HomeMy WebLinkAboutFCS-17-029 - 2016 Year-End Variance Report
REPORT TO: Committee of the Whole
DATE OF MEETING: March 20, 2017
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: March 7, 2017
REPORT NO.: FCS-17-029
SUBJECT: 2016 Year-End Variance Report
______________________________________________________________________
RECOMMENDATION:
For information.
BACKGROUND:
This is the third and final report to Council regarding the Citys financial performance versus
the 2016 budget. The report and attached schedules include information regarding:
· Tax supported services
· Rate supported enterprises/utilities, and
· Supplementary information related to investment income
Variance reports take four to six weeks to prepare once the books are closed, and are
forwarded to the next available meeting cycle (either Finance and Corporate Services
Committee, or Committee of the Whole). In this case, December books were closed in
mid-February and the variance report is being forwarded to Committee of the Whole in
mid-March.
REPORT:
The Citys 2016 overall results were better than budgeted, coming within 2% of budget. Tax
supported operations were slightly lower than projected at Final Budget Day, while
Enterprises as a whole were somewhat higher than projected. The major contributors to the
overall net positive variance in the City were the Gas utility, the Building enterprise, and Tax
supported operations. Year-end positions for all City operations are summarized below.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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2016 Summary Results
($000's)
Two examples are provided below to assist in interpreting the 2016 Summary Results table.
· The first line of the table shows Tax Supported Operations ended the year with a
surplus of $941,000 on budgeted expenses of $169,229,000, which equates to a
variance of 0.6% of total expenses.
· The bottom line of the table shows Total City Operations ended the year with a
surplus of $6,346,000 on budgeted expenses of $383,336,000, which equates to a
variance of 1.7% of total expenses.
Additional details about tax supported operations and each of the enterprises are provided in
the balance of the report.
Operating Fund Tax Base (Schedule 1)
The City ended the year with an operating surplus of $941,000 in tax supported operations,
and is the second consecutive year that tax-supported operations have yielded a surplus.
The surplus equates to a 0.6% positive variance from the operating expenditure budget of
$169M and was transferred to the Tax Stabilization Reserve Fund, which ended the year
with a balance of nearly $2.4M. While this is a positive trend for tax supported operations,
the reserve balance is still well below its minimum target balance of $5.6M.
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.
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Significant Variances (over $200,000)
Community Services Department:
· By-law Enforcement - Parking/Noise had a surplus of $308,000 due to increased
fines from the Ministry of Transportation as a result of their increased collection fee. It
is unknown if this revenue stream will be on-going.
Infrastructure Services Department:
· Engineering - Administration had a surplus of $405,000 largely due to increased
engineering sub-division review revenues which are volatile and can vary from year
to year.
· Operations - Sidewalk Repairs had a deficit of $209,000 because of more repairs
performed during a longer work season.
· Operations - Sportsfields, Trails & Parks had a deficit of $269,000 due to a longer
season and an overage in the water budget.
General Expenses:
· Gapping had a deficit of $558,000 due to actual staffing costs being close to
budget.
General Revenue:
· Payments in Lieu (PIL) had a surplus of $522,000 due to retroactive Municipal
Property Assessment Corporation (MPAC) assessments on the Strasburg Road
Transit Facility, the Women's Correctional Facility, the Kitchener Operations
Facility, and the Kitchener Public Library Main Branch parking lot.
· Investment Income had a surplus of $606,000 due to higher than anticipated
rates as a result of the Canadian economy outperforming expectations which
transpired to GIC rates remaining unchanged while the Citys budget had
assumed a rate reduction based on forecasts at the time.
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Building Enterprise (Schedule 2)
2016 Summary Results
($000's)
The Building Enterprise had a surplus of $2.4M which was better than the budgeted surplus
of $148,000. The positive variance was largely due to higher than expected activity in most
sectors and the rush for permits in the last quarter as customers applied before the expected
increase to Region of Waterloo development charges on January 1, 2017.
Golf Courses (Schedule 3)
2016 Summary Results
($000's)
The Golf Enterprise was on budget.
Parking Enterprise (Schedule 4)
2016 Summary Results
($000's)
The Parking Enterprise was on budget.
Water Utility (Schedule 5)
2016 Summary Results
($000's)
The Water Utility had a surplus of $567,000, which was better than the budgeted surplus of
$418,000. The variance was due to higher than expected bulk water sales combined with
lower than budgeted staff costs. These savings were offset by lower water revenue due to
reduced consumption.
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Sanitary Sewer Utility (Schedule 6)
2016 Summary Results
($000's)
The Sanitary Sewer Utility had a surplus of $679,000 which was better than the budgeted
surplus of $411,000. The variance was due to maintenance savings as staff was reallocated
to the Storm Sewer Utility. These savings were offset by lower than budgeted sewer
surcharge revenue which is consistent with the Water Utility.
Storm Sewer Utility (Schedule 7)
2016 Summary Results
($000's)
The Storm Sewer Utility had a deficit of $304,000 which fell short of the expected surplus of
$206,000. Storm sewer maintenance costs due to increased repairs and the Citys
environmental insurance deductible of $100,000 related to the Grand River oil spill largely
contributed to the unfavourable variance.
Gas Utility (Schedule 8)
2016 Summary Results
($000's)
Gas Utility - Overall the Gas Utility has a deficit of $1.6M, which was better than the
budgeted deficit of $4.9M. Revenues in all gas companies were under budget due to less
than anticipated consumption as a result of the milder temperatures. The variances
outlined below were anticipated when preparing, and are incorporated into the rate
recommendations brought forward by staff in report INS-16-061 Natural Gas Rates.
Gas Delivery had a deficit of $106,000 which fell short of the budgeted surplus of $616,000.
Contributing to the negative variance was lower than expected gas revenues due to lower
volumes. Offsetting the negative variance was the lower than budget maintenance costs
and the surplus realized in Other Programs which had a surplus of $1.1M. This positive
variance was primarily due to rental water heaters performing better than expected
combined with savings from staff vacancies and efficiencies.
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Gas Supply had a deficit of $741,000 which is better than the budgeted deficit of $5.7M. This
was largely due to the price of gas being lower than budgeted, but was offset by lower
consumption due to the warm weather during 2016. This positive variance is what allowed a
supply rate reduction in 2017 (versus the previously expected increase).
Gas Transportation had deficit of $778,000 which was worse than the budgeted surplus
of $200,000. This was largely due to lower than expected gas transportation revenues
due to the lower volumes which is consistent throughout all Gas companies.
Investment Report (Schedule 9)
All investments made were in accordance with the Citys investment policy. Short term
investment yields averaged 1.47%, and average short term investment balances remain
healthy. A surplus of $606,000 was realized due to the higher than anticipated rates as a
result of the Canadian economy outperforming expectations leading to GIC rates to remain
unchanged while analysts had expected a reduction.
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.
ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services)
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Schedule 9 Page 1
* includes average balance in the overnight bank account
This graph compares the yields for:1)City investments2)Interest rate for City bank account with CIBC
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Schedule 9 Page 2
Average Interest Rate 2016 = 1.47%Average Interest Rate 2015 = 1.47%