HomeMy WebLinkAboutFCS-14-041 - December 2013 Variance Report
REPORT TO:Planning and Strategic Initiatives
DATE OF MEETING:
March 17, 2014
SUBMITTED BY:
Ryan Hagey, Director of Financial Planning
519-741-2200 Ext 7353
PREPARED BY:
Debra Fagerdahl, Managerof Financial Planning
519-741-2200 Ext 7114
WARD(S) INVOLVED:
All
DATE OF REPORT:
March 5, 2014
REPORT NO.:FCS-14-041
SUBJECT:
2013December Variance Report
RECOMMENDATION:
For information.
BACKGROUND:
This is the third and final report to Council regarding the City’s financial performance versus the 2013
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 table below summarizes the year-endpositions for tax supported operations as well as each of
the City enterprises.
IF1 - 1
Twoexamples are provided below to assist in interpreting the 2013 Summary Results table.
The first line of the table shows that Tax Supported Operations ended the yearwith a deficit
of $286,000onbudgetedexpenses of $164,742,000, which equates toa variance of -0.17%
of total expenses.
The bottom line of the table shows that Total City Operations ended the year with a deficit of
$1,946,000 on budgetedexpenses of $364,768,000, which equates to a variance of -0.53%
of total expenses.
Additional details about tax supported operations and each of the enterprises is provided in the
balance of the report.
Operating Fund – Tax Base (Schedule 1)
The City ended the year with anoperating deficit of $286,000in tax supported operations.This
equates to a-0.17% variancefrom the operating expenditure budget of $165M. The deficit in tax
supported operations wasfunded by a transfer from Tax Stabilization Reserve Fund, which ended
the year with a balance of $473,000. The Tax Stabilization Reserve Fundis well below itsminimum
target balance of $5.1Mand is essentially depleted.
Significant variances (over $200,000) are summarized below.Additional comments identifying the
primary factor contributing to variances that exceed $50,000 and/or 10% of the budget are included
in Schedule 1.
Significant Variances (over $200,000)
Community Services Department:
Fire – Suppression had a deficit of $242,000 as the 2013 budget required four retirements for
positions eliminated by Council which did not fully materialize until early 2014.
Infrastructure Services Department:
Engineering – Administration had a surplus of $291,000 largely due to higher than expected
Engineering feerevenues.
Operations – Administrationhad a deficit of $202,000due to increased equipment repairs.
Operations – Environmental Services had a deficit of $276,000 due to an increase in forestry
work.
General Expenses:
Debt Charges had a surplus of $287,000 due to the final reconciliation for deferred
charges of the 2004 bond issue.
General Revenue:
Investment Income had a surplus of $291,000 due to higher investment balances.
Penalties and Interest had a deficit of $254,000 resulting from improved collection
experience. Collecting funds earlier than normal resulted in less penalty and interest
charges levied against customers, but also resultedin higher investment income for the
City.
IF1 - 2
Building Enterprise (Schedule 2)
The Building Enterprise had adeficit of $1,032,000which waslarger than the budgeted deficit of
$273,000. Building revenues weredown $936,000. Even thoughthe number of building permits
issued was just slightly less than expected, the dollar amount per permit was down significantly in
2013. Expenses were also less than budgeted,by $177,000, largely due to savings from vacant
positions throughout 2013.
Golf Courses (Schedule 3)
The Golf Enterprise ended the year ina break-even position.Golf revenues were less than budget
due to the late opening of both golf courses, but this was offset by a corresponding and equal
reduction of expenses.
Parking Enterprise (Schedule 4)
The Parking Enterprise had adeficit of $401,000, which was more than the budgeted deficit of
$2,000. Revenues fellshort of budget by $1.2M largely due to the lower than anticipated demand in
theDuke & Ontario garage, the Charles & Benton garage and thedelayed opening of phase twoof
the Civic District garage.The revenue shortfall waspartially offset by savings in expenses related to
lowerthan budgeted costs for property taxes, snow clearingand discretionary items.
Water Utility and Sanitary Sewer Utility (Schedules 5 and 6)
The Water Utilityhad a deficit of $1.1M,which was $1.2Mworse than the budgeted surplus of
$93,000, and wasdue to higher than budgeted expensesand lower than expected revenues. Water
transmission and distribution costsweremore than budget by $606,000 due to higher than
anticipated water main break repairs. Water revenues and water supply purchases from the Region
weredown by 4% due to less water consumption.
The Sanitary Sewer Utilityhad adeficit of $775,000, which fell short ofthe budgeted surplus of
$2.7M. Revenues fell short of expectations and costs were significantly more than budget. Revenues
were less than budget by $1.4Mdue to less water usage, andthe cost of sewage processing was
over budget by $2.5M due to the wetter than average weather in 2013, leading to increased inflow
and infiltration.The deficitwassomewhat offset by lower than anticipated sanitary sewer
maintenance costs, which were better than budget by $125,000 due to the late start to spring repairs.
Other revenue wasalso better than budget by $314,000due to higher external recoveries and cross
border billings.
Storm Sewer Utility (Schedule 7)
The Storm Sewer Utility had a surplus of $3.3Mwhich wasbetter than budget by $4.8M.Revenues
were just slightly better than budget, but expenses weredown significantly compared to budget
largely due to lower than anticipated costs for stormwater creditsand capital closeouts that were re-
budgeted intofuture years.
Gas Utility (Schedule 8)
Gas Delivery’s revenue over expenseswas $11.0M which is $871,000better than budget.Gas
revenue wasup slightly due to increased volume, but was offset by a lower than budgeted rate
increase.Expenses for Gas Delivery werebelow budgetdue to a decrease in cost of Union Gas
services (storage and delivery).Other programs revenue over expenses was $583,000 better than
budgetprimarily due to rental water heaters performing better than expected.
IF1 - 3
Gas Supply revenue over expenses was lowerthan budget by $2.4M with a net deficit of $1.2Mas
the actual purchase price of gas was higher than budgeted.
Gas Transportation wasbetter than budget by $785,000, with a net surplus of $5.3M due to
lower than budgeted transportation costs. As of July 1, 2013, Council separated Gas
Transportation from the rest of the Gas Delivery program and adopted a new rate setting model
for this portion of the business.Going forward,this part of the gas utility will be operatedon a
breakeven basis similar to Gas Supply. The surplus for 2013 represents the final “transportation
benefit” generated in the first half of the year and wasused to fund high-priority projects within
the City’s 2014 capital program, consistent with past practice for the use of these funds.
Investment Report (Schedule 9)
Allinvestments made were in accordance with the City’s investment policy.Short term investment
yields averaged1.56%.Despite lower average interest rates, investment income had a surplus of
$291,000 due to higher than budgeted investment balances in2013.
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:
Inform – This report has been posted publicly as part of the agenda to inform the public.
ACKNOWLEDGED BY:
Dan Chapman, Deputy CAO (Finance and Corporate Services)
ATTACHMENTS:
Schedule1-OperatingFund-TaxBase
Schedule2-BuildingEnterprise
Schedule3-GolfCourses
Schedule4-ParkingEnterprise
Schedule5-WaterUtility
Schedule6-SanitarySewerUtility
Schedule7-StormSewerUtility
Schedule8-GasUtility
IF1 - 4
SCHEDULE1
IF1 - 5
IF1 - 6
IF1 - 7
IF1 - 8
IF1 - 9
SCHEDULE2
IF1 - 10
SCHEDULE3
IF1 - 11
SCHEDULE4
IF1 - 12
SCHEDULE5
IF1 - 13
SCHEDULE6
IF1 - 14
SCHEDULE7
IF1 - 15
SCHEDULE8
IF1 - 16
IF1 - 17
SCHEDULE9
IF1 - 18
IF1 - 19