Report to: General Committee – Finance & Admin. Date of
Meeting: February 23, 2009
SUBJECT: 2008 Year End Review of Operations
PREPARED BY: Andrea Tang, Manager Financial Planning
RECOMMENDATION:
1)
That the report dated February 23rd, 2009, entitled “2008 Year End Review of Operations” be received; and,
2) That the preliminary
2008 operating surplus for the Town of Markham (‘Town’) of $0.047M be transferred
to the Corporate Rate Stabilization Reserve; and,
3) That the year
end accounting accruals of $1.767M be funded from the Corporate Rate
Stabilization Reserve; and,
4) That the preliminary
2008 operating unfavourable variances in Planning and Design, Engineering,
Building Standards and Waterworks departments be funded from the Town’s
respective reserves; and further,
5) That any year
end balances in the Ramp-Up Reserve at the end of each fiscal year be transferred
to the Corporate Rate Stabilization Reserve.
EXECUTIVE SUMMARY:
Town
At the end of December 31, 2008, the
operating budget results (excluding Planning & Design, Engineering, Building
Services and Waterworks) reflected a favourable variance of $0.047M. The $0.047M favourable variance was comprised
of $1.818M favourable variance in revenues and ($1.771M) unfavourable variance
in expenditures, as shown below:
|
Revenues
|
Fav./
(Unfav.)
|
|
Expenditures
|
Fav./ (Unfav.)
|
|
Income from investments
|
$1.555 M
|
|
Salaries & benefits
|
$2.431 M
|
|
Interest and penalties
|
$0.630 M
|
|
Salary gapping
|
($0.455) M
|
|
Proceed from
sale of assets and land
|
$0.507 M
|
|
Winter maintenance
|
($3.824) M
|
|
Additional
grants (Waste Diversion Ontario, Eco. Dev. & Museum Grants)
|
$0.254 M
|
|
Street light maintenance
|
($0.355) M
|
|
Snow plowing
recoveries for unassumed subdivisions
|
$0.154 M
|
|
Fuel
|
($0.289) M
|
|
Rental income
from 8100 Warden Ave.
and 60 Esna Park
|
($0.517) M
|
|
Waste
|
($0.116) M
|
|
Recreation revenue
|
($0.400) M
|
|
Utilities
|
$0.709 M
|
|
Financial services
admin. fees
|
($0.341) M
|
|
Training/travel/promotion
& advertising/rental/lease/professional fees
|
$0.260 M
|
|
Other
|
($0.024) M
|
|
Other
|
($0.132) M
|
|
|
$1.818 M
|
|
|
($1.771) M
|
The Town’s 2008 year end results from operations yielded a favourable
variance of $0.047M. It has been the
Town’s practice to include year end accounting accruals in the results of
operations. In 2008, these accounting
accruals total $1.767M placing the Town in a deficit position of ($1.720M)
after inclusion of the year end accounting accruals.
Further details of all variances are available in the Discussion
Section of this report.
Planning & Design
Planning &
Design ended the year with a net unfavourable variance of ($1.511M). The 2008 budget projected a surplus of
$0.118M, and the department ended the year with a deficit of ($1.393M). This resulted in a draw of ($1.511M) from
reserve in order to achieve a balanced budget.
The unfavourable
variance of ($1.511M) was due to lower revenues of ($1.888M) resulting from fewer development
application activities, offset by favourable variances of $0.350M in personnel
costs, and $0.027M in non-personnel costs (see Appendix 2).
Engineering
Engineering ended
the year with a net unfavourable variance of ($0.384M). The 2008 budget projected a deficit of
($1.526M), and the department ended the year with a deficit of ($1.910M). This resulted in an additional draw of
$0.384M from the reserve to achieve a balanced budget.
This was due to an
unfavourable variance of ($0.639M) in Engineering fees, offset by a favourable
variance of $0.207M in personnel costs and $0.048M in non-personnel costs (see
Appendix 3).
The deficits in Planning & Design
($1.393M) and Engineering ($1.910M) resulted in a total draw of $3.303M from
the reserve in order to achieve balanced budgets. This will bring the combined reserve to a
negative balance of ($1.716M) (see Appendix 5).
Building Services
Building Services
ended the year with a net unfavourable variance of ($0.727M). The 2008 budget projected a deficit of ($0.244M),
and the department ended the year with a deficit of ($0.971M). This resulted in an additional draw of
$0.727M from the reserve to achieve a balanced budget.
The variance was
due to lower building permit revenues of ($1.089M), offset by favourable
variances of $0.225M in personnel costs and $0.137M in non-personnel costs (see
Appendix 4).
The additional
draw of $0.727M from the reserve will bring the reserve balance to $2.411M (see
Appendix 5).
Waterworks
Waterworks ended 2008
with a net unfavourable variance of ($1.994M).
The 2008 budget projected a surplus of $8.226M, and the department ended
the year with a surplus of $6.232M. This
resulted in a draw from the reserve in the amount of $1.994M to achieve a
balanced budget.
This unfavourable
variance of ($3.945M) in the net sales and purchases of water resulted from a significant
amount of rainfall. Staff are analyzing
the relationship between sales and purchases to be followed by a meeting with
York Region staff to clarify any differences.
The results from
Waterworks operations yielded favourable variances of $0.538M in personnel costs,
$1.056M in non-personnel costs, and $0.357M in other revenues (see Appendix 6)
totaling $1.951M.
To provide an
overview of the preliminary 2008 year-end financial results.
BACKGROUND:
On
February 12th, 2008,
Council approved the 2008 Budget of $355.3M (adjusted for the 2007 year-end
surplus). The 2008 budget consists of $158.1M
in the Operating budget, $7.0M in the Building Services Operating budget, $59.2M
in Waterworks Operating budget, and $131.0M in the Capital budget.
The
Planning & Design, Engineering, Building Services and Waterworks Operating
Budgets are shown separate from the Town’s Operating Budget as they are
primarily user fee funded (e.g. Building Permit Revenue and revenues based on
water consumption, respectively) and separate reserves have been established
for each.
Each quarter, departments provided details of
significant financial variances (actual to budget) in their areas. The
variances were reviewed, substantiated and summarized by the Financial Planning department. Minor variances were reviewed by staff, but
not discussed in detail in this report.
OPTIONS/ DISCUSSION
YEAR END OPERATING BUDGET VARIANCES:
Town
At the end of the year, the 2008 operating budget (excluding Planning
& Design, Engineering, Building Services and Waterworks) results reflected
an overall $0.047M favourable variance before year end accounting accruals. After inclusion of the year end accounting
accruals in the amount of $1.767M, the Town incurred a deficit of ($1.720M).
The $0.047M favourable variance (before year end accounting
accruals) was comprised of variances in three main areas of the Town’s
operating budget:
$1.818M favourable
variance in revenues
$1.976M favourable
variance in personnel expenditures
($3.747M)
unfavourable variance in non-personnel
expenditures
$0.047M
($1.767M) year end accounting accruals
($1.720M) year end deficit
The remainder of the report provides more details of the variances
above.
REVENUES
At the end of 2008, revenues were favourable by
$1.818M due to the followings:
|
Revenue items
|
Fav./(Unfav.)
|
|
General revenues
|
$2.175 M
|
|
Grant & subsidy revenues
|
$0.276 M
|
|
Taxation revenue
|
$0.084 M
|
|
User fees and service charges
|
($0.665) M
|
|
Other income
|
($0.052) M
|
|
|
|
|
Net favourable variance
|
$1.818 M
|
General Revenues
The favourable variance of $2.175M was due to income from investments of $1.555M
of which $1.090M was due to the portfolio balance, and $0.464M being interest
rate driven; and a favourable variance in interest and penalties $0.630M.
Grants & Subsidy Revenues
The Town received additional grants in excess of the budget from Waste
Diversion Ontario and Federation of Canadian Municipalities totaling to $0.136M. In addition, the Town received one-time
grants in Economic Development of $0.072M and in Museum of $0.038M.
User Fees and Service Charges
The unfavourable variance of ($0.632M)
was primarily driven by recreation fees of ($0.400M or 3.0%) due to lower user
fees in program registration, aquatics and arena rentals.
Other Income
The unfavourable variance of ($0.052M) was due to the loss of rental
income from 8100 Warden Ave. and 60 Esna Park ($0.517 M), and lower financial
services administrative fees on sub-division agreements of ($0.341M) which is
consistent with the lower development trend being experienced by the
Development Services departments; partially offset by the proceeds from sale of
Town assets $0.507M (offset in expenditures to transfer the proceeds to
reserve), and snow plowing recoveries for unassumed subdivisions $0.154M.
PERSONNEL EXPENDITURES
The year end favourable personnel expenditure variance
was $1.976M:
|
Salary expenditures items
|
Fav. / (Unfav.)
|
|
Full time salaries net of vacancy
backfills
|
$4.198
|
M
|
|
Overtime
|
($1.124)
|
M
|
|
Other personnel costs
|
($0.643)
|
M
|
|
Favourable variance before salary gapping
|
$2.431
|
M
|
|
Salary gapping
|
($0.455)
|
M
|
|
Salaries & benefits favourable variance
|
$1.976
|
M
|
The $4.198M favourable variance in full time salaries
net of vacancy backfills was the result of an average of 67 net vacant
positions; offset by an unfavourable variance of ($1.102M) in Fire overtime due
to an average of 11 vacancies during the year.
The unfavourable personnel costs variance was due to
part time and overtime in various departments.
Further, the 2008 budget included $0.455M in salary gapping.
NON-SALARY EXPENDITURES
At the end of 2008, non-salary expenditures were unfavourable
by ($3.747M).
|
Non-Salary Items
|
Fav. / (Unfav.)
|
|
Purchased services
|
($2.627) M
|
|
Materials & supplies
|
($1.182) M
|
|
Other expenditures
|
$0.062 M
|
|
Total Non-Salary Unfavourable Variance
|
($3.747) M
|
Purchased Services
The unfavourable
variance of ($2.627M) in purchased services was due to variances in the
following areas:
- ($3.093M or 84.4%) unfavourable variance related to winter
maintenance;
- ($0.355M or 43.7%) unfavourable
variance in street light maintenance due to unexpected underground
fault repairs and bulb replacements;
- ($0.116M or 1.6%) unfavourable variance in waste collection;
These
unfavourable variances are partially offset by:
- $0.705M favourable variance in utilities across the Town due to
lower consumption volume of $0.510M as a result from energy conservation
efforts, and the delay in the opening of the Centennial Community Centre
expansion $0.195M;
- $0.119M favourable variance in training, travel, promotion
& advertising, rental/lease and professional services.
Materials & Supplies
The unfavourable variance in material
& supplies was due to additional purchases of salt and sand for winter
maintenance ($0.730M or 67.7%), fuel & vehicle parts ($0.295M or 39.8%),
offset by favourable variances in printing and office supplies $0.141M.
FINANCIAL CONSIDERATIONS:
The financial results are unaudited and the audited statements are
expected to be available by mid April, 2009.
In accordance to the Town’s reserve policy, the final 2008 Operating
deficit for the Town will be funded from the Corporate Rate Stabilization
Reserve in 2009.
The Budget Sub-Committee during the 2009 budget process, endorsed
transferring the Ramp-up reserve balance at the end of each fiscal year to the
Corporate Rate Stabilization reserve.
This equates to a transfer of $3.696M resulting in a balance of $17.977M
in the Corporate Rate Stabilization reserve.
According to the reserve policy, the Corporate Rate Stabilization
reserve should be equivalent to 15% of the local tax levy.
The Town’s 2008 deficit in the amount of $1.720M will be funded from
the Corporate Rate Stabilization reserve; leaving the reserve balance at $16.257M
($17.977M-$1.720M) or 15.5% of the local tax levy.
Similarly, the unfavourable variances in Planning & Design,
Engineering, Building Standards and Waterworks will require draws from the
respective reserves in order to fund the shortfalls.
RECOMMENDED
BY: ________________________ ________________________
Barb Cribbett, Treasurer Andy
Taylor, Commissioner
Corporate
Services