Service Delivery Review Final Report

Transcription

1 Corporation of the Township of Central Frontenac Service Delivery Review Final Report September 16, 2013

2 Township of Central Frontenac Service Delivery Review Table of Contents Executive Summary 2 I. Study Overview 3 II. Environmental Scan 9 III. Service Level Baselines 17 IV. Council Structure t 25 V. Opportunities for Consideration 28 VI. Financial Projections 36 VII. Concluding Comments 38 VIII. Appendices 40 Appendix A Municipal comparative indicators Appendix B Financial projections Appendix C User Fee Calculation Model Appendix D Working Session Presentations 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 1

3 Township of Central Frontenac Service Delivery Review Executive Summary Over the past decade, the Township of Central Frontenac (the Township) has experienced increases in its municipal levy that has concerned Council. In recent years, Council has attempted to maintain taxation increases at an affordable level, the 2013 budget process still resulted in a 4% increase in the levy, however, the two previous years saw increases of 14% and 9%. In order to assist the Township with the identification of potential opportunities for cost reductions and incremental revenues, KPMG was retained to undertake a service delivery review that involved an evaluation of the Township's operations, personnel and financial performance with the view of identifying options for maintaining adequate service levels while allowing for long-term sustainable budgets to be met. The service delivery review process identified the fact that in some instances, the Township's service levels are higher than minimum standards and those adopted by comparator municipalities with similar populations and other characteristics, allowing the Township to reduce services to an acceptable level while reducing costs as well. Additional opportunities were identified through strategies focused on consolidating municipal assets such as community halls, public works yards and fire halls that have remained untouched since amalgamation in Finally, there were several opportunities identified that involve shared service delivery between neighbouring municipalities and/or Frontenac County in the areas of land use planning, solid waste management and municipal finance. Overall, the service delivery review identified a total of $ $293,500 in potential savings that could be realized between 2014 and 2017, providing Council with a range of potential options for both the short to mid-term. As Council proceeds with the 2014 budget process, additional opportunities may be brought forward by staff or the public for consideration, allowing Council to determine which options to pursue. We recognize that the ultimate decision as to type and level of services provided by the Township rests with Council and we trust that our report assists with the decision-making process KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 2

4 Corporation of the Township of Central Frontenac Service Delivery Review Chapter I Study Overview

5 Study Overview Terms of Reference The terms of reference for our engagement were established in the Township's letter of engagement document dated April 15, As outlined in the letter of engagement, the objectives of the service delivery review include: A description and evaluation of the Township's operation structure and service levels; Assessment of the overall effectiveness and efficiency of the Township s operations with the view of identifying potential courses of strategy to maximize value-for-money and minimize pressure on taxes; and Options for maintaining adequate service levels while allowing long-term sustainable budget objectives to be met. The terms of reference for the service delivery review considered the following components: Component Section of Report 1. An environmental scan that summarizes the major factors affecting the Township's cost structure and staffing levels 2. A compensation analysis that summarizes the compensation practices of the comparator municipalities and analyzes the Township s relative position; 3. The development of service level baselines for comparison to the Township's service level standards and practices; 4. An analysis of Council composition and commentary of potential opportunities for enhanced efficiency and effectiveness. 5. An evaluation of the Township's current service delivery, including opportunities for enhanced efficiencies and cost savings; Chapter II Chapter III Chapter III Appendix A Chapter IV Chapter V 6. The development of financial forecasts projecting the Township's s anticipated Chapter VI financial performance. Appendix B 7. Copies of all presentations made over the course of the project Appendix C 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 4

6 Study Overview Methodology The development of the service delivery review involved the following major work steps: 1. Environmental scan Historical financial information for the Township, including audited financial statements, internal financial statements, Financial Information Returns and annual budgets were summarized and reviewed to identify factors influencing operating costs, non- taxation revenues and municipal levies. Historical information relating to staffing levels was summarized and reviewed to identify staffing levels by department and the nature of year-over-year staffing changes. Meetings were held with representatives of the Township's management group to review the Township's financial performance and staffing trends. 2. Service level baseline An initial working session was held with the Township's management group to identify: Services provided The rationale for the delivery of the service (mandated, expected, discretionary) The service delivery model (internal resources, volunteers, contracted t out, shared service) The targeted service level Additional information and documentation relating to the Township's services and service levels, including previous studies, analyses and reports to Council, were reviewed. Discussions were held with Township management concerning appropriate municipal comparators, based on the following considerations: Population Households Geography Distribution of services between upper and lower tiers Role as a vacation locale 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 5

7 Study Overview Methodology 2. Service level baseline (continued) Based on these considerations, the following communities were selected as municipal comparators Community Population 1 Households 2 Area (km) 1 1. Central 4, , Frontenac North Frontenac 1,842 3, Minden Hills 5,655 6, Greater 2,485 2, Madawaska 5. Tay Valley 5, Stone Mills Information concerning municipal services, operating costs, staffing levels, management compensation, organizational structures and other aspects of the comparator municipalities was obtained through interviews with the comparator municipalities and analysis of available documentation (including information provided by the municipalities, information obtained through the municipalities websites and other information such as Financial Information Returns). Information concerning service levels for Ontario municipalities was also obtained from other sources, including the Office of the Fire Marshal, the Ministry of Transportation, the Ontario Good Roads Association, Ontario Library Service and the Ministry of Municipal Affairs and Housing. The population numbers for the Township does not include the seasonal population who have summer homes in the municipality. 1 Statistics Canada census profile, 2011 census data. 2 Municipal Financial Information Return Schedule 02 & 90, KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 6

8 Study Overview Methodology 3. Current service delivery At the beginning of the service delivery review, a confidential Council survey was conducted and submitted to KPMG to determine Council s position with respect to taxation levels, municipal services (specifically whether services could be eliminated, reduced, maintained or enhanced), alternative means of delivering services and staffing reductions. A second working session was held with the Township's s management group to identify potential opportunities for enhancing efficiencies, reducing operating costs and increasing non-taxation revenues, as well as potential risks associated with each of the opportunities. A presentation of the potential opportunities was made to Council and whether they should be considered as part of the Township's 2014 budget process. KPMG identified additional opportunities based on our experience with other Ontario municipalities and similar service delivery reviews. 4. Staffing levels Information concerning the Township's current and historical staffing levels was summarized and reviewed. Information concerning staffing compensation by department/function were obtained for the comparator municipalities and compared to the Township's current staffing compensation. A summary of potential employee retirements (i.e. employees entitled to retire with non-reduced pensions) to December 31, 2020 was reviewed to assess the potential attrition rate for Township employees and associated financial impact. 5. Financial forecasts An initial meeting was held with the Township's Treasurer to review the Township's financial performance and identify anticipated changes in non-taxation revenues and operating costs, as well as the Township's capital forecast. Initial financial projections were prepared p that indicated the potential changes to the municipal levy based on possible future changes to the Township's financial environment but excluding the implementation of potential opportunities identified during the course of the management study. Additional financial projections were prepared that considered the potential implementation of opportunities identified through the service delivery review and the associated impact on the municipal tax levy. 6. Council composition Information concerning Council structure t and compensation for the comparator communities was obtained and compared to the Township's Council structure and compensation arrangements in order to identify potential opportunities for Council s consideration KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 7

9 Corporation of the Township of Central Frontenac service delivery review Chapter II Environmental Scan

10 Study Overview Restrictions This report is based on information and documentation that was made available to KPMG at the date of this report. KPMG has not audited nor otherwise attempted to independently verify the information provided unless otherwise indicated. Should additional information be provided to KPMG after the issuance of this report, KPMG reserves the right (but will be under no obligation) to review this information and adjust its comments accordingly. Pursuant to the terms of our engagement, it is understood and agreed that all decisions in connection with the implementation of advice and recommendations as provided by KPMG during the course of this engagement shall be the responsibility of, and made by, the Township of Central Frontenac. KPMG has not and will not perform management functions or make management decisions for the Township of Central Frontenac. This report includes or makes reference to future oriented financial information. Readers are cautioned that since these financial projections are based on assumptions regarding future events, actual results will vary from the information presented even if the hypotheses occur, and the variations may be material. Comments in this report are not intended, nor should they be interpreted, to be legal advice or opinion. KPMG has no present or contemplated interest in the Township of Central Frontenac nor are we an insider or associate of the Township of Central Frontenac or its management team. Our fees for this engagement are not contingent upon our findings or any other event. Accordingly, we believe we are independent of the Township of Central Frontenac and are acting objectively KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 9

11 Environmental Scan Overview of the Township's Financial Performance The Township's 2013 budget reflects a total municipal levy of $ 6.1 million 1 which, when combined with $4.9 million in other revenues, will fund a total of $11.1 million in expenditures; operating costs ($7.6 million), capital costs ($3.5 million) and contributions to reserves ($0.2 million) Since 2003, the Township's municipal levy has increased by an average of $247,000 or 5.8% per year. In comparison, the average annual increase in upper tier (Frontenac County) taxes paid by Central Frontenac ratepayers was 2.8% over the period of , while the Consumer Price Index increased on average 1.9% annually since It is important to note, however, that the annual increases in the Township's municipal levy have fluctuated significantly from year to year, with several large annual increases experienced during 2004 (13%) and 2010 (14%) and a significant decrease in 2005 (-5%). The leading practice for tax policy is levy increases that are steady and predictable over a five to ten year period a policy that the Township has not been able to achieve. Total municipal levy 2003 to 2012 (millions of dollars) 2 Annual change in municipal levy 2003 to $6 $5 $4 $3.5 $3.9 $3.7 $4.1 $4.1 $4.3 $4.4 $5.0 $5.5 $5.7 15% 10% 5% 13% 9% 5% 14% 9% 4% $3 1% 2% $2 0% $1-5% -5% $ % 1 For the purposes of our report, municipal levy includes payments-in-lieu but excludes supplementary taxes, write-offs and rebates. 2 Source Municipal Financial Information Returns (Schedule 10), Township of Central Frontenac 2013 Budget and internal financial information provided by management KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 10

12 Environmental Scan Overview of the Township's Financial Performance For the most part, the increase in the Townships municipal levy since 2009 ($0.9 million) appears to be the result of increased operating costs, which have increased from $7.1 million in 2009 to $7.6 million in 2013, net against a decrease in other revenue of $0.4 million resulting in a change of $0.9 million. Comparison of municipal operating costs, other revenues and taxation funding 2009 to 2013 Operating Costs Operating Costs (Budget) 2013 (Budget) Other Revenues 2 Taxation Funding Operating Costs 1 Other Revenues 2 Taxation Funding Change in Taxation Funding Council , Administration 3 1, , Fire Policing Planning and Building Controls Roads 3, ,637 3, Environmental Services Cemeteries and Health Recreation Municipal Levy $7,125 $2,752 ($437.4) $763.1 $2,343 ($5,288) ($914) 1 Represents operating costs only (wages, benefits, materials, supplies, contract services) and excludes debt servicing costs or contributions to reserves. 2 Represents non-taxation revenue sources generated by the specific department (e.g. user fees, permit fees, rental revenue, OMPF funding). 3 Includes taxation, default, economic development, sundry, conservation authorities, bylaw enforcement streetlights, cemeteries, administration, protection, emergency services and animal control KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 11

13 Environmental Scan Overview of the Township's Financial Performance In terms of expenditures by type, personnel-related costs account for almost 32% of the Township's operating costs, with the majority of these costs represented by salary (77% of total payroll costs) and employee benefits (23% of total payroll costs). Since 2009, personnel costs have increased from $1.9 million to a budgeted amount of $2.4 million for Budgeted operating costs by type (2013) 1 (in thousands) Compensation Salary Benefits Total Council Administration Fire Planning, Building and Property Roads Environmental Services Health Parks and Recreation Total $ 1894 $ 577 $ 2471 Percentage of Total 76.7% 23.3% 100% 1 Based on the Township'ss 2013 approved operating budget, includes compensation paid to part-time time employees, students and volunteer firefighters. 2 Includes taxation, default, economic development, sundry, conservation authorities, bylaw enforcement, administration KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 12

14 Personnel Profile Benefits as a Percentage of Compensation (2013 Budget) % 50.0% 40.0% 30.0% Average 23.4% 20.0% 10.0% 0.0% Council Administration Fire Planning, Building & Property Roads Environmental Services Health Parks and Recreation 1 KPMG analysis based on 2013 budgeted expenditures. Considers all compensation paid to Township employees KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 13

15 Environmental Scan Overview of the Township's Financial Performance The increase in the Township's personnel costs reflects a mix of staff additions and regularly salary increases pursuant to the Township's non-union salary grids. As noted below, the Township's full-time staffing complement has increased by two employees between 2008 and The Township s full time staffing complement has experienced little change since There has been a re-allocation of staffing resources from Roads to Waste and an increase in Administration by approximately one position. The total number of full time employees, however, has not significantly changed. In contrast, the Township s part-time complement has significantly decreased by 14 positions from 2008 to Full-time and part-time staffing levels by department 2008 to Full-time employees Net Change Administration Fire Planning Roads Waste Recycling Parks Health Total Part-time employees Source Municipal Financial Information Returns (Schedule 80). Information for part-time employees represents positions only and does not equate to full-time equivalents. 2 Includes part-time employees but does not include volunteer firefighters. Amounts shown represent part-time positions and do not equate to full-time equivalents KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 14

16 Environmental Scan Staffing Levels 1 35 Full-time Part-time Seasonal Source Municipal Financial Information Returns (Schedule 80), excludes volunteer part time firefighters 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 15

17 Environmental Scan Overview of Staffing Changes Within the next five years, four municipal employees will be entitled to retire on an unreduced OMERS pension. Additionally, there will be one additional employee who will be eligible to retire on their self administered RRSP pension plan. These retirements represent 18% of all full-time employees. In an organization the size of Central Frontenac Township this change in staffing will present some challenges over the next five years Cumulative number of employees reaching unreduced pension Based on personnel information provided by management KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 16

18 Corporation of the Township of Central Frontenac service delivery review Chapter III Service Level Baseline

19 Service Level Baselines How to Read the Analysis The service level baselines are intended to provide a comparison of service levels, delivery methods, staffing levels and overall operating costs for the Township against the comparator municipalities (Townships of North Frontenac, Minden Hills, Tay Valley, Stone Mills, and Greater Madawaska) and other service level benchmarks that may be relevant. For the purposes of our report, the service level baselines are presented on a departmental basis (consistent with the Township's budget structure), with additional detail provided at the sub-departmental level where considered appropriate. For each service level baseline, the following information is presented: Services Provided A high-level listing of the types of services provided. Delivery Model The method of delivery used by the Township in the provision of the service, which may include own resources, external service providers (both private sector and public sector), shared service arrangements with other organizations or volunteers. Service Level Standard Information concerning minimum i service levels l and/or service levels provided by the comparator municipalities as well as an indication as to whether the Township's current service levels are consistent with, exceed or fall below the minimum/comparable service levels. Please note that for certain services, service level standards are not available. Indicators A comparison of key financial i and staffing indicators for the Township against the comparative municipalities. Where the Township's indicators are higher than the comparator municipalities, they could be indicative of (i) a higher level of service or (ii) the potential for efficiencies and other cost reductions. Except where noted, the indicators have been developed based on 2011 Municipal Financial Information Returns as this represents the last year for which Financial Information Returns are available for the Township. Overall Potential for Cost Reductions Overall assessment as to the potential for cost reductions based on the differences between the Township's service levels, delivery model and indicators and those of the comparative municipalities and other service level standards KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 18

20 Service Level Baselines Corporate Services Services Provided Chief Administrative Officer Finance Legal Human resources Clerks (including licensing) Information Technology Health and safety Administrative support Front desk reception Council support Bylaw Enforcement Payroll Services Delivery Model The Township relies primarily on its own resources (mix of full-time and part-time personnel) for administrative services, with the following exceptions: Employee benefits combination own staff and consultant Legal Services Insurance Services Payroll Transactions Bylaw Enforcement Services Service Level Standard Service levels for specific administrative functions are established either by legislation (e.g. Municipal Act, Occupational Health and Safety Act), or Township bylaws. Aspects of the Township's administrative functions (e.g. Information Technology, Front Desk Reception), however, do not appear to have formally defined service level standards. Bylaw enforcement is on a complaint basis Indicators Net general government costs per household at $245 are higher than the comparator average of $ Nonetheless, general government costs as a percentage of total municipal operating costs are slightly lower (14%) than the average of the comparator municipalities (15%). 1 User fees as a percentage of operating costs (0.4%) are significantly below the comparator average (15%). Staffing compensation for administrative positions are consistent with the comparator municipalities Financial Information Return Schedule 40 Overall Potential for Cost Reductions High It is apparent that the Township recovers only a small amount of its general government costs through user fees in comparison to its peers. There is an opportunity for Central Frontenac Township to increase the use of user fees to provide services that directly affect individual rate payers and reduce the burden on the overall tax levy KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 19

21 Service Level Baselines Planning and Development Services Provided Planning (variances, zoning amendments, official plan amendments, site plans) Building Inspection Delivery Model Planning services are provided through the Township's own resources and the use of a planning consultant. Service Level Standard Planning services are provided pursuant to the Municipal Act. The provision of planning services as a part time duty of the Township s clerk is indicative of a minimum level of service. Building Inspection services are provided pursuant to the Building Code. The Township has a fulltime Chief Building Official (CBO) and part-time administrative support indicating a higher level of service. Indicators Staffing levels and the use of a planning consultant for the Township's planning services are consistent with comparator municipalities. The net cost per household for planning and building services ($31) is lower than the comparator average of $38. Nevertheless, it appears building inspection services are not recovering the cost of delivering building inspection and permit services (approximately $85,000/yr) Financial Information Return Schedule 40 Overall Potential for Cost Reductions Moderate The small size of the Township's planning services, both in terms of staffing levels and operating costs, limits the potential for meaningful cost reductions. The retention of a CBO however presents the Township with the opportunity to provide shared building inspection services to neighbouring municipalities and reduce overall service costs. There is also the additional opportunity to increase building permit fees to recover the cost of service delivery KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 20

22 Service Level Baselines Fire Rescue Services Provided Fire suppression structural & wildfire Rescue - Auto extrication, ice water rescue Medical assistance Fire prevention Fire education & Training i Inspections and building plan reviews Delivery Model Fire services are delivered primarily through the Township's volunteer firefighters, although mutual aid agreements with other fire services does exist. Volunteer firefighters are trained to the same professional provincial i standard d as full time fire fighters. Service Level Standard Fire prevention and education is mandated under the Fire Prevention and Protection Act. Under the Fire Prevention and Protection Act, Council determines the level of service for fire suppression activities. The current level of service includes internal fire suppression, forest fire suppression, auto extrication and ice water rescue. The number of services provided by the fire service, the required training to maintain the necessary competency and work place location is a threat to the long term future of the volunteer fire service There are four fire stations and two substations; each station has a complement of volunteer firefighters indicating a high level of service for 4,008 households. Indicators On a per household basis, the Township's fire costs ($104/HH) are lower than the average of its comparators ($120/HH). 1 The Township s salaries and benefits for fire services as a percentage of the department s operating costs is slightly below the comparator average (41% vs. 42%). The Township s staffing costs for fire services ($170,182) is slightly below the average of it comparators ($174,000). There were five structural fires in Financial Information Return Schedule Financial Information Return Schedule 92 Overall Potential for Cost Reductions High Notwithstanding the consistency of the Township's staffing costs with the comparative municipalities, the current service level standards of the Township specifically the wide range of rescue services and number of fire halls could be adjusted to provide for cost savings, recognizing the associated reduction in service levels and potential for public relations implications KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 21

23 Service Level Baselines Parks and Recreation Services Provided Outdoor recreation facilities, including sports fields and ball diamonds Public beaches, Walking trails & boat launches Indoor Arena Financial i support to community groups Delivery Model Parks and recreation services are provided primarily through Township resources (full and part-time employees, including students). In certain instances, services may be contracted out or involve community groups (e.g. special events). Service Level Standard For the most part, parks and recreation services are discretionary in nature and as such, formal service level standards do not exist. The Township provides recreation facilities like an outdoor rink and ball diamonds and provides funding for swim programs but offers limited recreation programming services. The Township has 41% ownership of an indoor arena (North Frontenac Arena) with the Township of South Frontenac that owns the remaining 59%. The Township provides an annual grant to the North Frontenac Arena board of approximately $28,000. The Township operates 4 community centres and a library facility. Indicators The total parks and recreation expenditure is significantly lower than the comparative average ($421,000 vs. $559,000). 1 The Township s recreation facility net operating costs per household are greater than the average of comparator municipalities ($61/HH vs. $52/HH). 1 The Township s proportionate operational cost per year for the North Frontenac Arena is $146,000. The Township recovers 96% of the operating costs through user fees. 2 The cost of operating and maintaining community centres is approximately $185,000 per year Financial Information Return Schedule Financial Statements Overall Potential for Cost Reductions MODERATE The number of community centre and library facilities and the required maintenance given their state of repair presents an opportunity to the Township to reduce the costs of Parks and Recreation services KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 22

24 Service Level Baselines Roads Services Provided Winter roads maintenance (snowplowing, salting, sanding, snow removal) Summer roads maintenance (ditching, roadside grass mowing, pot hole patching, guide rail replacement) Sweeping & line painting Culvert replacement Road reconstruction Bridge maintenance Fleet maintenance Delivery Model The Township relies primarily on its own resources (mix of full-time and part-time personnel) for roads maintenance, with some external contractors utilized for line painting, winter control, ditch and culvert maintenance and roadside grass mowing. Fleet maintenance is performed in house except for specialty work. Service Level Standard d Indicators The primary service level standard for roads maintenance (summer and winter) is Ontario Regulation 239/02 Minimum Maintenance Standards for Municipal Highways. Under the regulation, roads are classified into one of six classes depending on speed limit and traffic volumes, with different maintenance standards established for each class of road. Roads with lower speed limits and/or lower traffic volumes have lower maintenance standards. The current service levels provided by the Township for winter and summer maintenance exceed the minimum requirements under Ontario Regulation 239/02,,particularly ygiven the nature of the Township's road network which is not characterized as high speed or high volume. The Township operates 1122 lane kilometers of roads including from rural arterial, rural collector and rural local roads (Class 4 to Class 6). The Township's operating cost per lane kilometre of road is $3,119 slightly higher than the comparator average of $3,066/km. 1 In contrast, the Township s operating costs per household were $873 significantly higher then the average of the comparator municipalities ($512). 1 The Township s salaries and benefits for transportation services as a percentage of the department s operating costs is below the comparator average (28% vs. 40%) 1 There are 136 streetlights using the old incandescent technology that have higher environmental and operating costs Financial Information Return Schedule 40 Overall Potential for Cost Reductions High The Township's current service levels significantly exceed the minimum service level standard, potentially supporting reductions in service levels and associated costs, recognizing the potential for adverse response by residents. The use of incandescent technology for street lighting represents an opportunity to improve service levels at a substantially lower cost KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 23

25 Service Level Baselines Environmental Services Services Provided Two active land fill sites (two other sites are being closed) One transfer station Recycling program Delivery Model The Township relies primarily on its own resources (mix of full-time and part-time personnel) for the operation and maintenance of landfill, recycling and transfer station sites. External consultants are engaged to perform hydrogeology testing on the landfill sites. Service Level Standard Landfill sites and other waste management activities are subject to Part V of the Environmental Protection Act (EPA) and the regulations made under the Act. The recycling program is operated under Regulation 101/94 of the EPA. Two waste sites service a municipality of 4,008 households. The EPA requires municipalities to operate a recycling program only if the municipality is greater than 5,000 in population. Indicators The Township has a 41% diversion rate 1 The Township s net solid waste disposal costs per household ($95) is only 59% of the comparator s average. 2 The Township s salaries and benefits for environmental services as a percentage of the department s operating costs is approximately equal to the comparator average (33% vs. 32%) Financial Information Return Schedule Financial Information Return Schedule 40 Overall Potential for Cost Reductions MODERATE There exists opportunities for shared services with neighbouring municipalities to reduce operational costs. These include the sharing the cost of hydrogeology engineering and the use of the Portland landfill site in Verona KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 24

26 Corporation of the Township of Central Frontenac service delivery review Chapter IV Council Structure

27 Council Structure Comparisons of Council Compositions and Costs The Township of Central Frontenac currently has a nine member Council comprised of the mayor (elected at large) and eight councillors. Some municipalities have a Deputy Mayor/Reeve in addition to the Mayor/Reeve and Councillors (Tay Valley & Stone Mills). For the purposes of calculating Councillor representation per 1000 residents, households or 100 km 2, we have included the Deputy Mayor/Reeve position. Council composition for selected municipalities 1 Central Frontenac North Frontenac Tay Valley Stone Mills Minden Hills Greater Madaw aska Council size Number of Councillors Ward system Yes Yes Yes Yes Yes Yes Number of w ards At-large councillors Councillors per w ard (excluding at-large councillors) Councillors per residents Councillors per Households Councillors per 100 sq KM In the event that the Township reduced its Council size from nine to seven members, we note that the ratio of councillors to residents and households would be consistent with the average of the comparator municipalities, indicating a comparable level of political representation with a smaller Council size. Full council per thousand residents (one Mayor & 6 councillors) 1.3 councillors to 1000 residents compared to average of 1.4 Full council per thousand households (one Mayor & 6 councillors) 1.5 councillors to 1000 households compared to average of KPMG analysis based on information obtained from the selected municipalities websites. 2 The larger ward has two Council representatives 3 The larger ward has three Council representatives 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 26

28 Municipal Council Structure Comparisons of Council Compositions and Costs The Township has established a compensation plan for Council based upon a standard amount for each position on Council: Mayor, Deputy Mayor and Councillor. Council is not eligible for the full time benefit plan available to full time employees of the Township. Council members salaries are one third tax exempt. Other benefits, such as computer support, conference attendance and travel expenses are within the norm and consistent with their comparators municipalities in Ontario. We note that compensation levels for Mayor and Deputy Mayor are lower than the average of the comparator group and slightly higher than the average of the comparator group for councillors. $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Mayor Deputy mayor Councillor Central Frontenac Greater Madawaska Minden Hills North Frontenac Stone Mills Tay Valley Comparator Average 1 KPMG analysis. Actual compensation may vary based on per diems and expense amounts submitted. Greater Madawaska does not have a Deputy Mayor/Deputy Reeve position KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 27

29 Corporation of the Township of Central Frontenac service delivery review Chapter V Opportunities for Consideration

30 Opportunities for Consideration Presenting the Results Overall, the service delivery review identified 33 potential opportunities for cost reductions and/or increased operational efficiencies that are provided to the Township for consideration, with an estimated annual financial impact of $293,500 (recognizing that financial impacts have not been estimated for all opportunities and that not all opportunities can be implemented in 2013). The following pages provide information concerning the opportunities including: A description of the potential opportunity An indication as to the potential financial impact associated with the opportunity, based on the 2013 budget and other information Potential risks The decision to implement any of the opportunities identified in the service delivery review will be taken during the 2014 budget process and as such, no formal decision has been made as to the implementation of the identified options KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 29

31 Opportunities for Consideration Municipal Council Option Description Financial Impact 1 Risks Labour Relations Other A.1 Reduce Council size by two members $25,000 No Yes 2 A.2 Establish a formal policy with respect to community grants and donations n/a No No 1 Preliminary estimate based on 2012 budgeted expenditures including support costs, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Potential that residents may view reduction in Council size as adversely impacting political representation; potential that reduced Council compensation may limit candidates for elected office KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 30

32 Opportunities for Consideration Parks, Recreation & Community Services Option Description Financial Impact 1 Risks Labour Relations Other B.1 Rationalize the number of community halls $40,000 No Yes 2 B.2 Explore the potential of closing the Mountain Grove library building and shifting library services to another municipal building $45,000 No Yes 2 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included d implementation ti or other one-time costs. 2 Potential concerns about over accessibility and/or lack of community support to change in delivery model 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 31

33 Opportunities for Consideration Roads Option Description Financial Impact 1 Risks Labour Relations Other C.1 Determine the appropriate p service and funding model for winter road maintenance a) Develop a tiered service standard for winter road maintenance (15% assumed savings) $95,000 No Yes 2 b) Highway 38 Bridge utilized by recreational users tbd No Yes 2 C.2 Convert current street lighting to LED street lights $13,500 No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Potential concerns over public safety, economic development impacts and other risks arising from reduced level of service KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 32

34 Opportunities for Consideration Fire Services Option Description Financial Impact 1 Risks Labour Relations Other D.1 Explore the potential of sharing the positions of Fire Chief and $35,000 Yes No Training Officer with North Frontenac D.2 Establish a fire pumper life cycle reserve plan tbd No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Requires inter-jurisdictional agreement with the Township of North Frontenac 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 33

35 Opportunities for Consideration Corporate Services Option Description Financial Impact 1 Risks Labour Relations Other E.1 Investigate potential shared corporate services with other municipalities & the County tbd No No E.2 Actively register properties that are eligible for tax sales $458,000 No No E.3 Undertake group purchasing arrangements with other public sector organizations and County municipalities tbd No No E.4 Develop and implement an Asset Management Plan tbd No No E.5 Conduct a User Fee Review to ensure the levy is not subsidizing non levy services E.6 Consider entering into shared service arrangements for building controls with other municipalities $30,000 No No tbd No No E.7 Complete annual budgets prior to end of calendar year n/a No No E.8 Establish a capital financing policy n/a No No E.9 Explore the potential of cloud computing tbd No No 1 Preliminary estimate based on 2013 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 34

36 Opportunities for Consideration Environmental Services Option Description Financial Impact 1 Risks Labour Relations Other F.1 Explore the potential of consolidating the Township s public works yard into one site tbd No No F.2 Determine the appropriate service and funding model for solid waste management a) Investigate the potential of closing a transfer station $45,000 No Yes 2 b) Consider entering into shared service arrangements for geo technical staff with other municipalities $50,000 No No F.3 Establish stabilization reserves for major public works activities: a) Winter roads maintenance n/a No No b) Solid waste n/a No No F.5 Explore the potential of selling the Township s gravel pits to a third party tbd No No F.6 Establish a lifecycle reserve for public works equipment n/a No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Requires inter-jurisdictional agreement with the Township of South Frontenac 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 35

37 Corporation of the Township of Central Frontenac service delivery review Chapter VI Financial Projections

38 Financial Projections Council Direction With Respect to Cost Reductions We have developed a taxation model to illustrate the quantum change required in the 2013 to achieve the following taxation policy. We also compare these reductions to the effect of a two percent increase in the 2013 levy. 2% taxation increase 0% taxation increase 2% taxation decrease Based on these targets for the 2014 budget and considering potential adjustments to the 2013 budget for inflation, changes in nontaxation revenues and other items, we have estimated that the amount of cost savings and/or incremental non-taxation revenue that are required for 2013 is in the range of $247,000 to $488,000. This level of cost savings/incremental non-taxation revenue assumes that contributions to reserves and debt servicing costs are consistent with the prior year (i.e. frozen) and that no enhancements in Town services are introduced. Summary of required cost reductions and incremental non-taxation revenue required to achieve a 2% change in taxation (in thousands) 2% Taxation Increase 0% Taxation Increase 2% Taxation Decrease Total municipal levy (2013) $6,151 $6,151 $6,151 Targeted change in municipal levy ($) $123 ($123) Targeted municipal levy for 2014 $6,274 $6,151 $6,028 Projected 2014 municipal levy before cost reduction strategies 1 $6,514 $6,514 $6,514 Required level of cost reductions and non-taxation revenue $240 $363 $486 As a percentage of projected 2014 operating costs 0.31% 4.7% 6.3% 1 Based on 2013 municipal levy adjusted for estimated inflationary increases to KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 37

39 Corporation of the Township of Central Frontenac service delivery review Chapter VII Concluding Comments

40 Township of Central Frontenac Service Delivery Review Concluding Comments In today s municipal environment, councillors are faced with the competing objectives of attempting to minimize taxation increases while ensuring sufficient funds are available to maintain, support existing operations and finance residents demands for enhanced services. The experience of the Township of Central Frontenac, which combines Council s intention to reduce costs and a meaningful level of community interest, is in no means unique. The overall intention of the service delivery review was to identify potential opportunities for cost reductions and incremental nontaxation revenues that would ensure the long-term sustainability of the Township, provide an acceptable level of service to residents and reduce taxation increases after a period of significant increases in operational costs. We trust that the opportunities identified in the report are of use to Council and staff during the 2014 budget process as well as budget processes for subsequent years. We believe, however, that if Council is to be truly successful in managing future taxation increases, certain key principles need to be adhered to: While efficiencies exist, meaningful cost savings will often require service level reductions. In the case of Central Frontenac, the analysis indicates that service levels in some service areas are higher than comparator communities, providing the opportunity to reduce costs while delivering a level of services that is consistent with other municipalities. The implementation of the service delivery review opportunities is a multi-year process that will require consistency on the part of Council. This requires Council to maintain and defend its decision to implement opportunities that may impact on service levels. By virtue of its proximity to neighbouring communities, a number of significant opportunities are available for shared service arrangements with other municipalities. In developing these opportunities, we suggest that the Township start small and ensure that sharing is a two-way street, with the Township both providing services to and purchasing services from other communities. At some point, Council will be faced with the prospect of reducing services to a point that is less than acceptable. Where core services are to be maintained, Council should ensure that sufficient funding is provided to support the operations at the required level. KPMG would like to express our appreciation to members of Council, management and staff of the Township of Central Frontenac, community members and other individuals who assisted with and participated in the service delivery review KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 39

41 Corporation of the Township of Central Frontenac service delivery review Chapter VIII Appendices

42 CORPORATION OF THE TOWNSHIP OF CENTRAL FRONTENAC Schedule of Financial and Other Indicators for Comparator Municipalities (note 1) Central Frontenac ****************************Comparator Municipalities*************************** Notes Greater Minden North Madawaska Hills Frontenac Stone Mills Tay Valley Average Percentage of Average (1) ADMINISTRATION Administrative wages per household $ 184 $ 125 $ 138 $ 193 $ 123 $ 145 $ % (2) Administrative costs as a percentage of total municipal operating costs 14% 20% 16% 19% 9% 17% 16% 88% (2) FIRE Fire costs per household, net of non taxation revenues $ 103 $ 92 $ 44 $ 151 $ 197 $ 105 $ % Firefighters (full time, volunteer) per 1,000 residents % (3) ROADS Operating cost per lane kilometre $ 3,148 $ 2,350 $ 2,889 $ 2,880 $ 4,300 $ 2,577 $ 2, % Winter maintenance cost per lane kilometre maintained $ 3,119 $ 2,333 $ 2,837 $ 2,851 $ 4,242 $ 2,567 $ 2, % (4) PARKS AND RECREATION Parks and recreation costs per household,net of non taxation revenues $ 67 $ 61 $ 168 $ 73 $ 134 $ 103 $ % Recreation facility costs per household, net of non taxation revenues $ 61 $ 40 $ 35 $ 35 $ 96 $ 55 $ % Square metres of indoor recreation space per 1000 residents $ % Total participant hours for recreation programs per 1,000 residents $ 2,021 14% (5) ENVIRONMENTAL SERVICES Solid waste disposal costs per household, net of non taxation revenues, incl diversion $ 95 $ 97 $ 300 $ 141 $ 119 $ 144 $ % Recycling costs per household, net of non taxation revenues $ 22 $ 29 $ 33 $ 29 $ 45 $ 77 $ 43 51% Diversion Rate 41% 26% 51% 19% 22% 47% 33% Notes: (6) FULL TIME PERSONNEL Administration % Fire % Public Works % Parks and Recreation % Library % Planning % Other % Health % % 1KPMG analysis based on 2011 Municipal Finanical Information Returns and other documentation. 2 Administration costs are recorded as general government costs including program support, governance and corporate management. Some caution should be applied to the analysis of administrative costs given that there is no standard methodology of calculating and applying these costs. APPENDIX A

43 APPENDIX B FINANCIAL PROJECTIONS CORPORATION OF THE TOWNSHIP OF CENTRAL FRONTENAC Schedule of Projected Financial Results and Municipal Taxation Assuming No Strategies for Cost Reductions or Incremental Non-Taxation Revenue For the Years Ending December 31 Budget Projected A. Operations (1) Wages and benefits 2,391,000 2,420,000 2,456,000 2,500,000 2,545,000 2,596,000 (2) Other operating costs 5,240,000 5,319,000 5,399,000 5,496,000 5,595,000 5,707,000 TOTAL OPERATING COSTS 7,631,000 7,739,000 7,855,000 7,996,000 8,140,000 8,303,000 Ontario Municipal Partnership Fund 1,469,000 1,300,000 1,300,000 1,300,000 1,300,000 1,300,000 User fees 330, , , , , ,000 Other revenues 543, , , , , ,000 Total projected non-taxation revenues (current fund basis) 2,342,000 2,173,000 2,173,000 2,173,000 2,173,000 2,173,000 MUNICIPAL LEVY FOR OPERATIONS 5,289,000 5,566,000 5,682,000 5,823,000 5,967,000 6,130,000 B. Municipal Capital Projected capital expenditures 3,456,000 3,542,000 3,631,000 3,722,000 3,815,000 3,910, Projected capital revenue 2,594,000 2,594,000 2,594,000 2,594,000 2,594,000 2,594,000 Municipal levy for capital 862, ,000 1,037,000 1,128,000 1,221,000 1,316,000 Total projected municipal levy 6,151,000 6,514,000 6,719,000 6,951,000 7,188,000 7,446,000 PERCENTAGE INCREASE IN MUNICIPAL LEVY 5.9% 3.1% 3.5% 3.4% 3.6% AVERAGE RESIDENTIAL TAX PER HOUSEHOLD 1, , , , , , number of households per FIR KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 41

44 APPENDIX C USER FEE CALCULATION MODEL (Illustrative Purposes Only) SERVICE/ACTIVITY: COST DESCRIPTION OF SERVICE/COST Required Info. Input ESTIMATED Qualifier Rate Hrs COST Direct Costs: Union Labour Cost number of staff * hours * hourly rate Hrs -Union $ $0.00 Union Benefit Cost Township average benefit percentage 26.82% $ Non-Union Labour Cost hours * hourly rate Hrs - Non Union $ $31.33 Non-Union Benefit Cost Township average benefit percentage 23.21% $7.27 Equipment Charge - Vehicles and Large Machinery Vehicle Used Large Equipment (EB 14 to EG31) PW-02 (Y/N) $ $0.00 Dump Trucks (VD11 to VD29) PW-06 (Y/N) $ $0.00 Pick-up Trucks (VP 02 to VP72) PW-07 (Y/N) $ 6.00 $0.00 Small Dump Trucks (VT12 to VT 23) PW-08 (Y/N) $ $0.00 Water Works Vans (VV16 to VV17) PW-09 (Y/N) $ 4.00 $0.00 Cars (Township Car VC13) PW-05 (Y/N) $ $ Building Department Vehicles (BDVH) BDVH (Y/N) $ $0.00 Fire Services Vehicles VFVH (Y/N) $ $0.00 Supplies material, forms, etc. $ $0.00 Staff Inspection/Review-Union number of staff * hours * hourly rate Hrs -Union $ $0.00 Benefits-Union Township average benefit percentage 26.82% $0.00 Staff Inspection/Review-Non-Union number of staff * hours * hourly rate Hrs - Non Union $ $0.00 Benefits-Non-Union Township average benefit percentage 23.21% $0.00 Filing Costs Copying and filing internal copy #of pieces $ 2.62 $ Mailing Costs Cost for mail regular # of pieces $ 0.54 $0.00 Other (GIVE DESCRIPTION) $0.00 $38.60 Indirect Costs: Department Overhead Allocation Allocation to Department of overhead (IT allocation, supplies allocation, office costs, etc.) (%) no input required 0.00% $0.00 Township General Administration Overhead Council, CAO, Finance, Clerk's and general overhead (%) no input required 8.59% $3.31 $3.31 Subtotal Less Ancilliary Revenues Grants,offsetting revenues, Council approved Grants/reductions $/% 0% $0.00 Total Costs no input required $41.91 Volume of Users/Annual Number etc. Number 1 Calculated User Fee/Charge no input required $41.91 Recommended User Fee/Charge $ input cells 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 42

45 Corporation of the Township of Central Frontenac service delivery review Appendix D Project Presentations

46 The Corporation of the Township of Central Frontenac Service Delivery Review Preliminary Presentation to Council

47 Agenda 1. Introductions 2. Study Overview 3. Financial Perspectives 4. Defining Council s Priorities 5. Next Steps 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 1

48 Overview Our Approach Confirmation of Project Scope Define Council Expectations Environmental Scan Jurisdictional Review Opportunity Identification Council Direction Reporting 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 2

49 Financial Perspectives on the Township What We See in Other Communities 1. Residents are looking for some form of vision from Council 2. Very limited appetite for outright service level reductions or eliminations 3. Strong desire to control tax increases 4. Infrastructure funding is a major issue 5. Budget processes are becoming more difficult 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 3

50 Financial Perspectives on the Township of Central Frontenac Reported Operating Results (In Millions) $12.0 Revenue Expenditures Surplus (Deficit) $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 -$2.0 -$ KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source audited financial statements adjusted for pre- TCA accounting basis 4

51 Financial Perspectives on the Township of Central Frontenac Operating and Capital Expenditures (In Millions) 2008 Operating Capital $0.0 0 $2.0 $4.0 $6.0 $8.0 $ $ KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source audited financial statements adjusted for pre- TCA accounting basis 5

52 Financial Perspectives on the Township of Central Frontenac Reserves per Household (2011) $1,200 $1,000 $800 $600 $400 $200 $0 Central Greater Tay Valley Minden Hills North Stone Mills Frontenac Madawaska Frontenac 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 6

53 Financial Perspectives on the Township of Central Frontenac Debt per Household (2011) $600 $500 $400 $300 $200 $100 $0 North Minden Hills Greater Tay Valley Central Stone Mills Frontenac Madawaska Frontenac 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 7

54 Defining Council Priorities The Issue of Affordability Higher income Lower cost Higher income Higher cost Residential taxes per household Lower income Lower cost Lower income Higher cost Income per household 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 8

55 Defining Council Priorities The Issue of Affordability Tay Valley Residential taxes per household Stone Mills Minden Hills Central Frontenac Greater Madawaska North Frontenac Income per household 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 9

56 Defining Council Priorities Key Questions for Council Question no. 1 Often times, priorities will conflict. For example, investing in infrastructure requires money, most likely raised from taxpayers. This runs contrary to a focus on affordability. From Council s perspective, please rank the following tax priorities in order of preference: 1. Reducing taxes 2. Maintaining taxes at current levels 3. Increasing taxes for inflation 4. Increasing taxes by a reasonable amount to fund operating and capital needs Things to consider: Service level impacts Affordability issues Infrastructure requirements 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 10

57 Defining Council Priorities Residential Taxes per Household (Average/Typical Property Lower Tier) Stone Mills Central Frontenac Tay Valley North Frontenac Minden Hills Greater Madawaska $0 $200 $400 $600 $800 $1,000 $1,200 $1, KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 11

58 Defining Council Priorities Key Questions for Council Question no. 2 Municipal services can typically be grouped into two categories must haves and nice to haves, the difference being the requirement to actually deliver the service in question. From Council s perspective, please identify the importance of nice to haves based on the following choices: 1. Reduce service levels, including the potential for outright service elimination 2. No change to service levels 3. Enhance service levels Things to consider: Community needs and impacts Labour relations impacts Council discretion 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 12

59 Defining Council Priorities 2011 General Government Costs per Household (Net of Related Revenues) $300 $250 $200 $150 $100 $50 $0 Stone Mills Minden Hills Greater Madawaska Tay Valley Central Frontenac North Frontenac 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 13

60 Defining Council Priorities 2011 Road Maintenance Costs per Kilometre (Net of Related Revenues) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Greater Madawaska Tay Valley Minden Hills North Frontenac Central Frontenac Stone Mills * - Road maintenance is largely a lower tier function in Frontenac County 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 14

61 Defining Council Priorities 2011 Recreation Facilities per Household (Net of Related Revenues) $120 Recreation Facilities per Household Cost Recovery 60% $100 50% $80 40% $60 30% $40 20% $20 10% $- Minden Hills North Greater Tay Valley Central Stone Mills Frontenac Madawaska Frontenac 0% 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 15

62 Defining Council Priorities Key Questions for Council Question no. 3 Various strategies are available to municipalities in order to reduce operating costs. However, certain aspects of these strategies may be unpalatable to Council. From Council s perspective, please identify which strategies are not acceptable: 1. Regional or shared delivery model 2. Increases in non-taxation revenue (user fees) 3. Contracting out to the private sector 4. Contracting out to another public sector organization 5. Staff FTE reductions 6. Governance restructuring Things to consider: Community needs and impacts Labour relations impacts Reliance on external service providers 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 16

63 Defining Council Priorities Staffing Complement Full-time Positions (2011) Greater Madawaska Tay Valley Central Frontenac North Frontenac Stone Mills Minden Hills 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 17

64 Defining Council Priorities Council Size Greater Madawaska Minden Hills North Frontenac Stone Mills Tay Valley Central Frontenac 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. Source KPMG analysis of annual financial information returns 18

65 The Township of Central Frontenac Services Delivery Review First Impressions and Next Steps What we see: Debt levels are high among the comparators Reserves are lowest in comparison to peer municipalities Taxation levels are near the highest in comparison to peer municipalities but may reflect service level decisions for Central Frontenac Next steps: Report back on the Council survey responses Commence work on reviewing municipal services, service levels and costs Interim presentation to Council (tbd) 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International KPMG CONFIDENTIAL. 19

66 KPMG CONFIDENTIAL The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.

67 Township of Central Frontenac Service Delivery Review Council Presentation No. 2 May 21st, 2013

68 Township of Central Frontenac Service Delivery Review Purpose of Today s Meeting 1. Brief Council as to the work undertaken to date and upcoming work efforts 2. Present the results of the initial survey of Council 3. Provide additional information concerning the municipal comparatives 4. Present our status quo financial projections for Council s consideration 5. Introduce some of the potential opportunities identified to date 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 1

69 Township of Central Frontenac Service Delivery Review Work Plan Confirmation of Project Scope Define Council Expectations Environmental Scan Jurisdictional Review Opportunity Identification Substantially completed Council Direction In progress Upcoming Reporting 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 2

70 Council Survey Results Taxation Policy Option Percentage Ranked as Most Important Reduce taxes 14% Maintain taxes at current levels 72% Increase taxes for inflation 14% Increase taxes by a reasonable amount to fund operating and capital needs 0% 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 3

71 Council Survey Results Service Levels Option Percentage Ranked as Most Important Reduce service levels, including the potential for outright service elimination 57% No change to service levels 29% Enhance service levels 14% 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 4

72 Council Survey Results Operational Changes Option Regional or shared service delivery model Contracting out to the private sector Contracting out to another public sector organization Staff FTE reductions Increases in non-taxation revenue (user fees) Governance restructuring Acceptable 20% 0% 80% 40% 20% 20% 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 5

73 Council Survey Results Implications for the Service Delivery Review 1. Consensus on tax policy Survey results show that a significant majority of Council supports maintaining the current tax levy Ultimate level of taxation will be determined by Council s choices as to service levels and other strategies 2. Willingness to consider service level reductions including outright elimination Opportunities that have the highest potential for implementation will likely involve efficiencies and changes to program funding Efficiencies can involve shared service arrangements as well as alternative service delivery Service level reductions will be identified for Council s consideration 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 6

74 Comparative Analysis Why Compare to Other Communities The primary purpose of the comparative analysis is to identify opportunities to change how services are delivered by the Township Communities with similar service levels insight into operating efficiencies Communities with different service levels opportunities to change existing service levels to reflect common service levels Comparing taxation levels has both benefits and risks Provides insight into affordability issues, particularly if residents are locating just across the border Assumes that all variables are the same (assessment base, non-taxation revenues) Assumes that taxation levels in other communities are right 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 7

75 Township of Central Frontenac Service Delivery Review Comparator Communities For the purposes of the Service Delivery Review, five comparator municipalities were chosen one from Frontenac County and four similar sized Eastern Ontario communities within a County system structure. Municipality Central Frontenac Tay Valley Greater Madawaska Minden Hills North Frontenac Stone Mills County Frontenac Lanark Renfrew Haliburton Frontenac Lennox and Addington 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 8

76 Comparative Analysis Single Family Home (Average/Typical Property) - Upper & Lower Tier* Stone Mills Tay Valley Central Frontenac Greater Madawaska North Frontenac Minden Hills * Excluding education taxation $0 $500 $1,000 $1,500 $2,000 $2, KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Source KPMG analysis of municipal budgets, taxation bylaws and other information (OPTA) 9

77 Township of Central Frontenac Service Delivery Review Projecting the Township s Financial Performance Intended to assist Council with determining the extent of change that is required to meet Council s preferences with respect to services vs. financial performance Assumes no changes to service levels or municipal resources but does consider inflation and other factors, with the 2013 municipal budget as the starting point 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 10

78 Township of Central Frontenac Service Delivery Review Projecting the Township s Financial Performance $12 Projected municipal expenditures status quo scenario (in millions) $10 $9.2M $9.5M $9.65M $9.8M $9.9M $10.1M $8 $6 $4 $2 $- Capital Non-payroll Payroll KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 11

79 Township of Central Frontenac Service Delivery Review Potential Opportunities for Council s Consideration Generally speaking, opportunities can be divided into four categories: Operating efficiencies Alternative service delivery Increased cost recovery from non-taxation sources Service level reductions Ultimately, the decision as to which (if any) opportunities are pursued rests with Council The Service Delivery Review is intended to identify options and provide direction to staff as to which opportunities should be considered as part of the budget process Council approval for opportunities occurs during the budget setting process 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 12

80 Township of Central Frontenac Potential Opportunities for Council s Consideration Operating efficiencies Implement an automatic attendant Alternate service delivery Community Halls Regional approach to building controls, planning and snow removal Revenue generation Waste Treatment and Recycling User Fee Review Parks Fees Service levels Winter roads maintenance Infrastructure reinvestment Reduce number of community halls Reduce number of fire halls 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 13

81 Township of Central Frontenac Service Delivery Review Status Update Work undertaken Initial meeting with Township staff to review operations Review of reports, analysis and other documentation Comparative Analysis of Peer Municipalities Development of base case financial projections Upcoming work efforts Meeting with Township staff to review potential opportunities Presentation of opportunities to Council for direction (June 4) Presentation of final report (July 2) 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 14

82 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.

83 Township of Central Frontenac Service Delivery Review Potential Opportunities for Council Consideration June 20, 2013

84 Township of Central Frontenac Service Delivery Review Agenda I. Introduction to the session II. Financial perspectives p III. Opportunities for Council s consideration Municipal Council Parks and Recreation Roads Fire Corporate services Environmental Services IV. Next steps 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 1

85 Township of Central Frontenac Service Delivery Review Work Plan Confirmation of Project Scope Define Council Expectations Environmental Scan Jurisdictional Review Substantially completed In progress Upcoming Opportunity Identification Objectives Council Direction 1. Ensure Council has a sufficient understanding of the opportunities 2. Shortlist opportunities for further consideration during the Township s budget setting process Reporting 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 2

86 Introduction Obtaining Council s Direction Today Provide additional analysis concerning Central Frontenac s financial position Introduce and discuss identified opportunities Next Steps Final report Closed session opportunities Shortlisted opportunities for consideration in 2013 budget process 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 3

87 Financial Perspectives on the Township of Central Frontenac

88 Financial Perspectives on the Township of Central Frontenac Historical and Projected Operating Costs 1 Since 2008, the Township s operating costs have increased from $6.9 million to $8.2 million. Over the next five years, the Township can expect increases of approximately 9.1% per year, assuming no changes to operations or funding. $10.0 $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 $6.9M Actual 6.7% (annual) Budget $8.2M Projected 9.1% (annual) $9.0M KPMG analysis of audited and unaudited financial statements of the Township, the Township s 2012 budget and projections prepared in connection with the Service Delivery Review. Considers operating costs only (i.e. excludes capital or reserve transactions), with amounts adjusted to reflect pre-tca accounting standards (i.e. excludes amortization of TCA) KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 5

89 Financial Perspectives on the Township of Central Frontenac Changes in Historical Operating Costs The primary contributor to past increases in operating costs has been higher salary and benefit costs, which have increased an average of 5.7% per year. Operating expenditures by type 1 (in millions) Avg Annual Increase Salaries and benefits $1.92 $ % 08% Goods and services $5.00 $ % Total $6.92 $ % Salaries and benefits by function 1 (in thousands) Avg Annual Increase Fire 2 $119,925 $199, % Public works $937,452 $1,060, % Parks and recreation $88,892 $77, % Environmental Services $103,123 $176,360 14,2% General Government and other $666,916 $861, % Total $ 1.92m $2.38m 5.7% 1 KPMG analysis of internal financial statements and annual financial information returns. 2 Includes volunteer firefighter honorariums and hourly rates KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 6

90 Opportunities for Potential Taxation Reductions Municipal Council

91 Municipal Council Council Representation With a total of nine councillors (mayor, deputy mayor and seven councillors), Central Frontenac provides a higher level of representation (less residents and households per councillor) than selected comparator communities Municipal representation per capita and per household (Council size in brackets) 1 1,200 1, Residents per councillor Households per councillor Central Frontenac (9) Greater Madawaska (5) Minden Hills (7) 1 KPMG analysis. North Frontenac (7) Stone Mills (7) Tay Valley (8) 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 8

92 Municipal Council Council Remuneration Councillor remuneration is second lowest of the comparative group, ranging from 2% higher (Councillor) to 16% (Deputy Mayor) lower than the average of the other communities. Council remuneration by position 1 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Mayor Deputy mayor Councillor Central Frontenac Greater Madawaska Minden Hills North Frontenac Stone Mills Tay Valley Comparator Average 1 KPMG analysis. Actual compensation may vary based on per diems and expense amounts submitted. Greater Madawaska does not have a Deputy Mayor/Deputy Reeve position KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 9

93 Municipal Council Potential Opportunities for Council Consideration Option Description Financial Impact 1 Labour Relations Risks Other A.1 Reduce Council size by two members $25,000 No Yes 2 A.2 Establish a formal policy with respect to community grants and donations n/a No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Potential that residents may view reduction in Council size as adversely impacting political representation KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 10

94 Opportunities for Potential Taxation Reductions Parks and Recreation Services

95 Parks and Recreation Services Composition of 2013 Budgeted Costs Recreation Costs (65%) represents the largest single component of the Township s recreation and community services budget. $79,200 of the budgeted costs are related to indoor and outdoor maintenance contracts. Recreation and Community Services costs by function 1 Community Halls 17% ($45,700) Recreation 63% ($207886) 1 KPMG analysis of 2013 operating budget. Excludes capital and reserve transactions. Rinks 3% ($10,500) Ball Parks 7% ($16,900) Library 5% ($15,321) Beaches 4% ($26,700) 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 12

96 Parks and Recreation Services Composition of 2013 Budgeted Costs Care and Parks and Recreation costs by type 1 maintenance of parks and recreation facilities accounts for 88% of the Township s operating budget. Materials, Supplies and Other Repair 36% ($110,020) 020) Heat, Hydro, Insurance, Etc. 26% ($78,770) Community Grants 8% ($23,500) Maintenance Contracts 26% ($79,200) Wages and Benefits 4% ($13,266) 1 KPMG analysis of 2013 operating budget. Excludes capital and reserve transactions KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 13

97 Parks and Recreation Services Comparative Costs for Parks and Recreation Services The Township spends the equivalent of $105 per household on parks and recreation, which is below the average among compared to its peers. It also recovers the greatest proportion of costs through user fees, resulting in a comparable net cost per Parks and recreation costs per household 1 $250 Gross cost Net cost (after user fees) $200 $150 $100 $50 household. $- Central Greater Minden Hills Frontenac Madawaska North Frontenac Stone Mills Tay Valley 1 KPMG analysis of financial information returns and internal financial information for the Township of Central Frontenac KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 14

98 Recreation and Community Services Comparative Costs for Parks and Recreation Services Parks and recreation costs by type (net user fees) 1 The Township spends the least Programming Facilities on recreation $ programming $ among the comparator group $80.00 and the Township s $60.00 expenditures for $40.00 recreation facilities is second $20.00 highest. $- This reflects the Central Greater Minden Hills North Stone Mills Tay Valley Frontenac Madawaska Frontenac limited recreation programming offered by Central Frontenac. 1 KPMG analysis of financial information returns and internal financial information for the Township of Central Frontenac KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 15

99 Recreation and Community Services Potential Opportunities for Council Consideration Option Description Financial Impact 1 Labour Relations Risks Other B.1 Rationalize the number of community halls tbd No Yes 2 B.2 Explore the potential of closing the Mountain Grove library building and shifting library services to another municipal building tbd No Yes 2 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Potential concerns about over accessibility and/or lack of community support to change in delivery model 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 16

100 Opportunities for Potential Taxation Reductions Roads

101 Roads Composition of 2013 Budgeted Costs 1 After Wages & Benefits, the 2012 roads operating budget is almost evenly divided between summer work, winter control and overhead (equipment maintenance & administration) Equipment Maintenance 6% ($219,500) Administration 20% ($718,675) Summer Roads Maintenance 19% ($680,000) Wages & Benefits 32% ($1,124,947) Winter Control 20% ($717,100) Bridges and Culverts 2% ($73,300) 1 KPMG analysis of 2013 operating budget. Excludes capital and reserve transactions KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 18

102 Roads Comparative Cost of Road Maintenance 1 The Township s road costs per km are slightly above average of the comparator group ($2,244/km). $3,500 Road Costs Per KM Winter Control Costs Per KM $3,000 $2,500 $2,000 However, the cost $1,500 of winter control per km is higher $1,000 ($854/km) than the average of the $500 comparator group ($748/km). $- Central Frontenac Greater Madawaska Minden Hills North Frontenac Stone Mills Tay Valley 1 KPMG analysis of 2011 Financial Information Return 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 19

103 Roads Overview of the Municipal Road Network Responsibility for establishing service levels for roads rests with Council. However, Ontario Regulation 239/02 establishes minimum maintenance standards based on the class of road, which considers both speed limit and traffic volume. Determining minimum maintenance standards for roads 1 Average Annual Daily Traffic >15,000 12,000-14,999 10,000-11,999 8,000-9,999 6,000-7,999 5,000-5,999 4,000-4,999 3,000-3,999 2,000-2,999 1,000-1, <50 Speed Limit (kilometres per hour) > <41 Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 1 Ontario Regulation 239/ KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 20

104 Roads Overview of the Municipal Road Network Minimum winter maintenance standards vary based on the class of road, with Class 1 roads (highest volumes, highest speeds) having a higher level of service than Class 5 roads (lowest volumes, lowest speeds). Minimum roads maintenance standards snow accumulation Class 1 Class 2 Class 3 Class 4 Class 5 Accumulation (cm) Response time (hours) 1 Ontario Regulation 239/ KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 21

105 Roads Overview of the Municipal Road Network Similarly, summer maintenance standards will also fluctuate based on the class of roads, reflecting the prioritization of roads maintenance efforts. Minimum roads maintenance standards pothole repairs 1 1, Maximum m surface are ea (cm 2 ) 1, Rep pair time (day ys) - Class 1 Class 2 Class 3 Class 4 Class 5 - Maximum surface area of pothole Repair time (days) 1 Ontario Regulation 239/ KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 22

106 Roads Potential Opportunities for Council Consideration Option Description Financial Impact 1 C.1 Determine the appropriate service and funding model for winter road maintenance a) Develop a tiered service standard for winter road maintenance (15% assumed savings) Labour Relations Risks Other $95,000 No Yes 2 b) Highway 38 Bridge utilized by recreational users tbd No Yes 2 C.2 Convert current street lighting to LED street lights $13,500 No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Potential concerns over public safety and other risks arising from reduced level of service KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 23

107 Opportunities for Potential Taxation Reductions Fire Services

108 Fire Services Comparative Costs for Fire Services Fire services costs for Central Frontenac are comparable to their municipal peers. Fire Costs Per Household (Net of User Fees) 1 Cost per Household Central Greater Minden Hills North Frontenac Madawaska Frontenac Stone Mills Tay Valley 2 $103 $92 $45 $151 $197 $105 # of Structural Fires 1 KPMG analysis of statistical data provided by the Financial Information Return and Central Frontenac Fire Department 2 Tay Valley has a joint fire department with Drummond/North Elmsley 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 25

109 Fire Services Composition of 2013 Budgeted Costs 1 Fire service costs by type 1 Administration 26% ($123,593) Wages & Benefits 44% ($213,000) Training 1% ($7,000) Materials & Equipment 29% ($140,500) 1 KPMG analysis of 2013 operating budget. Excludes capital and reserve transactions KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 26

110 Fire Services Distribution of Fire Response During 2012, Central Frontenac fire service responded to 114 calls for assistance of which 6 involved the threat of an actual structural fire. In comparison, a total of 49 medical assist calls were received during the same period. The large number of medical response calls is consistent with the experience of other fire departments in Ontario. Calls by type 1 Medical response 43% False alarm 4% 1 KPMG analysis of statistical data provided by the Central Frontenac fire service. Outdoor Fire 12% Non Fire Response 35% Structural Fire 5% 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 27

111 Fire Services Staffing Central Frontenac s fire service is the largest among the selected peer communities in the number of volunteer fire fighters on the municipal force. Firefighter complements by type Full-time Volunteer 20 - Central Greater Minden Hills North Frontenac Madawaska Frontenac Stone Mills Tay Valley Average 1 KPMG analysis of statistical data provided by the Central Frontenac Fire Service and comparators; Tay Valley belongs to a joint fire department with Drummond/North Elmsley 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 28

112 Fire Services Personnel Costs The Township s increasing salary and benefit costs for the fire service reflects the general trend across the Province. The increase for Central Frontenac is above the comparator group average of 33%. Analysis of fire salary and benefit costs 2007 to YR Change Central Frontenac $119,257 $170,182 43% Greater Madawaska $66,914 $110,629 65% Minden Hills $162,713 $160,480 1% North Frontenac $121,329 $141,518 17% Stone Mills $179,482 $241,861 35% Tay Valley $159,016 $215,538 36% Composite average $134,785 $173,368 33% 1 KPMG analysis of annual financial information returns KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 29

113 Fire Services Personnel Costs Central Frontenac ($235,808) is slightly lower than the average cost of fire materials and contracted services ($246,513) Analysis of fire materials and contracted services costs 2007 to Materials 2011 Contracted Services Total Material & Contracted Services Central Frontenac $235,808 $0 $235,808 Greater Madawaska $140,398 $0 $140,398 Minden Hills $90,083 $19,648 $109,731 North Frontenac $237,716 $132,734 $370,450 Stone Mills $291,624 $113,914 $405,538 Tay Valley $217,154 $0 $217,154 Composite average $202,131 $44,383 $246,513 1 KPMG analysis of annual financial information returns KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 30

114 Fire Services What the Fire Prevention and Protection Act Says The Fire Municipal responsibilities 2.(1) Every municipality shall, Prevention and (a) establish a program in the municipality which must include public education Protection Act with respect to fire safety and certain components of fire prevention; and (b) provide such other fire protection services as it determines may be establishes necessary in accordance with its needs and circumstances. Council as the Methods of providing services body that 2.(2) In discharging g its responsibilities under subsection (1), a municipality shall, determines the (a) appoint a community fire safety officer or a community fire safety team; or (b) establish a fire department. appropriate level of fire services. Services to be provided 2.(3) In determining the form and content of the program that it must offer under clause The threat for (1) (a) and the other fire protection services that it may offer under clause (1) (b), Central Frontenac a municipality may seek the advice of the Fire Marshal. is the retention Review of municipal fire services and recruitment of 2.(7) The Fire Marshal may monitor and review the fire protection services provided by municipalities to ensure that municipalities have met their responsibilities under trained this section and, if the Fire Marshal is of the opinion that, as a result of a firefighters. municipality failing to comply with its responsibilities under subsection (1), a serious threat to public safety exists in the municipality, he or she may make recommendations to the council of the municipality with respect to possible measures the municipality may take to remedy or reduce the threat to public safety KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 31

115 Fire Services Potential Opportunities for Council Consideration Option Description Financial Impact 1 Labour Relations Risks D.1 Explore the potential of sharing the positions of Fire tbd No No Chief and Training Officer with North Frontenac D.2 Establish a fire pumper life cycle reserve plan n/a No No Other 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 32

116 Opportunities for Potential Taxation Reductions Corporate Services

117 Corporate Services Composition of 2013 Budgeted Costs Consistent with other Ontario municipalities, corporate services costs are largely comprised of salaries and benefits in Central Frontenac (47%). Corporate service costs by type 1 Salaries 37% ($431,721) Benefits 10% ($121,692) Professional fees & insurance 32% ($371,560) Facility, equipment & supplies 20% ($230,150) Grants & Donations 2% ($18,500) 1 KPMG analysis of 2013 operating budget. Excludes capital and reserve transactions. Includes Administration, Sundry, Planning & Economic Development operating expenses 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 34

118 Corporate Services Potential Opportunities for Council Consideration Option Description Financial Impact 1 E.1 Investigate potential shared corporate services with other municipalities & the County E.2 Actively register properties that are eligible for tax sales Labour Relations Risks Other tbd No No $458,000 No No E3 E.3 Undertake group purchasing arrangements with other tbd No No public sector organizations and County municipalities E.4 Develop and implement an Asset Management Plan tbd No No E5 E.5 Conduct a User Fee Review to ensure the levy is not tbd No No subsidizing non levy services E.6 Consider entering into shared service arrangements tbd No No for building controls with other municipalities E.7 Complete annual budgets prior to end of calendar year n/a No No E.8 Establish a capital financing policy n/a No No E.9 Explore the potential of cloud computing tbd No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 35

119 Opportunities for Potential Taxation Reductions Environmental Services

120 Environmental Services Comparative Costs for Solid Waste Disposal & Recycling Services Central Frontenac s solid $100 waste treatment $90 costs are slightly $80 Net Environmental Costs Per Household 1 Solid Waste Disposal/ HH Recycling/HH above the $70 average of the $60 comparator group while solid waste diversion costs are below the comparator group average. $50 $40 $30 $20 $10 $ Financial Information Return; net expenditures less user fees and government grants 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 37

121 Environmental Services Composition of 2013 Budgeted Costs Solid waste management costs by type 1 Materials & Supplies 7% ($34,700) Wages & Benefits 44% ($205,518) Operations 27% ($128,854) Site Monitoring and Compliance 21% ($100,600) 1 KPMG analysis of 2013 operating budget. Excludes capital and reserve transactions KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 38

122 Environmental Services Changes in Historical Operating Costs Net Operating expenditures Yr Change Solid Waste Disposal $ 245,706 $358,851 46% Recycling - $80, % Total $245,706 $439,413 79% Historical Solid Waste Financials 1 Wages & Benefits Contracted Services Materials User Fees/ Grants Net Costs Per Household 2011 $146,629 $80,562 $212,222 $58,095 $381,318 $ Five Yr Change $83,901 - $161,805 $68,060 $177,646 $45.05 $62,728 $80,562 $50,417 $9,965 $203,672 $ KPMG analysis of internal financial statements and annual financial information returns; net gross expenditures net user fees and grants KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 39

123 Environmental Services Potential Opportunities for Council Consideration Option Description Financial Impact 1 Labour Relations F1 F.1 Explore the potential ti of consolidating the Township s tbd No No public works yard into one site F.2 Determine the appropriate service and funding model for solid waste management Risks Other a) Investigate the potential of closing a transfer tbd No Yes 2 station b) Consider entering into shared service arrangements for geo technical staff with other municipalities F.3 Establish stabilization reserves for major public works activities: tbd No No a) Winter roads maintenance n/a No No b) Solid waste n/a No No F.5 Explore the potential of selling the Township s gravel pits to a third party F.6 Establish a lifecycle reserve for public works equipment tbd No No n/a No No 1 Preliminary estimate based on 2012 budgeted expenditures, discussions with management and other assumptions. Subject to revision as part of the 2013 budget process. Does not included implementation or other one-time costs. 2 Potential concerns arising from reduced level of service 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International 40

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