City of Toronto

REPORT No. 6

OF THE STRATEGIC POLICIES AND PRIORITIES COMMITTEE

(from its meeting on April 28, 1998,

submitted by Mayor Mel Lastman , Chair)

As Considered by

The Council of the City of Toronto

at its Special Meeting

on April 29 and 30, 1998

The amendments to these Clauses and to the 1998 Operating and Capital Budgets as a whole, have been consolidated and appear at the beginning of this Report. All supplemental reports and communications considered with these Clauses, together with all additions thereto, have also been consolidated and appear at the end of this Report.)

Clause No. 1 Proposed Capital Financing Management Plan and Other Capital Funding Issues;

Clause No. 2 1998 Operating and Capital Budget for the Water and Water Pollution Control Programs and Harmonization of Water and Sewer Rates;

Clause No. 3 1998 Preliminary Transition Project Requests;

Clause No. 4 1998 Operating Budget - Community and Neighbourhood Services - Funding Cost of Filling 2,000 Licensed Child Care Spaces;

Clause No. 5 Leaf Pick Up Program in Ward 16;

Clause No. 6 Reconstruction of York Mills Road Between Hedgewood Road and York Ridge Road;

Clause No. 7 Mayor's Youth Employment Summit;

Clause No. 8 Child Nutrition Programs: Partnerships in Funding;

Clause No. 9 Toronto Transit Commission Five-Year Capital Subsidy Agreement - Prepayment of Subsidy in Exchange for Release;

Clause No. 10 Provincial Downloading - Updated Estimates;

Clause No. 11 Previously Approved but Unstarted Capital Projects Further Report;

Clause No. 12 Establishment of City Reserves and Reserve Funds;

Clause No. 13 Association of Municipalities of Ontario - Payment of 1998 Membership Fee;

Clause No. 14 Summary of Deputations on 1998 Capital and Operating Budgets;

Clause No. 15 Workers' Compensation - Transfer of the Toronto Public Library Board from Schedule 1 to Schedule 2;

Clause No. 16 Tax Options - 1998-2000;

Clause No. 17 Adjustments to 1997 Surplus and Offsetting 1998 Budget Adjustments;

Clause No. 18 Non-Union Compensation Program, Development and Implementation;

Clause No. 19 Amalgamation and Restructuring 1998 Funding Requirements;

Clause No. 20 Financial Support to the Caribbean Cultural Committee and Caribana;

Clause No. 21 1998 Capital Program Parks and Recreation - Supplementary Arrangements - Woodbine Park Construction (East Toronto);

Clause No. 22 1998 Operating and Capital Budgets and 1997 Sinking Fund Surplus and Annual Sinking Fund Levies for 1998;

Clause No. 23 Recommended 1998 Capital Budget and Financing Authorities;

Clause No. 24 1998 Capital Budget and Financing Authorizations; and

Clause No. 25 1998 Operating Budget;

and received, as information, Clause No. 26, headed "Other Items Considered by the Committee",

subject to the following amendments:

1998 OPERATING BUDGET

Directly Controlled Programs:

Children's Services (No. 3):

(1) by adding thereto the following:

"It is further recommended that the report dated April 28, 1998, from the Committee Administrator, Committee on the Status of Women, entitled 'Pressures Facing Subsidized Child Care Programs', be referred to the Commissioner of Community and Neighbourhood Services."

Hostels, Income and Skills Support, Community Development and Support

Program, Social Services and Housing Administration (Nos. 7, 9, 10 and 11):

(2) by adjusting the gross expenditures and revenues of the following programs within the Community and Neighbourhood Services Department as indicated in the three items below. These technical adjustments have no net impact on the total budget.

Gross Revenues Net

$000s $000s $000s

Children's Services (8,500.0) (8,500.0) 0.0

Hostels 0.0 (3,100.0) 3,100.0

Income Skills and Support 0.0 3,100.0 (3,100.0)

(To correctly reflect the Provincial downloading estimates.)

Social Services and Housing Administration 934.0 434.0 500.0

Community Development and Support (934.0) (434.0) (500.0)

(To correctly reflect the transfer of the Community Development Unit to the Social Services and Housing Administration Program.)

Children's Services 1,132.3 0.0 1,132.3

Consolidated Grants

Community Services Grants (228.0) 0.0 (228.0)

Miscellaneous Toronto (904.3) 0.0 (904.3)

(1,132.3) 0.0 (1,132.3)

(To transfer purchase of services funding from the Consolidated Grants program to the Children's Services Division.)

(3) by adding thereto the following:

"It is further recommended that the name of the Social Services and Housing Administration Program be changed to Social Development and Administration Program in order to more properly reflect the functions of the Program."

Parks and Recreation Program (No. 12):

(4) by adding thereto the following:

"It is further recommended that the communication dated April 14, 1998, from the Director, Community and Tenant Services, regarding Metropolitan Toronto Housing Authority's support for adequate funding for a range of programs affecting children, be received."

Transportation Program (No. 14):

(5) by referring Expenditure Reduction Categories Nos. 30 and 31, headed "Road & Sidewalk Occupancy Permits" and "Permit Enforcement", respectively, to the Commissioner of Works and Emergency Services, with a request that he submit a report to the Budget Committee on additional methods of fulfilling the commitment to the Operating Budget while maintaining the staff complement in these areas.

Special Purpose Bodies:

Licensing Commission (No. 20):

(6) by adding thereto the following:

"It is further recommended that the following motion be referred to the Budget Committee for further consideration and report thereon to the meeting of City Council to be held on May 13, 1998:

Moved by Councillor Moscoe:

'That an amount of $200,000.00 be added to the 1998 Operating Budget for the Toronto Licensing Commission to cover incremental legal costs resulting from the restructuring and the establishment of the Toronto Licensing Tribunal, such costs to be raised in future years through cost recovery from licensing fees.' "

Police (No. 21):

(7) any request that the Toronto Police Service not charge for pay duty for Special Events being referred back to the Budget Committee for further consideration.

(8) by adding thereto the following:

"It is further recommended that:

(1) the target policing project be considered in the existing 1998 Operating Budget envelope for the Toronto Police Service, and the Toronto Police Services Board be requested to submit a report to the Emergency and Protective Services Committee, at the end of July, 1998, on the status of this portion of the budget;

(2) a special committee be established to consider the issue of pay-duty policing;

(3) the membership of the special committee shall include Councillor Gardner, (Chairman of the Police Services Board), Councillor Sgro, (Vice-Chair of the Toronto Police Services Board), Councillor Korwin-Kuczynski, Councillor Nunziata, Councillor Rae and any other interested Members of Council;

(4) the special committee shall report to the Emergency and Protective Services Committee;

(5) the Toronto Police Services Board be requested to submit reports to Council, through the Budget Committee, on the following:

(a) the number of Police Officers and civilians (FTEs) in each year since 1992;

(b) the cost to municipal taxpayers of providing police services to the Provincial Government programs and facilities in the City of Toronto, including the courts and the Queen's Park Government Complex; and

(c) a detailed report on the pay-duty programs, including a list of community events served in 1996 and 1997 and, if possible, a list of those events or groups which could not afford to pay for pay-duty services in those two years; and

(6) the following communications be received:

(a) (April 6, 1998) from the City Clerk forwarding the Toronto Community Council's recommendation that the Toronto Police Service not charge non-profit organizations for criminal records checks;

(b) (April 24, 1998) from the Chairman, Toronto Police Services Board, entitled 'Response to City of Toronto Budget Committee Recommendations - Meeting of March 30, 1998'; and

(c) (April 24, 1998) from the Chairman, Toronto Police Services Board, entitled 'Authority of the Toronto Police Services Board, Toronto City Council and the Chief of Police regarding Police Budgets'; and

(7) the following motion be referred to the Toronto Police Services Board for report thereon to the Budget Committee:

Moved by Councillor Brown:

'It is further recommended that the Budget Chair be requested to include in future budget deliberations, the possibility of offering rookie members of the Toronto Police Service at a nominal rate at the City's subsidized housing projects, in an effort to encourage our officers to truly be a part of our community and to increase the visibility of officers both on- and off-duty.' "

Toronto Zoo (No. 24):

(9) by adding thereto the following:

"It is further recommended that the communication dated April 24, 1998, from the General Manager, Toronto Zoo, regarding the 1998 Operating Budget for the Toronto Zoo, be received."

Support Services:

Clerk's Program (No. 27):

(10) by adding thereto the following:

"It is further recommended that the City Clerk be requested to review the staffing requirements for City Clerk's and report thereon to the Budget Committee."

Other:

Non-Program Net Expenditures:

(11) the fee payable to the Association of Municipalities of Ontario (AMO) for the City of Toronto's 1998 membership being increased from $68,532.33 to $99,604.67.

(12) the City of Toronto's contribution to the Federation of Canadian Municipalities (FCM) Telecommunications Defence Fund being increased from one cent per capita ($22,000.00) to three cents per capita ($66,000.00).

(13) by adding thereto the following:

"It is further recommended that the following motion be referred to the Assessment and Tax Policy Task Force:

Moved by: Councillor Augimeri

Seconded by: Councillor Silva

"WHEREAS the City of Toronto is mandated by the Province of Ontario to provide tax relief for the impacts of Current Value Assessment (CVA). This relief, in the form of a lien, is not relief; and

WHEREAS senior citizens and people with disabilities do not want tax deferrals. Deferrals are liens and as most people consider their homes a heritage for the future and for their children they do not want to have a lien on that future; and

WHEREAS City Council will not be dealing with the issue of the low income senior and low income disabled tax relief program until June; and

WHEREAS City Council will be faced with a choice of a tax deferral or tax cancellation program for low income seniors and low income disabled taxpayers; and

WHEREAS a tax cancellation program would cost from $6-10 million if CVA is implemented immediately; and

WHEREAS funds for a low income seniors and low income disabled tax cancellation program are not in the budget;

NOW THEREFORE BE IT RESOLVED THAT City Council increase the 'tax write-offs' budget in 'Non Program Expenditures' by $8 million."

Corporate Grants:

(14) by adding thereto the following:

"It is further recommended that:

(1) Council recognize the difficulty facing the Municipal Grants Review Committee as a result of the lateness of the Budget this year and, therefore, provide up to $200,000.00 this year only to assist in satisfying those requests made to the Committee; and

(2) the following motions be referred to the Municipal Grants Review Committee for consideration:

Moved by Councillor Nunziata:

'It is further recommended that the Municipal Grants Review Committee be requested to recognize the special circumstances surrounding the needs of the Weston Minor Hockey League and increase the grant from $15,000.00 to $25,000.00.'

Moved by Councillor Balkissoon:

'That the foregoing motion by Councillor Nunziata be referred to the Commissioner of Economic Development with a request that he work with the Weston Minor Hockey League and the Board of Management of the relevant Arena.'

Moved by Councillor Giansante:

'It is further recommended that the request from Etobicoke Federation of Residents' & Ratepayers' Associations (EFRRA) in the amount of $15,000.00 be referred to the Municipal Grants Review Committee for consideration.'

Moved by Councillor Pantalone:

'It is recommended that an additional $20,000.00 be allocated, for consideration by the Municipal Grants Review Committee, as the annual grant to the Alliance of Portuguese Clubs and Associations of Ontario for its yearly Portugal Week Festival to be held in Toronto during the week of June 6 to 14, 1998.'; and

(3) the report dated April 22, 1998, from the Interim Secretary, Audit Committee, entitled 'Management Letter - Metropolitan Toronto Convention and Visitors Association for the year ended December 31, 1998', wherein the Interim Secretary advises that the Audit Committee directed that a copy of the aforementioned Management Letter be forwarded to Council for consideration in conjunction with the grant to the Metropolitan Toronto Convention and Visitors Association (Tourism Toronto), be received."

Capital and Corporate Financing:

(15) by adding thereto the following:

"It is further recommended that:

(1) as certain Toronto Harbour Commissioners' corporate expenses are not essential to support Toronto Harbour Commission operations, the City indicate that it will not cover any deficit resulting from:

(a) first class travel by Commissioners;

(b) travel by Commissioners' spouses; and

(c) costs associated with future development plans related to the new Port Authority unless specifically authorized by Council;

(2) the Chief Financial Officer and Treasurer be requested to submit a report to the Urban Environment and Development Committee on the reductions to the Toronto Harbour Commissioners' Operating and Capital Budgets which might result from the aforementioned policy; and

(3) the following motion be referred to the Chief Administrative Officer for report thereon to the Corporate Services Committee:

Moved by Councillor Layton:

'It is further recommended that the City Solicitor and the Chief Financial Officer and Treasurer be requested to submit a joint report to the Urban Environment and Development Committee on the legal and financial obligations of the City with respect to the Toronto Harbour Commissioners, pursuant to the subsidy agreement dated November 28, 1994, between the Toronto Harbour Commission and the Corporation of the City of Toronto.' "

Non-Mill Rate Operations:

Water:

(16) by adding thereto the following:

"It is further recommended that the Budget Committee review the Downspout Disconnect Program to ensure that the stated 4,000-household objective is achieved; and to report back on any internal program budget adjustments which may be necessary."

1998 CAPITAL BUDGET

Gross Budget Costs:

Parks and Recreation Program:

(1) by striking out and referring the following Items to the Budget Committee for further consideration as part of the 1998 Capital Program:

(a) Item No. 606, North York - New Lit Sports Pad - Grandravine CC; and

(b) Item No. 643, Park Restoration and Naturalization - Vyner Greenbelt Phase 2.

(2) by adding thereto the following:

"It is further recommended that the following motions be referred to the Budget Committee for consideration:

Moved by Councillor Adams:

'It is recommended that the request for an additional $100,000.00 for Don Valley Brick Works (Item No. 45) be referred to the Budget Committee for further consideration.'

Moved by Councillor Davis:

'It is recommended that $150,000.00 for the Phil White Arena - Lobby (Item No. 906) be added back to the Parks and Recreation Program 1998 Capital Budget.'

Moved by Councillor Jones:

'It is recommended that $100,000.00 for the Colonel Sam Smith Extension (Item No. 2) be added back to the Parks and Recreation Program 1998 Capital Budget.'

Moved by Councillor Sgro:

'It is recommended that $100,000.00 for the Tennis Courts Convert - Amesbury (Item No. 619) be added back to the Parks and Recreation Program 1998 Capital Budget."

Transportation Program:

(3) the 1998 Capital Program - Transportation being amended, in principle, by adding funds for:

(1) Bridge Construction $ 1,530,000.00

(2) F.G. Gardiner Expressway $ 2,000,000.00

(5) Bridge Reconstruction $ 1,350,000.00

(6) Road Resurfacing $ 3,323,000.00

(7) Traffic Control $ 400,000.00

(9) Safety and Operational Improvements $ 500,000.00

Total $ 9,130,000.00;

and further that the Budget Committee be requested to report to City Council on June 3, 1998, on the source of the additional $9,103,000.00 for the 1998 Capital Program for Transportation, possibly from the projected sale of major assets.

(4) to provide that:

"WHEREAS the Capital Budget identifies Previously Approved but Unstarted Projects (Tax Supported) in Appendix A and Previously Approved but Unstarted Projects (Rate Supported) in Appendix B; and

WHEREAS the following projects in Appendix A for reasons stated no longer require funding:

(1) Page 32 of 41 - Sidewalks ($21,000.00)

York Road - Fenn to Glenridge - constructed in 1993

(2) Page 33 of 41 - Sidewalks ($45,000.00)

Daneswood - Stratford to Blythwood - $5,000.00 estimated cost

not constructed by Motion of North York Council 1995

and together constitute a total of $26,000.00; and

WHEREAS the following projects in Appendix B for reasons stated no longer require funding:

(3) Page 36 of 40 - Storm Sewer ($12,000.00)

Daneswood - Stratford to Blythwood

not constructed because deemed unnecessary - 1995

(4) Page 38 of 40 - Storm Sewers

Valleyvanna ($20,000.00) - completed

and together constitute a total of $32,000.00; and

WHEREAS the total amount budgeted and no longer needed for these projects amounts to $58,000.00; and

WHEREAS all above projects are in Ward 9; and

WHEREAS the Local Initiative on Fenn Avenue from York Road South (costed at approximately $40,000.00) is first in the Ward 9 Public Works queue for consideration in 1998, should funds become available;

NOW THEREFORE BE IT RESOLVED THAT the projects (1), (2), (3) and (4) listed above be deleted from the 1998 Capital Budget;

AND BE IT FURTHER RESOLVED THAT the $58,000.00 savings accrued be applied to the Local Initiative on Fenn Avenue;

AND BE IT FURTHER RESOLVED THAT this project be included in the 1998 Capital Works Budget."

(5) to provide that:

"WHEREAS the Audible Pedestrian Signals Program is an important initiative started in 1996, that enables citizens who are visually impaired to cross intersections without the assistance of others, therefore allowing them to live as independently as possible; and

WHEREAS $100,000.00 per year was budgeted for 1997; and

WHEREAS during the budget consultations, the Audible Pedestrian Signals Program was shown to be a new initiative, with no previous funding listed, rather than a continuation of an existing program; and

WHEREAS during the budget process funding was cut to this Program as a result of it being shown as a new project, therefore eliminating the possibility of continuing the installation of these important pedestrian signals;

NOW THEREFORE BE IT RESOLVED THAT the funding for the Audible Pedestrian Signals Program be reinstated into the Transportation Capital Program in order to correct this omission and continue this important initiative for residents of the City of Toronto who are visually impaired."

Police:

(6) by adding thereto the following:

"It is further recommended that City Council request the Toronto Police Services Board to have the City Auditor perform a value for money audit of the expenditures incurred on the Metropolis project, and if additional resources are required by the City Auditor to perform the review, such request be made to the Budget Committee."

Toronto Harbour Commission (No. 60):

(7) to provide that the matter of the proposed fixed link project at the Toronto City Centre Airport be referred to the Urban Environment and Development Committee, for further consideration, and the Committee be requested to:

(a) consider the potential impacts on the police marine unit to meet its objectives and any other additional costs resulting from this link; and

(b) review the "screening" Environmental Assessment on the fixed link to the Toronto City Centre Airport.

(8) by adding thereto the following:

"It is further recommended that:

(a) the report dated April 23, 1998, from the Chief Financial Officer and Treasurer, entitled 'Toronto Harbour Commissioners - Financing Options for the Fixed Link Project', be adopted, subject to amending Recommendation No. (2) by inserting the words 'and the Budget Committee', after the words 'and Treasurer', and adding at the end thereof the words 'and that such financing assumes no net cost for the City's Capital Budget', so that the recommendations embodied in such report shall now read as follows:

'It is recommended that:

(1) the THC submit to the Chief Financial Officer and Treasurer a revised 5-year business plan for the Toronto City Centre Airport as well as any supplemental financial analysis of preferred options; and

(2) the financing authority for the fixed link project in the recommended 1998 Capital Budget for the THC be deferred pending a report from the Chief Financial Officer and Treasurer and the Budget Committee respecting the financial implications of financing the fixed link capital project and that such financing assumes no net cost for the City's Capital Budget.'; and

(b) the Commissioner of Urban Planning and Development Services be requested to submit a report to the next meeting of the Urban Environment and Development Committee on whether plans are being considered by the Toronto Harbour Commission to substantially lengthen the City Centre Airport runway and grant landing rights to DC-9s.' "

Tax Options - 1998-2000 (No. 65):

(9) by adding thereto the following:

"It is further recommended that City Council advise the Province of Ontario that the City appreciates the $50 million grant, and inasmuch as the terms regarding the $200 million interest free loan offered by the Province over two years have not been finalized, and insofar as no other municipality in Ontario is being asked to take Provincial funds in the form of a loan, the City would urge the Province to consider providing such $200 million in the form of a grant, in order that the City could better determine its budgetary needs in the coming years."

Proposed Capital Financing Management Plan and Other Capital Funding Issues (No. 70):

(10) by amending the report dated April 16, 1998, addressed to the Budget Committee from the Chief Financial Officer and Treasurer, as embodied in Clause No. 1 of Report No. 6 of The Strategic Policies and Priorities Committee, headed "Proposed Capital Financing Management Plan and Other Capital Funding Issues", by adding to Recommendation No. (3) the words "with such amounts to be reviewed annually in the context of the budget process", so that the recommendations embodied in such report shall now read as follows:

"It is recommended that:

(1) as a guideline, Council adopt future capital programs which would limit average borrowing to a maximum of $110 million for tax supported programs, excluding the impact of TTC downloading and borrowing for the Sheppard Subway;

(2) a Capital Financing Stabilization Reserve be established to minimize fluctuations in future operating budgets due to changes in debt charges and that seed funding be provided from the consolidation of like reserves of the former municipalities;

(3) the base level of capital from current be increased by a minimum of $15 million in 1998 (as contained in the operating budget currently being considered) and that Council approve, in principle, further increases of $25 million in each of 1999 and 2000, $35 million in 2001 and $40 million in each of 2002 and 2003 to offset the impact of Provincial Downloading on the capital program of the TTC, estimated at a total of $180 million annually with such amounts to be reviewed annually in the context of the budget process;

(4) the Chief Financial Officer and Treasurer review, and bring forward for Council's consideration as appropriate, potential offsets against future capital from current increases contained in recommendation (3); and

(5) proceeds from major asset sales be applied to reduce borrowing each year, unless Council specifies that a portion of these proceeds be used to fund major rehabilitation and maintenance projects."

Establishment of City Reserves and Reserve Funds (No. 72):

(11) by amending Recommendation No. (3) of the report dated April 16, 1998, addressed to the Budget Committee, from the Chief Financial Officer and Treasurer, as embodied in Clause No. 12 of Report No. 6 of The Strategic Policies and Priorities Committee, headed "Establishment of City Reserves and Reserve Funds", by adding thereto the words "and that such by-law be submitted to Council through the appropriate Standing Committee and the Budget Committee", so that the recommendations embodied in such report shall now read as follows:

"It is recommended that:

(1) reserves and reserve funds in the amount of $915,445,484.00 be established and consolidated where appropriate as listed in Schedule I;

(2) a further report on the adequacy of each reserve and reserve fund established be brought back as soon as possible after an analysis of projected inflows and outflows is complete; and

(3) staff be directed to prepare a by-law giving effect to the consolidation or continuance of reserve funds included in this report, and that such by-law be submitted to Council through the appropriate Standing Committee and the Budget Committee."

(12) by adding thereto the following:

"It is further recommended that any decision to exercise discretion to use reserve funds for any purpose other than that for which the fund was established in matters greater than $50,000.00 be exercised only with the concurrence of Council."

General:

(13) to provide that Recommendation No. (1) of the Budget Committee, as embodied in Clause No. 5 of Report No. 6 of The Strategic Policies and Priorities Committee, headed "Leaf Pick Up Program in Ward 16", be amended by inserting the words "and Guildwood Village" after the words "West Rouge Community", so that the recommendations of the Budget Committee shall now read as follows:

"The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee and Council:

(1) the reinstatement of the fall leaf vacuum collection in the West Rouge Community and Guildwood Village for 1998;

(2) that the cost of the reinstatement of this program be absorbed within the Departmental budget; and

(3) that this program be subject to the service review being carried out on all programs."

(14) to provide that the following adjustments be made to the capital financial authorizations included in the report dated April 16, 1998, from the Chief Financial Officer and Treasurer, entitled "Recommended 1998 Capital Budget and Financing Authorities":

($000)

Solid Waste Management Program

(a) City-Recycling Facilities 409

Water Pollution Control Program

(b) East York - Sewer Construction - Various 343

(c) Etobicoke - Storm Sewers 380

(d) Etobicoke - Sanitary Sewers 1,190

(e) Toronto - Construction of Sewers 1,000

Water Supply Program

(f) City - P/Harris - Residue Management Facility 32

(g) Scarborough - Water Connection 350

Total 3,704

(15) by adding thereto the following:

"It is further recommended that:

(a) the McCormick Recreation Centre and Eatonville Library requests be considered in the five-year Capital Plan; and the Budget Committee be requested to advise Council on any design funding requirements by September 1998;

(b) Council establish a User Fee Committee, such Committee to report back to Council, through the Strategic Policies and Priorities Committee, no later than its first meeting in September 1998; and that the following proposed membership of the User Fee Committee be referred to the Striking Committee for consideration and report thereon to the next regular meeting of Council to be held on May 13, 1998:

Councillor Giansante;

Councillor Korwin-Kuczynski;

Councillor Li Preti;

Councillor Mammoliti;

Councillor Moeser; and

Councillor Nunziata; and

(c) Council convey its appreciation and thanks to staff, particularly those involved in the budget process, for their efforts and hard work.")

1

Proposed Capital Financing Management Plan and

Other Capital Funding Issues

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendation:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the report (April 16, 1998) from the Chief Financial Officer and Treasurer.

The Budget Committee reports having requested the Chief Administrative Officer to review the TTC state of good repair budget and report to the Budget Committee on the appropriateness and financing of those assets and providing a comparison with the other infrastructure in the City.

Background:

The Budget Committee on April 20, 1998, had before it a report (April 16, 1998) from the Chief Financial Officer and Treasurer forwarding recommendations regarding the proposed Capital financing management plan and other Capital funding issues.

--------

(Report dated April 16, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To outline a plan for minimizing fluctuations in future operating budgets caused by the capital budget.

Financial Implications:

There are no immediate financial implications from this report. The recommendations contained herein will reduce the impact of the capital program on future operating budgets.

Recommendations:

It is recommended that:

(1) as a guideline, Council adopt future capital programs which would limit average borrowing to a maximum of $110 million for tax supported programs, excluding the impact of TTC downloading and borrowing for the Sheppard Subway;

(2) a Capital Financing Stabilization Reserve be established to minimize fluctuations in future operating budgets due to changes in debt charges and that seed funding be provided from the consolidation of like reserves of the former municipalities;

(3) the base level of capital from current be increased by a minimum of $15 million in 1998 (as contained in the operating budget currently being considered) and that Council approve, in principle, further increases of $25 million in each of 1999 and 2000, $35 million in 2001 and $40 million in each of 2002 and 2003 to offset the impact of Provincial Downloading on the capital program of the TTC, estimated at a total of $180 million annually;

(4) the Chief Financial Officer and Treasurer review, and bring forward for Council's consideration as appropriate, potential offsets against future capital from current increases contained in recommendation (3); and

(5) proceeds from major asset sales be applied to reduce borrowing each year, unless Council specifies that a portion of these proceeds be used to fund major rehabilitation and maintenance projects.

Council Reference:

Budget Committee, at its meeting on March 12, 1998, directed the Chief Financial Officer to bring forward options for the management of the City's debt and recommendations regarding the disposal of assets in 1998. At its meeting of February 4, 1998, Council adopted a report from the Chief Financial Officer and Treasurer (January 20, 1998), entitled "1998 Capital Works Program - Preliminary Targets". Among the recommendations adopted within that report was the establishment of an interim limit of debt charges to 10 percent of the municipal property tax levy and the setting of a minimum amount and general allocation of capital from current.

Discussion:

In the absence of financial stabilization policies, operating budgets may be subject to substantial fluctuations from year to year which largely result from prior years' Council decisions. This report addresses the following objectives which would otherwise impact on future operating budgets:

(1) establish a Capital Financing Stabilization Reserve which would flat-line debt charges in future years at the 1998 level, excluding impacts of Provincial downloading on the TTC; and

(2) identify preliminary options for addressing the TTC downloading issue.

As well, as requested by the Budget Committee at its meeting of March 9-12, 1998, further options for reducing 1998 borrowing are outlined.

The proposed plan is predicated on Council approving capital programs which, on average, limit annual borrowing to $110 million for tax supported programs (excluding the impact of TTC downloading which is addressed separately, and the Sheppard Subway which is financed from a dedicated reserve account). While one-time deviations from this plan could be accommodated within the program, approval of capital programs above this level on an ongoing basis would result in debt charge pressure in future operating budgets. Until detailed planning and costing of infrastructure maintenance has been carried out, for example, long term facilities and road maintenance requirements, the adequacy of the $110 million borrowing level cannot be determined. As well, there are potential costs on the horizon that could further add to the City's capital pressures. For example, capital requirements have not yet been determined for GO Transit, a potential long term landfill site, or for social housing.

While the ultimate goal of the City should be to establish the capital program on a basis which would reduce future debt charges and move to more of a pay as you go basis, this would be possible only through one or more of the following actions:

(1) reducing future capital expenditures - to the extent that the program is oriented toward maintenance and rehabilitation requirements, it would be inadvisable over the longer term to defer maintenance - longer terms costs would be higher as a result of this strategy whereby rehabilitation could give way to replacement of assets; and

(2) identifying alternative sources of revenue. A process is now underway to evaluate and bring forward recommendations on a City-wide development charges program. As well, other potential revenue sources will continue to be evaluated, for example, asset sales.

It must be recognized, though, that the combined impacts of the above actions will be unlikely to offset a significant portion of the Provincial TTC downloading. As well, the Operating Budget will continue to be stretched to accommodate the operating impact of downloading and the City's own pressures, and cannot be expected to also absorb the capital downloading. The inescapable conclusion is that successive operating budgets should accommodate the TTC downloading. Options for phasing in these operating increases are discussed later in this report.

Fluctuations in Debt Charges:

One component of the operating budget which can fluctuate from year to year and which is largely beyond the control of Council in each year is the reduction in debt charges from maturing debt. Decisions made with respect to capital borrowing up to 10 years prior have a direct bearing on the level of debt charges each year, regardless of the capital program being considered. This will occur, even if, for example, Council adopted a capital program over the next five years which approximated a stable borrowing level of $110 million, exclusive of the impact of Provincial TTC downloading, and the Rapid Transit Expansion Program which is discussed later in this report.

To offset these fluctuations in debt charges, it is recommended that a Capital Financing Stabilization Reserve be established. Currently, reserves exist in the former municipalities for capital financing purposes, with an aggregate 1998 opening balance of approximately $30 million. On the basis that Council approves successive capital programs which maintain tax supported borrowing requirements of an average of $110 million, exclusive of the impact of TTC downloading, then the reserve could be used to stabilize debt charges in future years at the 1998 level. In those years where debt retirements were low, or, because of market conditions, borrowing occurred earlier in the year, withdrawals could be made from the reserve. Alternatively, when retirements were high or borrowing occurred later in the year, provisions could be made to the reserve. Over time, the reserve could be expected to maintain a constant balance.

Following illustrates how the reserve could work with annual borrowing of $110 million. The actual provisions and withdrawals to and from the reserve will vary from these, based on actual market conditions, timing of borrowing, levels of capital expenditures, capital from current changes based on the recommendations above, etc.

Capital Financing Stabilization ($Million)

1998 1999 2000 2001 2002

Change in Tax Supported Debt Charges

($110 million annual borrowing excl.

Impact of Provincial TTC

Downloading and RTEP): 0 8 (12) 4 (8)

Offset To/(From) Stabilization Reserve 0 (8) 12 (4) 8

Net Change in Debt Charges 0 0 0 0 0

Capital Financing Stabilization Reserve

Opening Balance 30 30 22 34 30

Provisions/(Withdrawals) 0 (8) 12 (4) 8

Closing Balance 30 22 34 30 38

TTC Downloading:

The above recommendations are designed to manage fluctuations in future operating budgets. They exclude the impact of Provincial downloading on the TTC on basis of the fact that the balance of the capital program, which is mainly dedicated to infrastructure rehabilitation and maintenance, cannot absorb the downloading. In fact, the impact of approximately $180 million is more than one and a half times the stable borrowing level. Were the balance of the capital program to be maintained, i.e. requiring annual borrowing of $110 million, and no offsets found against the downloading, the total annual borrowing requirements would rise to $290 million by the year 2001. Debt charges would rise over the next 20 years from the current level of $200 million to $470 million, requiring average increases in the operating budget of $14 million, or 0.5 percent every year for 20 years. At the same time, debt charges as a percent of property taxes would rise from the current level of 7.5 percent to 18 percent. At some point, the inevitable downward implications on the Corporation's credit rating could also affect the City's borrowing rate, which would further push future capital financing costs higher.

To maintain the Corporation's infrastructure, limit future operating budget impacts, and maintain the City on a sound financial footing, it is critical that the TTC downloading issue be addressed decisively. As such, it is recommended that the base level of capital from current be increased by a minimum of $15 million in 1998, as contained in the preliminary budget being considered by the Budget Committee. From a financial standpoint, the ideal solution would be to fully offset the impact of downloading in each year through corresponding increases to capital from current, i.e. $45 million in 1998, and a further $15 million in 1999, $5 million in 2000 and $115 million in 2001. However, from a practical standpoint, this may place undue burdens on the operating budget in certain years. Instead, it may be preferable to phase in the increases to capital from current and borrow the remaining shortfall in each year.

It is therefore recommended that Council approve, in principle, additional increases to the base operating budget of $25 million in each of 1999 and 2000, $35 million in 2001 and $40 million over the succeeding two years to offset the impact of Provincial Downloading on the capital program of the TTC.

Following is a summary of the impacts of the TTC downloading and recommended approach:

Impacts $Million

1998 1999 2000 2001

Annual Provincial Downloading Impact 45 60 65 180

Cumulative Capital From Current Increase 15 40 65 100

Borrowing for Remaining Shortfall 30 20 0 80

Accumulated Debt Charges on Shortfall 1 5 7 10

Although these recommendations will cause very significant operating pressures over the next few years, these increases are critical to the ongoing financial condition of the Corporation. To the extent that there may be other options to the recommended capital from current increases, it is recommended that potential offsets be reviewed and brought forward for Council's consideration as appropriate.

Funding of the Rapid Transit Expansion Program (Sheppard Subway):

A further factor which will affect future debt charges is the Sheppard Subway. When Metro Council approved construction of the line in 1996, it dedicated $12 million annually to a reserve to fund future debt charges, which translated at that time into a one percent dedicated tax. This increase was predicated on the fact that the balance of Metro's capital program or operating budget could not absorb the impact of RTEP. At that time, Metro Council was apprised that further increases in the annual provision to the reserve of approximately $24 million would be required to fully offset the debt charges and the approval of the RTEP program was made on that basis.

Based on the total expenditures to date and projected cash flows and a continuation in the operating budget of the $12 million annual provision, the existing reserve will be insufficient to offset the debt charges by the year 2000. In that year, the shortfall will be $7.6 million and will grow to approximately $24 million following completion of borrowing for the line in 2002. Council will be given the opportunity at that time to increase the annual contribution to the reserve, increase the operating budget by the amount required each year to fund the debt charges, or incorporate other potential financing options. The impacts of RTEP debt charges have not been factored into the capital financing options identified in this report, above. In other words, the recommended capital financing stabilization reserve is not intended to fund debt charges related to RTEP.

Summary of Operating Impacts From Above Recommendations:

In total, the following operating impacts would result from the above recommendations:

Annual Operating Impacts $Million

1998 1999 2000 2001 2002

Base Program (After Stabilization Reserve) 0 0 0 0 0

TTC Provincial Downloading:

Capital From Current Increase 15 25 25 35 40

Accumulated Debt Charges From

Remaining Shortfall 1 4 2 3 11

RTEP Additional Requirements 0 0 8 10 5

Total Projected Annual Impacts 16 29 35 48 56

Potential Offsets Against 1998 Borrowing:

Following is a breakdown of the net borrowing requirements for tax supported programs (excluding Sheppard Subway) based on the 1998 Capital Budget recommended by the Budget Committee at its meeting of March 31 and April 2 and 3, 1998:

$Million

Base Program TTC Downloading Total

Net Requirements 270 45 315

Potential Underspending/

Cash Flow Deferrals (46) 0 (46)

Capital From Current/Other

Internal Funding (131) (15) (146)

Borrowing 93 30 123

Incorporated within the above financing is one time revenues of $20 million. In a communication dated March 11, 1998, the Chairman of the Toronto Parking Authority indicated that, on a one time basis in 1998, surplus capital reserve funds in the amount of $20 million could be made available to the City. Given that a sizeable portion of the 1998 Capital program is committed to past funding decisions and that the new City has not had the time to fully review its long term capital priorities, it is appropriate to use funding of this type on a one time basis to reduce 1998 borrowing requirements. Of the $20 million proposed by the Authority, $10 million was included as a potential funding source within the Capital from Current and Other Internal Funding previously tabled with the Budget Committee. The balance of $10 million has been applied in the above table and reduces the borrowing for the recommended base program to $93 million, below the long term stable borrowing level of $110 million.

A second potential capital financing tool is the sale of surplus City owned properties and other major assets. From a financial perspective, an appropriate use of these funds is against capital borrowing requirements. One option would be to apply proceeds from asset sales to reduce debt each year and make corresponding increases to the capital from current allocation equal to the debt charges avoided from this action.

As an illustration, were the City to secure surplus revenues annually of $35 million over ten years from sale of assets or other sources and applied these amounts to reduce annual borrowing, the City could increase its capital from current by $80 million and reduce its annual debt charges by $90 million, while maintaining a base capital program at the 1998 level (again, excluding the impact of TTC downloading and RTEP). At that rate, one half of the annual reductions in debt charges from the retirement of old debt would be converted to additional capital from current each year. There is no indication at this time that such surplus revenues would be available, but the same concept could apply to lesser amounts which would help to reduce the reliance on debt. The change in mix of capital financing from capital from current and debt charges from this scenario is illustrated in the following graph:

Given that surplus asset sales provide a temporary source of funding, it may also be appropriate during the transition to the new City to use such funds to offset borrowing required for transition related projects. The funding of such projects will be the subject of a separate report.

The Case for Debt Financing:

Several major trends continue to influence domestic and international financial markets. The effects of global access to markets, deregulation, competition as well as new financing alternatives have created new opportunities for innovation and being able to achieve lower borrowing costs.

Although the City is committed to reducing its reliance on debt issuance to finance capital expenditures over the next five years, it is important to realize that the cost of issuing municipal debt has never been lower over the last thirty years. The financial markets have emerged from a period of extreme volatility, high rates of inflation and federal and provincial deficits to an era of low inflation accompanied by low interest rates not seen since 1968 and the virtual elimination of current budgeted operating deficits. Even with a declining need for debt being established as an objective to be achieved over the next five years, it is important to have the ability to participate in the financial markets with an appropriate degree of flexibility to ensure that the City's transactions are successful and result in the lowest cost of funds available. Therefore, although a target of $110 million in average debt issuance is being recommended, there must be the ability to vary this amount as well as the term-to-maturity on occasion, depending upon market conditions. Debt financing occurs in a highly specialized environment and requires the ability to be able to respond to economic and financial indications as judged to be appropriate.

Debt, when managed properly, is one of several efficient and effective methods of financing capital projects. It can be used to equate the costs and benefits of capital expenditures over the useful economic life of the asset in order to transfer the cost of infrastructure between current and future generations who will also benefit from the project. This argument is suited to growth-related projects with an extended useful life such as a subway and not for regular maintenance and required renovation which should either be financed from current funds or through debt with a relatively short maturity.

In order to handle an emergency, such as the ice storm which affected parts of eastern Ontario and Quebec earlier this year, debt financing may be the only reasonable course of action available to cover these types of expenditures.

Although it may be difficult to measure at the municipal level, responsible and well-managed debt financing can have a positive impact on the local economy by providing jobs, income and a demand for construction materials whereby the alternative would be a deferral of various projects until funding could be provided from current funds. By avoiding these delays, the City may be able to take advantage of favourable economic conditions whereby a skilled labour force, combined with lower material costs can actually create cost-savings and allow a project to be completed under-budget and on time.

In order for a capital financing management plan to be effective, it must be responsive to external economic and financial conditions and not artificially constrain the ability to participate in domestic and global capital markets in order to achieve the lowest cost of funds available through a successful transaction.

Conclusions:

The recommendations contained in this report would serve to minimize the fluctuations in future operating budgets due to annual changes in debt charges. Further, specific recommendations with respect to capital from current funding to offset the impacts of Provincial downloading on the TTC are identified. Although these will dramatically impact on the operating budget over the next few years, the actions are necessary to maintain the City's long term financial stability and infrastructure. Finally, recommended application of one-time offsets against borrowing would reduce the impact of future debt charges on the operating budget.

Contact Name:

Len Brittain, 392-5380; Fax: 392-3649; Internet: len_s._brittain@metrodesk.metrotor.on.ca

2

1998 Operating and Capital Budget for the Water and

Water Pollution Control Programs and Harmonization of

Water and Sewer Rates

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the 1998 Capital and Operating Budgets for the Water and the Water Pollution Control Programs, including the following:

(1) the transfer of $18.6 million of expenditures from the mill rate to the water rate;

(2) expenditure reductions and fee adjustments totalling $14.9 million, excluding the early payment discount or late payment penalty as applicable;

(3) a general water rate increase of 2 percent or $3.7 million effective July 1, 1998 applicable to all water users; and

(4) the deferral of water rate harmonization to January 1, 1999, to be considered as part of a report on the harmonization of all fees and service levels in the new City.

The Budget Committee reports having requested the Chief Financial Officer and Treasurer to submit a report to the Budget Committee in the fall of 1998 on a recommended phase-in for the harmonization of all user fees and service levels across the entire City commencing in 1999.

Background:

The Budget Committee on April 20, 1998, had before it the following:

(a) letter of transmittal (April 9, 1998) from the Scarborough Community Council regarding the 1998 Operating and Capital Budget for the water and water pollution control programs and harmonization of water and sewer rates;

(b) report (April 17, 1998) from the Chief Financial Officer and Treasurer regarding a follow-up report to the Scarborough Community Council meeting of April 9, 1998; and

(c) report (April 20, 1998) from the Interim Lead Economic Development regarding the impact of the harmonization of water and sewer on business in the community of Scarborough.

--------

(Transmittal letter dated April 9, 1998, addressed to the

Budget Committee from the

Scarborough Community Council)

Recommendations:

The Scarborough Community Council, on April 9, 1998, directed that the Budget Committee be advised that Scarborough Community Council supports:

(1) that the rates in Toronto, East York and York remain at a constant level for this year versus last year, and that the additional revenue be used to accelerate the meter program;

and recommends:

(2) that the water harmonization fees in Scarborough be deferred until harmonization of all fees and service levels in the City is reviewed and reported to Committees and Council;

(3) that the Chief Financial Officer and Treasurer be requested to report to Budget Committee with the following additional information:

(a) the status of the various Reserve Funds maintained by the former municipalities and the Utility Commissions with regard to this issue;

(b) the impact of deferral on the harmonization of rates on the overall budget and the alternatives for funding;

(c) the viability of harmonizing water and sewer rates over a variety of time periods with the residents in areas experiencing increases receiving some form of compensation from utility reserve funds to offset the increases;

(4) that the Interim Lead, Economic Development, be requested to report to Budget Committee on the impact of the harmonization of rates on businesses;

(5) that the Chief Administrative Officer be requested to report on a public information programme;

(6) that Council consider the following issues when setting the water and sewer rates for the City of Toronto:

(a) the age of the district infrastructure for sewer and water systems;

(b) the condition rating of the district systems;

(c) the maintenance needs of the total system;

(d) the rate of maintenance spending by district:

(i) direct staff to report back later in 1998 on the method of harmonizing the maintenance standards and spending levels per district;

(ii) in the interim, maintain as much as possible, the current levels of expenditure per district, until Council has made a decision on service level harmonization for infrastructure maintenance; and

(7) that any harmonization of water and sewer rates be subject to the implementation of a property tax credit/discount mechanism for the former City of Scarborough ratepayers, sufficient to reflect the quantum dollar shift from tax-supported sewer/water infrastructure costs in Scarborough.

Background:

The Scarborough Community Council had before it a communication (April 6, 1998) from the City Clerk, referring a copy of the report (April 3, 1998) from the Chief Financial Officer and Treasurer, dealing with:

(1) the 1998 Operating and Capital Budget for the Water and Water Pollution Control Programs, including recommendations on rates;

(2) User Service Fees, Water Rebate Programs and Sewer Service Rebate Programs; and

(3) the Harmonization of Water Rates;

and advising that Budget Committee, on April 3, 1998, recommended that:

(1) the implementation and impact of the harmonization of water and sewer rates on the former City of Scarborough be deferred to the meeting of the Budget Committee scheduled for April 20, 1998; and

(2) Scarborough Community Council be requested to hold an emergency meeting before April 20, 1998, to discuss this issue and to provide a report to the April 20, 1998, meeting of the Budget Committee.

--------

(Report dated April 17, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

This report is a follow-up to the emergency meeting of the Scarborough Community Council held on April 9, 1998 at the request of the Budget Committee.

Recommendation:

That this report be received for information.

Background:

On April 3, 1998, Budget Committee considered a report on the '1998 Operating and Capital Budget for Water and Water Pollution Control, and Harmonization of Water and Sewer Rates'. The Budget Committee recommended that the Scarborough Community Council hold an emergency meeting to discuss a number of related issues.

Subsequently, the Scarborough Community Council met on April 9, 1998 to review the staff report. The minutes from that meeting are part of the agenda and the amendments from the April 3, 1998 Budget Committee meeting are attached to this report (see Attachment A). Following is a report that addresses some of the questions raised by the Scarborough Community Council.

Issue (Item 3(a) ):

"The status of the various Reserve Fund maintained by the former municipalities and the Utility Commissions with regard to this issue" .

Comment:

Fund balances as at January 1, 1998 relating to water and sewer reserves are as follows:

Former Municipality ($ million)

Metro 144.4

Toronto 17.3

North York 7.6

Scarborough 4.3

Etobicoke 4.7

York 0.5

East York 3.8

TOTAL 182.6

The 1998 Capital and Operating Budget has minimal impact on these Reserve Fund balances as additions to and withdrawals from the reserves reduce the above balances by only $1.6 million. Appendix A provides more detail on the reserve funds.

Issue - (Item 3(b) ):

"The impact of deferral on harmonization of the rates on the overall budget and the alternatives for funding"

Comment:

The Water Rate harmonization proposal before Council is revenue neutral. Revenue gains from users whose rates are increasing offset the revenue loss from users whose rate are decreasing. Deferring the start of water rate harmonization by 1, 2, 3 year or longer will not change the total revenue received as long as water usage patterns remain similar to the current pattern; it only changes the rate of increases and decreases as shown in the following tables.

Table 1

Water Rates by Municipality - Two-Year Phase-in

1. First year rates to take effect July 1, 1998.

2. Fully harmonized rates to take effect July 1, 1999

3. 250 cubic metres is used annually by average residential water user

Table 2

Annual Increases for Scarborough if

Phase-In Extended Beyond 2 Years

Immediate Phase In:

There would be an immediate increase of 20.3 percent for most Scarborough water users and decreases of 7.1 percent for East York water users. The water users in other municipalities will experience smaller changes as indicated in Table 1.

Phase-In Period - 2 Years:

Under this option, they range from a decrease of 2.9 percent to an increase of 8.1 percent in year one and a decrease of 4.6 percent to an increase of 10.2 percent in year two. This mitigates the impact of the changes while not drawing out the process of harmonization over an extended period of time.

Phase-In Period - 3 Years:

This further smooths out impacts as changes range from decreases of more than 2.3 percent in East York to increases of 6.4 percent annually for Scarborough.

Longer Phase In Period - e.g. 8 years:

A longer the phase in period would lead to a further smoothing out of any impact on the water users and relatively smaller total dollar changes. Scarborough customers under this option would experience an increase of 2.4 percent annually.

Issue - (Items 4 and 5):

- that the water rates for Toronto, York and East York not be decreased

- "that revenues generated from the approval to allow existing rates to remain in place in Toronto, York and East York be used to accelerate the Metering Program"

Comment:

The staff report to the April 3, 1998 Budget Committee recommended a two-year phase in for all municipalities. Scarborough, North York and Etobicoke rates would go up, while Toronto, East York and York would experience a decrease. Deferring the decreases for Toronto, East York and York until the third year, while increasing rates for Scarborough, East York and York to the proposed harmonized rate of $.9416/cu. metre over a two-year period, would result in revenue gains as shown below in Table 3:

Table 3

Revenue Impact of Maintaining Current Rates

in Toronto, East York and York

($ Million)

Cumulative Savings

($million)

Year 1 4.5

Year 2 15.8

Year 3 27.1

These additional revenues may be used to pay for the conversion of flat rate to metered conversion for accounts for approximately 88,000 customers in the old City of Toronto. Deferral of decreases over three years would pay for a complete conversion to metered accounts over a three year period, based on an average cost of $300.00 per conversion.

It should also be noted that going to fully metered accounts will increase operating costs for administration, meter reading and billing. Also, the revenue received from these customers may decrease as water usage will go down. These factors may place added pressures on the water rates in the future.

Issue (Item 3(c) ):

"the viability of harmonizing the water and sewer rates over a variety of time periods with the residents in areas experiencing increases receiving some form of compensation from utility reserve funds to offset the increases"

Comment:

Another way to mitigate the effect of harmonization on Scarborough water users would be to harmonize rates for the former municipalities of Toronto, East York, York, North York and Etobicoke over a two-year period and to extend harmonization for Scarborough over a three year, four year, or longer period. As shown in Table 4 this would reduce the annual rates of increase for Scarborough, but would cost $6.0 million if the Scarborough phase-in were extended to 3 years, $13.0 million if extended to 4 years and $41.0 million if extended to 8 years.

Table 4

Cost of Deferring Scarborough's Harmonization

While Phasing In Other Municipalities

to $.9416/cu. metre Over Two Years

Conclusion:

On the assumption that Toronto should move to a harmonized water rate for all areas within its new boundary, the issue before Council is how to minimize the impact of the phase-in on those municipalities that would experience an increase. As shown in Table 1, Scarborough would require the largest increase, at 20.3 percent, followed by Etobicoke at 6.5 percent and North York at 1.8 percent. A number of options have been put forward to mitigate these impacts. These range from extending the phase-in period for all municipalities; extending the phase-in period for Scarborough only; freezing the rates for Toronto, York and East York for two years, while phasing-in increases for the three municipalities whose rates go up, over two years. If the latter option were adopted, the additional revenues generated would be used to pay for major system upgrades, including the conversion of all existing flat rate accounts to metered ones.

Contact Name:

Nick Kristoffy, 392-7051

Attachment A

10. that prior to any financial commitment being made by the Toronto Police Services Board for the following capital projects:

(a) No. 037: Occurrence Re-engineering, ($4,997,000.00);

(b) No. 054: MDT Replacement ($3,650,000.00); and

(c) No. 057: Radio System Re-engineering ($2,700,000.00);

approval must be obtained from the Chief Administrative Officer who has been requested by the Budget Committee to review these projects in the context of the Information Technology review.

The Budget Committee reports having requested that:

(a) when the Chief Administrative Officer is conducting an internal review of the Audit functions, other support functions within the City and the Police Department and the benefits, if any, of amalgamating them under one department also be considered;

(b) the Chief Administrative Officer and Chief Financial Officer and Treasurer report to the Budget Committee as soon as possible on the impact on the 1999 Operating Budget with respect to the additional officers required to meet the target of 4009; and

(c) the Commissioner of Corporate Services report to the Budget Committee at is next meeting scheduled for May 26, 1998 with respect to the acquisition of the land for the replacement of 51 Division.

The following persons appeared before the Budget Committee in connection with the Toronto Police Services Budgets:

- Councillor Norman Gardner, Chair of the Toronto Police Services Board;

- Chief David Boothby;

- Mr. Hugh Moore, CAO - Policing; and

- Deputy Chief Steve Reesor.

Water and Water Pollution:

The Budget Committee reports having approved the 1998 Capital and Operating Budgets for Water and Water Pollution with the following amendments:

(1) that the Etobicoke free sandblasting of water service connections ($73,000.00) be reinstated;

(2) that $580,000.00 be reinstated for the following programs:

(a) Water Conservation Program Consolidation ($350,000.00)

(b) Reduce Downspout Disconnection Program ($230,000.00);

(3) that an off-setting amount be identified from other amalgamation savings for funds reinstated in recommendations 1. And 2.;

(4) that the water rates from Toronto, York and East York not be decreased;

(5) that revenues generated from the approval to allow the existing water rates to remain in place in Toronto, York and East York be used to accelerate the Metering Program;

The Budget Committee reports having requested that:

(a) the implementation and impact of water rate harmonization in the former City of Scarborough be deferred until the meeting of the Budget Committee scheduled for April 20, 1998;

(b) Scarborough Community Council be requested to hold an emergency meeting before April 20, 1998;

(c) Finance staff be in attendance at the emergency meeting of Scarborough Community Council;

(d) report be brought back to the Budget Committee on April 20, 1998 on the outcome of the Scarborough Community Council meeting;

(e) staff report to the Budget Committee on the cost implications of extending the Water Service Replacement Program over the entire City and determine funding for same;

(f) the Chief Administrative Officer report to the Budget Committee on the Best Practices Program outlining savings and efficiency improvements with regard to operations and defer further commitment until receipt of said report.

The following persons appeared before the Budget Committee in connection with Water and Water Pollution Budgets:

- Councillor Jack Layton, Don River; and

- Councillor Ron Moeser, Scarborough Highland Creek.

--------

(Report dated April 20, 1998, addressed to the

Budget Committee from the

Interim Functional Lead, Economic Development)

Purpose:

The purpose of the report is to demonstrate the impact of the proposed harmonization of water and sewer rates on business located in the community of Scarborough. The companies most affected by the proposed harmonization of water rates are those that rely on significant supplies of water for production purposes as compared to those that use water for domestic purposes only.

Source of Funds:

No funds required.

Recommendations:

For information of Finance Committee.

Council Reference/Background/History:

Scarborough Community Council requested the Interim Lead, Economic Development to report to Budget Committee on the impact of the harmonization of water rates on businesses in Scarborough.

Comments:

The harmonization of water rates across the new Toronto will have the most severe impact on Scarborough businesses as compared to businesses elsewhere in Toronto. The proposed rate of $ .9416 per m3 is a 20 percent increase from the current Scarborough rate of $ .7826 per m3. As the table below demonstrates Scarborough, Etobicoke, and North York will have an increase with Toronto, East York and York experiencing a decrease.

Water Rate Harmonization Comparison

The seven largest industrial water users in Scarborough are shown in the accompanying table which are impacted significantly by water and sewer rate harmonization. Proposed rate increases, including rebates, at full implementation, ranges from $45,179.00 for the smallest water user to $260,263.00 for the largest water user based on estimates provided by City of Toronto Finance Department staff.

Each company has been contacted by staff to determine the impact of the proposed new rates on their Scarborough operations. In all cases, increases in the cost of water would have a significant negative impact on operations and impact future expansion considerations.

It may be extreme to state categorically that new investment in plant and equipment will be directed elsewhere but it is not irrational to expect that incremental increases in taxes and fees will impact negatively upon each company's profitability. It should be noted that at least one company affected by the potential rate increase moved to Scarborough because of the then favourable water rates.

The accompanying chart, showing the seven companies in the community of Scarborough most affected by the rate changes, demonstrates their importance to the City of Toronto in terms of assessment and employment. The chart also states the amount of the dollar increase and summarizes each of the companies' concerns relating to future investment.

Largest Users of Water in the District of Scarborough.

Some of the companies identified in the chart have forwarded by fax their concerns. Copies are attached.

The average increase for the top fifty industrial water users is $30,000.00 per annum excluding the seven largest which receive volume discounts. The majority of business in Scarborough that do not require water as a input to their operations are less adversely affected. However, like property taxation and increasing water and sewer costs are for the most part an uncontrollable cost and directly impact the bottom-line profitability.

Conclusions:

Scarborough-area companies have already paid for the infrastructure improvements through adjustments to water rates and general tax levies in previous years. It appears that these same companies would be subject to a form of double taxation should the proposed rate structure be implemented.

Some of the firms contacted suggested that a lengthier phase-in period for Scarborough-area companies be considered and that the annual increase in rates be limited to the Consumer Price Index until such time as the rates throughout the City become harmonized.

Contact Names:

F. Bruce Graham, Manager Business Development , Scarborough Office, Phone: 396-7066,

Fax: 396-4241, E-mail: graham@city.scarborough.on.ca.

D. Ronald Rea, Business Development Advisor, Scarborough Office, Phone: 396-5141,

Fax: 396-241, E-mail: rea@city.scarborough.on.ca.

3

1998 Preliminary Transition Project Requests

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 23, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, that:

(1) funding in the amount of $85.5 million be approved based on the transition projects listed in Attachment 'A' appended to the supplementary report (April 20, 1998) from the Chief Financial Officer and Treasurer and the supplementary listing of projects for Community and Neighbourhood Services distributed at the meeting; and

(2) funding for all transition projects be referred to the Chief Administrative Officer for review on a project by project basis and that the Chief Administrative Officer submit a report to the appropriate Standing Committee outlining the source of funding and identifying the related savings and budget reductions, prior to consideration by the Budget Committee.

The Budget Committee reports having requested the Chief Administrative Officer:

(a) to provide a report to the Budget Committee in July regarding the central computerized call-taking/dispatch system for fire services; and

(b) to review the matter of the recent exits of key personnel and provide a report to the Corporate Services Committee, in camera, on the procedure being followed with respect to the exit packages being offered to employees.

Background:

The Budget Committee on April 20, 1998, had before it the following:

(a) Report (April 3, 1998) from the Chief Financial Officer and Treasurer presenting the projected 1998 Transition project estimates and outlining a potential funding strategy;

(b) Letter of Transmittal (March 27, 1998) from the Emergency and Protective Services Committee regarding transition funding for a radio communications system;

(c) Report (April 2, 1998) from the Fire Chief regarding transition funding for self-contained breathing apparatus;

(d) Report (April 6, 1998) from the Fire Chief regarding 1998 training transition investment costs for Toronto Fire Services;

(e) Joint report (April 16, 1998) from the Commissioner of Corporate Services and the City Clerk regarding transitional investments for the City Clerk's Department;

(f) Report (April 17, 1998) from the Chief Financial Officer and Treasurer regarding financing strategy for transition projects;

(g) Supplementary report (April 20, 1998) from the Chief Financial Officer and Treasurer regarding 1998 transition projects, funding and savings estimates; and

(h) Report (April 20, 1998) from the Fire Chief regarding a central computerized call-taking/dispatch system for fire services.

--------

(Supplementary Report dated April 20, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To provide a list of 1998 Transition Projects and to tentatively identify the funding sources and the estimated savings for each.

Recommendation:

It is recommended that the Budget Committee review this report in conjunction with the previous report (Agenda item 3e).

Council Reference:

Supplemental information requested by Budget Committee.

Discussion:

At the direction of Budget Committee the request for Transition Funding list has been revised as follows;

(a) to show only 1998 project requirements which are ready to proceed;

(b) to specify funding sources; and

(c) to identity related savings and 1998 budget reductions already taken (where possible).

The new listing is attached (Attachment 'A'). It must be noted that, due to the nature of the transitional/amalgamation process itself, additional projects will come forward. As such the process recommended in the original report (Agenda item # 3e) remains a priority.

The funding framework and strategy outlined in that report also remains a priority. A formalized mechanism for capturing appropriate revenues and utilizing them through the proposed Transition Project Reserve Fund remains a key requirement to track transitional costs and reduce future debt charges.

The revised listing shows:

1998

$

Program Requests 30,848,000

Staff Exit Cost 45,000,000

Total Gross Costs 75,848,000

Potential Reserve-Existing Sources (6,356,000)

Approved use of Reserve Funds (re staff exit) (10,000,000)

(re staff exit)

Total Potential Offset/Reserve (16,356,000)

Projected Net Requirements 59,492,000 *

(From Transition Project Reserve Fund/Debt)

* Represents 1998 proposed cashflow only. Cashflows associated with some of these projects may increase the commitment and the associated debt charges.

Projected Debt Charges:

Projected debt charges for 1999 would be in the range of $9 million (assuming all projects completed) and the debt issued late in 1998 or early in 1999.

Conclusions:

The attached listing shows potential projects as submitted and their potential funding sources and savings. Detailed justification and appropriate cost-benefit information will be contained in individual reports.

Contact Name:

Ross Cuthbert, 297-4214.

(Report dated April 17, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To receive approval for the process and financing strategy for transition projects.

Funding Sources, Financial Implications and Impact Statement:

This report discusses the general funding guidelines and framework for transitional projects and the overall impact. The establishment of, and the funding sources for a Transition Project Reserve Fund is proposed. The report estimates a potential for debt requirements, for Transition related projects, of up to $220 million less whatever funding can be found from Transition related sources. Various scenarios are presented that show the impact on future current budgets - ranging from $16.3 to $26.5 million in 1999, additional costs of between $4.5 million to $7.5 million in 2000 and a further additional cost ranging form $5.7 million to $7.6 million in 2001.

Recommendations:

That the Budget Committee approve;

(1) the Transition project funding framework proposed in the report;

(2) the establishment of a "Transition Project Reserve Fund" to be used to fund Transition projects;

(3) that the following revenues be contributed to the new Transition Project Reserve Fund;

(i) all one-time revenues (unbudgeted or "windfall" revenues),

(ii) all revenues from asset/land sales in 1998, 1999 and the year 2000,( not previously committed by Council)

(iii) the residual Provincial loan funds in 1998 (if any),

(iv) additional Provincial Transition support (if any),

(v) surplus reserve or reserve funds as identified (with Council approval)

(vi) existing current budget allocations and rate financing (as appropriate)

(vii) Debt financing (for unfinanced reserve fund balance)

(4) that existing current budget allocations be used wherever possible to fund expenditures of an operational nature (training, consulting fees, project management etc) and that existing reserve funds and rate financing be utilized where appropriate;

(5) that a maximum envelope of $250 million (gross) be approved for transitional project spending between 1998 and the year 2000, resulting in a requirement for debenture financing in the range of $150 million to $250 million depending on the City's success in utilizing existing allocations (rate/current budget/reserves) and in capturing additional funds from the sources identified above.

(6) that Committee receive for information Attachment "1", the revised preliminary listing of requests for Transition Funding, and direct that all requests for transitional project approvals, in report form, be submitted for approval following the process outlined in this report

Council Reference/Background/History:

At its meeting of April 3, 1998, the Budget Committee received the 1998 Preliminary Transition Project Requests Report and directed that staff report back to its meeting of April 20, 1998, identifying the transition projects proposed, the associated 1998 expenditures, and the source of funding proposed.

Discussion:

The transition process will extend over a period of years as the City's infrastructure, service delivery structure and information and communications technology are restructured to meet the service needs of the new City. At this point staff have not identified all of the transition related projects nor confirmed the actual amounts required for each project as complete project justifications are still being prepared. An initial list was presented to Budget Committee in the previous report. A revised listing is attached as Attachment "1" to this report. A significant number of revisions have been made to the listing which highlights the preliminary nature of the requests. While the actual total has been reduced (from $246 million to $235 million) an unallocated amount has been added to reflect the expected future requests.

Additional projects could be identified as service restructuring and the preliminary studies in progress which could increase the total amount of transitional projects and funding required. Alternatively, certain projects could be scaled back or eliminated as further analysis is performed. Significant 1998 and future operating savings and service delivery rationalizations are contingent on these projects.

The attached list identifies those projects which have been submitted by the Departments. The preliminary Departmental submissions supporting the projects which shows the justification, details the expenditures and summarizes the potential savings are bound separately and are available for review.

A preliminary review indicates that operational-type expenditures (training, consulting etc) included in these transitional requests. If funds exist for these types of expenditures - within the proposed 1998 Current Budget - then they should be utilized first. The funding strategy proposed does not impact the 1998 Current Budget.

Funding Framework:

Specific funding is to be proposed for each project. The funding will, generally, follow the rationale outlined below and be transferred to the 'Transition Project Reserve Fund' as applicable.

Rate Funding : where expenditures directly relate to an activity normally financed through rates ( water, water pollution, parking etc) And,

where the amount requested will not result in an increase in the rate itself, and,

where sufficient funds exist in the appropriate rate related reserve fund, and

where the project will result in demonstrable savings or improvement which will directly benefit future rates, then

Rate funding is recommended.

Reserve financing: Where the project relates to expenditures normally financed through reserve or reserve funds and,

where, in the opinion of the Chief Financial Officer and Treasurer, sufficient funds exist in the reserve fund,

where a specific payback is available which is suited to internal funding,

or where surplus Reserve funds have been identified by the Chief Financial Officer and Treasurer, then

Reserve funding is recommended

Departmental

Current Budgets: Where the expenditures are of a type which normally would be financed through the normal current budget (consulting, training, furniture, signage etc) or

where the amount requested is small ($100,000 or less), then

The Departments be directed to absorb the cost within their approved 1998 Current Budget allocation or to include in future years budgets.

Special Transition

financing / debt: Expenditures which will result in the acquisition of a long term asset, or

where no other alternative financing exists

Will be funded through the Transitional fund established for this purpose.

Where approved transitional expenditures exceed available funds in the Transition Project Reserve Fund debt financing is recommended.

The Transition Project Reserve Fund:

The Transition Project Reserve Fund will be funded by the following means - all of which directly reduce the City's borrowing needs:

(a) the residual Provincial Loan available after 1998 Current Budget requirements

(b) all proceeds from land sales in 1998 - 2000 (unless the proceeds have been previously committed)

(c) all Corporate "one-time" revenues in 1998 (not already recognized in the 1998 Budget)

(d) Funds from existing reserve funds no longer required for their original purpose which may be identified (subject to Council approval )

(e) any additional Provincial funding which may be secured to cover transition costs associated with downloaded responsibilities.

(f) existing current budget allocations and rate financing (as appropriate)

(g) Debt financing (for unfinanced reserve fund balance)

The Transition Project Reserve Fund will accumulate funds from these sources and will be used to fund project expenditures as required. When insufficient funds are available in this Fund debt financing will be required.

The use of debt financing is appropriate due to the fact that the use of debt will allow the Corporation to spread the impact of these one-time costs over many years and properly match the benefits (savings) with the costs (debt charges).

Staff Exit Costs:

Staff Exit Costs have been shown separately. Council has approved the initial use of $10 million from existing Reserve Funds.

Financial support ($50 million) from the Province has been requested in accordance with Council's direction. A further report on the amount required for staff exits will be brought forward in September. The total estimate of $90 million is expected to be the upside limit at this time.

The Process:

All transition projects should be supported by separate reports which will flow as soon as the appropriate information is available. In addition to complete description of the projects and a full justification, the report will detail the expenditures and the identified savings. As well, the reports will specify the timing and the specific source of funding within the approved framework.

Financial Impact:

At this point the total cost for transition related projects identified to date, excluding the staff exit costs, is estimated at $144.7 million (gross). In addition, an estimated $90 million is shown for staff exit costs. It is also reasonable to expect additional projects to be identified as the transition / amalgamation process proceeds. It is therefore believed that additional projects will be added bringing the total potential expenditures to the $250 million range.

At this time, potential funding from existing sources (rate/Reserve fund/current budget) of approximately $50 million has been identified over this three year period. In addition it is estimated that over this period the Transition Project Reserve Fund could receive some $50 to $100 million from the sources identified.

Attachment #2 shows the potential net requirements by year and estimates the potential debt charges under three scenarios. The first scenario assumes 100 percent debt financing will be required. The second assumes $50 million in revenues from existing sources. The third assumes that the City will generate $50 million in new one-time funding over this period.

Scenario #1 (attachment #2a), shows cumulative debt costs of $0.0 in 1998, $26.5 million in 1999, $36.4 million in 2000, and $37.6 million for 2001 and beyond.

Scenario #2 (attachment #2b) shows potential cumulative debt charges of $0.0 in 1998, $20.9 million in 1999, $29.9 million in 2000 and $30.0 million beyond that year.

Scenario #3 (attachment #2c), shows potential cumulative debt costs of $0.0 in 1998, $16.3 million in 1999, $22.4 million in 2000, and $22.5 million for 2001 and beyond.

These estimated debt charges are directly impacted by the our financial strategies and our success in raising new one-time revenues as outlined above.

Conclusions:

To capture the savings identified in the 1998 current budget reductions, and to begin the process of restructuring the City's infrastructure, service delivery structure and information and communications systems, there are transition projects required that must be initiated.

It is appropriate to fund these one-time transition costs from one-time revenue sources associated with the amalgamation such as land sales, provincial loan funds, and other unexpected or windfall revenues. In the event these are not sufficient, the authority to issue debt for these projects is also requested.

The issuance of debt is appropriate due to the nature of the costs (one-time restructuring) and due to the use of debt to allow the City to match the benefits of amalgamation (savings) with the costs.

No review of the requests listed on Appendix "1" is recommended at this time as all will be the subject of separate reporting.

Contact Name:

Ross Cuthbert; 397-4214.

(Report dated April 3, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To present the projected 1998 Transition project estimates and to outline a potential funding strategy.

Funding Sources, Financial Implications and Impact Statement:

In total, the funding requests identified to date for the period from 1998 to the year 2000 are $246.3 million. The 1998 requests submitted total $134.5 million with approximately 8 percent, or 11.2 million, of this representing operational type expenditures, which should be funded from current funds if available. A further 29 percent, or $39.4 million, represents expenditures for which reserve fund or rate financing has been potentially identified. The remaining 62 percent - or $83.8 million - are identified as capital expenditures for which debt issuance would be appropriate.

Recommendations:

(1) That this preliminary transition project request listing be received for information; and

(2) that a detailed status report on all transition project requests by program area be presented with full details and justification to the next meeting of the Budget Committee.

Council Reference/Background/History:

Budget Committee recommendation January 26, 1998, Clause 3(e) as adopted by Council February 5, 1998, directed that a report on transitional projects and potential funding sources for transitional costs required to support the amalgamation process be prepared.

Comments and/or Discussion and/or Justification:

Background:

The transition process will extend over a period of several years as the process of changing the City's infrastructure and processes are made to capture the efficiencies and opportunities of amalgamation. The costs of transition will range from relatively small and straight forward costs - the changing of signage and uniforms, for example, which can be dealt with over a reasonable time frame using normal replacement processes in the operating budget, to large and complex projects, such as wiring up all customer service points to ensure seamless and consistent service across the City.

Special reviews of all Information Technology and radio system related projects, by the Corporate I.T. staff, will be required to ensure that Corporate standards are maintained, connectivity is maintained and that acquisitions are cost effective.

Preliminary transition projects have been identified and preliminary potential funding sources have been identified. Appendix 'A' summarizes these requests by program and Appendix 'B' details the projects.

Program areas were required to prepare project justifications including the projected costs, anticipated savings and offsets/revenues. In some program areas, these project justifications are not fully complete and require further staff work and reports to justify the request.

Funding Options:

The funding for transition projects should generally match against the nature of the project.

Operating Budgets (existing and future):

Equipment, supplies, uniforms, badges, furniture, computer upgrades, licences and software etc. are all normally funded annually in the current budget. These should be used to fund similar transitional costs. As well, certain new costs can be offset against expenditures currently in each budget. For example, new software licences can be (partially) offset by the termination of old licences and staff training budgets should be allocated to training on new systems and processes.

Debt Financing:

Expenditures which result in a long term asset, or whose benefits are long term should be considered for debenture funding.

Reserve Funds:

Reserve Funds could appropriately represent a potential source of transitional funding. For example, Workers' Compensation reserve funds have been recommended to cover one time Worker's Compensation costs relating to the amalgamation and Employee Benefit reserve funds could be used to help fund workforce reduction and reorganization projects.

Rate, Fees and Charges:

Certain type of projects, in areas normally covered by rates, fees and/or charges may be funded directly from this source.

Provincial Funding:

The Province has announced several funding programs and has recently announced that it is willing to finance certain severance costs for the School Boards. All opportunities should be taken to secure Provincial assistance to help cover these transition costs.

One-time costs which do not increase operational efficiency should ideally be spread over time and funded from existing budget sources. These would include signage, vehicles, uniforms, operational supplies etc.

Current Budget allocations exist that should be used (re-prioritized) to fund transitional costs. For example corporate training budgets, including an allocation of $750,000.00 in the former City of Toronto's estimates, should be used to fund transitional training requirements.

Expenditures which will increase operational efficiency are reasonably funded from other sources given the expectation that the "return" on the investment will allow the investment to be repaid or generate savings which will benefit the corporate financial position.

Conclusions:

The submissions, many of which are still preliminary in nature and therefore have not estimated direct cost savings, budget offsets, productivity, efficiency or consolidation savings or revenue potential, suggest that over $35 million in annual savings are achievable. This number will be higher when all submissions are finalized. These savings have been included in the 1998 Budget submissions.

Contact Name:

Len Brittain 392-8350, Ross Cuthbert 397-4214.

(Copies of the reports referred to in the transmittal letter dated April 23, 1998, from the Budget Committee, have been forwarded to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting on April 28, 1998, and copies thereof are also on file in the office of the City Clerk.)

4

1998 Operating Budget - Community and Neighbourhood

Services - Funding Cost of Filling 2,000 Licensed Child

Care Spaces

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, that:

(1) a reserve account be set up into which savings resulting from a social assistance caseload drop below 88,000 be directed;

(2) the purpose of this reserve account be to protect against future caseload increase and that these funds also be available to provide interim funding for the child care costs of up to 2,000 clients leaving social assistance;

(3) a communication be sent to social assistance recipients advising that should they cease to be dependent upon social assistance, child care funding could be available immediately to support their work or study commitments. However, funding from this reserve fund would cease upon re-entry to the social assistance system;

(4) the funding of child care spaces from the reserve fund be contingent upon appropriate provincial cost sharing; and

(5) the Commissioner of Community and Neighbourhood Services report back on the results of the cost sharing discussions with the Province and any implementation progress that follows.

Background:

The Budget Committee on April 20, 1998, had before it the following:

(a) Report (April 15, 1998) from the Commissioner of Community and Neighbourhood Services regarding funding cost of filling 2,000 licensed child care spaces; and

(b) Letter of transmittal (April 16, 1998) from the Children's Action Committee regarding the expansion of child care subsidies.

--------

(Report dated April 15, 1998, addressed to the

Budget Committee from the

Commissioner of Community and Neighbourhood Services)

Purpose:

At the request of the Children's Action Committee, this report has been prepared to provide Council with information concerning the funding cost of expanding child care subsidies to fill 2,000 licensed vacancies within the child care system as recommended by the Children's Action Committee at its meeting held on April 6, 1998.

Funding Sources, Financial Implications and Impact Statement:

The funding identified as necessary to provide the subsidies to fill 2,000 licensed child care spaces is not currently included in the 1998 budget request of the Children's Services Division of the Community and Neighbourhood Services Department. Provincial approval would be required before the cost of these 2,000 additional child care subsidies could be cost shared under the normal cost sharing formula of 80 per cent provincial 20 per cent local contribution.

Recommendations:

It is recommended that this report be received for information.

Council Reference/Background/History:

The Children's Action Committee on April 6, 1998, recommended to Council for its meeting to be held on April 16, 1998 that funding be provided to fill the 2,000 licensed daycare spaces currently vacant; and further, that Council be advised that the Children's Action Committee reiterated point no. (1) of its previous recommendation to the Community and Neighbourhood Services Committee, viz:

"That the following principles be considered during the 1998 budget process:

(1) that there be expansion of child care subsidies to ensure that the 2,000 vacancies in the licensed child care system are filled......"

The Children's Action Committee requested that the Department provide information concerning the cost of funding the 2,000 child care subsidies referenced in the Children's Action Committee recommendation.

Comments and/or Discussion and/or Justification:

The total cost of funding 2,000 additional child care subsidies at a per space cost of up to $7,500.00 would be approximately $15 million. If provincial cost sharing approval for such an expansion was obtained, under the normal cost sharing formula, the City's share would be $3 million and the provincial share would be $12 million. This estimate assumes that these spaces would be used to support the child care needs of Ontario Works participants and, therefore, would not include user revenue.

Conclusions:

The above is provided for the information of the Committee.

Contact Name:

Marna Ramsden, General Manager, Children's Services Division, Tel.: 392-8128.

--------

(Transmittal letter dated April 16, 1998, addressed to the

Budget Committee from the

Children's Action Committee)

Recommendation:

The Children's Action Committee on April 6, 1998, recommended to Council for its meeting to be held on April 16, 1998 that funding be provided to fill the 2,000 licensed daycare spaces currently vacant; and, further, that Council be advised that the Children's Action Committee reiterated point no. (1) of its previous recommendation to the Community and Neighbourhood Services Committee, viz:

"That the following principles be considered during the 1998 budget process:

(1) that there be expansion of child care subsidies to ensure that the 2,000 vacancies in the licensed child care system are filled;..."

5

Leaf Pick Up Program in Ward 16

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council:

(1) the re-instatement of the fall leaf vacuum collection in the West Rouge community for 1998;

(2) that the cost of the re-instatement of this program be absorbed within the Departmental budget; and

(3) that this program be subject to the service review being carried out on all programs.

Background:

The Budget Committee on April 20, 1998, had before it a report (April 16, 1998) from the Interim Functional Lead for Solid Waste Management and the Commissioner of Works and Emergency Services regarding the fall leaf vacuum collection.

The following Members of Council appeared before the Budget Committee in connection with the foregoing matter:

- Councillor Frank Faubert; Scarborough Highland Creek; and

- Councillor Ron Moeser, Scarborough Highland Creek

--------

(Report dated April 16, 1998, addressed to the

Budget Committee from the

Interim Functional Lead for Solid Waste Management)

Purpose:

To provide information as to the cost of reinstating fall leaf vacuum collection in a selected area of Ward 16, in response to a petition from Michael Mackie, 304 Taylor Road, and accompanying letter of support from Councillor Moeser, and further to report on the cost implications of expanding this service.

Funding Sources:

The estimated annual cost of providing this service in a defined area of Ward 16 is estimated to be between $20,000.00 and $40,000.00 depending upon the tonnage of leaves generated. The provision of the same service level throughout the Scarborough Community Council area is estimated at $1,584,000.00. No funding is available in the 1998, Current Budget proposal for this service.

Recommendation:

That no changes are made in 1998, to the service level or method of collecting leaves throughout the City of Toronto.

Background:

Every fall prior to 1996, for the past 30 or more years, Scarborough's Works and Environment Department has vacuumed loose leaves from specific older areas of the city, primarily in the areas adjacent to and south of Kingston Rd. This service was intended to prevent the flooding of ditches on ditched roads and to prevent the narrowing of the travelled portion of the curbed roads. Residents were permitted to rake their leaves to the curb or into the ditch on uncurbed roads. The remainder of the city received collection of bagged leaves only.

During the 1996, current budget process, in an attempt to meet Council's objective of a 0 percent mill rate increase, staff proposed and Council adopted a service level reduction for the leaf pick up program. The approved service level required all residents living on curbed streets to bag their leaves. The service level remained unchanged for residents of ditched roads. The saving associated with this change was estimated at $100,000.00 and the budget was reduced accordingly.

Between October 1996 and December 1996 this item was debated on several occasions by the Works and Environment Committee and Scarborough Council. Staff was subsequently directed to consider this matter further as part of the 1997, budget deliberations. During this process staff proposed a further service level reduction which would require that all residents bag their leaves for collection. This proposal was adopted by Council and the 1997, budget was reduced by a further $90,000.00.

Discussion:

At the special Budget Committee meeting of April 2, 1998, Committee received a petition (copy attached) from Michael Mackie, 304 Taylor Road. A letter of support from Councillor Moeser was also attached. The petitioners are requesting the reinstatement of the annual Fall Leaf Program within much of the West Rouge Community. Budget Committee directed staff to report on this matter.

While it is acknowledged that the West Rouge Community is heavily treed there are many similar areas within the new city and the former Scarborough. It is the opinion of staff that service levels should be standardized as much as possible and that any new service levels being considered should only be contemplated for introduction on a city wide basis.

In researching this report each of the former municipalities was contacted to determine their practices in this area. Results of this survey are as follows:

East York has never had a residential leaf vac collection system and all residents must bag their leaves. Their Parks Department uses a small leaf vacuum for collection in parks only. Front end loaders are used for bulk collection of loose leaves in heavily treed areas, but only on the road.

Toronto (former) uses a modified hydraulic claw system to pick up loose leaves on municipal property only. Residents are encouraged not to rake their leaves to the curb and are required to bag.

North York uses a claw system for the removal of leaves on the road in curbed areas only. Residents are not allowed to rake their leaves to the street and must bag to receive municipal collection.

Etobicoke operates 18 leaf vacuums. Some areas have no leaf vac service, while heavily treed or ditched areas are vacuumed once and in some areas twice during the five-week program. Residents receiving this service are expected to bag their leaves during the balance of the leaf season. This limited program cost Etobicoke $600,000.00 in 1997.

York utilizes a front end loader for bulk collection of loose leaves for two heavily treed areas only, during a three-week period starting in early November. During this time only, residents can rake their leaves to curbside. All residents in the remaining areas are required to bag their leaves at all times.

In the Scarborough district there are currently four surplus leaf vacuums that could be placed into service. It is estimated that approximately 27 units would be required to collect within the entire Scarborough Community district over a six-week period.

The vacuuming of leaves is an extremely costly and unproductive operation. A typical crew consists of four persons to operate the leaf vac, operate a dump truck, rake leaves and flag vehicles. The hourly cost of $163.00 is almost double that of two persons collecting bagged leaves on a garbage packer, while the daily tonnage collected is significantly less. During the leaf season the leaf vacs typically operate 10 hours per day six days per week. This equates to a six-week operating cost of $58,680.00 per unit. The 27 units necessary to service the Scarborough district would cost $1,584,360.00 annually to operate. A further $460,000.00 would be required to purchase the additional 23 leaf vac units required.

In 1997, the cost of Scarborough's yard waste collection program, which includes bagged leaves, decreased by $5.81 per tonne from $103.74 to $97.93. This decrease is attributed solely to the addition of the leaves formerly collected through the leaf vac program, resulting in improved productivity. The removal of this tonnage would unquestionably increase the cost of providing this program.

Without an in-depth analysis it is not possible to accurately estimate the cost of providing a leaf vac program across the new City of Toronto. However it is safe to assume that the cost could easily exceed $10,000,000.00.

Conclusion:

In the interest of moving toward standardized service levels across Toronto and in consideration of the tremendous pressure to reduce operating costs, the practice of permitting residents to rake their leaves into the ditch or to the curb for collection should not be reinstated.

Contact Name and Telephone Number:

Ron Gordon, Director, Solid Waste, Recycling and Fleet Services, Scarborough Community Council Area, Phone: (416) 396-4771, Fax: (416) 396-4156, E-mail: gordon, Internet: gordon@city.scarborough.on.ca.

--------

The Strategic Policies and Priorities Committee also had before it the following, which was forwarded to all Members of Council with the agenda of its special meeting of April 28, 1998, and copies thereof are on file in the office of the City Clerk:

- (April 2, 1998) communication from Councillor Moeser

- (March 30, 1998) communication from Mr. Michael Mackie, addressed to the Chair of the Budget Committee

- Petition filed by the residents of Ward 16, supporting the written request of Mr. Michael Mackie.

6

Reconstruction of York Mills Road Between

Hedgewood Road and York Ridge Road

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 22, 1998) from the Budget Committee:

Recommendation:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, that funds in the amount of $40,000.00 be included in the 1998 Capital Budget for engineering design work for the reconstruction of York Mills Road between Hedgewood Road and York Ridge Road.

Background:

The Budget Committee on April 20, 1998, had before it a communication (April 1, 1998) from Councillor Joanne Flint, North York Centre South, requesting that funds in the amount of $40,000.00 be included in the 1998 Capital Budget for the design work in preparation for the reconstruction of York Mills Road between Hedgewood Road and York Ridge Road in 1999.

--------

(Communication dated April 1, 1998, addressed to the

Budget Committee from Councillor Joanne Flint)

I am upset that the completion of the reconstruction of York Mills Road between Hedgewood Road and York Ridge Road to remove the dangerous hump that now exists is not scheduled for 1998.

It shows nowhere in the Capital Budget! At the very least we should have the design work done this year in preparation for the reconstruction in 1999. I understand that the necessary engineering design work will cost approximately $40,000.00. Please include these funds in the Studies Budget.

I was assured last year that York Mills Road work was on a high priority for completion this year and red-flagged this when I was asked to identify projects in Ward 9 for inclusion in this year's Capital Budget. I am, therefore, extremely disappointed that I was given misinformation and false hope.

(Memorandum dated February 17, 1998, addressed to

Councillor Tom Jakobek from

Councillor Joanne Flint)

Please find below projects in Ward 9 that should be included in the 1998 Capital Budget:

(1) Complete the Jolly Miller parking lot (Toronto Parking Authority). The conditions of Site Plan must be fulfilled as they were agreed to after extensive public consultation in connection with the re-zoning of the property in 1997. This is a TRUST issue and PRIORITY I.

(2) Rebuild York Mills Road between York Ridge Road and Hedgewood Road to eliminate the "hump". This was not included in the Metro 1997 York Mills reconstruction project because of time constraints. Assurances were given to the community that removing the dangerous humped section between York Ridge Road the Hedgewood Road would be given high priority.

(3) Install a traffic signal light on Bayview Avenue at an appropriate place between Post Road and York Mills Road. Arterial road traffic has increased to the point where it is almost impossible to enter/exit the Wilket/Tudor Gate community safely.

7

Mayor's Youth Employment Summit

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following report (April 28, 1998) from the Commissioner of Community and Social Services:

Purpose:

To brief City Council on the initial commitments and strategy developed at the Mayor's Youth Employment Summit.

Funding Sources, Financial Implications and Impact Statement:

That City Council allocate an additional $200,000.00 in funds to support the Mayor's Youth Employment Summit Program: Getting Jobs for Toronto's Youth.

Recommendations:

(1) that $200,000.00 be added to the consolidated grants budget to support the Mayor's Youth Employment Summit Program entitled, Partnerships in Youth Employment: Getting Jobs for Toronto's Youth. This program will be cost-shared with Human Resources Development Canada and the Ministry of Education and Training, who will each contribute $400,000.00, for a total public sector budget of $1,000,000.00;

(2) the program will be a funding partnership between the City, Corporate Sector and Federal and Provincial levels of government. The funding for this program will be contingent on the Corporate Sector matching the funds made available by the three levels of government;

(3) that City Council approve broadening the mandate of the Children's Advocate to include youth and re-naming the position Children and Youth Advocate;

(4) that the Commissioners of Community and Social Services and Urban Development Services, in consultation with the Children and Youth Advocate, submit a more detailed report outlining the various strategies developed at the Mayor's Youth Employment Summit;

(5) that City Council extend their thanks to all the volunteers, City staff and the Summit Planning Committee, particularly Mr. Gordon Cressy, Ms. Susan Pigott and Mr. Holger Kluge, who assisted in the Mayor's Youth Employment Summit; and

(6) that the appropriate City officials be authorized and directed to take the necessary actions to give effect thereto .

Background:

As identified in my report to the April 15 and 16, 1998, meeting of City Council, The Mayor's Youth Employment Summit was held on April 27, 1998, at Metro Hall. This report was prepared on the request and in consultation with Mayor Lastman's office. Mayor Lastman's proposal for a $200,000.00 funding commitment on the part of the City for a new partnership program to create jobs for youth, required that this report be forwarded directly to the Strategic Policies and Priorities Committee in order that the request could form part of City Council's overall budget deliberations this week. Mayor Lastman's office consulted with Councillor Jakobek (Budget Chair) who is in agreement with the need to forward this request through the Strategic Policies and Priorities Committee.

This report provides an initial report on the outcomes of the Mayor's Youth Employment Summit: Count Me In. A more detailed report will be prepared within the next month and forwarded through the Community and Neighbourhood Services Committee of Council.

Comments:

As outlined in the previous report, the purpose of the Summit was to bring together the key stakeholders required to deal with the issue of youth unemployment and to develop real strategies to employ the youth of our City. A total of 150 people participated in the Summit. The participants represented Toronto's corporate, government, labour, education and community agency sectors and included a number of youth. The Summit's success was due to the support it received from the community agency sector, who assisted with both the planning of the event and the volunteer support required on the day of the Summit. On behalf of all City staff I would like to extend our thanks to all those who helped in making this Summit a reality.

The agenda for the Summit divided the day into three key sessions (refer to Appendix 1). The first session was dedicated to four keynote speakers, who included: David Crane (Economic Editor for the Toronto Star); Bob Richardson (Senior Vice-President - Angus Reid); Charles Beer (Executive Director of Ontario Association of Youth Employment Centres) and Tracey Lloyd (Director - Alternative Youth Centre for Employment). The speakers covered a wide range of issues including: the underlying economic condition that has contributed to the current youth employment situation; a demographic overview of youth in the City; and the current services available to support the youth. Each speaker articulated the challenges that need to be addressed if the problem of youth employment is to be solved.

The second session of the day focussed on the "Stories" of current and past programs/initiatives that met the challenges, and resulted in a number of inspiring success stories. CITY-TV sponsored this segment of the Summit, which incorporated both video clips of people as well as interviews with participants who were present at the Summit. The stories approached the issue of youth employment from a variety of perspectives, including those of youth, sponsoring agencies, business and government.

The passion and sincerity of the Stories inspired the third and final segment of the Summit, which required that participants break into small groups and develop strategies to address one of three key challenges: becoming job ready, getting and keeping a job, and creating job opportunities. A wide range of strategies were developed by each of the 15 groups. The majority of these strategies focussed on addressing the challenges faced by "at-risk" youth.

The Mayor's Commitments:

The Mayor spoke at the opening of the Summit and also provided the closing remarks, which emphasized both his commitment to at-risk youth and outlined immediate steps required to begin to address youth unemployment. In his opening remarks the Mayor recommended that the role of the Council appointed Child Advocate be "officially" broadened to include the youth portfolio. Councillor Chow accepted this challenge and it should be recognized that her work program for the Children's Action committee currently contains a work stream dedicated to Youth issues. However, by expanding this role, various interest groups will now have a single contact point around child and youth issues.

The Mayor also acknowledged the challenges facing youth in the City, referencing a number of statistics of which one of the most revealing is the 17.6% unemployment rate for youth between the ages of 15-24. It is based on this reality that the Mayor felt most compelled to issue his first challenge to the Summit participants and the City in general.

The Mayor agreed to bring forward a request to City Council this week to commit $200,000.00 in 1998, to launch a pilot program that will result in at-risk youth getting permanent jobs. Human Resources Development Canada and the Ministry of Education and Training each agreed to come forward with $400,000.00 to support this new City initiative. This will result in a total public sector commitment of $1,000,000.00. The Mayor challenged the Corporate sector to meet or exceed the $1,000,000.00 commitment and agreed to pursue this matter. The City, Federal and Provincial funding are contingent on matching funds from the Corporate sector. The basic focus of the program is to provide youth with four months of on the job experience (at minimum wage), the cost of which would be fully subsidized by the program. Two challenges were directed at the corporate sector. The first was to provide matching funds for the program. The second was to get business to commit to training the youth for the four month period and then providing the youth with a permanent job. Agencies will be critical partners in this program as they will assist in screening applicants identifying, placements and assisting with follow-up. The Mayor stressed the importance of monitoring these next steps and assessing this pilot initiative.

The response to the Mayor's challenge was positive. Representatives from the Federal and Provincial levels of government, Mr. Temple Harris from the Toronto Construction Association, Mr. Dennis Kucherawy from Famous Players, Mr. Don McCreesh from CIBC and Ms. Susan Pigott of St. Christopher Neighbourhood House, all spoke in strong support of this program as well as the need to follow-up on other initiatives developed as part of the Summit. The Mayor agreed to review all of the strategies developed at the Summit and consider further action on this issue.

Conclusions:

The Mayor's Youth Employment Summit was the first step in a three-year commitment to this issue. The proposed pilot program will result in youth getting job experience and an opportunity to participate in the work force. As noted above, a large number of highly innovative strategies were discussed at the Summit and these will be reflected in a further report to City Council.

Contact Name:

Ann-Marie Nasr (392-0402)

--------

Appendix 1 "Mayor's Youth Employment Summit Agenda", referred to in the foregoing report, was forwarded to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its special meeting of April 28, 1998, and a copy thereof is on file in the office of the City Clerk.

8

Child Nutrition Programs: Partnerships in Funding

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following report (April 27, 1998) from the Commissioner of Community and Neighbourhoods Services, addressed to the Budget Committee:

Purpose:

This report describes the cost sharing partnership for child nutrition programs as requested by the Budget Committee.

Source of Funds:

Funding for the Child Nutrition Programs will be provided by the municipality (through the 1998 operating budget of the Public Health unit) with matching contributions being provided by the private sector, the provincial government, school boards and parents.

Recommendations:

It is recommended that Council strongly urge the provincial government to match the Toronto municipal allocation of $1.185 million in order to ensure adequate child nutrition programs with total direct funding of $4.939 million.

Background:

At its meeting on March 24, 1998, the Board of Health endorsed the report "Child Nutrition Programs in the New City of Toronto" and recommended that $1,185,480.00 be allocated to provide municipal core funding for existing child nutrition programs in the city.

On March 28, 1998, the Budget Committee requested the Commissioner of Community and Neighbourhoods Services to report back on the funding commitments to cost-sharing of the child nutrition programs.

Comments:

A review of funding for existing child nutrition programs in both community and school sites across the new city of Toronto shows that programs have been funded through a combination of community partnerships involving parents, provincial government, school boards and the private sector.

In the former City of Toronto, the funding partnership was supplemented by municipal contributions from both Public Health and the Board of Education. This stable funding base resulted in strong overall program coordination, ongoing support and training programs for local staff, and improved nutritional quality of food. This core funding also strengthened the volunteer base and resulted in increased parental contributions.

1998 Funding Partnerships:

The following funding is expected in 1998:

Parents, Fundraising and Private Sector - $2,500,000.00:

Parental contributions across all former municipalities were approximately $750,000.00 in 1997. Based on experience during the past two years and the current contribution rate, we are confident that this projected level of parental funding will be achievable in 1998.

The private sector, in combination with local school community fundraising, contributed approximately $750,000.00 in 1997. We are confident that this level of private sector funding will be maintained or exceeded. A contribution of $50,000.00 was received on April 20, 1998 from the Royal Bank, which challenged others in the corporate sector to follow this lead.

Provincial Government:

Funding has not yet been committed. Without substantial support from the provincial government, the municipal funding allocation is not sufficient to expand our existing child nutrition programs to five days a week from their current 1-3 day operations. In 1997, approximately $700,000.00 in provincial funding was given to programs across the city. This was not adequate to ensure that nutritious food was available to all programs on a daily basis.

At its April 15^th meeting, the Children's Action Committee recommended to the Community and Neighbourhoods Services Committee that: The Mayor and the Children's Advocate, together with representatives from the Board of Health and the Toronto school boards, be requested to meet with the Minister of Community and Social Services to seek a matching contribution of $1.2 million from the Province for the continuation of the children's nutrition program. Any shortfall in the provincial contribution would require further fund-raising from parents and the private sector, which will be difficult to achieve. Staff in the Mayor's Office are currently attempting to secure an appointment with the Minister of Community and Social Services.

School Boards:

Currently 209 child nutrition programs are operating in school and community sites across the city. Nineteen of these are under the auspices of the Toronto Catholic District School Board. The two major Toronto school boards have committed $1,143,000.00 of in-kind contributions to programs within their jurisdictions:

(i) The Toronto District School Board has committed $1,041,000.00 of in-kind contributions, including space, utilities, maintenance, caretaking, food delivery and administrative support; and

(ii) the Toronto Catholic District School Board has committed $102,000.00 of in-kind

contributions including space, utilities, maintenance, caretaking and administrative support.

Proposed Mechanism for Allocation of Funds:

Health and school board representatives have set up a Steering Committee to develop an administrative structure that would include the following:

(i) A Steering Committee comprised of management from Toronto District School Board, Toronto Catholic District School Board and Public Health will meet at least bi-annually to make policy decisions and finalize funding allocations to community and school-based child nutrition programs, based on an equity / needs based formula and specific program standards.

(ii) The Toronto Community Partners for Child Nutrition, comprised of foundations representing the two school boards, public health and representatives from Area Program Networks, will make recommendations to Steering Committee regarding policies, funding criteria and formula and funding allocations, coordinate citywide implementation, and ensure matched funding, program monitoring and evaluation.

(iii) Area Program Networks comprised of representatives from local program districts will implement local programs and coordinate local training, volunteers, local participation and fundraising.

(iv) Non-profit foundations will hold funds in trust prior to allocation. On an interim basis, an existing non-profit foundation, the Foundation for Advancement of Community Education (FACE, which is affiliated with the former East York Board of Education), has agreed to undertake this function for the Toronto District School Board pending the establishment of a city-wide foundation.

Conclusions:

Total direct funding required to ensure adequate child nutrition programs totals $4.939 million. The municipal allocation of $1,185,480.00 will be matched by $2,500,000.00 from parents, local fundraising and the private sector, and $1,143,000.00 of in-kind contributions from Toronto District and Toronto Catholic District School Boards.

To ensure sustainable child nutrition programs across Toronto, $1.185 million in provincial funding is required. To date, no commitment has been made by the provincial government to support these initiatives. It is recommended that Council urge the Province of Ontario to commit the necessary funding to enable the development of high quality child nutrition programs in Toronto.

Contact Names:

Dr. Sheela V. Basrur, Medical Officer of Health, Tel: 392-7402, Fax: 392-0713 .

9

Toronto Transit Commission Five-Year Capital

Subsidy Agreement - Prepayment of Subsidy

in Exchange for Release

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council:

(1) the adoption of the report (April 20, 1998) from the Chief Financial Officer and Treasurer; and

(2) that the City and the Toronto Transit Commission enter into a surviving agreement that requires the City to match the provincial funding over the life of the agreement and permits the City the flexibility contemplated in the report (April 20, 1998) from the Chief Financial Officer and Treasurer.

Background:

The Budget Committee on April 20, 1998, had before it the following:

(a) Report (April 20, 1998) from the Chief Financial Officer and Treasurer regarding prepayment of all remaining Provincial subsidy obligations under the TTC Five-year Capital Subsidy Agreement;

(b) Communication (April 9, 1998) from the General Secretary, Toronto Transit Commission forwarding Toronto Transit Commission Report No. 1 dated April 8, 1998, regarding the Provincial/Municipal/TTC Capital Subsidy Agreement;

(c) Communication (March 31, 1998) from the Minister of Transportation regarding the cancellation of the TTC Capital Subsidy Agreement; and

(d) Communication (April 17, 1998) from the General Secretary, Toronto Transit Commission regarding the five-year TTC/Provincial/Municipal Capital Subsidy Agreement.

The following Members of Council appeared before the Budget Committee in connection with the foregoing matter:

- Councillor Howard Moscoe, Chair, Toronto Transit Commission; and

- Councillor Rob Davis, Vice Chair, Toronto Transit Commission

--------

(Report dated April 20, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To arrange for the discounted prepayment of all remaining Provincial subsidy obligations under the TTC Five-year Capital Subsidy Agreement.

Funding Sources, Financial Implications and Impact Statement:

Prepayment of the subsidy into an interest bearing capital reserve fund is designed to have no financial impact on the City. The release of the Province from the Capital Subsidy Agreement and the prepayment of all outstanding subsidies under the agreement in no way alleviates the fiscal difficulties arising from the elimination of capital subsidies for transit purposes. At an estimated impact of $180 million per year, the subsidy loss is the single largest budget pressure the City has ever faced. The Budget Committee has requested a report in September 1998 outlining a strategy to address this issue, which is also discussed in a separate report to this Committee on a proposed capital financing management plan.

Recommendations:

It is recommended that:

(i) in exchange for prepayment to the City by the Province of an amount of $828,200,100.00 adjusted as necessary for changes in the prevailing interest rates and any undue delays in the receipt of payment:

(a) the City, TTC and the Province execute a mutual release from the Five-year Capital Subsidy Agreement;

(b) a by-law be introduced to create two interest bearing Reserve Funds entitled "The TTC Capital Subsidy Reserve Fund" and "The Sheppard Subway Project Capital Reserve Fund" to be established with the proceeds of the prepayment, to be expended solely for the purposes of funding TTC capital projects in accordance with the subsidy assumptions in the 1998 capital program;

(c) the TTC report entitled "Provincial/Municipal/TTC Capital Subsidy Agreement" be received for information; and

(ii) appropriate staff be authorized to undertake any necessary actions to implement these initiatives.

Council Reference/Background:

On September 25, 1996, Metro Council authorized the execution of a five-year tripartite capital subsidy agreement with the Ministry of Transportation and the Toronto Transit Commission . The agreement set the terms for continued capital subsidy for the completion of the Sheppard Subway project and other TTC capital works through to the year 2000. The agreement was executed on October 5, 1996.

Discussion:

The Five-year Capital Subsidy Agreement (CSA) was instrumental in the decision of Metro Council to complete the Sheppard Subway project. The agreement provided assurances that subsidies for the project and the rest of the TTC capital program would continue, at least through to the year 2000. Shortly afterward the Province announced that it was discontinuing transit subsidies across the Province as of January 1, 1998, confirming the benefit of the agreement, but leaving the City exposed to the full downloading impact culminating in 2001.

(A) Potential Benefits of Prepayment:

The Province's proposal, as suggested by the attached correspondence from the Minister of Transportation, is to prepay all outstanding subsidies provided by the agreement, presumably for the purposes of reducing the Ministry's administration costs. As long as the payment is sufficient to fund the remaining subsidies obligations, the proposal has the following benefits:

(i) Guaranteed Receipt of Subsidy - under the CSA, subsidy availability is subject to the Legislature allocating adequate funding to the Ministry of Transportation. Therefore, the risk exists that we would not receive the full subsidy as set out in the agreement.

(ii) Administrative simplicity - the release as proposed in this report reduces the need to process and account for subsidy claims to the Province, eliminates uncertainty about cash flow of subsidies due to payment processing delays and ineligibility rulings, and eliminates the opportunity for Provincial intervention into purchasing decisions through subsidy eligibility restrictions.

(iii) Financial flexibility - the reserve funds, as proposed in this report, would provide the opportunity to partially defer the use of debt financing for TTC projects, depending on prevailing capital market conditions.

(iv) Potential Financial Gains - under the proposed lump sum prepayment of the subsidy, the City assumes all the benefit and risk associated with gaining an investment return on the funds. The Province has suggested that it could guarantee a rate of return on the funds if they are held by the Ontario Financing Authority and metered out in annual payments to the City, however, such a safeguard is not deemed necessary. An additional benefit of the release is that surplus property used for TTC purposes, previously subject to partial claw back of the proceeds of disposition by the Province of between 16 percent and 75 percent on the grounds that either the purchase or maintenance of the assets had been subsidized, will no longer be subjected to this treatment.

(v) The City Finance Department has reviewed the outstanding subsidies with TTC staff. The assumptions used to derive the net present value of all remaining subsidy payments and the proposed payment of $828.2 million are deemed to be fair and reasonable subject to the following conditions:

(a) changes to the prevailing interest rates at the time of the transfer of the funds or significant delays in the payment after Council approval of the prepayment could result in the need for adjustment to the amount of the payment;

(b) the Province will not impose any expenditure eligibility criteria on the funds; and

(c) there will be no further claw back on the proceeds of future asset sales as described above.

Full prepayment of the discounted value of future subsidy obligations will place all responsibility on the City to plan for full funding of TTC capital expenditures, and to invest the funds in such a way as to ensure that the funds generate a rate of return sufficient to provide a cash flow comparable in value to that the Ministry of Transportation was compelled to provide under the agreement.

(B) The TTC Position:

The TTC has reviewed the proposal and approved execution of a release at the April 8 Commission meeting as described in the accompanying transmittal, subject to certain conditions, such as the funds being set aside in two (one for the Sheppard Subway) separate interest accruing reserve funds. In general, these conditions are consistent with standard financing procedures followed by the City or as proposed in this report.

The TTC report also proposes that the funds be set aside in a trust, to ensure that the funds are used only for TTC purposes as would have been the case under the subsidy agreement. This option has been considered by the City's legal department. In the opinion of the legal department, as supported by Finance, a trust fund is a disadvantageous mechanism for the City to employ, primarily because:

(1) it would transfer beneficial ownership of the funds to the TTC, e.g. surplus returns on investment; and

(2) it would create restrictions on the use of and access to the funds by the City to reduce its financing costs.

Consequently, it is recommended that the TTC report "Provincial /Municipal/TTC Capital Subsidy Agreement" be received for information.

(C) The Recommendations of this Report:

The release of the Province from future obligations under the Capital Subsidy Agreement should be constructed in such a way as to:

(1) terminate all obligations under the capital subsidy agreement;

(2) provide for a lump sum payment from the Province of Ontario of $828.2 million or the equivalent adjusted for changes in interest rates and undue delays in payment; and

(3) terminate any rights of the Ministry to audit TTC capital expenditures, claw back subsidy payments, or claim any portion of proceeds from sale of TTC assets or assets used for TTC purposes.

In order to safeguard the funds for their intended purpose and protect fiscal integrity of the City, it is recommended that two interest accruing reserve funds (one for the Sheppard Subway Project) be set up for TTC capital financing purposes only and that the proceeds from the release be contributed to such reserve upon receipt. Normal budget procedures and Council by-laws are sufficient to guide the use of these funds until they are fully depleted. If the funds are placed in a reserve fund as recommended in this report, a motion in Council to reopen the enabling by-law would require a majority before use of the funds for any other purpose could be considered.

The release of the Province from the Capital Subsidy Agreement and the prepayment of all outstanding subsidies under the agreement in no way alleviates the fiscal difficulties arising from the elimination of capital subsidies for transit purposes. At an estimated impact of $180 million per year, the subsidy loss is the single largest budget pressure the City has ever faced. Staff have been asked to report back to the Budget Committee in September on a fiscal strategy to address the elimination of the TTC capital subsidy, which is also discussed in a separate report to this Committee on a proposed capital financing management plan.

Conclusion:

The proposal from the Province to prepay all future TTC capital subsidies required under the capital subsidy agreement in exchange for release from the agreement has certain policy, administrative and financial advantages for the City. Subject to approval of this report, two interest accruing reserve funds will be set up so that the funds will be available when required to finance budgeted TTC capital expenditures.

Contact Name:

Rob Hatton, telephone: 392-9149, fax: 392-3649, Interim Budget Lead, Urban Environment and Development Committee, Internet: robert_hatton@metrodesk.metrotor.on.ca.

--------

(Communication dated April 9, 1998, addressed to the

City Clerk from

the General Secretary, Toronto Transit Commission)

At its meeting on Wednesday, April 8, 1998, the Commission considered the attached report entitled, "Provincial/Municipal/TTC Capital Subsidy Agreement."

The Commission amended Condition #1 and #5 noted on page 3 of the report to read as follows:

(1) two reserve funds or trust funds (if it can be accommodated without any adverse tax implications) be established - one for the Sheppard Subway project and one for the Commission's base capital program; and

(5) new projects not included in Schedule A of the 1998-2002 Capital Budget will require specific Commission and Council approval.

The Commission then approved the following:

(1) the execution of an agreement to release the Province from the Provincial/Municipal/TTC Capital Subsidy Agreement in consideration of their prepaying their obligation under the agreement, subject to the conditions set out in this report, as amended.

(2) that this report be forwarded through the City Urban Environment and Development Committee to City of Toronto Council for approval.

The Commission also requested that when staff reply back to the Minister regarding the

release that the letter include reference to the fact that the Province does not have unilateral power to cancel the contract.

The foregoing is forwarded to the City of Toronto Council for approval.

--------

(Toronto Transit Commission Report No. 1

dated April 8, 1998)

Recommendation:

It is recommended that the Commission approve:

(1) the execution of an agreement to release the Province from the Provincial/Municipal/TTC Capital Subsidy Agreement in consideration of their prepaying their obligation under the agreement, subject to the conditions set out in this report; and

(2) that this report be forwarded (through the appropriate standing committees) to the City of Toronto for approval.

Funding:

If the proposed financial settlement of $828.2 million offered by the Province is properly protected in reserve funds and is appropriately invested to obtain a return at least equal to the discount factor applied by the Province, there should be no impact on the capital program for either the City of Toronto or the TTC from a funding perspective.

Background:

On June 6, 1996, the Minister of Transportation announced wide-ranging changes to Provincial subsidy for transit projects including dropping traditional funding from 75 percent Provincial share to 50 percent for transit capital projects and disallowing certain overhead costs previously charged against the TTC capital program. A copy of the announcement is attached. Subsequently, TTC, Metro and Provincial staff met to work out the details of an agreement to provide flexibility and security of capital funding to the TTC. This resulted in a five year Provincial/Municipal/TTC Capital Subsidy Agreement which was approved by the Commission on September 17, 1996, and by Metro Council on September 25,1996.

The Capital Subsidy Agreement (CSA) agreement provides for provincial funding of $511 million for the Sheppard Subway project and $915 million for the Commission's base capital program for the years 1996-2000 (contingent upon matching funding from Metro - now the City of Toronto). The CSA reflects Provincial subsidy eligibility rules and rates (reduced from 75 percent to 50 percent) and it includes various capital envelopes (groupings of like projects) and provides for benchmarking of projects or components of projects (eg. overheads). Other key features of the agreement include:

(1) The establishment of a credit account to permit money saved on a project to be re-invested in other transit projects and to allow timing differences in cash flow on an individual project to be recognized.

(2) Allowance for the carry forward of unspent capital funds to future years.

(3) Immediate Provincial project approval for all items set out in Schedule A of the agreement.

It was anticipated that these features would provide the Commission with the flexibility to better manage and deliver its Capital Program through the recognition of the Commission's long-term capital needs as defined and prioritized in the capital program.

Discussion:

In a letter dated March 31, 1998, to the Mayor of the City of Toronto and the Chair of the TTC (copy attached), the Minister of Transportation advised that the Province intends to make a one-time payment of $828,200,100.00 to discharge its responsibilities flowing from the Provincial/Municipal/TTC Capital Subsidy Agreement. The $828.2 million payment represents the discounted value of payments not yet received under the CSA and will be made in exchange for a full release, signed by the TTC and the City of Toronto, of any future claims under the agreement. City of Toronto staff are currently reviewing the discount factors (based on Provincial bond zero coupon curves), however, it is believed that they are reasonable.

Staff from both the TTC and the City have met with representatives of the Province to discuss the details of this announcement. While it is understood that the Provincial proposal is not intended to place the Commission at any disadvantage compared to the current arrangement, the proposed settlement is being made without any Provincial conditions other than the requirement that a release be signed before any monies are paid. While the Province wishes to prepay its obligations and withdraw from any future involvement in municipal transit matters, the principles of the Capital Subsidy Agreement (noted above) must continue in force under the agreement between the Commission and the City of Toronto. This can be facilitated through the establishment of reserve funds for the $828.2 million, with the following conditions:

(1) two reserve funds should be established - one for the Sheppard Subway project and one for the Commission's base capital program,

(2) joint approval from both the TTC and the City will be required to draw funds from the reserve accounts and the City of Toronto will be required to provide matching funds. This approval would be provided through the annual budget process and will include an updated Schedule A to the agreement. The current version of Schedule A is as approved by the Commission along with the 1998-2002 Capital Program at its meeting of November 18, 1997, (see copy attached). This Schedule A must be updated to reflect 1997 actuals, the slippage of bus deliveries from 1998 into 1999 and, the proposed reallocation of future bus purchase funds to a subway car purchase order to replace the H2 subway cars.

(3) since the Province's one-time payout covers their obligation discounted, the funds in reserve must be in income earning investment vehicles and the earnings must accrue to the fund in order to ensure sufficient funds are available for the Commission's capital program, and

(4) any underruns, cost savings or slippages must remain in the funds,

(5) new projects will require specific Commission and Council approval,

(6) additional contributions to the reserves should be accepted (eg. through the sale of surplus assets).

In addition to the foregoing, based on discussions with Provincial staff, the following conditions should be included in the release agreement:

(1) there will be no further Provincial capital subsidy compliance audits (post-1996),

(2) there will be no future Provincial recapture or clawback of funds received from the sale/disposition of assets,

(3) the Province will no longer establish municipal transit policies.

Once the Commission and City of Toronto Council approve the Province's proposed settlement, TTC and City legal staff will meet to develop appropriate documentation to conclude a release agreement in exchange for the $828.2 million.

Justification:

The TTC's Capital Program represents the Commission's prioritized needs. Long-term, comprehensive, reinvestment plans and multi-year budgets are included based on life-cycle replacement programs, implementation of necessary safety improvements and the need to overcome the effects of previously deferred maintenance/investment. The Province and Metro Council recognized the Commission's needs through the provision of $915 million under the Capital Subsidy Agreement for the base capital program. In order to ensure that the Commission's requirements can be met, it is essential that the $828.2 million settlement be set aside and utilized only for the Commission's capital program to ensure that the transit system is restored and maintained in a state of good repair.

--------

The following material referred to in the transmittal letter dated April 21, 1998, from the Budget Committee, was forwarded to all Members of Council and copies thereof are on file in the office of the City Clerk:

- (March 31, 1998) communication from the Minister of Transportation regarding the cancellation of the TTC Capital Subsidy Agreement;

- Appendix 5 entitled, "Proposed Updated Schedule "A" - TTC 1996 Actual/1998-2002 Capital Program Budget (000's) for Presentation to the Commission on November 18, 1997;

- communication (April 17, 1998) from the General Secretary, Toronto Transit Commission regarding the five-year TTC/Provincial/Municipal Capital Subsidy Agreement."; and

- (June 6, 1996) communication from the former Minister of Transportation, addressed to the Chairman of the former Municipality of Metropolitan Toronto.

10

Provincial Downloading - Updated Estimates

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council:

(1) the adoption of the report (April 17, 1998) from the Chief Financial Officer and Treasurer; and

(2) that the Chief Financial Officer and Treasurer communicate with the Province prior to April 24, 1998, as to what her estimate is of the residential tax room and how the figures were determined.

The Budget Committee on April 20, 1998, had before it a report (April 17, 1998) from the Chief Financial Officer and Treasurer regarding an update of the financial impact of provincial downloading initiatives on the 1998 Operating Budget.

--------

(Report dated April 17, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

This report provides an update of the financial impact of Provincial downloading initiatives on the 1998 Operating Budget.

Funding Sources, Financial Implications and Impact Statement:

The budget impact of Provincial downloading, based on the latest estimates, has been reduced by $32.3 million from the December 12, 1997 amount of $163.5 million to $131.2 million. $22.9 million is already reflected in the 1998 Budget, therefore, the remaining budget reduction totals $9.4 million to various program areas (as noted in the recommendations). The details of the Provincial calculation of the Residential Education Tax Room is to be confirmed and may have a negative impact on the budget in the approximate amount of $16 million.

Recommendations:

Approve adjustments to the 1998 Operating Budget for the following programs:

Net Change ($ Millions)

Program Increase (Decrease)

Hostels (3.1)

Income & Skills Support (1.9)

Children's Services (1.7)

Housing 1.1

Property Assessment (3.8)

Net Adjustment (9.4)

Council Reference/Background/History:

N/A.

Discussion:

Province-Wide Impact:

In May of 1997, the Province announced details on the financial impact of its "Who Does What" proposals. Service and funding responsibilities totalling $3 billion will be downloaded to Ontario's 815 municipalities in exchange for the Province's assumption of $2.5 billion in residential education taxes. In addition, the Province eliminated municipal support grants totalling $665 million. The Province announced that the swap in service responsibilities would be revenue neutral for municipalities.

City of Toronto Impact:

Under the original downloading proposal, the new City of Toronto stood to come up $375 million short. On August 6, 1997, the Province decided to pool the cost of Welfare, Social Housing, Ambulance Services, Child Care and Public Health across the Greater Toronto Area. This shifted more of the financial impact to the 905-areas and reduced the impact on Toronto to $84.4 million. On October 6, 1997, the Education Tax Room amount changed and the net impact on Toronto was reduced to $65.9 million.

On December 12, 1997, the Province modified the pooling equation by eliminating Public Health, Child Care and Land Ambulance services from the pooled services and increasing Toronto's share of GO Transit costs. As a result, Toronto's shortfall increased from $65.9 million to $163.5 million. Adjusting for the known base amounts in the City's budget, the net financial impact, currently reflected in the 1998 Budget, is $140.6 million.

On April 3, 1998, the Province provided a further update to the numbers. The latest downloading estimates totalled $157.1 million. Adjusting for the known base amounts in the 1998 Budget, the resultant net impact on the budget is $131.2 million.

Based on a formula provided by the Province, a preliminary calculation reveals that Toronto's share of the Residential Education Tax Room could potentially be revised downward to $557.4 million, and will have a negative impact of approximately $16 million on the 1998 Budget which would revise the net downloading impact to $147.2 million.

The potential tax room allocation for Toronto is less than the 50 percent share (47 percent or $30 million less) of total residential education taxes needed to offset the new downloaded costs. The exchange of service responsibilities is not revenue neutral, with the shortfall in residential education tax room a major factor behind the additional downloaded costs faced by Toronto . The revised tax room calculation or confirmation of the previous amount has yet to be clarified by the Province.

Minor adjustments to various program areas result in a $9.4 million net reduction and relate to changes to Provincial cost sharing and further fine-tuning of the estimates:

Hostels Reduce by $3.1 million

Income Skills & Support Reduce by $1.9 million

Children's Services Reduce by $1.7 million

Housing Increase by $1.1 million

Property Assessment Reduce by $3.8 million

Net Adjustment Reduction of $9.4 million

A complete history and updated impact of Provincial downloading is summarized in Appendix A.

Implications:

Several concerns over the downloading of services for the new City of Toronto have been identified and continues to be monitored. Specifically, there are many additional costs that are not included in the downloading estimates:

(i) Transition costs for Social Services, Child Care and Social Housing are estimated at $11.2 million and, at this time, are required in 1998.

(ii) Administrative costs of Social Housing is expected to be $10.0 million on an annualized basis. Although the timing of this impact is not known, it is probably not a 1998 issue.

(iii) Capital provisions in the restructuring funds for transit, housing and water & sewer may not be adequate to support future requirements.

Capital deficiencies related to Social Housing were previously estimated at $260 million over five years, with the majority of the deficiencies related to Ontario Housing Corporation assets. The actual budget impact continues to be identified and refined.

The capital subsidy loss for the Toronto Transit Commission will reach $180 million per year by the year 2001. This impact has not been recognized by the Province as a direct downloading cost due to the timing of its announcement and its deferred impact.

(iv) Some programs now mandated by the Province (e.g. Daycare, Housing, Public Health), were previously discretionary and now will be 100 percent municipally funded and are not all considered part of the GTA pooling.

Access to Provincial Funds:

The Province has set up a series of funds worth about $900 million to help municipalities cope with some of the downloaded costs. Originally, Toronto was not eligible to access these funds since the Province assumed the City had a larger tax assessment base and had more room to find efficiency savings.

However, the Province has indicated that $53.3 million may be allocated to Toronto from the Municipal Capital and Operating Restructuring Fund. This one-time funding may be available to provide for capital projects under the Transportation Program. This may provide the City with some additional flexibility in the Capital Program. Further clarification is being sought from the Province.

Conclusions:

With the changing roles and responsibilities driven by Provincial legislation, the nature of the business of local government has been dramatically re-defined. Provincial downloading has placed significant financial pressures on Toronto's operating and capital budgets, for 1998 and beyond.

In the 1998 operating budget, Toronto has identified offsets to its own internal budget pressures primarily through restructuring and efficiency savings. Although the updated estimates of Provincial downloaded costs are lower than originally expected, the City must still address remaining operating budget pressures of $117.6 million.

Remaining 1998 budget pressures (as at April 3, 1998) $127.0 million

Additional program adjustments:

(Hostels, Income & Skills Support, Children's Services, Housing

Property Assessment) ($9.4 million)

Remaining 1998 budget pressures (as at April 20, 1998) $117.6 million *

* (These pressures could change, pending clarification of the Province's calculation of the Residential Education Tax Room:)

Options to address the remaining budget pressures have been outlined in a separate report to Budget Committee.

Contact Name:

Shekhar Prasad, 392-8095

--------

Appendix A

Provincial Estimate of Downloaded Costs

New City of Toronto

($ Millions)

* Latest Provincial estimate has been adjusted to reflect known budget base amounts for Public Health, Ambulance, Children's Aid, Transit and Gross Receipts Tax. Provincial Offences Net Revenue adjusted for part-year impact in 1998.

** Residential Education Tax Room calculation to be confirmed by the Province.

11

Previously Approved but Unstarted Capital Projects Further Report

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendation:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the report (April 16, 1998) from the Chief Financial Officer and Treasurer.

Background:

The Budget Committee on April 20, 1998, had before it a report (April 16, 1998) from the Chief Financial Officer and Treasurer regarding the disposition of previously approved capital projects that were funded but not yet started.

--------

(Report dated April 16, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To recommend the disposition of previously approved capital projects that were funded but not yet started

Financial Implications:

For those projects which are being recommended for deletion and for which funding has been provided, the funds of $506 thousand can be applied to reduce the 1998 Capital Budget program borrowing level, currently recommended by the Budget Committee at $123 million (excluding Rapid Transit Expansion and rate supported programs).

Recommendations:

It is recommended that:

(1) the projects indicated with a 'C' in Appendix A and B of this report be deleted;

(2) the current funding of $46 thousand from tax supported projects so identified in Recommendation No. (1) above be used to reduce the 1998 Capital Budget borrowing requirement;

(3) the debenture authorizations be cancelled for projects so identified in Recommendation No. (1) above;

(4) the projects indicated with a 'D' in Appendix A and B of this report be deferred for consideration with the 1999-2003 Capital Budget;

(5) the current funding of $460 thousand from tax supported projects so identified in Recommendation No. (3) above be used to reduce the 1998 Capital Budget borrowing requirement; and

(6) the balance of the projects be deemed to be started in 1998, be incorporated into the final 1998 Capital Budget, be referred to the respective service areas for further monitoring and be reported on a quarterly basis.

Council Reference:

At its meeting of January 26, 1998, the Budget Committee had before it a report (January 20, 1998) from the Chief Financial Officer and Treasurer entitled "1998 Capital Works Program - Preliminary Targets". In considering that report, the Committee requested the Chief Financial Officer and Treasurer to respond to several motions regarding capital expenditures including a request for a report concerning unstarted capital projects. At its meeting of March 30, 1998, the Budget Committee had before it a report (March 30, 1998) from the Chief Financial Officer and Treasurer entitled "Previously Approved But Unstarted Capital Projects". The Committee reviewed the enclosed list of such projects and recommended that a further report be provided that indicated, for each project, whether it could be cancelled, deferred or proceed in 1998.

Discussion:

Appendix A and B contain the lists of previously approved tax and rate supported projects, respectively, which for a variety of reasons have not yet incurred any commitments. After discussions with the respective service areas, the disposition of these projects was determined as follows: (I) a 'C' beside a project means that it can be cancelled and the funds used to reduce borrowing, and (ii) a 'D' beside a project means that the project can be deferred for consideration in the 1999-2003 Capital Budget and any allocated funding can be reapplied against future borrowing. For all the other projects on the lists, staff of the respective service areas advise that the projects will be proceeding in 1998.

Conclusions:

The quantum of funding which can be applied to the 1998 Capital Program by cancelling and deferring previously authorized but unstarted projects is $506,000.00.

Contact Name:

Len Brittain, 392-5380; Fax: 392-3649; Internet: len_s._brittain@metrodesk.metrotor.on.ca

12

Establishment of City Reserves and Reserve Funds

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendation:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the report (April 16, 1998) from the Chief Financial Officer and Treasurer.

Background:

The Budget Committee on April 20, 1998, had before it a report (April 16, 1998) from the Chief Financial Officer and Treasurer regarding the establishment of City Reserves and Reserve Funds.

--------

(Report dated April 16, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

The purpose of this report is to approve the consolidation and establishment of reserves and reserve funds for the new City of Toronto as of January 1, 1998.

Funding Sources, Financial Implications and Impact Statement:

Funding for the City reserves and reserve funds to be established is provided from the reserves and reserve funds of the seven municipalities amalgamated as of January 1, 1998. Amounts which are identified in this report are preliminary at this time pending finalization of the 1997 accounts in each municipality.

Recommendations:

It is recommended that:

(1) Reserves and reserve funds in the amount of $915,445,484.00 be established and consolidated where appropriate as listed in Schedule I; and

(2) That a further report on the adequacy of each reserve and reserve fund established be brought back as soon as possible after an analysis of projected inflows and outflows is complete.

(3) Staff be directed to prepare a bylaw giving effect to the consolidation or continuance of reserve funds included in this report.

Council Reference / Background / History:

The amalgamation of seven Toronto municipalities, as of January 1, 1998, results in the accumulation of reserves and reserve funds previously established for a variety of purposes. In some cases, the use of a reserve fund has been restricted by legislation or agreement with a third party. In many cases the use of the reserve or reserve funds was at the discretion of Council. Where reserves or reserve funds have been established for similar purposes, it is appropriate to consolidate these into a single reserve or reserve fund upon amalgamation.

Schedule I attached to this report groups the reserves and reserve funds as of January 1, 1998 for consolidation purposes and provides preliminary balances pending the finalization and audit of the 1997 accounts. Part A of this schedule identifies those reserves and reserve funds which are discretionary, which can be used for other purposes as Council may approve and which relate to tax supported funding, either in the form of the tax mill rate or user fees. Part B groups those reserve funds which are funded from user fees but which are restricted as to use by the Development Charges Act, the Planning Act, or agreements with third parties. Part C groups those reserves and reserve funds which are rate supported by water and parking operations.

Discussion:

The rationale for the establishment of reserves and reserve funds included in this report is described below.

Working Capital Reserve:

A working capital reserve is intended to ensure adequate resources are available to cover net operating expenditures. This is of particular concern at the start of a year when operating cash flows are negative. In 1998, there was a negative operating cash flow of approximately $200 million in January.

Employee Related Reserve Funds:

• Workers' Compensation Reserve Fund.
• Employee / Retiree Benefit Reserve Fund.
• Sick Leave Reserve Fund.
• Workforce Reduction Reserve Fund.

Four reserve funds are required for funding obligations to the municipal workforce. A study is being done to quantify these obligations.

Productivity Improvement Reserve Fund:

A Productivity Improvement Reserve Fund is recommended to provide the initial funding on projects which are expected to generate long term savings from productivity improvements. The annual savings generated from approved projects would be used to replenish the initial funding and would include a component for interest.

Insurance Reserve Fund:

An Insurance Reserve Fund is required to fund various insurance claims and related adjusting and legal expenses. The balance available in the Insurance Reserve Fund is necessary to cover future payouts on losses which have occurred and includes any payment below deductible limits or above coverage levels.

Vehicle and Equipment Replacement Reserve:

A vehicle and equipment replacement reserve is required for the funding of vehicle and equipment purchases. This reserve helps to ensure funding is available when vehicles and equipment require replacement and eliminates the need to absorb large expenditures in the operating budget in the year of replacement.

Capital Financing Reserve Fund:

A Capital Financing Reserve Fund is recommended to provide financing on capital projects that would otherwise be financed through the issuance of debentures.

Land Acquisition Reserve Fund:

A Land Acquisition Reserve Fund is proposed to accumulate proceeds from the sale of land and density. This reserve fund would be available to help finance the purchase of new properties or could be used for other purposes as Council may direct.

Solid Waste Management Perpetual Care Reserve Fund:

A reserve fund for the long term obligations associated with the closure of landfill sites is required.

Waste Management Reserve:

A Waste Management Reserve is proposed for funding the net current and capital expenditures of solid waste disposal.

Winter Control Stabilization Reserve:

A winter control stabilization reserve is recommended to help fund winter control expenditures in years when such expenditures exceed amounts budgeted. This reserve would be funded from winter control accounts in years of under-expenditure and would help to stabilize the impact of adverse weather on the mill rate.

Building Maintenance Reserve Fund:

A Building Maintenance Reserve Fund is recommended for the consolidation of various reserves and reserve funds originally established for the preservation and major repairs of municipal buildings.

City Parking Reserve Fund:

A City Parking Reserve Fund is required for municipal parking operations. The Municipal Act requires that a reserve fund be established for the net revenue from the operation of all parking facilities operated on or behalf of the City but allows Council to use the funds for other (non-parking) purposes after payment of debenture debt charges and capital expenditures for additional parking lots or facilities.

Parking Payment In Lieu Reserve Fund:

A Parking Payment In Lieu Reserve Fund is required to accumulate those parking charges levied under provisions of the Planning Act. Similar to the City Parking Reserve Fund, Council may choose to use funds collected under the Planning Act for purposes other than parking.

Election Reserve Fund:

An Election Reserve Fund is recommended for the funding of municipal elections. Annual funding provisions for municipal elections to this reserve fund eliminates the impact of large expenditures for this activity in election years and helps to stabilize the mill rate.

Contingency Reserve:

A contingency reserve is proposed for the estimated costs of arbitrations and awards established by the former municipalities.

Reserves for Program Surplus Allocation:

Three reserves were previously established by the Metropolitan Toronto Corporation for the allocation of surplus in specific program areas. It is recommended that these reserves be continued.

Other Discretionary Reserves and Reserve Funds:

Each of the former municipalities have also established reserves and reserve funds for specific programs or facilities. It is proposed that these reserves and reserve funds be continued during this transition phase of amalgamation.

Parkland Acquisition Reserve Fund:

The Planning Act provides that payments may be required from developers in lieu of a conveyance of land for parks purposes. The Act restricts the use of these funds to parks or other public recreational purposes and requires that monies collected be maintained in a separate account. The need to establish a new City wide Parkland Acquisition Reserve Fund as of January 1, 1998 and the need to separately distinguish the December 31, 1997 balances by former municipality is being addressed in a separate report to the Budget Committee.

Development Charges Reserve Funds:

Reserve funds are required under the Development Charges Act for development charges which are applied and collected pursuant to various municipal bylaws. The charges fund the cost of infrastructure and are restricted under the Act to those uses and geographic areas for which they were raised.

Scarborough Capital Levy Reserve Fund:

A Capital Levy Reserve Fund is recommended for funding capital projects previously approved by Scarborough City Council. Funding of these capital projects in Scarborough has usually been in the year of expenditure rather than the year of the levy.

Subdividers' Deposits Reserve Fund:

A reserve fund is required for deposits received from subdividers and developers in respect of obligations for the construction of various infrastructure.

Restricted by Agreements with Third Parties:

Various reserve funds are required for funding obligations arising through third party agreements.

Donated Funds Designated for Specific Purposes:

Similar to reserve funds, which are established in response to third party agreements, four reserve funds are required for donated monies which are designated for specific projects or programs.

Temporary Reserve Funds:

Three reserve funds are required for the sale of land or density where proceeds received is in the form of a promissory note or a mortgage loan. As the note and loans mature and cash is received, funds will be allocated to the Land Acquisition Reserve Fund and these temporary reserve funds will be discontinued.

Water Rate Stabilization Reserve:

A reserve is required to provide funding for the stabilization of water rates. The reserve helps to reduce the impact of unusual increases in water expenditures and can be applied in the rationalization and implementation of a water rate structure that is uniform throughout the City.

Water and Sewer Capital Expenditure Reserve Fund:

A reserve fund for capital expenditures is recommended to provide funding for watermains, storm and sanitary sewers and water pollution control equipment and facilities. The availability of these reserve funds provides a capability to undertake major infrastructure initiatives without an adverse impact on the water rate.

Parking Authority Capital Expenditure Reserve Fund:

A reserve fund is required for reserve funds of the Parking Authority. Similar to the City Parking Reserve Fund, the Authority can apply any balance available in this reserve fund for the acquisition or improvement of additional parking lots or facilities.

The Municipal Act provides that council may enact a bylaw to apply discretionary reserve monies to a purpose other than that for which the fund was established. A bylaw will be prepared and submitted to Council giving effect to the consolidation and continuance of reserve funds included in this report.

Conclusions:

N/A

Contact Name:

Ken Colley, 416 395-6715.

Shekhar Prasad, 416 392-8095.

13

Association of Municipalities of Ontario -

Payment of 1998 Membership Fee

(City Council, at its Special Meeting on April 29 and 30, 1998, considered Clauses Nos. 1 to 26, contained in Report No. 6 of The Strategic Policies and Priorities Committee, concurrently. Refer to page 3430 for Council's action.)

The Strategic Policies and Priorities Committee submits, without recommendation, the following transmittal letter (April 21, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on April 20, 1998, recommended to the Strategic Policies and Priorities Committee, and Council:

(1) that its previous decision on April 3, 1998, that the City's contribution to the Association of Municipalities of Ontario be equivalent to the amount paid by the former Municipality of Metropolitan Toronto in 1997, be rescinded;

(2) the adoption of the report (April 16, 1998) from the Chief Financial Officer and Treasurer; and

(3) that AMO membership fees in future years be based on the same assessment used for all other cities.

Background:

The Budget Committee on April 20, 1998, had before it the following:

(a) report (April 16, 1998) from the Chief Financial Officer and Treasurer regarding the payment of Association of Municipalities of Ontario 1998 Membership Fee; and

(b) memorandum (April 16, 1998) from Councillor Joan King regarding City of Toronto support for municipal organizations.

The following Members of Council appeared before the Budget Committee in connection with the foregoing matter:

- Councillor Joan King, Seneca Heights; and

- Councillor Howard Moscoe, North York Spadina.

--------

(Report dated April 16, 1998, addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To obtain approval for payment of Association of Municipalities of Ontario 1998 membership fee.

Financial Implication:

Funds are provided in the Sundry at Large Account - Corporate Expenditures.

Recommendations:

That the Chief Financial Officer & Treasurer be authorized to pay 1998 membership for the Association of Municipalities of Ontario in the amount of $68,532.33 in accordance with the stated formula for 1998 AMO membership fees as contained in Appendix C.

Discussion:

The Budget Committee, at its meeting of April 3, 1998, recommended to restrict the amount of 1998 AMO membership fees paid by the City of Toronto to the amount paid by the former Metro in 1997. The fee paid by Metro in 1997 amounted to $14,139.25. Appendix A details the membership fees paid in 1997 by the former municipalities. In 1997 the Councils of the former Cities of North York and Scarborough did not approve payment of AMO membership fees. The combined fees billed in 1997 for all seven municipalities was $99,604.67. The combined fees paid in 1997 for five of the seven former municipalities was $66,060.99. Previously the area municipalities were billed under the fee schedule for lower tier municipalities while Metro was billed as an upper tier municipality. If the standard membership fee structure, for a separate City as per Appendix C, was used for the City of Toronto, membership fees for 1998 would have been $68,532.33 based on the 928,039 household reported by Metro in the 1996 Annual Financial Report.

AMO has billed the City for 1998 fees in the amount of $106,498.80, which is not based on households as in previous years, but rather on the amount of property tax paid by AMO. The attached document from AMO, Appendix B, details the reasons why AMO proposes not to invoice the City using the same fee structure as other Ontario municipalities. As the letter indicates, the payment for the City would be reduced if the actual amount of property taxes paid by AMO is less than estimated.

Contact:

Al Shultz, 416 397-5240, Finance Department.

--------

Appendix A

City Of Toronto

Schedule Of Amo Membership Fees

Billed In 1997