Consolidated financial statements of The Corporation of the Town of Whitby
Table of contents Independent Auditor s Report... 1-2 Consolidated statement of financial position... 3 Consolidated statement of operations... 4 Consolidated statement of change in net financial assets... 5 Consolidated statement of cash flows... 6... 7-21 Consolidated schedule of segmented disclosure - Schedule 1... 22-23
Deloitte LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca Independent Auditor s Report To the Members of Council, Inhabitants and Ratepayers of the Corporation of the Town of Whitby We have audited the accompanying financial statements of the Corporation of the Town of Whitby, which comprise the consolidated statement of financial position as at, and the consolidated statements of operations, change in net financial assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation of the Town of Whitby as at and the results of its operations, change in its net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants Licensed Public Accountants June 30, 2016 Page 2
Consolidated statement of financial position as at (Restated - Note 2) Financial assets Cash 143,314,013 99,464,628 Investments 21,323,178 56,245,040 Taxes receivable (Note 5) 10,826,340 10,990,251 Accounts receivable 6,188,304 5,149,366 Other accounts receivable (Note 6) 6,521,300 6,521,300 Investment in Whitby Hydro (Note 15) 47,278,000 45,841,000 Long-term note receivable (Note 15) 21,816,642 21,816,642 257,267,777 246,028,227 Liabilities Accounts payable and accrued liabilities 10,550,265 11,591,913 Other current liabilities 3,811,578 3,138,953 Deferred revenue (Note 7) 95,159,292 90,333,153 Liability for contaminated sites 3,556,000 - Employee future benefits liabilities (Note 8) 10,028,920 9,845,500 123,106,055 114,909,519 Net financial assets 134,161,722 131,118,708 Non-financial assets Tangible capital assets (Note 9) 618,833,467 618,221,623 Prepaid expenses 999,985 1,209,449 Inventory of supplies 473,140 505,200 620,306,592 619,936,272 Accumulated surplus (Note 10) 754,468,314 751,054,980 The accompanying notes to the financial statements are an integral part of this financial statement. Page 3
Consolidated statement of operations year ended Actual Budget (Restated - (Note 13) Actual Note 2) $ Revenue Taxation 75,157,388 75,036,420 72,560,164 User fees and charges 18,413,219 19,518,858 17,893,680 Grants 237,548 1,164,099 427,526 Developer and other contributions earned 4,936,470 2,711,940 3,683,754 Gas tax revenue 3,524,886 3,637,077 3,012,093 Investment income 1,303,410 1,291,381 1,752,528 Fines, penalties and interest 2,640,000 2,695,078 2,661,563 Licenses and permits 391,957 375,472 450,438 Rents and other 2,139,076 3,204,200 2,644,604 Revenue recognized on contributed tangible capital assets 8,856,926 8,856,926 6,835,648 Net earnings, Whitby Hydro (Note 15) 3,245,924 4,245,000 5,144,000 120,846,804 122,736,451 117,065,998 Expenses (Schedule 1) General government 14,613,705 14,904,609 15,660,447 Protection to persons and property 22,440,584 22,075,385 21,546,035 Transportation services 36,433,327 37,173,209 37,952,792 Environmental services 6,133,889 5,987,947 5,637,616 Recreation and cultural services 31,190,337 30,229,159 29,339,262 Planning and development 4,027,542 4,057,978 3,958,560 Social and family services 1,302,316 1,338,830 1,380,701 116,141,700 115,767,117 115,475,413 Annual surplus 4,705,104 6,969,334 1,590,585 Accumulated surplus, beginning of year (Note 2) 751,054,980 747,498,980 749,464,395 Accumulated surplus, end of year 755,760,084 754,468,314 751,054,980 The accompanying notes to the financial statements are an integral part of this financial statement. Page 4
Consolidated statement of change in net financial assets year ended Actual Budget (Restated - (Note 13) Actual Note 2) $ Annual surplus 4,705,104 6,969,334 1,590,585 Acquisition of tangible capital assets - (26,121,896) (22,729,836) Amortization of tangible capital assets - 22,967,365 22,220,535 Write down of tangible capital assets - 2,542,687 1,989,300 4,705,104 6,357,490 3,070,584 Decrease in prepaid expenses - 209,464 (459,661) Acquisition of inventories of supplies - (473,140) (505,200) Consumption of inventories of supplies - 505,200 444,872 Change in net financial assets 4,705,104 6,599,014 2,550,595 Net financial assets, beginning of year (note 2) 131,118,708 127,562,708 128,568,113 Net financial assets, end of year 135,823,812 134,161,722 131,118,708 NMBT: April 09 2016. U Drive Financial Report December 31 2015. The accompanying notes to the financial statements are an integral part of this financial statement. Page 5
Consolidated statement of cash flows year ended (Restated - Note 2) Operating activities Annual surplus 6,969,334 1,590,585 Items not involving cash Amortization 22,967,365 22,220,535 Write down of tangible capital assets 2,542,687 1,989,300 Net earnings of Whitby Hydro Energy Corporation (4,245,000) (5,144,000) Value of contributed tangible assets recognized as revenue (8,856,926) (6,835,648) Changes in non-cash assets and liabilities Taxes receivable 163,911 339,904 Accounts receivable (1,038,938) 4,646,948 Inventory of supplies 32,060 (60,328) Prepaid expenses 209,464 (459,661) Accounts payable and accrued liabilities (1,041,648) (1,995,034) Other current liabilities 672,625 (57,424) Deferred revenue 4,826,139 2,794,562 Employee future benefits liability 183,420 170,852 23,384,493 19,200,591 Capital activity Acquisition of tangible capital assets (17,264,970) (15,894,188) Investing activities Net changes in investments 34,921,862 (975,421) Dividend from Whitby Hydro Energy Corporation 2,808,000 2,311,000 37,729,862 1,335,579 Change in cash during the year 43,849,385 4,641,982 Cash, beginning of year 99,464,628 94,822,646 Cash, end of year 143,314,013 99,464,628 The accompanying notes to the financial statements are an integral part of this financial statement. Page 6
1. Significant accounting policies The consolidated financial statements of The Corporation of the Town of Whitby (the Town ) are the representations of management prepared in accordance with accounting standards, as recommended by the Public Sector Accounting Board ( PSAB ) of the Chartered Professional Accountants of Canada. a) i) Reporting entity These consolidated financial statements reflect the assets, liabilities, accumulated surplus, revenues, expenses and annual surplus of the reporting entity. The reporting entity is comprised of all organizations, local boards and committees which are controlled by the Town, including the following: Town of Whitby Public Library Board; and Groveside Cemetery Board All material inter-entity transactions and balances are eliminated on consolidation with the exception of transactions/balances with Whitby Hydro Energy Corporation (Note 1(a) (ii)). ii) Investment in Whitby Hydro Energy Corporation Whitby Hydro Energy Corporation and its subsidiaries are accounted for on a modified equity basis, consistent with generally accepted accounting principles as recommended by PSAB for government business enterprises. Under the modified equity basis of accounting, the business enterprise s accounting principles are not adjusted to conform to those of the Town, and interorganizational transactions and balances are not eliminated. The Town recognizes its equity interest in the annual income or loss of Whitby Hydro Energy Corporation in its statement of operations with a corresponding increase or decrease in its investment asset account. Any dividends that the Town receives from Whitby Hydro Energy Corporation are reflected as reductions in the investment asset account. iii) Accounting for region and school board transactions The taxation, other revenues, expenses, assets and liabilities with respect to the operations of the school boards and the Region of Durham are not reflected in the municipal fund balances of these financial statements. iv) Trust funds Trust funds and their related operations administered by the Town are not consolidated, but are reported separately on the Trust Funds Statement of Financial Activities and Change in Fund Balance and the Trust Funds Statement of Financial Position. b) Basis of accounting i) Revenues and expenses Revenues and expenses are reported on the accrual basis of accounting. The accrual basis of accounting recognizes revenues, as they are earned and measurable; expenses are recognized, as they are incurred and measurable as a result of the receipt of goods or services and the creation of a legal obligation to pay. Tax revenue Tax revenue is recognized on all taxable properties within the Town included in the tax roll provided by the Municipal Property Assessment Corporation, using property values included in the tax roll or property values that can be reasonably estimated by the Town as it relates to supplementary or omitted assessments using tax rates authorized by Council for the Town s own purposes in the period for which the tax is levied. ii) Investments Investments are recorded at lower of cost or market value. Page 7
1. Significant accounting policies (continued) b) Basis of accounting (continued) iii) Non-financial assets Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year and are not intended for sale in the ordinary course of operations. Tangible capital assets Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of the tangible capital assets excluding land are amortized on a straight line basis over their estimated useful lives as follows: Useful life-years Land improvements 10-20 Building and building improvements 10-50 Vehicles, machinery and equipment 5-20 Stormwater management 15-75 Road infrastructure 25-50 One half of the amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is available for productive use. Contribution of tangible capital assets Tangible capital assets received as contributions are recorded at their fair value as the date of receipt and also are recorded as revenue. Interest capitalization The Town s tangible capital asset policy does not allow for the capitalization of interest costs associated with the acquisition or construction of tangible capital assets. iv) Deferred revenue - obligatory reserve funds Deferred revenue - obligatory reserve funds represents development charge contributions, payments in lieu of parkland, building code net revenues, Invest in Ontario grants, and gas tax, levied or received under the authority of federal and provincial legislation and Town by-laws. These amounts have been collected but the related services have yet to be performed. These amounts will be recognized as revenue in the fiscal year the related services are performed. v) Deferred revenue - general Deferred revenue - general represents user charges and other fees, which have been collected, for which the related services have yet to be performed. These amounts will be recognized as revenue in the fiscal year the related services are performed. vi) Employee future benefits liabilities The present value of the cost of providing employees with future benefits programs is recognized as employees earn these entitlements through service. Page 8
1. Significant accounting policies (continued) b) Basis of accounting (continued) vii) Government transfers Government transfers are recognized as revenues by the Town in the period during which the transfer is authorized and any eligibility criteria are met. Government transfers are deferred if they are restricted through stipulations that require specific actions to be carried out in order to keep the transfer. For such transfers, revenue is recognized when the stipulation has been met. viii) Reserves and reserve funds Certain amounts, as approved by Town Council are set aside in reserves and reserve funds for future operating and capital purposes. Transfers to and/or from reserves and reserve funds are an adjustment to the respective fund when approved. ix) Use of estimates The preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Significant estimates relate to taxes receivable, accounts receivable, employee future benefits liabilities and accounts payable and accrued liabilities. Due to the inherent uncertainty in making estimates, actual results could differ from those estimates. 2. Restatement (a) Whitby Hydro Energy Corporation first time adoption of International Financial Reporting Standards (IFRS) Whitby Hydro Energy Corporation (WHEC) which is a wholy owned subsidiary of the Town if the Town of Whitby adopted IFRS on January 1, 2015. The adoption of IFRS requires retrospective application of the new accounting framework to January 1, 2014, the date of transition. As a result, the amounts reported by WHEC for its December 31, 2014 year end and the opening balance sheet as at the date of transition have been restated. In preparing its opening IFRS consolidated balance sheet WHEC has adjusted amounts reported previously in its financial statements prepared in accordance with Canadian GAAP. IFRS 1 requires an entity to explain how the transition from its previous GAAP to IFRS affected its reported financial position, financial performance and cash flows by providing reconciliations of shareholder s equity, comprehensive income and cash flows for prior periods. Accordingly, WHEC prepared their first annual financial statements in accordance with IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. The adjustments in the Town s financials due to IFRS are provided as per below: IFRS adjustments to opening As at and for the year accumulated ended December 31, Balance surplus as at IFRS Balance, 2014, unless otherwise previously January 1, adjustments restated stated reported 2014 to 2014 (Note 6) Investment in WHEC 67,775,210 400,265 (517,833) 67,657,642 Equity pick up from WHEC 5,661,833 - (517,833) 5,144,000 Accumulated surplus, January 1, 2014 749,064,130 400,265-749,464,395 Page 9
2. Restatement (continued) (b) Liability for Contaminated Sites The Town has implemented PSAB section 3260 Liability for Contaminated Sites. Section 3260 requires governments to record a liability in their financial statements if they have a contaminated site that meets the requirements set out in the standard. The standard defines contamination as the introduction into air, soil, water, or sediment of a chemical, organic or radiative material or live organism that exceeds an environmental standard. The standard generally applies to sites that are not in productive use. Sites that are in productive use are only considered contaminated if there was an unexpected event that resulted in contamination. The adoption of this standard has been applied retroactively without the restatement of prior periods. The adoption of this Standard resulted in an increase in liability for contaminated sites and a reduction accumulated surplus at January 1, 2015 of $3,556,000. 3. Operations of school boards and the Region of Durham Further to Note 1 a) iii), requisitions were made by the Region of Durham and School Boards requiring the Town to collect property taxes and payments in lieu of property taxes on their behalf. The amounts collected and remitted are summarized as follows: School Region of boards Durham Total Total Taxation 50,053,278 120,867,320 170,920,598 168,686,977 Payment in lieu of taxes 622,767 1,907,141 2,529,908 2,507,096 Amounts collected and remitted 50,676,045 122,774,461 173,450,506 171,194,073 4. Trust funds Trust funds administered by the Town amounting to $ 1,077,297 (2014 - $1,041,528) have not been included in the Consolidated Statement of Financial Position nor have their operations been included in the Consolidated Statement of Operations. The trust funds have been reported separately on the Trust Funds Statement of Financial Activities and Change in Fund Balance and Trust Funds Statement of Financial Position. 5. Taxes receivable The balance in taxes receivable, including penalties and interest, is comprised of the following: Current year 6,723,783 6,592,420 Arrears previous years 4,102,557 4,397,831 10,826,340 10,990,251 Page 10
6. Other accounts receivable 7-1/4% promissory note issued to the Town of Whitby by Whitby Hydro Energy Corporation. The Town has the option of calling the principal amount in whole or in part, with notice of sixty days. The Town has agreed not to call this loan before January 1, 2017. 1,460,300 1,460,300 7-1/4% promissory note issued to the Town of Whitby by Whitby Hydro Energy Corporation. The Town has the option of calling the principal amount in whole or in part, with notice of sixty days. The Town has agreed not to call this note before January 1, 2017. 5,061,000 5,061,000 6,521,300 6,521,300 Interest revenue earned on these notes totaled $ 472,794 (2014 - $472,794). 7. Deferred revenue Deferred revenue represents user charges and fees which have been collected but for which the related services have yet to be performed. These amounts will be recognized as revenues in the fiscal year the related services are performed. The following is the current status of the deferred revenues: Obligatory reserve funds Development charges 82,713,129 78,833,436 Parkland 3,948,382 2,819,833 Federal gas tax 4,665,647 4,689,673 Deferred revenue - general 3,832,134 3,990,211 95,159,292 90,333,153 Page 11
7. Deferred revenue (continued) Continuity of deferred revenue is as follows: Balance, beginning of year 90,333,153 87,538,591 Developer contributions collected 6,861,820 5,053,932 Federal gas tax 3,533,198 3,624,317 Other collections 3,832,134 3,990,211 Interest earned 1,414,031 2,049,779 15,641,183 14,718,239 Less Developer contribution revenue recognized in current operations 1,815,802 952,876 Developer contribution revenue recognized in capital operations 1,371,954 2,730,878 Gas tax revenue recognized in capital operations 3,637,077 3,012,093 General deferred revenue recognized 3,990,211 5,227,830 10,815,044 11,923,677 Balance, end of year 95,159,292 90,333,153 8. Employee future benefits liabilities The Town makes available to qualifying employees who retire before the age of 65, the opportunity to continue their coverage for such benefits as extended health and drugs, dental care and life insurance. Coverage ceases at the age of 65. The accrued benefit liability and the expense for the year ended are based on the results and assumptions of an actuarial valuation as at. The significant actuarial assumptions used in estimating the Town s related accrued benefit obligation are as follows: Discount rate 4.75% Inflation rate 2% per year Dental benefit cost escalation 4% per year Medical benefit cash escalation 6% per year reducing to 4% per year over 6 years Information about the Town s post retirement benefit plan is as follows: Accrued benefit liability Accrued benefit obligation 10,779,937 10,683,030 Unamortized actuarial loss (751,017) (837,530) Employee future benefit liability 10,028,920 9,845,500 Page 12
8. Employee future benefits liabilities (continued) Expense Current year benefit expense 468,037 438,053 Amortization of actuarial losses 86,513 86,513 Interest on accrued benefit obligation 497,920 493,715 1,052,470 1,018,281 9. Tangible capital assets i) Contributed tangible capital assets The Town records all tangible capital assets contributed by an external party at fair value on the earlier of the date received or of the transfer of risk and responsibility. Typical examples are land, roadways, and storm sewer lines installed by a developer as part of a subdivision agreement. Transfer of tangible capital assets in 2015 amounted to $8,856,926 (2014 - $6,835,648). ii) Tangible capital assets recognized at nominal value Certain assets have been assigned a nominal value of one Canadian dollar, because of the difficulty of determining a tenable valuation and/or the assets were older than their estimated expected useful lives, and therefore were fully amortized. iii) Works of art and historical treasures The Town applies efforts to protect and preserve a number of owned historical buildings, collections of equipment, artifacts, documents and exhibits and works of art. These assets are not held for financial gain or to provide service but rather for public exhibition, education or research in furtherance of public service. These historical treasures and works of art are not recognized as tangible capital assets in the financial statements. The acquisition or betterment of such assets is recognized in the financial statements as an operating expense. Page 13
9. Tangible capital assets (continued) iv) Other No interest was capitalized during the year (2014 - $Nil). 2015 Vehicles, Building and machinery Land building and Stormwater Road Work in Land improvements improvements equipment management infrastructure progress Total Cost Balance, beginning of year 79,391,023 79,092,301 144,585,027 37,150,136 65,793,958 547,077,885 2,901,274 955,991,604 Additions 16,085 1,667,612 2,719,529 2,757,470 1,150,630 13,482,130 4,328,440 26,121,896 Work in process - - - - completed - 42,422 235,983 - - 2,622,869 (2,901,274) - Write downs - (344,018) - (1,474,993) (87,733) (4,014,028) - (5,920,772) Balance, end of year 79,407,108 80,458,317 147,540,539 38,432,613 66,856,855 559,168,856 4,328,440 976,192,728 Accumulated amortization Balance, beginning of year - 28,930,778 58,160,723 26,512,303 14,500,542 209,665,635-337,769,981 Write downs - (2,979,977) (18,651) (202,961) (25,058) (151,438) - (3,378,085) Amortization expense - 2,060,610 4,345,613 2,472,543 830,577 13,258,022-22,967,365 Balance, end of year - 28,011,411 62,487,685 28,781,885 15,306,061 222,772,219-357,359,261 Net book value, end of year 79,407,108 52,446,906 85,052,854 9,650,728 51,550,794 336,396,637 4,328,440 618,833,467 Page 14
9. Tangible capital assets (continued) iv) Other (continued) 2014 Vehicles, Building and machinery Land building and Stormwater Road Work in Land improvements improvements equipment management infrastructure progress Total Cost Balance, beginning of year 79,391,023 72,469,099 142,380,349 35,304,925 64,671,147 536,653,676 6,598,234 937,468,453 Additions - 3,926,309 1,934,462 2,994,688 1,194,934 9,778,169 2,901,274 22,729,836 Work in process - completed - 2,696,893 270,216 28,751 8,141 3,594,233 (6,598,234) - Write downs - - - (1,178,228) (80,264) (2,948,193) (4,206,685) Balance, end of year 79,391,023 79,092,301 144,585,027 37,150,136 65,793,958 547,077,885 2,901,274 955,991,604 Accumulated amortization Balance, beginning of year - 26,979,372 53,920,391 25,473,361 13,688,041 197,705,666-317,766,831 Write downs - (1,178,228) (12,273) (1,026,884) - (2,217,385) Amortization expense - 1,951,406 4,240,332 2,217,170 824,774 12,986,853-22,220,535 Balance, end of year - 28,930,778 58,160,723 26,512,303 14,500,542 209,665,635-337,769,981 Net book value, end of year 79,391,023 50,161,523 86,424,304 10,637,833 51,293,416 337,412,250 2,901,274 618,221,623 Page 15
10. Accumulated surplus Accumulated surplus consists of individual fund surplus, reserves and reserve funds and invested in tangible capital assets as follows: General 5,278,428 4,658,872 Unfunded employee future benefits (10,028,920) (9,845,500) Unfunded liability for contaminated sites (3,556,000) - Internal borrowings from deferred revenue (7,603,652) (7,966,695) Unfunded capital (142,131) (900,421) Equity in Whitby Hydro 69,094,642 67,657,642 Reserve and Reserve Funds 82,592,480 79,229,459 Invested in tangible capital assets 618,833,467 618,221,623 754,468,314 751,054,980 11. Internal loans As a means of funding various capital acquisitions, funds are borrowed by the Operating Fund from Development Charges. These funds are secured by promissory notes and are repaid over a determined period of time. The financing arrangements and ultimate repayment are approved by Council through the current budget process. The following is a summary of the individual loans. Whitby Public Library 4,673,353 5,180,160 Recreation and Cultural 595,192 253,233 Soccer Club 2,335,107 2,533,302 7,603,652 7,966,695 12. Pension agreements The Town makes contributions to the Ontario Municipal Employees Retirement System ( OMERS ) which is a multi-employer plan, on behalf of all permanent, full-time members of its staff. The Plan is a defined benefit plan that specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. Contributions to OMERS for the year were $8,410,048 (2014 - $9,282,732). Page 16
13. Budget figures The budgets originally approved by Town Council for 2014, adjusted as noted below, are reflected on the Consolidated statement of operations and accumulated surplus and Consolidated statement of change in net financial assets. An amount for amortization expense has been added and is based on management s best estimate of amortization expense determined at the beginning of the year. Amortization expense was not included in the original council approved budget. Amounts for the cost of contributed tangible capital assets and the related revenue have been added and are based on management s best estimate of the value of contributed tangible capital assets determined at the beginning of the year. Neither the cost of the contributed tangible capital assets nor the revenue was included in the original council approved budget. Amounts included in the original council approved capital budget which are not recognized as tangible capital assets are included in Consolidated Statement of Operations and Accumulated Surplus under the appropriate functional expense category, while those recognized as tangible capital assets are include in the Consolidated Statement of Change in Net Financial Assets. Budget figures have been reclassified for purposes of these consolidated financial statements to comply with PSAB reporting requirements. 14. Contingent liabilities Unsettled legal claims and potential other claims The Town has been named as the defendant in certain legal actions in which damages have been sought. The outcome of these actions is not determinable at this time and, accordingly, no provision has been made in these financial statements for any liability that may result. 15. Investment in Whitby Hydro Energy Corporation In accordance with the requirements in Bill 35 (The Energy Competition Act, 1998) the Town of Whitby (the Town ), passed a transfer by-law, effective November 1, 2000, that transferred substantially all of the assets and liabilities of the Whitby Hydro-Electric Commission to Whitby Hydro Energy Corporation. Whitby Hydro Energy Corporation carries on the former business of the Commission with all its rights, duties, obligations and responsibilities. a) Equity in Whitby Hydro Energy Corporation (Restated Note 2) Balance, beginning of year 67,657,642 64,824,642 Changes during the year Net income for the year 4,245,000 5,144,000 71,902,642 69,968,642 Dividend received from Whitby Hydro Energy Corporation (2,808,000) (2,311,000) Balance, end of year 69,094,642 67,657,642 Page 17
15. Investment in Whitby Hydro Energy Corporation (continued) a) Equity in Whitby Hydro Energy Corporation (continued) (Restated Note 2) Investment in Whitby Hydro Energy Corporation 47,278,000 45,841,000 Long-term note receivable 21,816,642 21,816,642 69,094,642 67,657,642 Reported on the consolidated statement of financial position as follows: The long-term note receivable by the Town is a demand note with a fixed interest rate of 7.0%. The Town has the option of calling the principal, in whole or in part, with twelve months notice. The Town does not anticipate calling this note before January 1, 2017. Interest revenue earned on this note totaled $1,527,206 (2014 - $1,527,206). Page 18
15. Investment in Whitby Hydro Energy Corporation (continued) a) Equity in Whitby Hydro Energy Corporation (continued) The following table provides condensed financial information of Whitby Hydro Energy Corporation at and for the year ended. (000 s) (000 s) (Restated Note2) Assets Current 32,257 32,416 Capital and intangibles 81,634 70,569 Other 2,402 2,522 Total assets 116,293 105,507 Regulatory balances 6,201 5,745 Total assets and regulatory balances 122,494 111,252 Liabilities Current 18,430 17,758 Long-term debt 32,338 32,738 Other 17,572 9,399 Total liabilities 68,340 59,895 Shareholders' equity Share capital 30,432 30,432 Accumulated other comprehensive loss 12 (85) Retained earnings 16,834 15,494 Total equity 47,278 45,841 Regulatory balances 6,876 5,516 Total liabilities, equity and regulatory balances 122,494 111,252 Comprehensive Income Commodity revenue 105,607 92,348 Commodity expenses (105,367) (96,481) Distribution revenue 21,951 21,655 Operating expenses (16,956) (16,838) Other income (expense) (183) 308 Accumulated other comprehensive loss 97 (567) Net movements in regulatory balances, net of tax (904) 4,719 Total comprehensive income for the year 4,245 5,144 Included in revenues above is $4,242,000 (2014 - $3,855,104) earned from the Town for services provided. Expenses above include $2,583,000 (2014 - $2,529,811) paid to the Town. Page 19
15. Investment in Whitby Hydro Energy Corporation (continued) (b) Commitments and Contingencies of Whitby Hydro Energy Corporation as disclosed in their financial statements are as follows: General Liability Insurance The Corporation maintains appropriate types and levels of insurance with major insurers. With respect to liability insurance, the Corporation is a member of the Municipal Electricity Association Reciprocal Insurance Exchange ( MEARIE ). A reciprocal insurance exchange may be defined as a group of persons formed for the purpose of exchanging reciprocal contracts of indemnity or inter-insurance with each other. MEARIE is licensed to provide general liability insurance to its members. All members of the pool could potentially be subjected to an assessment for losses experiences by the pool for the years in which they were members on a pro-rata basis on the total of their respective service revenues. It is anticipated that should such an assessment occur it would be funded over a period of up to 5 years. As at, no such assessments have been made. Contractual Obligations The Corporation is party to a connection and cost recovery agreement with Hydro One Networks Inc. (Hydro One) related to the construction by Hydro One of a transformer station designated to meet the Corporation s anticipated load growth. Construction of the project was completed during 2007 and the Corporation connected to the transformer station in November 2007. To the extent that the cost of the project is not recoverable from future transformer connection revenues, the Corporation is obliged to pay a capital contribution equal to the difference between these revenues and the construction costs allocated to the Corporation. Hydro One performs a true-up based on actual load on a periodic basis. There is currently no revenue shortfall owing by the Corporation based on the most recent true-up. Any estimated short fall in the future would be recorded as a liability and a corresponding intangible asset when determined. General From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation s financial position, results of operations or its ability to carry on any of its business activities. The Corporation is committed to lease agreements for various vehicles and equipment. The future minimum non-cancellable annual lease payments are as follows: Less than one year 227 203 Between one and five years 880 834 More than five eyars 69 48 1,176 1,085 Page 20
16. Segmented information The Town provides a wide range of services to its residents. Segmented information has been provided in Schedule 1 for the following Town Services: Protection to persons and property Public works services (transportation and environmental) Recreation and Culture Planning and Development General Government Revenues and expenses directly attributable to each segment are reported by segment. Typically general government expenses are incurred in support of all services. Similarly general government revenues including taxes are used to finance all activities of the Town. For purposes of segmented reporting general government revenues and expenses have not been allocated to the other services but rather are shown separately. 17. Comparative figures Certain of prior year s figures have been reclassified to conform with current year s presentation. Page 21
Consolidated schedule of segmented disclosure - Schedule 1 year ended Protection to persons Public works Recreation Planning and General and property services and culture development government Consolidated Revenue Tax revenues - - - - 75,036,420 75,036,420 Grants 6,099 1,677 313,396 20,796 822,131 1,164,099 Developer contributions used for capital 90,271 1,326,705 1,099,151 109,815 85,998 2,711,940 Revenue recognized on contributed assets - 8,840,841 - - 16,085 8,856,926 Other revenues 1,735,612 7,794,528 9,158,012 1,495,449 14,783,465 34,967,066 1,831,982 17,963,751 10,570,559 1,626,060 90,744,099 122,736,451 Expenditures Salaries and wages 18,899,289 13,507,974 17,627,051 3,383,873 9,305,387 62,723,574 Materials and supplies 838,382 6,345,398 3,694,721 562,791 2,161,410 13,602,702 Contracted services 1,318,868 4,067,718 3,385,283 98,404 1,930,604 10,800,877 Other 11,187 222,398 495,428 1,537 2,406,088 3,136,638 Loss on disposal of tangible capital assets - 1,288,989 - - - 1,288,989 Amortization 1,007,659 17,728,679 5,026,676 11,373 439,950 24,214,337 22,075,385 43,161,156 30,229,159 4,057,978 16,243,439 115,767,117 Annual surplus (20,243,403) (25,197,405) (19,658,600) (2,431,918) 74,500,660 6,969,334 Page 22
Consolidated schedule of segmented disclosure - Schedule 1 year ended December 31, 2014 Protection to persons Public works Recreation Planning and General and property services and culture development government Consolidated Revenue Tax revenues - - - - 72,560,164 72,560,164 Grants 2,992 36,600 323,681 9,000 55,253 427,526 Developer contributions used for capital 75,987 2,516,106 838,525 253,136 3,683,754 Revenue recognized on contributed assets - 6,682,368 - - 153,280 6,835,648 Other revenues 1,415,396 4,631,821 9,368,147 211,601 18,449,774 34,076,739 1,494,375 13,866,895 10,530,353 473,737 91,218,471 117,583,831 Expenditures Salaries and wages 18,110,964 13,106,690 16,803,442 3,017,316 9,327,952 60,366,364 Materials and supplies 1,294,390 8,375,147 3,863,981 762,375 3,463,054 17,758,947 Contracted services 1,128,315 3,915,000 3,308,050 160,898 1,785,373 10,297,636 Other 9,332 218,571 499,749 6,599 2,108,380 2,842,631 Loss on disposal of tangible capital assets - 1,989,300 - - - 1,989,300 Amortization 1,003,034 15,985,700 4,864,040 11,372 356,389 22,220,535 21,546,035 43,590,408 29,339,262 3,958,560 17,041,148 115,475,413 Annual surplus (20,051,660) (29,723,513) (18,808,909) (3,484,823) 74,177,323 2,108,418 Page 23