ADMINISTRATIVE REPORT

Date: April 12, 2001
Author/Local: Ken Bayne / 7223

RTS No.: 02012

CC File No. 1605

CS&B: April 26, 2001

TO:	Standing Committee on City Services and Budgets
FROM:	General Manager of Corporate Services / Director of Finance
SUBJECT:	2001 Operating Budget - Final Estimates

RECOMMENDATION

A(i) THAT Council adopt the final 2001 Operating Budget revenue and expenditure estimates with a property tax increase of 2.75%, including an instruction to the Director of Finance to find funding within the estimates to accommodate the reduction in Provincial Revenue Sharing, as outlined in this report by approving the budget resolution attached as Appendix 2.

OR

A(ii) THAT Council adopt the final 2001 Operating Budget revenue and expenditure estimates, including an additional 0.25% increase in the general purposes tax levy (to a total of 3.0%) to pass through to taxpayers the reduction in Provincial Revenue Sharing as outlined in this report and summarized in Appendix 1 by approving the budget resolution attached as Appendix 3.

GENERAL MANAGER'S COMMENTS

The General Manager of Corporate Services notes that for the fourth time in five years, the Provincial Government has made last minute adjustments to revenue sharing programs affecting the Operating Budget. As a result of the reduction in Police Traffic Fine Revenue Sharing of $1.0 million communicated to the City on March 29, 2001, the Operating Budget currently has a shortfall position of approximately $910,000. Recommendations A(i) and A(ii) offer Council the option of passing through this shortfall to taxpayers by increasing the general purposes property tax increase by 0.25% to 3.0% (A(ii)) or accommodating the reduction within the current estimates (A(i)).

As the timing of this reduction comes late in the budget process, the General Manager of Corporate Services, with the support of the City Manager, RECOMMENDS approval of A(ii).

COUNCIL POLICY

The Vancouver Charter requires the Director of Finance to present the estimates of revenues and expenditures to Council not later than April 30 each year and for Council to adopt a resolution approving the budget and a rating bylaw establishing general purpose tax rates as soon thereafter as possible. There are generally three reports in the budget building process:

· the Preliminary Estimates Report provides Council with the first indication of the budget requests from Departments and Boards and seeks Council guidance on the policies that will govern the administrative review of the estimates. This report was considered by Council on December 12, 2000.
· the Interim Estimates Report summarizes the results of the detailed administrative review of the budget and seeks Council approval to finalize the estimate, bringing the budget into balance. Council considered the interim estimates on March 13 and March 15, 2000.
· the Final Report on the Operating Budget presents the finalized revenue and expenditure estimates including any final adjustments approved by Council at the interim report stage. The final report is accompanied by a resolution in which Council adopts the estimates for the year.

PURPOSE

The purpose of this report is to seek approval of the final budget estimates for the 2001 Operating Budget.

BACKGROUND

On March 15, 2001, Council approved the following recommendation related to the development of the 2001 Operating Budget:

A. THAT Council approve the Park Board Global Budget of $45,028,700, including $672,200 for added basic costs, this amount excluding any reductions approved by Council to balance the 2001 Operating Budget.

B. THAT Council approve the 2001 Operating Budget - Interim Estimates as outlined in this report and detailed in Appendix 1 and instruct the Director of Finance to bring the budget into balance with a 2.5% general purposes tax increase, reflecting an increase of approximately:

· 2.0% related to growth in City costs and
· 0.3% related to the growth in regional sewer costs and
· 0.2% to reflect the reduction in funding from TransLink for the Major Road Network.

C. THAT the City Manager or Corporate Management Team locate $139,000 within the existing budget to be transferred to the Vancouver Public Library in order to maintain current service levels.

D. THAT Council approve an increase in the sworn staffing at the Police Department from 1046 to 1096 (50 positions) at an additional cost of approximately $725,000 in 2001 (and $2.5 million in 2002), increasing the 2001 tax increase indicated above to 2.75%, and

THAT the City Manager, Chief Constable and Director of Finance report back to Council on the balance of the Police Department request for additional staffing by June 2001.

DISCUSSION

1. Current Budget Position

Since March 15, staff have worked to bring the budget into balance within the 2.75% tax increase approved by Council. Appendix 1 reflects the final estimates including the following changes from the interim budget estimates:

· the budget adjustments approved on March 15 have been reflected.
· funding of $139,000 was identified in the final adjustments to the budget and was allocated to maintain service levels at the library. This funding would otherwise have been applied to Contingency Reserve.
· funding to maintain 36 existing and add 14 additional sworn staff has been added to the Police Department budget.
· the Park Board global budget has been adjusted by a further $340,000 reflecting a recalculation of increased natural gas costs for the various facilities operated by the Board.
· the general purposes tax levy has been increased by 2.75%, adding $9.9 million to the budget.

These adjustments leave the 2001 Operating Budget in a shortfall position of approximately$910,000 as detailed below.

2. Reduction in Provincial Revenue Sharing

When Council approved the budget on March 15, there was one outstanding issue that threatened the budget position: revenue from the Police Traffic Fine Revenue Sharing program. On March 29, 2001, the City was advised that funding under this program had been reduced by approximately 25% or about $3.0 million. As a result of this reduction, the City has been allocated a reduction of approximately $1.0 million, reducing the estimate to $2.56 million. This allocation is based on application of the distribution formula to the total funding available for distribution. Approximately $100,000 of this reduction can be accommodated within the final estimates, leaving a shortfall in the budget of approximately $910,000.

Council has a range of options for dealing with this reduction at this point in the budget process.

· The shortfall could be recovered through an additional increase to the general purposes tax levy of 0.25%, bringing the total increase to 3.0%. As this reduction comes very late in the budget process, this is the option recommended by the Director of Finance and City Manager.
· Council could instruct the Director of Finance to find funding to cover the shortfall from within the current budget position. The options for reallocating funding from the current estimates without impacting on service levels are limited, likely requiring this reduction to be from the Contingency Reserve allocation.
· Council could approve a combination of higher property taxes and some expenditure reductions.

Recommendations A(i) and A(ii) offer Council the choice between the first two options. Should Council wish to accept option three, a alternative recommendation would be required.

3. The Budget Resolution

With approval of Recommendation A(i) or A(ii), the 2001 Operating Budget will be brought into balance and the budget cycle completed. Council approval of this final position requires adoption of the budget resolution attached as Appendix 2 (accompanying Recommendation A(i)) or Appendix 3 (accompanying Recommendation A(ii)).

4. Final Steps

Two additional actions will be required of Council over the next two weeks to put in placethe necessary rating bylaws to provide for billing of the general purposes property tax levy:

· On April 26, Council will consider a report from the Director of Finance outlining the impact of shifting a further one percent of the property tax levy from non-residential to residential properties. This shift follows from actions of Council over the last seven years to shift the property tax burden from the non-residential property classes. The Director of Finance will present this change in taxation burden for Council's consideration.
· On May 8, 2000, the Director of Finance will bring forward a report summarizing property taxes and presenting a series of resolutions that give effect to the land averaging program approved by Council earlier this year, as well as Rating Bylaws for the City's general purpose tax levy and the requisition from the Greater Vancouver Regional District. This report will reflect the final impact of decisions made regarding taxation policy measures.

- - - - -

Link to Appendix 1

 

Appendix 2

RESOLUTION

MOVED BY COUNCILLOR:

SECONDED BY COUNCILLOR:

THAT WHEREAS, the Vancouver Charter, Section 219 requires that the Director of Finance submit to Council each year the detailed estimates of revenue and expenditure of the City for the year;

AND WHEREAS the Vancouver Charter, Section 372 requires that Council adopt the estimates of revenues and expenditure for the City as soon thereafter as possible;

AND WHEREAS Council has reviewed the development of the estimates in reports submitted by the Director of Finance on December 12, 2000, on March 13 and March 15, 2001 and on April 24, 2001, and approved measures to bring the estimates into balance, including approval of a 2.75% general purposes property tax increase;

AND WHEREAS the total estimated expenditures of the City to pay all debts and obligations of the City falling due in the year 2001, exclusive of the amounts required for school, Greater Vancouver Regional District, Greater Vancouver Transportation Authority, British Columbia Assessment Authority and Municipal Finance Authority purposes and not otherwise provide for, as amended by Council, amount to $635,606,400;

AND WHEREAS the total estimated expenditures as aforesaid is the sum of the appropriation requests of all departments and boards properly supported by detailed analysis of those expenditures and listings of the salaried staff;

AND WHEREAS the total estimated revenue of the City for 2001 from sources other than real property taxes, as amended by Council, amounts to $264,276,500;

AND WHEREAS the amount of the General Purposes Tax Levy so required is $371,329,900;

THEREFORE be is resolved that the said estimates, both as to totals and individual items pertaining thereto, of the Director of Finance as so amended by Council be and the same are hereby adopted by Council.

Appendix 3

RESOLUTION

MOVED BY COUNCILLOR:

SECONDED BY COUNCILLOR:

THAT WHEREAS, the Vancouver Charter, Section 219 requires that the Director of Finance submit to Council each year the detailed estimates of revenue and expenditure of the City for the year;

AND WHEREAS the Vancouver Charter, Section 372 requires that Council adopt the estimates of revenues and expenditure for the City as soon thereafter as possible;

AND WHEREAS Council has reviewed the development of the estimates in reports submitted by the Director of Finance on December 12, 2000, on March 13 and March 15, 2001, and on April 24, 2001, and approved measures to bring the estimates into balance, including approval of a 3.0% general purposes property tax increase;

AND WHEREAS the total estimated expenditures of the City to pay all debts and obligations of the City falling due in the year 2001, exclusive of the amounts required for school, Greater Vancouver Regional District, Greater Vancouver Transportation Authority, British Columbia Assessment Authority and Municipal Finance Authority purposes and not otherwise provide for, as amended by Council, amount to $636,514,500;

AND WHEREAS the total estimated expenditures as aforesaid is the sum of the appropriation requests of all departments and boards properly supported by detailed analysis of those expenditures and listings of the salaried staff;

AND WHEREAS the total estimated revenue of the City for 2001 from sources other than real property taxes, as amended by Council, amounts to $264,276,400;

AND WHEREAS the amount of the General Purposes Tax Levy so required is $372,238,100;

THEREFORE be is resolved that the said estimates, both as to totals and individual items pertaining thereto, of the Director of Finance as so amended by Council be and the same are hereby adopted by Council.

* * * * *

(c) 1998 City of Vancouver