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HomeMy WebLinkAboutFND-023-19Clarftwn Staff Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: Joint Committees Report Number: FND-023-19 Date of Meeting: September 9, 2019 By-law Number: Submitted By: Trevor Pinn, Director of Finance/Treasurer Resolution#: 1C-111-19 Reviewed By: Andrew C. Allison, CAO File Number: Report Subject: 2020 Budget Guidelines Recommendations: 1. That Report FND-023-19 be received; 2. That Staff prepare a draft budget with a target municipal increase of 3.85%; 3. That Staff include within the draft budget requests for funding from external agencies up to a maximum limit of 3.15%; 4. That the 2020 Budget Schedule as outlined within the report be approved and that the Clerk establish the meeting dates; 5. That the Budget Policy (G14) be amended to include that the budget ratification shall be targeted for the second Council meeting of any given year; and 6. That all interested parties listed in Report FND-023-19, and any delegations be advised of Council's decision. Page 327 Municipality of Clarington Page 2 Report FND-023-19 Report Overview Council adopted a budget policy which provides guidance on the preparation of the annual operating and capital budgets. The budget policy requires an annual report to Council to determine the target municipal levy change for the following year. This report meets that policy requirement. 1. Background Budget Policy 1.1. On June 10, 2019, Council approved a new Budget Policy which provides guidance on the creation and preparation of the annual operating and capital budgets. 1.2. As part of the policy, the Director of Finance / Treasurer is required to report to Council in September of each year with a report seeking guidance on the target municipal levy increase for the upcoming budget year. This report meets this policy requirement. Economic Factors 1.3. The Bank of Canada is forecasting CPI to grow 1.9% and GDP to grow 1.8% in 2020 according to their July Monetary Policy Report. This is down from 2.0% and 2.1 % respectively in their previous report. 1.4. CPI and GDP are two indicators of inflation; however they are not necessarily reflective of the Municipality's inflation as the "bucket" of goods and services for CPI and GDP are more consumer based than the Municipality's. 1.5. The Municipality currently receives annual capital funding from the Province of Ontario under the Ontario Community Infrastructure Fund. This fund provides over $2.1 million in annual funding and is limited to "small" municipalities with populations under 100,000. It is anticipated that after the next census that the Municipality will no longer qualify for this funding. The Province has also stated that they are reviewing transfer payment programs, this program may be subject to change from the Province. This funding is currently fully utilized annually as part of the Municipality's infrastructure replacement program; the elimination of this program would have a significant impact on the Municipality's ability to invest in infrastructure. Municipality of Clarington Report FND-023-19 2. Budget Calendar Overview Page 3 2.1. The budget sets spending guidelines and priorities for the Municipality's operating year of January 1 to December 31. It is beneficial to pass the budget early in the year to allow staff sufficient time to complete the capital plan and adjusting operating priorities. 2.2. Historically, the Municipality has passed its budget between late January and mid March. The 2019 budget was presented to GGC on February 19, 2019, this was later than January 29, 2018 in the prior budget year. 2.3. The proposed date for 2020 follows the first council meeting cycle of the year. 2020 Key Dates 2.4. The following timeline is proposed for the preparation of the 2020 budget: October 25, 2019 November 8, 2019 Mid -November December 6, 2019 January 10, 2020 January 13, 2020 January 20, 2020 2020 Operating and Capital Budget Due from Departments 2021 to 2024 Operating and Capital Forecasts Due from Departments Department Head Meetings with Treasurer and CAO Budget Workshop -'/2 day Special GGC Meeting — External Agencies Special GGC Meeting — Budget Deliberations Council Meeting — Budget Ratification Municipality of Clarington Page 4 Report FND-023-19 2.5. Based on the three week cycle that the Municipality follows, an alternate schedule for meetings would be: January 31, 2020 Special GGC Meeting — External Agencies February 3, 2020 Special GGC Meeting — Budget Deliberations February 10, 2020 Council Meeting — Budget Ratification 2.6. The January date is preferred as these dates were proposed back in April 2019 and members of Council and staff have made plans around these dates. Future Budget Dates 2.7. For improved predictability, long-term planning and efficiency, it is suggested that the budget meeting dates follow a consistent timeframe from year to year. This will ensure that Members of Council and senior staff are able to be available for key budget meetings in and around the New Year. 2.8. It is proposed that going forward the budget ratification be set for the second Council meeting of the year. This would have ratification of the budget on the following dates: • February 8, 2021 • February 7, 2022 3. Target Municipal Levy Increase Range Per Budget Policy 3.1. The Budget Policy outlined a range for tax levy increased based on a combination of Consumer Price Index (CPI) and asset management requirements. 3.2. The low end of the range is set at 75% of the CPI value plus 1.5% as indicated in the asset management plan. 3.3. The high end of the range is set at 125% of the CPI value plus 2.0% as indicated in the asset management plan. Municipality of Clarington Page 5 Report FND-023-19 3.4. The July 2019 all items CPI was 2.10% for Ontario. The following table outlines the Municipal Tax Levy increase range: Recommended Target 3.5. Staff recommend that the target be the mid -point of the range, this would be a target which reflects CPI (2.1 %) plus an amount to reduce the outstanding infrastructure funding gap. The mid -point of the above range is 3.85%. 3.6. Based on the 2019 municipal levy of $59,822,692, the midpoint would provide approximately $1.3 million for operating expenses (including transfers to reserves and reserve funds, and debt servicing payments) and $1.1 million for capital expenses; this would be in addition to new growth in assessment (NOT market growth which does not have an effect on the tax levy). 3.7. The Budget Policy also outlines that external agencies are limited to an increase of 150% of the CPI. Therefore, for the 2020 taxation year, external agencies are capped at a maximum 3.15% increase. 4. Key Assumptions for 2020 Levels of Service 4.1. The budget will be prepared assuming the same levels of service from the 2019 fiscal year. Any proposed changes to non -mandated levels of service, either decreases or increases will be separately identified and provided as a decision item for Council. Municipality of Clarington Page 6 Report FND-023-19 4.2. Several services, such as winter control, are mandated by the Province of Ontario. Changes to these regulations may result in mandatory changes to levels of service. As these are mandated any changes in required levels of service will be included in the budget, with the impact quantified for Council. 4.3. The Province of Ontario has undergone a review of Regional Municipalities. It is not known when this report will be made public, or what changes to services may be affected. The budget will be prepared assuming that no changes to the current division of services occurs, unless a formal announcement from the Province of Ontario is made. 4.4. During the 2019 budget deliberations Council expressed concerns regarding the level of service for playground equipment. Currently annual funding allows for two of the 62 playgrounds to be replaced each year; this represents a lifespan of approximately 30 years. If Council would like to see a change in this level of service it will necessitate a change in the funding levels towards parks. 4.5. Changes to service levels, if directed by Council, can be taken into account during the preparation of the draft budget. This would allow for a more complete picture when prioritizing projects to meet the budget target. 4.6. The Municipality is undergoing an organizational review which will be finalized by November 30, 2019. It is anticipated that options for implementation will be presented and may require phasing over a long-term period; therefore the preparation of the budget will not include any changes resulting from this report. Recommendations that can be implemented in 2020 will be pursued, with savings being recognized in 2020, if possible. 5. Citizen Engagement Activities 5.1. For the 2018 and 2019 budget preparations the Municipality of Clarington conducted an online budget survey to solicit feedback from residents on areas which they felt should have lower, similar or higher levels of funding. 5.2. In 2019, fewer than 140 responses were received despite the survey being on the Municipality's website for almost six weeks and advertised through social media platforms. 5.3. While it is recognized that online surveys provide easy access for residents, uptake was minimal from residents which may be a result of technological and demographical barriers. Municipality of Clarington Report FND-023-19 Page 7 5.4. To provide an alternative means of engagement, as well as providing an opportunity for public education of the budget process, a series of "Town Halls" are being proposed for the following dates and locations: • Clarington Public Library Newcastle Branch — October 8 from 6:OOpm to 7:45pm • Clarington Municipal Administration Centre (Council Chambers) —October 10 from 6:OOpm to 7:45pm • South Courtice Arena — October 17 from 6:00 to 7:45pm 5.5. Members of the public, as well as Members of Council, are also encouraged to contact the Finance Department if they have any questions regarding the budget process, dates, and impacts. 6. Concurrence Not Applicable. 7. Conclusion It is respectfully recommended that the budget target, which is subject to normal deliberations, be set so that staff may prepare a draft budget that meets Council's expectations. A target set which takes into account an inflationary index will ensure that levels of service are maintained. Staff Contact: Trevor Pinn, B.Com, CPA, CA, Director of Finance / Treasurer, 905-623-3379 ext.2602 or tpinn@clarington.net. Attachments: Not Applicable Interested Parties: There are no interested parties to be notified of Council's decision.