|
|
Author/Local: Ken Bayne/7223
TO:
Vancouver City Council
FROM:
Director of Finance
SUBJECT:
1998 Operating Budget: Interim Estimates
[Note: View Appendix 2 or download Excel files of Appendix 1 and Appendix 2 of this report. Appendix 3 is available from the Office of the City Clerk. ]
A. THAT Council approve the Interim Estimates of the 1998 Operating Budget as reviewed in this report and detailed in Appendix 1, and instruct the Director of Finance to bring the 1998 Operating Budget into balance with a 2% general purposes tax increase, reflecting a 1.1% increase related to City costs and a 0.9% increase related to regional sewer costs. The final report on the budget will be submitted for approval by April 30, 1998.
B. THAT Council approve the Park Board 1998 Global Budget of $38,048,700, including revenue adjustments totalling $220,000 and the addition of $330,000 for added basic costs. This represents the base budget for Park Board for 1998, prior to the adjustments recommended in Recommendation C below.
C. THAT Council approve the revenue enhancement and expenditure reduction proposals listed as "Year 1" items in Appendix 3 for inclusion in the 1998 Operating Budget.
D. THAT the Director of Legal Services be instructed to bring forward the appropriate bylaw amendments to give effect to increases in Building Grade fees and Parking Meter rates as detailed in Appendix 3.
E. THAT the Director of Finance in conjunction with the Corporate Management Team, be instructed to report back on those revenue enhancement and expenditure reduction proposals listed as "Year 2" items for consideration when Council deals with the projections for the 1999 Operating Budget. Development of a budget plan for 1999 will be considered by Council in September, 1998.
The City Manager RECOMMENDS approval of A, B, C, D and E.
The Vancouver Charter requires that the operating estimates of the City be reported to Council by April 30 of each year. There are generally three reports to Council in the budget building process.
The Preliminary Budget 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 February 17, 1997. The Interim Report summarizes the results of the detailed administrative review of the budget and seeks Council approval of measures necessary to finalize the estimates, bringing the budget into balance. 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 purpose of this report is to review the 1998 Operating Budget as revised since Council considered the Preliminary Report on February 17, and to present recommendations for bringing the budget into balance, incorporating normal Budget Review adjustments plus further budget measures recommended by the Corporate Management Team (CMT). The report also recommends approval of the 1998 Park Board Global Budget, including two adjustments to reflect declining revenues in the Board's revenue programs. Finally, the report presents further revenue and expenditure adjustments, as submitted by the Corporate Management Team, for consideration by Council in developing a budget and taxation plan for the 1998 and 1999 Operating Budgets.
On February 17, 1998, Council considered the preliminary report on the 1998 Operating Budget which reviewed the revenue and expenditure estimates as submitted by departments prior to a detailed administrative review. The position presented in that report reflected a general purposes tax increase in excess of 4.0%. The report indicated that bringing departmental budgets to target levels, reflecting funding for approved programs only, as well as other adjustments normally associated with the administrative review of the budget, would likely reduce the necessary tax increase to approximately 3.2%.
Recognizing that the resulting tax increase exceeded Council’s policy of holding tax increases to inflationary levels and that there are a number of factors which will further impact on the Operating Budget over the next two years, the City Manager proposed the development of a two-year plan that would provide Council some options for managing the budget and property taxation.
Council approved the following recommendations:
A. THAT Council receive the preliminary estimates of the 1998 Operating Budget for information and refer them to the Corporate Management Team and the Budget Office for detailed review and report back.
B. THAT in reviewing the estimates as submitted by departments, staff be instructed to:
- bring departmental budgets within appropriate target levels, reflecting only the cost of providing 1997 service levels at 1998 costs.
- remove any supplemental requests that reflect increase in service levels, new programs or staffing, and instruct departments to bring those requests to Council for consideration, with appropriate offsetting expenditure reductions or revenue increases.
C. THAT the Director of Finance, in consultation with the Corporate Management Team, report back to Council with the interim estimates and a plan for bringing the budget into balance.
D. THAT Council direct staff to submit a two year plan to manage the 1998 and 1999 tax increases, reflecting a number of circumstances – an anticipated 1997 surplus, the implementation of utilities in 1998 and 1999, and significant cost increases from capital programs and authorized service level increases.
E. THAT, as a part of that two year plan, staff report back, with the Interim Estimates, on $3.5 and $7.0 million dollar expenditure reductions (roughly equal to 1% and 2% taxes) beyond those achieved through the normal budget review process for consideration in developing the two year taxation plan.
F. THAT Council direct staff, in consultation with the GVRD Labour Relations Department, to develop a submission to the provincial government requesting changes in the legislation governing police and fire wage arbitration.
Staff have completed the administrative review of the revenue and expenditure estimates according to the instructions approved by Council on February 17. That review involved discussions between Budget Office and departmental staff to ensure that individual department budgets included only that funding necessary to maintain programs, services and staffing at current levels and additional funding requests that could be justified on the basis of Council approvals, health and safety concerns or increased workload. The objective was to move departmental estimates to budget target levels established for 1998. Appendix 1 indicates the adjustments made to the revenue and expenditure estimates as a result of this budget review process.
Staff have also worked toward development of the two year budget and taxation plan that Council requested in Recommendations D and E of the Preliminary Operating Budget report. The overall objective of this plan is to limit the growth in the general purposes tax levy over the 1998 and 1999 budget years to Council’s ongoing policy of inflationary increases. As part of the development of this two-year plan, departments were requested to submit proposals for new or increased revenues and expenditure reductions equal to 3% of their budgets. These proposals were reviewed by the Budget Office and Corporate Management Team and have been incorporated into the plan presented in this report.
The result of this process was the identification of a number of initiatives that can be implemented in 1998 with a minimum of impact. The proposals do include the elimination of several vacant, exempt (administrative) positions, however, no encumbered positions (union or exempt) are involved. Moreover, the reductions do not involve significant changes to services currently provided to the public. Initiatives recommended for 1998 are summarized in Appendix 3, are reflected in the budget adjustment presented in Appendix 1, and are further discussed below.
Achieving reductions beyond the proposals recommended in this report will be more difficult. Appendix 3 summarizes a range of adjustments, many involving staffing and service level issues that are available to assist in dealing with the 1999 Operating Budget. In total, these exceed the $7.0 million objective established at the Preliminary Operating Budget stage. It is recommended that these items be referred for report back as outlined later in this report.
In addition to budget adjustments that affect taxation, staff have reviewed the operations of the Water and Solid Waste Utilities to identify opportunities for cost reductions that can be reflected in user fees or which can be utilized to moderate increases than might otherwise be necessary. While these proposals will not impact on previously approved user fees in 1998, they are included in Appendix 3 for information and will be reported back to Council for further consideration prior to establishing 1999 user fees.
The presentation of the interim estimates reflects the recommendation by staff that implementation of the proposed sewer user fees be deferred until at least January 1999. As a result, City and Regional District costs associated with the sewer utility are fully reflected in the proposed 1998 Operating Budget and will be recovered through property taxation.
As noted, the budget estimates have been the subject of two parallel streams of review, one reflecting the normal budget review process, the second the revenue enhancement and expenditure reduction process undertaken by the Corporate Management Team. Appendix 1 summarizes the adjustments recommended to Council from each of these streams that lead to the current budget position reflected in the following table.
The adjustments presented for approval in this report will leave the 1998 Operating Budget with a shortfall of revenues over expenditures of $6.9 million, equivalent to a general purposes tax increase of 2.0%. This shortfall represents the cumulative impact of a 1.1% increase related to City expenditures and 0.9% related to the growth in regional sewer costs.
The 1998 Interim Estimates include a revenue budget of $532,618,200, prior to consideration of a property tax increase. This position reflects the impact of adjustments arising from the detailed review of the revenue budget undertaken as part of budget review as well as several adjustments proposed by the Corporate Management Team. This represents an increase of $1.3 million or 2.5% over the final 1997 revenue budget.
Taxation revenue includes both the City’s general purposes tax levy and other related revenues from grants-in-lieu of taxes and penalties. The 1998 levy, prior to consideration of a tax increase, is set at $344.7 million, down approximately 1% from the 1997 level. This reduction is the net impact of removing residential garbage collection costs ($8.4 million) from the levy and of adding $4.9 million in tax revenue from new construction.
Taxation revenue has also been adjusted as a result of:
…increase in revenues anticipated from penalties and interest on outstanding and arrears taxes, ($100,000).
…increase in payments-in-lieu of property taxes by utility companies, ($176,400).
…reduction in payment-in-lieu of property taxes anticipated from Vancouver Port Corporation, ($250,000).
Council is aware of the outstanding payments in lieu of taxes due from three federal Crown Corporations. Vancouver Port Corporation, CBC and Canada Post have all disputed the classification and/or valuation of their properties in Vancouver. As these disputes progressed, the Operating Budget has been adjusted to reflect reduced payments from these properties. Staff continue to work with the BC Assessment Authority to resolve these issues and this latest adjustment related to the Vancouver Port Corporation reflects the most recent property inventory developed by BCAA, Public Works Canada and the Port Corporation. A report updating Council on the status of these payments-in-lieu will be developed in the near future.
b) Other Revenue and Utility Fees
After taxation, the City earns its revenues from a variety of sources including fees and charges, utility fees, rental income associated with city-owned property, short term interest earnings and funding from the Provincial Government. This report is recommending two adjustments in these estimates: a $400,000 increase in Short Term Interest Earnings and a minor adjustment in income from rental properties.
The Corporate Management Team is however recommending to adjustments to these estimates as a result of its review of revenue programs. These proposals are detailed in Appendix 3 and include:
…an increase in Building Grade Fees to bring these fees closer to cost recovery levels. Building Grade fees were last adjusted as part of the 1991 - 1993 Budget Management Program and currently recover approximately 60% of their costs. The proposed adjustment will generate an estimated $30,000 in 1998 ($60,000 ongoing).
…an increase in parking meter revenues through two initiatives. The first is a program of parking meter in-filling in existing areas that is anticipated to generate $50,000 in 1998 ($100,000 ongoing). The second is an increase in meter rates in portions of the West End and along the Broadway corridor that will take the hourly rate from $.75 per hour to $1.00 per hour, generating $75,000 in 1998 ($150,000 ongoing).
Both of these initiatives will require amendments to City bylaws and it is the recommendation of this report that the Director of Legal Services be instructed to bring the appropriate amendments forward for approval by Council.
Utility fees represent the revenues generated from operation of the Solid Waste and Water Utilities. These revenues are offset by equivalent operating and debt-related expenditures and have no net impact on property taxation.
c) Transfers from Reserves and Funds
The interim estimates include funding of $7.6 million from several sources outside the operating budget, including: the annual funding provided from the Property Endowment Fund ($7,000,000); a transfer from the Hastings Park Reserve to fund the City’s building maintenance obligations at Hastings Park until the lease with the PNE expires ($500,000); and, a transfer of the interest earnings in the Art Gallery Reserve which partially offsets the City’s operating grant to the Vancouver Art Gallery ($150,000).
2. Expenditure Estimates
The interim budget expenditure estimates are $539,536,600, representing a reduction of $8.3 million from the preliminary estimates. At this level, expenditures have increased 3.8% above the 1997 final budget position. Appendix 2 summarizes the changes in the current budget from 1997.
Adjustment to the expenditure estimates have been identified through the normal administrative budget review process and through the parallel expenditure reduction process undertaken by the Corporate Management Team.
a) Departmental Expenditures
Departmental Expenditures as presented at the preliminary stage of the budget process have been reduced by $4.6 million as a result of the detailed Budget Review process. Additional adjustments totalling $3.4 million are recommended as a result of the review undertaken by the Corporate Management Team. In total, these adjustments bring departmental expenditures to $487.0 million, up 2.7% from the 1997 final budget.
The expenditure adjustments identified from the Budget Review are the result of bringing virtually all departments to budget target levels. The outstanding adjustments are not material and will be reported as part of the final budget.
Holding departmental expenditure estimates to target levels was the primary objective of budget review. It ensures that program funding is sufficient to provide for increased salary, wage and benefit costs as well as the costs associated with general and specific expenditure inflation. Where appropriate, funding is also included for "added basic" which is the cost of new or expanded programs and services approved by Council over the last year. In meeting these targets, departments have often had to make choices among competing demands for resources and, in some cases, reallocations of funding has taken place to accommodate those demands that were of a higher priority. One of the objectives of the Budget Review process was to ensure that, where reallocations were made, departments could provide adequate justification. That review has not identified any significant changes in on-going programs that are funded in the budget and no changes in staffing except those approved by Council.
In addition to the adjustments arising from Budget Review, the Corporate Management Team has identified a series of additional adjustments that assist in achieving the current budget position. These adjustments, totalling $3.4 million, are detailed in Appendix 3 and are recommended for approval by the CMT. Most of these adjustment represent ongoing reductions to the Operating Budget, achieved through efficiencies in the delivery of programs or revised operating processes. As noted previously, none of the reductions proposed for 1998 involve encumbered positions or affect levels of public service.
The following summarizes some of the more significant changes in departmentalestimates using the final 1997 budget as the basis for comparison:
General Administrative includes most of the internal service departments including City Manager, Finance, Human Resources, Legal Services and the City Clerk. Adjustments proposed here move these budgets to target levels and also include several minor adjustments to operating procedures that will result in efficiencies. In addition, it is proposed to fund staff support for the Better City Government program from the Strategic Initiative Fund.
Other General Government includes those estimates that are inter-departmental or corporate in nature and tend to vary significantly from year-to-year. The adjustment proposed in this area include
…reduction in the Operating Budget premium to the Liability Insurance Reserve of $500,000 annually following the recommendations of the Risk Management Committee. A separate report on this program will be considered by Council.
…reduction in the provision for the Strategic Initiative Fund, the primary source of funding for the Better City Government Program. This $250,000 reduction reflects the belief by CMT that the organization is approaching its capacity to undertake additional work beyond that underway at this time.
…a reduction in benefit program costs as a result of the more proactive management of employee absences. Maintaining this reduction requires replacement of the current temporary resources with a permanent position in Human Resources and is recommended.
Community Services is the business group in which Planning, Permits & Licences, Social Planning, the City’s Housing Program as well as Carnegie Centre and the Downtown South Gathering Place are managed. In order to streamline the operations of these departments, the General Manager has reorganized the administrative functions resulting in shifts of activities and staffing that are reflected in the 1998 estimates. A review of the overall estimates for Community Services has brought this area to its expenditure target.
The growth in the Police Department budget reflects the impact of recent arbitrated salary and benefit adjustments which exceed the levels achieved by other City employees. In addition, the budget supports the reorganization and redeployment initiative of the Chief Constable by implementation of a new funding model for sworn staffing. This model, which will be reported separately to Council, leaves the department with full funding for approved sworn staffing levels which the Chief is utilizing to deploy additional sworn staff to front-line policing duties.
With the implementation of the new organization structure at the Fire Department and appointment of the new Fire Chief, the department has proposed the elimination of one Assistant Chief position. This position is currently vacant. As noted elsewhere in this report, uniform staff at the department have not settled their contract for 1998 and the budget includes a provision for settlement consistent with collective agreements for other City employees.
There have been many changes in the Public Works section of the expenditure estimates, however most reflect the impact of continuing reorganization of the department’s activities, especially around the Solid Waste Utility, rather than a change in programs. Each area of the department has been brought to its target expenditure level in 1998 and, in addition, the City Engineer has proposed a series of reductions totalling $309,000 that can be achieved in 1998 without program impact.
The expenditure estimates for the Solid Waste and Waterworks Utilities reflected levels previously approved by Council. The apparent growth in Solid Waste expenditures reflects the addition of residential recycling costs to the budget for the first time in 1998. These expenditures are fully offset by user fees that are reported with revenues.
Sewer Utility costs continue to increase beyond the level of inflation, driven primarily by an increase in debt charges associated with the City system (2.1%) and further increases in the requisition from the regional district for treatment costs (13.6%). Adjustments to these expenditures have been made since the preliminary budget stage, reflecting efficiencies in operations and increased recoveries. As Council is aware, staff have recommended deferral of the implementation of the Sewer Utility until 1999, and, as a result, the increase in sewer costs will be funded by property taxes in 1998.
Departmental expenditures reflected in the Other Recreation and Community Services area of the budget have all been adjusted to target levels as part of budget review. In addition, the Corporate Management Team is recommending a reduction in the Vancouver Public Library budget of $203,000 reflecting savings from a reorganization of administrative staffing. The Board had proposed to utilize this funding to increase the level of public service at the Library. Discussion of the Park Board Global Budget is presented later in this report.
Civic Theatres continue to experience a decline in event bookings from the levels of previous years and this is reflected in reduced revenues and an increased impact on the Operating Budget in 1998. While the dollar impact ($200,000) is not significant, the trend to more competition for theatre space in the region and to more competition for the audience’s disposable income is troublesome. Staff continue to investigate ways to minimize this impact on the budget, however, there appear to be no short term remedies.
b) Debt Charges
The growth in general purposes Debt Charges (excluding debt charges related to the City utilities) reflects continuation of the borrowing program related to recent Capital Plans. The net increase in debt charges from 1997 to the 1998 interim estimate stage is $2.6 million or 7.2%, bringing debt charges to $39.1 million. This estimate includes a provision for a 1998 debenture issue.
Borrowing costs are also affected by the earning of the Sinking Fund, the vehicle the City utilizes to provide for the retirement of its long term debt. The annual surplus in the Sinking Fund is transferred to the Operating Budget. In 1998, this transfer has declined by 25% to $5.5 million.
c) Transfers to Reserves and Funds
The primary component of this part of the budget is the annual provision for capital expenditures. The transfer for Capital Purposes represents approximately one third of the funding available for the 1997-1999 Capital Plan and had been established at $13.35 million for 1998. In addition, the estimates include one half of the $2.0 million in funding for community centre upgrading approved by the electorate in an opinion question on the 1996 ballot.
As a result of the CMT review of the Operating Budget, it is recommended that $500,000 of capital from revenue funding be eliminated over this year and next. This reduction of $250,000 annually will require that Capital Plan projects or programs of this value and funded from revenue, be eliminated. If Council agrees to this proposed reduction in the capital program, staff will forward recommendations on specific reductions to Council with the 1998 Capital Budget on May 14, 1998.
The interim estimates also include the annual provision for the 1999 civic election at $300,000.
e) Contingency Reserve
The interim estimates include a Contingency Reserve provision of $2.4 million after adjustments of $2.6 million from the preliminary budget stage.
At the preliminary estimate stage, Contingency Reserve also included $1.2 million associated with a new funding model for Police sworn staffing. This funding was proposed to provide the department with transition for its re-organization and re-deployment initiative. After review of the model with the department, it was determined that this funding is not necessary for 1998 and it has been removed from the interim estimates.
The proposed funding in Contingency Reserve does represent an increase over the normalopening position in the Operating Budget. However, in addition to providing a source of funding for issues that emerge during the year, Contingency Reserve also provides for several factors that may impact on the budget during 1998. These include:
…Staff anticipate that discussions with the Vancouver Port Corporation over outstanding payments-in-lieu of taxes will be finalized this year which may require a repayment of past grant amounts: The City’s liability could exceed $1.0 million depending on the outcome of discussions with the Port Corporation.
…Uniform staff at the Fire Department have been without a contract since December 1996 and based on settlements with other City unions, some provision is required for a settlement in 1998.
…In 1997, Council approved the beginning of phase 2 of the CityPlan in two City neighbourhoods. Completion of these initial neighbourhood visioning exercises is anticipated in 1998 and a provision for further projects is appropriate.
…There continue to be several significant appeals outstanding at the Assessment Appeal Board that could impact on the City’s general purposes tax levy. While a provision is made in the estimates for tax write-off following from Appeal Board rulings, this provision could be quickly depleted and Contingency Reserve provides the appropriate source of back-up funding.
…The budget provides no provision for the costs of snow fight in the fall. A major fall, similar to that experienced in 1996 could quickly leave the Operating Budget in a deficit position.
PARK BOARD GLOBAL BUDGET
The interim estimates make full provision for the Park Board Global Budget of $38,048,700, including added basic funding of $330,000. This represents an increase from the 1997 budget of 0.9%. The provision has been calculated by the City and Board staff according to the agreed upon principles and makes provision for two further adjustment detailed below.
The change in the Park Board basic estimates in 1998 reflects a variety of adjustments arising from the global budget arrangement. These require the Board to increase revenues at least at the level of inflation in order to qualify for adjustments on the expenditure side equivalent to those available to other departments. The base budget has increased by 1% over the 1997 level.
In addition, this report proposes two other adjustments which follow from an agreement that the global base will be adjusted to reflect changing revenue patterns in the Park Board revenue operations. After a review of the proposals by the Park Board, staff have agreed to recommend the following adjustment to Council:
…The first adjustment relates to a declining revenue trend at the Park Board ice rinks. After many years of ice time shortages in the lower mainland, several newice surfaces have opened in the region. Faced with access to better ice time and better facilities, commercial users of the Board’s facilities have taken their business elsewhere. In addition, there has been a general decline in the popularity of public skating. With the loss of these commercial rentals and the loss of public skate session patrons, revenues have declined and the Board is having increasing difficulties achieving current budgets at these facilities. The Board has moved to increase rental rates for its remaining users, however, any new revenues will not be sufficient to offset the losses that have grown over the last three or four years. The global budget proposed in this report has been adjusted by $120,000 to account for this situation.
…The Board has demonstrated a similar declining trend with net income from its beach and park concession stands since the early 1990s. Net revenues declined by 30% from 1992 through 1997, with about 60% of these losses related to outlets in Stanley Park. Although the global budget has been adjusted over several years to reflect these declines, the Board estimates that there remains a gap of about $200,000 between the current budget expectations and the actual revenues. The global budget proposed in this report includes an adjustment of $100,000 related to this shortfall with the Board intending to seek efficiencies in its operation to generate the balance.
Added Basic is the ongoing operating costs that arise from the Park Board capital programs. Under the global budget arrangement, Council has agreed to add these costs to the Park Board budget. The 1998 allocation includes funding for maintenance and support of systems infrastructure, buildings and parks infrastructure, as well as the costs of maintaining a new parksite at Coal Harbour and two new parksites on the Concord lands in False Creek that were provided at no cost to the City. These new costs have been set at $330,000 in the 1998 operating budget.
A final adjustment is recommended to the Park Board global budget following from the CMT review of expenditure reductions. This adjustment, totalling $150,000 in 1998 ($250,000 ongoing), is achieved through adjustments to fees and charges reflecting market conditions and from minor reductions related to efficiencies achieved in the delivery of services and programs. These adjustments have been approved by the Park Board.
In 1997, Council requested that City and Park Board staff review the global budget process for report back with the 1998 global budget. However, with changes in senior staff at the Park Board in the fall of 1997, it would be more appropriate to defer that review. Council can expect a report back prior to development of the 1999 global budget.
BRINGING THE OPERATING BUDGET INTO BALANCE
With the adjustments recommended in the 1998 interim estimates, the shortfall in the operating budget has been reduced from $15.8 million a the preliminary report stage to $6.9 million, the equivalent of a 2% tax increase. The primary components of this increase are:
Change in Cost
Tax Impact
net impact of changes in City revenue/ expenditure estimates
impact of growth in regional sewer costs
$3,924,900 $2,993,500
1.1% 0.9%
Total $6,918,400 2.0% The Director of Finance recommends that Council balance the 1998 Operating Budget with a 2% general purposes tax increase, which reflects an increase related to City controlled estimates of 1.1%, which is close to the level of local inflation, and a 0.8% increase related to growth in regional sewer costs that are beyond the control of Council.
The application of a 2% tax increase translates to an increase of $0.054 per thousand dollars of assessed value in the residential class--$20 for the average single family dwelling valued at $375,000--and an increase of $0.30 per thousand dollars of assessed value in the commercial class.
The general purposes tax increase represents only one component of the impact that City services will have on residents in 1998. In addition to property taxes, residential property owners will see the impact of the new Solid Waste user fees which include a tax reduction equivalent to approximately 5.6% of general purposes taxes and, for those who receive these services, new charges related to garbage collection and "blue box" recycling. The impact of these changes will vary depending on property value and the services provided. For the average single family residence receiving garbage collection services from the City, the net impact is a $40 increase in the total bill from the City. Recycling service add a new charge of $45. Multi family properties not receiving these services will benefit from the full impact of the tax reduction. On April 23, 1998, Council will further consider the impacts of these changes on residential properties along with other property taxation options that could affect all classes of property.
In addition, water users in all classes will see the impact of an average increase in water rates of 6.0% approved by Council in December 1997. For metered properties, the impact will vary with water consumption. The increase of $13 for unmetered properties translates to an additional cost of approximately 1.0% on the total tax and utility bill for the average single family home.
PLANNING FOR 1999
When Council received the 1998 preliminary estimates, staff were instructed to develop a two year plan for managing budget and tax increases. The first component of that plan, involving selected revenue enhancements and expenditure reductions, are reflected in the current budget position.
In developing the plan for 1998, the Director of Finance and Corporate Management Team, have recommended only adjustments that do not impact on encumbered positions, that minimize changes to current levels of public service and that involve only market-related impacts on the costs of City services. As a result, the $3.8 million of adjustments recommended in the 1998 interim estimates, equivalent to a property tax increase of 1.1%, are primarily the result of changes in business practices and the realization of efficiency gains that do not directly impact on current public service levels.
The current projections for the 1999 Operating Budget indicate a property tax increase of 1.5% will be necessary to hold the base budget in balance, this assuming that the sewer utility remains funded by property taxes. This increase reflects continuation of general inflation in the 1% to 2% range and the impact of existing collective agreement costs which extend through 1999. In addition, E-COMM. which had been estimated to add $5.7 million to the budget, will require a further tax increment of 1.6%. However, more recently, it appears that these costs may not fall entirely on the budget in 1999 and that a more phased impact over 1999 and 2000 may be realized. This does not reduce the overall cost, just the anticipated impact on the budget in 1999, however, it does suggest that the predicted tax increase in the 3.0% range may be overstated at this time.
The Director of Finance recommends that development of phase 2 of the two year budget and taxation plan be delayed until the fall when more confidence in next year’s projections can be developed. A deferral will also allow time for the Corporate Management Team to give further consideration to the budget reduction initiatives put forward in Appendix 3 that have staffing and service level impacts. Should Council agree to defer these items, staff propose to bring the projections for the 1999 budget to Council in September along with a series of possible budget reductions that can be utilized to meet the budget and taxation targets for 1999. That timing will allow the initiatives to be approved and put in place prior to the beginning of the budget year.
CONCLUSION
This report presents the interim results of the 1998 Operating Budget building process. It recommends a series of adjustments to revenue and expenditure estimates following from the Budget Review process and further recommends a series of adjustments following from a separate review of the budget by the Corporate Management Team. With these adjustments in place, it is recommended that Council approve a 2% general purposes tax increase to bring the budget into balance, reflecting a 1.1% increase related to the growth in City controlled costs and an additional 0.9% increase related to the growth in regional sewer costs.
SUBSEQUENT PROCEDURES
On Thursday April 23, 1998, City Services and Budgets Committee will consider a report from the Director of Finance outlining property tax options for 1998. This report will review the impact on residential properties of the implementation of the Solid Waste Utility in 1998, including potential mitigation measures should Council wish to utilize them. Also to be reported are the potential for a further shift in the property tax burden between the residential and non-residential classes and an outstanding proposal to integrate classes 5 and 6 for taxation purposes.
On Thursday April 30, 1998, City Services and Budgets Committee will consider a report from the Director of Finance summarizing the final adjustments to the 1998 Operating Budget for approval "in principle". This report will satisfy the Vancouver Charter requirement for the estimates to be presented to Council by April 30 each year.
On Tuesday May 12, 1998, Council will consider a report presenting the final Operating Budget Resolution and Rating Bylaws. This report will reflect the final impact of decisions made regarding taxation policy measures.
On May 14, City Services and Budgets Committee will consider two reports dealing with the balance of the 1998 Capital Budget. The first report will include recommendations dealing with allocation of Capital from Revenue funds to individual capital projects. The second report will deal with allocation of Supplementary Capital funds.
Comments or questions? You can send us email.
![[City Homepage]](/graphics/footnava.gif) |
![[Get In Touch]](/graphics/footnavb.gif) |
 |
 |
 |
(c) 1998 City of Vancouver