Report to: General Committee – Finance & Admin. Date of Meeting: October 15, 2007

SUBJECT: August 2007 Year-To-Date Review of Operations and Year-End Projection

PREPARED BY: Andrea Tang, Acting Manager Financial Planning

RECOMMENDATION:

THAT the report dated October 15, 2007 entitled “August 2007 Year-To-Date Review of Operations and Year-end Projection” be received.

EXECUTIVE SUMMARY:

At the end of August, 2007 the operating budget results (excluding Waterworks and Building Services) reflect a favourable variance of $1.272M. The $1.272M favourable variance is comprised of $0.378M favourable variance in Revenues and $0.894M net favourable variance in Expenditures, as shown below:

Revenues	Fav./ (Unfav.)			Expenditures	Fav./ (Unfav.)
Financial Services Admin Fees	$0.286		M	Salary & Benefit Costs	$1.250	M
Snow Plowing Unassumed Subdivisions Recovery	$0.175	M		Salary Gapping Allocation	($0.654)	M
Waste/WDO Grant	$0.137		M	Professional Services & Promotions	$0.391	M
Library and Recreation Services User Fees & Service Charges	($0.230)		M	Utilities & Street Light Hydro	$0.321	M
Other	$0.010		M	Operating Materials & Supplies	$0.232	M
				Vehicle Supplies & Fuel	($0.161)	M
				Insurance	($0.295)	M
				Elections	($0.370)	M
				Winter Maintenance	($0.430)	M
				Other	$0.610	M
	$0.378		M		$0.894	M

Further details of all variances are available in the Discussion section of this report.

Waterworks ended August with a year-to-date $0.440M favourable variance. This variance was mainly due to a favourable variance of $0.188M in personnel costs, $0.480M in non-personnel costs and $0.073M for other revenues; and was partially offset by an unfavourable variance of ($0.301M) in the sale and purchase of water.

Also, at the end of August, Building Services had a year-to-date unfavourable variance of ($0.092M). This was mainly due to lower than expected building permits and other revenues resulting in an unfavourable variance of ($0.533M) which was partially offset by favourable variance of $0.398M in personnel expenses and $0.042M in non-personnel expenses.

FINANCIAL CONSIDERATIONS:

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

OPTIONS/ DISCUSSION

YEAR-TO-DATE OPERATING BUDGET VARIANCES:

At the end of eight months, the 2007 operating budget (excluding Waterworks and Building Services) results reflect an overall $1.272M favourable variance. The $1.272M

favourable variance is comprised of favourable variances in three main areas of the

Town’s operating budget:

$0.378M favourable variance in Revenues (Section 1 of the report)

$0.597M favourable variance in Personnel Expenditures (Section 2)

$0.297M favourable variance in Non-Personnel Expenditures (Section 3)

$1.272M

The remainder of the report provides more details of the variances above, and provides details of the Waterworks and Building Services year-to-date variance.

SECTION 1 – REVENUES

At the end of August 2007, revenues were favourable by $0.378M due to the following:

Revenue Items	Fav./(Unfav.)
Taxation Revenues	($0.064)		M
Grant & Subsidy Revenues	$0.217	M
General Revenues	($0.113)		M
User Fees and Service Charges	($0.285)		M
Other Income	$0.623		M
Net Favourable Variance	$0.378		M

General Revenues

The unfavourable variance of ($0.113M) was mainly due to unfavourable parking fines ($0.069M) and Income from Investments ($0.083M) which was partially offset by a favourable variance in Licenses & Permits of $0.074M. The redirection of existing officers, delay in new hires and lower than budgeted portfolio balances resulted in unfavourable variances in Parking fines and Income from Investments respectively however, both are expected to be on budget by year-end.

User Fees and Service Charges

The unfavourable variance of ($0.285M) was primarily related to lower revenue in Recreation Services and Library due to the renovation closures at Centennial Recreation Centre and Markham Village Library ($0.230M). In addition, lower engineering fees contributed to the unfavourable variance by ($0.082M).

Other Income

The favourable variance of $0.623M was mainly due to the Snow Plowing Unassumed Subdivisions Recovery of $0.175M, Financial Services Admin Fees of $0.286M which is due to increased revenue from receipts of subdivision agreements and WDO Grant of $0.137M offset by lower than budgeted Library and Recreation Services user fees & service charges due to renovations and closures at Centennial Community Centre and Markham Village Library.

SECTION 2 – PERSONNEL EXPENDITURES

The August year-to-date personnel expenditure variance was $0.596M favourable:

Salary Expenditures Items	Fav. / (Unfav.)
Full Time Salary	$1.043	M
Part Time/Contract Employees	$0.012	M
Net Favourable Variance	$1.055	M
Benefits Savings	$0.195	M
Salary & Benefit Fav. Variance before Salary Gapping	$1.250	M
Salary Gapping Target	($0.654)	M
Overall Salary & Benefit Favourable Variance	$0.596	M

The $1.043 favourable variance in full time staffing costs was mainly the result of vacant positions (e.g. budgeted positions currently in the recruitment process, and staff away on Long-Term Disability (LTD), Parental Leave).

The favourable variance in employee benefits of $0.195M was mainly the result of the premium holiday the Town is taking from its A.S.O. Long Term Disability program due to surplus monies in account with the Region of York. This holiday is expected to run through to the end of 2007, yielding an estimated total year savings of $0.500M.

Further, the 2007 budget included $0.654M of annual salary gapping savings which had been fully allocated to the individual business units.

SECTION 3 - NON-SALARY EXPENDITURES

At the end of August, Non-Salary expenditures were within budget with the exception of Vehicle Fuel and Parts, Winter Maintenance and Insurance. The variances in the non-salary accounts are outlined below:

Non-Salary Items	Fav. / (Unfav.)
Materials & Supplies	$0.008	M
Purchased Services	$0.669	M
Capital Asset Acquisition	$0.010	M
Transfers to/from Reserves	$0.067	M
Other Expenditures	($0.455)	M

Total Non-Salary Unfavourable Variance	$0.297	M

Materials & Supplies

The favourable variance of $0.008M was mainly due to favourable variances in Library supplies and program expenses $0.111M and Recreation Services $0.076M as a result of the renovations and closures at Centennial Community Centre and Markham Village Library. The favourable variances were partially offset by unfavourable variances in vehicle fuel and parts ($0.161M) and Winter Maintenance salt and sidewalk accounts ($0.430M). Starting in 2006, Winter Maintenance increase is phased-in over 4 years. This is the second year of phase-in with the remaining $0.176M phase-in to be realized in 2008 and 2009. The final variance in the winter maintenance accounts will be dependant upon the winter conditions and snowfall in November and December 2007.

Purchased Services

The $0.669M favourable variance in Purchased Services was due to $0.964M favourable variances in the following accounts offset by a ($0.295M) unfavourable variance in the Town’s insurance expenditures:

$0.391M favourable variance in professional services, promotion, and advertising expenditures across the Town;
$0.194M favourable variance in Utilities across the Town due to cooler summer conditions and savings from the facilities closed for renovation;
$0.151M favourable variance in contracted municipal services primarily due to Street Light Hydro which has been changed from fixed rating to spot rating, and savings were expected as a result from the change;
$0.113 favourable variance in maintenance and repairs across the Town; and
Other accounts

As discussed during the 2007 operating budget process, the budget for higher insurance costs for 2007 is to be phased-in over 4 years. Accordingly, an unfavourable variance due to insurance was projected for 2007.

Other Expenditures

The $0.455M unfavourable variance in Other Expenditures was due to $0.370M unfavourable variances in Elections Rebate Program.

SECTION 4 - WATERWORKS

Waterworks reported a year-to-date favourable variance of $0.440M at the end of August (see Appendix 2).

The year-to-date variance was mainly due to favourable variances in Water/Sewer Billings ($0.599M), Personnel expenditures ($0.188M), non-personnel ($0.481M) and other Revenues ($0.072M)) which were partially offset by unfavourable variance in Contracted Municipal Services ($0.900M).

The Waterworks department reported fewer meters installations, fewer required maintenance and delays in receipt of invoices resulted in a favourable variance in non-personnel of $.450M. Also, the favourable $0.072M variance in Other Revenues was due to greater number of signed subdivisions than planned.

SECTION 5 – BUILDING SERVICES

Building Services reported ($0.091M) unfavourable variance at the end of eight months (refer to Appendix 3).

The unfavourable variance is primarily due to lower than projected building permit revenue arising from lower than expected construction activity ($0.502M) which was partially offset by favourable variance in personnel costs $0.398M. Building permit activity is not expected to recover by year-end and will result in an unfavourable variance in revenues for the Building Services department. As per the budget, $0.622M will be transferred to Reserves resulting in to a transfer from the reserve of $1.122M to fund the projected deficit.

The reporting of Building Services separate from the Town’s operating results was new in 2006 due to the implementation of Bill 124 - Building Code Statute Law Amendment Act in mid-2005. As reported to Council in June of 2005, with the implementation of Bill 124, the Building Services department became “self-funding” (e.g. full-cost recovery) through Building fees. A separate reserve was established for Building fees to stabilize development fee rates and to fund actual shortfalls in the Building department in future years.