1 Spruce Grove as a whole operates through the relationships between - PDF document

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Spruce Grove as a whole operates through the relationships between Council, Administration and our Residents. Residents share their vision with Council who articulate that to Administration through leadership and a strategic plan. The two then work together to determine and implement the strategies required to achieve that vision and our residents rely on Administration to provide value through services. This interwoven relationship is essential in building a successful midsized city. Residents, Council and Administration are working together to create a sustainable city where families thrive alongside business and industry, coming together to make Spruce Grove the Community of Choice. 2

The corporate planning process from January to July involves a strategic retreat with Council, department business planning and the ranking of initiatives and service changes to above/below the line through a prioritization exercise with the Senior Leadership Team. This information is then given to our finance team to analyze funding, which is presented back to the Senior Leadership Team to review and decide which initiatives/service changes are included in the recommended corporate plan. It was at this point in the process that we realized we needed to re‐evaluate how we were making these decisions given our financial position. Understanding our fiscal realities led to this shift in thinking and a greater understanding of the importance of fiscal sustainability. Given the opportunities ahead of us, now is the right time for this shift in thinking to occur. As a leadership team, we identified the need for a Reframing year. 3

Departments were directed to go back to their 2019 budget forecasts, 2020 status quo budgets and 2020 initiatives to determine what could be deferred or removed, and what was critical to continue in the coming year. Through this process we decided that all 2020 FTEs would be pushed back to 2021 and a significant number of initiatives were deferred or put below the line. Doing this allows us to “hold the line” for 2020 as we work through the reframing year’s philosophies and strategies required to make decisions from an organizational perspective. This process also made us realize the need for a touch point with Council on October 3 rd prior to the Recommended Corporate Plan being released so members of Council have the strategic and financial context around the recommendations included in the plan. 4

The City of Spruce Grove is in a time of transition and is shifting to operating as a mid‐size city. With this shift comes a variety of opportunities and challenges that need to be addressed in the coming years. Over the past few years the City has been in the fortunate position of having a significant amount of growth. Investments and decisions were made based on our prosperity and those growth rates, including investing in capital and services that have resulted in a new Protective Services building, a new RCMP facility through a partnership with the Town of Stony Plain, improved underground infrastructure and local transit, along with a variety of service enhancements to our community. However, growth rates have now slowed down and the City’s debt servicing costs, combined with inflation, added staffing requirements to respond to previous years’ growth, and launching a local transit service, have had a significant impact on the financial position. The City’s financial position presents challenges and changes to the current financial trajectory need to be implemented. As a result, Administration recommends that 2020 be a reframing year where Administration will confirm fiscal philosophies, align planning processes and review service delivery in response to Council’s strategic direction. The 2020‐2022 Recommended Corporate Plan was built with this change in strategy and direction in mind and it represents only what Administration believes is critical to proceed in 2020. 5

The outcomes of implementing council’s strategic direction as part of this reframing year include: • A clearer focus • Strategies to support and guide problem solving and decision making • Redefined strategic and corporate planning processes • Organizational objectives set by the Corporate Leadership Team • A planning hierarchy established that aligns the organization to those objectives Our corporate focus will be on strategy, the day to day work, culture, communication and structure. 6

Although we don’t know exactly what the process will be as we work through the reframing year, we do know the high level objectives of what we’re trying to achieve. We’d ask that Council determine their financial strategy as it relates to long term community sustainability, assess and confirm policy direction, and review recommendations from Administration and approve as required. As administration, we’ll work towards: • developing a fiscal sustainability plan to implement Council’s financial strategy, • review our current policies and further align them with Council’s strategies, • streamline processes in an effort to reduce red tape, • develop recommendations for Council on budget philosophy and strategic planning • review current department budgeting practices Once these pieces are in place, it’ll allow for a better alignment between Council’s strategic direction, administration’s policies and philosophies and our department planning processes. We will be scheduling a Council retreat in early 2020 to assess and confirm policy direction. In addition, we’re expecting to have a series of interactions between administration and Council throughout the year to provide guidance to the process. Once administration has recommendations finalized, they will be brought to Council for consideration and approval. 7

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The following initiatives were approved as part of the 2019‐2021 Corporate Plan but as part of the 2019 forecast review, it is recommended to delay the projects to 2020. All are listed in the 2020 Above the Line table of the Recommended Corporate Plan 10

The following initiatives were also approved as part of the 2019‐2021 Corporate Plan but after the 2019 forecast review, some initiatives had a reduction in the 2019 budget (subsequent years may have also changed, which is reflected in the initiative tables of the recommended corporate plan), or have been moved outside of the Recommended Corporate Plan 11

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The goals of this session are: • To update Council on the City of Spruce Grove’s Financial Condition at the close of 2018 including information on comparator communities and trends over time. • To present financial picture related to the Recommended Corporate Plan 17

Three Financial Indicators we use to monitor the City’s Financial Condition are: • Net Financial Assets • Debt Limit • Municipal Fund Level (previously referred to as Municipal Surplus) – We are going to refer to this as municipal fund to avoid the impression that these funds are Surplus and available for spending. These three items will be explained more fully as we progress through the presentation. 18

We will initially do a quick update on where we ended 2018 because the closing municipal fund numbers for that year flow into 2019 opening balances and set the stage for the Corporate Plan about to be deliberated 19

The First Financial Indicator we speak about is Net Financial Assets/Net Debt. Net Financial Assets/Net Debt is a measure of the difference between an entity’s financial assets and liabilities at a point in time. The performance measure indicates important information regarding a municipality’s requirement to generate future revenues to fund past services and transactions. If a municipality has a Net Asset position, there are sufficient assets on hand to settle existing liabilities. If a municipality has a Net Debt position, the municipality must generate future revenues to cover the cost of past transactions and events 20

The City of Spruce Grove is in a Net Debt Position. This means the City is incurring expenses today that will rely on the generation of future revenues for repayment. When analyzing Spruce Grove alongside of the comparator communities, Net Assets or Net Debt as a percentage of Financial Assets ranges from ‐45.04% to +39.47%. The City of Spruce Grove has the lowest measure (the greatest Net Debt Position) at ‐45.04%. (Last year was ‐ 14.17%) Three communities have Net Debt (Spruce Grove, Stony Plain, and Leduc) and all others have Net Financial Asset positions. When Net Debt exceeds Long Term Debt outstanding then a position will be reached where future revenues are paying for today’s operations. When considering the communities in a Net Financial Asset position, the average percentage of Financial Assets is 28.74%. For Spruce Grove to reach a Net Financial Asset position of 28.74%, it would require a change in cash position of $43,326,278. (Last year to reach the community average of 24.70% would have required a change in cash position of $22,572,000). Net Debt is increased by acquiring inventory and prepaid expenses and purchasing assets. Net Debt is reduced by annual surplus and proceeds on disposal. If the Net Debt position is to be changed into a Net Financial Asset Position, the City must earn more surplus than is being spent on Assets. 21