Vancouver City Council |
ADMINISTRATIVE REPORT
Date: October 20, 2003
Author/Local: A. Klein
604-873-7789
RTS NO. 03732
CC File No. 1605
Meeting Date: November 6, 2003TO: Standing Committee on City Services and Budgets
FROM: General Manager of Corporate Services/Director of Finance in Consultation with the Corporate Management Team
SUBJECT: 2003 Operating Budget - August Review
RECOMMENDATION
THAT Council receive the 2003 Operating Budget August Review 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 2003 Operating Budget at August 31, 2003, 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. 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 and make recommendations on budget adjustments to balance the budget by year-end. Appendix A includes a summary of the anticipated year-end position of the Operating Budget.
Variances to Revenue AppropriationsThe review of revenue appropriations at August 31 and the projection to year-end indicates 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 variances are reviewed below:
Surplus (Shortfall)
Receipts-in-Lieu-of-Taxes $1.99 million
Receipts-in-Lieu-of-Taxes are expected to exceed budget by year-end. This surplus is related to higher than anticipated revenues for Sundry Rentals ($1.2 million) and Taxes on Properties Sold ($0.50 million).
Short-Term Interest Earnings ($1.60 million)
Short-term interest earnings are below expectations due to lower unreserved cash balances within the Revenue and Capital Funds and slightly lower rates of return on investments.
On-Street Parking & Enforcement Revenues $0.45 million
A review of revenues for the on-street parking program indicates that revenues are ahead of expectations mainly as a result of greater voluntary compliance by vehicle owners who receive parking tickets following implementation of electronic ticketing equipment.
Service and Inspection Fees ($0.36 million)
Service and Inspection Fee revenue is currently estimated to be under recovered by $0.36 million by year-end. This position is related to the lower than expected development activity which has impacted Development Permit and Rezoning Fee revenues ($0.36 million).
Other Revenues ($0.13 million)
Licence fee and civic property rental revenues are estimated to be over recovered by $0.11 million and $0.07 million respectively, while right-of-way utility company access revenues are estimated to be under recovered by $0.31 million.
Total Revenue Surplus/(Shortfall) $0.35 million
Variances to Expenditure Appropriations
As indicated in Appendix A, most departments are projected to complete the year with expenditures close to the allocations approved by Council in April. Unusual and unexpected circumstances related to pension plan benefits, discussed in more detail below, have increased retirement pay-outs in the Fire and Police Departments which are unlikely to be accommodated within existing departmental funding levels. It is the responsibility of departments to remain within their budget appropriations by adjusting expenditure priorities as necessary. Anticipated variances in departmental appropriations are generally related to issues that are beyond their control.
Surplus (Shortfalls)
Corporate Services $0.76 million
Community Services $0.36 million
The Corporate Services and Community Services groups are anticipating to be under budget primarily due to delays in filling vacant positions. In addition, Community Services has experienced under expenditures within the Structural Review Program.
Legal Services ($0.14 million)
Legal Services is anticipating to be over budget due to outside legal costs related to litigation cases.
Engineering - Public Works ($0.27 million)
The Engineering department is currently projecting an over-expenditure as a result of changes implemented in the street cleaning operation which has unexpectedly increased costs. The department has undertaken to find offsetting savings in its operation to ensure a balanced position by year-end.
Utilities (Water, Sewer, & Solid Waste) ($0.12 million)
The Sewer Utility divides its costs between tax support and user fee support. A shortfall is anticipated in recoveries from outside parties of $0.27 million and an over recovery from user fees of $0.32 million due to a mid-year rate change in BOD/TSS charges. The surplus revenues offset by utility supported portion of the shortfall will be transferred to Reserve leaving a $0.12 million shortfall in the tax supported portion of the utility.
Solid Waste Utility is estimating a $2.54 million surplus mainly due to higher than anticipated demolition, recyclable, and program revenues ($1.14 million), project delays ($0.49 million), and improved equipment and material utilization ($0.51 million). Any surpluses will be transferred to the Solid Waste Capital Reserve at year-end.
The Water Utility is projecting a balanced position by year-end.
Fire Department ($4.37 million)
Police Department
Both the Fire and Police Department budgets have been affected by changes to pension plan benefits introduced by the Municipal Pension Plan that have accelerated retirement of uniform staff beyond the rate anticipated in the budget. In total, it is anticipated these costs will be $2.69 million ($0.69 million for Fire and $2.0 million for Police). The departments have attempted to identify funding within their existing budgets to accommodate these costs, however, their magnitude would have resulted in significant service impacts. As a result, much of this cost will flow to the bottom line of the Operating Budget.
In addition to these impacts, the Fire Department has minor over-expenditures in a number of areas totalling approximately $0.28 million.
The Police Department continues to face significant pressures related to outside legal and criminal investigation costs that are not provided for in the budget. Managing these costs year-to-year is difficult because of the significant variability in these activities. Criminal investigation costs are dependant on the number of investigations, their complexity and the standards for evidence collection demanded by the Crown. In 2003, a single case is responsible for $0.60 million of the $0.85 million over-expenditure in this area.
The Department is anticipating an over expenditure of $0.18 million in civilian salary costs to support investigations, recruitment, fleet management and the Information Section. Higher than anticipated overtime of $0.80 million, to cover the Stanley Cup Playoffs, the Celebration of Light , and the 4AM bar closures, have been offset by one-time cost recoveries from the Provincial Government.
Civic Theatres $0.52 million
Civic Theatres has benefited from the unexpected booking of Mama Mia at the Queen Elizabeth Theatre which provided a surplus of $0.60 million to event bookings revenue. Offsetting this surplus is a slight deficit in salary related costs for Technical and Stage Door Operations.
General Government $0.64 million
General Government includes expenditures of a corporate nature that are not readily allocated to individual departments. An anticipated under-expenditure is primarily due to a delay in implementing several initiatives funded from the Strategic Initiatives Fund. These delays were agreed to by CMT in part because of the anticipated over-expenditures in Fire and Police and in part because of other staff priorities.
Other Departmental Variances $0.21 million
The remaining departments are projecting to either be balanced by year-end or generate minor variances.
· Departments projected to be within budget or with slight surpluses- Office of the City Manager, Mayor and Council, City Clerks, Equal Employment Opportunity Office, Britannia Community Services, Civic Grants, Park Board, and Library Board.· Departments projected to have minor over expenditures - Human Resources
Expenditure Surplus/(Shortfall) ($2.06 million)
Contingency Reserve $2.06 million
At present Contingency Reserve has an uncommited balance of $1.7 million and it is anticipated that a further $0.32 million will be available as a result of departmental action to bring expenditures on or under budget.
Net Budget Position - Surplus/(Shortfall) ($0.00 million)
Balancing the Budget By Year-End
The current budget position is very tight with little room available to absorb the unexpended revenue and expenditure variances. In addition, there remains some uncertainties in the budget, most notably, the impact that a significant snowfall would have on the year end results. In order to ensure the budget does not fall into a shortfall position, departments have been instructed to curtail discretionary spending.
CONCLUSION
Current estimates for the year-end shows that the Operating Budget will be balanced 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. The Corporate Management Team is committed to achieving a balanced budget, therefore, adjustments to the budget are not recommended.
* * * * *
Appendix A
2003 August Review Summary
$ millions
Annual Budget
Year-End Projection
Year-End Variance
% Variance
REVENUES
Property Taxation
(422.87)
-422.87
balanced
0%
Payments in Lieu (PIL)
(35.58)
-37.57
1.99
(6%)
License Fees
(12.89)
-13
0.11
(1%)
Service & Inspection Fees
-21.6
-21.24
-0.36
(2%)
Municipal By-Law Fines
(9.45)
-9.8
0.35
(4%)
Parking Meter Revenue
(19.60)
-19.7
0.10
(1%)
Civic Property Rentals
-1.28
-1.35
0.07
(5%)
Miscellaneous Revenue
-5.44
-5.13
-0.31
(6%)
Short-Term Interest
(11.60)
-10
(1.60)
14%
Provincial Revenues
(6.14)
-6.14
balanced
0%
Transfers
(9.37)
-9.37
balanced
0%
Total Utility Revenues
(110.38)
-110.38
balanced
0%
TOTAL REVENUES
(666.20)
-666.55
0.35
(0%)
EXPENDITURES
Mayor and Council
1.59
1.52
0.07
4%
Office of the City Manager
0.61
0.61
balanced
0%
Equal Employment Opportunity
0.39
0.38
0.01
1%
EEO City Wide Training
0.08
0.08
0.01
17%
Law Department
3.46
3.6
-0.14
(4%)
Civic Theatres (Net Budget)
0.29
-0.23
0.52
176%
Britannia Community Services
2.45
2.38
0.07
3%
City Clerk's
3.37
3.31
0.06
2%
Community Services Group
39.83
39.47
0.36
1%
Civic Grants
11.19
11.17
0.02
0%
Corporate Services
28.66
27.9
0.76
3%
Engineering Public Works
48.63
48.9
(0.27)
(1%)
Utility Expenditures
141.90
142.02
-0.12
(0%)
Human Resources
5.97
6
(0.03)
(1%)
Fire Department
67.73
68.74
(1.01)
(1%)
Library Board
30.85
30.84
0.01
0%
Park Board
48.33
48.33
balanced
0%
Vancouver Police Department
133.40
136.76
-3.36
(3%)
General Government
50.48
49.84
0.64
1%
Total Debt Charges
46.99
46.99
balanced
0%
TOTAL EXPENDITURES
666.20
668.61
-2.41
(0%)
Excess of Expenditures Over Revenues
($2.06)
Unexpended Contingency
$2.06
NET POSITION
0