Comité de l’urbanisme et de l’environnement
and Council / et au Conseil
Finance Department/Service des finances
(613) 580-2424 x41723, firstname.lastname@example.org
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.
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.
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.
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.
The purpose of this report is administrative in nature and therefore no public consultation is required.
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 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.
There are no rural implications to implementing the recommendations in this report.
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
The Financial Services Branch will make the necessary accounting adjustments.
Document 1 (contd)
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.