2016 Financial Plan Presentation Feb 18

8/20/2019 2016 Financial Plan Presentation Feb 18

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The Corporation of the City of Nelson


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Council Priorities 2016 1) Waterfront Downtown MasterPlan

Railtown planning project Public art Hall St. & Baker St. – washroom facility Waterfront/Downtown Urban Design

Strategy

2) Community Energy Plan Ecosave Energy Retrofit Program District Energy Business Plan Solar Garden Active Transportation Improvements

3) Bylaw Updates Sewer Regulatory Parks Regulation and Fees

Business Licence

4) Infrastructure Renewal Program

Water & Sewer Nelson Hydro IT Investment Buildings

5) Broadband Fibre lines Educating business community

6) Doing Business Differently Look for ways to generate non-

tax revenues 1.75% taxation cap Managing costs


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Financial Planning Process

Departmental staffprepare budget

Finance staff &senior management

review

Adjustments bystaff

Staff presentationsto Council

Council debate &propose tax rate

Public consultation

Council review ofinput & potential

subsequent changes

Bylaw introductionand adoption

Today


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Financial Planning Environment

Economic performance expected to increase 3.1% in BC

Shifting of responsibilities/downloading

Public demand for services

Increasing demands on aging infrastructure and the needto address this issue

Sustainability & GHG Reduction Plans

Long term planning

Current and potential new private development will assistin generating new market construction taxation revenue

Reduced interest earned on investments


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General Operating Budget PrinciplesCouncil’s Direction to Staff

Support delivery of municipal services

Maintain services delivered at 2015 levels

Reduce costs of service delivery, where possible, whileminimizing service impact levels

Can additional support be found for arts and culture?

Generate new revenue

Minimize tax rate increase Long term planning as a focus

Continue infrastructure program

Implement sustainability principles


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Revenue SourcesOperating Expenses


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Quick Facts

All City Operational revenue close to $42 Million

Total operational expenses $37 Million

Revenue over expenses pay down debt & flow intoOperational and Capital reserves

General Fund Operational expense is budgeted at $17.2Min 2016, funded by $9.2M in Taxation (approx. 2 to 1 ratio)

A 1% increase in taxation produces about $75,000 to coveroperational expenditures

The dividend from Hydro to operations is equal to a 36%tax increase

Only Municipality in Western Canada that generates anddistributes electricity

162 Regular Employees


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City of Nelson 2014 Operating Revenues

41,982,203


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City of Nelson 2014 Operating Expenses

37,142,463


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Five Year Financial Plan

Funding SourcesDebt &Grants

Taxation UserFees

General

Water

Sewer

Hydro

Waste

Areas:

General

Water

Sewer Hydro

Resource Recovery

Costs include: Capital

Operating


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Budget Overview - 2016

Highlights:

New market construction taxation revenue generation for 2016 isexpected to be $98,000

Hydro dividend to operations increased by $100,000

Recommending a 1.75% average overall property tax increase

3% or $15 annual increase in water rates for a home

2% or $9 annual increase in sanitary sewer rates for a home

3.8% increase in Hydro rates effective April 1, 2016 (2.6%

annual increase) No change in garbage and recycling fees

2016 Capital Budget:

• $12.6M including General, Water, Sewer & Hydro


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General Operating Budget PrinciplesCouncil’s Direction to Staff

Support delivery of municipal services

Maintain services delivered at 2015 levels

Reduce costs of service delivery, where possible, whileminimizing service impact levels

Can additional support be found for arts and culture

Generate new revenue

Minimize tax rate increase Long term planning as a focus

Continue infrastructure program

Implement sustainability principles


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2016 Operating Budget Revenues

TAXES58%

GRANT-IN-LIEU OFTAXES

3%

SALE OFSERVICES

17%

OTHER REVENUEFROM OWNSOURCES

15%

GRANTS -UNCONDITIONAL

3%GRANTS -CONDITIONAL

3%INVESTMENT

INCOME1%


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Operating Fund - How did we get there?

Operating Budget Shortfall $(419,250)

New Revenues

New Development – Taxation 98,000

New Tenants at City Hall 25,000

Increase in Prison Maintenance Revenue 10,000

Nelson Hydro Dividend 100,000

Total New Revenues $233,000


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Operating Fund - How did we get there?

Expenditure Addit ions/Reductions

Restructure of Public Works Management Wages $40,000

Add 1 Year Initial Funding of Restorative Justice 15,000

Police Management Restructure 30,000

Shortfall after adjustments 131,250

Proposed 1.75% Taxation revenue $131,250


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Revenue SourcesOperating Expenses

Capital Plan


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• Who does the City collect taxes for?• Assessment * Tax Rate = Property Taxes

• What is the proposed change for 2016?


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2015 Tax Collection Over All Gov’t Sectors

Municipal Taxes $ 8,368,827

School Taxes 8,375,914

RDCK 4,072,753

Regional Hospital 646,190

BCAA & MFA 163,842

Total $21,627,526

Municipal

Taxes

38%

School Taxes

39%

RDCK

19%

RegionalHospital

3%

BCAA & MFA

1%


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Tax Revenues: Growth – Where does

it come from?

New revenue only exists when there is newassessment

Increase in “inventory” i.e. through subdivision ornew construction

General increases in market value do not generatemore tax dollars

Past couple of years has resulted in minimum newrevenues from growth


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Effect of Assessments in 2016 Average market changes: Residential up 3.45% from 2015 Commercial up 4.75% from 2015

As in the prior year Council has directed staff to lower theBusiness tax multiplier in order to offset the larger increasein Commercial assessment values versus Residential in thecurrent year.

This will keep the tax burden consistent with prior yearsinstead of shifting it to the Commercial sector.

Business Tax Class Multiple will likely decrease from 2.04 in2015 to 2.00 in 2016.


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2015 Business Tax Class Multiples

1.75

1.93

2.002.04

2.13

2.14

2.61

2.652.70

3.42

3.82

4.11

4.83

0.00 1.00 2.00 3.00 4.00 5.00 6.00

Rossland

Creston

Trail

Nelson

Kelowna

Nakusp

Fernie

CranbrookInvermere

Castlegar

Revelstoke

Kimberley

North Saanich


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Property Taxes & Assessments

Property Class 2016 AssessedValues

AssessedValue

Percentages

% of PropertyTaxes Levied

Residential $1,288,708,300 79.6% 73.11%

Utility 104,295,375 6.4% 1.28%

Light Industry 1,284,800 0.1% 0.13%

Business/Other 223,974,200 13.8% 25.42%Recreation/NonProfit

1,777,600 0.1% 0.06%

Total $1,620,040,275


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Allocation of 2015 Taxes on an average SFD

Municipal Taxes $1,482

School Taxes 805

RDCK 554

Regional Hospital 96

BCAA & MFA 19

Total $2,956

MunicipalTaxes50%

SchoolTaxes27%

RDCK19%

RegionalHospital

3%

BC Assessment Authority &

MFA1%


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2016 Proposed Budget

Effect on $328,814 Home (Nelson 2016 average)

2015 Actual

2016Proposed

Net Annual

Change

NetMonthly

Change

Property Tax (municipal only) 1,482 1,508 $ 26 $ 2.17

Water Rates (after discount) 512 527 15 1.25

Sewer Rates (after discount) 445 455 10 0.83

Resource Recovery 118 118 0 0

Overall $2,557 $2,608 $ 51 $4.23


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2016 Proposed Budget

Effect on $1,000,000 Commercial Restaurant(50 seats - Nelson 2016 average)

2015 Actual

2016Proposed

Net Annual

Change

NetMonthly

Change

Property Tax (municipal only) $9,300 $9,463 $163 $13.58

Water Rates (after discount) 1,535 1,581 47 3.90

Sewer Rates (after discount) 1,334 1,360 26 2.18

Overall $12,169 $12,404 $236 $19.67


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Where your tax dollar goes:

Corporate

Services, $0.17

Police Services,

$0.22

Fire Services,

$0.12

Other Protective

Services, $0.01

Operations,

$0.21

Rec &

Community

Services,

$0.12

Nelson Municipal

Library, $0.04

Reserves, $0.08Debt, $0.03


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2016 General Budget Expenditures

GENERALGOVERNMENT

SERVICES19%

POLICE PROTECTION18%

FIRE SERVICES9%

OTHER PROTECTIVE

SERVICES3%

TRANSPORTATIONSERVICES

19%

ENVIRONMENTAL

HEALTH SERVICES1%

PUBLIC HEALTH AND WELFARE

SERVICES1%

RECREATION &CULTURAL

11%

INTEREST ANDOTHER DEBT

CHARGES4%

DEBT REPAYMENT5%

CONTRIBUTIONTO RESERVES

10%


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Transit

2015Budget

2016Budget

Transit operating costs $1,293,000 $1,333,000

Debt service costs 199,000 205,000Total costs $1,492,000 $1,538,000

Fares $226,000 $237,000

RDCK/BCT Contribution 968,000 997,000

City Contribution 298,000 304,000

Total Funding $1,492,000 $1,538,000


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Overall Capital Plan – 2016 Highlights

Total Capital - $12.6M$7.1M Water, Sewer & Hydro

Complete Mountain Station UV project

Continuation of CIPP relining Hydro Distribution System upgrades

$5.5M General Capital

General paving & park improvements

Building improvements (i.e. roof replacement)

IT – Network cabling, fiber lines, virtual desktops

Vehicle & equipment purchases


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Why are Assets important?

Assets exist to provide services Changes in services and service levels drive capital costs

Assets depreciate over time Each asset requires ongoing maintenance to maintain the

infrastructure

Many of the City’s assets are long lasting and

very old, such as: Hydro generating station

Water pipes

Roads

Buildings


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Overview – Total City Assets

0

50

100

150

200

250

300

Water Utility Sewer Utility Hydro Utility PW Assets City Assets

M

i

o

Replacement

Historical


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Surplus and ReservesDebt


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Funding - What is a Surplus?

• A surplus is the amount by which revenue exceedsexpenditures in a year. We do not budget for asurplus.

• May be caused by:• Unexpected revenue

• Revenue exceeding budget (i.e. investments, fees -difficult to budget)

• Budgeting may be conservative because we cannothave a deficit

• Vacant positions


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How Should We Spend

General Surplus or Reserves?

Good tool for non-recurring items (e.g. capital or one-

time projects).

Recurring items (e.g. policing costs or parks

maintenance) should generally not be funded through

reserves, as the benefits can be short lived.


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Statutory Reserves

Statutory Reserves are set up by bylaw. The bylawdescribes the specific purpose of the reserve, how it isfunded and what expenditures the funds can be used for.

Examples are: Equipment replacement reserve

Capital projects reserve

Water licence reserve

Land sales reserve Parks acquisition reserve

Non-Utility statutory Reserves at the end of 2015 was approx.$6.2 Million


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Other Appropriated Surplus

Past Councils have directed allocation of surpluses to bereserved from a variety of one-time and ongoing activitiesincluding:

Selkirk College Campus Services – Recycling, Economic Development

Administrative Costs – Insurance, Legal

Development and Infrastructure– Land Sale, Bridges,

Airport, Buildings Fortis Pay Down

Appropriated Surplus at the end of 2014 was $3.4 Million


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Debt and Debt Servicing

Major capital projects typically funded byusing combination of existing reserves and byborrowing funds.

Strategic decision when to borrow vs usingreserves or taxation.

$18.1M in General & Utility Debt

Of $9.6M in General Debt (Dec 31, 2015),only $1.26M is supported through

general taxation.


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2016 $5.5M General Capital Funding Sources

StatutoryReserves80.75%

Contrib.&Donations

6%

Storm SewerParcel Tax 1%

Borrowing0.25%

Recovery1%

SpecialReserves 11%


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Water Licence Reserve

2016 2017 2018 2019 2020

Opening bal. $2,166,656 $1,129,253 $767,353 $875,133 $1,114,628

Water licence rev. 743,867 761,500 773,230 785,195 797,398

BorrowingGrants/Donations

Debt Servicing 175,000 175,000 175,000 175,000 175,000

Capital program (1,978,370) (1,313,400) (857,650) (742,600) (1,288,350)

Interest 22,100 15,000 17,100 21,800 16,000

Closing Balance $1,129,253 $767,353 $875,133 $1,114,628 $814,676


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Water License Building Reserve –

Planned Five Year Expenditures

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2016 2017 2018 2019 2020

Other

Info. Tech.

Sidewalks

Parks

Buildings


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Capital Reserve (Transportation System)

2016 2017 2018 2019 2020

Opening bal. $419,253 $483,753 $441,288 $531,688 $623,888

Parking meterrevenue 730,000 730,000 730,000 730,000 730,000

Other funding 25,000 3,420,331

Road/sidewalkmaintenanceprogram

(700,000) (4,201,496) (650,000) (650,000) (650,000)

Interest Income 9,500 8,700 10,400 12,200 14,100

Closing Balance $483,753 $441,288 $531,688 $623,888 $717,988


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Assets Versus Reserves - 2015

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Water Sewer Hydro General * Roads & Storm

2.9 3.1 3.8 5.4 0.4

45.5

27.9

40.4

58.751.0

$91

$53

$125$122

$200

Annual Contribution

Reserve Balance

Historical Cost

Replacement Cost

$ M i l l i o n s


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Debt Payments– Trend Line – 5 years

$-

$100,000

$200,000 $300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

2016 2017 2018 2019 2020

Sewer Utility

Water Utility

Hydro Utility

General (NET)

General (GROSS)


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Statutory Reserves – Trend Line

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

2016 2017 2018 2019 2020

Water Licence

Capital (Roads)

Equipment

Water UtilityHydro Utility


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WaterSewer

Resource Recovery

Nelson Hydro


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Overview – Water Utility

• Strategic Direction:• Long term planning critical to maintain safe and

accessible water and fire flow protection• UV disinfection, water conservation analysis, and other

secondary water sources (i.e. Grohman Creek)• Continuation of watermain replacement and strategicand data gathering water metering plan

• Rates:•

Council approved 3% or $15 annual increase in ratesfor 2016 (after discount).• Rates proposed to increase 3% per year for the next

10 years


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$0

$200

$400

$600

$800

$1,000

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

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Projected Water Rates - SFD


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Overview – Water Utility 2016

Operating Highl ights Capital Highlights

Revenue:

User fees $3.4M

Other $163,000 Operating costs:

Approx. $1.2M

Debt Service:

$106,000 per year

No new debt planneduntil 2019

2016 Budget $2.5M

Water treatment $440,000

Continuation of UVDisinfection (Mt. Station)

ICI Metering & data collection

Other infrastructureexpansion & replacement:

Source/Supply $620,000 Water Distribution $1.5M

2016-2020 Capital• funded through User Fees, Gov’t

grants, and borrowing (2019)


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Overview – Sewer Utility

Strategic Direction: Sewer Masterplan – asset repair & maintenance

Develop replacement program in conjunction withwater utility and road network upgrades

Improved technology “CIPP (cured-in place pipe)” hascut cost of relining sewer pipes

Rates: Council approved 2% or $9 increase in 2016 sewer

rates

Rates proposed to increase 2% per year on average


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$0

$200

$400

$600

$800

$1,000

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

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2 0 0 5

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2 0 1 5

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2 0 2 0

2 0 2 1

2 0 2 2

2 0 2 3

2 0 2 4

2 0 2 5

2 0 2 6

2 0 2 7

2 0 2 8

2 0 2 9

2 0 3 0

Projected Sewer Rates - SFD


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Overview – Sewer Utility

Operating Capital

Revenue:

User fees $2.9M

Other $103,000

Operating costs:

Approx. $1.7M

Debt Service:

$93,000 in 2016

2016 Budget $1.5M Infrastructure expansion and

replacement: Lift Stations $275,000

Grit Chamber & Surge Tank$150,000

CIPP Relining $600,000

Sewer Main $350,000 (incl.Hall St. Phase II design)

2016-2020 Capital funded through User Fees &

grants


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Overview – Resource Recovery Utility

The waste function is based on a fee for servicemodel

The yearly charge per household pays for the

collection 2016:

No increases proposed

Monitoring the increase in transportation costs to

truck garbage to new RDCK transfer station The City is receiving $140K annually from MMBC

to collect recycling – this revenue is currentlybeing used to fund operations


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Overview – Hydro Utility

Strategic Objective:• Provide safe and efficient generation, distribution and sale

of electrical energy

Strategic Infrastructure Priorities: Transmission Distribution Systems

Reliability (Vegetation Mgmt & Voltage Conversions) Safety (Porcelain Cut-Out Changes, Pole Replacements)

Power Plant – G5 Protection & Control Upgrade, Head gate

Strategic Business Priorities: District Energy Business Plan EcoSave Energy Retrofit Program


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2016 Budget:• Status quo in most areas with a one time increase for

decommissioning the City substation;• Decrease in capital budget - largest capital upgrades to the

power plant, substations, and transmission lines arebehind us now.

Nelson Hydro 2016 Contributions:• $2,700,000 to City of Nelson operations

• $568,000 Water Licence Reserve• $90,000 to the Nelson District Community Complex• Utility pays a share of admin costs


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2016 General Rate Changes (prelim. data)

(3.80% Apr 1st - equivalent to 2.6% annual)

Average 2016 Nelson Hydro residential bill:

approximately $92.01 / month

an increase of $2.25 / month from 2015


Nelson Hydro Apr 01 3.80%

FortisBC Jan 01 2.96%

Municipal Utilities various 3.0 – 9.0%BC Hydro Apr 01 4.0%


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Overview – Hydro UtilityOperating Capital Revenue:

Energy Sales $16.6M

Other Revenues $440k

Operating costs: Est. $4.6M

Power Purchase: Est. $6.8M

Debt Service: Debt payments of $499k

Transfers To City Funds $3.4 M

To Capital Reserve $2.3 M

2016 Budget $3.1 M

Infrastructure Renewal:

Vegetation Management G5 Upgrades

Pole Replacements

60L3 Rebuild

2016-2020 Capital fundedthrough Energy Sales


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Email: [email protected]
mailto:[email protected]:[email protected]

Documents

2016 Financial Plan Presentation Feb 18