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Home My WebLink AboutFIN-19-083 - 2019 August Variance ReportREPORT TO:Finance and Corporate Services Committee DATE OF MEETING:October 21,2019 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 8,2019 REPORT NO.:FIN-19-083 SUBJECT:2019AugustVariance Report ___________________________________________________________________________ RECOMMENDATION: For Information BACKGROUND: Staff prepares a variance report three timesper year reflecting results as at the end of April, August and December. This is the second performance versus the 2019budget as at the end of August. The report and attached schedules include information regarding: tax supported services rate supported enterprises/utilities, and supplementary information related to investment income -year financial results are normal as operations rarely exactly reflect budgeted expectations. Because of this, the City maintains stabilization reserves that have minimum/maximum targets based on the variability of the associated activities. The Tax Stabilization Reserve balance as at December 31, 2018was $5.2M compared to the minimum target of $5.9M. REPORT: 1.0% of budget. The major contributors to the overall net positive variance are the projected surplusesin Engineering, Facilities Management, Payments in Lieu (PILs) and Investment Income.These surpluses are offset by a large deficit in Parks & Cemeteries.More details about each of the ded in the report below and in Schedule 1. -tax supported business lines) results to the end of August show that all of the enterprises have results that meet or exceed expectations. More details about ded in the report below and in Schedules 2-8. ***This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY1-866-969-9994for assistance. IF1 - 1 Significant projected tax supported variances (over $200,000) are summarized below. Additional details are provided in Schedule 1 for variances that exceed $50,000. Operating Fund Tax Base (Schedule 1) Staff iscurrently projecting a surplus of $1,425,000in tax-supported operations in 2019. This equates to a 0.7% variance from the operating expenditure budget of $196M. Significant Projected Variances (over $200,000) Development Services Department: Engineering Administration is projecting a surplus of $215,000 due to higher than anticipated engineering revenues from shared Planning fees and from subdivision reviews. Infrastructure ServicesDepartment: Facilities Management is projecting a surplus of $400,000 due to utility savings from continued benefit of energy conservation initiatives at large facilities such as the Kitchener Operations Facility, Kitchener Memorial Auditorium, City Hall and the Market, as well as seasonal variability. Parks and Cemeteries is projecting a deficit of $720,000 due to higher than expected winter maintenance costs because of new provincial standards for sidewalks and the requirement to respond to icy conditions. There was also an increase in the multi-use trails requiring winter maintenance. General Revenue: Payment in Lieu (PILs) is projecting a surplus of $415,000 due to an unbudgeted September supplementary tax billing. Investment income is projecting a surplus of $675,000due to higher investment balances. IF1 - 2 Enterprises (Schedules 2 to8) For the period of January to August, Enterprise results as a whole are $5.2M better than budget. All Enterprises performed as expected or better than expected with the largest positive variance in the Building Enterprise($1.4M).Details of each Enterprise are noted below. Building Enterprise (Schedule 2) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Building 1,627 154 1,473 The Building Enterprise has a surplusof $1.6Mwhich is $1.4Mbetterthan the budgeted surplus. This is largely due to higher than expected revenues from downtown residential and office project permits. Golf Courses (Schedule 3) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Golf 515 510 5 The Golf Enterprise is on budget. Parking Enterprise (Schedule 4) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Parking 681 82 599 The Parking Enterprise has a surplus of $681,000 which is $599,000 better than the budgeted surplus. This is due to higher demand at some of City parking facilitiesand the delay of the redevelopment at Forsyth parking lot.The lower than expected salary costs due tovacancies and snow removal costs also contributed to the positive variance. Water Utility (Schedule 5) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Water 582 133 449 The Water Utility has a surplusof $582,000which is $449,000 better than the budgeted surplus. Extra revenue from increased water sales above the 5-year average used to prepare the budget was offset by increased purchases of water from the Region. Savings in expenses due to fewer number of watermain breaks make up the majority of the net favourable variance. IF1 - 3 Sanitary Sewer Utility (Schedule 6) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Sanitary Sewer 558 (182) 740 The Sanitary Sewer Utility has a surplus of $558,000which is $740,000 better than the budgeted deficit. This is due to higher than expected sewer surcharge revenue which is consistent with the water utility. The positive variance from revenue is offset bya higher sewage processing costs which is consistent with increasedconsumption.Lower maintenance costs due to delays of the maintenance program contribute to the positive variance. Storm Sewer Utility (Schedule 7) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Storm Sewer 1,352 878 474 The Storm Sewer Utility has a surplus of $1.4Mwhich is $474,000 better than the budgeted surplus. This is due to staff vacancies and lower than expected maintenance activity because of delays of pipe repairs. Gas Utility (Schedule 8) Net ResultsVariance ($000's)ActualBudgetFavourable/ (Unfavourable) Gas Division (Total) 82 (1,351) 1,433 Gas Delivery 1,898 899 999 Gas Supply (1,816) (2,250) 434 Gas Utility -Overall, the Gas Utility has a surplus of $82,000which is $1.4M better than the budgeted deficit. Revenues in both Gas companies are better than budget due to higher than anticipated consumption related to cooler temperatures in the first four months of the year. Gas Delivery has a surplus of $1.9M which is $999,000 better than the budgeted surplus. Increased revenues account for just over 50% of the variance, and costs associated with lower than expected Union delivery charges and staff vacancies added to the positive variance. Gas Supply has a deficit of $1.8M which is $434,000 better than the budgeted deficit. Revenues were well above budget ($1.1M) for the first portion of the year due to higher gas consumption. This was offset by an increase in direct costsdue to the higher volume of sales. Current year results were considered in the rate change recommendation presented to Council in the fall. IF1 - 4 Investment Report (Schedule 9) -term investment yields to date have averaged 2.57%, and average short-term investment balances remain high. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: through the delivery of core service. FINANCIAL IMPLICATIONS: Financial implications are discussed above and detailed in the attached schedules. COMMUNITY ENGAGEMENT: INFORM the council / committee meeting. ACKNOWLEDGED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services. IF1 - 5 IF1 - 6 IF1 - 7 IF1 - 8 IF1 - 9 IF1 - 10 IF1 - 11 IF1 - 12 IF1 - 13 IF1 - 14 IF1 - 15 Average Short-Term Investment Balance* Investment Report as of August 31, 2019 January to August 2019 Comparison of Short Term Yields IF1 - 16 Operating Fund Accumulated Interest Investment Report as of August 31, 2019 Long Term Investments Cash & Short Term Investments Investment Balances IF1 - 17