Subject: August 2012 YTD Operating Variance Report (Report #12031)

Transcription

1 Date: November 22, 2012 Report to: Board of Directors Submitted by: Brenda Osborne, Chief Executive Officer/ Secretary Prepared by: Maria Zegarac Business Administrator Subject: August 2012 YTD Operating Variance Report (Report #12031) RECOMMENDATION That Report #12031 be received for information. Brenda Osborne, Chief Executive Officer/Secretary EXECUTIVE SUMMARY Year-to-date results as at August 31, 2012 show a net deficit of $123,371. Total revenue is favourable to budget by $44,404 whereas total expenditures are overspent by $167,775. Main categories contributing to the favourable revenue variance are increased Tenant Recoveries and Other Revenue offset by increased Vacancy Loss. The main category contributing to the unfavourable expenditure variance is Maintenance offset by favourable variances in Administration, Utilities and Mortgage/Debenture Interest and Amortization. Further details are outlined below. Date: November 22, 2012 Page 1 of 6

2 BACKGROUND Summarized consolidated Operating results as at August 31, 2012 are shown below: CONSOLIDATED Budget Actual Variance Budget 2012 YTD Forecast 2012 YTD REVENUE OPERATING REVENUE 23,274,865 23,352,503 77,638 34,912,297 35,023,755 CITY OF HAMILTON(SERVICE MANAGER) SUBSIDY 20,939,205 20,905,971-33,234 31,408,808 31,358,957 TOTAL REVENUE 44,214,070 44,258,474 44,404 66,321,105 66,382,712 EXPENSES ADMINISTRATION - SAL/WGS/BEN 5,801,526 5,765,738 35,789 8,702,289 8,640,664 ADMINISTRATION - BAD DEBT 254, , , , ,336 ADMINISTRATION - INSURANCE 713, ,967-33,817 1,069,724 1,120,450 ADMINISTRATION - OTHER 818, ,449 43,807 1,227,400 1,107,137 MATERIALS AND SERVICES 7,261,140 8,220, ,039 10,891,721 11,447,001 UTILITIES 6,714,348 6,382, ,796 10,071,522 10,120,598 PROPERTY TAXES 8,266,677 8,144, ,702 12,400,015 12,359,909 AMORTIZATION/MORT INTEREST 9,131,534 8,949, ,460 13,697,270 13,710,652 ALLOCATION TO CAPITAL RESERVE 5,252,772 5,252, ,879,161 7,879,161 TOTAL EXPENSES 44,214,070 44,381, ,774 66,321,105 66,602,908 NET SURPLUS/(DEFICIT) , , ,196 Appendix A outlines the Statement of Operations and Changes in Fund Balances. The following analysis will detail significant variances within this statement Revenue Detailed revenue information is shown in the chart below: Date: November 22, 2012 Page 2 of 6

3 REVENUE DETAILS Budget Actual Variance OPERATING REVENUE RESIDENTIAL RENT 21,531,410 21,431,433-99,977 COMMERCIAL RENT 789, ,107-45,207 TENANT RECOVERIES 85, , ,933 OTHER REVENUE 868, ,539 92,889 TOTAL OPERATING REVENUE 23,274,865 23,352,503 77,638 CITY OF HAMILTON SUBSIDY RENT/OPERATING SUBSIDY 20,261,358 20,159, ,832 RENT SUPPLEMENT SUBSIDY 677, ,445 68,598 TOTAL CITY OF HAMILTON SUBSIDY 20,939,205 20,905,971-33,234 TOTAL REVENUE 44,214,070 44,258,474 44,404 Operating Revenue Net operating revenue is showing a favourable variance to budget of $77,638 due to: o Residential Rent (unfavourable variance of $99,977) due to: o RGI rent (unfavourable variance of $44,762) o Market rent (unfavourable variance of $55,215) as a result of unfavourable Vacancy Loss due to continued vacancies at First Place representing an average of 62 vacancies per month of which 30 units are Assisted Living Units). CHH continues its efforts in mitigating these vacancies by self-subsidizing $200/unit. To date 15 tenants have been approved from the ATH waitlist under this program. These tenants will maintain their original date on the waitlist and be transferred to full rent supplement when spaces are available. o Tenant Recoveries (favourable variance of $129,933) due to large move-out costs being charged back to the tenants City of Hamilton/Service Manager Subsidy Net overall subsidy is showing a decrease over budget of $33,234. This is a result of reduced subsidies due to mortgage renewals coming in at much lower rates than budgeted. As the Service Manager funds mortgages dollar-for-dollar, the reduction in subsidy for mortgage renewals is immediate. Administration Salaries, Wages and Benefits Salaries, wages and benefits continue to show a favourable variance to budget. This represents $35,789 at August 31, 2013 and relates to vacant FTEs offset by additional staff on board to support the Northgate systems implementation. Additional Date: November 22, 2012 Page 3 of 6

4 staff dedicated to the project are expected to be back at their regular jobs by January 1, Administration - Bad Debt Expense Bad Debt expense shows a favourable variance to budget of $109,533. This is a result of adjusting the Allowance for Doubtful Accounts for the write off period July 1, 2010 to June 30, The analysis conducted determined that the Allowance was overstated based on the internal report of suggested account balances to be written off. In reviewing and confirming the balances to be written off, there was a $76,000 favourable adjustment made to bring the Allowance for Doubtful Account in line. Materials and Services Operating expenses relating to Materials and Services are showing an unfavourable variance to budget of $959,039. The chart below shows a distribution of total materials and services costs among the main cost categories: Actual Budget Variance Total Roofing Operating 69, ,781 54,137 Total Building Operating 4,536,037 3,199,097 (1,336,940) Energy Conservation Operating Total Elevators Operating 65, , ,284 Total Electrical Operating 257, ,266 (67,797) Total Equipment Operating 174, ,578 (51,454) Total Grounds Operating 834, ,701 87,012 Total Life Safety Systems Oper 347, ,171 (33,258) Total Heating & Ventilation Ope 511, ,799 (2,035) Total Plumbing Operating 552, ,102 (46,958) Total Painting Operating 128, , ,075 Total Waste Removal 299, ,108 (32,425) Total Building Security 191, ,053 2,755 Total Social & Recreation Prog 21,535 (87,471) (109,006) Total Contingency - 266, ,702 Total Sundry Materials & Servic 71,050 58,159 (12,891) HST Expense-Materials & Se 159,826 - (159,826) Total Materials & Services Operat 8,220,180 7,261,140 (959,039) The Building Operating account shows an unfavourable variance at $1,336,940 and includes items such as: Date: November 22, 2012 Page 4 of 6

5 *Operating General ($243,658) (includes emergency expenses of $268,600 for unusual items such as fires ($32k), trauma ($35k) and water damage ($71k) ). The CHH insurance deductible is $50K per incident. *Move Out repairs is showing unfavourable variance of ($447,141). The main costs include kitchen, bathroom renovations and floor replacements. In addition CHH remediates any mould found in the units at turnover and makes necessary plumbing and electrical repairs. *Bed Bug treatment is showing an unfavourable variance of ($759,289). We are on our second round of full unit inspections and treatments and while the strategy is showing positive results it is an expensive and slow process. The cost of treatment is approximately one third of the total cost while the unit preparation is two-thirds. The bed bug contract is currently out for tender. The new contract divides the portfolio into quadrants allowing for a number of service providers. We believe this will reduce costs and improve treatment timelines. Amortization and Mortgage Interest Mortgage interest is showing a favourable variance of $182,459 due to 2012 mortgages renewing at much lower interest rates. As mortgages are funded dollar-for-dollar by the Service Manager, this favourable variance is offset by an unfavourable variance in the Service Manager operating subsidy. Accounts Receivable (Appendix C) As of August 31, 2012, there were 660 tenants with outstanding rental arrears totalling $515,200 or 18.3% of current month rent revenues. Including other tenant charges such as maintenance and misrepresentation, total receivables represent 26.9% of current month rent revenues. Capital Reserve Fund Appendix A also details the activity in the Capital Reserve Fund. The Capital Reserve Fund balance at the end of August 31, 2012 is $3,756,918 which is made up of an opening balance of $8,220,423 plus current year deficit of $4,463,505. The deficit relates to timing variances between replacement reserve funding (straightlined over the year) and scheduling of capital jobs. Many capital jobs occur during the spring and summer due to favourable weather conditions. Balance Sheet Appendix B details the financial balances of CHH s assets, liabilities and fund balances as at August 31, CITYHOUSING HAMILTON OPERATIONAL PLAN This report implements: Date: November 22, 2012 Page 5 of 6

6 Goal 1: Create Financial Sustainability Ensure that CityHousing Hamilton has sufficient capital to invest in buildings to minimize the impact on City of Hamilton taxpayers. APPENDICES / SCHEDULES Appendix A Statement of Operations and Changes in Fund Balances Appendix B Statement of Financial Position Appendix C Accounts Receivable Analysis BO/MZ Date: November 22, 2012 Page 6 of 6