AGENDA. Financial Sustainability & Audit Meeting No. 3. March 28, 2018 at 1:30 p.m. Council Chambers, City Hall

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1 AGENDA Financial Sustainability & Audit Meeting N. 3 March 28, 2018 at 1:30 p.m. Cuncil Chambers, City Hall Page A. CALL TO ORDER - Mayr Simpsn [CHAIR] B. APPROVAL OF AGENDA: C. ADOPTION OF REGULAR MINUTES: 2-3 1) Minutes f February 14, 2018 D. ACTIONS / OLD BUSINESS: 4 1) Actin Summary E. STAFF REPORT(S): 5-6 1) 2017 Surplus Reprt - Directr Bltn ) Five Year Financial Plan - Directr Bltn F. NEW BUSINESS: 1) Finance Department Update 2) Spending Issues (Overage) Late Item 3) Reid Street Update/Review tenders & recmmendatins Directr Cben Late Item 4) Tax Rates - Directr Bltn 16 5) Emplyer Health Tax - Directr Bltn G. CORRESPONDENCE: H. NEXT MEETING April 4, Regularly scheduled meeting April 17, 2018 Special Open 2017 KPMG Audit Review I. MOVE TO SPECIAL CLOSED J. RELEASE ITEM(S) FROM SPECIAL CLOSED TO SPECIAL OPEN K. ADJOURN SPECIAL CLOSED AND RESUME SPECIAL OPEN L. ADJOURNMENT: Page 1 f 16

2 MEETING NO. 2 A Municipal Cuncil Standing Cmmittee - FINANCIAL SUSTAINABILITY & AUDIT Meeting was held n the 14th day f February, 2018 cmmencing at 1:30 p.m. at Cuncil Chambers, City Hall, 410 Kinchant Street. Present: Cmmittee members: Mayr Bb Simpsn [CHAIR], Cuncillrs Ed Cleman and Jhn Brisc [via telecnference] Staff: City Manager Byrn Jhnsn, Deputy City Manager/Directr Finance and Crprate Services Kari Bltn Guest(s): Nne Gallery: Nne A. CALL TO ORDER - MAYOR SIMPSON [CHAIR] B. APPROVAL OF AGENDA: MOVED Cuncillr Brisc, Secnded Cuncillr Cleman and reslved: THAT the Financial Sustainability and Audit Cmmittee apprve the February 14, 2018 Agenda as presented. CARRIED C. ADOPTION OF REGULAR MINUTES: C.1) Minutes f January10, MOVED Cuncillr Cleman, Secnded Cuncillr Brisc and reslved: THAT the Financial Sustainability and Audit Cmmittee adpt the January 10, 2018 Minutes as presented. CARRIED D. ACTIONS / OLD BUSINESS: D.1) Actin Summary Reviewed & updated E. STAFF REPORT(S): E.1) Five Year Financial Plan - Directr Bltn t Reprt Reviewed Five Year Plan. Updated the Cmmittee n the latest cst updates fr the prpsed Public Wrks Building. It is anticipated a lan f $8.5 millin wuld be required fr the prject, which will be built int the five year financial plan, shuld the referendum be successful. F. NEW BUSINESS: F.1) Finance Department Update Busy with year end and Utilities F.2) Spending Issues (Overage) Nne F.3) 2017 Capital Prjects Reviewed draft December reprt n all capital prjects Minutes f February 14, 2018 Page 2 f 16

3 Meeting N. 2 Financial Sustainability & Audit Cmmittee 14 February, 2018 F.4) Reserves Update Reviewed draft reprt n expected reserve balances at year end. F.5) Cannabis Discussed the pssible csts fr lcal gvernment due t the new cannabis regulatins. Determined mre clarity n the regulatins is required befre being able t determine csts. G. CORRESPONDENCE: H. NEXT MEETING March 7/18 I. ADJOURNMENT: With there being n further business t discuss the Financial Sustainability and Audit Cmmittee ended at 2:27 p.m. CERTIFIED CORRECT Mayr Bb Simpsn [CHAIR] Minutes f February 14, 2018 Page 3 f 16

4 Actin Summary Page 4 f 16 Financial Sustainability & Audit Cmmittee Actin Tracking Summary 2018 [ ] Date # Respnsible Actin Status/ Cmplete 2016 NOV K.Bltn [M.Thmas] 2018 Fleet review Develp Terms f Reference fr a fleet review t determine the best cycle perid fr ur equipment and types f equipment Reprt n yearly investments Directr Bltn f/u with M.Thmas JAN K.Bltn Business Licenses fr Nightclubs/Bars. Rate fr licensed facilities PabCm Jan 23 Referred back t FSAC FEB Nne FUTURE AGENDAS Wrap up meeting with Directrs; Cuncil invitatin June Asset Management grant details

FSAC Reprt Date: Mar 12, 2018 Meeting Date: Mar 28, 2018 T: Frm: Subject: Surplus 2017 Financial Sustainability and Audit Cmmittee Directr f Crprate and Financial Services Purpse The purpse f this

Summary After perating and capital carryfrwards, the surplus fr 2017 is $437,047. This surplus is after $93,593 f leftver snw budget frm 2017 had been allcated t the snw reserve.

Cuncil s Plicy CF-2 Reserves and Deferred Revenue recmmends that any remaining general surplus funds be allcated t the Capital Reinvestment Reserve fund.

5 FSAC Reprt Date: Mar 12, 2018 Meeting Date: Mar 28, 2018 T: Frm: Subject: Surplus 2017 Financial Sustainability and Audit Cmmittee Directr f Crprate and Financial Services Purpse The purpse f this reprt is t review the 2017 General Surplus with the Cmmittee and make a recmmendatin t Cuncil regarding the allcatin f the Surplus funds. Summary After perating and capital carryfrwards, the surplus fr 2017 is $437,047. This surplus is after $93,593 f leftver snw budget frm 2017 had been allcated t the snw reserve. At this pint in 2018 the City has already used 75% f the 2018 snw budget s it may be a year the snw reserve is required. There is currently $269,221 in the snw reserve. Cuncil s Plicy CF-2 Reserves and Deferred Revenue recmmends that any remaining general surplus funds be allcated t the Capital Reinvestment Reserve fund. Staff is recmmending that cnsideratin be given t allcating sme f the 2017 Surplus funds t the Equipment Reserve Fund again as this fund will nt be sufficient t buy the equipment required in the next few years. Recmmendatin THAT the Financial Sustainability and Audit Cmmittee recmmend t Cuncil that the 2017 General Operating Surplus be allcated as fllws: Cuncil Plicy $200,000 t the Equipment Reserve Fund $237,047 t the Capital Reinvestment Reserve Cuncil s Plicy CF-2 Reserves and Deferred Revenue recmmends that any remaining general surplus funds be allcated t the Capital Reinvestment Reserve fund. Strategic Objective Strategic use f surplus funds t fund reserves helps t achieve the financial sustainability f the crpratin. Financial Implicatins The general perating surplus fr 2017 $808,739 Less Capital Carryfwards: $166,626 Less Operating Carryfrwards: $205,065 Net Surplus $437, Surplus Reprt - Directr Bltn Page 5 f 16 Page 1 f 2

6 Majr Variances RCMP 55,000 Public Wrks General 130,000 Street Lighting 19,000 Public Service 32,000 Legislative/Cmmunity Supprt 49,278 General Gvernment 126,800 Other 24, ,047 Airprt Fund: The airprt fund had a surplus f $66,000 that went t the airprt surplus accunt. The ttal airprt surplus is nw $398,927 (45% f annual expenses). Nte a substantial abut f these funds have been allcated t varius airprt capital prjects in the next few years. Transit Fund: The transit fund had a deficit f $6,468 that was taken frm the transit surplus accunt. The ttal transit surplus is nw $290,247 (47% f annual expenses) Optins In additin t the ptin f putting funds int the Capital Reinvestment Fund, there is anther reserve fund that shuld be cnsidered fr additinal funds. Equipment Reserve Fund: As discussed during the budget prcess this fund had been depleted and in rder t purchase the necessary large equipment needed in the next few years the City will need additinal funds, either by putting mre funds int the Equipment Reserve Fund r by using the MFA Equipment Financing prgram t access funds Surplus Reprt - Directr Bltn Page 6 f 16 Page 2 f 2

7 FSAC Reprt Date: Mar 14, 2018 Meeting Date: Mar 28, 2016 T: Frm: Subject: Financial Sustainability and Audit Cmmittee Directr f Crprate and Financial Services Five Year Financial Plan Purpse The purpse f this reprt is t review the draft five year financial plan t make any suggested changes befre bringing the bylaw t Cuncil fr apprval. Summary The five year financial plan utlines plices regarding revenues, distributin f prperty taxes and permissive exemptins. The five year financial plan includes the prpsed revenues and expenditures fr the next five years. Since the last review the fllwing updates have been made Lan required fr Public Wrks Facility $8,500,000 All carryfwards updated Depreciatin updated All charts in Schedule B updated Recmmendatin THAT the Financial Sustainability and Audit Cmmittee recmmends t Cuncil City f Quesnel Financial Plan Bylaw N f Statutry Requirements In accrdance with Sectin 165 f the Cmmunity Charter, the City f Quesnel is required t adpt by bylaw a Five Year Financial Plan. The Financial Plan must utline the prpsed expenditures, revenues and transfers between funds fr the next five years. It must als utline the City s financial bjectives and plicies fr the planning perid. Financial Implicatins The plan has been built with the five year capital plan and current year perating plan apprved by Cuncil. Capital Capital carryfwards f $3.9 millin have been added t the apprved capital budget f $11 millin. Operating: The plan has been built with the apprved perating 2018 budget and the fllwing assumptins fr future years. 2% Inflatin Each Year 5% Grwth in Water Utility Fees, 2% in Sewer Five Year Financial Plan - Directr Bltn Page 7 f 16 Page 1 f 2

Assessment Appeal: There is still an utstanding industrial appeal frm 2012. The estimated amunt f this appeal is apprximately $90,000 per year.

8 Assessment Appeal: There is still an utstanding industrial appeal frm The estimated amunt f this appeal is apprximately $90,000 per year. The attached financial plan prpses that the City treats the expected appeal in the same way it was treated last year. The assessment related t the appeal has nt been used t determine the tax rates. The taxes that will be cllected n that assessment will g directly t the tax stabilizatin reserve s that when the appeal is cmpleted, the funds t pay fr the appeal will cme directly frm the tax stabilizatin reserve. Attachments City f Quesnel Financial Plan Bylaw N f 2018 Five Year Financial Plan - Directr Bltn Page 8 f 16 Page 2 f 2

9 CITY OF QUESNEL BYLAW NO A Bylaw fr the Financial Plan fr WHEREAS, Sectin 165 f the Cmmunity Charter requires City Cuncil t have a financial plan that is adpted annually by bylaw; AND WHEREAS City Cuncil has undertaken a prcess f public cnsultatin regarding the prpsed financial plan in accrdance with Sectin 166 f the Cmmunity Charter, including submissins/public input received thrugh an nline budget survey as well as a number f Financial Sustainability and Audit Cmmittee sessins being pen t the public frm December 2017 t February, 2018; NOW THEREFORE the Cuncil f the City f Quesnel in an pen meeting assembled enacts as fllws: 1. That Schedule A as attached heret and made part f this bylaw is hereby adpted and is the Financial Plan f the City f Quesnel fr 2018 t 2022 inclusive. 2. That Schedule B as attached heret and made part f this bylaw is hereby adpted and is the Statement f Objectives and Plicies. 3. This bylaw shall be cited fr all purpses as City f Quesnel Financial Plan Bylaw N f READ A FIRST TIME this day f, READ A SECOND TIME this day f, READ A THIRD TIME this day f, FINALLY ADOPTED by a Majrity f Cuncil this day f, MAYOR, Bb Simpsn Five Year Financial Plan - Directr Bltn Page 9 f 16

10 CORPORATE ADMINISTRATOR, Byrn Jhnsn Five Year Financial Plan - Directr Bltn Page 10 f 16

11 City f Quesnel Five Year Financial Plan Amendment Bylaw 1850 Schedule "A" Revenues 3.4% 3.6% 2.0% 2.0% 1.6% Prperty Taxes 15,160,443 15,707,856 16,020,578 16,340,677 16,610,127 Grants in Lieu/Penalties/1% Taxes 1,036,274 1,036,274 1,036,274 1,036,274 1,036,274 Parcel Taxes/Frntage Taxes 958, , , , ,118 Sale f services 2,096,444 2,138,373 2,181,140 2,224,763 2,269,258 Gvernment grants 4,454,680 7,005,418 2,023,418 2,423,418 2,023,418 Expenditures Dnatins Services prvided t ther gvernments 1,004,793 1,014,841 1,024,989 1,035,239 1,045,592 Investment Incme 225, , , , ,000 Utility user fees 2,477,896 2,552,233 2,628,800 2,707,664 2,788,893 Other 366, , , , ,099 27,779,877 31,008,004 26,336,908 27,170,479 27,179,780 General gvernment services 2,400,662 2,398,675 2,446,649 2,495,582 2,545,493 Prtective services 5,589,637 5,701,429 5,815,458 5,931,767 6,050,403 Transprtatin services 3,667,715 3,741,069 3,815,891 3,892,208 3,970,053 Slid Waste Mgmt/Recycling 1,498,557 1,528,528 1,559,098 1,590,280 1,622,086 Develpment services and planning 993, , , , ,562 Recreatin and cultural services 1,304,817 1,330,913 1,357,531 1,384,682 1,412,375 Operatins 3,492,446 3,562,295 3,633,541 3,706,212 3,780,336 Operating Expenses 18,947,108 19,201,050 19,585,071 19,976,773 20,376,308 Interest Expense 227, , , , ,236 Amrtizatin 4,000,000 4,300,000 4,529,000 4,864,000 4,943,000 23,175,081 23,701,523 24,314,544 25,275,745 25,750,545 Annual Surplus 4,604,796 7,306,481 2,022,364 1,894,734 1,429,236 Asset Transactins Tangible capital assets purchased (15,065,305) (11,446,594) (16,769,490) (3,957,000) (3,909,150) Amrtizatin f tangible capital assets 4,000,000 4,300,000 4,529,000 4,864,000 4,943,000 Debt Transactins principal payments (376,036) (296,174) (296,174) (513,060) (513,060) prceeds frm debt 8,500,000 2,000,000 Reserves/Deferred Revenue Transactins TO Interest t Varius Reserves (200,000) (200,000) (200,000) (200,000) (200,000) Public Wrks Relcatin Reserve (300,000) (397,863) (397,863) 0 0 Capital Reinvestment Reserve (2,467,621) (2,467,621) (2,467,621) (2,467,621) (2,467,621) West Quesnel Land Stability 0 General Capital (1,023,065) (1,023,065) (1,023,065) (1,023,065) (1,023,065) Tax Stabilizatin 0 Gas Tax Reserve (517,293) (527,639) (538,192) (548,955) (559,935) Utility Reserves (1,288,100) (1,315,000) (1,219,450) (1,233,034) (1,270,025) FROM Capital Reinvestment Reserve 5,460,270 1,539,094 4,155,350 1,803, ,000 Public Wrks Relcatin Reserve 50, , , ,000 Land Sales Reserve 0 General Capital 1,626,020 1,133, , , ,469 Tax Stabilizatin West Quesnel Land Stability 69,608 Develpment Cst Charges (Deferred Revenue 3, ,150 88,290 3,150 3,150 Gas Tax 1,210, , , , ,000 Utility Reserves 3,386,642 2,331,130 1,530, , ,000 SURPLUS (includes capital carryfrwards) 826,067 TOTAL CASH TRANSACTIONS (4,604,796) (7,306,481) (2,022,364) (1,894,734) (1,429,235) NET CASHFLOW must be zer (0) (0) (0) (0) 0 Five Year Financial Plan - Directr Bltn Page 11 f 16

12 City f Quesnel Five Year Financial Plan Bylaw N Statement f Objectives and Plicies Schedule B In accrdance with Sectin 165(3.1) f the Cmmunity Charter, the City f Quesnel is required t include in the Five Year Financial Plan, bjectives and plicies regarding each f the fllwing: 1. The prprtin f ttal revenue that cmes frm each f the funding surces described in Sectin 165(7) f the Cmmunity Charter, 2. The distributin f prperty taxes amng the prperty classes, and 3. The use f permissive exemptins. 1. FUNDING SOURCES: Table 1 shws the prprtin f ttal revenue t be raised frm the each funding surce in It is imprtant t nte that the table includes all Municipal activities and funds including the General Operating fund, the General Capital fund, the Water and Sewer funds, the Slid Waste Fund, the Airprt fund, and the Transit fund. The General Operating fund, Transit, and the Airprt funds tend t be mre highly supprted by prperty taxes based n assessment valuatins. The Water and Sewer funds are mre highly funded by user fees, and the taxes that are cllected are parcel taxes. The Slid Waste Fund is a cmbinatin f user fees, cntributins frm the Carib Reginal District and taxatin. The Capital fund is funded t a significant level by Grants frm senir gvernments and frm City reserves. Prperty taxes are easy t administer and are relatively cnsistent frm ne year t the next. As a revenue surce, they wrk well t fund activities which are nt well suited t funding n a user fee basis such as plicing activities, fire prtectin, mst public wrks activities, and administratin. User fees and charges are als a very large revenue cmpnent. Fr thse services where the cst can be wrked ut t an equitable charge-ut rate, user fees wrk well. The advantage f user fees is that they charge thse wh use a service with the cst f prviding the service, this is the mst equitable frm f funding. TABLE 1: SOURCE OF REVENUE Revenue Surce % f Ttal Revenue Dllar Value Prperty Taxes/Grants in Lieu 58% 16,196,717 User Fees and charges 20% 5,579,133 Other Surces 6% 1,549,347 Gvernment Grants 16% 4,454,680 Ttal 100% 27,779,877 Objective: T cntinue t lk fr ways t grw the nn-taxatin based revenue surces ver the next five year perid. Five Year Financial Plan - Directr Bltn Page 12 f 16

13 Plicies: T maximize the grant funding received frm senir gvernments, prviding that the grants supprt pririty City initiatives. T cnsider new Revenue Generatin activities which can create r enhance nn-tax revenue streams. Examples include: Leasing pprtunities fr City facilities Cmmunity Frest T cntinue t mve twards user fee based funding, where apprpriate, t lwer the pressure n taxatin. Examples in the next 5 years culd include: Landfill rates Transit peratins Utility Rates Varius Misc Fees T cntinue t mve twards full cst recvery n any services prvided by the City t Reginal district residents. 2. DISTRIBUTION OF PROPERTY TAXES: Table 2 utlines the distributin f prperty taxes amng the prperty classes. The largest tax burden in Quesnel is brne by the Majr Industrial rate payers. This has been recgnized as being an issue in Quesnel, and previus Cuncil s have pursued a deliberate plicy f shifting taxes t ther tax classes. At this pint in time ur Majr Industrial tax rates are in the tp quartile in the Prvince, ur Business and Other tax rates are clse t average in the prvince, and ur Residential rates are in the lwest quartile. TABLE 2: DISTRIBUTION OF PROPERTY TAXES Prperty Class % f Ttal Prperty Taxatin Dllar Value RESIDENTIAL 22% 3,368,091 UTILITIES 2% 273,244 MAJOR INDUSTRIAL 56% 8,423,351 LIGHT INDUSTRIAL 2% 241,090 BUSINESS 19% 2,852,446 RECREATIONAL 0% 1,598 FARM 0% 622 TOTAL 100% 15,160,443 The table abve includes the prperty taxes cllected fr General Municipal purpses, fr the Capital Reinvestment Plan levy, fr the Transit functin and fr the Airprt functin. Cuncil is aware that the Majr Industrial tax class is the ecnmic backbne f the City, creating much f the emplyment and cntributing the largest share t Municipal tax revenues. Cuncil chses t fster an ecnmic envirnment in which these businesses can thrive, withut a taxatin disincentive fr being lcated in Quesnel. Five Year Financial Plan - Directr Bltn Page 13 f 16

14 Cuncil als recgnizes that small business (Class 6 tax payers) are als majr ecnmic cntributrs t the lcal ecnmy. Our class 6 tax rate is currently cmpetitive with ther municipalities within the Prvince, and Cuncil will d its best t ensure this cntinuing cmpetitiveness. Residential taxpayers create the largest demand n municipal services, and Cuncil wants t mve twards mre f a user-pay apprach t help fster tax equity. Taxes will be kept t a reasnable level t encurage residential cnstructin and retentin and attractin f senirs. Cuncil will cntinue with an emphasis f cst cntrl ver the five year financial plan windw. The City s fcus will cntinue t be prviding high-quality services t all f ur municipal residents, hwever any new expenditures will be clsely analyzed t cnsider the cst / benefit t ur residents Objectives: T cntinue t freeze taxatin levels at 2015 dllar amunts fr the majr industry and light industry classes until 2018 (three year prgram ). Majr Capital Investment in the Industry Classificatin will be used t reduce the taxatin levels f that assessment class nly. Cuncil will maintain cmpetitive tax rates fr the Business and Other tax class (Class 6), and will cntinue t prvide quality services t ur Residential tax payers at a reasnable cst. Plicies: Any new municipal services being requested will be analyzed t cnsider hw t fund the service (taxatin versus user fees) and hw t equitably charge the tax classes which benefit frm the service. 3. PERMISSIVE EXEMPTIONS: Objectives are als required regarding permissive exemptins. This includes exemptins fr nn-prfit grups and revitalizatin exemptins. The City f Quesnel grants permissive exemptins t many nt-frprfit rganizatins within the City; the guidelines fr granting these are cntained within ur plicy. Our plicy is a living dcument that gets reviewed each year t ensure that Cuncil s bjectives are still being met. The City granted ne large revitalizatin exemptin under Sectin 226 f the Cmmunity Charter that ended in 2016 Objectives: The City will cntinue t ffer permissive exemptins t nn-prfit scieties, recgnizing the cntributins these rganizatin make t the verall well-being f the City. The City will ffer 226 permissive tax exemptins t cnstructin n the airprt lands that meet the criteria f the City f Quesnel Reginal Airprt Revitalizatin Tax Exemptin Prgram Bylaw. Five Year Financial Plan - Directr Bltn Page 14 f 16

15 The City will ffer 226 permissive tax exemptins fr the cnstructin f husing prjects that meet Cuncil s strategic bjectives: t encurage multi-family residential develpment that are lw-envirnmental impact and in areas with full municipal services, nearby amenities and access t public transit; t create a brader range f husing ptins, with a particular emphasis in prviding an increase in adaptable husing units t allw residents t "age in place"; t attract new cmmunity investments in the frm f multi-family husing; and t encurage partnerships between nn-prfit husing rganizatins and develpers. The City will review pprtunities t encurage ecnmic diversificatin thrugh the use f revitalizatin exemptins under Sectin 226 f the Cmmunity Charter. Plicies: A full review f all permissive exemptins fr nn-prfit rganizatins is dne every fur years was a full review f all permissive exemptins. Our gal is t ensure that each grup meets the municipal requirements as described in ur plicy statement. T review any requests fr revitalizatin exemptin n an individual basis, analyzing the cmmunity benefits versus the fregne tax revenue. Our gal is t increase ecnmic diversificatin by attracting new business ventures. Five Year Financial Plan - Directr Bltn Page 15 f 16

16 Changes t Medical Services Premium - City f Quesnel Anticipated Csts MSP Premiums 152,000 76,000 76,000 Emplyer Health Tax - Estimate 192, , % f earnings TOTAL 152,000 76, , , ,320 Csts had there been n changes MSP Premiums 152, , , , ,000 Anticipated Yearly Increase 40,660 Tax Increase 0.29% Anticipated Increase t Husehld Prperty Taxes $ 2.63 Savings fr Single Member Husehld paying MSP 900 Savings fr Family Husehld paying MSP 1,800 Fr emplyees whse MSP premiums were paid by their emplyer there will be a incme tax savings due t the fact that MSP was a taxable benefit. The 2019 budget year will create an issue since the City will have t pay bth MSP and EHT that year. Will need t cnsider allcating 2018 surplus twards that extra payment. This des nt take int cnsideratin any cst increases passed n t cnsumers by private sectr emplyers wh nw have t pay this premium. Emplyer Health Tax - Directr Bltn Page 16 f 16

ADMINISTRATIVE REPORT

LATE DISTRIBUTION FOR COUNCIL JANUARY 20, 2009 RR-2 ADMINISTRATIVE REPORT Reprt Date: January 19, 2009 Cntact: Kenneth Bayne Cntact N.: 604.873.7223 RTS N.: 07877 VanRIMS N.: 08-2000-20 Meeting Date: January