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HomeMy WebLinkAboutFIN-2021-7 - 2020 Year End VarianceStaff Report RN -Financial Planning REPORT TO: DATE OF MEETING: SUBMITTED BY: PREPARED BY: WARD(S) INVOLVED: DATE OF REPORT: REPORT NO.: SUBJECT: RECOMMENDATION: For information. Committee of the Whole March 22, 2021 Ryan Hagey, FIN -Financial Planning Ryan Hagey, FIN -Financial Planning All February 25, 2021 FIN -2021-7 2020 Year End Variance www. kitchener ca REPORT HIGHLIGHTS: • The purpose of this report is to provide the yearend financial results for City operations • As reported throughout the year, most City operations were negatively impacted by COVID-19, leading to significant deficits in tax -supported operations ($5.06M), Parking ($2.3M), and Golf ($595k). • Deficits in 2020 were fully offset by Safe Restart funding provided by the Federal and Provincial governments, with some funds available to be carried over to 2021, in accordance with the parameters of the Safe Restart funding allocation. • Carried over Safe Restart funds will bolster the City's financial capacity to deal with expected continuing deficits in 2021. • This report supports the delivery of core services. BACKGROUND: This is the third and final formal variance report to Council regarding the City's financial performance versus the 2020 budget. The report and attached schedules include information regarding: • Tax supported operating • Rate supported enterprises/utilities, and • Supplementary information related to investment income REPORT: The City's tax -supported operations ended the year with a significant deficit related predominantly to the COVID-19 pandemic. Almost all City operations were disrupted in some way due to the pandemic, with some services/programs being completely suspended to comply with Provincial health guidelines. These major alterations to normal operations resulted in considerable losses in income for recreational programs (e.g. pools, *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. arenas, sportsfields, and community centres), as well as economic relief measures approved by Council such as waiving fees for portable signs, and waiving penalty and interest charges on late payments. Likewise, many rate supported operations were impacted by COVID-19, with Parking and Golf being the most severely hit. Parking saw major decreases in the number of downtown parkers due to the pandemic, and Golf had reduced revenues as a result of the pandemic from delayed opening of courses, no food & beverage service, and reduced memberships in 2020. Fortunately, the City was successful in receiving enough Safe Restart funding from the Federal and Provincial governments to completely offset all deficits realized in 2020, with some funding remaining to be carried over into 2021 in order to offset expected deficits tax supported operations as well as Parking and Golf. The table below shows the amount of Safe Restart funding received, how it was applied in 2020, and the amounts remaining to be employed in 2021. Safe Restart Fundina Continuitv Tax $ 8,472,000 $ 5,062,000 $ 3,410,000 $ 1,693,000 $ 5,103,000 Parking $ 2,852,000 $ 2,263,000 $ 589,000 $ 673,000 $ 1,262,000 Golf $ 619,000 $ 596,000 $ 23,000 $ 146,000 $ 169,000 Utilities $ 1,119,000 $ 1,119,000 $ - $ - $ - Total $ 13,062,000 $ 9,040,000 $ 4,022,000 $ 2,512,000 $ 6,534,000 Further to the Safe Restart funding provided in 2020, on March 4, 2021, the Provincial government announced an additional $500M for Ontario municipalities to deal with the ongoing impacts of COVID-19. This funding was unanticipated at the time of its announcement, but will help Kitchener and other municipalities fund additional costs and lost revenues caused by the pandemic response. Kitchener's share of this funding is $4.8M and is in addition to the $6.5M of Safe Restart funding available to the City in 2021. Based on the actual variance experienced in 2020 and the ongoing nature of the pandemic, it is expected the full amount of funding available through Safe Restart and the additional Provincial funding will be needed to offset sizeable deficits anticipated in 2021. Operating Fund — Tax Base (Schedule 1) The City ended the year with an operating deficit of $5,060,000 in tax -supported operations, largely due to the impacts of COVID-19. This result is 2.5% of budgeted expenditures totaling $205,193,000. The deficit experienced in 2020 breaks a stretch of five years where tax -supported operations ended the year in a surplus as shown in the table below. It's also worth noting that the $5.06M deficit experienced in 2020 is almost as large as all the surpluses experienced over the past five years ($5.84M). Surplus/ (Deficit) Tax Supported Operation 2015 2016 2017 $0.98M 0.94M $1.42M — Yearend Position $1.73M I $0.77M ($5.06M) This year's deficit was fully funded by Safe Restart funding from the Federal and Provincial governments which has allowed the City's Tax Stabilization Reserve Fund to end the year with a balance of $8.1 M. This reserve balance will be available to fund any future deficit in tax supported operations, which is good news for the City as the financial realities of COVID-19 are anticipated to have a negative financial impact on 2021 and possibly beyond. Significant variances (over $200,000) are summarized below by division. Schedule 1 provides a little more detail by including information for variances that exceed $100,000 of the budget. Significant Variances (over $200,000) Community Services Department: • Bylaw Enforcement had a deficit of $571,000 due to decreased enforcement activity during the pandemic. Staff continued to enforce any bylaws related to the health and safety, but suspended other enforcement activities during the year. • Fire had a surplus of $481,000 due to discretionary expense savings, Regional computer aided dispatch (CAD) cost savings, and various program savings due to COVID-19. • Neighbourhood Programs & Services had a deficit of $331,000 due to reduced revenues as facilities like the City's 13 community centres were closed and programs were suspended/modified due to COVID-19 restrictions. • Sport had a deficit of $6,624,000 due to reduced revenues as facilities were closed and programs suspended/modified due to COVID-19 restrictions. Examples of closed facilities include arenas, pools, and the Budd Park indoor facility. Development Services Department: • Economic Development had a deficit of $309,000 due to reduced revenues at the Kitchener Market and Victoria Park Pavilion in addition to providing funding for the City's Reimagine Winter campaign. Planning had a deficit of $310,000 due to the waiving portable sign permit fees in order to help businesses still trying to operate during the pandemic, and a reduction in the number of some applications because of COVID-19. • Transportation Services had a surplus of $308,000 due to revenues from work permit road closures & administration fees, and discretionary expense savings. Infrastructure Services Department: • Facilities Management had a surplus of $1,479,000 due to reduced utility consumption. A number of City facilities were closed for a portion of the year and/or operating at reduced capacity due to COVID-19 restrictions which resulted in significantly lower than budgeted utility costs. General Expense: • Gapping had a surplus of $4,168,000 primarily due staff savings related to COVID- 19. A number of staff whose facilities or programs were suspended during the pandemic were put on designated emergency leave (DEL) or infectious disease emergency leave (IDEL) throughout the year, which allowed them to take advantage of various income support programs offered by the Federal government such as the Canada Emergency Response Benefit (CERB). • Other had a deficit of $925,000 due to year-end provisions for contingent liabilities. Emergency Operations Centre had a deficit of $1,743,000 due to the COVID-19 pandemic. Example of costs include: o Purchases of personal protective equipment and other health & safety supplies o Additional Citrix licenses for a higher number of staff working from home o Staff overtime related to managing the City's COVID-19 response o Additional cleaning and minor retrofits of City facilities General Revenues: • Supplementary Taxes/Write-offs had a deficit of $594,000 due to lower supplementary tax revenues and an increase in property tax write-offs. • Investment income had a deficit of $389,000 due to reduced interest rates throughout most of the year. • Penalties & Interest had a deficit of $337,000 due to due to waiving of penalties & interest as an economic support for citizens and businesses impacted negatively by COVID-19. Enterprises — (Schedules 2 to 8) While COVID-19 disrupted the operations of the City's enterprises, only Golf and Parking ended the year with financial results worse than budget. The other enterprises were less directly impacted by the pandemic, as building activity continued to be strong, and the City's utilities were more impacted by weather (e.g. amount of rainfall, or winter temperatures) than the global health crisis. Summary information about each Enterprises are noted below, with more detailed information provided in the schedules attached to this report. Building Enterprise (Schedule 2) , $1,186 , ($467) The Building Enterprise had a surplus of $1,186,000, which was $1,654,000 better than budgeted. The main reason for the surplus is that revenues were higher than budget due to increased permit applications in the apartment, commercial, government/ institutional and single detached categories. As well, expenses were lower due to staff vacancies and reduced discretionary spending in accordance with the rest of the City. Golf Enterprise (Schedule 3) The Golf Enterprise had a deficit of $595,000, which was $610,000 worse than budgeted. Safe Restart funding was used to fully offset the deficit which was caused mostly by reduced revenues. The golf courses opened approximately one month later than normal with a reduced number of memberships, and offered a reduced cost of membership. In addition due to COVID-19 restrictions there were no revenues from normal golf course offerings such as food & beverage, driving range, or pitch and putt. Parking Enterprise (Schedule 4) The Parking Enterprise had a deficit of $2,263,000, which was $2,163,000 worse than budgeted. Safe Restart funding was used to fully offset the deficit which was caused mostly by reduced revenues. Parking revenues were down significantly as many downtown businesses were closed and/or running at reduced capacity either due to economic reasons or to comply with provincial stay-at-home orders. This translated into much less vehicle traffic requiring monthly or hourly parking in the downtown core. Water Utility (Schedule 5) The Water Utility had a surplus of $2,557,000 (including $197,000 of Safe Restart funding), which was $2,511,000 better than budgeted. Water revenues were significantly better than budgeted due to increased volume sales from a dry summer. As well, some maintenance costs were delayed due to COVID-19 and were not incurred in 2020. Sanitary Sewer Utility (Schedule 6) Sanitary Sewer The Sanitary Sewer Utility had a surplus of $6,486,000 (including $256,000 of Safe Restart funding), which was $6,415,000 better than budgeted. Sewer surcharge revenues were significantly better than budgeted, which is consistent with increased volume sales noted in the Water utility. In addition, sewage processing costs were less than budgeted due to lower than normal inflow/infiltration. And much like the Water utility, some maintenance costs were delayed due to COVID-19 and were not incurred in 2020. Stormwater Utility (Schedule 7) J1V1111WQ1C1 .p IVL Wy I . The Stormwater Utility had a surplus of $519,000 (including $86,000 of Safe Restart funding), which was $417,000 better than budgeted. Like the Water and Sanitary Sewer utilities, some maintenance costs were delayed due to COVID-19 and were not incurred in 2020. Gas Utility (Schedule 8) Gas Utility (Total) Gas Delivery ($687) $1,453 ($2,040) $1,653 $1.353 $200 Gas Supply_ $766 ($387) $1,153 The Gas Utility (Total) had a deficit of $687,000 (including $581,000 of Safe Restart funding), which was $1,353,000 better than budgeted. Gas Delivery was very close to budget, while Gas Supply was considerably better than budget, due mainly to reduced commodity prices for natural gas during the global pandemic. Investment Report (Schedule 9) All investments made were in accordance with the City's investment policy. Average short- term investment balances remained healthy, but short-term investment yields averaged 1.64%, which is considerably lower than originally projected prior to the COVID-19 pandemic. The lower rate environment resulted in a deficit of $388,000, which made up part of the overall tax supported operations deficit of $5.06M which was fully funded by Safe Restart funding received from the Federal and Provincial governments in 2020. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: Final results for tax supported operations and rate supported enterprises/utilities have been closed out to the appropriate stabilization reserves. Surpluses increase the funds available in the reserve to offset future deficits, while deficits decrease funds available to deal with unanticipated funding needs. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: • FIN -20-055 2020 June Operating Variance Report • FIN -20-062 COVID Financial Impacts - Request for Phase 2 Safe Restart Funding ATTACHMENTS: • Schedule 1: Statement of Operations — Tax Supported Services • Schedule 2: Statement of Operations — Building • Schedule 3: Statement of Operations — Golf • Schedule 4: Statement of Operations — Parking • Schedule 5: Statement of Operations — Water • Schedule 6: Statement of Operations — Sanitary Sewer • Schedule 7: Statement of Operations — Stormwater • Schedule 8: Statement of Operations — Gas • Schedule 9: Investment Report V N LL N N U] N h T c W c °ti W r l6 a ao 0 0 a; lip V�1 m r W N U] h N m C r o000 000 lmp a O a T h N 00 l6 00 00 ,� a tO1p ,C a 0`$ o a N U1 00 00 m t^p a a Ont rn m l6 l6 a �i l6 ri U] 00 a O N lO1p N ul r N m N O O a N co o m ri � ri ri ri m o` -'o m 11Op 0010 N O N U1 N h N T U] U1 N N �-I 00 m LD N 0010 111 lop o m Ln m rn N N m m m a a N h m U] a N N r m h m U r rl h n a p1 n c N U1 00 T 00 , W m a h O O a a m N lO1p N a rl N N U1 N � h O m Om Ul U] r N O N Ln N a c a rrUr1 N lop N C rl N N U1 N � a N o 1p n a m 1p o rn rn m n -I N T V1 O T U rl N N U1 N v Y E p O O d � � v � - L � � C 0 E O -O a O N � CY1 a N � v i C O N N N > O a O N N O ON L C v j Y E E i E N t K Q > >O Q w O v L O 'c a 2 N C E C NO N w O k w X N Q L J � -0 C O C O 00 > .? 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