August 10, 1998

STRIKING COMMITTEE:

City Council on July 29, 30 and 31, 1998, in adopting, as amended, Clause No.1 contained in Joint Report No.1 of The Corporate Services Committee and The Budget Committee, headed "City of Toronto Year 2000 Project", directed, inter alia, that a Member of Council, recommended by the Striking Committee, be appointed as a Lead for the Year 2000 Project.

for City Clerk

J. A. Abrams/csb

Encl.

Clause sent to:Strategic Policies and Priorities Committee

Striking Committee

Mayor, City of Toronto

Chief Administrative Officer

Commissioner of Corporate Services

Chief Financial Officer and Treasurer

City Solicitor

CITY CLERK

Clause embodied in Joint Report No. 1 of the Corporate Services Committee and Budget Committee, as adopted by the Council of the City of Toronto at its meeting held on July 29, 30 and 31, 1998.

1

City of Toronto Year 2000 Project

(City Council on July 29, 30and 31, 1998, amended this Clause by adding thereto the following:

"It is further recommended that the joint report dated July 22, 1998, from the Chief Administrative Officer and the Chief Financial Officer and Treasurer, embodying the following recommendations, be adopted:

'It is recommended that:

(1)the Chief Administrative Officer be authorized to spend up to $1,500,000.00 in 1998 to set-up, staff and acquire tools for the Year 2000 Project Office;

(2)the Chief Administrative Officer be authorized to spend up to $3,596,000.00 to complete the inventory of the City's critical systems and begin their assessment and remedy;

(3)the total initial funding of $5,096,000.00 in recommendation Nos. (1) and (2) above be provided from the Corporate Contingency Account;

(4)the Chief Administrative Officer be authorized to enter into the necessary agreements in support of the above;

(5)the Chief Administrative Officer report on the expenditures to date of the $5,096,000.00 to the Strategic Policies and Priorities Committee at its first meeting in November; and

(6)the Chief Administrative Officer report to the Strategic Policies and Priorities Committee at its first meeting in November on the work plan, including cost estimates, to achieve the following milestones which will ensure business continuity through the Year 2000:

The Corporate Services Committee and the Budget Committee jointly recommend:

(1)the adoption of the report (June 8, 1998) from the Commissioner of Corporate Services, with the exception of Recommendations Nos. (9) and (10); and, subject to:

(a)amending Recommendation No. (2) by:

(i)adding after the words "Chief Administrative Officer", the words "and the Mayor"; and

(ii)deleting therefrom the following words "after delivery of existing services", so that Recommendation No. (2) now read as follows:

"(2)the Chief Administrative Officer and the Mayor be requested to declare the Year 2000 issue a top priority of the City, including the suspension of activities deemed non-critical, in order to free up resources for deployment on Year 2000 initiatives, if and when necessary";"

(b)amending Recommendation No. (3) by adding thereto the following:

"and that the Chief Administrative Officer and Chief Financial Officer and Treasurer be requested to:

(i)develop an inventory list of priority projects, and a formal workplan with a timetable of action and funding needed to implement this plan, as amended by the foregoing recommendation, and provide a status report thereon to the Strategic Policies and Priorities Committee on a monthly basis, until such time as the problem has been resolved; and that the approved inventory list be made available and updated on a regular basis and expanded to include:

(a)ballpark cost;

(b)whether it has been researched; and

(c)what the estimated completion date is;

(ii)include in the workplan, projects submitted by Agencies, Boards and Commissions (including the co-ordination of the Police and the Toronto Transit Commission year 2000 action plan); and

(iii)report, through the Strategic Policies and Priorities Committee on a source of funds for the Year 2000 Project, so that Recommendation No. (3) now read as follows:

"(3)the creation of the Year 2000 Office be approved to co-ordinate the inventory, assessment, remedy, testing and compliance of critical business, operational and IT systems, agreements and partnerships for the City of Toronto Departments, Agencies, Boards and Commissions; and that the Chief Administrative Officer and Chief Financial Officer and Treasurer be requested to:

(i)develop an inventory list of priority projects and a formal workplan with a timetable of action and funding needed to implement this plan, as amended by the foregoing recommendation, and provide a status report thereon to the Strategic Policies and Priorities Committee on a monthly basis until such time as the problem has been resolved; and that the approved inventory list be made available and updated on a regular basis and expanded to include:

(a)ballpark cost;

(b)whether it has been researched; and

(c)what the estimated completion date is;

(ii)include in the workplan, projects submitted by Agencies, Boards and Commissions (including the co-ordination of the Police and the Toronto Transit Commission year2000 action plan); and

(iii)report, through the Strategic Policies and Priorities Committee on a source of funds for the Year 2000 Project;";

(c)amending Recommendation No. (7) by adding thereto the following words, "such report to be submitted to the Strategic Policies and Priorities Committee in September, 1998, so that Recommendation No. (7) now read as follows:

"(7)The City Solicitor with the assistance of the City Treasurer bring forward a report, in camera, on the possible liabilities of the City, Council and the executive management resulting from the Year2000 issue and the insurance protection available to cover these liabilities, such report to be submitted to the Strategic Policies and Priorities Committee in September, 1998;";

(2)that a Member of Council, recommended by the Striking Committee, be appointed as a Lead for the Year 2000 Project; and

(3)that all matters pertaining to the Year 2000 Project be reported to Council through the Strategic Policies and Priorities Committee.

The Corporate Services Committee and the Budget Committee jointly report, for the information of Council, having:

(1)requested the Chief Administrative Officer and the Chief Financial Officer and Treasurer to report to Council for its meeting scheduled to be held on July 29, 1998:

(a)on the workplan and estimated cost respecting Recommendation No. (9) embodied in the report (June 8, 1998) from the Commissioner of Corporate Services;

(b)on the use of the $3 million referred to in the following motion (b) by Councillor David Shiner; and

(c)respecting a workplan for the months of August, September and October, 1998; such report to include a ballpark figure regarding the amount of funds that are required for these three months; and

(2)referred Recommendations Nos. (9) and (10), together with the following motions directly to Council for consideration with the aforementioned report from the Chief Administrative Officer and Chief Financial Officer:

(a)Moved by Councillor Olivia Chow:

"That Recommendation No. (9) be amended by striking out all of the words after the words "amount of $5 million ".

(b)Moved by Councillor David Shiner:

"(1)That Council support in principle Recommendation No.(9) respecting the $80 million required for the Year 2000 Project; and that such funding be raised by debenturing; and

(2)adding to Recommendation No. (9) the following words "$2million of which be allocated for Year 2000 office operation and $3 million for Year 2000 Projects".

(c)Moved by Councillor Blake F. Kinahan:

"That Recommendation No. (9) be amended by adding after the words "$5 million ", the words, "and that Council authorize an amount of $2 million for 1998; and that such funds be provided from the Corporate Contingency account."

(d)Moved by Councillor Olivia Chow:

"That Recommendation No. (10) be amended by adding thereto the following words, "within the $5 million dollar budget approved."

The Corporate Services Committee and the Budget Committee jointly submits the following report (June 8, 1998) from the Commissioner of Corporate Services:

Purpose:

To advise Council on Year 2000 issues and the potential impacts on the City. This report represents the recommended strategy for addressing the City's Year 2000 issues and seeks initial funding for remedy.

Funding Sources, Financial Implications and Impact Statement:

This report recommends that the City Treasurer bring forward a report on options for funding the initial request of $85 million for the Year 2000 program.

The potential impacts of Year 2000 failures in the City's building, equipment and information technology systems include:

(a)loss of life or personal injury to clients and/or staff due to accidents or diseases;

(b)loss of revenue due to an inability to collect money and/or undercharging clients;

(c)impaired ability to deliver services to clients;

(d)increased costs due to reinstatement of manual processes and/or increased re-work;

(e)lawsuits against the City by clients and/or staff who suffered negative impacts; and

(f)loss of confidence in the City on the part of clients, staff and/or other partners.

Recommendations:

In order to continue and intensify City's efforts to become Year 2000 ready, it is recommended that:

(1)the general strategy outlined in this report be approved;

(2)the Chief Administrative Officer (CAO) be requested to declare the Year 2000 issue a top priority of the City after delivery of existing services, including the suspension of activities deemed non-critical, in order to free up resources for deployment on Year 2000 initiatives, if and when necessary;

(3)the creation of the Year 2000 Office be approved to co-ordinate the inventory, assessment, remedy, testing and compliance of critical business, operational and IT systems, agreements and partnerships for the City of Toronto Departments, Agencies, Boards and Commissions;

(4)the Year 2000 Office be directed to implement the necessary financial controls for managing this project;

(5)the Year 2000 office be authorised to establish a communications strategy aimed at raising the level of awareness of the Year 2000 issue and what the City can do to address it;

(6)the goal of City-wide compliance with the International Standards Organization standard ISO8601 for the formatting of dates and times in all electronic and printed material by the end of the year 2003 be approved;

(7)the City Solicitor, with the assistance of the City Treasurer, bring forward a report in-camera on the possible liabilities of the City, Council and the executive management resulting from the Year 2000 issue and the insurance protection available to cover these liabilities;

(8)the City Treasurer establish a policy that the purchase and acquisition of all goods and services by the City of Toronto and its Agencies, Boards and Commissions be contingent on the supplier demonstrating that both the supplier and its products are Year 2000 compliant;

(9)the City Treasurer bring forward, to the Budget Committee, a report on financial options for funding the Year 2000 program, including initial funding for the establishment and ongoing operation of the Year 2000 office over the next 2 years in the amount of $5 million , and for establishing an initial reserve of $80 million to be administered jointly by Finance and the Year 2000 Office to begin addressing the critical Year 2000 issues as identified jointly by the business areas and the Year 2000 Office recognizing that significant additional funds will be required once detailed plans are created at the departmental level;

(10)the CAO be granted one-time extraordinary authority to act on behalf of Council to acquire the necessary goods and services to remedy the Year 2000 problem given the critical timeframe with reporting back to the Corporate Services Committee at the earliest possible opportunity;

(11)the accountability for Year 2000 compliance rest with the CAO, Commissioners, and heads of Agencies, Boards and Commissions for their respective program mandate;

(12)the Year 2000 Office be directed to work with the Commissioner of Works and Emergency Services Department to develop and test an emergency preparedness plan specifically for Year 2000 failures; and

(13)the Corporate Services Committee forward this report to the Budget Committee for review and approval of the financial requirements to address the Year 2000 issue.

Council Reference/Background/History:

In a memorandum dated February 24, 1998, from the Commissioner of Corporate Services, Department Heads were advised of a committee that had been established to amalgamate the Year2000 programs of the former municipalities into a single program for the new city. The new program was to build on the work already done while at the same time taking into account the changes to the City's technology portfolio resulting from amalgamation activities.

The Committee was directed by the Commissioner to produce three deliverables:

(a)a consolidated inventory of all affected systems which reflects amalgamation decisions;

(b)a summary of the efforts to date and an assessment of the City's overall degree of compliance and state of readiness to deal with the Year 2000 issue; and

(c)an integrated action plan for any outstanding tasks identified by the assessment including a budget submission if required.

The scope of the Year 2000 Committee's mandate covered all aspects of the Year 2000 issue. The Committee's mandate covered five distinct problems, which fall under the Year 2000 umbrella:

(a)input, output, storage and processing of dates beyond December 31, 1999;

(b)assignment of days of the week beyond December 31, 1999;

(c)recognition of the year 2000 as a leap year;

(d)use of specific dates such as September 9, 1999 as non-date markers;

(e)use of binary date representations with domains that end in the near future such as the Global Positioning System date rollover on August 22, 1999.

The mandate of the Committee covered all systems which might be affected by any of the above problems. Affected systems can be grouped into five distinct categories:

(a)operational (non-IT or embedded) systems such as elevators, time clocks, traffic lights, telephone exchanges, personal organizers, etc.;

(b)business systems such as financial information systems, permit systems, tracking systems, pre-printed forms, etc.;

(c)information technology (IT) systems such as computers, software, telecommunications, etc.;

(d)agreements such as insurance policies, purchase contracts, licenses, maintenance contracts, data provisioning arrangements, etc.; and

(e)external organizations whose Year 2000 failures would affect the operations of the city such as suppliers, businesses, property owners, etc.

For examples of the above systems see Appendix 1 - Impacted System.

The Committee's mandate included the following organizations:

(a)the six departments of the City of Toronto;

(b)all extra-departmental units of the City of Toronto; and

(c)Agencies, Boards and Commissions of the City of Toronto.

A discussion of the Year 2000 issue always begs an answer to the question of how it happened. As in the case of almost all crises, there is no one cause of the Year 2000 problem. The seed of the crisis began when programmers in the 1960's and 1970's dropped the century from year data to save on storage space and speed up computations. Even today in spite of much lower costs for storage space and CPU cycles there is still pressure from users for doing more with less. Users always want programs to run faster. The problems persisted through the 1980's into the 1990's as a result of the introduction of PC's and a new wave of trying to squeeze the most out of cheaper hardware. Even when storage and speed were not an issue programmers continued to use two digit years. Programmers tend to reuse libraries of utility routines including date processing routines. Updating these routines to use four digit years is a tedious maintenance task that kept being put off. Programmers never expected their software to still be in use ten or 15 years after they had written it. Budget pressures through several recent recessions kept organizations from investing in the refurbishment of their information and process control assets. The extent of the problem clearly shows that its cause is systemic rather than the result of negligence or malice.

The insidiousness of these problems can best be conveyed by describing in this report what it takes for an asset to be considered Year 2000 compliant. Any asset, service, or system, whether computerized or not, must be Year 2000 compliant. This is critical to the delivery of services by the City of Toronto to its citizens. The major aim of insisting on compliance to standards is to reduce risks to the health and safety of citizens, and minimize the liabilities in case of year 2000 related failures by either the City, or other entities that it exchanges information with. Compliance standards should encompass all computerised systems, and any entity or equipment using microchips or an electronic/mechanical time clock.

Year 2000 Compliance:

Year 2000 conformity means that neither performance nor functionality is affected by dates prior to, during, and after the year 2000. Specifically, to be compliant a system, process, device, or piece of equipment, etc. must:

(1)function without error or interruption related to date data, specifically including errors or interruptions from functions which may involve date data from more than one century;

(2)correctly process date information before and after midnight, December 31, 1999, including but not limited to: accepting date input, providing date output and performing calculations, comparisons on dates or portions of dates, and sorting date data. Date interpretation and manipulations must be correct for all valid date values within the application;

(3)function accurately and without interruption before, during, and after January 01, 2000, without any change in operations associated with the advent of the new century;

(4)respond to two-digit year date input in a way that resolves the ambiguity in a defined and predetermined manner, through the use of non-ambiguous algorithms or inference rules. Interfacing software must make the same century assumptions when processing two-digit years;

(5)correctly handle date field containing non-date information and correctly handle date information in a non-date field;

(6)correctly process any date with a year specified as "99" or "00", regardless of other subjective meanings attached to these values within a program. Special concern must be directed at September 09, 1999, as a date (9999);

(7)not use particular date values as having special meanings; e.g., "99" to signify "no end value" or "end of file", or "00" to denote "not applicable" or "end of file";

(8)process year 2000 (February 29, 2000) as a leap year;

(9)recognize that February 29, 2000, is a "real" date, so that on that and subsequent days, including Saturdays and Sundays, correct date and time information will be available to ensure proper functioning of the device or system;

(10)recognize that there are 366 days in 2000 and ensure that all calculations, especially year-end ones, function correctly and produce accurate results;

(11)undertake correct week-of-the-year calculations. The 11^th week of the year 2000 is March13 through 19, not March 14 through 20;

(12)undertake correct day-of-the-week calculations. January 1, 2000, must appear as a Saturday, and all subsequent dates must assigned to the correct day of the week;

(13)not cause any computerised or non-computerised function or asset to abort, terminate, switch off/on at other than at the usual times, provide inappropriate information, or otherwise malfunction;

(14)dates on automated or pre-printed forms, or for "screen display only" should not automatically assume the century to be 19 in any date field. This generally results from an internal hard-coded 19 for the century; and

(15)new potential acquisitions should be carefully evaluated as to the method of date compliance they utilize. It is preferred that all dates be expressed explicitly in four (1999) or eight (1999/12/31) digit format.

For assets having embedded electronic clocks/timing devices or microchips, that are not necessarily IT assets (e.g., timers for lighting/heating, fire and burglar alarms, security and surveillance systems, sprinklers and halon release systems, maintenance and navigational microchips in vehicles, metre systems), the following compliance standards should be agreed to with third parties:

(16)that the device will continue to function subsequent to its annual maintenance in 1999, and will not be affected by manual or automatic setting of the next maintenance date to 2000 or00;

(17)that if the device is operating when its date/time setting moves on from 23:59:59 on December 31, 1999, it will function correctly after the clock change, i.e., that it will continue to function, no alarm conditions will be triggered, and no interruption or disruption will result;

(18)that the clock change will not result in the loss or corruption of data needed for functioning subsequently;

(19)that the device will function correctly when first:

(a)switched on;

(b)switched off; and

(c)maintained in the Year 2000.

(20)that the device will recognise that February 29, 2000 is a "rea"" date, so that on that and subsequent days, including Saturdays and Sundays, correct date and time information will be available to ensure proper functioning of the device;

(21)that the device will not switch on or off at an inappropriate time, as a consequence of a Year2000 problem. It will continue to operate on its existing activity cycle; and

(22)that no replacement part or component, provided as part of any service or maintenance agreement for any equipment, systems, asset, device, etc., be non-2000 compliant.

Potential Impacts:

No one can say for sure what the impacts of the Year 2000 issues are going to be. This section will discuss potential impacts. The Committee was unable to fully determine what the probabilities of these impacts are for the City. The examples given below will cover the potential impacts of Year2000 failures in the City's computerised systems as well as the potential impacts on the City of Year 2000 failures in the systems of external organizations.

Loss of life or personal injury to clients and/or staff:

(i)failure in a lifting platform's embedded control might suddenly cause the platform to drop resulting in an injury to the operator;

(ii)a failure in the road traffic system might result in a car accident causing death or injury;

(iii)failure of an embedded controller in a water treatment plant may result in deaths or illness due to a lack of drinkable water;

(iv)loss of access to correct immunization records could result in vaccinations being missed resulting in disease;

(v)an extended power failure could lead to an increase in hypothermia due to a lack of heating; and

(vi)failure of an embedded system in a manufacturing or nuclear power generating plant could cause a toxic spill resulting in illness or death.

Loss of revenue:

(i)a revenue system failure might result in an inability to collect money;

(ii)a Year 2000 defect may result in issuing bills undercharging clients;

(iii)loss of access to our deposits due to one or more bank failures;

(iv)loss of business taxes due to Year 2000 directly or indirectly induced business failures; and

(v)decreased use of chargeable services due to a local, regional, national or global recession.

Impaired ability to deliver services to clients:

(i)recreation centres closed due to failures in the HVAC system;

(ii)shortage of critical supplies such as needles due to supplier failure;

(iii)closed airport results in staff being unable to return from their Christmas vacations; and

(iv)snow plows inoperable due to failure in embedded microprocessor.

Increased operating costs:

(i)due to reinstatement of manual processes;

(ii)staff having to handle an increase in client complaints due to errors in date information;

(iii)greater demand for emergency services due to increase in incidents;

(iv)greater demand for health services due to increased pollution and poverty; and

(v)greater demand for social services due to increased leaves for stress.

Lawsuits against the City by clients and/or staff who suffered negative impacts:

(i)death and personal injury lawsuits;

(ii)missed payments such as welfare; and

(iii)inconvenience caused by stuck elevators.

Loss of confidence in the City on the part of clients, staff and/or other partners:

(i)providing and/or acting on incorrect information;

(ii)inability to provide information or a service; and

(iii)we are not adequately prepared for an increase in emergencies.

Risk Factors:

According to Joe Boivin, Executive Director of the Global Millennium Foundation, there are ten danger signs which indicate that an organization is at high risk of suffering a significant negative impact as a result of the Year 2000 issue. Nine of the ten factors are present in the City, which places the City in a high-risk category.

An organization is at highest risk if it fits into one or more of the following categories:

(1)argest employers;

(2)multinational;

(3)recent merger/acquisitions; and

(4)governments.

The City falls into all but the second category. Mr. Boivin also says that an organization is at high risk if any of the following are true.

(5)Cannot produce cost projections:

None of the former municipalities had sufficiently detailed and accurate asset information systems that would allow them to forecast the cost of a Year 2000 program. The amalgamation into a single city and the downloading of services from the Province has added uncertainty to the future of systems, buildings and organizations. The rationalization of systems is progressing slowly because of the need to appoint senior managers with the authority to make the decisions and the complexity of the issues involved. Even in a stable organization the lack of a common understanding of the Year 2000 issue and standard methods for arriving at estimates make it hard to produce reliable cost projections. Many analysts are saying that the true cost will not be apparent until it is all over.

Most of our knowledge of the potential costs of the Year 2000 Program comes from the experience of others. The Committee has been unable to find any example of an organization similar to the City in size and diversity of services, which expects to pay less than $50 million. The cost of resolving the Year 2000 issue in the Financial, HR and Payroll systems alone has been variously estimated at up to $30 million and these are only three of the hundreds of systems which must be remedied.

The Public Health Division is the furthest ahead in their Year 2000 planning. They have identified $10 million worth of Year 2000 remedial work. Over and above the cost to fix the problems are any costs the City might incur as a result of defects are missed and Year 2000 failures in external organizations.

(6)No program office:

All of the experts on the subject and any of the organizations, which appear to be successfully addressing the Year 2000 issue, have implemented a program office. A key recommendation of this report is the authorization to establish a Year 2000 Office for the City of Toronto as outlined further in this report. It is anticipated that a significant number of employees and contractors will need to be dedicated to finding and fixing Year 2000 defects.

(7)No status tracking/reporting:

The size of the Year 2000 program and the seriousness of the potential consequences dictate hands-on management at the executive level. The Year 2000 Office will respond to directions from the Audit and Corporate Services Committees, and will report project updates on a monthly basis to the CAO and Senior Management Team.

(8)Lack of executive support:

The CAO and Commissioners are fully aware of the seriousness of the Year 2000 issues, but senior management has been preoccupied with the amalgamation and the day-to-day operations of the City. This report makes several recommendations to address the issue of executive support. These include making the Year 2000 problem a top priority of the City, the establishment of the Year 2000 Office, the creation of a communication strategy for raising awareness in the business areas, and the accountability of the Commissioners and Heads of the agencies, boards and commissions for Year 2000 compliance.

(9)Less than top priority:

This report recommends making the Year 2000 project a top priority of the City. Time does not permit procrastination on this issue. The deadline is immovable.

(10)No accountability defined:

As the Year 2000 problem is a business problem, this report recommends that accountability for implementing a suitable remedy to the problem be the responsibility of the CAO, Commissioners and heads of the Agencies, Boards and Commissions for their specific program mandate. The Year 2000 Office will provide support, advice and co-ordination to these efforts, including the acquisition of experts.

Year 2000 Program Strategy:

The strategy consists of creating an inventory of all vulnerable systems and assigning each a priority based on the probability and impact of a Year 2000 failure. Appendix 2 provides more detail on the Year 2000 Program strategy. The priorities will be acted upon as follow:

(1)critical systems which must be fixed in time regardless of the cost;

(2)important systems which will be fixed as time and resources permit;

(3)systems which will be fixed only as resources become available; and

(4)systems which require no action due to a nil probability and/or nil impact.

Critical systems include those which have health and safety impacts or a large probability of failure resulting in legal and/or large financial impacts.

A list of systems inventoried by the Year 2000 Committee as of May 22, 1998, and their priorization, identified as Appendix 4, is on file with the City Clerk's Office.

Year 2000 Survey:

A survey was issued to all business areas to collect information with which to assess the City's Year2000 readiness, estimate the cost of remedial work and prepare an action plan. The survey results identified as Appendix 3 are on file with the City Clerk's Office.

There is not yet sufficient information available upon which to reasonably estimate the City's Year2000 exposure. However, as of May 22, 1998, the Year 2000 survey currently underway in the City has identified:

(a)thirty-one systems with health and safety impacts;

(ii)fifty-one systems with legal impacts; and

(iii)twenty-eight systems with financial impacts greater than $1M.

The survey also indicates a total of 227 systems with at least some chance of failing due to a Year2000 defect. If we assume that the City, like many other organizations, has 4 times as many operational systems as it does business and IT systems, then, based on the inventory collected last summer, the City has 1500 times 5 or 7500 systems. If, as indicated by the current survey, 10percent of these systems has a potential financial impact in excess of $1 million, then the City's financial exposure could be in excess of $750 million. This estimate does not include the cost of possible lawsuits against the City as a result of deaths and personal injuries. Nor does it include the costs of collateral damage caused by Year 2000 failures in external organizations.

Issues:

Communication

A communication strategy will be one of the first priorities of the Year 2000 Office to raise the awareness of year 2000 issues.

This strategy will focus upon councillors, senior management, middle management and staff of the City. A variety of communication vehicles such as presentations by consultants, videos, and electronic bulletin boards will be utilised to reach the broad audience.

As this is a business problem with a fixed deadline that must be solved by the business leaders working with the support and advice of the Year 2000 office, it is essential that awareness be raised at all levels of the organization immediately.

Corporate Management:

A number of identified issues fall into the area of corporate management, which deals with decisions that are in the best interests of the administration of the City including all Agencies, Boards, and Commissions. These issues will be dealt with by the Senior Management Team or delegated to the Year 2000 Project Director.

There are a large number of systems in the City that provide essentially the same function. These range from public health to administrative systems such as payroll and finance. Assuming that none or few of these systems are Year 2000 compliant, decisions will be made as to which system will be assigned resources to bring it to a level of Year 2000 readiness. Given that most of the existing systems were designed for a specific business requirement of a city or business unit, a detailed analysis will be completed to determine if any existing system meets the business needs of the new City.

The survey asked respondents to assess the risk to their business or the public as a result of a system failure or lack of service due to Year 2000. The majority of respondents did not specifically address this issue or replied that they did not know. This combined with the small number of surveys returned creates a large information gap in trying to assess the city's ability to provide services in the year 2000 and beyond. Information remains to be gathered on how or who would deal with leased versus owned property issues, HVAC systems, card access systems or other embedded technology issues.

The Year 2000 Office proposes to undertake certain enterprise-wide initiatives which would include:

(a)information and technology infrastructure which includes the network, server platforms (including the mainframe) and desktops;

(b)facilities management which includes items such as HVAC (Heating, Ventilation and Air Conditioning), elevators and security access systems; and

(c)fleet which includes fire engines, ambulances and other emergency vehicles.

The Operating Departments, Agencies, Boards and Commissions will be expected to work with the Year 2000 office to remedy Year 2000 issues relating to Business and Operational systems within their program mandate. The responsibilities of the Year 2000 office include:

(a)develop policies to govern the City's relationship with business partners;

(b)develop a communication strategy for responding to enquiries from the public, businesses and other levels of government;

(c)prioritization of systems;

(d)provide advice on remedy strategies. This could include replacement or repair;

(e)jointly develop contingency plans for systems which cannot be remedied given the time constraints;

(f)develop testing strategies to confirm compliance; and

(g)work with business partners to mitigate the risk to the City which could result from items such as system interfaces, shared data, contracts and agreements.

External Organizations:

There are several issues related to external organizations. In order to better understand these issues we have grouped external organizations into three categories: other levels of government, suppliers and the community. The following paragraphs cover the issues for each of these categories.

Other Levels of Government:

Industry Canada has created a task force called SOS 2000. The task force has made several recommendations which impact the City's Year 2000 program. The first is that the City make grants, loans and other financial assistance to external organizations dependent on that organization having a formal Year 2000 program in place. The second recommendation of the task force which impacts the City is a requirement to report Year 2000 readiness to the Province who would in turn report to the task force. The City is not in a position at this time to comply with any substantive reporting requirements. The Province is working on a framework for addressing the Year 2000 issue with the municipalities. We have not received any indication of the content of that framework. The City will take a proactive approach on this issue and contact the Province at a senior level so as to influence the structure and content of the framework being developed by the Province.

Community:

The category of external organizations that we have identified as the community refers to everyone who might have an impact on the City should they suffer some sort of Year 2000 failure. Examples of impacts were discussed in the potential impacts section above. The issue here is that the City is not prepared for the kinds of worst case scenarios that some analysts are describing. The City has an obligation to safeguard its citizens from harm. The question is how much do we spend on preventing and getting ready for these worst case scenarios. The report recommends that Council authorizes the Year 2000 office to work with the Commissioner of Works & Emergency Services Department to develop and test an emergency preparedness plan specifically for Year 2000 failures.

External Suppliers:

There are three issues related to suppliers. The first has to do with determining a supplier's importance to the conduct of the City's business. We have in excess of 13,000 suppliers. The line departments must identify which of those suppliers are critical to the delivery of their services. The departments will submit a list of their critical suppliers to the Year 2000 Office. The second issue relates to getting the required information from suppliers on the Year 2000 compliance of their products and their readiness to face the Year 2000 (i.e., their viability). Many of them consider the information to be too sensitive to share with us or are concerned that the City might use it against them in possible future litigation. With the assistance of Legal Services, a letter has been drafted to suppliers which informs them that the City will not use the information they provide for litigation purposes nor will we disclose it to anyone. The third issue related to suppliers is the lack of contingency plans should critical suppliers be unable to deliver their products and/or services. An example of this is the City's lack of a contingency plan should Ontario Hydro be unable to provide electricity for an extended period of time.

Finance:

Funding is one of the critical success factors for the project in solving the Year 2000 issue. The cost to solve the Year 2000 problem was estimated over $600 billion worldwide and the Provincial Government of Ontario has reserves over $400 million for this purpose.

The City of Toronto, as a result of the amalgamation, could not start the Year 2000 project until February 1998. The late start makes the estimate of funding required by the project difficult. The cost estimate for the Year 2000 project should be based either on the number of lines of coding to be fixed or application systems to be replaced. Currently, both figures are not available. Therefore, the cost to fix the Year 2000 problem for the City is still unknown and no departments have funds budgeted for the solution of the Year 2000 problem.

The establishment and ongoing operation of the Year 2000 Office is estimated at $5 million for the remainder of 1998 and 1999. This will cover salaries, external consulting services, communications, tools and general office expenses for the project.

The Year 2000 office is requesting initial funding of $80 million over two years for beginning to remedy critical Year 2000 issues. This funding request covers the following areas:

Technology Infrastructure:

Year 2000 compliant equipment has only been available on the market within the last 18 months. As a result the majority of the equipment owned by the City is non-compliant. The $52 million for infrastructure is broken down into $2 million for networks, $10 million for mainframe, $10 million for other server platforms and $30 million for desktops. Leasing will be utilised as a method of reducing the cash flow impact on the City.

Facilities Management:

As the majority of our facilities have HVAC systems and elevators, we recognize that corrective action will be required. Because information regarding the readiness of leased vs. owned facilities is still unknown, for budgetary purposes we have recommend a preliminary allocation of $5 million.

Fleet:

The Year 2000 project will focus on emergency service vehicles to ensure their availability. As the information on their readiness is not available we recommend a preliminary allocation of $5 million.

Business Applications and Operation Systems:

Critical departmental applications and operational systems such as Traffic Signals, Water Treatment plants, Waste Water Treatment Plants, and the Hazardous Material Plants will require significant upgrading for compliance. The assessment of these systems is still ongoing. The initial request of $18million will be used to begin remedial action on the critical systems identified to date. When detailed departmental plans have been developed, a request for additional funding will be forwarded for approval.

The City will achieve additional benefits from the Year 2000 system replacements or upgrades. These will include accelerated technology consolidation and rationalization and the ability to implement strategic asset management while strengthening and rebuilding the City's infrastructure.

Human Resources:

Staff with business-specific knowledge and skills are rare. As the year 2000 draws closer, the demand on these staff will get higher and the cost to maintain them will rise as envisaged by many Year 2000 analysts and experts. It is therefore recommended that measures be implemented to keep as many as possible of the existing staff in the Information Technology division of the previous seven municipalities who are knowledgeable and experienced with various suppliers the City has.

Legal:

This is an initial outline of the legal issues relating to Year 2000 Compliance. It is a general survey and is not intended to be exhaustive.

Existing Contracts:

A full legal audit will be performed on all agreements for computer and other technological, date-dependant deliverables, including related or collateral support and maintenance services. (The audit should include an examination of the suppliers with whom the City's suppliers have an interface or other relationship, for if those secondary suppliers are not Year 2000 Compliant the City's suppliers may not been able to continue providing deliverables to the City, even though they themselves are compliant.) Priority should be given to those agreements that are critical to the delivery of essential services by or to the City.

The focus of the contract review will be the representations and warranties (express and implied, statutory or otherwise), disclaimers, exclusions and limitations of damages and other liabilities, limitation periods (statutory or otherwise), copyright ownership, moral rights, trade secrets and other intellectual property rights clauses, confidentiality clauses, indemnities, force majeure clauses, entire agreement clauses (of note here is the issue of whether the agreement includes advertising and other promotional material -- really, representations -- that may have induced the City to enter into the agreement) and remedies contained in the agreements as they relate to the duties and liabilities of suppliers or the City or both with respect to the Year 2000 problem. Among the statutes that have a bearing on these matters are the Municipal Act, Sales of Goods Act, Limitation Act, and Copyright Act. (As of this writing, it does not appear that any federal or Ontario legislation has been enacted requiring suppliers or, for that matter, the City to be Year 2000 Complaint.) Key questions here include who is responsible for identifying and correcting Year 2000 problems, including their cost; who is actually permitted to correct the problems and under what conditions; and who owns the corrections. In regard to source code trust or escrow agreements, it should be determined whether a Year 2000 problem entitles the City to a release of source code to make any necessary corrections. In that regard it should be remembered that for some systems the first critical date of compliance could be as early as January 1, 1999.

As noted earlier, inquiries will be made of existing suppliers on the state of their Year 2000 compliance. Consideration should be given to establishing a list of alternative suppliers in the event that existing suppliers are not Year 2000 Compliant and cannot be so by the critical dates established in the City's Year 2000 Action Plan or may be affected by the inability of others to be compliant. This is a crucial component of emergency or contingency planning and should be incorporated in the City's existing or proposed plan.

New Contracts:

A broad Year 2000 warranty will be included in all agreements for new computer and other technological, date-dependant deliverables and, most importantly, in the procurement documents that lead to these agreements. (Renewals of existing agreements should incorporate the warranty as well.) The warranty should extend to subcontractors and suppliers of the prime supplier and also provide for a demonstration by the supplier or testing by the City that the supplier's deliverables are Year2000 Compliant. The remedies available to the City arising from a breach of the Year 2000 warranty should be specified.

Year 2000 Compliance assurances and remedies will be negotiated in any agreement with a supplier retained by the City to provide conversion and other Year 2000 remedial services. Such agreement should also address the issues of confidentiality, copyright ownership, moral rights and other intellectual property rights. Non-solicitation and non-substitution clauses may also be in order.

Given the workload facing the City, very careful consideration should be given to whether to proceed with new major computer or other technology-related projects until the City has addressed its own Year 2000 problems sufficiently. However, whenever the project is intended to replace, as part of the City's amalgamation process, all of the existing systems of the seven old municipalities for a particular service, all or some of which systems may not be Year 2000 compliant, with one new system, which can be required to be Year 2000 compliant and can be completed by March 31, 1999, there is much merit to proceeding with the project. If the City does decide to proceed, careful due diligence must be exercised when hiring the supplier for the project and comprehensive Year 2000 assurances must be negotiated in the project agreement. Performance of the project must take into account the critical dates for general Year 2000 Compliance, for, while the system produced by the project may be compliant, other systems that may or may not have bearing on its operation might not be. A properly drafted excusable delay clause will be crucial here.

Directors and Officers Liability:

Failure of the Council and its Officers to address adequately the Year 2000 problem may result in personal liability. It is incumbent on them to institute and implement appropriate measures, such as the present Assessment Report and Action Plan, and monitor them to address the problem. Such due diligence is also essential in defending the City corporation itself against claims in the event of Year2000 problems.

Insurance:

Existing City insurance policies, including without limitation Directors and Officers Liability Insurance Policies, will be examined to determine whether they cover Year 2000 problem claims. If they do not, then the insurance market will be explored to see if such coverage can be obtained.

Agreements with existing and new suppliers must ensure that, where permitted, the City has been named or added as an additional insured and that the insurance coverage extends at least to the year2001. The actual insurance policies will be examined to see whether Year 2000 problem claims are excluded.

(3)Employment:

Human resources issues were addressed briefly earlier in this Report. Where it is necessary to retain the services of outside programmers to assist the correction of internal Year 2000 problems, written employment contracts will be required. Besides compensation issues, the contracts must address such matters as confidentiality and the ownership of copyright in corrected deliverables and the waiver of moral rights in them. Non-competition clauses may also be in order.

Disclosure:

The City may be required to disclose in its financial statements the Year 2000 problem as a contingency. Advice on this issue will be obtained from the Finance Department.

Litigation:

All efforts of the City to address the Year 2000 problem will be thoroughly and systematically documented. A clear and effective reporting structure must be established to implement and monitor conversion and other remedial measures. It is important that the City be able to demonstrate that it acted in a reasonable, prudent and timely manner in addressing the Year 2000 problem. This is part of the due diligence that the City, its Council and officers must perform to defend the City against Year 2000 problem claims and to advance claims, if need be, against non-Year 2000 compliant suppliers and others. The present Assessment Report and Action Plan is the initiating document in this process.

Privileged communications must be identified and preserved. This legal privilege may also affect how the City's action plan is executed.

In so far as the liability of suppliers for Year 2000 non-compliance is concerned, while a conciliatory approach is preferred and is being pursued, provincial statutory limitation periods and other legal considerations may of necessity require the City to start actions before the turn of the century to preserve its legal rights. Alternative dispute resolution provides an alternative to litigation.

Consideration should be given to requesting the senior levels of government to impose a limit on the damages that the City may suffer as a result of Year 2000 problem claims.

Conclusions:

The initial surveys collected by the Year 2000 Committee from the City Departments, Agencies, Boards and Commissions have confirmed that there are significant Year 2000 issues to be dealt with to mitigate the risk to both the City and the public. As the timeline for resolving these issues is fixed, it is critical that the Year 2000 Office receive approval from Council to proceed in the remedy of these issues based on the strategy outlined and that the necessary funding be approved to enable the implementation of appropriate remedies.

Contact Name:

Lana Viinamae

Year 2000 Project Executive

392-4548

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Appendix 1 - Impacted Systems

The following are examples of systems, agreements and external organizations which could be impacted by the Year 2000 issue:

Operational Systems:

fire alarmssprinklersburglar alarms

process control alarmslighting controlscard access

elevatorstime clocks (payroll)date stamp devices

scanners (OCR, cheques, etc.)digital camerasphotocopiers

fax machinestraffic controlsUPS systems

navigational aidstelephone exchangesmetres (utility)

climate controls (HVAC)security systemsvideo systems

thermostatswater flow controlsaccess control systems

traffic lightsmicrochips (engine timing, etc.)real-time clocks

time locks on vaultsradiospersonal organizers

car park barriershousehold appliancestelephones

monitoring systems

Business Systems:

payrolltime and labourfinancial

revenue collectionpaymentsdocument management

records managementdocument imagingGIS

human resourcestraining and developmentoffice applications

licensingpermittinghealth and safety

public healthdispatchscheduling

purchasingmaintenance managementasset management

inventory systemstracking systemsgraphics systems

statistical analysis toolsland information systemsregistration

information holdingcatalogue systemsbilling

pre-printed forms

Information Technology Systems:

PC'sUNIX workstationsfile servers

print serversfax serverscommunication servers

Web serversapplication serversdata servers

mainframesfrontend processorsASCII terminals

X terminalsnetwork concentratorsnetwork routers

network bridgesnetwork switchesnetwork hubs

Information Technology Systems: (Cont'd)

cluster controllersvoice mailgateways

firewallsnetwork interface devicesprinters

card readerstape readersimage processor

storage devicesCD-ROM writerstape robots

network operating systemsoperating systemscommunications software

remote access softwaresecurity softwaree-mail

calendaring softwareoffice softwareproject management software

DBMSfile management softwarebackup software

network management softwareserver administration softwaretelephony software

CASEcompilerstesting tools

debuggerseditorstransaction monitors

help desk softwaredesktop management softwareprotocol stacks

librariesfirmwareutility programs

anti-virus software

Agreements:

purchaseleaselicense

maintenancesupportoutsourcing

serviceconsultingdevelopment

data provisioningdata salesinsurance policies

External Organizations:

suppliersvendorsdevelopers

utilitiesProvinceFederal government

banksoutsourcing providersservice delivery partners

telecommunications providersInternet service providersproperty owners

Note:An example of how property owners might affect City operations as a result of Year 2000 failures in their homes or businesses would be their fire and burglar alarm systems might generate thousands of false alarms on January 1, 2000, diverting emergency services away from real emergencies.

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Appendix 2 - Year 2000 Strategy

The Year 2000 Program is divided into five phases: Plan, Assess, Remedy, Test and Re-implement. There is overlap between phases and some re-iteration especially among the first three phases.

The planning phase consists of three steps: inventory, determination of business impacts and setting of priorities. The Committee has begun assembling an inventory of systems by surveying departments. The survey will be discussed in more detail in the next section. The inventory will continue to play a key role throughout the process as individual systems are tracked through the process. Departments are being asked to estimate the impact on the business of the City of a Year2000 failure in the system. Finally, the systems will be assigned a priority to ensure that the City's most critical systems go through the remaining phases first. The priority assigned to the system is derived from the triage matrix given in table A 2.1.

Table A 2.1 Triage Plan - Priority by Impact vs. Probability:

The strategy consists of inventorying all vulnerable systems and assigning each a priority based on the probability and impact of a Year 2000 failure. The priorities will be acted upon as follow:

(1)critical systems which must be fixed in time regardless of the cost;

(2)important systems which will be fixed as time and resources permit;

(3)systems which will be fixed only as resources become available; and

(4)systems which require no action due to a nil probability and/or nil impact.

Critical systems include those which have health and safety impacts or a large probability of failure resulting in legal and/or large financial impacts.

Appendix 4 lists the systems inventoried by the Year 2000 Committee as of May 22, 1998, and their prioritization.

The assessment phase consists of determining whether or not the system is Year 2000 compliant, estimating the effort/cost of fixing the defects uncovered, and selecting the option to be applied. Generally speaking there are 4 possible options which can be applied: modify, replace, abandon, and let fail. If the option selected is not abandon, contingency planning should be initiated in case the system is not remedied in time or it fails anyway. In the case of external organizations the contingency planning includes developing and testing an emergency preparedness plan.

It will not always be possible to assess the compliance of operational systems. The experts are advising organizations to replace such operational systems if they are critical to the business of the organization. For purchased systems the vendor should be asked to formally document what their method of compliance is, the following is a list of typical date compliance methodologies. Those with Asterisks are not considered to be adequately compliant and any service, system, or asset using them will have to be independently examined as to its acceptability and ability to function appropriately. Ideally, all dates should be explicit, four (ISO 8601:1988) or eight digit fields.

(a)Date expansion; options:

-CCYYMMDD

-DDMMCCYY

(b)Date windowing; options:

-Pivot Year (implied century)*

- Fixed/Sliding Window*

Windowing techniques are especially weak where it is necessary to process data that can span more than 100 years (e.g., pension, medical, insurance, legal) and carry future exposures. Calculations can also be erroneous when data span centuries especially when using the implied century method (e.g.,if 2 digit value > 50 assume 20^th century, < 50 assume 21^st century). While not a desirable method given the time constraints on converting existing applications, this method is a more time efficient (3 to 4times faster) way of ensuring compliance than attempting to convert all dates to 4 or 8 digit format. However this would be a temporary fix and a more permanent solution would have to be implemented in the longer term.

(c)Century byte/bit; options:

-if century byte;

-contiguous;

-located elsewhere in the record;

-if century bit; and

-location and format.

(d)Date encapsulation:

(e)Date encryption*

The code of programs developed in house needs to be inspected. In some cases there are tools available to assess program source code. Agreements will need to be reviewed to determine if they represent a Year 2000 exposure. Finally, external organizations will be asked to disclose the details of their Year 2000 programs. Getting information from other organizations may be problematic if they feel they would be relinquishing competitive advantage or if they perceive that the City is looking to assign liability.

If the conclusion of the assessment is that the system should be modified or replaced, the system moves through the remaining phases of the process. In the case of external organizations modification consists of working with them to increase their awareness of the issue and helping them address it.

The testing phase is the most demanding especially on users. It is generally accepted that this phase represents between 50percent and 60percent of the work. Not only do the fixes have to be tested but the rest of the system must be thoroughly tested as well to make sure that the fixes have not introduced any new defects.

Re-implementation requires the usual steps of installation, documentation, training, acceptance testing and cut over.

A Year 2000 Office is being established to shepherd the process. The Program Office will:

(i)document the process in greater detail;

(ii)train program participants;

(iii)monitor progress; and

(iv)act as the focal point for communication with external organizations and citizens; and

(v)identify and mitigate all Year 2000 liabilities.

A Year 2000 consultant will be engaged to advise on the design and staffing of the Program Office. Staffing for the senior positions in the Program Office is already underway.

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Appendix 3 - Year 2000 Survey Results as of 1998 May 22

The purpose of the survey is to collect information with which to assess the City's Year 2000 readiness, estimate the cost of remedial work and prepare an action plan for the remainder of the millennium. We need to know:

(i)what systems the City is likely to be operating into the new millennium;

(ii)which of these systems is likely to fail due to a Year 2000 bug;

(iii)which of these systems is likely to provide incorrect information without actually failing;

(iv)what the impact is on the City and its clients of failures in these systems or groups of them;

(v)the relationships between systems to understand the inheritance of criticality;

(vi)the terms of license agreements and purchase contracts to understand liabilities;

(vii)what actions have been taken to ensure that future acquisitions of systems are compliant;

(viii)the terms of support contracts to reduce the risk of re-infection of a tested system;

(ix)what the plans are for the system such as decommissioning or replacement and when;

(x)what external organizations the City is dependent on;

(xi)what the impact is on the City and its clients of a Year 2000 failure at these organizations;

(xii)the terms of agreements between the City and these organizations to understand liabilities; and

(xiii)what contingency plans are in place to mitigate the impact of failures (e.g., insurance).

The following tables (A3.1 to A3.5) are a summary of the survey results as of May 22, 1998. Last summer an inventory was created for the IT directors for their transition report. That inventory had 1518 business and IT systems in it. Table A3.1 shows the number of responses received to date broken down by the impact of a Year 2000 failure versus the probability of a Year 2000 failure. A response may have multiple impacts but has only one probability. A large number of responses did not provide one or both pieces of information so were counted as unknown. Note that the table shows 110 high impact systems of which only 7 have a nil probability of a Year 2000 failure.

Table A3.1 Survey Results - Impact vs. Probability

Table A3.2 provides the number of responses broken down by department and priority. The priority is derived from table A1.1 using the most severe impact and the probability of occurrence.

Table A3.2 Survey Results - Departments vs. Priorities

Table A3.3 is similar to table A3.2 except that the counts are broken down by categories of systems rather than departments.

Table A3.3 Survey Results - Categories vs. Priorities

Table A3.4 provides a break down of the responses by departments and categories of systems.

Table A3.4 Survey Results - Departments vs Categories

As the above tables show, most of the responses to date have been business or IT systems. The numbers of operational systems is expected to increase dramatically as Works, Facilities Management and Parks submit more responses. Departments have not put a very high priority on inventorying agreements and external organizations. However, we can get some indication of the number of suppliers the City deals with. The vendor table in the former City of Toronto's purchasing system has just over 13,000 entries. Only the departments can indicate the these suppliers' criticality to their service delivery.

Table A3.5 provides the counts by departments and categories of systems where the respondent indicated that the system was scheduled to be replaced. Replacing these numbers of systems over the next 19 months will put a severe strain on the resources of the City.

Table A3.5 Survey Results - Number of Systems to be Replaced by Departments vs Categories

Appendix 4 - List of Systems in Year 2000 Inventory as of May 22·Appendix 4 - List of Systems in Year 2000 Inventory as of May 22

The Corporate Services Committee and the Budget Committee jointly report, for the information of Council, having also had before it, a communication (May 26, 1998) from the City Clerk, advising that the Audit Committee on May 21, 1998, directed that:

(1)the report prepared by the City Auditor dated March 4, 1998, related to the Year 2000 be forwarded to the Corporate Services Committee and that the concerns expressed in the report by the City Auditor be conveyed to the Committee;

(2)the Corporate Services Committee be advised that there are end of year 1998 time critical issues with respect to Year 2000 and the Audit Committee is concerned that the Corporation is not moving quickly enough to address these issues; and

(3)the Budget Committee be advised that funds may be required to address Year 2000 issues in a timely fashion.

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The Corporate Services Committee and the Budget Committee jointly report, for the information of Council, having also had before it during consideration of the foregoing matter, a communication (July14, 1998) from the City Clerk, advising that City Council, at its meeting held July 8, 9 and 10, 1998, had before it Clause No. 37 of Report No.9 of The Corporate Services Committee, headed "Other Items Considered by the Committee"; and that Council directed that the aforementioned Clause be received as information, subject to striking out and referring Item (f) embodied in such Clause back to the Corporate Services Committee for further consideration.

(A copy of the reports (May 7, 1998) from the Commissioner of Corporate Services (March 4, 1998) from the City Auditor; and the communication (February 16, 1998) from the City Auditor addressed to the Commissioner of Corporate Services, respecting the Year 2000 issues, was forwarded to all Members of Council with the agenda of the joint meeting of the Corporate Services Committee and the Budget Committee, and a copy thereof is also on file in the office of the City Clerk.)

(City Council on July 29, 30 and 31, 1998, had before it, during consideration of the foregoing Clause, the following joint report (July 22, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer:

Purpose:

To respond to the request made by the joint Corporate Services and Budget Committee at their meeting of July 21, 1998 reproduced below:

(C)requested the Chief Administrative Officer and the Chief Financial Officer and Treasurer to report to Council for its meeting scheduled to be held on July 29, 1998:

(a)on the workplan and estimated cost respecting Recommendation No. (9);

(b)on the use of the $3 million dollars referred to in the foregoing motion (B) by Councillor David Shiner; and

(c)respecting a workplan for the months of August, September, and October, 1998, such report to include a ballpark figure regarding the amount of funds that are required for these three months.

Funding Sources, Financial Implications and Impact Statement:

This report provides the additional details requested by the joint committee on the work plan for the Year 2000 project and specifically requests authority to spend $1,500,000.00 to establish the Year 2000 Project Office and $3,596,000.00 to complete the inventory and begin the assessment and remedy of systems. These funds will come from contingency.

A detailed work plan and cost estimate for making the rest of the City's critical systems Year 2000 ready will be completed by October 31, 1998.

Recommendations:

'It is recommended that:

(1)the Chief Administrative Officer be authorized to spend up to $1,500,000.00 in 1998 to set-up, staff and acquire tools for the Year 2000 Project Office;

(2)the Chief Administrative Officer be authorized to spend up to $3,596,000.00 to complete the inventory of the City's critical systems and begin their assessment and remedy;

(3)the total initial funding of $5,096,000.00 in recommendation Nos. (1) and (2) above be provided from the Corporate Contingency Account;

(4)the Chief Administrative Officer be authorized to enter into the necessary agreements in support of the above;

(5)the Chief Administrative Officer report on the expenditures to date of the $5,096,000.00 to the Strategic Policies and Priorities Committee at its first meeting in November; and

(6)the Chief Administrative Officer report to the Strategic Priorities Committee at its first meeting in November on the work plan, including cost estimates, to achieve the following milestones which will ensure business continuity through the Year 2000."

Council Reference/Background/History:

At a joint meeting of the Corporate Services and Budget Committees held on July 21, 1998 the Chief Administrative Officer and the Chief Financial Officer and Treasurer were asked to provide additional details on the work plan and budget for the 3-month period beginning August 1, 1998.

The following tables outline the total projected budget for the Year 2000 project to October 31, 1998. This budget is broken into funding for the Year 2000 Project Office and funding for work to ensure Year 2000 readiness of systems.

Comments and/or Discussion and/or Justification:

The current estimate of funding required to address the critical year 2000 issues is $80 million. Some or all of this funding may need to be provided from the issuance of new debenture debt, as needed. This option, however, will be considered in conjunction with initiatives in progress to assess the current state of all the City's reserves. Any surplus funds identified in this process will be considered in determining the best option to provide funds for the establishment of a reserve to address critical year 2000 issues.

In the event that debt financing is required, the annualized debt service cost on debt of $80 million is approximately $12 million. The preferred option of funding the debt service costs is to encumber funds in the current Corporate Contingency base budget, thereby eliminating any mill rate impact from this project.

The City Treasurer will report in due course, recommending the funding source(s) for the establishment of the reserve to address critical year 2000 issues, and the payment of any related debt service costs.

Conclusions:

The strict timetable for this project requires us to act quickly. The Year 2000 Project requires $5,096,000.00 in immediate funding. An estimate of the projected cost and time table for remedy of all critical systems will be available at the end of the assessment activity (October 31, 1998). The sources of the funding will be the corporate contingency.

Contact Name:

Lana Viinamae, Year 2000 Project Executive, 392-4548.)