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. * * * * *