SPECIAL MEETING OF CITY COUNCIL CITY HALL, A STREET, DAWSON CREEK THURSDAY, DECEMBER 14, 2017 AT 1:00 PM AGENDA

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1 SPECIAL MEETING OF CITY COUNCIL CITY HALL, A STREET, DAWSON CREEK THURSDAY, DECEMBER 14, 2017 AT 1:00 PM Page AGENDA 1. CALL TO ORDER 2. NEW/COUNCILLOR BUSINESS 3. REPORTS Report No from the Chief Financial Officer re: Preliminary Budget Items. 4. BUSINESS ARISING Memo from Councillor Rogers re: Tangible Capital Assets Memo from Councillor Shuman re: Recycling/Waste Reduction Memo from Councillor Parslow re: Rotary Lake Replacement Memo from Councillor Parslow re: Exhibition Grounds Memo from Councillor Gevatkoff re: Flood Prevention Memo from Councillor Parslow re: Mitigating Flood Risk Memo from Councillor McFadyen re: Airport Runway Extension Memo from Councillor Gevatkoff re: Runway Extension. Page 1 of 44

2 Page SPECIAL MEETING OF CITY COUNCIL THURSDAY, DECEMBER 14, Memo from Councillor Gevatkoff re: Paving Project Memo from Councillor Gevatkoff re: Street Upgrades Memo from Mayor Bumstead re: Walking Path Memo from Mayor Bumstead re: Grandview Property Memo from Councillor Wilbur re: Economic Development Budget. 5. ADJOURNMENT Page 2 of 44

3 REPORT TO COUNCIL DATE: December 14, 2017 REPORT NO.: SUBMITTED BY: Adam Langenmaier, CPA, CA, BBA FILE NO.: Chief Financial Officer SUBJECT: Preliminary Budget Items PURPOSE To provide Council with an opportunity to put forward projects and other special items to be researched further for possible inclusion in the Financial Plan. SUMMARY/BACKGROUND In prior years, Administration had found that during the budgeting process, it was not until February or March when Council would see the first draft of the budget and have a chance to provide input on specific new services they would like to see included. Council would give initial direction from the Budget Assumption Report issued in early October for Administration to proceed with the assumptions presented as status quo; however, this report did not address new services. As a result of the late timing of Council s input on new services, there was a time constraint for Administration to do adequate research and costing of proposed services to be brought before Council for further deliberation and possible inclusion. Current Financial Situation As identified in the Budget Assumption Report (Appendix A) and the Preview Roll Report (Appendix B), the City is faced with a slowdown in new building construction and a cooling of the housing market, which has led to a plateau and now a decline in the overall assessment value. This decline in value, coupled with the reduced new construction, has not been seen by the City for many years and, as a result, it has been many years since the City has not benefited from the increase in the tax base was the first year that the City saw a decrease in property tax revenue and, if no change is made to the tax rate, the City will see another decline in property tax revenue. This issue of declining property tax revenue has been exaggerated by the declining Peace River Agreement (PRA) funding in 2017, and although Administration expects this funding to increase from 2017 levels, it will still be below the 2015 and 2016 levels. The chart below outlines the year over year changes in total property tax revenue and the PRA amounts. Property tax revenue and PRA make up about 70% of the total revenue for the City, and in Page 3 of 44

4 Report No re: Preliminary Budget Items Page 2 of 5 addition it makes up over 80% of discretionary revenue (non-utility) (projected) Property Tax $ 13,138,183 $ 14,031,034 $ 15,262,985 $ 16,011,097 $ 16,434,556 $ 16,245,102 $ 16,034,511 Change from PY 637, ,851 1,231, , , , ,591 % Change 5.1% 6.8% 8.8% 4.9% 2.6% -1.2% -1.3% PRA 10,854,217 11,807,658 12,955,954 14,588,147 14,972,804 13,896,555 14,500,000 Change from PY 821, ,441 1,148,296 1,632, ,657-1,076, ,445 % Change 8.2% 8.8% 9.7% 12.6% 2.6% -7.2% 4.3% Total $ 23,992,400 $ 25,838,692 $ 28,218,939 $ 30,599,244 $ 31,407,360 $ 30,141,657 $ 30,534,511 (PY = previous year) $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ Property Tax PRA (projected) Budget Assumptions Per the Budget Assumption report, the City will follow the status quo for service levels as identified in the Financial Plan for the 2018 year. Taking the information from the Financial Plan for 2018 and adjusting for known changes such as change in property tax, PRA, special projects (U17) etc. will form the basis of the City s financial position for The table below outlines the summary of revenue, expenses and available capital spending for Total Projected Revenue $47.8M Total Projected Operating Expenses $41.7M Total Projected Available for Capital $6.1M Total Projected Revenue This amount includes all revenue from all sources available to the City (tax, fee for service, government grants, utilities, water sales, etc). Page 4 of 44

5 Report No re: Preliminary Budget Items Page 3 of 5 Total Projected Operating Expenses This amount includes all operating expenses for the City to offer the current level of service. This amount includes known cost increases (IT licencing costs, staff change over, specialized repairs and maintenance) over and above those identified in the Financial Plan. Administration Identified Capital Projects The capital projects identified by administration are those of the highest propriety; there are many projects that did not make the list. That being said, the projects have been ranked in importance. Area Road works Facilities Total Total $4.2M $2.7M $6.9M Although the current capital plan exceeds the anticipated funding available, this is a preliminary budget with additional work to be completed in both the operational and capital budget areas. While some changes in these areas are projected, they are not expected to be substantial. Based on the information received to date, a balanced budget can be provided to Council that will maintain the existing level of service in the community if that is Council s will; however, the amount of funding allocated to the capital program would be less than in previous years under this model. The information provided in this report represents the City s financial position based on what we know today and some assumptions, in order to provide context for the December 4th Special Budget Meeting. As staff and Council work through the budget process, Council will be provided with more detailed information, changes and options for consideration. Previous Motions of Council to be Brought Forward for 2018 Budget Deliberations Brookside Cemetery Road (information report to be included on December 18 th Regular Council Meeting) Public Works Yard Relocation Fire Hall Replacement/Renovation Sudeten Hall Siding Replacement Encana Events Centre West End Suite Expansion Conclusion The purpose of this report is to provide Council with some high level information regarding the current financial situation and to seek input to drive specific requests as part of the continued goal of improving the budgeting process. ALTERNATIVES N/A IMPLICATIONS (1) Social N/A (2) Environmental N/A Page 5 of 44

6 Report No re: Preliminary Budget Items Page 4 of 5 (3) Personnel N/A (4) Financial The identification of projects to be researched and considered for inclusion in the Financial Plan will have to be determined. Through project identification, no significant financial impact will occur until final adoption of the Financial Plan. (5) Risk Assessment Compliance: Best Practices, Community Charter. Risk Impact: Low. Internal Control Process: Provide Council with early opportunity for budget input to improve planning and Financial Plan adoption. GUIDING PRINCIPLES We will have a reputation for acting with integrity and will earn the trust of our stakeholders by pledging to align our actions with the guiding principles that support our vision. STRATEGIC PRIORITIES Fiscal Responsibility and Sustainability IMPLEMENTATION/COMMUNICATION With Council s direction, staff will collect information and report back to Council on the identified projects with more detail to be presented for deliberation to be included in the Financial Plan. RECOMMENDATION That Report No from the Chief Financial Officer re: Preliminary Budget Items be received for discussion. Council will need to provide direction regarding the previously identified projects that are included within this report. Separate motions are recommended for each project. Respectfully submitted, ORIGINAL SIGNED BY APPROVED FOR AGENDA BY CAO Adam Langenmaier, CPA, CA, BBA Chief Financial Officer AL/eg Page 6 of 44

7 Report No re: Preliminary Budget Items Page 5 of 5 Attachments: Budget Assumptions attach Budget Process Timeline attach 2 Updated Statement of VMGP attach Strategic Planning Document attach 4 Revenue Disclosure Requirements Preview Roll Assessment Information attach 1 A2 Statistical History Assessment Information Page 7 of 44

8 REPORT TO COUNCIL DATE: October 13, 2017 REPORT NO.: SUBMITTED BY: Adam Langenmaier CPA, CA, BBA FILE NO.: Chief Financial Officer SUBJECT: 2018 Budget Assumptions, Timeline and Public Consultation Process PURPOSE To present to Council the 2018 Budget Assumptions, Timeline and Public Consultation Process to be used in the preparation of the 2018 Financial Plan for discussion and approval. SUMMARY/BACKGROUND In 2015, Council directed Finance staff to complete a report that outlined the assumptions used to guide the preparation of the annual Financial Plan. Using this report as the beginning step to the annual budget process is now embedded in the system. The context and format of the report are essentially unchanged from 2016 aside from updated information with a summary of recommendations. As the governing body for the community, Council makes decisions and sets direction for funding and spending through policy and resolution. These decisions are made in the context of ever changing conditions and the direction can be adjusted by Council at any time throughout the budgeting process. City staff is tasked with preparing the data that aligns to Council direction, as well as ensuring that the Plan stays within the legislated framework that the City operates under (A Balanced Budget). Wants and needs are often conflicting because the City and its taxpayers have limited resources. The budget framework is set up so that by the end of the process, these limited resources will be prioritized by Council and the community. Starting Point The process begins by using the 2018 amounts that Council approved in the 2017 Five Year Plan. Capital and operating budget worksheets are distributed to senior managers to review and update with any new information arising over the past year from Council decisions, changed policies, new planning documents, contracts and other items that may require increased or decreased funding or changes due to one-time expenditures. These budget adjustments are compiled into the main Page 8 of 44

9 Report No re: 2018 Budget Timeline and Assumptions Page 2 of 14 document and further changes throughout the process are made as current information becomes available. Typically this includes updates for 2018 strategic planning projects, assessment changes, service cost alignments based on budget to actual comparisons, 2017 capital project carryovers, adjustments to the 2018 Capital Plan and 2017 year end surplus carry forward amounts. Some background information for 2018 from last year s plan is provided below for context: The residential variable tax rate will be held at $5.16 (2010 rate). The commercial variable tax rate will be held at $16.75 (2014 rate). Residential and commercial assessments are forecasted to have minimal increases with all other classes forecasted at no increases. The preview assessment roll is received in November and will give staff an indication as to whether the forecast needs adjusting. Based on these projections 2018 total tax revenues including flat and other taxes will be $16.5M compared to 2017 budgeted tax revenues of $16.3M. (Increase $197K). Peace River Agreement funding is forecasted to be $14.5M compared to 2017 budgeted amount of $13.9M (Increase $600K). Operating revenues in total are estimated at $47.7M an increase of 0.6% or $295K. Operating expenditures including debt payments are estimated at $39.4M compared to $39.2M in 2017 an increase of 0.6% or $230K from the 2017 budget budgeted operating carry forward surplus is used as a funding source for the 2018 Plan. It is estimated at $2,667,660 and is made up of $779,864 in unrestricted operating surplus and $1,887,796 in restricted operating surplus. Capital funding is estimated at $10.4M Funding for the capital plan, including debt principal payments will be made up of $10.4M in transfers from the operating fund. No new borrowing is forecasted for the 2018 Capital Plan. Capital spending before including any carry forward projects from 2017 or new projects approved in 2017 by Council is estimated at $10.4M, this includes $2.4M of debt payments. Ending operating surplus is estimated at $2.5M and ending capital reserves are estimated at $4.6M. Assumptions Assumptions used to guide the preparation of the 2018 Draft 1 Financial Plan are proposed as follows: Page 9 of 44

10 Report No re: 2018 Budget Timeline and Assumptions Page 3 of 14 Process City Council has set a number of previous strategic priorities and policies and they will drive the process and the Plan until Council changes them. The Strategic Planning document will continue to be used as the key driver for the 2018 Plan. The 2018 process starts by using historical assumptions and information included in previous plans. These will remain in place until such time that Council chooses to change them. The budget process used will be the same as in previous years, guided by the attached Budget Timeline. Roles and responsibilities for preparing the Plan will remain the same as in previous years. The senior management team will prepare the document and present the information to Council for discussion, changes and approval. Prior years simplified approach to public consultation and input through social media platforms and the City s website will be used. Planning The Plan will be prepared using the principles outlined in the City s Vision, Mission, and Guiding Principles (attached). The Plan will include resources to move forward Council s Strategic Planning Priorities (attached) including any updates Council chooses to make. The Plan will allocate funding resources to those City services included in the 2018 Financial Plan until such time that Council completes an updated City Services Policy (Policy repealed April 13, 2015 and discussed September 7, 2016 at the Fiscal Gap meeting). The Plan will incorporate changes and adjustments arising from bylaw and policy changes made by Council since the last budget cycle. Assessments Assessment changes are an integral driver in setting the annual tax rates. Variables such as whether the base is increasing or decreasing, how the classes are changing within the total, as well as how much of the increase is from market vs non market all have an effect on setting the annual and long term tax rates. Assessment information used for setting the City s tax rates included in the Financial Plan comes from the BC Assessment Authority at different times throughout the budgeting process. Various analytics are provided after each roll is received as follows: Preview Roll Received in mid-november. This information gives staff an indication as to the reasonableness of the forecasts used. Page 10 of 44

11 Report No re: 2018 Budget Timeline and Assumptions Page 4 of 14 Metrics reported to Council include: - dollar and % changes compared to the 2017 completed roll by class and in total. - dollar and % changes compared to the 2018 forecasted roll by class and in total. - dollar and % changes to the 2018 forecasted tax rates and revenues. Completed Roll Received in early January. The completed roll includes detailed folio information and is therefore used to prepare the in-depth analytical metrics for recommending the annual tax rates. Metrics reported to Council include: - Have 2018 assessments increased or decreased? - Have 2018 folio counts increased or decreased? - Has the mix of assessment changed significantly from previous years? - What is the change in the average assessment for residential and commercial properties? - How does this compare to other communities used for benchmarking purposes? - How many folios are above or below the average? - How is the market value distributed? Revised Roll Received in late March or early April. The revised roll is used for calculating the tax levy. No change is made to the Plan unless the variance in tax revenue is material. (A material variance is one that would affect other components in the Plan). The initial assessment forecast used in the 2018 budget is prepared by staff based on historical trends and conservative increases. Based on this forecast, the increase to tax revenue (based on the tax rates mentioned above) is estimated at about $197K. Revenue Disclosure Requirements Policy The Revenue Disclosure Requirements Policy attached to the Financial Plan is the primary document that sets out the main sources for funding the budget (attached). The Policy outlines the sources of revenue, speaks to the integration of funding sources and recognizes that Council s decision making authority is limited in some areas. The City s main sources of funding include: a) Municipal property taxes b) Grants in lieu of taxes c) User fees and charges d) Government transfers e) Utility fees and charges f) Return on investment g) Other revenues Integration - Annual estimates for one revenue category are affected by changes in all other sources and therefore an integrated approach to setting property taxes and user fees is used. Page 11 of 44

12 Report No re: 2018 Budget Timeline and Assumptions Page 5 of 14 Control Council recognizes that some revenue items are set by third party authorities and are beyond their decision making authority. Examples of these types of revenue sources include the Peace River Agreement allocation, other provincial and/or federal government transfers, grants in lieu, 1% utility taxes, franchise revenues and gaming revenues. Municipal Property Taxes - Tax Rates Municipal property taxes will not be set arbitrarily but will be recommended to the public after the following factors are considered: Dollar increase/decrease by class. Dollar increase/decrease in total. Affordability of increase. Historical trends and changes. Use of averages. Responsiveness to economic conditions. Equity among classes. Target ratio between commercial and residential rates <=3:1. Fees and Charges Fees and Charges $3.4M Revenues from fees and charges are established within the guidelines of the Revenue Disclosure Requirements Policy. They are established by bylaw and are imposed for some services and not for others. As well, subsidy levels vary depending on the service area. Presently, service areas that are covered 100% by user fees include the water and sewer utility funds, waste services; and building inspection and bylaw enforcement that are covered by business license and building inspection fees. Recreational fees and charges or subsidy levels related to those services will be set in accordance with the User Fees and Charges Policy for Publicly Provided Parks and Recreation Services. Utility fees and charges $9.7M Utility rates are set by bylaw to ensure funding is sufficient to cover service delivery, debt servicing and provide for reserves to fund capital investment. Sewer infrastructure rates were increased on January 1, 2017 to support long term capital investment. Waste Services ($706K) - The contract with Canadian Waste Corporation was renewed in April 2015 for five years with the new cart service delivery model. User fees will be reviewed during the budget process to ensure they are sufficient to cover the new contract costs. In addition, there is an operating reserve of approximately $272K available to cover short term deficits. During the 2017 budget process staff recommended a fee increase for this service area to compensate for the projected annual deficit. Council chose instead to use the operating reserve to fund the 2017 projected deficit. Based on 2017 actuals to date the yearend deficit is forecasted to be $94,802 compared to the budgeted deficit of $108,986. This will leave approximately $162,757 to cover any deficit in 2018 if Council chooses to defer any fee increase for another year. BC Transit ($144K) - BC Transit carried out a service review in 2017 which identified a 3.9% Page 12 of 44

13 Report No re: 2018 Budget Timeline and Assumptions Page 6 of 14 increase in transit costs that are not offset by increases in revenue. Revenue projections from the review indicate an estimated $104K of revenue for The report suggested that increasing rider fees could help recover some of the operating costs. If current trends continue with no increase to rider fees, the per-rider subsidy paid by the tax payer must increase to maintain current service levels. Government Transfers Government transfers are considered to be general revenue unless a specific restriction is inherent in the agreement. The 2018 Plan includes an estimate for government transfers of $16.5M ($14.5M) Peace River Agreement funding and $2M in other grants. o Funding from the Peace River agreement is the largest government transfer the City receives and any change in use is determined by Council. The 2018 preliminary estimate is $14.5M. The total amount forecast to be received by the region for 2018 is set at $50M, the same as in 2016 and The actual amount Dawson Creek will receive in 2018 is dependent on population increases in each municipality as well as in boundary assessment increases for classes 2, 4 and 5. Any budget change cannot be confirmed until the middle of February after the PRRD completes the formula adjustments. o City staff has been working with Ministry staff through the Partnership Committee to develop a reporting template that meets the terms of the new agreement and the reporting conditions of the Comptroller General s office. These provincial reports need to align to what has already been decided by Council. This becomes somewhat complicated because the Province and the Municipality have different fiscal year ends. The Province wants the Long Term Development Plan (LTDP) and Annual Development Plan (ADP) reporting information prior to approval of the City s five year plan. The complexity of integrating different funding allocations into provincial spending reporting has jumped significantly. For this reason, staff is asking Council to approve the Annual Development Plan submission before it goes to the Province. This will ensure that staff is reporting the same information to both Council and the Province. These forms are a revised version of what was originally sent to the Province in October 2015 and January A summary table is shown: Operations and Maintenance $5,558,639 $5,600,000 $5,600,000 $5,712,000 Capital 8,337,958 8,400,000 8,400,000 8,568,000 Total 13,896,597 14,000,000 14,000,000 14,280,000 Operations/Capital split 40/60 40/60 40/60 40/60 o Staff is requesting that the above five year operational/capital split be used going Page 13 of 44

14 Report No re: 2018 Budget Timeline and Assumptions Page 7 of 14 forward and that this long term use plan replace the old formula that was based on the 2011 amount of $5,903,829 with any increase applied to capital. The Plan is very similar in nature but simpler to understand and administer. Further, the use allocations for operations goes to policing, fire and transportation with the premise that funding for basic public safety and transportation is needed to support quality of life to attract workers and support investment growth (both being objectives outlined in the new Peace River Agreement). The capital allocation on the other hand is used to pay for debt servicing (general fund only - net of other funding such as local area service payments) and current capital projects. This allocation to capital is consistent with Council s previous definition of capital and can also be considered an application to the infrastructure deficit. If funding was available at the time of build, the debt would not have been incurred. As the debt payments expire the allocation can be moved to current capital and/or funding depreciation. The other anomaly that has to be considered is the use of community works gas tax funding. Again, staff is required to report out on the use of this government funding. There are several categories that this funding can be used for, but most are capital and because it is collected through the general fund, it must be integrated into the big picture of operational vs capital allocation. In summary, what is reported out to Council must be the same as reported out to the Province and both reports must meet the overriding conditions of both governing bodies. o Applying the integration framework mentioned earlier into the annual plan will sometimes result in contradictions. As operational revenues flat line and/or fall and operational costs increase, a gap is created that requires attention to keep a balanced budget. Interim measures such as raising taxes, decreasing service costs and/or adjusting the capital plan are all sound approaches to filling the shortfall. Re-allocating Peace River Agreement funding from capital to operations and not addressing current capital priorities will, however, bring the fiscal gap issue into the picture sooner rather than later. For this reason, staff is recommending that the capital plan be prepared as a basket of priority projects, with any surplus from the Peace River Agreement put into capital reserve and that any operating budget shortfall be addressed by modest tax increases combined with modest targeted service cuts. If contradictions still result, staff will report out recommendations to address them. Other government transfers are estimated at $2,004,126 and include provincial transfers, federal transfers and regional transfers related to shared service agreements. Government transfers with specific service allocations are as follows: Small Communities Grant ($348K) presently allocated to general government services. Traffic Fine Revenue Grant ($181K) presently allocated to offset policing costs, including the victim services program. Community Works Gas Tax Grant ($567K) presently allocated to capital sidewalk projects. Page 14 of 44

15 Report No re: 2018 Budget Timeline and Assumptions Page 8 of 14 Future funding arrangements between the PRRD and the City are in progress. Other Revenues Gaming revenues ($561K) - are presently allocated to community grants and other not for profit contracts. Pacific Northern Gas (PNG) Ltd. Franchise Fees ($178.5K) - this revenue source has been declining over the past number of years due to the falling price of natural gas which forms the basis of the franchise fee. There is no specific allocation attached to this revenue source. Interest - ($74K) - this revenue source is directly linked to current interest rates which are still at historic lows and as a result we do not expect interest revenue to change from prior years. There is no specific allocation attached to this revenue source. Carry Forward Surplus Carry forward or previous year surplus is used as a source of funding in calculating the total annual funding that is needed to cover the forecasted spending. Doing so reduces the volatility impact of tax rate changes. This approach stabilizes annual fluctuations however unexpected changes to yearend surplus can negatively impact the Plan at the end of the process. Some communities allocate remaining operating surplus or budgeted carry over surplus to increase appropriated or capital reserves and do not use it as a funding source for the following year. The 2017 budgeted carry forward operating surpluses for the 2018 Plan are as follows: General Revenue fund $128,716 Water Utility fund $525,537 Sewer Utility fund $125,611 Spending and Service Provision Determining service provision and capital investment spending is determined more by Council s past decisions and commitments than by assumptions. The 2018 preliminary operating budget used an inflationary forecast of 2%, but with reductions in one time budget items the Plan s total operating budget increased from $36.6M to $37M, an increase of $400K (1.1%). Identified items that have changed significantly from the prior year s financial plan or that have a greater risk of volatility that should be considered are as follows: Group Health Benefits cost increasing Peace River Agreement funding variation Dawson Creek Tourism variation Organizational re-structuring Peace River Regional District Alternative Contribution Funding Arrangements At the April 13, 2015 Policy Meeting, Council repealed the City Services Policy with the direction that Page 15 of 44

16 Report No re: 2018 Budget Timeline and Assumptions Page 9 of 14 it be re-evaluated within the Fiscal Gap discussions. The need for a new policy was discussed at the September 7, 2016 Fiscal Gap meeting but not finalized. Council directed staff to bring back a statement of concern and to defer doing any work related to defining a services inventory until after the Official Community Plan review was completed. Until such time that a defined city services inventory list is created, staff will continue to prepare the budget in a manner that funds the existing services included in the 2016 Plan. Refer to Report September 7, 2016 Special Meeting of Council Fiscal Gap for further information on this topic. Regardless of how the spending is categorized the amount that is spent in each area will be determined based on the cost of contracts, labour, supplies and maintaining the infrastructure that support each service area. The main premise is that City staff put forward their best estimates for costing so that quality service is provided at the most efficient price. The amount that City Council decides to spend annually on service provision and capital investment, of course, is limited by the funding resources that are available. The assumptions used in setting resourcing limitations have already been described. As mentioned above, the preliminary resource allocations and spending amounts will of course change as decisions made throughout 2017 are costed into the 2018 Plan. Council can reprioritize both funding and spending throughout the process. Additional factors affecting the updated 2018 Plan are described below: External Drivers Some of the external drivers affecting the Plan for 2018 are as follows: CPI - The consumer price index measures inflationary effects. The BC CPI from August 2016 to August 2017 is 2.0% compared to the Canadian CPI of 1.4% for the same time period. The inflationary increase used to estimate the 2018 Plan was also 2% therefore as long as inflation is stable the Plan should only need to be adjusted for local inflation and new contracts, agreements and ongoing decisions of Council. Economy and Market Forces - Dawson Creek s economy has been affected by the downturn of the oil and gas industry; however, there are many projects and activities underway. Additionally, planned investment in the near future by some of the major companies may also affect short term results. Currently the local economy has made a recovery from the prior year s slowdown but with increased economic activity comes added pressure from local contractors on their bid pricing. Monitoring the external environment will be necessary to ensure a flexible and resilient plan going forward. Job Market - Recruitment and retention in the past three years has experienced higher than average pressure. This pressure has dissipated somewhat depending on the position required. The City has implemented a succession plan to reduce risk in this area and is restructuring to allocate resources to areas of higher risk. Development Trends and Growth - Development statistics suggest that although the global and Canadian economies have slowed, Dawson Creek is still showing positive progress as highlighted in Page 16 of 44

17 Report No re: 2018 Budget Timeline and Assumptions Page 10 of 14 the statistics reported out in the Development Services department Committee of the Whole report for September. In 2017, 151 new business licences were issued with 13 new ones in the oilfield industry (In 2016, 155 new business licences were issued with 3 in the oilfield industry). Building permits are down with $19.9M in 2017, compared to $37.4M in Additionally, 12 new dwellings were added in 2017, compared to 8 in In summary, these statistics suggest that although activity has slowed it has not stopped. Internal Drivers Some of the internal drivers affecting 2018 spending are as follows: Contracts and Agreements - Based on the City s agreement list, 22 agreements will need to be updated in 2018, compared to 39 in Staff Resourcing - The City is currently working towards a centralized HR department to relieve senior managers with the responsibility for staff recruitment and replacement while providing uniform and consistent HR services to all current and future staff. As mentioned previously, staff resourcing has been a challenge in the past year as new employees are coming on board and long term employees are retiring. Changing staff resource structures is often difficult for any organization; however, resource alignment to Council s strategic plan is critical in moving the organization forward effectively. CUPE contract The CUPE contract was renegotiated in 2016 resulting in a four year contract with a 1.75% increase for 2016 and 2017 and a 2% increase for 2018 and IAFF (International Association of Firefighters) union contract The IAFF contract was renegotiated in 2016 resulting in a four year contract with an annual 2.5% increase. There is a delay in the ratification of wage rates of the local IAFF agreement because the local agreement wages are directly linked to those of Vancouver IAFF Local 18 agreement which was not ratified until February This adoption of Local 18 wage rates is common practice across the province. Management and Exempt salaries the compensation review was completed and approved by Council on October 17, The 2018 Plan will need to be adjusted for the recommended changes and other staffing changes that have occurred in the past year. RCMP and Firefighters - Public safety, including policing and the fire department, are two of the City s most important and largest budget areas. Funding for staff increases were allocated prior to Requests from both departments for additional staff in 2014 were denied. Presently, policing resources are budgeted at 25 members, however the detachment continues to deal with vacancy issues and has yet to operate at its approved capacity. For 2018, each member costs out at $174,850 compared to $174,580 in 2017 (The City pays 70% or $122,206 per member resulting in a total increase of $167,830). Additional increases for overtime and training are estimated at $45K. If there is a request for additional members from the Staff Sergeant, it will be included in the budget process. The Fire Department has resources for a dispatcher and four shifts, two on and two off at all times. Funding to these levels was approved prior to 2014 and was in response to safety regulations and Page 17 of 44

18 Report No re: 2018 Budget Timeline and Assumptions Page 11 of 14 increased overtime costs. There are no expected changes to staffing levels within the Fire Department for The City and the Regional District are currently looking at funding options to support the new training facility that was completed in Councillor Remuneration - Mayor and Council remuneration is set by policy. The policy was amended October 1, 2012 to automatically increase by the BC CPI change each September. The current policy will be adjusted by 1.8%, increasing the Mayor s salary from $58,306 to $59,356 and a Councillor s remuneration from $17,918 to $18,241 for 2018 for a total increase of $2,985, pending any change from the current review. Community Grants and other Not for Profit Group payments The Draft Plan holds the community grants budget at $25,000. The City grants policy was repealed on August 22, 2016 and staff is in the process of integrating it into the City s User Fees and Charges for Publicly Provided Recreation Services Policy. Not for profit groups requesting subsidy during the review period can ask for subsidy directly from Council through the delegation process. Not for profit groups receiving subsidy without long term contracts include the following: South Peace Community Resource Society - Victim Services Program - $34,568 Step Up and Ride - Transportation Subsidy for Mobility Impaired Persons - $25,500 Kiwanis Band - Promotion of Dawson Creek - $5,100 South Peace Arts Council - Promotion of the Arts - $15,300 Dawson Creek Exhibition Association - Budget of $112,962 Kiwanis Club - Annual Home and Garden Show - rent subsidy - $7,000 South Peace Historical Society - Rent Subsidy and archivist support - $66,000 These subsidies are included in the 2018 Plan and will be funded through the transition period related to the Fee For Service Policy change unless otherwise directed by Council. Debt Servicing Assumptions related to debt borrowing and debt servicing follow the guidelines of the Debt Management Policy (Reaffirmed June 15, 2015). Debt servicing costs for 2018 are primarily fixed. Past decisions related to loan authorizations have already been made. The estimate for 2018 debt servicing is $4,028,948 (a decrease of $291K from 2017). An updated forecast will be provided during the budget process. Equipment Pool Charges The 2017 Plan includes $2.1M in equipment pool charges and this amount is expected to increase as new equipment replaces old units. Some cost savings will be realized through lower maintenance charges, however this will be replaced with a higher replacement charge as pricing for new units continue to rise Capital Plan Preparing the 2018 Proposed Capital Plan begins with using the amounts in the 2017 five year capital Page 18 of 44

19 Report No re: 2018 Budget Timeline and Assumptions Page 12 of 14 plan. Based on this process, the Plan starts out with capital spending of $8,069,000 funded mainly by transfers as follows: Operating funds - $7.3M - General revenue fund $4.0M - Water utility fund $1.3M - Sewer utility fund $2.0M Assumptions related to the capital plan include: allocating resources to 2017 unfinished projects if necessary; allocating resources to new projects prioritized by Council; reprioritizing the original 2018 projects so that resources are allocated to maintaining infrastructure in areas of greatest need (public safety, keeping up with regulatory requirements, technological advances, and replacement due to rising maintenance costs) and/or commitments to which governments grants have already been approved for; and allocating resources to reserves in the utility funds for future capital upgrades. The preliminary capital plan of $8.1M includes $420K in equipment pool additions, $2.6M in building upgrades, $3.9M in road, sidewalk, streetlight and storm upgrades and $1.12M in utility infrastructure upgrades. Carry forward projects, including those that were flood related and other projects approved during 2017, will be incorporated into the new plan. An updated capital plan will be provided during the budget process. Conclusion In summary, there are many financial assumptions and decisions that affect the Financial Plan. The first stage of the process is for Council to confirm the methodology used to prepare the 2018 Plan, approve the budget timeline and public consultation process and approve updating new information in a manner that produces a 2018 balanced budget, followed by completing a long term plan that includes forecasts for all funds included in the Five Year Plan prior to May 15, Estimates change throughout the process as new information is received. The main underlying principles and policies do not change unless directed by Council. Council as the governing body decides how much and where to spend and allocate City resources for the community; funding resources available must cover those decisions. Staff s responsibility is to prepare a balanced Plan that supports that direction. None of the assumptions are fixed determinations. Council makes the final decision when they adopt the 2018 budget prior to May 15, 2018 after considering the implications of the various assumptions put forward and frequently after making many changes to these preliminary directives. ALTERNATIVES 1. Council can direct staff to change any of the assumptions and/or other information throughout the budget process. Page 19 of 44

20 Report No re: 2018 Budget Timeline and Assumptions Page 13 of 14 IMPLICATIONS (1) Social The five year plan uses the principles of trust and integrity, inclusivity, creativity, health and lifestyle in addressing the social needs of the community with the overall goal of promoting Quality of Life. (2) Environmental The five year plan includes principles for demonstrating respect for the future of the earth by promoting recycling and using renewable energy strategies as well as committing resources to the preservation of clean air, water and healthy land. (3) Personnel The five year plan includes resourcing for the people and partner organizations that carry out City services. (4) Financial The five year plan is prepared to ensure that there are sufficient resources to cover spending in the short term as well as the long term. (5) Risk Assessment Compliance: Best Practices. Risk Impact: Low. Internal Control Process: Providing Council with the Budget Assumptions, Timeline and Public Consultation Plan for discussion and approval early in the process improves planning and clarifies direction. The final Budget document provides authority for City spending within the legislated requirements of the Community Charter. GUIDING PRINCIPLES The City s Vision, Mission and Guiding Principles provide the underlying values used in preparing the City s 2018 Financial Plan. STRATEGIC PRIORITIES Council s Strategic Plan is used to provide focus and direction in preparing the City s 2018 Financial Plan. IMPLEMENTATION/COMMUNICATION The 2018 Plan is a rolling document; staff will continue to make revisions as directed by Council. RECOMMENDATION That Report No from the Chief Financial Officer re: 2018 Budget Assumptions, Timeline and Public Consultation Process Report be received for information and discussion and further, that the following recommendations be approved as presented below: Page 20 of 44

21 Report No re: 2018 Budget Timeline and Assumptions Page 14 of 14 That the 2018 Budget Timeline be approved as presented. That the 2018 public consultation process follows prior years modernized method to use the City s website and other online platforms to provide budget information to a wider demographic and further that if contentious issues arise during the process that Council agrees to host two face to face town hall meetings to gather feedback from the public. That the 2018 Financial Plan be based on the principles and values included in the City s Vision, Mission and Guiding Principle documents, Council s Strategic Planning document and other bylaw and policy documents. That the list of City services funded in 2017 will form the basis for the 2018 budget absent a new City Services policy. That the methodology used in preparing the 2018 Financial Plan will be based on an integrated and long term approach to setting tax rates, fees and charges and service provision. That any funding gap created in the current operations budget from rising service and program costs and lower than forecasted operating revenues be funded by a combination of tax rate increases, and/or targeted service reductions and/or reductions to the 2018 capital plan. That the Long Term Development Plan as presented be used as the City s guide to Peace River Agreement funding use. Respectfully submitted, ORIGINAL SIGNED BY APPROVED FOR AGENDA BY CAO Adam Langenmaier, CPA, CA, BBA Chief Financial Officer AL/eg Attachments: Budget Timeline Vison Mission Guiding Principles Strategic Plan Revenue Disclosure Policy Page 21 of 44

22 2018 Budget Timeline October Budget worksheets distributed to all senior managers for updated information 23 Council to discuss and approve the 2018 budget timeline and assumptions November 15 Senior Managers to have operating budget changes submitted to Finance 20 Council receives the updated BC Assessment preview assessment roll report 30 Senior Managers to have capital budget changes submitted to Finance December Updated information is consolidated and analyzed for the the 2018 Draft 1 Consolidated Budget Report January 8 Council receives the updated BC Assessment completed assessment roll report 22 Finance to confirm preliminary carry forward surplus and reserve balances available for 2018 budget Finance to distribute draft consolidated budget amounts to Senior Managers for review February 5 Council's First Budget Meeting (2018 Annual Plan - Draft 1) - Council Chambers - (1:00 PM) Discuss proposed tax rates and operations budget 26 Council's Second Budget Meeting (Draft 2 Changes) - Council Chambers - (1:00 PM) Complete operations budget, review and discuss capital budget projects March 12 Public Consultation Session - Council Chambers - Monday (1:00 PM) 31 Staff receives the BC Assessment Revised assessment roll report to calculate the tax levy April 16 Council's Third Budget Meeting (Five Year Plan) - Council Chambers - (1:00 PM) 30 Draft Financial Statements presented for approval 30 Tax rate information received from other tax authorities for tax rate bylaw 30 Auditor Presentation on Draft/Approved Financial Statements May * 2 Council to approve first three readings for the Financial Plan and Tax Rate Bylaws Draft/Approval of Audited Financial Statements * 4 Council to adopt the Financial Plan and Tax Rate Bylaws Auditor Presentation on Approved Audited Financial Statements 15 Legislative deadline for Financial Plan and Tax Rate Bylaw *Special Meeting **Spring Break March C:\Users\Shall.CITYDC\Desktop\Copy of Budget Process Timeline - Internal Instruction Document Page 22 of 44

23 Dawson Creek will be a visionary community that works together for innovative social, cultural, economic and environmental vitality. The Corporation of the City of Dawson Creek will be a forward looking, honest, respectful, fair, accessible and collaborative government that prides itself on responsive fiscal stewardship and holds the trust and confidence of the community. The Corporate Mission of the City of Dawson Creek is to provide excellence in service and leadership that promotes a dynamic community within a healthy environment for all generations. We will have a reputation for acting with integrity and will earn the trust of our stakeholders by: Keeping promises. Pledging to align our actions with the guiding principles that support our vision. Modeling competence and anchoring behaviour on enduring values. Communicating with care and respect. Working to develop positive relationships. Sharing information in timely and comprehensive ways. We will create an invitational climate by: Ensuring all individuals have equal access to services and opportunities for success. Seeking ways to reflect and celebrate the diversity of our community and ensuring physical accessibility. Engaging people in issues that directly affect them. Maintaining and strengthening our links to the First Nations, Aboriginal and Metis populations. Making literacy concerns a core component of communication strategies. We will strengthen the community s economic vitality by: Establishing a climate that encourages responsible economic development. Honouring small and big business partnerships and contributions. Focusing on and promoting the opportunities for economic development that are inherent in our community and region. Encouraging projects that serve the local community and enhance regional self sufficiency in areas such as power, general supply, and food. We will nurture engagement in a collective sense of belonging and contribution by: Celebrating arts, heritage and culture. Creating recreational opportunities. Providing opportunities for life-long learning. Optimizing transportation and movement around the city. Working to reduce crime rates and opportunities for crime in our community. We will foster a culture of creativity, innovation, and learning by: Encouraging cooperative and collaborative thinking. Employing open dialogue and wide input into decision making and planning. Supporting risk taking and challenging conventional practices. Including learning opportunities in all actions. We will optimize opportunities for healthy living by: Developing an environment free from undue risk. Providing opportunities to enhance physical, emotional, and spiritual well-being. Enhancing the cleanliness and aesthetic appearance of our community. Promoting physical activity. We will strive to make decisions that reflect the needs and desires of our community by: Providing opportunities for engaged, active citizens to help create and participate in developing solutions for pressing issues. Encouraging a wide range of agencies and citizens to take a meaningful role in decision-making. We will achieve excellence in all our endeavours by: Incorporating principles of excellence in all our actions. Developing shared goals to serve the long term interests of the community. Establishing appropriate measures of success and being accountable for the level of achievement of shared goals. We will demonstrate respect for the future of the earth by: Fostering recycling, reuse and reduced consumption. Promoting, demonstrating and using renewable energy. Advocating for the preservation of clean air, clean water and healthy land. Page 23 of 44

24 City of Dawson Creek Strategic Plan Corporate Vision: The Corporation of the City of Dawson Creek will be a forward looking, honest, respectful, fair, accessible and collaborative government that prides itself on responsive fiscal stewardship and holds the trust and confidence of the community. Focus Area: Fiscal Responsibility and Sustainability Quality Sustainable Infrastructure Community Development and Quality of Life Vibrant and Diversified Economy Organizational Capacity 2015 Actions A. Fiscal Responsibility and Sustainability Council adopt a Corporate Vision reflecting their strategic focus Council develop a clear statement of purpose for the Fiscal Gap Initiative Council develop core values/guarding principles for the Fiscal Gap Initiative Council establish targets for buy-in by internal and external stakeholders for the Fiscal Gap Initiative Council review in detail the City Services Policy Council pursue an extension to the Fair Share M.O.U. Staff develop for Council and the Community educational materials relative to the Fiscal Gap Initiative B. Quality Sustainable Infrastructure Staff continue the Tangible Capital Assets project Council review and approve Phase II of the Tangible Capital Assets Management Plan C. Community Development and Quality of Life Staff provide a process map, timeline and budget for a review/update of the Official Community Plan in 2016 D. Vibrant and Diversified Economy Council review current commitments for the Tourism Sector Council review the contract with Global Entertainment Staff provide Council detail regarding current economic development efforts of the City Council consider establishing a position to oversee economic development (EDO) for the 2016 budget year E. Organizational Capacity No action in 2015 Staff develop an organizational needs assessment coupled with a retention and succession plan in 2016 Page 24 of 44

25 Policy Finance REVENUE DISCLOSURE REQUIREMENTS The Council of the City of Dawson Creek directs that: Total Revenues Council recognizes that changes in one revenue source may affect decisions relating to other sources and that City revenues are derived from the following sources: 1) Municipal property taxes 2) Grants in lieu of taxes 3) User fees and charges 4) Government transfers 5) Utility fees and charges 6) Return on investments 7) Other revenues Municipal Property taxes Council will approve Municipal property tax rates annually by considering changes in the assessment base, inflationary factors and economic conditions and costs of providing ongoing and new City services. Grants in lieu of taxes Grants in lieu of taxes will be determined in accordance with the applicable Statutes and Acts regulating these revenues. Parcel taxes Parcel taxes will be levied in accordance with the Community Charter if and when a service is established that requires this type of tax to be imposed. User fees and charges Authority to impose various fees and charges will be in accordance with regulations under the Community Charter and any other regulating Acts. A comprehensive review of the City s fees and charges will be completed every three years to ensure the City s objectives are being addressed. Government transfers The City will ensure that all government transfers are used in accordance with the terms and conditions attached to the funding and that all reporting requirements are met. Unconditional government transfers will be considered as general revenue in the financial plan. Page 25 of 44

26 Policy Finance Utility fees and charges Utility fees and charges will be levied at rates that will be sufficient to meet service delivery costs and debt servicing within the utility funds. Return on investments Return on investment revenue will be considered general revenue. Investment revenue generated from restricted reserves will remain within the specified reserve. Other revenues Other revenues including franchise fee and gaming revenue will be considered as general revenue in the financial plan and any restriction placed on these revenues will be determined annually. Borrowing proceeds Proceeds from borrowing will be used within the guidelines of the bylaw established to borrow the funds. The maximum amount of accumulated borrowings will be in accordance with the regulations outlined in the Community Charter and the City s Debt Management Policy. Distribution of property taxes among the property classes Annually, before approving the annual tax rates, Council will consider the amount of tax revenue required in relation to other sources of revenue in funding the cost of ongoing and new City services. Tax revenue and ratios between classes will be reviewed with consideration given to changes in the assessment base as a whole as well as changes to the components that make up the base. Permissive tax exemptions Permissive tax exemptions will be provided in accordance with the guidelines and regulations contained in the Community Charter. The objectives and policies as stated above are put forward and are broad in nature to assist Council in their decision making process. Rate capping and ratio limitations on property tax were intentionally excluded so as not to restrict Council s ability to make future decisions. The assessment base, components of the base, priority and provision of services, as well as the various components of total revenues are all factors that are interrelated. Setting the annual tax rates after due consideration is given to each of these factors will ensure the process generates the best result. APPROVED BY COUNCIL: DATE: February 4, 2008 AMENDED BY COUNCIL: DATE: May 7, 2012 Page 26 of 44

27 REPORT TO COUNCIL DATE: November 20, 2017 REPORT NO.: SUBMITTED BY: SUBJECT: Adam Langenmaier, CPA, CA, BBA Chief Financial Officer 2018 Preview Assessment Roll FILE NO.: PURPOSE To provide Council with information regarding the 2018 Preview Assessment Roll. SUMMARY/BACKGROUND Staff received the 2018 Preview Assessment Roll on November 2, The following is an analytical narrative of the changes that have occurred and the possible results of the changes Assessment Preview vs 2017 Revised Assessment CLASS 2017 REVISED ASSESSMENT 2018 PREVIEW ASSESSMENT VARIANCE % CHANGE Residential $1,222,834,800 $1,224,385,600 $1,550, % Utilities 1,587,800 1,587, % Major Industrial 20,755,000 21,876,000 1,121, % Light Industrial 12,587,700 14,019,900 1,432, % Business 470,607, ,016,954 (15,590,217) (3.31%) Seasonal 676, ,800 (38,800) (5.73%) Farm 263, ,689 2, % TOTAL $1,729,312,648 $1,717,789,883 $(11,522,765) (0.68%) The City showed small increases in residential ($1.5M), major industry ($1.1M) and light industry ($1.4M) property classes; however, these increases were offset by the relatively significant decrease in the business property class ($15.6M). The overall assessment change from 2017 to the 2018 preview is a decrease of $11.5M (0.68%). The decrease in value of the business class properties can be attributed to a reduction in folios and a decrease in the average value of a folio. Total business folios have decreased to 973 from 981 in 2017; this is a decrease of 14. Furthermore, the average value of business class properties have decreased to $467K from $477K in The total residential folio has increased by 17 units to 4,709 from 4,692 in This increase has led to the increase in the residential assessment; however, existing properties did not see an increase in Page 27 of 44