The Budget Committee:

1.         Requested the City Manager to report to the October 2, 2013 meeting of the Budget Committee on actions taken and planned actions for ensuring that staff vacancies do not go unfilled for long periods.

The Deputy City Manager and Chief Financial Officer gave a presentation to the Budget Committee on the 2013 Second Quarter Tax Supported Budget Variance.

The purpose of this report is to provide Council with the City of Toronto Operating Variance for the six-month period ended June 30, 2013 as well as year-end projections and to request Council's approval for amendments to the 2013 Approved Operating Budget between Programs to ensure accurate reporting and financial accountability with no increase to the 2013 Approved Net Operating Budget.

For the six-month period ended June 30, 2013, Tax Supported Operations' expenditures were under-spent by $158.611 million gross or 3.5% ($99.340 million net or 5.6%) of planned expenditures.  Projections indicate that the 2013 year-end under-expenditure is anticipated to be $167.414 million gross or 1.8% ($58.544 million net or 1.6%) of the 2013 Approved Operating Budget.  The year-to-date under-spending was driven largely by under-expenditures in corporate accounts due to timing for Non-Program Expenditures, salary savings from vacant positions that were not filled and higher than planned revenue from the Municipal Land Transfer Tax and Third Party Sign Tax.  The projected year-end favourable variance will result primarily from salary and benefit savings arising from vacant positions and higher than planned revenue from the Municipal Land Transfer Tax.

Rate Supported Programs were under-spent by $9.252 million gross or 1.5% ($2.488 million net or 3.2%) compared to planned expenditures for the six-month period ended June 30, 2013.  These net savings were driven by Solid Waste Management Services' under-spending of $2.437 million or 16.1% largely from lower than planned expenditures for salaries and benefits and property taxes for transfer stations.  Rate Supported Programs project year-end under-spending of $14.924 million gross or 1.1% ($10.315 million net or 16.3%) of the 2013 Approved Net Operating Budget.

As shown in Table 1 below, Tax Supported Programs' and Agencies' expenditures were under-spent by $158.611 million gross or 3.5% ($99.340 million net or 5.6%) of planned expenditures for the six-month period ended June 30, 2013 and projections indicate that the year-end under-expenditure is anticipated to be $167.414 million gross or 1.8% ($58.544 million net or 1.6%) based on the most current information.

(See Table 1 – Tax Supported Net Expenditure Variance)

Higher than planned revenues for Toronto Building, mainly from a sustained high volume of permit application intake and lower than planned Ontario Works caseload costs plus under-spending in salaries and benefits due to vacancies that were not filled, has resulted in City Operations being under-spent by $28.553 million or 3.2% at June 30, 2013 and projecting to be under-spent by $32.266 million or 1.8% at year-end.

Agencies reported a net under-expenditure of $8.997 million or 1.1% at the end of the second quarter primarily driven by lower than budgeted diesel fuel prices and timing of certain non-labour expenses as well as workforce gapping for the Toronto Transit Commission.  Agencies collectively forecast a net over-expenditure of $2.178 million or 0.1% for the 2013 Approved Net Operating Budget by year-end primarily from an over-expenditure of $2.100 million or 0.2% for Toronto Police Service due to an approved unallocated reduction for which actions to meet this target have not yet been fully identified and have been projected to be unrealized by year-end should further actions not be taken.

Corporate Accounts were under-spent by $61.790 million as of June 30, 2013.  The variance was partially attributed to lower net expenditures of $37.189 million primarily driven by timing related to the provision of the union agreement with the City of Toronto Professional Firefighters' Association, Local 3888.  Council at its meeting of July 16, 17, 18 and 19, 2013 approved the collective agreement between the City of Toronto and the Toronto Professional Firefighters' Association and subsequent funds will be transferred through the Operating Variance Report for the Nine-Month Period Ended September 30, 2013 to the Toronto Fire Services 2013 Approved Operating Budget.  In addition, there was a timing difference with transferring the one-time lump sum payment for unionized employees and non-union cost of living allowance payment following Council approval.  This budget adjustment is included in the year-end projections.  The Non-Program Revenue Budget experienced a variance of $21.601 million higher than planned, primarily from increased net revenue of $16.788 million for the Municipal Land Transfer Tax as a result of higher average home prices and sales combined with receipt of Third Party Sign Tax net revenue of $7.258 million due to issuance of the 2013 Third Party Sign Tax invoices earlier than planned.  Corporate Accounts collectively forecast a favourable variance of $28.456 million for the 2013 Approved Net Operating Budget by year-end primarily from higher than planned revenue of $24.911 million for the Municipal Land Transfer Tax from stronger average home prices and sales.

Rate Supported Programs were under-spent by $2.488 million or 3.2% compared to net planned expenditures for the six-month period ended June 30, 2013 and project year-end under-spending of $10.315 million or 16.3% of the 2013 Approved Net Operating Budget.

Appendices A, B and C attached summarize net expenditures, gross expenditures, and revenues, respectively.  Appendix D provides the in-year budget adjustments for the second quarter ended June 30, 2013.  Appendix E provides detailed variance explanations for City Programs and Agencies for the six months ended June, 2013 as well as projections to year-end.