That the Budget Committee recommends to the Executive Committee that:

1.         City Council receive the item for information.

Net expenditures, after in-year Council approvals, for the year ended December 31, 2012 were lower than planned by $248.183 million for Tax Supported Operations, as outlined in the table below.  This represents 6.7% of the net budget or just 2.6% of the gross budget.  The key contributors to the under-spending included the following:

(See Financial Impact Section of the report dated May 23, 2013, from the

Deputy City Manager and Chief Financial Officer for Table 1

entitled "Tax Supported Net Expenditure Variance")

Lower than planned winter maintenance costs and Ontario Works caseload (average monthly caseload of 104,069 actual versus 108,500 budgeted) plus under-spending in salaries and benefits due to vacancies that were not filled resulted in City Operations being under-spent by $65.00 million or 3.5% at year-end.

Agencies reported a net under-expenditure of $70.455 million or 4.2% at year-end primarily driven by the Toronto Transit Commission. The Toronto Transit Commission (Conventional Services) reported net under-spending $40.954 million or 10.0% due largely to savings of $24.171 million or 1.6% from lower market prices of diesel fuel, electricity and natural gas as well as lower consumption of energy and natural gas from the milder weather earlier in 2012.  Planned revenue was $16.783 million or 1.6% above budget mostly as a result of higher than expected ridership, with 514 million rides provided compared to a budget of 503 million riders; reflecting an increase of 11 million rides.  In addition, Toronto Police Service reported net under-spending of $15.483 million or 1.7% due to savings from members on unpaid leave; materials; and, supplies.  In addition, revenues were higher than planned from increased background checking requests; paid duty administration fees; recoveries from overseas secondments; and, additional grant funding.

Corporate Accounts were under-spent by $172.461 million.  Revenues from the Municipal Land Transfer Tax were $56.180 million or 19.5% higher than a budget of $288.290 million resulting from the number of property sales and values.  In addition, Third Party Sign Tax revenue was $22.446 million higher than the 2012 Approved Operating Budget of $1.582 million.  The net positive variance reflected the collection of retroactive Third Party Sign Taxes, now that the Supreme Court of Canada has not granted leave to appeal the Ontario Court of Appeal’s decision on April 2, 2012 that the Third Party Sign Tax may be applied to all signs regardless of the date they were installed, enabling the City to retroactively bill for past due payments.  A more robust cash flow during 2012, which allowed more income generated from short-term investments, combined with relatively favourable interest rates and capital gains from the sale of investments, resulted in a an extra $22.057 million or 19.4% in revenue from Interest/Investment Earnings.

Altogether, Rate Supported Programs reported an under-expenditure of $63.186 million, as outlined in the table below.  Toronto Water was under-spent by $50.0 million from lower than planned gross expenditures of $33.866 million or 3.8% mainly due to savings in salaries and benefits arising from vacancies that were not filled.  In addition, revenues were $16.134 million or 1.8% above planned largely from increased water and wastewater surcharges. Solid Waste Management Services reported a favourable net variance of $11.265 million resulting primarily from lower than planned expenditures of $15.140 million or 4.4% mainly due savings in salaries and benefits arising from vacancies were not filled.  The Toronto Parking Authority's net expenditures were $1.921 million or 3.4% above budget, driven by higher than planned revenues of $3.577 million or 2.8% mostly from rate increases implemented in August and September of 2012.

(See Financial Impact Section of the report dated May 23, 2013, from the

Deputy City Manager and Chief Financial Officer for Table 1-B

entitled "Rate Supported Net Expenditure Variance")

After $59.734 million is allocated to comply with approved Council direction/legislative requirements as outlined on pages 9 and 10, the 2012 year-end surplus available for distribution is $248.183 million for Tax Supported Programs.  In accordance with the City's Surplus Management Policy, $186.116 million of the final year-end surplus available for distribution will be allocated to the Capital Financing Reserve to fund the City's 2013 to 2022 Capital Budget and Plan.  The remaining $62.067 million will be allocated to underfunded liabilities and/or reserve funds.  Table 2 below summarizes the allocations for Tax Supported Programs and Agencies and Rate Supported Programs.

(See Financial Impact Section of the report dated May 23, 2013, from the

Deputy City Manager and Chief Financial Officer for Table 2

entitled "2012 Year-End Net Operating Results – Tax Supported Programs/Agencies")

Appendices A, B and C attached summarize net expenditures, gross expenditures, and revenues, respectively.  Appendix D provides detailed variance explanations for City Programs and Agencies for the twelve months ended December 31, 2012.