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RFD- 4125 Business Items   Item #:   4. a.    
Committee of the Whole Meeting Agenda
Meeting Date: 11/02/2020  
Title:    2021-23 Corporate Plan - Wolanski
Presenter: Wendy Boje
Department: Corporate Services  
Strategic Vision Element: This topic relates to all three of the City’s strategic vision elements contained in Council’s Strategic Plan Related Goal:

Information
Request for Decision Summary
Administration brings forward a Corporate Plan to Council’s Committee of the Whole each year which outlines the investments required to support existing service levels as well as new investments in programs and resources that are needed to meet the needs of a growing community in addition to regional obligations. 

Over the course of the November 2-4 meetings, Committee is asked to provide feedback on:
1.    Fiscal policy:
  • creating municipal life-cycling reserves 
2.    Expenses:
  • funding for business cases, including allocation of municipal operational;
  • funding for municipal reserves for life-cycling;
  • funding for life-cycling costs outside of the business cases; and
  • funding for public budget submissions.
3.    Revenue options:
  • five-year dedicated tax increase for life-cycling;
  • seven-year adjustment of residential and non-residential tax rate split; and 
  • one-time increase of ATCO Gas franchise fee.

Proposed Motion
That the deliberations and Committee input provided on the proposed 2021 to 2023 Corporate Plan be brought to Council for consideration. 
Background/Analysis
The Municipal Government Act RSA 2000 c M-26 (the Act) requires under Financial Administration Part 8 that a Council to adopt an operating budget and a capital budget for each calendar year. The Act also requires that the budget must include estimated amounts needed to provide for Council’s policies, programs and financial obligations. It must also include estimated amounts for sources of revenues and transfers to surplus. Furthermore, a municipality must prepare a written plan respecting its anticipated financial operations for the next three financial years and a written plan for anticipated capital property additions over a period of at least the next five financial years. 
 
The City of Spruce Grove’s Corporate Plan provides Council with a comprehensive operational and capital plan with operating and capital budgets for municipal, utility and developer entities. The Corporate Plan is the principal guiding document for governance, community development and service delivery. Operational requirements are identified over a three-year horizon while capital planning initiatives are anticipated over the next 10 years. Council only approves the first year of the budget (i.e. 2021); the remaining years are provided for planning and contextual purposes. 
 
The fiscal plan reflects the financial requirements to support existing services and/or changing services as well as recommended new work. The financial requirements include operating revenue and expenses and capital funding sources and expenditures. It is worth noting that while this corporate plan has addressed the revenue for the proposed expenditures, this is not currently a recommended balanced budget, hence the need for deliberations.
 
 2021-23 Corporate Plan 
Due to the impacts of COVID-19, decreasing oil prices and many other factors, Alberta is experiencing an economic downturn. The City is currently shifting away from a time of rapid growth and focus on new infrastructure to maintaining our existing resources and investments to ensure they continue to serve the community well over the coming years. Challenging decisions will need to be made with this year’s budget and financial resources will need to be built over the next few years to fund future infrastructure needs. 
 
Reframe 2020, COVID-19, the City’s current financial position and the desire for more efficient and strategic processes has led to the development of a more holistic and corporate approach to planning in conjunction with the development and implementation of a fiscal sustainability framework. 
 
The Corporate Plan for 2021-23 focuses on the “triple bottom line” of economic, social and environmental sustainability and includes financial approaches to inform how we are telling the story of what the City of Spruce Grove wants to achieve. 
 
  Key Changes in this plan include: 
  • New budget format – split of capital and operational costs 
  • Proposed creation of municipal reserves for life-cycling
  • Articulation of a performance measurement approach that will be built over the next few years. As the data matures, the information will support cost analysis of service level changes and inform investment decisions and trade-off discussions. 
  • Introduction of three Strategic Portfolios and supporting business case model to inform integrated decision making.
 
Assessing the City’s Financial Health
In 2020 the City commenced the build of a Fiscal Sustainability Framework with the principles of transparency, sustainability, equity and competitiveness. This framework combined with the revised budget format (splitting out of operational and capital budget) and the proposed development of municipal reserves for the purposes of maintaining the City’s assets will allow Council and citizens to have a clearer picture of the City’s financial health.

The current draft of the Corporate Plan has incorporated a number of substantive priorities, from the Arena Complex to the City Centre Area Redevelopment Plan to the incremental funding of life-cycling reserves.  As a result, the common three indicators (net financial assets/net debt; long term debt; municipal fund) of the City’s financial health are somewhat strained in the out years of this Plan.

While the 2021 proposed operating budgets and staffing have held to the same line for the past few  years, the continued strain on maintaining an appropriate level of $15 to $23 million in the unrestricted Municipal Fund ($17 million) is challenging with the competing capital demands. 

The City’s self-imposed debt limits (50% of provincial limits) will be exceeded by 2025 with this current draft plan.  At the close of 2021, the City is projected to reach a debt level of $41 million, which represents 31% of the provincial limit and 62% of the municipal policy limit. Long term debt contributes to the increase of the City’s net debt position and the service of that debt reduces available operating budget dollars.
 
The net debt position at the close of 2021 is projected to be $34.6 million.  Net debt becomes problematic when it exceeds the amount of long-term debt the municipality holds.  The city is forecasting to reach this magnitude of net debt position by 2024.
 
Reviewing the 2020 Budget Forecast and 2021 Operational Budgets
Administration implemented several processes to address the operational impacts of COVID-19 in 2020.  To move from a 3.9% tax increase to zero in 2020, administration permanently reduced operating budgets ($1.6 million). Other one-time program adjustments ($2.8 million) were made to forecasts to enable the City to navigate any further changes that came about through the pandemic.  Additionally, only those positions that were deemed essential in the business continuity model were filled if vacancies in the City came about.  Throughout 2020, the City has continued to be mindful of operational costs, and as a result will see a one-time addition to the Municipal Reserve of approximately $5,865,000, but this is an estimate only at this time and does not include the Operational funding noted below as it is not clear if that will come before the end of 2020.  This amount of surplus is still $13 million lower than we originally budgeted due to the slowdown in capital and the lack of grants taken into income.    

Additional one-time funding in the form of stimulus funds (capital and operational) were forthcoming from the Federal and Provincial Governments.  These one-time funds will address the lost revenue from the removal of the 3.9% tax rate, other lost revenues such as transit and mitigate the costs incurred by programming due to COVID-19 (i.e. personal protective equipment, etc.)
 
Reviewing Business Cases 
As part of the new Corporate Planning process this year, departments were asked to review their existing, multi-year and net new initiatives to determine which ones strongly aligned with the three Strategic Portfolios: Investing in Our Service Supports, Investing in Our Interconnectivity and Investing in Our Growth and Prosperity. 
 
Business cases were then developed to provide detailed information on the work required to achieve the outcomes identified within a Strategic Portfolio. Business cases move us away from the review of separate initiatives that occurred in the past to a holistic approach that considers interdependencies, risks, outcomes and multi-year costs to support more effective long-term planning. A description of each of the 29 business cases and the Strategic Portfolio they best align with can be located on pages 9 to 12 of the Corporate Plan (Attachment 1). 
 
Administration evaluated the business cases to assess which ones were priority and in alignment with Council’s direction to date.  Administration made recommendations - either to revisit in the future, amend to address with existing resources, fund through one-time external stimulus funding, fund through developer and utility reserves or to move forward for Council’s deliberations. Administration’s recommendations for each of the business cases is contained on pages 16 to 22 of the Corporate Plan. 
 
Given our fiscal situation, we are unable to fund all the business cases and will have to make difficult decisions about which ones to move forward. The business cases will be reviewed with the Committee during the November 2-4 deliberations. Revenue options/levers and scenarios will be presented to illustrate the financial impacts of the business case decisions, particularly the larger capital projects and life-cycling needs.
 
To build a Fiscal Sustainability Framework for funding of lifecycle requirements for assets, the City could choose to build and fund lifecycle reserves. Discussions will occur with the Committee about what the lifecycling and reserve design may look like over the medium to long-term. 
 
Finally, we will be looking for input from the Committee on which revenue levers could be considered to support funding of the budget needs. Once the deliberations are complete, administration will be able to outline the budget impacts as well as the impacts to residents and non-residents. 
 
Options/Alternatives
Council will have the opportunity to provide administration options to pursue outside the recommendations and approaches provided for both expense and revenue deliberations.
Consultation/Engagement
Due to the impacts of COVID-19, Council was unable to host presentations from community groups and the public for budget submissions to the Corporate Plan. Instead, this year’s submissions were submitted through a web-based application process. An overview of each of the five submissions can be found on pages 12 and 13 of the Corporate Plan. Administration reviewed the submissions and provided recommendations for Council to consider regarding funding. These recommendations can be found on page 24 of the Corporate Plan. 
 
Council engaged in several retreat and fiscal education sessions with administration to support their deliberations this fall.  The cumulative materials and discussions of those sessions were tabled at Committee of the Whole on October 19, 2020 to ensure that the insight to the budget challenges and the opportunities to address them were discussed openly.
 
Implementation/Communication
After Committee’s review of the Corporate Plan, Council is scheduled to consider approval of the 2021-23 Corporate Plan at the Council meeting on November 23, 2020. The Plan, once approved by Council, is effective January 1, 2021. 
Impacts
The overall impact on ratepayers will be determined after the Corporate Plan deliberations during the November 2-4 meetings. 

Attachments
2021-2023 Corporate Plan
Corporate Plan Presentation

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