Report to: General Committee – Finance & Admin. Date of
Meeting: September 14, 2009
SUBJECT: June 2009 Year-To-Date Review of Operations and Year-End Projection
PREPARED BY: Andrea Tang, Manager Financial Planning
RECOMMENDATION:
THAT the
report dated September 14,
2009 entitled “June 2009 Year-To-Date
Review of Operations and Year-end Projection” be received.
EXECUTIVE SUMMARY:
Town
At the end of June
2009, the operating budget results (excluding Planning & Design,
Engineering, Building Services and Waterworks) reflects a favourable variance
of $1.240M. The $1.240M favourable
variance is comprised of a $0.438M favourable variance in Revenues and a $0.802M
favourable variance in Expenditures, as shown below:
|
Revenues
|
Fav./
(Unfav.)
|
|
Expenditures
|
Fav./ (Unfav.)
|
|
Income from
investments
|
$0.500 M
|
|
Salary &
Benefit Costs
|
$1.109 M
|
|
Tax interest and
penalties
|
$0.350 M
|
|
Salary Gapping
Allocation (full year)
|
($0.455) M
|
|
Streetlight
hydro and snow plowing recoveries for unassumed roads
|
$0.281 M
|
|
Winter
Maintenance
|
($0.980) M
|
|
Grants (Waste
Diversion Ontario,
Economic Development & Recreation)
|
$0.107 M
|
|
External legal
fees
|
($0.146) M
|
|
Financial
services administration fee
|
($0.459) M
|
|
Training/Travel/Promotion
& Advertising/Rental/Lease/Professional Fees/Office Supplies
|
$0.494 M
|
|
Theatre revenue
– professional entertainment series
|
($0.218) M
|
|
Utilities
(natural gas, hydro & streetlight hydro)
|
$0.455 M
|
|
New tax account
& ownership changes administration fee
|
($0.072) M
|
|
Fuel
|
$0.221 M
|
|
Fire
(inspection/vehicle accident fees/flashover simulator/second suite inspection
fees)
|
($0.071) M
|
|
Other
|
$0.104 M
|
|
Other
|
$0.020 M
|
|
|
|
|
Total
|
$0.438 M
|
|
Total
|
$0.802 M
|
Based on the preliminary July YTD results and the key economic
indicators, the Town has prepared a year-end projection. The year-end surplus is projected to be $0.500M
favourable to $1.500M favourable before year-end accounting accruals of
approximately ($2.300M).
Planning & Design
Planning &
Design ended June with a year-to-date unfavourable variance of ($0.899M). This was due to an unfavourable variance of
($1.184 M) in revenues, offset by favourable variances of $0.266M in personnel
costs, and $0.019M in non-personnel costs.
Planning &
Design is projecting a year-end deficit of ($1.490M) compared to a budgeted
deficit of ($1.309M). This will result
in an additional draw from reserves of ($0.181M). The unfavourable variance is due to lower
user fees, partially offset by a favourable variance in personnel.
Engineering
Engineering ended
June with a year-to-date unfavourable variance of ($0.119M). This was due to an unfavourable variance of
($0.302M) in revenues, offset by a favourable variance of $0.183M in personnel and
non-personnel costs.
Engineering is projecting a year-end deficit of ($1.912M) compared
to a budgeted deficit of ($2.505M); thereby, projecting a lower draw from
reserves of $0.593M. This is due to higher
than budgeted engineering and administration fees.
Building Services
Building Services ended June year-to-date unfavourable by ($1.735M). This was due to lower than expected building
permit revenue of ($1.941M); offset by a favourable variance of $0.206M in
personnel and non-personnel costs.
Building Services is projecting a year-end deficit of ($2.873M)
compared to a budgeted deficit of ($0.375M).
This will result in an additional draw from reserves of ($2.498M). The
unfavourable variance is due to lower building permit revenues.
Waterworks
Waterworks ended June
with a year-to-date favourable variance of $0.693M. This variance was due to favourable variances
of $1.017M in non-personnel costs,
$0.283M in personnel costs, and $0.212M in other revenues; offset by an
unfavourable variance of ($0.819M) in the net sales and purchases of water.
Waterworks is
projected to have an unfavourable variance of ($0.250M) to ($0.750M) at
year-end. The unfavourable variance is driven by significant rainfall and a
higher than budgeted water loss. In order to balance the budget, a draw from
reserve will be required if there is a deficit.1. Purpose 2. Background 3.
Discussion 4. Financial 5. Environmental
PURPOSE:
To provide an
overview of the year-to-date financial results at the end of June 2009 and a
2009 year-end projection.
BACKGROUND:
There are 5 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 4 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.
In June 2009, staff reported the March 2009
year-to-date review of operations and year end projections for each of the 5
operation budgets.
OPTIONS/
DISCUSSION
YEAR-TO-DATE OPERATING BUDGET VARIANCES:
Town
At the end of six months, the 2009 operating budget (excluding Planning
& Design, Engineering, Building Services and Waterworks) results reflected
an overall $1.240M favourable variance.
The $1.240M favourable variance was comprised of variances in three
main areas of the Town’s operating budget:
$0.438M favourable
variance in Revenues
$0.654M favourable
variance in Personnel Expenditures
$0.148M favourable
variance in Non-Personnel Expenditures
$1.240M
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 June 2009, revenues were
favourable by $0.438M due to the followings:
|
Revenue Items
|
Fav./(Unfav.)
|
|
General Revenues
|
$0.895
M
|
|
Grant & Subsidy Revenues
|
$0.107
M
|
|
User Fees and Service Charges
|
($0.369) M
|
|
Other Income
|
($0.195) M
|
|
Net Favourable Variance
|
$0.438
M
|
General Revenues
The favourable variance of $0.895M was due to investment income of $0.500M of
which $0.200M was due to the portfolio balance and $0.300M being interest rate
driven; and tax interest and penalties $0.350M.
Grant & Subsidy Revenues
The Town received additional grants of $0.064M in excess of the
budget from Waste Diversion Ontario. In
addition, the Town received one-time grants in Economic Development and
Recreation totaling to $0.043M.
User Fees and Service Charges
The unfavourable variance of ($0.369M)
was primarily due to lower theatre ticket sales in the professional
entertainment series of ($0.218M), new tax accounts and ownership changes
administration fees ($0.072M).
Other Income
The unfavourable variance of
($0.195M) was primarily due to lower financial services administration fee of
($0.459M) and lower Fire revenues of ($0.071M) for inspection fees, vehicle
accidental fees, second suite inspection fees and flashover simulator, offset by
additional revenues from streetlight hydro and snow plowing recoveries for
unassumed roads $0.281M.
PERSONNEL EXPENDITURES
The June year-to-date personnel expenditure variance
was $0.654M favourable:
|
Salary Expenditures Items
|
Fav./(Unfav.)
|
|
Full Time Salaries net of vacancy
backfills
|
$1.919
|
M
|
|
Overtime
|
($0.593)
|
M
|
|
Other Personnel Costs
|
($0.217)
|
M
|
|
Favourable Variance before Salary Gapping
|
$1.109
|
M
|
|
Salary Gapping
|
($0.455)
|
M
|
|
Salaries & Benefits Favourable
Variance
|
$0.654
|
M
|
The $1.919M favourable variance in full time salaries
net of vacancy backfills was the result of 52 net vacant positions; mainly offset
by an unfavourable variance of ($0.593M) in Fire and Operations overtime due to
an average of 12 vacancies in Fire through June and Operations requirements for
winter maintenance.
The unfavourable variance of ($0.217M) in other
personnel costs was due to part-time salaries in Recreation ($0.142M) and the Sustainability
Office ($0.059M).
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 June, Non-Salary expenditures were $0.148M
favourable:
|
Non-Salary Items
|
Fav. / (Unfav.)
|
|
Materials & Supplies
|
$0.418 M
|
|
Purchased Services
|
($0.317) M
|
|
Other
Expenditures
|
$0.047 M
|
|
Total Non-Salary Favourable Variance
|
$0.148 M
|
Materials & Supplies
The Material & Supplies variance
of $0.418M was due to lower fuel costs (price driven) by $0.220M, lower
operating materials and supplies for Fire and Recreation $0.130M, lower
streetlight hydro by $0.066M and lower office supplies $0.052M; partially
offset by unfavourable variances for purchases of salt and sand for winter
maintenance ($0.045M).
Purchased Services
The unfavourable
variance of ($0.317M) in Purchased Services was due to winter maintenance of ($0.935M),
external legal fees ($0.146M), with the unfavourable variance being offset by
the following accounts:
- $0.442M favourable variance in training, travel, promotion
& advertising, rental/lease and professional services;
- $0.389M favourable variance in utilities across the Town due to
lower consumption volume;
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 ($0.899M) at the end of June (see Appendix 2).
The unfavourable revenue variance of ($1.184M) was due to lower user
fees as a result of reduced development applications, offset by favourable variance
of $0.285M in personnel and non-personnel expenditures.
The June year-to-date results represent a continuation of the reduced
development applications resulting to an unfavourable variance in planning
fees.
ENGINEERING
Engineering reported a year-to-date unfavourable
variance of ($0.119M) (Appendix 3).
The unfavourable revenue variance of ($0.302M) is due to lower user
fees as a result of less development application activity, offset by a
favourable variance of $0.183M in personnel and non-personnel expenditures.
The June year-to-date results represent an improvement in the
department’s engineering and administration fees as compared to budget.
BUILDING SERVICES
Building Services reported an unfavorable
variance of ($1.735M) at the end of six months (see Appendix 4). The unfavourable revenue variance of
($1.941M) is due to lower than budgeted building permit revenues, partially offset
by the favourable variance of $0.206M in personnel and non-personnel costs.
In the second quarter building permit
revenue was unfavourable by ($0.612M) as compared to the first quarter unfavourable
variance of ($1.355M).
WATERWORKS
Waterworks reported a year-to-date favourable
variance of $0.693M at the end of June (see Appendix 6). The YTD net sales and
purchases of water was unfavourable by ($0.819M) due to lower sales resulting
from significant amount of rainfall (and cooler summer months); as well as
higher than budgeted water loss (11% compared to 8%). This unfavourable variance was offset by
favourable variances in non-personnel costs of $1.017M, $0.283M in personnel
costs due to an average 5 vacancies, and $0.212M in other revenues.
ECONOMIC KEY INDICATORS
Staff identified 15 economic key indicators early in this year, to
assess the impact of the current economic situation on Town operations. As communicated in the March YTD report, these
indicators are 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 continues to have a negative impact to
development related revenues. These
include planning, engineering, building, legal revenues (from developer’s
agreements) and financial service administration fees. The results for the second quarter in 2009
show a significant reduction from the same period from the prior years due to
slower development activities. This is
evident by the chart below which outlines the declining trend in the six months
for the years 2006-2009.
Although revenues continue to trend unfavourably compared to prior
years, Building permit revenue for the period from April to June (2009 vs.
2008) was less unfavourable than the period January to March (2009 vs. 2008). On the other hand, Planning & Design and
Engineering fees are trending more unfavourable in the second quarter.
YTD June Actual Development Related
Revenues
DC Revenues
DC revenues continue to trend below the prior year due to lower
development activity resulting from the current economic downturn. Higher DC Revenues in 2007 were due to
increased development activity prior to the Region of York’s development
charges by-law update.
For the three months period April to June, DC revenue total $2.990M
compared to $9.104M for the same period in 2008.
YTD June Actual DC Revenues
Recreation &
Culture Revenues
The Recreation revenues are trending consistently in the second
quarter with the same period in prior years, and are trending upwards through
June YTD with the same period in the prior years.
YTD June Actual Recreation & Culture
Revenues
Expenditures
Staff will continue to monitor the spending on winter maintenance
and streetlight maintenance.
YTD June 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 June year-to-date results, it is anticipated that the
year-end projection will range from $0.500M favourable to $1.500M favourable before
year-end accounting accruals.
It is expected that the year-end revenue variance will range from being
on budget to $0.500M favourable 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, lower Theatre ticket sales from the professional
entertainment series and lower Fire revenue due to lower inspection fees, vehicle
accident fees, flashover simulator and second suite inspection fees.
The year-to-date Recreation revenue is on budget, however, it is
projected to be unfavourable in arena rentals due to lower non-primetime rental
and lower aquatic program revenue due to the closure of the Centennial Community
Centre pool and lower fill rate at the Milliken Mills Community Centre pool.
The year-end
expenditure variance will range from being $0.500M favourable to $1.000M
favourable. This variance is due to favourable
personnel expenditures resulting from vacancies, lower than budgeted fuel cost and
lower utility consumption, offset by unfavourable variances in winter maintenance
and external legal fees.
The year-end accounting accrual is estimated to be $2.300M which
includes provisions for the firefighters vested sick leave program, post
retirement benefits, 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 ($1.490M) compared to a
budgeted deficit of ($1.309M). This will
result in an additional draw from reserves of ($0.181M).
This is an additional ($0.070M) draw from reserves when compared to the
previous forecast.
Engineering is projecting a year-end deficit of ($1.912M) compared to a
budgeted deficit of ($2.505M); thereby, projecting a lower draw from the
reserves of $0.593M.
This is a reduction in a draw from reserve of $0.668M when compared
to the previous forecast.
The 2009 budget projected draw from reserves for both Planning &
Design and Engineering is ($3.814M).
Based on the revised forecast the anticipated draw from reserves is
projected to be ($3.402M) or a reduction of $0.412M.
Based on the revised forecast, the reserve will be in a negative
balance of ($5.153M) by the end of the year (Appendix 5).
Building Services
The projected year end deficit in Building Services will result in a
draw of ($2.873M) from reserves in order to achieve a balanced budget. The budget anticipated a draw from reserves
of ($0.375M); therefore, an additional draw of ($2.498M) is required.
Following the first quarter of 2009, Building brought in a
consultant to analyze the current market.
Frank Clayton from Altus Consulting provided a 4 year estimate for residential
building permits from 2009 to 2012.
Included within were 3 estimates; a low (10% confidence), best estimate
(60% confidence), and high (30% confidence).
The consultant recommended using the best estimate which identified
1,080 building permits for 2009. Based
on July year-to-date results, this estimate is consistent with current
trending.
This will result in a negative reserve balance of ($0.543M) by the
end of the year (Appendix 5).
Waterworks
Based on the July
year-to-date results, Waterworks is projected to be in the range of ($0.250M)
unfavourable to ($0.750M) unfavourable by year end. The unfavourable variance is due to lower net
sales and purchases of water resulting from water loss of 11% compared to a
budget of 8% (2009 reserve study update assumed 10% water loss), as well as a significant
amount of rainfall and cool summer months. This unfavourable variance is partially offset
by favourable personnel and non-personnel expenditures.
FINANCIAL CONSIDERATIONS:
Staff will
continue to monitor variances for the remainder of the year.
As per the 2010 budget schedule, Staff will be presenting the 2010
Planning & Design, Engineering and Building Services Operating Budgets and
future year forecasts at the October 13th, 2009 Development Services Committee
meeting, and the 2010 Waterworks Operating Budget on the October 19th, 2009
General Committee meeting.
RECOMMENDED
BY: ________________________ ________________________
Joel Lustig, Director Barb
Cribbett, Treasurer
Financial
and Client Services
________________________
Andy Taylor, Commissioner
Corporate
Services