OPERATING OVERVIEW
Table of Contents 2018-2020 Budget Summary OPER-3 Residential Tax Bill Information Municipal Price Index (MPI) Corporate Overview Departmental Breakdown Revenue Breakdown Expense Breakdown Staff Changes Reserves and Reserve Funds Full Accrual Budgeting OPER-4 OPER-5 OPER-6 OPER-7 OPER-8 OPER-10 OPER-11 OPER-12 OPER-19 Operating - 2
2018-2020 Budget Summary The 2018 Operating Budget calls for an increase in the property tax levy of $16.5 million over 2017. The Base Operating and Growth portion of the budget consists of delivering today s services to existing and new residents for 2018-2020. The 2018 Base Operating and Growth budget proposes a reduction of $3.1 million, which was achieved through a concerted effort to modernize the corporation, maximize the use of existing resources, become more business-like and realign how the City works. Examples of improved efficiencies include a new e-procurement process, winter maintenance service improvements, increased recreation service access, as well as a new site plan review process and 311 customer service integration. BUDGET VARIANCES ($000s) CATEGORY 2018 2019 2020 Base Operating & Growth (3,094) 1,856 6,889 Infrastructure Levy 8,961 9,112 9,424 New or Enhanced Services 10,667 13,652 5,537 PROPERTY TAX LEVY INCREASE $16,534 $24,619 $21,850 New or Enhanced Services for 2018 require $10.7 million dedicated to Transit, Fire, Library and Enforcement. These service increases are focused on adding value to the quality of life in our community. The Infrastructure Levy increase of $9.0 million in 2018 is required to maintain our existing assets and in line with the City s Long Term Financial Plan, which was endorsed by Council in 2017. Assessment Growth of $11.5 million and Revenue Growth of $18.2 million are included in the 2018 Operating budget and result in reducing the overall budget increase of $46.1 million. Operating - 3
Residential Tax Bill Information RESIDENTIAL TAX BILL IMPACT The City of Brampton is a two-tier municipality, where the resident receives one tax bill to cover the total cost of services provided by the City, the Region and School Boards. Therefore, to calculate the annual change to the residential property tax bill, all three components must be considered. The City of Brampton s proposed 2018 tax levy increase of $16.5 million translates into an increase of $80 per year or 1.7% on the average residential property tax bill. The Region of Peel s 2018 tax levy increase is estimated to have a 1.0% impact on the overall property tax bill. This impact equates to $46 per year on the average residential property tax bill. The School Board component of the residential property tax bill is estimated to have no change for 2018. The average residential tax bill in the City of Brampton will increase by approximately $126 in 2018, based on the average residential assessment of $471,000. TOTAL TAX BILL IMPACT - WEIGHTED 2018 2019 2020 % $ % $ % $ City of Brampton 1.7% $80 2.5% $130 2.2% $116 Region of Peel 1.0% $46 1.3% $69 1.1% $60 Education 0.0% - 0.0% - 0.0% - Residential Tax Bill Increase 2.7% $126 3.9% $199 3.3% $176 * Based on the 2018 Average Residential Assessment = $471,000 ** Amounts and percentages may not add to totals due to rounding Property Tax Levy Increase $16,534 Add: Assessment Growth 11,450 Revenue Growth 18,157 2018 Net Budget Variance ($000s) $46,141 Operating - 4
Municipal Price Index (MPI) The City of Brampton s Municipal Price Index (MPI) is calculated annually and is designed to measure the increases in prices of goods and services purchased by the municipality. The MPI differs from other indices such as the Consumer Price Index (CPI) in that it is constructed based on purchasing patterns of the City rather than consumers. The MPI is a weighted aggregate of prices which means that the price or wage increases are weighted by the relative importance that each represents in the City budget. Component Weight Inflation Factor Source Salaries, Wages, and 2017 Mercer Compensation Survey/Globe and 55.6% 2.4% Benefits Mail Outside Services 6.8% 1.6% Statistics Canada - April 2017 (CPI) Capital Contributions 8.0% 2.4% 2017 Non-Residential Building Construction Index - 1st Quarter Heat, Hydro, and Water 2.9% 3.9% Statistics Canada - April 2017 Internal Borrowing 1.9% 2.4% 2017 Non-Residential Building Construction Index - 1st Quarter Brampton Library 2.2% 1.6% Statistics Canada - April 2017 (CPI) Fuel 2.5% 15.9% Statistics Canada - April 2017 Office Expenses 2.2% 1.6% Statistics Canada - April 2017 (CPI) Winter Contracts 2.0% 6.6% Statistics Canada - April 2017 Insurance 1.7% 3.5% Statistics Canada - April 2017 Materials 1.2% 1.6% Statistics Canada - April 2017 (CPI) Preventative and Demand Maintenance 0.9% 1.6% Statistics Canada - April 2017 (CPI) Vehicle Repairs and Maintenance 1.1% 1.7% Statistics Canada - April 2017 Promotion and Advertising 0.6% 1.6% Statistics Canada - April 2017 (CPI) Professional Services 0.5% 1.6% Statistics Canada - April 2017 (CPI) Rent 1.5% 0.6% Statistics Canada - April 2017 Equipment Costs 0.3% -0.5% Statistics Canada - April 2017 Communications 0.3% 0.4% Statistics Canada - April 2017 Staff Development 0.2% 1.6% Statistics Canada - April 2017 (CPI) Uniform and Cleaning 0.3% -2.0% Statistics Canada - April 2017 Mileage 0.1% 0.0% CRA Rates (2017 over 2016) Vehicle Lease 0.1% -3.1% Statistics Canada - April 2017 Non Inflationary Items 7.2% 0.0% N/A 100% Municipal Price Index 2.5% Operating - 5
Corporate Overview 2018 2019 2020 ($000s) % ($000s) % ($000s) % Base Operating and Growth (3,094) -0.7% 1,856 0.4% 6,889 1.5% A) Base (Excluding External Uncontrollable) (5,712) -1.3% (829) -0.2% 4,973 1.1% Compensation Adjustments / Provisions 9,859 2.2% 10,064 2.2% 10,494 2.2% New Staff Requests 525 0.1% 3,812 0.8% 2,582 0.5% Road and Traffic Infrastructure Maintenance 1,231 0.3% 1,197 0.3% 1,277 0.3% I.T. Maintenance and Support 1,442 0.3% 981 0.2% 219 0.0% I.T. Operating Impacts - New Systems 303 0.1% 456 0.1% Security Contract Renewal 1,290 0.3% 345 0.1% 106 0.0% Sub-Division Admin Fees 479 0.1% Transformation Savings (832) -0.2% Transit Conventional Service Increase 1,596 0.4% 1,225 0.3% 1,727 0.4% Transit Ridership Revenue Increase (7,500) -1.7% (1,000) -0.2% (500) -0.1% Transit Fare Increase (724) -0.2% (760) -0.2% (736) -0.2% Presto Commission 909 0.2% 460 0.1% 1,360 0.3% Provincial Gas Tax (200) 0.0% (2,850) -0.6% (2,850) -0.6% Investment Income 600 0.1% 600 0.1% 600 0.1% Hospital Levy Return (1,333) -0.3% (8,500) -1.9% Assessment Growth (11,000) -2.5% (9,000) -2.0% (9,000) -1.9% East-End Community Centre 1,455 0.3% Other Variances (2,054) -0.5% 839 0.2% (761) -0.2% B) External Uncontrollable Impacts 2,619 0.6% 2,684 0.6% 1,916 0.4% Minimum Wage 802 0.2% 837 0.2% Compression 1,200 0.3% 1,200 0.3% 1,200 0.3% Diesel Fuel Cap and Trade 617 0.1% 647 0.1% 716 0.2% Infrastructure Levy 8,961 2.0% 9,112 2.0% 9,424 2.0% New or Enhanced Services 10,667 2.4% 13,652 3.0% 5,537 1.2% Zum Service Increase 4,657 1.0% 2,392 0.5% 3,467 0.7% Fire Full Response Enhancement 1,955 0.4% 2,040 0.4% 1,845 0.4% Fire Headquarters & Training Facility 3,200 0.7% Second Unit Task Force 643 0.1% Bramwest Interim Branch 212 0.0% 212 0.0% Downtown Improvements ($31.4M) 2,027 0.4% Centre for Innovation ($100M) 6,756 1.5% $5M University Contribution (Investment Income Loss) 225 0.0% 225 0.0% PROPERTY TAX LEVY INCREASE 16,534 3.7% 24,619 5.4% 21,850 4.6% Operating - 6
Departmental Breakdown The chart below illustrates the 2017 approved and 2018-2020 proposed budgets for each department. ($000s) 2017 BUDGET 2018 BUDGET Proposed 2019 BUDGET 2020 BUDGET DEPARTMENT BREAKDOWN Office of the CAO $20,465 $20,331 $20,574 $20,126 Corporate Services 53,952 57,186 58,934 59,656 Planning & Development Services 1,825 1,906 2,126 2,215 Public Works & Engineering 92,168 93,372 98,421 100,608 Community Services 60,687 61,584 64,278 66,455 Economic Development & Culture 13,013 12,631 12,641 12,649 Fire & Emergency Services 66,519 73,210 77,578 81,319 Transit 63,478 66,301 67,495 70,130 Brampton Public Library 15,612 16,781 17,667 18,711 Mayor & Members of Council 3,106 3,135 3,077 3,077 General Government (390,825) (406,437) (422,791) (434,946) Net Expenditures $0 $0 $0 $0 Operating - 7
Departmental Breakdown This chart illustrates the 2018-2020 proposed budgets variances by department for Base Operating and Growth, which for 2018, results in a reduction of $3.1 million. The Infrastructure Levy and New or Enhanced Services recommend increases of $9.0 million and $10.7 million for 2018, leading to a net property tax levy increase of $16.5 million. BUDGET VARIANCES ($000s) CATEGORY 2018 2019 2020 DEPARTMENT BREAKDOWN Office of the CAO (134) $243 (449) Corporate Services 2,483 1,749 722 Planning & Development Services 189 220 89 Public Works & Engineering 1,204 3,023 2,187 Community Services 898 2,694 2,177 Economic Development & Culture (382) 10 8 Fire & Emergency Services 1,536 2,328 1,896 Transit (1,834) (1,198) (832) Brampton Public Library 956 674 1,044 Mayor & Members of Council 29 (59) - General Government (8,039) (7,828) 46 BASE OPERATING & GROWTH (3,094) 1,856 6,889 Infrastructure Levy 8,961 9,112 9,424 OPERATING BUDGET VARIANCE $5,867 $10,967 $16,313 New or Enhanced Services 10,667 13,652 5,537 PROPERTY TAX LEVY INCREASE $16,534 $24,619 $21,850 Operating - 8
Revenue Breakdown 2018 Budgeted Revenues by Category ($000s) User Fees & Service Charges $163,245 24.1 % Investment & Other Income $15,110 2.2 % Contribution from Reserves $13,299 2.0 % Grants & Subsidies $11,347 1.7 % Property Taxes $474,984 70.1 % Operating - 9
Expense Breakdown 2018 Budgeted Expenses by Category ($000s) Category 2018 Budget $ 2018 Budget % Salary, Wages & Benefits 392,388 57.9% Contribution to Reserves & Capital 74,064 10.9% Repairs, Maintenance & Materials 42,595 6.3% Contracted Services 41,343 6.1% Utilities & Fuel 36,512 5.4% Financial Services 20,127 3.0% Grants, Subsidies & Donations 19,171 2.8% Office & Administrative 14,428 2.1% Internal Borrowing Repayments 11,302 1.7% Rent & Lease Charges 9,601 1.4% Professional Services 7,143 1.1% Advertising, Marketing & Promotion 6,074 0.9% Staff Development 3,237 0.5% Total Budgeted Expenses 677,985 100.0% Operating - 10
Staff Changes COMPLEMENT ADDS* DEPARTMENTS 2018 2019 2020 TOTAL Office of the CAO 0 2 0 2 Corporate Services 7 5 1 13 Planning & Development Services 5 6 1 12 Public Works & Engineering 0 8 0 8 Community Services 7 21 19 47 Economic Development 0 0 0 0 Brampton Public Library 6 5 6 17 Mayor and Members of Council 0 0 0 0 Fire and Emergency Services 20 28 23 71 Transit 62 35 49 146 DEPARTMENTAL TOTAL 107 110 99 316 * Includes F/T and conversions to F/T For further details on individual position requests, see Section 7 - Staff Requests. Operating - 11
Reserves and Reserve Funds Reserves and Reserve Funds are established by Council to help pay for future costs and are: Designated for specific purposes Meant to assist with long-term financial planning Reserves are earmarked to fund programs or projects and: Do not reference any specific asset Do not require segregation as in the case of a reserve fund Are often referred to as contingency or rainy day funds Are generally used towards operating expenses Example: General Rate Stabilization Reserve Reserve Funds are separate bank accounts that: Must remain segregated from general operating funds Are based on statutory requirements or future financial commitments Usually have restrictions and rules around collection and use Are of two types: obligatory and discretionary Obligatory Reserve Funds: Are created when provincial or federal statute requires that revenues are segregated from general municipal revenues Can also be created as a result of a legal agreement Examples: Development Charges Fund; Federal Gas Tax Reserve Fund Discretionary Reserve Funds: Are created when Council wishes to earmark revenue to ensure funds are available as required to finance a future expenditure Examples: Legacy Fund; Community Investment Fund; Brampton University Reserve Fund Operating - 12
Reserves and Reserve Funds Contributions to Reserves include contributions in support of current and/or future tax based capital asset repair and replacement, self-insurance deductibles, WSIB claims provisions and Municipal elections. The 2018 Operating Budget includes contributions to reserves and reserve funds (estimated) as follows: Reserve Fund # Reserve Fund Description 2017 Budget 2018 Budget Variance 3 Workplace Safety and Insurance Board $2,004 $2,087 $84 4 Asset Repair and Replacement $45,169 $53,585 $8,416 8 Self Insurance of Deductibles 4,609 4,609 0 10 Corporate Facilities 255 304 49 23 Brampton Columbarium 4 4 0 25 Municipal Elections 600 600 0 37 Official Plan Review 120 120 0 58 Theatre Capital Improvements 75 75 0 78 10% Non Development Charge 4,899 4,899 0 126 Peel Memorial Hospital 9,833 8,500 (1,333) 127 Major Maintenance Reserve Fund 634 634 0 128 Brampton Starter Company 0 375 375 134 Development Charges - Recreation 59 59 0 211 Interest Rate Stabilization Reserve 300 300 0 TOTAL ($000s) $68,561 $76,151 $7,590 Operating - 13
Reserves and Reserve Funds Reserve Descriptions Capital Contributions (Res #4, Res #10, Res #58, Res#127, Contribution to Capital) These contributions are required to support current and future tax based components of the capital program, the majority related to repair and replacement of existing City assets. For 2018, the operating budget includes a base contribution of $54.6 million. Municipal Elections (Res #25) A contribution to this Reserve Fund is made annually to spread election costs more evenly between elections. Peel Memorial Hospital (Res#126) As previously endorsed by Council on April 3, 2013, an annual tax contribution of approximately $9.8 million, commencing in 2013 and ending in 2018, was approved to support the new Peel Memorial Centre for Integrated Health and Wellness. Due to the City s prudent investment practices, the 2018 requirement has been reduced to $8.5 million. Funds will be held in a Reserve Fund until payments are due in accordance with Memorandum of Understanding between the City of Brampton and William Osler Health Services. 10% non-dc Contribution (Res #78) As the City continues to grow, the requirement to fund growth driven capital infrastructure projects has remained unabated. The growth funding from Development Charges comes with an associated tax based funding need to support the non-dc eligible portion of capital projects. Operating - 14
Reserves and Reserve Funds Draws from Reserves include required draws from Reserves to support the current year s operating functions. The 2018 Operating Budget includes draws from reserves and reserve funds (estimated) as follows: Reserve Fund # Reserve Description 2017 Budget 2018 Budget Variance Contribution from Trust Funds $36 $21 ($16) General Rate Stabilization Reserve 2,913 2,939 26 3 WSIB Fund 1,472 1,872 400 8 Self Insurance of Deductibles 3,080 3,510 430 19 Employee Benefit Rate Stabilization 350 350 0 25 Municipal Elections 63 1,800 1,737 78 10% Non Development Charge 1,015 1,015 0 89 Provincial Dedicated Gas Tax - Transit 10,682 10,882 200 93 Building Rate Stabilization 8 2,158 2,150 128 Brampton Starter Company 0 195 195 138 Development Charges - Parking 454 454 0 Legacy, Community Investment and 100/110/120 Community Development Funds 9,000 9,000 0 TOTAL ($000s) $29,073 $34,196 $5,123 Operating - 15
Reserves and Reserve Funds Reserve Descriptions Self Insurance of Deductibles (Res #8) As a result of the City s growing infrastructure base, insurance costs are also increasing (e.g. community facilities, transit fleet, etc.) Dedicated Gas Tax (Res #89) The Provincial Dedicated Gas Tax Funds for Public Transportation Program provides funding of $10.9 million in 2018. The Province has announced that this program will double between now and 2022, which will translate to over $10 million additional funding expected over the coming years. Municipal Elections (Res #25) Draw down required to offset ongoing operating costs associated with municipal election planning. Legacy Fund This reserve fund was originally established with a $100 million balance, which has been maintained. Annual interest on the balance is built into the base budget to offset tax levy needs (currently targeted at $4.5 million). Community Investment Fund This reserve fund was originally established with a $100 million balance and is almost fully committed annually. Internal loans for initiatives such as the Rose Theatre, parking garages, POA Courthouse, and administrative space have been made with a long term payback horizon. Revolving loans continue to be made as principal is repaid and funding is made available. Annual interest on the fund, including loans outstanding, is built into the base budget to offset tax levy needs (currently targeted at $4.5 million). General Rate Stabilization Reserve The remaining base budget for 2018 includes a $2.7 million provision to fund operations. The General Rate Stabilization Reserve draw is used on an annual basis to mitigate tax pressures. Operating - 16
Reserves and Reserve Funds Reserve Balance Details The City has several reserves and reserve funds, which have funding balances that change from year to year. Supplemental Details - Reserves and Reserve Fund Balances shows the preliminary year-end reserves and reserve fund balances as at September 30, 2017. Commentary is provided below for some key Reserves and Reserve Funds. Interest Rate Stabilization This reserve fund has a balance of $11.3 million. It is recommended that the balance be protected for use in mitigating any shortfalls in investment income from the Legacy Fund and Community Investment Fund. Building Rate Stabilization This reserve fund, established pursuant to Bill 124 changes in the Building Code, is available for building operations only, to offset temporary shortfalls in building permit revenue. This reserve fund has a balance of $38.1 million. General Rate Stabilization (GRS) Reserve This reserve is intended to smooth the impact on the tax base of major unforeseen or unavoidable events and one-time impacts. Council has provided direction to maintain a target in this reserve at 10% of budgeted gross annual operating expenditures, which equates to a reserve requirement of $67.8 million for 2018. The current GRS Reserve balance is $74.9 million. The 2018 Capital Budget proposed $4.8 million worth of projects funded from this reserve with further reserve draws anticipated as the City invests in large key initiatives. Development Charge (DC) Reserve Funds DC reserve funds are in a surplus position of $87.7 million. For more information on projected DCs, refer to the Development Charge Reserve Projection in the 2018-2020 Capital Budget Overview. Cash In Lieu of Parkland There was a balance in this reserve fund of $99.5 million. This fund has limited cash inflows from receipts and sizeable land acquisition costs in the short to medium term. It is therefore critical that a cash flow strategy be considered as part of the long term funding plan. Operating - 17
Reserves and Reserve Funds Reserve Balance Details Legacy, Community Investment, and Community Development Reserve Funds The balance in these reserve funds are Legacy ($100 million), Community Investment ($24.6 million), and Community Development ($0) respectively. The Legacy Fund has generated more than $79.4 million in interest revenue since the inception of the fund. Of this, over $62.7 million has been transferred to the Operating Budget during that time, which has offset tax levy requirements and the balance has been transferred to the Interest Rate Stabilization reserve Fund. The Community Investment Fund has outstanding internal loans of $84.9 million committed against this fund for initiatives such as the Rose Theatre, Provincial Offences Act Courthouse and public works yards. Annual interest of $4.5 million on the fund has also been built into the base budget to offset tax levy needs. The remaining uncommitted balance plus annual principal repayments are forecasted to be allocated to internal financing of capital projects beyond 2017. The Community Development Fund has been fully drawn down for projects of citywide benefit and was closed out in 2009. Funding was committed towards initiatives such as the Rose Theatre, downtown revitalization, Sheridan College and Alderlea. Operating - 18
Full Accrual Budgeting Municipal government budget methods have historically been focused on the annual cash requirements to operate the municipality and the associated property tax needed to fund operations. With the introduction of Public Sector Accounting Board (PSAB) changes with respect to the tangible capital asset reporting (TCA) in 2009, additional financial information has become available, such as annual depreciation expense and developer contributed assets that were not previously reported in the City s financial statements or budgets prior to this change. Full accrual budgeting provides stakeholders with a better reflection of the long term financial health of the municipality for decision making purposes. Full accrual budgeting also serves to meet the disclosure requirements of Ontario Regulation 284/09 - Budget Matters - Expenses. The full accrual budget for 2018 projects a net surplus of $87 million. This surplus is primarily due to developer contributed assets, recognized development charges and other grants and subsidies, such as gas tax funding. Property Tax Related Expenditure Budget $677,985 Less: Contributions to Reserve Funds 76,151 Add: Amortization (Depreciation Expense) 129,459 Project Expenses that are Operating in Nature 40,686 Post Employment and Other Liabilities 4,600 Full Accrual Expenditure Budget 776,579 Property Tax Related Revenue Budget 677,985 Less: Contributions from Reserve Funds 34,196 Add: Recognized Development Charges, Grants & Subsidies 164,113 Developer Contributed Assets 44,215 Interest Earned on Reserves 11,477 Full Accrual Revenue Budget 863,594 Net Surplus / (Deficit) $87,016 Operating - 19
Full Accrual Budgeting Developer contributed assets consist of the City taking ownership of subdivisions built by developers. The value of the subdivision is included on the City s balance sheet as an asset and must therefore be operated, maintained and depreciated. Recognized development charges are sources of funding received from developers and utilized during the year to fund growth-related assets, such as new roads and parks. PSAB rules require that development charge revenues be recognized on the City s statement of operations when the corresponding investment in growth funded assets occurs. Other grants and subsidies such as gas tax funding are sources of funding contributed to the City for specific purposes and cannot be used to offset property tax funding. Gas tax funding is primarily used for transit and infrastructure related projects and is recognized as revenue when the corresponding investment in the infrastructure occurs. Although the 2018 full accrual budget indicates a surplus position of $87 million, this is largely due to the City of Brampton s current growth cycle and cannot be used to offset property taxes. Operating - 20