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Home My WebLink AboutFCS-12-039 - 2011 Year End Variance ReportREPORT TO: Finance and Corporate Services Committee DATE OF MEETING: March 19, 2012 SUBMITTED BY: Ryan Hagey, Manager/Interim Director of Financial Planning PREPARED BY: Ryan Hagey, Manager/Interim Director of Financial Planning WARD(S) INVOLVED: All DATE OF REPORT: March 1, 2011 REPORT NO.: FCS-12-039 SUBJECT: 2011 Year End Variance Report RECOMMENDATION: For information. BACKGROUND: This is the third and final report to council regarding the City’s financial performance versus the 2011 budget. The report and attached schedules include information regarding: tax supported services rate supported enterprises/utilities, and supplementary information related to investment income REPORT: The tax supported budget and a number of enterprises ended the year better than budget. These results were a factor of many things including reduced spending in discretionary items, weather conditions, and savings in the capital program. Operating Fund – Tax-Base (Schedule 1) Before considering capital closeouts, the City ended the year with a tax-supported operating deficit of $238,000 which equates to 0.16% of the operating expenditure budget. In anticipation of a deficit, early in 2011 it was determined that capital closeouts would be transferred to the operating budget. There were nearly $1.4M of capital closeouts available to be transferred into the operating budget, so a net surplus of $1.15M was transferred to the Tax Stabilization Reserve Fund in accordance with City policy. Significant variances (over $200,000) are summarized below. Additional details are provided in Schedule 1 for variances that exceed $50,000 and/or 10% of budget. Community Services Department: By-law Enforcement - Parking/Noise had a deficit of $294,000 as fine revenues failed to meet budget and wage costs were higher in order to cover off sick time, vacation and seasonal initiatives. KMAC and Arenas had a surplus of $274,000 related to increased rentals throughout the year. These additional rentals resulted in increased costs in Facilities Management. Planning had a surplus of $226,000, largely due to higher activity in site plan review fees. ì ó ï Infrastructure Services Department: Facilities Management – Building Maintenance had a deficit of $622,000 due largely to utility costs resulting from higher than budgeted electricity prices, additional water costs for operating new splash pads and increased activity at KMAC and Arenas. There were also additional costs due to the continued servicing of former facilities (e.g. Bramm, Elmsdale). Operations – Administration had a deficit of $673,000 related to the requirement for additional supervisor time due to harsh weather at the start of the year and the move to the Kitchener Operations Facility, as well as additional Fleet costs and a loss on work conducted for the Region. Operations – Sportsfields, Trails & Parks had a deficit of $290,000 because of increased activity related to the wet spring. With the additional rain, wages and materials were increased as staff performed tasks necessary to get the fields playable and correct damage caused by play in the rain. Operations – Turf & Rinks Maintenance had a surplus of $220,000 due to weather conditions that prevented staff from cutting the fields. Operations – Winter Maintenance had a deficit of $751,000 due to the harsh winter conditions at the start of the year. General Expenses: Other expenses had a surplus of $342,000 mainly due to a one time correction of the accounting for tenant deposit interest, which had historically been funded out of general interest, but was adjusted to Gas, Water and Sanitary Sewer upon the reconciliation of all customer accounts. Gapping revenues had a surplus of $547,000 as several senior positions were vacant for most of the year, there was higher than typical gapping from Fire and higher than typical gapping due to detailed year end review of compensation accounts. General Revenues: Supplementary taxes had a surplus of $493,000 as a result of an unanticipated fourth supplementary tax run. Investment income had a surplus of $226,000 due to higher than average short term investment balances. Building Enterprise (Schedule 2) The Building Enterprise ended the year with a surplus of $624,000, which was $583,000 better than the budgeted surplus of $41,000. The surplus was due to both higher revenues and lower expenses. Revenues exceeded budget due to continued low interest rates which encourage building activity, as well as increased permit activity as developers tried to avoid an increase in development charge fees from the school board. Expenses were lower than budget due to vacancies caused by regular staff turnover, maternity leaves and a retirement. Golf Courses (Schedule 3) Overall, the golf courses came in slightly better than budget with a surplus of just under $9,000. Revenues in course operations were lower than budgeted due to late opening and weather conditions at the start of the season, but staff hours and maintenance expenses were reduced to compensate for this. Canteen revenues and expenses both exceeded budget, but the net results were not significantly different than budget. Parking Enterprise (Schedule 4) The Parking Enterprise had a deficit of $317,000, which fell short of the budgeted surplus of $227,000 by $544,000. Revenues fell short of budget by $845,000, largely due to delayed openings ì ó î of the Charles & Benton garage and the Civic District garage. The revenue shortfall was somewhat offset by savings in staffing and other operating costs. Water Utility and Sanitary Sewer Utility (Schedules 5 and 6) The Water Utility posted a surplus of $2.5M, which exceeded the budgeted surplus of $1M by $1.5M. Sale of water revenues were down by $461,000 due to less water usage, but expenses for water supply purchases from the Region were down by $1.4M. As well, transfers to capital were under budget by $813,000 due to savings in tender prices and closeouts from previously approved projects. The Sanitary Sewer Utility experienced a surplus of $859,000, which fell short of the budgeted surplus of $1.6M by $759,000. Sewer surcharge revenues were under budget by $385,000 due to less water usage, while processing costs from the Region were higher than budgeted by almost $1.5M due to wet weather which led to excessive inflow and infiltration. These shortfalls were significantly offset by reduced transfers to the capital program of $1.3M as a result of favourable tender results and capital closeouts. Storm Sewer Utility (Schedule 7) The Storm Sewer Utility ended the year at a deficit of $1.4M which is nearly $600,000 ahead of the budgeted deficit of $2M. The largest single factor was related to transfers to the capital fund, which were significantly under budget based on tender results experienced in 2011, and closeouts from previously approved capital projects. Revenues were also slightly better than budget. Offsetting a portion of these positive variances were higher than budgeted operating expenses related to additional storm sewer repair and maintenance activities carried out in 2011. Gas Utility (Schedule 8) Gas Delivery’s revenue over expenses were $15.1M which was $2.6M better than the budget of $12.6M. Gas consumption was higher than budgeted, which led to net revenues of over $20.3M compared with a budget of $17.6M. As per Council’s direction, an unbudgeted transfer of $2M moved funding from Gas to the Tax Stabilization Reserve Fund in light of these favourable results Gas Supply had lower than anticipated volumes, but also lower than expected pricing and only posted a deficit of $551,000 compared with a budgeted deficit of $4.1M Investment Report (Schedule 9) Short term investment yields averaged nearly 1.50% in 2011, which is up from approximately 1% in 2010. As well, average short term investment balances were slightly higher than in 2010. Combined, these two factors led to a surplus in investment income for the City in 2011. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: This reporting falls within the Efficient and Effective Government plan foundation area of the Strategic Plan. It helps support the financial goal of ensuring openness and transparency of city finances. FINANCIAL IMPLICATIONS: Financial implications are discussed above and detailed in the attached schedules. COMMUNITY ENGAGEMENT: N/A ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services) ì ó í ì ó ì ì ó ë ì ó ê ì ó é ì ó è ì ó ç ì ó ïð ì ó ïï ì ó ïî ì ó ïí ì ó ïì ãÓ×ÐØ ì ó ïë ì ó ïê