CITY OF VANCOUVER
ADMINISTRATIVE REPORT
Date: |
October 14, 2004 | |
Author: |
Annette Klein | |
Phone No.: |
873-7789 | |
RTS No.: |
04590 | |
CC File No.: |
1605 | |
Meeting Date: |
November 4, 2004 |
TO: |
Standing Committee on Planning and Environment |
FROM: |
General Manager of Corporate Services/Director of Finance |
SUBJECT: |
2004 Operating Budget - August Review |
RECOMMENDATION
A. THAT Council receive the 2004 Operating Budget August Review for INFORMATION.
B. THAT Council modify the standing instructions to the Director of Finance to report on the status on the Operating Budget as of August 31 each year rather than September 30.
COMMENTS OF THE CITY MANAGER
The staff review of revenue and expenditure estimates as of August 31 has determined that, with the exclusion of the Vancouver Police Department, the City's financial performance at year-end will exceed expectations by $3.65 million including unallocated Contingency Reserve of $0.52 million. The favourable year-end position, however, has been severely impacted by a shortfall within the Vancouver Police Department (VPD) of $5.01 million resulting in a Corporate shortfall of $1.36 million. The VPD shortfall is mainly related to over-expenditures in overtime, civilian salaries, and E-Comm and Computer equipment expenditures.
Section 200 of the Vancouver Charter stipulates that "...the Council shall not wilfully permit the total expenditures made in any year to exceed the amount allocated therefor in the estimates as adopted...". Further the Police Act [Section 27 (6)] states "Unless the council otherwise approves, a municipal police board must not make an expenditure, or enter an agreement to make an expenditure, that is not specified in the municipal police board budget and approved by the council". Therefore, the unfavourable year end position forecasted by the Vancouver Police Department presents a fiscal challenge. It is the responsibility of each Department and Board to ensure that Council approves any major deviation from the Operating Budget.
The Chief Constable has agreed to reduce the Department's overall anticipated shortfall of $5.01 million thereby allowing the overall Corporate budget to be balanced by year end. However, this year end position highlights the importance of accountability and reviewing VPD's resource requirements over the long run. Council approved in March 2004 an independent review of the Vancouver Police Department's Long Range Strategic Staffing Plan, including an evaluation of potential process and efficiency improvements. The RFP evaluation process for hiring an independent consultant is now complete and it is expected that a full report to Council and the Police Board will be available in the new year.
The August Review also evaluated potential new revenue sources and savings that have or will become available to the City. It has been determined that the amount of new funds available is limited, restricted in use, or unconfirmed. The 2004 GST rebate introduced by the Federal Government has been applied to the Capital Program as approved by Council and is therefore not available to the Operating Budget. The opening of the Plaza of Nations Casino was originally expected to generate additional Gaming Revenue in 2004 for the City. However, this additional revenue will be offset by revenue reductions related to the changes in the Casino market and the delayed opening of the Plaza of Nations Casino. Finally, though recently announced by the Provincial Government that 100% rebate of the Traffic Fines Revenue would be transferred to Municipalities, the timing and the exact amount of the rebate has not yet been confirmed.
Should the mitigating strategies by VPD and other Departments be insufficient to balance the budget by year end, staff will report back with recommended adjustments to the budget.
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. Staff concluded a review of revenue and expenditure estimates as of August 31 to be in a better position to react to any issues that may impact the City's year-end position.
PURPOSE
This report reviews the status of the revenue and expenditure appropriations in the 2004 Operating Budget at August 31, 2004, provides a projection for year-end and identifies any significant variances for Council.
DISCUSSION
August Budget Review included detailed reviews of both revenues and expenditures compared to the budget approved by Council in March. In addition, a projection of the year-end position was completed. The purpose of the review is to identify areas of significant variance that could impact on the budget position at year-end and to make recommendations on adjustments to balance the budget by year-end.
1. Summary of Variances to Revenue & Expenditure Appropriations
Table 1 summarizes the 2004 revenue and expenditure year-end projections. Appendix A includes provides additional detail of this position.
Table 1 - August Review Summary
Year-End Estimated
Surplus/(Shortfall)
Net Revenues $1.93 million
Departmental Under Expenditures (Excluding VPD) $1.20 million
Year-End Projection (Excluding VPD) $3.13 million
VPD Year End Projection ($5.01 million)
Net Year-End Projection (prior to mitigation) ($1.88 million)
Unallocated Contingency* $0.52 million
Mitigation Strategies by Year-End $1.36 million*
Target Year-End Financial Projection BALANCED
*Note: Funding from Contingency Reserve would be required if there is major snow fall later in the year
Net Revenues are anticipated to end the year with a $1.93 million over budget. Departmental under expenditures, excluding the Vancouver Police Department (VPD), add a further $1.20 million to the Corporate year end position, bringing the projected surplus to $3.13 million. However, the Vancouver Police Department's anticipated year-end shortfall of $5.01 million brings the overall year-end position to a shortfall of $1.88 million. Offsetting this position is approximately $0.52 million of unallocated Contingency Reserve funding: If this funding is retained until year-end, the year-end projection results in an excess of expenditures over revenue of $1.36 million. To ensure a target balanced year end position, mitigating strategies totalling $1.36 million will be required. If these cannot be achieved, staff will need to report back to Council with recommended adjustments to the budget.
2. Variances to Revenue Appropriations
The review of revenue appropriations at August 31 and the projection to year-end indicates several areas where revenues will exceed budget and two areas where a shortfall is anticipated. However, overall the revenue appropriations are anticipated to exceed the current budget. The major variances are reviewed below:
Surplus (Shortfall)
Service and Inspection Fees $2.00 million
Service and Inspection Fee revenue are expected to exceed budget by year-end by $2.00 million. This position is related to the higher than expected development activity which has impacted both Building Permits and Anchor Rod Fees.
On-Street Parking & Enforcement Revenues $0.23 million
Revenues are ahead of expectations mainly as a result of greater voluntary compliance by vehicle owners who receive parking tickets and higher than anticipated parking meter revenue.
Other Revenues ($0.30 million)
Licence fees and right-of-way utility company access revenues are estimated to be under recovered b y $0.21 million and $0.09 million respectively. Licence fees were mainly impacted by the roll back of bar closures from 4 am to 3 am since business license fees for these premises are based on hours of operations.
Net Revenue Surplus $1.93 million
3. 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 March with the exception of the Vancouver Police Department. It is the responsibility of departments to remain within their budget by adjusting budget priorities as necessary with the exception of expenses that are beyond their control.
Surplus (Shortfall)
Community Services $0.53 million
Corporate Services $0.45 million
The Corporate Services and Community Services groups are anticipating to be under budget primarily due to delays in filling vacant positions.
Fire Department $0.44 million
The Fire Department is anticipating salary savings due to the replacement of a large number of retired officers with less senior staff.
Engineering - Public Works $0.27 million
The Engineering department is currently projecting to be under-budget as a result of higher than anticipated revenues for Temporary Crossing Fees that have been impacted by increased construction activity. Under expenditures are also anticipated in the Anti-Graffiti program due to vacancies and a revised program delivery strategy.
Utilities (Water, Sewer, & Solid Waste) balanced
The estimated year-end surplus for all three Utilities is $1.59 million. The surplus will be transferred to the Utility rate stabilization reserves at year end leaving Utilities balanced for the Operating Budget year-end position.
The Utilities favourable year end position is due to a $1.05 million and $0.42 million surplus in the Solid Waste Utility and Water Utility respectively. The surplus in the Solid Waste Utility is mainly due to higher than anticipated demolition, recyclable, and program revenues ($0.77 million) and project delays ($0.28 million) while the surplus in the Water Utility is mainly attributed to efficiencies associated with service leak repairs, valve maintenance and flushing.
Legal Services ($0.22 million)
Legal Services is anticipating to be over budget due to outside legal costs related to on-going litigation.
Civic Theatres ($0.44 million)
Event bookings at the City's civic theatres have declined in 2004 relative to expectations. As a result, Civic Theatres' Program is estimating a year-end shortfall due to a reduction in revenues.
Police Department ($5.01 million)
The Police Department is anticipated to overspend the Council approved budget by $5.01 million. The main drivers, as highlighted in Table 2 are overtime, civilian salaries, computer supplies, E-Comm equipment repairs, and drycleaning.
Table 2 - Summary of VPD Major Variances
2004 Operating Budget
In 2003, the VPD was affected by changes to pension plan benefits introduced by the Municipal Pension Plan that encouraged the early retirement of approximately 90 uniform staff. When combined with the already anticipated retirement of approximately 50 senior officers, sworn staffing levels had declined by almost 140 uniform staff by year end 2003. A portion of this staffing shortfall was managed by the hiring back of 15 retired officers. However with these retirements, the department experienced an overall reduction in sworn staffing levels.
The 2004 Operating Budget attempted to anticipate the resources required to transition the department as they brought their staffing levels back up to authorized strength (1,124). Specifically, the budget provided $8.2 million funding for the following :
_ $1.0 million for contracting back 15 retired officers for a limited period;
_ $4.2 million to fund 85 new recruits - this level of recruitment would ensure that the department was fully deployed by late 2004 and at authorized levels throughout the year;
_ $0.8 million from Provincial recoveries were provided for Criminal Investigations.
_ Over and above regular wage increases, Sworn Overtime1 was increased by $2.2 million or 20%:
o $0.6 million overtime to address policing requirements for late night bar closure;
o $1.0 million overtime from the Vancouver Agreement to augment patrols around the safe injection site in the Downtown Eastside
o $0.6 million from Provincial recoveries were provided for general overtime
Variance Explanations
a) Sworn Salary & Overtime Expenditures
The main cause for the VPD shortfall is an estimated $3.9 million over-expenditure in overtime costs, offset by $1.1 million in sworn staffing savings due the replacement of retired officers with less senior staff. Adding the $3.9 million of over-expended overtime to the $2.2 million of additional overtime funding provided in the 2004 Operating Budget, the level of sworn overtime expenditures by year-end will have risen by $6.1 million over 2003 base budget level.
Deployable Officers - During 2004, the number of deployable officers was significantly reduced by the high number of early retirements in 2003. Due to the time lag in which recruits are hired and graduate from basic training, this shortage could not be filled until later in the year. During this period, the Department utilized overtime to compensate for the staff shortage. In the latter months of the year, however, more recruits will become deployable, which should reduce these shortages and overall pressure on overtime and potentially reduce the $5.01 million shortfall.
Specialty Squads - The Department has augmented a number of specialty squads thereby decreasing the number of officers available for traditional Patrol duties. The Department has determined that increases to these squads are required to address the growing demand and complexity of investigative services. This deployment model has contributed to increased overtime costs since the VPD has utilized overtime to supplement traditional Patrol deployment levels.
Table 3 illustrate the changing deployment model utilized by the VPD and its implications to Patrol.
Table 3 - VPD Deployment Changes
*VPD's Specialty Squads, which require specialized training, include: Homicide, Robbery/Assault, Sexual Offence Squad, Drugs, Anti-Fencing, etc.
