SUPPORTS ITEM NO. 1
CS&B COMMITTEE AGENDA
NOVEMBER 16, 1995
ADMINISTRATIVE REPORT
Date: November 7, 1995
TO: Standing Committee on City Services and Budgets
FROM: Director of Finance
SUBJECT: 1995 Operating Budget - September Review
RECOMMENDATION
A. THAT the proposed adjustments to the 1995 Operating Budget
revenue and expenditure appropriations as outlined in this
report be approved, including the proposed adjustments to
Contingency Reserve.
B. THAT any shortfall in the Park Board revenue programs be
funded from Revenue Surplus as provided for in the Global
Budget agreement.
C. THAT Council request the Park Board to report back in the
early new year on a program to address the Board's
accumulated deficit identified in this report.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services RECOMMENDS approval of
A, B and C.
COUNCIL POLICY
Council s standing instructions are that the Director of Finance
report on the status of the City s Operating Budget as of June 30 and
September 30 each year, along with recommenda-tions for any
adjustments deemed necessary.
Council must approve transfers to and from reserve accounts.
Under provisions of the Park Board global budget, Council has
authorized the Director of Finance to maintain a notional Revenue
Stabilization account to balance the annual surpluses or deficits that
result from seasonal or weather-related factors affecting the revenue
programs.
PURPOSE
In accordance with Council s standing instructions, this report
reviews the status of the revenue and expenditure appropria-tions in
the 1995 Operating Budget at September 30, 1995 and seeks Council
approval to make appropriate adjustments.
DISCUSSION
The September Budget Review focuses on detailed reviews of both the
revenue and expenditure sides of the Operating Budget. The review of
revenue appropriations seeks to identify areas of significant variance
that have arisen as a result of experience or new information since
the budget was approved in April. Council will note that there are
several areas where adjust-ments are recommended.
Under normal circumstances, departments are expected to operate within
the expenditure appropriations approved by Council in April each year.
Where problems are identified, departments are required to realign
priorities or reallocate resources within existing budgets. This is
an ongoing process in which Finance staff work with departments to
identify and minimize these problems. The focus of the September
review of expenditures is generally restricted to those areas where
departments have been impacted by factors which cannot otherwise be
accommodated.
ADJUSTMENTS TO REVENUE APPROPRIATIONS
The following adjustments to the revenue appropriations in the 1995
Operating Budget are recommended as a result of September Review.
Revenue
Increase/(Decrease)
General Tax Levy (520,000)
The Assessment Appeal Board has ruled on the first of a series of
appeals related to downtown commercial buildings. These
decisions have resulted in a loss of value on the tax roll and a
reduction in taxation revenue. This adjustment increases the
provision for tax write-offs in the 1995 budget.
Receipt-in-lieu of taxes $1,722,200
This adjustment represents the net change in receipts-in-lieu of
taxes since the budget was approved in April. There are several
components to the change:
- final settlements on Crown Dominion and Post Office property
for 1994 and increased interim payments for 1995 have
resulted in additional revenue.
- based on the CBC dispute of the value of its Vancouver
headquarters building for 1994 and 1995, provision has been
allowed for reduced payments-in-lieu of taxes. We will be
reporting to Council in more detail on this matter in a
future report.
Licences $ 250,000
This adjustment reflects increased collections from Business
Licences and from the alarm permit fee which is approaching the
levels as originally anticipated.
Trade Permit Fees $(485,300)
A slowing in development activity has been apparent since the
middle part of 1995 and this is reflected in lower than
anticipated development permit and other trade permit fees.
Engineering Fees and Charges $435,000
This adjustment results from higher than expected earnings from
anchor rod fees payable by developers using City property to
anchor building excavations.
Municipal Bylaw Fines $(395,000)
Parking Meter Revenues $(540,000)
Council is aware of the difficulties we are experiencing with
parking meters in the City. The impact on the budget is
reflected in lower than anticipated meter revenues and fewer
infraction notices being issued. This adjustment reflects our
revised expectation for 1995.
Revenues from City-Owned Leasehold Properties $744,700
This adjustment reflects the net impact of several changes to
rents and rents-in-lieu of property taxes on city-owned
properties leased out during the year. The most significant of
these adjustments relates to the addition of rents-in-lieu of
taxes at the Library Square complex.
Short Term Interest Earnings (200,000)
Earnings from short term investments are anticipated to be about
2% below the 1995 budget level as a result of generally lower
cash balances during the year.
Net Increase in Revenue Accounts $ 1,011,600
ADJUSTMENTS TO EXPENDITURE ACCOUNTS
Our review of the Operating Budget as of September 30 indicates that,
for the most part, departmental and other expenditures are consistent
with the expectations reflected in the 1995 Operating Budget. Smaller
problems have been dealt with within departmental appropriations.
However, there are four adjustments that are recommended at this time.
Expenditure
Increase/(Decrease)
Police Department $ 835,000
Several issues have arisen in the Police Department which are
beyond the department s ability to fund from the original budget
allocation. Some of these were anticipated early in the year but
could not be quantified until this time. Others have arisen
since the budget was approved. These adjustments include the
following items:
- the requirement for a September Recruit Class was confirmed.
Sixteen recruits were enrolled to maintain manning levels in
the department.
- Statutory Holiday leave costs have been higher than
anticipated as members take pay in lieu of time off.
- Court Time/Overtime costs have remained higher than
anticipated.
- Special Security costs have been incurred as a result of
several high profile cases.
- on the positive side, the department is recovering costs
associated with its participation in a special ICBC sponsored
Counter Attack program.
Civic Theatres $ 180,000
Since the revenue estimates for Civic Theatres were established
early in the year, several anticipated bookings have not
materialized or were cancelled. As a result the theatres
operation is expected to record a small deficit of approximately
$40,000 compared to a surplus of $140,000 currently reflected in
the budget.
Debt Charges $ (728,400)
The 1995 Operating Budget includes a provision for the cost of
additional financing for Library Square. This funding was to
provide for:
- the shortfall on the proceeds from the sale of the old
library site
- interim financing for the fundraising campaign which has
generated commitments which will not immediately be converted
to dollars. The additional financing has not yet been
obtained and interim financing has been provided internally,
which accounts, in part, for the reduction in interest
earnings noted earlier in the report. A summary of the
Library Square project will be reported to Council before the
end of this year. Council should note that the 1996
Operating Budget will include a provision for these financing
costs.
Contingency Reserve $500,000
Contingency Reserve provides unallocated funding from which the
City Manager (under limited circumstances) and Council can deal
with issues that emerge during the year. A review of the pending
items in Contingency Reserve and considera-tion of the potential
requirements to year-end suggests that additional funding should
be provided at this time.
Net Increase in Expenditures $ 786,600
The unallocated balance after these recommended adjustments is
$225,000, which leaves the budget in a surplus position. The Director
of Finance recommends that this amount be allocated to Contingency
Reserve as a partial offset against a shortfall in the Park Board
Global Budget as addressed below.
With these transfers, the 1995 Operating Budget will be adjusted to
reflect our current expectations for the year, and brought into
balance.
PARK BOARD GLOBAL BUDGET
The Park Board staff have conducted a detailed review of Board
revenues and expenditures to August 31 and their projections to year-
end suggest that the Board will exceed its global budget by
approximately $930,000.
Under the terms of the global budget, Council provides an annual
allocation representing the City contribution to the parks and
recreation programs. Within this global amount, the Board takes
responsibility for balancing revenues and expenditures. On its non-
revenue programs the Board is not normally held responsible for
factors over which it does not have direct control (e.g., fringe
benefit variances). On revenue programs, including the golf
courses/clubhouses, concessions and fee-based recreation programs (ice
rinks and pools), the global budget provides for a stabilization fund
to cushion the Board from weather-related problems that can affect
revenues.
There are several reasons for the budget difficulty projected by the
Board staff. Weather was a problem for outdoor revenue programs in
May and June and again in August. As a result, concession and golf
course revenues are projected to incur shortfalls totalling $438,300.
Recreation programs are also experiencing revenue shortfalls totalling
$309,000, concentrated in the indoor pools, ice rinks and fitness
centres. In the case of the latter programs, the Board has identified
its Leisure Access Card program, which offers reduced admissions, as a
contributing factor.
Should the projected deficit materialize, 1995 will be the fourth
consecutive year that the global budget has been exceeded, and
accumulated deficits will exceed $2.5 million. This result has
occurred despite making net revenue reductions totalling $400,000 in
the global budget over the last three years. These shortfalls have
been funded by the City's Revenue Surplus account.
The Director of Finance notes that the City's 1995 Operating Budget
remains very tight and the projected Park Board over-expenditure may
produce an operating deficit at year-end. As insurance against that
eventuality, we have recommended that the unallocated balance
($225,000) from the adjustments proposed above be allocated to
Contingency Reserve.
HEALTH REGIONALIZATION
In April 1995, the Provincial Government announced that the services
operated by the Vancouver Health Department would be assumed by the
Vancouver Health Board (VHB) and that the City would be compensated
for expenditures made on health services. Because no date had been
established for the assumption of service by the VHB, the 1995
Operating Budget includes a full year of funding for these services.
Discussions with the Health Board have been under way since the summer
but no agreement has yet been concluded and no additional funding has
been provided to the City.
Should the VHB agree to pay for the 1995 health programs already
funded in the Operating Budget, this funding will be passed through
the Operating Budget to Revenue Surplus.
CONCLUSION
A review of the 1995 Operating Budget as of September 30, 1995
indicates that several adjustments are appropriate based on changes
since the budget was approved in April.
These changes are summarized as follows:
Increase in Revenues $ (1,011,600)
Increase in Expenditures 286,600
Balance to Contingency Reserve
- for general purposes 500,000
- for Park Board global budget 225,000
Net Adjustment $ 0
With these recommended adjustments, the 1995 Operating Budget will be
brought back into balance. The Director of Finance notes that the
1995 budget remains very tight at this point in the year and the
Corporate Management Team have agreed to take particular care to
control discretionary expenditures to year-end.
* * * * *