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CITY OF VANCOUVER
CITY CLERK'S OFFICEM E M O R A N D U M
DATE: March 8, 1999 File: 1650
TO: Vancouver City Council
FROM: Tarja Tuominen, Administrative Assistant
SUBJECT: 1999 Operating Budget - Preliminary Report
At its meeting on February 16, 1999, Council referred consideration of Appendices 1 and 3 of the Administrative Report, dated February 9, 1999, entitled " 1999 Operating Budget -Preliminary Report" to the Standing Committee on city Services and Budgets meeting of February 25. Subsequently, the meeting date was changed to March 11.
On March 11, the Comptroller of Budgets & Research will be updating Council on the status of the budget, including proposals to bring the budget into balance.
Accordingly, the following material refer:
· Relevant extract from the Regular Council meeting of February 16, 1999
· Administrative Report, dated February 9, 1999.
EXTRACT - REGULAR COUNCIL MEETING - FEBRUARY 16, 1999
RR-11. 1999 Operating Budget Preliminary Report File: 1605
RTS: 532
Ken Bayne, Comptroller of Budgets and Research, reviewed the recommendations contained in the Administrative Report dated February 9, 1999 and provided a summary of the report's contents. This report is the first in a series, leading to approval of the Budget by April 30, 1999.
Mr. Bayne explained that since the October 1998 budget discussions, five significant changes have taken place that affect the budget position. These are: the elimination of the Province's equalization grant to the City; the delay in Major Road Network Maintenance Recovery from the GVTA; increases in the Public Safety Budget estimates; the reduction in revenue estimates from the development and building industry; and deferral of the 1998 Debenture Program (this is a temporary deferral and will result in additional costs being considered over the years 2000-2002. Upon review of the preliminary estimates of expenditures and revenues, Mr. Bayne advised there will be a shortfall of $15.4 million, which is an indicated tax increase of 4.4%.
Council was offered a range of options for completing development of the 1999 Operating Budget, including a series of revenue and expenditure program proposals developed by the Corporate Management Team.
MOVED by Cllr. Puil,
A. THAT the preliminary estimates of the 1999 Operating Budget, as summarized in the Administrative Report dated February 9, 1999 and in Appendix 1 of the report, be received for information.
B. THAT the budget initiatives detailed in Appendix 2 and reflected in the current budget position, including changes to the On-Street Parking Program ($250,000 net revenue) and elimination of the By-Law Fines Pre-Collection Service ($110,000 expenditure reduction) be approved.
C. THAT the preliminary estimates be referred back to the Corporate Management Team and the Budget Office for detailed review and report back, and THAT this review be focused on:
- bringing departmental budgets within appropriate target levels, reflecting only the cost of providing 1998 service levels at 1999 costs.
- removing any supplemental requests that reflect increased service levels or new programs or staffing and instruct departments to bring these requests to Council for consideration, with appropriate offsetting expenditure reductions or revenue increases.D. 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.
E. THAT the targeted level of the general purpose tax increase be 3.4%, and that the proposals on expenditure program changes (Appendix 3) submitted by the Corporate Management Team be considered by Council at the meeting of City Services and Budgets Committee on February 25, 1999.
F. THAT a review of the City's core services be undertaken for the year 2000 budget.
- CARRIED UNANIMOUSLY
ADMINISTRATIVE REPORT
Date: February 9, 1999
Author/Local:Ken Bayne / 7223
RTS No: 532
CC File No: 1605TO: Vancouver City Council
FROM: Director of Finance
SUBJECT: 1999 Operating Budget - Preliminary Report
RECOMMENDATION
A. THAT the preliminary estimates of the 1999 Operating Budget, as summarized in this report and in Appendix 1, be received for information, noting that the estimates suggest a general purposes property tax increase of 4.4% to bring the budget into balance.
B. THAT the budget initiatives detailed in Appendix 2 and reflected in the current budget position, including changes to the On-Street Parking Program ($250,000 net revenue) and elimination of the By-Law Fines Pre-Collection Service ($110,000 expenditure reduction) be approved.
C. THAT the preliminary estimates be referred back to the Corporate Management Team and the Budget Office for detailed review and report back, and THAT this review to be focused on:
- bringing departmental budgets within appropriate target levels, reflecting only the cost of providing 1998 service levels at 1999 costs.
- removing any supplemental requests that reflect increase service levels or new programs or staffing and instruct departments to bring these requests to Council for consideration, with appropriate offsetting expenditure reductions or revenue increases.D. 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.
CONSIDERATION
E. THAT, should Council wish to reduce the level of the general purposes tax increase below the projected 4.4% level, then the proposals on expenditure program changes (Appendix 3) submitted by the Corporate Management Team be considered by Council at the meeting of City Services and Budgets Committee on February 25, 1999.CITY MANAGER COMMENTS
The City Manager and Corporate Management Team RECOMMEND approval of A, B, C and D and submit E for CONSIDERATION.
In anticipation of Council dealing with Consideration E above, the Corporate Management Team has submitted a series of proposed changes to the expenditure program. In submitting these proposals, the CMT notes that it is increasingly difficult for operating departments to identify budget management proposals that do not impact directly on public services. The items included in Appendix 3 generally reflect elimination this view.
The City Manager notes that Council has a range of taxation and/or expenditure program options to achieve a balanced budget within acceptable taxation limits. Where in this range Council makes a decision to balance the budget should be considered in this context:
· That Council has previously made reductions to funding levels in departmental budgets sufficient to hold the tax increase for City services to inflationary levels. These changes reduced funding levels in the budget by $3.5 million (see page 4).
· That many of the drivers in the budget increase are beyond the immediate control of Council, including the loss of Equalization Grants from the Provincial Government; the cyclical decline the development and building industry; and, the increase in sewer costs from the Greater Vancouver Sewerage & Drainage District.
· That the balance of the increase is related to new program/service initiatives that have been approved by Council, including the 1.0% tax increase for the Downtown Eastside Police Team; Park Board added basic arising from the Capital Plan; and the costs associated with E-Comm.
· That a recent survey undertaken as part of this budget process indicates that the public remains positive toward the quality of City services, generally satisfied with the level of municipal taxation, and willing to accept a combination of targeted service level changes and property tax increases exceeding local inflation in order to balance the budget. Results of this survey will be presented to Council as part of the Report Reference on the 1999 Operating Budget.If Council wishes to consider the changes to the expenditure program outlined in Appendix 3, it is recommended that they be deferred to the City Services and Budgets Committee on February 25, 1999 in order to provide an opportunity for departments, boards, the unions and the public to comment on the proposals.
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.
The process of developing the Operating Budget normally involves three reports to Council. The preliminary report, presented early in February, outlines the position of the budget prior to a detailed review and seeks Council instruction on the overall budget envelope that meets Council's budget and taxation targets. Subsequent reports submitted in April each year, bring the detailed estimates to Council for final consideration and approval.
It has been Council policy that general purpose tax increases associated with development of the Operating Budget be held within the range of local inflation.
In approving the annual budget, Council has adopted a practice of passing tax increases related to requisitions from outside agencies, including the Greater Vancouver Sewerage and Drainage District, through to taxpayers rather than forcing offsetting reductions in City programs and services to meet Council's taxation objectives.
It is Council policy that changes in service levels, either expansions or reductions be approved by Council. This includes the creation and deletion of regular positions and the allocation of funding from revenues or taxation.
PURPOSE
This report is the first in a series of reports that Council will consider leading to approval of the 1999 Operating Budget by April 30.
BACKGROUND
On October 6, 1998 and October 23, 1998, Council considered a report from the Director of Finance outlining the projections for the 1999 Operating Budget. The budget position in the projections would have required a property tax increase of 3.1% in order to bring the budgetinto balance. However, recognizing that this position exceeded Council's taxation policies, the Director of Finance and the Corporate Management Team proposed two recommendations, approval of which were intended to establish an acceptable envelope within which the 1999 Operating Budget would be developed.
A. THAT Council instruct staff to develop the 1999 Operating Budget by working to a maximum increase in property taxes of 1.9%, reflecting a 1% increase related to increases in City expenditures and 0.9% related to growth in the requisition from the Greater Vancouver Sewerage and Drainage District.
B. THAT Council approve the revenue and expenditure adjustments to the 1999 Operating Budget proposed by the Corporate Management Team and outlined in this report and summarized in Appendix 2.
Recommendation B referenced new revenues totaling $200,000 and a series of adjustments to the City's expenditure program totaling $3.5 million as follows:
Business Group
Net Funding Change
Nature of Change
Fire
$464,000
equipment to reserve status
Police
1,173,000
administrative restructure
Library
275,000
general service reductions
Community Services
130,000
reduce policy/planning work
Corporate Services
207,000
general operating efficiencies
Park Board
367,000
horticulture maintenance
Engineering Services
451,000
general service reductions
Strategic Initiatives Fund
350,000
service improvement funding
Grant Program
100,000
withhold inflationary increase
Total
$3,517,000
While the expenditure program changes recommended by the Corporate Management Team and approved by Council, were generally targeted to take advantage of efficiencies in departmental operations and at reducing administrative costs, the report noted that they would result in an increase in administrative burden within the organization with the potential to impact public service levels. The report also noted that further program changes would likely have to touch on direct services to the public.
On October 23, 1998 Council also considered a proposal put forward by the City Manager and the Chief Constable which provided police resources and funding as a first step to deal with the growing problems in the Downtown Eastside. Council approved the following recommendation:
THAT Council approve City participation in the Downtown Eastside Police Beat Team proposal . . . at a cost of $3.6 million, with funding from an additional 1.0% increase in property taxes in 1999, subject to the Police Board entering into the three year service and funding agreement.
Although discussions with the Police Board related to the agreement noted in this recommendation have continued, the Board has not formally responded to the proposal. However, on the expectation that Council wishes to proceed with the initiative, and that the Police Board will participate in the plan, funding for this program remains part of the budget position outlined in this report.
In putting forward the recommendations in the October report, the Director of Finance and City Manager noted that there were several potential threats to meeting the proposed budget target. These included concerns over continuation of Equalization Grants from the Provincial Government; access to the road maintenance recoveries from the Greater Vancouver Transportation Authority (GVTA); outstanding issues with respect to the Police Budget; the costs associated with the transfer of fire and police dispatch services to E-Comm; and the strength of revenues earned from the development and building industry which was experiencing a significant downturn in activity.
The effect of these three recommendations was that Council established an overall limit on the size of the 1999 Operating Budget and an overall property taxation target for 1999 reflecting a 2.9% increase. This tax increase was comprised of the following components:
· growth in the City's base budget1.0%
· Downtown Eastside Police Team1.0%
· increase in Regional Sewerage costs0.9%
Total2.9%
DISCUSSION
Since the budget projections were considered by Council in October, the process of developing the 1999 Operating Budget has continued. The process involved review and updating of the estimates of revenues, debt charges and regional sewer costs from the budget projections to ensure they reflect actual experience from 1998, as well as any additional information available since the fall. In addition, the Budget Office has worked with departments to develop expenditure targets upon which departmental budgets will be based. These budget targets make provision for estimated costs of providing 1998 program and service levels at 1999 costs, as well as for changes in expenditure levels arising from Council decisions on new or expanded levels of service. Adjustments have also been made to thebudget to reflect expenditure program changes approved by Council in October.
This work has led to many changes in the budget position considered by Council in October, 1998 and suggests that there are difficult decisions to be made if the 1999 tax increase is to be held to 2.9%. If Council were to fund all of the changes reflected in the current budget position, it would require a general purposes property tax increase of 4.4%.
SIGNIFICANT DRIVERS IN THE CURRENT BUDGET POSITION
The most significant changes reflected in the preliminary estimates follow from the issues raised by the Director of Finance and Corporate Management Team in the October, 1998 projections. These are reviewed below:
1. Elimination of Provincial Equalization Grant
On December 18, 1998, the Minister of Municipal Affairs announced elimination of the Equalization Grant program for municipalities, resulting in withdrawal of $40 million in funding that had been provided by the province to municipalities. This was the final step in elimination of approximately $140 million in provincial transfer payments to municipalities since 1997. The City of Vancouver share of this cut is in excess of $22 million, including $5.8 million lost in the 1999 Operating Budget.
In a parallel announcement, the government announced a new program of traffic fine revenue sharing with municipalities. This follows strong representation from municipalities that their taxpayers fund all of the costs of traffic enforcement but do not share in the revenues generated for the province. The Minister has indicated that the City of Vancouver will receive $3.55 million in 1999 from this source.
The net impact of these two measures on the 1999 Operating Budget is a loss of revenue of $2.3 million, equivalent to a 0.7% property tax increase.
2. Delay in Major Road Network Maintenance Recovery from the GVTA
The October 1998 budget projections included $1.5 million in recoveries from the Greater Vancouver Transportation Authority related to maintenance of the major regional road network in the City. This original estimate has now been revised to $1.8 million. To date, Council and the GVTA have not completed an agreement on designation of the road network and budget planning for 1999 has proceeded on the basis that this recovery will not be achieved in 1999. While Council has been working to resolve the issues related to withholding designation of City streets, there are expenditures that would have been offset by the recovery that will have to befunded from taxation if that recovery is not to be received in 1999.
The impact of a delay in receiving the recovery from the GVTA is the equivalent of a 0.5% property tax increase.
3. Increases in Public Safety Budget Estimates
The October 1998 projections included allowances for two major components of the City's public safety expenditure program that were of concern to the Director of Finance and Corporate Management Team. The first was the level of funding necessary to pay for the equipment and services being provided to the City by E-Comm. The second was the base funding that would be required to support the Police Department in the 1999 budget year.
E-Comm will begin operations in June 1999 with transfer of the regional E-911 service and the fire and police dispatch and radio services currently provided by the City. E-Comm represents a significant improvement in the service levels of the Fire and Police Departments, including access to a new regional radio network. Initial estimates in 1997 were that the increased costs associated with E-Comm (net of savings in the City budget) would be in the range of $3.7 million in 1999 and approximately $5.7 million on an ongoing basis. However, with E-Comm now completing its 1999 budget process and developing levies to participating municipalities, it seems likely that the City's costs will increase to the range of $4.6 million in 1999. Details of this change in E-Comm costs will be reported to Council when more accurate information is available and after staff have had the opportunity to review the equipment needs of the Fire and Police Departments. Any reduction in these costs as a result of this review will go directly to reducing the projected tax increase. However, the anticipated increase in costs since the October projections were developed is the equivalent of a 0.25% property tax increase.
There are a variety of issues impacting on the increase in the funding for the Police Department beyond the levels projected in October 1998. The costs of restructuring the sworn ranks included in the current collective agreement, and of the reorganization undertaken by the Police Board have been higher than anticipated in the October projections. In addition, a series of classification reviews for civilian staff has increased salary costs above those initially anticipated. Together, these have increased the funding requirements in Police by the equivalent of a 0.25% tax increase.
4. Revised Estimates for Development and Building Fee Revenues
The value of building permits in Vancouver declined by 20% ($200 million) in 1998, reflecting a general decline the level of development and building activity in the City. This decline has continued into the first month of 1999. A review of the estimates for revenues from this source for 1999 has resulted in a significant reduction relative to the expectations included in the October 1998 projections. In total, this reduction is $1.9 million or a further reduction of 10% from the October projections. The current reduction is equivalent to a 0.6% tax increase.
The major difficulty with the decline in this revenue is that it is very likely cyclical and will rebound. For the City's part, achieving offsetting expenditure reductions is problematic for several reasons. First, much of the inspection workload related to revenues earned in 1998 has not been completed, making it difficult to reduce staff and maintain reasonable service levels. Second, the City has developed a highly trained staff in Community Services and the loss of this expertise in what may turn out to be a short term decline in activity is not desirable. If the decline in business is protracted, Community Services will have to review staffing levels to ensure the City is not carrying staff it cannot justify.
In addition to these negative impacts on the budget, there has been one additional event that has had a positive impact on the budget position that was presented in October:
5. Deferral of the Debenture Program
The October 1998 projections were based on the expectation that the City would issue a $60 million debenture late in the year to support the capital expenditure program. Review of capital expenditures indicated that this debenture issue could be deferred until the spring of 1999. The result of this deferral is that interest and sinking fund costs, originally planned for 1999, will be deferred. The impact of this deferral on the 1999 Operating Budget, net of reductions on short term interest earnings is to reduce expenditures by $5.0 million, equivalent to a 1.4% tax reduction. Council should note that, without this deferral, the preliminary estimates would indicate a tax increase of almost 6.0% for 1999.
While these expenditures will not be incurred in 1999, the delay in borrowing will mean a deferral, not elimination, of these costs. The revised borrowing plan will result in the deferred debenture issue being picked up as part of the normal borrowing program over the next three years, with the associated costs impacting on operating budgets over this period.
CURRENT POSITION OF THE 1999 OPERATING BUDGET
The impact of these and a series of other less significant changes in the budget is reflected in the preliminary estimates shown in the following table:
Revenues ($000s)
Taxation Revenue
$379,880
General Revenue
109,989
Transfers
12,450
$502,319
Expenditures ($000s)
Department Expenses
$403,273
Debt Charges
67,988
Regional Sewer Charges
28,237
Transfers
18,250
$517,749
Shortfall
$15,430
Indicated Tax Increase
4.4%
A more detailed summary of the preliminary estimates is attached as Appendix 1.
As noted, the current budget position, reflecting a 4.4% increase in property taxes, represents a net increase from the 2.9% tax increase target established for development of the 1999 Operating Budget in October, 1998. This increase can be summarized as follows:
Additional Increase
Indicated Tax Increase
Base Budget (October 1998)
1.0%
Equalization Grants
0.7%
GVTA Recovery
0.5%
E-Comm/Public Safety
0.5%
Trade Fees
0.6%
Miscellaneous
0.6%
Debenture Program
-1.4%
1.5%
Total Base Budget
2.5%
Downtown Eastside Police Team
1.0%
Regional Sewerage Charges
0.9%
Total Tax Increase (February 1999)
4.4%
1. The Revenue Estimates
Overall, the revenue estimates in the preliminary budget show no change from the 1998 budget level at $502.3 million (excluding Waterworks and Solid Waste Operations). This represents the net impact of several changes:
Taxation Revenue has increased 1.1%, prior to consideration of a property tax increase, primarily as a result of two factors
· new construction revenue has been established at $4.45 million, down from $4.8 million in 1998 but about 10% higher than the October budget projections
· grants in lieu of taxes revenues are anticipated to be up as a result of the updated inventory of Port of Vancouver property and the addition of new properties to other senior government grantable properties.General Revenues are down 3.1% from 1998 to $110 million. This report has documented the changes brought about by elimination of provincial grants and the downturn in the construction industry, the two primary drivers of this decline. However, there are several other areas that have influenced the current budget position.
· Short term investment earnings are anticipated to decline by 3.7% in 1999, primarily as a result of the delay in the debenture program discussed above. With lower cash balances in the early part of the year, these earnings are expected to decline by up to $500,000.
· Revenues from the On Street Parking program are expected to increase by 5.6% as a result of increased parking meter rates and improved enforcement activity. Recommendation B of this report proposes increases in these revenues that are reflected in the current estimates.
· Property Rental revenues are expected to increase by 1%, primarily the result of assessment changes on City owned property.Transfers from Other Funds and Reserves will decline 5.2% from the 1998 levels. The transfer from the Property Endowment Fund will remain at $7.0 million, however, the surplus on the City's Sinking Fund will fall to $4.8 million from $5.4 million in 1998. Lower interest rates on investments in the Sinking Fund have resulted in the reduction of $2.4 million annually since 1996.
2. The Expenditure Estimates
The preliminary estimates indicate an expenditure budget of $517.75 million, up 3.0% from 1998. The October 1998 report on the Budget and this report document the factors that have led to this increase. What is worth noting here is that there is a considerable increase in departmental operating expenditures in 1999, beyond the normal inflationary growth in the budget. A review of the budget summary in Appendix 1 indicates that for most operating areas, funding increases are limited to the additional costs flowing from collectiveagreements and general inflationary pressures. In some cases, these increases have been mitigated by the expenditure program changes approved by Council in October.
However, in selected areas, there have been increases that go beyond inflation, mostly related to the uncontrollable changes in expenditures or recoveries or the addition of new programs/services. These circumstances are having a significant impact on the increase in the expenditure budget.
The reduction in Debt Charge expenditures were dealt with earlier in this report. Without the deferral in the debenture program, Council would have been faced with a potential additional property tax increase of 1.5%. This deferral is not permanent and debt charges will increase in future years as the capital expenditure program gets caught up.
Regional Sewerage Charges have increased by 13% from 1998, to $28.2 million. This reflects projected growth in the regional sewerage program as well as the phase-in of BODS/TSS charges to municipalities. Council has adopted a resolution to pass this increase through to taxpayers as a 0.9% tax increase.
Transfers to Reserves includes two provisions. Funding for Capital from Revenue is set at $12.3 million, consistent with the 1997-1999 Capital Plan funding plan. Also included in the final $1.0 million of Community Centre capital funding approved by the voters in 1996. Other transfers include a provide for the cost of the 1999 civic election and funding for the Information Systems Long Range Financing Plan.
3. Status of Contingency Reserve
Contingency Reserve is intended to provide funding for issues that arise during the year or for which there is some contingent liability that cannot be accurately quantified at the time the budget is set. The preliminary estimates include a Contingency Reserve provision of $1.8 million, which is consistent with normal funding at this point in the budget.
The Contingency Reserve provision, representing 0.3% of the expenditure budget should be considered minimal at this point in the budget process. For example, the estimates currently make no provision for the costs of fighting a significant snowfall: costs to date will have to be funded from Contingency Reserve. If these costs increase much beyond current levels, additional funding will have to be added to the Operating Budget.
Contingency Reserve must also provide for the 1999 costs of any additional programs or services approved by Council during the year. Staff have identified a series of program/service reports that are expected to be dealt with by Council over the next few weeks, some by Council request, others arise from ongoing activities in departments. These initiatives include:
· City Plan Neighbourhood Visioning program ($420,000 to in 1999 / $2.25 to $2.9 million total))
· Transportation Plan Monitoring ($80,000 annually)
· Downtown Transportation Plan ($237,000 in 1999 / $400,000 in 2000)
· SAP Sustainment ($100,000 in each of 1999 and 2000)
· Information Technology Staffing ($100,000 in 1999 / $200,000 ongoing)
· Human Resources Staffing ($75,000 in 1999 / $125,000 ongoing)
· Policing costs related to Grey Cup ($125,000 one time)In addition, the 1999 preliminary estimates make no provision for City costs associated with administering the revitalization plan for the Downtown Eastside, beyond the funding provided to the Police Department. If funding is received from the federal government in support of this program, additional City costs can be expected to be in the range of $250,000 in 1999.
The current level of funding in Contingency Reserve will not provide adequate funding for all of these initiatives. If Council is inclined to undertake any of this work, additional funding is recommended in Contingency to at least offset the approvals.
OPTIONS FOR COMPLETING DEVELOPMENT OF THE BUDGET
Council has a range of options for completing development of the 1999 Operating Budget. At either end of this range are the following options:
1. Approve the Preliminary Estimates as Presented Accepting a 4.4%Tax Increase
This option would fund the current budget estimates ensuring no changes to service levels. This position would require Council to accept a property tax increase of 4.4% for 1999, equivalent to about $0.11 per $1,000 of taxable value for residential properties (approximately $42 for the average single family residence) and about $0.60 for each $1000 of assessed value on Class 6 business properties in the City.
2. Adjust the Expenditure Program to Reduce the Tax Increase Below 4.4%
This option would result in reduction of the overall expenditure budget. If Council wished to hold the property tax increase in the City to the 2.9% approved in October, 1998, adjustments to the current expenditure estimates of up to $5.1 million would be necessary.
In anticipation that Council would wish to consider both expenditure program changes, the Corporate Management Team developed a series of revenue and expenditure program proposals for consideration. These proposals were developed by the General Managers, eachof whom was given a target based on the size of their departmental budget in order to identify a total of $5.0 million in expenditure program changes.
Upon review of these proposals. CMT determined that those involving additional revenues or recoveries and expenditure changes not impacting on service levels should be included in the preliminary estimates. In addition, two proposals which require Council approval (detailed in Appendix 2) are included in the current budget position and are recommended by the CMT (Recommendation B):
· elimination of the Bylaw Fines Pre-Collection Service ($110,000)
· changes to On-Street Parking (meter rate) charges ($250,000)The balance of the proposals, totalling $5.9 million are summarized in Appendix 3 and are presented for Council's consideration. Details of the proposals from City departments are included in Appendix 3. The Police, Library and Park Board have provided only general descriptions of their proposed reductions. The following table summarizes the departmental targets; the proposals included in the current budget or recommend for approval; and targets remaining for Council consideration:
Business Group
Target
Included in
EstimatesBalance for Consideration
City Manager (note 1)
$0
$0
$0
Corporate Services
320,000
220,000
93,000
Human Resources
51,000
0
44,500
Fire & Rescue Services
887,000
0
769,000
Engineering Services
665,000
250,000
281,000
GVTA Recovery
0
0
1,800,000
Community Services
206,000
0
206,000
Grants
159,000
0
159,000
Park Board
577,000
0
577,000
Police Board
1,644,000
0
1,644,000
Library Board
397,000
0
397,000
Total
$4,906,000
$470,000
$5,970,500
Note: The City Manager includes the Office of the City Manager, City Clerk, Civic Theatres and Britannia Community Services Centre. No specific proposals have been submitted by this group, however, one of the objective of a detailed review of these budgets will be to identify the appropriate level of reductions to be reported back with the interim estimates.
In reviewing the proposals, Council will note that, for the most part, they impact directly on public service, by either increasing the cost of access to service users or by reducing the level of services provided. This is reflective of the comments made by the Director of Finance and the City Manager in the October 1998 report on the budget that the organization is generally beyond the point where reductions can be absorbed without direct public service impacts.
The proposals do not represent the full range of expenditure program changes that might be considered by Council, however, they are considered to be of lowest priority to the responsible General Managers and are changes that are reasonably achievable in the near term. If Council has other service areas that it wishes to consider in this process, it would be appropriate to request a report back for the City Services & Budgets Committee meeting on February 25, 1999.
NEXT STEPS IN DEVELOPING THE BUDGET
In addition to the options presented to Council for dealing with the projected property tax increase, there is the need for a detailed review of the preliminary estimates submitted by departments. As a result, it is recommended that Council refer the preliminary estimates to the Budget Office to conduct that review with departmental staff, with instructions to:
- bring departmental budgets within appropriate target levels, reflecting only the cost of providing 1998 service levels at 1999 costs.
- remove any supplemental requests that reflect increase service levels or new programs or staffing and instruct departments to bring these requests to Council for consideration, with appropriate offsetting expenditure reductions or revenue increasesIt is anticipated that the interim estimates would be ready to report back to Council in early April.
CONCLUSION
The preliminary estimates of the 1999 Operating Budget indicate that a property tax increase of 4.4% would be necessary to provide for the costs of base City programs and the added basic costs associated with new programs approved by Council. This increase compares with the target tax increase of 2.9% approved by Council in October, 1998 and indicate the impact of:
· elimination of Provincial Equalization Grants
· cyclical downturn in revenues from the development and building industry· delay in major road network recovery from the Greater Vancouver Transportation Authority
· increased public safety costs
· deferral of the City's debenture programCouncil has a range of options for completing the budget cycle with a balanced budget. Approval of a 4.4% tax increase would achieve that result without impacting on public service. Reduction to the expenditure program totalling approximately $5.0 million would be required to bring the budget into balance at the 2.9% target established in October.
The next steps in the budget cycle will be for the estimates to be referred to the Budget Office and departmental staff for detailed review. This review is intended to ensure that only sufficient funding to provide for approved service levels is provided in the 1999 Operating Budget. The Director of Finance, in consultation with the Corporate Management Team will report the results of that review as the 1999 Operating Budget - Interim Report early in April.
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SECTION 1: Summary of Revenues
APPENDIX 2 1999 Operating
Budget
ATTACHMENTS TO THIS DOCUMENT THAT DO NOT HAVE ELECTRONIC COPYARE AVAILABLE ON FILE IN THE CITY CLERK'S OFFICE *****
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