City's Reserves down $122-mil in one year: Audit, Finance & Administration for October 8, 2013

Tuesday’s Audit, Finance & Administration Agenda is measured in hundreds of pages – well over 400 pages.

With none of the mayoral hopefuls on the committee, it should be immune from the silly season election posturing that is adding hours to other meetings.

The Committee will consider approving an exception of $862,409.15 in Development Charges for the Eva Rothwell Resource Centre. They are installing improvements for accessibility and much like St. Leonard’s, are required to rezone. City staff are recommending waiving the fees.

City reserve funds are down $122-million in 2013 due to the new stadium and Council’s funding of provincially cut social services among other the items. See the list below.


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Full Agenda

Items of Note
City’s Credit Rating | Waving DCs for Eva Rothwell Resource Centre | City Reserves Down $125-mil in one year


Minutes from Previous Meeting
3.1     September 9, 2013

Public Delegations
None

Delegation requests
None

Consent Items
5.1      Capital Projects’ Status as of June 30, 2013 (FCS13066) (City Wide)
5.2     Projected Costs for Retiree Benefits (FCS13059) (City Wide)
5.3     Monthly Status Report of Tenders and Requests for Proposals for August 3, 2013 to August 30, 2013
5.4     Reserve/Revenue Fund Investment Performance Report – June 30, 2013 (FCS13063) (City Wide)
5.5     Hamilton Future Fund Investment Performance Report – June 30, 2013 (FCS13064) (City Wide)
5.6     Cemetery Accounts Investment Performance Report – June 30, 2013 (FCS13065) (City Wide)
5.7     2012 Standard & Poor’s Credit Rating (FCS13072) (City Wide)
5.8     LGBTQ Advisory Committee Minutes
(a)      May 16, 2013
          (b)      May 29, 2013

Discussion Items
8.1     Community and Emergency Services – Corporate Trunked Radio Upgrade Project (AUD13027) (City Wide) (Tabled from September 9, 2013)
8.2     Request to Consider making Services Eligible under the Development Charges Act (FCS13044(a)) (City Wide)
8.3     Robert Land Community Association Request to have Development Charges and Cash-in-Lieu of Parkland Dedication Fees Waived (FCS13071) (Ward 3)
8.4     2012 Reserve Report (FCS13061) (City Wide)
8.5     Audit Report 2013-05 – Community and Emergency Services – Food Services (Arenas and Recreation Facilities) (AUD13026) (City Wide)
8.6     Audit Report 2013-07 – Public Works and Finance and Corporate Services – Inactive Landfill Sites – Controls & Liabilities (AUD13032) (City Wide)
8.7     Debt Management Policy and Lease Financing Policy (FCS13074) (City Wide)

Other Business
11.2   Resignations from the Status of Women Advisory Committee
(a)      Uzma Qureshi          (b)      Heather Judson

Closed Session
None

Source: City of Hamilton Agendas Site


Items (Consent Agenda):

Capital Projects Status Report for AF&A | Costs for Retirement Benefits | Investments | City’s Credit Rating

Capital Projects Status Report for AF&A

  • **The report says the City’s Information Services (IT) security improvements are not on target. Thus far, none of the capital budget is spent. The report states:
  • “High level risk assessment completed for SMT in June 2013 identified the projects that we need to review. This work will begin in the fall of 2013 and continue through 2014.”
  • The new IS perimeter firewall project “to replace current aging firewall” is also list as not on target and “to be installed in Q3 2013”. The original target date was in 2012.
  • The City plans to spend $287.575 on Microsoft Office and Windows 7 during the remainder of the year.
  • Two Clerks Records Management projects, one scheduled for completion in 2008, the other in 2011, remain incomplete. The report says they will be completed by year-end.

Costs for Retirement Benefits

  • The City owns $36,284,172 to staff for banked “sick days”. Currently, only fire and police officers are still able to bank sick days. $19,343,081 is owed to police officers, $15,832,992 to fire, and $1,108,099 to others. There is $9,109,939 in reserve to cover payouts to retiring staff. It is expected that $3,620,000 will be the annual payout during the next four years. - Of the reserve funds, $5,461,384 is for police payouts. Police payouts are expected to average $1,639,000 each year until 2017. $1,024,000 of the annual police budget is earmarked towards these payments. The staff report says police will need to increase their annual contribution – meaning an increase to the police budget is needed for this.
  • Health/Dental/Life benefits cost for retirees will increase as well. Between police and city retirees, there is an expected annual deficit of $2,034,000 that will need to be covered. Of this $567,000 will need to be funded from the police budget.
  • Retired Councillors from prior to amalgamation who served two terms are entitled to a “Deferred Income Plan”. Staff say the plan has an estimated cost of $250,000 each year, $50,000 of which is unfunded. This could increase in 2015 as two of the current Councillors qualify (Merulla and Jackson) for the plan. (Collins was elected mid-term in 1995)

Investments

  • Future Fund investments are performing well, Reserve/Revenue investments are above inflation, Cemetery Account investiments are below benchmarks.

City’s Credit Rating

  • Standard & Poor’s Credit Rating for the City Remains Stable. However, the credit report expresses concern about the City’s growth in debt forecasted for the next few years. The City’s debt will exceed $1-billion dollars in 2016. The debt was $297-million in 2009. Most of the new debt is for improvements to the water treatment plant and new growth. Much of it will be recovered from water charges and development charges.
  • The City’s AA rating is equal to Barrie, Kingston, Niagara, Toronto, and Windsor. Brantford, Guelph, Ottawa, and Regina are all rated AA+. York is AAA-. Durham, Halton, London, Peel, and Waterloo are AAA.

Items (Discussion Agenda):

Encrypted Radios Overbudget | Development Charges to fund hospitals, parkland, and waste management | Waving DCs for Eva Rothwell Resource Centre | City Reserves Down $125-mil in one year | Arena Food Service Cash Handling | Inactive Landfills – financial controls | Debt Policy

Encrypted Radios Overbudget

  • The city’s new encrypted radio was $901,330 overbudget costing $24,215,298. Council asked the Internal Auditor to investigate. $876,740 in “non-recoverable taxes” were not included in the initial budget. There was a $11,074 in comparing ledgers. The Fire Station Alerting System had an overage of $10,266 in “non-recoverable taxes” and was $3,218 over budget.
  • The “non-recoverable taxes” were including in the contract with Motorola but not included in the cost by City staff.

Development Charges to fund hospitals, parkland, and waste management

  • **City staff are recommending Council support a resolution from the Township of Adjala-Tosorontio asking the province to allow the collection of development charges (DCs) to fund new hospitals. The province is increasingly asking municipalities to contribute to health care facility expansions. Municipalities must fund these contributions from their property tax levies as they cannot charge developers for the cost of new hospitals. City staff recommend Hamilton add cost of adding parkland and waste management to DCs.
  • City staff also recommend asking the province to remove the limitation of the 10-year average level of service restriction for transit services. The City cannot charge DCs for new transit improvements.

Waving $862,409.15 in City Fees for Eva Rothwell Resource Centre to make building accessible

  • **The Keith neighbour’s community centre is becoming fully accessible thanks to a grant from the Federal Economic Development Agency for Southern Ontario and the City of Hamilton. First, much like the St. Leonard’s Centre, they need to change zoning to receive a building permit. The existing zoning is for its prevent use as a school and must change to community centre.
  • With the change comes $822,409.15 in development charges and $40,000 in parkland dedication fees. As well, there are Education Development Charges of $12,269.20 to the Catholic School Board.
  • City staff are recommending the City’s fees be waived and that the education DCs will need to be addressed by the Catholic School Board.
  • The project must be substantially complete by March 31, 2014 and City staff are recommending Council approving the waiving this week so the work can begin.

City Reserves Down $122-mil in one year

  • City of Hamilton Reserve History (City of Hamilton)City of Hamilton Reserve History (City of Hamilton) [Click to Enlarge]

City Reserves were $748,437,701 at the beginning of 2013, $825,386,569 when the Future Fund is included.
- City Reserves will be $669,141,594 at the end of 2013, $702,831,034 when the Future Fund is included. (Future Fund A is down to $26.6M, it suppose to be $100M) - City Reserves are down $122-million in one year. Some of the factors: - $198.1M for capital infrastructure, $147.3M improving existing infrastructure, $50.8M for new infrastructure - $18.5M to Operating Budget to avoid tax increases for administrative costs and transit. - $31.9M for new vehicles and equipment - $14.6 million provision from Development Charge reserves to repay forecasted borrowings for the DC funded portion of growth related capital projects. The debt is repaid from future DC collections. - $40.7M from Future Fund for new stadium - $2.4M for HECFI transition costs with privatization - $3.4M for Homelessness Prevention Initiative - $3.4M for Basement Flooding Assistance Program and Protective Plumbing Program - New reserve be created for parkland acquisition for future school closures using $2.0 million in the Capital Levy Reserve and $1.5 million in a Capital project fund. - Tax Stablization Reserve is down to $6,839,708 at the end of 2013 from $15,412,648 at the beginning. This fund is used to prevent tax increases from unexpected mid-year expenses and is the main protection against tax increases in the event of a disaster. Provincial cuts to social services are being funded from the reserve and a primary driver in the decrease.

Arena Food Service Cash Handling

  • **Internal Auditor recommending improvements to cash registers and cash handling.

Inactive Landfills – financial controls

  • Internal Auditor recommending minor changes to administrative processes for monitoring inactive landfills and for monitoring the status of the Glanbrook landfill.

Creation of Formal Debt Policy for City of Hamilton

  • One of the recommendations of the S&P credit rating report is that the City create a formal debt policy to give bond buyers more confidence. The policy outlines what the City can borrow for and how high the City debt can be expressed a percentage of tax revenue (60%)
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