Report to: General Committee – Finance & Admin. Date of Meeting: October 26, 2009

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

PREPARED BY: Andrea Tang, Manager Financial Planning

RECOMMENDATION:

THAT the report dated October 26, 2009 entitled “September 2009 Year-To-Date Review of Operations and Year-end Projection” be received.

EXECUTIVE SUMMARY:

Town

At the end of September 2009, the operating budget results (excluding Planning & Design, Engineering, Building Services and Waterworks) reflects a favourable variance of $2.671M. The $2.671M favourable variance is comprised of a $1.092M favourable variance in Revenues and a $1.579M favourable variance in Expenditures, as shown below:

Based on the preliminary September 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 September with a year-to-date unfavourable variance of ($0.652M). This was due to an unfavourable variance of ($1.124 M) in revenues, offset by a favourable variance of $0.472M in personnel and non-personnel costs.

Planning & Design is projecting a year-end deficit of ($1.576M) compared to a budgeted deficit of ($1.309M). This will result in an additional draw from reserves of ($0.267). The unfavourable variance is due to lower user fees, partially offset by a favourable variance in personnel.

Engineering

Engineering ended September with a year-to-date favourable variance of $0.405M. This was due to favourable variances in personnel costs of $0.251M, non-personnel costs of $0.057M and revenues of $0.097M.

Engineering is projecting a year-end deficit of ($1.731M) compared to a budgeted deficit of ($2.505M); thereby, projecting a lower draw from reserves of $0.774M.

Building Services

Building Services ended September year-to-date with an unfavourable variance of ($1.666M). This was due to lower than expected building permit revenue of ($1.961M); offset by a favourable variance of $0.295M in personnel and non-personnel costs.

Building Services is projecting a year-end deficit of ($2.209M) compared to a budgeted deficit of ($0.375M). This will result in an additional draw from reserves of ($1.834M). The unfavourable variance is due to lower building permit revenues.

Waterworks

Waterworks ended September with a year-to-date favourable variance of $0.099M. This variance was due to favourable variances of $1.312M in non-personnel costs, $0.318M in personnel costs, and $0.208M in other revenues; offset by an unfavourable variance of ($1.739M) 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 un-metered usage. In order to balance the budget, a draw from reserve will be required should there be a deficit.

PURPOSE:

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 September 2009, staff reported the June 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 nine months, the 2009 operating budget (excluding Planning & Design, Engineering, Building Services and Waterworks) results reflected an overall $2.671M favourable variance.

The $2.671M favourable variance was comprised of variances in three main areas of the Town’s operating budget:

$1.092M favourable variance in Revenues

$0.889M favourable variance in Personnel Expenditures

$0.690M favourable variance in Non-Personnel Expenditures

$2.671M

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

REVENUES

At the end of September 2009, revenues were favourable by $1.092M due to the followings:

Revenue Items	Fav./(Unfav.)
General Revenues	$1.340 M
Grant & Subsidy Revenues	$0.143 M
User Fees and Service Charges	($0.456) M
Other Income	$0.065 M
Net Favourable Variance	$1.092 M

General Revenues

The favourable variance of $1.340M was due to investment income of $0.500M of which $0.060M was due to the portfolio balance and $0.440M being interest rate driven, and tax interest and penalties $0.769M.

Grant & Subsidy Revenues

The Town received a one-time grant of $0.096M in excess of the budget from Waste Diversion Ontario. In addition, one time grants in Recreation, Economic Development and Theatre totaling to $0.047M.

User Fees and Service Charges

The unfavourable variance of ($0.456M) was primarily due to lower theatre ticket sales in the professional entertainment series of ($0.193M), fire inspection fees ($0.078M), and new tax accounts and ownership changes administration fees ($0.068M).

Other Income

The favourable variance of $0.065M was primarily due to additional revenues from streetlight hydro and snow plowing recoveries for unassumed roads $0.281M, and one-time unclaimed refundable deposits for developer front ending agreements $0.256M, offset by lower financial services administration fee of ($0.466M) and lower Fire revenues of ($0.087M) for vehicle accidental fees, second suite inspection fees and flashover simulator.

PERSONNEL EXPENDITURES

The September year-to-date personnel expenditure variance was $0.889M favourable:

Salary Expenditures Items	Fav./(Unfav.)
Full Time Salaries net of vacancy backfills	$2.826	M
Overtime	($1.056)	M
Other Personnel Costs	($0.426)	M
Favourable Variance before Salary Gapping	$1.344	M
Salary Gapping	($0.455)	M
Salaries & Benefits Favourable Variance	$0.889	M

The $2.826M favourable variance in full time salaries net of vacancy backfills was the result of 50 net vacant positions; offset by an unfavourable variance of ($1.056M) in Fire and Operations overtime due to an average of 13 vacancies in Fire through September and Operations requirements for winter maintenance.

The unfavourable variance of ($0.426M) in other personnel costs was due to part-time salaries in Recreation ($0.191M), Sustainability Office and other various departments.

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 September, Non-Salary expenditures were $0.690M favourable:

Non-Salary Items	Fav. / (Unfav.)
Materials & Supplies	$0.783 M
Purchased Services	($0.181) M
Other Expenditures	$0.088 M
Total Non-Salary Favourable Variance	$0.690 M

Materials & Supplies

The Material & Supplies variance of $0.783M was due to lower fuel costs (mainly price driven) by $0.324M, lower operating materials and supplies for Library, Recreation, Museum and Fire $0.278M, and lower office supplies $0.095M.

Purchased Services

The unfavourable variance of ($0.181M) in Purchased Services was due to winter maintenance of ($0.980M), external legal fees ($0.220M), recruitment advertising ($0.075M), and streetlight maintenance ($0.073M) with the unfavourable variance being offset by the following accounts:

$0.668M favourable variance in utilities across the Town due to lower consumption volume;
$0.561M favourable variance in training, travel, promotion & advertising, rental/lease and professional services;

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 ($0.652M) at the end of September (see Appendix 2).

The unfavourable revenue variance of ($1.124M) was due to lower user fees as a result of reduced development applications, offset by favourable variance of $0.472M in personnel and non-personnel expenditures.

The September year-to-date results represent a continuation of the unfavourable variance in planning fees.

ENGINEERING

Engineering reported a year-to-date favourable variance of $0.405M (Appendix 3), which is comprised of a favourable variance of $0.308M in personnel and non-personnel expenditures, and a favourable variance of $0.097M in revenue.

For the three-month period from July through September (third quarter), engineering fees were favourable by $0.400M, as compared to the three-month period from April through June (second quarter) which had a favourable variance of $0.169M.

BUILDING SERVICES

Building Services reported an unfavorable variance of ($1.666M) at the end of nine months (see Appendix 4). The unfavourable revenue variance of ($1.961M) is due to lower than budgeted building permit revenues, partially offset by the favourable variance of $0.295M in personnel and non-personnel costs.

For the three-month period from July through September (third quarter), the building permit revenue was on budget, as compared to the three-month period from April through June (second quarter) which had unfavourable variance of ($0.612M).

WATERWORKS

Waterworks reported a year-to-date favourable variance of $0.099M at the end of September (see Appendix 6). The YTD net sales and purchases of water was unfavourable by ($1.739M) due to lower sales resulting from significant amount of rainfall (and cooler summer months); as well as higher than budgeted un-metered usage. This unfavourable variance was offset by favourable variances in non-personnel costs of $1.312M, $0.318M in personnel costs due to an average 5 vacancies, and $0.208M 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 and June 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 year-to-date September 2009 revenues are significantly reduced from the same period of the prior years due to slower development activities. This is evident by the chart below which outlines the declining trend in the nine months for the years 2006-2009.

Although, the year-to-date revenues continue to trend unfavourably compared to the prior years, the revenues for the three-month period from July to September 2009 are trending more favourably when compared to the same three-month period in 2008 (July to September).

YTD September Actual Development Related Revenues

DC Revenues

The year-to-date DC revenue is trending consistently with the revenue for the same period in 2008. This is mainly due to adjustments to account for the increase in Town Wide Soft Revenue following the passage of the by-law in June 2009. Higher DC Revenues in 2007 were due to increased development activity prior to the Region of York’s development charges by-law update.

YTD September Actual DC Revenues

Recreation & Culture Revenues

The Recreation revenues are trending consistently in the third quarter and in the September year-to-date with the same periods in prior years.

YTD September Actual Recreation & Culture Revenues

Expenditures

Staff will continue to monitor the spending on winter maintenance and streetlight maintenance.

YTD September 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 September 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, which remains unchanged from the June year-end projection.

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, one-time unclaimed refundable deposits for developer front ending agreements 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 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-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, and the favourable variance in non-personnel is due to 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 ($1.576M) compared to a budgeted deficit of ($1.309M). This will result in an additional draw from reserves of ($0.267M).

This is an additional ($0.086M) draw from reserves when compared to June’s year-end projection – deficit of ($1.490M).

Engineering is projecting a year-end deficit of ($1.731M) compared to a budgeted deficit of ($2.505M); thereby, projecting a lower draw from the reserves of $0.774M.

This is a reduction in a draw from reserve of $0.181M when compared to the June year-end projection – deficit ($1.912M).

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 ($3.307M) or a lower draw for reserves of $0.507M.

Based on the revised forecast, the reserve will be in a negative balance of ($5.062M) by the end of the year (Appendix 5).

Building Services

The projected year end deficit in Building Services will result in a draw of ($2.209M) from reserves in order to achieve a balanced budget. The budget anticipated a draw from reserves of ($0.375M); therefore, an additional draw of ($1.834M) is required.

The September year-end projection is improved by $0.664M when comparing to June year-end projection - deficit of ($2.873M) . This resulted from additional activities for commercial building permits.

This will result in a positive reserve balance of $0.141M by the end of the year (Appendix 5).

Waterworks

Based on the September year-to-date results, Waterworks is projected to be in the range of ($0.250M) unfavourable to ($0.750M) unfavourable by year end, which is consistent to the June year-end projection. The unfavourable variance is due to lower net sales and purchases of water resulting from higher than budgeted un-metered usage, 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.

RECOMMENDED

BY: ________________________ ________________________

Joel Lustig, Director Barb Cribbett, Treasurer

Financial and Client Services

________________________

Andy Taylor, Commissioner

Corporate Services