ADMINISTRATIVE REPORT

Date: October 25, 2002
Author/Local: A. Klein 7789

RTS NO. 03052

CC File No. 1605

CS&B: November 7, 2002

TO:

Standing Committee on City Services and Budgets

FROM:

General Manager of Corporate Services/Director of Finance in Consultation with the Corporate Management Team

SUBJECT:

2002 Operating Budget - August Review

INFORMATION

The General Manager of Corporate Services/Director of Finance submits this report for INFORMATION.

COUNCIL POLICY

Council's standing instructions require that the Director of Finance report on the status on the Operating Budget as of September 30 each year, along with recommendations for any appropriate adjustments.

PURPOSE

In accordance with Council's standing instructions, this report reviews the status of the revenue and expenditure appropriations in the 2002 Operating Budget at August 31, 2002, and identifies any significant variances for Council.

DISCUSSION

In place of the normal September Budget Review, staff concluded a review of revenue and expenditure estimates as of August 31 in order to be in a better position to react to any issues that may impact the City's year-end position. This August Budget Review includes detailed reviews of both the revenue and expenditure appropriations in the Operating Budget. The review seeks to identify areas of significant variance that could impact on the budget position at year-end. This review did not identify major variances that require adjustments to the budget. Appendix A includes a summary of the anticipated year-end position of the Operating Budget.

Variances to Revenue Appropriations

The review of revenue appropriations at August 31 and the projection to year-end indicates that several areas where revenues will exceed budget and one area where a shortfall is anticipated. However, overall the revenue appropriations are anticipated to meet or exceed the current budget. The major variance are reviewed below: Surplus (Shortfall)

Receipts-in-Lieu-of-Taxes$1.10 million

Receipts-in-Lieu-of-Taxes are expected to achieve a surplus by year-end. A portion of this revenue is based on the financial performance of utility companies that are not reported to the City until after the budget is approved. Strong financial performance of some corporations has had a positive impact on the City's revenues.

Short-Term Interest Earnings$0.95 million

Short-term interest earnings are ahead of expectations due to increased cash on-hand and higher rates of return on investments.

On-Street Parking Revenues$0.39 million

A review of parking meter revenue indicates that collections are ahead of expectations suggesting that revenues would exceed the budget by $0.39 million by year-end.

Service and Inspection Fees($1.01 million)

Service and Inspection Fee revenue is currently estimated to be under recovered by $1.01 million by year-end. This deficit position is directly related to the decline in development activity which has impacted Development Permit and Rezoning Fee revenues.

Other Revenues $0.18 million

Estimates of licence fee and civic property rental revenues indicate a slight surplus of $0.17 million and $0.11 million respectively. On the other hand, municipal by-law fines and utility company access revenues show a slight decline at ($0.07 million) and (0.03 million) respectively.

Total Revenue Surplus/(Deficit)$1.61 million

Variances to Expenditure Appropriations

As indicated in Appendix A, most departments are projected to be close to the allocations approved by Council in April. In cases where departments are projecting a shortfall, these are generally the result of issues beyond their control. The major variances affecting the City's year-end forecast are detailed below.

Surplus (Shortfalls)

Corporate Services $0.54 million
Community Services$0.21 million

The Corporate Services and Community Services groups are anticipating to be under budget due to delays in hiring for vacant positions. In addition, Community Services has experienced under expenditures within the Structure Review Program.

Legal Services$0.13 million

Legal Services is anticipating to be under budget because of an unanticipated recovery of court costs from a litigation case.

Engineering - Public Works$0.16 million

Engineering is anticipating an under expenditure as a result of efficiencies in Equipment Services ($0.25 million) and a decline in repairs needed for the street light maintenance program ($0.17 million). These budget surpluses are offset by a decline in recoveries for development related utility ($0.24 million) consistent with the experience in Service and Inspection Fees above.

Fire Department($0.72 million)

The Vancouver Fire Department's projected deficit is partly due to the delay in the transition of its dispatch operations to E-Comm which is now anticipated to occur by year-end instead of July, as was originally planned. The anticipated deficit of $0.29 million associated by this delay is offset by savings in the E-Comm levy which is budgeted in General Government. The remaining deficit of $0.37 million is mainly attributed to reduced sick-time and WCB recoveries.

Police Department($0.24 million)

The Vancouver Police Department (VPD) has made a significant effort to better manage its budget in 2002 and is projecting a minor deficit of $0.24 million by year-end. Managing costs for legal expenditures and criminal investigations continues to be a challenge for VPD as they can vary greatly from year to year and, as a result, are predicted to be over budget by $0.25 million and $0.50 million respectively. The Department has implemented an aggressive recruitment strategy for 2002 but will realize significant savings in uniform salaries due to retirements and delays in bringing new recruits into active duty which offsets these over expenditures. As a note, the Provincial Government has been reimbursing the Department for its continued investigation efforts into the Missing Women's case. The total anticipated recovery from the Provincial government is estimated at $2.9 million.

Civic Theatres($0.20 million)

Event bookings at the City's civic theatres have declined in 2002 relative to expectations. As a result, Civic Theatres? Program is estimating a year-end shortfall due to a reduction in revenues.

City Clerks($0.18 million)

The City Clerk's Office is anticipating an overexpenditure in the Elections budget due to higher than anticipated printing expenditures and additional costs related to election staffing.

Library ($0.15 million)

The Library is anticipating a minor budget shortfall related to salary expenditures.

Other Departmental Variances($0.08 million)

The remaining departments are projecting to either be balanced by year-end or generate minor variances.
· Departments projected to be within budget - Mayor and Council, Park Board and Equal Employment Office.
· Departments projected to have minor over expenditures: Office of the City Manager, Library, Britannia, and Human Resources

Departmental Expenditure Surplus/(Deficit)($0.53 million)

Excess of Revenues over Expenditures$1.48 million

In addition to this position, there is currently $0.84 million in unallocated funding in Contingency Reserve.

CONCLUSION

Current estimates for the year-end shows that the Operating Budget will show a small under expenditure at year-end. However, there is a risk that unanticipated items could impact the City's bottom line between now and the end of the year. Perhaps the most significant of these risks is the possibility of a major snowfall prior to year-end. The Corporate Management Team is committed to achieving a balanced budget, therefore, adjustments to the budget are not recommended.

APPENDIX A

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