The RegionalMunicipality of Halton Report To: From: Chair and Members of the Administration and Finance Committee Mark Scinocca, Commissioner, Finance and Regional Treasurer Date: November 6, 2013 Report No.-Re: FN-15-13 - Operating Budget Variance Report for the period ending August 31, 2013 and Capital Budget Variance and Closure Report for the period ending June 30, 2013 RECOMMENDATION 1. THAT Report No. FN-15-13 re: Operating Budget Variance Report for the period ending August 31, 2013 and Capital Budget Variance and Closure Report for the period ending June 30, 2013 be received for information. 2. THAT staff be authorized to revise the capital project financing as per Attachment #4 to Report No. FN-15-13 re: Operating Budget Variance Report for the period ending August 31, 2013 and Capital Budget Variance and Closure Report for the period ending June 30, 2013. REPORT Executive Summary This report projects operating budget variances to year-end based on actual results as of August 31, 2013. Staff are projecting a favourable variance of $2.4 million for tax-supported services excluding police which primarily relates to additional revenues and no net variance is projected for the water and wastewater program. The capital budget variance is based on actuals as at June 30, 2013 and indicates that 49.1% of the $2,922.5 million has either been spent or allocated in open purchase orders. Budget adjustments are required for a reduction of $3.3 million for 17 capital projects. 1
Background Staff are currently projecting a $2.4 million favourable variance at year-end for Regional tax-supported services and no net variance for rate-supported services. The Halton Regional Police Service is projecting a favourable variance of $1.5 million at year-end. The combined year-end favourable variance for tax and rate supported programs is $3.9 million on total net expenditures of $505.0 million or 0.8%. Discussion The table below summarizes the projected operating budget variances by major program area. TAX & RATE SUPPORTED OPERATING BUDGET VARIANCES - August 31, 2013 2013 APPROVED BUDGET 2013 PROJECTED YEAR-END ACTUALS 2013 PROJECTED YEAR-END VARIANCE GENERAL TAX $ $ $ % Regional Programs Public Health 14,265,800 13,950,800 315,000 2.2% Paramedic Services 16,095,800 15,495,800 600,000 3.7% S & CS Administration 1,491,600 1,491,600 0 0.0% Children's Services 12,592,600 12,482,600 110,000 0.9% Employment, Housing & Social Services 33,876,800 33,413,800 463,000 1.4% Services for Seniors 17,288,300 17,588,300 (300,000) -1.7% Quality & Community Innovation 11,439,400 11,317,600 121,800 1.1% Legislative & Planning Services 10,421,800 10,218,300 203,500 2.0% Waste Management 38,530,600 38,126,500 404,100 1.0% Transportation 43,288,000 43,372,100 (84,100) -0.2% Corporate Administration 0 (253,700) 253,700 0.0% Total Regional Programs 199,290,700 197,203,700 2,087,000 1.0% Non-Program Supplementary Taxes (8,600,000) (8,600,000) 0 0.0% Assessment Services 8,486,300 8,224,500 261,800 3.1% General Expenditures 19,398,500 19,398,500 0 0.0% Net Interest Earnings (7,750,800) (7,750,800) 0 0.0% Provincial Offences Act (1,400,000) (1,480,000) 80,000 5.7% Tax Policy (3,800,000) (3,800,000) 0 0.0% Tax Write-off-Provisions 4,663,000 4,663,000 0 0.0% GO Transit 3,255,000 3,255,000 0 0.0% GTA Pooling 0 0 0 0.0% Total Non-Program 14,252,000 13,910,200 341,800 2.4% Conservation Authorities 7,707,700 7,707,700 0 0.0% RBG and Special Grants 714,200 714,200 0 0.0% Total Boards & Agencies 8,421,900 8,421,900 0 0.0% NET REGIONAL OWN EXPENDITURES 221,964,600 219,535,800 2,428,800 1.1% Halton Regional Police Services 126,954,700 125,454,700 1,500,000 1.2% TOTAL TAX SUPPORTED SERVICES (including Police) 348,919,300 344,990,500 3,928,800 1.1% TOTAL RATE SUPPORTED SERVICES 156,040,800 156,040,800 0 0.0% COMBINED TAX (including Police) AND RATE 504,960,100 501,031,300 3,928,800 0.8% Program variances are discussed in detail below. 2
TAX SUPPORTED SERVICES Public Health $3,928,800 F $315,000 F A favourable variance is projected to year-end of $118,500 due to temporary staff vacancies, $52,700 savings in printing and resource development, $31,200 savings in facility related costs due to delay in securing a site for the Georgetown multi-use facility and lower costs from renegotiated lease arrangements, lower than anticipated travel costs of $30,900, and higher than budgeted revenues of $13,700 primarily due to increase in demand for Food Safety courses and exams. This is partially offset by an additional $16,500 mostly due to dental equipment required in 2013 that was not included in the budget. There is also an unfavourable variance of $27,800 in the Universal Influenza Program as a result of the decline in demand for service and a $44,200 unfavourable variance in the dental assistance programs (CINOT, DCC) based on yearto-date increase in demand for service. Paramedic Services $600,000 F A favourable variance is projected to year-end of $489,700 due to additional subsidy received in 2013, representing a 3.93% increase over the 2013 budget. A favourable variance of $243,400 is projected in vehicle costs due to lower than anticipated repairs and maintenance offset by higher than budgeted fuel expenditures. This will be offset by higher than budgeted personnel costs of $113,500. Expenditures related to the Dedicated Offload Nursing initiative will be offset by 100% funding from the Ministry for which funding has been secured at $505,855 from April to March of next year. Social & Community Services Administration $0 No year-end variance is projected at this time. Children s Services $110,000 F Children s Services is projecting a favourable variance primarily due to higher than anticipated full fee paying spaces at the Regional child care centres of $110,000. Employment, Housing & Social Services $463,000 F A favourable net variance of $550,000 is projected for housing providers due to year-end subsidy settlements with social housing providers. The favourable variance will be transferred to the Social Housing Housing Purposes reserve at year-end to provide funding for future capital repairs/replacement needs. A favourable variance is mainly driven by the receipt of additional funding of $407,500 for Ontario Works (OW) cost of administration. The additional subsidy resulted from a Provincial adjustment to the OW Cost of Administration funding formula. In addition, OW 3
caseloads continue to decline contributing to lower than anticipated benefit payments resulting in a favourable variance of $254,900. A favourable variance of approximately $100,000 is also anticipated for the adult mental health supports program as a result of relatively low year to date participation in this program. These favourable variances are partially offset by $329,500 in higher temporary staffing costs to respond to OW caseloads which continue to be higher than pre-recession levels. Services for Seniors $300,000 U An unfavourable variance is expected in Services for Seniors due to higher personnel costs of $737,500 to ensure coverage at the LTC Homes and due to increasing sick time. Savings of $26,000 are projected in food due to better control of costs from utilizing the new food costing software and high intensity supplies are expected to be favourable by $62,000 due to lower than anticipated levels. Purchased Services are favourable by $77,000 due to renewals for laundry and occupational therapy contracts and the deferral of one project amounting to $91,000. Total revenues are expected to be favourable due to subsidy adjustments for a higher than planned case mix index and other subsidies which were higher than anticipated by $251,000 offset by reduced resident preferred revenues of $80,000. Quality & Community Innovation $121,800 F The favourable variance is a result of the postponement of one project and planned training together amounting to $50,000. Temporary staff vacancies have also resulted in a favourable variance of $65,800 as well as deferred equipment purchases of $6,000. Legislative & Planning Services $203,500 F A net favourable year-end variance of $203,500 is projected for Legislative and Planning Services. This favourable variance is due to $300,000 in temporary staff vacancies and $30,000 in lower than budgeted utility costs in Asset Management Services, offset by unfavourable revenues of $80,000 for the museum and lower than planned development administration fees in Legal Services. Also unfavourable variances are projected for rental costs at the museum of $27,000. Waste Management $404,100 F The Waste Management Program is projecting a favourable year-end variance of $404,100. Increased WDO revenue which reflects Halton s high waste diversion rate as funding is based on an efficiency-based model results in a projected favourable variance of $835,050. A favourable variance of $73,900 is expected in other revenues including container station and recoveries from Halton District School Board as a result of increased locations. A savings of $146,000 is projected in collection and processing contracts mainly due to lower than anticipated garbage tonnages. In addition, a favourable variance of $65,700 is expected in several contracted services, equipment maintenance and material and supplies due to less demand than anticipated. 4
The phasing-in of the enhanced recycling program and three bag garbage limit programs are expected to realize a $238,000 savings due to an April program start up. While the implementation of the fee garbage tags commences on September 9, 2013 data on the use of complimentary bag tags between April and September 2013 suggest revenues will be unfavourable by $645,000. The sale of recycled materials is expected to produce an unfavourable variance of $258,800 due to a lower than anticipated market price. Transportation $84,000 U Staggered implementation of additional Red Light Cameras will result in one-time savings of $186,600 for the year. Transportation Services is also projecting a favourable variance of $59,500 due to temporary staff vacancies. These favourable variances are more than offset by $197,000 in unfavourable variances related to higher than expected landscaping costs, higher than expected maintenance requirements for traffic signals, increased service levels for road patrols and damaged guiderails. In addition, a $127,000 unfavourable variance is projected primarily due to property taxes for the storm water station, hydro and unexpected storm water station maintenance. Corporate Administration $253,700 F Corporate Administration which consists of the CAO s Office, Office of the Chair, Regional Council and Finance projects a favourable variance to year-end of $253,700 which primarily relates to savings due to temporary staff vacancies and additional revenues in Purchasing for increased document fees and GST refunds. Non-Program and Boards & Agencies $341,800 F The projected favourable year-end variance relates to lower than budgeted fees paid to the Municipal Property Assessment Corporation (MPAC) of $261,800 as well as a slight favourable variance projected for POA revenues of $80,000. MPAC has completed two supplementary / omitted rolls in 2013 with two additional rolls planned for this fall. The estimated revenue from the first two rolls is $3.5 million on a budget of $8.6 million, although no variance is projected there is a concern that the volume of additional properties being added through supplementary rolls will remain under target and therefore result in unfavourable variances by year-end. As indicated in Report FN-19-13, re: Investment Performance to August 31, 2013, investment income, which includes interest earnings and realized capital gains, is projected to be favourable by $9.5 million resulting from capital gains. These earnings are distributed to accounts based on their average balances. Given the growth in the capital accounts, the additional investment earnings have been allocated to the capital reserves. 5
Police Services $1,500,000 F The Halton Regional Police Service is currently projecting a favourable variance of $1.5 million which relates mainly to compensation savings due to the delay in hiring officers to replace those that have retired or resigned. RATE SUPPORTED SERVICES $0 Water Services $952,400 F An overall favourable variance is projected for the Water Division due to savings in hydro costs of $900,000, temporary staff vacancies of $250,000, chemicals of $143,400 and water billing charges are less than planned by $111,200. Other savings of $72,400 are projected for natural gas. These savings somewhat are offset by unfavourable variances due to emergency repairs of $315,000 on Lakeshore Road and Brant Street (PW-18-13), higher than anticipated water charges of $102,500 for water testing and property assessments resulting in an increase of $105,700 in taxes. Wastewater Services $445,200 F A favourable variance of $445,200 is projected for the Wastewater Division at this time. Favourable variances include: debt charge savings of $550,000 due to a delay in the issuance of debt and lower than anticipated chemical costs of $164,900. Other favourable variances totalling $150,000 are projected due to unspent professional services, lower sewer billing fees, natural gas, diesel and landscaping costs. These are somewhat offset by projected unfavourable variances for biosolids haulage of $168,100, hydro of $85,600, sewer charges of $33,100 in the treatment plants, and $10,000 for fuel. Other projected unfavourable variances are expected in the Basement Flooding Prevention program of $95,000 from increased homeowner participation due to wetter weather conditions, and $45,000 in additional property tax assessments. Business and Technical Services $17,400 F Business and Technical Services are projecting an overall favourable variance of $17,400. This is mainly due to favourable permit inspection revenue of $125,000 resulting from higher than expected demand offset by unfavourable net staffing costs of $104,100 required to manage the capital projects. Revenues $1,415,000 U Based on water production at the plants and year-to-date billed water consumption data water volumes are down 4.0% over those in 2012 due to wetter summer seasonal 6
conditions. Based on water consumption continuing at similar volumes to 2012 for the balance of the year, staff are projecting 2013 utility revenues to be $1.4 million unfavourable. CAPITAL BUDGET The capital variance report is completed on a semi-annual basis for the six month periods ending June 30 and December 31 in order to review and monitor the implementation of the capital budget. This report provides an overview of project variances as of June 30, 2013, as well as projected variances over the project life. In addition, this report identifies the completed projects that can be closed, and the redeployment of excess funds resulting from these closures. Staff have delegated authority to close capital projects with net expenditures that are less than 10% or $100,000 over the approved project budget. As shown in the chart below, as of June 30, 2013, the total combined active capital program budget is $2,922.5 million, consisting of 735 capital projects. Of this total, the rate programs (water and wastewater) constitute 58.1% ($1,697.9 million) with the tax program accounting for the remaining 41.9% ($1,224.6 million), including 33.4% for transportation ($976.7 million), 2.0% for asset management ($58.6 million), and 1.6% for police ($46.9 million). 7
Current and Projected Variances The following chart provides the overall status of the approved $2,922.5 million budget. Of the total, 49.1% ($1,435.8 million) of the approved budget has been either spent ($1,195.8 million) or allocated in open purchase orders (POs) ($240.0 million). The remaining 50.9% ($1,486.7 million) represents net funds that are unspent as of June 30, 2013, reflecting the multi-year nature of the capital projects. As shown in Attachment #1, the net $1,486.7 million in unspent funding includes a total unspent amount of $1,487.9 million in projects offset by $1.2 million of unfavourable variance(overspending) incurred in some projects. The unfavourable variance in these projects is mainly a result of changed project scope and increased construction costs incurred during project implementation. Of the 44 active projects with unfavourable variances, 4 meet the reporting criteria requirement of either an unfavourable variance greater than 10% of budget or greater than$100,000. These projects are listed in Attachment #2 of this report, along with explanations for the variances. Any additional funding requirements arising from unfavourable variances will be addressed throughout the year by reports to Council and/or as part of the 2014 Budget process. As a part of the capital variance and closure reporting process, staff have reviewed the forecast and determined that the total budget and forecast of active capital projects is $4,104.8 million, which includes the current budget of $2,922.5 million and $1,182.3 million in the forecast period. The existing program is expected to be completed within the approved budget and forecasts, and will be further reviewed as part of the annual capital budget process. 8
Project Closure Attachment #3 indicates capital projects with a total approved budget of $25.8 million will be closed within staff delegated authority. The closure of these 37 capital projects will result in approximately $1.9 million of excess funds. The excess funds will be transferred to the appropriate capital reserves and reserve funds as set out in CS-15-06 (re: Update to Capital Financing Policy). Revisions to Capital Project Accounts As part of the capital variance review, some capital project accounts require revisions to their project budget and/or financing, in order to reflect the budget reductions and/or receipt of additional external recoveries/subsidy that have occurred since the time of the original budget approval. A total of 12 projects require the adjustments including a budget reduction of $3.3 million. Detailed adjustments are included in Attachment #4. 9
FINANCIAL/PROGRAM IMPLICATIONS There are no direct financial implications in this report. RELATIONSHIP TO HALTON REGION S 2011-2014 ACTION PLAN The subject of this staff report is an operational matter not related to Halton Region s 2011-2014 Action Plan. Respectfully submitted, Mark Scinocca Commissioner, Finance and Regional Treasurer Approved by Jane MacCaskill Chief Administrative Officer If you have any questions on the content of this report, please contact: Mark Scinocca Tel. # 6005 Attachments: Attachment # 1 Current Variance for Active Projects Attachment # 2 Active Projects with Variance Over 10% or $100,000 of Project Budget Attachment # 3 Summary of Project Closures Attachment # 4 Capital Budget Project Refinancing 10