine & Tim O'ReMy J. Brent McGovern John Collin RECOMMENDATION It is recommended that Finance Committee: 1. Request Staff submit an application to Infrastructure Canada under the Active Transportation Fund (ATF) for the following capital projects: a. "The Cove" Extension of a portion of Harbour Passage b. Boars Head Road Sidewalk Extension 2. Request Staff submit an application to Infrastructure Canada under the Active Transportation Fund (ATF) for the following Panning and Design Projects: a. Identification, Design Features, and Prioritization of Needed Crosswalks Crossing Arterial and Collector Streets b. Sidewalk Infill Strategy Completion c. Preliminary Road Safety Public Education Plan d. Assessment of Data (Currently Available, Gaps, and Opportunities) for Supporting a Road Safety Strategy EXECUTIVE SUMMARY The purpose of the report is to provide the Finance Committee with background information on the Active Transportation Fund (ATF) and request Staff to submit funding applications on the various capital and planning projects. 021 -z- PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT The proposed ATF along with the capital and planning projects align with Council Priorities for Green: "We value the environment" and Move: "We value sustainable transportation choices." REPORT Background On February 10, 2021, the Prime Minister, Minister of Infrastructure and Communities, and Minister of Environment and Climate change announced $5.9 billion in new funding for public transit and active transportation projects over 5 years, beginning in 2021-22, with a permanent annual envelop of $3 billion on going and beginning in 2026-2027. This funding includes the creation of an Active Transportation Fund (ATF) which includes a funding envelope of $400 million to be spent over 5 years to fund projects across Canada that expand and enhance active transportation networks in communities of all types and sizes and supports Canada's National Active Transportation Strategy. Active Transportation refers to the movement of people or goods powered by human activity. Active transportation includes walking, cycling and the use of human -powered or hybrid mobility aids such as wheelchairs, scooters, e-bikes, and the like. Th objective of the ATF is to increase the total amount, usage, and quality of active transportation infrastructure throughout Canada. The ATF will support capital and planning projects that encourage a shift away from cars and improve the safety and security of Canadians. Projects Eligibility for funding There are two streams of projects eligible for funding: Capital projects and planning projects. 1- Planning Projects (Grant Program) The maximum amount payable for a planning project will not exceed $50,000 and the government will cover 100% up to $50,000. Eligible projects include Public and/or Stakeholder engagement, policy development, feasibility studies, business cases, detailed costing estimates, research, and data collection, etc. My -3- Projects must be completed by March 31St, 2027. The deadline for the City to submit applications is March 31St, 2022 2- Capital Projects (Contribution Program) The maximum amount payable for a capital project is $50 Million and the federal government will cover up to 60% of the eligible costs. Eligible projects include building or enhancing infrastructure for active transportation including safety and design features, such as multi -use paths, sidewalks, footbridges, separated bicycle lanes, crosswalks, speed bumps, wayfinding signage, lighting, greenery, shades, etc. Projects must be completed by March 31St, 2027. The deadline for the City to submit applications is March 31St, 2022. Eligible Recipients The City of Saint john is considered an eligible recipient along with provincial and territorial governments as well as not -for -profit organizations. There is no limit on the number of applications that may be submitted by an eligible applicant. However, the City may be required to include a rationale for prioritizing the projects. City of Saint John Submissions City staff have met to review and identify a list of projects for 2023-2027, which are aligned with the ATF program, Council Priorities for 2021-2026 as well as the City's long-term capital plan. The following are the list of recommended projects for the ATF funding programs with a high-level overview: The "Cove" Extension of a portion of Harbour Passage • Total estimated cost of the project including a contingency is $1.1 Million • Type of project: Capital • City funding request under the AFT program is $660,000 • City funding required over the next five years is $440,000. It is expected this project would be completed between 2023-2027 when the City has required City share funding budgeted in the City's Capital program. • Estimated substantial completion date: 2024 • Overview of the project and benefits: Harbour Passage as recommended in MoveSJ includes an off-street trail connection between Riverview Drive and Riverview Avenue on the West side and this project would construct this portion of Harbour Passage. With traffic volumes low on both streets and sidewalks in place, this connection would benefit pedestrians and cyclists as it would prevent or delay on -street cycling infrastructure to be 019] -4- installed on Lancaster Avenue, Prince Street and a portion of Riverview Drive which is recommended in MoveSJ. This improvement would complement portions of Harbour Passage already built in Lower West on Market Place West and planned in a portion of the District Park with the same name. This project will place more focus on a portion of Harbour Passage on the West side to complement recent and planned extensions in the South -Central Peninsula. Boars Head Road Sidewalk Extension • Total cost of the project including contingency is $620,000 • Type of project: Capital • City funding request under the AFT program is $372,000 • City funding required over the next five years is $248,000. It is expected this project would be completed over 1 construction season between 2023-2027 when the City has required City share funding budgeted in the City's Capital program. • Estimated substantial completion: 2023 • Overview of the project and benefits: The project would involve the installation of new sidewalks and curbs along Boars Head Road for approximately 340 metres. This project would connect the existing curb and sidewalk on Boars Head Road to an existing curb and sidewalk on Woodward Avenue. The work would also include the installation of a new storm sewer to collect stormwater off the roadway and the existing ditches would be filled in. Once the new curb, sidewalk and storm sewer is installed the section of roadway would be milled and resurfaced with new asphalt. Installing the missing section of curb and sidewalk on Boars Head Road would complete a pedestrian route in the area with sidewalks already constructed on surrounding streets. Two nearby schools and residential development growth planned for the immediate area would also be served by infilling this missing section of sidewalk. SERVICE AND FINANCIAL OUTCOMES The City of Saint John has an opportunity to leverage capital funding from the new Active Transportation Fund (ATF) toward the capital cost of several City active transportation initiatives. This funding, if successful, would help reduce the City capital costs over the next 5 years and support the long-term financial sustainability of the City of Saint John. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS The following City departments were consulted during this process and preparation of the report as well as the selection of projects: Utilities and Infrastructure Services, Public Works and Transportation Services and Strategic Services. ATTACHMENTS N/A 0L! FINANCE COMMITTEE REPORT Report Date March 17, 2022 Meeting Date March 23, 2022 Chairman Gary Sullivan and Members of Finance Committee SUBJECT. Solid Waste Modernization — Procurement and Delivery of Bins and Totes OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Tom McGrath/Tim O'Reilly Mike Hugenholtz John Collin RECOMMENDATION It is recommended that: Finance Committee endorse the allocation of up to $400,000 from capital reserve funds to cover an unfunded portion of the expenses required to implement the new Solid Waste Collection Model. EXECUTIVE SUMMARY Modernization of the City's Solid Waste Model includes: 1. Providing eligible Saint John households "front door" collection of recyclables to assist in diversion of waste from our region's landfill, 2. Continuing to reduce the handling of garbage by City employees for improved employee health and productivity, and 3. A net zero financial impact to City taxpayers. In December, 2021, after a successful pilot of the modified collection service, Common Council endorsed the commencement of a city wide implementation of the new solid waste model. It was identified at that Council meeting that there were many components of the model that required further consideration. Investigation and planning of these components are now underway. Roll -out out of the model for the vast majority of eligible households is clearly defined. Each would receive a new garbage bin as well as two totes for 0M -2- recyclables and one cover. A recommendation to procure and deliver the bins, totes, and covers for the majority of eligible residents will be brought before Council in the coming weeks. As a prelude to that report, City Staff is seeking direction and approval for funds not covered by the 2022 Capital Budget allocation for this solid waste project. The unbudgeted amount is approximately $3601< ($400K including contingency amount). The entire Solid Waste service transformation is expected to cost $2.6M. Accounting for expected saving from waste diversion, revenue from estimated bag tag sales and a yearly 10% operating cost for cart and tote replacement, it is estimated that the investment will be paid back in approximately 6 years. PREVIOUS RESOLUTION On December 13, 2021, it was resolved by Common Council to receive and file M&C 2021-352 "Update on Pilot Program for New Solid Waste Collection Model". STRATEGIC ALIGNMENT The proposed modernization of the City's Solid Waste Service best aligns with two Common Council priorities: • Green — by demonstrating environment stewardship at both the City and resident levels through increasing waste diversion, and • Perform — by managing cost of service delivery, while providing "at your door" recycling services and achieving environmental and employee safety outcomes. BACKGROUND In December 2021, Common Council endorsed the City's Solid Waste Modernization model. The model consists of a City wide collection service that includes the use of City supplied refuse carts which will be picked up via automated hardware on our city refuse packers. The new system of collection will also include curb side recycling pick up for every eligible household in the City. In order to complete this transformation of the service, the City will be required to purchase a quantity of refuse carts and recycle totes. The new system will also incorporate a "Bag Tag" system that will be put in place to control excess refuse that does not fit into the refuse cart. The new system of collection will also include curb side recycling pick up for every eligible household in the City. In order to complete this transformation of the service, the City will be required to purchase a quantity of refuse carts and recycle totes. In February, 2020, the City's Supply Chain Management team undertook the task of obtaining supply agreements for the carts and totes and covers. Supply agreements were awarded on Feb 24, 2020. -3- Commodity Supplier Start Date End Date Refuse cart (180L) Toter, LLC Feb 24, 2020 Feb 28, 2022 Recycling Totes Nova Products Division Feb 24, 2020 Feb 28, 2022 Suppliers submitted new pricing to extend the agreement for purchase of bins and totes for the full program roll -out. Supply chain issues have caused original commodity pricing to increase an average of 35%, which the City's Supply Chain Management team have investigated and found justified. Suppliers have been contacted and are holding those resubmitted prices for the order which City staff are seeking permission to place once complete funding has been approved. In addition to the required purchase of hardware, City staff will also be seeking endorsement from Common Council to obtain deployment services from Toter, LLC. The initial pilot program utilized Publics Works and Parks resources to deliver carts & totes door to door. This proved to be a very big draw on resources. It is City staff's recommendation that the deployment of carts and totes be handled by a 3rd party. In Toter's initial tender documentation, they included a value added service that deals with cart deployment. They have a department that specializes in the logistics surrounding the delivery of carts to households. The City's Supply Chain Management team was approached and it was discussed whether or not this service would require a tender process. It was decided that due to the complex nature of the deployment service and the lack of other vendorsdoing such work that Toter should be used as the service provider for this work. Deployment of bins and totes to the vast majority of residents is planned for June 2022. As stated in the last report to Council, there are many components of the project that still need to be finalized. The Solid Waste Team has begun this work and will make our plans known and we move forward. The timeline for full implementation, as stated in the last report to Council, is to have all eligible City households included in the transformed Solid Waste Collection Model by November 2022. This includes the inclusion of the new curb side recycling collection service. SERVICEAND FINANCIAL OUTCOMES Based on the latest GIS information, as provided by the PNB, the City services approximately 22,000 eligible households with solid waste services. Over 1,000 of these households have already received carts and totes as they were a part of the pilot project. In addition, there are a number of areas in the City that may require a modified model of collection. These areas will be investigated further as the project moves ahead. Also, there are a number of carts and totes still on AA ME hand that were ordered as part of the pilot. City staff estimates an order of 18,600 carts, 21,048 recycle totes (2 / household), and 21,048 lids (utilized for paper/cardboard tote) will meet the requirements of a full city-wide deployment, with the exception of approximately 2,500 households that will require further consultation and analysis as to the method of garbage collection that best suits their existing service. This number may fluctuate slightly to accommodate for full truck load quantities and the acquisition of some spare pa rts. In addition, as stated previously, there is also a fee as part of the 3r1 party service required for the delivery of carts and totes. The Finance Department has confirmed a Capital Allocation in the 2022 budget of $1.63M that has been set aside for the Solid Waste project. Based on the 18,600 households, and the agreed to pricing for carts, totes, covers, and deployment services, the required funding, not included in Capital, is approximately $360K (includes City portion of HST). The request of up to $400,000 in the recommendation of this report accounts for some contingency to this amount. Commodity Cost (each Required Quantity Total PO Totals (before tax) Recycle Tate - Green i22Q - Nova $10.23 21.04S S215,742 Nova Products $519,986 Recycle Tate - Blue (22L) - Nova S10.23 2L.G48 S215,742 Recycle Tote Cover- Blue- Nova S4.20 21.C49 '88,402 Refuse Carts {18OLI-Toter S66..5E 18.603 S1.238,016 Tuter $1,397,926 Deployment Expe^ce( Ca-r - Toter S7.85 18.600 $146,010 Recycle Tate Unloading =ee 53, 900.00 1 S3 900 Total Before Tax $1,907,212 H ST After Rebate $81,769 Total $1,989,580 Capital Allocation 1 $1,630,000 Funding Required (Including HST - after Rebate) 1 $359,580 INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS N/A ATTACHMENTS 01:3 -5- TotaB Cast of Im plem entat(on IProj-t 1 es Pilot (1014 households) Additional Households Cost of Ton I Implementation Carts (180L) & Depioyment Fee Recycle Totes & Lids (22L) Commun?caCcn 5 57,594 24,342 2,624 S 1,397,926 519,886 20,000 S 1,445,520 544,229 22,524 Total Project Expense S 84,560 S 1,927,812 S 2.01"72 Additional Expense-QneTime He W`ng Hanoi -ed7nc c.-Y i62K each'cr I.- trucks) 124,OGO 496,Oa4 520,00G Total Additional Expense $ 124,WO S 496,000 $ 620,O00 Total Net Finanical Impact $ 208,560 S 2,423,812 S 2,632,372 Investment Pavback Schedule Year 1 Year 2 Year 3 Yea r 4 Year 5 Year 6 Year 7 Total Implemetation Lusts 3 2,632,372 S 2,191,114 $ 1,749,857 $ 1,308,599 $ 867,342 S 426,084 -5 15,173 Annual Savings) Revenue Savings From Waste Diversion -$ 182,403 -$ 192,403 -$ 182,403 -$ 182,403 -$ 182,405 -$ 182,405 -$ 182,403 Revenue -5 457,829 -$ 457,829 -$ 457,829 -$ 457,829 -$ 457,829 -$ 457,829 -$ 457,829 Total Annual Savings/ Revenue -3 640,232 -3 540,232 -3 540,232 -3 540,232 -3 540,232 -3 640,232 -3 640,232 Annual CarLq to Maintenance $ 199,975 $ 199,975 $ 198,975 $ 199,975 $ 199,975 $ 199,975 $ 199,975 Remaining Payback $ 2,191,114 $ 1,749,957 $ 1,308,599 $ 367,342 $ 426,084 -$ 15,173 -$ 456,431 Total Households Est. Aviz Net Savin & Revenue P ct/Y'r 22.011 Compost D'vers'on (Savings) S 2,267 � 182,403 Recyc 11 ng Dive rsIon (Savings) 5 6,135 Extra Bag Revenue (Avg 4.2 bags fp-CkLli 5 �1,592 Extra Bag Revenue (Using 2 bags/pi ckup) $ �57,829 Total (1014 Customers) 56,295 64C,232 061