THE CORPORATION OF THE CITY OF BURLINGTON CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at December 31, 2008 (with comparative figures as at December 31, 2007) Financial Assets Cash and temporary investments $ 96,440 $ 77,933 Taxes receivable (note 4) 9,749 8,984 Accounts receivable 9,815 9,965 Other current assets Long term receivables Investments (note 6) 75,413 62,591 Investment in Burlington Hydro Electric Inc. (note 12) 108, , , ,481 Liabilities (Dollars in Thousands) Accounts payable and accrued liabilities 17,983 18,634 Other current liabilities Deferred revenue - general 3,637 3,253 Deferred revenue - obligatory reserve funds (note 7) 42,438 42,243 Employee benefits and other liabilities (note 8) 16,762 16,294 Net long term liabilities (note 10) 48,386 49, , ,155 Net Financial Assets 170, ,326 Non-Financial Assets Inventory 2,059 2,039 Net Assets $ 172,778 $ 142,365 Municipal Position Amounts to be recovered From reserves and reserve funds $ ($2,106) $ ($2,213) From future revenues ($63,042) ($63,962) ($65,148) ($66,175) Fund Balances Current fund (note 11) Equity in Burlington Hydro Electric Inc. (note 12) 108, , , ,679 Capital fund (note 11) 58,753 42,514 Reserves and reserve funds 70,045 54,347 Total fund balances 237, ,540 Commitments and contingencies (note 16) Total municipal position $ 172,778 $ 142,365 The accompanying notes are an integral part of this financial statement. -2-

2 CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES (with comparative figures for 2007) (Dollars in Thousands) Budget Actual Actual (note 17) Revenues Unaudited Taxation for municipal purposes $ 99,688 $ 104,486 $ 94,536 User fees and charges 25,807 21,799 23,995 Grants Government of Canada 5,985 2,973 2,004 Province of Ontario 8,885 14,659 4,419 Investment income 6,706 7,737 6,586 Penalties and interest on taxes 1,950 2,040 1,878 Contributions from developers 10,430 13,255 5,369 Sale of land and other capital assets Donations 10, Fines and Penalties 5,465 5,120 4,771 Rents and Concessions 5,976 5,593 5,169 Licenses and Permits 5,112 5,525 5,734 Other 332 1,182 1,595 Burlington Hydro Electric Inc., net increase in equity - - 2,033 Hydro dividends and interest 16,371 6,371 Total revenues 186, , ,828 Expenditures General government 21,001 22,833 25,046 Protection to persons and property 32,397 29,972 29,893 Transportation services 71,774 64,311 50,431 Environmental services 4,054 1,693 1,565 Health services Recreation and cultural services 83,353 43,183 43,234 Planning and development 5,563 6,270 6,047 Burlington Hydro Electric Inc. net decrese in equity (note 12) 2,578 Total expenditures 218, , ,440 Net revenues (expenditures) (31,717) 30,413 9,388 New debt issued 25,282 4,247 10,620 Debt principal repayments (5,742) (5,742) (4,757) Employee benefits and other liabilities ,757 19,540 (1,027) 7,620 Change in Fund Balances $ (12,177) $ 29,386 $ 17,008 The accompanying notes are an integral part of this financial statement. -3-

3 CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (with comparative figures for 2007) Operations (Dollars in Thousands) Net revenues (expenditures) $ 30,413 $ 9,388 Items not involving cash: Burlington Hydro Electric Inc., net decrease (increase) in equity (note 12) 2,578 (2,033) 32,991 7,355 Uses: Increase in taxes receivable (765) - Increase in accounts receivable - (1,044) Increase in other current assets (109) - Increase in inventory (20) (197) Decrease in accounts payable and accrued liabilities (651) - Decrease in other current liabilities - (70) (1,545) (1,311) Sources: Decrease in accounts receivable Decrease in taxes receivable Decrease in long term receivables Decrease in other current assets Increase in accounts payable and accrued liabilities - 2,981 Increase in other liabilities 54 - Increase in deferred revenue - general Increase in deferred revenue - obligatory reserve funds 195 9,116 Increase in employee benefits and other current liabilities 468 1,757 1,378 15,144 Net increase (decrease) in cash from operations 32,824 21,188 Investing Increase in investments (12,822) (4,405) Net increase (decrease) in cash from investing (12,822) (4,405) Financing New debt issued 4,247 10,620 Debt principal repayments (5,742) (4,757) Net increase (decrease) in cash from financing (1,495) 5,863 Change in cash and temporary investments 18,507 22,646 Cash and temporary investments, beginning of year 77,933 55,287 Cash and temporary investments, end of year $ 96,440 $ 77,933 The accompanying notes are an integral part of this financial statement. -4-

4 1. Accounting Policies The consolidated financial statements of the City of Burlington (the City ) are the representation of management prepared in accordance with Canadian generally accepted accounting principles for local governments as recommended by the Public Sector Accounting Board ( PSAB ) of the Canadian Institute of Chartered Accountants. Significant accounting policies adopted by the City are as follows: (a) Basis of Consolidation (i) Consolidated Entities These consolidated statements reflect the assets, liabilities, sources of financing and expenditures of the current fund, capital fund, reserves and reserve funds and include the activities of all committees of Council and the following boards and enterprises which are under the control of Council: Burlington Public Library Board Burlington Museums Board Burlington Downtown Aldershot Business Improvement Association Burlington Economic Development Corporation All interfund assets and liabilities and interfund revenues and expenditures have been eliminated. (ii) Non-Consolidated Entities These consolidated statements do not reflect the assets, liabilities, sources of financing, expenditures and the activities of the following boards and enterprises, which are not under the control of Council: (iii) Modified Equity Accounting Burlington Art Centre Tourism Burlington LaSalle Park Marina Association Burlington Hydro Electric Inc. ( BHEI ) is accounted for on a modified equity basis, consistent with the generally accepted accounting treatment for government business enterprises. Under the modified equity basis, the business enterprise s accounting principles are not adjusted to conform to those of the City, and inter-organizational transactions and balances are not eliminated. (iv) Accounting for the Region and School Board Transactions The taxation, other revenues, expenditures, assets and liabilities with respect to the operations of the Region of Halton and the school boards are not reflected in the municipal fund balances of these financial statements

5 1. Accounting Policies (continued) (a) Basis of Consolidation (continued) (v) Statements of Current Fund Operations, Capital Fund Operations and Reserves and Reserve Funds The Statements of Current Fund Operations, Capital Fund Operations and Reserves and Reserve Funds have been prepared in accordance with Canadian generally accepted accounting principles for local governments. These statements have been included in order to provide additional information relevant to the understanding of the financial activities of the City. (vi) Trust Funds Trust Funds and their related operations administered by the municipality are not consolidated, but are reported upon separately on the Trust Funds Statement of Continuity and Statement of Financial Position. (b) Basis of Accounting (i) Accrual Accounting Sources of financing and expenditures are reported on the accrual basis of accounting. The accrual basis of accounting recognizes revenues as they are earned and measurable; expenditures are recognized as they are incurred and measurable as a result of receipt of goods or services and the creation of a legal obligation to pay. (ii) Inventory Inventory is valued at the lower of cost and net realizable value. (iii) Capital Assets The historical cost and accumulated amortization for capital assets are not recorded for municipal purposes. Capital assets are reported as an expenditure on the Consolidated Statement of Financial Activities in the year of acquisition. (iv) Government Transfers Government transfers are recognized in the financial statements as revenues in the period in which events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met, and reasonable estimates of the amounts can be made. (v) Deferred Revenue Obligatory Reserve Funds The City receives development charges and subdivider contributions under the authority of provincial legislation and City by-laws. These funds, by their nature, are restricted in their use and, until applied to specific capital works, are recorded as deferred revenue. Amounts applied to qualifying capital projects are recorded as revenue in the fiscal period they are expended

6 1. Accounting Policies (continued) (b) Basis of Accounting (continued) (vi) Investment Income Investment income earned on surplus current funds, capital funds, reserves and reserve funds (other than obligatory reserve funds) are reported as revenue in the period earned. Investment income earned on development charges reserve funds is added to the fund balance and forms part of the deferred revenue obligatory reserve funds balance. (vii) Cash and Temporary Investments Cash and temporary investments are comprised of cash on hand, cash held in banks, and temporary investments with maturities of 365 days or less. (viii) Use of Estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting periods. Actual results could differ from these estimates. 2. Tangible Capital Assets (a) Determination of Cost A Council approved, PS3150 Tangible Capital Assets Reporting Policy, has been established with seven main classes: Land; Land improvements; Buildings/Leasehold Improvements; Machinery & equipment; Vehicles; Linear assets; and Work-in-progress. Valuation for the 2008 opening balance is based on historical costs if available, and replacement costs were estimated with the following parameters, and then deflated back to year of construction or acquisition: Land 2006 assessment values from MPAC; Land Improvements 2006 assessment values from MPAC; Buildings/Leasehold Improvements original cost grossed up to 2008 using annual construction indexes; Machinery & Equipment original cost grossed up to 2008 value using an annual CPI increase of 3%; Vehicles original cost grossed up to 2008 value using an annual CPI increase of 3%; Linear Assets 2007 replacement costs grossed up to 2008 value by adding 3% CPI; and Work in Progress based on actual expenditures

7 2. Tangible Capital Assets (continued) Capitalization thresholds by asset classes are as follows: Asset Class Threshold for Individual Assets (Historical Cost) Threshold for Pooled Assets Land $0 (capitalize all) $0 (capitalize all) Land Improvements $20,000 $0 (capitalize all) Buildings/Leasehold Improvements $30,000 $0 (capitalize all) Machinery & Equipment $5,000 $0 (capitalize all) Vehicles $5,000 $0 (capitalize all) Linear Assets $20,000 $0 (capitalize all) Work in Progress Same as above by individual Asset and asset class Same as above by individual asset class Assets that cannot be sold or with no re-sale value are cost at the nominal value of $1. These include land under road right-of-ways, cemeteries, and landfills. (b) Amortization Method Used Amortization is recorded to reflect the cost, net of anticipated salvage value, associated with the use of the asset in providing government services over the estimated useful life of the asset. Exceptions will be land, work-in-progress, and assets removed from service. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, with consideration to the level of maintenance; technological obsolescence; and expected wear and tear. Amortization is calculated on a straight-line basis over expected useful life as follow: Land Improvement - 12 to 50 years Buildings 10 to 50 years; Leasehold Improvements Term of the Lease Machinery & Equipment 3 to 20 years Vehicles 8 to 20 years Linear Assets 10 to 75 years (c) Contributed Assets Contributed assets include roads assumed in new sub-divisions. Land under right-of-way is valued at a nominal value of $1, and other linear assets are valued at replacement cost

8 3. Operations of School Boards and the Region of Halton Further to note 1 (a) (iv), the taxation, other revenues and expenditures of the school boards and the Region of Halton are comprised of the following: School Boards Region of Halton Taxation $ 97,787 $103,697 Payments in lieu of taxes 230 1,251 Amounts received or receivable $ 98,017 $104,948 Requisitions $ 98,017 $104, Taxes Receivable The taxes receivable, totaling $9,749 ( $8,984), represent uncollected taxes billed for the following purposes based on total assessments: City of Burlington $ 3,265 $ 2,883 Region of Halton 3,337 3,129 Halton school boards 3,147 2,972 $ 9,749 $ 8, Trust Funds Trust funds administered by the municipality amounting to $11,306 ( $9,923) have not been included in the Consolidated Statement of Financial Position nor have their operations been included in the Consolidated Statement of Financial Activities. 6. Investments The total investments of $75,413 ( $62,591) reported on the Consolidated Statement of Financial Position at cost, have a market value of $79,311 ( $63,402) at the end of the year

9 7. Deferred Revenue Obligatory Reserve Funds A requirement of PSAB is that obligatory reserve funds be reported as deferred revenue. This requirement is in place as provincial legislation restricts how these funds may be used and under certain circumstances these funds may be refunded. The balances in the obligatory reserve funds of the City are summarized below: Development Charges $ 36,588 $ 36,762 Parkland 5,850 5,481 Total $ 42,438 $ 42, Employee Benefits and Other Liabilities Summary of Employee Benefits and Other Liabilities Future payments required for: Banked Overtime $ 297 $ 329 WSIB 3,160 2,698 Vacation Pay Liability 6,056 6,000 Retiree Benefits 7,249 7,267 Total $ 16,762 $ 16,294 (a) Liability for Banked Overtime Under the Employee Benefit Plan, unused banked overtime can accumulate and certain employees may become entitled to a cash payment upon termination of services. (b) Liability for Workplace Safety & Insurance ( WSIB ) The City is a Schedule II employer under the Workplace Safety and Insurance Act. As a Schedule II employer, the City assumes the liability for any award made under the Act. An actuarial valuation as at December 31, 2008, estimated the liability at $3,160. This increase in liability over 2007 is the result of settlements of firefighter survivor benefit claims awarded and pending. The liability is net of an actuarial loss of $2,182. The loss is due to actual experience compared with the previous actuarial update arising from projected claims for survivor benefits. Amortization of $242 is included. A reserve fund in the amount of $1,545 ( $1,648) has been provided for this liability and is reported on the Statement of Reserves and Reserve Funds

10 8. Employee Benefits and Other Liabilities (continued) (c) Retiree Benefits The City provides dental and health care benefits between the time an employee retires under the Ontario Municipal Employees Retirement System (OMERS), or retires at a normal retirement age, up to the age of 65. A liability of $6,124 has been reported on the Consolidated Statement of Financial Position for the liability accruing to existing employees for dental, health care and life benefits and for retired employees for health, dental and life benefits coverage. The amounts reported are based on an actuarial valuation conducted as at December 31, 2007 using a discount rate of 5.0% and assuming an inflation rate of 2.0%. The liability at December 31, 2008 is based on the actuarial valuation. The liability is net of an actuarial loss of $2,356 realized due to the actual experience as compared with the previous actuarial update but includes amortization of $232. A reserve fund in the amount of $561 ( $564) has been provided for this liability and is reported on Statement of Reserves and Reserve Funds. In addition, employees earn one day of vacation per year of service that can be paid out at retirement. The liability is estimated at $1,125. Information about the City s defined benefit plan is as follows: Accrued benefit obligation: Balance, beginning of year $ (8,434) (7846) Current benefit cost (330) (498) Actuarial Loss ( 269) _ Change in actuarial estimate 399 _ Interest (473) (528) Benefits paid Balance, end of year (8,480) (8,434) Unamortized actuarial loss 2,356 2,319 Liability for benefits (6,124) (6,115) Amortization of actuarial loss $ (232) (232)

11 9. Pension Agreements The municipality makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a multi-employer plan, on behalf of its entire permanent staff. The Plan is a defined benefit plan, which specifies the amount of the retirement benefit to be received by the employees based on length of service and rates of pay. Contributions to OMERS are made at rates ranging from 6% to 9.8%. Contribution rates are dependent on proposed retirement age and the level of earnings. The amount contributed to OMERS for 2008 was $4,304 (2007- $4,153) for current service and is included as an expenditure on the Consolidated Statement of Financial Activities. 10. Net Long Term Liabilities (a) The balance of the net long-term liabilities reported on the Consolidated Statement of Financial Position is made up of the following: Total long term liabilities incurred by the municipality including those incurred on behalf of municipal enterprises and outstanding at the end of the year amount to $ 48,386 $ 49,881 - Net long term liabilities at the end of the year $ 48,386 $ 49,881 (b) Of the net long term liabilities reported in (a) of this note the principal payments are detailed as follows: 2009 $ 6, , , , , and thereafter 18,,

12 $ 48, Net Long Term Liabilities (continued) (c) The long-term liabilities in (a) issued in the name of the municipality after January 1, 1993 have been approved by by-law. The annual principal and interest payments required to service these liabilities are within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs and Housing. (d) Total charges for net long-term liabilities are as follows: Principal payments $ 5,742 $ 4,757 Interest 2,387 2,470 $ 8,129 $ 7,227 These charges, included on the Consolidated Statement of Financial Activities were financed from the following sources: General municipal revenues $ 8,049 $ 7,151 Benefiting landowners $ 8,129 $ 7,

13 10. Net Long Term Liabilities (continued) (e) The net long term debt By-law Purpose Interest Rates Maturity Dates Various 5.875%-6.000% 2010 $ Road Reconstruction 5.750%-6.000% Road Reconstruction 5.625%-6.000% , Facilities & Roads 4.550%-5.200% , Road Reconstruction 5.875%-6.000% , Road Reconstruction 3.550%-4.850% , Road Reconstruction 2.430% Road Reconstruction 3.300%-4.100% , Road Reconstruction 2.410%-2.430% Facilities & Roads 4.250%-4.600% , Library Expansion 4.050%-5.400% , Various 4.800%-5.000% , Road Reconstruction 3.200%-4.650% ,247 $ 48, Municipal Fund Balances - Current Fund and Capital Fund The balances on the Consolidated Statement of Financial Position for the Current Fund and the Capital Fund at the end of the year are comprised of the following: Current Fund For reduction in taxation $ 194 $ Equity investment in Burlington Hydro Electric Inc. 108, ,512 $ 109,128 $ 111,679 Capital Fund Funds available for future capital expenditures $ 66,642 $ 49,316 Capital expenditures to be financed from: - Taxation (35) (1,996) - Reserves and reserve funds (479) (758)

14 - Proceeds from long term liabilities (5,766) (1,472) - Benefiting parties and special subsidies (1,609) (2,576) $ 58,753 $ 42, Investment in Burlington Hydro Electric Inc. In compliance with provincial legislation enacted to restructure the electrical industry in Ontario, Council approved the incorporation of the electricity distribution business of the former Burlington Hydro-Electric Commission (the Commission ). Pursuant to this legislation, the City incorporated three companies, Burlington Hydro Electric Inc. ( BHEI ) and its wholly-owned subsidiaries, Burlington Hydro Inc. ( BHI ) and Burlington Electricity Services Inc. ( BESI ). BHEI was incorporated on December 1, 1999 as a wholly-owned subsidiary of the City and commenced active operations on January 1, At incorporation, 1,000 shares were issued for $100 cash to the City. Effective January 1, 2000, substantially all of the assets and liabilities of the former Commission were transferred to BHEI. The City s financial statements reported an increase in municipal position as a result of this transaction and the subsequent operations of BHEI, which is comprised of the following: Continuity of investment: Balance at December 31, 2007 $ 111,512 Net income for year 10,322 Dividends received during the year (12,900) Net decrease in equity during the year (2,578) Ending balance, December 31, 2008 $ 108,934 As a business enterprise of the City, BHEI is accounted for on a modified equity basis in these financial statements

15 12. Investment in Burlington Hydro Electric Inc. (continued) The following table provides condensed, consolidated supplementary financial information for Burlington Hydro Electric Inc. and 2007: Financial Position: Current Assets $ 52,701 $ 53,703 Capital Assets 81,114 83,462 Other Assets 3,172 3,012 Future payment in lieu of taxes 3,888 3,042 Total Assets 140, ,219 Current Liabilities 25,882 25,980 Promissory note payable to City of Burlington 47,879 47,879 Customer's Deposits 3,378 3,184 Liability for future benefits 2,681 2,543 Total Liabilities 79,820 79,586 Net Assets $ 61,055 $ 63,633 Results of Operations: Net revenues $ 36,276 $ 31,237 Operating expenses 25,954 26,304 Net Income $ 10,322 $ 4,933 The investment in BHEI is represented by the following: Total Net Assets $ 61,055 $ 63,633 Promissory note receivable 47,879 47,879 $ 108,934 $ 111,

16 The financial position and contingent liabilities information is as reported by Burlington Hydro Electric Inc. at December 31, 2008 and the results of operations is as reported for the year ended December 31, The comparative financial position and results of operations figures are as reported by Burlington Hydro Electric Inc. at December 31, Contingent liabilities are reported in more detail in note Investment in Burlington Hydro Electric Inc. (continued) The following summarizes the Municipality s related party transactions with Burlington Hydro Electric Inc for the year. All transactions are in the normal course of operations, and are recorded at the exchange value based on normal commercial rates, or as agreed to by the parties. Gross revenue earned by Burlington Hydro Electric Inc from the City of Burlington $2,583,315 ( $2,901,321). Of this amount, $276,466 ( $310,969) was net distribution revenue. Payments in Lieu of Taxes paid to the City of Burlington by Burlington Hydro Electric Inc. were $113,905 ( $114,075). 13. Expenditures by Object The following is a summary of the current expenditures reported on the Statement of Current Fund Operations by the object of expenditures: Salaries, wages and employee benefits $ 88,167 $ 86,268 Net long term debt charges (interest) 2,387 2,470 Materials 16,116 14,773 Contracted Services 18,740 16,769 Rents and Financial Expenses 2,660 2,388 External Transfers 1,926 1,366 Total Current Expenditures $ 129,996 $ 124,

17 14. Segmented Information The City of Burlington is a diversified lower tier municipality that provides a wide range of services to its citizens, including fire, public transit and recreation programs. The City of Burlington uses Fund Accounting as the basis for recording and reporting of all financial transactions. Fund Accounting is an accounting system in which a self-balancing group of accounts is provided for each accounting entity established by legal, contractual or voluntary actions. City services are provided by departments and their activities are reported in these funds. Certain departments that have been separately disclosed in the segmented information, along with the services they provide are as follows: Corporate Services The Corporate Services division is a key business partner in enabling Council to meet its strategic plan goals and in assisting the Community Services and Development & Infrastructure divisions in achieving their service delivery and operational needs. It includes the Finance Department, Human Resources Department, Legal Department, Information Technology Services Department and Clerks Department. Roads and Parks Maintenance Department The Roads and Parks Maintenance Department provides services related to maintaining roads and parks. This includes awareness and planning for maintenance activities related to growth. The services include winter control activities. Traffic and Transit Department The Transit and Traffic Department is comprised of 3 sections: The Transit Section is responsible for the provision of public transit services in Burlington including the administration, planning, operations and vehicle maintenance for conventional and specialized transit services. The Traffic Signal Systems and Parking Section is responsible for the operation and maintenance of the computerized Traffic Signal Control System, Parking By-law enforcement and the management of municipal parking facilities within the downtown. The Traffic Services Section is responsible for traffic control, traffic calming projects, collision data analysis and School Crossing Guards. Recreation and Culture

18 It is under the umbrella of recreation and culture that the City presents recreational and cultural opportunities to its citizens. This not only includes recreational programs that foster healthy, active living but also includes the operations of the Libraries and Museums of the City. 14. Segmented Information (continued) Fire The Burlington Fire Department is a composite force consisting of highly trained and caring professionals who provide vital emergency services serving the diverse needs of the community. Activities of the Department include fire suppression, fire prevention, public education, training and emergency planning. Development and Infrastructure This division s responsibilities include planning development, planning policy, engineering, economic development, environmental initiatives, building approvals and inspections within the jurisdiction of the department. Other This section includes the corporate governance and corporate management of the City of Burlington as well as the net revenue the City realizes from the operations of the Provincial Offences Act ( POA ). Certain allocation methodologies are employed in the preparation of segmented financial information. The General Revenue Fund reports on municipal services that are funded primarily by taxation such as property and business tax revenues. Taxation and payments-in-lieu of taxes are apportioned to General Revenue Fund services based on the Fund s net surplus. The accounting policies used in these segments are consistent with those followed in the preparation of the consolidated financial statements as disclosed in note

19 CONSOLIDATED SCHEDULE OF SEGMENT DISCLOSURE SERVICE For the year ended December 31, 2008 (in thousands of dollars) General Revenue Fund Corporate Services RPM Traffic & Transit Recreation and Cultural Fire Development and Infrastructure Other Consolidated Revenues Taxation 9,896 25,023 8,340 24,069 21,670 4,044 13, ,526 User Fees and ,756 Charges 221 2,460 4,292 8, ,701 Government 1 3, , ,738 Transfers Investment Income 65 6,040 6,105 Fines & Penalties 1, ,705 5,120 Rents & Concessions 1,188 4, ,593 Licenses and Permits , ,525 Other ,166 10,228 27,978 18,810 38,137 22,603 24,342 24, ,529 Expenses Salaries Wages & Benefits 8,909 12,427 9,064 20,732 19,867 9,262 7,438 87,699 Long Term Debt 3, , ,129 Materials 270 4,447 3,504 6, ,116 Contracted Services 1,943 4,746 1,891 4, ,121 18,739 Rents & Financial Expenses , ,660 External Transfers 3 1, ,927 Burlington Hydro Electric Inc. net decrease in equity 2,578 2,

20 Transfer to (from) Other Funds (1,142) 2,539 3,492 1,416 1,107 12,705 11,115 31,232 Other 10,228 27,978 18,810 38,129 22,603 24,323 27, ,080 $( $ $ $ $ 8 $ $ 19 $ ( 2,551) Net Surplus/(Deficit) 2,578) 15. Lease Agreements The municipality has entered into lease agreements for office equipment, facility space, vehicles and other services, at a present value of $5,976, which have received Ontario Municipal Board approval where necessary. The aggregate minimum payments under these leases over the next four years and thereafter are as follows: 2009 $ 1, , and thereafter 2,066 $ 5, Commitments and Contingencies Commitment BHEI has an $14,000,000 revolving line of credit facility available for use. A letter of credit in the amount of $14,000,000 has been issued in favour of the Independent Electricity Service Operator ( IESO ) as security for BHEI s purchase of electricity through the IESO. No other amounts were drawn down on the line of credit at year-end. Contingencies As at December 31, 2008, certain legal actions and other contingent liabilities are pending against the municipality. The outcome of these matters is indeterminate at this time and has therefore not been reflected in these financial statements. Included in the reserve balance is a provision for contingencies of $ 1,864 ( $1,206). A class action claiming $500 million in restitutionary payments plus interest was served on Toronto Hydro on November 18, The action was initiated against Toronto Hydro Electric Commission as the representative of the Defendant Class consisting of all municipal electric utilities in Ontario. The action has not yet been certified as a class action and no discoveries have been held, as the parties were awaiting the outcome of a similar proceedings brought against Enbridge Gas Distribution Inc. (formerly Consumers Gas)

21 On April 22, 2004, the Supreme Court of Canada released a decision in the Enbridge case rejecting all of the defences which had been raised by Enbridge, although the Court did not permit the Plaintiff class to recover damages for any period prior to the issuance of the Statement of Claim in 1994 challenging the validity of late payment penalties. The Supreme Court remitted the matter back to the Ontario Superior Court of Justice for determination of the damages. At the end of 2006, a mediation process resulted in the settlement of the damages payable by Enbridge. On February 4, 2008, the Ontario Energy Board ( OEB ), in response to an application filed by Enbridge, ruled that all of Enbridge s costs related to settlements of the class action lawsuits, including legal costs, settlement cost and interest, are recoverable from ratepayers. The OEB s 16. Commitments and Contingencies (continued) decision allows Enbridge to recover all amounts over a five year period commencing in Burlington Hydro Electric Inc. is not a party to the Enbridge class action, however, it is anticipated that the above noted class action will now proceed for determination in light of the reasons of the Supreme Court in the Enbridge class action. The Defendant Class may have defences available to it in this action that were not disposed of by the Supreme Court in the Enbridge class action. Also, the determination of whether the late payment charges collected by the Corporation from its customers were in excess of the interest limit stipulated in section 347 of the Criminal Code is fact specific in each circumstance. At this time it is not possible to quantify the effect, if any, on the financial statements of Burlington Hydro Electric Inc. Developer Rebate Contributions are received from developers by Burlington Hydro Inc. to finance necessary capital additions. The OEB requires the utility to calculate a rebate to the developers based upon recoverability of capital investment through future hydro usage. At December 31, 2008 a liability in the amount of $1,948 ( $1,876) was accrued by Burlington Hydro Inc. This growth is expected to continue in the future. Working capital will be drawn down to support these payments. 17. Budget Figures Burlington City Council completes a review of its operating and capital budgets each year. The approved operating budget for 2008 is reflected on the Statement of Current Fund Operations and is included in the budget figures presented in the Consolidated Statement of Financial Activities. Budgets established for capital funds are on a project-oriented basis, the costs of which may be carried out over one or more fiscal years. The budget reflected in the Statement of Capital Fund Operations and included in the Consolidated Statement of Financial Activities is an annual budget only as required by the recommendations of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants. The City does not have a budget for activity within Reserves and Reserve Funds, with the exception being those transactions that flow through either the operating or capital budgets. 18. Prior Year Figures Certain of the comparative figures have been reclassified to conform with the Financial Statement presentation adopted for the current year

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23 STATEMENT OF CURRENT FUND OPERATIONS for the year ended December 31,2008 (with comparative figures for 2007) (Dollars in Thousands) Budget Actual Actual (note 17) Revenues Unaudited Taxation $ 300, ,449 $ 293,289 Less: amounts received for Region and School Boards (201,057) (202,963) (198,753) Taxation for municipal purposes 99, ,486 94,536 User fees and charges 19,653 19,756 20,965 Grants Government of Canada 1,985 2,467 1,989 Province of Ontario 2,493 14,271 4,011 Contributions from developers Investment income 4,302 6,105 4,661 Sale of land and other capital assets Penalties and interest on taxes 1,950 2,040 1,878 Donations Fines & Penalties 5,465 5,120 4,771 Rents & Concessions 5,976 5,593 5,169 Licenses & Permits 5,112 5,525 5,734 Other Burlington Hydro Electric Inc., net increase in equity (note 12) - - 2,033 Total revenues 147, , ,853 Expenditures General government 18,989 21,394 23,567 Protection to persons and property 29,767 29,583 27,593 Transportation services 34,095 37,330 34,310 Environmental services Health services Recreation and cultural services 35,856 34,625 31,712 Planning and development 5,375 6,018 5,851 Burlington Hydro Electric Inc., net decrease in equity (note 12) - 2,578 - Total expenditures 125, , ,034 Net revenues 22,368 33,955 22,819 Financing and transfers Debt principal repayments (5,742) (5,742) (4,757) Transfers to reserves and reserve funds (16,236) (30,946) (17,581) Transfer to capital fund (276) (286) (298) Employee benefits and other liabilities ,757 Net financing and transfers (22,254) (36,506) (20,879) Change in current fund 114 (2,551) 1,940 Current fund, beginning of year 6 111, ,739 Current fund, end of year $ ,128 $ 111,679 The accompanying notes are an integral part of this financial statement. -19-

24 STATEMENT OF CAPITAL FUND OPERATIONS (with comparative figures for 2007) (Dollars in Thousands) Budget Actual Actual (note 17) Revenues Unaudited User fees and charges $ 6,308 $ 2,030 $ 3,004 Grants Government of Canada 4, Province of Ontario 6, Contributions from developers 12,560 12,993 5,070 Donations 10, Prepaid special charges Sale of land and other capital assets Total revenues 39,260 16,262 9,204 Expenditures General government 2,012 1,439 1,479 Protection to persons and property 2, ,300 Transportation services 37,679 26,981 16,121 Environmental services 3, Recreation and cultural services 47,497 8,558 11,522 Planning and development Other Total expenditures 93,191 38,536 32,406 Net expenditures (53,931) (22,274) (23,202) Financing and transfers New debt issued 25,282 4,247 10,620 Transfers from current fund Transfers from reserves and reserve funds 28,373 33,980 22,419 Net financing and transfers 53,931 38,513 33,337 Change in capital fund balance - 16,239 10,135 Capital fund balance, beginning of year - 42,514 32,379 Capital fund, end of y ear $ - $ 58,753 $ 42,514 The accompanying notes are an integral part of this financial statement. -20-

25 STATEMENT OF RESERVES AND RESERVE FUNDS (with comparative figures for 2007) (Dollars in Thousands) Revenues Investment incom e $ 1,632 $ 1,925 Contributions from LaSalle Marina users Donations Sale of land and other capital assets 3 12 Hydro Dividends & Interest 16,371 6,371 Other 661 1,143 Total revenues 18,732 9,771 Financing and transfers Transfers to capital fund (33,980) (22,419) Transfers from current fund 30,946 17,581 Total net tra nsfers (3,034) (4,838) Change in reserves and reserve funds 15,698 4,933 Reserves and reserve funds, beginning of year 54,347 49,414 Reserves and reser ve funds, end of year $ 70,045 $ 54,347 Analyzed as follows: Reserves set aside for specific purposes by Council: Working capi tal $ - $ 1,200 Contingency and other 4,111 3,059 Total reserves 4,111 4,259 Reserve funds set aside for specific purposes by Council: Acquisition of fixed assets 2,779 3,107 Capital improvements 54,104 39,719 Employee accidents 1,545 1,648 Benefits Tax rate stabilization 6,945 5,049 Total reserve funds 65,934 50,088 Total reserves and reserve funds, end of year $ 70,045 $ 54,347 The accompanying notes are an integral part of this financial statement. -21-