Toronto Police Service

Analysis of 1999 Operating Budget Shortfall

The Policy and Finance Committee recommends the adoption of the Recommendation of the Budget Advisory Committee embodied in following communication (December 10, 1999) from the City Clerk:

Recommendations:

The Budget Advisory Committee on December 9, 1999, recommended to the Policy and Finance Committee, and Council, that:

(1) the report (November 13, 1999) from the Chief Financial Officer and Treasurer be adopted;

(2) the report (December 8, 1999) from the Chief Financial Officer and Treasurer be adopted;

(3) the Chair, Toronto Police Services Board, be requested to report back to the Budget Advisory Committee on the funds expended on community events last year, and funding required for such events in the year 2000; and

(4) the Chair, Toronto Police Services Board, be requested to reimburse the City and contribute towards the $6.9 million overexpenditure through any excess funds in 1999; and that in future years, such funds be identified in the stolen/unclaimed goods account, the said funds to be transferred to the new reserve fund identified in Recommendation No. (2) of the report (November 13, 1999) from the Chief Financial Officer and Treasurer.

Background:

The Budget Advisory Committee had before it the following:

(1) report (November 13, 1999) from the Chief Financial Officer and Treasurer, recommending that:

(a) with respect to financial management information:

(i) the Toronto Police Service forward to the Chief Financial Officer and Treasurer each month a copy of the variance report currently sent to the Toronto Police Services Board, which includes projected full year operating budget estimates and at the same time provides year-to-date actual expenditure data as compared to year-to-date budgets to allow more time to react to significant variances;

(ii) the Toronto Police Service provide the Chief Financial Officer and Treasurer with regular, periodic operating and capital budget variance reports in the format prescribed by the Chief Financial Officer and Treasurer for all City departments, agencies, boards and commissions;

(iii) the Toronto Police Service provide full time equivalent (FTE) as well as position requirements when submitting budget requests in future years; and

(iv) the Toronto Police Service provide the 'Managed Savings Program' and the 'Staff Deployment and costs related to overtime/premium pay allocations' reports to the Policy and Finance Committee as requested at the City of Toronto Council meeting of July 6, 7 and 8, 1999;

(b) with respect to the costs resulting from step rate progressions in the Toronto Police Service:

(i) the Chief Financial Officer and Treasurer be authorized to create a reserve (Reserve for the Stabilization of Step Rate Progressions in the Toronto Police Service) as at January 1, 2000, such reserve to be held in the City's books and be under the jurisdiction of the Chief Financial Officer and Treasurer;

(ii) the reserve at January 1, 2000 be $2 million, funded from the City's Employee Benefit Reserve Fund;

(iii) subsequent allocations to the reserve be part of the City's annual budget process, with in-year adjustments as recommended for Council's consideration by the Chief Financial Officer and Treasurer;

(iv) draws from the reserve be subject to a report from the Toronto Police Service to the Chief Financial Officer and Treasurer, and the Chief Financial Officer and Treasurer's recommendation for Council's consideration; and

(v) the continuing need for and adequacy of the reserve be reviewed by the Chief Financial Officer and Treasurer on a regular basis in the context of corporate requirements; and

(c) with respect to future year budget requirements of the Toronto Police Service:

(i) the hiring target for the Year 2000 be reviewed in the 2000 Operating Budget process;

(ii) the Toronto Police Service develop performance measures for vehicle maintenance, premium pay and training programs for comparative purposes to other Canadian and United States municipal police forces and report back to the Budget Advisory Committee in March 2000 and thereafter on a quarterly basis; and

(iii) the Toronto Police Service approved hiring targets be met only if the Council approved net budget is not exceeded and that the Toronto Police Services Board report on the status of meeting hiring targets as part of the variance reporting process;

(2) report (December 8, 1999) from the Chief Financial Officer and Treasurer, recommending that:

(a) the Budget Advisory Committee endorse the recommendations of the original report from the Chief Financial Officer and Treasurer regarding the 1999 Operating Budget shortfall including the recommendation that costs resulting from step rate progressions relating to Toronto Police Services be accommodated through the establishment of a reserve fund under the authority of the Chief Financial Officer and Treasurer at January 1, 2000 for a total of $2.0 million as funded through the City's Employee Benefit Reserve Fund;

(b) the Toronto Police Services Board request the Province to release the Toronto Police Services Board's excess OMERS Type (3) contributions estimated at $40 million; and that the Chief Financial Officer and Treasurer be directed to credit this to the Vehicle Reserve Fund for Toronto Police Services purposes; and

(c) the Chief Financial Officer and Treasurer develop a financial control policy respecting all Agencies, Boards and Commissions' operating and capital budget requirements and report back to the Policy and Finance Committee prior to final Council approval of the 2000 Operating Budget; and

(3) report (November 22, 1999) from the Chief of Police, regarding the 1999 Operating Budget variance update and future reductions; and recommending that this report be received for information.

_________

(Report dated November 13, 1999, addressed to the

Budget Advisory Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To provide an analysis of the projected 1999 Operating Budget shortfall of the Toronto Police Service.

Financial Implications:

The Toronto Police Service reported that the operating budget shortfall as at September 30, 1999 is $7.7 million. There are no specific financial reductions for the current 1999 estimate at this time as a result of the recommendations contained in this report.

Recommendations:

It is recommended that:

(1) with respect to financial management information:

(a) the Toronto Police Service forward to the Chief Financial Officer and Treasurer each month a copy of the variance report currently sent to the Toronto Police Services Board, which includes projected full year operating budget estimates and at the same time provides year-to-date actual expenditure data as compared to year-to-date budgets to allow more time to react to significant variances;

(b) the Toronto Police Service provide the Chief Financial Officer and Treasurer with regular, periodic operating and capital budget variance reports in the format prescribed by the Chief Financial Officer and Treasurer for all City departments, agencies, boards and commissions;

(c) the Toronto Police Service provide full time equivalent (FTE) as well as position requirements when submitting budget requests in future years; and

(d) the Toronto Police Service provide the 'Managed Savings Program' and the 'Staff Deployment and costs related to overtime/premium pay allocations' reports to the Policy and Finance Committee as requested at the City of Toronto Council meeting of July 6, 7 and 8, 1999;

(2) with respect to the costs resulting from step rate progressions in the Toronto Police Service:

(a) the Chief Financial Officer and Treasurer be authorized to create a reserve (Reserve for the Stabilization of Step Rate Progressions in Toronto Police Service) as at January 1, 2000, such reserve to be held in the City's books and be under the jurisdiction of the Chief Financial Officer and Treasurer;

(b) the reserve at January 1, 2000 be $2 million, funded from the City's Employee Benefit Reserve Fund;

(c) subsequent allocations to the reserve be part of the City's annual budget process, with in-year adjustments as recommended for Council's consideration by the Chief Financial Officer and Treasurer;

(d) draws from the reserve be subject to a report from the Toronto Police Service to the Chief Financial Officer and Treasurer, and the Chief Financial Officer and Treasurer's recommendation for Council's consideration; and

(e) the continuing need for and adequacy of the reserve be reviewed by the Chief Financial Officer and Treasurer on a regular basis in the context of corporate requirements; and

(3) with respect to future year budget requirements of the Toronto Police Service:

(a) the hiring target for the Year 2000 be reviewed in the 2000 Operating Budget process;

(b) the Toronto Police Service develop performance measures for vehicle maintenance, premium pay and training programs for comparative purposes to other Canadian and United States municipal police forces and report back to the Budget Advisory Committee in March 2000 and thereafter on a quarterly basis; and

(c) the Toronto Police Service approved hiring targets be met only if the Council approved net budget is not exceeded and that the Toronto Police Services Board report on the status of meeting hiring targets as part of the variance reporting process.

Council Reference/Background/History:

At its April 13, 1999 meeting, the Strategic Policies and Priorities Committee approved the Budget Committee's recommended net 1999 Operating Budget for the Toronto Police Service at $522.9 million which included $12 million in additional expenditures to accommodate the 1998 wage settlement. This total represented gross expenditures of $535.9 million and revenues of $13.0 million. A total of $15.0 million in additional pressures that the Toronto Police Service identified were to be absorbed in their 1999 Operating Budget. At its meeting of April 26, 27 and 28, 1999, Council approved the Budget Committee recommended budget with a number of recommendations which mostly centred around Toronto Police Service reporting on its deployment strategies, but did not call for any amendment to the $522.9 million net budget.

At its meeting of September 16, 1999, the Policy and Finance Committee had before it the Toronto Police Service May 31, 1999 variance report which showed a projected 1999 year-end budget shortfall of approximately $10.1 million. At its meeting of October 14, 1999, the Policy and Finance Committee received the City's June 30, 1999 variance report. This report indicated a year-end projected shortfall for the Toronto Police Service of $7.9 million. In receiving the variance report, the Policy and Finance Committee requested that those areas showing significant variances be revisited to determine opportunities for reducing the shortfall.

Discussion:

At the time the June 1999 Variance Report was finalized, the reported shortfall had been reduced to $7.9 million and is now estimated at $7.7 million as at October 22, 1999. The variance explanations relating to this estimate can be found in Appendix "A", and are reported by Police Services as including:

(a) "mandatory pressures", which include inflationary increases to benefits, net impacts of separations and hirings as well as Use of Force initiatives; and

(b) other "unforeseen pressures", which include the Kosovo Crisis, Coroners' inquests, net attrition and other items.

As part of the 1999 Budget process, the Toronto Police Service was requested to investigate savings and/or efficiencies that would offset the increases described in (a) above. It was noted at the time that limited opportunity existed in the non-salary items of the Toronto Police Service Budget to make these reductions. The significant shortfall continuing to be reported needed to be addressed. Over the past two months, therefore, several internal and committee meetings have been conducted in an attempt to address the significant budget shortfall being reported by the Toronto Police Service for 1999. Specific discussions focussed on budgeting practices related to:

- reclassifications;

- separations/hirings targets;

- premium pay (including court appearance, overtime, shift, holiday and other pay);

- vehicle maintenance costs;

- revenues; and

- contingency items.

As a means of tackling these concerns the following provides some insights to each of the items noted above and makes recommendations.

(A) Reclassifications:

Each year the Toronto Police Service is faced with working to a hiring target and making assumptions about the number of separations versus the number of new hires. Although it is not done in quite so simple terms, once the separations/new hire totals are established, the budgeted expenditures related to these positions are derived. The separations are shown as a reduction using the top wage rate classification and new hires coming on board are conversely calculated using the lowest wage rate.

As illustrated in Appendix "B", if the Toronto Police Service had budgeted at the top rate or included the step rate increments as is done by Toronto Fire Services and Toronto Ambulance Services, their base budget request would have averaged 7.4 percent higher than was actually submitted. Toronto Fire Services and Toronto Ambulance Services each budget positions at the known progression increment level and reduce their budget for gapping allowance.

For 1999, providing for the reclassification components alone would appear to translate into a $14 million addition to the Toronto Police Service budget (Appendix "B"). This figure is misleading, however, in that gapping, attrition, separations and new hires are all interrelated and are not easily detailed by individual components; that is, an impact on one component may be offset by decreases in another. A more appropriate measure of the impact would be found in this example. Assume that the average number of separations and new hires equals 200 FTEs each year. It is known that the difference in salary between a new recruit and a First Class Constable is approximately $23,000.00 a year; therefore, it would be reasonable to expect that the 1999 budget should be at least $2 million above the base step level in 1999. This has been identified as an issue in previous years, but has not materialized as an expenditure pressure since high fluctuations in staffing levels have offset the increases. In short, significant staffing reductions as budgeted at the top rate exceeded the incremental progression rate costs being incurred and it was a while for a "catch up" to be seen.

Corporately, the City is currently working towards establishing a guideline that would ensure equal budget treatment of wage progressions for all Programs, Agencies, Boards and Commissions. However, implementation is constrained by the City's financial position. The difficulty in the case of the Toronto Police Service has been a financial one where the City has not been in the position to afford increases to operating expenses. Three options are available to address this issue: (a) change hiring targets to meet budget requirements; (b) establish a reserve to smooth fluctuating expenditures; or, (c) budget for the staffing complement at the known progression rate in each and every year. Option No. (a) ensures that budgeted expenditures can be met, but at the expense of maintaining service levels. Option No. (b) provides for a smoothing out of expenses over time, but is cumbersome to manage and can distort financial reporting. Option No. (c) provides for actual costs as they incur, but is impacted where monies are not available to pay for increases.

Of the three, Option No. (c) is the most favourable option for it allows decision making to be made based on consideration of data that has not been adjusted or "smoothed". Unfortunately, this could result in significant fluctuations in budget requirements from year to year that the City may not be able to address financially. As an interim measure therefore, it is recommended that Option No. (b) be adopted for the Toronto Police Service.

(B) Separations/Hirings Targets:

Another component of the budgeting process currently in place at the Toronto Police Service is the means through which attrition is considered in the context of staffing targets. It is understood that any approved hiring plan includes informed assumptions on retirement and other separations through time as well as training and/or other hiring restrictions. This is described in Section (A) above as planned gapping. The Toronto Police Service provides this information with each year's operating budget submission as seen in Appendix "C". Adjusting hiring plans becomes problematic once the year commences since the Ontario Police College provides only three classes per year and limits Toronto based enrolment to specific recruit levels. Thus, there is a timing delay involved in reacting to changes to the hiring plan such as the attrition target not being met or conversely being exceeded. Some attempts have been made to address this issue as evidenced by the reduction of 32 recruits from the October class of 1999. Unfortunately, there are difficulties in making these changes in light of competing Council objectives (i.e., meet hiring targets and meet budget).

The 1999 experience is an example of the above. The Toronto Police Service did not realize the number of separations anticipated. Essentially this resulted in unrealized savings for top wage officers assumed and budgeted to be leaving. To act prudently in response to this shortfall, a significant reduction in the early class sizes for recruits was recommended by the Toronto Police Service staff but rejected by the Toronto Police Services Board, which was concerned over the associated reduced recruiting levels.

One solution for this issue would be to establish targets, but manage the hiring within the Council approved net Toronto Police Service Operating Budget. In this scenario, the Toronto Police Service would attempt to adhere to target but remain within Council approved spending limits. This way the Toronto Police Service can reassess their attrition assumptions on an on-going basis relative to budgeted positions as well as full time equivalents. The Toronto Police Service should report through the Policy and Finance Committee on revisions to their FTE targets in addition to their expenditure results through the City's Operating Budget Variance reports.

(C) Premium Pay (including court appearance, overtime, shift, holiday and other pay):

Concern has been expressed with respect to overtime and premium pay related to officer duties. The premium pay category consists of payments for court attendance, overtime, callback and other items contained in the collective agreement (e.g., Statutory Holiday Pay, Shift Premium, Acting Pay, etc.). Approximately 50 percent of total premium pay is related to court attendance, which represents almost $14.7 million in 1999. As outlined in Appendix "D", overtime is approximately $6.2 million or 20 percent of the overall premium pay account; and savings in this area are, therefore, limited in scope. As well, given that Senior Officers are not eligible for overtime, the actual overtime per officer is approximately $1,050.00 annually or about $20.00 per week. As a result, all components of premium pay should be examined and not just overtime.

There are several factors that contribute to premium pay. These can all be summarized as being a function of the level of enforcement (i.e., staffing) in place at any given time. The Toronto Police Service contends that higher staffing levels result in increased enforcement activity that ultimately results in increased premium costs. On this basis, the opportunity to address premium pay costs should be related to a review of the level of policing.

(D) Vehicle Maintenance Costs:

Appendix "E" shows vehicle maintenance activities over time. It is evident that strictly in terms of labour costs, reductions of $64,700.00 or one percent have been realized in the period of 1993 to 1999 before adjusting for wage increases. The difficulty is that previous years' budgets have sometimes reflected greater improvements than actually realized based on fleet replacement plans and are, therefore, not readily apparent when making budget to budget comparisons. Further complicating the issue, is the reality that marked vehicles used by the force have a real life of just over two years. This means that the maintenance savings would not be as discernible as may occur in other services (e.g., Fire Services), where vehicles are driven less often and maintenance plans can be stretched out or managed over longer time periods.

(E) Revenues:

Appendix "F" provides a breakdown of the revenue sources assumed for 1999 as compared to projected actual experience for the current year. In summary, it is apparent that the assumptions used in establishing the 1999 target have been optimistic. When establishing the revenue estimates for the 1999 Operating Budget, the Toronto Police Service examined historical levels of revenue generation where continued increases were evident. This trend was assumed for all revenue categories in 1999 while attention was also paid to the corporate initiative to allow for a 10 percent increase to fees and other revenue sources where possible. Rather than pro-rate these increases across all revenue categories the total increase was budgeted in the miscellaneous revenue feature group. In total, the projected actual has fallen approximately $800 thousand short of the 1999 estimate as seen in Appendix "F".

(F) "Contingency Items":

In addition to the key items discussed above, the Toronto Police Service was significantly impacted in 1999 by the Serbian Demonstrations and extraordinary legal expenses related to Coroners' inquests. The Kosovo Crisis is expected to top $1.3 million in additional direct costs in 1999, and may include as much as $400,000.00 in additional expenditures for indirect costs related to court time and other incremental expenses related to the Kosovo arrests (Appendix "H"). The Coroners' inquests are estimated at approximately $700,000.00, but this estimate includes a one-time expense of $520,000.00 for counsel representation at the Coroner's Inquest into the Death of Edmund Wai-Kong Yu. While both these items could be viewed as anomalies, it is not unreasonable to expect that these type of expenses would recur in future years.

Two options are available for dealing with these "one-time" items: budget for them based on historical experience, i.e., increase the budget by approximately $500 thousand, or make no provision at all. The latter is the most desirable in a time of financial constraint, however, it is understood that the Toronto Police Service would seek recognition in their variance reporting of these as contingency expenses.

General Observations:

The Toronto Police Service expends over 92 percent of its operating budget on wages, salaries and benefits. Any significant reduction can, therefore, only be viewed in terms of workforce changes be it reductions in the number of officers, alterations of collective agreements or otherwise. This understanding is consistently found in the requests made by Council, as well as, the Budget Advisory Committee and the Policy and Finance Committee's requests for staff deployment and management savings reports from the Toronto Police Service that are now expected at the next Council meeting of November 23, 24 and 25, 1999. Any further reductions to the presently reported $7.7 million shortfall will be difficult as workforce expenditures have already been incurred and the last class of Police recruits for 1999 has been started.

This leaves only the Year 2000 and future budget years available to pursue future staff deployment issues. Key issues that need to be addressed therefore include:

(a) reassessment of the 2000 staffing hires; and

(b) re-evaluation of revenue targets.

Conclusion:

The Toronto Police Service currently projects a 1999 Operating Budget shortfall of $7.7 million for year-end, which is $2.4 million below its preliminary estimate of $10.1 million. Reducing this figure significantly at this time when expenditures have already been incurred is difficult. Efforts to address the problem are, therefore, more aptly dealt with through the 2000 and future year Operating Budget requirements of the Toronto Police Service. As part of this examination, a review of workforce deployment practises is required to help gain an understanding of the pressures under which the Toronto Police Service operates, as well as to insure that Council's financial pressures are addressed in an informed and responsible manner.

Contact Names:

Mr. Al Horsman, 397-4532; Mr. Glenn Vollebregt, 392-8095.

(A copy of Appendices "A", "B", "C", "D", "E", "F" and "G" referred to in the foregoing report was forwarded to all Members of Council with the December 9, 1999, Agenda of the Budget Advisory Committee, and a copy thereof is on file in the office of the City Clerk.)

(Report dated December 8, 1999, addressed

to the Budget Advisory Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To respond to the Budget Advisory Committee's request, at its meeting of November 15, 1999, that the Chief Financial Officer and Treasurer report back with additional information regarding the analysis of the Toronto Police Service 1999 Operating Budget Shortfall of $7.7 million.

Financial Implications and Impact Statement:

As a result of adopting this report, a reserve fund of $2.0 million will be established, as at January 1, 2000, funded by a contribution from the Employee Benefit Reserve Fund.

Recommendations:

It is recommended that:

(1) the Budget Advisory Committee endorse the recommendations of the original report from the Chief Financial Officer and Treasurer regarding the 1999 Operating Budget shortfall including the recommendation that costs resulting from step rate progressions relating to the Toronto Police Service be accommodated through the establishment of a reserve fund under the authority of the Chief Financial Officer and Treasurer at January 1, 2000, for a total of $2.0 million as funded through the City's Employee Benefit Reserve Fund;

(2) the Toronto Police Services Board request the Province to release the Toronto Police Services Board's excess OMERS Type (3) contributions estimated at $40 million; and that the Chief Financial Officer and Treasurer be directed to credit this to the Vehicle Reserve Fund for Toronto Police Services purposes; and

(3) the Chief Financial Officer and Treasurer develop a financial control policy respecting all Agencies, Boards and Commissions' operating and capital budget requirements and report back to the Policy and Finance Committee prior to final Council approval of the 2000 Operating Budget.

Background:

The Budget Advisory Committee on November 15, 1999, reviewed a report from the Chief Financial Officer and Treasurer regarding the Toronto Police Service 1999 Operating Budget shortfall. The report was referred back to staff for further review and the Chief Financial Officer and Treasurer was requested to report back to the Budget Advisory Committee at its wrap-up meeting of December 9, 1999.

Discussion:

A report was tabled at the November 15, 1999 meeting of the Budget Advisory Committee that provided an analysis and recommendations respecting the Toronto Police Service 1999 Operating Budget shortfall of $7.7 million. The City of Toronto Budget Services staff along with the Toronto Police Service representatives were present for the presentation and subsequent discussion on this item. A number of specific concerns were raised during consideration of the matter and additional information requested by the Budget Advisory Committee included:

(1) Review the costing of the officer ranks found in Appendix "A" attached and amounts budgeted in 1999 as compared to projected actuals to determine what additional reclassification costs need to be added to the base budget for 2000. It was requested that calculations be based on actual reclassification rates and not the highest rate. Comparisons were to be made to the $5.8 million pressure identified by the Toronto Police Service for 1999.

The costing of officers has been provided by the Toronto Police Service in Appendix "B." This Appendix separates out the progression or reclassification expenses from other pressures for the period of 1994 through to 2005. Here, the staffing levels have been costed for hires and separations while the step rate progressions are tracked through time for recruits through to the First Constable level. Hiring and separations were assumed for this exercise to be equally spread throughout the year.

The reclassification effects of hires and separations presented in this exercise are approximately $2.8 million in 1999. This supports the original recommendation for the establishment of a reserve to accommodate the variable impact of wage progressions on the Toronto Police Service budget and to bring them in line with other departments, agencies, boards and commissions. The remaining pressures relate to attrition and or hiring/separation assumptions that are deployment or resource management issues that are to be examined by Council and the Toronto Police Service in terms of policing levels required as compared to available financing in any given year.

(2) An outline of expenses incurred over several budget years, which are included in the Toronto Police Service Budget for demonstrations or other events requiring special policing (e.g., Gay Pride parade or Caribana).

This information has been provided in Appendix "C". In summary, the Toronto Police Service contends that since premium pay and regular duties are established based on historical experience, the repetitive policing of special events is already included in the base budget. The additional costs incurred for extraordinary circumstances such as the Serbian crisis are not readily predictable and, therefore, contingencies have never been made by the Toronto Police Service for such items. This is an acceptable means of budgeting in a time of financial constraint and given that such extraordinary occurrences have been infrequent in the past. It should be further noted that separate reports on special policing and financial protocols for Agencies, Boards and Commissions are expected to be forwarded to the Policy and Finance Committee in the year 2000.

(3) Details of the additional costs of $180,000.00 for inquest related expenditures excluding the Edmund Wai-Kong Yu expenditure of $520,000.00 was requested. There are essentially two significant cases that contribute to this increase; namely, the Jerzy Tobol ($90,000.00) and the Kenneth Allen ($80,000.00) inquests.

(4) A listing of the non-salary expenditure accounts that the Toronto Police Service have available from which monies can be drawn to further offset the projected overexpenditures. This information is being provided at the same time as this supplementary report under a separate memo from the Chief of Police. Included in the Chief's memo is a revised 1999 Operating Budget projection, which now indicates a $6.9 million shortfall for 1999.

(5) A motion was tabled recommending that the City secure $40 million in funding for the Toronto Police Service vehicle reserve fund from the 50 percent share of OMERS Type (3) plan overpayments. This motion is now included as part of this supplementary report.

Conclusions:

At its meeting of November 15, 1999, the Budget Advisory Committee requested further information respecting the Toronto Police Service 1999 Operating Budget shortfall and clarification of the recommendations of the previous report on this item. In total, five issues arose as a result of the November 15, 1999 review. These included information requests and/or recommendations pertaining to: reclassification costs; historical expenditures for special events; court attendance costs; non-salary expenditures to date; and availability of OMERS Type (3) overpayments. This information has been provided in this report and under separate cover from the Chief of Police.

Contact Names:

Mr. Al Horsman, Budget Analyst, 397-4532, Fax 392-3649, ahorsman@mta1.metrodesk.metrotor.on.ca; Mr. Carmine Bruno, Manager, 397-4218, Fax 392-3649, cbruno@mta1.metrodesk.metrotor.on.ca; Mr. Glenn Vollebregt, Director, 392-8095, Fax 397-4465, gavolleb@mta1.metrodesk.metrotor.on.ca.

(A copy of Appendices "A", "B" and "C" referred to in the foregoing report was forwarded to all Members of Council with the December 9, 1999, Agenda of the Budget Advisory Committee, and a copy thereof is on file in the office of the City Clerk.)

(Report dated November 22, 1999, addressed to the

Budget Advisory Committee and the

Toronto Police Services Board from the Chief of Police)

Recommendation:

It is recommended that the City of Toronto Budget Advisory Committee receive this report.

Background:

The Toronto Police Service has reported its financial status through variance reports during 1999. The Toronto Police Service's finance staff have also worked with the City's budget staff in reviewing the reasons for the variance and identifying options to reduce the shortfall. The results of these reviews formed part of a report from the Chief Financial Officer and Treasurer to the Budget Advisory Committee at its meeting of November 15, 1999. The Budget Advisory Committee discussed the report and requested a further report from the Chief Financial Officer and Treasurer outlining the reasons for the salary shortfall and that the Toronto Police Service re-examine all potential sources of funding to reduce the shortfall of $7.7 million as much as possible. City staff, with the assistance of Toronto Police Service staff, have prepared a report to respond to the Committee's request. One of the significant issues the report addresses is the impact on salaries as Uniform staff progress through the Constable ranks (i.e., reclassifications). Recommendations to resolve this issue in the future are provided in the report. The following provides the Toronto Police Service's response on potential funding sources to reduce the shortfall.

Further Reductions:

Actions taken by the Toronto Police Service during 1999 (e.g., reduced spending, purchase deferrals) resulted in savings of $2 million. With less than two months remaining in the year, remaining options for savings are limited. However, given the Budget Advisory Committee's request, the Toronto Police Service re-examined all discretionary spending and further potential deferrals. As a result, the projected variance of $7.7 million can be reduced by $763,000.00 to $6.9 million. This further reduction, over and above what the Service has already implemented, poses hardship for the remainder of 1999 and will have future budget impacts. Expenditure deferrals, particularly for equipment items, result in increased maintenance costs and eventually the items require replacement.

Ongoing Review:

The Toronto Police Service has and will continue to pursue cost-saving initiatives. The revised shortfall of $6.9 million to year-end is the Toronto Police Service's best estimate based on current available information. Cost recoveries for events that occurred in 1999 are still being pursued and any impacts of these will be reported to the Board and the City.

Summary:

With the further reductions identified in this report, the Toronto Police Service has reduced spending by $2.7 million in 1999. Given that the Toronto Police Service's budget is 92 percent salaries and benefits, any further initiatives to reduce the shortfall would have impacted significantly on the hiring of Uniform staff. Uniform staff replacements and increasing front-line staff are a priority of the Board and City Council and the 1999 projected spending level maintains this.