Report to: General Committee – Finance & Admin.  Date of Meeting:  June 15, 2009

 

 

SUBJECT:                          March 2009 Year-To-Date Review of Operations and Year-End Projection

PREPARED BY:               Andrea Tang, Manager Financial Planning

 

 

RECOMMENDATION:

THAT the report dated June 15, 2009 entitled “March 2009 Year-To-Date Review of Operations and Year-end Projection” be received.

 

EXECUTIVE SUMMARY:

 

Town

At the end of March 2009, the operating budget results (excluding Planning & Design, Engineering, Building Services and Waterworks) reflect a favourable variance of $0.360M.  The $0.360M favourable variance is comprised of a $0.524M favourable variance in Revenues, offset by an unfavourable variance of ($0.164M) in Expenditures, as shown below:

 

Revenues

    Fav./ (Unfav.)

 

Expenditures

Fav./ (Unfav.)

Income from Investments

 $0.475   M

 

Salary & Benefit Costs

 $0.687   M

Tax Interest and Penalties

 $0.125   M

 

 

Salary Gapping Allocation (full year)

($0.455)  M

Theatre revenue – professional entertainment series

($0.162) M

 

Winter Maintenance

($0.947)  M

Other

 $0.086   M

 

Streetlight Maintenance

($0.057)  M

 

 

 

Fuel

 $0.101    M

 

 

 

Waste

 $0.105    M

 

 

 

Utilities

 $0.148    M

 

 

 

Training/Travel/Promotion & Advertising/Rental/Lease/Professional Fees

 $0.265    M

 

 

 

Other

($0.011)  M

Total

$0.524  M

 

Total

($0.164)  M

 

 

Based on the preliminary March YTD results and the key economic indicators, the Town has prepared a year-end projection.  The year-end deficit/surplus is projected to be in a range from unfavourable ($0.500M) to favourable $0.500M before year-end accounting accruals of approximately ($1.725M).

. 

 

 

 

 

Planning & Design

 

Planning & Design ended March with a year-to-date unfavourable variance of ($0.433M).  This was due to unfavourable variance of ($0.565M) in revenues, offset by favourable variances of $0.118M in personnel costs, and $0.014M in non-personnel costs.

 

Planning & Design is projected to be unfavourable by ($0.111M) at year-end due to lower user fees, partially offset by favourable variance in personnel.

 

Engineering

 

Engineering ended March with a year-to-date unfavourable variance of ($0.229M).  This was due to unfavourable variance of ($0.290M) in revenues, offset by total favourable variance of $0.061M in personnel costs and non-personnel costs. 

 

Engineering is projected to be unfavourable by ($0.075M) at year-end due to lower user fees, partially offset by lower personnel costs.

 

Building Services

 

Building Services ended March year-to-date unfavourable by ($1.239M).  This was mainly due to favourable variance of $0.102M in personnel expenses and non-personnel expense; offset by lower than expected building permits revenue of ($1.341M).

 

Building Services is projected to be unfavourable by ($4.385M) at year-end resulting from lower building permit revenues. 

 

Waterworks

 

Waterworks ended March with a year-to-date favourable variance of $0.632M.  This variance was due to a favourable variance of $0.232M in the net sales and purchases of water, favourable variances of $0.182M in personnel costs, and $0.253M in non-personnel costs; offset by unfavourable variance of ($0.035M) in other revenues.

 

Waterworks is projected to be on budget by year end.  Staff will continue to monitor the water loss rate, and the net sales and purchases of water variance.

1. Purpose                                                                                                                                                                                                                                                         2. Background                                                                                                                                                                                                                                                         3. Discussion                                                                                                                                                                                                                                                         4. Financial                                                                                                                                                                                                                                                         5. Environmental

 

6. Accessibility                                                                                                                                                                                                                                                         7. Engage 21st                                                                                                                                                                                                                                                         8. Affected Units                                                                                                                                                                                                                                                         9. Attachment(s)

 

PURPOSE:

To provide an overview of the year-to-date financial results at the end of March 2009 and a  2009 year-end projection.

 

BACKGROUND:

 

There are 4 operating budgets that are monitored on a monthly basis.  The Town’s primary operating budget (excluding Planning & Design, Engineering, Building Services and Waterworks) is to support the Town’s day-to-day operations.

 

The remaining 3 budgets include Planning & Design, Engineering, Building Services and Waterworks Operating Budgets, and they are shown separate from the Town’s Operating Budget as they are primarily user fee funded (e.g. planning and engineering fees, building permit revenue and revenues based on water consumption, respectively) and separate reserves have been established for each.

 

Departments provide details of significant financial variances (actual to budget) in their areas.  The variances are reviewed, substantiated and summarized by the Financial Planning department. Minor variances are reviewed by staff, but not discussed in detail in this report.

 

OPTIONS/ DISCUSSION

 

YEAR-TO-DATE OPERATING BUDGET VARIANCES:

 

Town

 

At the end of three months, the 2009 operating budget (excluding Planning & Design, Engineering, Building Services and Waterworks) results reflected an overall $0.360M favourable variance. 

 

The $0.360M favourable variance was comprised of variances in three main areas of the Town’s operating budget:

 

             $0.524M      favourable variance in Revenues

             $0.232M      favourable variance in Personnel Expenditures

            ($0.396M)    unfavourable variance in Non-Personnel Expenditures

             $0.360M

 

The remainder of the report provides more details of the variances above, and details of the Planning & Design, Engineering, Building and Waterworks year-to-date variances.

 

 

 

 

 

REVENUES

At the end of March 2009, revenues were favourable by $0.524M due to the followings:

 

Revenue Items

Fav./(Unfav.)

General Revenues

 $0.601    M

Grant & Subsidy Revenues

 $0.006    M

User Fees and Service Charges

($0.172)  M   

Other Income

 $0.089    M    

Net Favourable Variance

 $0.524    M  

 

General Revenues

The favourable variance of $0.601M was due to investment income of $0.465M of which $0.145M was due to the portfolio balance and $0.320M being interest rate driven; and tax interest and penalties $0.125M.

 

User Fees and Service Charges

The unfavourable variance of ($0.172M) was primarily due to lower theatre ticket sales in the professional entertainment series of ($0.162M).

 

PERSONNEL EXPENDITURES

The March year-to-date personnel expenditure variance was $0.232M favourable:

 

Salary Expenditures Items

Fav./(Unfav.)

Full Time Salaries net of vacancy backfills

 $1.069

M

Overtime

($0.272)

M

Other Personnel Costs

($0.110)

M

Favourable Variance before Salary Gapping

 $0.687

M

Salary Gapping

($0.455)

M

Salaries & Benefits Favourable Variance

 $0.232

M

 

The $1.069M favourable variance in full time salaries net of vacancy backfills was the result of 48 net vacant positions; mainly offset by an unfavourable variance of ($0.272M) in Fire and Operations overtime due to an average of 13 vacancies in Fire through March and Operations requirements for winter maintenance.

 

The unfavourable variance of ($0.110M) in other personnel costs was due to Recreation part-time salaries.

 

Further, the 2009 budget included $0.455M of annual salary gapping savings which has been fully allocated to the individual business units.

 

NON-SALARY EXPENDITURES

At the end of March, Non-Salary expenditures were unfavourable due to winter maintenance operations. 

 

Non-Salary Items

   Fav. / (Unfav.)

Purchased Services

($0.327) M

Materials & Supplies

 $0.006   M

Other Expenditures

($0.075)  M

Total Non-Salary Unfavourable Variance

($0.396)  M

 

Purchased Services

The unfavourable variance of ($0.327M) in Purchased Services was due to winter maintenance of ($0.902M) and streetlight maintenance of ($0.057M), with the unfavourable variance being offset by the following accounts:

 

  • $0.265M favourable variance in training, travel, promotion & advertising, rental/lease and professional services;
  • $0.148M favourable variance in utilities across the Town due to lower consumption volume, and additional savings from the energy saving program at the Milliken Mills Community Centre;
  • $0.105M favourable variance in waste collection due to lower volume;
  • $0.114M favourable variance in other contracted services among various departments.

 

Materials & Supplies

The Material & Supplies variance was due to a favourable variance of $0.101M from lower fuel costs (price driven), partially offset by unfavourable variances for purchases of salt and sand for winter maintenance ($0.045M).

 

Further details on the Town’s Operating results are provided in Appendix 1.

 

PLANNING & DESIGN

Planning & Design reported a year-to-date unfavourable variance of ($0.433M) at the end of March (see Appendix 2).

The unfavourable revenue variance of ($0.565M) was due to lower user fees as a result of reduced development applications, offset by favourable variance of $0.132M in personnel and non-personnel expenditures.

 

ENGINEERING

Engineering reported a year-to-date unfavourable variance of ($0.229M)

(see Appendix 3).

The unfavourable revenue variance of ($0.290M) is due to lower user fees as a result of less than budgeted capital administration fees and development application activity, offset by a favourable variance of $0.061M in personnel and non-personnel expenditures.

 

BUILDING SERVICES

Building Services reported an unfavorable variance of ($1.239M) at the end of three months (refer to Appendix 4).  The unfavourable revenue variance of ($1.341M) is mainly due to lower than budgeted building permit revenues, offset by the favourable variance of $0.102M in personnel and non-personnel costs.

 

WATERWORKS

Waterworks reported a year-to-date favourable variance of $0.632M at the end of March (see Appendix 6).

The favourable variance is driving a favourable variance in the net sales and purchases of water $0.222M, personnel costs of $0.182M as a result of 6 average vacancies, and non-personnel cost of $0.253M. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ECONOMIC KEY INDICATORS

 

Staff has identified 15 key economic key indicators to assess the impact of the current economic situation on Town operations.  These indicators will be monitored on a monthly basis to assist the Town in taking the appropriate measures and to respond to the economic changes in a proactive manner.     

 

Development Related Revenues

 

The current economic downturn has resulted in reduced development activity. This has led to a significant reduction in the development related revenues.  These include planning, engineering, building, legal revenues (from developer’s agreements) and financial service admin fees.  This is evident by the chart below which outlines the declining trend in first quarter revenues for the years 2006-2009.

                                   

                                    YTD March Actual Development Related Revenues

 

 

 

 

 

 

DC Revenues

 

Higher DC Revenues in 2007 were due to increased development activity prior to the Region of York’s development charges by-law update, which also contributed to lower 2008 DC revenues.  In addition, the economic downtown has negatively impacted development activity and DC revenues in 2008 and 2009.   

                                                           

                                                YTD March Actual DC Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recreation & Culture Revenues

 

Notwithstanding the decline in growth related revenues, Recreation and Culture revenues have remained pretty consistent over the same time period. 

 

                                  YTD March Actual Recreation & Culture Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures

 

Staff will also monitor the spending on winter maintenance and streetlight maintenance.  The severe winter conditions as well as price increases over the last few years have put pressure on the Operating budget.  In 2008, streetlight maintenance incurred an unfavourable variance at year end, and the trend continues in 2009 through March.

 

                                                YTD March Expenditures

 

 

The other key economic indicators that will be monitored include assessment growth and reserve balances for building, planning and engineering.  

 

YEAR-END PROJECTION

 

Town

 

Based on the March year-to-date results, it is anticipated that the year-end projection will be in a range from unfavourable variance of ($0.500M) to favourable $0.500M before year-end accounting accruals.

 

It is expected that the year-end revenue variance will range from unfavourable variance of ($0.500M) to being on budget resulting from higher income from investments, higher tax interest and penalties and higher Waste Diversion Ontario grant, offset by lower revenues from financial services administrative fees, lower legal revenues as a result of reduced development applications, lower Recreation revenues in arena rentals and aquatic programs and lower Theatre ticket sales from the professional entertainment series.  

 

The year-end expenditure variance will range from being on budget to $0.500M favourable.  This variance is due to a favourable variance in personnel expenditures resulting from vacancies, lower than budgeted fuel cost and lower utility consumption, offset by unfavourable variances in winter maintenance, streetlight maintenance, external legal fees and recruitment costs. 

 

The year-end accounting accrual is estimated to be approximately $1.725M which includes provisions for the firefighters vested sick leave program, post retirement benefits and vacation pay.  This was funded in 2008 from the Corporate Rate Stabilization Reserve.

 

Planning & Design and Engineering

 

Planning & Design is projecting a year-end deficit of ($1.420M) compared to a budgeted deficit of ($1.309M).  This will result in an additional draw from reserves of ($0.111M).

 

Engineering is projecting a year-end deficit of ($2.580M) compared to a budgeted deficit of ($2.505M); thereby, projecting an additional draw from reserves of ($0.075M). 

 

The total projected year end deficit in Planning & Design ($1.420M) and Engineering ($2.580M) is ($4.000M) compared to a budget of ($3.814M).  This results in an additional draw of $0.186M. 

 

Based on the revised estimate, the reserve will be in a negative balance of ($5.743M) by the end of the year (Appendix 5).

 

Building Services

The projected year end deficit in Building Services will result in a draw of ($4.760M) from the reserve in order to achieve a balanced budget.  The budget anticipated a draw from reserves of ($0.375M); therefore, an additional draw of ($4.385M) is required. 

 

This will result in a negative reserve balance of ($2.421M) by the end of the year (Appendix 5).

 

Waterworks

Based on the March year-to-date results, Waterworks is projected to be on budget by year end. 

 

 

 

 

FINANCIAL CONSIDERATIONS:

Staff will continue to monitor variances for the remainder of the year. 

 

 

RECOMMENDED

 

                            BY:    ________________________          ________________________

                                      Joel Lustig, Director                            Barb Cribbett, Treasurer

                                      Financial and Client Services

 

 

                                      ________________________

                                      Andy Taylor, Commissioner

                                      Corporate Services

 

 

 

ATTACHMENTS:


Appendix 1 – Operating Budget - Financial Results for the Three Months Ended March 31, 2009

 

Appendix 2 – Operating Budget for Planning & Design - Financial Results for the Three Months Ended March 31, 2009

 

Appendix 3 – Operating Budget for Engineering - Financial Results for the Three Months Ended March 31, 2009

 

Appendix 4 – Operating Budget for Building Services - Financial Results for the Three Months Ended March 31, 2009

 

Appendix 5 – Development Services Reserve Balances

 

Appendix 6 – Operating Budget for Waterworks - Financial Results for the Three Months Ended March 31, 2009