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2022-11-03 Finance Committee Agenda Packet - Open Session
�B City of Saint John Finance Committee - Open Session AGENDA Thursday, November 3, 2022 4:30 pm Meeting Conducted by Electronic Participation 1. Call to Order 2. Approval of Minutes 2.1. Minutes of September 28, 2022 3. Approval of Agenda 4. Disclosures of Conflict of Interest 5. Consent Agenda 5.1. Saint John Police Force and Public Safety Communication Centre - 2023 Operating Budget (Recommendation: Receive for Information) 5.2. Update on Long -Term Financial Plan - General Fund and Utility Fund (Recommendation: Receive for Information) 6. Business Matters 6.1. Unconditional Grant and Tax Base 6.2. 2023 Draft General Fund Operating Budget 6.3. 2023 Utility Fund Operating Budget 7. Adjournment Pages 1-4 5-24 25 - 27 28 - 80 81 - 130 131 - 162 Finance Committee Meeting Open Session September 28, 2022 MINUTES— OPEN SESSION FINANCE COMMITTEE MEETING SEPTEMBER 28, 2022, AT 5:00 PM MEETING CONDUCTED BY ELECTRONIC PARTICIPATION Present: Councillor G. Sullivan Councillor P. Radwan Councillor G. Norton Councillor D. Hickey Absent: Mayor D. Noade Reardon Also Present: City Manager J. Collin 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 Resources S. Hossack Director Engineering and Chief City Engineer M. Baker Director Financial Services J. Forgie Director Financial Services C. Lavigne Intermediate Accountant V. Parikh City Clerk J. Taylor Administrative Officer R. Evans Administrative Assistant K. Tibbits 1. Meeting Called to Order Councillor Sullivan called the Finance Committee open session meeting to order. 2. Approval of Minutes 2.1 Minutes of August 24, 2022 Moved by Councillor Hickey, seconded by Councillor Norton: RESOLVED that the minutes of August 24, 2022 be approved. MOTION CARRIED. 3. Approval of Agenda Moved by Councillor Hickey, seconded by Councillor Norton: RESOLVED that the agenda of September 28, 2022 be approved. MOTION CARRIED. 4. Disclosures of Conflict of Interest No disclosures. 5. Consent Agenda 1 Finance Committee Meeting Open Session September 28, 2022 6. Business Matters 6.1 2022 Bilateral Program Protects — Reserve Funding and Pre -approval of 2023 Utility Program Fundinr? Mr. McGovern noted that the cost of construction has increased significantly which has impacted previous cost estimates on several multi -year projects. Costs were estimated to escalate in accordance with historical and inflationary trends, not the double-digit increases being seen. Mr. Baker reviewed the submitted presentation and discussed how funding might be allocated to complete the projects based on revised engineering estimates. It is in the City's best interest to get tenders out as early as possible. Supplemental funding is required for seven 2022 Bilateral funded projects. The supplemental funding is being requested based on the higher -than -expected tenders received in 2022. Moved by Councillor Norton, seconded by Councillor Radwan: RESOLVED that as recommended in the submitted report 2022 Bilateral Program Projects — Reserve Funding and Pre -approval of 2023 Utility Program Funding, the Finance Committee: • Endorse the approval of the allocation of capital reserve funding ($485,000) for the seven 2022 Bilateral funded projects as noted in Appendix A attached to the Finance Committee Report dated September 21, 2022 and titled 2022 General Fund - Bilateral Program Projects - Supplemental Funding; and • Endorse the allocation of $170,000 of unallocated 2022 General Fund Capital Budget to the seven 2022 Bilateral funded projects as noted in Appendix A; and • Endorse the pre -approval of the proposed 2023 Utility Fund Capital projects (Supplemental Funding) noted in Appendix B attached to the Finance Committee Report dated September 21, 2022 and titled Preapproval of Utility Fund — 2022 Bilateral Program Projects (Supplemental Funding); and • Recommend approval of the above noted items at the next meeting of Council. MOTION CARRIED. 6.2 City of Saint John Natural Infrastructure Fund Mr. Yammine provided an update on the City's funding application to the Natural Infrastructure Fund ("NIF") for Urban Tree Planting within the City of Saint John. Staff identified a list of capital projects that are aligned with the NIF program, Council Priorities for 2021 to 2025 and the 10 Year Strategic Plan. The Urban Tree Planting project was identified as a suitable candidate, taking into consideration the timeline to complete the work and alignment with various plans and priorities. There is opportunity to leverage capital funding from the new Natural Infrastructure Fund toward the City Urban Tree Planting Project. City funding will be covered under the operating budgets of 2023 and 2024. Moved by Councillor Norton, seconded by Councillor Radwan: RESOLVED that the submitted report Natural Infrastructure Fund — City Submission, be received for information. MOTION CARRIED. 6.3 Recommended 2023/2024 General Fund and Utilitv Fund Capital BudEets Mr. Fudge noted that a two-year draft capital budget for both the general fund and utility fund was presented at the last Finance Committee meeting. The two-year capital programs have a combined value of approximately $90M with less than $18M funding through new debt. Mr. Lavigne provided explanation on the minor changes made from the first draft of the budgets, noting that most changes are based on updated information on funding opportunities, feedback from stakeholders, and more certainty around projects, with some projects being moved between budget Finance Committee Meeting Open Session September 28, 2022 years. With the creation of the new Regional Service Commission, contributions are expected from the Commission as it relates to Capital renewal and funding which is included in the updated version. Moved by Councillor Norton, seconded by Councillor Hickey: RESOLVED that as recommended in the submitted report 2023 & 2024 Draft General and Utility Fund Capital Budgets, the Finance Committee adopt the following: • The Finance Committee approve the 2023 and 2024 General Fund Capital Budget for $62,570,055 with City Share of $29,949,247 and Other Share of $32,620,808 and forward to the next meeting of Common Council for receive and file; and • The Finance Committee approve the 2023 and 2024 Utility Fund Capital Budget for $27,237,067 with Utility Share of $9,908,556 and Other Share of $17,328,511 and forward to the next meeting of Common Council for receive and file. LVA IQII:.L[dL1;1:11a. 6.4 Council Professional Development Polic Mr. Fudge noted that Council wanted structure to the way professional development opportunities are budgeted and allocated to elected officials. The Mayor and Council professional development policy sets criteria for eligible professional development activities, establishes protocol on the allocation of budget to Mayor and Council, ensures fairness and equity between Councillors with respect to usage of funds and instills reporting requirements for public transparency. Moved by Councillor Radwan, seconded by Councillor Hickey: RESOLVED that as recommended in the submitted report FAS-027 Mayor & Council Professional Development the Finance Committee endorse FAS-027 Mayor & Council Professional Development Policy as presented and that the Chair of the Finance Committee bring forth a recommendation to Common Council for approval. LVA [•ll[•7►[oL1:1NI1C 6.5 Grant POlicv Update Mr. Fudge stated that Council requested the development of a Grant Policy to strengthen grant oversight with best practices respecting application, eligibility, evaluation, reporting, strategic alignment, and accountability. Mr. Fudge provided an update on the public engagement process and updates to the draft policy since it was first seen in March 2022. Moved by Councillor Hickey, seconded by Councillor Radwan: RESOLVED that as recommended in the submitted report FAS 023 — Grant Policy 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. IQ I I IM ► 1110*1:1 1.111 %, 6.6 Proposed Fundinr? Plan for New Recreation Facility Mr. Fudge stated that eight high impact initiatives were endorsed by Council as priorities for catalytic growth, including 4 key infrastructure projects and 4 advocacy projects. A key infrastructure project is a Comprehensive Recreation Facility, envisioned to be a large multi -purpose facility to replace the City's aging arena with space for sports, recreation, and arts. Although no engineering design or preliminary estimates have been conducted, it is reasonable to assume the construction of this facility could range between $50-60M. For this project to be affordable, funding from other levels of government is required. To construct a catalytic recreation facility, a funding plan is required that is fiscally responsible and does not compromise the goals outlined in the long-term financial plan. An allocation up to $3M peryear ($15M over 5 years) into a Recreation Facility capital reserve would need to be funded from the general operating budget. Finance also recommends consideration of a resolution of Council to direct staff to allocate any annual operating budget surpluses to a Recreation Facility capital reserve throughout the Council term. Moved by Councillor Hickey, seconded by Councillor Norton: Finance Committee Meeting Open Session September 28, 2022 RESOLVED that as recommended in the submitted report Proposed Funding Plan for New Recreation Facility, the Finance Committee endorse the following recommendations: 1. Direct staff to consider including in the draft 2023 General Operating Budget, conditional upon tax base growth and service level requirements, up to $3 million dollars into a Recreation Facility Capital Reserve. 2. Recommend that Common Council resolve to allocate any operating surpluses over the Council term to a Recreation Facility Capital Reserve to support construction of a new Comprehensive Recreation Facility. 3. Recommend that Common Council direct staff to prioritize the pursuit of federal and provincial funding to support the project. 4. Direct the City Manager to discuss the project with the Regional Service Commission to determine if there is regional interest. MOTION CARRIED. 7. Adjournment Moved by Councillor Hickey, seconded by Councillor Norton: RESOLVED that the Finance Committee meeting be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on September 28, 2022, was adjourned at 6:15 pm. i1. REPORT TO SAINT JOHN BOARD OF POLICE COMMISSIONERS OPEN SESSION October 4, 2022 Members of the Board of Police Commissioners SUBJECT Saint John Police Force and Public Safety Communication Centre — 2023 Operating Budget BACKGROUND The purpose of this report is to provide the Saint John Board of Police Commissioners an overview of the 2023 Operating Budgets for the Saint John Police Force and the Public Safety Communication Centre. REPORT Saint John Police Force Operatina Budget The overall budget for expenditures is $28,247,479 which consist of salaries and benefits of $23,754,062 and good and services of $4,493,417. The overall increase in wages and benefits complies with the wage escalation policy. There is an addition position included in the 2023 budget which is a civilian non -union body camera coordinator and was identified as a need during the 2022 budget presentation. Goods and Services submission is a significant increase over the previous year's budget, which has been mainly frozen since 2020. The previous year's budget submission highlighted several budgetary pressures that would materialize in 2023. These pressure's 61 Members of the Board of Police Commissioners October 4, 2022 Page 2 Subject: Saint John Police Force & PSCC 2023 Operating Budget included upcoming costs related to update the Force's records management system, increase for body camera system, need to segregate data on a separate servers and other information technology pressures. The 2023 budget also has a number for unforeseen budget pressures such as inflationary increases related to insurance, fuel, ammunition, patrol equipment and various other goods and services. The increase in goods and services over the 2022 operating budget is $715,342. Summary below provides a high-level overview of the increases in goods dnd services. Budget Variance Technology Pressures 474,226.00 Body Camera, Records Management, IT infrastructure Vehicles 82,631.00 Insurance, Fuel Cost Legal 50,000.00 Contract negations preparation Building Maintenance 28,650.00 Increase Internal Charges Patrol Equipment 21,000.00 General Cost Increase Identification Division 17,500.00 50CA, Accident Reconstruction Ammunition 15,000.00 Increase cost of ammunition 689, 007.00 The budgetary pressures known last year, as well as the pressures due to the current economic environment cannot be offset within the existing goods and services budget. The revenue budget for 2023 will be a total of $275,000 which is a decrease of $250,000 over the past year. The largest driver of the decrease relates to secondment revenue which will be zero for 2023. Public Safety Communication Centre The 2023 budget submission is $2,976,457 which is an increase of $187,034 over the 2022 approved budget. Wages and benefits proposed increase is $93,139 and goods and service increase being proposed is $93,895. The salary and benefits budget complies with the wage escalation policy. Staffing does remain a challenge in the Centre and will continue to be the focus of management to recruit and maintain staffing levels. C.1 Members of the Board of Police Commissioners October 4, 2022 Page 3 Subject. Saint John Police Force & PSCC 2023 Operating Budget On the expenditure side the only major increase in the annual cost of the Centre's new CAD system which is estimated at an additional $80,000. There are some minor cost increases for other goods and service and to replace some equipment in the Centre. Revenue projections for 2023 are anticipated to be $1,247,670 which is a minor increase of $33,870 over 2022. Conclusion The Police Force has consistently been good corporate citizens and have managed their budget accordingly to provide best value for taxpayers. However, as the Force along with City has entered a new era as it comes to Cyber Security. The investments that are being made in the Records Management System and CAD System has an increase in annual operating costs as shown in the 2023 budget submission. The Force will continue to be diligent managing the operating budget however, there is very little control over rising fuel prices, increasing insurance rates, legal costs, vehicle maintenance parts cost as examples and these types of expenditures are not in the control of the Force. RECOMMENDATION It is recommended that the Board approve the additional civilian body camera coordinator position as identified and the 2023 Operating Budget for the Saint John Police Force and the Public Safety Communication Centre as presented and forward the budget and resolution to the next meeting of Finance Committee. Attached reports and documents: • Appendix 1 - Saint John Police Force 2023 Operating Budget • Appendix 2 - Public Safety Communications Centre 2023 Operating Budget Respectfully submitted, Craig Lavigne, CPA, H.B.Com FINAN IAL CONTROLLER Robert M. Bruce CHIEF OF POLICE r� The Saint John Police Force 2023 Operating Budget f - 2023 2022 Budget Budget Expenditures by Division Administrative Services 1,987,487 1,835,003 Saint John Board of Police Commission 116,350 112,050 Support Services Division 1,925,494 2,224,375 Criminal Investigative Division 4,623,244 4,398,533 Patrol and Operations Services Division 17,342,680 15,136,000 Detention Services 179,975 176,575 Facility Management Services 966,100 937,450 Fleet Services 1,106,149 1,023,518 Total Expenditures by Division 28,247,479 25,843,504 Revenues Secondments - 200,000 Prisoner Lodging 75,000 75,000 Accident Reports 20,000 20,000 Extra Duty Charges 50,000 100,000 Province of NB Cost Sharing Tunnel 55,000 55,000 Other Revenues 75,000 75,000 Total Revenues 275,000 525,000 Expenditures by Category Salaries and Benefits General Services 2023 2022 Budget Budget 23,754,062 22,065,429 477,010 453,500 Insurance 90,000 80,700 Professional Services 358,400 315,000 Other Purchased Services 209,250 158,500 Repairs and Maintenance 668,090 115,150 Rentals 967,900 1,065,000 Purchased Goods 336,725 301,700 Internal Charges 960,642 868,375 Asset Purchases 425,400 420,150 Total Expenditures by Category 28,247,479 25,843,504 E:3 Public Saftey Communications 2023 Operating Budget 2023 2022 Budget Budget Expenditures by Category Salaries and Benefits 2,S72,889 2,479,7S0 General Services 294,286 214,686 Repairs and Maintenance 44,000 42,000 Rentals 1,100 1,100 Purchased Goods 24,S00 17,000 Computers 34,682 33,887 Asset Purchases S,000 1,000 Total Expenditures by Category 2,976,457 2,789,423 Revenues 1,247,670 1,213,800 • I &I �) mo - n.,-, Meg • .C: O fa � ca U O N 4-) E N U N > L O Ln N O OU U O •fa U > •� 0- 0 U E -0 > O 4�-+ O , U ate-+ L- � CC cn }, ca U N •— C: ! 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Update on Long Term Financial Plan — General Fund and Utility Fund OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Craig Lavigne J. Brent McGovern/Kevin Fudge John Collin RECOMMENDATION It is recommended that members of the Finance Committee receive and file this report. EXECUTIVE SUMMARY The purpose of this report is to provide Finance Committee with an update on timelines regarding the Long -Term Financial Plans for both the Utility Fund and General Fund. The timeline established as part of the 2022 work plan was to bring forward to the Finance Committee an updated General Fund Long Term Financial Plan as well as the first Long Term Financial Plan for the Utility Fund by the 4tn Quarter of 2022. The proposed timelines for the completion and presentation of the two plans will be the 15t Quarter of 2023. PREVIOUS RESOLUTIONS N/A STRATEGIC ALIGNMENT This report aligns with Council's Priority of Perform. The Long -Term Financial Plan for the General Fund is one the most important plans approved by Common Council. The plan sets out the financial principles, financial targets, and a roadmap for how the City should perform financially. The first Utility Fund plan will also set out the financial road map with targets and principles embedded in it. i►R -2- REPORT The purpose of this report is to provide Finance Committee an update on timelines with the Long -Term Financial Plans for both the Utility Fund and General Fund. The timeline established as part of the 2022 work plan was to bring forward to the Finance Committee an updated General Fund Long Term Financial Plan as well as the first Long Term Financial Plan for the Utility Fund by the 41h Quarter of 2022. The economic environment has changed drastically throughout the year. The Bank of Canada has raised interest rates six times thus far in 2022. The first-rate increase occurred on March 2, 2022 which moved that rate from .25 basis point to .50 basis points. The most recent rate announcement occurred on October 26, 2022, bringing the rate up to 3.75%. Along with interest rate hikes the inflation rates seen in 2022 are the highest seen in almost 40 years. Inflation appears to be slowing down, however the next major issue facing Canadian is the possibility of a recession. For the City of Saint John, the 2023 tax assessment grew by 8.76% which is up from 6.24% in 2022. The strong housing market has been the driver of much of the assessment growth. The Province also announced changes to the tax differential for Commercial and Heavy Industry for 2023, along with changes that will reduce the amount the City will receive in Unconditional Grant in the future. The General Fund's current plan did not anticipate how volatile the current economic environment would be, the impact of Provincial tax reforms and Unconditional Grant change, as well as the potential for the City to reduce it tax rate by 16.5 cents over two years. The Utility Fund model for the long-term plan has been drafted with the assistance of a 3rd party consultant. The model will take into consideration several factors, but the main driver will be the impacts of moving to Universal Metering for all potable users. The plan for the Utility is complicated due to the very large infrastructure deficit, lower growth rate than the General fund and the pressure of maintaining rates. Conclusion In conclusion, both plans are at different stages of completion, as there are many financial factors, as stated, which need to be carefully considered when providing the best plan moving forward for both funds. Staff are advising the Finance Committee that the workplan will reflect changing the completion and presentation of both long-term financial plans from Q4 of 2022 to Q1 of 2023. MCI -3- SERVICEAND FINANCIAL OUTCOMES N/A INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS N/A ATTACHMENTS N/A WA '4 v 1 4-1 m oo � loJ 'U m E ,c: O m C: N Q E L- L E > vi N p p 0 O E ca 0 U N iz O — N C: O ca > OO � p cn ca Z CC N E w I O O 0 in N ca � 'U E p L > 4— 0 � O ca f +5 CL U U O 0 Ln V .0 = 0 0 0 0 0 M a--+ a--+ 4-) 4-) a--+ to c 0-0 U'�'ca n'>- X n U O O N +� O 7_n cn +_+ = O O �i cn a..r O O � — � — U ca c N � aID . 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IL }'� O0 •�Q �}'a) 0� U-0 I � •— N N- �•U �O N+j a) E� �� 00 0 �� �00 '�•C: Ez M� U m �� 0 •NNE a�oN-0 cn 0 U N 'f6 N — 'm N +-+ .— �� W •— i cn U � ' �. � atej 0 0 N ^ �+_+ N O U N N� � —gym N M— u a) 0 a Q Q •V OU m •V i > 0 �a.� Q> �>U Q 0-0 N +�� a)Xm DN O ir E��Q �.— �_0 �m OW�W fi z r z ri W L O O P1 .� � buo O CL � O � U � � Ov bn U ate-+ N C _ ' U m U- C: a_ c O O U U c: X ca > O w E N , + '> N O O E 4- U O a_ -P rl N N O rq 0 Report ot the ?rnvinrial Mi grrangeme ;mne.wirk pert Panel c ipal Fiscal Vibrant and Sustainable Communities - Community Funding and Equalization Grants Executive Summary Provincial -Municipal Grant Funding in New Brunswick - A brief History Provincial -Municipal Transfers Provincial -Municipal transfer systems across Canada Equalization Grants and Unconditional Transfers Unconditional Transfers Provincial -Municipal Revenue Sharing Changing Economy and Society Panel Recommendations 0 6 7 9 10 11 11 12 14 AI 2 Vibrant and Sustainable Communities - Community Funding and Equalization Grants Executive Summary The Expert Panel was tasked with identifying, assessing, and proposing options related to a new system of fiscal transfers between the Province of New Brunswick and Local Government entities suited to the new local governance system as laid out in Working Together for vibrant and sustainable Communities, White Paper, 2021. The Panel was asked specifically to examine the system of community financing and equalization grants and to recommend a new system of fiscal transfers between the Province and Local Governments. The Panel researched the history of Provincial -Municipal transfers in New Brunswick and in Canada to study success and failure in meeting their intended purposes especially regarding equalization. Differences in approaches in the use of conditional and unconditional grants, utilization of other revenue sources to supplement property tax and user fees were all examined in the context of the reforms to local government as set out in the White Paper. The Terms of Reference for the Expert Panel are attached for ease of reference. Phase Two Finances, as outlined in the White Paper, was not part of the work of the Panel and time did not permit a thorough review that is essential as reforms progress. The Panel does however recognize that a new equalization formula cannot be looked at in isolation of an overall funding strategy and as such has some recommendations for Phase 2 deliberations. The vision for the future of local governments in New Brunswick is clearly and succinctly articulated in the White Paper as vibrant and sustainable communities working together to enhance the quality of life for all New Brunswickers. This policy objective clearly sets the stage for the collective efforts of all New Brunswickers and their local governments to work toward achieving. This is the first significant strategic reform of local government in New Brunswick in 55 years. The province will move from 340 local entities to 77 local governments and 12 rural I' districts. Collaboration is key to reform and as such the mandates of the 12 Regional Service Commissions will be strengthened to promote cooperation and collaboration among communities in regions. To guide its work on recommending a new system of fiscal transfers the Panel turned to the White Paper's guiding principles and criteria used in its strategic restructuring. Of particular importance were the following: 1. upholding the principles of Equal Opportunity such that all New Brunswickers enjoy comparable minimum standards of services and opportunities at comparable tax rates, regardless of the financial and economic opportunities of their locale. 2. increasing the capacity of communities through larger tax bases such that residents enjoy a higher and more sustainable level of service Principles The goal of equalization is to allow citizens to receive a reasonably comparable level of service at a reasonably comparable level of taxation. In Canada, Equalization is embedded in the Constitution: "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation". (Subsection 36(2) of the Constitution Act, 1982) In our report, the goal is to increase the fiscal capacity of municipalities such that municipalities have the financial resources to allow them to offer comparable services at a reasonable, yet comparable level of taxation The proposed formula does not identify or dictate which services should be offered by municipalities but rather respects the autonomy of locally elected officials to make these decisions. Thus, services across municipalities may vary. M rd The Panel recommends the following: 1 - The formula is based on fiscal capacity to equip local governments with a grant that will enable them to grow their tax rates to meet the average of their group. 2 - Five groupings of municipalities as follows: 1 - Cities with a population of more than 40,000 2 - Cities with a population of less than 40,000 3 - Municipalities with a population of more than 10,000 4 - Municipalities with a population of less than 10,000 5 - Rural districts 3 - Transition period of five years 4 - Elimination of the core funding grant in the equalization program. 5 - Additional services offered by the Regional Service Commissions to be funded 50/50 by the provincial government and the municipalities. The province's share should be linked to the tax base, increasing as the value of the tax base increases, distributed on a per capita basis. 6 - The Panel recommends that the Equalization formula includes a component to recognize that roads in old local service districts (LSDs) will be financed by the provincial government. 7 - The Panel recommends that the Equalization Program should have an initial budget sufficient to bring everybody's capacity at their groups average. 8 - The Panel recommends that in the future, the Equalization Program budget be increase proportional to the increase of the province's tax base. 9 - The Panel recommends that the three-year averages be used for tax base and population, to reduce fluctuation and increase certainty for program recipients. 10 - The Panel recommends that the Equalization Formula be reviewed at the end of the five-year transition period to ensure it remains valid and more work be conducted in Phase 2 - Finances on other potential revenue sources that may be more appropriate after five years of experience with the reforms. 11 - The Panel recommends that varied potential additional revenue sources be further explored in Phase 2 - Finances. AEII 12 - The Panel recommends an analysis of the province's property assessment process, as it is a fundamental element of the Equalization Program. ARI C: Provincial -Municipal Grant Funding in New Brunswick - A brief History The history of provincial -municipal funding arrangements in New Brunswick has been well documented and studied in the years since the 1963 New Brunswick Royal Commission on Finance and Municipal Taxation commonly known as the Byrne Report. The report recommended a new governance model as key to a prosperous and self- sufficient New Brunswick. The Province would assume responsibility for the provision and financing of services to people such as education, health, justice, and social services while local governments would provide services and funding to properties. Property taxes from tax rates on both residential and non-residential property were the main sources of revenue for this new municipal governance model. Other municipal revenue was raised by various fees levied on property for such things as water and wastewater disposal. As the Province required more revenue for services for which it was responsible than it could raise through its own sources, namely income tax, sales tax, and federal transfers, it was determined that the Province and local governments would share the property tax field. That is to say, that both the Province and local governments would levy taxes on real property. Additional tax revenue was also required by the Province as it retained responsibility for the provision and payment of municipal -like services for LSDs. This sharing of property tax room remains to this day. Byrne acknowledged the need for provincial -municipal grant funding to complement the revenue raised by property tax. An unconditional core funding grant was put in place for municipalities to cover the fiscal gap created due to insufficient property tax revenue to cover the expenditure needs of municipalities. In support of the principles of Equal Opportunity an equalization grant was instituted to address differences in the capacity of municipalities' ability to raise revenues to provide comparable services at comparable tax rates. C�� 7 Provincial -Municipal Transfers History shows that the original formulas were amended or suspended with regularity over the years. From 1974 until 2021 the formula was amended seven times to incorporate such variables as density, expenditures, average expenditures, and fiscal capacity. Equalization necessitates the grouping of reasonably similar types of communities to allow for fair comparisons regarding relative financial need and or capacity. Communities with similar populations have similar service demands and as such offer a reasonable basis for comparison purposes. Over the years the grouping methodologies have changed to reflect for example new census information or changes to the industrial base of any given community. In 2008, the Finn Report, Building Stronger Local Governments and Regions, proposed sweeping reform of local governance including their fiscal arrangements. This was the first system wide review and recommendations for the future of local governance since the 60s. The preservation of the basic premise of Equal Opportunity in Finn's proposed governance model, set the tone for fiscal reform. It endorsed a new equalization formula based on three groupings of municipalities by population, elimination of the unconditional grant or core funding, and proposed a tax room transfer. The Province would vacate a portion of the Provincial share of property tax allowing local governments to occupy that space. The Finn report was not implemented but it helped inform the 2021 White Paper. The 2001 Action Plan for a New Local Governance System in New Brunswick addressed community funding arrangements and introduced generally accepted Principles of Public Finance to guide the development of a new formula for funding. The principles enunciated were equity, accountability, predictability, simplicity, and viability. They remain as relevant a decade later and they guided the Panel's formulation of the recommended 2022 equalization formula. The Community Funding and Equalization Grant was implemented in 2013 and included changes to the cost sharing of policing services and local taxation for LSDs. The grant included an unconditional transfer payment for core funding and the Equalization grant was tied to expenditure and fiscal capacity. The Community Funding and Equalization Grant addressed the principles of predictability, stability, and simplicity. This formula remained in place until 2021 AYA The history of the efforts of many governments, municipal organizations, and various experts at designing an equalization formula that is acceptable to local governments and the provincial government has proven to be problematic over the years. The formula applications over the years and the suspensions of various formulas for prolonged periods have shown that unanticipated consequences can and do occur: - A formula based on fiscal effort which took municipalities expenditures into consideration, resulted in rewarding spending, which greatly benefited some and penalized others. - At its highest the grant pool funded 32.2% of net budgets because of the absence of a fully functioning formula. The unconditional grant was not a reflection of the municipalities' needs nor of their ability to raise revenue. - Years of reductions in provincial funding as a cost -saving measure reduced the size of the grant pool resulting in higher property taxes and/or a decrease in municipal services. - Poorly designed formulas or lack of formulas did not serve their intended purpose of increasing the fiscal capacity and financial autonomy of local governments and thereby reducing or eliminating dependence on provincial transfers. - The Principles of Public Finance often did not guide the development of the funding mechanisms such that they were perceived as fair, providing adequate funding to meet local governments' needs, simple, easily understood and explained, transparent and providing adequate funding to facilitate longer term planning. C�:3 9 Provincial -Municipal transfer systems across Canada The White Paper of 2021's policy objective of vibrant and sustainable communities can only be realized if local governments have the necessary resources to meet their existing needs and to finance their evolving mandates. All municipalities across Canada have many of the same challenges as those in New Brunswick and although there are similarities in the provincial -municipal arrangements across Canada there are also some marked differences. The Panel looked at funding arrangements of municipalities and regions of provinces including the cities. C1'] 10 Equalization Grants and Unconditional Transfers Provincial -Municipal equalization grants in Canada all have the same goal of ensuring that local governments can provide reasonably comparable levels of service at reasonably comparable tax rates to their citizens. The notion of Provincial -Municipal equalization is based on the Federal -Provincial Equalization embedded in Subsection 36 (2) of the Constitution Act, 1982. The Act states: "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." These transfers can be unconditional and come in the form of revenue sharing or as equalization or other schemes. Transfers can also take the form of conditional grants which as the name suggests, come with prescribed conditions for their use. Both kinds of grants have a role in municipal funding: Unconditional grants provide autonomy to local governments to determine the priorities of its citizens in terms of services and programs they expect. They require that local governments be accountable for policy decisions and for the execution of those decisions. Conditional Transfers Conditional grants are the most used form of provincial -municipal transfers in Canada. Alberta is an outlier receiving 100% of its provincial -municipal transfers as conditional grants. By contrast, New Brunswick receives 35% conditional grants. Conditional grants are generally used in the funding of capital projects or for the provision of services and programs that are of benefit to both the provincial and local government. The largest conditional transfers in Canada are for transportation, infrastructure, environment (water and sewage) and in Ontario and Alberta for social services. The federal government also funds federal -municipal initiatives of interest to both levels as conditional grants. 11 The Panel is of the view that unconditional grants allow more autonomy to local governments to set their own priorities in the provision of services for which they are fully accountable to the citizenry. As noted above however conditional grants are suited to the realization of initiatives that benefit both local governments and provincial and federal governments and for the provision of social services. Unconditional Transfers The systems of provincial -municipal transfers in Canada bear similarities in how municipal governments are funded for the purpose of equalization and reducing fiscal gaps. Unconditional equalization grants form a component of provincial -municipal transfers in British Columbia, Ontario, Quebec, New Brunswick, Prince Edward Island and Nova Scotia. The criteria for receipt of equalization and the ensuing formulas differ from province to province reflecting their geographies, municipal remoteness, and the economic viability of certain areas of provinces. As can be seen from the following, equalization grants in Canada serve the purpose of bringing areas of a province to a comparable level of services at a comparable tax rate but different approaches are taken to reach this end. Briefly, equalization grants in the six provinces are as follows: Quebec, New Brunswick, and Nova Scotia equalization grants are based on a recognition of fiscal need and fiscal capacity, while Newfoundland and Labrador base its grant on population and a remoteness index. Prince Edward Island's equalization grant is based on non -farm property assessment British Columbia and Ontario provide equalization grants to small communities, northern and rural municipalities targeting those with challenging fiscal circumstances. Provincial -Municipal Revenue Sharing There has been some movement towards provincial -municipal revenue sharing in Canada, but it is not the norm. Municipalities, especially the largest cities, have long called for access to more tax revenue to supplement revenues from property tax and user fees. 71 12 Sharing tax room, tax room transfer, or imposition of municipal sales tax or income tax are all examples of diversifying the tax revenue mix in municipalities. As provinces ask local governments to assume more responsibilities for various social and economic programs traditionally provided by provincial governments, local governments will require revenue over and above the revenue derived from their traditional sources. Changing Economy and Society New Brunswick's society and economy are in transition. Covid-19 changed the way we live, work, and spend our money. As examples, many workers who worked in traditional spaces such as office buildings made the transition to home offices and may never return to those spaces. E-Commerce has changed the way we shop thereby requiring stores and malls to adapt, repurpose or close their doors. The population of New Brunswick has grown rapidly in the past five years. Latest Stats Can statistics report a population of more than 800,000 with an increase of 15,000 new residents in 2021-22 alone. This bodes well for the economy and for the growth of our municipalities. Demand for housing and new business opportunities will increase our overall wealth. With a growing population and changing economy come many opportunities to grow a prosperous province. However, with growth comes societal challenges that municipalities in New Brunswick and across Canada are experiencing such as homelessness, mental health issues and poverty. The White Paper acknowledges the important role municipalities play in service delivery and the importance of regional cooperation in realizing the vision of vibrant and sustainable communities. Municipalities are best placed to deliver services as they have the capacity to understand those factors that are unique to their own community. Building on the success of the Regional Service Commissions, the mandates of the Commissions will be expanded to include economic development, community development, regional tourism 13 promotion, regional transportation, and cost -sharing on recreational infrastructure. This enlarged mandate that moves from a strict provision of services to property to one that includes services to people comes with a price. Property tax and user fees alone will not provide adequate revenue for the new reality. As provinces ask local government to assume more responsibilities for various social and economic programs and services traditionally provided by provincial governments, local governments will require revenue over and above the revenue derived from their traditional sources. The Panel examined examples of provincial -municipal revenue sharing programs in Canada and potential sources of New Brunswick provincial revenue that could be shared with municipalities for the purposes of equalization, replacement of core funding, and for the expanded mandates of the Regional Service Commissions. Provincial -Municipal Revenue Sharing Three provinces, namely British Columbia, Saskatchewan and Quebec have some form of revenue sharing: British Columbia transfers 100% of net revenues from traffic fines to municipalities as well as 10% of the net casino gambling revenues from community casinos and community gambling centers in their jurisdiction. This revenue transfer is unconditional. Saskatchewan has a long-term revenue sharing program with its municipalities linked to the performance of the province's economy. It shares 0.75 of one full point of Provincial Sales Tax distributed on a per capita basis to cities, towns, villages, and resort villages and rural municipalities receive their share through an unconditional grant formula. Quebec shares natural resource royalty revenue with municipalities that have mining or oil and gas production. Since 2021, all Quebec municipalities receive a share of the growth of one percentage point of the Quebec Sales Tax. In these three provinces then, revenue sharing with municipalities comes primarily from fines and gaming revenues in one province, to a share of provincial sales tax in the others. 150 14 The Panel examined the following potential revenue streams in New Brunswick that are available to the Province that could be shared with municipalities, including to support the new mandates of the Regional Service Commissions: -Cannabis tax -Enhanced GST/HST rebate for local governments -Property tax exemption for local government -owned property -Property Tax Room Transfer -Provincial Sales Tax Panel Recommendations This report set out to provide a context for the Panel's recommendations on provincial - municipal fiscal arrangements. An understanding of the evolution of these arrangements in New Brunswick and learning from the methodologies of fiscal arrangements of other jurisdictions in Canada helped guide its work. Of particular importance were respecting the Principles of Public Finance and the White Paper's guiding principles and criteria used in its strategic restructuring. These informed the Panel's thinking and subsequent recommendations. Equalization The focus of the new equalization program is on capacity such that municipalities with less resources are brought to the provincial average. The formula does not identify or dictate which services should be offered by municipalities but rather it is left to locally elected officials to make those decisions. The goal of the formula is to ensure municipalities have the financial resources to allow them to offer comparable services at a comparable level of taxation. 1. Methodology All municipalities have their own unique characteristics. Equalization, however, necessitates the identification of reasonably similar types of communities to allow for fair comparisons rLl 15 regarding relative financial need. Groupings of communities based on population are most likely to have similar service and similar capacity to pay for these services. The Finn Report proposed three groupings: less than 10,000, 10,000 to 40,000 and more than 40,000. The present equalization program has eight categories plus another for LSDs for a total of nine categories. The Panel recognizes that there are differences in New Brunswick's municipalities that require the creation of groupings. We also recognize that regional hubs have special characteristics including those hubs whose population does not exceed 40,000. As such, we have created a group of cities with a population of less than 40,000. Finally, we have created a separate group for rural districts. The Panel proposes five groupings as follows: 1- Cities with a population of more than 40,000 2 - Cities with a population of less than 40,000 3 - Municipalities with a population of more than 10,000 4 - Municipalities with a population of less than 10,000 5 - Rural districts 2. Formula The following principles from the White Paper informed the formulation of a new equalization program: 1 - upholding the principles of Equal Opportunity such that all New Brunswickers enjoy comparable minimum standards of services and opportunities at comparable tax rates, regardless of the financial and economic opportunities of their local. 2 - increasing the capacity of communities through larger tax bases such that residents enjoy a higher and more sustainable level of service. The formula proposed by the Panel compares the municipality's tax base per capita with the tax base per capita average for the group. The steps are as followed: 1. Compare average tax base per capita vs average tax base per capita of the municipality's group 01 16 Measure the dollar value of the gap to measure the equalization that the municipality should receive: Gap X population X average tax rate of the group / 100 If the municipality's own tax rate is below the group average, the municipality's tax rate should be used in the above calculation. This is to represent fairness. Equalization's goal is to increase the capacity of the less wealthy municipalities. To receive equalization based on the group average, the municipality should minimally tax its own taxpayers at the group's average. If its own tax rate is below this average, equalization should be based on the rate it taxes its own citizens. To calculate the tax base, we recognize that municipalities will be able to tax non- residential properties at a ratio between 1.4 and 1.7 of the residential rate. The formula must include this additional flexibility offered to municipalities. We also assume that tax rates in former LSDs will increase to cover their share of the administrative cost of the new municipalities. Starting year 2, the calculation of equalizations grants needs to be revised annually to consider the variation in the tax base per capita, as well as tax rate variations. 3. A Transition Period The proposed equalization program presents important changes to many municipalities. Some will benefit, while others, because of the elimination of the core funding, but also the impact of the mergers associated with the reform, will receive less in transfers. To guarantee a smooth transition, but also to give managers the time to take appropriate actions, the Panel proposes a five-year transition period, as follows: Year 1: 20% new program, 80% old program Year 2: 40% new program, 60% old program Year 3: 60% new program, 40% old program Year 4: 80% new program, 20% old program Year 5: 100% new program, 0% old program Note that the White Paper announced that a second phase of finance reform would be developed in 2024. To quote the White Paper "the intent is to bring forward further changes related to finances before January 1, 2025". In the transition period that we propose, assuming an implementation in 2023, the phase out of the transition period would correspond to the implementation of the changes from phase 2 of finance reform. NQ 17 4. Elimination of Core Funding The Panel recommends that the core funding grant be eliminated from the equalization program. The equalization program should be limited to increasing the capacity of municipalities whose asset base per capita is below the average of their group. The broader questions of municipal financing will be addressed in phase 2 of finance reform, in 2024. Considering that the proposed change will have an important impact on some municipalities, we have proposed a five-year transition period. Furthermore, a temporary partial compensation to municipalities losing as a result from these changes is presented in the section titled "Roads". 5. Regional Service Commission Additional services offered by the Regional Service Commissions are often services which in the past were offered by the provincial government. The Panel recommends that these additional services be funded 50/50 by the provincial government and the municipalities. The province's share should be linked to the tax base, increasing as the value of the tax base increases, distributed on a per capita basis, which will be through a property tax room transfer from the Province. 6. Roads With the reform, the provincial government will maintain responsibility for roads in old LSDs. This is a form of subsidy that will be unevenly distributed: some municipalities will be benefiting more than others. Consequently, to recognize this fact, the Panel proposes that in the calculation of the equalization to be paid to municipalities, the value of the province's contribution for roads in old LSDs should de deducted from the equalization amount that the municipality would receive. In other words, the fiscal capacity measure (average tax base per capita) should be modified to consider the fact that the province will be paying for roads outside the municipal budget in the old LSD. The amounts deducted from the equalization payments should then be redistributed prorated, for the transition period, to all municipalities losing money with the new equalization program compared to the previous one. For example, if the total amount of the reduction in equalization a result of the provincial road financing for LSDs is 16 million dollars and if the total reduction of transfers to municipalities receiving less money is 28 NO IN million dollars, each municipality experiencing a reduction in total grants would receive a temporary compensation of 57,1 % (16/28) of the reduction. This would only be temporary, before the second phase of fiscal reform announced in the Department's White Paper takes effect. 7. Initial Budget The Panel recommends that the Equalization Program should have the funds required to bring those municipalities eligible for equalization to the group's average capacity. To estimate the amount required, we must add all individual equalization amounts for which municipalities qualify based on the formula. This calculation will generate the initial budget for the equalization budget. 8. Future Budget Adjustments After the initial year, the fiscal and financial reality will change. The equalization budget should be modified to consider these changes. One option would be to increase the budget based on inflation, measured using the consumer price index (CPI). The Panel does not favor this approach as this is linked to expenditures while the principle we propose in the equalization formula is one of capacity. Therefore, the Panel recommends that the program's budget be increased annually proportionally to the average increase in the province's tax base. 9. Three -Year Averages Municipalities will benefit from certainty and stability in the program. This will improve municipalities' capacity to do more long-term planning. Consequently, the Panel recommends that in the future, three-year averages (the given year and the two previous years) be used to calculate equalization. Considering that the Panel is proposing a transition period for the program, the implementation of this three-year average component would be rolled out during the first three years of the new program. The first year, the data for this given year would be used. For the second year, it would be the average of the first year and the second year. The third year, and every year thereafter, the data for the given year and the two previous years would be used. The weight of all years would be equal (1 /3 per year when using three years). rE:3 19 10. Evaluation of Equalization Program In five years, after the completion of phase 2 of finance reform, we recommend that the equalization program should be the subject of a new analysis. The impact of municipal reform will be clearer. At this time, it is still too early to know how the new municipalities will ultimately operate (for example, what new services will be offered in old LSDs). Phase 2 of finance reform will possibly require revisiting the equalization program. Finally, any weaknesses of the proposed program could be analyzed, with the benefit of experience, and improvement proposed. 11. Recommendation - Revenue Sharing The Panel examined expected tax revenues from various sources to assess the appropriateness as mechanisms to diversify the revenue base for local governments. The Panel recommends that these varied potential revenue sources be further explored in Phase 2 - Finances. 12. Property Assessment Process The proposed equalization program is highly dependent on the assessment process to estimate property values. To not only increase the confidence in the assessment process, but also guarantee that the program's objectives are truly met, the Panel recommends an analysis of the province's property assessment process. One of the objectives of this assessment would be to identify any regional differences in assessment, where the difference between the assessed value and the market value would be different across the province. If this is the case, recommendations would be proposed to improve the situation. ADDITIONAL ELEMENTS Police Services In the past, a component for police services was included in equalization. One reason for this was that the financing from LSDs was capped. This is no longer the case. Furthermore, the proposed equalization formula is based on capacity, allowing local leaders to make decisions with respect to what services are going to be offered, but also how they are going to be offered. The Panel considers that the equalization program should not be modified to consider those choices. It should only allow local leaders to be able to make decisions. r0%] C Potential Claw back Is there a maximum level of equalization that a municipality should receive? If we are to set a maximum level, what should that level be? These are difficult questions to answer. In the last provincial budget (2022-2023 Budget Speech), we can see that the government of New Brunswick receives 21.9% of its revenue from the federal equalization program. This could be a threshold. The threshold could also be higher, 25% for example. If a claw back is applied, should it be a hard number or a gradual reduction? One possibility would be to start a claw back at 25% of revenues from equalization. Over that amount, the municipality could only keep the additional equalization if its tax rate is above its group average - which is a concrete demonstration of need - and that this additional equalization would be in proportion to the relative difference between the municipality's tax rate and the average tax rate of the group. For example, if the municipality's tax rate is 30% above the groups' average, it would keep 30% of the equalization of the 25% threshold. E:ii] W�A[ d :.:'T FINANCE COMMITTEE REPORT Report Date October 26, 2022 Meeting Date November 3, 2022 Chairman Sullivan and Members of the Finance Committee SUBJECT: 2023 Proposed General Fund Operating Budget OPEN OR CLOSED SESSION This matter is to be discussed in open session of the Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Craig Lavigne Kevin Fudge John Collin RECOMMENDATION It is recommended that the Finance Committee reflect upon the proposed 2023 General Fund Operating Budget, make all inquiries to staff and receive and file the report. EXECUTIVE SUMMARY The proposed 2023 General Operating Budget will be presented to the Finance Committee on November 3rd, 2022. The budget has been produced based on Council's strategic priorities, 10-year Strategic Plan, as well as on the principles, policies and targets contained in the City's Long Term Financial Plan. The proposed 2023 General Operating Budget totals $176,439,982, up 7.1% year over year. The budget includes a property tax rate reduction of 9.0 cents, from $1.71 to $1.62 per $100 of assessed value. If approved by Council, the 2023 property tax rate would be reduced by a total of 16.5 cents or 9.24% reduction over the last two years. The budget also incorporates moving the tax differential for Commercial and Heavy Industry from 1.5 to 1.7 which aligns the City's strategy on tax reform. PREVIOUS RESOLUTION N/A E:1iI -2- STRATEGIC ALIGNMENT The proposed 2023 draft General Fund Operating Budget is aligned with Councils' priorities, the 10-year Strategic Plan, the City's financial policies and plans, and strategic operational plans. REPORT The proposed 2023 General Operating Budget will be presented to the Finance Committee on November 3rd, 2022. The budget has been produced based on Council's strategic priorities, 10-year Strategic Plan as well as on the principles, policies and targets contained in the City's Long Term Financial Plan. The proposed 2023 General Operating Budget totals $176,439,982, up 7.1% year over year. The budget includes a property tax rate reduction of 9.0 cents, from $1.71 to $1.62 per $100 of assessed value. If approved by Council, the 2023 property tax rate would be reduced by a total 16.5 cents or 9.24% reduction over the last two years. The budget also incorporates moving the tax differential for Commercial and Heavy Industry from 1.5 to 1.7 which aligns the City's strategy on tax reform. REVENUE Property tax assessment has increased based on a growth rate of 8.76% due a strong real estate market. The growth rate can be split between market adjustments at 7.41% and new construction of 1.35%. The proposed reduction of the tax rate to 1.62 and increasing the property tax differential on Commercial and Heavy Industry from 1.5 to 1.7 results in an increase of annual property tax revenue of $10,626,544 or 8.08% over previous year. The annual equalization and unconditional grant saw a reduction of $1,325,687 or -7.96%. This reduction will be partially offset by a onetime Regional Service Grant of $546,630 as the new Regional Services Commission model enters its first year of operation in 2023. Revenue also includes $1,012,000 from Saint John Energy in relation to the benefits derived from the Burchill Wind Farm project, along with $1,753,145 surplus from 2021. Own source revenues are budgeted at $15,637,042 which is an increase of $1,408,225 or 9.9% over last yar. This includes a significant increase in accommodation levies over previous year at $1,193,000 as the hotel industry returns to pre -pandemic levels and interest revenue budgeted to be more due to the increase in interest rates. E-1YA -3- EXPENDITURES Overall expenditures are up year over year by $11,718,124 or 7.1%. Wages and benefits are within wage escalation with an increase of $4,692,586 or 5.3% over previous year. Goods and Services are increasing by $2,553,778 or 6.18% and the increase is due to several factors such as inflationary increases in fuel, asphalt, repairs and maintenance. There is an increase in assessment charge due to an overall increase in the tax assessment and there is funding for professional and contracting services for various initiatives related to strategic plans. The City's grants to Agencies, Boards and Commissions will see an increase of $1,461,938 or 11.78% over previous year. This includes an increase in the Transit subsidy as this service continues to reinvent itself, along with additional costing for the new Regional Service Commission. The increased cost to Envision SJ relates to the increase in accommodation levies expected in 2023 which essentially flows through to Envision. Fiscal and other charges have an increase of $3,009,822 or 13.36%. Capital from operating increased by $1,350,000 and aligns with the Long -Term Financial Plan targets. There is an additional increase to the Reserves of $2,710,000 of which a large portion will go to the establishment of funding for future recreation facilities. Council Priorities/Strategic Plan/Service Delivery The 2023 budget addresses multiple elements of the 10-year strategic plan, Council Priorities, and addresses service delivery. The following list are highlights from the various service areas which have one time funding and recurring expenditures. ➢ Reinstatement of cutting grass— additional resources to mow various medians and other areas throughout City ➢ Additional resources to maintain the new public space at Fundy Quay ➢ Professional development funds for Mayor and Council ➢ Budget for Professional Services o Legal work for elements of Strategic Plan o 10 Year HR Strategy and Employee Performance System o North End Neighborhood Plan o City Market Strategic Plan o Recreation Subsidization Review o Parking Study o Development of Community Energy Action Plan (net zero pathway to 2050) ➢ Additional staffing for Community Services included (21FTE) to support recreation, community development and social inclusion ➢ Additional temporary staffing to support enhanced recreational programming (Playground supervisors, special events and summer programing staffing) ➢ Funding for 5 new Recreation programs (including cost of 2 all -terrain wheelchairs and reinstatement of F$Ssport to Parks) -4- Significant contribution towards reserves to fund future Recreation facility ➢ Funding to support Civic Commemoration and Abilities ➢ Affordable Housing — Contact staffing and resources to support implementation of the Affordable Housing Action Plan ➢ Continued investment in IT Security and infrastructure, Public Safety Records Management Systems ➢ Reinstatement of Passport to Parks ➢ Additional temporary staffing to support City Market Strategic Plan and Night Market ➢ Additional full time resource supporting Traffic Management and Engineering ➢ Employee recognition program ➢ New Internal Audit/Risk Management Position ➢ Additional funds for Transit Services transformation ➢ Funding for Urban Stormwater outfall inspections The investments being made maintain existing service levels but also support the priorities of council, follow various plans, and address social issues and meeting the targets and principles of the long-term financial plan. Aligning with Long Term Financial Plan The budget follows 4 key financial values set out in the long-term financial plan: 1. Don't spend more moneythan you make —2023 budget is a structurally balanced budget Borrow Wisely — the budget includes principal and interest charges of $15.7M The city continues to reduce debt and increase pay as you go and is on track with its Debt Management Plan. 3. Save your money for a rainy day — The budget includes approximately $3.9M in capital reserves to address several Council priorities, avoiding new debt and continuing a culture of "save first" versus "spend first". 4. Take control of your expenses before they take control of you — the 2023 operating budget follows the City's wage escalation policy. The City continues to perform as it balances the priorities of Council with the goals and targets of the long-term financial plan. Below are just some of some of targets being met or exceeded. Evil -5- Debt per Capita Lower is better $1,427 $1,233 $1,175 De bt Service Lower is better 10.5% 8.9% 9.0% Ratio Total Debt as a % of Lower is better 60% 49% 50% Operating Budget Tax Rate Lower is better $1.785 $1.62 $1.57 Total People Cost Lower is better 57% 52/° ° (% of total N/A revenue) Managing risk in the 2023 Operating Budget The City has experienced high growth rates in the past two years. It is important to follow financial best practices in good times and in bad. When looking back at the years 2009-2012 the City received tax base growth from 5.23%-9.08%; yet without having a long-term financial plan (goals, targets, performance measures) the City fell into a structural deficit years later. The proposed 2023 budget follows a balanced risk -based approach which reduces the tax rate to maintain the City's competitive advantage while being mindful of inflationary pressures in the community. The budget shows responsibility by not increasing the reccurring cost of government based on multiyear spikes in assessment largely associated with a market adjustment and premised on new construction. The challenges with tax burden faced by citizens, along with increases in other costs outside inflationary pressures was not lost when preparing this budget which is a large reason for the decrease in property tax rate. E:16'7 -6- 10.00% 9.08% 8.00% 6.00% \6.42% Saint John Tax Base Increase STRUCTURAL DEFICIT 8.76% 6.24% 5.23% 4.00% 4.01% 3.26% 2.00% 1.53% 0.59% 1.86%.83 o 0.00% 0 0 0.39% LOS% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 -2.00% -0.48% —Tax Base Increase CONCLUSION In conclusion, the proposed 2023 General Fund Operating Budget continues to advance and surpassthe City's long term strategic financial objectives. This budget advances the City's strategic financial objectives to increase flexibility, reduce vulnerability, and is sustainable. The budget also balances the financial objectives of the long-term plan while balancing the priorities of Council along with the recently adopted 10 year strategic plan. SERVICEAND FINANCIAL OUTCOMES The proposed 2023 General Operating Budget aligns with Councils 5 priority areas of Move, Belong, Grow, Green and Perform. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input has been received from all Service Areas. ATTACHMENTS Exhibit 1— 2023 Draft General Fund Operating Budget E:11.1 The City of Saint John 2023 General Fund Operating Budget 2023 2022 Budget Budget Revenues Property Taxes 142,105,410 131,478,866 PILT Adjustment 64,323 - Equalization & Unconditional Grant 15,321,432 16,647,119 Regional Services Grant 546,630 - Surplus 2nd Year Previous Year 1,753,145 - Transfer from Operating Reserves - 2,367,056 Growth & Community Services 4,327,812 2,749,714 Public Works & Transportation Services 5,599,798 5,656,780 Public Safety Services 1,951,432 2,105,169 Utilities & Infrastructure Services 317,000 332,039 Strategic Services 3,156,000 3,100,115 Corporate Services 285,000 285,000 Saint John Energy Benefits 1,012,000 - Total Revenues 176,439,982 164,721,858 Expenditures Growth & Community Services 17,733,221 16,291,320 Public Works & Transportation Services 41,715,344 39,445,202 Public Safety Services 59,633,669 56,204,643 Utilities & Infrastructure Services 6,994,893 6,623,401 Strategic Services 7,917,074 7,286,166 Corporate Services 7,443,379 7,092,813 Other Charges 35,002,402 31,778,313 Total Expenditures 176,439,982 164,721,858 Surplus (Deficit) - - RYA City of Saint John by Service 2023 General Fund Operating Budget Growth & Community Services Salaries Goods & Services TOTAL Public Works & Transportation Services Salaries Goods & Services TOTAL Public Safety Services Salaries Goods & Services TOTAL Utilities & Infrastructure Services Salaries Goods & Services TOTAL Strategic Services Salaries Goods & Services TOTAL Corporate Services Salaries Goods & Services TOTAL Other Charges Goods & Services 2023 2022 Budget Budget 5,335,007 5,099,241 12,398,214 11,192, 079 17,733,221 16,291,320 16, 645, 616 15, 514, 645 25,069,728 23,930,558 41,715,344 39,445,203 48,826,474 46,230,825 10,807,194 9,973,818 59,633,668 56,204,643 3,575,653 3,392,655 3,419,240 3,230,746 6,994,893 6,623,401 4,003,562 3,831,341 3,913,512 3,454,825 7,917,074 7,286,166 5,266,536 5,105,822 2,176,843 1,986,991 7,443,379 7,092,813 35,002,402 31,778,313 35,002,402 31,778,313 TOTAL EXPENDITURES 176,439,982 164,721,859 The City of Saint John 2023 General Fund Operating Budget 2023 2022 Budget Budget Revenues Property Taxes 142,105,410 131,478,866 PILT Adjustment 64,323 - Equalization & Unconditional Grant 15,321,432 16,647,119 Regional Services Grant 546,630 - Surplus 2nd Year Previous Year 1,753,145 - Transfer from Operating Reserves - 2,367,056 Growth & Community Services 4,327,812 2,749,714 Public Works & Transportation Services 5,599,798 5,656,780 Public Safety Services 1,951,432 2,105,169 Utilities & Infrastructure Services 317,000 332,039 Strategic Services 3,156,000 3,100,115 Corporate Services 285,000 285,000 Saint John Energy Benefits 1,012,000 - Total Revenues 176,439,982 164,721,858 Expenditures Growth & Community Services Growth & Community Planning Services 1,852,877 1,695,676 Development Services 102,884 102,884 Development Engineering 350,328 346,667 Community Development 577,820 388,623 Animal Control 109,250 91,244 Dangerous and Vacant Building Program 374,428 547,385 Minimum Property Standards 375,506 310,229 Heritage Conservation Service 203,654 195,842 Cultural Affairs 129,827 126,289 Other By -Laws 356,103 429,822 Permitting & Inspection Services 1,181,614 1,027,434 Regional Economic Development Agency 3,093,000 2,175,000 Market Square 2,250,000 2,250,000 Saint John Trade & Convention Centre 390,186 262,615 Imperial Theatre 295,714 330,444 Saint John Aquatic Centre 521,281 451,198 Saint John Arts Centre 178,408 191,673 TD Station 478,246 590,777 Library 487,597 473,001 City Market 1,137,775 1,075,756 Arts & Culture Board 70,000 70,000 :! The City of Saint John 2023 General Fund Operating Budget 2023 2022 Budget Budget Growth & Community Services (Continued) Public Art Maintenance & Repair 16,000 16,000 Remembrance Day 1,500 1,500 New Year/Canada Day Celebrations 40,000 15,000 PRO Kids 109,693 235,526 Succeed & Stay 92,785 171,758 Local Immigration Partnership 86,424 124,153 Carleton Community Center 190,700 182,700 Loch Lomond Community Center 45,000 45,000 North End Community Center 174,876 166,876 Recreation Programming 674,269 564,327 Neighbourhood Development 170,000 152,000 YMCA - Contracted Services 157,560 149,560 Boys and Girls Club - Contracted Services 145,887 137,887 Unspecified Grants 184,000 184,000 Affordable Housing Strategy 193,754 300,000 Lifeguards 195,500 181,000 Play SJ 45,000 15,000 Lord Beaverbrook Rink 167,392 166,474 Building Incentive Reserve 350,000 350,000 Regional Services Commission 176,383 - Total Growth & Community Development Services 17,733,221 16,291,320 Public Safety Services Fire Rescue and Suppression Service 23,591,356 22,749,472 Fire Training 1,319 - Technical Rescue Response 46,925 46,065 Hazardous Materials 69,984 67,188 Fire Prevention 908,059 850,077 Fire Investigation 66,123 58,578 Emergency Management Services 360,216 341,536 Water Supply and Hydrants 2,500,000 2,500,001 Public Safety Communications Centre 2,894,857 2,789,423 Street Lighting 1,060,000 958,800 Police Administration 1,987,488 1,835,003 Criminal Investigations 4,623,244 4,398,533 Police Commission 116,350 112,050 Automotive Equipment 1,106,149 1,023,518 Support Services 1,812,844 2,224,375 Detention 179,975 176,575 Police Operations 17,342,680 15,136,000 Stations and Buildings 966,100 937,450 Total Public Safety Services 59,633,669 56,204,643 all The City of Saint John 2023 General Fund Operating Budget 2023 2022 Budget Budget Public Works & Transportation Services Snow Control Streets 5,601,737 5,177,279 Street Cleaning 1,605,543 1,520,026 Utility Cuts 919,782 710,263 Street Services -Surface Maintenance 7,448,639 7,722,859 Snow Control Sidewalk 1,034,591 921,437 Sidewalk Maintenance 712,014 459,829 Pedestrian & Traffic Management Service 2,343,221 1,982,463 Solid Waste Management 3,830,567 3,674,381 Regional Services Commission - 28,657 Landscape - Parks & Open Spaces 2,095,731 1,883,049 Rockwood Park 405,699 376,336 Urban Forestry 336,497 282,576 Saint John Horticultural Association 50,000 40,000 Arena Operation & Maintenance 1,375,297 1,319,299 Sportsfield Operation & Maintenance 1,228,942 1,159,089 Other Facilities Operation & Maintenance 548,513 396,901 Transit Debt 1,746,105 1,824,485 Transit Subsidy 5,630,640 5,273,690 Fleet Stockroom 354,448 282,982 Stormwater Rural 1,844,465 1,958,602 Parking Administration 942,723 760,182 Peel Plaza Parking Garage 389,616 297,216 Market Square Parking Garage 115,881 132,914 Off Street Parking 1,154,693 1,260,687 Total Public Works & Transportation Services 41,715,344 39,445,202 91 The City of Saint John 2023 General Fund Operating Budget Utilities & Infrastructure Services Engineering 1,252,328 1,191,095 Carpenter Shop 371,482 325,622 Facilities Management 1,579,996 1,545,173 City Hall Building 1,014,205 1,014,587 GIS 413,258 426,585 Stockroom 246,122 248,134 Stormwater Urban 2,117,502 1,872,205 Total Utilities & Infrastructure Services 6,994,893 6,623,401 Strategic Services Finance 1,250,757 1,172,280 Assessment 1,701,756 1,468,310 Supply Chain Management 449,075 428,124 Information Technology 3,511,071 3,332,935 Corporate Planning 316,055 312,720 Insurance 138,360 121,797 Liability Insurance 550,000 450,000 Total Strategic Services 7,917,074 7,286,166 Corporate Services City Manager's Office 779,271 1,019,922 Mayor's Office 225,837 219,350 Common Council 602,503 524,902 Common Clerk 642,779 607,207 Human Resources 1,942,089 1,853,166 Legal Department 1,136,916 1,030,331 Real Estate 177,086 176,940 Saint John Industrial Parks 170,763 71,371 Barge Terminal 25,000 15,000 Customer Service 999,115 896,456 Corporate Communications 516,634 524,001 External Relations 225,386 154,167 Total Corporate Services 7,443,379 7,092,813 Other Charges Fiscal Charges 15,685,605 15,741,124 Deficit 2nd Previous Year - 991,456 Landfill Closure 300,000 300,000 Special Pension Contributions 9,460,000 9,245,733 Transfer to Capital Reserves 3,771,797 1,200,000 Transfer to Operating Reserves 135,000 - Other Charges - - Capital from Operating 5,650,000 4,300,000 Total Other Charges 35,002,402 31,778,313 Total Expenditures 176,439,982 164,721,858 Surplus (Deficit) - - The City of Saint John 2023 Operating Fund Budget by Object 2023 2022 Proposed Budget Approved Budget Revenues Property Taxes 142,105,410 131,478,866 PILT Adjustment 64,323 - Equalization & Unconditional Grant 15,321,432 16,647,119 Regional Services Grant 546,630 - Saint John Energy Benefits 1,012,000 - Surplus 2nd Previous Year 1,753,145 - Permits & Licenses 1,124,754 1,090,804 Rentals & Fees 1,582,979 1,656,139 Inter -fund Charges 1,900,000 1,800,000 Market Square Parking 1,350,000 1,154,000 Meter Violations & Summonses 290,000 225,000 Parking Meters 783,000 938,000 Traffic By -Law 362,300 281,000 Fines 25,000 25,000 Secondments - 200,000 Extra Duties 100,000 100,000 Training 70,000 64,817 Contributions from Others 889,244 856,910 Partnerships 195,000 191,933 Emergency Dispatch 1,240,432 1,213,800 Utility Cuts 860,713 816,000 Interest Income 750,000 500,000 Internal Services 252,000 282,000 Insurance Proceeds 20,000 - Advertising - 15,450 Accommodation Levy 1,193,000 500,000 Other Miscellaneous Revenues 1,034,625 882,569 Saint John Industrial Parks 260,000 260,000 Barge Terminal 25,000 25,000 Peel Plaza Parking Garage 301,500 286,000 Off Street Parking 1,027,495 864,395 Transfer from Operating Reserve - 2,367,056 Total Revenues 176,439,982 164,721,858 Expenditures Salaries & Benefits Salaries 63,703,149 60,539,685 Overtime/Other Personnel Costs 2,844,773 2,466,180 Fringe Benefits 17,104,926 16,168,664 Pension 9,460,000 9,245,733 Total Wages and Benefits 93,112,848 88,420,262 019] The City of Saint John-.���, 2023 Operating Fund Budget by Object 2023 2022 Draft Budget Approved Budget Goods & Services General Services 522,594 592,372 Insurance 1,225,768 1,049,906 Professional Services 2,151,320 1,963,765 Other Purchased Services 2,393,527 2,266,152 Repairs & Maintenance 1,935,225 1,616,539 Other Purchased Goods 1,295,930 1,234,636 Roads 4,199,850 4,269,115 Tipping Fees 1,113,050 1,305,000 Property Taxes 1,391,324 1,270,477 Assessment Charge 1,701,756 1,468,310 Asset Purchases 1,017,048 799,466 Contracted Services 1,657,951 1,286,065 Postage 97,640 99,365 Inter -Fund Charges 3,553,508 3,523,001 Telephone 679,989 703,437 Radio 401,080 385,020 Building Incentive Reserve 350,000 350,000 Fuel 3,332,974 2,939,499 Advertising 174,575 148,075 Travel, Conferences & Training 856,543 773,174 Commissionaires 489,018 385,000 Engineering 321,000 161,000 Cleaners & Janitors 243,820 240,620 Solid Waste Collection 127,700 117,500 Licenses & Software 497,210 455,147 Rentals - Vehicles & Equipment 5,444,620 5,432,098 Asphalt 1,257,622 889,139 Parts 1,412,850 1,377,893 Apparel 214,692 204,488 Fuel Oil & Gas Oil 306,685 305,818 Salt & Sand 1,023,073 969,673 Electricity 685,863 728,320 Office Supplies 151,175 168,920 Operating & Safety Supplies 506,942 494,782 Water 167,950 165,470 Meals 165,805 154,023 0L! The City of Saint John 2023 Operating Fund Budget by Object 2023 2022 Draft Budget Approved Budget Lumber, Paint, Chemicals & Cement 451,644 389,534 Tools & Hardware 102,362 104,182 Memberships 175,829 158,294 Affordable Housing Strategy - 300,000 Receptions 115,768 114,227 Grants - Agencies, Boards & Commissions Grants Transit Commission Lord Beaverbrook Rink Saint John Free Public Library Regional Services Commission Regional Facilities Commission 43,913,280 41,359,502 706,500 641,500 7,376,745 7,098,175 167,392 166,474 487,597 473,001 176,383 28,657 1,863,835 1,826,707 Regional Economic Development Agency 3,093,000 2,175,000 13,871,452 12,409, 514 Fiscal Charges Interest 2,514,628 2,689,728 Principal Repayment 13,170,977 13,051,396 15,685,605 15,741,124 Other Charges Howes Lake Landfill 300,000 300,000 Capital from Operating 5,650,000 4,300,000 Transfer to Operating Reserves 135,000 - Transfer to Capital Reserves 3,771,797 1,200,000 Deficit 2nd Previous Year - 991,456 9,856,797 6,791,456 Total Expenditures General Fund Surplus (Deficit) 176,439,982 164,721,858 OR Am Q III - VC, 41 FA 'Y 14F, 1� ca O Q Q L O L� s N r-I i N E N U N r) I �U O U O E E O U z 0 O y 0 V � 'Q^ W CL .E U N N ca C �O N O � U >-U U O x ca O N N >. ca — Cl) r-I . i i _0 M O N (n N U X E — fu ca +j O Q > U rl O — U- ifu o •U •— �aA rl _ O o0, � i � i Q tZ0 N cc m ('O O C: N ca N � CO r•U aA X M }+ ate—., ate- a O N • C > L O O �i O — cn a--+ • U L a--+ � �..+ E •N O O ca O a) a)X c O U .O Cat'E U 4-J �� Q � ca U M.m U O O O N N M O N N O riA (,O cn O � ca O Lcnn N dl U w , ( Q U cc -Ln O .2 m0. ++ O � � ~NO � U CL� Fo bD DC =3 ago aA r- C: ri c i m w �CD m m A cn Z rl N (Y) 4 Lri l0 I-� 00 0 0) I� 0 00 O N m H 0 m m W 0 rl rl Ln N O O 0rl rl 00 rl 00 O 00 m N l0 H 00 m 00 N 00 I� 00 � H ri Ln � cn 0N 00 H � I�t N 0 0) I�t O N 00 0) I� l0 N m N N N l0 N O I, N cn cn u1 cn O m N N O 0 O N m�t M N N H N mI�t mI�t O 00 N'�t 0 M I� � O 00 I�t m� o o H O Ol N m o 00 o m� m i M 01 , u1 , I , rl , � , 0 , m , N 0) , m , u1 , mI�t , , r" , m , N N dA O 0 N mI�t Ln m cn rn O cn0 Ln� om r,r,00)0) 0m N m N L( L( 1 rl � r rl 0) l0 � � Ln cn v U_ +� > (n N U 6 (� L Ln C } U 1�75 > C N 0 N � � L 4-1 4 J 0 W v1 0 > 1�75 Q N 0 U L L7 a v m C v :Ln N Ln N ozS � c0 . 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O LL cc W a M 0 N 4S7 C3 rV r-A r-1 CT I`• -cam m CIO X-A CD cn 00 r- to 1 m r--j CD r.i ri r~.i CD 0 nr N CD r•� co N 00 O N d rlJ LO CD r"I Ln CD 1 bA m H 5 OC O LL cc W a 4 00 rf) rV C) C) r4 m Q rl-4 al 4 O DO N N 0 CD Ca �u a cn Ln 0 Ia 01 I'll. 6 6 6 Q (Dl C� ()1 OZ 06 06 ���T--i rA r-4 C) CV C� r4 I Ln a� CL bA aj L. 0 H 5 OC O LL cc W a co r-� Q CD Ln� Ln� Ln C) M C-! C] C) C) Q r4 I o Ln m w F- too L. H 5 OC O LL cc W a 4 r4 0 N 1p a m R1 C) N N N 0 0) 0 I 5 OC O LL cc W a o 0 0 C) o C 0 0 0 0 CD 0 d & Q 6 C� 0 0 C C C C) V � ; 0 CO rJ 0 +r q 0 0 C) N I 0 PI �L ro ro ro cz m O N M •— O E �' N 0) ca can Ln 0-0 N U CL ro p '� > V i ,— -0 _� LL I 9 FINANCE COMMITTEE REPORT Report Date October 26, 2022 Meeting Date November 03, 2022 Chairman Councillor Sullivan and Members of Finance Committee SUBJECT. 2023 Utility Fund Operating Budget OPEN OR CLOSED SESSION This matter is to be discussed in open session of Finance Committee. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Craig Lavigne J. Brent McGovern I John Collin RECOMMENDATION It is recommended that the Finance Committee approve the proposed 2023 Utility Fund Operating Budget and forward to the next meeting of Common Council for approval and first and second reading of Water and Sewerage Bylaw amendments. EXECUTIVE SUMMARY The 2023 Utility Fund Operating Budget will represent the fifth year in a row that will see no rate increase for ratepayers that use both water and sewer services. These ratepayers include both flat rate customers which will see the annual cost remain the same at $1,428 per year and metered customers will see no change in the cost per cubic meter and meter charges. The budget also includes rates for the Industrial Raw Water customers who will see various levels of increases in the rates compared to the approved 2022 Industrial Raw Water rates. The Utility has continued to focus on all areas of its business to reduce costs in 2022. Rate stabilization has been achieved for rate payers for the past five years despite the Utility still experiencing declining revenues and increasing costs in several areas. PREVIOUS RESOLUTION N/A 131 -2- STRATEGIC ALIGNMENT The proposed 2023 Utility Fund Operating Budget is aligned with Council's priorities demonstrated though the commitment to address infrastructure risk associated with climate change, focusing on its leak detection program that helps eliminate water waste. The Utility continues to find operational efficiencies through continuous improvement, focus on ensuring service objectives are being met and managing the finances of the Utility to achieve rate stabilization for rate payers. REPORT The 2023 Utility Fund Operating Budget will represent the fifth year in a row that will see no rate increase for ratepayers that use both water and sewer services. These ratepayers include both flat rate customers who will see the annual cost remain the same at $1,428 per year and metered customers will see no change in the cost per cubic metre and meter charges. Potable Revenue Overall potable revenue for 2023 is budgeted at $37,550,000 (2022- $36,920,000). The Utility has experienced a reduction in flat rate accounts over the past several years, however it anticipated the loss in customers accounts has leveled and 2023 will see a minor increase. Meter rate revenue is from metered customers and are largely commercial, manufacturing, malls, schools, restaurants, hotels, and apartment buildings. COVID 19 has had a negative impact on many of these businesses, however throughout 2022 revenue is trending positive. The Utility is being conservative in predicting water consumption for 2023, however is estimating an increase in consumption as the recovery continues. The Utility is also recommending $421,492 be transferred from the operating reserves. There is $750,000 budgeted in 2023 for the dredging of Lancaster Lagoon and the operating budget cannot absorb this cost and hold the rates stable. This is a one-time cost that is not expected to reoccur for approximately a decade and therefore the one-time use of funds from the operating reserve is appropriate. The balance of revenues includes the fire protection levy, storm sewer levy, interest revenue, other revenue, and prior year surplus. Potable Expenditures The Utility operating expenditures increased by $1,101,502 or 2.66% over 2022. Wages and benefits increased by $159,729 or 1.51% despite the general fund setting the wage escalation rate at 5.35% due positive assessment growth. This is due to further attrition and position reduction through 2022. The largest driver in `19% -3- expenditures is the $750,000 budgeted for the Lancaster Lagoon large scale dredging, an operational project that is necessary before capital improvements to the Lagoon are made as part of the Utility Capital Program. The balance of inflationary increases has been offset though other savings and efficiencies. The Utility still has a large amount of expenses that cannot be reduced further to provide water and sewer services. Costs such as annual payments for the water treatment plant capital and operating, cost of operating water and wastewater pump stations, sewer treatment plants, debt payments, electricity, property taxes, chemicals and insurance are just some examples of areas that need to be funded to provide services. There are several initiatives that will be undertaken in the 2023 budget. There will be leak detection done on 33% of the east water distribution system which may identify leaks to be repaired to improve water efficiency and maintain a highly reliable water system. An intelligent hydrant pilot program is being undertaken to help identify potential leaks while generating alerts to staff for follow up. The fire hydrant and paint program will continue into 2023 with approximately 25% of the 2,100 hydrants repainted and inspection of 35% of the hydrants. The budget includes, as mentioned earlier, significant investment in Lancaster Lagoon, along with biofilter media replacement at the Eastern Wastewater Treatment Facility. There is increased funding in trenchless technology, an efficient and cost-effective repair solution as well as security upgrades at the three large wastewater treatment facilities. The budget includes $4,867,800 million in pay as you go (capital from operating). This will allow the Utility to complete its 2023 capital program without any borrowing. There has been a lot of success in obtaining funding for Capital projects as can be seen in the proposed 2023 Capital Utility Budget. The funding will allow the Utility to focus on climate change initiatives, sewer separation and the renewal of underground infrastructure in coordination with the General Fund. Industrial Raw Water The Utility budget also includes the expenditures and revenues for the four customers who receive raw untreated water. The bylaw rates include. ➢ Operational cost to provide the service, ➢ Contributions to asset replacement/asset management, ➢ Rate stabilization reserves, ➢ New debt associated with the industrial system delivering the service, ➢ Previous debt associated with being a member of the water distribution system. In summary, the City set the rates to cover all operating costs associated with providing raw water to each customer, recover past debt associated with each system and include a charge for future asset replacement. There is also a charge `Edc3 -4- to some customers to cover the cost of assets currently being replaced, along with funding to a rate stabilization reserve for each customer. Rates for each of the four customers are seeing various degrees of increases. Some of the increases are a result of lower than consumption estimates or higher cost of service. Overall, the consumption rates will increase for each customer as note below. Customer 2023 Rate 2022 Rate East Industrial Irving Oil 0.2834 0.2755 Irving Paper 0.0896 0.0677 West Industrial Irving Pulp & Paper 0.0816 0.0704 NB Power Coleson Cove 0.9199 0.7145 Conclusion The fifth straight rate freeze for 2023 is a positive note for potable ratepayers particularly with the current economic environment and inflationary pressures. The Utility has continued to focus on cost reductions, continuous improvement, finding efficiencies, and process improvements in 2022, as well as debt management, leveraging of funds from other levels of Government and pay as you go (no borrowing) for all capital expenditures. The Utility will continue to focus on the various cost control initiatives. However, a major issue the Utility cannot control is its revenue base. As positive growth continues in the City, the Utility often bears a large cost for infrastructure related to growth, but will see very little revenue in comparison to the tax assessment the City receives. In accordance with the City Manager's Work Plan and updates to the Finance Committee, work has commenced on preparing for 10-year long-term financial plan and work on it will be completed in 2023. The document will provide the financial road map for the Utility. SERVICEAND FINANCIAL OUTCOMES See enclosed 2023 Utility Fund Operating Budget INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS The budget was established in collaboration with the City's Finance team. ATTACHMENTS • Appendix —A— 2023 Saint John Water Operating Budget • Presentation Saint John Water 2023 Water & Sewerage Operating Budget 2023 2022 Budget Budget Revenues Flat Rate Accounts 22,250,000 22,250,000 Meter Rate Accounts 15,300,000 14,670,000 Industrial Raw Water Accounts 6,983,657 6,347,859 Fire Protection Levy 2,500,000 2,500,000 Storm Sewer Levy 925,000 925,000 Other Revenues 1,365,000 937,216 Previous Year's Surplus 680,796 437,400 Total Revenues 50,004,453 48,067,475 Expenditures Drinking Water Service 22,883,671 21,560,595 Wastewater Service 19,062,663 19,272,505 Infrastructure Management 709,668 717,900 Industrial Raw Water Service 7,348,451 6,516,475 Total Expenditures 50,004,453 48,067,475 Surplus (Deficit) - - Saint John Water 2023 Water & Sewerage Operating Budget '* x 2023 Budget 2022 Budget Revenues Flat Rate Accounts 22,250,000 22,250,000 Meter Rate Accounts 15,300,000 14,670,000 Industrial Raw Water Accounts 6,983,657 6,347,859 Fire Protection Levy 2,500,000 2,500,000 Storm Sewer Levy 925,000 925,000 Other Revenues 1,365,000 937,216 Previous Year's Surplus 680,796 437,400 Total Revenues 50,004,453 48,067,475 Expenditures Drinking Water Service Watershed Management 794,953 822,650 Water Treatment 8,768,620 8,440,300 Water Pumping & Storage 1,230,957 1,178,345 Transmission & Distribution 4,396,550 4,503,100 Customer Metering 720,634 728,300 Internal Charges 510,050 467,500 Other Charges 574,093 555,000 Debt Servicing 3,752,315 3,808,000 Transfer to Operating Reserve 0 0 Capital from Operating 2,135,500 1,057,400 Total Drinking Water Service 22,883,671 21,560,595 Wastewater Service Wastewater Pumping 3,131,775 2,997,800 Wastewater Collection 3,039,799 3,017,855 Wastewater Treatment 6,054,322 4,919,450 Internal Charges 510,050 467,500 Other Charges 574,093 555,000 Debt Servicing 3,020,324 3,202,100 Capital from Operating 2,732,300 4,112,800 Total Wastewater Service 19,062,663 19,272,505 `Ki.1 Infrastructure Management Engineering Services 709,668 717,900 Total Infrastructure Management 709,668 717,900 Industrial RawWater Service Watershed Management 668,245 660,800 Water Pumping & Transmission 2,157,068 1,859,300 Customer Metering 176,652 175,950 Debt Servicing 1,846,586 1,892,065 Transfer to Capital Reserves 836,677 1,005,304 Transfer to Operating Reserve 895,516 455,178 Capital from Operating 767,708 467,878 Total Industrial Raw Water Service 7,348,451 6,516,475 Total Expenditures 50,004,453 48,067,475 Surplus (Deficit) Annual Flat Rate - Water and Sewerage $1,428 Meter Rates:/Cu.m. Block 1 - First 100 $1.9940 Block 2 - Excess of 100 $1.2700 Consumption based on Bi-monthly billings NOTE: Sewer Surcharge 80.35% of Water Charge Industrial Raw Water Rate:/Cu. M $1,428 $1.9940 $1.2700 East Industrial Irving Oil $0.2834 $0.2755 Irving Paper $0.0896 $0.0677 West Industrial Irving Pulp and Paper $0.0816 $0.0704 NB Power (Coleson Cove) $0.9199 $0.7145 Industrial Raw Water Rate - Bi-monthly fixed charge Ii19YA East Industrial Irving Oil $27,057 $25,067 Irving Paper $7,874 $3,587 West Industrial Irving Pulp and Paper $53,094 $45,879 NB Power (Coleson Cove) $1,322 $1,329 `191:3 z x 0 Tip C� L CL Alr•� LL m N O N N N O N m L E O z w .C: 4-0 ate-+ a--+ E E O U U m .C: O O , >, m `� o b -0 0 > Z Z; O CO co � S •- QL a) Q a"' C6 C6 C6 O N _ c6 p � c6 c�i� ca > Z3 -0 O O O � • � U C6 C6 O a--+ O C C U >, Q ro -• Z; M E O O O U U U O C: > m > E O C O z LZ cn z U 00 N E O z vi E a) E c6 ca m O w 0 i a--j E 10 O a--j a--+ a--+ C6 V) C: 4J C6 U u _0 [a O L =3 dJ �O dJ --+ aA �, +, o m � E _0 o a) aA O i >' > U O ' � U +, O � can � +-j u) LL a--+ C6 U ca 4-, a--' dJ 0 u O aJ v 'v r,-. 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