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2020-05-14 Finance Committee Agenda Packet - Open Session Finance Committee Meeting Open Session January 22, 2020 MINUTES OPEN SESSION FINANCE COMMITTEE MEETING JANUARY 22, 2020 AT 4:30 PM th 8 FLOOR COMMON COUNCIL CHAMBER (LUDLOW ROOM), CITY HALL Present: Mayor D. Darling Councillor D. Merrithew Councillor S. Casey Councillor D. Reardon Councillor G. Sullivan Councillor G. Norton Also Present: City Manager J. Collin Commissioner of Finance and Treasurer K. Fudge Comptroller Finance C. Graham City Solicitor J. Nugent Fire Chief K. Clifford Commissioner Transportation & Environment Services M. Hugenholtz Senior Financial Manager C. Lavigne Administrative Assistant K. Tibbits 1. Meeting Called To Order Councillor Merrithew called the Finance Committee open session meeting to order. 1.1 Approval of Minutes December 3, 2019 Moved by Councillor Reardon, seconded by Councillor Norton: RESOLVED that the minutes of December 3, 2019 be approved. MOTION CARRIED. (Mayor Darling entered the meeting) 1.2 Emergency Response Simulation Project Mr. Collin commented on some of the benefits of the simulation project, including increased revenue and training potential, and also having the ability to practice and validate emergency plans without deploying response forces, saving money in the long-term. Moved by Councillor Reardon, seconded by Mayor Darling: RESOLVED that as recommended by the City Manager in the submitted report entitled Common Council: 1 Finance Committee Meeting Open Session January 22, 2020 Approves the proposed renovations to the soon to be vacated Fire Prevention Division located in the second level office space next to the Saint John Emergency Operations Centre (EOC) for the purpose of establishing an emergency planning, preparation, response and testing simulation theatre; Award a contract as presented by ADMS simulation (Attachment C) for the purpose of providing the City of Saint John with simulation equipment that will support the development of a comprehensive emergency planning, preparation, response and testing simulation theatre; Approves the adjustment to the 2020 Capital Budget for the purchase of the Emergency Planning, Preparedness, Response Testing Simulation Project based on the appropriateness of the submitted business case for a total of $571,385; Approves the local acquisition of the furniture, monitors and other related electronic equipment necessary for the simulation theatre from the CAER contribution received from Canaport LNG. MOTION CARRIED. 1.3 Agreement with NB Power Backup Fire Protection Service Chief Clifford reviewed the submitte This ten-year agreement encompasses emergency response and training. Rates are adjusted based on CPI and current salary for the duration of the agreement and significantly increases the annual contribution from NB Power. The City was prepared to step away from the relationship in place since 1982 if a better value arrangement could not be met. Moved by Mayor Darling, seconded by Councillor Reardon: RESOLVED that as recommended by the City Manager in the submitted report entitled, -up Fire Protection Services and Response Training at the authorizes the Mayor and Common Clerk to execute the submitted 10-year agreement for Backup Fire Protection and Response Training between the City of Saint John Fire Department and NB Power Corporation, Point Lepreau Generating Station. MOTION CARRIED. 1.4 Request to RDC to Share Cost of Seawall Mr. Lavigne stated that the request of the Finance Committee is to endorse a letter be sent to the RDC requesting the province contribute to the cost of the seawall refurbishment project. The City secured funding for the $8.1M project through the Disaster Mitigation and Adaptation Fund with the Federal Gs contribution is 40% or $3.24M; the City $4.86M and has been budgeted as part of the 2020 and 2021 capital budget. The letter is asking RDC to contribute 30% of the overall cost of the project, or $2.43M. The province stands to gain considerable property tax revenue and therefore considered a reasonable ask of the province. The project will proceed, even if the City does not obtain the requested cost-sharing arrangement. Moved by Councillor Reardon, seconded by Councillor Sullivan: Quay Seawall mmittee recommends that Common Council direct the Mayor to sign the submitted letter to the Province of New Brunswick, requesting 50/50 cost sharing for the remaining Municipal portion of infrastructure costs for the refurbishment and raising of the Fundy Quay Seawall. MOTION CARRIED. 2 Finance Committee Meeting Open Session January 22, 2020 1.5 Understanding Consolidated Financial Statements and some of the numbers contained within. The City is projecting a $10M structural deficit for 2021 in the operating budget. Balancing the operating budget is a legislative requirement. Interpreting the structural deficit in the operating budget is very different than interpreting the results of the consolidated statements and should not be analyzed in isolation. Moved by Councillor Norton, seconded by Councillor Sullivan: RESOLVED Debunking the MOTION CARRIED. 1.6 2020 General Operating Budget Resolution Referring to the submitted report, Mr. Fudge stated that the province requires a revised resolution related to the 2020 General Operating Budget, due to the treatment of LNG revenue. There is no impact to the overall budget and is an adjustment between two revenue line items. Moved by Councillor Norton, seconded by Councillor Sullivan: inance Committee endorse the following revised resolutions for the 2020 General Fund Operating Budget and submit to Common Council for approval: 1. That the sum of $166,708,424 be the total Operating Budget of the City of Saint John for 2020; 2. That the sum of $125,842,974 be the Warrant of the City of Saint John for 2020; 3. That the tax rate for the City of Saint John be $1.785; 4. That Common Council orders and directs the levying by the Minister of Environment and Local Government of said amount on real property liable to taxation under the Assessment Act within the Municipality of Saint John; 5. That Common Council authorizes the Commissioner of Finance and Administrative Services to disburse, at a time acceptable to him, to the named Commissions, Agencies and Committees, the approved funds as contained in the 2020 budget. MOTION CARRIED. Adjournment Moved by Councillor Reardon, seconded by Councillor Norton: RESOLVED that the open session meeting of the Finance Committee be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on January 22, 2020 was adjourned at 5:30 p.m. 3 Finance Committee Meeting Open Session April 15, 2020 MINUTES OPEN SESSION FINANCE COMMITTEE MEETING APRIL 15, 2020 AT 4:30 PM MEETING CONDUCTED BY ELECTRONIC PARTICIPATION Present: Mayor D. Darling Councilor D. Merrithew Councilor S. Casey Councilor D. Reardon Councilor G. Sullivan Councilor G. Norton Also Present: City Manager J. Collin Commissioner of Finance and Treasurer K. Fudge Director of Strategic Affairs I. Fogan Comptroller Finance C. Graham City Solicitor J. Nugent Fire Chief K. Clifford Commissioner Saint John Water B. McGovern Commissioner Growth & Community Development J. Hamilton Commissioner Transportation & Environment Services M. Hugenholtz Senior Financial Manager D. Arbour Senior Financial Manager C. Lavigne Deputy Fire Chief R. Nichol Deputy Fire Chief M. Carr Common Clerk J. Taylor Administrative Assistant K. Tibbits 1. Meeting Called To Order Councilor Merrithew called the Finance Committee open session meeting to order. 2. Consent Agenda 2.1 Year End 2019 Forecast for General Fund and Utility Fund Moved by Councillor Norton, seconded by Councillor Reardon: RESOLVED that the Finance Committee receive and file the submitted report and submit a copy to Common Council to be received and filed at its next meeting. MOTION CARRIED. 3. Business Matters 3.1 Financial Risk Assessment COVID-19 -The global and Canadian economic impact of this event is significant. The City is positioned to mitigate some of the financial vulnerabilities through polices such as the Restructuring Reserve, Winter Weather Reserve, Benefit Fluctuation Reserve, and City Hall Reserve. 1 Finance Committee Meeting Open Session April 15, 2020 Mr. Fudge reviewed the forecast of as a result of COVID-19 as well as the assumptions used in developing the forecast. The model addresses a best and worst case scenario based on the length of the pandemic from three to nine months. The impact to the General Fund revenue is between $4.2M to $8.9M depending on the length of the pandemic, or approximately $1.3M per month based on the worst case scenario. The impact to Saint John Water revenue is projected to be between $1.1M to $3.3M. The consolidated financial impact assessment ranges from $5.3M to $12.2M under a worst case scenario. The is in addition to the on-going restructuring plan to address sustainability. The cost mitigation strategy addresses loss of revenue through workforce adjustments, hiring freezes, freezing overtime and discretionary spending, service reduction for Saint John Transit, reinstatement of transit fares and parking fees, closing of facilities such as ice rinks, sports fields, Aquatic Centre, TD Station, and Trade and Convention Centre, in an effort to mitigate costs and risk to the City. The City has moved to an essential services model and reduced service levels and cancelled events, programs and services. A 25% reduction in water consumption for Saint John Water is estimated. SJ Water has a high infrastructure deficit and a high debt load with no operating reserves in place. There is very little flexibility to reduce operating expenses as most expenses are associated with infrastructure and labour force. Mr. Fudge commented on possible service impacts under the cost mitigation strategy. The cost mitigation plan will address the expected shortfall over 2020 but there are longer term risks such as the potential reduction to the C Mr. Collin stated that the City is operating under an essential services model and conforming to the mandatory order issued by the Province. These initial services were primarily based upon health and safety but if this becomes a longer-term event, the identification of critical services will change. The mandatory order does not permit the City to alter collective agreements currently in place. In response to a question, Mr. Collin stated that the City has terminated the employment of the casual workforce which has impacted the dilapidated building program. If COVID-19 becomes a prolonged event, it is possible that this service will be restored to address dangerous buildings in the City. The cost for the contracted services to deliver the program is recoverable through the province but staffing costs are not. Some development services such as permitting and building inspections are being done virtually. Virtual PAC and Public Hearings will soon be introduced. There is a team in place to address how the City can restore services as soon as the mandatory order is amended or lifted. In response to a question with respect to the interim funding from the province, Mr. Collin stated that those funds can only be used for specific purposes. The City has requested that any there has been a positive indication of this approach, although nothing has been received in writing. It is unlikely that the Province will permit the City to use surplus funds to mitigate against COVID-19 impacts. It is more likely that a provincial approach will be taken in terms of municipal relief. The City must deal with its deficit, currently projected at $10M, but due to COVID-19 could be more. The City is facing additional financial pressures beyond sustainability and COVID-19 as higher than its growth. Transformational reforms must occur to address the financial pressures in the long term. In addition, the City will play a role in economic recovery which is an additional financial pressure. Moved by Councillor Sullivan, seconded by Councillor Reardon: RESOLVED that the Finance Committee recommends that Common Council: 2 Finance Committee Meeting Open Session April 15, 2020 Re-designate the $2 million Winter Weather Reserve more broadly as an Emergency Service Reserve; 80% of the Growth Reserve be dedicated to serve as a Recovery Fund to spur economic recovery in the City of Saint John post Covid-19; th Saint John Transit reduce operating costs by at a minimum 25% no later than May 15 unless Federal or Provincial funds become available; Finance Committee acknowledges that Cost Mitigation Strategy is dependent on the savings presented which include short-term service reductions and that any future Council directive to reinstate these services will compromise the plan. MOTION CARRIED. 3.2 Gas Detection Agreement Fire Services Chief Clifford stated that gas detection has been at a cost of approximately $17K per year. The current inventory of equipment is beyond its useful life. Detection assets have been reduced from 11 to 6 units and the cost of the proposal is less than the amount forecasted for gas detection equipment in 2020 and future years. Moved by Mayor Darling, seconded by Councillor Sullivan: Detection Agreement Finance Committee recommends to Common Council that Council enter into an inept 72 Month Agreement (Exchange Program) with Industrial Scientific Canada, ULC, for the hardware, service, repairs and consumables required for its gas detection program at an annual cost of $16,490.52 plus HST and that the Mayor and Common Clerk be authorized to execute the necessary contract documents. MOTION CARRIED. 3.3 Reclassification of Capital Program Moved by Councillor Reardon, seconded by Mayor Darling: and Utility Fund Finance Committee endorse the adjustments to the General and Utility Fund 2020 Capital Budgets and to have the report approved at the next meeting of Common Council. MOTION CARRIED. Adjournment Moved by Councilor Reardon, seconded by Mayor Darling: RESOLVED that the open session meeting of the Finance Committee be adjourned. MOTION CARRIED. The Finance Committee open session meeting held on April 15, 2020 was adjourned at 6:00 p.m. 3 Strategic Planning Finance and Growth Committees, May 2020 Council Approved Sustainability Plan th May 4, 20202 Sustainability Plan Recommendations for Action RESOLVED that as recommended by the City Manager in the submitted presentation entitled Sustainability Plan Recommendations for Action Common Council adopt the following: 5.Direct City Manager to develop a 10-year vision and strategy document that will be used to guide all further decision-making and subordinate policy development for the City of Saint John. 6.Direct City Manager to maintain and update all policy documents on an as required basis. 7.Direct City Manager to prepare for the development of the next Four-Year Priorities. 2 Objective of Presentation -What is a strategic planning? -Why is it important? -What are the parts of a plan? -What is the strategic planning process? 3 What is strategic planning? making decision to allocate its resources to pursue that strategy -Why? -Failing to plan is planning to fail Alan Lakein -A goal without a plan is just a wish Antoine de Saint-Exupery Functions like a road map Look at a corporate plan as a "business improvement plan" that examines internal capabilities to take advantage of external opportunities 4 Why is it important? Allows organizations to be proactive rather than reactive It sets a sense of direction Communicates priorities to the community Communicates your direction to staff Increases operational efficiency Drives organizational alignment Helps communicate your message - Brand 5 Strategic Planning Framework 6 Long Term Financial Plan/Strategic Plan 7 Why it is important for the City of Saint John Guides other existing plans (PlanSJ, PlanSJ PlaySJ, Move SJ) and helps builds new ones Strategic LTFP PlaySJ Plan Guides existing policies and helps build new ones MoveSJ 8 Sections of a plan Executive Summary Inputs PESTEL SWOT The Plan Vison Mission Strategic goals Short, medium, and long-term strategic objectives High level tactics or Actions to achieve strategic objectives 9 PESTEL External Analysis 10 SWOT Strengths What do we do well, where do we excel over competitors, internal capabilities and assets Weaknesses Where are our gaps, what Opportunities Emerging needs, media, underserved areas Threats Emerging competitors, changing customer needs, negative press 11 Heart of the plan 12 Parts of a Plan - Vision Statement A statement of what the organization wants to be in the future. The Vision Statement provides the major long-term direction for the planning and is the ultimate outcome to be achieved through the planning process What will the City of the future be like? What role should the City play in the future? How should the City be different than it is now? 13 Parts of a Plan - Mission A statement that indicates what the City plans to do and how it will be done. The statement indicates the reason the City exists. The Mission Statement serves as the basis for the development of the The Mission Statement should be exciting, inspiring, and motivating. The Mission Statement should be short and concise. The Mission Statement should answer the following questions: Who are you as a organization? Why do you exist? What do you do? Whom do you serve? Part of a Plan - Goals What is a specific goal that relates to you mission? Long Term Should be aligned with your vision/mission Example: Increase population 15 Parts of a Plan - Objectives How will you reach your goal? Long Term set from the goals you establish, should be aligned with your Vision/Mission Example: Increase Citizen retention/reduce out migration from City/region 16 Parts of a Plan - Strategies How will you accomplish your Objectives? What should you CHANGE to accomplish your goal? Example: Build the best parks 17 Parts of a Plan Tactics Specific actions or initiatives that align with the strategy Example: Increase capital investment in parks 18 Performance Management Continuous feedback and communication Tactics between key stakeholders to ensure the Strategies achievement of the strategic objectives of Objectives the organization Goals Reported yearly and used to update plan, Were the tactics implemented? Mission Did the tactics or action support your Vision strategy? Did your strategy support your objective Does your objective support your goal 19 Key Performance Indicators Measurable value that demonstrates how effectively a company is achieving key objectives KPIs at multiple levels to evaluate success at reaching targets. High-level KPIs may focus on the overall performance of the business Low-level KPIs may focus on processes in departments such as sales, marketing, HR, support and others 20 Creating Key Performance Indicators Leading Influence future performance Lagging Analyze past performance 21 Performance Metrics in Action Evaluate Course Correct Accomplishing your goal? Adjust strategies and tactics Is there is a gap? Evaluate data collection Are you headed toward the Tweak metric expected outcome? Constantly Monitor and Control 22 Tools for Reporting Performance 23 Process (June - November) Conduct Kick-off Meeting Conduct SWOT and PEST Public Consultation & Provide Business Insights (Result of PEST and SWOT) Stakeholder Engagement Define Mission and Vision Identify Goals Identify key Corporate Objectives Identify Required Strategies to Reach Objectives Identify Key Tactics or Actions to Support Strategies Create Performance Management Processes 24 Who will be writing the plan Key staff conducting workshops and engaging in consultation Input from Senior Leadership Team Inputs from Finance and Growth Committee Input from citizens, could include citizen participation in working group Updates Monthly Finance and Growth Committees Senior Leadership team updates Presentation to Council to show process and for endorsement of plan December 2020 25 Focus on outcomes what changes do we envision for our community Set the direction for the next four years to achieve a desired future for Saint John Relate to people and are at the heart of what we do in terms of public service delivery Focus on Saint John citizens and the investments and services they want and need so that they can achieve their goals 26 Strategic Decision Making Corporate Objectives Achieve Long Term Service- Priorities desired Vision & Based (Short- future for Budget Strategy Term) Saint John Annual Report / Scorecard Council Priorities Developing Priorities Context Outlook and Trends Engagement Define outcomes Create measureable objective Identify KPIS Engagement Agreement Adoption 28 10 year vision Strategic Plan 29 FINANCE COMMITTEE REPORT Report Date April 29, 2020 Meeting Date May 14, 2020 His Worship Mayor Don Darling and Members of Common Council SUBJECT: City Market Tower Interior Renovations Second Floor and Fit-Up OPEN OR CLOSED SESSION This matter is to be discussed in open session of Common Council. AUTHORIZATION Primary Author Commissioner/Dept. Head City Manager Samir Yammine Kevin Fudge/Ian Fogan John Collin RECOMMENDATION It is recommended that the change order submitted by Eclipse Construction Services Ltd., for the City Market Tower Interior Renovations Second Floor and Fit-Up, in the amount of $324,843.49 plus HST be accepted. Further to the base quote amount, it is recommended that a contingency allowance be carried for this project in the amount of $10,000 plus HST, for a total project cost of $334,843.49 plus HST. EXECUTIVE SUMMARY the change order of the City Market Tower Interior Renovations Second Floor and Fit-Up to Eclipse Construction Services Ltd. The contractor is also currently mobilized to carry out City Market Tower Interior Renovations the City Market Tower. PREVIOUS RESOLUTION The following previous resolutions were adopted by Common Council: 1) M&C 2015-199. a. Approve the Contribution with the Atlantic Canada Opportunity Agency (Project No. 206167) and authorize its execution by the Mayor and Common Clerk; b. Commit to allocating $1,330,000 toward the Saint John City budget prior to 2018, contingent on the Government of New Brunswick confirming its contribution of $2,030,000 - 2 - 2) M&C 2016-238. Approve the contribution Agreement between the City of Saint John and the Regional Development Corporation (Project No. 7807) and authorize its execution by the Mayor and Common Clerk; 3) M&C 2017-048. It is recommended that the tender submitted by Eclipse Construction Services., for the replacement of the Heritage Window Replacement, in the amount of $853,252.85 including HST be accepted. Further to the base tender amount, it is recommended that a contingency allowance be carried for this project in the amount of $35,000 plus HST, for a total amount of $893,502.85 including HST. Additionally, it is recommended that the Mayor and Common Clerk be authorized to execute the necessary contract documents. 4) M&C 2017-197. It is recommended that the tender submitted by Eclipse Construction Services Ltd., for the City Market Tower Phase 1 Envelope Rehabilitation and Structural Remediation, in the amount of $2,013,249.47 plus HST be accepted. Further to the base tender amount, it is recommended that a contingency allowance be carried for this project in the amount of $290,000 plus HST, for a total project cost of $2,303,249.47 plus HST. Additionally, it is recommended that the Mayor and Common Clerk be authorized to execute the necessary contract documents. 5) M&C 2019-80. It is recommended that the tender submitted by Eclipse Construction Services Ltd., for the City Market Tower Phase 2 Interior Renovations and Fit-Up, in the amount of $3,162,806.30 plus HST be accepted. Further to the base tender amount, it is recommended that a contingency allowance be carried for this project in the amount of $158,140.32 plus HST, for a total project cost of $3,320,946.62 plus HST. Additionally, it is recommended that the Mayor and Common Clerk be authorized to execute the necessary contract documents. STRATEGIC ALIGNMENT The City Market is a gem for the City of Saint John. The City Market is one of the most important public gathering spaces in the greater Saint John region. It is a place where regional vendors sell a range of goods as well as goods from around the world. The Market provides a range of merchandise that serves all residents of the community. The City Market, the oldest continuing farmer's market in Canada, forms the historic centerpiece of the revitalized city center in Saint John. The City Market the identity and culture of Canada. In February 1988, the City of Saint John entered into a cost sharing agreement with the Federal Government (Environment Canada Parks) for the restoration of the Saint John City Market. An important stipulation in this agreement is as follows: - 3 - l, at its own expense, and subject to the Conservation Report, operate, maintain, and protect the Market in its restored state for a period of forty- As such, the City of Saint John has a responsibility under this agreement to maintain and protect the City Market in a restored state until the year 2030. This includes the Head Tower. In addition to the above, in terms of strategic alignment, the Saint John City Market is also located in an intensification area (uptown primary centre), which aligns with Plan SJ. The proposed exterior and structural remediation work is part of the City Market Tower capital renewal which was identified as a high priority by the Common Council. REPORT BACKGROUND In April, 2019, Common Council has awarded the City Market Tower Phase 2 Interior Renovations and Fit-Up to Eclipse Construction Services Ltd. Phase 2 consists of the interior renovation and fit up of the main floor, stairwell, elevator lobby, third and fourth floor as well as the following items: Replacement of the two boilers Supply and Installation of a new high efficiency heating and cooling system including a smart control system Supply and Installation of three high efficiency Energy Recovery Ventilators (ERV) Expanding of the electrical and boiler rooms Supply and installation of a new electrical service entrance Supply and installation of new lighting, power and communications distribution including lighting control Supply & installation of new exterior lighting system Modernizing of the existing elevator Structural remediation of interior timber systems, and interior brick bearing walls Phase 2 is substantially completed with the exception of outstanding items and deficiencies. However, this phase has excluded the interior renovation of the second floor due to capital budget limitations. - 4 - ANALYSIS In March 2020, the City of Saint John received confirmation from NB Power of grant funding in the amount $675,020.28 as a result of the implementation of the energy measures as part of Phase 1 & 2 of the City Market Tower Renovation. These measures have been completed and all associated costs have been accounted for under the original City Market Tower Budget for Phase 1 & 2. The grand funding from NB Power is considered new funding which was not accounted in the capital budget. In response to the new funding, the City has asked Eclipse Construction Services to provide a quote to complete the interior renovation and fit-up of the second floor at the City Market Tower. The proposed scope of work of the City Market Tower second floor renovation and fit-up consists of, but is not limited to, the following: Interior renovations of the City Market Tower Second Floor and Fit-Up Supply and Installation of a new high efficiency heating and cooling system including a smart control system Supply and installation of new lighting, power and communications distribution including lighting control The City Market Tower will be fully utilized and floor plans will be finalized in the coming weeks. SERVICE AND FINANCIAL OUTCOMES The total cost to perform the City Market Tower Interior Renovations and Fit-Up for the second floor, if awarded to Eclipse Construction Services Ltd as recommended, will be $334,843.49 plus HST. This includes the $10,000 contingency allowance. The cost of the project with the HST rebate applied (100% in this case) will be $334,843.49. City staff would like to use the NB Power grant to fund the City Market Tower Second Floor Renovation and Fit-Up. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS MATERIALS MANAGEMENT In February 2020, City staff in cooperation with the Consultant prepared a design document and requested Eclipse Construction Services Ltd to provide a quote. - 5 - City staff and the Consultant reviewed the quote and found the cost represents good value to the City and is in accordance with the industry standard for the scope of work. The following rationale provided are to justify the work of Eclipse Construction Services: 1- Eclipse Construction Services are currently mobilized on site which would help reduce any overhead and mobilize costs 2- Eclipse Construction Services have submitted their cost prior to Covid-19 and agreed to hold their cost. The proposed quote will minimize risk related to any unexpected cost increase as a result of the Covid-19 City staff has estimated an 20% increase in cost if the City decide to postpone the award of the project or proceed with public tender. General Administration of ons (Division 6) and Materials Management support the recommendation being put forth. ATTACHMENTS N/A Title: Budget Monitoring Policy Subject: Budget Monitoring Policy Category: Finance and Administrative Services Policy No.: FAS-021 M&C Report No.: 2020-127 Effective Date: Next Review Date: Area(s) this policy applies to: Cross Corporate Office Responsible for review of this Policy: Finance and Administrative Services Related Instruments: Policy Sponsors: FAS-001 Asset Management Policy Chief Financial Officer FAS-002 Investment Management Policy FAS-003 Reserves Policy FAS-004 Operating Budget Policy FAS-005 Capital Budget Policy FAS-006 Debt Management Policy FAS-007 Wage Escalation Policy FAS-020 Long Term Financial Plan Policy Document Pages: This document consists of 5 pages. Revision History: Common Clerk's Annotation for Official Record Date of Passage of Current Framework:_________________________ I certify that this Policy was adopted by Common Council as indicated above. ________________________ ______________________ Common Clerk Date Date Created: Common Council Approval Date: Contact: Finance and Administrative Services City of Saint John Budget Monitoring Policy (DRAFT) TABLE OF CONTENTS 1. 2. POLICY STATEMENT ..................................................................................................... . 3 3. DEFINITIONS ................................................................................................................... 4 4. PRINCIPLES ...............................................................................................5 5. POLICY APPLICATION ..................................................................................................... 5 6. ROLES AND RESPONSIBILITIES........................................................................................ 6 2 City of Saint John Budget Monitoring Policy (DRAFT) 1. PURPOSE AND CONTEXT 1.1. put the City on a sustainable path going forward; 1.2. To be sustainable, the City must find ways to grow revenue but also control costs from escalating faster than its revenue growth; 1.3. The Budget Monitoring Policy enhances budget accuracy, accountability and cost control by ensuring budget allocations are managed and adhered to; 1.4. The Budget Monitoring Policy enhances fiscal responsibility and financial flexibility by integrating budget monitoring practices Management strategies; st 1.5. Effective Date of Budget Monitoring Policy is January 1, 2021; 2. POLICY STATEMENT 2.1 It is a best financial practice to have a Budget Monitoring Policy to monitor financial performance; 2.2 The Budget Monitoring Policy objectives are as follows: 2.2.1 Manage separately personnel and non-personnel budgets; 2.2.2 Increase operating budget transparency & performance management; 2.2.3 Increase budgeting accuracy by ensuring annual operating expenditures match forecasts and predefined Council approvals; 2.2.4 Increase financial control to ensure resources are funded and spent in a fiscally prudent manner; 2.2.5 Provide enhanced fiscal oversight and supports a strategic corporate lens throughout each fiscal year; 2.2.6 Increase financial flexibility by integrating reserve strategies with the annual budget monitoring process. 2.3 Revenue budgets shall be carefully monitored with particular attention to: 2.3.1 Seasonality, and whether comparable to prior observations 2.3.2 Any potential volatility and the resulting impacts 2.3.3 Trends and comparison to projections 2.3.4 One time sources and Timing of receipts 3 City of Saint John Budget Monitoring Policy (DRAFT) 2.3.5 Relationship to economic indicators 2.3.6 Changes in policy/practice of overarching governments involved in disbursement of revenues 2.3.7 Review of patterns at other similar/related governments 2.4 Expenditure budgets shall be carefully monitored with particular attention to: 2.4.1 Wages and Benefits (Personnel) - Examine additional detail beyond just regular payroll expenses, including hiring and vacancy information, analysis of part-time, overtime, leave pay out and special pay, as well as whether fringe benefit costs are within budgeted expectations 2.4.2 Goods and Services (Non-personnel) - Monitoring needs to include more than just current expenses, but also encumbrances, outstanding purchase orders, and major contracts to develop a better picture of not only what was spent, but what remains to be spent 2.4.3 Service Outcomes Determine if services are being provided as budgeted and if additional services have been provided that were not anticipated, in addition to trends observed that may impact whether or not spending remains on track 2.4.4 Performance Measures Examine performance measures and linkages to financial outcomes. The analysis should include any changes to goals/initiatives since budget adoption and are there any new initiatives not initially included in the budget 2.4.5 Root cause - move beyond just identifying deviations from budget versus actuals and work towards analyzing why deviations occurred; 3. DEFINITIONS 3.1 Personnel Costs means the total wage and benefit costs for internal resources (inclusive of benefits); 3.2 Non Personnel Costs - means the total amount of annual expenditure spent on goods and services; 3.3 Surplus means an approved annual budget amount is great than the actual spend within a particular category; 3.4 Deficit means an approved annual budget amount is less than the actual spend within a particular category. 4 City of Saint John Budget Monitoring Policy (DRAFT) 4. PRINCIPLES 4.1 Recognize in principle that all budget surpluses and deficits are non-recurring in nature and should be treated as such; 4.2 Budget surpluses and deficits considered to be recurring shall be permanently adjusted for in the following year operating budget; 4.3 Operating Budget surpluses for Wages and Benefits are not intended to subsidize Goods and Services; 4.4 Operating Budget surpluses for Goods and Services are not intended to subsidize Wages and Benefits; 4.5 Operating Budget surpluses for Wages and Benefits is appropriate to reallocate to Goods and Services when a staff vacancy generating the surplus require third party contracted services to maintain the service level for that particular role; 4.6 Revenues and Grants intended for resourcing programs (human resources) will not be spent on Goods and Services; 5. POLICY APPLICATION: 5.1 Personnel budgets are not intended to subsidize non personnel budget; therefore surpluses occurring in wages and benefits shall not be reallocated to offset budget deficits in goods and services unless supported by a business case and approved by the City Manager and the Chief Financial Officer; 5.2 Non personnel budgets are not intended to subsidize personnel budgets; therefore surpluses occurring in goods and services shall not be reallocated to offset deficits in Wages and Benefits unless supported by a business case and approved by the City Manager and the Chief Financial Officer; 5.3 Aggregate Wage and Benefits surpluses will be applied to the Operating Reserve until the Operating Reserve is fully financed in accordance with FAS-003 Operating and Capital Reserves Policy; all surpluses thereafter will be applied fifty Obligations; 5.4 Aggregate Goods and Services surpluses will be applied to the Operating Reserve until the Operating Reserve is fully financed in accordance with FAS-003 Operating and Capital Reserves Policy; all surpluses thereafter will be applied fifty Obligations; 5 City of Saint John Budget Monitoring Policy (DRAFT) 5.5 All departmental and service area surplus and deficit positions shall be analysed annually to determine if permanent budget adjustments for the following year are necessary; 5.6 As part of the annual operating budget process, service areas will identify one time operating expenditures and submit proposals to fund the one time expenditure through the use of Reserve Funds as per FAS-003 Operating and Capital Reserves Policy; 5.7 The City Manager and Chief Financial Officer shall make any recommendations respecting the use of Reserve Funds as part of the Annual Operating Budget Process and shall be in accordance with the Long Term Financial Plan. 6 ROLES AND RESPONSIBILTIES 6.1 Council shall: 6.1.1 Approve the Budget Monitoring Policy; 6.2 Finance Committee shall: 6.2.1 Recommend the Budget Monitoring Policy to Common Council for approval; 6.2.2 Review any changes to the Budget Monitoring Policy in the future. 6.3 The Finance Commissioner shall: 6.3.1 Review annually to ensure that Wages and Benefits vs Goods and Services allocations are in compliance with the Budget Monitoring Policy 6.3.2 Recommend any changes to the Budget Monitoring Policy in the future. 6.3.3 Design an analysis framework that will monitor surplus and deficit positions 6 Budget Monitoring Policy City of Saint John th May 8, 2020 LTFP Financial Policies Policy # Policy Title Status FAS-001 Asset Management Policy Approved FAS-002 Investment Management Policy Approved FAS-003 Operating & Capital Reserves Policy Approved FAS-004 Operating Budget Policy Approved FAS-005 Capital Budget Policy Approved FAS-006 Debt Management Policy Approved FAS-007 Wage Escalation Policy Approved FAS-020 Long-Term Financial Plan Policy Approved FAS-021 Budget Monitoring Policy Pending Agenda GFOA Best Practice Financial Policies Why do we need a Budget Monitoring Policy Objectives Principles Application Recommendation 3 Best Practice aǒƓźĭźƦğƌźƷźĻƭ ƷŷğƷ ğƦƦƌǤ ğ .ǒķŭĻƷ aƚƓźƷƚƩźƓŭ tƚƌźĭǤͳ London, ON Waterloo, ON Kamloops, BC Surrey, BC York Region, ON Calgary, AB Edmonton, AB Revelstoke, BC Toronto, ON Kelowna, BC The Government Finance Officers Association considers Budget Monitoring to be best practice. 4 Best Practices in Budget Monitoring Revenue Budgets: consider seasonality, volatility, one time receipts, timing, consider impact of economic conditions, and changes in policies of other levels of government; Expenditure Budgets: Personnel Costs (Wages and Benefits): consider trends such as vacancies, turnover, hiring plans, changes in job descriptions, part time, overtime, fringe benefit costs, and costs associated with leaves and absenteeism; Non Personnel Costs: consider encumbrances, outstanding purchase orders, and major contracts to develop a better picture of not only what was spent, but what remains to be spent; Service Outcomes: determine if services are being provided as budgeted; Performance Outcomes: examine performance measures and linkages to financial outcomes. The analysis should include any changes to goals/initiatives since budget adoption and any new initiatives not initially included in the budget; wƚƚƷ ĭğǒƭĻ - move beyond just identifying deviations from budget versus actuals and work towards analyzing why deviations occurred; 5 Why do we need a Budget Monitoring Policy first Long Term Financial Plan to put the City on a sustainable path going forward; The Budget Monitoring Policy enhances accountability and strengthens cost control by ensuring budget allocations are managed and adhered to; The Budget Monitoring Policy will increase the accuracy of the Annual Budget Process; The Budget Monitoring Policy will provide a means to increase funding to Reserves and Accelerate Debt Reduction; Effective Date of Budget Monitoring st Policy proposed is January 1, 2021; 6 Objectives 1.Personnel and Non Personnel budgets shall be effectively managed separately; Wages and Benefits budget performance managed separately from Goods and Service budget performance; 2.Increase Operating Budget performance management; Service areas shall not have the authority to utilize budget surpluses to fund new initiatives that are unplanned or are one time in nature; Unplanned initiatives and performance enhancements will require a business case and recommendation to utilize Reserves through the Reserve Policy process (FAS-003); 3.Increase Operating Budget accuracy; Service areas will separately identify one time non recurring spends during the budget preparation process; One time spending decisions will be better managed, reducing the risk of future structural deficits in accordance with (FAS-004) Operating Budget Policy; 4.Improve Strategic Decision making; Will provide a strategic corporate lens approach when recommending use of surpluses and reserve funds; 5.Improve Financial Flexibility: flexibility to fund reserves (FAS- 003 Operating and Capital Reserve Policy) and accelerate Long Term Debt reduction (FAS-006); 7 Policy Application 1.Recognize in principle that all surpluses and deficits are non recurring and one time in nature; Operating Budget surpluses for Wages and Benefits are not intended to subsidize Goods and Services; Surpluses occurring in Wages and Benefit budgets shall not be reallocated to offset deficits in Goods and Services budgets unless supported by a business case and approved by both the City Manager and the Chief Financial Officer; 2.Operating Budget surpluses for Goods and Services are not intended to subsidize Wages and Benefits; Surpluses occurring in Goods and Services budgets shall not be reallocated to offset deficits in Wages and Benefits budgets unless supported by a business case and approved by both the City Manager and the Chief Financial Officer; 3.Operating Budget surpluses for Wages and Benefits is appropriate to reallocate to Goods and Services when a staff vacancy generating the surplus is replaced with a third party contract; 4. Operating Reserve until such time a permanent adjustment in the annual budget is made to reflect a more accurate wage and benefit budget; 5. Operating Reserve until such time a permanent adjustment in the annual budget is made to reflect a more accurate goods and services budget; 8 Policy Application 6.In the event the Operating Reserve is fully funded in accordance with FAS-003 Operating and Capital Reserves Policy; surpluses thereafter will be applied fifty percent to the Capital Reserve and fifty percent to Debt Reduction; 7.All departmental and service area surplus and deficit positions shall be analysed annually to determine if permanent budget adjustments for the following year are necessary; 8.As part of the annual operating budget process, service areas will identify one time operating expenditures and submit proposals to fund the one time expenditure through the use of Reserve Funds as per FAS-003 Operating and Capital Reserves Policy; 9.The City Manager and Chief Financial Officer shall make any and all recommendations respecting the use of Reserve Funds as part of the Annual Operating Budget Process and shall be in accordance with the Long Term Financial Plan. 9 2019 Personnel and Non Personnel Costs $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 Non Personnel Costs $600,000 $400,000 $200,000 Personnel Costs $- 2019 Personnel CostsNon Personnel Costs 10 Example Scenario I -Staff vacancies creating a wage and benefit surplus of $400,000 in TES budget; -One time and significant unanticipated fuel spike due to global economic conditions with no change in service outcomes causes a $100,000 deficit in the TES budget Application -End of year recommendation to transfer $400,000 surplus in the TES wage and benefit to the Operating reserve; -End of year recommendation to fund $100,000 deficit in TES budget due to unanticipated and one time spike in fuel prices due to global economic conditions from Operating Reserve. -Net Transfer to Operating Reserve = $300,000 -Staff Vacancies in the TES budget will be analyzed to determine if a permanent budget adjustment is required for the following year; -Fuel prices will be monitored to see if the fuel price increase is a permanent increase to determine if the fuel budget needs to be adjusted in the following year. 11 Recommendation It is Recommended that: 1.Finance Committee approves the Draft Operating Budget Allocation Policy; 2.Finance Committee Recommends that Common Council approve the Operating Budget Allocation Policy as presented by Staff. 12 Q & A 13 FINANCE COMMITTEE REPORT Report Date May 08, 2020 Meeting Date May 14, 2020 Chairman Councillor Merrithew and Members of Finance Committee SUBJECT: 2019 Capital Budget Analysis Report 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 Kevin Fudge John Collin RECOMMENDATION It is recommended that this report be received and filed. EXECUTIVE SUMMARY The purpose of this report is to provide the Finance Committee with an update on the 2019 General and Utility Fund Capital Budgets in terms of projects completed, projects ongoing or not started and estimated surpluses. The report with the debt management policy and long term financial plan. PREVIOUS RESOLUTION N/A STRATEGIC ALIGNMENT This report aligns with policy, long term financial plan and capital budget policy. REPORT Common Council approved the 2019 General and Utility Fund on July 30, 2018. The total budget approved for the General Fund was $18,292,275 and total amount for the Utility was $7,595,500. The City share of the General fund which - 2 - would be issued through debt is $11,997,109 and the Utility share which is funded through pay as you go is $4,669,020. The General Fund is projecting to have a positive variance of $1,028,830 (Appendix 1.) and the Utility Fund is projected to have a positive variance $2,525,976 (Appendix 1.), however the majority of the surplus represents cancelled projects due to the City not being successful in securing funding from other government sources. Staff closely manages the capital expenditures to ensure optimal delivery of projects within the approved capital budgets. Capital projects often have several phases including; planning, design, tendering and construction. Through these various steps; project scope, costs and other unplanned expenditures can affect the approved budget both positively and negatively. Therefore, budget adjustments are generally managed within capital budget. Budget overages are offset by positive variances in other budgets and are often brought to Common Council for approval to align with the Capital Budget Policy. 2019 Summary of Projects General Fund The General Fund Capital Budget has on overall budget of $18,292,275. The 2019 projects that have been completed have favorable variance of $706,830 and projects that are ongoing are anticipated to have a favorable variance of $17,000. Projects that have been cancelled worth $305,000 has funding from other sources in the amount of $201,300, therefore, these funds will be used up in the 2020 and 2021 capital under different projects. Summary of Projects 2019 - General Fund BudgetActual/Projected Variance Expenditures Project Completed$11,947,500$11,240,670$706,830 Project Ongoing $5,794,775$5,777,775$17,000 Project Cancelled$305,000$0$305,000 Reclassed to City Market Tower$245,000$245,000$0 MC 2018-80$18,292,275$17,263,445$1,028,830 A detailed list of projects can be viewed in Appendix 1. There were a few projects in the amount of $305,000 that were cancelled and funding directed towards the City Market tower renovations per M&C 2018-80. Some of the projects that have favorable variances included facilities such as municipal operations and the Peter Murray Arena. The overall variance for - 3 - projects under transportation and storm that were completed or are still ongoing is just under $500,000. IT infrastructure had a positive variance of $228,970; however these projects are funded from the Computer reserve, so these funds will be used for future assets. Likewise fleet replacement was over their anticipated budget, however this has not impact on the Impact on Long Term Debt The approved budget had a City Share of $11,997,109 which would be funded through debt. Based on the variances shown in the report, the City Share will be reduced to approximately $11,179,310 which is a reduction of $817,799 or 6.82%. The City share of capital will also be offset by additional funding in pay as you go that amounted to $903,342 resulting in a net borrowing of $10,275,788. This reduced net borrowing aligns strategically with the debt management policy approved in 2019. Three key performance indicators in the debt management continue to move in a positive direction; o General Fund Debt per Capital shall not exceed $1600 o General Fund Debt Service Ratio shall not exceed 12% o General Fund Total Debt Outstanding as a percentage of Operating Budget shall not exceed 70% Pay as you go was increased in the 2019 operating budget to just over $730,000 and was increased again to $2,000,000. These increases will continue year over year to allow the City to reduce its reliance on debt and meet the 2030 debt targets set out in the Long Term Financial Plan and the Debt Management Policy. 2019 Summary of Projects Utility Fund The 2019 Utility Fund Capital Budget has an overall budget of $7,595,500 with funding from pay as you go in the amount of $4,699,020 and funding from other sources in the amount of $2,896,480. The overall variance for projects that are completed and projects that are ongoing is expected to be a favorable variance of $33,976. A number of projects of projects have been cancelled with the largest one of the projects being water main lining budgeted at $1,500,000. The majority of the cancelled projects have funding from other sources and projects have already identified to use this source of funding. - 4 - Summary of Projects 2019 - Utility Fund BudgetActual/Projected Variance Expenditures Project Completed$2,924,500$2,825,085$99,415 Project Ongoing $2,179,000$2,244,439-$65,439 Project Cancelled$2,492,000$0$2,492,000 $7,595,500$5,069,524$2,525,976 Impact on Long Term Debt The Utility continues to focus on paying down its debt and continues to fund capital from pay as you go and continuing to leverage as much external funding opportunities that is available. The ending balance for long term debt in 2019 was $94,715,000, a reduction of $6,368,000 over 2018. The goal is to continue to pay down debt and have a debt balance of $56,875,000 by end of 2025. SERVICE AND FINANCIAL OUTCOMES The 2019 Capital Budget projects that are completed and ongoing have a positive variance for both funds. The positive variances on the General Fund as well as additional pay as you go will reduce the amount that will need to be borrowed. Both capital funds are managed to ensure the infrastructure deficit is being addresses while continuing to be fiscally responsible. INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS Input was received from Saint John Water, Transportation and Environment, Saint John Transit and Finance and Administrative Services. ATTACHMENTS Appendix 1 2019 Detailed Capital Budget Analysis Appendix 1 2019 GENERAL FUND CAPITAL BUDGET ACTUAL & ESTIMATED EXPENDITURE BUDGETVARIANCESTATUS STRATEGIC IT infrastructure replacement/upgrades$575,000$346,030$228,970 FACILITY & ENERGY MANAGEMENT Relocation of North Depot$250,000$250,000$0 Heat Pump Installation Program$45,000$45,000$0 Central Fleet Garage Roof Snow Control Pads$40,000$37,178$2,822 Fire Station 8 Exterior Remediation$75,000$75,000$0 Fire Station 4 window replacement$25,000$32,759-$7,759 Municipal Operations Complex: exterior siding acid wash and epoxy$80,000$14,897$65,103 Leisure Service Offices window replacement$50,000$50,000$0 Market Slip-Steel sheet wall coating and anode protection replacement$150,000$150,000$0 Peter Murray Arena ice surface brine header replacement and flushing$75,000$44,500$30,500 City Hall-Renovation and Fitup$3,500,000$3,500,000$0 $4,290,000$4,199,334$90,666 FLEET Fleet replacement program$2,500,000$2,597,532-$97,532 PARKING Pay by Plate parking meter machines - 10$62,000$64,365-$2,365 TRANSIT 2 Handy buses (Fleet replacement)$200,000$183,209$16,791 TRANSPORTATION Engineering investigations & Design$235,000$231,294$3,706 Asphalt Roadway Resurfacing & Curb & Sidewalk Renewal$3,600,000$3,241,115$358,885 Chipman Hill: King St to Union CWWF $300,000$287,074$12,926 Wentworth Street: Union St to Elliott Rowe CWWF $235,000$166,642$68,358 Queen Square North: Charlotte to Sydney$185,000$190,688-$5,688 Mecklenburg: Wentworth to Sydney$723,000$831,543-$108,543 Metcalf: Main St to Landsdowne Ave$492,000$488,586$3,414 St James Street: Prince William St to Germain$210,000$0$210,000 Asphalt Roadway Resurfacing & Curb & Sidewalk Renewal GTF $1,500,000$1,500,000$0 $7,480,000$6,936,942$543,058 STORM (FLOOD CONTROL) Chipman Hill/King Street to Union$145,000$102,145$42,855 Wentworth Street: Union St to Elliot Row$85,000$81,313$3,687 Mecklenburg Street: Wentworth to Sydney$288,000$187,689$100,311 Metcalf Street: Main to Landsdowne$162,000$159,836$2,164 Germain Street: Cantebury, Harding, St. James$162,000$145,000$17,000 St James: Prince William St to Germain$95,000$0$95,000 $937,000$675,983$261,017 MUNICIPALLY OWNED FACILITIES LBR-Ammonia Gas Detection$35,000$17,830$17,170 Harbour Station-replace 10 heat pumps$40,000$42,896-$2,896 Harbour Station-replace failed jet ice boiler$8,500$8,500$0 Harbour Station-replace domestic hot water piping$15,000$11,569$3,431 Appendix 1 2019 GENERAL FUND CAPITAL BUDGET Harbour Station-overhaul two ice plant ammonia compressors$25,000$27,324-$2,324 Harbour Station-replace food/beverage equipment tables$24,000$25,350-$1,350 Harbour Station-replace 1980 floor scrubber$48,000$47,995$5 CGAC-roof replacement Phase II$150,000$150,000$0 CGAC-replace leisure side piping over pools$20,000$25,000-$5,000 CGAC-security and locks and key lock change$25,000$21,848$3,152 CGAC-Install UV lighting/anti-crypto$60,000$81,606-$21,606 CGAC-Accessibility lift replacement$40,000$9,190$30,810 Trade & Convention Centre-replace function chairs$82,775$82,775$0 $573,275$551,884$21,391 RECREATION Asset Renewal Dominion Park/Rockwood Park$75,000$75,000$0 Playgrounds$200,000$233,167-$33,167 Fieldhouse Year 2 of 3$1,400,000$1,400,000$0 $1,675,000$1,708,167-$33,167 $18,292,275$17,263,446$1,028,829 Completed Ongoing Cancelled Funding Reclass Appendix 2 2019 UTILITY FUND CAPITAL BUDGET ACTUAL & ESTIMATED EXPENDITURE Infrastructure Renewal-SanitaryBUDGETVARIANCESTATUS Beach Crescent Lift Station$400,000$0$400,000 Chipman Hill: King Street to Union Street$195,000$195,000$0 Douglas Avenue: Civic 399 to 425$297,000$0$297,000 Lakewood Heights Sanitary System $430,000$430,000$0 Mecklenburg Street: Wenworth to Sydney Street$324,000$287,626$36,374 Metcalf Street: Main Street to Lansdowne Ave$204,000$159,247$44,753 Millidgeville Inflow and Infiltration Reduction Strategy$150,000$139,100$10,900 Mitigation Plan: Saint John River$38,000$38,000$0 Queen Square North: Charlotte to Sydney Street$94,500$94,492$8 St. James Street : Prince William to Germain Street$130,000$0$130,000 Wastewater Pumping: Prospect Street West to Walnut Street$100,000$100,000$0 Wentworth Street: Union Street to Elliott Row$100,000$79,282$20,718 $2,462,500$1,522,749$939,751 Infrastructure Renewal-Water Engineering Investigations and Design$205,000$205,000$0 Chipman Hill: King to Union Street$210,000$280,272-$70,272 Ellerdale Street: Valley Street to Margaret Street$650,000$621,457$28,543 Mecklenburg Street: Wenworth to Sydney Street$279,000$278,909$91 Metcalf Street: Main Street to Lansdowne Ave$170,000$169,537$463 Michael Crescent$424,000$424,000$0 Orthophosphate System: West$296,000$296,000$0 Queen Square North: Charlotte to Sydney Street$135,000$134,982$18 St. James Street : Prince William to Germain Street$165,000$0$165,000 Watermain Cleaning and Lining Phase 16$1,500,000$0$1,500,000 Wentworth Street: Union Street to Elliott Row$155,000$127,179$27,821 Fallsview Pump Station$274,000$364,439-$90,439 Safe Clean Drinking Water$220,000$220,000$0 $4,683,000$3,121,775$1,561,225 Industrial Water Renewal - West Floodplain Mapping - Musquash$100,000$100,000$0 Musquash Water Pump Station$350,000$325,000$25,000 $450,000$425,000$25,000 $7,595,500$5,069,524$2,525,976 Completed Ongoing Cancelled 2019 Capital Budget Report General Fund/Utility Fund Finance Committee th May 14, 2020 Allocation of 2019 General Capital Budget ЋЉЊВ /ğƦźƷğƌ .ǒķŭĻƷ Ώ υЊБͲЋВЋͲЋАЎ υЊͲЍЉЉͲЉЉЉ υЎАЎͲЉЉЉ Transportation/Environment Transit/Parking υЋͲЎЉЉͲЉЉЉ Facilities/Recreation υБͲЍЊАͲЉЉЉ υЎАЌͲЋАЎ Regional Facilites/ABC's Fleet υЍͲЎЏЎͲЉЉЉ Information Technology Field House υЋЏЋͲЉЉЉ /źƷǤ {ŷğƩĻ Ώ υЊЊͲВВАͲЊЉВ hƷŷĻƩ {ŷğƩĻ Ώ υЏͲЋВЎͲЊЏЏ 2 2019 General Fund Capital Budget General Fund Capital Budget Variance Analysis Projects completed $706,830 positive variance Projected underway $17,000 projected positive variance Project cancelled $305,000 variance Project reclassed to City Market Tower Renovation - $245,000 Summary of Projects 2019 - General Fund BudgetActual/Projected Variance Expenditures Project Completed$11,947,500$11,240,670$706,830 Project Ongoing $5,794,775$5,777,775$17,000 Project Cancelled$305,000$0$305,000 Reclassed to City Market Tower$245,000$245,000$0 MC 2018-80$18,292,275$17,263,445$1,028,830 3 2019 General Capital Budget ğƩźğƓĭĻƭ Transportation and Storm had favorable variance of approximately $500,000 Municipal Operation Building and Peter Murray Arena under budget IT was under budget by $228,000, however all funding is from reserves, therefor funds will be utilized in future budgets Overall, staff is managing capital expenditures to ensure optimal delivery of projects within the approved capital budgets 4 2019 General Capital Budget LƒƦğĭƷ ƚŅ 5ĻĬƷ Approved budget had a City share of $11,997,109 was to be funded by debt. Positive budget variance mean that City share will be approximately reduced by υБЊАͲАВВ However due to the Debt Management Policy passed in 2019 which -as-you-go as an υВЉЌͲЉЉЉ that will be used to pay for capital. Due to positive variance and additional pay-as-you-go the City will reduce borrowing on its 2019 General Fund Capital budget by υЊͲАЋЉͲАВВ 5 2019 General Capital Budget The debt management policy has set out the following debt limits the payments required on the debt. The following debt limits shall be applicable: Њ͵DĻƓĻƩğƌ CǒƓķ 5ĻĬƷ ƦĻƩ /ğƦźƷğʹ Measures Debt per Population. wĻĭƚƒƒĻƓķĻķʹ DĻƓĻƩğƌ CǒƓķ 5ĻĬƷ ƦĻƩ /ğƦźƷğ ƭŷğƌƌ ƓƚƷ ĻǣĭĻĻķ υЊЏЉЉ ͳ Ћ͵5ĻĬƷ {ĻƩǝźĭĻ wğƷźƚʹ Measures percentage of operating budget used to service debt (principal and interest). wĻĭƚƒƒĻƓķĻķʹ DĻƓĻƩğƌ CǒƓķ 5ĻĬƷ {ĻƩǝźĭĻ wğƷźƚ ƭŷğƌƌ ƓƚƷ ĻǣĭĻĻķ ЊЋіͳ Ќ͵ƚƷğƌ 5ĻĬƷ hǒƷƭƷğƓķźƓŭ ğƭ ğ tĻƩĭĻƓƷğŭĻ ƚŅ hƦĻƩğƷźƓŭ .ǒķŭĻƷʹ Measures the percentage of annual operating budget that would be required to extinguish wĻĭƚƒƒĻƓķĻķʹ ŷĻ DĻƓĻƩğƌ CǒƓķ 5ĻĬƷ hǒƷƭƷğƓķźƓŭ ğƭ ğ tĻƩĭĻƓƷğŭĻ ƚŅ hƦĻƩğƷźƓŭ .ǒķŭĻƷ ƭŷğƌƌ ƓƚƷ ĻǣĭĻĻķ АЉіͳ tƚƌźĭǤ ƭƷğƷĻƭ .ƚƩƩƚǞźƓŭ bĻǞ 5ĻĬƷ źƭ ƚƓƌǤ ƦĻƩƒźƭƭźĬƌĻ ǞŷĻƓ ƷŷĻ DĻƓĻƩğƌ CǒƓķ ƒĻĻƷƭ ƷŷĻƭĻ ĭƚǝĻƓğƓƷƭ͵ 6 Is the City Controlling Debt in the General Fund? DĻƓĻƩğƌ CǒƓķ 5ĻĬƷ .ğƌğƓĭĻ $125,000,000 $120,000,000 υЊЊВͲЊЊЌͲЉЉЉ υЊЊАͲЉВЌͲЉЉЉ $115,000,000 υЊЊЋͲЉЎЎͲЉЉЉ $110,000,000 υЊЉЏͲЎЎЊͲЉЉЉ $105,000,000 υЊЉЌͲАЏЊͲЉЉЉ υЊЉЋͲЍЉВͲЌЉЉ $100,000,000 $95,000,000 $90,000,000 20122013201420152016201720182019 General Fund Debt per Capita Metric: Outstanding General Fund Debt Balance at Year End per Capita ƩĻƓķ 5ĻĬƷ tĻƩ /ğƦźƷğ Positive $1,900 Trend υЊͲАЏЌ υЊͲАЍЎ $1,800 υЊͲАЌЌ decrease υЊͲЏЎБ $1,700 in debt υЊͲЎАА per capita $1,600 υЊͲЎЊЏ $1,500 tƚƌźĭǤ /ğƦ $1,400 $1,600 $1,300 tƚƌźĭǤ ğƩŭĻƷʹ $1,200 $1,175 by $1,100 2030 $1,000 2014 Actual2015 Actual2016 Actual2017 Actual2018 Actual2019 Actual 8 General Fund Debt Service Ratio Metric: Percentage of the Operating Budget that funds Debt Trend 5ĻĬƷ {ĻƩǝźĭĻ wğƷźƚ 0.43% change from 2019 to 12.00% 2020 10.40% 10.65% 10.44% 10.42% 10.16% 9.99% 10.00% 9.34% tƚƌźĭǤ /ğƦ 12% 8.00% tƚƌźĭǤ ğƩŭĻƷ 6.00% 9% by 2030 4.00% 2.00% 2014201520162017201820192020 ActualActualActualActualActualActualBudget 9 Debt/Budget Ratio Metric: Percentage of Annual Budget Required to Extinguish ƚƷğƌ 5ĻĬƷΉ.ǒķŭĻƷ wğƷźƚ ƩĻƓķ 100.00% Positive Trend 80.08% 77.27% 78.03% 80.00% 72.75% decrease 68.26% 63.90% Debt/Budget 60.00% Ratio 40.00% tƚƌźĭǤ /ğƦ 70% 20.00% tƚƌźĭǤ ğƩŭĻƷ 0.00% 50% by 2030 201420152016201720182019 Total Debt/Budget Ratio 10 2019 Utility Fund Capital Budget 2019 Capital budget $7,595,500 Funding for Capital budget Pay-as-you-go - $4,669,020 Other Funding - $2,896,480 NO NEW DEBT! Additional funding - $363,000 currently secured Capital funding challenges for next several years to close infrastructure deficit gap Continued focus on debt retirement 11 2019 Utility Fund Capital Budget 2019 Summary Capital Budget Variances Overall variance positive between completed and ongoing projects $33,976 Cancelled projects - $2,492,000 Includes $1,500,000 for watermain lining Funding for cancelled projects is to be utilized for other priority projects such as Champlain Heights Watermain Approved last council meeting Summary of Projects 2019 - Utility Fund BudgetActual/Projected Variance Expenditures Project Completed$2,924,500$2,825,085$99,415 Project Ongoing $2,179,000$2,244,439-$65,439 Project Cancelled$2,492,000$0$2,492,000 $7,595,500$5,069,524$2,525,976 12 Saint John Water Long Term Debt - Projections /ƚƓƷźƓǒĻ Ʒƚ Cƚĭǒƭ ƚƓ tğǤźƓŭ 5ƚǞƓ 5ĻĬƷ 120,000,000 υВЍ͵А a 100,000,000 80,000,000 υЎЏ͵Б a 60,000,000 40,000,000 20,000,000 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 13 2019 Capital Budget Analysis The City continues to move in a positive financial direction Capital Budget Policy Debt Management Policy = Long Term Financial Plan Success! Debt for both funds is being reduced Targets set out in Debt Management Policy trending positively Capital programs are being delivered on Budget! 14 2019 Capital Budget Analysis Recommendation 15 General Fund COVID-19 Financial Impact Update th Finance Committee May 14, 2020 Background Economic landscape continues to evolve at a rapid pace New Brunswick seems to be fairing much better than the rest of the country we are Malls & restaurants can now reopen Daycares & campgrounds Social distancing and cleaning protocols are required new wave. It is unclear when this will be rolled out. State of the Economy The COVID crisis has ravaged the world economy: Canadian unemployment rate 13% (Globe & Mail) U.S. unemployment rate 14.7% (Globe & Mail) Regardless of Government financial assistance, many businesses in Saint John will have to fight for survival Long-term effects on the City are unknown but could include: Decreased property tax assessment base Increased structural deficit Some businesses may not return to operation Assumptions phase will require a vaccination or herd immunity As a result, assumptions include (but are not limited to): there for the rest of 2020 10% reduction in permit, inspection and rezoning revenue for remained of 2020 All organized sports will be cancelled for remained of 2020 Overtime will remain by City Manager approval only Hiring restrictions Spending is minimized No travel for 2020 Estimated Financial Impact on Revenue th 7.0 April 14 2020 Forecasted Range Revenue Updated Forecasted Revenue \[VALUE\] Million 6.0 \[VALUE\] Impact Million 5.0 4.0 \[VALUE\] Million 3.0 2.0 1.0 0.0 Projected Revenue Revenue Loss Mitigation Plan Estimated Revenue Loss - $5M Estimated Cost Savings -$5M Agencies, Goods & Services Salaries & Benefits Discover SJ Boards & $1.6M $3.3M $1.3M Commissions ($1.2M) -$2.0-$1.0$0.0$1.0$2.0$3.0$4.0$5.0$6.0$7.0 Millions Conclusion It is estimated that the City of Saint John will mitigate loss revenues with cost savings The results of the May forecast are consistent with the April forecast We continue to monitor results very closely as more information emerges The City will look to additional cost mitigation efforts if necessary Saint John Transit Commission Funding Request Purpose The Saint John Transit Commission is requesting an increase of $200,000 to its Annual Operating Subsidy, for the month of June, to ensure that Transit remains cash-flow positive, thus enabling us to meet our financial obligations. Similar requests may need to be made in subsequent months Saint John Transit in conjunction with the Finance department, will continue to monitor cash flow and make any and all necessary adjustments, as required. Transit Commission Saint John Transit Commission is a legal entity; Separate Bank Account Separate Payroll Separate CRA business number Subsidy paid in 12 equal monthly payments City is responsible for funding 100% of Transit annual deficit Covid-19 and the ensuing State of Emergency has restricted (almost in a dramatic inability to achieve our projected revenue target. 2020 Transit Operating Budget Revenues From Own Sources $4,315,000 Expenditures $10,209,787 Net Subsidy from City $5,894,787 Important highlights: Reduced operating budget by more than 25% Achieved through layoffs and reduction in fuel consumption Reduced service hours from 97,000 hours to 71,200 hours 26.6 % Completed 2 weeks ahead of schedule (April 26 instead of May 5) Majority of buses are travelling with the 9 passenger limit, even though some segments may have lesser numbers Saint John Transit is leaving behind about 70-100 passengers/day. Making them wait for the next available bus. Installed plexiglass shields to enable the resumption of fare collection. (April 16, 2020) Transitioned to a Reduced Service level on April 26,2020 Scenario 1 Expenditures - Reduced Service for Balance of Year Revenue - Passenger Limit 9 for Balance of Year Cash Flow Negative Balance by July Projected Deficit -$200,000 -$378,599 Year to Date Actual -$400,000 -$600,000 ($717,972) -$800,000 -$1,000,000 ($1,195,285) -$1,200,000 -$1,400,000 Transitioned to a Reduced Service level on April 26,2020 Scenario 2 Expenditures - Full Service Starting in July for Balance of Year Revenue Back to Normal Levels by September, no restrictions Cash Flow Negative Balance by July Projected Deficit -$200,000 -$300,000 -$378,599 Year to Date Actual -$400,000 -$500,000 -$600,000 ($676,839) ($751,468) -$700,000 -$800,000 Transitioned to a Reduced Service level on April 26, 2020 Scenario 3 Expenditures - Reduced Service Level for Balance of Year Revenue 75% Revenue Recovering September - December Cash Flow Positive for Balance for Year Projected Deficit ($204,340) -$200,000 -$250,000 -$300,000 -$378,599 -$350,000 ($479,072) Year to Date Actual -$400,000 -$450,000 -$500,000 -$550,000 -$600,000 Questions ? Supporting Documents Saint John Transit Commission Act 6(2) Not later than ninety days before the beginning of each fiscal year the Commission shall submit to the Council an operating budget for the coming fiscal year, which shall reflect projected revenues and projected operating expenditures; 6(3) Council shall review the operating budget and not later than sixty days before the beginning of the fiscal year, notify the Commission of the extent to which the operating budget has been given preliminary approval by the Council; 6(4) Council shall notify the Commission with ten days after the Minister of Municipal Commission has been given final approval; 6(5) On or before the first day of each month in each year, the City shall pay to the Commission one-twelth of the projected operating loss (budget) for that year Saint John Transit Act (continued) 6(6) Within forty-five days after the end of each fiscal year the Commission shall submit to 6(8) The City shall be liable for and shall pay to the Commission the amount by which the actual operating loss for a fiscal year exceeds the monthly payments previously paid on the account for that fiscal year; 6(14) The City shall be liable for any judgement obtained against the Commission by a third party which the Commission cannot financially satisfy; Conclusion Finance Department Year end deficit risk between Scenario 1 & 2 $676,839 1,1195,285 additional funding risk for taxpayers Current deficit for Saint John Transit April 2020 - $378,599 Very difficult to determine revenues with amount of uncertainty related to COVID19 Cash Flow Projections Transit will receive payment of $231,301 in May 2020 for 2019 year end deficit Transit will not be able to meet cash obligations by July 2020 Recommendations Finance Department Staff recommend that the Finance Committee approve the following recommendations; Direct the Commissioner of Finance to advance the Saint John Transit Commission the budgeted July operating subsidy of $491,323 early in June to ensure there is sufficient cash flow to operate; That the Council Resolution (20 April) to reduce transit costs by 25% remain in effect for the remainder of 2020 and be subject to review as the situation develops in the coming months; The City and the Commission continue to advocate to the provincial and federal governments for funding relief for public transit; Request that an updated presentation be brought forward to the Finance Committee in early July with updated year-end projections and any additional mitigation recommendations that may need to be made to Council.