Report to: General Committee Date of Meeting: March 29, 2010

SUBJECT: Status of Capital Projects as of December 31, 2009

PREPARED BY: David Milenkovski, Senior Financial Analyst

RECOMMENDATION:

1) THAT the report entitled “Status of Capital Projects as of December 31, 2009” be received;

2) AND THAT $1.12M from closed capital projects be transferred to the sources of funding as listed on Exhibit A;

3) AND THAT $200,000 be transferred from the Waterworks Stabilization/Capital Reserve account to fund the Relocation of Waterworks Operations from Miller Avenue to 8100 Warden Avenue (account # 053-5350-9502-005);

4) AND THAT the Capital Budget Control Policy section 3.1 be amended to grant authority to Staff to approve funding transfers (within limits defined in Expenditure Control Policy section 6.03),

5) AND THAT the Capital Budget Control Policy section 3.2 be amended to grant authority to the CAO to approve refinements to activities within approved scope of the project,

6) AND THAT the Capital Budget Control Policy section 3.3 be amended to grant authority to the Treasurer to approve project consolidations, as long as the projects involved are of a similar scope;

7) AND THAT the CAO be delegated authority to make any future administrative changes to the Capital Budget Control Policy;

AND THAT Staff be authorized and directed to do all things necessary to give effect to this resolution.

EXECUTIVE SUMMARY:

Capital Projects to be Closed

There are 101 capital projects recommended for closure with a total budget remaining of $1.12M as of December 31, 2009, which will be returned to the original sources of funding as listed in Exhibit A. The following is a summary of the sources of funding to which the remaining budgets will be returned;

Source of Funding Amount

DCA $0.20M

Reserve Funds $0.06M

Reserves $0.48M

Capital Contingency $0.07M

Capital Budget Gapping $0.31M

Total $1.12M

Status of Open Capital Projects

There are 592 projects that have been requested to remain open, with a total budget of $403.84M as of December 31, 2009 (excluding approved 2010 capital projects). The following summarizes the status of these open capital projects;

Open Capital $403.84M

Total Encumbered $180.44M 45%

Unencumbered/Uncommitted $223.40M 55%

This indicates that 45% of the total approved open capital project budget is encumbered by expenditures and outstanding purchase orders. These totals do not include the 102 capital projects recommended for closure in this report.

Amendment of the Capital Budget Control Policy

Currently, Section 3.1 of the Capital Budget Control Policy states “Requests for additional funding to an approved project are governed by the Expenditure Control Policy”. Section 3.1 also states “Requests for additional funding will be included in the semi-annual report to Council for approval”. Staff recommends that section 3.1 of the Capital Budget Control Policy be amended such that Staff be given authority to approve funding transfers and scope changes, within limits as defined in the Expenditure Control Policy (section 6.03), as follows:

Staff Member	Authorization Limit
Director	$10,000 and less than 10% contract value
Commissioner	$25,000 and less than 10% contract value
Treasurer	$50,000 and less
CAO	$100,000 and less
Council	Greater than $100,000

This alignment with the Expenditure Control Policy will eliminate the inconsistencies with the request for additional funds.

Staff also proposes amending section 3.2 of the Capital Budget Control Policy to allow for refinements to activities within approved scope of the project subject to approval of the CAO. Changes in the nature of work of a project must continue to be approved by Council.

Additionally, Staff recommends that section 3.3 of the Capital Budget Control Policy be amended so that the Treasurer can approve consolidations of projects with a similar scope.

Amended sections 3.1 to 3.3 of the Capital Budget Control Policy can be found on exhibit C pages 2 to 4.

PURPOSE:

CAPITAL PROJECTS TO BE CLOSED

There are 101 capital projects recommended for closure. Of the total budget of $17.85M for these projects, $1.12M was not spent and will be returned to the original sources of funding as listed in Exhibit A.

STATUS OF OPEN CAPITAL PROJECTS

The total capital budget for open projects at December 31, 2009 is $403.84M of which, $180.44M (or 45%) is encumbered by expenditures/commitments. The unexpended amount, for which there are no expenditures/commitments, is $223.40M ($403.84M -$180.44M). These amounts exclude the 101 capital projects recommended for closure in this report.

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 a majority of these inactive projects are being closed and are included in Exhibit A.

FINANCIAL CONSIDERATIONS:

CAPITAL PROJECTS TO BE CLOSED

A detailed listing of capital projects with unexpended funds totaling $1.12M, to be closed upon approval of this report, is outlined in the following Exhibits:

Exhibit A “Summary of Closed Capital Project Funding to be Transferred” summarizes where the closed capital project balances will be transferred;

Exhibit B “Closed Capital Projects – With Funds to be Returned to Original Sources of Funding” provides a detailed summary by project where the closed capital project balances will be transferred.

Exhibit A summarizes the return of funds from the closed capital projects to the original sources of funding. In accordance with the Capital Budget Control Policy, the remaining funds from the closure of operating budget and life cycle replacement and capital reserve funded capital projects will be transferred as follows;

The capital contingency is topped up to a maximum of $250k from closed projects. Since the balance of the contingency is currently $185k, only $65k needs to be transferred to the contingency from Life Cycle and Operating Budget funded projects.

As part of the Town’s commitment to achieve a 0% net tax rate increase in 2010, the budget had pre-committed $315,000 of capital budget gapping funds to cover for the 2010 budget shortfall. As such, dollars remaining from the closure of Operating Budget and Life Cycle Replacement and Capital Reserve will be transferred to the capital budget gapping. As shown on Exhibit A, the total available to be transferred is sufficient to cover this pre-commitment.

Similarly, there are Planning Development Charge (DC) and Design DC capital contingencies that are funded from the closure of capital projects in the Planning department and in the Design department to a maximum of $50,000 and $100,000 respectively. The Planning DC contingency currently has a balance of $50,000, so no additional amounts will be closed to this contingency. The Design DC contingency currently has a balance of $14,870, but no projects from the Design department with remaining funds have been identified for closure, therefore the Design DC contingency cannot be topped up to $100,000.

In summary, the net amount of $1.12M as outlined in Exhibit A will be transferred back to the original sources of funding as follows:

Source of Funding Amount

DCA $0.20M

Reserve Funds $0.06M

Reserves $0.48M

Capital Contingency $0.07M

Capital Budget Gapping $0.31M

Total $1.12M

The majority of the projects listed in Exhibit B 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. There are some projects listed on Exhibit B that did not begin and thus are returning their entire budgets to the original sources of funding. The following are the reasons:

Facility Assets

Project # 8642 – Operations Facilities Improvements – West Parks Paint Shop –Budget of $20,400 : This project was requested for painting the John Street water tower. Staff opted to defer the paint work as it was unclear what to do with the Tower (tear it down, or leave it and paint it).

Waterworks

Project # 8319 – Sanitary Trunk Sewer Inspection Program – Budget of $60,000 : This was the 2008 annual budget request for sanitary trunk sewer inspections but the project was delayed due to a lack of staff resources at the time. The project was eventually tendered in 2009 and the 2009 annual budget request was sufficient to complete the project. Therefore, these funds are no longer required.

Project # 8430 – Water System Hydraulic Modeling (Flushing Module) – Budget of $18,000 : A module was purchased with funds from ITS project # 8674 (Water System Modeling) instead of this project, therefore these funds are not required.

Engineering

Project # 7270 – Mid-Block Crossing at Highway 404 between Elgin Mills and 19^th Avenue – Budget of $150,219 : The feasibility study has been completed and the project is awaiting an Environmental Assessment by the Region of York. However, the timing for completion of this work has not yet been determined, therefore this funding can be returned and the budget will be requested again at a later date.

Projects with over expenditures (or negative balances remaining) will be offset against other identified closed projects with the same funding source(s), as per guidelines established in the Expenditure Control Policy.

STATUS OF OPEN CAPITAL PROJECTS

As of December 31, 2009, there are 592 open capital projects with a total budget of $403.84M (excluding approved 2010 capital projects). 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 $403.84M

Total Encumbered $180.44M 45%

Unencumbered/Uncommitted $223.40M 55%

This indicates that 45% of the total approved open capital project budget is encumbered.

These totals do not include the 101 capital projects recommended for closure in this report.

The total encumbered of $180.44M includes commitments of $34.94M and expenditures of $145.50M.

Commitments refer to purchase orders (PO’s) on file with the Purchasing Department as of December 31, 2009. Expenditures refer to payments issued for goods/services received as of December 31, 2009.

PROJECT REQUIRING ADDITIONAL FUNDING

The following details a funding shortfall that was encountered by one project and a proposal for ensuring adequate funding is available;

Project # 9502 – Relocation of Waterworks Operations from Miller to 8100 Warden Avenue

A staff award dated July 7, 2009 entitled “061-R-09 Consulting Services for Facility Project Management and Space Planning” awarded an amount of $364,810.20 for the Relocation of Waterworks Operations from Miller Avenue to 8100 Warden Avenue (account # 053-5350-9502-005). The budget available for this move at the time the award was prepared was $164,810.20. The shortfall of $200,000 was temporarily funded from the 2009 Facility Assets Corporate Accommodation account # 750-101-5399-9218. Since this move was to accommodate the Waterworks department, Staff recommends returning the $200,000 to the Life Cycle Replacement and Capital Reserve and funding the shortfall from the Waterworks Stabilization/Capital Reserve account (account # 086-2700-112). This will be offset by the $454,851 being returned to the Waterworks Stabilization/Capital Reserve account from other closed projects.

AMENDMENT OF CAPITAL BUDGET CONTROL POLICY

Staff Member	Authorization Limit
Director	$10,000 and less than 10% contract value
Commissioner	$25,000 and less than 10% contract value
Treasurer	$50,000 and less
CAO	$100,000 and less
Council	Greater than $100,000

This alignment with the Expenditure Control Policy will eliminate the inconsistencies with the request for additional funds.

Staff also proposes amending section 3.2 of the Capital Budget Control Policy to allow for refinements to activities within the approved scope of a project, subject to approval of the CAO. Changes in the nature of work of a project must continue to be approved by Council.

Staff is also proposing that section 3.3 of the Capital Budget Control Policy be amended to allow consolidations of projects of a similar scope to be reviewed and authorized by the Treasurer on a periodic basis, in order to reduce the total number of open capital projects and simplify the reporting of similar projects. Projects considered for consolidation must be of a similar scope. Requests for consolidation of projects with different scopes must continue to be approved by Council.

A copy of the Capital Budget Control Policy is attached in Exhibit C and the revised sections 3.1 to 3.3 are highlighted in pages 2 to 4 of the exhibit.

ATTACHMENTS:

Exhibit A Summary of Closed Capital Project Funding to be Transferred

Exhibit B Closed Capital Projects – With Funds to be Returned to Original Sources of Funding

Exhibit C Amendment to Capital Budget Control Policy