Sudbury East Municipal Shared Services Study. Final Report March 23, 2017

Transcription

1 Sudbury East Municipal Shared Services Study Final Report March 23, 2017

2 Mr. Denis Turcot Chief Administrative Officer/Clerk Corporation of the Municipality of Markstay-Warren PO Box Main Street South Markstay ON P0M 2G0 March 23, 2017 Dear Mr. Turcot Shared Municipal Services Study We are pleased to provide our report concerning KPMG s study of potential opportunities for the sharing of municipal services in the Sudbury East region. Our study was undertaken based on the terms of reference outlined in our engagement letter with the Municipality dated September 1, The purpose of the study was to assist the municipalities in the Sudbury East area with a review of the municipalities operations with the intention of identifying potential opportunities for the four municipalities in Sudbury East to share and increase the efficiency and effectiveness of those services with an additional expectation to reduce operating costs. We trust our report is satisfactory for your purposes and appreciate the opportunity to be of service to the Municipalities of Markstay-Warren, French River, Killarney and St.-Charles. Please feel free to contact the undersigned at your convenience should you wish to discuss any aspect of our report. Yours truly, Chas Anselmo, Senior Manager canselmo@kpmg.ca

3 Sudbury East Municipal Shared Service Study Contents Page Executive Summary 4 Study Overview 10 Municipal Profile 16 Shared Services in Ontario 35 Potential Shared Service Opportunities 42 Considerations for Implementation 111 Concluding Comments 122 Appendix A Critical Path for Implementation 126 Appendix B Sample Shared Service Agreements 134 Appendix C Municipal Services Summary 144 Appendix D Considerations for Other Municipalities 150 3

4 Sudbury East Municipal Shared Services Study Executive Summary

5 Sudbury East Shared Services Study Executive Summary KPMG was retained by the Municipality of Markstay-Warren on behalf of the municipalities of Sudbury East to provide the municipalities of Sudbury East with an objective evaluation of the operations, staffing and equipment level and service offerings currently provided by each municipality, with the view of identifying potential opportunities to share services intended to increase operating effectiveness and efficiencies while reducing operating costs. The shared services study explored all aspects of each municipality s operations with each service given consideration for its potential suitability for sharing among the four municipalities of Sudbury East. With a geographic area that would rival the City of Greater Sudbury as the largest municipality in Ontario, geographic barriers exist for the purposes of sharing services. Regardless, there are factors that should encourage the municipalities of Sudbury East to pursue the opportunities contained within the report which include: Shared service arrangement have proven successful elsewhere, with 368 of Ontario s 444 indicating that they participate in some form of shared service arrangement. All of the municipalities in the region are facing financial challenges with operating grant levels either declining or remaining constant while operating expenditures are continue to increase on an annual basis which is then resulting in a greater reliance on municipal taxation as each municipality s main revenue source. This financial pressure is placing a greater emphasis on the realization of operating efficiencies and effectiveness. With the formal adoption of asset management plans and a heightened emphasis on managing capital, municipalities are seeking out ways to address their respective infrastructure needs and any cost savings identified and realized have the potential of being re-invested in an attempt to begin to address this challenge. At the beginning of the study, the membership of the Sudbury East Municipal Association ( SEMA ) was asked what was on the table. At that time, all matters of a municipal nature were to be explore with one exception. The membership of SEMA did not appear to support the rationalization of recreational facilities. The shared services study initially identified several broad areas of municipal service delivery where there was the potential for shared services intended to achieve additional efficiencies and economies of scale within the region and potentially reduce operating costs. Ultimately, seven opportunities were identified for potential implementation and following additional analysis, including discussions with municipal staff, other opportunities previously identified/discussed were not recommended with an explanation as to why the municipalities may not wish to pursue them further. 5

6 Sudbury East Shared Services Study Executive Summary The following seven opportunities for potential implementation are: Group purchasing Shared building inspection and bylaw enforcement Regional training Adopting a regional approach for the addition of municipal drainage personnel The potential creation of engineering/asset management capacity The establishment of a regional approach to equipment maintenance With respect to these opportunities, it is important to note that: The current staffing levels of the Sudbury East municipalities reflect the nature of smaller municipalities in Northern Ontario and as such, there exists a multi-functional approach to job responsibilities and the overall efficiency of municipal operations reflecting a focus on fiscal control. Given this, we do not believe that shared service arrangements will result in significant, if any, reductions in staffing levels without a corresponding impact on service levels and therefore, the ability to achieve major cost reductions is likely limited to non-personnel expenditure items. In certain instances, consideration could be given to reinvesting a portion of any potential savings in order to enhance service levels and municipal capabilities. Ultimately, the pursuit and implementation of any of the following opportunities will most likely result in greater operating efficiency rather than substantive cost savings. 6

7 Prioritization of Opportunities We have provided below a suggested implementation framework for consideration by the Sudbury East municipalities. Short (<1 Year) Medium (1 to 2 Year) Long (2+ Years) High Group Purchasing Regional Building Controls and Bylaw Enforcement 5 Regional Asset Management and Engineering Priority Med Low 4 Regional Training 7 Regional Equipment Maintenance 6 Municipal Drainage Timeframe 7

8 Executive Summary The following chart provides a summary of the opportunities contained within the report. For the purposes of the reader, financial considerations are provided within a cost savings range when applicable and are as follows: Low - Less than $10,000 Moderate Between $10,000 to $25,000 High - $25,000 and Over Opportunity Financial Considerations Consistent with Municipal Best Practices Other Considerations Recommended Group Purchasing High Yes None Yes Building Controls High Yes None Yes Bylaw Enforcement Low Yes Service enhancement Yes Regional Training Low Yes Capacity building Yes Regional Asset Management/ Engineering Regional Equipment Maintenance Low No Service enhancement Yes Moderate No Capacity building Yes Municipal Drainage Low Yes Capacity building Yes Regional Economic Development Low Yes Service enhancement No Regional Fire Services Low Yes Potential cost increases No Sharing of Senior Administration Low No Potential cost increases No 8

9 Executive Summary The following chart provides a summary of the opportunities contained within the report. For the purposes of the reader, financial considerations are provided within a cost savings range when applicable and are as follows: Low - Less than $10,000 Moderate Between $10,000 to $25,000 High - $25,000 and Over Opportunity Financial Considerations Consistent with Municipal Best Practices Other Considerations Recommended Recreation Facilities High No Potential service level reduction Water and Wastewater Low No Potential cost increases No Solid Waste Management Regional Library Services Low Low Yes Yes Labour relations risk and potential service level reduction Potential service level reduction Administrative Functions Low No Capacity building No No No No 9

10 Sudbury East Municipal Shared Services Study Study Overview

11 Study Overview A. Terms of Reference The terms of reference for our engagement were established in KPMG s engagement letter dated September 1, 2016 and consistent with KPMG s proposal document dated July 15, 2016, the intention of our review was to provide the municipalities of Sudbury East with an objective evaluation of the operations, staffing and equipment level and service offerings currently provided by each municipality, with the view of identifying potential opportunities to share services intended to increase operating effectiveness and efficiencies while reducing operating costs. Specific outcomes outlined within the engagement letter included: Assisting the Municipality and the member municipalities of the Sudbury East Municipal Association ( SEMA ) with the establishment of a methodology for the municipal shared services study; In conjunction with each municipality s staff, undertaking of analysis of services, internal processes, service and equipment levels, and associated costs and funding; and Summarizing the results of our analysis and presenting potential opportunities in the form of business cases to the Municipality and the member municipalities of SEMA. B. Methodology Project Initiation An initial meeting was held with the Chief Administrative Officer/Clerk (the CAO ) to confirm the terms of the study including the objectives, deliverables, methodology and timeframes. The Municipality assisted in the creation and establishment of a committee comprised of senior management to liaison with KPMG for the purposes of the study. The committee was comprised of the Chief Administrative Officers for the four municipalities as well as representation from the Province of Ontario s Ministry of Municipal Affairs. A presentation was provided to SEMA on September 15, 2016 to explain the process to all of the member municipalities and discuss any areas of interest and address questions regarding the study. 11

12 Study Overview B. Methodology Current State Assessment An initial information request was submitted to all of the municipalities to complete including the completion of municipal service matrices which documented each of the municipality s services, current service levels, method of service delivery and associated revenues and expenditures. In addition to the completion of the service matrices, each municipality was requested to provide financial information, staffing and equipment levels, organizational charts and other related documents. Upon the receipt and review of each municipality s service matrices and other requested information, meetings were held with municipal staff at each municipality to confirm the information provided, discuss the nature of the services provided and the associated service level with the intent of beginning to assess where improvements and efficiencies could be realized across the region. Identification and Prioritization of Potential Shared Service Opportunities Prior to the identification of potential opportunities, KPMG identified a list of criteria by which each opportunity would be analyzed by. Given the nature of the study and the desired outcome of reducing cost savings while increasing efficiencies and effectiveness in the delivery of municipal services, the following criteria were established: Financial benefit; Ease of implementation and the associated timeframe; Associated risks/barriers if applicable; and Degree of harmonization. Based upon the nature of each municipality s operations and other matters raised during the second phase of the study, potential opportunities were identified and working sessions were held with each municipality to discuss each potential opportunity. The sessions involved discussions of each opportunity in relation to the criteria listed above and capture any local variances in service delivery. 12

13 Study Overview B. Methodology Business Case Development After the completion of the fourth phase of the study, an additional information request was sent to each municipality to assist in the further development of opportunities into more detailed business cases for the consideration of the four municipalities. For each business case, the following factors were explored: Changes to operating costs including potential cost reductions to each municipality where applicable and one-time implementation costs; Identification of any infrastructure needs for the pursuit of the opportunity and the potential associated costs for each; Potential impact on staffing and service levels across the region; and Other considerations on the sharing of costs. To assist the municipalities, a potential critical path as well as matters pertaining to implementation were developed to assist the municipalities in the development of implementation plans. Potential governance and cost apportionment models were developed to assist in how each opportunity could potentially be managed if the Sudbury East municipalities pursued them. For those opportunities that did not meet the criteria established, the rationale as to why they did not result in a full business case was provided in the event that if conditions should change, the municipalities could potentially revisit these. Sample shared service agreements were developed (where applicable) to assist in the potential implementation of the opportunities. Communication Throughout the study process, KPMG and the study s working committee scheduled and participated in bi-weekly teleconference calls to discuss the progress of the study An interim presentation was provided to SEMA on October 27 th to update the participating municipalities on the process with a preliminary list of potential opportunities as well as KPMG s perspectives on municipal shared services. 13

14 Study Overview B. Methodology Communication A presentation of the draft report was provided to SEMA on January 24 th to review the opportunities developed as part of the study Over the month of February, KPMG and the CAOs of the four municipalities worked together in the production of two subsequent versions which were discussed bi-weekly. The third version of the draft report served as the document to be discussed as part of the consultation phase of the study. Following the delivery of the draft report, public consultation sessions were held in each community on the following dates to share with the region s residents and receive feedback about the potential to share services: February 27 th Municipality of Markstay-Warren March 7 th Municipality of French River March 14 th Municipality of St.-Charles March 16 th Municipality of Killarney Upon the completion of the public consultations, the results of the consultations were incorporated into the report The presentation of the final report was provided to SEMA on March 23 rd,

15 Study Overview Restrictions This report is based on information and documentation that was made available to KPMG at the date of this report. KPMG has not audited nor otherwise attempted to independently verify the information provided unless otherwise indicated. Should additional information be provided to KPMG after the issuance of this report, KPMG reserves the right (but will be under no obligation) to review this information and adjust its comments accordingly. Pursuant to the terms of our engagement, it is understood and agreed that all decisions in connection with the implementation of advice and recommendations as provided by KPMG during the course of this engagement shall be the responsibility of, and made by, the Municipality of Markstay-Warren and the member municipalities of SEMA. KPMG has not and will not perform management functions or make management decisions for the Municipality of Markstay-Warren and the member municipalities of SEMA. This report includes or makes reference to future oriented financial information. Readers are cautioned that since these financial projections are based on assumptions regarding future events, actual results will vary from the information presented even if the hypotheses occur, and the variations may be material. Comments in this report are not intended, nor should they be interpreted, to be legal advice or opinion. KPMG has no present or contemplated interest in the Municipality of Markstay-Warren and the member municipalities of SEMA nor are we an insider or associate of the Municipality of Markstay-Warren or its management team nor of the other member municipalities of SEMA and their respective management teams. Our fees for this engagement are not contingent upon our findings or any other event. Accordingly, we believe we are independent of the Municipality of Markstay-Warren and the member municipalities of SEMA and are acting objectively 15

16 Sudbury East Municipal Shared Services Study Municipal Profile

17 Municipal Profile Population and Households Located outside of the City of Greater Sudbury and within the territorial Sudbury District, the four municipalities of the Sudbury East area have a combined population of just under 6,600 residents, 5,781 households and over 3,200 square kilometres. The geographic area covered by the four municipalities is just slightly smaller than the City of Greater Sudbury and as a result, these four municipalities collective geographic size would place them as the second largest single tier municipality in the Province of Ontario. Population, Households and Land Area for Sudbury East Municipalities Population Households Land Area (km 2 ) French River 2,547 2, Killarney Markstay- Warren 2,366 1, St.-Charles 1, Total 6,594 5,781 3, Largest Geographic Ontario Single Tier Municipalities Municipality Land Area (km 2 ) 1. Greater Sudbury 3, Kawartha Lakes 3, Timmins 2, Ottawa 2, Greenstone 2, Chatham-Kent 2, West Nipissing 1, Temagami 1, Killarney 1, Norfolk 1,

18 Municipal Profile Population and Households Dating back to 2001 until the most recent census (2016), the population in the region among the four municipalities has not seen significant decline or growth. Prior to the release of the 2016 Census of Population statistics, three of the four municipalities experienced a population decline and the Municipality of St.-Charles experienced population growth. Between 2011 to 2016, the Municipalities of French River and Markstay-Warren experienced population growth with Markstay-Warren s population increasing by 15.6% and French River s population grew by 9.0%. The Municipality of St.-Charles population declined by 1.0% and the Municipality of Killarney had the largest decrease in population with the loss of 119 residents or 23.6% of its population. Population by Municipality (2001 to 2016) French River Killarney Markstay-Warren St.-Charles Source: KPMG Analysis of Statistics Canada Census Profiles (2001 to 2016) 18

19 Municipal Profile Municipal Revenues Over the past five years, three of the four municipalities in Sudbury East have experience positive growth in their revenues. Only the Municipality of Killarney had a decrease in revenues between the years of 2011 to 2015 but this is attributed to a reduction in conditional grants received by the Municipality. The remaining three municipalities had increases in revenues ranging from 10% (St.-Charles) to 13% (French River) and 14% (Markstay-Warren). For the purposes of the reader, revenues listed within this chart include: Property taxation Grants (Conditional and unconditional) User fees and charges Licenses, permits and rents Fines and penalties Revenue from other municipalities Other revenues as recorded by the municipality Revenues by Municipality (2011 to 2015) Change 2011 to 2015 French River $6.76 million $6.85 million $7.16 million $7.00 million $7.64 million +13% Killarney $4.36 million $3.64 million $3.87 million $3.81 million $3.62 million -17% Markstay- Warren $5.16 million $4.75 million $5.03 million $6.30 million $5.88 million +14% St.-Charles $2.87 million $2.84 million $3.02 million $3.09 million $3.16 million +10% Source: KPMG Analysis of Schedule 10 Financial Information Returns (2011 to 2015) 19

20 Municipal Profile Municipal Revenues Municipal Taxation Municipal taxation represents the main source of revenues for the four municipalities in Sudbury East and in 2015, it accounted for at least half of each municipality s revenues and as much as 62% of one municipality s revenues (Municipality of French River). The four municipalities generated over $11.5 million in 2015 through municipal taxation. Over the past five years, municipal taxation in each of the four municipalities has increased on an annual basis illustrated in the chart below. Municipal Taxation as a Percentage of Total Revenues (2015) French River Killarney Markstay-Warren St.-Charles 62% 57% 50% 57% Source: KPMG Analysis of Schedule 10 Financial Information Returns (2015) Municipal Taxation by Municipality (2011 to 2015) In Millions $5.00 $4.00 $ $2.00 $1.00 $- French River Killarney Markstay-Warren St.-Charles Source: KPMG Analysis of Schedule 10 Financial Information Returns (2011 to 2015) 20

21 Municipal Profile Municipal Revenues Municipal Taxation The following chart illustrates median residential property taxes per household for the years of 2014 to 2016 for Sudbury East. The median represents the middle value. The Municipality of Markstay-Warren had the higher median residential property taxes within the Sudbury East group ($1,592) with the Municipality of Killarney being the lowest ($937). Over the course of the three years, residential taxes increased across the region with larger increases in the Municipalities of St.-Charles (an increase of 8.9% between the years of 2015 to 2016) and the Municipality of French River (7.1% between the years of 2015 to 2016). Residential Property Taxes Typical/Median Property ( ) Markstay-Warren St.-Charles French River Killarney $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1, Source: KPMG Analysis of OPTA Analysis

22 Municipal Profile Municipal Revenues Taxable Assessment Over the years of 2011 to 2015, all four of the municipalities in Sudbury East had their respective assessment grow across all properties with one exception. The Municipality of St.-Charles had a decline in their multi-residential assessment over the five year period. The growth in total assessment across the region ranged from 39.3% in the Municipality of Killarney to 56.1% in the Municipality of Markstay- Warren. The following charts on this page and the next illustrate phased in taxable assessment for the years of 2011 and 2015 and the change over that time period. Phased In Taxable Assessment 2011 vs 2015 (In millions) French River Change from 2011 to 2015 Residential $294.1 $ % Multi- Residential $0.4 $ % Industrial $2.6 $ % Commercial $10.6 $ % Farmland and Managed Forest $4.5 $ % Pipeline Total $312.2 $ % Killarney Change from 2011 to 2015 Residential $113.8 $ % Multi- Residential Industrial $1.6 $ % Commercial $6.2 $ % Farmland and Managed Forest - $ Pipeline Total $121.6 $ % Source: KPMG Analysis of Financial Information Returns (2011 and 2015) 22

23 Municipal Profile Municipal Revenues Taxable Assessment Phased In Taxable Assessment 2011 vs 2015 (In millions) Markstay- Warren Change from 2011 to 2015 Residential $112.8 $ % Multi- Residential $0.6 $0.6 - Industrial $1.5 $ % Commercial $3.1 $ % Farmland and Managed Forest $3.7 $ % Pipeline $4.2 $ % Total $125.9 $ % St.-Charles Change from 2011 to 2015 Residential $98.1 $ % Multi- Residential $0.7 $ % Industrial Commercial $5.6 $ % Farmland and Managed Forest $2.6 $ % Pipeline $0.5 $0.5 - Total $107.5 $ % Source: KPMG Analysis of Financial Information Returns (2011 and 2015) 23

24 Municipal Profile Municipal Revenues Taxable Assessment Municipal assessment is determined by the Municipal Property Assessment Corporation( MPAC ) every four years in Ontario and represents the variable in the equation by which municipalities have no control over in setting their municipal levy. The municipal levy is driven by the desired services levels of the municipality and when increases occur, municipalities may wish to establish tax rates accordingly to potentially address affordability issues within their respective communities. The following chart provides the typical/median current value assessment for a single family residence for the four municipalities in Sudbury East. Over the past three years, the current value assessment for this property class has increased on an annual basis for all four in the region. Residential Current Value Assessment Typical/Median Property ( ) 2016 Markstay-Warren French River Killarney St.-Charles $- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140, Source: KPMG Analysis of OPTA Analysis

25 Municipal Profile Municipal Revenues Operating Grants The main operating grant provided to municipalities in Ontario is the Ontario Municipal Partnership Fund ( OMPF ) and all of the municipalities in Northern Ontario and therefore, by extension, all four municipalities in Sudbury East receive OMPF funding on an annual basis. The Province of Ontario announced its intent to reduce the overall envelope of funding to $505 million by 2016 and in 2017, maintained this level of funding. As a result of this, the four municipalities of Sudbury have experienced a decrease in annual support from the Province with one exception where the Municipality of St.-Charles received an increase of almost $18,000 between 2016 to The following chart illustrates the level of support the four municipalities of Sudbury East have received over the past five years. In response to this challenge, municipalities are seeking out innovative ways to avoid simply passing along the decrease to their respective tax base and a study such as this is one potential strategy in assisting the four municipalities in Sudbury East. OMPF Funding by Municipality (2013 to 2017) $ $2.00 $1.50 $1.00 $0.50 $- French River Killarney Markstay-Warren St.-Charles Source: KPMG Analysis of OMPF Funding Allocation Notices (2013 to 2017) 25

26 Municipal Profile Municipal Revenues User Fees and Service Charges Another source of revenue for municipalities is the creation of user fees and service charges for municipal services. Under the authority of the Municipal Act and by way of municipal bylaw, municipalities have the ability to impose fees for services provided and for the use of its property. User fees will vary by municipality as each municipality establishes their own rates and in some instances, does this with cost recovery targets in mind. A municipal best practice which all municipalities in Sudbury East may wish to consider is the annual review of their fees and charges bylaw to at a minimum review and discuss the user fees and whether or not increases are necessary. The following chart illustrates the user fees and service charges revenues that the four municipalities of Sudbury East have received over the past five years. User Fees and Service Charges Revenues by Municipality (2011 to 2015) $700, $600, $500, $400, $300, $200, $100, $- French River Killarney Markstay-Warren St.-Charles Source: KPMG Analysis of Schedule 10 (2011 to 2015) 26

27 Municipal Profile Operating Expenditures The following chart is a summary of operating expenditures for the four municipalities of Sudbury East for the years of 2011 to While each of the municipalities may have experienced a decrease in operating expenditures from one year to the next, the consistent trend across the region is an increase in operating expenditures over the five year used for the purposes of the study. Total Operating Expenditures by Municipality excluding amortization (2011 to 2015) Change 2011 to 2015 French River $5.49 million $5.37 million $5.78 million $6.01 million $5.98 million +9% Killarney $2.85 million $3.08 million $3.17 million $3.15 million $3.31 million +16% Markstay- Warren $4.09 million $4.38 million $4.51 million $4.36 million $4.62 million +13% St.-Charles $2.50 million $2.66 million $3.19 million $3.13 million $2.90 million +16% Source: KPMG Analysis of Financial Information Returns (2011 to 2015) 27

28 Municipal Profile Operating Expenditures In 2015, the four municipalities of Sudbury East had operating expenditures ranging from $2.9 million (St.-Charles) to $6 million spent in the Municipality of French River. The level of expenditures across the region of Sudbury East is consistent with our experience in the municipal sector where it is expected that the majority of municipal operating expenditures reside within the delivery of infrastructure services and in corporate services and that is reflected in the chart below. Operating Expenditures by Category and by Municipality excluding amortization (2015) General Government Protective Services Expenditures French River Killarney Markstay-Warren St.-Charles As of % of Total Expenditures As of % of Total Expenditures As of % of Total Expenditures As of % of Total $1,378, % $705, % $829, % $792, % $865, % $248, % $943, % $476, % Infrastructure (Transportation and Environment) Health and Social Services $1,742, % $1,183, % $1,644, % $807, % $1,191, % $985, % $655, % $276, % Recreation $595, % $133, % $455, % $442, % Planning and Development $202, % $50, % $90, % $108, % Total $5,976,354 $3,306,946 $4,617,974 $2,904,822 Source: KPMG Analysis of Financial Information Returns (2015) 28

29 Municipal Profile Personnel One of the largest expenditures that municipalities have on an annual basis relates to the salaries and benefits paid to their employees to carry out the operations of their respective municipalities. In Sudbury East, wages and benefits account for a range of almost 25% in the Municipality of Killarney to 36% in the Municipality of St.-Charles. The range in Sudbury East appears to be lower based on our experience with similarly sized municipalities where the salaries and benefits account for 30% to 40% of total operating expenditures. French River Killarney Markstay-Warren St.-Charles Salaries and Benefits $1.89 million $0.82 million $1.38 million $1.05 million Total Operating Expenditures exc. Amortization Salaries and Benefits as a % of Total Operating Expenditures $5.98 million $3.31 million $4.62 million $2.90 million 31.6% 24.8% 29.9% 36.2% Source: KPMG Analysis of Financial Information Returns (2015) 29

30 Municipal Profile Personnel The following chart below illustrates the staffing levels in the four municipalities of Sudbury East. The staffing levels across the four municipalities are relatively consistent and where variance occur, they are reflective of the complement of municipal services provided and the associated service levels. For example, the Municipality of French River has the largest staffing complement in the group but unlike the other municipalities, performs services such as solid waste management where the others rely on different approaches. Municipal Staffing Levels French River Killarney Markstay-Warren St.-Charles Corporate Infrastructure Protective Community 30 Source: KPMG Analysis of Information Provided by Sudbury East Municipalities

31 Municipal Profile Personnel The Ministry of Finance has identified the aging population as the greatest demographic trend facing Ontario and much like many of their municipal peers, the municipalities of Sudbury East will need to address an aging workforce and the need to plan for the future. Based on information shared with KPMG, the following charts illustrate the years of experience and demographics of the Sudbury East municipal staffing complement. While the majority of the municipal workforce has less than 5 years of service with their respective municipalities, 33% of the workforce is over the age of 50 with 17% over the age of 60. The potential threat and one that many municipalities currently face is when these individuals decide to retire and if plans are not in place, their knowledge and experience follows which can create operational inefficiencies in the interim until their replacements develop. Years of Service Breakdown of Current Sudbury East Municipal Workforce 30 Age Breakdown of Current Sudbury East Municipal Workforce 20 to 29 Years 10% Years 17% 50 to 59 Years 33% 30 to 39 Years 19% 40 to 49 Years 21% 0 0 to 5 Years 6 to 10 Years 11 to 15 Years 15+ Years 31 Source: KPMG Analysis of Information Provided by Sudbury East Municipalities

32 Municipal Profile Capital Expenditures and Infrastructure For municipalities who have the eligibility to apply for provincial capital grants, one requirement is the adoption of an asset management plan and as much as the exercise was a pre-requisite to meet the criteria of future capital grant funding, it was necessary step in explicitly stating the infrastructure needs of every municipality and provided each municipality with a roadmap of where their respective capital needs would be over the next decade. In almost every plan, the costs associated with replacement and re-investment appear to be significant and this is consistent with the four municipalities in Sudbury based upon a review of each municipality s asset management plan. Based on 2013 AMPs Replacement Cost Annual reinvestment French River $105.5 million $2.9 million Killarney $31.7 million $0.7 million Markstay-Warren $161.0 million $7.8 million St.-Charles $43.5 million $0.7 million Historical Capital Expenditures by Municipality (2011 to 2015) $2.50 $2.00 $1.50 $ $0.50 $- French River Killarney Markstay-Warren St.-Charles 32

33 Municipal Profile Capital Expenditures and Infrastructure Asset Sustainability Ratio The Ministry of Municipal Affairs established an asset sustainability ratio which is an approximation of the extent to which a municipality is replacing, renewing or acquiring new assets as the existing infrastructure being managed by the municipality are reaching the end of their useful lives. The Province sets a target ratio of 90% or greater and if a municipality is below the ratio, there may be concerns about the sufficiency of the municipality s asset management and the potential future burden this may place upon residents. For the years of 2011 to 2015, all four municipalities in Sudbury East had at least one year that did not meet the target ratio. However, for the years of 2014 to 2015, all four municipalities exceeded the ratio and the average over the course of the five years is well above the target ratio. Asset Sustainability for Sudbury East Municipalities (2011 to 2015) 500% % 400% 350% 300% 250% Average 200% 150% 100% 50% 0% French River Killarney Markstay-Warren St.-Charles Source: KPMG Analysis of Multi-Year Financial Information Returns (2011 to 2015) 33

34 Municipal Profile Capital Expenditures and Infrastructure Asset Consumption Ratio The previous page examined the sufficiency of asset maintenance, renewal and replacement and the Ministry of Municipal Affairs also established a ratio which measures the consumption of a municipality s physical assets in comparison and their cost. As part of this ratio, the Province established the following ranges: Less than 25% - relatively new infrastructure, 26% to 50% - moderately new infrastructure, 51% to 75% - moderately old infrastructure and 75% or greater old infrastructure. All of the municipalities in Sudbury East have asset consumption ratios that either trending towards moderately old infrastructure or have a ratio within that range (Municipality of St.-Charles). This may pose a challenge for these municipalities as the need to replace assets outpaces their respective investments into their infrastructure. All municipalities appear to entering into the replacement phase for a large portion of their infrastructure and as such, there appears to be the need for each municipality to strategize and prioritize their capital needs. Asset Consumption for Sudbury East Municipalities (2011 to 2015) 70.0% % 50.0% 51% to 75% - moderately old infrastructure 40.0% 30.0% 26% to 50% - moderately new infrastructure 20.0% 10.0% 0.0% Less than 25% - relatively new infrastructure French River Killarney Markstay-Warren St.-Charles 34 Source: KPMG Analysis of Multi-Year Financial Information Returns (2011 to 2015)

35 Sudbury East Municipal Shared Services Study Shared Services in Ontario

36 Shared Services in Ontario An Overview of Shared Services in Ontario For the purposes of summarizing the prevalence of shared service arrangements within the municipal sector, we relied upon a survey conducted by the Ministry of Municipal Affairs and Housing in November 2012 where 400 of Ontario s 444 municipalities participated in. In addition to the 2012 survey, we also relied upon our experiences in working with municipalities across Ontario who have participated in shared service arrangements to varying degrees. What Do Municipalities Share? Section 20 of the Municipal Act provides municipalities in Ontario with the legal authority to enter into shared service agreements. Section 20(1) of the Act: Joint undertakings 20. (1) A municipality may enter into an agreement with one or more municipalities or local bodies, as defined in section 19, or a combination of both to jointly provide, for their joint benefit, any matter which all of them have the power to provide within their own boundaries. 2001, c. 25, s. 20 (1). Ultimately, what the legislation does not place upon municipalities are explicit restrictions as to what and who a municipality can share with other municipalities or local bodies and First Nations. 36

37 Shared Services in Ontario An Overview of Shared Services in Ontario What Do Municipalities Share? Based upon a review of the survey results and our experience in working with municipalities across Ontario, the following chart illustrates the most commonly shared services in Ontario. Other Roads Maintenance Libraries Planning, Building Inspection Or By-Law Enforcement Waste Management Landfill Or Recycling Economic Development Purchasing Recreation Arenas/Parks/Pools Water Or Sewer Tourism Information Technology Tendering Of Contracts Community Emergency Management Meeting Investigation Municipal Equipment Clerk Or Related Administrative Responsibilities Website Facilities Management Finance Payroll/Tax Collection/ Audit Legal Services 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 37

38 Shared Services in Ontario An Overview of Shared Services in Ontario Why Do Municipalities Share? Based upon our experiences with municipalities and coupled with a review of literature on the subject, public sector entities share services for a variety of reasons: Reducing operating costs The financial environment in which municipalities exist continues to challenge municipalities where they attempt to balance meeting the expectations of their residents while trying to manage operating costs. That balancing act coupled with reductions in grant revenues, municipalities are now seeking out innovative ways of reducing costs. Similar to the intended objective of the Sudbury East municipalities, municipalities seek out shared services arrangements with each other to maintain service levels while reducing the overall costs associated with delivering those services. Strategic approach to addressing infrastructure needs Similar to challenges relating to operating expenditure pressures and with the adoption of municipal asset management plans in 2012, municipalities face significant challenges in maintaining and eventually replacing their assets. In response, municipalities explore the potential of sharing assets with others to spread the costs of replacement costs of the asset beyond the scope of one and this coordination of assets can also contribute to lower ongoing operating/maintenance costs. Increasing capacity While reducing costs (either operating or capital) may be the main objective for municipalities seeking out shared service opportunities, municipalities may share in order to increase operational capacity and in turn, provide a higher level of service without having to bear the full cost of doing so. Past Experience in Ontario The overall result of the 2012 survey demonstrated that 369 municipalities in Ontario indicated that their involvement in some form of a shared service arrangement which represented 92% of the survey s respondents. The percentage of municipalities involved in shared services was typically in excess of 90% with the exception of Northeastern Ontario (87%). The primary reason why municipalities entered into shared service arrangements was to reduce operating costs with other secondary reasons being increased goodwill between municipalities and enhancing the overall quality of service. Despite the high degree of consistency in the prevalence and rationale for shared service arrangements, there are noticeable differences in terms of what is shared by region. While emergency medical services (land ambulance and paramedics) were cited as a shared service in all regions of Ontario, the sharing of other services will vary. For example, Western Ontario has a higher degree of sharing of so-called infrastructure-heavy services such as water, wastewater and roads, which is likely indicative of the proximity of municipalities to potential partners (as opposed to Northwestern Ontario where the major shared services are less infrastructure intensive). 1 1 Sharing Municipal Services in Ontario - Case Studies and Implications for Ontario Municipalities 38

39 Shared Services in Ontario An Overview of Shared Services in Ontario Past Experience in Ontario The Northern Ontario Experience As noted earlier, there appear to be regional variances in what services are shared based upon geography. In Northern Ontario, the sharing of building, planning and bylaw related services was the most commonly shared service across the two regions. In Northwestern Ontario and beyond planning, building and bylaw related matters, municipalities west of the Algoma District share landfill operations, meeting investigations and economic development. For the 110 municipalities in Northeastern Ontario, the sharing of libraries, facility management and roads maintenance were the most commonly shared services. Northeastern Ontario Planning, building and bylaw 45% Libraries 40% Facility management 38% Roads maintenance 29% Northwestern Ontario Planning, building and bylaw 41% Landfill operations 35% Meeting investigations 29% Economic development 29% 39

40 Shared Services in Ontario Sudbury East Municipalities and Shared Services Consistent with their municipal peers across the Province of Ontario, the four municipalities of Sudbury East have engaged or attempted to participate in various shared service arrangements with varying levels of formality: Sudbury East Planning Board The four municipalities of Sudbury East along with a number of unincorporated townships are provided with land use planning services by the Sudbury East Planning Board. The Board s governance structure is comprised of political representation from all four municipalities as well as two provincially appointed members. The Board provides all land use planning functions to the area including but not exclusive to oversight of all Official Plans and associated zoning bylaw matters. Building Control Services At the time of the study, the Municipality of St.-Charles and the Municipality of Killarney share a Chief Building Official ( CBO ) and share costs with St.-Charles assuming 60% of the associated operating costs and Killarney assumes the remaining 40%. The Municipality of St.-Charles provides administrative support as part of the arrangement. Boundary Road Agreements Based on information shared with KPMG during the study, the Municipalities of Markstay-Warren and St.-Charles have boundary road agreements which sets out who is responsible for maintenance activities and the subsequent sharing of those costs. Mutual Aid Agreements All of the municipalities participating in the study have mutual aid agreements in place with one or more of their neighbours to assist in the case of emergencies. Public Library Services Another example of a current shared service arrangements exists between the Municipalities of French River and Killarney. As part of this arrangement, the Municipality of Killarney provides the Municipality of French River with an annual financial contribution through a provincial operating grant for access to library services. 40

41 Shared Services in Ontario Sudbury East Municipalities and Shared Services Consistent with their municipal peers across the Province of Ontario, the four municipalities of Sudbury East have engaged or attempted to participate in various shared service arrangements with varying levels of formality: Economic Development Three of the four municipalities (the Municipalities of French River, St.-Charles and Markstay-Warren) belong to Economic Partners Sudbury East/Nipissing West. In addition to the three municipalities, the Municipality of West Nipissing and two First Nations (Dokis and Nipissing) are also members. The objective of Economic Partners is dedicated to creating opportunities for entrepreneurship and to the pursuit of economic growth in our community. Informal Sharing During the second phase of the study, instances were brought to our attention whereas municipalities would reach out to each other to share. Examples provided were where if a neighbouring municipality required a piece of equipment such as a water truck, a phone call would initiate the sharing/rental of the equipment but nothing formal was developed subsequently. 41

42 Sudbury East Municipal Shared Services Study Potential Shared Service Opportunities

43 Potential Shared Service Opportunities Based on our experience in working with municipalities and other public sector entities, any arrangement to share between two partners need to incorporate the following pillars and/or give consideration to these to enhance the likelihood of success. Trust When discussing any form of relationship, trust consistently ranks as probably the most fundamental element to any successful relationship/partnership. Without trust among the partners involved, there is the potential for an increased level of risk to the longevity of the arrangement. Communication Closely related to trust, communication is another essential element to a positive working relationship. Communication, as part of any partnership, needs to ongoing and honest with clearly established channels. In working with other municipalities who have long-standing shared service arrangements, one of the lessons learned is with a high level of trust and communication, discussions involving the allocation of costs take considerably less time. Mutual Benefit The concept of mutual benefit is crucial to the success of any shared service arrangement. At no time during the process, should one be able to clearly identify winners and losers. Each partner in the arrangement should be able to point to the benefit of the partnership. In some cases, one municipality may experience an increase in revenues as a result of sharing with another whereas the other will experience a decrease in operating costs. In the absence of mutual benefit, the relationship/arrangement is exposed to the risk of one side seeking to end it. Data Collection Beyond the pillars above that specifically deal with the relationship, good data can assist and facilitate the development of shared service arrangements. If any one or all of the three concepts identified above are lacking, verifiable and reliable data can reinforce and/or support the building of trust as well as the demonstration of mutual benefit to all parties. Under certain circumstances, it may be beneficial to postpone moving forward with an agreement until there is reliable data that can be then translated into pertinent information for the purposes of a shared service arrangement. 43

44 Potential Shared Service Opportunities Other Considerations Within the municipal sector, there is a misconception that the potential expansion of shared service arrangements among municipalities is the first step towards amalgamation. Based upon the current language contained within the Municipal Act, municipal restructuring is a locally driven process and not one initiated by the Province of Ontario. With that in mind, an increased interest in shared service arrangements is not one of municipal restructuring but instead an attempt to reduce the cost of providing a service across two or more municipal partners and/or providing service in a more effective and efficient manner. 44

45 Establishment of Group Purchasing for Sudbury East A. Overview of Group Purchasing The concept of joint procurement or group purchasing is practiced across Ontario and it is not exclusive to the municipal sector. Group procurement is the most common interaction in the public sector. Based on survey data collected by the Province, approximately 32% of Ontario s municipalities participate in group purchasing and group procurement may include the collective purchasing of office supplies, materials, engineering services, insurance and legal services. Based on previous research conducted by KPMG, the following demonstrates the potential cost savings: Sector Commodity Estimated Savings Municipal Electricity (hedged) 4% Municipal Electricity (streetlights) 15% Municipal Gas 10% Municipal Audit services 10% Municipal Asset management planning 10% Healthcare Equipment 9% Municipal Calcium Chloride 15% Municipal Sodium Chloride (road salt) 12% 45

46 Establishment of Group Purchasing for Sudbury East A. Overview of Group Purchasing There are no limitations as to what the municipalities of Sudbury East could purchase as a group. The following are examples of areas where group procurement can take place. Bulk materials There are materials that are common across the operations of all four municipalities such as aggregate, fuel, and office supplies. Based on our experience, there exists the potential of reducing the costs of acquiring these materials as part of a larger group purchasing initiative opposed to doing so on an individual basis. With respect to the acquisition of aggregate, one consideration for the group is the Municipality of Markstay-Warren owns and operates its own pit for the purposes of providing its operations with aggregate. Purchasing of equipment As part of the study, one aspect of each municipality that was examined was the suitability of its current equipment complement and as identified earlier in the report, municipalities have been sharing equipment on an informal basis. The concept of group procurement for equipment is two-fold. First, there may opportunities in the future as to when one municipality is looking to replace a common piece of equipment such as a truck that others can participate in the process and try achieve greater cost savings. Second, when a municipality is seeking out a piece of equipment that is of a more specialized nature (rubber tire excavator is an example and one raised during consultations with the participating municipalities), the opportunity to have the discussion about the needs of all can take place and potentially lead to the cost of the equipment. The majority of the municipalities indicated that their respective equipment complement meets the needs of the organization with some exceptions such as the reliance on a neighbour for access to a water truck. Professional services All of the municipalities purchase various professional services from third party providers and those services may include the following professional services: external audit, information technology services, legal, human resources, banking services, and employee benefits The proposed approach for the consideration of the municipalities of Sudbury East could involve mandatory and optional elements whereas this is not an all or none proposition for the four municipalities of Sudbury East. Instead and as illustrated in the implementation section of this opportunity, at the initial consultation phase, a municipality has the ability to decide to participate or not. However, if a municipality decides to participate in the group procurement process for that particular matter, it is mandatory for the municipality to award based on the group s consensus. One cannot opt out at the end if they decide they do not like the result because it jeopardizes the credibility of the group s purchasing power in the future. Additionally and to ensure initial buy-in, the municipalities may wish to include a component that does not allow for a municipality who opted out to try to take advantage of the result if the costs are lower than their current costs. 46

47 Establishment of Group Purchasing for Sudbury East B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Current Service Delivery All municipalities purchases goods and services on an individual basis During the course of the study, a number of potential areas of the municipalities operations may be considered for group purchasing and those include but not exclusive to: French River Killarney Markstay-Warren St.-Charles Fuel Costs $86,270 $16,731 $93,492 $65,740 Aggregate Costs $235,861 Not Applicable Provided by MTO Not Applicable Provided by Municipally Owned Pit $62,103 Information Technology $3,369 $17,698 $4,786 $21,395 Legal Services $8,939 $24,202 $26,345 $79,831 Audit Services $18,080 $12,000 $18,000 $39,797 HR Services $26,302 $0 $0 $0 Insurance Services $163,001* $60,543 $121,400 $142,844 * - Denotes an 18 month term for the Municipality of French River 47

48 Establishment of Group Purchasing for Sudbury East C. Opportunity Evaluation Financial Impact a) Potential Cost Savings While the potential cost savings will be dependent on nature of the purchase and the group s ability to realize cost savings through greater volume, the following chart provides potential cost savings based on information provided to KPMG during the study: Fuel Municipality Potential Discount Cost Potential Cost Savings French River $86,270 $8,627 Killarney $16,731 $1,673 10% Markstay-Warren $93,492 $9,349 St.-Charles $65,740 $6,574 Legal French River $8,939 $894 Killarney $24,202 $2,420 10% Markstay-Warren $26,345 $2,644 St.-Charles $79,831 $7,983 48

49 Establishment of Group Purchasing for Sudbury East C. Opportunity Evaluation Financial Impact a) Potential Cost Savings While the potential cost savings will be dependent on nature of the purchase and the group s ability to realize cost savings through greater volume, the following chart provides potential cost savings based on information provided to KPMG during the study: Audit Municipality Potential Discount Cost Potential Cost Savings French River $18,080 $1,808 Killarney $12,000 $1,200 10% Markstay-Warren $18,000 $1,800 St.-Charles $39,797 $3,980 Insurance French River $163,001 $16,300 Killarney $60,543 $6,054 10% Markstay-Warren $121,400 $12,140 St.-Charles $142,844 $14,284 49

50 Establishment of Group Purchasing for Sudbury East C. Opportunity Evaluation Financial Impact b) One-Time Implementation and/or Harmonization Costs With respect to the apportionment of cost and given the nature of the opportunity, the actual costs associated with group procurement would be staff s time participating in the process identified above and therefore, should not require any allocation of costs because the entire group benefits. c) Capital/Infrastructure Costs None identified given the nature of the service. Consistent with Municipal Best Practices Yes the potential shift to a group purchasing initiative in Sudbury East is consistent with municipal best practices. As noted earlier within this section, group purchasing is the most common shared service arrangement in the public sector. 32% of Ontario s municipalities have participated in some form of group procurement. Other Considerations Additionally, there does not appear to be a need to develop a formal governance body for group procurement but a formal agreement establishing the process and procedures would be required. Beyond the elements of the shared service identified within this opportunity, there do not appear any other non financial consideration. This opportunity is administrative in nature and therefore, group purchasing should not impact upon customer service, public health, and/or labour relations. Provided a formal arrangement is adopted by all four municipalities, we do not believe there is any additional risk associated with the group s participation in procurement to the four municipalities in Sudbury East. A sample agreement for the purposes of establishing a group purchasing initiative can found within Appendix B. 50

51 Establishment of Group Purchasing for Sudbury East D. Potential Cost Apportionment and Governance Model With respect to the apportionment of cost and given the nature of the opportunity, the actual costs associated with group procurement would be staff s time participating in the process identified above and therefore, should not require any allocation of costs because the entire group benefits. Additionally, there does not appear to be a need to develop a formal governance body for group procurement but a formal agreement establishing the process and procedures would be required. E. Recommendation Based on the evaluation of the opportunity, it is recommended that the municipalities of Sudbury East pursue the implementation of group purchasing in Sudbury East. 51

52 Building Controls A. Overview of Building Controls Services In Ontario, the Building Code Act and its regulation, the Ontario Building Code ( OBC ) set out the rules for construction. The following describes what the two pieces of legislation deal with: Building Code Act Governs the construction, renovation, change of use, and demolition of buildings; Provides specific powers for inspectors and rules for the inspection of buildings; and Allows municipalities to establish property standard by-laws. Ontario Building Code A Regulation of the Act Focuses primarily on ensuring public safety in newly constructed buildings, but also supports the government s commitments to energy conservation, barrier-free accessibility and economic development; Sets out objectives and requirements for new construction; Does not provide standards for existing buildings, with the exception of small on-site sewage systems; and Establishes the qualification and registration requirements in Ontario for certain building practitioners Municipalities play a significant role in Ontario s building regulatory environment. Every municipality is required to appoint a Chief Building Official ( CBO ) and as many qualified inspectors as are needed to carry out their duties regarding enforcement. The responsibilities of those qualified personnel include: Review and issue building permits; Conduct inspections during construction to make sure work is in compliance with the OBC and building permits; Set fees for building permits; and Enforce compliance through inspections and if necessary, issue orders (e.g., stop work orders and orders to comply) 52

53 Building Controls A. Overview of Building Controls Services Currently and identified earlier in the report, two of the four municipalities (the Municipalities of Killarney and St.-Charles) have a formal arrangement whereas they share the services of a CBO on the basis of the Municipality of Killarney assumes 40% of the costs with the Municipality of St.-Charles assuming the balance. Based upon information shared during the study, the Municipality of Markstay-Warren s use of a contract CBO until the completion of the study and will then re-evaluate how it staffs the mandatory position. With building control services already being shared in the area between two municipalities with a third staffing the position to potentially respond to the findings of the study, there exists the potential of the building control services being shared by the four municipalities in Sudbury East. Based on our work in the municipal sector, a building inspector can typically manage between 200 to 300 permits annually. Over the past four years (not including 2016), the four municipalities in Sudbury East have managed 263 building permits on average. In 2012, the four municipalities managed 298 with the fewest number of permits (245) managed in the following year. Given the volume of permit but recognizing the seasonality of the service and the timing requirements under the Ontario Building Code, the municipalities of Sudbury East could shift towards a shared building controls delivery model for the entire region. 53

54 Building Controls B. Current Service Delivery Model Current Service Delivery 2015 Operating Revenues 2015 Operating Expenditures French River Killarney Markstay-Warren St.-Charles Own Resources Fulltime employee Shared agreement with St.-Charles Contracted service Shared agreement with Killarney $46,338 $19,276 $41,546 $36,054 $77,911 $45,158 $48,405 $79,180 Net Levy Impact ($31,573) ($25,882) ($6,859) ($43,126) Cost Recovery 59.5% 40.0% 85.8% 45.5% Number of Permits Issued (2012 to 2015) Average French River Killarney Markstay-Warren St.-Charles Total Numbers of Permits Issued

55 Building Controls C. Opportunity Evaluation Financial Impact a) Potential Cost Savings Potential cost savings will be dependent on the structure of the agreement and how costs will be apportioned. Under Section 7 of the Ontario Building Code Act, municipalities are provided with the authority to establish fees for building services and associated permits and provided with the ability to operate respective building departments at full cost recovery. If all four municipalities shift towards a full cost recovery model, the potential cost savings of this opportunity would be the annual differential between the expenditures and revenues. b) One-Time Implementation and/or Harmonization Costs None identified given the nature of the service c) Capital/Infrastructure Costs There exists the potential need for a vehicle for the CBO and Building Inspector if those resources are not readily available across the region to support a shift to a shared service delivery model. Consistent with Municipal Best Practices Yes the potential shift to a shared building controls service in Sudbury East is consistent with municipal best practice to extent that it is already being shared among two of the municipalities in Sudbury East. 37% of Ontario s municipalities participate in some form of sharing building control services and there are other examples in Northeastern Ontario such as the Town of Kapuskasing provides this service to its neighbouring communities which is delivered through a direct delivery model (identified later in the report) and seven municipalities in the Parry Sound District currently share building control services and costs are apportioned based upon a five year average of the value of the building permits issued. Other Considerations Provided a formal arrangement is adopted by all four municipalities, we do not believe there is any risk associated with shifting to a shared service delivery model for building controls to the four municipalities in Sudbury East. 55

56 Building Controls D. Potential Cost Apportionment and Governance For the initial arrangement, the municipalities may wish to apportion the costs associated with building controls on the historic average of building permits per year. The chart below illustrates the distribution of average building permits on an annual basis: French River Killarney Markstay-Warren St.-Charles Total Average # of Permits Issued % of Total Permits Issued % 7% 33% 15% 100% Beyond the cost apportionment formula which would allow for the distribution based upon historic averages, another common practice in the municipal sector for the sharing of building control services is one municipality builds the capacity within their organization and then sells the service to the other municipalities. The cost of providing the service are done based on hourly rates and also include the utilization of a vehicle. Vehicle charge out rates also have a capital replacement component built in to address the eventual need to replace the assets associated with the delivery of the service. E. Recommendation Based on the evaluation of the opportunity, it is recommended that the municipalities of Sudbury East pursue a shared building controls service for the region. The proposed delivery model that the municipalities of Sudbury East may wish to consider is illustrated below: Sudbury East Chief Building Official Building Inspector Plans Examiner/Administrative Support 56

57 Bylaw Enforcement A. Overview of Bylaw Enforcement Under Part II of the Municipal Act, the scope of municipal powers is broadly defined as: Scope of powers 8. (1) The powers of a municipality under this or any other Act shall be interpreted broadly so as to confer broad authority on the municipality to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality s ability to respond to municipal issues. 2006, c. 32, Sched. A, s. 8. Beyond the scope of powers to empower municipalities to govern its affairs, the legislation sets out the scope of a municipality s bylaw making power: Scope of by-law making power (3) Without limiting the generality of subsections (1) and (2), a by-law under sections 10 and 11 respecting a matter may, (a) regulate or prohibit respecting the matter; (b) require persons to do things respecting the matter; (c) provide for a system of licences respecting the matter. 2006, c. 32, Sched. A, s. 8. Across the municipal sector, there are common bylaws which municipalities adopt to regulate matters in their respective communities and/or are required to adopt through legislation. Some of those bylaws include: Animal control Property standards Noise Fees and charges for services Use of water Outdoor burning Fences Tax and budget related Notice Procedural Solid waste management Signs While some of the common bylaws listed above do not require enforcement, there are bylaws which require (if they choose) enforcement on the behalf of municipalities with varying levels of recourse for those in non-compliance. 57

58 Bylaw Enforcement A. Overview of Bylaw Enforcement Based on the current level of service, there exists the opportunity of incorporating bylaw enforcement services into the previously identified shared building controls opportunity. One common practice in the municipal sector is the joint delivery of building controls and bylaw enforcement activities as part of the overall delivery of protective services. B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Current Service Delivery Municipal bylaws Current Service Delivery Animal control 2015 Operating Expenditures Own Resources Function of the CBO Own Resources - Function of the CBO Own Resources Function of the Public Works Superintendent Contracted service Rainbow District Animal Control and Shelter Services Contracted service Function of the CBO Contracted service Rainbow District Animal Control and Shelter Services The role is not currently assigned to a municipal staffperson Contracted service $7,374 $13,740 $10,232 $0 In consultation with the participating municipalities, both municipal bylaw and animal control services are delivered on complaint basis opposed to a proactive approach to enforcement. This is consistent with other municipalities who provide these services in a similar manner. C. Opportunity Evaluation Financial Impact a) Potential Cost Savings Potential cost savings will be dependent on the structure of the agreement and the service delivery model. Also, this may represent an increase in operational capacity opposed to direct cost savings based on the current spending levels. 58

59 Bylaw Enforcement C. Opportunity Evaluation b) One Time Implementation and Harmonization Costs There exists the potential indirect costs to each municipality dependent on to what extent the municipalities want to harmonize municipal bylaws. c) Capital/Infrastructure Costs Similar to building code enforcement and potentially dependent on which course of action the municipalities of Sudbury East ultimately decide upon, there exists the potential need for a vehicle for staff if those resources are not readily available across the region to support a shift to a shared service delivery model. Consistent with Municipal Best Practices Yes the potential shift to an integrated building controls and bylaw enforcement model is consistent with municipal best practice. 37% of Ontario s municipalities participate in some form of sharing building control services and there are other examples in Northeastern Ontario such as the Town of Kapuskasing provides both building controls and bylaw enforcement services to its neighbouring communities and there are a number of examples of integrated service delivery in central and southwestern Ontario. Other Considerations The four municipalities in Sudbury East have various municipal bylaws and there may need to be some consideration to harmonizing common bylaws to facilitate easier enforcement. The implementation of this opportunity can commence immediately. Provided a formal arrangement is adopted by all four municipalities, we do not believe there is any risk associated with shifting to a shared service delivery model for bylaw enforcement to the four municipalities in Sudbury East. D. Potential Cost Apportionment and Governance Regardless of whether or not, the municipalities of Sudbury East harmonize building controls and bylaw enforcement into one cluster of services, there are two suggested cost apportionment models that they may wish to consider: Similar to how costs could potentially apportioned under building controls, the arrangement can have a cost apportionment model where municipalities are billed on the basis of historical need for bylaw services. The challenge that this poses for the four municipalities is the data does not appear to be readily available and therefore, may not be the best approach to doing so. 59

60 Bylaw Enforcement D. Potential Cost Apportionment and Governance Again, as previously proposed, the arrangement can have a direct delivery model where one municipality hires the bylaw officer and services provided are billed on a per call basis. This will address the lack of historical information to rely upon but given the perceived low level of activity in the region, one municipality may be increasing operational costs in the process unless building controls is part of this service delivery. If the municipalities apportion costs based on a direct delivery/call for service model, they may wish to review after one year to determine the suitability of the financial arrangement. E. Recommendation Based on the evaluation of the opportunity, it is recommended that if the municipalities of Sudbury East decide to pursue a shared building controls service for the region, consideration should be given to integrating municipal bylaw enforcement as part of a larger protective services cluster. 60

61 Regional Training A. Overview of Training Municipalities are complex organizations who provide a broad cross-section of services and in some cases, the services provided a municipality are considered to be discretionary while others are done so within a legislative or regulatory environment. Regardless of the nature of the service, things change and evolve. To adapt to change and/or to learn from and incorporate municipal best practices, municipal staff may participate in various training sessions in any given year. B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Current Service Delivery All municipalities participate in training on an individual basis All of the municipalities in Sudbury East participate in training throughout the year and as a result, there exists the potential of coordinating and participating in training on a regional basis. The types of training that the municipalities may wish to consider but not exclusive to: Matter pertaining to provincial legislation and regulations Subject matter expert sessions (health and safety, municipal finance, etc.) Council Orientation (4 year cycle) Municipal software training Emerging municipal issues C. Opportunity Evaluation Financial Impact a) Potential Cost Savings Exploring regional training may produce limited cost savings. 61

62 Regional Training C. Opportunity Evaluation Financial Impact b) One Time Implementation and Harmonization Costs None identified given the nature of the service. c) Capital/Infrastructure Costs None identified given the nature of the service. Consistent with Municipal Best Practices Yes the potential shift to regional training is consistent with municipal best practice. Based on our experience, municipalities will share in training across the province but in many cases, it is performed on a more informal basis where area municipalities may meet to discuss common issues and/or receive information on emerging issues. Other Considerations One of the benefits of training as a group opposed to doing so on an individual basis is the potential to develop networks with municipal peers beyond the time spent together in a training session. The benefits of network development cannot be quantified but in our experience, may assist in providing services in a more efficient and effective manner. The implementation of this opportunity can commence immediately. We do not believe there is any risk associated with shifting to regional training based on the needs of each municipality in Sudbury East. D. Potential Cost Apportionment and Governance With respect to the apportionment of cost and given the nature of the opportunity, the actual costs including any costs associated with hosting the session should be divided among the participating municipalities. Additionally, there does not appear to be a need to develop a formal governance model for regional training needs as the pre-existing structure of the Sudbury East Municipal Association may serve as an appropriate mechanism to discuss upcoming training needs in any given year. 62

63 Regional Training E. Recommendation While a shift to regional training may not produce significant cost savings, it provides qualitative benefits which can potentially support operational efficiencies across the region and thus, it is recommended that the municipalities of Sudbury East explore the implementation of this opportunity. 63

64 Establishment of Regional Engineering/Asset Management Coordination A. Overview of Engineering and Asset Management The provision of engineering services is not considered to be an essential or required service for municipalities. Engineering services are typically purchased by smaller municipalities in Northern Ontario (municipalities with populations of 5,000 or less) with larger municipalities providing dedicated engineering resources. The types of engineering services either purchased or provided include project management, engineering design, quality control, including testing for major projects, contract administration, surveying services, GIS support, procurement and asset management. To further expand upon asset management coordination and as noted earlier in the report, over the past five years, the importance placed upon asset management planning has increased across the municipal sector with the Province of Ontario requiring i) the development and adoption of municipal asset management plans in 2012 as a requirement of future eligibility for capital grant programs and ii) a refresh of those plans to reflect all municipal assets. With the engineering needs of the municipalities largely tied to the level of annual capital investment and the ongoing maintenance of asset management plans and its incorporation into the day to day operations, there exists the need within each municipality for a heightened level of service and coordination. In order to introduce this capacity into their respective organizations and operations, there may the opportunity for the four municipalities to establish a regional engineering/asset management coordination position. B. Current Service Delivery Model Current Service Delivery Engineering Current Service Delivery Asset management 2015 Engineering Expenditures 3 Year Average in Expenditures $165,373 French River Killarney Markstay-Warren St.-Charles All four municipalities in Sudbury East purchase engineering services on an as-needed basis All four municipalities in Sudbury East do not assigned the responsibility of asset management coordination $166,959 $61,000 $126,688 $8,750 $25,000 to $35,000 Estimated range provided by Municipality $93,859 $8,750 64

65 Establishment of Regional Engineering/Asset Management Coordination C. Opportunity Evaluation Financial Impact a) Potential Cost Savings The opportunity is considered to be an enhancement of operational capacity but based upon the spending levels for engineering services, there is an expectation that a portion of those engineering costs would be saved through the addition of this capacity. b) One Time Implementation and Harmonization Costs There exists the potential of an indirect cost of staff time to develop a job posting. c) Capital/Infrastructure Costs There exists the potential need for a vehicle for staff if those resources are not readily available across the region to support a shift to a shared service delivery model. Consistent with Municipal Best Practices No Based on our experience, municipalities typically purchase engineering services from the private sector for their capital projects and given the relatively recent emphasis placed on asset management, we are not aware of any shared service arrangements for this particular service but municipalities appear to be building this capacity into their respective organizations. Other Considerations Based on a review of similar positions in the municipal sector, the potential cost of a one year pilot project could range from $50,000 - $70,000. Based on an environmental scan of the municipal sector and dependent on the willingness of the municipalities to approach this on a contractual/pilot project basis, the municipalities of Sudbury East may wish to seek out the following skills/attributes: Junior level experience as an engineer (less than 5 years); Asset management experience including asset condition assessments, needs prioritization, and funding estimates; and Budgeting knowledge. 65

66 Establishment of Regional Engineering/Asset Management Coordination C. Opportunity Evaluation Other Considerations The implementation of this opportunity can commence immediately. Provided a formal arrangement is adopted by all four municipalities, we do not believe there is any risk associated with to implementation of an engineering/asset management specialist to the four municipalities in Sudbury East. D. Potential Cost Apportionment and Governance Given that engineering needs vary on an annual basis depending on each municipality s capital projects and with the concept of asset management coordination being a relatively new priority for municipalities, the four municipalities in Sudbury East may wish to approach this as a pilot project among the four to determine the long-term need for this specialized capacity within their organizations for the first year and as such, costs could be divided evenly and then re-evaluated at the conclusion of the first year of the project. However, if the concept of a pilot project does not suit the needs of the region and the objective of building and maintaining this capacity, costs could potentially be apportioned on the basis of each municipality past engineering costs over a time period (three to five years) and then distributed as a percentage of the total costs. 3 Year Average in Expenditures French River Killarney Markstay-Warren St.-Charles Total $165,373 $35,000 Estimated high end of range provided by Municipality $93,859 $8,750 $302,982 Approximate share 55% 12% 31% 2% 100% 66

67 Establishment of Regional Engineering/Asset Management Coordination D. Potential Cost Apportionment and Governance With respect to governance, there are two aspects of this opportunity that may require attention. First, a selection committee would be required to evaluate the suitability of the candidates and recognizing this is more operational than strategic in nature, the committee should be comprised of representation from each municipality s respective administration opposed to elected officials and may include but to exclusive to representation from treasury and/or public works from each municipality. Similar to all of the other opportunities outlined and from the viewpoint of the region s elected officials, the governance structure for this shared service will be dependent on which model the municipalities decide to pursue for this opportunity as identified later on within the report. E. Recommendation Based on the evaluation of the opportunity, it is recommended that the municipalities of Sudbury East pursue the creation of engineering and asset management coordination. 67

68 Establishment of Regional Equipment Maintenance A. Overview of Equipment Maintenance Equipment maintenance is crucial for two reasons. First, proper and ongoing maintenance of a municipal asset will extend the useful life of the asset and therefore, the associated costs of replacement are extended over a longer term. The second is a well functioning complement of equipment is necessary in the effective and efficient delivery of municipal services. There are costs and risk associated beyond the actual cost in repair when a piece of equipment is not functioning and the increased risk can have a significant impact on a municipality such as winter road maintenance standards not being met. While internal resources are available within each municipality to provide routine maintenance on their respective fleets, the addition of a regional mechanic would provide the ability to free up the capacity within the two municipalities who currently manage maintenance with public works staff (Killarney and St.-Charles); capacity which can then be re-directed in the delivery of other infrastructure services. With the level of expenditures in the remaining two municipalities (French River and Markstay-Warren), the additional resource would assist their current staff in managing the workload. The proposed intent of this resource is to have the mechanic float and provide service to all. B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Current Service Delivery 2015 Operating Expenditure Fleet maintenance 3 year average operating expenditure fleet maintenance Own resources Mechanic on staff Own resources No mechanic on staff but managed internally Own resources Mechanic on staff All municipalities contract out specialized maintenance Own resources No mechanic on staff but managed internally $162,492 $15,716 $106,602 $65,740 $181,324 $23,929 $131,870 $66,645 68

69 Establishment of Regional Equipment Maintenance B. Opportunity Evaluation Financial Impact a) Potential Cost Savings Potential cost savings will be dependent on the level of maintenance required of each municipality. a) One Time Implementation and Harmonization Costs None identified given the nature of the service. a) Capital/Infrastructure Costs There exists the potential need for a vehicle for staff if those resources are not readily available across the region to support a shift to a shared service delivery model. Consistent with Municipal Best Practices Yes 12% of Ontario s municipalities share equipment maintenance. It is more commonly shared outside of Northern Ontario where the upper tier municipality will assist in equipment maintenance for its lower tier municipalities. Other Considerations Based on the potential workflow provided on the following page, the participating municipalities will need to define priority status to effectively and efficiently allocate work to the new position. The implementation of this opportunity can commence immediately. Provided a formal arrangement is adopted by all four municipalities, we do not believe there is any risk associated with shifting to a shared service delivery model for regional equipment maintenance to the four municipalities in Sudbury East. 69

70 Establishment of Regional Equipment Maintenance C. Opportunity Evaluation Other Considerations Potential workflow management Priority Yes Prioritized work orders are managed based on agreed upon criteria Regional mechanic receives work orders from municipalities No Work order is placed into queue for completion D. Potential Cost Apportionment and Governance Cost apportionment for the sharing of a regional mechanic may want to managed on an incremental basis. In year one, the participating municipalities may want to apportion costs whereas the municipalities with the higher expenditures and need for maintenance (French River and Markstay-Warren) assume a higher portion of the operating costs and upon the completion of the first year of the arrangement, the municipalities will have more reliable information as to how the costs should be apportioned moving into year two and beyond. The potential cost apportionment is shown on the following page. 70

71 Establishment of Regional Equipment Maintenance D. Potential Cost Apportionment and Governance French River Killarney Markstay-Warren St.-Charles Total 3 Year Average in Expenditures $181,324 $23,929 $131,870 $66,645 $403,768 Approximate share 45% 6% 33% 16% 100% Similar to all of the other opportunities outlined and from the viewpoint of the region s elected officials, the governance structure for this shared service will be dependent on which model the municipalities decide to pursue for this opportunity as identified later on within the report. E. Recommendation Based on the evaluation of the opportunity, it is recommended that the municipalities of Sudbury East pursue the creation of additional equipment maintenance for the region. 71

72 Municipal Drainage A. Overview of Municipal Drains Municipal drains are part of a drainage system and are created under the authority of the Drainage Act. For municipal purposes, if a municipality constructs a drain under the legislation and by municipal bylaw, the municipal drain becomes part of that municipality s infrastructure. Similar to other components of a municipality s infrastructure, the municipality is responsible for the repair and maintenance of these drains. With the exception of the Municipality of Killarney which does not have any municipal drains, the other three municipalities purchase municipal drainage expertise on an annual basis. There may be an opportunity to the hiring of a municipal drain superintendent to serve the Municipalities of French River, Markstay-Warren and St.-Charles. B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Current Service Delivery Nature of contract 2016 Operating Expenditures 5 Year Average Expenditures Contracted Service Not Applicable No municipal drains Contracted Service Contracted Service With the exception of Killarney (no municipal drains), the three municipalities are charged based on calls for service on an annual basis $31,408 Not Applicable $26,565 $7,500 $36,945 Not Applicable $48,537 $7,500 72

73 Municipal Drainage C. Opportunity Evaluation Financial Impact a) Potential Cost Savings The opportunity is considered to be an enhancement of operational capacity and therefore, may not produce cost savings. However, the Ontario Ministry of Agriculture, Food and Rural Affairs provide grants under Agricultural Drainage Infrastructure Program which cover half of the wages of a drainage superintendent. b) One Time Implementation and Harmonization Costs Based on a review of similar positions in the municipal sector, the potential cost of a one year pilot project could range from $60,000- $80,000 Potential indirect cost of staff time to develop a job posting. c) Capital/Infrastructure Costs There exists the potential need for a vehicle for staff if those resources are not readily available across the region to support a shift to a shared service delivery model. Consistent with Municipal Best Practices Yes The sharing of municipal drainage expertise is uncommon in Northern Ontario but based on a scan of service delivery across Ontario, municipalities in central Ontario participate in a formal arrangement where municipal drainage is shared. Other Considerations Beyond the elements of the shared service identified within this opportunity, there do not appear any other non financial considerations. The implementation of this opportunity can commence immediately. Provided a formal arrangement is adopted by the three municipalities, we do not believe there is any risk associated with to implementation of a municipal drain superintendent to the Municipalities of French River, Markstay-Warren and St.-Charles. 73

74 Municipal Drainage D. Potential Cost Apportionment and Governance The addition of municipal drainage expertise will require the apportionment of costs associated with the service. To attempt to appropriately allocate the expenditures related to the service, the three participating municipalities wish to distribute the costs based on a three year average. At the end of the first year of this position s employment, the municipalities should re-evaluate the fairness in cost redistribution. With respect to governance, there are two aspects of this opportunity that may require attention. First, a selection committee would be required to evaluate the suitability of the candidates and recognizing this is more operational than strategic in nature, the committee should be comprised of representation from each municipality s respective administration opposed to elected officials and may include but to exclusive to representation from infrastructure related services from each municipality. Similar to all of the other opportunities outlined and from the viewpoint of the region s elected officials, the governance structure for this shared service will be dependent on which model the municipalities decide to pursue for this opportunity as identified later on within the report. E. Recommendation Based on the evaluation of the opportunity, it is recommended that the municipalities of Sudbury East pursue the creation of municipal drainage expertise. 74

75 Regional Economic Development A. Overview of Economic Development The provision of economic development services is not considered to be a mandatory service of a municipality but every municipality participates in economic development in one form or another. Where legislation does not mandate economic development as a service, the Municipal Act sets out what a municipality can and cannot do as part of their economic development activities such as the inability to provide bonuses to any manufacturing, industrial or commercial enterprise and the inability to provide assistance through the following as per the Municipal Act: giving or lending any property of the municipality, including money; guaranteeing borrowing; leasing or selling any property of the municipality at below fair market value; or giving a total or partial exemption from any levy, charge or fee. In terms of the actual delivery of economic development, there are common mechanisms by which municipalities utilize to achieve their goals: Job function within the municipality Based on our experience in working with a number of municipalities across Ontario, the economic development portfolio may reside within the job description of the Chief Administrative Officer ( CAO ) or senior administrator (Clerk- Treasurer, etc.) of the municipality. The rationale in delivering economic development in this manner is it is typically considered to be a strategic initiative on the behalf of a municipality and a municipality s top administrator is typically tasked with those types of matters. Dedicated economic development staff/departments To assist in the coordination and leadership in a municipality s economic development efforts, some will have dedicated staff and/or departments (depending on the size of the municipality). In many cases, municipalities will employ an Economic Development Officer ( EDO ) who has the responsibility of the economic development portfolio but does not operate in complete isolation as they typically report to the CAO/senior administrator of the municipality. Economic Development Corporation ( EDC ) Municipalities may creates EDCs which then operate at arms-length of the municipality. This type of corporation typically receives an annual financial contribution from its host municipality to achieve its economic development goals. An Economic Development Corporation are not exclusively limited to one municipality and there are examples in Ontario where multiple municipalities may belong to regionally based corporations. 75

76 Regional Economic Development A. Overview of Economic Development Functions of Economic Development The traditional view of economic development is that of stack chasing where the sole function of an economic development officer and/or department was to attract large industry to the community to provide an increase in large industrial assessment and therefore, reduce the tax burden borne by the residential property class. Economic development has evolved over time and no longer reflects the traditional view but now economic development and its associated strategies represent a more comprehensive approach to the overall economic well being of a community. Although not an exhaustive list, the types of economic development strategies employed by municipalities include: Business retention and expansion This strategy focusses on what the municipality has opposed to seeking out new businesses and providing support to current businesses. Investment attraction This differs from the traditional view in that the intent of investment attraction is to build upon previously existing strengths (tourism, agricultural, etc) rather than simply seek out large industry. Oversight and development of a community profile In order to be investment ready, the development of a community profile can assist in economic development initiatives because the municipality is in position to be able to share what it has to offer in terms of land, workforce, etc. to a potential opportunity. Marketing and promotion The role of any economic development body is to highlight what the community/region has to offer and this is not limited to businesses but also potential new residents. Grant applications One skillset often sought out within the job description of an Economic Development Officer is the ability to seek out and respond to grant funding opportunities. In some cases and in particular within smaller municipalities, this responsibility goes beyond grants pertaining to economic development but for the entire organization. This strategy currently exists in Sudbury East where the Municipality of St.-Charles has managed to leverage an estimated $303,000 for municipal purposes. Workforce development When opportunities may be on the radar as part of an economic development initiative, another function of an Economic Development Officer is to ensure that the local workforce is in a position to take advantage of potential employment opportunities when the time comes. This can range from hosting workshops with potential employers to coordinating training opportunities for local residents. 76

77 Regional Economic Development B. Current Service Delivery Model Two municipalities (French River and Killarney) do not have dedicated resources to provide economic development support and are considered to be a responsibility of the CAO. The Municipality of French River did have a dedicated economic development department but as part of recent municipal restructuring, the department has been eliminated. The other two municipalities (Markstay-Warren and St.- Charles) provide the service through the use of contracted resources. The chart below illustrates the delivery model as well as the amount each municipality spent in Current Service Delivery French River Killarney Markstay-Warren St.-Charles Responsibility of the CAO Responsibility of the CAO Contracted service Economic Development Officer Contract employee 2016 Expenditure $26,151 $0 $10,000 $58,650 C. Opportunity Evaluation Financial Impact a) Potential Cost Savings Analysis of economic development spending by the four municipalities indicated relatively low expenditures levels without large direct costs in delivering the service. As such, sharing of economic development activities would likely not result in cost savings. b) One Time Implementation and Harmonization Costs None identified with respect to this opportunity. c) Capital/Infrastructure Costs None identified with respect to this opportunity. 77

78 Regional Economic Development C. Opportunity Evaluation Consistent with Municipal Best Practices Yes There are number of municipalities across Ontario that participate in formally shared economic development initiatives. 32% of Ontario s municipalities indicated that they participate in shared economic development activities. Other Considerations While nearly one-third of Ontario s municipalities share economic development activities, our experience with municipalities and economic development demonstrates that a regional approach to economic development may not be as effective to all parties than if a municipality pursues its own economic development goals. Common themes resulting in the ineffectiveness of regional economic development are unclear goals, competing interests and in the absence of early progress, unmet expectations. Regional economic development appears to be more effective outside of Northern Ontario where the upper tier coordinates economic development and based on that, greater economies of scale, collaboration and elimination of duplication occurs. Initially, the concept of a shared service model including the potential development of a separate economic development corporation was explored as a regional approach to economic development could potentially ensure greater collaboration and eliminate duplication across the four member municipalities of Sudbury East. However, returning to the current service delivery models and level of spending, it is not apparent that a shift would eliminate duplication. Despite the potential lack of direct financial benefit associated with regional economic development (in the form of cost savings), the option of testing regional economic development remains. As noted earlier within the report, three of the four municipalities (the Municipalities of French River, St.-Charles and Markstay-Warren) belong to Economic Partners Sudbury East/Nipissing West. There exists the potential of the three municipalities with the potential inclusion of the Municipality of Killarney to leverage grant funding to attempt a pilot project for the purposes of regional economic development. If the municipalities of Sudbury East decide to proceed in developing a regional model for economic development, both the governance and cost apportionment structure should be divided equally among all partners. The rationale in equal representation and cost sharing is to assist an equal voice and equal share within. 78

79 Regional Economic Development C. Recommendation Based on our evaluation of regional economic development, it is not recommended that the municipalities of Sudbury East pursue a regional economic development model but again and taking into consideration the items brought forward on the previous page, the option for the municipalities of Sudbury East to potentially leverage grant funding remains in an attempt to establish some form of regional economic development activity in the region 79

80 Regional Fire Services A. Overview of Fire Services Under Section 2 of the Fire Protection and Prevention Act, every municipality shall: 2. (1) Every municipality shall, (a) establish a program in the municipality which must include public education with respect to fire safety and certain components of fire prevention; and (b) provide such other fire protection services as it determines may be necessary in accordance with its needs and circumstances. In other words, Council of each municipality has the legislated authority to establish the level of fire service for their respective communities. For the purpose of the study and fire services, the approach needs to be broken out in two categories: operational matters that relate to the human resources required to deliver fire services including shared staff, service delivery and training and infrastructure matters pertaining the assets required to deliver fire services across the region All of the municipalities in Sudbury East train to the standards established by the National Fire Protection Association to provide the services established by their respective fire services. With four volunteer fire services in place across Sudbury East, there is the potential that aspects of the fire services can be shared and over the long-term, there may exist the potential for further integration dependent on future studies. In the short-term and which can be incorporated as part of a broader regional training initiative identified earlier in the study, the four municipalities may be able to begin to coordinate fire service training among the four departments. While all four departments train to the NFPA standard, there exist services which are consistent across the region and therefore, to potentially lower training costs and enhance efficiencies. Additionally and similar to regional fire training, the four municipalities could potentially explore the potential of prevention and education activities being done regionally. Activities such as this may not produce cost savings but offer an enhanced level of service across the region and process identified for regional training can be used from an implementation standpoint. The final aspect that the municipalities may wish to consider formalizing across the region is the delivery of emergency management planning which is required of all municipalities in Ontario. On the following page is a map depicting the locations of the fire stations in Sudbury East 80

81 Regional Fire Services A. Overview of Fire Services Markstay Fire Station #1 Markstay Fire Station #2 Markstay Fire Station #3 St.-Charles Fire Station French River Noelville Fire Station French River Alban Fire Station Killarney Fire Station 81

82 Regional Fire Services A. Overview of Fire Services Proximity of Fire Stations in Sudbury East Fire Station Proximity to Fire Stations Equipment Killarney Fire Station - French River Alban Fire Station French River Noelville Fire Station St.-Charles Fire Station Markstay-Warren Fire Station #1 Markstay-Warren Fire Station #2 Markstay-Warren Fire Station #3 Killarney Alban Noelville St.- Charles 88.7 km 107 km 133 km 118 km 129 km 148 km 88.7 km km 44.6 km 70.4 km 66.6 km 62.9 km 107 km 17.9 km km 61.6 km 48.9 km 45.1 km 133 km 44.6 km 26.9 km km 22.2 km 18.4 km Station #1 Station #2 Station #3 118 km 70.4 km 61.6 km 34.8 km km 33.1 km 129 km 66.6 km 48.9 km 22.2 km 14.9 km km 148 km 62.9 km 45.1 km 18.4 km 33.1 km 20.4 km - 1 Tanker 1 Pumper 1 Rescue vehicle 1 Pumper 1 Tanker 1 Rescue vehicle 1 Pumper 1 Tanker 1 Rescue vehicle 1 Tanker 1 Pumper 1 Rescue vehicle 1 Service truck 3 Trailers 1 Tanker 1 Pumper 1 Service truck 1 Tanker 1 Pumper 1 Service truck 1 Tanker 1 Pumper 1 Service truck 82

83 Sudbury East Shared Services Study Regional Fire Services B. Current Service Delivery Model The following chart is a summary of fire services in Sudbury East French River Killarney Markstay-Warren St.-Charles Current Service Delivery Volunteer fire service Volunteer fire service Volunteer fire service Volunteer fire service Fire Chief (Fulltime/Parttime) All four municipalities have a part-time fire chief with limited to no dedicated administrative support # of Fire Halls Operating Expenditures 2015 Operating Revenues $164,085 $75,262 $397,290 $116,931 $2,505 $0 $26,144 $2, Salary Costs $82,139 $32,965 $193,766 $46,212 As a % of Operating Costs Salary Range for Fire Chief 50.1% 43.8% 48.8% 39.5% $35,573 - $40,909 $5,700 $32,752 - $40,595 $19,200 83

84 Sudbury East Shared Services Study Regional Fire Services C. Opportunity Evaluation Financial Impact a) Potential Cost Savings The following is an examination of what the financial implications of a fulltime regional fire chief model could potentially be. For this model, the following assumptions are: Low, medium and high salary scenarios for a fire chief for a single municipality based on a market rate of $100,000 salary apportioned evenly across the four municipalities. Based on our experience with another municipality in Northeastern Ontario, the salary range listed below is consistent with their experience. Consideration for the addition of administrative support each municipality salary apportioned evenly across the four municipalities Assumption of 30% to account for benefits Low Medium High Regional Fire Chief $90,000 $100,000 $110,000 Benefits (30%) $27,000 $30,000 $33,000 ¼ Share to Each Municipality $29,250 $32,500 $35,750 Addition of Administrative Support $35,000 $40,000 $45,000 Benefits (30%) $10,500 $12,000 $13,500 ¼ Share to Each Municipality $11,375 $13,000 $14,625 Total Cost to each municipality (1/4 share of Fire Chief and Administrative Support) $40,625 $45,500 $50,375 84

85 Sudbury East Shared Services Study Regional Fire Services C. Opportunity Evaluation Financial Impact a) Potential Cost Savings The following is an examination of what the financial implications of a part-time regional Fire Prevention and Education Officer could potentially be. For this model, the following assumptions are: Low, medium and high salary scenarios for a Fire Prevention and Education Officer for a single municipality based on a market rate of $40,000 salary apportioned evenly across the four municipalities Assumption of 30% to account for benefits Low Medium High Regional Fire Prevention and Education Officer $35,000 $40,000 $45,000 Benefits (30%) $10,500 $12,000 $13,500 Total $45,500 $52,000 $58,500 ¼ Share to Each Municipality $11,375 $13,000 $14,625 85

86 Sudbury East Shared Services Study Regional Fire Services C. Opportunity Evaluation Financial Impact b) One Time Implementation and Harmonization Costs There do not appear to be any related one time implementation and/or harmonization costs as it would expected that current fire service levels would remain the same with a single fire chief overseeing all operations based on the desired service levels established by the four Councils in Sudbury East. The addition of a fulltime fire chief has the potential to establish greater coordination across region while enhancing current services including emergency management coordination across the four municipalities. As noted in the following section, if the municipalities in Sudbury East determine that they would like to reduce the number of pumper trucks across the region, each municipality may be required to undertake a comprehensive risk management assessment and the potential cost of this study to each municipality could range between $90,000 to $100,000. c) Capital/Infrastructure Costs Given the nature of this opportunity examines the sharing of human resources, there does not appear to be any associated capital costs. The question of whether or not equipment could be shared was posed during the course of the study. Based on our knowledge of municipal fire services, a rescue van and tanker would be considered to be essential in the delivery of fire services whereas the rescue van brings equipment on scene and the tanker is required to support initial suppression services. Excluding those two types, the question of sufficiency of the number of pumpers in the Sudbury East region remains. Given the geographic distance between fire stations, any change in the number of pumpers may potentially trigger need for a fore-mentioned comprehensive risk assessment which would then determine the appropriate number and location of those pumpers to provide fire services to the entire region. Consistent with Municipal Best Practices Yes Municipalities have mutual aid agreements in place to provide assistance to neighbouring communities when requested but these agreements do not serve as a replacement for the provision of fire services. Additionally, we are aware of two municipalities of similar sizes to the those in Sudbury East who currently share a fire chief at the time of this report and are in the process of looking to add additional capacity with the inclusion of a fulltime deputy fire chief (estimated salary included benefits - $105,000) and a part-time fire prevention officer (estimated salary included benefits - $40,000). 86

87 Sudbury East Shared Services Study Regional Fire Services C. Opportunity Evaluation Other Considerations Beyond the integration of fire administration, the region could potentially explore a much longer term opportunity which would be a rationalization of the fire services across the region but given the geographic area which is Sudbury East, the financial benefit to a community such as Killarney would be very low. Again, any significant changes to fire services would require a more specialized fire services review study including those potential adjustments to the region s fire related infrastructure. During the course of the study, one of the challenges facing the four fire services is maintaining and access to their volunteer firefighters. Unfortunately, given the geographic size of the Sudbury East region, there does not appear to be any operational benefit to pool volunteer firefighters for the purposes of suppression. However, if the four municipalities in Sudbury East are of the opinion that they want to pursue a regional fire chief, they may wish to give some consideration as to including the legislated responsibility of emergency management coordination. This represents an increased focus on regional emergency management opposed to meeting the minimum standards required of municipalities. D. Recommendation With all four municipalities employing part-time fire chiefs across the region, the integration of fire administration could be considered by the municipalities of Sudbury East but given the current model, the establishment of a fulltime regional fire chief has the potential to increase costs and require the addition of administrative capacity across the four municipalities. 87

88 Sudbury East Shared Services Study Sharing of Senior Administration A. Overview of Senior Administration With salary and benefit costs typically being the largest cost to every municipality including the four participating in the study, the concept of sharing human resources (people opposed to the provision of human resource services) was examined across the four organizations. One particular area that was examined was the potential of sharing senior administration across the four municipalities. For the purposes of the study, senior administration positions were the positions of Chief Administrative Officer, Clerk, Treasurer and Director/Superintendent positions. The Municipal Act establishes the roles for senior administration positions and under the Act, there are two positions that every municipality must appoint the Clerk under Section 228 and a municipal Treasurer under Section 286(1). Chief Administrative Officer (CAO) The role of the CAO is to exercise general control and management of the affairs of a municipality for the purposes of ensuring the efficient and effective operation of the municipality. In doing so, the CAO is tasked with implementing Council s strategic direction and seeking guidance, approval and revisions to this direction where considered appropriate. In our experience, CAOs in municipalities similar to those in Sudbury East have CAOs that are operational in nature with respect to municipal service delivery and will have responsibilities that their counterparts in larger municipalities would not have such as serving as their municipality s Clerk. Clerk Section 228 of the Municipal Act requires all municipalities to appoint a clerk and under the provisions of the Municipal Act, the formal duty of the clerk includes: recording, without note or comment, all resolutions, decisions and other proceedings of the council; if required by any member present at a vote, recording the name and vote of every member voting on any matter or question; keeping the originals or copies of all by-laws and of all minutes of proceedings of the council; performing other duties required under the Municipal Act or under any other act; and performing other duties as are assigned by the municipality. 88

89 Sudbury East Shared Services Study Sharing of Senior Administration A. Overview of Senior Administration Treasurer Pursuant to Section 286(1), all Ontario municipalities are required to appoint a treasurer who is responsible for the handling of all financial affairs of the municipality on behalf of and in a manner directed by the council of the municipality. During the course of the study, the concept of sharing senior administration was explored with the intent of examining whether the region could shift to shared service model with one CAO atop a new regional organizational structure. B. Current Service Delivery Model Current Service Delivery CAO French River Killarney Markstay-Warren St.-Charles All four municipalities have the position of CAO within their organizational structure Clerk Dedicated position Function of the CAO Function of the CAO Function of the CAO Treasurer Dedicated position Dedicated position Dedicated position Dedicated position Salary Range CAO $90,000 - $130,000 $60,425 - $68,009 $67,133 - $84,965 $62,074 - $75,234 Salary Range Treasurer $78,261 - $90,000 $51,312 - $57,753 $66,468 - $84,124 $52,176 - $63,263 89

90 Sudbury East Shared Services Study Sharing of Senior Administration C. Opportunity Evaluation Financial Impact a) Potential Cost Savings For the purposes of evaluating the potential for cost savings, the following assumptions are being applied: Low, medium and high salary scenarios for a regional CAO salary apportioned evenly across the four municipalities Consideration for the addition of a Deputy CAO in each municipality who may take on other functions such as Clerk, etc Assumption of 30% to account for benefits Low Medium High Regional CAO $120,000 $140,000 $160,000 Benefits (30%) $36,000 $42,000 $48,000 ¼ Share to Each Municipality $39,000 $45,500 $52,000 Addition of Deputy CAO $50,000 $55,000 $60,000 Benefits (30%) $15,000 $16,500 $18,000 Total $65,000 $71,500 $78,000 Total Cost to each municipality (1/4 share of CAO + Deputy) $104,000 $117,000 $130,000 Based on the assumptions above and the current salary ranges for this position within Sudbury East, it is unlikely that cost savings would be realized by all four municipalities in Sudbury East. 90

91 Sudbury East Shared Services Study Sharing of Senior Administration C. Opportunity Evaluation One Time Implementation and Harmonization Costs If the decision to shift to a regional CAO with a series of direct reports in each municipality, there exists the potential for four CAO positions to be deemed redundant within the current organizational structures of the municipalities of Sudbury East. As a result, each respective municipality may need to provide severance to those individuals. Financial Impact b) Capital/Infrastructure Costs There are no infrastructure costs associated with this opportunity as it examined the sharing of human resources. Other Considerations Given the number of municipalities and the roles and responsibilities assigned to the senior administrative staff, the notion of sharing a CAO, Clerk and/or Treasurer did not meet the criteria established as part of the study. To share the most senior positions but in particular the position of CAO may potentially lead to an increase in operational inefficiencies as well as place unrealistic expectations on an individual to manage four municipalities with varying services. The corporate and governance requirements associated with each municipality (e.g. council meetings, budgeting, financial statement audit) requires a minimum level of staffing for each municipality and absent a reduction in the number of municipalities, the ability to reduce senior management staff is likely limited. Based on consultations with the four municipalities, the challenge of sharing at the Director level or equivalent position with respect to public works and recreation activities is those who hold those positions across the region are not exclusively strategic. Each may be called upon to provide operational support in order to meet legislated/regulated requirements and therefore, the ability to share the resource across the region may increase all four municipalities exposure to risk. D. Recommendation Based on an evaluation of the opportunity to share senior administration, it is not recommended that the municipalities of Sudbury East pursue this opportunity. 91

92 Sudbury East Shared Services Study Recreation Facilities A. Overview of Recreation Facilities Under the Municipal Act, there are no requirements for a municipality to provide recreational facilities to its residents. However, it is an expectation within every community that some level of recreation will be provided and many municipalities view recreational assets as a tool to attract and retain residents. In terms of recreational facilities, municipalities typically own and operate arenas and ball fields. Identified earlier in the report, the geographic area of Sudbury East is vast and almost nearly as large as the City of Greater Sudbury. The challenge that geography presents is that it does not lend itself to easily identifying recreational facilities that could be rationalized. While reducing the number of assets that the four municipalities are required to operate, maintain, and ultimately replace would result in significant cost savings, the impact on maintaining/increasing operating efficiencies appear to be at risk. Early in the process, a question was posed to all four municipalities about their respective opinions on recreational facilities and whether there was early support of rationalizing recreational facilities across the region as part of a cost savings exercise. At that time, there was no clear support of pursuing this opportunity. Additionally, utilization in the region s recreational facilities is strong based upon the anecdotal information provided with only one facility experiencing inconsistent usage. B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles 2015 Operating Revenues 2015 Operating Expenditures Net Municipal Levy Support $53,279 $37,433 $65,421 $21,422 $332,186 $118,678 $239,116 $221,926 $278,907 $81,245 $173,695 $200,504 Cost Recovery % 16.0% 31.5% 27.4% 9.7% 92

93 Sudbury East Shared Services Study Recreation Facilities C. Opportunity Evaluation Financial Impact a) Potential Cost Savings The potential cost savings associated with the closure of one facility would have an impact on the municipality no longer operating the facility and the other municipalities would benefit from the receipt of funding through a shared service agreement. However and identified below, there are utilization issues that may negate any additional revenues if capacity isn t available to purchase. b) One Time Implementation and Harmonization Costs No one time implementation and harmonization costs were identified as part of this opportunity because it is not suggested that uniform user fees be charged across the region if pursued. A shared agreement with an established contribution for access to services would be suggested. c) Capital/Infrastructure Costs The municipalities of Sudbury East would not be acquiring additional infrastructure but reducing one municipality s infrastructure and thus, there are no associated capital costs with this opportunity. Consistent with Municipal Best Practices No The majority of municipalities in Ontario own and operate their own recreational facilities. Other Considerations Where there may be an opportunity with respect to recreational facilities is the potential collaboration amongst the four municipalities to improve upon utilization of recreational facilities. Based upon information shared during the study, usage of the facilities in the Municipalities of French River and Markstay-Warren is high with prime-time ice rentals either nearing or at full capacity. Although usage statistics were not available, the Municipality of St.-Charles does not have utilization similar to the other two municipalities. As such, there exists the opportunity for the other municipalities in Sudbury East to re-direct those who cannot rent time at their facilities towards the facility in St.-Charles. A closure of one facility in the area would potentially result in significant customer service issues because there does not appear to be sufficient capacity to re-direct from one municipality to the next. 93

94 Sudbury East Shared Services Study Recreation Facilities C. Opportunity Evaluation Other Considerations One aspect of their recreational facility operations that each municipality may wish to give consideration to is a review of their user fees and the associated cost recovery to determine whether or not the relationship between operating expenditures and associated user fees meets their respective expectations. D. Recommendation Based on an evaluation of the opportunity to share recreational facilities, it is not recommended that the municipalities of Sudbury East pursue this opportunity. 94

95 Sudbury East Shared Services Study Water and Wastewater Services A. Overview of Water and Wastewater Services Under the Municipal Act, there is no requirement for municipalities to maintain drinking water systems and/or wastewater systems. Where municipalities choose to maintain a drinking water system, the provisions of the Safe Drinking Water Act, 2002, S.O. 2002, c.32 ( SDWA ) and related regulations apply and for those who choose to provide wastewater services, the Water Resources Act and its associated regulations apply. With respect to the actual provision of water and wastewater services, it is common for smaller municipalities (population less than 10,000) to rely upon third party service providers to deliver upon and maintain water and wastewater systems. The rationale as to why municipalities contract out for water and wastewater services is it allows them to achieve the following: Achieve economies of scale; and Access to expertise and up to date certifications. In our experience, smaller municipalities in Ontario face a challenge of retaining qualified personnel which is required to operate and maintain systems and having a third party provider in place addresses the challenge. B. Current Service Delivery Model The chart on the following page is a summary of water and wastewater operations in Sudbury East All four municipalities rely upon third party contractors to provide water and/or wastewater services as the Municipalities of French River and St.-Charles do not provide water services to their residents. Three of the four municipalities have contracts with the Ontario Clean Water Agency ( OCWA ). The Municipality of St.-Charles was previously with OCWA prior to a switch to their current provider, Canadian Shield Consultants Agency. 95

96 Sudbury East Shared Services Study Water and Wastewater Services B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Water Service x x Wastewater Service Service Delivery Method Contracted Service OCWA Contracted Service OCWA Contracted Service OCWA Contracted Service Canadian Shield Consultants Agency Year for Renewal Currently up for renewal Currently up for renewal 2015 Operating Revenue Combined where applicable 2015 Operating Expenditure Combined where applicable $0 $485,296 $429,053 $44,859 $63,374 $485,296 $327,494 $39,419 96

97 Sudbury East Shared Services Study Water and Wastewater Services C. Opportunity Evaluation Financial Impact a) Potential Cost Savings Based on our experience working with municipalities and water and wastewater systems, municipalities who have repatriated water and wastewater services experienced increases in costs opposed to long-term cost savings. However, the rationale for repatriating these services was to gain greater control over the maintenance of the systems opposed to the day-to-day functions. With all four currently participating in third party contracts, one of the questions posed to each was relating to level of satisfaction with current service delivery with their providers. All four municipalities indicated that they did not have any significant concerns with their current contractors. On the following page, we provide an example of a municipality who shifted away from a third party operator to a municipal operation. Since the time of this analysis, the municipality has decided to return to a third party contractor. 97

98 Sudbury East Shared Services Study Water and Wastewater Services Third Party Operated Municipality Operated Administration Admin Wages $ 22,623 $ 32,150 $ 30,386 $ 32,815 $ 30,762 Training Wages $ 770 $ 345 $ 828 $ 488 $ 2,846 Benefits $ 5,930 $ 9,180 $ 8,637 $ 9,920 $ 9,859 WSIB $ 471 $ 472 $ 468 $ 579 $ 685 Training $ 998 $ 5,369 $ 1,240 $ 2,499 $ 8,105 Other Costs $ 3,909 $ 9,765 $ 17,744 $ 44,974 $ 12,343 Total $ 34,701 $ 57,281 $ 59,303 $ 91,275 $ 64,600 Plant Operations Wages $ - $ - $ 1,726 $ 54,893 $ 59,505 Benefits $ - $ - $ 382 $ 23,182 $ 24,633 Travel and Training $ - $ - $ - $ 3,889 $ 5,783 MOE Op. Agreement $ 141,586 $ 145,290 $ 147,884 $ - $ - Property Taxes $ 17,018 $ 17,653 $ 17,788 $ 23,336 $ 26,883 Audit (Int & Ext) $ - $ 7,355 $ 5,524 $ 3,782 $ 5,403 Supplies $ 30,469 $ 36,508 $ 33,879 $ 46,332 $ 23,936 Hydro $ 38,681 $ 37,924 $ 40,462 $ 33,740 $ 55,939 Insurance $ - $ - $ - $ 5,801 $ 6,079 Testing $ - $ - $ - $ - $ 15,857 Chemicals $ - $ - $ - $ 39,651 $ 44,724 Eqmt Purch./Rent. $ 940 $ 3,957 $ 994 $ 2,345 $ 4,557 Other $ - $ - $ - $ 6,862 Total $ 228,694 $ 248,687 $ 248,639 $ 236,951 $ 280,161 Activities Source of Supply $ 1,122 $ 528 $ 585 $ 492 $ 1,093 Thawing $ 288 $ 2,109 $ - $ 536 $ 8,556 Distribution $ 476 $ 6,836 $ 5,107 $ 4,427 $ 15,285 Hydrant Repair $ 2,099 $ 1,289 $ 323 $ 4,607 $ 1,291 Valve Mtce $ 968 $ 523 $ 779 $ 1,028 $ 551 Leak Detection $ - $ 119 $ 1,310 $ 133 $ 1,688 Connections $ 8,258 $ 13,657 $ 9,661 $ 8,384 $ 10,014 Special Items $ 60 $ - $ - $ - $ - Total $ 13,271 $ 25,061 $ 17,765 $ 19,607 $ 38,478 Transfer to Reserves $ 16,505 $ 7,500 $ 7,500 $ - $ - TOTAL $ 293,171 $ 338,529 $ 333,207 $ 347,833 $ 383,239 98

99 Sudbury East Shared Services Study Water and Wastewater Services C. Opportunity Evaluation Financial Impact b) One Time Implementation and Harmonization Costs There are no one time implementation and harmonization costs identified with this opportunity. A shift to regional water and wastewater model would incur ongoing costs (salaries and benefits, specialized equipment rental, and materials) opposed to one time costs. c) Capital/Infrastructure Costs The four municipalities in Sudbury East own their respective facilities so any capital/infrastructure costs should have been captured as part of each municipality s asset management plan and therefore, no additional capital/infrastructure costs have been identified. Consistent with Municipal Best Practices No Based on our experience in the municipal sector, municipalities operate their water and/or wastewater systems in one of two ways: (i) operate the systems with the use of their own resources or (ii) engage third party service providers such as OCWA to provide their expertise to operate the system. Either approach is dependent on a variety of factors including the ability to attract qualified operators to oversee operations and the complexities of operating these systems within its heavily regulated environment. Other Considerations One consideration that each of the municipalities within the region may wish to consider going forward is an examination of water and/or wastewater user rates as it is considered to be a municipal best practice to operate water and wastewater systems on a full cost recovery basis and many municipalities will also build a capital component within their rate structure to assist in financing future water and wastewater needs. D. Recommendation The rationale in the sharing of water and wastewater activities is intended to maximize collaboration, achieve greater economies of scale, providing for a greater level of control over related assets (from an ongoing maintenance perspective and not relating to the delivery of the service which is heavily regulated) and eliminate potential profit components built into the costs charged by third party service providers. Additionally, the municipalities appear to be achieving the benefits of contracting out the service and integration of the service would not create cost savings across the region and may increase costs at the expense of access to the specialized services and economies of scale provided by the current service providers. 99

100 Sudbury East Shared Services Study Regional Solid Waste Management A. Overview of Solid Waste Management In the Province of Ontario and under the Municipal Act, there are no provisions within the legislation that require municipalities to provide waste management services. Regardless of the absence of a legislated/regulated requirement on the part of the Province, municipalities typically provide waste management services to their residents in the form of access to landfill sites, transfer stations and/or curbside collection of waste. If a municipality decides to own and operate a landfill site, the provisions of the Environmental Protection Act, R.S.O. 1990, c.e.19 and Ontario Regulation 232/98: Landfilling Sites ( EPA ) apply. In Sudbury East, three of the four municipalities provide weekly curbside collection for their residents. Only the Municipality of French River does not provide curbside collection and instead provides access to bin sites throughout the community for the collection of residential waste with subsequent disposal at the municipality s landfill. Additionally, the service delivery model is split in half where two municipalities use their own resources to manage their solid waste (French River and Killarney) and the other two contract out the service. The Municipality of St.-Charles indicated its contract has expired with their current contractor and is awaiting the results of the shared services study before making a decision to tender out the operation again. The municipalities of Sudbury East could potentially explore the idea of one contract for collection services across the region and if so, the process to follow is provided earlier in the report as part of any group purchasing initiative. Landfills were examined as potential candidates for consolidation. In the short term, landfill capacity does not appear to be a significant issue for the municipalities in Sudbury East whereas every municipality has access to at least one landfill site that has a minimum of ten years of capacity. The Municipality of St.-Charles opened a new cell at its landfill site in 2015 and as a result, based on the information provided, the site will reach its capacity in the year French River has approximately 22 years of capacity remaining and the other two municipalities (Markstay-Warren and Killarney) have approximately 10 to 14 years of capacity at one of their sites. 100

101 Sudbury East Shared Services Study Regional Solid Waste Management B. Current Service Delivery Model Solid waste collection French River Killarney Markstay-Warren St.-Charles Bin sites Own resources Curbside Own resources Curbside Contracted service Curbside Contracted service Landfill Operations Own resources Contracted service Contracted service Contracted service 2015 Operating Expenditure Solid Waste Collection $63,374 $7,595 $97,670 $147,410 Households 2, , Solid Waste Collection Operating Costs per Household $24.85 $8.12 $73.27 $

102 Sudbury East Shared Services Study Regional Solid Waste Management C. Opportunity Evaluation Financial Impact a) Potential Cost Savings If the group were to approach solid waste management from a group purchasing perspective and assuming that service levels as part of this initiative were to remain unchanged, a discounted rate of 10% was applied. Solid Waste Collection Municipality Potential Discount Cost Potential Cost Savings French River Killarney 10% $63,374 $7,595 Costs may increase as a result of nature of current service delivery Costs may increase as a result of nature of current service delivery Markstay-Warren $97,670 $9,768 St.-Charles $147,410 $14,741 b) One Time Implementation and Harmonization Costs There are no one time implementation and harmonization costs identified with this opportunity. However, if the municipalities were to consider a shift to a regional landfill model in the future. There would be costs associated with changes to the landfill s certificate of approval. c) Capital/Infrastructure Costs If the decision of the municipalities is to seek out a third party provider for all four municipalities, the municipalities of French River and Killarney would reduce their overall capital needs. 102

103 Sudbury East Shared Services Study Regional Solid Waste Management C. Opportunity Evaluation Consistent with Municipal Best Practices Yes The sharing of solid waste management occurs in the municipal sector but it should be noted that the prevalence of shared solid waste management is by default in many cases in Ontario because it is an upper tier responsibility that the lower tier municipalities contribute towards. Beyond the upper and lower tier relationships, municipalities will share in landfill arrangements where one municipality will utilize another s site rather than expand upon a current site or develop a new site. The following chart is summary of the per household costs for Northeastern Ontario municipalities who reported solid waste collection costs in The analysis does not establish a trend as to whether or not own resources versus contracting out solid waste collection services is more cost effective. Northeastern Ontario Municipalities with population <2,500 Solid Waste Collection Costs per Household (2015) $350 Own Resources Contracted Service $300 $250 $200 $150 $100 $50 $- Source: KPMG Analysis of Schedule 40 Financial Information Returns (2015) 103

104 Sudbury East Shared Services Study Regional Solid Waste Management C. Opportunity Evaluation Other Considerations Based on the current service delivery models and collective bargaining agreements in place, there may be labour relations risks associated if the municipalities were to seek out a group contract for provision of service because of language within the agreements that does not allow the municipalities to contract out work that can be performed by unionized staff. D. Recommendation Based on the mixed service delivery methods and large variances in operating expenditures and per household costs among the four municipalities, the likelihood of cost savings with the maintenance of service levels does not appear to be high. With three municipalities contracting out, only the Municipality of French River has the potential to be in a position to become a candidate for direct delivery but current capacity and geography appear to present challenge to that model opposed to seeking a single contract for all four. As a result, sharing of solid waste management services appear to be limited and not recommended. 104

105 Sudbury East Shared Services Study Regional Library Services A. Overview of Library Services Municipal libraries are established under the Public Libraries Act and the library is governed by a separate Board with municipal representation. The traditional perspective of what a library is a facility that houses a series of collections where one can come in and borrow. With changes to how people share and receive information, libraries have adapted to serve more of a community hub-like approach by offering a variety of programming for residents of all ages as well as offering access to computer workstations and internet access. Active Cardholders (2013 to 2015) Program Attendance (2013 to 2015) French River Markstay-Warren St.-Charles 0 French River Markstay-Warren St.-Charles Source: KPMG Analysis of Ontario Public Library Statistics (2013 to 2015) 105

106 Sudbury East Shared Services Study Regional Library Services B. Current Service Delivery Model In examining library services in Sudbury East, three of the four municipalities have libraries established under the Public Libraries Act and as such have library boards who are responsible for the oversight of their respective libraries. The exception in Sudbury East is the Municipality of Killarney which has a previously existing agreement with the Municipality of French River for access to library services. French River Killarney Markstay-Warren St.-Charles Current Service Delivery Own resources Shared arrangement with the Municipality of French River Own resources Own resources Number of Branches 2 Not applicable Operating Expenditures 2015 Municipal Contribution for Library Services $137,252 $1,066 $92,664 $59,749 $115,066 $1,066 $80,339 $37,879 C. Opportunity Evaluation Financial Impact a) Potential Cost Savings Source: KPMG Analysis of Ontario Public Library Statistics (2013 to 2015) The ability to achieve meaningful savings from library integration appears to be limited because the three libraries current CEOs could be considered to be working CEO s, with a major portion of their job functions relating to client service. Accordingly, the elimination of library CEO s would not yield significant cost reductions as other staff would need to be hired to maintain the current service levels. 106

107 Sudbury East Shared Services Study Regional Library Services C. Opportunity Evaluation Financial Impact b) One Time Implementation and Harmonization Costs No implementation costs were identified as part of a regional library services model. c) Capital/Infrastructure Costs No capital related costs were identified as part of a regional library services model. Consistent with Municipal Best Practices Yes - there are examples of shared library services across Ontario and this is occurring within Sudbury East with the Municipality of Killarney having an agreement in place with the Municipality of French River for access to library services for its residents. Other Considerations Given the level of activity identified on the previous page and the distribution of labour among the existing libraries, any changes to the current delivery model would result in service level reductions and will require the approval of each respective library board which may present another challenge to this approach. D. Recommendation Based on these considerations, the potential benefits of library integration were considered to be low and not recommended. 107

108 Sudbury East Shared Services Study Administrative Functions A. Overview of Administrative Functions There are a number of common functions performed by all four municipalities including various administrative/accounting functions including but not exclusive to: Budgeting; Tax collection; Accounts payable; Accounts receivable; and Payroll One aspect of the study examined whether or not these functions could be shared and performed by one on behalf of all four municipalities of Sudbury East. Additionally, the concept of building human resources capacity within the region was raised in consultation with the Sudbury East Municipal Association. B. Current Service Delivery Model French River Killarney Markstay-Warren St.-Charles Treasury function including budgeting, accounts payable/receivable, taxes and tax related activities, and payroll Own resources Own resources Own resources Own resources Human Resources Contracted service Contracted service Contracted service 2015 Human Resource Costs Own resources Function of the CAO $26,302 $0 $0 $0 108

109 Sudbury East Shared Services Study Administrative Functions C. Opportunity Evaluation Financial Impact a) Potential Cost Savings While all four municipalities may be performing these tasks, the opportunity to share across the four is limited. Based on our experience, there may be limited benefit to the municipalities of Sudbury East to share these functions and not result in any cost savings/operational efficiencies. For example, payroll activities will still need to occur in every municipality and therefore, it does not appear to make operational and financial sense to shift to a centralized approach. With respect to the creation of human resources capacity within the region, the median salary for a human resources specialist is on average $53,000 per year excluding benefits. For the purposes of evaluating the potential for cost savings, the following assumptions are being applied: Low, medium and high salary scenarios for a human resources specialist salary apportioned evenly across the four municipalities Assumption of 30% to account for benefits Low Medium High HR Specialist $46,000 $53,000 $60,000 Benefits (30%) $13,800 $15,900 $18,000 ¼ Share to Each Municipality $14,950 $17,225 $19,500 b) One Time Implementation and Harmonization Costs If the municipalities of Sudbury East were to decide to share administrative functions, three of the four municipalities utilize the same accounting software package. The Municipality of French River operates on a different software system and therefore, may need to determine whether there is the capability to harmonize services without having to change systems. 109

110 Sudbury East Shared Services Study Administrative Functions C. Opportunity Evaluation Financial Impact c) Capital/Infrastructure Costs Based on the nature of this opportunity, there are no capital/infrastructure related costs associated with it. Consistent with Municipal Best Practices No Based on the nature of administrative functions and that these activities still need to occur within each municipality, municipalities provide these functions directly opposed to sharing them. Other Considerations From a service delivery perspective, sharing these functions may potentially increase customer service issues because both internal (payroll related matters) and external (payment of taxes etc) are functions that customers expect from their respective municipalities opposed to travelling to receive service. With respect to human resources, the municipalities in Sudbury East need to determine whether or not they want to increase capacity by adding a human resources specialist recognizing that the position may not be required on a fulltime basis. However, there exists the opportunity to potentially seek out this specialized service as part of a group procurement initiative as well. Based on a review of capacity within the senior administration and the complexity of human resources, it is not suggested that this role be added to one s roles and responsibilities within the region. D. Recommendation Based on the evaluation of the opportunity, it is not recommended that the municipalities in Sudbury East share administrative functions. 110

111 Sudbury East Municipal Shared Services Study Considerations for Implementation

112 Prioritization of Opportunities We have provided below a suggested implementation framework for consideration by the Sudbury East municipalities. Short (<1 Year) Medium (1 to 2 Year) Long (2+ Years) High Group Purchasing Regional Building Controls and Bylaw Enforcement 5 Regional Asset Management and Engineering Priority Med Low 4 Regional Training 7 Regional Equipment Maintenance 6 Municipal Drainage Timeframe 112

113 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Typically, there are two potential service delivery models by which municipalities share the costs of municipal services. Direct Delivery Under this model, one municipality builds the capacity and then in return sells the service to other participating municipalities. Arrangements such as this can be found across the province. It is common in areas of the province where there is one larger municipality surrounded by smaller municipalities and in these instances, the larger municipality either previously had or builds capacity with the intent of providing the service to neighbouring communities. Within a direct delivery model, the intended outcomes is not that the host municipality profits from the others but offers a service to its neighbours at a cost that is lowered than its current service provider while ensuring that the municipality is not providing the service with a subsidy from its own tax base. An example of this type of arrangement currently exists within the region. The Municipality of Killarney provides the Municipality of French River with an annual fee for access to its libraries. Advantages Allows for municipalities to become a centre of excellence where they have the expertise and capacity to provide neighbouring communities In the absence of past trends, this model may distribute costs in a more equitable manner until such a time comes where the partners can agree upon a cost apportionment formula on a go forward basis. In essence, the model reflects a user pay approach. Provides municipalities with the ability to forecast potential operating revenues and costs as part of their annual budget process Other Considerations for Cost Apportionment Disadvantages There exists the risk of demand. If neighbouring municipalities do not purchase enough of the capacity, the host municipality may incur greater operating costs An agreed upon review schedule of the agreement and the rates for service. In some cases and in particular, services where vehicles and mileage are involved, there needs to be a mechanism where these rates can be reviewed to ensure they remain equitable to all parties involved. For example, if fuel costs should rise by more than an agreed upon range (10% to 20%) and remain at those prices, the agreement should have the flexibility to allow for those unforeseen costs to be addressed. 113

114 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Separate Arrangement with a Separate Body In contrast to direct delivery where one municipality serves as the lead and charges back for services provided, this service delivery model is governed by a separate body which establishes the cost apportionment formula and oversees and manages any issues that may arise over the course of the agreement. Advantages Board would be created with specific mandate to focus on shared services and inter-municipal relationships All municipalities have a vested interest in providing the service Disadvantages If the participating municipalities do not have reliable information to base cost apportionments on, there may be the need for a trial period which in turn may allow for a participant to walk away from the arrangement after one year and this may jeopardize the potential cost savings and operating efficiencies of the service. May create additional administrative work for the senior administration The following pages provide potential cost apportionment models for the municipalities consideration upon deciding upon a service delivery model beyond direct delivery. 114

115 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Cost Apportionment Models Within the agreement, municipalities can explore the apportionment of costs in ways that differ from a direct delivery model. Other potential approaches to sharing costs include: Utilization of Service Under this type of cost apportionment model, costs are apportioned based on the utilization of a service. An example of this type of arrangement currently exists within Sudbury East where the Municipalities of Killarney and St.-Charles where they currently share building control services on the basis of a 60% to 40% split. Advantages An increased potential for more equitable distribution of costs among partners based upon either actual or estimated use of a service Provides municipalities with the ability to forecast potential operating costs as part of their annual budget process Disadvantages Arrangement may not address and distribute costs where the apportionment when one or more municipalities use the service more than their agreed upon percentage May create additional administrative work for the senior administration Other Considerations for Cost Apportionment As identified within the sample agreements, a review mechanism is important to ensure that the cost apportionment formula is reflective of each party s use of the service. 115

116 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Cost Apportionment Models Equal Distribution of Costs Under this type of cost apportionment model, costs are apportioned equally to all of the participants. An example as to where this may be of use is if there is not any historical data to rely upon to allocate costs and none of the interested parties want to build the capacity and use a direct delivery model. Advantages All participants share equally in the costs of the providing the service Provides municipalities with the ability to forecast potential operating costs as part of their annual budget process Disadvantages May distribute costs equitably where the apportionment when one or more municipalities use the service more than their agreed upon percentage Other Considerations for Cost Apportionment With the potential for inequities in cost apportionment, municipalities allocating costs under this model may want to give some consideration to it being a short-term arrangement until a time comes when they have the ability to more accurately determine usage across the group. 116

117 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Cost Apportionment Models Weighted Assessment This is a common approach in the distribution of costs of social services within the District Social Services Administration Boards across Northern Ontario. Under this cost apportionment model, the costs of providing a service are distributed among based upon the prior year s weighted assessment of all participating municipalities. Weighted assessment is the result of multiplying the taxable assessment for each prescribed property class by the tax ratio established by the municipality for each class. Advantages It is commonly used approach for the allocation of costs Provides municipalities with the ability to forecast potential operating costs as part of their annual budget process Disadvantages May not truly reflect each municipality use of a service and therefore, may allocate costs in an unequitable manner Other Considerations for Cost Apportionment While it is a common approach, municipalities may want to proceed with caution if implementing this cost allocation method. Municipalities with higher assessment will assume a larger portion of the associated costs of a service but this may not reflect utilization and may place an unfair burden upon those residents. 117

118 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Cost Apportionment Models Blended Approach Another potential cost apportionment model that the municipalities can consider is the use of a blended approach. A blended approach cost allocation model can take a variety of items under consideration including: Population; Households; Weighted assessment; and Service related revenues (if applicable). An example where this is used within the municipal sector is the United Counties of Leeds and Grenville and three other municipalities distribute costs relating to the Provincial Offences Act. The four municipalities have agreed to apportion net revenues and costs based on the following formula 25% population, 25% households, 25% ticket revenues and 25% weighted assessment. Advantages Provides municipalities with the ability to forecast potential operating costs as part of their annual budget process Takes into account any service related revenues Accounts for various factors across the participating municipalities Other Considerations for Cost Apportionment Disadvantages Despite the inclusion of various factors, may not truly reflect each municipality use of a service and therefore, may allocate costs in an unequitable manner May over complicate matters for a service and has the potential to create additional administrative work for the senior administration While this approach takes various factors into consideration, municipalities may want to proceed with caution if implementing this cost allocation method because any changes in any one of the factors could potentially result in issues around cost allocation. 118

119 Considerations for Implementation Potential Service Delivery and Cost Apportionment Models Cost Apportionment Models Other Service Specific Another potential cost apportionment model is one which can be tailored specifically to a municipal service. One example and relevant to the study is the apportionment of costs pertaining to building controls. Seven municipalities in the Parry Sound District have a shared service arrangement for building control services. Costs are apportioned based on the value of building permits opposed to the level of activity. Advantages Takes into account the value of the permit instead of simply looking at the number issued Provides municipalities with the ability to forecast potential operating costs as part of their annual budget process Other Considerations for Cost Apportionment Disadvantages May not be equitable in distributing costs because one municipality may issue one large permit while another may issue a far greater number. As identified within the sample agreements, a review mechanism is important to ensure that the cost apportionment formula is reflective of each party s use of the service in conjunction with the value of those permits. 119

120 Considerations for Implementation Potential Governance Models In order to manage shared service arrangements and provide a mechanism that promotes trust and communication among all interested parties, a governance model should be established. The creation of a governance body is considered to a best practice and are utilized across the province. For the purposes of the shared services study for the municipalities in the Sudbury East, the following governance models are noted below and provide both the potential advantages and disadvantages of each model for the consideration of the group. Regardless of the preferred governance model, a best practice that should be given consideration is the membership composition of the board. Similar as to how municipalities appoint members to boards and committees, the length of the appointment should mirror one s term on Council. Based on our work with other municipalities, continuity at the board level assists in maintaining successful relationships/arrangements whereas less time is spent on training/educating opposed to effectively and efficiently evaluating the arrangement to make sure the intended benefits remain. Sudbury East Municipal Association Advantages Previously established group with membership/representation from all four municipalities in Sudbury East with a terms of reference Disadvantages Regional organization and similar to other district associations, the association s objectives are typically more broad in nature Limits participation to those who represent their municipalities on the association s board. Creation of a single board to manage any shared services arrangements Advantages Dependent on how the board is structured, this may provide for more opportunities for elected officials to participate Board would be created with specific mandate to focus on shared services and inter-municipal relationships Disadvantages Dependent on the number of services/arrangements that the municipalities decide on, the board s workload may become overwhelming 120

121 Considerations for Implementation Creation of boards who are assigned portfolios Advantages Dependent on how the board is structured, this model expands further on providing for more opportunities for elected officials to participate Board would be created with specific service mandate to focus on and provide the opportunity to become more familiar with one service opposed to all Disadvantages Dependent on how many arrangements are developed and adopted, there may not warrant the need for such a drilled down approach and boards could sit idle May create additional administrative work for the senior administration of the four municipalities 121

122 Sudbury East Municipal Shared Services Study Concluding Comments

123 Concluding Comments The following chart provides a summary of the opportunities contained within the report. For the purposes of the reader, financial considerations are provided within a cost savings range when applicable and are as follows: Low - Less than $10,000 Moderate Between $10,000 to $25,000 High - $25,000 and Over Opportunity Financial Considerations Consistent with Municipal Best Practices Other Considerations Recommended Group Purchasing High Yes None Yes Building Controls High Yes None Yes Bylaw Enforcement Low Yes Service enhancement Yes Regional Training Low Yes Capacity building Yes Regional Asset Management/ Engineering Regional Equipment Maintenance Low No Service enhancement Yes Moderate No Capacity building Yes Municipal Drainage Low Yes Capacity building Yes Regional Economic Development Low Yes Service enhancement No Regional Fire Services Low No Potential cost increases No Sharing of Senior Administration Low No Potential cost increases No 123

124 Concluding Comments The following chart provides a summary of the opportunities contained within the report. For the purposes of the reader, financial considerations are provided within a cost savings range when applicable and are as follows: Low - Less than $10,000 Moderate Between $10,000 to $25,000 High - $25,000 and Over Opportunity Financial Considerations Consistent with Municipal Best Practices Other Considerations Recommended Recreation Facilities High No Potential service level reduction Water and Wastewater Low No Potential cost increases No Solid Waste Management Regional Library Services Low Low Yes Yes Labour relations risk and potential service level reduction Potential service level reduction Administrative Functions Low No Capacity building No No No No 124

125 Concluding Comments Community and Council Consultations Consistent with the RFP document issued by the Municipality of Markstay-Warren, KPMG facilitated community consultation sessions in each municipality beginning in late February one session intended for Council to receive the draft report and provide comments and a second session to provide each community with an opportunity to share their thoughts and inquire about the opportunities presented as well as offer suggestions as to areas where sharing could exist. Over the course of the sessions, the following common subjects were discussed: Scope of the Study Participants in the community consultations inquired about the scope and whether or not, consideration was given to opportunities where only two municipalities could share. Based on the RFP document, the scope of the project was to consider opportunities where all four municipalities could potentially share in service delivery. While the analysis in the preceding pages does not specifically address reducing the number of municipalities, the opportunity to share among fewer than the member municipalities of Sudbury East as well as going beyond the borders of the region to other neighbouring municipalities will always exist. Community Expectations For those who participated in the community consultations, there appears to be an expectation of residents that the municipalities of Sudbury East will take the opportunities identified under consideration and begin to implement the study s findings. During the consultations, residents asked a number of technical questions as to how the arrangements will be governed and structured indicating an interest in implementation. Next Steps Based upon feedback received from the elected officials and community participants during the consultation phase, there appears to be general support in moving into the next phase and attempting to implement a number of the opportunities addressed within the study. One opportunity appears to appeal to a number of elected officials, group purchasing, and in discussion with those elected officials, this could potentially serve as the stepping stone into the further implementation of the study s findings. 125

126 Sudbury East Municipal Shared Services Study Appendix A Critical Path for Implementation

127 Critical Path for Implementation The Establishment of Group Purchasing in Sudbury East Proposed Critical Path A procurement need is identified by one of the four municipalities Other municipalities are consulted to determine their interest in participating Interested municipalities commit to participation in specific procurement RFP/Tender is issued by one municipality and responsible for receipt of responses Evaluation of responses by participating municipalities, with objective of group consensus as to award All participating municipalities award based on evaluation results 127

128 Critical Path for Implementation The Establishment of Regional Building Controls Services Proposed Critical Path Sudbury East municipalities discuss the location of the CBO, Building Inspector and Plans Examiner Sudbury East municipalities determine the cost apportionment model to pursue After the first year, a review of cost apportionment to examine suitability Upon the first year review, revisit agreement based on the terms established Each municipality reviews current user fees to explore moving towards full cost recovery Each municipality reviews progress on achieving full cost recovery 128

129 Critical Path for Implementation The Establishment of Regional Bylaw Enforcement Proposed Critical Path Sudbury East municipalities discuss the location of the bylaw enforcement Sudbury East municipalities determine the cost apportionment model to pursue After the first year, a review of cost apportionment to examine suitability Upon the first year review, revisit agreement based on the terms established If a direct delivery model is chosen In consultation with other municipalities, one municipality establishes bylaw enforcement capacity Lead municipality establishes the rates for service Municipalities agree to the terms for service and associated cost Upon the first year review, revisit agreement based on the terms established 129

130 Critical Path for Implementation Regional Training Proposed Critical Path Common Need Yes One municipality assumes the lead to coordinate training needs for the group Training takes place on a rotational basis Sudbury East municipalities determine known training needs for upcoming year No Municipality develops training plan to meet their needs 130

131 Critical Path for Implementation Establishment of Regional Engineering/Asset Management Coordination Proposed Critical Path Sudbury East municipalities discuss position and potential roles and responsibilities Opportunity to opt in or out for partners Participating municipalities determine distribution of resource and allocation of costs Direct Delivery Shared Service Delivery Group consensus on preferred candidate Committee of participating municipalities evaluate candidates and chosen candidates are interviewed One municipality assumes the lead in coordinating the job posting Preferred candidate assume the role of engineering/asset management specialist Upon completion of year one, committee re-evaluates need for position 131

132 Critical Path for Implementation Establishment of Regional Equipment Maintenance Proposed Critical Path Sudbury East municipalities discuss position and potential roles and responsibilities Opportunity to opt in or out for partners Participating municipalities determine distribution of resource and allocation of costs Direct Delivery Shared Service Delivery Group consensus on preferred candidate Committee of participating municipalities evaluate candidates and chosen candidates are interviewed One municipality assumes the lead in coordinating the job posting Preferred candidate assume the role of equipment maintenance resource Upon completion of year one, committee re-evaluates need for position 132

133 Critical Path for Implementation Municipal Drainage Proposed Critical Path Direct Delivery Sudbury East municipalities (excluding Killarney) discuss position and potential roles and responsibilities Participating municipalities determine distribution of resource and allocation of costs Shared Service Delivery One municipality assumes the lead in coordinating the job posting Upon completion of year one, committee re-evaluates cost allocation Preferred candidate assume the role of municipal drain superintendent Group consensus on preferred candidate Committee of participating municipalities evaluate candidates and chosen candidates are interviewed 133

134 Sudbury East Municipal Shared Services Study Appendix B Sample Shared Service Agreements

135 Sample Shared Services Agreement Once the municipalities of Sudbury East have decided to what extent they want to share services across the region, formal agreements will need to be developed to clearly set out what is being shared, how costs will be apportioned, communication protocols, and mechanisms for dispute resolutions. There exists a variety of agreements that can be adopted and the following are samples for the potential use of the Sudbury East municipalities. Please note that these are samples and the municipalities should consider legal review prior to adoption. Blanket agreement Could encompass any of the potential shared services SAMPLE Between The Corporation of the Municipality of French River (hereinafter called French River ) And The Corporation of the Municipality of Killarney (hereinafter called Killarney ) And The Corporation of the Municipality of Markstay-Warren (hereinafter called Markstay-Warren) And The Corporation of the Municipality of St.-Charles (hereinafter called St.-Charles ) Whereas the Municipalities of French River, Killarney, Markstay-Warren and St.-Charles hereto have agreed to enter into an Agreement with respect to the services set out below. 1. Services The Municipalities of French River, Killarney, Markstay-Warren and St.-Charles agree to share the following services: Service #1 Service #2 Service #3 135

136 Sample Shared Services Agreement Blanket agreement Encompasses all shared services agreed upon SAMPLE 2. Term of Agreement The Agreement shall be effective <<ENTER DATE>> and shall continue in full force and effect until a written notice is served by one of the parties hereto upon the other parties, providing one year s notice of an intention to terminate the Agreement. 3. Governance A board shall be responsible for the administration and implementation of the terms of the Agreement in an orderly and proper fashion, and shall make recommendations to the Councils with respect to shared service issues. Responsibilities of the Board The responsibilities of the board shall include, but not necessarily limited to reviewing the financial needs and performance including the appropriate levels of staffing and service levels and making recommendations to the Council regarding any issues to the operations of the services being shared. Composition Determination to be made by the Municipalities of French River, Killarney, Markstay-Warren and St.-Charles The members are to be appointed by the Council of each municipality and those members shall be appointed for the term of Council. Frequency of Meetings The board shall meet once each quarter of the calendar year. Additional meetings may be scheduled if issues arise which the Chief Administrative Officers believe need to be presented to the board. Meetings Procedure Meetings will be conducted in accordance with the Municipal Act requirements and relevant regulations. 136

137 Sample Shared Services Agreement Blanket agreement Encompasses all shared services agreed upon SAMPLE 4. Cost Sharing The costs for the services outlined under the Services section of the agreement will be divided among the Municipalities on the basis of the cost sharing formula agreed upon by the board. 5. Dispute Resolution In the event of any dispute about any matter arising out of this agreement between the Municipalities, the following shall apply: a) The dispute shall be referred initially by the party raising the dispute to the other parties in writing for a decision, which the others shall give in writing within a reasonable time; b) If the dispute is not satisfactorily settled between the parties, the dispute shall be submitted forthwith to a mediator to be agreed upon by the parties. c) The costs of mediation shall be shared equally among all parties d) The decision of the mediator shall be final and binding on all parties. 6. Withdrawal (Dependent on the nature of the agreement) In the event that a municipality wishes to withdraw from the agreement, the Municipalities may wish to consider the following as part of the agreement: a) Timing One example If a municipality wishes to withdraw, the withdrawal can only take place at two points in a calendar year (June 30 th or December 31 st ) b) Notice The party wishing to withdraw must submit a notice of withdrawal to the governing body in advance of the two dates listed above Using the same dates provided above, if a municipality chooses to withdraw by June 30 th, notice must be provided by February 28 th and by August 30 th for a December 31 st withdrawal. c) Payments The withdrawing party is not responsible for making payments after the effective withdrawal date but remains responsible for any payments requested prior to that date. 137

138 Sample Shared Services Agreement Blanket agreement Encompasses all shared services agreed upon SAMPLE 6. Withdrawal (Dependent on the nature of the agreement) d) Refunds The withdrawing party is not entitled for any refund after the effective withdrawal date but remains eligible for any refunds requested prior to that date. During the period between the submission of notice and the parties agreeing to the effective withdrawal date, the governing body will determine if any additional costs are required of the withdrawing party including potential contributions to capital expenditures. 138

139 Sample Shared Services Agreement Group Purchasing SAMPLE 1. Objectives of group procurement for Sudbury East The Municipalities of French River, Killarney, Markstay-Warren and St.-Charles agree to following principles for group procurement: To procure by purchase, rental or lease the required quality and quantity of goods and services in an efficient manner and without favouritism. To ensure acquisition of goods and services through the application of the highest standards of business ethics. To encourage open competitive bidding on all acquisition and disposal of goods and services, where practical. To consider total acquisition costs including quality, service and availability, rather than the lowest price submitted; To coordinate the acquisition of like goods and services required by all municipalities in Sudbury East to take advantage of purchasing power. 2. Membership Membership of the group will be comprised of the Municipalities of Sudbury East: Municipality of French River; Municipality of Killarney; Municipality of Markstay-Warren; and Municipality of St.-Charles Members are expected to the following: Attend regularly scheduled meetings over the course of the year to discuss potential upcoming needs Take a turn at hosting a regularly scheduled meeting; 139

140 Sample Shared Services Agreement Group Purchasing SAMPLE 2. Membership Members are expected to the following: Actively participate in collaborative initiatives by representing the organization and providing prompt response to the specific organization requesting information required for a competitive bid; Assign a lead contact person from their organization for any competitive bid; Assume the role of co-ordinator for a reasonable number of bid solicitations; and Membership shall, at all times, be recognized as being entirely voluntary in nature and beneficial in practice for achieving savings and efficiency in the best interest of purchasing for the participating municipalities. 3. Terms of Reference The following terms of reference shall apply to collaborative purchasing ventures: Goods and services that lend themselves to cost reduction, process improvement and/or quality improvement because of volume and/or methods will be considered. A Project-Coordinator will be appointed for each competitive solicitation. All members are expected to share responsibility for providing suitable project co coordinators as required. All bid solicitations will adhere to Canadian contract law, Provincial Procurement legislation and Ministry of Finance Procurement Directives. Bid solicitations shall be posted for a minimum of 15 calendar days on a national electronic bid service (e.g. Biddingo or MERX) and locally if required to satisfy individual Member s needs. It is recognized that various policies and procedures govern purchasing for Member agencies. The specific policies applying to each municipality who participates in collaborative solicitations shall govern for such things as tax conditions, public disclosure, delivery,etc. 140

141 Sample Shared Services Agreement Group Purchasing SAMPLE 3. Terms of Reference The following terms of reference shall apply to collaborative purchasing ventures: Bids received shall be opened publicly by the respective Co-ordinator. Contract awards shall be posted publicly using the same services as the original solicitation. The control of ordering, receiving and paying for collaboratively tendered items will remain the responsibility of the individual organization for its portion of the competitive award. Competitive solicitations will be issued, as far as possible, in a document form agreed upon by the members. The document shall specify conditions, also to be agreed upon by the members. It is understood that individual specifications, delivery points, and other unique circumstances may vary for participating institutions. The decision to participate in a bid solicitation is voluntary. No Member will be expected to participate in a competitive exercise which would be contrary to the interests of their organization. Names of participating organizations will be noted in the minutes. Post competition Members that choose to participate will be expected to accept and abide by the award decision unless they can present acceptable economic justification in writing to the other participants. The remaining participants will decide by majority vote whether to proceed with the adjusted contract or cancel and reissue the bid exercise. Post award each participating organization is responsible for finalizing a separate contract with the successful bidder within a reasonable time frame and for the ongoing management of that contract for the term of the agreement. Members may withdraw from existing contracts subject to cancellation rights outlined in the competitive bid documents. 141

142 Sample Shared Services Agreement Building Controls and Bylaw Enforcement SAMPLE Direct Delivery One Municipality Builds the Capacity and Sells to Neighbouring Municipalities AGREEMENT Building Controls and Bylaw Enforcement The Municipality of <<Insert Name>> will provide building controls and bylaw enforcement services for the Municipalities of <<Insert Name>>. Building Controls Services The schedule is on an as-required basis throughout the year. The following outlines the scope of work for the services to be provided: Review building permit applications including drawing review, complete and issue building permits and provide inspection services as required by the Ontario Building Code Act. Provide monthly reports Schedule of Fees for Building Control Services The schedule of fee reflects the rates for the positions involved with the delivery of services: Chief Building Official - $xx per hour Building Inspector - $xx per hour Plans Examiner/Administrative Support - $xx per hour Vehicle Utilization - $0.55 per km 142

143 Sample Shared Services Agreement Building Controls and Bylaw Enforcement SAMPLE Direct Delivery One Municipality Builds the Capacity and Sells to Neighbouring Municipalities AGREEMENT Building Controls and Bylaw Enforcement The Municipality of <<Insert Name>> will provide building controls and bylaw enforcement services for the Municipalities of <<Insert Name>>. Bylaw Enforcement Services The enforcement schedule would encompass two (2) days per week from April 1 st to September 30 th and one (1) day per week from October 1 st to March 31 st. The schedule may be amended by the participating municipalities upon ten (10) days prior written notice. The following outlines the scope of work for the services to be provided: Undertake community patrol and enforce municipal bylaws pertaining to building construction and renovations, property standards, animal control and other bylaws as mutually agreed. Provide monthly reports Schedule of Fees for Bylaw Enforcement Services Bylaw Officer - $xx per hour Vehicle Utilization - $0.55 per km The above noted fees (for both building controls and bylaw enforcement) are subject to change on an annual basis as costs increase and the host municipality will provide written notice of changes to the fee schedules. The municipalities will be issued monthly invoices for services rendered. 143

144 Sudbury East Municipal Shared Services Study Appendix C Municipal Services Summary

145 Municipal Services Summary Corporate Services French River Killarney Markstay-Warren St.-Charles CAO function Own resources Own resources Own resources Own resources Clerk function Treasury function including budgeting, accounts payable/receivable, taxes and tax related activities, and payroll Own resources Own resources Function of the CAO Own resources Function of the CAO Own resources Function of the CAO Own resources Own resources Own resources Own resources Information technology Contracted service Contracted service Contracted service Contracted service Human resources Contracted service Contracted service Contracted service Own resources Function of the CAO Cemeteries Own resources Own resources Own resources Own resources Other legislated requirements including line fences, livestock, etc Own resources Own resources Own resources Own resources 145

146 Municipal Services Summary Protective Services Police Contracted service - OPP Fire Emergency Management Building Controls Bylaw Enforcement French River Killarney Markstay-Warren St.-Charles Volunteer fire department Contracted service - OPP Volunteer fire department Contracted service - OPP Volunteer fire department Contracted service - OPP Volunteer fire department Own resources Own resources Own resources Own resources Own resources Own Resources Function of the CBO Animal Control Own Resources - Function of the CBO Shared service arrangement with Municipality of St.- Charles Own Resources Function of the Public Works Superintendent Contracted service Contracted service Shared service arrangement with Municipality of Killarney The role is not currently assigned to a municipal staffperson Contracted service Contracted service Contracted service 146

147 Municipal Services Summary Infrastructure Services French River Killarney Markstay-Warren St.-Charles Summer road maintenance Own resources Own resources Own resources Own resources Winter road maintenance Solid waste management collection services Solid waste management landfill operations Water and wastewater operations Fleet maintenance Municipal drainage Both own resources and contracted service Own resources Bin sites Own resources Contracted service (Wastewater only) OCWA Own resources Mechanic on staff Contracted service Both own resources and contracted service Own resources Curbside Both own resources and contracted service Contracted service (Both water and wastewater services) OCWA Own resources No mechanic on staff but managed internally Not Applicable No municipal drains Own resources Contracted service Curbside Contracted service Contracted service (Both water and wastewater services) OCWA Own resources Mechanic on staff Contracted service Own resources Contracted service Curbside Contracted service Contracted service (Wastewater only) Canadian Shield Consultants Agency Own resources No mechanic on staff but managed internally Contracted service Engineering Contracted service Contracted service Contracted service Contracted service 147

148 Municipal Services Summary Community Services French River Killarney Markstay-Warren St.-Charles Library services Own resources Own resources Own resources Own resources Recreation services including recreational maintenance and recreational programming Own resources Own resources Own resources Own resources Land use planning Member of the Sudbury East Planning Board Member of the Sudbury East Planning Board Member of the Sudbury East Planning Board Member of the Sudbury East Planning Board Economic Development Own resources Responsibility of the CAO Own resources Responsibility of the CAO Contracted service Own resources Economic Development Officer Contract employee 148

149 Municipal Services Summary Social and Health Services French River Killarney Markstay-Warren St.-Charles Social Services Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Social Housing Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Land Ambulance Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Member of the Manitoulin-Sudbury District Services Board Public Health Member of the Sudbury and District Health Unit Member of the Sudbury and District Health Unit Member of the Sudbury and District Health Unit Member of the Sudbury and District Health Unit 149

150 Sudbury East Municipal Shared Services Study Appendix D Considerations for Other Municipalities

151 Consideration for Other Municipalities In our experience, one size fits all approaches in the municipal sector do not produce intended results. Every municipality in Ontario is complex and unique in one way or another in how they deliver services on a day-to-day basis. At the same time, there are services that are common across the municipal sector and therefore, the opportunity exists as to whether or not the service could be shared among two or more municipalities. Earlier in the report, it was identified that under Section 20 of the Municipal Act, municipalities in Ontario have the legal authority to enter into shared service agreements and the legislation does not place explicit restrictions upon municipalities as to what and who a municipality can share with other municipalities or local bodies and First Nations. Prior to beginning the conversation about potentially sharing a service, there are two questions need to be asked: 1. Who is looking to share? Proximity Typically, a municipality will naturally look to a neighbour or neighbours to share a municipal service. Dependent on the geographic size of the region, this may present both opportunities and challenges to a shared service arrangement. For example, there may be greater opportunities for the sharing of assets when potential partners are closer opposed to spread out over a large geographic region. Common municipal services Whereas the Sudbury East Municipal Shared Services Study examined a series of common municipal services that had the potential to be shared, shared service arrangement Other Intangibles Trust When discussing any form of relationship, trust consistently ranks as probably the most fundamental element to any successful relationship/partnership. Without trust among the partners involved, there is the potential for an increased level of risk to the longevity of the arrangement. Communication Closely related to trust, communication is another essential element to a positive working relationship. Communication, as part of any partnership, needs to ongoing and honest with clearly established channels. In working with other municipalities who have longstanding shared service arrangements, one of the lessons learned is with a high level of trust and communication, discussions involving the allocation of costs take considerably less time. 151

152 Consideration for Other Municipalities 1. Who is looking to share? Other Intangibles Mutual Benefit The concept of mutual benefit is crucial to the success of any shared service arrangement. At no time during the process, should one be able to clearly identify winners and losers. Each partner in the arrangement should be able to point to the benefit of the partnership. In some cases, one municipality may experience an increase in revenues as a result of sharing with another whereas the other will experience a decrease in operating costs. In the absence of mutual benefit, the relationship/arrangement is exposed to the risk of one side seeking to end it. Data Collection Beyond the pillars above that specifically deal with the relationship, good data can assist and facilitate the development of shared service arrangements. If any one or all of the three concepts identified above are lacking, verifiable and reliable data can reinforce and/or support the building of trust as well as the demonstration of mutual benefit to all parties. Under certain circumstances, it may be beneficial to postpone moving forward with an agreement until there is reliable data that can be then translated into pertinent information for the purposes of a shared service arrangement. 2. Why are you looking to share? Based upon our experiences with municipalities share services for a variety of reasons but the most common are: Reducing operating costs The financial environment in which municipalities exist continues to challenge municipalities where they attempt to balance meeting the expectations of their residents while trying to manage operating costs. That balancing act coupled with reductions in grant revenues, municipalities are now seeking out innovative ways of reducing costs and municipalities seek out shared services arrangements with each other to maintain service levels while reducing the overall costs associated with delivering those services. It may be at this point that a municipality undertakes internal financial analysis to examine any or all of the following: Past financial performance of a municipal service over a period of time (3 to 5 years) with potential future trend analysis; and Quantify the financial impact on its residents - this can be done on a per household basis and/or the level of taxation required to provide the service (net of any associated revenues). 152

153 Consideration for Other Municipalities 2. Why are you looking to share? Based upon our experiences with municipalities share services for a variety of reasons but the most common are: Strategic approach to addressing infrastructure needs Similar to challenges relating to operating expenditure pressures and with the adoption of municipal asset management plans in 2012, municipalities face significant challenges in maintaining and eventually replacing their assets. In response, municipalities explore the potential of sharing assets with others to spread the costs of replacement costs of the asset beyond the scope of one and this coordination of assets can also contribute to lower ongoing operating/maintenance costs. Similar to the previous point regarding operating costs, a municipality want to glean from its asset management plan as to the following: An analysis as to which assets are in need of immediate replacement as well as identifying any short-term capital needs; Quantify the financial impact on its residents - this can be done on a per household basis and/or the level of taxation required to replace those assets (net of any associated revenues); and Examine whether or not, any of the assets analyzed above are suitable for the purposes of a shared arrangement. Increasing capacity While reducing costs (either operating or capital) may be the main objective for municipalities seeking out shared service opportunities, municipalities may share in order to increase operational capacity and in turn, provide a higher level of service without having to bear the full cost of doing so. Once the above has been addressed, the next question is what does the municipal service look like in each municipality and included on the following page of the study is a municipal service inventory template. The template is intended to assist in examining all of the potential components associated with the delivery of a municipal service. While the scope of the study was broad and all municipal services were given consideration, this may not necessarily translate to other municipalities and in some cases, it may be best to start with one common service opposed to examining all municipal operations. 153

154 Consideration for Other Municipalities Municipal Service Inventory Template The purpose of the Municipal Service Inventory Template is to assist in developing an inventory of municipal services provided by all participating municipalities with respect to any services that they are considering for sharing. Municipality Municipal Department Service Service Standard Method of Service Delivery Example: Winter Road Maintenance If there is an established standard Provincial regulation Own resources, contracted out, shared Financial Resources (Operating) Expenditures Revenues Most recent financial information Own resources $500,000 Most recent financial information Not applicable Personnel Associated with Service # of municipal employees associated with delivery 5 operators Equipment Associated with Service If applicable 2 graders 154

155 Consideration for Other Municipalities 3. To Pursue or Not? It is at this point where two or more municipalities can test the potential to share a municipal service. For the purposes of the study for the municipalities in Sudbury East, the following considerations were examined to determine whether or not a shared arrangement should be pursued. In making the determination to move forward with a shared arrangement, the municipal service in question does not necessarily have to satisfy all of the points listed below but rather provides all parties with the necessary information to make an informed decision. Financial benefit For the purposes of sharing services, the concept of financial benefit may not want to be restricted to the potential for direct cost savings. As noted above, one reason why municipalities share is to increase capacity and by sharing in the costs, a municipality can increase its capacity without assuming 100% of the costs. Potential cost savings as a result of sharing, can all parties expect to reduce their operating expenditures One time and/or implementation costs in some cases, there may exist one-time costs and/or implementation costs an example of an implementation cost could be the need to acquire software to deliver a service. Infrastructure costs Dependent on the nature of the shared service, there may exist the need for one or more party to incur capital costs to deliver the service. One example and included within the study, if the municipalities in Sudbury East do not have Ease of implementation and the associated timeframe In some cases, the ease of implementation and its timeframe can assist in determining whether or not a service may be suitable to be shared as well as assist in quantifying implementation costs. Opportunities with a greater ease of implementation may be done so on quicker schedule. These early wins can assist in fostering trust and communication among the involved parties and may serve as the foundation for increased integration of services. To further illustrate, an example is if two municipalities were in discussions to share residential garbage collection but one municipality utilizes a curb-side bin system meanwhile the other municipality allows their residents to use trash bags. If the decision was to share in a curb-side bin system, the other municipality would need to implement new service level with the associated costs including upgrading its infrastructure as well as potentially passing costs along to the users with the acquisition of approved bins. 155

156 Consideration for Other Municipalities 3. To Pursue or Not? Associated risks/barriers if applicable There may be various risks and/or barriers associated with a shared service arrangement that need to be taken into consideration as part of the decision making process. Those may include the following risk/barriers: Labour relations will the shared service arrangement impact upon any collective bargaining agreements in place? Customer service does the shared service arrangement have the potential to impact upon residents including access to the service and/or changes in service levels Public health and safety if there are instances where public health and safety may be comprised, these risks should be fully explored and to ensure no impact occurs. Consistency with municipal best practices Performing an environmental scan of other municipalities across Ontario and potentially Canada can assist in determining whether or not a shared service can be pursued. One potential starting point is the engagement of the Ministry of Municipal Affairs ( MMA ) as a resource because MMA undertook a comprehensive survey examining shared services across Ontario and can direct other municipalities to those currently sharing the service in question. Other considerations The final consideration is a catch-all for those matters not addressed above. Examples of other considerations that may past experiences in attempting to share as well as any local variances that need to be raised prior to moving forward. 156

157 Consideration for Other Municipalities 4. The Implementation of a Shared Service Arrangement Upon reaching a decision as separate parties to pursue the sharing of a municipal service, there are three fundamental questions that will need to be answered: How will the shared service be delivered? Will a direct delivery model be used or will it be shared by the parties? How will the costs be divided? There is not a perfect cost apportionment model and dependent on the nature of the service being shared, there are many different ways to apportion costs. Earlier in this report, there are number of potential cost apportionment models that municipalities may wish to consider as part of any shared service arrangement. What oversight will be created to oversee the arrangement? While the determination of an equitable distribution of costs is important to a successful arrangement, ensuring that all parties can agree upon how they will govern the agreement is no less important. Ultimately, the implementation of a governance structure provides a venue to foster inter-municipal trust and communication and provide for the following: An opportunity discuss the shared service in terms of its intended goals and outcomes Discuss any issues and/or comments regarding the service this may be vital in attempting to resolve issues as they arise opposed to allowing matters to become grounds to end one s participation Receive information regarding the current year s financial performance as well as the forecast for the upcoming year(s) Discuss and approve any changes to the cost apportionment formula dependent on the agreed upon terms to do so The answers to the questions above then serve as the basis of the formal agreement signed by the parties. Appendix B provides samples shared service agreements which address the key components of a formal agreement. 157

158 Contacts The contacts at KPMG in connection with this report are: Chas Anselmo, MPA Senior Manager, KPMG Sudbury Tel: (705)