HomeMy WebLinkAboutFCS-17-111 - 2017 April Variance Report
REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: June 12, 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: June 1, 2017
REPORT NO.: FCS-17-111
SUBJECT: 2017 April Variance Report
______________________________________________________________________
RECOMMENDATION:
For Information
BACKGROUND:
Staff prepares a variance report three times per year reflecting results as at the end of April,
August and December. This is the first report to Council regarding the Citys financial
performance versus the 2017 budget as at the end of April.
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 organizations 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.
***
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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REPORT:
Ov
erall staff is projecting that the Citys tax supported results will be within .1% of budget.
The major contributors to the overall net variance is the projected deficit in Facilities
Management due to higher utility and maintenance costs and the projected deficit in gapping
due to staffing levels being close to budget. These deficits are offset by the projected surplus
resulting from additional assessments for payment in lieu (PIL) properties and the projected
surplus in winter maintenance.
Significant projected tax supported 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)
Staff are currently projecting a small deficit of $130,000 in tax supported operations in 2017.
The deficit equates to a 0.1% variance from the operating expenditure budget of $180M.
Significant Projected Variances (over $200,000)
In
frastructure Services:
· Facilities Management is projecting a deficit of $245,000 largely resulting from
increased utility costs relating to provincially legislated carbon allowance billings
and higher repair and maintenance costs at city facilities.
· Operations - Roads & Traffic - Winter Maintenance is projecting a surplus of
$340,000 resulting from lower than average snowfall requiring fewer full plows.
General Expense:
· Gapping is projecting a deficit of $500,000 due to actual staffing costs being
close to budget.
General Revenue:
· Tax Payment in Lieu (PIL) is projecting a surplus of $225,000 resulting from new
property assessments. (Regional Landfill, Corrections Centre and Courthouse)
Enterprises (Schedules 2 to 8)
For the period of January to April, Enterprise results as a whole were $456,000 better
than budget. Variances within the Enterprises range from a positive variance of $2.2M
(Gas Supply) to a negative variance of $716,000 (Sanitary Sewer). Details of each
Enterprise are noted below.
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Building Enterprise (Schedule 2)
Net Results Variance
($000's) Actual Budget Favourable/
(Unfavourable)
Th
e Building Enterprise has a deficit of $677,000 which is $473,000 worse than the
budgeted deficit. This is largely due to lower revenues from permits in single detached and
row houses. The increased activity in the last quarter of 2016 led to the shortfall in the first
quarter of 2017.
Golf Courses (Schedule 3)
Net Results Variance
($000's) Actual Budget Favourable/
(Unfavourable)
Th
e Golf Enterprise has a surplus of $86,000 which is $14,000 better than the budgeted
surplus. This is due to the earlier opening of Doon Golf Course.
Parking Enterprise (Schedule 4)
Net Results Variance
($000's) Actual BudgetFavourable/
(Unfavourable)
The Parking Enterprise has a surplus of $238,000 which is $210,000 better than the
budgeted surplus. This is due to higher demand at City parking facilities. Also contributing to
the surplus is lower expenses due to less snow removal in the first part of the year.
Water Utility (Schedule 5)
Net Results Variance
($000's) Actual BudgetFavourable/
(Unfavourable)
The Water Utility has a surplus of $1.1M, which is $729,000 better than the budgeted
surplus. This is mainly due to watermain break expenses being less than expected and the
recovery from the Region of Waterloo for prior period shared maintenance and water main
break repairs.
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Sanitary Sewer Utility (Schedule 6)
Net Results Variance
($000's) Actual Budget Favourable/
(Unfavourable)
Th
e Sanitary Sewer Utility has a deficit of $1.5M which is $716,000 worse than the budgeted
deficit. This is due to higher than expected sewage processing costs caused by the wetter
than average spring. This was somewhat offset by lower than expected sewer maintenance
costs.
Storm Sewer Utility (Schedule 7)
Net Results Variance
($000's) Actual Budget Favourable/
(Unfavourable)
Th
e Storm Sewer Utility has a surplus of $610,000 which is $111,000 worse than the
budgeted surplus. This is due to higher than expected maintenance activity.
Gas Utility (Schedule 8)
Net Results Variance
($000's) Actual Budget Favourable/
(Unfavourable)
Ga
s Utility - Overall the Gas Utility has a deficit of $1.3M which is $803,000 better than the
budgeted deficit. Revenues in all gas companies were under budget due to less than
anticipated consumption as a result of a milder than average winter. The milder winter has
been documented in the Monthly Financial Indicator for Heating Degree Days shown below.
Heating Degree Days for the first four months of 2017 were only 87% of the 5-year
benchmark, which means the weather was milder than average. Milder weather translates
into less need for natural gas heating, and therefore lower sales revenue for the Citys gas
utility. Lower than expected gas commodity prices in Gas Supply more than offset the
impact of lower revenues for that part of the natural gas utility..
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Heating Degree Days
800
700
600
500
400
300
200
100
-
JanFebMarAprMayJunJulAugSepOctNovDec
Benchmark
73771855138013645142399256447551
Actual
65
2538598283
Benchmark year-to-date heating degree days 2,386
Actual year-to-date heating degree days 2,071
Gas Delivery has a deficit of $640,000 which is $501,000 worse than budgeted deficit. The
milder winter was a major contributing factor leading to lower than budgeted consumption as
well as increased costs under the Union Gas T3 contract. This increase was to cover the
expansion and renewal of capital infrastructure on Union Gass transmission system and
other transmission related costs. The impact of the T3 contract was highlighted in Report #
INS-17-21(March 20, 2017). Partially offsetting the negative variance is savings in budgeted
expenses due to unfilled vacancies and higher rental water heater revenues.
Gas Supply has a deficit of $2.3M which is $2.2M better than the budgeted deficit.
Decreased revenues from lower than expected gas sales were more than offset by the
lower than expected price of the gas commodity.
Gas Transportation has a surplus of $1.9M which is $592,000 worse than the budgeted
surplus. This is mainly due to decreased revenues from lower than expected gas sales and
higher than expected transportation prices.
Gas Carbon has a deficit of $216,000 which is $319,000 worse than the budgeted surplus.
This is mainly due to decreased revenues from lower than expected gas sales.
Based on the current rates, surpluses and deficits, there is an expectation that any excess
or shortfall of stabilization reserve requirements will be addressed during the next rate
change (November 2017).
Investment Report (Schedule 9)
All investments made were in accordance with the Citys investment policy. Short term
investment yields to date have averaged 1.44%, and average short term investment
balances remain high.
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AL
IGNMENT 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 2017 = 1.44%Average Interest Rate 2016 = 1.47%
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