SUPPORTS ITEM NO. 1 
                                                CS&B AGENDA
                                                FEBRUARY 20, 1997  

                             ADMINISTRATIVE REPORT

                                           Date: February 12, 1997
                                           C.C. File No. 1605-1

   TO:       Standing Committee on City Services and Budgets

   FROM:     Director of Finance

   SUBJECT:  1997 Operating Budget - New Revenues/Service Reductions


   RECOMMENDATION

        A.   THAT  Council review and take action on the individual revenue
             increases totalling $4.265  million as set out in the Appendix
             of this  report, noting  the City  Manager's comments  on each
             item. Further  that the  finalized estimates of  these revenue
             items,  and  related staffing  increases  and  other start  up
             costs,  be  subject  to Budget  Review  and  reported  back to
             Council in the Interim Report on the 1997 Operating Budget.

        B.   THAT  Council  review  and   take  action  on  the  individual
             expenditure reductions totalling $3.075  million as set out in
             the  Appendix  of  this  report,  noting  the  City  Manager's
             comments on each item.

        C.   THAT  all  service  cuts  approved  by  Council  this  day  be
             implemented  immediately   and  be   subject  to   the  layoff
             provisions in the respective collective agreements between the
             City and its Unions, if applicable.

        D.   THAT  all new revenues,  fees and charges  approved by Council
             this day be implemented as soon as possible in order to reduce
             the amount of transition funding required in 1997.

   GENERAL MANAGER'S COMMENTS

        The General Manager of Corporate Services RECOMMENDS approval of A,
        B, C and D.

   COUNCIL POLICY 

   City  Council is the approving body  for the City's annual operating and
   capital budgets and changes in authorized staffing levels.

   City Council approves service cuts, new programs and new revenues. 

   PURPOSE

   The  purpose of  this  report is  bring  forward new  revenue  items and
   service  cuts  for  Council  consideration and  approval,  arising  from
   instructions  given  to staff  at the  Council  meeting of  February 4th
   during  consideration  of  the  preliminary report  on  the  City's 1997
   Operating Budget.  


   BACKGROUND

   On  February 4, 1997,  City Council had its  first opportunity to review
   the preliminary  estimates comprising the City's  1997 Operating Budget.
   These estimates indicated revenues from  all sources of $531,157,100 and
   expenditures of $558,643,900, leaving  a budget shortfall of $27,486,800
   or $27.5 million rounded.

   The staff report which introduced those estimates provided a strategy to
   address the shortfall, as follows:

   - a  2% base property  tax increase  to generate $6.6  million to  cover
   growth and inflation in core services;

   - a 1%  incremental property tax  increase to generate  $3.3 million  to
   cover growth and inflation in sewerage costs;

   -  application of  the 1997  portion of  increased revenues  approved by
   Council on January 30th  relating to permit and development fees  in the
   amount of $3.6 million;

   - application of the 1997 portion of new revenue opportunities (about $4
   million annually) put forward  by staff in response to the City's budget
   problem in the amount of $2 million, subject to further Council action;

   - application of a 3% incremental property tax increase to generate $9.9
   million  as an  alternative  to major  service  cuts in  Policing,  Fire
   Protection, Traffic Management and Planning; and

   - the balance of the shortfall, about $2.1 million, to be raised through
   selective service cuts and administrative budget adjustments. 

   In reviewing the staff strategy, Council tabled its own strategy to deal
   with the shortfall  and, after considerable  discussion, an action  plan
   comprising  16   recommendations  was  approved,  with   four  of  those
   recommendations deferred to future meeting dates.

   -    Recommendation A  recognized the previous approval  of $3.9 million
        of  increased trade  and development  fee increases  and instructed
        staff to report back on new revenues of $4.755 million (annualized)
        to the City Services and Budgets Committee on February 20th.

   -    Recommendation   B  established   target  service   reductions  for
        departments totalling  $3.051 million to be reported back in detail
        to the City Services and Budgets Committee on February 20th.

   -    Recommendations C, D and E  were referred to the City Services  and
        Budgets Committee on February 6th. These recommendations advanced a
        total 1997 tax increase of 4.5%.

   -    Recommendation  F   referred   the  Tourism   Vancouver,   Regional
        Development Cost Charges and City Programs in the Provincial  Field
        reports to the City Services and Budgets Committee on February 6th.

   -    Recommendation G eliminated the City's annual grants of $200,000 in
        the health field as of April 1, 1997.

   -    Recommendation H instructed staff  to investigate the restructuring
        of the City's  civic cultural institutions to  provide cost savings
        and efficiencies.

   -    Recommendation I  instructed staff  to identify items  to eliminate
        any remaining  shortfall in the  1997 Operating Budget  for further
        Council consideration  through a combination  of revenue increases,
        service cuts or administrative adjustments.

   -    Recommendation J instructed staff  to report back on the  detail of
        service reduction items to the  City Services and Budgets Committee
        on February 20th. 

   -    Recommendation K  instructed staff  to consider using  Capital from
        Revenue funds  for annualizing and transitioning  revenue increases
        and service reductions for report back at a later date.

   -    Recommendation  L received  the 1997  preliminary  Operating Budget
        estimates for information.

   -    Recommendation M instructed staff to  proceed with a normal  budget
        review process.

   -    Recommendation N requested the Provincial  Government to reconsider
        its withdrawal of the $1.9 million in CAP funding.

   -    Recommendation  O instructed the Director of Finance to report back
        on property tax policy options later in the year.

   -    Recommendation P  was  referred to  the City  Services and  Budgets
        Committee  on February 20th for  staff to report  back on Vancouver
        Parking Corporation matters.


   On February 6th, Council dealt with the three reports referred  from the
   February  4th meeting of Council  including recommendations C,  D and E,
   and made the following decisions.

   -    the  publication contract  to  Tourism Vancouver  was reduced  from
        $600,000 to $400,000 in 1997.

   -    the 50% municipal  assist on Regional Development  Cost Charges was
        eliminated at a saving of $1.325 million in 1997.

   -    the  report on City Programs  in the Provincial  Field was received
        for information.
    
   -    recommendations  C,  D  and  E  of  February  4th  were  confirmed,
        resulting in a  target general  purposes tax increase  for 1997  of
        4.5% and $14.85 million in additional revenues.


   DISCUSSION

   On February 4, 1997, Council instructed staff to report back on a number
   of  new   revenue  opportunities   and  the   detail  of   service  cuts
   corresponding to  the target  budget reductions assigned  to departments
   that  day. This  report  responds to  that  instruction and  Council  is
   referred to the  report Appendix sheets for  the details, prefaced  by a
   summary sheet with the City Manager's comments.

   For  the new  revenue  opportunities identified  by Council,  staff have
   estimated the  following targets totalling  $4.265 million (annualized),
   as further set out in the revenue section of the report Appendix.


   Resident Parking Fees                        $   325,000
   Parking Meter Revenue                          1,750,000
   Sewer/Streets Overhead                           250,000
   PowerSmart Loan                                        0
   BIA Administration Fee                                 0
   Board of Variance Appeal Fee                      30,000
   Demolition Fee                                   300,000
   Increased Library Fines                           75,000
   Police Revenues                                  135,000
   By-law Fines                                   1,250,000
   Property Tax Search Fee                          150,000

        Total                                   $ 4,265,000



   Council  has established  the  following  departmental budget  reduction
   targets totalling $3.051 million (annualized, as follows:

   Police                                       $   300,000
   Fire                                             200,000
   Park Board                                       700,000
   Library Board                                    475,000
   Support Services                                 500,000
   City Clerk                                        76,000
   Community Services                               500,000
   Engineering                                      300,000

        Total                                   $ 3,051,000


   The  details  of  the  service  reduction  items  are  set  out  in  the
   expenditure section of the report Appendix.


   1. Present Budget Situation

   After  taking  into account  all previous  Council  actions on  the 1997
   Operating Budget shortfall leading  up to this present report,  and with
   the approval  of all the  items identified in  the report  Appendix, the
   following budget situation results at the preliminary budget stage.

   Preliminary Budget Shortfall                 $27,500,000-
   Less:
      Permit and development fees                 3,630,000
      New revenue opportunities                   3,065,000
      Departmental service reductions             3,075,000
      Elimination of health grants                  150,000
      Tourism Vancouver reduction                   200,000
      50% municipal assist                        1,325,000
      Approval of 4.5% tax increase              14,850,000

   Net shortfall before transition              $ 1,205,000- 

   Less:
      Transition Capital from Revenue to bring
      budget into a balanced position, subject
      to a further report on April 10/97          1,205,000

      Current Budget Position                   $  Balanced


   It  is important to  note that the  current budget position  shown above
   does  not  include any  provision for  a  wage/salary increase  in 1997.
   Additionally, staff  need to review the budget estimates that contribute
   to the  preliminary budget  position in  accordance with  Council policy
   approved on February 4th. There are requests for service increases among
   those numbers  and staff will  need to report  them back to  Council for
   consideration at the interim stage of budget development. 


   2. Next Step

   Once  Council  deals  with this  present  report,  staff  will have  the
   necessary policy  and instruction to begin  a detailed review  of all of
   the  1997 Operating Budget estimates.  This process will  take about six
   weeks to  complete, after which  the Budget  Office will report  back to
   Council with an Interim Report  on the Operating Budget. At that  stage,
   the details  of the  estimates  for the  1997 Operating  Budget will  be
   presented, including recommended actions to achieve a balanced position.

   The  Interim Report on the  City's 1997 Operating  Budget is tentatively
   scheduled for Council review on April 10, 1997.

    
   CONCLUSION

   This  report  sets out  in  its  Appendices,  a  number of  new  revenue
   opportunities and  a number of  service cuts for  Council consideration.
   Approval of  all of these items  would total about $7.340  million on an
   annualized  basis to  generate a corresponding  reduction in  the City's
   1997 Operating Budget shortfall with transition funding.






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