RECOMMENDATIONS. Business Business Case Description (000 s)

Transcription

1 RECOMMENDATIONS The submitted 2014 property tax supported budget represents a 3.1% tax levy increase from rates (after projected assessment growth of 1%). In order to achieve the 3.1% submitted tax levy increase from rates; $4.9 million in operating cuts were required from service program areas. The budget cuts are categorized as a) Operating Impacts ($1.3 million) and b) Capital Impacts ($3.6 million). 1. DECISION POINT 1: (Included in the 3.1% submitted budget: service changes and capital cuts) The following actions be taken with respect to the 2014 Property Tax Supported Budget: a) 2014 Operating Budget Impacts ($1.3 million) That the $1.3 million in Operating Budget Cuts (Business Case 1 4) and Additions (Business Case 5) BE CONSIDERED as outlined below: Business Business Case Description (000 s) Case # 1 Elimination of all direct City funding to the Downtown London Business Improvement Area resulting in a reduction to the property tax levy of $53 BE APPROVED. 2 A $1,000 elimination to the planned increased contribution to the Economic Development Reserve Fund BE APPROVED. 3 A reduction to the contribution to the Sanitary Landfill Reserve Fund of $255 as a result of less business garbage going to the landfill BE APPROVED. 4 Reduction to the Upper Thames River Conservation Authority contract related to the management of the City s environmentally significant areas of $72 BE APPROVED. 5 The addition of a Curator devoted to conserving, researching, interpreting, promoting and exhibiting its unique Harris family collection for Eldon House resulting in a $59 tax levy increase from rates BE REVIEWED. b) 2014 Capital Budget Impacts ($3.6 million) That the $3.6 million in 2014 Capital Budget Cuts (Business Cases 6-13) BE REVIEWED, it being noted that these 2014 capital budget cuts are included in the 3.1% submitted tax levy increase from rates. Bus Case # Project # Project Description $000 6 SW6030 Landfill Site Property Acquisition $200 7 MU Bus Purchase Renewal $500 8 TS Arterial Road Rehabilitation Main $1,700 9 RC2608 Glen Cairn Major Upgrades $ PP2014 Floodplain Acquisition $ TS4207 Downtown On-Street Pay & Display Parking $ TS Bike Lane Program $ TS6217 Facility Energy Management $500 TOTAL $3,600 See APPENDIX F Decision Point 1 for detailed business cases. Page 4

2 i) That 2013 surplus (notwithstanding the Surplus Policy), if any, BE APPROVED as a source of funding to avoid the 2014 Capital Budget cuts highlighted above it being noted that 2013 surplus will only provide one time capital funding and a permanent source of funding is required to restore the base 2015 to 2023 capital plan and it being further noted that 2013 surplus, if any, will not be known until early ii) That a capital levy increase of $3.6 million BE CONSIDERED in 2015 in order to provide a permanent source of funding for the 2015 to 2024 Capital Plan. 2. DECISION POINT 2: (Included in the 3.1% submitted budget: costs of a growing city funded by assessment growth) (in 000 s) That the assessment growth business cases (see Appendix F business cases 14-40) that explain the operating and capital costs associated with servicing a growing City BE APPROVED, it being noted that the assessment growth business cases have been placed into either Category A (costs due to an expanding City that clearly fit into the parameters of the assessment growth policy) or Category B (costs due to an expanding City that are worthy of consideration given that they appear to fit the spirit of the assessment growth policy), it being further noted that total available assessment growth funding is $7,261 which is composed of a projected 1% or $4,796 increase and carry forward from 2013 one-time assessment growth funding of $2,465. It is recommended that: Operating Budget 3. That the 2014 Tax Supported Operating Budget BE REVIEWED under a SERVICE BASED BUDGET format as highlighted below, it being noted that the Civic Programs, Boards and Commissions have been categorized into the following key services to facilitate better budget decision making: 2014 Net Budget ($million) % of Net Tax Levy Culture $ % Economic Prosperity % Environmental Services % Parks, Recreation and Neighbourhood Services % Planning & Development Services % Protective Services % Social and Health Services % Transportation Services % Corporate, Operational and Council Services: o Capital Financing (Pay As You Go, Debt Servicing, RF Contributions) % o Corp. Contingencies (Tax Write-Offs, Legal, Personnel) % o Other Corp. Expenditures (Insurance, MPAC Service Fee) 8.3 2% o Other Municipal Revenues (GILs, Draws from Stab. Reserve) (35.5) (7)% o Corporate, Council and Public Support Services % Total 2014 Tax Levy From Rates $ % Page 5

3 2014 Operating Budgets ($ 000 s): i. That the Culture Services Budget BE REVIEWED (submitted at a 1.9% increase from rates), after review of the following key service areas: (a) Centennial Hall submitted at $101 representing an increase in tax levy requirement from rates of 0.7% ii. (b) Arts, Culture and Heritage Advisory and Funding submitted at $2,071 representing an increase in tax levy requirement from rates of 0.1% (c) Museum London submitted at $1,550 representing an increase in tax levy requirement from rates of 2.5% (d) Eldon House submitted at $232 representing an increase in tax levy requirement from rates of 34%, it being noted that a $59 increase for a Curator is included in the submitted budget (e) Heritage submitted at $182 representing an increase in tax levy requirement from rates of 1.8%, it being noted that Heritage has been allocated $85 in assessment growth funding as a result of costs due to an expanding city (f) London Public Library submitted at $18,713 representing an increase in tax levy requirement from rates of 1.8% That the Economic Prosperity Budget BE REVIEWED (submitted at a -0.6% decrease from rates), after review of the following key service areas: (a) Business Attraction and Retention submitted at $6,792 representing an increase in tax levy requirement from rates of 0%, it being noted that a $1,000 elimination to the planned increased contribution to the Economic Development Reserve Fund is included in the submitted budget (b) Community Improvement/BIA submitted at $191 representing a decrease in tax levy requirement from rates of -26%, it being noted that a $53 reduction to the Downtown London Business Improvement Area is included in the submitted budget (c) London Convention Centre submitted at $600 representing an increase in tax levy requirement from rates of 0% (d) Tourism London submitted at $1,845 representing an increase in tax levy requirement from rates of 0.7% (e) Covent Garden Market submitted at $0 representing an increase in tax levy requirement from rates of 0% iii. That the Environmental Services Budget BE REVIEWED (submitted at a 1.1% increase from rates), after review of the following key service areas: (a) Kettle Creek Conservation Authority submitted at $393 representing an increase in tax levy requirement from rates of 2.3%, it being noted that Kettle Creek Conservation Authority has been allocated $19 in assessment growth funding as a result of costs due to an expanding city (b) Lower Thames Valley Conservation Authority submitted at $93 representing an increase in tax levy requirement from rates of 5.5% (c) Upper Thames River Conservation Authority submitted at $2,726 representing an increase in tax levy requirement from rates of 3.3%, (d) Environmental Stewardship submitted at $712 representing an increase in tax levy requirement from rates of 0% (e) Garbage Recycling & Composting submitted at $13,194 representing an increase in tax levy requirement Page 6

4 from rates of 0.6%, it being noted that a $255 reduction to the contribution to the Sanitary Landfill Reserve Fund is included in the submitted budget, it also being noted that Garbage Recycling & Composting has been allocated $458 from assessment growth funding as a result of costs due to an expanding city iv. That the Parks, Recreation & Neighbourhood Services Budget BE REVIEWED (submitted at a 0.8% increase from rates), after review of the following key service areas: (a) Neighbourhood & Recreation Services submitted at $18,422 representing a decrease in tax levy requirement from rates of -0.4%, it being noted that Neighbourhood & Recreation Services has been allocated $406 in assessment growth funding as a result of costs due to an expanding city (b) Parks & Urban Forestry submitted at $11,561 representing an increase in tax levy requirement from rates of 2.8%, it being noted that a $72 reduction to the Upper Thames River Conservation Authority contract is included in the submitted budget, it also being noted that Parks & Urban Forestry has been allocated $627 in assessment growth funding as a result of costs due to an expanding city v. That the Planning & Development Services Budget BE REVIEWED (submitted at a 2.4% increase from rates), after review of the following key service areas: (a) Building Controls submitted at -$1,253 representing an increase in tax levy requirement from rates of 0.7% (b) City Planning & Research submitted at $3,092 representing an increase in tax levy requirement from rates of 4.4%, it being noted that City Planning & Research has been allocated $85 in assessment growth funding as a result of costs due to an expanding city (c) Development Services submitted at $3,523 representing an increase in tax levy requirement from rates of 0.1% vi. vii. That the Protective Services Budget BE REVIEWED (submitted at a 3.5% increase from rates), after review of the following key service areas: (a) London Police Services submitted at $92,882 representing an increase in tax levy requirement from rates of 3.3%, it being noted that the London Police Service has been allocated $900 in assessment growth funding as a result of costs due to an expanding city, it being further noted that the London Police Service budget has been adjusted to show the full impacts associated with the transfer of the School Crossing Guard Program in (b) London Fire Services submitted at $56,727 representing an increase in the tax levy requirement from rates of 4%, it being noted that the employee agreement between the London Professional Fire Fighters Association and the City expired December 31, 2010 and is currently at interest arbitration. (c) Animal Services submitted at $1,060 representing a decrease in tax levy requirement from rates of -0.1% (d) By-Law Enforcement submitted at $1,139 representing an increase in tax levy requirement from rates of 1.1% (e) Emergency & Security Management submitted at $1,184 representing an increase in tax levy requirement from rates of 0.7% That the Social & Health Services Budget BE REVIEWED (submitted at a -2.9% decrease from rates), after review of the following key service areas: (a) Social Housing submitted at $12,278 representing a decrease in tax levy requirement from rates of -2.4% (b) London Middlesex Housing Corporation submitted at $8,052 representing an increase in tax levy requirement from rates of 2.7% (c) Long Term Care submitted at $4,722 representing a decrease in tax levy requirement from rates of -2.3% Page 7

5 (d) Primary Health Care Services: (i) Land Ambulance submitted at $11,712 representing an increase in tax levy requirement from rates of 8.0%, it being noted that Land Ambulance did not achieve the 0.7% Administrative target guideline and represents a $865 budget pressure for 2014 (ii) Middlesex-London Health Unit submitted at $6,095 representing an increase in tax levy requirement from rates of 0%, it being noted that the City of London, the County of Middlesex, and the Middlesex London Health Unit are working collaboratively in efforts to identify cost efficiencies in the delivery of public health and that the provincial/municipal funding ratio in the 2014 budget remains at 69/31 rather than the desired 75/25 (e) Social and Community Support Services submitted at $23,417 representing a decrease in tax levy requirement from rates of -10.0%, it being noted that the municipal share of Ontario Works Financial Assistance and Employment Assistance costs are scheduled to be fully uploaded to the province by 2018 viii. ix. That the Transportation Services Budget BE REVIEWED (submitted at a 1.8% increase from rates), after review of the following key service areas: (a) Parking submitted at -$3,093 representing an increase in tax levy requirement from rates of 0.7% (b) London Transit Commission submitted at $26,096 representing an increase in tax levy requirement from rates of 2.4% (c) Roadways submitted at $38,498 representing an increase in tax levy requirement from rates of 1.3%, it being noted that the Roadways Budget has been adjusted to show the full impacts associated with the transfer of the School Crossing Guard Program in 2013, it also being noted that Roadways has been allocated $4,280 in assessment growth funding as a result of costs due to an expanding city That the Corporate, Operational & Council Services Budget BE REVIEWED (submitted at a 7.9% increase from rates), after review of the following key service areas: (a) Corporate Services submitted at $42,250 representing an increase in tax levy requirement from rates of 0.4%, it being noted that Corporate Services has been allocated $401 in assessment growth funding as a result of costs due to an expanding city (b) Corporate Planning & Administration submitted at $2,012 representing an increase in tax levy requirement from rates of 0.4% (c) Council Services submitted at $3,240 representing an increase in tax levy requirement from rates of 0.2% (d) Financial Management submitted at $88,924 representing an increase in tax levy requirement from rates of 12.3%, it being noted that Financial Management is subject to the allocation of assessment growth funding (e) Public Support Services submitted at $54 representing an increase in tax levy requirement from rates of $22 Capital Budget 4. The capital budget and forecast, representing $111.1 million of total expenditures in 2014, achieves a 10 year average debt cap of $26.0 million between 2015 and 2023, BE REVIEWED as follows: a) The 2014 capital budget for Lifecycle Renewal projects BE APPROVED (Appendix C, page 153); b) The capital plan for Lifecycle Renewal projects BE APPROVED in principle (subject to annual review); c) The 2014 capital budget for Growth projects BE APPROVED (Appendix C, page 163); d) The capital plan for Growth projects BE APPROVED in principle; (subject to annual review and Page 8

6 2014 Development Charges Background Study); e) The 2014 capital budget for Service Improvement projects BE APPROVED (Appendix C, page 176); f) The capital plan for Service Improvement projects BE APPROVED in principle (subject to annual review). 5. The 2014 Corporate Capital Cash Flow (Appendix C, page 152) that identifies the accounting recognition of capital expenditures for 2014, consistent with Public Sector Accounting Board standards as highlighted in 2014 Draft Capital Budget Highlights, BE APPROVED. 6. The Reserves and Reserve Fund Overview and Analysis Schedules BE APPROVED, noting projections are subject to annual review and adjustment (Appendix D, page 185). 7. DECISION POINT 3: (Not Included in the 3.1% Submitted Budget: Strategic Investments, Emerging Issues and Municipal Grant Requests) a) Strategic Investments That a 1% tax levy increase in the 2014 budget BE REVIEWED to accumulate funding to support the strategic investments discussed under Decision Point #3 (see summary in table below) as Municipal Council continues to receive information on these initiatives and decide on the highest priority items. Business Case # Initiative 2014 Impact ($000 s) Estimated Annual Tax Levy Impact 41 Transportation Master Plan Lifecycle Infrastructure Gap $7, % 42 Transportation Master Plan Growth Infrastructure Gap $1, % 43 Bus Rapid Transit $0 0.0% 44 Downtown Master Plan $0 0.0% Economic Development Initiatives 45 Industrial Land Development Strategy $4, % 46 Medical Innovation and Commercialization Network $1, % 47 Performing Arts Centre (incl. related development) $1, % 48 Hydro Lands (Kilmer Brownfield) $0 0.0% 49 Ontario Works Decentralization Strategy $2, % Total $16, % Page 9

7 b) Emerging Issues That the emerging issues in the table below and discussed in Decision Point #3 BE REVIEWED by Municipal Council for consideration for funding in the 2014 Budget, noting the tax levy impact included in the table. Business Case # Initiative 2014 Cost ($000 s) 2014 Tax Levy Impact 2015 Cost ($000 s) 50 Blackfriars Bridge $0 0.0% $3, Huron Street Improvements $ % $0 52 Safety Issues for Railway Pedestrian Crossings $ % $ Veterans Memorial Parkway Noise Wall $ % $0 54 Traffic Calming Program $ % $25 55 Sidewalk Maintenance Program $ % $ Emerald Ash Borer $ % $ Cultural Prosperity Plan $ % $100 Total $1, % $3,810 c) Municipal Grant Requests (Strategic Funding Framework) That the City of London Municipal Grant Requests BE REVIEWED, noting that Business Case #58 (Appendix F, Decision Point #3) identifies additional funding requests for both operating and capital grants that have been referred to the 2014 budget noting that these requests have not been accommodated in the submitted 3.1% tax levy increase. 8. The 2014 tax levy be adopted in the amount of $xxx; it being pointed out that the tax levy represents an approximate x% increase over the 2013 tax levy after recognizing $xxx of increased taxation from assessment growth. 9. Administration bring forward any necessary by-laws regarding the 2014 Operating and Capital budgets for introduction at the Municipal Council meeting on February 27 th, Administration be provided with the necessary authority to accommodate 2014 budget transfers that are considered housekeeping in nature, and do not impact the Corporate Net Operating Budget. Page 10

8 IMPACT TO THE AVERAGE RESIDENTIAL HOMEOWNER A 2014 property tax supported budget increase from rates of 3.1% reflects a potential $76 increase annually for the average residential ratepayer. A 1% change in the property tax rate would increase/decrease the average property tax bill by $24. $76 property tax increase to the average residential homeowner NOTES: (1) Average rate payer owning a home with an assessed value of $208,000. Municipal Property Tax Amount is subject to 2014 tax policy. Excludes the Education tax portion which is set by the Province ( $440.96). *Figures rounded for presentation purposes. Page 11

9 The chart below explains, in broad terms, the annual increases to the average residential ratepayer for municipal property taxes. Service CULTURE (Library, Museum London, Eldon House, Heritage) Municipal Property Tax increase From Rates 2013 Approved 2014 Submitted $ 2 $ 2 ECONOMIC PROSPERITY (Convention Centre, Tourism London, Business Attraction) ENVIRONMENTAL SERVICES (Conservation Authorities, Garbage Recycling & Composting) PARKS, RECREATION & NEIGHBOURHOOD SERVICES (Neighbourhood & Recreation Services, Parks & Urban Forestry) PLANNING & DEVELOPMENT (Building Controls, City Planning & Research, Development Approvals) $ 5 $ - $ 1 $ 1 $ - $ 1 $ 1 $ 1 PROTECTIVE SERVICES (Police, Fire, By Law Enforcement, Emergency & Security Management) $ 14 $ 26 SOCIAL AND HEALTH SERVICES (Housing, Long Term Care, Middlesex London Health Unit, Land Ambulance, Social Services) TRANSPORTATION SERVICES (Parking, Public Transit - LTC, Roadways) CORPORATE, OPERATIONAL & COUNCIL SERVICES $ (18) $ (10) $ 9 $ 5 i) Capital Financing (Pay As You Go, Debt Servicing, RF Contributions) $ 14 $ 24 ii) Corp. Contingencies (Tax Write-Offs, Legal, Personnel) $ 14 $ 18 iii) Other Corp. Expenditures (Insurance, MPAC Service Fee) $ 3 $ - iv) Other Municipal Revenues (GILs, Draw s from Stab. Reserve) $ (16) $ 7 v) Corporate, Council and Public Support Services $ 1 $ 1 Total $ 30 $ % 3.1% NOTE: Figures subject to rounding and changes to tax policy. Excludes the Education tax portion which is set by the Province. Page 12

10 The table below shows a breakdown by of the costs of services that make up the average property tax bill of $2,480. Police Services accounts for $ which represents the greatest proportion of the average property tax bill. NOTE: Figures subject to rounding and changes to tax policy. *Excludes the Education tax portion which is set by the Province. Page 13

11 COUNCIL STRATEGIC PLAN This section describes some of the City s achievements and investments in the five results identified in Council s Strategic Plan. The five results that contribute to the high quality of life in London are; A Strong Economy, A Vibrant and Diverse Community, A Green and Growing City, A Sustainable Infrastructure, and A Caring Community. The following is a selection of recent achievements and investments related to each of the strategic results. A Strong Economy Council has kept property taxes low. From 2011 to 2013, the average property tax increase has been 0.4%. The City of London has held the Aaa credit rating since 1977, indicating confidence in the quality of the City s debt and financial management benefiting the City s ability to raise future financing. Invested in Fanshawe College s new downtown campus. Invested in 87 acres of strategically located shovel ready industrial land. Executed agreement with the province for new Highway 401 Interchanges. A Vibrant and Diverse Community A Green and Growing City Host of the International Skating Union World Figure Skating Championships. The event was seen by 165 million fans around the world and generated an estimated $32 million in economic activity for the City and $42.6 million for Ontario. According to the Ontario Municipal Benchmarking Initiative (OMBI) 2012 report (most recent report release), the London Public Library has the highest annual library use per capita (40.4). Granting Programs comprised of financial assistance to not-for-profit organizations or individuals within the London arts community total $1.25 million reaching over 50 recipients in The City continues to expand its use of social media tools to communicate with and engage citizens within Facebook, Twitter and YouTube. Storybook Gardens was voted "Best Local Tourist Attraction" in the Spring 2012 "Best Of" reader poll in the London Free Press. Created new interactive play opportunities inside. Continued the preservation of Elsie Perrin Williams, Eldon House, Grosvenor Lodge and Flint Cottage heritage properties with $700,000 of Lifecycle renewal works completed. Invested in emerging sports: three cricket pitches and four sand volleyball courts. The City maintains approximately 2,600 hectares of parks and natural areas, has initiated the Million Tree Challenge that calls on Londoners to plant one million trees over the next ten years, and has implemented the Emerald Ash Borer program that has resulted in 384 tree injections since 2011 in order to create a healthy, well maintained green infrastructure. The City planted more trees in 2012 than in any year prior. Services offered and encouraged by the City such as home composting and grass recycling, curbside collection, composting of yard materials and leaves, and using the Community Page 14

12 EnviroDepots have resulted in approximately 66 thousand tonnes of materials per year that are no longer destined for waste disposal. Initiatives aimed at environmental concerns related to emissions reduction have been implemented such as the use of B5 biodiesel at the Exeter Road facility that has resulted in reduced carbon emissions by over 90 tonnes in 2012 and the use of 40 hybrid vehicles in the fleet complement. Installed LED street lights as part of major road construction projects. Constructed 17 km of new pathways and bike lanes since Opened City s first Leadership in Energy and Environmental Design (LEED) certified building Stoneycreek Community Centre, YMCA & Library, a $25 million investment. A Sustainable Infrastructure London Transit Commission ridership reached historic levels in 2012 with 23.7 million combined conventional and specialized transit trips. The specialized transit service provides access to the community for approximately 5,000 Londoners with disabilities. Maintenance and snow control provided on approximately 3,600 km of roads, 1,400 km of sidewalks, and 450 km of walkways that improves safety and accessibility. Completed $3.6 million of Lifecycle renewal works at Argyle and Carling arenas and Byron and Boyle Community Centres. Significant infrastructure investments have been made since 2011: o Four skate parks developed: Medway, Springbank, Wolseley and White Oaks; o Two park spray pads constructed: Ed Blake and Medway Parks; o Facility upgrades at South London, Carling Heights, North London, Kinsmen, Hamilton Road Community Centres, and in arenas; o Invested $5 million to refurbish Gibbons, Northeast and Westminster outdoor pools; and o Invested $3 million in the construction of City Wide sports fields. A Caring Community Over 8,000 social housing and rent supplement units provided to low to moderate income households, senior citizens and other vulnerable citizens. In 2012, a total of 89 new affordable housing units were approved and approximately $4 million of municipal funding was committed. The City provides subsidized bus passes for two target populations - senior citizens and the visually impaired. Total subsidized bus passes issued has grown to approximately 10 thousand and subsidized senior bus tickets to approximately 500 thousand. Opened two new seniors satellite centres. Page 15

13 ECONOMIC CONTEXT Canada s economy continues to recover from the Great Recession, but the recent pace of growth has been slower than many had hoped. (Source: The Canadian Chamber of Commerce, Policy Brief December 2012, Economic) On a global scale, the economy remains fragile and uncertain since the recession in 2008 that was marked by a sharp drop in international trade, rising unemployment, rising commodity pricing, and steep declines in financial and housing markets. Although progress has been made towards recovery, the global economy has experienced setbacks. Europe s ongoing financial crisis, climbing government debt, and slower growth patterns in large emerging market economies have adversely affected the state of the global economy. The challenges experienced on the global scale are borne domestically and recovery is slower than anticipated. Minister of Finance Jim Flaherty has repeatedly warned of rising household indebtedness and the resulting risk in the event of interest rate hikes. Many Canadians have responded by making it a key priority to reduce their reliance on debt. Although the cost of borrowing has been low for several years, interest rates are anticipated to rise in the near future (CIBC World Markets). A rise in interest rates may put some households in a vulnerable position. Tighter mortgage regulations have been adopted in an effort to avoid the mortgage collapse encountered in the U.S. This has slowed the sales of existing homes and growth in prices for many markets in Canada. On a local scale, a sample of measures listed below will provide some context to London s pulse. LONDON S PULSE Measure Projected Population 366, , ,730 Unemployment Rate 1 8.9% 8.6% 7.9% Housing Starts 1,430 1,873 1,689 Avg. Residential House Value 2 $238,238 $240,370 $247,294 NOTES: 1) Source: Statistics Canada Table Labour force survey estimates (LFS), by census metropolitan area based on 2006 census boundaries, 3-month moving average, seasonally adjusted. For 2013, the unemployment rate is based on the October 2013 release. 2) Source: The London and St. Thomas Association of Realtors - Statistical Report (October 2013) Page 16

14 THE BUDGET STORY 2011 To 2014 Budget Story: Service Areas continuously seek to improve efficiency and effectiveness Civic Administration has worked aggressively at containing cost increases and generating revenue in order to limit the tax levy increase to an average annualized 0.4% tax levy increase over the last three budget cycles. This was accomplished through the hard work and effort of all Service Areas. Service Areas continuously seek to improve efficiency and effectiveness of service delivery by regularly evaluating processes, identifying and modelling best practices, and evaluating alternative service delivery options. Outlined below are some of the key corporate initiatives that have been undertaken by Civic Administration: Over $30 million in personnel cost savings/avoidanc e since Reducing Personnel Costs: Civic Administration has implemented several programs/initiatives in the last three years to reduce and contain personnel costs. These programs and initiatives which are outlined below have resulted in over $30 million in personnel savings/cost avoidance since Position Management Program: In 2011, Civic Administration introduced an enhanced Position Management Program that gave Civic Administration the ability to contain costs by creating systems and processes to allow us to better understand and manage the workforce and personnel budget. The program included a centralized process to review vacancies as they arose to determine whether they were mission critical to the function of the Service Area and needed to be filled as is, restructured, consolidated in another area or declared redundant. This review process generated over $5.1 million in personnel budget cuts ($1.0 million in 2011, $2.6 million in 2012, and $1.5 million in 2013) since 2011 and was a key reason why the municipality achieved the 0% tax levy increase in 2011 and 2012 as well as the 1.2% increase in The municipality continues to realize cost savings (avoidance) as a result of these past budgetary decisions. Over $15.0 million of cumulative savings has been generated by this program to date. Areas such as Technology Services, Parks and Recreation, Corporate Services, Fleet Services and Environmental Services are all operating under a refined operational structure where staff positions were reviewed, rationalized and responsibilities reassigned to new positions to reflect a lower overall cost to the municipality and ultimately the London ratepayer. Page 17

15 Vacancy Management Savings: As part of the Position Management Program, Civic Service Areas also aggressively changed the timing and the way vacancies are filled. By extending the waiting period that a position remains vacant (from 60 days to 90 days), the Corporation has been able to generate over $11.0 million in contributions to the Efficiency, Effectiveness and Economy Reserve (EEE). Employees across all personnel groups have worked and continue to work in an effective manner to try to avoid operational service impacts when staff vacancies occur. The savings generated when a staff vacancy occurs is contributed to the EEE Reserve and has been utilized to fund important programs such as Infrastructure Ontario capital initiatives and Service London. The savings generated from Vacancy Management allowed the municipality to avoid significant tax levy increases for capital initiatives as well as fund new capital initiatives. Collective Bargaining: Civic Administration has also avoided significant costs in reaching employment settlements for Local 101, Local 107 and management employees as a result of effective, cooperative and collaborative negotiations. Our Local 101 (inside workers) and Local 107 (outside workers) freely negotiated 4 year settlements representing a 1.5% average annualized increase and accepted a 0% increase in each of their 1 st year term (0% in 2011 for Local 101, 0% in 2012 for Local 107) Management employees had 2 years of 0% economic increases in 2009 and 2010 which continues to provide significant cost avoidance in subsequent years and into These agreements were settled without strikes or operational service disruption and highlight the efforts by these employee groups to contain costs for the municipality during tough economic times. Civic Administration continues to try to seek similar fair and collaborative employment agreements with other employee groups such as the London Professional Fire Fighters Association. Service Efficiency Measures have generated significant cost savings for London ratepayers 2. Creating Service Efficiencies and Alternate Service Delivery: Outlined below are service efficiencies generated by service program areas: Culture An Energy Audit, Asset Review and Component Inventory Evaluation to improve energy efficiency, renew aging facility assets and enhance operational effectiveness in Library buildings. Page 18

16 Economic Prosperity Tourism London: Eliminated the operation of the double decker bus due to high maintenance costs Covent Garden Market: Replacement of light fixtures with energy efficient models Environmental Services: Installation of cardboard compactors at Clarke Road and Oxford St to reduce haulage costs Parks, Recreation & Neighbourhood Services: Sharing of administrative/clerical support between 2 buildings Negotiated reduced janitorial contracts in Arenas Restructured the staffing model at Storybook Gardens Improved technology to better manage lighting and irrigation on sports fields Extended the Lifecycle of equipment Planning & Development Services: Building Control: Paperless permit approval process resulting in more time efficient approvals and reduction in paper cost Planning: Undertaking a complete re-write of the Official Plan utilizing in-house staff which has avoided significant consultant costs Social and Health Services: Long Term Care: Implemented a consulting contract for the operational management of Dearness home within budgetary targets. London Middlesex Housing Corporation: Implemented cost containment and expenditure control saving over $500,000 and continue to work with PricewaterhouseCoopers to identify further purchasing and cost sharing initiatives. Transportation: London Transit Commission: Moving to larger vehicles for both conventional and specialized transit. The vehicles both improve capacity and scheduling flexibility resulting in a lower net cost per trip. Traffic Control and Street Lighting: Continued efforts and implementation of the LED lighting program. Page 19

17 Increased revenue realized by Social Housing and London Middlesex Housing Corporation in 2014 to limit tax rate growth Corporate Operational and Council Services: Technology: Cellular Services and Hardware New contracts have been entered into for cellular services which allowed the municipality to customize and implement more flexible plans. This agreement provided cost avoidance of approximately $542,000 over the 3 year contract term budget reflects savings of approximately $100,000. IT Print Strategy has resulted in cost savings of approximately $100,000 in 2014 budget. Software licence rationalization and maintenance renewal contracts. Renegotiation of several contracts and the elimination and/or consolidation of several applications which were not fully utilized has resulted in net savings of approximately $100,000 in computer central site and maintenance accounts. Negotiations with software vendors to keep their annual maintenance increase to a maximum of 2-3% and in some cases, at 0% has assisted in containing costs in IT. Legal Services: Continued use of in house legal staff to contain outside legal costs. Internal Audit: Outsourcing of internal audit to PricewaterhouseCoopers to promote greater independence, openness, transparency and accountability. Human Resources: Expanded health and wellness initiatives to support attendance management. Negotiated favorable compensation agreements/contracts. Developed and administered the Position Management program which has generated significant saving across the Corporation. 3. Revenue Opportunities: Service Program areas continue to look at opportunities to increase non-property tax sources revenues utilizing best practices as well as optimization of user fee revenue. Cultural Services Museum London: Increased sponsorship and fundraising efforts to mitigate operational cost pressures. Eldon House: Increase in Government grants to support new programming. Environmental Services: Focused efforts on commercial garbage tipping fee revenue from new sources to partially offset a drop in tipping fee revenue. Parks Recreation & Neighbourhood Services: Increase in revenue realized by maximizing provincial cost sharing agreements. Page 20

18 New Golf operational models introduced which has resulted in enhanced revenue. User Fee increases for Golf, Aquatics, Storybook Gardens, and Arenas. Planning & Development Services: New Fees for telecommunication companies. User Fee increases for Official Plan and Zoning By-Law. Social and Health Services: Social Housing: In 2013, Social Housing administration was able to mitigate an estimated 1.5% rate increase in Housing provider subsidies as per provincially legislated benchmarks by implementing enhanced revenue monitoring review process of vacant rental units. This new process more closely monitors vacant social housing units and ensures increased follow up with housing providers not in compliance with Rent Geared-to- Income and market rent targets. London Middlesex Housing Corporation: Improvements in its rental vacancy management program has resulted in reducing unit vacancies from 5% to 3% and therefore has resulted in increased revenues. Transportation: Parking: Private Parking Enforcement Program has resulted in new and additional revenue for the municipality. Corporate, Operational & Council Services User fee increases have been included for various Finance fees. Realty Services has reviewed leases and negotiated increases based on current market trends. 4. Capital Budget Cuts and Deferrals: In order to achieve a 0%, 0% and 1.2% increase in 2011, 2012, and 2013 respectively, the following capital cuts and deferrals were required: The 3.1% submitted tax levy increase in 2014 includes $3.6 million of Capital Budget reductions 2011 Capital Cuts/Deferrals: ($0 million) o No Capital Budgets were cut by Council 2012 Capital Cuts/Deferrals: ($1.1 Million) o $500,000 City Vehicle & Equipment Replacement o $210,000 City Hall Major Upgrades o $120,000 Industrial Land Acquisition o $100,000 Landfill Acquisition o $100,000 Facility Energy Management o $25,000 Other City Facilities Renewal (Dearness Home, Storybook Gardens) Page 21

19 2013 Capital Cuts/Deferrals: ($3.6 million) o $2,400,000 - Deferral of Fire Training Tower o $250,000 - Facility Management o $400,000 - Industrial Oversizing o $50,000 - Dearness Home Upgrades o $20,000 - Library System Updates o $500,000 - Transit Reduction in Bus Purchases Council s decision to cut operating levy financing by $3.6 million in 2013 has led to the following capital project reduction for 2014 and are included in the 3.1% submitted property tax levy increase: 2014 Capital Cuts/Deferrals: ($3.6 million) o Landfill Site Property Acquisition o Bus Purchase Renewal o Arterial Road Rehabilitation o Glen Cairn Major Upgrades o Floodplain Acquisition o Downtown On Street Pay & Display Parking o Bike Lane Program o Facility Energy Management As part of the 2014 Budget, Civic Administration has recommended utilizing temporary one-time funding sources such as 2013 operating surplus, if any, to avoid the impacts of these capital cuts. The amount of the 2013 surplus, if any, will not be known until early Current Transportation Infrastructure Gap = $34 Million and projected to be $272 Million in ten years In October 2013, a Transportation Infrastructure Gap report was brought forward for review by Municipal Council. This report outlined the current state of the City of London s lifecycle transportations assets and extent of the current funding gap. The lifecycle funding gap is defined as the cumulative difference between the existing funding levels and that required to maintain the assets at current desired levels of service. Based on the condition assessments of the various transportation assets the infrastructure gap at current levels is $34 million and is projected to grow to over $272 Million over the next ten years. It is evident from the results of this report that the City of London must continue to invest in its current infrastructure. The City of London s Corporate Asset Management group will be bringing forward additional information in the upcoming months. This report will address the funding gaps for all other City owned assets. Page 22

20 5. Reserves and Reserve Funds: Since 2011, the City of London has budgeted $15.4 Million in stabilization reserves to mitigate tax rate growth In 2011, Council did not have to drawdown Capital Reserve Funds or cut the 2011 Capital Plan to achieve a 0% increase. It should be noted that Civic Administration as part of its financial planning process recommended drawdowns of $3.4 million from the Operating Budget Contingency Reserve to offset one-time tax rate pressures such as budget spikes from programs such as Ontario Works. For the 2012 budget year, Council reduced reserve funds by $21.9 million to achieve a 0% levy increase. The reduction in reserve funds resulted in capital cuts in 2012 as noted above as well as a lower balances in reserve funds. In Addition, Civic Administration included in the 2012 Operating Budget, a draw of $4.7 million from the Operating budget contingency reserve to mitigate one-time tax rate pressures. For the 2013 budget year, a planned increase of $3.6 million in the capital plan was reduced by Council during budget deliberations to achieve a 1.2% tax levy increase. This resulted in the capital cuts noted above. In addition, the 2013 Approved Operating Budget included a draw of $4.5 million from the Operating Budget Contingency Reserve to mitigate one-time tax rate pressures. In 2014, Civic Administration has reduced its reliance on stabilization reserves to $2.8 million. The reduction in the utilization of the stabilization reserve in 2014 was strategically tied to the reduced cost of Ontario Works resulting from provincial uploading. 6. Value for Money Audits: In 2011, PricewaterhouseCoopers was engaged to perform a 3 year risk based audit plan for the City of London. The plan was designed to work with City Administration to identify and implement operating efficiencies within various Service Areas. Value for money opportunities identified by the Internal Audit Team are being implemented The following list identifies some of the efficiencies implemented by Civic Administration to assist in providing efficient and effective services to the citizens of London. 1. Fleet Asset Management Environmental and Engineering Services Reduction of 17 units with low utilization 2. Housing Division Housing and Social Services Identification of housing providers not meeting occupancy targets 3. Health and Safety Parks and Recreation Reduction of duplicate training for temporary and casual staff 4. Contract and Tending Administration Utilization of available staffing (reducing consultant costs) and development of construction bonding criteria 5. Building Control Compliance contribute operation surpluses to the Building Permit Reserve Fund Page 23

21 In Addition, Civic Administration is in the process executing other actions plans that were brought forth as recommendations. Examples of these project actions plans include: Bid Process and Approved Consultants Building Control and Compliance Expenditure Approval and Payment Payroll Administration Urban Forestry and Planning Application Process Budgeting Process Civic departments as well as the London Middlesex Housing Corporation and the London Public Library continue to work with PricewaterhouseCoopers to implement new action plans to create ongoing permanent savings in the annual operating budget. Page 24

22 Tax Levy From Rates Versus CPI Since 2011 the average approved tax levy from rates has increased by 0.4% Since 2011, the average tax levy increase from rates has been below the average increase in the Ontario consumer price index. Assuming the tax levy increases from rates increased at the same pace as the Ontario consumer price index, the tax levy requirement in 2014 would have been $563 million. In comparison, the tax levy requirement from rates as approved by Council from 2011 to 2013 and as submitted in 2014 is $483 million (excludes the impacts of assessment growth). Council decisions to keep property taxes below inflationary levels have put significant budgetary pressures on Civic Administration resulting in $80 million that has been absorbed by operations. 2.0% 2.0% 3.1% 0% 1.4% 0% 1.2% 3.1% NOTE: The consumer price index is based on the increases in Ontario. The consumer price index for 2013 and 2014 are projected to increase by 2% per year (Ministry of Finance: Ontario's Economic Outlook). Municipal governments have very different spending patterns than the average consumer which is used to develop the consumer price index According to the Ministry of Finance Ontario s Economic Outlook, the consumer price index in Ontario is projected to be 2% from The consumer price index is determined by comparing the cost of a basket of goods and services purchased by consumers. There are about 600 goods and services identified to represent the price movement in 175 basic goods and services classes. The basket of goods and services included in the consumer price index is based on an average consumer. The consumer price index is not an adequate measure of the rise in the level of goods and services for the City because the City purchases considerably different goods and services than the average consumer. When assessing the municipal inflationary pressures, consideration should be given to the costs to fund services such as Police and Fire, utility and fuel cost increases, and debt servicing costs as these are a few key cost drivers. These costs put Page 25

23 pressure on the City to keep property taxes low without eroding the quality of municipal services. From 2011 to 2013, London s property tax increase from rates was 0.4% while the group average was 2.4% How Does London Compare To Other Municipalities? From 2011 to 2013 the approved City of London property tax increases from rates has averaged 0.4% (0% , 0% , 1.2% ). The group consisting of Chatham, Guelph, Hamilton, Ottawa, Sarnia, and Kingston has averaged 2.4% during the same period. Assuming London s property tax increase was consistent with the group average of 2.4% then the City would have received an additional $59 million in property tax revenue. Please note that this comparison is solely for illustrative purposes to show potential lost property tax revenue. London received $59 million less in revenue in comparison to other municipalities NOTE: The municipal comparators include Chatham, Guelph, Hamilton, Ottawa, Sarnia, and Kingston. Page 26

24 As seen in the illustration below, the total amount of property taxes required to be collected by the City is $19.9 million or a 4.1% increase. This is composed of a $15.1 million or 3.1% increase in property tax from rates as submitted and estimated assessment growth of $4.8 million or 1% to cover the costs associated with an expanding City. It should be noted that there are a number of strategic investments, emerging issues, and municipal grant requests that will require Council consideration that could further increase the tax levy requirement. The costs to maintain existing service levels in 2014 is $20 million or 4.2% The starting point for developing the 2014 budget was to determine the costs to maintain existing service levels. Civic Administration has forecasted a 4.2% or $20.0 million property tax levy increase to maintain existing service levels across the Corporation. It is important to note that this forecast excludes the costs associated with changes to service levels and strategic investments, emerging issues, and municipal grant requests. Early in the budget development process, budget targets were established that were endorsed by the Senior Leadership Team. A global target was set at 2.2% and was established taking into consideration the political environment, external environment, inflationary pressures, and municipal comparators. In order to achieve the global budget target, all service areas received a target at or below 0.7% and exceptions were given for Police and Corporate Financing. Exceptions were given for Police due to budgetary pressures related to personnel contractual agreements and Corporate Financing in order to maintain the financing needed to support the capital plan. Page 27

25 2014 property tax levy increase of 3.1% as submitted Due to some service areas not achieving target, the 2014 property tax budget has been submitted at 3.1% or an increase of $15.1 million which includes $4.9 million in budget cuts for Council s consideration. The key cost drivers that have put pressure on the tax levy from rates resulting in an increase of $15.1 million include: 2014 Net Budget Pressure Protective Services (Police at 3.3% & Fire at 4%) Police (Submitted at 3.3%) Fire (Submitted at 4%) Capital Financing (Note 1) Pay As You Go Debt Servicing Corp. Contingencies (Tax Write-Offs, Legal, Personnel) Land Ambulance (Submitted at 8%) London Transit Commission (Submitted at 2.4%) London Public Library (Submitted at 1.8%) London Middlesex Housing Corporation (Submitted at 2.7%) Conservation Authorities Net Ontario Works (0.9) (4) Ontario Works (Provincial Uploading) (2.6) (13) Reduced Reliance On Stabilization Reserve Remaining Service Areas Tax Levy Increase From Rates As Submitted $15.1 $76 ** Figures subject to rounding $ Inc. / (Dec.) (millions) $ Impact To Avg. Res. Homeowner NOTE 1: Capital Financing funds all service programs such as Environmental Services, Recreation, Transportation and Protective Services. Page 28

26 Below is an illustration that shows the path to the submitted budget of 3.1% from rates and the key decision points. Page 29

27 DECISION POINTS Decision Point 1 (Included in the 3.1% submitted budget: service changes and capital cuts) Below are three critical decision points that have been identified to guide Council through the 2014 property tax supported budget. The decision points are: 1) Business cases that are included in the submitted budget, including operating impacts and capital reductions; 2) Assessment growth - Operating and capital costs associated with servicing a growing and expanding city; and 3) Strategic investments, emerging issues and municipal grant requests that are not included in the submitted budget and will require property tax funding. Civic Administration has submitted 13 business cases amounting to $4.9 million in tax levy budget reductions that are included in the submitted 2014 budget and assisted in driving towards the 3.1% tax levy increase from rates. These business cases are separated into two groups: a) Operating program impacts amounting to $1.3 million; and b) Capital financing impacts amounting to $3.6 million. Recommendations in the table below for business cases #1 to #5 reflect the operating program impacts to reduce the tax levy impact. 1. a) Operating program impacts amounting to $1.3 million Case # Service Program Business Case Recommendation ($000 s) 1 Economic Elimination of all direct City funding to the Downtown London Business Improvement Prosperity Area resulting in a reduction to the property tax levy of $53 BE APPROVED. 2 Economic Prosperity 3 Environmental Services 4 Parks, Rec. & Neighbourhood Services A $1,000 elimination to the planned increased contribution to the Economic Development Reserve Fund BE APPROVED. A reduction to the contribution to the Sanitary Landfill Reserve Fund of $255 as a result of less business garbage going to the landfill BE APPROVED. Reduction to the Upper Thames River Conservation Authority contract related to the management of the City s environmentally significant areas of $72 BE APPROVED. 5 Culture The addition of a Curator devoted to conserving, researching, interpreting, promoting and exhibiting its unique Harris family collection for Eldon House resulting in a $59 tax levy increase from rates BE REVIEWED. In 2013, Council reduced the capital plan by $3.6 million which impacts the plan. Business cases #6 to #13 for capital financing impacts were determined to accommodate Council s reduction to the capital financing program in With Council approval of the 2013 Budget, the tax levy contribution to the capital budget was reduced by $3.6 million. This was accommodated by eliminating or reducing $3.6 million of capital projects that were originally planned in 2013 (e.g. a reduction in the facility energy management program and the bus purchase renewal program). However, Council s decision during 2013 Budget deliberations represents a permanent reduction to the capital plan or $36 million over the ten Page 30

28 year plan. Civic Administration was required to identify an additional $3.6 million of reductions to the capital program in Civic Administration has included $3.6 million of cuts within the 3.1% submitted budget in response to Council s decision to reduce the capital budget by $3.6 million during 2013 budget deliberations. Business cases #6 to #13 identified below represent eight capital projects that were eliminated or reduced for a total of $3.6 million in Service Improvement projects were the first choice of capital projects to be cut, because Lifecycle projects maintain the existing capital infrastructure and Growth projects are partially supported by development charges. However, there were a limited number of service improvement projects to choose from, so three Lifecycle projects were also impacted in Capital financing impacts amounting to $3.6 million RECOMMENDATION 1. b) i. Notwithstanding the Surplus Policy, the 2013 year end surplus, if realized, BE APPROVED as a source of funding to avoid the following cuts to the 2014 Capital Budget that have been submitted as part of the 3.1% submitted tax levy budget. ii. That $3.6 million of additional capital funding BE CONSIDERED for the 2015 budget, it being noted that 2013 surplus recommended above will only provide one time capital funding for 2014 and a permanent source of funding is required to restore the base 2015 to 2023 capital plan. Case # Project # Project Description $000 s 6 SW6030 Landfill Site Property Acquisition $200 7 MU Bus Purchase Renewal $500 8 TS Arterial Road Rehabilitation - Main $1,700 9 RC2608 Glen Cairn Major Upgrades $ PP2014 Floodplain Acquisition $ Downtown On-Street Pay & Display $175 TS4207 Parking 12 TS Bike Lane Program $ TS6217 Facility Energy Management $500 TOTAL $3,600 Refer to Appendix F for the details on business cases #1 to #13. Page 31

29 Decision Point 2 (Included in the 3.1% submitted budget: costs of a growing city funded by assessment growth) ASSESSMENT GROWTH FUNDING COMES FROM TAXES LEVIED ON NEW HOMES AND BUSINESSES Funding from assessment growth refers to property taxes levied on new homes and businesses. These new homes and businesses expect to receive the same municipal services that existing taxpayers receive. Assessment growth funds the additional volume of municipal services such as; road maintenance, snow plowing, garbage collection, street lighting, recreation, fire and police services, resulting primarily from the new homes and businesses. Definition For 2014, assessment growth funding is budgeted at 1.0%, or $4.8 million. The City s Assessment Growth Policy directs Civic Administration to first allocate the funding from assessment growth to the cost for services resulting from an expanding city. Examples of these services include; Collecting garbage and recycling from newly constructed homes; Policing for new subdivisions; Maintaining new sports fields; Servicing new parks; and Snow plowing for new subdivisions. Civic Administration will then apply any remaining funding available in that budget year, as follows; 50% to reducing authorized and unissued debt and 50% to economic development and/or tax mitigation. Amounts allocated for one-time use in a previous year are carried-over to the following year to be applied to growth costs. The amount of assessment growth funding carried over from 2013 is $2.5 million, giving a total of $7.3 million to be allocated to growth costs from an expanding city for Service areas have submitted business cases totalling $7.3 million of requests for assessment growth funding. These business cases as well as an overview are included in APPENDIX F of the budget document. Civic Administration has ranked the submitted cases into Category A and B. Category A cases reflect funding requests which clearly fit into the parameters of the assessment growth policy approved by Council and have been allocated assessment growth funding. Category B cases are worthy of consideration given that they appear to fit the spirit of the assessment growth policy. Civic Administration will examine and consider expanding the parameters of the assessment growth policy to include soft service areas such as Culture, Planning and Recreation and may bring forward a revised policy. For the 2014 budget, Category B cases have also been allocated assessment growth funding. Page 32

30 The chart below summarizes assessment growth funding and the allocation thereof. Summary of Assessment Growth Funding 2013 Amount ($ 000's) Amount ($ 000's) Carry Forward Balance - 2,465 Projected Assessment Growth 1.0% 6,683 4,796 To Be Allocated to Growth 6,683 7,261 FTE Impact Category A - (Business Cases 14-30) Environmental Services Parks, Recreation & Neighbourhood Services Protective Services Transportation Services 505 2, Corporate, Operational & Council Services ,753 3, Category B - (Business Cases 31-40) Culture Environmental Services Parks, Recreation & Neighbourhood Services Planning & Development Protective Services Transportation Services - 2, , Total Requests from Service Programs 1,753 7, Remaining Balance 4, Allocation of Remaining Balance per Assessment Growth Policy 50% Reduction to Authorized and Unissued Debt (One-time) 2,465-50% Economic Development and/or Tax Mitigation 2,465 - Permanent - Economic Development 1,100 One-time - Economic Development - Tax Mitigation 1,365-2,465 - Carry Forward Balance (One-time Allocations) 2,465 - Note: Amounts are subject to rounding 2. (Included in the budget Assessment growth funding and costs of a growing city) RECOMMENDATION: That the assessment growth business cases (see Appendix F business cases 14-40) that explain the operating and capital costs associated with servicing a growing City BE APPROVED, it being noted that the assessment growth business cases have been placed into either Category A (costs due to an expanding City that clearly fit into the parameters of the assessment growth policy) or Category B (costs due to an expanding City that are worthy of consideration given that they appear to fit the spirit of the assessment growth policy), it being further noted that total available assessment growth funding is $7,261 which is composed of a projected 1% or $4,796 increase and carry forward from 2013 one-time assessment growth funding of $2,465. Page 33

31 Decision Point 3 (Not Included in the 3.1% Submitted Budget: Strategic Investments, Emerging Issues & Municipal Grant Requests) Strategic Investments, Emerging Issues & Municipal Grant Requests A) STRATEGIC INVESTMENTS Municipal Council has discussed, and in some cases supported in principle, a number of initiatives and master plans. These plans received significant public input and provided many benefits for London residents, but the cost of these plans has not been fully captured and quantified in the context of the annual budget process. The discussions below include the best estimates of costs at this time, noting that costs are being fine-tuned. In addition, a number of emerging issues were referred to the 2014 budget by Council. The issues were not included in the 2014 budget, pending final Council decision, but most include considerable cost. The following Council strategic investments will be discussed: Transportation Master Plan o Lifecycle Infrastructure Gap o Growth Infrastructure Gap Bus Rapid Transit Downtown Master Plan Economic Development Initiatives o Industrial Land Development Strategy o Medical Innovation & Commercial Network o Performing Arts Centre o Hydro Lands (Kilmer Brownfield) Ontario Works Decentralization Strategy Some of the initiatives will not have a financial impact in 2014 (Bus Rapid Transit and Downtown Master Plan), but they have to be considered now in the context of all the strategic investments under discussion. Strategic investments should be a fulsome discussion, not a first to the gate gets the funding discussion. Municipal Council needs to make three levels of decisions: 1) what is the priority of various strategic investments; and 2) how much funding should be applied to these initiatives overall; and 3) how to prioritize funding for each initiative. It may not be necessary to proceed with all strategic initiatives at the same time, in fact it would be financially difficult for them all to proceed immediately, so what are the priorities and how much funding should be set aside to fund the priorities? In addition, these plans and initiatives are integrated. The Downtown Master Plan is integrated with the downtown elements of the Bus Rapid Transit program. Economic Development initiatives benefit from a comprehensive Transportation Master Plan. All elements have been discussed under the RETHINK process. The revised Official Plan has not been included with these initiatives because there are no significant direct costs associated with it, but it has a significant bearing on all initiatives. If decision makers start uncoupling the elements, then this could potentially make interconnected issues more expensive in the end. Page 34

32 Transportation Master Plan $2.1 billion = value of London s transportation assets The historical underfunding of transportation infrastructure has led to an overall decline of infrastructure and an accumulation of a significant backlog of required works. Transportation Master Plan (TMP) In October 2013, Civic Administration presented the financial impact of the Transportation Master Plan. The TMP identifies an infrastructure deficit in the transportation network in both the growth and Lifecycle plan. Transportation Lifecycle - The current capital budget for transportation Lifecycle renewal ranges from $16 million to $31 million per year from 2013 to 2022, depending on the planned projects. The total required capital budget to address Lifecycle deficiencies during this period is $50 to $60 million per year. If this gap is not addressed, the capital funding required to address the Lifecycle gap will accumulate to approximately $272 million by On top of this, operating funding of $1.0 million per year would be required to deliver these Lifecycle improvements. The Lifecycle gap can be eliminated by 2022 with a tax levy increase of 1.5% for six consecutive years starting in $1.3 million of assessment growth in 2014 has been recommended to begin to address this shortfall. $272 million gap by 2022 Deficit TMP Lifecycle TMP Growth Bus Rapid Transit Cumulative Gap by 2022 $272 million $291 million $78 million Transportation Growth - The current capital budget for transportation growth ranges from $19 million to $34 million per year from 2013 to 2022, depending on the planned projects. The total required capital budget to address growth deficiencies during this period is $34 to $75 million per year. If this gap is not addressed, the capital funding required to address the growth gap will accumulate to approximately $291 million by Being growth projects, development charges would apply. At the assumed development charges rate of 81.5% growth, the tax supported deficiency ranges from $1 to $9 million per year, accumulating to $54 million by Operating funding to deliver these growth projects would be $700,000 per year but the cost to operate and maintain these growth items will accumulate to approximately $7.0 million per year by The growth gap can be eliminated by 2022 with a tax levy increase of 0.25% for three years starting in 2014, followed by three years of a 0.50% increase. Page 35

33 $291 million gap by 2022 Bus Rapid Transit (BRT) The Way Ahead Bus Rapid Transit, as presented, would be implemented over 16 years. The total estimated capital cost is $383 million with $10.7 million of ongoing annual operating costs once fully implemented. The City of London cannot pursue BRT without 1/3 support from each of the provincial and federal governments (discussions in progress). In addition, some costs will have to be included in the Development Charges Background Study. With both of these assumptions, the City must still support approximately $32 million of capital over the 16 years. The capital costs plus the ongoing annual operating costs ($10.7 million) can be supported with a 0.25% increase in taxes for eight years starting in Without the additional development charges, the tax levy impact is as high as 0.75% for at least four years. $78 million gap by 2022 London s Bus Rapid Transit Page 36

34 Downtown Master Plan Civic Administration has been working on a master plan for the downtown since early This process included a number of public workshops and excellent public input. A draft Downtown Master Plan titled DOWNTOWNLDN OUR MOVE FORWARD was presented to Council in June The plan is built around six actions that provide directions for projects that will ultimately build a livable and vibrant downtown. The six actions are: 1. Make Dundas Street the most exciting street in London 2. Reconnect with the Thames 3. Better Connect Downtown with the City 4. Greening our Downtown 5. Building a Great Neighbourhood 6. Create a Buzz Ten transformational projects were identified in the plan that will set the vision for the Downtown. These projects were put out for discussion purposes only. Some of the projects may proceed immediately, while others will occur over the long term, while still others may not be necessary at all. The transformation projects are as follows. A very preliminary range of costs is also included for scoping purposes only and are subject to change. Project Preliminary Range of Costs 1. Dundas Flexible Street Project $5 - $15 million 2. Forks of the Thames > $15 million 3. Richmond Walk < $5 million 4. City Gateway Project $5 - $15 million 5. Market District $5 - $15 million 6. Sports Hero s Way < $5 million 7. Clarence Street Connector < $5 million 8. Alley Way Connections < $5 million 9. Queens Station < $5 million 10. Performance Venue - included separately below TOTAL approx. $55 million + Three discrete projects have also been brought forward which relate to the Downtown Master Plan and could be included in one or more of the above transformational projects: a) Urban Civic Spaces A business case for $100,000 in 2014, increasing to $150,000 in 2015, has been presented to implement projects for the creation and enhancement of urban civic spaces, primarily Downtown. Market Lane is an example of an urban civic space. b) Harris Park A business case has been presented for $200,000 in 2014, $1.8 million in 2015, and $750,000 in 2016 to improve park services and provide a suitable venue for events in Harris Park, taking pressure off of Victoria Park. Page 37

35 c) London Transit Buses off Dundas St To re-route LTC buses off Dundas St. and maintain London Transit s current levels of service will require an incremental investment of 14,800 additional annual service hours requiring an annual operating investment of $633,900 and the purchase of eight buses for $4. 0 million. Staff is continuing public consultation and is planning to report back to Council regarding the implementation strategy, including an identification of projects that are currently identified and funded or currently identified and planned to be funded in future budgets, and those projects that will require funding through future budget deliberations. Economic Development Initiatives A number of economic development initiatives have been discussed at the Investment and Economic Prosperity Committee. The ones that require significant funding are as follows: Industrial Land Development Strategy Accumulating industrial land for ready sale to interested parties is a key economic development initiative for the City of London. Civic Administration is currently completing the Industrial Land Development Strategy (ILDS). It has been identified to the Investment & Economic Prosperity Committee that the ILDS requires $120 million over ten years to purchase and service industrial land. With 1/3 contribution from each of the Federal and Provincial governments, the City s share is estimated to be $40 million. It is notable that some City funding is available in previously approved budgets and in capital plans included in the 2014 Budget. Further details on the financial plan to support this initiative will be brought forward as the ILDS is presented for strategic discussion. Medical Innovation & Commercialization Network London Health Sciences Centre (LHSC), St. Joseph s Health Care London, Lawson Research Institute, Robarts Research Institute and Western University have come together for the purpose of creating jobs, improving health care, fueling economic change and furthering London s reputation as an international leader in the health sector. Through this collaboration, the proposed London s Medical Innovation and Commercialization Network will translate medical discovery into products and processes that generate economic and social benefits in our community and beyond. An investment of $10 million from the City of London will activate the creation of the network and may result in an immediate leveraging of $20 million: $10 million in matching funds from Western University and a commitment from Western s development team to fundraise an additional $10 million. This initial funding will facilitate the leveraging of further investments from other levels of government and the private sector to secure an overall goal of $80-$100 million. Building upon collective research strengths and advantages while also supporting research most conducive to medical innovation and economic growth, the proposed network will focus on three centers of excellence: Page 38

36 1. A centre for research and innovation in musculoskeletal disease, serving as the home for world-leading research and development in bone and joint disorders. 2. A biomedical devices institute that will house research, innovation and the commercialization of novel disease interventions. 3. A centre for innovation in image-based medicine, where researchers will develop and test new patient care technologies and techniques to be used around the world. The Medical Innovation and Commercialization Network was supported in principle by Council. The Civic Administration has reflected the appropriate drawdowns for this initiative in the economic development reserve fund continuity schedule. Performing Arts Centre Two proposals have been submitted to build a performing arts centre to replace Centennial Hall. One proposal requires $10 million from the City over ten years and significant senior government and private sector investment. The second proposal does not require any City funding, but may require the donation of a City owned land. It also requires considerable senior government and private sector investment. Both proposals will incorporate towers with private residential development and/or commercial presence. Both proposals continue to be reviewed through the Investment and Economic Prosperity Committee. For purposes of scoping this initiative with other economic development proposals, it is estimated that the value of the Performing Arts Centre, including related development, will be somewhere around $100 million based on conceptual proposals. The investment from the City is assumed to be $10 million, although this value depends on the proposal selected and further refinement of each plan. Hydro Lands (Kilmer Brownfield) A proposal from Kilmer Brownfield to develop 111 Horton Street, otherwise known as the Hydro Lands, is being considered by the Investment and Economic Prosperity Committee. The initial proposal requested no capital funding from the City, although some costs are being incurred for a reach study to determine the amount of developable land. This study is expected to be completed in the first quarter of For purposes of scoping this initiative with other economic development proposals, Kilmer Brownfield has estimated that the property tax assessment on the Hydro Lands development will be $200 million or greater. Ontario Works Decentralization Strategy In February 2013, a plan to decentralize Ontario Works from the downtown core was approved in principle by Council. The plan calls for a staged implementation into each of the four quadrants of the City. In October 2013, an implementation plan was submitted which showed the decentralized model of service delivery being staged over the next 4 years. The overall plan with the goal of moving all Ontario Works related programs, services and operations out of Market Tower by the end of the current lease (March 31, 2017) is in progress. Most quadrants will involve leased space but the concept for the southwest quadrant is an expansion of the South London Community Centre, a city-owned facility. A budget of $6.5 million is being submitted for the expansion of the South London Community Centre to house the South West Ontario Works office and expand space for Page 39

37 Settlement Services of the South London Neighbourhood Resource Centre. To date, $4.2 million has been set aside in the City Facilities Reserve Fund from previous year surpluses, leaving $2.3 million outstanding. In the 2013 Operating Budget Status - Second Quarter report, Civic Administration projected $4.3 million of operational savings at 2013 year end and recommended a contribution to the City Facilities Reserve Fund to provide a potential source of funding for facility related initiatives such as Ontario Works Decentralization. The remaining $2.3 million in capital costs required for the South London Community Centre expansion is anticipated to be funded through the 2013 Operating Budget surplus should sufficient surplus be available. SUMMARY OF STRATEGIC INVESTMENTS The following chart summarizes the cost and tax levy impact of the above initiatives. The full capital cost values are high-level estimates only and need to be refined as projects progress. The municipal portion of costs is also subject to change. The 2014 impact and estimated annual tax levy impact is for demonstration purposes only. It is not assumed that all initiatives would begin in Some initiatives, such as the Medical Research Fund and Ontario Works in the Community, may be accommodated without additional tax levy. RECOMMENDATION 7. a): That a 1% tax levy increase in the 2014 budget BE REVIEWED to accumulate funding to support the strategic investments discussed above as Municipal Council continues to receive information on these initiatives and decide on the highest priority items. Page 40

38 B) EMERGING ISSUES In addition to the above initiatives and master plans, Council has also recently requested that the following emerging issues be referred to the 2014 budget process. Blackfriars Bridge ($3.0 million in 2015) - On September 17, 2013, Council resolved that Civic Administration be authorized to proceed with the Environmental Assessment for the rehabilitation for the Blackfriars Bridge. It is estimated that the rehabilitation will cost $3,000,000 and can begin in Huron Street Improvements ($500,000) On October 1, 2013, Council resolved that Civic Administration be directed to undertake, as a 2014 capital project, improvements to Huron Street, including, but not limited to, curbs, gutters, sidewalks, traffic calming measures and a delineation between the road and private property. Safety Issues for Railway Pedestrian Crossings ($135,000) On October 22, 2013, Council resolved that a new twoyear project be introduced for consideration in the 2014 budget for the implementation of engineering crossing safety treatments, with priority to be given to all items under Transport Canada requirements. It is estimated that this project requires $135,000 for 2014 and $170,000 in Veterans Memorial Parkway Noise Wall ($500,000) - On October 22, 2013, Council resolved that Civic Administration be directed to investigate new materials that may be available for the purpose of noise abatement on Veterans Memorial Parkway, between Simpson Crescent and Trafalgar Street, at an up-set limit of $500,000, with noise abatement measures to be completed in Traffic Calming Program ($25,000) On October 22, 2013, Council resolved that Civic Administration be directed to review and report back on the potential for a two-tier Traffic Calming Program which would provide an opportunity for addressing smaller street projects within a $25,000 budget envelope. Sidewalk Maintenance Program ($315,000) On October 22, 2013, Council received a report on the Sidewalk Maintenance Program and directed Civic Administration to bring forward a business case for one time funding to address the current maintenance gap and a business case to address incremental funding that would be required to eliminate future gaps as part of the 2014 budget process. It is estimated that this program requires $315,000 in Emerald Ash Borer ($200,000) On November 5, 2013, Council received a report requesting that the Provincial Emerald Ash Borer funding that expires in 2013 be replaced in the 2014 budget in the amount of $200,000. The business case noted that without this funding, it will take nine years to replace boulevard trees that were removed. The additional funding will reduce this time period to six years. Page 41

39 Cultural Prosperity Plan ($100,000) - On March 5, 2013, Council approved (in principle) London s Cultural Prosperity Plan. On June 24, 2013, IEPC asked the Culture Office to bring back a list of potential cultural strategies which would further the implementation of this plan. Some of the following potential cultural strategies could be implemented to further London s Cultural Prosperity Plan if funding is available in the 2014 Budget: London Artist in Residence Program Trails Open London (TOL) London Culture Days Museum School Cultural Heritage Landscape Interpretive Signage Artsbuild Energy Audit Pilot Program Celebration and Promotion of Culture Develop New Cultural Resource Mapping Expand the Citizen Culture Pass Program for Youth SUMMARY OF EMERGING ISSUES Business Case # Initiative 2014 Cost ($000 s) 2014 Tax Levy Impact 2015 Cost ($000 s) Source 50 Blackfriars Bridge $0 0.0% $3,000 Civic Works Sept 9 51 Huron Street Improvements $ % $0 Planning Committee Sept Safety Issues for Railway Pedestrian Crossings $ % $170 Civic Works Oct 7 53 Veterans Memorial Parkway Noise Wall $ % $0 Civic Works Oct 7 54 Traffic Calming Program $ % $25 Civic Works Oct 7 55 Sidewalk Maintenance Program $ % $315 Civic Works Oct 7 56 Emerald Ash Borer $ % $200 Planning Committee Oct Cultural Prosperity Plan $ % $100 Council - March 5 Total $1, % $3,810 RECOMMENDATION 7. b): That the emerging issues BE REVIEWED by Municipal Council for consideration for funding in the 2014 Budget, noting the tax levy impact included in the table above. Page 42

40 C) MUNICIPAL GRANT REQUESTS (STRATEGIC FUNDING FRAMEWORK) The intent of the Municipal Grants program is to ensure that only organizations which have a demonstrated ability to deliver on the proposed outcomes identified in the business plan and that are consistent with Council identified priorities are referred to Council through the budget process. The Strategic Funding Framework was used to evaluate new or increased requests for capital and operational (one time and/or ongoing) funding for City Council as part of the 2014 budget process. Requests for new or increased funding were reviewed based on the following: funding alignment with City of London and community priorities; capacity of the organization requesting the funds; the availability of City of London funds; ability of the organization to leverage additional investment in the community; and the duration of funding and the capacity of the organization to move towards self-sufficiency. This process directed $2,712,114 of operational funding to non-profit organizations which is included in the 2014 draft budget. A further $1,381,300 will be allocated during 2014 through the CAIP 1, CAIP 2, Community Heritage Investment Program (CHIP), and SPARKS! Neighbourhood Matching Fund. Business Case #58 (Appendix F, Decision Point #3) identifies additional funding requests for both operating and capital grants that have been referred to the 2014 budget. These requests have not been included in the submitted 3.1% tax levy increase. RECOMMENDATION 7. c): That the City of London Municipal Grant requests BE REVIEWED, noting that Business Case #58 identifies additional funding requests for both operating and capital grants that have been referred to the 2014 Budget, noting that these requests have not been accommodated in the submitted 3.1% tax levy increase. Page 43

41 2014 OPERATING BUDGET OVERVIEW The table below provides a corporate overview of the City of London budget Actual 2013 Revised Budget $000's 2014 Submitted Budget Budget Increase/ (Decrease) % Increase/ (Decrease) Total Expenditures 741, , ,563 22, % Total Revenues: Non-Property Tax Revenues 273, , ,039 2, % Property Tax From Rates 467, , ,728 15, % From Assessment Growth 4,796 4, % Total Property Tax 467, , ,524 19, % Total Revenues 741, , ,563 22, % The source of revenue contained in the 2014 general property tax supported budget is $774.6 million (Table 1). The largest source of revenue is property taxes which accounts for 64% of the total revenues. Table 1 Property taxes are the largest revenue source for the City Page 44

42 Municipalities are required to submit a balanced budget where revenues are offset by planned expenditures. This will require Council to make spending decisions that take into account: Council s strategic plan including its long-term vision for the City; The desire for enhanced services while keeping property taxes low; and Exit strategies or service reductions for services that are not providing the level of value the community expects. The allocation of the 2014 submitted budget for operating expenditures by service program can be found in Table 2 and by expenditure type in Table 3. Table 2 Page 45

43 Table Budget ($000's) % Of Budget Expenditures Personnel 305, % Administrative 5, % Financial 108, % Purchased Services 148, % Materials & Supplies 31, % Furniture & Equipment 23, % Transfers 160, % Recovered Expenses (16,829) -2.2% Costs Due To A Growing & Expanding City 7, % Total Expenditures 774, % Subject to rounding How Operating Dollars are Spent By Expenditure Type $774.6 million Expenditure Budget pressures beyond Administration s control continue to be a challenge in 2014 Administration continues to strive to eliminate waste, implement more efficient and effective operational methods, and pursue innovative means of conducting business. However, escalating cost pressures related to inflation, contractual agreements, and rising utility and fuel costs, to name a few, are putting additional pressure on Administration s ability to provide the same level of service while keeping the property tax levy from rates from rising. The net property tax supported budget is calculated by taking the total municipal expenditures less non-property tax revenues. Expenditures Non- Property Tax Revenues Net Property Tax Budget Page 46

44 Viewing the budget from the net property tax perspective helps to identify those service areas that are creating the greatest pressure on municipal property taxes. As seen in Table 4, Protective Services accounts for 1.1% of the 3.1% tax levy increase from rates. Table Budget ($000's) Tax Levy Increase ($000's) % Tax Levy Increase Culture 22, % Economic Prosperity 9,428 (52) 0.0% Environmental Services 16, % Parks, Recreation and Neighbourhood Services 28, % Planning & Development Services 5, % Protective Services 152,092 5, % Social and Health Services 66,276 (1,954) -0.4% Transportation Services 57,221 1, % Corporate, Operational and Council Services i) Capital Financing (Pay As You Go, Debt Servicing, RF Contr.) 91,501 4, % ii) Corp. Contingencies (Tax Write-Offs, Legal, Personnel) 18,387 3, % iii) Other Corp. Expenditures (Insurance, MPAC Service Fee) 8,255 (81) 0.0% iv) Other Municipal Revenues (GILs, Draw s from Stab. Reserve) (35,462) 1, % v) Corporate, Council and Public Support Services 53, % Total Corporate, Operational and Council Services 136,079 9, % TOTAL 2014 TAX LEVY FROM RATES 494,728 15, % Subject to rounding Net Property Tax Budget Page 47

45 2014 CAPITAL BUDGET Ontario Municipalities receive 9% of total revenues, yet are responsible for over 50% of the infrastructure A long term capital plan is a useful tool to help Council ensure objectives are met, help guide community expectations and provide a good planning tool for growth and financial planning. Why is the capital budget divided into Lifecycle Renewal, Growth and Service Improvement sections? Source: Association of Municipalities of Ontario Continued Investment in the City Over the next 10 years the City is forecasting to spend over $1.2 Billion on its capital plan including projects such as: 401/402 Interchanges New Recreation Facilities in Southwest and East Southeast New Public Housing investments Major Roads Rehabilitation Transit System Investment The estimated replacement value of city owned assets supported by the property tax capital budget is $ 4.1 Billion. Lifecycle Renewal Projects are devoted to maintaining the infrastructure that is in place today (e.g. projects that resurface roads, replace roofs, and replace equipment). This is a high priority component of the capital budget as we are obliged to keep our systems and facilities in good repair, and planned regular maintenance is cheaper in the long run than sporadic emergency work. The lifecycle renewal portion of the total taxsupported capital budget is $57.4 million. Growth Projects are planned to extend services into newly developed areas of the City (e.g. a road widening to handle additional traffic from new subdivisions). Growth works are supported in part by development charges collected when building permits are issued for new construction. Growth projects are not always immediately imperative, but in the long run the City has a responsibility to provide adequate services to newly developed areas. The growth portion of the tax-supported capital budget is $47.2 million. Service Improvement Projects provide a new or improved level of service or address an emerging need (e.g. purchasing property in the future that will be used as industrial land). These projects are usually optional, but the case for the work may be compelling. The service improvement portion of the tax-supported capital budget is $6.5 million. The charts below outline the capital plan by classification in 2014 as well as beyond. $23,970 per Household 2014 Capital Budget by Classification ($Millions) Page 48

46 Benefits of moving to pay as you go financing: 1) Reduces cost to the tax payer in the long run for renewing and maintaining Infrastructure 2) Creates Intergenerational Equity those who benefit from asset are those who pay for it 3) Creates debt capacity for increased investment in growth and new initiative projects that benefit future taxpayers Since 2006 the percent of lifecycle capital projects financed by debt has decreased from 35% to 10% and is forecasted to be essentially eliminated by Financial Strategy Debt financing has remained stable in the capital forecast, therefore the $26.0 million average debt cap has been maintained. Pay-as-you-go financing (capital levy) increased from $18.5 million in 2013 to $21.9 million for 2014 with continued increases in the forecast. The chart below shows the impact of increasing the pay-as-you-go financing component. The early years of the plan are heavily weighted on catch-up or accelerated programs to bring the infrastructure up to standard (such as roads and facilities renewal). This explains the percentage of debt remaining relatively high in the first five years. In the latter part of the plan, the debt authorized can be reduced, since the pay-as-you-go funding has increased to a level more appropriate to support the on-going renewal of municipal assets and infrastructure. The Corporate Strategic Financial Plan endorsed by Council has played a significant role in improving the funding mix for Lifecycle Maintenance Capital Works projects. The chart below shows the progress that has been made since 2006 with the debt financing forecasted to be down to 0% by % 40% 35% 30% 25% 20% 15% 10% 5% 0% Debt Financing as a % of Lifecycle Capital Budget TARGET 0% Debt Financing Linear (Debt Financing) Page 49

47 Expenditures Requested 2013 Revised Budget 2014 Proposed Budget 2015 Forecast 2016 Forecast 2017 Forecast 2018 Forecast 2019 to 2023 Forecast Total 2014 to 2023 Lifecycle Renewal Growth Service Improvement Total Capital Expenditures $104.8 $111.1 $123.4 $142.4 $104.7 $112.3 $627.5 $1,221.4 Source of Financing for Capital Expenditures Capital Levy (Pay-as-you-go) Debenture (1) Reserve Fund Other Total Tax Supported $61.4 $67.1 $77.2 $87.4 $71.7 $76.4 $389.5 $769.3 Total Non-Tax Supported $43.4 $44.0 $46.2 $55.0 $33.0 $35.9 $238.0 $452.1 Total Financing Available(2) $104.8 $111.1 $123.4 $142.4 $104.7 $112.3 $627.5 $1,221.4 * Figures rounded for presentation purposes (1) The 2014 to 2023 capital plan calls for an average debt cap limit of $26.0 million. (2) Total available funding will be contingent on the mix of projects approved; for example, projects supported by grants and other non-tax sources leverage more spending Revised Budget 2014 Proposed Budget 2015 Forecast 2016 Forecast 2017 Forecast 2018 Forecast 2019 to 2023 Forecast Total 2014 to 2023 Expenditures by Service Culture Economic Prosperity Environmental Services Parks, Recreation & Neighbourhood Services Planning & Development Protective Services Social & Health Services Transportation Services Corporate, Operational & Council Services Total Expenditures $ $ $ $ $ $ $ $ 1,221.4 * Figures rounded for presentation purposes 2014 CAPITAL BUDGET WITH FORECASTS FOR (in $ millions) Page 50

48 Managing Reserve Fund Levels Prior to the 2013 budget, reserve and reserve funds had been grouped into three main categories: 1. Operating Reserve Funds 2. Operating Reserves 3. Capital Reserve Funds For rationalization of balances, funding levels and prioritization of contributions, they are now grouped into five new categories: 1. Capital Asset Renewal and Replacement 2. Capital Asset Growth 3. Specific Projects & New Initiatives 4. Contingencies and Stabilization 5. Risk Management and Long Term Planning RESERVES AND RESERVE FUND OVERVIEW The importance of reserve and reserve fund balances within the whole framework of the City finances cannot be overlooked. Reserve funds assist in funding the 10 year capital plan as well as other strategic initiatives. The City has created guiding principles to assist in establishing, prioritizing and rationalization of reserve/reserve fund balances. These principles are continued from the strategic plan that was adopted by the City of London as seen below. Guiding Principles Liquidity Intergenerational Equity Rationalization of City Owned Assets Description of Principle Funding must be kept at an adequate level to ensure that the City has sufficient cash flow to meet its financial obligations. Those who use the asset will pay for the asset. Reserve fund must be funded to proper levels to ensure City owned assets do not deteriorate over time. Link to Strategic Plan A Strong Economy A Sustainable Infrastructure A Sustainable Infrastructure The total City owned Reserves and Reserve Funds balances at the end of 2014 is projected to be $179.3 million as outlined in the chart below: City of London - City Hall Building 000 s Projected Balance Dec 31, 2013 Projected Contribution from Tax Other Income and Interest Planned Draws Projected Balance Dec 31, 2014 Obligatory (DC s) 22,218-18,488 (22,144) 18,562 CITY OWNED: Capital Asset Renewal and 44,283 18,878 7,179 (21,904) 48,436 Replacement Capital Asset Growth 7,413 2,892 1,449 (3,072) 8,682 Specific Projects & New Initiatives 43,713 9,865 6,061 (23,884) 35,755 Contingencies and Stabilization 17, (4,673) 13,522 Risk Management and Long Term 71,774 1,670 3,298 (3,882) 72,860 Planning Total City Owned (excl. Obligatory) 184,881 33,802 17,987 (57,415) 179,255 A detailed overview of individual reserves and reserve funds is provided in Appendix D. Page 51

49 Did you know? As of December 31, 2012 the City of London has $155 Million in post-retirement and closure liabilities recognized on its financial statements. Reserve Fund Allocation The figures below outline the contributions and projected spending from each category in The city continues to prioritize spending and contributions on Capital Asset Renewal and Replacement, Special Projects and Risk Management and Long Term Planning. I. Allocation of Projected Contributions in 2014 Budget Risk Management and Long Term Planning 2014 Tax Supported Contr ibutions by Categor y Capital Asset Renewal and Replacement 56% Capital Asset Growth 9% The City is currently undertaking an asset management review for all Cityowned assets. The current estimated infrastructure deficit for transportation assets is $272 Million (property tax supported) by 2023 Risk Management and Long Term Planning 5% Contingencies and Stabilization 1% Specific Projects and New Initiatives 29% Capital Asset Renewal and Replacement Reserve Funds II. Allocation of Projected Drawdowns in 2014 Budget Ta x Suppor ted Spending by C at egor y Capital Asset Growth 5% Reserve Funds assist in allowing the city to meet its day to day cash needs as well as financing capital projects until they are completed and the debt is issued. Capital Asset Renewal and Replacement 38% Specific Projects and New Initiatives 42% Contingency and Stabilization Reserves Risk Management and Long Term Planning 7% Contingencies and Stabilization 8% Page 52

50 The Future - Funding Needs and Narrowing the Infrastructure Gap The estimated replacement value of the assets supported by capital reserve funds is $4.1 Billion. The City of London is currently in the process of implementing a review of its capital asset management process. The process will identify the need and prioritize spending on capital assets based on a comprehensive risk based approach. As seen in the previous figures the City of London is contributing greater than 50% of its reserve fund contributions to reserve funds that support its infrastructure needs. The chart below outlines the projected capital asset reserve fund balances from 2013 to ,000 Capital Asset Reserve Fund Balances (Projected - $Millions) 70,000 The reserve fund balance by 2017 will represent only 1.7 % of that estimated replacement value. 60,000 50,000 40,000 30,000 20,000 10, Capital Asset Renewal and Replacement Capital Asset Growth Projected Reserve Fund per Household by the end of 2014 Although the projected balances are increasing over the next five years the total balance of approximately $73 Million is a small percentage of the estimated replacement value of $4.1 Billion on property tax supported assets. In October 2013, a Transportation Infrastructure Gap report was brought forward for review by Municipal Council. This report outlined the current state of the City of London s lifecycle transportations assets and extent of the current funding gap. Based on the condition assessments of the various transportation assets the infrastructure gap at current levels is $34 million and is projected to grow to over $272 Million over the next ten years. $1,200 per Household The City of London s Corporate Asset Management group will be bringing forward additional information in the upcoming months. Use of reserve funds is one of the prudent strategies available to help mitigate growth of the infrastructure gap. Page 53

51 DEBT OVERVIEW Total outstanding debt for 2013 is $352.5 million, as follows: General Property Taxes $ Wastewater 79.1 Water 2.7 Reserve Funds Supported 30.0 Subtotal $ Joint Water Boards - City's Share 9.7 City Services Reserve Funds 28.4 Total $ Amounts are subject to rounding Total authorized debt for 2013 is $233.3 million, as follows: General Property Taxes $ 92.2 Wastewater 36.1 Water 0.5 Reserve Funds Supported 20.9 Subtotal $ Joint Water Boards - City's Share 27.3 City Services Reserve Funds 56.3 Total $ Amounts are subject to rounding Total potential debt $585.8 million. The City s 2013 debt repayment limit is $ 110 million, an amount that would support approximately $870 million of debt. The City of London s goal is to achieve and sustain a healthy financial position and debt management is a key component. Debt financing is a mechanism for funding capital projects, along with capital levy and reserve funds. Generally, capital projects provide benefits to residents over a number of years and therefore it is appropriate to spread the cost over the benefit period to achieve intergenerational equity. How does the City manage debt? 1. Limit the amount of debt authorized on an annual basis Each year council approves the financing for the City s Capital Plan; debt is part of this financing along with capital levy and reserve funds. As part of the City s strategy to limit debt, the City introduced a Debt Cap Policy in For 2014, the City s internal debt cap limit is an average of $26 million per year over a 10-year period for tax-supported initiatives. Another way the City limits the amount of authorized debt is by increasing pay-as-you financing for Lifecycle renewal projects in lieu of debt financing. Reliance on debt financing for Lifecycle renewal projects has decreased from 35% in 2006 to 10% in 2014, and is targeting 0% by Reduce authorized and unissued debt Consistent with Council policy, the City applies year-end savings and 50% of unallocated assessment growth funding to cancel authorized but unissued debt. Issued debentures are not callable; therefore, the City cannot reduce issued debt any sooner than the scheduled maturity date. In 2012, the City cancelled $5.1 million of authorized and unissued debt and expects to cancel approximately $5.6 million in Manage the City s debt servicing charges Each year the City receives its Annual Repayment Limit or ARL, (under Ontario Regulation 403/02) from the Ministry of Municipal Affairs and Housing. The limit is based on data contained in the City s Financial Information Return and it represents the maximum amount which the municipality has available to commit to payments relating to debt and financial obligations. In general, debt payments are limited to 25% of a previous year s own-source revenue. Page 54

52 The total debt servicing costs for 2014 are $66.6 million as follows: General Property Taxes $ 42.0 Wastewater 13.7 Water 0.4 Reserve Funds Supported 4.8 Subtotal $ 60.9 Joint Water Boards - City's Share 1.4 City Services Reserve Funds 4.3 Total $ 66.6 Amounts are subject to rounding Aaa for 37 years In 2013, the City of London issued $50,000,000 of debentures in the capital markets at an all-in-rate of 3.299% for a 10-year term. Debt per household for 2013 Per household $2,118 (5-year average $1,944) How does the City manage debt? Continued 3. Manage the City s debt servicing charges - continued Each year Moody s Investors Service reviews the credit worthiness of the City of London and then assigns the City a credit rating for the year. Moody's Investors Service is a leading provider of credit ratings, research, and risk analysis. The firm's ratings and analysis track debt covering more than 115 countries, 10,000 corporate issuers, 22,000 public finance issuers, and 82,000 structured finance obligations. For 2013, the City of London received the highest possible rating, Aaa, for the 37 th consecutive year. As a Aaa rated municipality the City of London bonds are considered to be of the highest quality with minimal credit risk making them appealing to institutional buyers and investors. This contributes to the City of London s favourable cost of borrowing on long-term financing, which may be between 3 to 5 basis points in comparison to being rated Aa depending on market conditions. This translates to approximately $1 million of interest costs avoided on a 10-year borrowing program of $60 million. Excerpt from Moody s Investors Service Credit Analysis Report, October 4, 2013: As with budgeting, London s debt management is also best characterized as prudent and conservative. The city s debt burden, measured by the ratio of net debt as a percentage of total revenues, declined in recent years from 54.8% in Registering 38.3% of revenues in 2012, the progressive reduction in the city s debt burden reflects the tight controls placed on debt issuance, notably through a selfimposed debt cap limiting the amount of debt issued for capital projects, as well as an increased reliance on pay-as-you go financing. Furthermore, debt remains reliable as interest expense consumed only 1.2% of operating revenues in The city s debt burden is low compared to other Canadian cities and, as such, constitutes a credit positive. A municipality may issue debt for long-term borrowing to provide financing for capital works. The City issues debt on projects that are substantially complete. The City reviews project status reports on a quarterly basis to determine which projects that have debt financing are substantially complete. This analysis along with cash flow requirements, budget constraints and market conditions determine the amount of debt issued each year. Down from 2012 s per household amount of $2,123. Page 55

53 Summary of Debt Process: From Authorization to Payments CAPITAL BUDGET DEBT IS AUTHORIZED FOR PROJECTS SPENDING ON PROJECTS ISSUE DEBENTURES ON COMPLETED PROJECTS OPERATING BUDGET PRINCIPAL AND INTEREST PAYMENTS Looking ahead The City has continued on the path of employing tighter controls for authorizing new debt and that is being reflected in a decline in total potential debt levels (i.e. issued and authorized) since The City expects that this trend will continue through As overall debt levels decline, debt servicing costs show a slight incline, which reflects an increase in the amount of debt issued and the rising interest rate environment that is expected in the next few years. Projected debt repayments are calculated over a 10-year term using interest rates starting from 4.30% in 2014, and rising to 6.0% by Interest rates are derived using forecasts published by the Big Five Canadian Banks. The graph below shows the Property Tax Supported debt levels and servicing costs from 2010 through to Debt Level ($ millions) Property Tax Supported Debt Levels and Servicing Costs WHERE WE CAME FROM WHERE WE ARE HEADED WHERE WE ARE Principal & Interest Payments ($ millions) Issued Authorized Principal & Interest Payments 0 Page 56

54 USER FEES Increase/Decrease Revised Draft Over 2013 Budget Budget Budget Service Program (millions) (millions) (millions) Culture $0.6 $0.6 $0.0 Environmental Services (0.6) Parks, Recreation & Neighbourhood Planning and Development Protective Services (0.1) Social & Health Services Transportation Corporate Services Total Civic Service Areas User Fee Budget $45.9 $45.7 ($0.2) User fees are charges imposed by the municipality to provide specific services to its citizens. This revenue source is intended to recover all or part of the costs associated with providing the service. The City of London anticipates raising $774.6 million in revenue for the 2014 Property Tax Supported Budget to support operations. User fees account for $45.7 million of the $774.6 million total operating revenue or 6 cents of every municipal revenue dollar collected. Parks, Recreation & Neighbourhood Services is the greatest contributor to user fee revenue for the City of London. In 2014, $15.9 million of the total $45.7 million budgeted user fee revenue from Civic Administration is anticipated from Parks, Recreation & Neighbourhood Services. This area charges a variety of user fees in service areas such as aquatics, arenas, community recreation and leisure programming, community centres, golf courses, sports services, senior centres and Storybook Gardens. The bar chart highlights the significant components of budgeted user fee revenue for civic services within the City of London. Culture Services (Centennial Hall) Licencing and Certification Corporate Services Public Support Services Planning and Development Services Dog Licenses & Cat Identification Protective Services Garbage Recycling and Composting 4.2 Long Term Care Building Controls Transportation (Roadways & Parking) Parks, Recreation & Neighbourhood Services Page 57

55 2015 TO 2018 PROPERTY TAX SUPPORTED BUDGET FORECAST The 2015 to 2018 Property Tax Supported budget forecast, as outlined in the chart below, anticipates an average property tax rate increase of 3.3%. These forecasts are based on the 2015 to 2018 forecast information provided by Civic Service Areas, Boards and Commissions to maintain existing service levels without any significant adjustments to services or introduction of new services. Average tax levy increase from rates is forecasted to be 3.3% from The 2015 to 2018 forecast incorporates the following assumptions: London Police have included an increase of 92 positions in its forecast from 2015 to The average annualized increase for the London Police Service for the 2015 to 2018 period is projected at 4.1%; Continued upload of Ontario Works to the Province that commenced in 2010 will be completed by 2018; Fair and reasonable collective bargaining agreements; Continuation of the Corporate Strategic Financial Plan (pay as you go) financing for Lifecycle Renewal capital projects; Average annual increase in debt servicing costs of $1.6 million for debt financing of previously approved capital projects; Strategic use of the Operating Budget Contingency Reserve to mitigate tax rate pressures is gradually reduced; The forecast is only reflective of the property tax levy increases from rates and excludes the impacts of assessment growth costs due to an expanding City in 2014 and beyond with the exception of the London Police Service; and No additional program or services are anticipated in this forecast. As with any financial planning process, new information becomes available that may impact the financial forecast and plan. While every effort is taken to ensure that all aspects are adequately covered, unforeseen items will still come forward resulting from changing government legislation/regulation and economic events. Page 58

56 TIMETABLE WHAT WHERE Tabling of General Property Tax Supported Budget December 3, :00 pm Strategic Priorities and Policy Committee Council Chambers Property Tax Budget Presentations Overview of 2014 Budget and Process January 9, :00 pm Strategic Priorities and Policy Committee Council Chambers Build a Budget Workshop (Session 1) Invitation to Londoners to explore the 2014 Budget Public Participation Meeting #1 Members of the public are invited to provide input into the City of London's Budget to Strategic Priorities and Policy Committee Build a Budget Workshop (Session 2) Invitation to Londoners to explore the 2014 Budget 2014 Property Tax Supported "Operating Budget Review Consideration and recommendation re: Tax Supported Operating Budget for civic programs, boards, commissions and outside agencies under service-based format Decision Point #1 Included in the 3.1% Submitted Budget: Service Changes and Capital Cuts - Operating Business Cases Capital Business Cases 6-13 (Use of Surplus) Decision Point #2 Included in the 3.1% Submitted Budget: Costs of a Growing City Funded by Assessment Growth - A Category Business Cases B Category Business Cases Operating Budget Review - Culture Services Operating Budget - Economic Prosperity Services Operating Budget - Environmental Services Operating Budget - Parks, Recreation & Neighbourhood Services Operating Budget January 11, :00am 11:00am Goodwill Industries, 255 Horton Street E January 13, :00 pm Strategic Priorities and Policy Committee Council Chambers January 15, :30pm 8:30pm Goodwill Industries, 255 Horton Street E January 30, 2014 (and January 31, 2014 if needed) 9:00am Strategic Priorities and Policy Committee Council Chambers Page 59

57 TIMETABLE (CONTINUED) WHAT 2014 Property Tax Supported (continued) "Operating Budget Review - Planning & Development Services Operating Budget - Protective Services Operating Budget - Social and Health Services Operating Budget - Transportation Services Operating Budget - Corporate, Operational & Council Services Operating Budget 2014 Property Tax Supported Capital Budget Review Consideration and recommendation re: 2014 Capital Budget Lifecycle Renewal Projects Capital Plan Lifecycle Renewal Projects Growth Projects Capital Plan Growth Projects Service Improvement Projects Capital Plan Service Improvement Projects Corporate Capital Cash Flow (PSAB) - Reserves and Reserve Fund Overview and Analysis Schedules Decision Point #3 Not Included in the 3.1% Submitted Budget: Strategic Investments, Emerging Issues and Municipal Grant Requests - Strategic Investments Business Cases Emerging Issues Business Cases Municipal Grant Requests Business Case 58 Public Participation Meeting #2 Members of the public are invited to provide input into the City of London's Budget to Strategic Priorities and Policy Committee. Tax Supported Budget Final Approval Operating and Capital Budget By-laws WHERE January 30, 2014 (and January 31, 2014 if needed) 9:00am Strategic Priorities and Policy Committee Council Chambers February 6, 2014 (and February 7, 2013 if needed) 9:00am Strategic Priorities and Policy Committee Council Chambers February 10, :00pm Strategic Priorities and Policy Committee Council Chambers February 27, :00pm Council Council Chambers Page 60

58 COMMUNITY ENGAGEMENT Community engagement continues to be a priority for Administration and Council Budget decisions impact the daily lives of all citizens, making it essential that they are informed and engaged throughout the budget process. Our experiences in previous years showed that there is interest from the public in new engagement tools. More than ever, citizens want to become involved in shaping the future of their cities. Gathering input from as many citizens as possible provides valuable input that is used and considered in the budget decision-making process. It results in a more informed Council, and leads to community driven priority setting. Administrative leaders are provided with a better understanding of the impact of service cuts, and which services are highly valued by the community. The data collected helps to determine consistent hot topics, which informs our planning for next year s budget engagement cycle and the broader discussion on service delivery in our community. WHAT WILL WE DO? The Budget 2014 Public Engagement Plan focuses on providing maximum opportunities for citizens to give input into the City s 2014 budget, including: Build a Budget Workshops The Build a Budget Workshop invites Londoners to explore the 2014 Budget in an environment where they can learn about the budget, but also have the opportunity to ask questions and provide thoughtful and meaningful input. The workshop consists of stations that can be visited at any time throughout the workshop. These include (but are not limited to): Priority Wall: Participants place cards representing different services at various points across the wall. Services are placed under the categories essential, nice to have, and not necessary. Comment Corner: A designated space where people can write down their biggest concerns about the budget. Visualizing the Budget: Visualizations of budget information. Twitter Wall: Using (a free web-based service), tweets with the hashtag #LdnBudget14 will be projected onto a screen so participants can read what others are saying about the budget. Participants will also take part in 20-minute educational sessions on a rotating basis, giving everyone an opportunity to participate at each station: Budget Basics, Introduction: Finance staff gave an introduction to the City s financial processes. Ask the Treasurer: Participants are given the opportunity to ask the City Treasurer anything they ever wanted to know about municipal finance and the budget. Your Voice: Participants sit with City staff and share their biggest concerns about the budget. Page 61

59 Build a Budget Website In 2013, The City of London piloted an interactive Build a Budget website ( ). The site was designed to provide Londoners with another way to participate and become involved in the 2013 budget process. We will be working on increasing the functionality and visibility of the tool in 2014 ensuring the site offers citizens a chance to review all of the key decision points. Citizens can then make their own decisions on the budget, and see the financial implications of those decisions on the overall property tax rate. Public Participation Meetings Two public participation meetings will be held as part of the 2014 budget review process. At the meetings, individuals or organizations will provide their input on the 2014 budget. Both public participation meetings will be streamed live on the City s website. Traditionally we only have one public participation meeting per budget cycle, but following the success of the additional public participation meeting added in 2013, the 2014 budget will continue with two public participation meetings to allow residents more opportunities to contribute. budget@london.ca Facebook.com/LondonCanada Twitter.com (#Ldnbudget14) Financial Planning & Policy Page 62