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2017-02-28 Finance Committee Minutes - Open SessionFinance Committee Meeting Open Session February 28, 2017 MINUTES - OPEN SESSION FINANCE COMMITTEE MEETING FEBRUARY 28, 2017 AT 5:30 PM 8t" FLOOR BOARDROOM, CITY HALL Present: Mayor D. Darling Councillor D. Merrithew Councillor D. Reardon Councillor G. Sullivan Councillor S. Casey Councillor G. Norton Also Present: Deputy City Manager N. Jacobsen Commissioner of Finance and Treasurer K. Fudge Deputy Commissioner Finance and Administrative Services I. Fogan Comptroller C. Graham Senior Manager, Financial Planning H. Nguyen Commissioner of Transportation & Environment Services M. Hugenholtz Commissioner Growth and Community Development J. Hamilton Fire Chief K. Clifford Deputy Commissioner Saint John Water K. Mason Assistant Comptroller Finance C. Lavigne Energy Manager S. Yammine Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. 1.1 Asset Management Policv Statement Mr. Fudge commented on the value of an asset management program, noting that it is evidence based and will provide the ability to assess the condition of assets and allow for strategic investment to minimize operating expenses. Mr. Yammine reviewed the submitted policy statement. An asset management policy is an integrated approach that ensures the organization and ultimately each department is committed to asset management practices to meet defined objectives. Moved by Councillor Sullivan, seconded by Councillor Reardon: RESOLVED that the Finance Committee recommend that Common Council approve the City of Saint John Asset Management Policy Statement. MOTION CARRIED. (Mr. Yammine withdrew from the meeting) 1.2 Financial Outlook and 2016 Year End Forecasts Finance Committee Meeting Open Session February 28, 2017 Mr. Fudge reviewed the submitted report, commenting on the City's financial health, benchmarking indicators with Moncton and Fredericton, the 2018 outlook, risks, reserve fund policies and preliminary results for each service area. 92% of the City's revenues are a combination of property taxes and the unconditional grant. There has been a steady decline in these revenues since 2008 and the level of debt has more than doubled since 2006. These factors have a significant impact on the flexibility of the City's operating budget. Over the last few years, in order to balance the budget and address this inflexibility, departments have reduced expenditures to offset operating costs. Over the past three years Council has limited the amount of borrowing to $12M annually to address the debt service issue. A worst case scenario forecast for 2018, assuming a reduction of the unconditional grant, flat assessment base, consideration of other revenues, inflation, increased fiscal charges, increased wages and benefits, is a shortfall of $4M to $5M in the operating budget. There is positive momentum with respect to other initiatives, including mitigation measures through continuous improvement programs and revenue generation opportunities, for potential operating savings of $2M. Council has recently approved a $2M operating reserve in 2016 which is very encouraging with respect to the City's financial strategies. The idea is to build and maintain reserves to fund major or unexpected expenditures that cannot be funded within a single year. It maintains financial resiliency and buffers the municipality from swings in the operations. Mr. Fudge commented on the year end preliminary results for 2016 noting that there may be some final audit adjustments. Commissioners commented on the end results for their service areas and changes to their budget since October with respect to the overall results. (Councillors Reardon and Sullivan withdrew from the meeting) (Mr. Fogan withdrew from the meeting) Mr. Fudge commented on the Saint John Water budget, the substantial completion payment and impact to the operating budget for the Safe Clean Drinking Water project. He commented on the projections for water rate increases up to 2018-2019, adding that staff will have a better idea as to the costs to ratepayers upon completion of a rate study to be conducted in 2017. It is expected that over a three year period the utility will put away reserves of $17M, which equates to savings of approximately $8M over the borrowing period. Saint John Water continues to be fiscally responsible with a focus on continuous improvement initiatives and revenue generation opportunities. Moved by Mayor Darling, seconded by Councillor Casey: RESOLVED that item 1.2 Financial Outlook and 2016 Year End Forecast, be received for information. MOTION CARRIED. 1.3 Finance Committee — Six Month Review Mr. Fudge asked for feedback on the expanded mandate of the Finance Committee noting that it is the end of the 6 month pilot project. Ms. Hamilton commented on the feedback received from the Growth Committee, noting that the recommendation was to keep the committees contained at this point to the Growth and Finance Committees and not expand to other topic areas, adding that these committees reflect Council's priorities. The committee held comment on the six month pilot of the extended mandate of the Finance Committee structure of governance until such time that the entire committee was available. Members noted that it would be helpful to quantify the costs of the committee structure in terms of staff time and resources. Adjournment Moved by Mayor Darling, seconded by Councillor Casey: Finance Committee Meeting Open Session February 28, 2017 RESOLVED that the Finance Committee open session meeting held on Tuesday, February 28, 2017 be adjourned. MOTION CARRIED. The Finance Committee meeting held on February 28, 2017 was adjourned at 7:00 p.m.