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2023-03-22 Finance Committee Minutes - Open Session Finance Committee Meeting Open Session March 22, 2023 MINUTES – OPEN SESSION FINANCE COMMITTEE MEETING MARCH 22, 2023 AT 4:30 PM MEETING CONDUCTED BY ELECTRONIC PARTICIPATION Present: Mayor D. Noade Reardon Councillor G. Sullivan Councillor P. Radwan Councillor G. Norton Councillor D. Hickey Also Present: Chief Administrative Office B. McGovern Commissioner of Finance and Treasurer K. Fudge Commissioner Transportation & Environment M. Hugenholtz Fire Chief K. Clifford Deputy Fire Chief R. Nichols Commissioner Utilities & Infrastructure I. Fogan 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 November 21, 2022 Moved by Councillor Hickey, seconded by Mayor Noade Reardon: RESOLVED that the minutes of November 21, 2022 be approved. MOTION CARRIED. 3. Approval of Agenda Moved by Mayor Noade Reardon, seconded by Councillor Radwan: RESOLVED that the agenda of March 22, 2023 be approved. MOTION CARRIED. 4. Disclosures of Conflict of Interest No disclosures. 5. Consent Agenda Finance Committee Meeting Open Session March 22, 2023 5.1 RESOLVED that the Budget 101 Infographic be received for information. 5.2 RESOLVED that the How is Money Spent in the City Infographic be received for information. 5.3 RESOLVED that as recommended in the submitted report “2023 General Fund and Utility Fund Capital Budget Update” the Finance Committee endorse the following recommendations and forward a copy of this report to Common Council for approval: Recommend approval of transferring up to $2 million dollars from the General Fund Capital Reserve, as needed, to offset potential cost overruns on the 2023 General Fund Capital Budget as a result of supply chain and other inflationary pressures; Recommend deferring General Fund Capital Budget Projects if cost overruns due to supply chain or other inflationary pressures exceed $2 million dollars based on the priority rankings in Appendix 1 (i.e., Priority ranking 4 would be utilized first); and, Recommend deferring three Utility Fund Capital Projects if required to offset cost overruns due to supply chain or other inflationary pressures based on the priority rankings in Appendix 2 (i.e., Priority ranking 3 would be utilized first). Moved by Mayor Noade Reardon, seconded by Councillor Hickey: RESOLVED that the recommendation set out in each consent agenda item respectively be adopted. MOTION CARRIED UNANIMOUSLY. 6. Business Matters 6.1 Strategic Procurement Policy Update Mr. Fudge stated that modernization of the Strategic Procurement Policy is a major milestone and a priority in the 2023 workplan. Ms. Forgie reviewed the submitted presentation “Procurement Policy Modernization Project.” The policy updates procurement practices to be more efficient and strategic to enhance the city’s financial health. It incorporates changes in public procurement and includes recommendations from the Ernst & Young Operation Review, such as Supplier Performance and Contract Management, reduction of Payment Vouchers, red-tape reduction, and spending authority limits. The policy also considers social procurement practices and promotes supplier diversity, Social Enterprises, payment of a living wage, inclusive employment practices, environmental stewardship and support of businesses owned by members of traditionally disadvantaged groups. Moved by Mayor Noade Reardon, seconded by Councillor Hickey: RESOLVED that the submitted draft Strategic Procurement Policy be received for information. MOTION CARRIED. 6.2 General Fund Long-Term Financial Plan Mr. Fudge stated that staff is seeking direction on stretch targets in the updated financial plan. In 2019, the financial management of the city was transformed with a ten-year financial plan and a suite of best practice financial policies and a performance management and reporting framework. The Long-Term Financial Plan policy contains a provision that requires two thirds of the total membership of council, or 8 votes, to make changes to the financial policies unless recommended by the Finance Department. The primary goal of the financial plan is to fund Council’s 10-year strategic objectives in a fiscally responsible manner. Many assumptions used in 2019 require update to reflect current conditions and actual results. The tax rate was reduced by 16.5 cents since the previous plan. An economic slowdown is expected in 2023 due to inflation which will impact the housing market, tax base, the City’s wage and benefit package, and GDP growth. Interest rates in 2023 are forecast to be 4.5%, increasing cost to the city to issue new debt. Further decline is expected in the unconditional grant. Population growth has exceeded assumptions and there has been a strong post-Covid job recovery, all of which form the assumptions for the long-term financial plan. Finance Committee Meeting Open Session March 22, 2023 The Finance Committee previously provided direction on the base case which focused on a reliable level of service and prioritizes funding for strategic plan initiatives over the next 10 years. The stretch case allows for acceleration of the strategic plan and provides an opportunity to exceed financial targets in areas of debt, tax rate, reserve funding and infrastructure deficit. Base case assumptions were discussed as outlined in the submitted presentation. Significant improvements were made in all categories, with continued significant improvements expected. Staff requested direction on the stretch case scenarios including assumptions and financial targets, as outlined in detail in the submitted presentation. Funding the strategic plan is prioritized under both the base case and the stretch case. Financial health will continue to improve with lower debt and infrastructure deficit levels and the ability to mitigate financial risk. Moved by Mayor Noade Reardon, seconded by Councillor Hickey: RESOLVED that the Finance Committee approve the assumptions and financial targets presented for the Stretch Case in the 2023-2032 General Fund Long-Term Financial Plan; and further that the submitted presentation entitled “2023-2032 General Fund Long Term Financial Plan Update” be received for information. MOTION CARRIED. 6.3 2024 General Fund Budget Proposed Timeline (Councillor Norton withdrew from the meeting) Mr. Fudge stated that Council indicated it wants a shorter gap between when the budget goes to the Finance Committee and subsequently to Common Council, greater participation in the budget process, and a desire for public engagement. The budget is a representation of Council’s plans, many of which have had extensive public engagement. A module called “Shape your Budget” is being recommended to allow the community to offer feedback on the budget. Staff will also re-introduce the service-based budget, to better understand service levels and performance. Mr. Lavigne reviewed the submitted presentation “2024 General Fund Operating Budget Timelines.” He discussed the key inputs for the 2024 budget including “Shape Your Budget”, service-based budgeting, consideration of the 10-year strategic plan, the long-term financial plan, and plans such as Plan SJ, Play SJ and Move SJ. Proposed dates with respect to the budget timeline were provided, noting that the budget process will also include presentations from each of the service areas and larger ABCs, to discuss workplans and budget submissions. Moved by Mayor Noade Reardon, seconded by Councillor Hickey: RESOLVED that the submitted presentation entitled “2024 General Fund Operating Budget Timelines” be received for information and any questions be directed to staff. MOTION CARRIED. 6.4 2022 Unaudited General Fund and Utility Fund Financial Results Mr. Fudge commented on the unaudited results, noting that the auditing process is on-going. A major adjustment related to the actuarial review of liabilities, which is an accounting entry, accounts for the biggest part of the surplus. Mr. Lavigne indicated that the audited consolidated financial statements is expected to be available for the May Finance Committee meeting. The unaudited results have an approximately $2.46M surplus, largely attributable to a favourable actuarial adjustment. This is a non-cash adjustment which can fluctuate significantly year over year due to a variety of factors including interest rates. The General fund has a surplus of $2,457,732 which is a result of the one-time adjustment of $2,466,342 due to the actuarial benefit review, meaning the City’s actual operating results is a small deficit of ($8,610) for year-end 2022. Despite cost overruns in the winter programs, increases in fuel, insurance, and many other goods in 2022, the risks and cost overruns were managed within the overall budget envelope. Moved by Mayor Noade Reardon, seconded by Councillor Hickey: Finance Committee Meeting Open Session March 22, 2023 RESOLVED that the submitted presentation entitled “December 31, 2022 Unaudited Financial Results General Fund and Utility Fund” be received for information and any questions be directed to staff. MOTION CARRIED. 7. Adjournment Moved by Mayor Noade Reardon, seconded by Councillor Radwan: RESOLVED that the Finance Committee meeting be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on March 22, 2023, was adjourned at 6:20 pm.