7.       CAPITAL ADJUSTMENTS AND CLOSING OF PROJECTS


RÉAMÉNAGEMENT DE CAPITAL ET CLÔTURE DE PROJETS

 

 

COMMITTEE RECOMMENDATIONS

 

That Council:

1.      Authorize the closing of capital projects listed in Appendix A, the funding of deficits as identified and the return of the balance of funds to funding sources;

2.      Approve the budget adjustments as detailed in Appendix BA;

1.      Approve the transfers to operating as detailed in Appendix B;

1.      Authorize the closing of capital projects listed in Appendix C, the funding of deficits as identified and the return of the balance of funds to funding sources;

1.      Approve a net decrease in debt authority of $10.845 million; and

3.      Authorize the transfer $6.245 million from the transit reserve fund to the city wide reserve fund; and

4.   Receive the budget adjustments in Appendix CD undertaken in accordance with the Delegation of Authority By-law 2001-12, as amended, as it pertains to capital works.

 

 

RECOMMENDATIONS DU COMITÉ

 

Que le Conseil :

1.      Autorise la clôture des projets d’immobilisations énumérés dans l’annexe A, le financement des dépenses tel que décrit, ainsi que le remboursement du solde des fonds aux sources de financement visées;

2.      Approuve les ajustements budgétaires décrits dans l’annexe B;

3.      Approuve une réduction nette des autorisations de dépenses de 10,845 millions de dollars;

4.      Prenne connaissance des ajustements budgétaires énoncés dans l’annexe C, entrepris conformément au règlement municipal 2001-12 sur la délégation de pouvoirs, tel que modifié en ce qui a trait aux projets d’immobilisations.

 

 

 

 

 

DOCUMENTATION

 

1.                  Chief Corporate Services Officer’s report dated 27 June 2006
(ACS2006-CRS-FIN-0027).

 

2.         Appendix A – Capital Projects Recommended for Closure; Appendix B – Budget Adjustments Requiring Council Approval; and, Appendix C – Budget Adjustments Processed Under Delegated Authority, issued previously to all members of Council and held on file with the City Clerk.

 

 

Report to/Rapport au :

 

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

 

and Council / et au Conseil

 

27 June 2006 / le27 juin 2006

 

Submitted by/Soumis par : Greg Geddes, Chief Corporate Services Officer/

Chef des Services généraux

 

Contact Person/Personne ressource : Marian Simulik, Acting Director, Financial Services and City Treasurer/Directrice des services financiers et Trésorière municipale par intérim

Financial Services/Services financiers

580-2424, Ext./poste 14159, Marian.Simulikl@ottawa.ca

 

City Wide

Ref N°: ACS2006-CRS-FIN-0027

 

 

SUBJECT:

CAPITAL ADJUSTMENTS AND CLOSING OF PROJECTS

 

 

OBJET :

RÉAMÉNAGEMENT DE CAPITAL ET CLÔTURE DE PROJETS     

 

 

REPORT RECOMMENDATIONS

 

That Corporate Services and Economic Development Committee recommend Council:

1.   Authorize the closing of capital projects listed in Appendix A, the funding of deficits as identified and the return of the balance of funds to funding sources;

2.   Approve the budget adjustments as detailed in Appendix BA;

3.   Approve the transfers to operating as detailed in Appendix B;

1.                  Authorize the closing of capital projects listed in Appendix C, the funding of deficits as identified and the return of the balance of funds to funding sources;

1.                  Approve a net decrease in debt authority of $10.845 million; and

4.                  Authorize the transfer $6.245 million from the transit reserve fund to the city wide reserve fund; and

4.   Receive the budget adjustments in Appendix CD undertaken in accordance with the Delegation of Authority By-law 2001-12, as amended, as it pertains to capital works.

 

 

RECOMMANDATIONS DU RAPPORT

 

Que le Comité des services organisationnels et du développement économique recommande au Conseil ce qui suit :

1.   Autoriser la clôture des projets d’immobilisations énumérés dans l’annexe A, le financement des dépenses tel que décrit, ainsi que le remboursement du solde des fonds aux sources de financement visées;

2.   Approuver les ajustements budgétaires décrits dans l’annexe B;

3.   Approuver une réduction nette des autorisations de dépenses de 10,845 millions de dollars;

4.   Prendre connaissance des ajustements budgétaires énoncés dans l’annexe C, entrepris conformément au règlement municipal 2001-12 sur la délégation de pouvoirs, tel que modifié en ce qui a trait aux projets d’immobilisations.

 

 

BACKGROUND

 

Recommendation 1 – Capital Projects Recommended for Closure

 

Appendix A provides a list of those capital projects that are recommended for closure and the adjustments required that return excess funds to source or fund deficits.  In some cases the same project has been included as part of a budget adjustment, in Appendix B, with the understanding that the adjustment will occur prior to closure.  Should the budget adjustments not be approved, the projects affected will not be closed.

 

In March 2006, Executive Management Committee approved a policy for the closure of capital projects.  Generally, projects that have been open longer than three years or have had no spending within the last year are considered candidates.  In the absence of justification for keeping those projects open, they will be recommended to Council for closure.  Appendix A is the result of the application of this policy.

 

Explanations are provided for those projects with deficits exceeding $100,000.  As can be noted, several projects included in this appendix also have surpluses exceeding $100,000.  While specific explanations are not provided for each of these surpluses, generally, they are the result of scope changes.   

 

City Council Direction

 

On September 14, 2005, City Council approved the funding of one-time expenditure items from pay-as-you-go contributions.  In 2006, the one time operating funds required is $4.436 million.  In order to limit the impact on the 2006 capital budget, Council directed departments to close completed projects and fund these one-time expenditures from the unspent balances.

 

On March 9, 2006, the Long Range Financial Plan Sub-Committee considered the motion approved by Council during the 2006 budget deliberation process to reduce capital spending by $7 million.  To achieve this, the Committee directed staff to review 2006 capital projects in the growth and strategic initiatives categories to determine if they could be deferred by one year or reduced by the consulting amounts without affecting project delivery.  Those projects identified by departments for reduction or deferral are included as budget adjustments in Appendix B.  The balance of $6.289 million will be funded from surplus funds resulting from the budget adjustments and project closures.

 

There is sufficient funding from project closures and budget adjustments to cover the one time operating expenditures of $4.436 million as well as the $7 million reduction as approved by City Council during budget deliberations.

 

Recommendation 21 and 2 –- Budget Adjustments, Including Transfers to Operating, Requiring Council Approval - Appendices A and B

 

 

Those capital budget adjustments that require Council approval because they are not within the delegated authority limits of the City Treasurer and the Chief Corporate Services Officer for the transfer of funds are listed in Appendix BA.  An explanation for the budget adjustment, as provided by the submitting department, is also included.  There are three parts to this appendix:  budget     adjustments initiated by the operating department; budget adjustments that are administrative in nature and budget reductions.

  Appendix B  includes transfers to operating for those parts of capital projects that are operating in nature.  An explanation for the budget adjustment is included in the attachments.

 

 

Generally, the budget adjustments relate to:

 

·        Requests for new authority;

·        Changes to project funding sources (as a result of gas tax guidelines or, to realign funding sources, or to provide for funding flexibility in future requests).

;

Transfer of surplus funds from older projects to current or new projects to facilitate closure of the more senior projects;

Reductions to total project authority; and

Transfers to operating.

 

 

Recommendation 3 – Capital Projects Recommended for Closure

 

Appendix C provides a list of those capital projects that are being recommended for closure and the adjustments required that return excess funds to source or fund deficits.  A short explanaation is provided for those projects with deficits exceeding $100,000.

 

In some cases the same project has been included as part of a budget adjustment (in Appendix A or B) with the understanding that the adjustment will occur prior to closure.  Should the budget adjustments not be approved, the projects affected will not be closed.

 

 

Recommendation 34 – Decrease in Debt Authority

 

All increases in debt authority require the specific approval of City Council.  The net change in debt authority resulting from the budget adjustments and project closures is a net decrease of $10.149845 million.

 

Several projects in the 2005 capital budget document that were funded from debt were also identified as requiring refinancing in future years. This was necessary in order to maintain the debt authority within the "revolving" debt envelope.  The reduction in debt authority identified in this report is being used to offset the amount of debt that requires refinancing with no negative affect on the "revolving" debt limit.  This consideration will continue in future project closures until the total amount of debt authority identified for refinancing in the 2005 capital budget can be fully offset by the amount of debt authority not required as a result of project closures. 

 

Recommendation 5 – Transfer from Transit Reserve Fund to City Wide Reserve Fund

 

On September 14, 2005, City Council approved the funding of one-time expenditure items from pay-as-you-go contributions.  In 2006, the one time operating funds required total $4.436 million.  In order to limit the impact on the 2006 capital budget, Council directed departments to close completed projects and fund these one time expenditures from the unspent balances. 

 

On March 9, 2006, the Long Range Financial Plan Sub-Committee considered the motion approved by Council during the 2006 budget deliberation process to reduce capital spending by $7 million.  To achieve this, the Committee directed staff to review 2006 capital projects in the growth and strategic initiatives categories to determine if they could be deferred by one year or reduced by the consulting amounts without affecting project delivery.  Those projects identified by departments for reduction or deferral are included as part of Appendix A.  The balance of $6.289 million, will be funded from the funding that is freed up as a result of budget adjustments and project closures. 

 

As indicated previously, when projects are closed, surplus funding is returned to source.  Likewise, deficits are funded from the same sources as the original funding.  The $6.245 million identified for transfer is the net excess funding from the closure of capital projects that would have been returned to the transit reserve fund.  This recommendation directs those excess funds to the city wide reserve fund to ensure a healthy position after the two directives of City Council are met.

 

Recommendation 46 - Capital Budget Adjustments Processed Under Delegated Authority

 

The delegation of authority for capital budget adjustments in which the transfer of capital funds could be made by the City Treasurer and the Chief Corporate Services Officer was approved by City Council on March 26, 2003, and revised on November 24, 2004. Appendix CD includes all those capital budget adjustments processed under delegated authority for the period July 1, 2005 to May 31, 2006.

 

Normally, capital budget adjustments processed under delegated authority have no net effect on the City’s total financing.  However, Oon November 30, 2005, a further authority was delegated to the City Treasurer to make adjustments to the 2005 capital budget prior to year end.  This was required because the federal gas tax guidelines were provided after the 2005 capital budget was approved and a reassignment of funds to eligible projects was necessary to ensure compliance.  At the time the delegated authority was requested, it was also indicated that the details would be provided as information in the next Capital Budget Adjustments and Closing of Projects report and they are included in this schedule.  Those gas tax adjustments related to debt require specific Council approval and these budget adjustments are included in Appendix BA.

 

 

Capital Budget Status

 

The capital budget status report showing all capital projects that were open as of December 31, 2005, is posted on the City’s Web site.  Neither the 2006 capital budget nor the recommendations in this report have been incorporated in that schedule.

 

 

CONSULTATION

 

This report is administrative in nature and all departments have been involved in its preparation.

 

 

FINANCIAL IMPLICATIONS

 

The impact of the closing of capital projects recommended in Appendix A and the budget adjustments in Appendix BA, the transfers to the operating budget in Appendix B and the closing of capital projects recommended in Appendix C resresult in the following impact on the City’s reserves and reserve funds:

 

 

 

Return to Source $

Funding Required $

Net Change $

Tax supported and other reserve funds

31,987

(19,707)

12,280

Rate supported reserve funds

18,396

(3,327)

15,069

Gas tax supported reserve funds

1,288

(8,234)

(6,946)

Development charge revenues

9,919

(4,710)

5,209

Total

61,590

(35,978)

25,612

 

 

Also,, as a result of capital project closures and recommended budget adjustments, there is a net reduction in budgeted revenue of $10.175.007 million and a net decrease in the debt authority required of $10.845149 million. 

 

A transfer to the operating budget of $925,000 is also recommended.  This reduces the yearly pay as you go contribution to capital and increases the operating base budgets in Public Works and Services by $80,000 and Community and Protective Services by $845,000.

 

The transfer of $6.245 million from the transit reserve fund to the city wide reserve fund has no impact on the total minimum reserve fund balance for the tax supported reserve funds. 

 

There is sufficient funding from project closures and budget adjustments to cover the one time operating expenditures of $4.436 million as well as the $7 million reduction as approved by City Council during budget deliberations. 

 

 

SUPPORTING DOCUMENTATION

 

Appendix A – Capital Projects Recommended for Closure (Issued separately)

Appendix B – Budget Adjustments Requiring Council Approval (Issued separately)

Appendix C – Budget Adjustments Processed Under Delegated Authority (Issued separately)

 

 

DISPOSITION

 

Upon approval of this report, the Financial Services Branch will process the necessary adjustments.