council 8 15 '09 - kingston, ontario€¦ · council meeting1 8 ,cfp 15 '09 report to...

COUNCIL MEETING1 8 SEP 15 '09

CITY OF KINGSTON

REPORT TO COUNCIL m

I ReDort No.: 09-276 I

TO: Mayor and Council

FROM:

RESOURCE STAFF:

Lance Thurston, Commissioner, Community Development Services

Jim de Hoop, Director, Community & Family Services

DATE OF MEETING: 2009-09-1 5

SUBJECT: Welch Group Consulting: Review and Report on Kingston & Frontenac Housing Corporation, Receipt of Final Report

EXECUTIVE SUMMARY: In the spring of 2009 Council commissioned an operational review of the Kingston & Frontenac Housing Corporation (K&FHC). The final report of the Welch Consulting Group, which was selected through a competitive bid process to undertake the review, is attached as Exhibit A to this report. The overall objective of the review was to provide information to assist Council, the board of directors of K&FHC, staff and others in making strategic, operational and management improvements to K&FHC going forward.

Based on all the information obtained from comparators and key stakeholders including city and housing corporation staff , tenants and others, an analysis of the productivity, performance and opportunities for improvements have been identified and incorporated in the final report.

RECOMMENDATION:

THAT the final report entitled, "Review and Reporf on Kingston & Frontenac Housing Corporation", prepared by the Welch Group Consulting, dated September 09, 2009, be received; and further

THAT the conclusions and recommendations of the report be referred to City Council sitting as the Shareholder of Kingston & Frontenac Housing Corporation, within the next 30 days in order to assess and confirm an implementation plan, including schedules and timelines.

REPORT TO COUNCIL Welch Consulting Group: Comprehensive Review and Report on Kingston & Frontenac Housing Corporation

Report No.: 09-276

Commissioner Leger, Corporate Services

Jim Keech, President, Utilities Kingston

September 15,2009 - -

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NIR NIR

AUTHORIZING SIGNATURES:

I Lance Thurston, Commissioner Community Development Services

I ORIGINAL SIGNED BY CHIEF ADMINISTRATIVE OFFICER 1 Gerard Hunt, Chief Administrative Officer

CONSULTATION WITH THE FOLLOWING COMMISSIONERS:

I Commissioner Beach, Sustainability & Growth I NIR I

COUNCIL MEETING1 8 ,CFP 15 '09 REPORT TO COUNCIL Welch Consulting Group: Comprehensive Review and Report on Kingston & Frontenac Housing Corporation

Report No.: 09-276


OPTIONS/DISCUSSION:

Study Content The overall objective of the comprehensive review of K&FHC was to provide information to city council, the board of directors of K&FHC and their respective staff that will assist in making strategic, operational and management improvements to K&FHC in order to achieve a positive financial position consistent with the delivery of effective, efficient, high quality housing for lower income households in Kingston and Frontenac. A strong fiscal position is important if K&FHC is to continue fulfilling its role as well as meet the challenges that the future may bring.

The specific mandate for the review was to conduct an objective analysis and report on the following functions, with recommendations for strengthening them as they relate to improved service delivery and cost containment:

1. 2. 3. 4. 5. 6. 7. 8. 9. IO.

11. 12.

13.

Governance and management Financial management including purchasing policies and revenue streams Human resources management including pay equity and internal equity Operational efficiency Staff structures and roles Relationship between K&FHC and Service Manager, including funding policies and practices Organizational culture Community interface as well as tenant programs and services Interface of K&FHC with the Service Manager from both perspectives Decision-making and communication policies, patterns, and practices including reporting of key indicators of service quality and fiscal position Identification of any other factors impacting the K&FHC's financial situation, including current city funding policies Development of a recovery and implementation plan in the form of a final report for the housing corporation to achieve a balanced financial position. Peer review of business case in support of enhanced funding request

Study Process Terms of Reference were created and a competitive Request for Proposals (RFP) process in accordance with city policy was undertaken. The evaluation team selected the Welch Consulting Group from among seven (7) proposals received. Following a project engagement meeting, data collection and analysis was carried out and over 30 structured interviews were conducted with a variety of stakeholders. Several meetings of the review steering committee were held.

Based on all the information obtained by the Welch Group from comparators and key stakeholders, an analysis of the productivity, performance and opportunities for process improvements and cost savings have been identified. This will provide a context for making key financial decisions of a strategic nature that will impact the housing corporation.

It is being recommended that the Welch Report be received by Council and then referred to council sitting as the Shareholder for Kingston and Frontenac Housing Corporation for further deliberation, engagement with its board of directors, and development and execution of an implementation plan that includes timeliness and implementation milestones for fulfilling the recommended actions. It is important for council, as Service Manager for social housing and sole Shareholder of K&FHC, to retain oversight of the implementation process.

EXISTING POLlCYlBY LAW: City Council, as Service Manager, approves the annual level of municipal subsidy allotted to each social housing provider, as part of its review of the Community and Family Services departmental budget submission. The Board of Directors of K&FHC then approves a budget for the housing corporation, which is subsequently adopted by city council sitting as the Shareholder of

REPORT TO COUNCIL Welch Consulting Group: Comprehensive Review and Report on Kingston & Frontenac Housing Corporation

Report No.: 09-276


the housing corporation. This comprehensive review and report was commissioned by City Council as Service Manager and the successful implementation of the recommendations will continue to be a matter for Council oversight.

NOTICE PROVISIONS: Not applicable

ACCESSIBILITY CONSIDERATIONS: This report is available in some alternate formats upon request, including French translation.

FINANCIAL CONSIDERATIONS: Any costs arising from the implementation of the report recommendations will be identified as part of future budget processes.

CONTACTS : Lance Thurston, Commissioner, Community Development Services; ext. 1250 Jim de Hoop, Director, Community and Family Services; ext. 4957

OTHER CITY OF KINGSTON STAFF CONSULTED: Gerard Hunt, Chief Administrative Officer Adele Lafrance, Manager, Finance and Administration, Community & Family Services Cheryl Hitchen, Manager, Applicant Services and Community Programs, Community & Family Services

EXHIBITS ATTACH ED: Exhibit A - Review and Report on Kingston & Frontenac Housing Corporation, Welch Group Consulting, 2009-09-14

COUNCIL MEETING1 8 SFP 15”op

REPORT TO

THE CITY OF KINGSTON

ON THE

KINGSTON & FRONTENAC HOUSING CORPORATION

SEPTEMBER 9,2009

WelchGroup Consulting Address 1200 - 15 1 Slater Street Ottawa, ON KIP 5H3 T: 613.236.9191 F: 613.236.8258 W: w-gmup.com

http://w-gmup.com

Table of Contents

1 . 0 EXECUTIVE SUMMARY .............................................................. i

2.0 INTRODUCTION .......................................................................... 6 2.1 Background ....................................................................................................... 6

2.2 Purpose .............................................................................................................. 6

3.0 SCOPE OF ENGAGEMENT ........................................................ 7 3.1 Scope Limitation ............................................................................................... 7 . . .

4.0 OUR APPROACH ........................................................................ 8

5.0 FINDINGS AND RECOMMENDATIONS ................................... I O 5.1 Governance ..................................................................................................... 10

5.1.1 The Board of Directors ............................................................................. 11

5.1.2 The Planning Process ................................................................................ 13

Operations Management and Organizational Culture., ................................... 15

5.2.1 Corporate Administration and Structure ................................................... 16

5.2.2 Property and Asset Management ..................... 5.2.3 Tenant Relations and Management .......................................................... 19

5.2.4 Stakeholder Relations .............................................................................. 20

5.2.5 Organizational Culture .............................................................................. 21

5.3 Financial Management .................................................................................... 23

5.3.1 The KFHC Business Case Prepared in July 2008 .........................

5.3.2 Review of Specific Accounts .................................................................... 26

5.2

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5.3.3 The Subsidy Funding Formula ............................................. 31

6.0 ALTERNATE CORPORATE STRUCTURES FOR KFHC .......... 34 6.1

6.2

Merger with Town Homes Kingston .............................................................. 34

Integrating KFHC inside the City of Kingston corporate structure ................ 35

APPENDIX 1 ....................................................................................... 1

City ofKingston Report on the Kingston & Fronfenac Housing Corp.

Seutmber 9, 2009

1 .O EXECUTIVE SUMMARY

We were engaged by the City of Kingston to conduct a broad and comprehensive review of the policies, practices, and patterns of decision making of both the Kingston & Frontenac Housing Corporation (“KFHC”), as the housing provider, and the City of Kingston Community & Family Services Department, as the Service Manager. The objective of the project was to enable KFHC and the City to make a sound decision on base budget increases and set direction for KFHC’s renewal.

As part of this review, a series of key informant interviews were conducted, relevant documents reviewed and financial analysis performed to establish an informed picture of KFHC and the City, as Service Manager and as shareholder respectively. Findings were considered in context with approaches used by typical organizations as well as practices employed elsewhere in the social housing system.

During our mandate, two additional alternatives for KFHC’s corporate structure were brought to our attention: (i) a merger with Town Homes Kingston and (ii) internalizing the Kingston & Frontenac Housing Corporation:

i) With respect to a merger with Town Homes Kingston, there does not appear to be a compelling reason to merge at this time. Financial benefits would be limited, at best. In our view, there is a need to re-establish control and stabilize the Kingston & Frontenac Housing Corporation first.

ii) With respect to bringing the Kingston & Frontenac Housing Corporation inside the City of Kingston structure, there does not appear to be a compelling reason to pursue this alternative at this time. Although this may provide certain benefits from a control perspective, it may add financial costs via salary creep and could limit the benefits that an arm’s length local housing entity can provide.

For both of the above alternatives, there would also be one-time transitional costs associated with moving to the new structure and a need to undertake a change management initiative to successfully implement the chosen model. This transitional period would also have operational consequences for all parties involved in the form of resource allocation.

In our opinion, the accountability structure and framework currently in place is the appropriate model to manage the existing arm’s length relationship. The issue is not with the model. The issue is that the framework and structure are not working properly and in the best interest of all stakeholders. To be effective, the existing structure needs to be refined and used appropriately by the Board of Directors and the shareholder.

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City of Kingston Report on the Kingston & Fronteiinc Housing Corp.

September 9, 2009

This assessment is based on our observations during the review and can be generally characterized as follows:

As an organization, KFHC appears to have managed operations adequately since devolution, but internal issues and deteriorating relationships with both the' Service Manager & community persist. Financial issues are emerging in part due to unilateral decisions by KFHC but also as a result of the funding decisions made by the Service Manager. The Board of KFHC is not meaningfully hlfilling its strategic role in setting direction for the corporation or obliging management accountability, The shareholder has not asserted the accountability provisions of the shareholder agreement, despite its vested interest in the health of the organization and how it can better serve community needs. The status quo is not working and there are bona fide opportunities to improve the way that KFHC, the Service Manager, and the shareholder operate. A commitment by the KFHC Board, the Service Manager and the shareholder is essential to revitalize the organization, and this would ultimately result in benefits for KFHC tenants and the broader community. In the absence of meaningful action, continued community discord and the real risk of KFHC becoming a Prqiect in Difficultly could be on the horizon. These outcomes would not be beneficial to the Board, the Service Manager or the shareholder.

Looking forward, we see the following key themes as being central to insuring an effective and efficient operating structure for the corporation:

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Create a more effective and accountable governance structure Become more client-centric in the delivery of services Enhance organizational effectiveness and culture through continuous improvement Ensure a stable and sustainable financial model that provides sufficient flexibility to inanage the local housing corporation obligations

In our opinion, the recommendations we are providing (summarized in Table 1, below and expanded on in the body of this report) will steer the organization in the desired direction. In the case of KFHC, recommendations will assist in creating a more appropriate role for the Board while setting out accountabilities and operational improvements for staff. In the case of the City, recommendations will help fi-ame a more accountable funding relationship between KFHC and the Service Manager. In the case of the shareholder, these recommendations will foster clarity in accountability and help establish clear directions forward for the organization. These directions can help support housing-related community initiatives such as Planning Together I1 and the Mayor's Task Force on Poverty.

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COUNCJL MEETING1 8 SEP 15 ’09

CiQ of Kingston Report on the Kingston (e Frontenac Housing Corp.

September 9, 2009

2.0 INTRODUCTION

2.1 Background Prior to 2001, KFHC was a local housing authority (“LHC”) owned by the Province of Ontario through the Ontario Housing Corporation (“OHC”). The OHC set budgets, and all LHCs were expected to operate within these budgets. Budgeting for deficits was not permitted.

In 2001, ownership of the KFHC was transferred to the City of Kingston (“the City”). The City, under the authority of the Social Housing Reform Act (“SHRA”), was also designated a local social housing Service Manager for the area at the time and, as such, must ensure that the KFHC and other local designated housing providers comply with provincial, federal and local funding program requirements to meet local housing needs.

Therefore the mandate of the City of Kingston Community & Family Services Department includes providing program administration oversight for not-for-profit housing providers including KFHC. In addition, the City of Kingston is the sole shareholder of KFHC and through Council, has a formal business relationship within the rights and obligations of the Business Corporations Act. While there can be overlapping expectations among these two roles, they are clear and legally distinct from one another.

In 2008, KFHC staff prepared a business case pointing to the need for a significant increase in its municipal subsidy allocation in the order of 15% in each of the next 4 years, totalling about $3 million. The size of this request, along with known operational challenges being faced by KFHC, have raised concerns about the viability of the housing corporation’s current operating model. As a result, after reviewing the request, the Coinmunity and Family Service staff recommended that an independent third party be engaged to conduct an in-depth review of the business case and relevant collateral information.

2.2 Purpose

The overarching objectives of this pro-ject were to enable KFHC and the City to (i) make a sound decision on base budget increases, (ii) set a progressive direction toward renewal for the KFHC and (iii) deliver a report to the City, as shareholder, outlining our investigation, analysis and fiscal/service recovery plan for KFHC.



Ci@ of Kingston Reporr on the Kingston & Frontenac Housing Corp.

Septeniber 9, 2009

3.0 SCOPE OF ENGAGEMENT

The scope of our work was broad enough to conduct an obiective analysis of the activities of KFHC and include such issues as:

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Governance and management Financial management including purchasing policies and revenue streams Human resource management including pay equity and internal equity Operational efficiency Staff structures and roles Relationship between KFHC and the Service Manager including fimding policies and practices Organizational culture Cormnunity interface as well as tenant programs and services Interface of KFHC with the Service Manager from both perspectives Decision making and communication policies, patterns and practices including reporting of key indicators of service quality and fiscal position A review of KFHC's business case in support of enhanced funding request

Scope Limitation

This report should not be construed as an operations review. We did not perform a detailed in- depth operations review of KFHC, as this was not the intent and beyond the scope of this engagement. Our review was conducted in sufficient detail, however, to allow us to report on our findings as outlined in this document.

We have relied on the financial information provided to us by KFHC and the City. We have not conducted any independent verification as to the accuracy or completeness of this financial information.

WelchGi-oup Consulting 7

COUNCIL MEETING1 8 SEP 15 ‘09 Cify of Kingston

Report on the Kingston (e Frontenac Housing Corp. September 9, 2009

4.0 OUR APPROACH

We undertook a collaborative 3-Phased approach to this pro-ject in an effort to promote the principles-based solutions raised in the Request for Proposal document, Our approach included a broad and comprehensive review of policies, practices and patterns of decision making on the part of both KFHC and the City of Kingston Community & Family Services Department, as Service Manager.

Phase 1, the pro-ject initiation phase, included: 0 Holding an initial pro-iect kick-off meeting with key stakeholders to confirm our

understanding and the pro-ject work plan Obtaining contact information and working out the logistics in relation to the interviewees Requesting any legacy background documentation from both the Service Manager and KFHC

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0 Establishing our communications protocol

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Reviewing the relevant documentation and processes Conducting interviews with the identified key personnel Questioning and confirming our findings as an iterative process Analyzing the results and documenting our findings.

We focused our work in this phase within 3 separate but interrelated modules: 0 Governance 0 Operations 0 Financial Management.

In our governance review, we looked at the governance framework and mechanisms governing the relationship between the KFHC and the Service Manager, examined the role of the appointed Board of Directors, and reviewed the terms of the shareholder agreement. In addition, we obtained an understanding of how KFHC interacts with the Service Manager, other housing providers and the broader community.

In our operations review, we looked at a series of key aspects of KFHC management, such as corporate administration, tenant management, property and asset management, and stakeholder relations including tenant programs and services. In addition, we reviewed the operational policies and procedures, including human resources management issues such as pay equity and internal equity, in order to identify factors impacting KFHC’s operational and financial position.

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Civ of Kingston Report on the Kingston B Frontenac Housing Corp.

Seoteniber 9. 2009

In relation to financial management, we reviewed KFHC's 2008 business case submission in support of the enhanced funding request. A review was also undertaken of the various fimding policies and practices adopted by the Service Manager, including those related to matters such as maintaining appropriate capital and operating reserves and annual reporting. We also examined the financial trending, cost drivers and revenue flows for KFHC to better understand the current financial state, determine which factors may have contributed to the current financial situation and identify savings opportunities.

As part of this phase, we also conducted a brief examination of two theoretical models for alternative KFHC corporate structure. The first was a merged entity of KFHC and Town Homes Kingston. The second was the integration of KFHC operations within the City structure. These options were examined at a high level with regard for issues identified elsewhere in phase 2 and based on experience with models like this in other jurisdictions.

Phase 3, the reporting phase included:

' Compiling our recommendations 0 Establishing an implementation plan 0 Reporting as required

Compiling our findings noted during the field work



Septeniber 9, 2009

5.0 FINDINGS AND RECOMMENDATIONS

5.1 Governance

Governance is essentially an issue of accountability and oversight. It is a framework characterising how an organization is managed. It includes how decisions are made and carried out, how outcomes are measured and how stakeholder relationships are managed. Effective governance involves .directing an organization to make the best decisions possible. Among other things, fundamental ingredients of good governance include trust, transparency, full disclosure, a focus on performance measurement and a respect for all stakeholders. Setting a sound framework in place and following it are key to maximizing an organization's effectiveness.

Figure 1 below illustrates the accountability framework and reporting relationships currently governing KFHC.

Figure 1: KFHC Accountability Framework

I City of Kingston

......... ___.__. # Service Manager (staff)

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. . . . . . . . . . ............. . . . . . . . . . . . . . . . . . .

: :Kingston and Frontenac: Housing Corp.' ; 1

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................................................. KFHC Tenants

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Ci@ of Kingston Report on the Kingston (e Frontenac Housing Corp.

Seotember 9, 2009

5.1 .I The Board of Directors In its oversight capacity, the role of the Board of Directors is to:

Establish the organization’s values 0 Enhance decision making 0 Provide leadership 0

0 Assess risk Participate and lead in the strategic planning process

However, the primary role of the Board is to select, evaluate, compensate and replace (if necessary) the Chief Executive Officer (CEO), given that the responsibility for day-to-day operations of the organization rests solely with the CEO.

The KFHC is governed by a 7 member Board of Directors consisting of 3 members from City Council, 2 members from the tenant community and 2 members from the community at large. In addition, there are 2 standing committees, a human resources coinmittee and a finance and administration committee.

We observed that although there is a structure in place under the Board’s direction, there appears to be a lack of clarity and understanding with respect to roles and responsibilities. Lines of accountability exist but are not respected or enforced. The shareholder needs to re-establish its expectations of both the Board and the organization and be prepared to address any shortfalls when expectations are not met.

Our discussions with the Board Chair and Vice-Chair led us to make the following observations with respect to Board effectiveness and to conclude that there is an immediate need for governance reform:

0 The Board does not have a written mandate outlining the division of responsibilities between Board and management. The Board is not actively involved in the development of the corporation’s mission, vision and values. The Board is not actively involved in the development of the strategic plan. The Board does not review the progress of key strategic issues at each meeting. Rather, Board meetings appear to be more operational than strategic. The Board does not have a process in place to measure performance against strategic ob-jectives. The Board does not participate in a periodic strategic planning session or hold an annual orientation session for directors. Board members are not exposed to formal or informal opportunities for development with respect to governance issues. Consequently, there is a lack of understanding by the directors with respect to their role and responsibilities.

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COUNCIL MEETING1 8 SEf" 1 5 '09

City of Kingston Report on the Kingston (e Frontenac Housing Corp.

September 9, 2009

0 The Board is not engaged in risk management. The Board needs to ensure that management has identified all key risks and subsequently monitor management's performance in relation to minimizing these identified risks. Management should manage risk and the Board should monitor management's performance. The Board has not put in place an ethics program including a whistle-blowing process. The Board is not systematically measuring the General Manager's performance. There is no formal succession planning process in place with respect to the General Manager position.

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In addition, we noted that the Board focus is more operational than strategic. The Board meeting package appears to be very administrative and technical and contains details that should be handled by staff. Meeting frequency needs to be reviewed. With monthly meetings and an excessively operational Board package, discussions tend to drift into management territory rather than remaining at a strategic level.

Our recoinmendations in relation to Board effectiveness are outlined below and are all high priority (i.e. to be put in place by the end of 2009)

1. Deliver a Board training/orientation session to ensure that the directors, shareholders and senior staff have a clear understanding of the roles, responsibilities, accountabilities and function of the Board of Directors. Participants would include all directors, the General Manager and other stakeholders as identified by the shareholder. This should be organized by the shareholder with senior KFHC staff handling the logistics.

2. Re-focus Board meetings to be more strategic in nature and less operational. Ensure the Board's focus is on the execution of strategy, the mitigation of risk and high-level financial management issues. This would involve a complete and comprehensive re- design of the Board meeting package and a re-design of the agenda. consideration would be given to reduce the frequency of meetings over time.

3. Establish a process to effectively evaluate and measure the performance of the General Manager. A performance measurement system will provide the Board with information to guide management, ensure accountability, measure performance and provide continuous improvement. We suggest that a tool such as a balanced scorecard would be effective for this purpose. Measures to be included in this scorecard would include both financial and non-financial metrics.

A balanced scorecard will link performance to strategy by applying financial (lagging) and non-financial (leading) indicators to the 4 dimensions of an organization namely, financial, customer or client, internal business processes and learning and growth, These 4 dimensions are interdependent and therefore altering one will have an effect on the


COUNCIL MEETING1 8 SFP 1.5 ’09

C i v of Kingston Report on the Kingston & Frontenac Housing Corp.

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other. Metrics, based on specific targets and linked to strategy can be used to track the performance within each of these dimensions.

The benefit of this type of measurement tool is that it measures leading indicators and encourages corrective action long before any inaction effects the organization’s financial situation. For example, from a learning and growth perspective a performance measure might be improving staff skills. If this is not done successfully, the scorecard will report on this shortfall and there will be an opportunity to remedy this before it can negatively impact on the financial situation.

4. Implement a General Manager succession plan. Senior management may leave an organization for several reasons, some planned and some unplanned. With this in mind, it is the Board’s responsibility to ensure that a proactive and complete plan is in place. The General Manager should work with the Board in this regard so that any eventual transition is carried our as smoothly as possible.

Succession planning should begin months or even years in advance. Although the Board may wish to consult a human resource professional to assist with this plan, issues to consider will include looking for leadership potential within KFHC and giving opportunities to train potential internal talent, benchmarking criteria and identifying talent in external but similar organizations and with the assistance of the current General Manager, establishing a methodology for an effective transition.

5. We suggest that a working group be established to deal with the above recommendations. The working group should consist of no more than 5 members and include representatives from the Board (preferably the Chair), the shareholder and the KFHC. The group would develop its own mandate and terms of reference.

5.1.2 The Planning Process Although we saw some evidence of planning documents, such as Vision 2002, the Business Case for additional funding and the 10-year Capital plan, we did not see a coordinated effort to adopt an integrated planning process.

Figure 2 below presents a model for an integrated planning process.

The strategic plan is the foundation for this process. Normally this is a 3 to 5 year document (usually revisited and refreshed every 3 to 5 years) incorporating input from all stakeholders. The organization’s mission, vision and values are developed and included in the document as well as the key strategic objectives. Usually the strategic planning process involves the determination of the organization’s strengths, weaknesses, opportunities and threats (SWOTS analysis).

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Ci& ofKingston Report on the Kingston (e Frontenac Housing Corp.

September 9, 2009

The annual business plan is essentially an implementation document, outlining how the organization will execute the key strategic objectives. This document has a 1 year cycle and outlines how the major initiatives and programs will be carried out during the year and the resources needed to do this. Budgets and financial forecasts also form part of the annual business plan.

The performance measurement process will determine how well the organization has accomplished its ob-jectives and it will provide the feedback loop back in the planning process. Tools such as dashboards and scorecards are used to capture, measure and report on performance.

Central to the planning process is a risk management framework. This framework will assist in identifying, mitigating and managing risks.

Figure 2: Planning Process

As an integrated process, it is also important to ensure a clear reflection of shareholder expectations as part of this planning framework. The Shareholder Agreement currently in place is the primary instrument for articulating the shareholder-KFHC relationship. In addition to establishing authorities, it also sets out minimum expectations and accountabilities for the benefit


COUNCIL MEETING1 8 SEP 1 5 ’09

City of Kingston Report on the Kingston Ce Frontenac Housing C o y .

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of both parties. The current Agreement reflects the nature of the shareholder-KFHC relationship post devolution in 2001. The shareholder-KFHC relationship has evolved since that time and with recommendations for renewal of corporate vision, goal setting and strategic planning, it will be timely to review and amend the Agreement to make it more reflective of go-forward expectations.

The current Agreement is comprehensive and covers a number of key areas but amendments should be considered in the areas of operational policy, rent supplement program administration, financial obligations/reporting and annual reporting to the shareholder. In addition, the role of City staff as advisors to the shareholder should be clarified. Given that KFHC corporate by-law #1 enshrines certain of these shareholder’s expectations, it too would need to be reviewed and amended as necessary to ensure alignment with the revised Shareholder Agreement. Once re- cast, both documents would need to be duly approved to bring them into force and effect.

Our recommendations in relation to planning process are outlined below and are all high priority (i.e. to be put in place by the end of 2009).

1. We recoinmend that a strategic planning process covering a 3 to 5 year time horizon be initiated and the annual business plan, performance measurement system and risk management framework form part of this integrated structure, similar to the above diagram.

A facilitated planning session should be held to begin the process and among other issues, the session should cover KFHC’s mission, vision and values and establish a set of high- level key strategic ob.jectives. Participants in this session would include representatives from the shareholder, the City, KFHC staff, tenants and the comnunity at large. The session should be facilitated by an experienced and independent consultant. The Board Chair and senior KFHC staff should take the lead on this initiative.

2. In consultation with all relevant parties, both the current shareholder agreement and by- law #1 be revisited and revised as necessary. These revisions should ensure that accountabilities align with strategic directions and that expectations of the organization and the shareholder are clearly articulated.

5.2 Operations Management and Organizational Culture

Having a sound approach to management and operations can certainly influence how an organization approaches its mandate and will directly translate into how effectively services are delivered. This sense of organizational culture permeates the workplace and is conveyed to




September 9, 2009

recipients of services (the clients), both directly and indirectly. It is therefore not surprising that when deficiencies arise, consequences can impact on clients.

While the overall management framework for operations is substantially complete, KFHC appears to have a reactive approach to management, with a focus on control. This creates a challenging work environment that is inward facing and not client-centric. In our view, there is a need to establish a clear vision for moving the organization forward and creating a process for getting there.

We looked at operations management and organization from 5 perspectives: 0 Corporate administration and structure 0 Property and asset management 0 Tenant relations and management 0 Stakeholder relations 0 Organizational culture

5.2.1 Corporate Administration and Structure Corporate structure, organization and lines of accountability have a direct influence on an organization's ability to perform. As such, there is a clear link between the services provided to clients and the inanner in which an organization is configured to deliver these services. Perhaps more important is the qualitative dimension of this discussion since how services are delivered is at least as important as what is delivered. A review of the organizational structure, areas of responsibility and supporting policies was undertaken to better understand the context in which KFHC delivers services.

Findings and Observations

The efectiveness of the current KFHC Service Model remains questionable

0 The rationale for changing to the current service delivery model remains unclear. Implementation of this structure occurred in 2006 and saw the consolidation of functions into two main property management teams rather then the previous three. Some minor adjustments in supervisory alignment and areas of responsibility also occurred. However, there is no documentation to indicate if stated goals have been achieved and no evidence of follow-up evaluation to assess how well this model is working. The interface with tenants crosses manyjob functions and appears less tenant-focused than in the past. Tenant management occurs across Applicant/Tenant Service Coordinator, Property Management Assistant and Property Manager positions and is organized more around job sub-functions rather then around tenant relationships. Administration of the rent supplement program is fragmented across a number of areas of responsibility and formal accountability is not clearly defined. Program reporting is

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CiQ of Kingston Report on the Kingston (e Fronteiiac Housing Corp.

Sevteniber 9. 2009

primarily limited to monthly financial summaries and not indicative of strategic program management. Despite the fact that this portfolio absorbs roughly 25% of the City’s annual social housing subsidy budget, program accountability is not well defined by the Service Manager. This only serves to limit opportunities to deliver the program more effectively.

The human resource functions(uo1icies do not fully reflect prudent practices

0 Job descriptions are not up to date, despite recent sizable compensation adjustments. As a result, the true status of roles, responsibilities and reporting as compared to the current service model remain unclear. Functional supervision and management responsibilities are not always clear. It is also unclear if functional obligations for liaison, advocacy and leadership within the community are being met. Human resources policies rely heavily on former LHA manuals and are incomplete, especially with regards to performance planning. Oversight for the HR hnction below the Board’s Human Resources Sub-committee appear unbalanced, particularly in the case of supervisory authority.

0

0

Committee struclure is excessive and overly ndminis frntive

0 There appears to be excessive committee structure with 2 standing committees of the Board and more then 15 internal staff committees. With minutes of each staff committee produced and cross-reported among committees, there is significant overlap in reporting, scope and personnel. This has the net effect of reducing staff effectiveness by absorbing staff time that would otherwise be available for core work functions.

Recommendations

Based on the above findings, we suggest that KFHC re-align its corporate efforts to better meet its objectives by:

0 Re-assessing the current organizational structure and effectiveness of KFHC within a client-centric framework in collaboration with the shareholder Cooperating with the Service Manager in a full evaluation of the current rent supplement program delivery model, with a view to moving this fimction to the Service Manager Updating policies and job descriptions with appropriate policy support from the shareholder, in order to re-establish effective lines of accountability for management, supervision and reporting Reducing committee structures to focus on core functions by eliminating duplication and excessive reporting

0

0

0


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5.2.2 Property and Asset Management Apart from managing tenant relations, one of the primary roles of any landlord is the management of physical assets (i.e. buildings and properties), especially given the significant investment in this resource. Having sound practices and procedures in place to guide operations is critical to this management finction, both on a day-to-day basis and for the longer term. Given the size and age of KFHC's portfolio, taking a more strategic approach will become increasingly important.


Operational practices and procedures are not current

0 Basic policies are in place but are outdated and out of context with the current social housing framework and associated legislation (e.g. KFHC is using old LHA manuals). While keeping policies current is an on-going challenge for all social housing providers, procedures do need to reflect the changed environment in which they operate. Manuals, policies and procedures need to be re-organized to make them more user- friendly. While existing manuals have been supplemented in some cases, the grouping and organization of current content makes finding related polices quite difficult. Some practices and procedures seem unnecessarily onerous and overly prescriptive (e.g. employment references, voicemail, smoke detectors, waste control). As part of a wholesale review, current policies should be evaluated for effectiveness, seeking opportunities to improve/modify/supplement as necessary.

0

0

Conflicts continue regarding operafional compliance

0 Non-adherence to Service Manager directives in the past has created an environment of conflict with KFHC despite the fact that there is clear legislative authority for these directives (e.g., rent calculation protocol for Registry, treatment of past arrears). As a consequence, time spent on procedural issues means less time for core business which puts a drag on operational effectiveness. Similarly, continued issues flagged in operational reviews and processes for corrective actions tend to be confrontational with the Service Manager, especially in areas of policy direction and information sharing. In both instances, the on-going conflicts between the Service Manager and KFHC have had a spill over effect with other housing providers in the service area which reflects poorly on the City as shareholder of the corporation.

0

0


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Cig ofKingston Report on the Kingston (e Frontenac Housing Corp.

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Portfolio manngement issues require more attention

0 Unit turnaround/vacancies are an on-going issue that have been cited regularly and continue to require attention. Capital planning is based more on 10 year spending projections rather than a detailed Building Condition Assessment framework and funding strategy. In the absence of a fonnal plan, needs are not adequately identified and planned for. With an aging and expanded housing portfolio, a more strategic and integrated approach will be required to manage and revitalize assets. Creative opportunities lie ahead but these rely on having an accurate baseline from which to plan.

0

Recommendations

Based on the above findings, we recommend that KFHC commit to continuous improvement in operations and portfolio management by:

Updating policies with appropriate policy support from the shareholder in order to align practices with service context, improve effectiveness of current policies and enhance outcomes for tenants Integrating portfolio management principles into consistent operational policies Actively dialoguing with the Service Manager on program policy issues to find compliant and practical solutions Seeking out best practices for unit turnover to help minimize vacancy loss Coinpleting a formal Building Condition Assessment for KFHC's portfolio with the assistance of the shareholder, using an energy audit framework (per SHSC tools that are available), and integrating these findings into capital planning practices Integrating strategic objectives for asset management into regular annual business planning (i.e. repairing, redeveloping, re-purposing housing stock)

5.2.3 Tenant Relations and Management The core business of any landlord is essentially tenant relations since the payment of rent directly impacts on the bottom line. While this is equally true of social housing landlords, the tenant populations that these landlords serve is economically challenged and may have related support needs. Finding the balance in this relationship is a clear challenge for social housing landlords, but those who find this balance tend to maintain a better bottom line and enjoy better relationships with tenants and the broader community. By contrast, losing focus on this balance can have the opposite effect, escalating tenant issues.


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Civ of Kingston Report on the Kingston (e Frontenac Housing Cosp.

September 9, 2009


Tenant engagement is limited despite opportunities that exist to enhance this 0 While recognizing challenges associated with tenant engagement, there is limited

representation of tenants on the Board or committees (i.e. in a decision-making role). There is a perception of less ‘face’ time on-site and lack of visibility is noticed by the community. There are basic tenant programs but we observed more recent examples of service reductions (e.g. Compton House phone/insurance). Although there are many opportunities to enhance relationships through community partners there appears to be a perception of disengagement on the part of KFHC.

0

0

0

Recommendations

Based on the above finding, we recommend that KFHC increase efforts to enhance tenant relations by:

0 Creating meaningful opportunities for greater tenant engagement in decision-making, especially at the committee level Increasing corporate visibility to tenants through presence on-site and through actions which demonstrate a responsiveness to issues (e.g. random issue follow-up calls, feedback surveys) Leveraging resources that are already available through community partners to help stabilize and support tenancies

0

0

5.2.4 Stakeholder Relations

In the case of KFHC as an entity, there is clear primacy of the shareholder since the Board is wholly accountable to them for corporate operations and the General Manager is responsible to the Board for all day-to-day activities of the organization. As such, the shareholder represents the most direct stakeholder for the corporation. Given the vulnerable populations that social housing services, the shareholder (i.e. Council) is also interested in broader community outcomes and the ways in which KFHC, as an owned entity, can contribute towards these broader objectives. There are also a myriad of other stakeholders in the community with whom KFHC has opportunities to advance community outcomes while improving the quality of life for the tenants that they serve.

Findmgs and Observations

Current Shareholder reporting is not consistent with typical expectations

Annual reporting to the shareholder is very basic, not at a strategic level and not tied to organizational goals. To be effective, reporting to the shareholder should be enhanced to

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address progress on shareholder directions, measures of performance and community outcomes. There is limited benchmarking with other providers and best practices. In the absence of this external information, it is not clear on what basis KFHC would demonstrate effectiveness.

0

Relationships with stakeholders in the community have become more strained over time

0 We observed a deteriorating relationship with community partners (e.g. legal clinic, Citizens Response to Neighbourhood Concerns, the poverty roundtable and other such community partner agencies) resulting in a diminished ability for KFHC to address or collaborate on tenant needs. As the largest provider in the Community, there is a natural opportunity for KFHC to demonstrate leadership among peers but evidence suggests that this is not the case. This lost opportunity reflects poorly on the image of the shareholder in the community.

0

Recommendations

Based on the above findings, we recommend that KFHC re-commit to improving stakeholder relations by:

0 Enhancing regular annual reporting to the shareholder and community partners especially in the area of service outcoines Demonstrating performance through regular tracking and reporting to the shareholder on key indicators, especially in the area of progress against the established business plan Re-engaging in important community initiatives that support shareholder ob-jectives and taking leadership in the outcomes for KFHC communities

0

0

5.2.5 Organizational Cul tu re

While the structure, management and policies of an organization are important reflections of what it does, the common bond that holds this fiamework together is its culture - the manner in which it delivers service. This culture can be expressed in a number of ways, whether in the form of a clear sense of purpose, a functional working environment or transparency in the principles by which it operates. Successful organizations tend to be better equipped to meet service expectations because they promote a supportive internal working culture.


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The strategic direction for the corporation is not current and is not embedded in service delivery principles

0 As noted in the Governance section above, there is no evidence of meaningful strategic planning including setting and re-visiting the vision and objectives for the future of the organization. As a result, it is unclear how current service delivery aligns with a vision for KFHC and to what degree a client-centred approach is being promoted.

0

There is room for improvement in the KFHC worhng environment 0 Concerns have previously been raised about the level of staff turnover, the handling of

staff complaints and issues involving litigation. Given the seriousness of these concerns, the Board adopted a formal plan for addressing them in August of 2006. Progress appears to have been made in certain of these initiatives but it's not clear whether all items have been adequately addressed. The perception of the work environment at KFHC continues to vary considerably, and issues still linger with regards to human resources, specifically in the areas of complaints and litigation. While sinaller organizations face clear challenges in furthering developinent of their employees, there is limited evidence of meaningful staff development opportunities and performance planning at KFHC.

0

0

Recommendations

Based on the above findings, we recommend that KFHC foster a corporate culture of continuous improvement by:

0 Undertaking with the shareholder a corporate visioning exercise that leads to development of a strategic business plan, as outlined in the Governance section of this report Re-visiting the current KFHC service model to re-align it with the renewed corporate vision and business plan Having the Board and shareholder re-visit the Board's August 2006 remedial action plan to ensure that all HR items raised have been sufficiently addressed Fostering staff development opportunities through regular staff performance planning, available sector initiatives and greater collaboration with the City of Kingston

0

0

0

In our view, implementing the above recommendations will:

1. Clarify administration by: 0 Better aligning corporate structure with mission and vision, once refieshed


Cip of Kingston Report on the Kingston & Frontenac Housing Corp.

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0

0

0

Improving strategic management of the Rent Supplement program Improving staff lines of accountability and ‘right-sizing’ responsibility Providing clear policies that reduce the need for stop-gap approaches and improve transparency Helping to ensure efforts and resources are directed to meaningful priorities 0

2. Enhance operational management by: Updating and standardizing policies that promote continuous improvement and mesh with the service model Improving clarity in policy outcomes and transparency to tenants Reducing time lost to unit turnover Fostering a more strategic approach to asset management and maintenance planning

0

0

3. Improve tenant and stakeholder relations by: 0

0

0

Increasing opportunities for tenant engagement Broadening KFHC’s visibility and image in the community as a key service provider Expand the network of partners to improve tenant relations Improving relationship with the shareholder and Service Manager, allowing efforts to focus on solutions to mutual challenges Improving visibility in the community Supporting the principles and objectives of ‘Planning Together’ and the Mayor’s Poverty Reduction Agenda

0

0

4. Enrich organizational cultural by: 0 Providing a clearer sense of purpose for KFHC going forward that is reflected in a service

model that ‘walks the talk’ Renewing a sense of corporate direction and purpose for staff Allowing for greater autonomy, provided KFHC is meeting accountability expectations Providing a demonstrable commitment towards improvement for stakeholders

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0

0

5.3 Financial Management

Financial management plays an integral part in any organization, ensuring that resources are properly acquired, maintained and used effectively. In addition to its reporting function, finance is involved in transaction processing, budgeting and control, risk management and decision support. In a traditional finance department, the majority of activities centre on transaction processing. A more effective finance function will devote more of its activities to decision support.


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City of Kingston Report on the Kingston (e Frontenac Housing Corp.

September 9, 2009

The finance department can add value to an organization by minimizing the time devoted to transaction processing and devoting more time to risk management and decision support. In order to do this, however, it must increase the efficiency of its transaction process activity by eliminating non-value added work and using technology to its full advantage.

For the most part, KFHC has adequate organizational resources, tools, techniques, skills and expertise to maintain the books and appropriately report on financial matters.

We looked at financial management from 3 perspectives. First, we examined the business case that was prepared by KFHC and submitted to the Service Manager in July 2008. We next reviewed specific line items in the accounts of KFHC, and finally we examined and proposed a modified funding formula.

5.3.1 The KFHC Business Case Prepared in July 2008

We reviewed the business case submitted to the Service Manager in July 2008 and noted the following:

The past financial data presented in the document (e.g. deficit/surplus, discretionary and non-discretionary costs etc.) are consistent with the information reported in the audited financial statements and Annual Information Returns (“AIR’). For various reasons the information provided regarding various service contracts could not be tied back to the numbers presented in the business case (e.g. the original projection failed to come true). The classification of costs into manageable and non-manageable does not reflect reality (e.g. maintenance and administration, utilities, insurance, and bad debt are listed as non- discretionary when in fact the organization has a certain amount of control over these costs). Legal and human resource expenses represent 67% of the total professional fees labelled as discretionary costs by KFHC. This appears to be excessive. The salaries and benefits for 2007 grew by approximately $77,000 due to legislated Pay Equity obligations. As part of this process, a lump sum payment of 10% of the 2007 wages was made to all employees in female classification jobs, and $6,500 was paid to former Registry staff in December 2007. In addition to the Pay Equity process mentioned above, an extraordinary increase in salaries and benefits was approved by KFHC management and the Board of Directors for 2008, and this was rationalized on the basis of minimizing the apparent variances between the City’s wage rates and KFHC’s wage rates. This is the primary reason for financial pressure on KFHC’s budget for 2009. The total actual impact represented an increase of $148,620 to the 2008 salaries and benefits expense line due to:

A 13% increase across the board for bargaining and non-bargaining unit staff representing an increase of $12 1,420.

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o A reduction of maintenance staff working hours from 40 hours a week to 35 hours a week, while keeping salary levels intact. The negotiated reduced work week schedules for the four maintenance staff resulted in an approximate impact of $5,000 per worker for a total of $20,000. Internal pay adjustments resulted in salary and wage increases to the two Technical Services Assistant positions and the Financial Services Assistant position (these are bargaining positions), the Financial Services Supervisor Position and the Finance & Administration Manager position. The total incremental annual labour cost adjustment for all above mentioned positions for 2008 was approximately $7,200.

o

0 The insurance costs show a steady increase due to higher premiums (as a result of frequent and high value insurance claims) and large deductibles incurred especially due to frequent fires in KFHC owned buildings. KFHC requested that its subsidy be topped up for the following items:

o Salaries and benefits in amount of $130,000 for 2009 and a subsequent increase of 4% for 2010. The 2009 increase was to cover the above mentioned extraordinary increases in salary approved by the Board of Directors in January of 2008. Materials and services in the amount of $135,000 for 2009 and subsequent annual increases of 5% for the next few years. The estimate for this request was based on past historical trends and assumes that factors active at that time will continue to influence these expenses. Utilities expenses were requested to be accepted by the Service Manager as either a “flow through” (i.e. subsidised at their actual level each year or that the subsidy be increased for this expense line by 25% in 2009 and by 10% in the subsequent years). The request assumes that utilities expenses are non-manageable, when in fact their level depends on both consumption levels and market prices, KFHC being able to influence the former in a positive way. The capital budget increase was pegged at $1 15,000 for each year, starting in 2009. After reviewing the 10-year capital plan provided to us by JSFHC, we concluded that this plan required that it receive an annual funding close to the current $1.4 million level. However, without a proper Building Condition Assessment connected to a realistic long-term capital plan and considering factors such as inflation, it is difficult to estimate the required level of capital funding needed to provide for a sustainable go-forward model.

o

o

o

The total impact of increases requested by KFHC, calculated as a sum of the subsidy top ups requested by the provider for the 2009 - 2012 period, represents approximately $3 million. We also noted that the impact of other programs (i.e. Rent Supplement and Affordable Housing) on the expense allocation formula has not been included in the business case.


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Ci& of Kingsion Report on the Kingston Ce Frontenac Housing C o y .

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Finally, we noted that subsequent to the issuing of the business case, KFHC also submitted to the Service Manager a document (Exhibit B in Report 09-096, dated January 12,2009) containing a series of cost saving measures to be implemented during the year, which in turn would amount to $144,330 (not including an additional potential saving of $30,150) and an overall saving in the budget for the 2009 fiscal year.

5.3.2 Review of Specific Accounts

We reviewed specific line items in KFHC accounts. Outlined below are our findings and recommendations in this regard.

Insurance Findings

The KFHC is not receiving the same premium reductions as other providers due to its claim history. In 2008, providers with a good claim history received an average of a 6% rebate at renewal. These same providers have seen an approximate 30% reduction in premiums over the last five years under SHSC’s group insurance plan. High deductibles have been used by KFHC to offset premium costs but this approach essentially results in “self insurance” without having a contingency fund in place.

0

Recommendations The KFHC should request the assistance of the Social Housing Services Corporation to help determine the appropriate insurance coverage. Reduce property insurance premiums by eliminating or reducing the factors causing insurance claims &e. through fire prevention, tenant education done by the local Fire Department, periodic unit inspections to identify fire hazards, etc.).

Rent Supplement

Findings All contracting and interacting with the landlords appears to be handled directly by the General Manager. Administration fees do not appear to be deducted by KFHC, and this leads to the potential for over-subscription as compared to available subsidy dollars. Also, it is unclear if the Service Manager is passing through 100% of all program subsidies since reconciliations do not match. It is unclear how management and overview reporting of this discrete program is being handled. Also, cumulative unit counts do not accompany financial fi,wes so it is difficult to determine the ‘take-up’ status in the program at any given point in time.


Ci@ of Kings ton Report on the Kingston Ce Fronfenac Housing Coip.

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0 Subsidy amounts in this program continue to escalate despite the fixed nature of subsidy envelopes, for both Regular and Strong Communities streams. For some of the landlord agreements, utilities are handled as separate add-back costs to programs, which is an anomaly not in line with typical program requirements.

0

Recommendations Consideration should be given to moving full administration and delivery of the rent supplement program to the Service Manager. This would result in potential cost reductions if combined with existing positions within the City since rent calculations are already performed by the Registry. This would also allow the City to interact directly with landlords and help advance broader housing issues in the community. In the case of KFHC, doing this would simplifi administrative functions and free resources for core responsibilities. If retained within KFHC, administrative costs of conducting this program should be recognized and accounted for accordingly. A formal review of the program with the Service Manager should be undertaken to ensure appropriate administrative funding is allotted, program reporting is improved, and program delivery expectations are clearly articulated. When renegotiating landlord agreements, utility payments should be included back into the base rent supplement subsidy.

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0

Vacnncy Loss

Findings 0 The KFHC incurred 301 months worth of vacancy, excluding the 15 RS-RGI units,

during 2008 as noted in the 2008 AIR. This represents about 2.5% of the total number of available occupancy months (maximum: 967* 12 = 11,604 months)

Recommendations 0 Reduce vacancy loss by minimizing the time required to repair and rent the units. This

would increase rental revenue by lowering turnover time, shortening the waiting time for incoming tenants and increasing tenant occupancy. Track and report to the Board of Directors the number of days a unit is vacant &e. starting with the day the unit was vacated until the day the new lease agreement commences) and the daily cost of keeping units vacant. This would increase accountability to the Board.

0


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Cir?, of Kingston Report on the Kingston (e Frontenac Housing Corp.

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Maintenonce and Administration

Findings 0 As there was only one bidder, the current snow removal contract did not follow the

tendering process. Also, some contracts were renewed more than once, which is not in line with KFHC’s procurement policy. Some contracts are being renewed each year at a fixed price, but there is no evidence that research into market prices was being done. Large unilateral increases in salaries by KFHC, rationalized on the basis of achieving parity between the City of Kingston’s wage rates and KFHC’s wage rates, and as a result of Pay Equity legislation.

0

0

Recommendations 0 Explore options for sharing services with the City or becoming a partner in the City’s

procurement processes. The benefit would be potential cost savings to both parties by purchasing in bulk at lower prices. Align KFHC’s purchasing policies with those of the City and ensure that they are followed every time a contract is being bid on or signed with an outside service provider. Track maintenance costs by project to better identify cost drivers and implement solutions. The benefit would be better differentiated cost drivers, enhanced control and reduced costs by improving project management. Research market prices each year before automatically renewing previous contracts to ensure the lowest costs are achieved.

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Professiona I Services

Findings 0 High legal fees incurred which are in part due to apparent communication barriers

constructed by the KFHC. High human resource (HR) related costs. 0

Recommendations 0 Eliminate the current restriction for communicating with KFHC through legal counsel in

all instances (for some stakeholders) except those that warrant external legal counsel involvement. When appropriate, engage the City’s HR and Legal staff to the maximum extent possible rather than purchasing these services from outside KFHC.

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Tenant Arrears

Findings 0

0

A high percentage of households are in arrears. There is excessive reporting done for arrears. For example, there are year-by-year comparisons provided monthly for several months. It is unclear what is being recorded in the books as collectible and what is being written off at year-end. Also, keeping former tenant arrears information in an “off the books” list is not consistent with accounting approach of writing off the amounts they owe to KFHC.

0

Recommendations 0 Reporting to the Board of Directors on arrears should be done on a quarterly basis and

should include information such as percentage of households in arrears, major determining factors for arrears, year-to-year comparison, expected recovery of hnds etc. That KFHC examine arrears files to better determine typical root causes for arrears. Institute preventative measures to reduce the number of households in arrears (e.g. by providing for free financial planning education seminars to qualifying tenants). For day-to-day management, KFHC should institute an early warning flag system regarding potential households in arrears. Once the household is late with the monthly rental payment, KFHC should evaluate its clients’ ability and willingness to repay in order to design appropriate strategies to pursue the recovery of funds (e.g. using repayment agreements to spread rent payments over several weeks instead of one monthly lump sum payment based on repayment capacity).

0

0

0

Affordable Housing Mortgage

Findings 0 The total amount of financing received was $758,096 greater than the net cost of the

construction of the recent seniors affordable housing project on Van Order Drive. Surplus funds have been invested at 2% while the interest rate on the mortgage is 5.42 1 %. The City provided for a municipal grant in the amount of $290,032, (via a municipal development fee refund), although the financing obtained at the beginning of the prqiect was more than sufficient.

0

Recommendations 0 Given the manner in which surplus funds were realized, the shareholder needs to be

consulted regarding the use of these surplus funds. Consider setting up an internally restricted fund for this amount and disclosing it separately in the financial statements.

0


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Ci@ ofKingston Report on the Kingston (e Fronteiiac Housing Corp.

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Capital Funding

Findings 0 As at December 3 1,2008 the total capital reserves amounted to $953,538, a level KFHC

has maintained since 2005. I

The most current 1 0-year Capital Plan was developed using the $1.4 million capital funds available each year and not using the actual capital fund requirements. Yearly amounts allowed for by the Service Manager have remained at $1.4 million since 2006 and have not been adjusted according to the allowable Provincial index, as per the guideline for the Provincial Reformed program.

0

0

Recommendation 0 Perform a Building Condition Assessment for all buildings in the KFHC’s portfolio as a

basis for a sound long-term capital plan. The Service Manager should use the latter to adjust the current preset annual capital subsidy to meet KFHC’s cash flow needs.

Year-end Surplus

Findings 0 The operating reserve is currently $153,632. Of this amount, $139,166 has been

generated in the Affordable Housing Program and is restricted.

Recommendation 0 The yearly operating surplus, excluding the Affordable Housing Program, up to a

maxinium of $300/unit (Le. $290,100) should continue to be retained and used by KFHC as per the Provincial Reformed funding model. The benefit would be to provide an incentive for KFHC to optimize its resource allocation and implement cost saving measures. This would ultimately result in a reduced Service Manager subsidy over time.

IJtilities

Findings 0 The utility costs exceed budgeted amounts and the benchmarked year-by-year increase

approved by the Service Manager. Also, compared to the provincial cost factors, the increase in KFHC’s costs is significant. A detailed analysis of the hydro consumption of selected properties (Le. high rise buildings) indicates that an increased consumption is a key factor in the escalation of costs.

0

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Recommendations 0 Utility cost containment measures should be implemented. This could include an energy

audit as part of Building Condition Assessment review. Replace electrical heating with gas or oil based heating and promote energy efficient replacement of building components at lifecycle renewal. Educate tenants about cost saving measures. Undertake a codbenefit analysis of installing individual meters in all buildings that are currently bulk metered. Maximize use of available energy and infrastructure renewal programs to offset capital costs of implementing energy savings measures.

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Subsidy Culculnfion

Findings 0 The Service Manager is calculating the yearly operating subsidy for KFHC in a manner

generally consistent with the Provincial Reformed Program subsidy formula (s. 106 of SHRA) but is doing so without consultation with KFHC. As a result, figures used in the calculations are not entirely reflective of KFHC’s own budgedactual and thereby result in a variance at the onset of the budgeting process. It is not clear that KFHC fully understands the dynamics of the Provincial Reformed funding formula and how this is implemented by the City. Baseline and escalation costs in the subsidy formula are rigid (e.g. capital funding) and this presents challenges to KFHC’s traditional approach to managing variable costs.

0

Recommendations 0 The yearly subsidy for KFHC should be determined based on a transparent funding

formula that is mutually understood and implemented by both the Service Manager and KFHC. The benefits of this approach include a more predictable model that provides adequate incentives for KFHC to manage expenses and take the initiative to generate cost savings (like all other providers who are funded under the same Provincial Unilateral formula). This will assist in reducing the net amount of the annual Service Manager subsidy over time.

5.3.3 The Subsidy Funding Formula

In order for KFHC to adequately fulfill its mandate, the subsidy established by the Service Manager needs to be at a level that not only allows for the organization to function and provide quality services to its clients, but also ensures predictability of funding for both KFHC and the Service Manager. The adopted funding model needs to be transparent to KFHC and consistently applied. At the same time, the model needs to ensure that KFHC will manage within its funding


Ciq of Kingston Report on the Kingston (e Frontenac Housing Corp.

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envelope, as is expected from all housing providers funded under the Provincial Reformed program.

The funding model we are proposing emulates the legislated funding formula used for the Provincial Reformed program, while taking into consideration specific aspects unique to KFHC, such as the composition of its clientele (i.e. 100% RGI portfolio), its debenture structures and its annual capital funding structure. It should be noted that the principles of the funding model are legislated and are currently applied to other providers in the Service Manager’s portfolio and some LHAs in the Province. The model is designed to provide a reasonable funding envelope within which the provider is expected to operate.

Prior to determining suggested funding levels for each revenue and expense item, we reviewed KFHC’s actual results for the past 5 fiscal years, its 2009 budget, the July 2008 business case, and the Service Manager’s budgets issued since 2001. Given that the Service Manager benchmarked KFHC’s subsidy requirements in 2006, we used the subsidy budget for this year as the starting point for our model.

The funding formula proposes a subsidy payment of $3,755,954 for 2009 (housing programs only, no rent supplement). Details regarding the proposed fundmg model and the underlying assumptions are provided in Appendix 1. There are variances between the KFHC’s 2009 budget request and the revenue and expense levels proposed as a result of the funding formula. These variances may be explained by the following factors:

0 Insufficient justification for portions of the business case presented to the Service Manager in July of 2008. Unilateral spending decisions made by KFHC that are were not consistent with funding model parameters (e.g. significant salary and benefits increases approved without consultation of the Service Manager or the shareholder): The methodology used by the Service Manager in past reconciliations of actual costs.

0

0

As KFHC implements the recommendations made in this report, it is expected that there will be some operational efficiencies realized, especially with respect to reducing losses due to vacancies, tenant arrearshad debts, administration and maintenance costs, utilities costs and insurance rates. It is also expected that non-rental revenue will gradually increase through active exploration of revenue options. As per the legislated funding model, KFHC would be allowed to retain annual operating surpluses (excluding the Affordable Housing Program) up to the cumulative threshold of $300/unit ($290,100 in total). These funds can be retained and used by KFHC as an operating reserve under the Provincial Reformed funding model. Where annual savings generate net surpluses beyond the operating reserve threshold, provisions of the funding model would allow KFHC to retain 50% of these savings with the remaining 50% being returned to the Service Manager. In this framework there is an on-going incentive for KFHC to prudently manage


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September 9, 2009

operations and take advantage of built-in incentives. Capitalizing on these incentives could also have the added benefit of reducing net subsidy costs to the Service Manager over time.

However, in the future, should KFHC encounter higher costs (e.g. due to fluctuations in the prices for utilities, etc.) the provider will be expected to manage within the annual funding envelope. If necessary, it can draw on the accumulated operating surplus to cover temporary cost overruns. In this manner, KFHC would only resort to business case submissions to the Service Manager in exceptional cases where the operating reserves have been depleted and an anticipated significant change in the operations and/or environment would put the provider in a potential position of insolvency.

Going forward, the funding model would be applied as per the rules governing the Provincial Reformed model, escalating 2009 figures per MMAH published indicators to arrive at a 201 0 hnding envelope and following similar rules for successive years. We expect that with a consistent application of the model by the Service Manager coupled with streamlining of KFHC activities and increased efficiencies over time, there should be reasonable opportunity for KFHC to adequately operate and generate annual surpluses from operations.


C i v of Kingston Report on the Kingston & Frontenac Housing Corp.

September 9, 2009

6.0 ALTERNATE CORPORATE STRUCTURES FOR KFHC

During our mandate, 2 additional alternatives for KFHC’s corporate structure were brought to our attention: (i) a merger with Town Homes Kingston and (ii) internalizing the Kingston & Frontenac Housing Corporation. While a more detailed analysis of such options is warranted if a formal change in service model is envisioned, we have briefly examined these alternatives as they relate to other areas of investigation during this review.

6.1 Merger with Town Homes Kingston

Town Homes Kingston is a local non-profit housing provider, managing more then 400 units of social housing within the Kingston service area and operating under the non-profit housing program. Town Homes Kingston in its current format is the result of a number of successive mergers of smaller housing organizations into one entity over the past 15 years (under the framework of the former Kingston Municipal Non-Profit Housing Corporation). The organization is a non-share capital organization, governed by a Board of Director which includes 4 City Councillors. Under the governing documents of the organization, the number of director is established and all appointments to the Board must be approved by the City. Recent amendments to these documents appear to have reduced the number of City Councillor directors. In order to merge, the Board of the organization would have to agree to such a merger and to do so, the City would likely need to assert its authority position with regards to appointing directions for the organization.

As an option, it is plausible that Town Homes Kingston could be merged with KFHC to create one entity. This would:

0 Create a singularly large arm’s length entity with a mixed portfolio of housing programs (1400+ units out of a portfolio of 1,800, not including RS programs) Require the dissolution of one of the Boards Oblige rationalization and re-alignment of staff and services Require a reframed accountability relationship with the shareholder

0

0

That said, such a merger would also: 0 Put the majority of social housing within the City under municipal shareholder

responsibility, creating disparity with other community housing providers Incur significant one-time transition costs in moving to the new structure Precipitate a period of transition during which the operational obligations of both providers would be strained

Based on this cursory review, there does not appear to be a compelling reason to merge the two entities at this time. It is assumed that seeking efficiencies is the prime motivator for such a merger but it is unlikely that substantive financial benefits would be realized, given the current


COUNCIL MEETING1 8 S.- cp 15 ‘09

Ci@ of Kingston Report on the Kingston & Frontenac Housing Corp.

September 9, 2009

financial status of both organizations. In our opinion, it may be more fruitful to pursue shared service opportunities in this regard. Managing the City’s Service Manager relationships within the community would also be strained if such a merger were undertaken, given the shear size of the new entity. Rectifying the director quotient for Town Homes Kingston and clarifying the City’s expectations in approving their directors would be prudent steps regardless. However, in our view, there is a more pressing need to re-establish accountability controls and stabilize operations at KFHC before any such merger could reasonably be considered.

6.2 Integrating KFHC inside the City of Kingston corporate s t ru et u re

While there are varying approaches to this model, it essentially would involve bringing the functions that KFHC performs into the municipal administrative structure. KFHC staff would formally become City staff and operations would fall under the direct control of the City and Council (rather then the current arm’s length arrangement). Bringing these functions in would provide a greater level of control but would also bring with it all liability of being a landlord for roughly 1,000 rental units.

Under this integration scenario, it is plausible that KFHC could be brought into the City structure and integrated with current housing administration operations. This would:

0 Create a concentrated housing function within the housing programs area with direct internal accountability Create service synergies with other municipal departments Require the dissolution of the KFHC Board and legal structure (assumed) Oblige rationalization and re-alignment of staff and services

0

0

0

That said, such a merger would also: 0 Blur the Service Manager relationship with other community housing providers by

making the City a housing provider, rent supplement provider, waiting list administrator and Service Manager Bring the liability for all operations of KFHC into the City Truncate the more flexible operating parameters available in law to LHC’s Result in salary creep for labour costs as more positions become unionized Incur significant one-time transition costs in moving to the new structure Precipitate a period of transition during which the operational obligations of both entities would be strained

0

0

0

0

Although this model may provide certain benefits from a control perspective, this would blur the City’s oversight relationship with other prescribed housing providers. Our high level review suggests that any perceived efficiencies realized may be more then offset by added financial costs due to salary creep. In addition, the innovation and legal flexibilities that an arm’s length


COUNCIL MEETING1 8 .SEP 1 5 '09

Civ of Kingston Report on the Kingston h Frontenac Housing Corp.

September 9, 2009

corporation llke KFHC enjoys would be lost. In our view, there does not appear to be a compelling reason to pursue this alternative at this time and instead, efforts should be focused on making the KFHC accountability provisions that are currently in place more effective.


Cip of Kingston Report on the Kingston (e Frontenac Housing C o y .

Seutember 9. 2009

Benchmark Inputs and Subsidy

APPENDIX 1

Table 2: Subsidy Estimate based on Recommended Model

Benchmark Year 2009

Provider

Line Guide

Reference c Estimates

L2

L3 L4

L5

L6 L7

L8

L9 L10

L11

L12 L13

Calculations Totals I Legend

1 L14

Benchmark Market Rents @ 100 %

L22

I

Mortgage Payment (AMP) Actual Mortgage Payment

less AMP)

Property Taxes (Estimated Actual)

Mortgage Subsidy (Actual Payments

Benchmarked RGI revenues (RGI

L12-L5-L11 $4,282,423 3

$0 2

L14=L13-L12 ($4,282,423) 3

$1,467,097 2

units @ BM rents) $9,416,691 I 2 Actual RGI Revenues Received $2,845,412 I 2

f =based on benchmarks provided by Province 2 = figures obtained from baseline numbers for 2009 3 = calculated fields

RGI Subsidy (RGI units at BM rent

WelckGroup Consulting

I

i.

less RGI rents) Operating Expense Ratio (OER) 1- OER SMs Required Subsidy Payment SMs Required Subsidy Monthly Payment

L18=L16-L17 $6,571,280 3 L19=L1 l/L5 0.5488 3 L20=1 -L19 0.4512 3

L21=L14+L15+L18 $3,755,954 3

L22=L21/12 $31 2,996 3

COUNCIL MEETING1 8 SFP 15 '09

CiQ of Kingston Repori on the Kingston & Fronienac Housing Corp.

Septeniber 9, 2009

Underlying Assumptions in the Recommended Model

Since the annual reconciliation takes care of any discrepancies between what has been forecasted at the beginning of the year and total actual revenue at year-end, we assumed that the total market rent at 100% occupancy is equal to that the amounts shown in the appendix to the 2008 AIR factored up by 1.8% for 2009 per Market Rent Index published by MMAH. Vacancy loss is generally not an allowable budget item, therefore the budget for it is zero. Non-rental revenue is not generally subject to much fluctuation and so we have estimated it using the amounts received in 2008 (per the AIR). Refer to separate comments below and table regarding the amounts included for maintenance and administration and utilities. We have assumed that, with help from SHSC, insurance costs will decrease below the 2008 level. Bad debts have been estimated at 0.3% of total market rent revenue for 2009 (see above for details how the 2008 market rent revenue has been indexed to the 2009 level). Capital reserve funding has been left at their 2008 levels - this amount should be updated once the building condition assessment and revised capital plan have been completed. Maintenance and administration costs have been estimated using the 2006 Service Manager calculated amount as a starting point, which then we adjusted for the inflation factors published in the SHB notifications by MMAH from 2006 to 2009.

WelchGI-oup Consulting 11.

CITY OF KINGSTON REPORT TO COUNCIL

COUNCIL MEETING1 8 SEP 1 5 '09

I Report No.: 09-087 I TO:

FROM:

RESOURCE STAFF:

DATE OF MEETING:

SUBJECT:

Mayor and Council

Gerard Hunt, Chief Administrative Officer Jim Keech, President & CEO, Utilities Kingston

Same

2009-09-1 5

Staff Accommodations: 121 1 John Counter Blvd.11425 Midland Avenue

EXECUTIVE SUMMARY: This report provides information on municipal accommodations including the city-owned properties at 121 1 John Counter Blvd. and 1425 Midland Avenue and specifically addresses motions of council related to these properties. In addition to and in consideration of the reference in the motion to Utilities Kingston, the report has been prepared jointly by the Chief Administrative Officer and the President and Chief Executive Officer of Utilities Kingston.

This report provides an impact analysis and immediate operating and capital cost estimates for relocating staff to the 1425 Midland Avenue property, which is not being recommended by staff. The report provides background information on strategic staffing location decisions and customer service information. In addition, the report provides information on the 1425 Midland Avenue property including the finalization of acquisition of MTO lands adjacent to the current city-owned site, the future needs of public works for satellite operations on adjacent city owned lands and information for consideration in support of the recommendations of the 1425 Midland Avenue property and adjacent parceling configuration.

RECOMMENDATION:

1.

2.

3.

4.

5.

6.

7.

THAT council receive this report in response to recent motions at council regarding staff accommodations at 1211 John Counter Boulevard and 1425 Midland Avenue

THAT council re-endorse the strategy of having 1211 John Counter Boulevard as the administrative hub for development related services

THAT staff be authorized to develop a plan to expand the 1211 John Counter Boulevard offices and to report the findings back to council no later than December 2009. THAT Council authorize the Mayor and Clerk to execute such agreements and documents as are necessary to finalize the acquisition of Parts 1 -15 on plan 13R-19436 from the Ministry of Transportation (MTO).

THAT a parcel of land be assembled as per exhibit A for employment land, such that the parcel provides options to be marketed in whole or in part($.

THAT the necessary zoning applications be submitted to change the zoning on the parcel from Institutional (I) and Service Industrial (M3) to a Business Park zone.

THAT the lands form part of the employment lands inventory and that they be marketed for sale or lease in accordance with employment land policies and practices.

REPORT TO COUNCIL September 15,2009 - Page 2 -

COUNCJL MEETJNG18 SEP 15 '09 Report No. 09-087


ORIGINAL SIGNED BY PRESIDENT & C.E.O., UTILITIES KI ORIGINAL SIGNED BY CHIEF ADMINISTRATIVE OFFl(\R Gerard Hunt, Chief Administrative Officer Jim Keech, President & CEO, Utilities Kingston


I Commissioner Beach, Susfainability 8, Growfh I / I ~~~~~~~ ~ I Commissioner Thurston, Communify Development Services I J I Commissioner Leger, corporate Services I d I (NIR indicates consultation not required)

COUNCIL MEETING1 8 SEP 15 ’09 REPORT TO COUNCIL September 15,2009 - Page 3 - Report No. 09-087

OPTIONSIDISCUSSION:

This comprehensive report is intended to address a number of issues that have been in progress for some time as well as addressing the specific motions of council.

At its meeting on June 16, 2009, Council deferred the following motion and referred it to the Chief Administrative Officer for a report back in September 2009:

Moved by Councillor MacLeod-Kane Seconded by Councillor Meers

WHEREAS the City’s lease on the British Whig is coming to an end in the near future; and

WHEREAS Kingston Utilities has indicated the need to expand their building on John Counter Boulevard; and

WHEREAS the current economic situation should encourage Council to practice fiscal restraint.

THEREFORE BE IT RESOLVED THAT Cify staff make all preparations necessary to have the Midland Ave Building ready for occupancy, as a minimum, for the following staff, Planning, Engineering, Building and Licensing Departments and a payment centre, no later than February 2010.

BE IT FURTHER RESOLVED THAT Kingston Utilities report to Council on the probable impact of their office space requirements over the next fen years, including the need to expand the building, if the Planning, Engineering, and Building and Licensing Departments vacate their current space, no later than the first Council meeting in September 2009.

DEFERRED

At that same meeting the following motion was moved and carried

THAT the Motion of Councillors MacLeod-Kane and Meers be referred to the Chief Administrative Officer, for a report back to Council in August, regarding the impact of moving staff accommodations back to Midland Avenue, with the inclusion of a payment centre, and the possibilify of using the John Counter Boulevard building more effectively.

CARRIED Background: During the amalgamation process in 199711998 there was considerable discussion of creating an administrative centre in the downtown and a developmentlinfrastructure hub (a one stop shop). The developmentlinfrastructure hub was envisioned to be a location that could possibly include all municipal functions relating not only to the management of municipal infrastructure but all those associated with development activities in the municipality. Departments that would be involved included Public Works and City Engineering, Fleet, Planning, Building Inspection, and Utilities. Ideally this was to include the operations sections of these departments as well, and it may have involved some others not noted. At that time there was contemplation that the Midland Avenue property might be used for community purposes. However, in the intervening years council has acquired a 22 acre land parcel across from this property on Gardiners Road, constructed the INVISTA Centre and envisions the future build out of that land for communitylrecreation purposes.

In 2004 Council endorsed the strategy in the Municipal Master Accommodation Plan (MAP). In 2006, council approved the creation of two main locations for s t a t administration in the downtown and a development hub at 121 1 John Counter Blvd. The development hub at John Counter Blvd would serve the development-related customer, where infrastructure (including Utilities Kingston and Engineering) and development (planning, building and engineering) related services would be located. At that time, interim accommodations were secured under lease in the downtown and the departments of Engineering, Building and Planning were moved to the 1211 John Counter Blvd location to be adjacent to Utilities Kingston. This has proven a very effective approach for customer service. At the time of the move to John Counter Blvd it was envisioned that expanded space would be required in the coming years, as the services expanded and as the groups developed working relations. There was

COUNCIL MEETfNG1 8 SEP 15 ’09 REPORT TO COUNCIL September 15,2009 - Page 4 - Report No. 09-087

some vision that hoteling space would be developed as well, so that field staff could have docking locations and avoid the need for separate offices. This approach is becoming the norm in operations and we expect that over the next while with the assistance of the recently hired Chief Information Officer, this practice will be explored here.

The Master Accommodation Plan called for the relocation of staff from 1425 Midland Avenue and for the sale of the property. The 20,400 square foot building at 1425 Midland Avenue was vacated in 2008 and remains vacant to date. Although the building continues to be minimally heated and maintained, it has been basically taken out of commission. Operating costs, including property insurance, heating and building maintenance totaled approximately $34,000 in 2008.

In 2008, staff requested that Council declare the subject property surplus to municipal need for the purpose of selling the property. However, the recommendation was deferred at that time. Several points were made about the configuration of the property including the potential assembly of the MTO lands adjacent, the potential severance of the property, the need for land for a public works operations satellite and the potential to retain ownership and lease the building.

On September 16, 2008, staff presented Information Report No. 08-274 which proposed tiling an application for rezoning from “I” institutional, to allow for commercial office use, assuming that the building would be offered for lease. The city’s planning department suggested to staff that rezoning to business park status would allow for a broader use of the land, including offices. Staff deferred making the application until the following could be established:

a) future needs of public works b) timeframe to secure the MTO lands c) effects of the economic downturn d) results of the employment land inventory e) other adjacent land opportunities 9 appropriate strategy to lease or sell the property

The following commentary provides information on some of the above noted considerations:

Public Works - Satellite office

Damon Wells, Director of Public Works, has been involved in the consultation regarding the property adjacent to 1425 Midland Avenue. Public Works has indicated that for public works purposes a portion of the adjacent property needs to be retained. This portion is indicated in Exhibit A.

As part of the preliminary design work for the new works facility on Division Street it was determined that the most effective way for delivery of the public works services going forward will be through the use of satellite offices in addition to the renewed facility approved for Division Street. Therefore staff wishes to maintain ownership of the adjacent property indicated on the attached drawing in Exhibit A for this ongoing and future use. Proximity to major transportation routes, municipal ownership and existing operations make this location ideal for satellite operations.

Acquisition of MTO land

The Ministry of Transportation of Ontario (MTO) in 2007 requested a letter from the City stating that Council is interested in acquiring the retired road right of way from the former alignment of Highway 38 (Midland Avenue). The MTO has now offered the parcel for sale to the City for $1.00. The agreement will include cost recovery to the MTO should the City ever sell any portion of the MTO land for more than $1 .OO for a period of five (5) years. The parcel is heavily encumbered by utility easements above and below ground. Staff is pursuing the acquisition of the parcel, in accordance with previous direction from council.

Upon completion of the land transfer with the MTO, Staff recommends the configured parcel form part of the employment lands inventory.

COUNCIL MEETING1 8 SEP 15 '09 REPORT TO COUNCIL September 15,2009 - Page 5 - Report No. 09-087

Employment LandslOpportunities

The building itself is part of a potentially larger parcel of land as shown in Exhibit A. The City owns the entire parcel, save and except the old Highway 38 road allowance that is owned by the MTO. In December 2007 the City completed its employment land strategy and updated that inventory analysis this summer. The analysis concludes that there is limited city-owned serviced land available for sale. Within the area of 1425 Midland Avenue, there are approximately 5-7 acres of potential land that could be configured. The official plan supports infilling, and with the supply of city-owned employment land dwindling, this parcel is of interest.

In late 2008 and early 2009 staff had discussions with three different parties who expressed an interest in the property for leasing purposes; two of these were interested for short term periods up to 2 years and a third inquiry did not advance beyond the initial stage. Unfortunately, and perhaps in part due to the economic downturn, the opportunities did not materialize. KEDCO markets city owned employment lands and was prepared to offer the Midland property to anyone expressing an interest in leasing office space; KEDCO continues to monitor opportunities closely. The recommendations in this report to move this property into the employment land inventory provides the opportunity to market the parcel as part of the employment lands grouping, which includes both the land and vacant building. The rezoning from institutional to business park offers more flexibility and will ensure that an interested party does not acquire the land for speculation, given that normal conditions of sale of employment lands carry a clause to force development within a timeframe or the City has the right to reacquire.

The configured property as illustrated in Exhibit A will provide opportunity for additional employment land. The parcel may be marketed in whole or in part, and is well located to command a high market price. A sale with the building included, dependent on the parcel options, could yield $2 to $3 million. The type of use in the end could yield new assessment and tax revenues of up to $400,000 per year.

Should the city retain ownership of the building, significant capital expenditures will be necessary in the short term. Rents in the first 5 years would go primarily to finance this work. A building condition assessment completed in 2008 identified an estimated $350,000 in capital repairs which are required over the next 5 years to sustain the building's structure and systems and maintain the exterior and roadways. The report calls for $162,000 to be expended during 2009 and 2010, with the remainder of the costs to be incurred between 2012 and 2014. Repairs in 2009 include water heater replacement, repairs to the lighting system, insulation, replacement or repair of flooring, ceiling tile replacement, kitchen update, commissioning of heating controls, as well as general repairs to the exterior walkways, and entrances and paving of the parking lot. The work recommended to be completed between 2012 and 2014 consists of items such as replacement of concrete paving around the building, landscaping, roof repairs, replacement of gypsum board and flooring. In the event a lease opportunity is secured, a retum on investment analysis would need to be completed including the timeliness of the expenditures noted here. Certain estimates above may be reduced if they could be factored in to a lease agreement. These costs have not been included in the capital budget forecasts or current financial plans.

Analysis - Moving Staff Back to 1425 Midland Avenue

As indicated earlier in this report Council endorsed the Master Accommodation Plan (MAP) and subsequent strategies to create two main locations for staff: administration in the downtown and a development hub at 121 1 John Counter Blvd. (JCB). Actual physical moves occurred by 2008. This relocation has resulted in efficiencies and improved customer service at the JCB location. Working relationships and coordination have been enhanced with the Engineering and Utility functions being in close proximity to one another, and is further enhanced due to the close proximity with the Planning and Building departments. One location for development-related functions has enhanced customer service. Surveys of the development community conducted by the Community Development Group found that enhanced customer service was desired and could be achieved by having the services consolidated at one location. Customer feedback has been positive. Other efficiencies include less time for travel when face to face communication is required between the various parties, consolidated equipment use, potential consolidated use of files, plans and other information.

REPORT TO COUNCIL COUNCIL MEET~NGI 8 SEP 15 '09

September 15,2009 Report No. 09-087 - Page 6 -

Along with the benefits there have been some negatives including staff commentslconcerns on space pressure for individuals and meetings, lack of privacy and some indication of a reduction in employee morale. It had been expected that an expansion would be required to accommodate future growth, although the timeframe had not been determined. Utilities Kingston had planned an operations centre expansion. That expansion would present the opportunity to address space constraints. The capital budget approved in August includes funding for the utility operations centre, which now provides the opportunity to develop office expansion plans at 121 1 JCB.

In noting both the negatives and positives of the relocation to JCB, it would be a step back to move most of the departments located here to another site. Other alternatives including expansion to the current facility should be examined.

In response to the Council Motion noted earlier in this report dealing only with Utilities Kingston (UK), in addition to the operations centre expansion recently approved by Kingston City Council, staff were initially planning to propose with this project the inclusion of an office administration centre expansion. This would have allowed relocation of all UK staff and provided room for growth. This in turn would have provided the majority of the office space on the main and second floors of the JCB administration building for use by those currently on the first floor, along with some City Engineering staff not currently located at this site. The approximate area of the addition was 24,000 square feet and the estimate was five million dollars. This would also have facilitated the needs of City and UK staff for the next 20 to 25 years. There is currently an immediate need for an additional 2,000 (minimum) square feet of space by UK. There were plans to include some of this with the proposed operations centre expansion but the approved budget envelope does not allow for this. In response to the motion above, if the municipal departments vacated 1211 JCB there would be no need for a UK expansion now or over the next 25 years. However for reasons noted above relocation from this site is not recommended.

There are further requirements for additional space currently for the municipal departments located on the first floor, to accommodate any staff additions and meeting space.

The specific motion of council asks staff to report the impacts of moving staff back to 1425 Midland Avenue, including the cost of developing a payment centre at that location and the possibilities of using 121 1 JCB more effectively.

Staff has provided a substantial amount of background on the topic. While the 1211 JCB location has served now as the customer service hub for over a year, there is, as was expected, pressure to expand the facility. Numerous benefits have been determined since the move, and more will become evident as departments work to share documents, plans, filing systems and equipment. Other efficiencies of operation have been commented on in the body of this report. It is difficult to assess the cost of separating certain of these functions; however, we would anticipate that it would result in delays and slower customer service, due simply to the distance and need for multiple sets of information for decision making. Increased budgets may be required to address costs such as travel, staffing and equipment operation. If quantified, such costs could be in the range of $100,000 annually.

In addition to the above, moving staff back to Midland would require an investment in office furniture and equipment and additional expenditures to fit up the space for efficient office operation purposes. While some furniture could be relocated, the space would require a layout plan and interior renovations, determination of the office equipment, including furniture and technological solutions. A capital budget allocation of approximately $250,000 is estimated. Moving costs could be as high as $50,000, bringing the potential outlay for this decision to $300,000.

With respect to the operation of the payment centre, strategies have been in place for several years to streamline payments and the need for over the counter service, by introducing multiple convenient ways for people to pay for city services. Web services, telephone systems services, payments at financial institutions are those most available. In 2007 Utilities Kingston moved to close its payment centre, and today only one centralized payment centre is available at city hall. This strategy was taken to move to services that are more in line with current day practices and to assist with maintaining reasonable costs and limited tax

REPORT TO COUNCIL COUNClL MEETING^ 8 SEP 15 '09

September 15,2009 Report No. 09-087 - Page 7 -

and utility rate increases. The cost to operate a payment centre would be in the range of $200,000 per year. One time fit up costs could be in the range of $1 50,000 for counters, equipment and security.

In addition to the costs identified in this section, staff would need to plan for the move, pack files, documents and other work related materials which would be disruptive to staff, workflow and customer service. Other support staff, primarily the Information Systems and Technology Department, would need to plan for the retro fit and reintroduction of systems, and would experience pressure to supply a full time resource, resident at the Midland office, causing cost pressure on that department budget. No estimate for this is developed at this time.

In summary the annual cost associated with a relocation decision, could increase the city's annual operating budget by $150,000 to $400,000, which would impact tax rate increases. Capital budget requirements would be in the $500,000 range, depending on the decision taken regarding a payment centre. In addition to these future costs, there would be sunk costs associated with moving the departments in the first place to 121 1 John Counter Blvd, in accordance with previous direction of Council.

EXISTING POLlCYlBY LAW:

Council's direction in relation to the Municipal Master Accommodation Plan (MAP) and associated strategies.

NOTICE PROVISIONS:

There are no notice provisions with this report.

ACCESSIBILITY CONSIDERATIONS:

There are no accessibility considerations required with this report.

FINANCIAL CONSIDERATIONS:

These are addressed in the body of the report.

CONTACTS:

Gerard Hunt, CAO Jim Keech, President & CEO, Utilities Kingston

OTHER CITY OF KINGSTON STAFF CONSULTED:

Cynthia Beach, Commissioner, Sustainability & Growth Denis Leger, Commissioner, Corporate Services Lance Thurston, Commissioner, Community Development Services Speros Kanellos, Director, Real Estate and Construction Services Alan McLeod, Senior Legal Counsel Peter Huigenbos, Project Engineer, Real Estate & Construction Services Damon Wells, Director of Public Works Jeff Garrah, CEO, KEDCO

61 3-546-4291, ext. 2205 613-546-1181, ext. 2217

EXH IBlTS ATTACH ED:

Exhibit A - Sketch of subject property

COUNCH. MEETING1 8 SFP 1 5 '09 Exhibit A

Fig. 1: Aerial Photo of 1425 Midland Avenue, to be assembled for Employment Lands Inventory.

COUNCIL MEETING1 8 SEP 1 5 '09

ISF project #

2548 2522 2579

CITY OF KINGSTON

REPORT TO COUNCIL

ISF Amount project name federal provincial contribution contribufion

Water Master Plan Implementation - OConnor Drive $4,500,000 $4,500,000 $9,000,000 Water Master Plan Implementation - Bayridge Drive $2,950,000 $2,950,000 $5,900,000 Water Master Plan Implementation - Front Road $3,333,333 $3,333,333 $6,666,666

total $1 0,783,333 $1 0,783,333 I $21,566,666 I

I ReDOrt No.: 09-286 1

Commissioner Thurston, Community Development Services Commissioner Leger, Corporate Services

Jim Keech, President, Utilities Kingston

TO: Mayor and Council FROM:

RESOURCE STAFF:

SUBJECT:

Gerard Hunt, Chief Administrative Officer

Judy Reichstein, Research & Policy Analyst

Infrastructure Stimulus Fund Contribution Agreement

DATE OF MEETING: 2009-09-1 5

NIA

NIA

d-

EXECUTIVE SUMMARY:

This report requests that council authorize the Mayor and Chief Administrative Officer, on behalf of the of the City of Kingston to enter into a contribution agreement with the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) to receive federal and provincial funding for the city's approved applications under the Infrastructure Stimulus Fund. On February 17, 2009 council endorsed (report 09-062) the Water Master Plan Upgrades and the John Counter Blvd Expansion Project as priority shovel- ready infrastructure projects for submission to the Infrastructure Stimulus Fund and authorized staff to execute any necessary documents. Staff submitted five applications to Infrastructure Canada on May 1,2009, three of which were approved.


Gerard Hunt, Chief Administrative Officer


1 Commissioner Beach, Sustainability & Growth I NIA

COUNCIL MEETING1 8 SEP 1 5 ’09

. - project costs contribution contribution

WMP Implementation - OConnor Drive $13,500,000 $4,500,000 $4,500,000

REPORT TO COUNCIL

requested approved $9,000,000 $9,000,000

2009-09-15 -Page 2 -

WMP Implementation - Bayridge Drive $8,850,000 $2,950,000 $2,950,000 WMP Implementation - Front Road $10,000,000 $3,333,333 $3,333,333 John Counter Blvd Improvements $38,300,000 $1 2,766,666 $1 2,766,666 Division Street Operations Centre $20,000,000 $6,666,666 $6,666,666

total

Report No.: 09-286

$5,900,000 $5,900,000 $6,666,666 $6,666,666

$25,533,332 $0 $13,333,333 $0 $60,433,331 $21,566,666

OPTIONSIDISCUSSION:

An economic stimulus package was announced in the federal budget on January 27, 2009 including the $48 Infrastructure Stimulus Fund aimed at providing funding to renew infrastructure. The intent of the ISF is to fund shovel-ready public infrastructure projects that have a national, provincial or regional impact and generate significant benefits in terms of a growing economy, a cleaner environment andlor stronger communities.

In February (report 09-062) staff prepared a list of recommended projects for council’s consideration, including the Water Master Plan (WMP) Upgrades and the John Counter Blvd Expansion Project. These projects were chosen based on their alignment with the criteria under the federal and provincial infrastructure priority criteria and with the priority themes identified and approved by council on January 8,2008. Staff submitted five applications to Infrastructure Canada on May 1 requesting federal and provincial funding for the following projects:

ISF project #

2548 2522 2579 2458 2673

project name eligible federal provincial I Isfamount I Isfamount I

The CAO’s’office received a letter from OMAFRA (dated August 26) confirming conditional funding support for the above (approved) projects under the ISF subject to the execution of the ISF Contribution Agreement. In order for the City of Kingston to secure this funding staff must return the following to OMAFRA within 30 days of the date of the above noted letter:

4 copies of the contribution agreement (including schedules A to G) signed by the Mayor and CAO

0 A certified municipal by-law designating these signing officers and authorizing the contribution agreement

At this time, staff is asking council to approve the recommendations in this report, which will allow the City of Kingston to meet the above requirements and secure $21,566,666 under the ISF.

EXISTING POLICYIBY LAW:

Not applicable

NOTICE PROVISIONS:

Not applicable

ACCESSIBILITY CONSIDERATIONS:

Not applicable

FINANCIAL CONSIDERATIONS:

Capital project funding received by the city from the Governments of Canada and Ontario will assist in addressing high priority infrastructure areas. The financing will include a one third funding commitment from the Government of Canada, Province of Ontario and the City of Kingston. The municipal share of this project budget was approved during the 2008 Utilities Kingston capital budget deliberations.

CONTACTS: Jim Keech, President & CEO, Utilities Kingston Judy Reichstein, Research & Policy Analyst David Mignault, Manager of Organization Development

ext. 2217 ext .2424 ext. 3187

REPORT TO COUNCIL

COUNCIL MEETING1 8 SEP 15 ’09 Report No.: 09-286

2009-09-15 -Page 3 -

OTHER CITY OF KINGSTON STAFF CONSULTED:

Alan McLeod, Senior Legal Counsel Stephen Dickey, Manager of Accounting Services

ext. 1237 ext. 2370

APPENDICES:

Appendix A - “a by-law to designate the Mayor and Chief Administrative Officer as signing officers for the Infrastructure Stimulus Fund Contribution Agreement to approve the execution of this agreement”, including Schedule A

COUNCIL MEETING1 8 SEP 15 ‘09

ISF project #

2548

Appendix A Report to Council 09-286

project name federal Provincial /SF Amount contribution contribution

Water Master Plan Implementation - OConnor Drive $4,500,000 $4,500,000 $9,000,000

DRAFT BY-LAW

2522 2579

A BY-LAW TO DESIGNATE THE MAYOR AND CHIEF ADMINISTRATIVE OFFICER AS SIGNING OFFICERS FOR THE INFRASTRUCTURE STIMULUS FUND CONTRIBUTION AGREEMENT TO APPROVE THE EXECUTION OF THIS AGREEMENT

Water Master Plan Implementation - Bayridge Drive $2,950,000 $2,950,000 $5,900,000 Water Master Plan Implementation - Front Road $3,333,333 $3,333,333 $6,666,666

total $1 0,783,333 $1 0,783,333 I $21,566,666 I

PASSED

WHEREAS the Federal and Provincial Governments announced, as part of their 2009 Budgets, its commitment to

provide funding to the lnfrastrucutre Stimulus Fund; and

WHEREAS the City of Kingston has been approved for funding under the Infrastructure Stimulus Fund in the amount of

$21,566,666; and

WHEREAS the province requires an authorizing by-law in order to process these funds.

NOW THEREFORE the Council of the Corporation of the City of Kingston hereby enacts as follows:

1. That Council authorize the Mayor and Chief Administrative Officer to sign the Infrastructure Stimulus Fund Contribution Agreement in the amount of $21,566,666 attached to this bylaw as Appendix A for the following projects:

2. This by-law shall come into force and take effect on the day that it was passed.

GIVEN ALL THREE READINGS AND PASSED

CITY CLERK MAYOR

council 8 15 '09 - kingston, ontario€¦ · council meeting1 8 ,cfp 15 '09 report to...

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