Report to/Rapport au :
Council / et au Conseil
17 January 2011 / le 17 janvier 2011
Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière municipale
Contact Person/ Personne ressource : Mona Monkman, Deputy City Treasurer, Corporate Finance/ Trésorière municipale adjointe – Finances municipales
Finance Department/ Département de finance
613-580-2424 ext./ poste 41723, Mona.Monkman@ottawa.ca
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Ref N°: ACS2011-CMR-FIN-0004 |
SUBJECT: |
2011 Draft Operating and Capital Budgets - Tax Supported Programs |
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OBJET : |
bUDGETS PRÉLIMINAIRES de fonctionnement et d’immobilisations de 2011 – programmes financés par les taxes |
REPORT RECOMMENDATIONS
1) That City Council receive and table the Draft 2011 Operating and Capital Budgets at its meeting of January 19, 2011 for subsequent consideration by Council in Committee of the Whole to be held March 8 to 10, 2011, as required.
2) That City Council refer the relevant portions of the 2011 Operating and Capital Budgets to each Standing Committee of Council for their consideration and recommendation to Council sitting in Committee of the Whole to be held March 8 to 10, 2011, as required.
3) That the Auditor General’s By-law (2009-323) be amended to reflect any changes made as part of budget approval.
4) That the Public Notice By-law 2002-522 (as amended) and any other relevant by-laws (e.g. Procedure By-law 2006-462, as amended) be amended to reflect any changes made as part of budget approval, such as removing non-mandatory print notice requirements and replacing them with notices on the City of Ottawa Website, removing notice requirements relating to repealed Sections, and any related housekeeping changes.
5) That the Delegation of Authority By-law be amended as described in this report and detailed in Document 4 to authorize the City Treasurer to proceed with one or more debt issues in a calendar year provided that the debt charges for the debt issue are within the debt servicing budget as approved in the annual operating and capital budgets.
RECOMMANDATIONS DU RAPPORT
1) Que le conseil municipal reçoive et dépose les budgets préliminaires de fonctionnement et d’immobilisations de 2011, et qu’il les examine subséquemment en comité plénier, qui aura lieu du 8 au 10 mars 2011, au besoin.
2) Que le conseil municipal transmette les parties pertinentes des budgets préliminaires de fonctionnement et d’immobilisations de 2011 à chaque comité permanent du conseil pour que ces derniers les examinent subséquemment et formulent des recommandations au Conseil en comité plénier qui aura lieu du 8 au 10 mars 2011, au besoin.
3) Que le Règlement municipal sur le vérificateur général 2009-323 soit modifié afin de tenir compte des modifications apportées dans le cadre du processus d’approbation du budget.
4) Que le Règlement municipal sur les avis publics 2002-522 (version modifiée) et tout autre règlement pertinent (p. ex., le règlement sur la procédure 2006-462, version modifiée) soient modifiés afin de tenir compte des changements apportés dans le cadre du processus d’approbation du budget, comme l’élimination de l’obligation de publier les avis par écrit; lesdits avis seront plutôt affichés sur le site Web de la Ville d’Ottawa, et l’élimination des exigences liées à la publication des avis concernant l’abrogation d’articles et tout autre changement d’ordre administratif.
5) Que le Règlement sur la délégation de pouvoirs soit modifié selon la description qui en est faite aux présentes expliquée en détail dans le document 4 visant à autoriser le trésorier de la Ville à effectuer une ou plusieurs émissions obligataires pourvu que les frais de la dette soient inclus dans le budget de l’amortissement de la dette qui a été approuvé dans le cadre des budgets de fonctionnement et d’immobilisations annuels.
BACKGROUND
On December 15, 2010, City Council adopted a report that set out the timetable, consultation process and 2011 budget development process. Council also directed that the budgets be prepared on the basis of a maximum 2.5% total tax increase and that the Mayor and City Manager present a budget overview report to Council that details how that tax target objective can be achieved.
DISCUSSION
This report brings forward the 2011 Draft Operating and Capital Budgets for tabling with Council on January 19, 2011. As requested by Council, this report sets out how the maximum 2.5% total tax target objective can be achieved.
The Draft Budgets being tabled are only for those programs supported by property taxation. In order to illustrate the total tax supported budget requirements for 2011, this report also includes an estimate of the budget requirements for the City’s boards and commissions. As directed by Council, the Ottawa Public Library Board and the Ottawa Police Services Board are to table their budgets directly with Council on January 19th, 2011. Crime Prevention Ottawa and the Committee of Adjustment are to recommend their budgets to Council prior to final budget deliberations in March of 2011.
The budgets for the Water and Sewer programs, which are fully funded from revenues raised on the water bill, are not included in this report as they will be reviewed separately. The 2011 draft budget for the water and wastewater rate supported programs will be tabled at the Environment Committee meeting of February 15, 2011. Committee will consider the budget and receive public delegations at their March meeting. City Council will consider and adopt the 2011 rate supported budget on March 23, 2011.
The new City Council will be setting its term of Council priorities, strategic plan and accompanying Long Range Financial Plan, after the 2011 budget has been adopted. The capital budget estimates for 2012 to 2014 have been prepared based on the previous Council’s strategic plan and adopted policies. It is expected that these forecasts will be amended as a result of the new Council’s deliberations on their own term of Council priorities. The Long Range Financial plan will include a forecast that extends beyond the 2014 time period.
2011 Budget Review and Decision Process
As requested by Council, this report shows how a maximum 2.5% tax increase can be achieved. This report also includes the draft estimates for all Standing Committees as well as the Transit Commission.
Each Standing Committee of Council and the Transit Commission will review the budgets in their mandates during meetings in February. In accordance with Council direction, Standing Committees and the Transit Commission will work within the funding envelope provided for the budgets in their mandates and any additions to the budget will require offsetting reductions.
The tabled draft budget documents include “proposed budget changes” that are being put forward in order to achieve the tax target. Committees and the Commission will consider the draft budgets, including the “proposed budget changes”. If the Committee/Commission is not in favour of the proposed changes or any other aspect of the budget, a motion to amend the budget will be required.
As the Board of Health is not yet formally constituted, the Council members of the Board of Health will review and recommend their budget to the Finance and Economic Development Committee.
The Ottawa Police Services Board and the Ottawa Public Library Board will separately table their budgets with Council as usual. These Boards were asked by Council to also deliver budgets that would have no more than 2.5% increase on their tax requirement.
Advisory Committees and members of the public will be able to provide their input to Standing Committees on budget matters during those Committees’ budget review meetings. At the conclusion of the Standing Committee/Transit Commission review phase, Council will hold five multi-ward public consultation sessions to present and discuss the recommendations in this report and any subsequent recommendations of the City’s Standing Committees and Transit Commission.
All budget documents will be posted on Ottawa.ca as of the date of tabling of this report. Members of the public are able to voice their opinions on the City budget through the 311 call centre number and budget email address.
Council will hold final deliberations on the budget in early March 2011.
Building the Budget
As outlined in the staff report on the budget timetable and process, staff were to develop the draft City services budgets in accordance with the approved Fiscal Framework, taking into account the subsequent decisions approved by Council in 2009 and in 2010 which impact the amount available for capital works. When adopting the report, Council directed that the Mayor and City Manager bring forward a budget report that would show how a 2.5% tax target could be achieved.
These draft estimates comply with the City’s Fiscal Framework in that they:
· Respect the taxpayer through a commitment to continuous improvement
· Finance permanent expenditures through permanent sources of financing
· Provide Council with a range of program eliminations, reductions, efficiencies and enhancements to consider
· Were developed based on a tax policy that recognizes inflation.
The Operating Budget estimates have been prepared based on a review of the 2010 financial results as of the third quarter of 2010 and updated to reflect results to date.
Budget Book Documents
The separate Standing Committee budget documents are on file with the City Clerk and available electronically on the City’s web site and at the various City libraries and client service centers. Summaries of the overall budget have been included as Documents 1 and 2 to this report.
City programs and departments have been aligned to each Standing Committee based on Council’s approved governance report.
Operating Budget Estimates
The net additional tax requirement is $29 million, or 2.45% expressed as a tax rate increase. This estimate assumes that the City’s local boards will adopt budgets that are within Council’s direction to achieve a maximum 2.5% tax increase.
A summary of the budgetary requirements for each Standing Committee and department is provided in Document 1.
The following table shows the budget requirements for each Committee of Council and local board. While the overall draft budget impact is a 2.45% tax increase, not all functional areas required an increase of the same amount, therefore increases by committee vary. The table below shows the change by committee resulting in a total tax increase of 2.45%
2011 Operating Budget – City Departments
Total budgeted tax supported operating expenses for 2011 are $2.4 billion. Operating expenditures are funded through property taxes (54%); Payments in Lieu of Property Taxes (7%), federal and provincial grants (18%), fees and service charges (18%) and other miscellaneous revenue sources (3%).The adjustments to the budget by category are summarized in the following table.
2011 Budget Adjustments :
There are $46 million in budget adjustments for City Services are required for 2011. These adjustments do not include those for the Ottawa Police Services Board.
2010 base budget adjustments
Adjustments to the 2010 base budgets are made after reviewing the forecasted year-end actual expenditures and revenues. Adjustments include transit revenue adjustments based on forecast revenues.
Maintaining existing programs and services
Labour contract settlements, increment and benefit adjustments add $34 million in pressures to the 2011 budget. These labour cost adjustments include an estimated $10 million impact because of changes to the OMERS contribution rates.
Various inflationary pressures in the cost of purchased goods and services (such as fuel) are also required. Total inflationary impacts are $17 million.
Adjustments reflect the $9 million in annual debt servicing costs associated with the replacement of transit vehicles; this is entirely offset by efficiency savings in transit’s operational costs. Also included is an $8.8 million budget pressure in transit services associated with fare revenues. In the 2010 budget, one time funding from reserves had been included in the transit budget to offset a forecast revenue lag following the transit strike. The “budget changes” section of this document includes an adjustment that would see the continuation of temporary funding from reserves to offset budget pressures.
Legislated programs and services
Legislated programs and services include child care, public health, social housing, long term care, social services, the costs of the Municipal Property Assessment Corporation and the cost of paramedic services. Growth in the number of social service caseloads has been assumed at 3.5%.
Growth
Changes are required to accommodate the growth as new neighbourhoods and facilities are built. These include costs associated with the opening of a new Ottawa South and West fire stations; funding for the phased in hiring of new paramedics and incremental costs for maintenance of newly constructed facilities.
New needs
New needs have been identified to meet Council’s strategic priorities.
A new $10 million Housing and Poverty envelope is being created to address homelessness and poverty in Ottawa. This envelope of funding will be used for rent supplements, provision of beds at shelters, and other priority initiatives identified by the task force. A report will follow the 2011 budget, making recommendations for allocations against priorities for Council consideration. In addition to the operating budget adjustment, the capital budget includes $4 million in capital investment for housing initiatives.
The budget includes $2 million for an economic development strategy; $300 thousand toward a youth suicide prevention program; $1.5 million for forestry initiatives; $2 million for additional debt servicing costs associated with strategic initiatives and the Congress Centre; and funding to improve transit service reliability.
Management Efficiencies
The ongoing Corporate Efficiencies savings program will see approximately $18 million in management efficiency savings contributing to reduce budget pressures during 2011.
User fees and Transit Fares
A 2.5% transit fare increase commencing in July 2011 is provided for in this budget.
User fees in various programs have been adjusted to reflect the cost of providing services, in accordance with the Fiscal Framework.
Provincial Uploading
The City’s share of the Ontario Disability Support Program benefits will be eliminated in 2011 and a 3% reduction in the City’s share of the Ontario Works program. Together this will relieve the City of funding $25 million. These cost reductions will have the effect of funding expanded social programs and reducing the overall rate of taxation increase.
Growth in Tax Assessment
Assessment growth is projected at 2%. Taxation revenues from new properties, generally offset the growth pressures in this budget.
Proposed Budget Changes:
In order to comply with Council’s 2.5% directive, certain budget changes totalling $26 million have been included in the tabled draft budget documents. These changes and their impacts are listed in the draft committee budget documents.
Highlights of the changes are:
Recreation fees are maintained at 2010 levels. This budget change will have the effect of removing the additional revenues from the budget that would come with the fee increases that are proposed in accordance with the fiscal framework.
Proposed transit service adjustments would remove $7 million in costs from the budget in 2011. Transit staff would prepare a comprehensive set of service changes that would improve the productivity of the transit system, carrying the same number of customers with substantially fewer operating resources. Staff would conduct consultation with customers and residents through the normal Transplan 2011 process, and changes would be brought to the Transit Commission.
Over $7 million in corporate administrative costs are curtailed. A corporate vacancy allowance of 3% has been assumed instead of 2.6% assumption from prior years ($3.8 M). Staff will manage the work force in order to achieve this target. Other administrative cost reductions include: services from external professionals and consultants; advertising expenses; and a corporate wide reduction in discretionary expenses.
As previously discussed, these budget changes include an $8.6 million provision for a one time transfer of reserve funds into the Transit budget.
Proposed changes include a $1.3 million winter maintenance savings strategy based on reduced need, better equipment and improved operational practices. This does not affect the base Service Standard Level. It is anticipated that a contribution will be made to the winter control reserve in 2010 that will provide for potential mitigation for severe winter events.
$1 million in growth related costs have been deferred.
Some new needs previously identified by Council for inclusion in the 2011 budget have not been funded.
Revisions to Existing City By laws
These budget estimates will require amendments to certain by laws.
The Auditor General’s budget is currently maintained at .08% of the of the City’s gross operating budget in accordance with the by-law. The budget changes would result in a revision of this percentage.
The Public Notice By-law will be amended to remove print advertising requirements. The Municipal Act, 2001 now provides greater flexibility for Council to determine for itself the form and frequency of public notices. Revisions will be made to remove print advertising for public notifications that are not mandated by Provincial legislation. Other by-laws such as the Procedure By-law will also be amended to remove non-mandatory notifications in print media. For these non-mandatory notice requirements, public notice will be given on the City’s web site. A revised schedule of public notifications is attached as Document 3.
The Treasurer’s authority to issue debt under the Delegation of Authority By- law needs to be amended. Currently, the by law allows the Treasurer to proceed with debt issues provided that the annual debt charges are within the debt servicing budget as approved by Council in the annual operating and capital budgets. The 2011 budget estimates include $2 million in additional debt servicing for the Congress Centre and strategic initiatives previously approved by Council. Those costs represent only the actual cost of the debt servicing in 2011 and not the full year cost of the debt. By amending the by-law the debt can be issued and the remaining debt servicing costs will be added in the 2012 budget. Changes to the applicable wording of the delegation are detailed in Document 4.
Projected Taxation and User Fee Impacts for 2011
The urban taxpayer with a home assessed at $295,300 will see a tax increase of 2.45%, or $75 per year for City services.
The 2011 budget requests for the Ottawa Public Library Board, the Ottawa Police Services Board, Crime Prevention Ottawa and the Committee of Adjustment, will be tabled separately at City Council. Based on the preliminary estimates from these agencies, and including the direction given by Council on December 15, we have prepared a summary taxation impact chart that includes their 2011 budget requirements.
These impacts as presented are preliminary and are based on certain assumptions that will only be confirmed once the final program spending and assessment data are confirmed.
Impact of Capital on Operating
Certain capital projects identified for funding in 2011 will result in increased operating costs for the City. These projects are primarily in the growth and strategic initiatives categories of capital. The additional costs result from the requirement to both operate and maintain the capital asset after it has been constructed or purchased. The operating impact of these projects is identified with each project’s description.
2011 Draft Capital Budget
The capital spending authority for 2011 is $622 million. The water and wastewater capital projects which are funded entirely from water and sewer surcharge revenues are not included in this program. That capital plan will be tabled separately with the Rate supported budget.
Document 2 to this report shows the recommended 2011 capital budget authority by Standing Committee and department. The following table provides a summary of the program and the financing sources.
Capital Program Funding Summary:
The spending program is at a similar to the 2010 program; however, the general tax supported program has been curtailed. Offsetting this decline is an increase in spending for the Light Rail Transit program as the preliminary engineering and land acquisition phases of the program are included in the draft 2011 budget. The Light rail program is funded from transit capital reserve funds, development charges and gas tax revenues.
The budget provides for a 2.9% inflationary increase in the contribution reserves to fund the capital program. This reflects the increase to the construction price index for Ottawa in 2010.
When compared to the 2010 budget, the draft 2011 capital budget is about $60 million less if the increased spending on the Light Rail Program is excluded. Authority will also be reduced in 2013 and 2014. For the period 2009 to 2013, the total City capital authority will not have changed from normal levels.
As previously indicated to Council, the capital financing decisions taken during 2009 and 2010 have reduced the tax supported component of the budget. These prior decisions that impact this year’s program are:
· Light Rail Transit legal settlement ($34.9m) funded from reserves in 2009, resulting in reduced future year funding available for capital project spending
· funding of a City Wide operating deficit by borrowing from reserves
· debt advanced to 2009 to support the Infrastructure Stimulus program
· additional debt in 2010 to meet the “incrementality” requirements of the Infrastructure Stimulus Program
· financing the 2010 increase in capital spending for rehabilitation of $20 million by issuing debt, resulting in a one time increase of capital spending
When preparing the draft capital estimates staff allocated the reduced funding capacity to those programs that had seen advanced funding in 2009 through the Infrastructure Stimulus program. Programs that did not receive stimulus funds were not affected in terms of their 2011 capital program.
Capital Budget Forecasts for 2012 to 2014
The Capital forecast for future years is included with Document 2. These forecasts show the increase in spending authority required for the Light Rail project (Tunney’s to Blair). $149 million in new authority is requested in 2011 to advance the design and property acquisition phase. $1.8 billion in authority is forecast for 2013.
As previously discussed, tax supported funding available for the capital program is restricted in 2012 and 2013.
The capital budget estimates in these documents have been prepared based on the previous Council’s strategic plan and adopted policies and the 2011 capital budget development strategy as previously discussed in this report. It is expected that these forecasts will be amended as a result of the new Council’s deliberations on their own term of Council priorities. The Long Range Financial plan will include a forecast that extends beyond the 2014 time period.
Debt and Reserves
The City funds its capital program through a combination of tax funds from reserves, debt and grants from senior levels of government.
The City has historically maintained balances in its various reserves in order to preserve some flexibility to adjust spending plans when emergencies or unusual spending requirements occur.
Over the past few years, reserve balances have been depleted to help mitigate the annual tax increase requirement, as well as to fund operating budget deficits. It is expected that final 2010 results will be positive, returning some funds to reserves.
Existing fiscal framework guidelines regarding debt are as follows:
· The increase in debt servicing for non-legacy projects will not be greater than one-quarter of 1% of taxes from property;
· Additional debt is permitted for legacy projects;
· Principle and interest for tax and rate supported debt is not to exceed 7.5% of own source revenues.
The recommended 2011 draft operating and capital budgets allow the City to continue to respect these principles. The debt servicing for tax supported debt as a % of own source revenue in 2011 will be approximately 4.2%.
Consideration of Non Cash Items during budget development
Ontario Regulation 284/09 requires that Council consider and adopt a report with respect to fixed asset amortization expenses and other non cash employee benefit liabilities, prior to finalizing the budget. This report will be presented to Council prior to final adoption of the 2011 budget.
RURAL IMPLICATIONS
The Agriculture and Rural Affairs Committee will review and make recommendations on the 2011 budget. The tax impacts are identified for the rural areas in this report.
CONSULTATION
The consultation on the Draft Operating and Capital budgets will be conducted during the Standing Committee review of these draft estimates and during the five multi-ward bilingual budget consultation meetings (centre, east, west, south, rural) held during February.
LEGAL/RISK MANAGEMENT IMPLICATIONS:
There are no legal/risk management impediments to implementing the recommendations in this report.
FINANCIAL IMPLICATIONS
Financial implications are identified within the report.
SUPPORTING DOCUMENTATION
Document 1 2011 Draft Operating Budget Summaries
Document 2 2011 Draft Capital Budget Summaries
Document 3 Public Notification By law Revisions to “Schedule A”
Document 4 Revisions to Delegation of Authority- Debt Issuance
Document 5 2011 Draft Operating and Capital Budget – Tax Supported Programs, for each Standing Committee of Council; on file with the City Clerk
DISPOSITION
Budgets will be amended as per Council deliberation and adoption.
The City Clerk and Solicitor will prepare the required amending By-laws to put into effect the recommended revisions as noted in the Report. The City Clerk and Solicitor will place the amending by-laws on Orders of the Day of Council.