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FCS-15-117 - 2015 August Variance Report
Staff Report R finance and Corporate Services Department wmkirchen er ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: October 19, 2015 SUBMITTED BY: Ryan Hagey, Director of Financial Planning 519-741-2200 Ext 7353 PREPARED BY: Debra Fagerdahl, Manager of Financial Planning 519-741-2200 Ext 7114 WARD(S) INVOLVED: All DATE OF REPORT: October 6th, 2015 REPORT NO.: FCS-15-117 SUBJECT: 2015 August Variance Report RECOMMENDATION: For Information This is the second report to Council regarding the City's financial performance versus the 2015 budget. The report and attached schedules include information regarding: • tax supported services • rate supported enterprises/utilities, and • supplementary information related to investment income Variances in an organization's in-year financial results are normal as operations rarely exactly reflect budgeted expectations. Because of this, the City maintains stabilization reserves which have minimum/maximum targets based on the variability of the associated activities. REPORT: Significant projected 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. Operating Fund —Tax Base (Schedule 1) Based on results as at the end of August, staff are projecting a $126,000 deficit in tax supported operations as of the end of 2015. This essentially represents a balanced budget. The three large deficits (Centre in the Square, winter maintenance and gapping) are offset ***This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. IF2 - 1 by two large surpluses (payments in lieu of property taxes and investment income). This projected deficit is lower than the year-end projected deficit as at April 2015 ($318k). It is also lower than the projected deficit this time last year($621 K). Staff will remain diligent in managing their individual budgets and the Corporate Leadership Team will continue to monitor the corporate results in order to mitigate the potential for a deficit at the end of the year. Significant Proiected Variances (over$200,000) Infrastructure Services Department: • Operations — Winter Maintenance currently has a deficit of $475,000. The projected deficit for year-end assumes some savings in the last half of the year and the year- end projected deficit is $400,000. General Expenses: • Centre In The Square (CITS) - The City is expecting to absorb 50% of CITS' 2015 projected operating results causing a $279,000 deficit to tax supported operations. • Gapping — The projected year-end deficit of $200,000 is based on historical trends. General Revenues: • Payments in Lieu of taxes (PILs) — Payments in Lieu has a surplus of $256,000 due to the collection of three years of supplementary PILs on the Region's transit facility. • Investment Income is projecting a surplus of$275,000 and accounts for expected balances and rates until the end of the year. Building Enterprise (Schedule 2) 111111 1111V11111 INN Building 342 (424) 766 The Building Enterprise has a surplus of$342,000 which is $766,000 better than the budget. This improvement is largely due to higher than expected revenues from all sectors except government and institutional projects. IF2 - 2 Golf Courses (Schedule 3) Golf 415 412 3 The Golf Enterprise has a surplus of$415,000 which is on budget. Parking Enterprise (Schedule 4) Parking 913 841 72 The Parking Enterprise is ahead of target with a surplus of$913,000 which is $72,000 better than budget. This is due to increased demand at City parking facilities. Water Utility (Schedule 5) Water (1,855) (32) (1,823) The Water Utility has a deficit of$1.9M, compared to the budgeted deficit of $32,000. More than half of the unfavourable variance is due to the large number of water main breaks experienced during the unusually cold winter. This impacts both expenses (higher distribution costs) and revenues (water not billed). Given the absence of a stabilization reserve balance, there will be a negative impact on water rates in 2016. Sanitary Sewer Utility (Schedule 6) C-I 'NOR Sanitary Sewer (1,124) (451) (673) The Sanitary Sewer Utility has a deficit of $1.1 M compared to the budgeted deficit of $451,000 causing an unfavourable variance of$673,000. Actual sewer surcharge revenues are 95% of budgeted revenues of$28M. This is consistent with the water utility. IF2 - 3 Storm Sewer Utility (Schedule 7) Storm 476 525 (49) The Storm Sewer Utility has a surplus of $476,000 which is less than the budgeted surplus of $525,000 resulting in a small unfavourable variance of $49,000. The variance is largely due to higher than budgeted repair costs. Gas Utility (Schedule 8) Gas Division (Total) 13,314 9,115 4,199 Gas- Del 6,129 6,234 (105) ........................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... Gas-Supply 7,602 2,810 4,792 Gas-Trp (417) 71 (488) Gas Delivery's revenue over expenses to the end of July is $6.1 M which is just shy of the budgeted surplus of $6.2M. Higher than budgeted revenues from increased consumption during the colder than normal winter are offset by the higher gas purchases. Staff will be recommending rate changes for components of Gas delivery that will have no impact to the average residential customer. (Refer to report INS-15-067) Gas Supply has a surplus of $7.6M which is more than the budgeted surplus of $2.8M resulting in a favourable variance of $4.8M. The variance is due to higher than expected revenues resulting from the colder than normal winter and gas commodity prices being lower than budget. Based on the current rates and surplus, there is an expectation that any excess in the stabilization reserve requirements will flow back to rate payers during the next rate review. Staff will be recommending the rate for Gas supply to drop from 19.0 cents to 10.5 cents (Refer to report INS-15-067) Gas Transportation has a deficit of $417,000 compared to a budgeted surplus of $71,000 resulting in a $488,000 unfavourable variance. Actual revenues are more than budget due to higher consumption because of the cold winter. This surplus is offset by the higher than budget costs due to unfavourable purchase prices. Based on the rising transportation costs, it is expected that stabilization reserve will be eroded and will be a factor during the next rate review. Staff will be recommending the rate for Gas transportation to increase from 3.0 cents to 4.0 cents (Refer to report INS-15-067) IF2 - 4 Investment Report (Schedule 9) All investments made were in accordance with the City's investment policy. Short term investment yields to date have averaged 1.48%, and average short term investment balances remain high. A surplus is projected due to the higher than anticipated balances. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the city's strategic vision through the delivery of core service. 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. 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