Report to/Rapport au :
Planning
and Environment Committee
Comité de l’urbanisme et de l’environnement
and Council / et au Conseil
1 April 2010 /
le 1 avril 2010
Submitted by/Soumis par :
Marian Simulik, City Treasurer/Trésorière municipale
Contact Person/Personne
ressource : Mona Monkman, Deputy City Treasurer – Corporate Finance /
Trésorière municipale adjointe – Finances municipales
Finance Department/Service des
finances
(613)
580-2424 x41723,
mona.monkman@ottawa.ca
|
|
Ref N°: ACS2009-CMR-FIN-0018
|
SUBJECT:
|
DISPOSITION OF 2009 RATE SUPPORTED OPERATING DEFICIT
|
|
|
|
OBJET :
|
Suivi du déficit de
fonctionnement 2009 financé par
les tarifs
|
REPORT RECOMMENDATIONS
That the Planning
and Environment Committee recommend Council approve the following:
1.
That the 2009 deficit of $5.579 million in the drinking water
program be funded from a transfer from the Water Capital Reserve Fund.
2.
That the 2009 deficit of $11.177 million in the wastewater program
be funded from a transfer from the Wastewater Capital Reserve Fund.
3.
That the capital project authorities and financing adjustments, as
detailed in Document 2 to this report, be approved, and that $5.579 million be
returned to the Water Capital Reserve Fund and $11.177 million be returned to
the Wastewater Capital Reserve Fund.
RECOMMANDATIONS DU RAPPORT
Que le Comité de
l’urbanisme et de l’environnement recommande au Conseil d’approuver les mesures
suivantes :
1.
Que le déficit de
5 579 millions de dollars enregistré en 2009 dans le cadre du
programme de gestion de l’eau potable soit financé par un transfert à partir du
fonds de réserve du service d’eau.
2.
Que le déficit de
11 177 millions de dollars enregistré en 2009 dans le cadre du
programme de gestion des eaux usées soit financé par un transfert à partir du
fonds de réserve du service d’égouts.
3.
Que les projets d’immobilisations et
les redressements financiers présentés dans le document 2 du présent
rapport soient approuvés et que 5 579 millions de dollars soient
retournés au fonds de réserve du service d’eau et 11 177 millions de
dollars au fonds de réserve du service d’égouts.
BACKGROUND
As part of the finalization of 2009 operations, and in
conjunction with the preparation of the financial statements it is necessary to
obtain Council approval of the funding of any operating deficit from the
capital reserve funds. This report
provides an analysis of the final results of the 2009 operations and the
disposition of deficits.
DISCUSSION
The City ended the year with a deficit of $5.579 million in the
drinking water program and a deficit of $11.177 million in the wastewater
program.
The 2010 Draft Operating and Capital Budget document that was before
the Planning and Environment Committee on February 23rd, 2010 and
City Council on March 24th, included an analysis of these year end
deficits. A variance analysis is also
reproduced as Document 1 to this report.
Deficits in the water and wastewater programs resulted primarily
from lower water and sewer surcharge billing revenues.
Committee had previously received a mid-year status report that
identified the budget to actual revenue discrepancy. At that time, staff advised that any year-end
deficit in the rate supported programs would be funded by a combination of a
review of capital projects for closure, a refinancing or utilization of
additional debt of existing projects or as a one-time contribution from the
rate capital reserve fund(s).
In order to finalize 2009 year end Financial Statement reporting
requirements, staff are recommending that the deficits be temporarily financed
from the rate capital reserve funds.
This requires Council approval.
Staff have undertaken a review of existing rate supported capital
projects and are recommending certain projects be closed and also that certain
projects be amended to reduce their approved spending authority. These recommendations will result in $2.290
million being returned to the Water Capital Reserve Fund and $3.480 million
being returned to the Wastewater Capital Reserve Fund. Recommended project budget adjustments and
refinancing adjustments are outlined in Document 2 to this report.
In order to fully replenish the reserve funds to their December 31,
2009 balances, staff are also recommending that a funding adjustment be made to
capital project #900061 King Edward (Laurier to Sussex). While the total authorized spending will stay
the same, $10.986 million in rate reserve fund financing will be replaced with
$3.289 million in Water supported debt and $7.697 million in Wastewater
supported debt and. Staff are continuing
to review the existing project authorities to determine if further project
allocations can be reduced in order to relieve this additional debt financing. Any further adjustments will be reported in
the Capital Adjustment and Close Out report scheduled to for the May Planning
and Environment Committee meeting.
With these recommendations, Council will be able to retain the
existing Reserve Fund balances of $15.082 million (water) and $6.760 million
(wastewater) for use in the 2010 and future capital budgets. Document 3 shows the Reserve
Fund Continuity for the rate supported reserves, prior to and after these
adjustments, including the final adjustments to the 2010 rate budget as adopted
by Council on March 24, 2010.
CONSULTATION
The purpose of this report
is administrative in nature and therefore no public consultation is
required.
LEGAL/RISK MANAGEMENT IMPLICATIONS
The transfers outlined in the recommendations require
Council approval. There are no legal or
risk management impediments to implementing the recommendations in this Report.
FINANCIAL IMPLICATIONS
Financial implications are outlined in this report. The projects refinanced with debt authority
will be brought forward to Committee and Council for approval at a later date.
RURAL IMPLICATIONS
There are no rural implications to
implementing the recommendations in this report.
SUPPORTING DOCUMENTATION
Document 1 – Variance Analysis – 2009
Operating Results – Rate Supported Programs
Document 2 – Budget Adjustments :
Reductions to Project Authorities and Refinancing
Document 3 - Capital Reserve Continuities –
Rate Supported
DISPOSITION
The Financial Services Branch will make the
necessary accounting adjustments.
Document
1 (contd)
Variance Analysis- 2009 Operating Results – Rate
Supported Programs
Drinking Water Operations - A $1.488 million surplus was generated through savings in water
production costs due to lower volumes of water purification waste discharged to
ROPEC. In addition, there were surpluses
in compensation costs from staff vacancies during the first part of the year,
and savings in hydro and heating fuel costs.
Water
Billings - An $8.2 million (7%) shortfall in water
billing revenues resulted from a drop in consumption that began in the second
half of 2008. The 2009 budget had not
been adjusted for a 4% drop in water billing revenues experienced during
2008. The timing of the 2009 billing
results did not allow for staff to adjust the 2009 budgets. During 2009, further reductions in
consumption were experienced. Planned
changes in water billing technology will enable the City to receive information
on water billing patterns in a more timely fashion. Changes in consumption patterns were
experienced for several reasons, including wetter spring and summer periods,
the downturn in the economy resulting in reduced ICI consumption and a consumer
and corporate focus on conservation measures.
Waste
Water Operations –
Unachievable efficiency targets caused a deficit in operations. These targets are deferred to 2010. Surpluses in compensation costs from staff
vacancies offset some of this deficit.
Sewer
Surcharge Billing revenues – Since sewer surcharges
are billed based on water consumption, the decline in water billings had a
similar negative impact on sewer surcharge revenues.
Investment
Income – Low short term interest rates and reduced
reserve fund balances have resulted in reduced investment earnings earned by
the waste water reserve funds.
