STAFF REPORT

Department/Function:General Government/Finance

Chair:Deputy Mayor Bill Rawson

Meeting Date:April 7, 2015

Report No.:GGF-2015-28

Report Title:2015 Operating and Capital Budget

RECOMMENDATIONS:

That 2015 Operating and Capital Budget Report No. GGF-2015-28, be received and that the following recommendations as outlined in the report be approved:

a)That the Treasurer is hereby authorized to make the following transfers related to reserves and reserve funds:

Transfer to reserves $1,251,318

Transfers from reserves $7,433,661

Transfer from development charges fund $4,311,556

b) That the 2015 total capital expenditures in the amount of $19,067,817 be approved.

c)That $6,000 of the 2014 surplus funds be used to fund the financial system version upgrade and;

That the balance of the 2014 surplus of $229,332 be transferred to reserve for future capital projects.

d)That where a project in the operating budget or capital equipment or construction budget is approved in the current budget and is not yet completed at year end, the funding or balance of the fundingprovided in the current budget shall be carried forward to the following year’s budget.

RECOMMENDATIONS CON’T:

e)That an annual donation in the amount of $______be authorized to support the community events of Portarama, Santa Claus Parade and Canada Day Celebrations currently organized by volunteers .

f)That Staff be directed to modify the tax bill to identify the OPP budget amount separately.

g)That the 2015 budget as amended, be approved and that staff are hereby directed to proceed with the preparation of the tax rate by-law for 2015.

INTRODUCTION/BACKGROUND:

Councilapproved the preliminary budget in January, 2015 with an increase to the tax levy of $379,455 over 2014. This draft of the budget reduces the increase to the tax levy over 2014 to $347,315.

The impact to the taxpayer in the preliminary budget was based on projected growth in assessment at that time of .55% and this remains the same.

Items to be reviewed with the final budget include:

Significant changes resulting from the 2014 total costs or 2015 cost projections

Carry forwards for projects not completed

Assessment and tax rate information

2014 Surplus

The budget attached is presented as follows:

Staff Report

Reserve Schedules

Capital Summary

Summary of Grants and Donations

Green sheets - Operating Expenditures

Yellow sheets -Capital Expenditures

White sheets – Department Notes

The budget is presented in a summary format. Council members wishing to see the line by line detail that supports the summary format should contact the Treasurer.

ANALYSIS

The Municipal Budget impact including policing, to the taxpayer in this draft of the budget is a 4.4% increase.

The Municipal Budget, as written, has an increase over 2014 of $347,315. Of this,approximately $38,500 will be absorbed by growth related assessment (newly assessed properties) with the balance being raised by an increase in taxation. The phased in reassessment means that the increase will vary from property to property depending on their percentage increase in assessment.

The budget to budget comparison is shown below:

Assessment and Tax Impacts

Municipal Tax Equity Consultants Inc. provides the County of Simcoe with data extracted from the assessment data base for each lower tier municipality. This information shows an estimate for a typical single family residential assessment in 2014 of $184,340rising to $188,261 in 2015.

The impact on a property bill in Tay Township with an assessment going from $184,340 to $188,261 would have a total tax increase of $43 as shown below.

This percentage increase/decrease will vary from property to property depending on the percentage change in assessment with the phased in re-assessment.

As noted last year, this re-assessment cycle brought some fairly substantial increases in farm properties. A typical property in the farm class rose 5.29% in 2015 in comparison to residential at 2.25%. Farm properties could therefore see a higher tax increase due to this assessment shift. An eligible farm will pay the residential rate of taxation for the house and property around the house and then 25% of the residential rate for property that is classified as farm.

Changes in Budget from Preliminary

There have been very few changes since the approved preliminary budget.

Vehicle insurance was increased in Parks ($900), a budget was added for the financial system software upgrade ($6,000 funded from the surplus) and the policing budget was updated to reflect final figures (reduction of $36,140).

In water and wastewater the budgets for liability and property insurance were increased in water ($3,264) and wastewater ($8,027). A budget was included for raw water intake sampling and analysis for the Tay Area Water Treatment Plant ($7,600) and the Rope Treatment Plant ($2,000), and a budget for interest income on reserves was included along with the corresponding transfer to reserves.

Capital budgets were adjusted to update carry forwards and pricing where more accurate estimates were known. Individual capital budgets for watermain and road projects tendered together have been consolidated for reporting purposes. This will decrease the administrative time and expense considerably, in allocating invoices throughout the year. The approved expenditure for the compressor at the Tay Community Rink ($31,500) has been added and funded from the surplus.

Budget Carry forwards from one Budget year to the next

Annually each year, departments advise the Treasurer of unfinished projects that will require funding in a future year. In 2014 Council passed a motion to carry forward unspent funds on approved projects which are not complete at the end of the year. This recommendation is included again for 2015. The following projects have unspent budget amounts carried forward to 2015.

  • Records Management Software $17,825
  • Work Order Software $5,000
  • McMann Side Road Culvert $29,500
  • Paradise Point Grandview Beach E.A. $208,120
  • Tay Shore Trail bridge $6,597
  • Port McNicoll Library Shelving $3,000
  • Stewardship Guide $4,000
  • Street lighting $1,725
  • Municipal Building Roof $45,705

Projects which had carry forward amounts and whose budgets were updated due to more accurate pricing and/or additional work (i.e. phase 2 of a project) include the following:

  • Duck Bay Bridge Piers and Superstructure $1,637,246
  • Victoria Harbour Standpipe $217,600
  • Albert Street Mall Roof $48,000
  • Wastewater Treatment Plant Upgrades (VH) $10,838,064
  • Tay Area Water Treatment Plant $2,118,000

Projects requiring Council approval

Council has directed Staff to bring the following budget items forward to Council for approval prior to spending the allocated budget funds:

  • Guiderails
  • Part- time Building Maintenance Staff

Council’s Direction is requested for the following items:

2014 Surplus

The 2014 Financial Summary, presented to Council February 11, 2015, showed a surplus of $273,909 ($354,303 less funding for projects carried forward surplus of $80,394). During the year end process, the surplus amount increased to $288,446, mainly due to revenue received from the Ministry of Transportation for Fire Department services. The preliminary budget and subsequent staff reports identified areas for use of the surplus, being:

Strategic Plan $15,000

Tay Community Rink Compressor $31,500

Records Management Software Licenses $6,614

Additionally staff are recommending surplus funds be used for:

Financial Software upgrade $6,000

It is recommended that the remaining surplus amount of $229,332 be transferred to the reserve for future capital and that its use be determined in future budget discussions.

As noted in the Year End Financial Summary $183,702 of this surplus is related to under budget expenditures in the roads capital program. In order to meet the gas tax funding requirements, the funding level for roads capital cannot be reduced, these funds should be spent on future roads capital. Public Works staff will report on possible projects for the use of these funds once costs for roads capital projects, currently tendered, are known.

Donations

Council directed that the level of funding provided to volunteer groups, holding annual functions in the Municipality, be brought for discussion during the 2015 Final Budget deliberations. Schedule “B” shows the past history with regards to donations and the current budget amounts. A recommendation has been included for Council’s consideration.

Policing

The reconciliation of Policing Costs, for the second half of 2014, was received March 27, 2015 and included a credit amount of $135,191. The budget amount of $90,000 and corresponding transfer to reserve has been amended for this draft of the budget. The increase in our credit, in effect lowered the calculated net cost of policing for 2014. The lower cost of policing for 2014 allows Tay to receive a higher 2015 phase-in adjustment reducing the 2015 increase to the Policing levy by $36,140.

The 2015 Policing budget was set using the new OPP Billing Model resulting in an increase to the net policing cost of $85,025. As this amount included a phase-in adjustment of $141,753 it is anticipated that the budget will increase substantially again in 2016.

Under the new billing model there will be stability in the base service costs, however, the costs for calls for service which make up approx. $578,000 of the costs, could see significant fluctuations from year to year depending on usage of services.

The Township currently has a reserve for policing with a projected balance of $389,237 at the end of 2015which will give council the flexibility to buffer an unusual year.

Council had indicated that they may like to see policing costs shown separately on the tax bill. A recommendation has been included for council’s consideration.

OTHER FINANCIAL CONSIDERATIONS AND INFORMATION

Reserve Transfers(see page 9-10)

The reserves for financial purposes(working funds), are held to offset accounts receivable ensuring enough cash is on hand to operate. We do not currently have enough funds in the working funds reserve to offset accounts receivable(predominantly outstanding taxes and water/wastewater receivables). We do maintain a number of other reserves as well as a contingency reserve which assist with cash flow. It is not recommended that the municipality increase its transfers to reserve for financial purposes at this time.

Transfers to reserves for the replacement of assets are reviewed with the Long Term Plan in the fall each year. Transfers to reserves for equipment were set inJanuary, 2015 and these are reflected in the budget.

Development Charges(see page 11)

A report was prepared for Council January 14, 2015 regarding borrowing for the development charge funding portion of the Tay Area Water Treatment Plant and Booster Station projects. It is anticipated that debt will be secured in 2015 and therefore a budget for principal and interest payments has been included in the water budget along with the corresponding funding from development charges.

Duck Bay Bridge

The proposed budget shows funding for the Duck Bay Bridge Project using gas tax revenue ($385,370), reserves ($400,000) and debt ($851,876). Prior to securing the debt portion, the amount of debt and reserves will be reviewed in conjunction with the most recent bridge inspection report to ensure adequate funds are available for ongoing rehabilitation work on the other bridge and culvert structures.

Capital Expenditures(page 12; yellow sheets throughout the document)

The 2015 budget provides for $19 million in capital expenditures, including the Library and Water and Wastewater budgets.

SUMMARY

The 2015final budget contains very few revisions from the preliminary budget other thanprojects carried forward from the prior year, project cost updates and the increase in insurance costs.

2015 has been a challenging budget year with the increase in policing, increases in hydro rates, natural gas, liability and property insurance, the wage study and benefit increases. Staffcontinue to look for areas to reduce costs as well as increase revenues from other sources in order to provide good service at the lowest cost possible.

Department Heads look forward to discussing this report with you further with the expectation of preparing the tax rate by-law for presentation to Council at the April 22,2015 Council meeting.

Prepared By;Date Prepared:

Joanne SandersApril 1, 2015

Treasurer

Reviewed By;Date:

Robert Lamb

C.A.O.

2015 Operating and Capital BudgetPage 1 of 28April 7, 2015

Report No. GGF-2015-28

2015 Operating and Capital BudgetPage 1 of 28April 7, 2015

Report No. GGF-2015-28

2015 Operating Budget Notes

General Government and Finance

Miscellaneous Revenue/Expense

Land Sales

In 2015, staff are budgeting $40,000 in revenue from the sale of land. It is anticipated that this will come from the sale of the newly created lots from the former Port McNicoll outdoor rink lands. Staff will report to Council on the listing of these lots early in 2015. As per past practice, when a parcel of parkland is sold the revenue goes to the Reserve for Recreation Facilities and Equipment (Park Development) and if during the course of the year, a miscellaneous parcel of land is sold those revenues would go to the General Reserve.

Administration

Revenue

Revenue has increased this year to due to the increase in administrative fees realized and the penalties and interest increase noted on accounts in tax arrears. Also, as noted in the body of the Treasurer’s report, the fees charged to Water & Wastewaster Operations were increased this year. Much of the increased revenue is noted in this section, which is being partially offset by the revenue lost to Water & Wastewater for penalties and interest on overdue water accounts.

Overhead

General Insurance- Our insurance broker, BFL Canada Ltd., is currently shopping our insurance needs but has advised that based on our experience and what they have been seeing in other municipalities we can expect to see an 8% – 10% increase in premiums for 2015. The budget includes a 10% increase for general and liability insurance and 3% for vehicle insurance.

Computer Maintenance Hardware/Software – This line has been increased to reflect the need to upgrade to our Financial System to Great Plains 2015. This upgrade needs to be completed prior to September 2015, as after this date our current version will no longer be supported. This will prohibit us from receiving important updates, such as those needed for processing payroll.

Health and Safety

Seminars & Courses- This amount is lower by $2,000as each department will now be paying for the specialty training they take. The remainder of the budget will mostly be used for Township wide retraining on the revamped government implemented Globally Harmonized System of Classification and Labeling of Chemicals (GHS).

Safety Supplies & Clothing-This amount will lower by $5,300 as each department will be paying out of their own operating budgets for supplies and clothing required to perform their duties.

Meals & Travel-There is a small increase to allow for the Health & Safety Representative mileage and meals when attending Township specific training or meetings.

Memberships & Dues- This line has been added to allow the H&S representative to join an association that would enable her to keep abreast of changes in legislation and develop a network of peers.

We also need to join the Ontario Association of Designated Officers. Designated Officers are responsible for following legislated procedures for advising the local Health Unit in event of an employee potentially being exposed to a Communicable Disease. Knowing what questions to ask and who to contact in case a court ordered blood test is required are just some of the duties.

Our Health & Safety Coordinator and the Fire Chief will be registered for this position. Training of staff occurred in October 2014.

Asset Management

As part of the Government’s Municipal Infrastructure Strategy, municipalities seeking Provincial Capital Funding are required to have a detailed Asset Management Plan. A detailed Asset Management Plan is a strategic, pro-active, long term comprehensive plan for managing existing and new infrastructure on a life cycle basis. Today, the Asset Management Plan must, at a minimum, include water, wastewater, roads and bridges and must be complete to be eligible for funding.

In order to ensure eligibility for future grant funding, we need to work towards completing a comprehensive Asset Management Plan which would include all assets owned and controlled by the municipality.

A budget of $5,000 has been included for 2015, as it is anticipated that some outside assistance may be required for asset valuation as we work through the development of our Asset Management Plan.

It is expected that this plan will become a living document and will be developed and improved over the next several years, becoming an integral part of long term financial planning process.

Strategic Plan

The last community based strategic planning exercise was complete just after amalgamation in 1994. Staff feel that with the beginning of the new term of council it is important that we engage the residents of Tay Township if the priorities of the community have changed over the last 20 years.

Municipal Buildings

The annual caretaker contracts for the Municipal Office and Albert StreetMall have been increased to match the awarded contract amounts for 2015. Both of these existing contracts end in December 2015 and in an effort to obtain more competitive pricing staff intend to merge the two contracts into one to make the job larger, thereby encouraging more bidders to participate in the process.

2015 Capital Budget Notes

General Government and Finance

Equipment

Replacement of office equipment and computer hardware is budgeted based on the expected life of the asset. Actual replacement is only entertained once the asset is either no longer functional or is requiring costly repairs. Printers/Equipment budgeted in 2014 are budgeted again in 2015 as they have continued to function satisfactorily.