Responding to the F sponding to the Fiscal Challeng scal Challenge: - - PowerPoint PPT Presentation

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Responding to the F sponding to the Fiscal Challeng scal Challenge: e: 2016-19 Budg 2016-19 Budget Guidelines et Guidelines

Budg Budget T et Task F sk Force May 26, 2015

Financial Sustainability: Always a Key Priority

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Ag Agenda enda

• Purpose and Mandate of the Task Force
• The Fiscal Challenge
• Implications for 2016-19 Budget Guidelines
• Next Steps

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Th The T Task F Force

• Council has limited tax rate increases to 3% or less for

the remainder of the Term of Council

• This means budget reduction targets of approximately

$15 M in 2016, $14 M in 2017, and $17 M in 2018.

• The mandate of the Task Force is to study the options

available to achieve this budget reduction plan.

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Alignment with the Budg Alignment with the Budget Cy et Cycle

Budget Cycle Task Force Develop Guidelines (May 2015) May 2015 - Confirm work plan and discuss principles to guide reductions Issue Instructions (June 2015) June 2015 – Review staff reports on fee reviews, leases, and P3s Department Budget Submissions Due (August 2015) July/August 2015 – to be determined through confirmation of work plan Staff/SMT/City Manager Review (September/October 2015) September 2015 – develop report to FAA Draft Budget Presentation to FAA (November 2015) October/November 2015 – potential incorporation of recommendations into Draft Budget

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Fiscal Challeng scal Challenge: Ga e: Gap of p of ~ $15M/yr ~ $15M/yr

Note: Some numbers may not add due to rounding

$M 2015 2016 2017 2018 Budget Recognized Plan Gross Operating Expenses 258.7 273.0 281.3 290.4 Less: Non-Tax Revenue

• 87.7
• 84.8
• 84.8
• 85.1

Assessment Growth

• 3.2
• 3.4
• 3.8
• 4.0

Levy Requirement 167.9 184.8 192.7 201.4 Budget Reduction Target

• 14.6
• 13.9
• 16.9

Net Levy Requirement 167.9 173.3 178.7 184.4 Incremental Levy 4.4 5.1 5.4 5.7 Tax Rate Increase 2.70% 9.87% 4.12% 4.24% Budget Reduction Target Required

• 6.87%
• 1.12%
• 1.24%

Tax Rate Increase 2.70% 3.00% 3.00% 3.00% Tax Bill Change for the Average Home $34 $39 $41 $42

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• Additional resource requests for new

initiatives

New

• Impact of growth and

previous decisions

• Less - growth in tax

revenue from assessment growth

Growth

• Non-discretionary,

including contingency and corporate adjustments

Status Quo

Budg Budget F et Frame amewor

• rk

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Wha What mak t makes up s up the Ga the Gap? p?

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11%

2015 2016 2017 2018

New Growth Staus Quo

4.12% 9.87% 4.24% Council Target 3% 2.7%

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Key components of y components of the Ga the Gap: 2016 p: 2016

• Status Quo Pressures

– $4.8M in salary and progressions and known economic adjustments – $2.9M in corporate contingency, primarily for economic adjustments – $1.7M reduction in expected Power Stream dividends – $0.9M net impact of phasing out reliance on reserves (over 5 years) – $0.6M related to 2015 phase-in of increased insurance costs

• Growth-related ARRs

– $2.6M phased-in from 2015 – $1.3M deferred from 2015 – $3.1M requested for 2016

• New ARRs

– $1.1M deferred from 2015 – $0.9M requested for 2016

Note: Some numbers may not add due to rounding

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La Labour bour: ~ 60% of : ~ 60% of Oper Operating Budg ting Budget et

• Constraining labour cost growth is critical

– challenging to do so while minimizing impact on service delivery

Potential Action Considerations

Reduce or eliminate economic adjustments Dependent on collective bargaining process – May result in not attracting the best talent – We are competing with other GTA municipalities for talent. Reduce employee benefit costs Dependent on collective bargaining process - May result in not attracting the best talent – We are competing with other GTA municipalities for talent. Invest in workforce planning Upfront effort for analysis and benchmarking could identify

• pportunities to reallocate resources and/or slow down the

addition of new resources to service growth Transformational Initiatives Could enable reduction or reallocation of resources to service growth e.g. Implement ICI recommendations. Invest in technology that transforms the workforce from transactional to analytical. Temporary hiring freeze with increased gapping Could have operational impacts; difficult to manage in the absence of workforce planning capability.

Shorter-term Longer-term

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Rev Revenue

• Additional revenue could make a significant difference in

the amount of expenditure constraint required

• Alternative revenue generating options are possible

– research has been underway to quantify the opportunities and assess the policy implications

• Awaiting outcomes of four fee reviews

– Recreation and Culture – By-law and Compliance

• Some existing fees not yet at cost recovery target set by

Council

– Planning – Engineering

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Comparison to Cost R Comparison to Cost Reco covery T ry Targets ets

44% 77% 73% 38% 100% 34%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Recreation Licensing Planning COA Building Standards (OBC) Building Standards (Non-OBC) Department Costs Full Cost Recovery Percentage of Full Cost Recovered

Revenue $19.1M $1.2M $4.6M $0.5M $10.5M $0.5M

Potential incremental revenue of over $28M

Note: excludes By-law & Compliance and Animal Services as they do not currently have a cost-recovery target

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Gr Growth R

• wth Rela

lated Pr ted Pressur essures

2016 2017 2018 $M $M $M Implementation of Previous Decisions: New infrastructure operating (ARRs) 4.2 3.6 1.7 Debt service - Roads Program 0.4

• 1.9

2.7 Infrastructure reserve contributions (reduced by 50%) 0.8 2.1 1.1 Subtotal 5.5 3.7 5.5 Maintain/Growth: Contract and utility volume increases 0.2 0.2 0.3 Program and service volume (ARRs) 2.6 1.3 0.3 User fee and service charge volume

• 0.5
• 0.9
• 0.2

Subtotal 2.3 0.7 0.4 Assessment growth:

• 3.4
• 3.6
• 3.7

Growth-Related Incremental Costs: 4.4 0.8 2.1 2.57% 0.44% 1.03%

Notes: Presented on an incremental basis Some numbers may not add due to rounding

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Additional Measur Additional Measures es

• Even if the City successfully adds non-tax revenue and

constrains wage growth, a large gap will remain

– Previous budgets have utilized various sources of one-time or reserve funding and continued deferral of ARRs with limited focus on managing base costs

• Imposition of base savings targets could provide

flexibility to invest in innovation

• Growth-related costs could be limited to available

assessment growth

• Three possible models to achieve across the board or

targeted reductions

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Constr Constraint Models aint Models

• Option 1 is to derecognize all ARRS and require base

departmental expenditure reductions of about 2%

– Departments could resubmit ARRs only if they were fully offset

• Option 2 would be to increase the departmental expenditure

reductions to about 5% to be able to fund some ARRs

• Option 3 would increase the departmental expenditure

reduction targets to about 6% to fund most of the currently recognized ARRs

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Ideas g Ideas gener nerated thr ted through 2015 Pr

• ugh 2015 Process
• cess
• Revenue tools: sponsorships and new/increased fees

– May include revisiting cost recovery targets

• Examining innovative service delivery models

– Alternative service delivery, innovative contracting, organizational realignments

• Reducing program and service costs

– This is about becoming more efficient

• Deferring growth-related capital investments to delay
• perational impacts

Budget guidelines could provide direction on where to focus our efforts

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Pr Proposed Budg

• posed Budget Guidelines

et Guidelines

Before Proposed Focus on rules for adding to base department costs Cost increases must be absorbed through offsets or efficiencies Undifferentiated ARR evaluation process Separate evaluation processes for growth-related and new ARRs Unsuccessful ARRs deferred to following year Unsuccessful ARRs not deferred but may be re-submitted in subsequent budget cycles No limit on amount of ARRs that could be submitted ARRs must be offset (savings, fees, assessment growth) Guidance on increasing fees by at least the rate of inflation Business case and timelines on achievement of cost recovery targets required New! Guidelines for savings proposals that minimize impact on services

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Ne Next Ste xt Steps

• Confirm work plan (today)
• SMT to select preferred constraint model (Wednesday)
• Guidelines to FAA (due June 4, 2015)
• Next Task Force Meeting Dates:

– June 3, 2015 1-3 pm – June 9, 2015 10-12 pm – June 22, 2015 9:30-11:30 am – September 21, 2015 9:30-11:30 am – September 22, 2015 following Committee of the Whole (Working Session)

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Appendix Appendix

Financial Sustainability: Always a Key Priority

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Key Components of y Components of the Ga the Gap

2016 2017 2018 $M % $M % $M % Status Quo Pressures 10.1 5.92 6.2 3.21 6.1 3.01 Growth Pressures 4.4 2.57 0.8 0.44 2.1 1.03 New Initiative Pressures 2.4 1.38 0.9 0.47 0.4 0.21 Incremental Levy Requirement 16.9 9.87 7.9 4.12 8.6 4.24 Budget Reduction Target 11.8 6.87 2.1 1.12 2.5 1.25 Incremental Levy Target 5.1 3.00 5.8 3.00 6.1 3.00

Notes: Presented on an incremental basis Some numbers may not add due to rounding