Report to: General Committee Date of Meeting: March 17, 2008

SUBJECT: Status of Capital Projects as of December 31, 2007

PREPARED BY: Andrea Tang, Manager, Financial Planning

David Milenkovski, Senior Financial Analyst

RECOMMENDATION:

That the report dated March 17, 2008 entitled “Status of Capital Projects as of December 31, 2007” be received;

And that $6.91M from closed capital projects be transferred to the sources of funding as listed on Exhibit A entitled “Summary of Closed Capital Projects by Account”;

And that projects listed on Exhibit B entitled “Summary of Completed Open Capital Projects Pending Payment of Final Invoices” be closed upon payment of final invoices and any outstanding amount returned to/from the original sources of funding;

And that Staff be authorized and directed to do all things necessary to give effect to this resolution.

PURPOSE:

To inform Council on the status of Capital Projects as of December 31, 2007 in accordance with the Capital Budget Control Policy.

BACKGROUND:

As at the end of December 2007, the Town of Markham had $217.20M of open capital projects.

· $212.15M which are projects still in progress

· $ 5.05M which are projects that are substantially completed and awaiting final invoice payment or fully committed (see Exhibit B)

CAPITAL PROJECTS TO BE CLOSED

There are 211 capital projects ($78.40M budget) recommended for closure for a total of $6.91M (Exhibit A).

STATUS OF CAPITAL AWAITING PAYMENT OF FINAL INVOICES

There are 54 open capital projects ($5.05M budget) that are completed but remain open, pending payment of outstanding invoices, as listed on Exhibit B. Upon payment of final invoices, these projects will be closed and any remaining funding will be transferred to/from the original sources of funding.

STATUS OF OPEN CAPITAL PROJECTS

The total capital budget for open projects under 100% encumbered at December 31, 2007 is $212.15M of which, $120.76M (or 57%) is encumbered by expenditures/commitments. The unexpended amount, for which there are no expenditures/commitments, is $91.39M ($212.15M-$120.76M).

Staff has conducted a compliance review on all open capital projects. In accordance with the Capital Budget Control Policy Section 4.1, projects that remain inactive for a period of twenty-four months or longer are subject to closure. The non-compliant projects were discussed and reviewed by the business units, of which majority of these inactive projects are closed and are included in Exhibit A “Summary of Closed Capital Projects”.

FINANCIAL CONSIDERATIONS:

CAPITAL PROJECTS TO BE CLOSED – EXHIBIT A

A detailed listing of capital projects with unexpended funds totaling $6.91M, to be closed upon approval of this report, is outlined in the following Exhibits:

Exhibit A “Summary of Closed Projects by Account” summarizes where the closed capital project balances will be transferred;

Exhibit A-1 “Summary of Closed Capital Projects - Detail” provides a detailed summary by project where the closed capital project balances will be transferred;

Exhibit A-2 “Summary of Closed Capital Projects – Detail, Projects that have been Fully Spent” outlines projects that have been 100% spent and therefore have no balance to return to their original funding source(s).

Exhibit A shows three transfers to capital contingency projects, $0.23M to the capital contingency project, $0.03M to the Planning DC Contingency project, and $0.01M to the Design DC Contingency project. These transfers are made in accordance with the Capital Budget Control Policy to top-up the capital contingencies to $0.25M, $0.05M and $0.10M respectively.

The capital contingency is funded from the closure of operating budget and Life Cycle Replacement & Capital Reserve funded capital projects. Once the capital contingency account is at the maximum $0.25M, further closures of operating budget & Life Cycle Reserve funded capital projects in the amount of $0.86M will be returned to the Life Cycle Replacement & Capital Reserve.

Similarly to the Capital Contingency, the Planning DC and Design DC Capital Contingencies are funded from the closure of capital projects in the Planning department to a maximum of $0.05M and in the Design department to a maximum of $0.10M, of which $0.03M and $0.01M will be allocated to the Planning DC and Design DC Capital Contingency accounts respectively.

Exhibit A also includes a repayment of $0.07M to the developer Townhomes of Thornhill Village, Inc. This relates to Project # 6151, John Street Sanitary Sewer – Bayview Avenue to Regional Trunk Sewer. The report to Council dated January 17, 2006 stated that funding for this project was entirely from the developer, and “upon payment of all invoices and engineering fees, any remaining funds will be returned to the original funding source, the developer, Townhomes of Thornhill Village, Inc.”

In summary, the net amount $6.91M as outlined in Exhibit A to be transferred back to the original source(s) of funding is as follows:

Source of Funding Amount

Reserves $1.29M

Reserve Funds $1.15M

Developer $0.07M

DCA $4.13M

Capital Contingency $0.23M

Planning DC Capital Contingency $0.03M

Design DC Capital Contingency $0.01M

Total $6.91M

The majority of the projects listed in Exhibit A-1 are projects that were completed within budget. Projects that were under spent will have the balance transferred back to the original source(s) of funding. Projects with over expenditures that fall within the guidelines established in the Expenditure Control Procedures will have the necessary funds allocated from other identified closed projects.

Projects listed in Exhibit A-2 are projects that were completed on budget. Therefore, there is no surplus funding from these projects to return to their original funding source(s).

STATUS OF CAPITAL AWAITING PAYMENT OF FINAL INVOICES – EXHIBIT B

Exhibit B, “Summary of Completed Open Capital Projects Pending Payment of Final Invoices at December 31, 2007” lists open capital projects with a total budget of $5.05M.

This exhibit identifies projects that are complete but still have outstanding invoices to be paid. The purpose of this Exhibit is to obtain approval at this time to close these projects, upon payment of final invoices. Obtaining pre-approval, at this time, to close fully expended/committed projects will allow for more timely and frequent closing of capital projects in the future which will lead to more efficient use of funding.

STATUS OF OPEN CAPITAL PROJECTS

As of December 31, 2007, there are 469 open capital projects with total budget of $212.15M. The term “open” refers to projects which have been approved but have not started or are at various stages of completion.

The following summarizes the status of open capital:

Open Capital $212.15M

Total Encumbered $120.76M 57%

Unencumbered/Uncommitted $ 91.39M 43%

This indicates that 57% of the total approved open capital project budget is encumbered. Out of the unencumbered/uncommitted amount of $91.39M, $44.50M or 49% represent the remaining balances from the 2007 projects due to the late approval of the 2007 budget in May 2007.

Total Encumbered:

The total encumbered of $120.76M includes commitments of $23.24M and expenditures of $97.52M.

Commitments refer to purchase orders (PO’s) on file with the Purchasing Department as of December 31, 2007, and does not include PO’s issued or in process since December 31. Expenditures refer to payments issued for goods/services received as of December 31, 2007.

RECOMMENDED

BY: ________________________ ________________________

Barb Cribbett, Treasurer Andy Taylor, Commissioner

Corporate Services

ATTACHMENTS:

Exhibit A - Summary of Closed Capital Projects by Account

Exhibit A-1 - Summary of Closed Capital Projects – Detail

Exhibit A-2 - Summary of Closed Capital Projects – Detail (Projects that have been fully spent)

Exhibit B - Summary of Completed Open Capital Projects Pending Payment of Final Invoices at December 31, 2007