April 10, 1999

To:Budget Committee

From:Chief Financial Officer & Treasurer

Subject:Facilities & Real Estate - 1999 Operating Budget

Further Budget Reductions

Purpose:

The purpose of this report is to respond to a request from Budget Committee for further reductions to the 1999 operating budget for Facilities and Real Estate.

Funding Sources, Financial Implications and Impact Statement:

The 1999 operating budget for Facilities & Real Estate, as recommended by Budget Committee, reflects gross expenditures of $81.915 million and revenues of $36.232 million resulting in a net budget of $45.683 million. This compares to a 1999 operating budget of $83.784 million (gross) and $48.362 million (net), as recommended by the Chief Administrative Officer. The 1999 operating budget, as recommended by Budget Committee is $1.869 million or 2.2% below gross and $2.679 million or 5.5% below the net operating budget, as recommended by the Chief Administrative Officer.

Recommendation:

It is recommended that this report be received for information purposes.

Background:

At its meeting on April 8, 1999, Budget Committee considered the report dated March 31, 1999 from the Commissioner of Corporate Services that responded to a request from Budget Committee for a report outlining the impact of reducing the Facilities and Real Estate budget by 10 to 15 per cent.

Budget Committee adopted budget reduction options presented in the report totaling $2,262.4 thousand in 1999 to be achieved from reductions in utility expenditures ($1,200.0 thousand), lease terminations ($252.4 thousand) and recoveries from third party tenants ($810.0 thousand).

Budget Committee also adopted a further reduction of $416.3 thousand and requested that a report be presented at the April 16, 1999 meeting of Budget Committee outlining a breakdown of this reduction.

Discussion:

A further review of the 1999 operating budget for Facilities & Real Estate was conducted in consultation with staff from the Facilities & Real Estate program. It is the opinion of Facilities and Real Estate staff that further budget reductions could not be absorbed without impacting service. However, the review attempted to identify areas that would have the least significant impacts on service delivery.

A budget reduction of $341.3 thousand has been allocated to Facilities that will be achieved through a reduction in facilities maintenance. Services & Rent have been reduced by $170.7 thousand to reflect a reduction in outside contract services and Materials & Supplies have been reduced by $170.6 thousand. These reductions will reduce the level of maintenance that will be performed and could lead to the accelerated deterioration of building components. However, sufficient funding is available to address emergency maintenance and other breakdowns that may arise.

The remaining budget reduction of $75.0 thousand has been allocated to Real Estate that will be achieved through a reduction in consulting services. This reduction could lead to delays in the processing of specialized real estate transactions that require outside, technical expertise. In addition, the program's ability to secure an outside opinion on real estate appraisals and evaluations for complex negotiations may be reduced. However, the program will endeavour to manage within the remaining budget allocation of $100.0 thousand for real estate consulting services.

There is no budget reduction allocated to staffing. The program's staffing complement was reduced from 819 FTE in 1997 to 729 FTE in 1998, a reduction of 90 FTE or 11%. Staffing in Real Estate was reduced from 60 FTE to 48 FTE, a reduction of 12 FTE or 20% and staffing in Facilities was reduced from 759 FTE to 681 FTE, a reduction of 78 FTE, or 10.3%. The program is leading extensive space accommodation and facility rationalization projects for the Corporation that require significant staffing resources in the short term. In light of these pressures, a budget reduction was not allocated to staffing. The program has been requested to report back on alternative service delivery in 1999 and additional restructuring savings may be achieved if alternative service delivery is implemented.

Conclusion:

The further budget reduction in Facilities & Real Estate totaling $416.3 thousand has been reflected in the 1999 Budget Committee recommended operating budget of $81.915 million (gross) and $45.683 million (net) for this program. It is recommended that this report be received for information purposes.

Contact Names:

Bruce Shintani397-4228

Val Sequeira397-4225

Shekhar Prasad392-8095

W.A. Liczyk

Chief Financial Officer & Treasurer

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