1. OPERATIONAL EXCELLENCE > Understanding Your Budget > Interacting and Communicating with Council Presenters: Alicia Italiano and Mike Seiling

2. Session Objectives Understand the purpose of a budget Become familiar with the components of a budget and how to create a budget Understand the importance of long term planning and sustainability Learn what happens after the budget is set Discuss who and how to educate Council on operating a Building Dept. Learn the benefits of communicating with Council and customers

3. What is a Municipal Budget? Municipality’s financial plan, the basis of all financial decision making Made up of an Operating Budget and a Capital Budget Structurally balanced: expenditures do not exceed the projected revenues Linked to Operational Plans Used for Performance Measurement and Long Term Planning

4. What’s your Role? Be involved Allows you to justify resources required You understand your industry and business and are aware of trends that would impact your budget FINANCE BUILDING

5. Budget Cycle Budget Planning Budget Preparation Budget Approval Budget Monitoring Finance and CBO Council and CBO

6. Budget Preparation Operating vs Capital budget Components of a budget – Revenues – Expenses The 5 Year Projection and Reserves Scenarios and Examples

7. Operating vs Capital Both budgets provide for the services/programs the Municipality delivers Types of expenditures and sources of financing differ Operating: annual cost to deliver services and maintain infrastructure Capital: investments in infrastructure (assets) that provide long term benefit

8. Operating Budget Normal operating expenditures and revenues associated with day to day services Municipal ExamplesPersonal Examples Staff compensation including overtime Fleet (vehicle charges) Memberships Training Safety Supplies Office Supplies Groceries Heat, Hydro & Water Mortgage payments Car Repairs Clothing

9. Capital Budget Significant expenditures to acquire, construct or improve land, buildings, infrastructure or machinery used to provide services Municipal ExamplesPersonal Examples Machinery and Equipment Computer Systems Roads Community Centers Parks Cottage House Car

10. Budget Components RevenuesExpenses Gov’t/InstitutionalIndustrialResidentialCommercialIndirect CostsSuppliesSalaries

11. Revenue Budget Quantity of Permits Issued User Fee (Cost/Permit) Revenue Received Revenue Sources: Commercial Permits Government/Institutional Permits Industrial Permits Residential – Multi and Single Permits Interest Other

12. Historical Trends Example

13. Revenue Projections Revenue projections are determined by user fee rates (permit fees) and activity levels Permit fees: fee/area of construction or % of CV CBO directly involved in setting permit fees CBO indirectly involved with activity levels CBO’s role to forecast or use crystal ball Economic forecasts are very common (research) Therefore don’t be shy & do your homework

14. Fees & Activity Levels Fees (permit fees): – intended to offset costs and require updating – if changing, Public meeting with minimum 21 days prior notice required (see sample) Prior to seeking approval: – Know your business – Use comparisons (chart) – Provide rationale for change – Provide advance notice to industry (more is better, seek no objection from customer groups )

15. Sample – Public Notice

16. Fees & Activity Levels Activity levels (forecasts/crystal ball): – historic levels (charts) – construction is cyclical – New sub-divisions and/or major projects via site plans – Ask the customer

17. Direct vs Indirect Expenses Direct expenses are those costs directly related to the principal activity of the business Indirect costs are expenses that affect the municipality as a whole and not just the specific service being offered

18. Examples DirectIndirect Salaries of Wages of Building staff Training and Conferences Office Supplies Employee Mileage Operating Supplies Cell Phones Office Space - Utility costs System Costs – ie – SAP, Amanda Accounting Services – Payroll, Accounts Payable HR services Legal CAO & Council

19. Direct Expenses Salaries/Wages and Benefits PositionSalary Amanda Analyst Developer $ 76,000 Municipal Building Official II $ 76,000 Manager, Building $ 92,150 Building Permit Assistant $ 47,500 Program Assistant (Building) $ 36,100 Admin Assistant (Building) $ 56,050 Municipal Buildng Official III $ 79,800 Supervisor, Permits $ 92,150 Director of Building $ 125,400 Municipal Building Official I $ 66,500 Information Officer $ 47,500 MBO Mechanical Specialist $ 61,750 Vacant - MBO Official II $ 76,000 $ 932,900 Fringe Benefits 29% $ 270,541

20. Direct Expenses Employee Costs – Training and Conferences – Memberships – Mobile Technology (Blackberry & Air Cards) – Mileage Other – Computer supplies – Office supplies – Advertising (OBOA Building Safety Month

21. Budget Analysis

25. Chart - Example

26. Chart – Example 2

27. The 5 Year Projection

28. What is a Reserve?

29. The 5 Year Projection

30. Scenarios 1.High Growth, Strong Economy 2.Economic Downturn

31. Scenario 1 – High Growth 5 YEAR OPERATING BUDGET PROJECTION - GROWING ECONOMY (000's)ProjectedBudget 201320142015201620172018 REVENUE Building Permit Revenue4,000 4,200 4,410 4,631 4,862 5,105 Total Revenue4,000 4,200 4,410 4,631 4,862 5,105 EXPENSES Direct3,000 3,060 3,121 3,184 3,247 3,312 Indirect750 769 788 808 828 849 Total Expenses3,750 3,829 3,909 3,991 4,075 4,161 Excess of Revenue over Expenses250 371 501 639 787 944 STABILIZATION RESERVE FUND Opening Balance2,000 2,255 2,635 3,150 3,811 4,630 Transfer from (to) Capital(25) Add: Excess of revenue over expenses250 371 501 639 787 944 Add: Interest revenue/(expense)30 34 39 47 57 69 Closing Balance2,255 2,635 3,150 3,811 4,630 5,619 Target balance (1.0x expenses)3,750 3,829 3,909 3,991 4,075 4,161 Funding level as % of target60.1%68.8%80.6%95.5%113.6%135.0%

32. Scenario 2 – Economic Downturn 5 YEAR OPERATING BUDGET PROJECTION - ECONOMIC DOWNTURN (000's)ProjectedBudget 201320142015201620172018 REVENUE Building Permit Revenue3,700 3,000 2,500 2,750 3,700 Total Revenue3,700 3,000 2,500 2,750 3,700 EXPENSES Direct3,000 3,060 3,121 3,184 3,247 3,312 Indirect750 769 788 808 828 849 Total Expenses3,750 3,829 3,909 3,991 4,075 4,161 Excess of Revenue over Expenses(50) (829) (1,409) (1,491) (1,325) (461) STABILIZATION RESERVE FUND Opening Balance3,750 3,731 2,933 1,543 49 (1,300) Transfer from (to) Capital(25) Add: Excess of revenue over expenses(50) (829) (1,409) (1,491) (1,325) (461) Add: Interest revenue/(expense)56 44 23 1 (20) Closing Balance3,731 2,933 1,543 49 (1,300) (1,806) Target balance (1.0x expenses)3,750 3,829 3,909 3,991 4,075 4,161 Funding level as % of target99.5%76.6%39.5%1.2%-31.9%-43.4%

33. Budget Cycle

34. Budget Monitoring

36. Annual Report

38. How Many Hats Do You Wear? CBO Industry Liaison Problem Solver Finance Economic Development

39. Benefits of a CBO wearing multiple hats? Increased professionalism Gain credibility Leadership opportunity Go-to-Person (gate keeper) Fewer Issues (Council & customer) Approval

40. Who educates Council on your Building Dept.? Councillors have all sorts of experience, are they aware of Building; By-law, OBC, BCA, CBO role & Public Safety? CBO opportunity when Mayor calls! How long before Council receives a reply Do you take the time to educate If no, don’t expect a different outcome Yes, good investment, pays dividends Speaking of money, do you know the MPAC rep in your area?

41. How to Leverage Communication Opportunities with Council/Customer Council – Do you take the time to explain to Councillors – Do you invite Council to home builder/industry functions i.e. Awards Banquet – Do you meet with Councillors on-site Customer (internal & external) – Do you share information of value to customers (i.e. – permit fee and DC rate changes) – Are you accessible to your repeat customers – Have you ever asked customers for feedback

42. Final Wrap Up Understand the purpose of a budget Become familiar with the components of a budget and how to create a budget Understand the importance of long term planning and sustainability Learn what happens after the budget is set Why should a CBO wear multiple hats Learn how to leverage communication opportunities with Council and customers

43. Budget LOL