November 24, 1998

TO:Budget Committee

FROM:Chief Financial Officer and Treasurer

SUBJECT:September 30, 1998 Operating Budget Variance Report

Purpose:

To provide the overall gross and net expenditure position of the City of Toronto for the nine months ended September 30, 1998 and to identify the funding issues to-date. This is the second scheduled corporate variance report for 1998, with a further update scheduled for December 31 (as a part of the operating budget process). Areas of significant variation, as reported by programs as of September 30, 1998, impacting the corporate position are highlighted within this report.

Financial Implications:

The nine month variance report indicates that City departments and operations are overall on track with respect to the 1998 Operating Budget as approved by Council on April 28 and 29, 1998. The projected net under-expenditure to year-end is $25.9 million, after transfers of surplus to various Community and Neighborhood Services' reserves of $27.6 million. This is an improvement of $3.1 million from the June variance position. Under-expenditures from the operational programs comprise $28.5 million of the total (with $27.2 million originating from the Social Services program) and corporate accounts are projecting a shortfall of $2.6 million (June reported of $11.9 million). The Parks and Recreation, and Facilities and Real Estate programs are projecting over-expenditures of $2.7 and $3.5 million, respectively (June reported of $1.6 and $0.0 million). The Exhibition Place, Toronto Zoo, TTC and Police Services are projecting over-expenditures totalling $5.5 million (June reported of $4.5 million).

It should be noted that subsequent to the 1998 budget approval, Council decisions have been made to addback items impacting the financial position of the corporation, through either draws to contingency (totaling $5.7 million) or absorption into existing budgets (totalling approximately $2.7 million).

Recommendation:

It is recommended that:

1.As a direct result of Provincial downloading adjustments, the Housing under-expenditures, to the extent of $10.5 million, be used to reduce the Transfer from the Transition Reserve Fund;

2.One-time transition funding of approximately $7.9 million in Homes for the Aged, be transferred to a new reserve fund to be created for Homes for the Aged Capital; and

3.To more accurately align budgets with the new reporting structures, the 1998 budget estimates be adjusted as reflected within the text of this report;

Comments:

Year to Date and Projected Year-End Variances:

The Corporation's total gross expenditure for the period ended September 30, 1998 of $3,621.5 million is $240.0 million or 6.2 percent under budget. On a net basis, the year-to-date expenditure of $1,627.6 million is $ 111.1 million or 6.4 percent under budget, based on the 1998 budget prorated to September 30, 1998.

The Corporation's projected year-end gross expenditure on the levy is $5,319.0 million, reflecting $220.8 million under-expenditure or 4.0 percent under budget. On a net basis, the projected under-expenditure on the levy is $25.9 million, primarily attributable to $28.5 million in program under-expenditures and an $2.6 million shortfall in the corporate accounts.

Approved draws to September 30, 1998 from contingency total $5,718.0 thousand.

Based on the adjusted actual figures, the following table highlights the contributors to the projected year-end gross and net expenditure variances.

Projected Year-End Variances ($ Millions)

Gross Expenditures Net Expenditures

Over / (Under) Estimate Over / Under Estimate

(1) Community and Neighborhood Services(203.5)(28.3)

(2) Works and Emergency Services 9.5(4.2)

(3) Economic Development, Culture and Tourism2.63.0

(4) Urban Planning and Development Services0.0(7.0)

(5) Corporate Services1.83.1

(6) Exhibition Place2.52.1

(7) TTC(3.3)2.1

(8) Police5.90.6

(9) Toronto Zoo(0.8)0.8

(10) Corporate Accounts(28.3)2.6

(11) Other(7.2)(0.7)

Projected Year-End Variance(220.8)(25.9)

The net position changes from the June variance, as well as a summary explaining the departments with significant or negative change are outlined below:

Projected Year-End Variances ($ Millions)

June Variance September Variance

Over / (Under)Over / (Under)

ProjectedProjected

Net EstimateNet Estimate

Community and Neighborhood Services(30.9)(28.3)

Works and Emergency Services (2.4) (4.2)

Economic Development, Culture and Tourism 1.1 3.0

Urban Planning and Development Services (5.9) (7.0)

Corporate Services (0.1) 3.1

Special Purpose Bodies 4.5 5.5

Corporate Accounts 11.9 2.6

Other (0.8) (0.6)

Total Net Expenditure(22.8) (25.9)

(a)Community and Neighborhood Services - Projected net under-expenditure decrease of $2.6 million (from $30.9 million in June to $28.3 million in September) due to improved under-expenditure positions in Children's Services, Homes for the Aged, and Public Health, offset by higher projected expenditures in Social Services and higher reserve contributions associated with the Child Care Capital Reserve Fund and the National Child Benefit Savings;

(b)Economic Development, Culture and Tourism - Projected net over-expenditure increase of $1.9 million (from $1.1 million in June to $3.0 million in September) due to higher shortfall positions in the Parks and Recreation primarily due to the late approval of the organizational structure and the delay in the implementation of the downsizing plan;

(c)Corporate Services - Projected net over-expenditure increase of $3.2 million (from $0.1 million under-expenditure in June to $3.1 million over-expenditure in September) due to delays in the reorganization and implementation of the downsizing plan within the Facilities and Real Estate program;

(d)Special Purpose Bodies - Projected net over-expenditure increase of $1.0 million (from $4.5 million in June to $5.5 million in September) primarily attributable to Exhibition Place from the lower than budgeted CNE revenues associated with new promotions, offset by a reduction in the Police Services' over-expenditure; and

(e)Corporate Accounts - Projected net shortfall decrease of $9.3 million (from $11.9 million shortfall in June to $2.6 million shortfall in September) due to lower interest/investment earnings, parking tag revenue, and temporary borrowing, as well as higher supplementary taxes and payments in lieu of taxes. Temporary borrowing requirements are lower due to using investments to fulfill short-term borrowing needs and the lower interest and investment earnings are associated with the delay in the final tax bill issuance. Revenue shortfalls in parking tag operations relate primarily to the a lower collection rate on parking fines. At this point in time, supplementary taxes are projected to be $15.2 million under-budget, a slight improvement from the $18.4 million projected in the June position. Additionally, the payments in lieu of taxes are expected to be $10.0 million over-budget.

The attached Appendices A and B support this report, reflecting the corporate gross and net variance, on a year-to-date and projected year-end basis. In some instances the budget estimates have been adjusted to account for re-alignments related to the definition of organizational structures. These adjustments are summarized later in the report.

Appendices C and D are attached to reflect the corporate salaries and benefits expenditures and corporate staff reductions related to the Restructuring program.

Based on the submissions received, the programs= year-to-date expenditures for salary and benefits account for approximately 70 per cent of the annual salary budget. Actual salaries and benefits to September 30, 1998 are underspent by $20.4 million for levy operations and are forecast to be $5.4 million underspent by year-end. This represents a $10.6 million reduction from the $16.0 million projected year-end under-expenditure reported in the June variance report. Delays in the approval of restructuring plans and the resultant deferral of implementation, are the major contributing factors to the change in position. This in turn, will increase the required financial reductions for the 1999 operating budget. In three instances, Parks and Recreation, Economic Development and Facilities and Real Estate, the delays in reorganizing negatively impact the projected year-end position to the extent of being over-expended on a net basis for the year, however, the staff reductions by year-end are projected to be on-target. The impact of these three programs' projected over-expenditures total $6.4 million. The Amalgamation Office in the City will continue to monitor the progress of the actual employee exits within the corporation against the anticipated levels.

(1) Community and Neighborhood Services:

The adjusted net budget variance of Community and Neighborhood Services is comprised of the following:

Expenditures Over / (Under) Budget

($ millions)

GrossNetNetSept. 30, 1998Sept. 30, 19981998 Projected

Program AreaYear-to-DateYear-to-Date Year-End

Children's Services(26.1)(2.2)(2.4)

Housing(2.2)(0.2)(11.8)

Social Services(104.2)(20.3)(27.2)

Library(2.7)(2.7)0.0

Homes for the Aged(3.4)(10.6)(9.3)

Public Health(3.4)(5.3)(4.9)

Other (Hostels, Housing, Social Dev.) (1.1)(1.0)(0.3)

Contribution to Reserve* 0.00.027.6

Total Department Expenditures(143.1)(42.3)(28.3)

*Consists of $1.7 million in Children's Services for the Child Care Capital Reserve Fund, $18.0 million in Social Services for the Social Services Reserve Fund and $7.9 million in Homes for the Aged for the Homes for the Aged Capital Reserve Fund.

Children's Services:

The Children's Services program is experiencing year-to-date gross and net under-expenditures of $26.1 and $2.2 million primarily due to the delay in the Provincial transfer of management responsibility of Purchased Services such as Special Needs Resourcing, Resource Centres and wage subsidies.

On a projected annual net basis, the delay in the Provincial transfer and an anticipated increase in user fee revenue resulting from a more favorable case mix associated with the delay in the Ontario Works implementation, result in a net under-expenditures of $2.4 million

This projected net under-expenditure will be reduced by $1.7 million in projected excess user fees, with the amount being transferred to the Child Care Capital Reserve Fund, as approved by Council on July 30, 1998.

The program has identified that $0.8 million may be required as a contribution for the municipal 20 percent share to the provincial adjustment of Ontario Works funding.

Housing:

The Ministry of Housing has advised Housing that payments for the amortization of the public housing stock will not occur until December, with the City being invoiced in January 1999. The program has been accruing these items, with no variance to be reflected. The Ministry has not yet provided a year-end forecast. A favorable year-end gross and net variance of $19.7 and $11.8 million, respectively, are being projected due to the Province no longer requiring municipalities to assume costs dedicated for Supportive Housing. This amount reduces the net impact of Provincial downloading on the City, therefore, it is recommended that to the extent of $10.5 million, these under-expenditures be used to reduce the Transfer from the Transition Reserve Fund.

Social Services:

For the September year-to-date, the Social Services program has a favorable gross variance of $104.2 million or 12.6 percent primarily attributable to:

(a)$51.4 million resulting from the change in budget assumptions relating to the number of transferred cases from provincially downloaded programs, as well as the delay in the transfer of these cases to the City of Toronto;

(b)$20.7 million related to the Ontario Works Program, due to a revised Provincially approved Ontario Works Business Plan and underutilization of the Employment Support budget due to maximum funding levels imposed by the Province; and

(c)$27.7 million attributable to lower than budgeted average caseload. Actual average caseload to date is 82,948 versus the budgeted caseload of 88,000.

As a result of this favorable gross under-expenditure and a change in the funding for Ontario Works Program delivery from 50/50 to 80/20, the program's September year-to-date net savings are $20.2 million.

On a projected year-end basis, continuing these trends, the program identifies a favorable net under-expenditure of $27.2 million.

Projected funding of $18.0 million is to be set aside at year-end for the Social Services Reserve Fund, for the following purposes:

(a)$16.0 million for the Social Services Reserve Fund, established by City Council during the 1998 Budget approval process. This reserve is intended to protect the City against future caseload increases by redirecting savings incurred from social assistance, in the event the caseload drops below 88,000 cases and to provide interim funding for the 2,000 childcare spaces for clients leaving assistance; and

(b)$2.0 million for the National Child Benefit Savings (NCBS). This is a Federal government initiative. Effective August 1998, the Federal government increased benefits for low-income families with children. These increased benefits will be treated as income for Social Services recipients, thus reducing their Ontario Works entitlement. The resulting net savings are to be reinvested in programs and services to support children of low-income families, per Provincial government directives. This item was subject of a report to the Community and Neighborhood Services Committee on November 5, 1998 (Clause 1, Proposed Reinvestment Strategy for Municipal Savings) and was deferred back to staff for an additional report, addressing the implications of giving the funding back to the affected families.

Library:

Current under-expenditures of $2.7 million, gross and net, result from spending delays for library material and other services, to offset anticipated over-expenditures in staffing costs resulting from reorganization delays. At this time, the Library is projecting to reduce staffing by 102.0 by year-end, compared with the budgeted staff reductions of 151.5. These actions are projected to result in program spending for year-end to be within budget.

Homes for the Aged:

Homes for the Aged reports year-to-date gross under-expenditures of $3.4 million, consisting of $2.0 million for salary and benefit expenditure patterns differing from the allocated budget, $0.7 million from the Supportive Housing program restructuring to conform with the Ministry of Health's new direction, $0.3 million due to a temporary payment decrease to Homemaker agencies, and $0.4 million of miscellaneous under-expenditures. On a net basis, the under-expenditure is further increased to $10.6 million, due to one-time transition subsidy funding made available by the Ministry of Health.

On a projected year-end basis, the program reports a favorable net under-expenditure of $9.3 million attributable to an increase in basic accommodation revenue resulting from fewer residents receiving subsidy.

The one-time transition funding is estimated to contribute $7.9 million of the projected year-end total. Subject to the year-end results, this transition funding should be transferred to a reserve for Homes for the Aged Capital. This item has been captured in the Contribution to reserve line for Community and Neighborhood Services Department. In the June variance report, this item was included in the year-end surplus projection.

Public Health:

The program reports favorable year-to-date, gross and net under-expenditures of $3.4 and $5.3 million, related to delays in program implementation of Healthy Babies / Healthy Children, Healthy Babies Possible and Parents Helping Parents, position gapping pending the program's reorganization, and unbudgeted funding from the Ministry of Health for the Preschool Speech and Language Services System starting in April 1998. These same factors influence the favorable year-end net under-expenditure of $4.9 million.

(2) Works and Emergency Services:

The adjusted net budget variance of the Works and Emergency Services is primarily comprised of the following:

Net Expenditures Over / (Under) Budget

($ Millions)

Sept. 30, 19981998 Projected

Program Area (excluding Police)Year-to-DateYear-End

Fire(6.3)0.8

Solid Waste Management(11.5)(4.7)

Transportation(11.2)0.0

Ambulance(0.3)(0.3)

Total Department Expenditures(29.3)(4.2)

Fire:

With a significant net under-expenditure of $6.3 million reported year-to-date due to equalization of the budget allocations, the Fire Program projects spending patterns to self-correct by year end, leaving a year-end net over-expenditure of $0.8 million related to the delay in the implementation of the new fees revenue.

Solid Waste Management:

Year-to-date the Solid Waste Management Program reports a net under-expenditure of $11.5 million, associated with the higher than estimated disposal revenue. The year-to-date actual revenue related to disposal tonnage is exceeding budgeted levels by approximately 120,000 tonnes. These sizable variances are attributable to the City's competitive pricing, as well as an improved economy.

A graph of the budgeted and actual tonnage levels for the years 1996-1997, along with the year-to-date budget, actuals and projections for 1998 follow.

The following graph highlights the current year=s budgeted and year-to-date waste tonnage revenue, along with projections for the remainder of the year.

While this revenue trend is projected to continue through year-end, the impact is a net under-expenditure of $4.7 million. Higher disposal revenue amounting to $6.2 million will be offset by higher transfer and haulage costs at the transfer stations, as well as higher royalty payments to the Region of York for the Keele Valley landfill site.

Transportation:

The Transportation Program reports a favorable year-to-date net variance of $11.2 million, while reporting $5.7 million in salary and benefit over-expenditures. These over-expenditures are attributable to budget misallocations within the program and between Facilities and Real Estate, Urban Planning and Licensing. Significant efforts are underway to determine the nature and extent of the relationships.

Projections for year-end are that the program will be on budget; correcting the misallocations resulting in a $7.6 million over-expenditure in salaries and benefits, as well as absorbing the $1.3 million projected shortfall in winter maintenance (as identified in the June variance report) through reduced non-salary expenditures and increases in revenue.

(3) Economic Development, Culture and Tourism:

The adjusted net budget variance of the Economic Development, Culture and Tourism is primarily comprised of the following:

Net Expenditures Over / (Under) Budget

($ Millions)

Sept. 30, 19981998 Projected

Program AreaYear-to-DateYear-End

Arts, Culture & Heritage (0.3)0.0

Economic and Tourism Development(0.6)0.2

Parks and Recreation(3.1)2.7

Other (Conservation, Special Events, Theatres

And Galleries)0.0 0.1

Total Department Expenditures(4.0)3.0

Economic and Tourism Development:

Year-to-date net under-expenditures of $0.6 million are the result of delayed implementation of program initiatives. Delays in the approval of the restructuring process are expected to impact the year-end net position with an unfavorable $0.2 million over-expenditure.

Parks and Recreation:

Year-to-date net under-expenditures of $3.1 million are primarily attributable to timing differences. By year-end it is anticipated that the program will incur a net over-expenditure of $2.7 million, of which $2.5 million relates to salaries and benefits, resulting from the late approval of the organizational structure and subsequent delayed implementation of the downsizing plan. Fifty percent of the budget reduction strategy was based on staff reductions effective July 1, 1998. While the program estimates that the staff reduction target will be reached by year-end, it also estimates a significant over-expenditure of $2.5 million for staffing costs.

Additionally, it should be noted that the program has absorbed over $0.7 million in unanticipated budget pressures during the 1998 budget year, consisting of the Parking Pilot Program deferral ($0.2 million), unrealized brochure and facility advertising revenues ($0.4 million), provision of no-charge public swimming across the City per Council directive, and the extension of the swimming season ($0.3 million).

(4) Urban Planning and Development Services:

The adjusted net budget variance of the Urban Planning and Development Services department is comprised of the following:

Net Expenditures Over / (Under) Budget

($ millions)

Sept. 30, 19981998 Projected

Program Area (excluding TTC)Year-to-DateYear-End

Toronto Licensing(1.9)(0.9)

Urban Planning and Building(6.7)(6.1)

Total Department Expenditure(8.6)(7.0)

Toronto Licensing:

Year-to-date under-expenditures of $1.9 million are mostly attributable to salaries and benefits, due to unfilled vacancies offset by an increase in establishment strength linked to accessing the Provincial icon system. Access has been granted for the first week of October 1998 and staff will be hired before year-end.

A projected year-end net under-expenditure of $0.9 million is a result of the above actions, as well as lower than budgeted costs for Police reports and mechanical inspections.

Urban Planning and Building Program:

The program reports significant net under-expenditures for September year-to-date and projected year-end of $6.7 million and $6.1 million, respectively, related to higher development levels than anticipated and the introduction of a new fee policy.

However, it should be noted that operational over-expenditures continue to occur due to the delay in the restructuring program. It is expected that staffing costs will exceed the 1998 budget allocation by approximately $1.0 million or 1.7 % of salaries and benefits.

(5) Corporate Services:

The net budget variance of the Corporate Services department is primarily comprised of the following:

Net Expenditures Over / (Under) Budget

($ millions)

Sept. 30, 19981998 Projected

Program AreaYear-to-DateYear-End

Clerk=s(0.5)0.0 Facilities and Real Estate0.53.5

Fleet and Equipment1.30.4

Information Technology1.4(0.5)

Legal (0.3)0.0

Other (Audit)0.1(0.3)

Total Department Expenditures2.53.1

Clerk=s:

Year-to-date net under-expenditures of $0.5 million are primarily due to timing differences and are expected to self-correct by year-end. Revenue shortfalls of $0.3 million related to the closure of three bingo halls are anticipated to be offset by higher than budgeted printing revenue.

Facilities and Real Estate:

For this program, significant account posting problems have been identified, including the possible misallocation of part-time salary costs of some 200 plus employees from Transportation, Water Supply and Water Pollution within the Facilities Program. The matter is presently being investigated for appropriate action.

Delays in the development of the organizational structure and implementation of the downsizing plan will contribute $3.9 million to the projected year-end over-expenditure of $3.5 million.

Fleet and Equipment:

Year-to-date over-expenditures of $1.3 million are primarily related timing differences. By year-end, this situation is expected to self-correct, leaving the program in an unfavorable $0.4 million position.

Fleet Management has incurred substantial costs on the replacement of major components of vehicles and equipment, which have extended the useful lives of these vehicles and equipment. Presently Finance is reviewing with Fleet Management the possibility of transferring these costs to the user departments.

Currently, fleet operations are being reviewed by KPMG, with many future issues being dependent upon the resultant restructuring and fleet size.

Information Technology:

Year-to-date, the program is net over-expended by $1.4 million attributable to non-salary over-expenditures of $0.8 million related to the one-time conversion costs for the former City of Toronto mainframe and for current value assessment upgrades to the tax system, and revenue shortfalls. Revenues will be collected prior to year-end; the program is projecting a net year-end under-expenditure position of $0.5 million.

Legal:

As indicated in the June variance report, the validity of revenue assumptions continues to be closely monitored. The approved budget included increased revenues from various initiatives, such as planning fees and reduced overall expenditures by over a million dollars. To-date the program has experienced a significant shortfall in planning fee income of $0.8 million, which is projected to result in a $0.5 million shortfall by year-end.

While the program continues to forecast coming in on budget as of September 30, this is due to expenditure reductions and higher than budgeted inter-departmental recoveries.

(6) Exhibition Place:

Net Expenditures Over / (Under) Budget

($ millions)

Sept. 30, 19981998 Projected

Program AreaYear-to-DateYear-End

Exhibition Place1.82.1

An unfavorable year-to-date position of $1.8 million over-expenditure primarily relates to Canadian National Exhibition (CNE) admission revenues falling below budget by approximately $3.3 million, as a result of promotions, particularly for Saturday, August 29, 1998 and the "pay-one-price", which may have served as disincentives to the public. This shortfall is primarily offset by $0.7 million from Exhibition Place operations attributable to heavy use of staff time to support trade and consumer show requirements for which costs are fully recoverable, $0.5 million in unbudgeted net revenue from the operation of the casino during the Canadian National Exhibition and $0.4 million net revenues from the National Trade Center.

For year-end, the National Trade Center and Exhibition Place are forecast to achieve favourable year-end variances of approximately $0.4 million, through expenditure control and implementation of initiatives to improve service delivery efficiency.

With the CNE event's significant revenue shortfall, efforts will be directed towards reducing the overall unfavorable position. All discretionary spending for the remainder of the year will be curtailed and CNEA management, in conjunction with the finance staff of Exhibition Place, will be reviewing all the 1998 operational data to ensure complete transaction accrual. In addition, incentives and fee structures will be thoroughly evaluated to assess the impact on 1998 and future years' income streams.

The overall year-end net projected position is to be a $2.1 million shortfall.

(7)Toronto Transit Commission (TTC):

Net Expenditures Over / (Under) Budget

($ millions)

September, 19981998 Projected

Program AreaYear-to-DateYear-End

Toronto Transit Commission (0.3)2.1

The Toronto Transit Commission=s (TTC) variance submission is for the period ended August 29, 1998.

While the year-to-date variance is slightly under budget, the projected year-end position reflects a net over-expenditure of $2.1 million almost entirely attributable to Wheel-Trans operations. Areas of shortfall in Wheel-Trans include the following:

(a)$1.4 million for Orion II fleet replacement costs;

(b)$0.3 million for additional Orion material maintenance;

(c)$0.2 million for legal fees associated with Charter of Rights and Freedom Challenge; and

(d)$0.2 million additional operating funds to maintain the unaccommodated rate at 2 to 3 percent. Year-to-date the unaccommodated rate is running at 3.4 percent.

Budgeted annual ridership for 1998 is 392 million rides, however, through August 1998, ridership is 1.7 percent below budget to-date but 2.0 percent higher when compared with a year ago. Per the TTC, the actual ridership growth has been less than budgeted due to the decline in the City=s jobs for the period of October 1997 through May 1998, extended holidays to the United States and a severe flu season.

If the current trends continue, the 1998 year-end ridership could be in the range of 386-388 million rides, with revenues projected to be $4.6 million under budget. It is projected that this revenue shortfall will be fully offset by expenditure reductions, primarily related to non-implementation of budgeted service improvements, savings in traction power and accident claims.

A graph of the budgeted and actual TTC ridership figures for the years 1996-1997, along with year-to-date actuals and projections for 1998 follows.

The following graph highlights the current year=s budgeted and year-to-date TTC passenger revenues, along with projections for the remainder of the year.

(8) Toronto Police Service:

Net Expenditures Over / (Under) Budget

($ millions)

Sept. 30, 19981998 Projected

Program AreaYear-to-DateYear-End

Toronto Police Service(0.9)0.6

The Toronto Police Service's budget was approved by City Council at $520.7 million gross and $511.2 million net. This included an expenditure reduction of $8.6 million dollars. Due to operational difficulties and insufficient lead-time, the Police Service was unable to implement all of Council=s recommended budget reductions. As a result, the Service has restructured its budget to achieve the same net Council approved funding level; $1.9 million of the expenditure reductions have been deferred and the Service has increased revenue estimates by the same amount. Based on the Council approved gross and net expenditures, the Police Service is anticipating a projected year-end gross over-expenditure of $5.9 million and a net over-expenditure of $0.6 million. This reflects a $0.5 million improvement, over the $1.1 million projected over-expenditure reported in June.

Police Services submitted the September variance report, on the basis of re-stated budget figures, accounting for the reallocation of expenditures and revenues. The reported net position is mainly attributable to:

(a)$0.7 million over-expenditure for premium pay associated with the impact of the early July Yonge Street closure for Celebrate Toronto and increased crowd activity as a result of the World Soccer games; and

(b)$0.9 million in revenue shortfalls; offset by

(c)$1.2 million in salary savings related to decreased uniform strength and gapping adjustments

The negotiated 1998 contract settlements impact the Police budget by $7.7 million. Funding to offset this increase has been approved by the Police Services Board and City Council, consisting of $3.5 million from OMERS holiday savings and $4.2 million from OMERS Type-3 Surplus.

(9) Toronto Zoo:

Net Expenditures Over / (Under) Budget

($ millions)

Sept. 30, 19981998 Projected

Program AreaYear-to-DateYear-End

Toronto Zoo0.40.8

The net expenditure of the Toronto Zoo is over budget by $0.4 million as of September 30, 1998, due to revenue shortfalls offset to some extent by expenditure reductions. The drop in attendance is mainly attributable to lower attendance of 90.1% of budgeted levels. The expected boost in attendance from the June opening of the new African Savanna did not materialize. As a result, admission and parking revenues were lower than budgeted.

For year-end, the Zoo projects a net over-expenditure of $0.8 million (including the $0.3 million impact of wage settlements); attributable to revenue shortfalls of $1.6 million offset more than half, by expenditure reductions of $0.8 million

(10) Corporate Accounts:

Capital Financing & Corporate Financing:

Although it appears as a projected net over-expenditure of $8.6 million in Capital Financing and Corporate Financing, this is on account of a $10.5 million reduction to the draw from the Transfer for the Transition Reserve Fund, offset by $1.9 million in lower debt charges due to the delay in the timing of debt issuance and lower than forecasted interest rates. The reduction is associated with the Province no longer requiring municipalities to assume costs dedicated to Supportive Housing.

An updated downloading schedule is attached as Schedule E.

Non-Program Expenditures:

A projected year-end favourable variance of $26.4 million is primarily related to projected under-spending in the Corporate Contingency account of $24.2 million and lower temporary borrowing.

Subsequent to the June 30, 1998 variance report, it was determined that funding for the Task Force on Community Access and Equity ($20.0 thousand) was provided through the Clerk's program 1998 budget. Contingency funding as reported in the June variance will not be required.

The current status of the Corporate Contingency Account is summarized as follows:

$ Thousands

Approved Contingency Provision 29,945.0

Draws approved to date (Council date):

Millennium Celebration Task Force, (5/14/98) 50.0

By-Election in Ward 1 East York (6/1/98)122.0

Parking Tags System Upgrade (7/8/98)350.0

Year 2000 Project B Office (7/31/98)1,500.0

Year 2000 Project B Systems (7/31/98)3,596.0

Accessibility Improvement Projects from

Capital Works Program (9/30/98)100.0

Total of Contingency Draws5,718.0

Balance after approved draws 24,227.0

At this time, temporary borrowing requirements are now projected to be under-budget by $6.1 million, an improvement from the June variance report. Year-to-date, borrowing costs have been contained using investments to fulfill short-term borrowing requirements. This pattern is expected to be sustained throughout the fourth quarter.

A corporate item has been included in the approved estimate for the 2 percent OMERS contribution reduction effective January 1, 1998 and amounting to $29.0 million annualized. Negative net variances related to the 2 percent OMERS reduction of $2.1 million year-to-date and $2.9 million projected year-end, are due to original estimates being based upon maximum insurable earnings for the entire approved salary budgets. In some instances, calculations based on the maximum insurable earnings may not be appropriate and significant portions of the salary budgets may be for non-permanent staff who are not eligible under the OMERS plan.

Non-Program Revenues:

A $20.5 million shortfall is currently projected in the corporate revenues, consisting of:

(a)$13.7 million related to lower interest and investment earnings, associated with the delay in final tax bill issuance adversely impacting funds available for investment;

(b)$15.2 million from supplementary taxes, due to the move to Current Value Assessment (CVA) and delays in the processing of supplementary taxes by the assessment office;

(c)$6.9 million reduction in tax penalties due to the two and half month delay in the second billing and changes to the assessment; and

(d)$2.3 million revenue shortfall in Parking Tag Operations relates primarily reduced parking fine revenue based on a lower expected collection rate of 78% (budget level of 80%); offset by

(e)$10.0 million increase to payments in lieu of taxes related to policy changes; and

(f)$7.7 million increase in revenue associated with the 1997 year-end surplus finalization by the former municipalities.

Staff are currently in active discussions with Ministry of Finance officials to recoup the interest and investment earnings shortfall, as well as tax penalties.

Non-Levy Operations:

Water and Water Pollution Control:

On a year-to-date basis, net expenditures for this program are $7.9 million under budget primarily related to timing issues.

For year-end, the program expects to come in on budget, with a contribution to the reserve of $6.1 million. This amount reflects the impact of a projected volume increase of 0.7%, and a 12.6% volume increase for the Region of York. Additionally there is a $1.0 million revenue increase associated with the reassessment of the Industrial Waste Surcharge Agreements from estimated to actual discharge levels.

Toronto Harbour Commission and Toronto Parking Authority

Operating variance submissions for the period ended September 30, 1998, were not received from the Toronto Harbour Commission and the Toronto Parking Authority, therefore their year-end financial position is unknown at this time. For the purposes of this report, it was assumed that they will be on-budget.

OMERS Holiday Savings

The full OMERS contribution holiday effective August 1, 1998 will provide an estimated additional $20.0 million in savings, after accounting for $3.5 million to offset the Police Services salary settlement. The $20.0 million in savings will flow into the Employee Benefit Reserve.

Other

1998 Approved Estimate Adjustments

Since the June 30, 1998 operating variance report, more organizational structures have been defined and budget accounts re-aligned. The re-alignments of the approved budget estimates result in a zero net impact to the corporation. The following budget adjustments are recommended for approval and have been incorporated into the September 30, 1998 operating variance report.

ApprovedRevised

1998 NetAdjustment1998 Net

Program: EstimateEstimate

Arts, Culture and Heritage 7,886.7( 599.7) 7,287.0

Parks & Recreation142,907.8( 1,229.1) 141,678.7

Special Events 0.0 2,134.6 2,134.6

Theatres & Galleries 0.0 950.6 950.6

Clerk's 28,664.3( 1,839.8) 26,824.5

Facilities & Real Estate 51,068.9( 750.0) 50,318.9

Legal 16,313.6( 55.9) 16,257.7

Non-Program Expenditures:

Consolidated Grants 45,768.0( 1,869.4) 43,898.6

Capital Financing / Corporate Financing175,721.2( 2,847.0)172,874.2

Liabilities - Employee Related 43,830.0 6,964.8 50,794.8

Liabilities - Current and Future 17,790.0( 5,990.0) 11,800.0

Other Corporate Expenditures 86,899.8( 974.8) 85,925.0

Less Non-Program Revenue:

Other Corporate Revenue 46,200.5( 2,982.7) 43,217.8

Other Adjustments 3,123.0( 3,123.0) 0.0

Net Total Impact 0.0

Adjustments for Arts, Culture and Heritage, Parks and Recreation, Special Events and Theatres and Galleries primarily reflect the dis-entanglement of these budgets. In the Clerk's Program, items have been adjusted for the Special Events Program and staff expense transfer from Legal. In Facilities and Real Estate, funding changes relate to capital financing of hydrants.

On the corporate side, Consolidated Grants was inappropriately charged with the funding of drain claim grants, which belonged in Other Corporate Revenue. Changes to the Capital Financing primarily relate to the capital financing requirements for Etobicoke. In both Liabilities, Employee Related and Current/Future, changes were made to reflect the re-classification of items within non-program expenditures. Changes to Other Corporate Revenue, reflect various offsetting adjustments, including entries for water conservation, drain claim grants, and re-alignment of Other Adjustments.

Conclusion:

At this time, a corporate year-end surplus of $25.9 million is projected, primarily resulting from operational program under-expenditures of $28.5 million and corporate accounts shortfall of $2.6 million. The City agencies, boards and commissions of the Toronto Zoo, Exhibition Place, TTC and Police, are reporting to be $5.5 million overspent by year-end.

Program factors noted at this time to monitor and report to committee as necessary with any significant changes from projected levels are: required funding for the municipal share of contribution toward the provincial adjustment of Ontario Works funding, General Welfare Assistance (GWA) caseload volumes, waste tonnage and revenues, winter maintenance expenditures for the seasonal months, Zoo attendance and revenue levels, materialization of development fee revenue levels, TTC ridership levels, and monitoring activity recoveries and revenue levels at the Police Services.

Contact Name and Telephone Number:

Keshwer Patel, Manager, Budget Operations and Support

Telephone: 392-8217; Fax: 392-3649; E-mail: kpatel@mta1.metrodesk.metrotor.on.ca

Shekhar Prasad, Director of BudgetsTel: 392-8095; Fax: 392-3649

W.A. Liczyk

Chief Financial Officer and Treasurer

Attachments

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