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RFD- 4137 Business Items   Item #   11. a.    
Regular Council Meeting Agenda   
Meeting Date: 11/23/2020  
Title:    2021 to 2023 Recommended Corporate Plan - Wolanski
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:

Request for Decision Summary
The recommended 2021-2023 Corporate Plan includes input from the Committee of the Whole as well as the community and is being presented to Council for approval. The plan includes a 2021 budget with Operating Revenues of $87,869,000, Operating Expenses of $85,952,065, Capital Revenues of $25,545,451, Capital Expenses of $34,716,320, and an overall Net Transfer from Reserves of $7,253,934.
Once approved, the final 2021-2023 Corporate Plan will be circulated and communicated to the organization and the community.

Proposed Motion
That the 2021-2023 Corporate Plan be adopted and that the 2021 budget be approved with Operating Revenues of $87,869,000, Operating Expenses of $85,952,065, Capital Revenues of $25,545,451, Capital Expenses of $34,716,320, and an overall Net Transfer from  Reserves of $7,253,934.  
The Municipal Government Act RSA 2000 c M-26 (Financial Administration Part 8) requires 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 reserves. 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.

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. 
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: 
  • Introduction of three Strategic Portfolios and supporting business case model to inform integrated decision making.
  • New budget format that separates capital and operating costs to more clearly demonstrate the impact of decisions, particularly those related to capital (i.e. reveal the cost of debt decisions and the magnitude of capital spending).
  • Creation of municipal reserves to fund lifecycle and rehabilitation costs that will be supported by long-term capital plans in future years when asset management is enabled.
  • 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. 
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.
While the 2021 proposed operating budgets and staffing have been maintained at the same level for the past few years, the continued strain on maintaining an appropriate level of $14.8 to $22.2 million in the Unrestricted Municipal Reserve ($19.6 million) is challenging with the competing capital demands. The maintenance of an Unrestricted Municipal Reserve with a balance equal to two to three months of budgeted operating expenses is important for managing cash flow and emergency preparedness.
The City will approach its self-imposed debt limit (50% of the provincial limit) in 2026 based on current projections in the Corporate 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 $33.7 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 2025 based on current projections.
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) are 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 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. 
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. 
The business cases were reviewed with the Committee during the November 2-4 meetings. Revenue options/levers and scenarios were presented to illustrate the financial impacts of the business case decisions, particularly the larger capital projects and lifecycling needs. Input was provided from the Committee on the revenue levers to be used to support funding of the budget needs. 
Council may make further amendments to the recommended Corporate Plan. 
The recommended Corporate Plan was prepared with input from residents, Administration and Council’s Committee of the Whole. 
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. Administration reviewed the submissions and provided recommendations for Council to consider regarding funding. 
Committee of the Whole reviewed the draft Corporate Plan during the November 2-4 meetings and provided direction that resulted in a recommended Corporate Plan that is now brought before Council for approval. 
Expense Discussions 
Business Cases 
In its deliberations, Committee supported Administration’s recommendations (pages 20-25 in the recommended Corporate Plan) including:
reassessment of specific business cases in 2021,
  • proceeding with specific business cases funded from one-time capital stimulus funding and reallocations in the Canada Infrastructure Program,
  • proceeding with specific business cases funded from the one-time Municipal Operating Support Transfer (MOST) funding,
  • proceeding with a business case funded from deferred developer contributions, and 
  • proceeding with specific business cases funded from utility user fees.
Committee discussions also informed the following business case recommendations:
  • City Centre Area Redevelopment Plan
    • Proceed as planned in 2021. 
    • Delay other neighbourhood renewal in future years to support funding completion of this project. 
  • Transportation Network 
    • Work on Boundary Road portion of this business case falls outside the period 2021-2023 due to competing budget priorities.
  • Arena Complex
    • Will come forward for deliberation prior to and may be incorporated in a spring budget adjustment.
  • Competitiveness and Investment Attraction 
    • The high load corridor study ($15,000) will be advanced and funded through MOST funding.
Public Budget Submissions
Committee agreed with the recommendations of Administration (page 27 of the recommended Corporate Plan) and provided support to proceed with the funding of two submissions from the one-time MOST funding. 
Reserve Funding 
Committee provided support for the creation of municipal reserves to fund lifecycle costs. The funding of reserves will be ongoing through dedicated and sustainable funding sources.
Lifecycle Funding
Committee provided support for lifecycle funding outside of the business cases.
Revenue Discussions  
In its deliberations on revenue, the Committee balanced a recognition of the fiscal realities facing residents and businesses with the long term growth strategy of the City. Implementation of a tax rate increase and property tax rate split shift were seen by the Committee as the first steps towards fiscal sustainability by enabling the building of financial resources over the next few years to fund future infrastructure needs.
Dedicated Tax Stream 
The recommended Corporate Plan implements a five year dedicated tax stream for lifecycling. The tax increase will be 1% in 2021. 
Property Tax Rate Split Shift
The recommended Corporate Plan implements a seven year property tax rate split shift. The increase in the rate split will be 0.025 for 2021. 
Administration will be bringing forward a policy with regard to the reserve set up for lifecycling and the tax rate split shift. A policy discussion will also be held with Council on debt limits related to municipal, utility and developer streams. In addition, the Committee will be holding Council remuneration to the 2019 base salary rate. 
The plan, once approved by Council, is effective January 1, 2021. Once finalized, the approved Corporate Plan will be published on the City website and shared with the community through a variety of appropriate communication tactics.
Residential Rate Changes Monthly Impact           
Residential Taxes $0.53
Based on an approved 1% tax rate increase per $100,000 of assessment for the next 5 years.*
Water and Sewer $1.70
2.0% rate increase based on monthly consumption of 14 cubic metres of water.
Solid Waste NIL No planned increase.
Electric Franchise Fees NIL No planned increase.
Natural Gas Franchise Fees NIL No planned increase.
Total Monthly Impact $2.23  
*The median assessment value of Single Family Detached Homes in Spruce Grove is $360,800.
Non-Residential Rate
Monthly Impact  
Non-Residential Taxes - 1%
$0.73 Based on an approved 1% tax rate increase per $100,000 of assessment for the next 5 years.*
Non-Residential Taxes - Tax
Rate Split Shift
$1.32 Based on a property tax split shift by 0.0250 per $100,000 of assessment in year one and 0.545 each year after that for six years.
Total Monthly Impact $2.05  
*The impacts of monthly utility costs and franchise fees (natural gas and electric) would be directly
related to the unique consumption levels and as such have not been represented in this chart.

Water and sewer
The water and sewer utility rate increase recommended for 2021 to cover operating and capital costs is $0.12 per cubic metre (2.0% increase) which is approximately $1.70 per month for a household consuming 14 cubic metres of water. 
Solid waste
The solid waste rate is affected by growth in the community, contracted costs and new initiatives.  There is no increase planned for solid waste utility for 2021.   
Storm utility
On September 14, 2020, a new storm utility rate was brought forward to Council and was approved for implementation to take effect October 1, 2020.  Monthly fees are $7.30 for small customers and $37.20 for large customers and are not projected to change for 2021.
Electric franchise fees
Electric franchise fees are charged by the City to Fortis Alberta for the exclusive right to provide and operate related assets.  Fortis Alberta passes along the cost of the franchise fee to the consumer as a separate charge on the electric bills.  The 2020 rate has been maintained for 2021 budget.
Natural gas franchise fees
Franchise fees for natural gas are charged by the City to ATCO Gas and Pipelines for the exclusive right to provide natural gas services within the City as well as for access to City lands to construct, maintain and operate related assets.  ATCO passes along the cost of the franchise fee to the consumer as a separate charge on the natural gas bills.  The 2020 rate has been maintained for 2021 budget.  

Fiscal Impact
Financial Implications:
The fiscal plan demonstrates strong stewardship of the City’s financial management in support of providing services and programs to residents, businesses and the surrounding area and the details of which are provided in the Fiscal Plan Summary section of the recommended 2021 to 2023 Corporate Plan which is attached.
2021-2023 Corporate Plan

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