That Council approve the 2005 City of Ottawa Consolidated Financial Statements.





Que le Conseil approuve les états financiers consolidés de 2005 de la Ville d’Ottawa.



















1.                  Chief Corporate Services Officer’s report dated 22 May 2006

2.         Ernst & Young Audit Results – Year Ended December 31, 2005 issued previously to all members of Council and held on file.


3.         Extract of Draft Minute, 06 June 2006.


Report to/Rapport au :


Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique


and Council / et au Conseil


22 May 2006 / le 22 mai 2006


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

Chef des Services généraux


Contact Person/Personne ressource : Wayne Martin, Manager, Accounting and Financial Reporting/Gestionnaire, Vérification et rapports

580-2424, x25183, Wayne.Martin@ottawa.ca


City Wide

Ref N°: ACS2006-CRS-FIN-0023













That the Corporate Services and Economic Development Committee and Council approve the 2005 City of Ottawa Consolidated Financial Statements.





Que le Comité des services organisationnels et du développement économique et le Conseil approuvent les états financiers consolidés de 2005 de la Ville d’Ottawa.





The Financial Statements have been prepared in accordance with the accounting policies prescribed by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.  These accounting policies require the reporting of revenues and expenditures on the accrual basis of accounting.  The accrual basis of accounting recognizes revenues, as they are earned and measurable; expenditures are recognized, as they are incurred and measurable as the result of the receipt of goods and services and the creation of a legal obligation to pay.  The City’s Operating and Capital Budgets are based upon a modified cash basis of accounting.  This results in significant differences between the City’s external financial statements and its Operating and Capital Budgets.


These differences are reported as Amounts to be Recovered in Future Years and represent the timing difference between when expenditures are recognized under the accrual method of accounting and when they are funded through property taxes and rates as part of the Operating Budget.  Specific details on the Amounts to be Recovered in Future Years are provided in note 14 to the Financial Statements.





Public Consultation was not required.





Not applicable.





Document 1 - 2005 City of Ottawa Consolidated Financial Statements
Document 2 - Ernst & Young Audit Results - Year Ended December 31, 2005 (issued separately and held on file with the City Clerk)




Consolidated Financial Statements


The City of Ottawa

December 31, 2005










To the Mayor and Members of Council


We have audited the consolidated statement of financial position of the City of Ottawa as at December 31, 2005 and the consolidated statements of financial activities and cash flows for the year then ended.  These consolidated financial statements are the responsibility of the City’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.


We conducted our audit in accordance with Canadian generally accepted auditing standards.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.


In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the City of Ottawa as at December 31, 2005 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.





Ottawa, Canada,                                                                                                     

March 24, 2006.                                                                   Chartered Accountants


As at December 31                                                                                                    

The City of Ottawa




[dollars in thousands]




                                                                                                 2005                   2004

                                                                                                                                       $                                  $



Cash and short-term investments                                                                  172,616                       170,614

Accounts receivable                                                                                        165,804                       157,760

Investments [note 4]                                                                                       719,825                       526,868

Investment in government business enterprises [note 5]                         253,569                       431,059

Total financial assets                                                                                   1,311,814                    1,286,301



Inventories                                                                                                           23,483                         23,854

Prepaid expenses [note 6]                                                                                 11,372                           9,231

Total non-financial assets                                                                                 34,855                         33,085

Total assets                                                                                                    1,346,669                    1,319,386



Accounts payable and accrued liabilities                                                     276,133                       227,284

Short-term loan [note 7]                                                                                    16,907                         12,985

Deferred revenue [note 8]                                                                              324,343                       300,826

Employee benefits [notes 9 and 14]                                                             253,498                       236,758

Accrued interest [note 14]                                                                               12,650                         11,278

Landfill closure and post-closure liability [notes 10 and 14]                     10,847                         17,828

Net long-term debt [notes 11 and 14]                                                          721,848                       655,481

Capital lease obligations [notes 12 and 14]                                                  87,667                         72,628

Total liabilities                                                                                              1,703,893                    1,535,068

Contingencies and commitments [notes 12 and 13]



Operating fund                                                                                                   (10,765)                          1,188

Capital fund                                                                                                          67,811                         58,503

Reserves and reserve funds                                                                            451,428                       300,202

Equity in government business enterprises [note 5]                                 253,569                       431,059

Fund balances                                                                                                   762,043                       790,952

Amounts to be recovered in future years [note 14]                              (1,119,267)                 (1,006,634)

Total municipal position                                                                                (357,224)                    (215,682)

Total liabilities and municipal position                                                    1,346,669                    1,319,386


See accompanying notes


The City of Ottawa



[dollars in thousands]


For the year ended December 31


                                                                                                 2005                   2004

                                                                                                                                       $                                  $



Net taxes available for municipal purposes [note 15]                                        1,099,196                    1,059,355

Fees and user charges                                                                                             489,446                       467,690

Government grants                                                                                                391,080                       363,975

Investment income                                                                                                   44,913                         40,448

Interest from Hydro Ottawa Holding Inc.                                                                    189                         16,455

Fines and penalties                                                                                                  20,448                         18,767

Development charges                                                                                               72,262                         47,052

Other revenue                                                                                                          35,668                         30,321

Total revenues                                                                                                  2,153,202                    2,044,063



General administration                                                                                           179,707                       187,141

Fire                                                                                                                         116,341                       113,716

Police                                                                                                                     178,524                       176,494

Land ambulance and other protective services                                                      103,946                         79,261

Roads, traffic and parking                                                                                      215,874                       199,256

Public transit                                                                                                          391,578                       310,920

Wastewater treatment                                                                                            101,961                         77,627

Water supply and distribution                                                                                88,491                         66,616

Waste and recycling services                                                                                   46,729                         44,221

Social housing                                                                                                        169,186                       137,318

Parks and recreation                                                                                               135,417                       131,950

Libraries                                                                                                                   43,051                         29,152

Planning and development                                                                                       30,936                         32,784

Social services                                                                                                        272,475                       267,458

Homes for the aged                                                                                                  53,162                         58,855

Child care                                                                                                                 89,546                         82,280

Health                                                                                                                      37,592                         35,095

Interest and financing fees                                                                                       62,738                         62,353

Total expenditures                                                                                           2,317,254                    2,092,497

Net expenses for the year before the following:                                                   (164,052)                      (48,434)

  Equity in earnings of government business enterprises [note 5]                           22,510                         19,659

Net expenses for the year                                                                                 (141,542)                      (28,775)



New debt issued                                                                                                    130,062                         35,026

Capital lease                                                                                                             16,200                               

Debt principal repayments                                                                                    (64,856)                      (61,970)

Obligations to be funded in future years                                                                 31,227                         11,937

Increase (decrease) in financing                                                                       112,633                        (15,007)

Change in fund balances for the year                                                                      (28,909)                      (43,782)

Fund balance at the beginning of the year                                                              790,952                       834,734

Fund balance at the end of the year                                                                  762,043                       790,952

See accompanying notes

For the year ended December 31                                                                               

The City of Ottawa



[dollars in thousands]




                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $



Net expenses for the year                                                                               (141,542)                      (28,775)

Adjustment for non-cash items:

  Equity in earnings of government business enterprises                           (22,510)                      (19,659)

  Capital expenditures financed by capital lease                                             16,200                               


  Increase in accounts receivable                                                                       (8,044)                      (16,829)

  Increase in inventories                                                                                                                            (90)

  Increase in prepaid expenses                                                                           (2,141)                             

  Decrease in accounts payable and accrued liabilities                                                                 (27,920)

  Decrease in landfill closure and post-closure liability                                  (6,981)                             

                                                                                                                            (165,018)                      (93,273)



  Decrease in inventories                                                                                         371                               

  Decrease in prepaid expenses                                                                                                            2,855

  Increase in accounts payable and accrued liabilities                                  48,849                               

  Increase in short-term loan                                                                                3,922                         12,985

  Increase in deferred revenue                                                                           23,517                         57,446

  Increase in employee benefit obligation                                                        16,740                         10,327

  Increase in accrued interest                                                                               1,372                              896

  Increase in landfill closure and post-closure liability                                                                     3,247

                                                                                                                               94,771                         87,756

Cash used in operating activities                                                                   (70,247)                        (5,517)



Decrease (increase) in investments                                                              (192,957)                        49,171

Cash provided by (used in) investing activities                                          (192,957)                        49,171



Proceeds from payment of Hydro Ottawa Holding Inc loan                      200,000                               

New debt issued                                                                                               130,062                         35,026

Debt principal repayment                                                                                 (64,856)                      (61,970)

Cash provided by (used in) financing activities                                          265,206                        (26,944)


Net increase in cash and short-term

  investments for the year                                                                                     2,002                         16,710

Cash and short-term investments, beginning of the year                          170,614                       153,904

Cash and short-term investments, end of the year                                     172,616                       170,614


See accompanying notes

The City of Ottawa



[dollars in thousands]


December 31, 2005





The City of Ottawa [“the City”] was created through Provincial legislation on December 20, 1999 and commenced operations on January 1, 2001.


The City is responsible for providing municipal services such as employment and financial assistance, long-term care, community services and libraries, emergency and protective services including police, fire and ambulance, and transportation, utilities and public works, including roads, sewers and wastewater, drinking water, garbage and recycling.


As sole shareholder of Hydro Ottawa Holding Inc. and the Ottawa Community Housing Corporation, the City also provides hydro and housing services to the residents of Ottawa.




Basis of presentation


These consolidated financial statements are prepared by management in accordance with accounting policies prescribed by the Public Sector Accounting Board [“PSAB”] of the Canadian Institute of Chartered Accountants [“CICA”].  Since precise determination of many assets and liabilities is dependent upon future events, the preparation of periodic financial statements necessarily involves estimates, which have been made using careful judgment.


Basis of consolidation


These consolidated financial statements reflect the assets, liabilities, revenues and expenditures of the operating fund, capital fund, reserves and reserve funds, and include the activities of all committees of council, and the following boards:


The Police Services Board

The Carp Village Business Improvement Area

The City of Ottawa Public Library Board

The Vanier Business Improvement Area

The Ottawa Community Housing Corporation

The Manotick Business Improvement Area

The Ottawa-Nepean Campsite Authority

The Sparks Street Mall Authority

The Bank Street Business Improvement Area

The Somerset Heights Business Improvement Area

The Westboro Business Improvement Area

The Preston Street Business Improvement Area

The Sparks Street Business Improvement Area

The Byward Market Business Improvement Area

The Somerset Village Business Improvement Area

The Rideau Business Improvement Area


All interfund assets and liabilities, revenues and expenditures have been eliminated.


Certain subsidiary corporations are accounted for on a modified equity basis, consistent with the generally accepted accounting treatment for such government business enterprises [see note 5].  Under the modified equity basis, the business enterprise’s accounting principles are not adjusted to conform to those of the City, and inter-organizational transactions and balances are not eliminated.   Subsidiary corporations accounted for in this manner are:


                Pine View Municipal Golf Course

            Hydro Ottawa Holding Inc. and its subsidiaries


The City of Ottawa Sinking Fund is not consolidated, except for the City’s share of Sinking Fund interest income used to finance the principal amount of debt.  The financial statements also exclude trust assets that are administered for the benefit of external parties.


School boards


The taxation, other revenues, expenditures, assets and liabilities with respect to the operations of the school boards are not reflected in these consolidated financial statements.


Basis of accounting


Revenues and expenditures are reported on the accrual basis of accounting.  The accrual basis of accounting recognizes revenues, as they are earned and measurable; expenditures are recognized as they are incurred and measurable as a result of receipt of goods or services and the creation of a legal obligation to pay.


Measurement uncertainty


The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions on such areas as employee benefits, assessment appeals and environmental provisions.  These estimates and assumptions are based on the City’s best information and judgment and may differ significantly based on actual results.


Financial instruments


The City’s financial instruments consist of cash and short-term investments, accounts receivable, investments, accounts payable and accrued liabilities, deferred revenue, and net long-term debt.  Unless otherwise noted, it is management’s opinion that the City is not exposed to significant interest, currency or credit risks arising from these financial instruments.  The carrying values of the City’s financial instruments approximate their fair values unless noted. 


Cash and short-term investments


Cash and short-term investments include all highly liquid investments with remaining maturities of 90 days or less as at the balance sheet date.




Investments are recorded at amortized cost less amounts written off to reflect a permanent decline in value.  Investments consist of authorized investments pursuant to provisions of the Municipal Act and comprise of financial instruments issued by Canadian government and Schedule I and II banks, as well as asset-backed securities and eligible commercial paper.  Investments for Ottawa Community Housing Corporation are carried at cost and only written down when there has been a permanent impairment to the carrying value.  Investments maturing less than or equal to 90 days are classified as short-term investments on the Consolidated Statement of Financial Position.


Environmental provisions


The City provides for the cost of compliance with environmental legislation when conditions are identified which indicate non-compliance with environmental legislation and costs can be reasonably determined.  The estimated amounts of future restoration costs are reviewed regularly, based on available information and governing legislation.


Deferred revenue


Certain amounts are received pursuant to legislation, regulation or agreement and may only be used in the conduct of certain programs or in the completion of specific work.  In addition, certain user charges and fees are collected but for which the related services have yet to be performed.  These amounts are recognized as revenue in the fiscal year the related expenditures are incurred or services performed.


Government transfers


Government transfers relate to the social services and housing programs and are recognized in the consolidated financial statements in the period in which events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met and reasonable estimates of the amounts can be made.




Inventories are recorded at the lower of cost and replacement cost.


Capital assets


The historical cost and accumulated depreciation of capital assets are not recorded for municipal purposes.  Capital assets are reported as an expenditure on the Consolidated Statement of Financial Activities in the year of acquisition.


Employee benefit plans


The City has adopted the following policies with respect to employee benefit plans:


[a]   The costs of post-employment benefits are recognized as a liability when earned; costs include projected future income payments, health care continuation costs and fees paid to independent administrators of these plans, calculated on a present value basis;


[b]   The costs of pensions and other retirement benefits are actuarially determined using the projected benefits method prorated on service and management’s best estimate of retirement ages of employees, salary escalation, expected health care costs and plan investment performance; and


[c]   The contributions to a multi-employer, defined benefit pension plan are expensed when contributions are due.


Solid waste landfill provision


The estimated costs to close and maintain solid waste landfill sites are based on estimated future expenditures in current dollars, adjusted for estimated inflation, and are reported as a liability on the Consolidated Statement of Financial Position.


Reserves and reserve funds


Reserves and reserve funds comprise funds set aside for specific purposes by Council [see schedule 3].




The City has adopted the accounting and disclosure requirements for local governments related to contingent liabilities in 2005.  Contingent liabilities must now be recognized as an expense in the financial statements when it is likely that a future event will confirm that a liability had been incurred at the date of the financial statements, and the amount can be reasonably estimated.  This change in accounting was applied prospectively in 2005.  As a result, an amount of $17,270 has been expensed in the Consolidated Statement of Financial Activities.




Investments are comprised of:

                                                                                        Cost                                              Market Value      

                                                                         2005                       2004                         2005                   2004

                                                                             $                              $                                $                          $


City of Ottawa debentures                       43,274                     49,164                     45,908                 52,482

Federal government                                315,045                   119,933                   317,965               123,732

Provincial government                             97,147                   140,661                   102,122               146,375

Municipal government                           134,551                   116,461                   137,846               120,657

Banks                                                          49,285                     39,391                     50,402                 40,471

OCHC securities*                                      31,088                     30,000                     34,552                 31,800

Other                                                           49,435                     31,258                     49,293                 31,744

                                                                   719,825                   526,868                   738,088               547,261

* Corporate bonds, common and foreign stock held for Ottawa Community Housing Corporation


The weighted average yield on investments held as at December 31, 2005 is 4.28% [2004 ‑ 5.00%].  Investments mature from April 7, 2006 to March 8, 2029.


Investments include $200,000 supporting a City Endowment Fund created through the repayment of a promissory note from Hydro Ottawa Holding Inc. [see note 5].




Investments are comprised of:


                                                                                  Net Assets                                         Share of Income    

                                                                         2005                       2004                         2005                   2004

                                                                             $                              $                                $                          $


Pine View Municipal Golf Course               (253)                       (198)                           (55)                   (41)

Hydro Ottawa Holding Inc.                   253,822                   431,257                     22,565               19,700

                                                                   253,569                   431,059                     22,510               19,659


[a]     Investment [100% owned] in Pine View Municipal Golf Course


The following table provides condensed supplementary financial information for Pine View Municipal Golf Course:


                                                                                                                           2005                           2004

                                                                                                                                       $                                  $


Financial position

Current assets                                                                                                           123                                83

Capital assets                                                                                                         1,704                           1,550

Total assets                                                                                                            1,827                           1,633


Current liabilities                                                                                                         71                                69

Cash advanced by the City of Ottawa                                                               2,009                           1,762

Total liabilities                                                                                                      2,080                           1,831

Net assets                                                                                                                 (253)                           (198)


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Results of operations

Total revenues                                                                                                       2,007                           1,682

Total expenses                                                                                                       2,062                           1,723

Net loss                                                                                                                       (55)                             (41)


[b]     Investment [100% owned] in Hydro Ottawa Holding Inc.


The following table provides condensed supplementary financial information of Hydro Ottawa Holding Inc. for the year ended December 31:


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Financial position

Current assets                                                                                                   152,571                       140,529

Capital assets                                                                                                    470,271                       440,141

Other assets                                                                                                         10,977                           7,239

Total assets                                                                                                       633,819                       587,909


Current liabilities                                                                                               148,480                       138,888

Other                                                                                                                   231,517                         17,764

Total liabilities                                                                                                 379,997                       156,652

Net assets                                                                                                          253,822                       431,257


Net assets consist of:

                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Investment in Hydro Ottawa Holding Inc.:

  Notes payable to the City of Ottawa                                                                                             200,000

  Common shares [100%]                                                                                 228,453                       228,453

  Retained earnings                                                                                             25,369                           2,804

Net assets                                                                                                          253,822                       431,257


Interest income of $189 [2004 ‑ $16,455] was earned by the City of Ottawa in 2005 on promissory notes bearing an annual interest rate of 6.9%.  On December 31, 2004, by Resolution approved by City Council dated August 25, 2004, $37,825 of the $237,825 promissory note issued by Hydro Ottawa Holding Inc. was converted into 37,825,000 Class A common shares of Hydro Ottawa Holding Inc.   On January 6, 2005, Hydro Ottawa Holding Inc repaid the promissory note to the City of Ottawa in the amount of $200,000 with proceeds contributed to a City Endowment Fund [see schedule 3]. 


A target dividend policy of 60% of any annual net income of Hydro Ottawa Holding Inc was also approved by City Council.  The City of Ottawa as holder of common shares in Hydro Ottawa Holding Inc is entitled to receive dividends related to 2005 operations as declared by Hydro Ottawa Holding Inc Board in 2006.


For the year ended December 31, 2005, Hydro Ottawa Holding Inc. earned revenues related to sale of electricity and broad bandwidth, the provision of street lighting services, and energy management consulting in the amount of $29,999 [2004 ‑ $30,757] from the City of Ottawa.  Certain services mainly related to water and sewer charges, fuel and permits were purchased from the City of Ottawa in the amount of $354 [2004 ‑ $852]; property taxes in the amount of $1,712 [2004 ‑ $1,644] and royalties in the amount of $137 [2004 ‑ $nil].


Hydro Ottawa Holding Inc. also owns 28.33% of Chaudière Water Power Inc. [“CWP”], a corporate entity formed and owned by Domtar Inc., Energy Ottawa Inc. and Hydro-Quebec that operates and maintains the Chaudière dam.  By agreement, all expenditures incurred by CWP, including those of a capital nature, are recovered from shareholders based on their pro-rata interest in the Company. 


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Results of operations

Total revenues                                                                                                  707,934                       621,856

Total expenses                                                                                                  685,369                       602,156

Net income                                                                                                           22,565                         19,700




The balance of prepaid expenses reported on the Consolidated Statement of Financial Position is comprised of:


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Prepaid welfare entitlements                                                                                7,100                           7,800

Other prepaids                                                                                                       4,272                           1,431

                                                                                                                               11,372                           9,231


Prepaid welfare entitlements represent the advance payment of January benefit entitlements in the month of December.  Of this amount, the Province of Ontario will fund 80%.




The City has entered into an agreement with the Ontario Strategic Infrastructure Financing Authority [“OSIFA”] for up to $45,700 in long-term loans to be issued in future years for bridge, water and wastewater projects.  The City had short-term construction loans outstanding in the amount of $16,907 [2004 ‑ $12,985] under this loan facility as at December 31, 2005.  In addition during 2005, $11,841 has been issued as a long term debenture to OSIFA.  This amount is included in note 11.




Deferred revenue, set aside for specific purposes by legislation, regulation or agreement as at December 31 is comprised of:


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Development charges                                                                                      257,407                       255,537

Other deferred revenue                                                                                      43,861                         34,914

Gas Tax                                                                                                                 12,463                               

Cash in lieu of parkland                                                                                        7,374                           7,475

Cash in lieu of parking                                                                                          3,022                           2,669

Local improvements                                                                                                 216                              231

Total deferred revenue                                                                                    324,343                       300,826




The City provides certain benefits including retirement and other employment benefits to most of its employees.


[a]  Employee benefits


Employee benefit liabilities of the City as at December 31 are as follows:


                                                                                                                                   2005                          2004                                                $              $

Post-retirement benefits                                                                                      116,407                     107,402

Post-employment benefits                                                                                   68,089                        66,939

Workplace Safety and Insurance Board obligations                                       51,851                        49,112

Vacation leave                                                                                                       17,151                        13,305

                                                                                                                                253,498                     236,758

The defined benefit plans relating to post-retirement and post-employment provide a variety of benefits to retirees, active and long-term disabled employees, including income, medical, dental, life insurance, workers’ compensation and sick leave gratuity benefits.


The City is a schedule 2 employer under the Workplace Safety and Insurance Act and, as such, assumes full responsibility for financing its workplace safety insurance costs.  The accrued obligation represents the present value of future benefits on existing claims.


The continuity for post-retirement and post-employment benefits for 2005 is as follows:


                                                                                          Post-retirement        Post-employment         Total

                                                                                                         $                                   $                           $


Balance, at the beginning of the year                                 107,402                         66,939               174,341

Experience trend and interest adjustments                             5,421                          (5,733)                   (312)

Current service costs/cost of new claims                               3,119                           8,314                 11,433

Interest cost                                                                                 5,326                           3,433                   8,759

Benefits paid                                                                              (4,861)                        (4,864)                (9,725)

Balance, at the end of the year                                           116,407                       68,089             184,496


Due to the complexities in valuating the plans, actuarial valuations are conducted on a periodic basis.  The liabilities reported in these consolidated financial statements are based on a valuation as of December 31, 2005.


Many of the estimates and assumptions used in 2005 may change significantly with the next detailed evaluation.  The significant actuarial assumptions adopted in measuring the City’s accrued benefit obligations for post-retirement and post-employment benefits are as follows:



Discount rate                                                                                                                                               4.5%

Inflation rate                                                                                                                                                 3.0%

Health care inflation rate                                                            10% initially, grading down to 5% in 2014



Discount rate                                                                                                                                               5.0%

Inflation rate                                                                                                                                                 3.0%

Health care inflation rate                                           11% initially, grading down to 5% in and after 2014


[b]  Pension agreements


[i]      Ontario Municipal Employees Retirement Fund


The City makes contributions to the Ontario Municipal Employees Retirement System [“OMERS”], which is a multi-employer pension plan, on behalf of most of its employees.  The plan is a defined benefit plan, which specifies the amount of the retirement benefit to be received by the employees based on length of service and rates of pay.  The City’s contribution to the OMERS Plan for 2005 was $45,514 [2004 ‑ $41,590] for current service and is included as an expenditure on the Consolidated Statement of Financial Activities.


The amount contributed for past service to OMERS for the year ended December 31, 2005 was $297 [2004 ‑ $320] and is included as an expenditure on the Consolidated Statement of Financial Activities.


[ii]     City of Ottawa Superannuation Fund


The City also sponsors the City of Ottawa Superannuation Fund [“COSF”], a defined benefit plan which provides retirement benefits to employees based on length of service and rates of pay.  With the introduction of OMERS, the COSF became a closed group in 1965.  As at December 31, 2005 there were no active members and 950 pension recipients.  As at December 31, 2004, there were 4 active members and 978 pension recipients.  No employee or matching employer contributions to the COSF for current service or for past service was required in 2005 or 2004.


The latest actuarial valuation was made as at December 31, 2004.  The net pension asset is as follows:




Pension fund assets ‑ end of the year                                                                                274,330

Accrued benefit obligation ‑ end of the year                                                                     272,469

Net pension asset                                                                                                                     1,861


The City is committed to provide an increase in indexation from 55% of inflation to 75% in 2005 and an increase of 5% for each of the next 5 years.  The cost of this indexation is expected to be approximately $20,000 and will be recorded over the average remaining life expectancy of the former employees. 



[iii]   Ottawa-Carleton Regional Transit Commission Employees’ Pension Plan


Staff of the former Ottawa-Carleton Regional Transit Commission [“OC Transpo”] joined OMERS as of January 1, 1999.


OC Transpo maintains a contributory defined benefit plan, which covers all of its employees and provides a pension based on length of service and rates of pay.  The last actuarial evaluation was conducted as at January 1, 2005 and no experience deficiency existed in the plan at that time.




The Ontario Environmental Protection Act sets out the regulatory requirements for the closure and maintenance of landfill sites.  Under this Act, the City is required to provide for closure and post-closure care of solid waste landfill sites.  The costs related to these obligations are provided over the estimated remaining life of the landfill sites based on usage. 


The City has two active landfill sites ‑ Trail Road Landfill and Springhill as well as one inactive site for which the City has responsibilities for all costs relating to closure and post-closure care.  As at December 31, 2005, the remaining capacity of the Trail Road site is approximately 8,200,000 [2004 ‑ 912,747] cubic meters, all of which is expected to be used by the year 2038.  A Site Optimization/Expansion Environmental Assessment for Trail Road was approved in 2005, which increased the capacity of the Trail Rd landfill and will therefore extend the life [capacity] of the landfill from the year 2009 to the year 2038.  The remaining capacity at the Springhill site is approximately 1,009,193 [2004 ‑ 1,140,017] cubic meters, which is expected to be used by the year 2021.


Closure for the Trail Road Landfill and Springhill will involve covering the site, implementing drainage control, installing ground water monitoring wells and gas recovery facilities.  Post-closure care activities for these sites and other inactive sites are expected to occur for approximately 25 years.


The estimated liability for the care of landfill sites is the present value of future cash flows associated with closure and post-closure costs discounted using the City’s cost of capital of 4.5% [2004 ‑ 5.0%] as well as considering an annual CPI inflation rate of 2.02% [2004 ‑ 2.02%] [annual average of the last 10 years].  This estimate amounts to $10,847 at December 31, 2005 [2004 ‑ $17,828] and is included as a liability on the Consolidated Statement of Financial Position.  The main reason for the reduction of the liability is due to the extension of the life of the Trail Road Landfill from 2009 to 2038.


Estimated total expenditures over the 25 years post-closure period are approximately $39,870.




[a]    Net long-term debt reported on the Consolidated Statement of Financial Position comprise the following:


                                                                                                                           2005                           2004

                                                                                                                               $                                  $


Instalment and sinking fund debenture debt issued at various rates of interest ranging from 2.41 % to 10.75%                                                                                                     618,773                       544,251


The total value of sinking fund deposits, which have accumulated to the end of the year to retire Sinking Fund debentures included in the above amount              (154,221)                    (135,034)

                                                                                      464,552              409,217


Public Private Partnership Debt                                         12,882                      


Mortgages payable on housing properties at various interest rates ranging from 2.5% to 11.25% guaranteed by the Canada Mortgage and Housing Corporation 242,175                       245,663


Forgivable loans related to Canada Ontario Affordable Housing Program and the Residential Rehabilitation Assistance Program                                                         2,239                              601

                                                                                      721,848              655,481


Public housing debentures issued by Canada Mortgage and Housing Corporation in the amount of $93,061 [2004 ‑ $96,877] included in the Ottawa Community Housing Corporation [“OCHC”] have not been included in these consolidated financial statements as they are the responsibility of the Province.


Mortgages and forgivable loans on housing properties are governed by operating agreements with the Province of Ontario and/or the Canada Mortgage and Housing Corporation and involve no direct or indirect obligation to the City of Ottawa.  Properties owned by OCHC with a net book value of approximately $244,414 [2004 ‑ $246,264] pledged as collateral for the mortgages and forgivable loans, have not been reflected in the Consolidated Statement of Financial Position.


[b]   Principal payments including contributions to the Sinking Fund in future years are:




2006                                                                                                                                                     55,746

2007                                                                                                                                                     48,902

2008                                                                                                                                                     47,760

2009                                                                                                                                                     49,457

2010 and thereafter                                                                                                                         473,453



These amounts will be paid from tax and rate supported operations.  It is estimated that interest to be earned by the Sinking Fund will amount to approximately $46,530, which together with the $675,318 shown above, will be used to retire the outstanding debt of $721,848.


[c]    In addition to the net long-term debt set out above, the City has entered into guarantees of loans amounting to $47,800 arranged to provide financing for the development of an ice rink and the construction of a Paramedic headquarters facility under Public Private Partnerships.  The City’s guarantees also cover the borrowers’ obligations under interest rate derivative agreements to manage the volatility of interest rates.  Similarly, the City has entered into a loan agreement and a respective interest rate derivative agreement for the construction of another ice rink facility in the amount of $12,882 under another Public Private Partnership.  With respect to these loan facilities, the City has converted $60,800 of floating rate debt for fixed rate debt ranging from 5.85% to 6.49%.  The related derivative agreements are in place until the maturity of the debts in 2025 to 2035.




The City leases an administrative office building and Paramedic Services headquarters building as detailed below:


                                                                                        Office                                Paramedic Services

                                                                                     Building                                          Building                


Lease term                                                                   24 years                                           30 years

Interest rate                                                                    6.0%                                               5.794%

Purchase option                                                          $10,000                                                $Nil


Future minimum payments for both the above capital leases are as follows:



                                            Office Building                     Services Building                            Total             

                                      Principal         Interest           Principal         Interest           Principal      Interest

                                              $                      $                         $                       $                         $                    $


2006                                  1,231                4,127                    517                   858                 1,748              4,985

2007                                  1,305                4,053                    529                   830                 1,834              4,883

2008                                  1,388                3,975                    542                   800                 1,930              4,775

2009                                  1,473                3,892                    554                   770                 2,027              4,662

2010                                  1,561                3,803                    566                   739                 2,127              4,542

Thereafter                      64,509              38,392               13,492                7,932               78,001            46,324

                                      71,467            58,242              16,200            11,929             87,667          70,171




[a]     In the normal course of operations, the City has become involved in various claims and legal proceedings.  While the final outcome with respect to claims and legal proceedings pending at December 31, 2005 cannot be predicted with certainty, it is the opinion of management that their resolution will not have a materially adverse effect on the City’s financial position or results of operations.


[b]     A class action suit claiming $500,000 in restitution payments plus interest was served on the former Toronto Hydro-Electric Commission in 1998 as the representative of the Defendant Class consisting of all municipal electric utilities in Ontario which have charged late payment charges on overdue utility bills at any time after April 1, 1981.


The claim is that late payment penalties result in electric utilities receiving interest at effective rates in excess of what is allowed under Section 347(1)(b) of the Criminal Code.  This action has not yet been certified as a class action and no discoveries have been held, as parties were awaiting the outcome of a similar proceedings brought against The Consumers Gas Company Limited [now Enbridge Gas Distribution Inc.].


On April 22, 2004, the Supreme Court of Canada released a decision in the Enbridge Gas Distribution Inc. [“EGD”] case with respect to late payment penalties.  The Court rejected all the defences which had been raised by EGD, however the Court did not permit the plaintiff class to recover damages for any period prior to the issuance of the Statement of Claim in 1994.  At this time, it is not possible to quantify the effect, if any, on the financial statements of the City of Ottawa.


[c]     Purchasers of electricity in Ontario, through the Independent Electricity System Operator  [“IESO”], are required to provide security to mitigate the risk of their default based on their expected activity in the market. 


The IESO could draw on these guarantees if Hydro Ottawa Holding Inc fails to make a payment required by a default notice issued by the IESO.  A prudential support obligation is calculated based upon a default protection amount and the distributor’s trading limit less a reduction for the distributor’s credit rating.  As at December 31, 2005 and December 31, 2004, Hydro Ottawa Holding Inc. provided bank letters of credit of $22,000 to cover its prudential support obligation.  In addition,  Hydro Ottawa Holding Inc provided bank letters of credit of $376 to the City of Ottawa and Ontario Power Authority as security for construction projects. 


[d]     Hydro Ottawa Holding Inc. participates with other electrical utilities in Ontario in an agreement to exchange reciprocal contracts of indemnity through the Municipal Electrical Association Reciprocal Insurance Exchange.  Hydro Ottawa Holding Inc. is liable for additional assessments to the extent premiums collected and reserves established are not sufficient to cover the cost of claims and costs incurred.  If any additional assessments are required in the future, their cost would be charged to operations in the year in which they occur.


[e]     Hydro Ottawa Holding Inc. may be subject to environmental regulatory requirements related to the destruction of PCBs in distribution transformers and other clean up related to PCBs if draft federal legislation in its current form is ultimately passed.  Proposed revisions to the Federal PCB Regulatory Framework under the Canadian Environmental Protection Act, 1999 recommends that certain equipment containing PCBs be removed from service by December 31, 2009 with final removal of PCB equipment expected by December 31, 2014.  This legislation could result in approximately $10,000 to $11,000 being spent over the 4-year period from 2006 to 2009.  No amount has been recorded in these financial statements.


[f]      The City has commitments on capital projects at December 31, 2005 in the amount of $261,075 [2004 ‑ $130,208].


[g]  The City is committed to the following payments over the next five years under operating lease agreements:




2006                                                                                                                                                     14,260

2007                                                                                                                                                     11,612

2008                                                                                                                                                     10,875

2009                                                                                                                                                     10,384

2010                                                                                                                                                       5,521


[h]  Hydro Ottawa Holding Inc. has $9,600 in open commitments for 2006.  This includes $3,200 for an application services agreement, for its customer information system and beginning in 2005 an arrangement to provide call centre services, with IBM Canada Limited.  The minimum billable value of the agreement over its term is $16,418 and is set to expire December 31, 2010.


[i]   The City has commitments for the purchase of ice rental time in the amount of $8,064 and $13,047 in accordance with two Public Private Partnership Agreements.  These commitments are set to expire in 2024 and 2034 respectively.




The amounts to be recovered in future years reported on the Consolidated Statement of Financial Position are comprised of:

                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Net long-term debt                                                                                            721,848                       655,481

Employee benefits                                                                                            253,498                       236,758

Capital lease obligations                                                                                    87,667                         72,628

Accrued interest on debt                                                                                   12,650                         11,278

Landfill closure and post-closure liability                                                       10,847                         17,828

Others                                                                                                                   32,757                         12,661

                                                                                                                          1,119,267                    1,006,634


Net financial liabilities are comprised of:


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Total financial assets                                                                                    1,311,814                    1,286,301

Total liabilities                                                                                                1,703,893                    1,535,068

Net financial liabilities                                                                                  (392,079)                    (248,767)




                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Property taxes                                                                                                1,334,561                    1,291,913

Payment in lieu of taxes                                                                                   175,686                       176,821

Local improvements and other charges                                                           15,159                         15,157

Less education taxes                                                                                       (426,210)                    (424,536)

Net taxes available for municipal purposes                                              1,099,196                    1,059,355



                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Salaries, wages and employee benefits                                                         979,280                       922,292

Contracted and general services                                                                      92,958                         86,219

Materials, equipment and supplies                                                                337,340                       296,878

Interest charges                                                                                                   61,053                         61,462

Rents and financial expenses                                                                            41,735                         35,537

Third-party social, cultural and recreation programs                                  321,926                       313,153

Expenditures recovered from capital                                                               (27,560)                      (28,855)

                                                                                                                          1,806,732                    1,686,686




The City self-insures for public liability claims up to a specific amount and outside coverage is in place for claims in excess of these limits. 


The City has reserve funds for self-insurance which at December 31, 2005 amounted to $4,298.  The City contributed $1,146 [2004 ‑ $703] to these reserve funds from operations.




Budgets established for capital, reserves and reserve funds cover multiple fiscal years and, therefore, have not been shown on the consolidated financial statements.




Certain comparative figures for 2004 have been reclassified to conform with the presentation adopted in 2005.

The City of Ottawa                                                                                  Schedule 1




[dollars in thousands]

For the year ended December 31



                                                                                                2005                                2005                        2004

                                                                                              Budget                            Actual                     Actual

                                                                                                   $                                      $                              $



Net taxes available for municipal purposes [note 15]      1,094,104                      1,099,196                1,059,355

Fees and user charges                                                           492,376                         489,446                   467,690

Government grants                                                              336,943                         346,930                   333,964

Investment income                                                                 33,697                           29,685                     30,923

Interest/Dividends from Hydro Ottawa Holding Inc.           12,000                                189                     16,455

Fines and penalties                                                                23,352                           20,448                     18,767

Development charges                                                                  553                                717                          693

Other revenue                                                                          5,748                             5,311                       5,340

Total revenues                                                                1,998,773                      1,991,922                1,933,187



General administration                                                         137,247                         127,811                   117,631

Fire                                                                                       109,032                         109,348                   109,035

Police                                                                                   171,276                         172,893                   166,636

Land ambulance and other protective services                      82,218                           82,344                     70,573

Roads, traffic and parking                                                    118,987                         130,750                   117,576

Public transit                                                                        269,659                         276,828                   240,674

Wastewater treatment                                                            34,565                           33,355                     30,022

Water supply and distribution                                              33,403                           32,934                     30,187

Waste and recycling services                                                 31,123                           31,835                     41,528

Social housing                                                                      120,638                         123,404                   114,245

Parks and recreation                                                             115,809                         117,863                   105,419

Libraries                                                                                 30,085                           35,301                     27,895

Planning and development                                                     27,928                           26,198                     28,032

Social services                                                                      273,339                         272,288                   267,458

Homes for the aged                                                                43,782                           45,206                     41,213

Child care                                                                               83,937                           88,044                     81,114

Health                                                                                    38,086                           37,592                     35,095

Interest and financing fees                                                     66,719                           62,738                     62,353

Total expenditures                                                         1,787,833                      1,806,732                1,686,686

Net revenues for the year                                                 210,940                         185,190                   246,501


Financing and transfers

Debt principal repayments                                                  (64,952)                        (64,856)                  (61,970)

Transfer from reserve funds                                                  17,591                           38,433                     57,036

Transfer to reserve funds                                                   (189,934)                      (197,588)                (247,216)

Transfer from [to] capital                                                       (4,894)                          (4,359)                      4,618

Obligations to be funded in future years                               31,249                           31,227                     11,937

Total financing and transfers                                         (210,940)                      (197,143)                (235,595)


Change in operating fund balance                                                                               (11,953)                    10,906

Fund at the beginning of the year                                                                                  1,188                      (9,718)

Fund balance at the end of the year                                                                      (10,765)                      1,188

The City of Ottawa                                                                                  Schedule 2




[dollars in thousands]





For the year ended December 31




                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $



Government grants                                                                                             44,150                         30,011

Development charges                                                                                         71,545                         46,359

Other revenue                                                                                                      21,201                         22,282

Total revenues                                                                                                  136,896                         98,652



General administration                                                                                        51,896                         69,510

Fire                                                                                                                           6,993                           4,681

Police                                                                                                                       5,631                           9,858

Land ambulance and other protective services                                              21,602                           8,688

Roads, traffic and parking                                                                                  85,124                         81,680

Public transit                                                                                                      114,750                         70,246

Wastewater treatment                                                                                        68,606                         47,605

Water supply and distribution                                                                          55,557                         36,429

Waste and recycling services                                                                           14,894                           2,693

Social housing                                                                                                     45,782                         23,073

Parks and recreation                                                                                           17,554                         26,531

Libraries                                                                                                                  7,750                           1,257

Planning and development                                                                                  4,738                           4,752

Social services                                                                                                           187                               

Homes for the aged                                                                                               7,956                         17,642

Child care                                                                                                                1,502                           1,166

Total expenditures                                                                                           510,522                       405,811

Net expenditures for the year                                                                       (373,626)                    (307,159)


Financing and transfers

New debt issued                                                                                               130,062                         35,026

Capital lease                                                                                                         16,200                               

Contributions from reserves and reserve funds                                          232,313                       160,315

Contributions from [to] operating fund                                                             4,359                          (4,618)

Total financing and transfers                                                                        382,934                       190,723


Change in capital fund balance                                                                           9,308                      (116,436)

Fund balance at the beginning of the year                                                     58,503                       174,939

Fund balance at the end of the year                                                                 67,811                         58,503


See accompanying notes

The City of Ottawa                                                                                  Schedule 3




[dollars in thousands]





For the year ended December 31



                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $



Investment income                                                                                              15,228                           9,525

Other revenue                                                                                                        9,156                           2,699

Total revenues                                                                                                     24,384                         12,224



Transfer from equity in government business enterprise                          200,000                               

Transfer from operating fund                                                                          197,588                       247,216

Transfer to operating fund                                                                               (38,433)                      (57,036)

Transfer to capital fund                                                                                  (232,313)                    (160,315)

Total financing and transfers                                                                        126,842                         29,865


Change in reserves and reserve fund balance                                             151,226                         42,089

Fund balance at the beginning of the year                                                   300,202                       258,113

Fund balance at the end of the year                                                               451,428                       300,202





As at December 31


                                                                                                                                   2005                           2004

                                                                                                                                       $                                  $


Reserves                                                                                                                 3,991                           3,404

Reserve funds:

  Endowment fund                                                                                             200,000                               

  Capital expenditures                                                                                       214,981                       271,473

  Equipment replacement                                                                                   22,679                         14,656

  Employee benefits                                                                                               5,479                           3,765

  Other                                                                                                                      4,298                           6,904

Total reserve funds                                                                                          447,437                       296,798

Total reserves and reserve funds                                                                  451,428                       300,202


See accompanying notes






Morris Romanow stated his concern was with how management gets the information to Council, so that it can manage the budget properly.  He said he was aware that currently Council receives a quarterly variance report six weeks after the end of a quarter.  He opined this was not a useful control document and suggested that a monthly report would be much better.  Mr. Romanow noted he had suggested two years previous, it would be helpful for the Corporate Services and Economic Development Committee to create a sub-committee (e.g. made up of three Councillors) to review the budget on a monthly basis and report back to Council.  He felt such a process would be useful for Council in determining priorities, in that Council would know how much was available to spend.  The response he received at that time to his suggestion was it was too expensive to do this.  He questioned how the City Manager does it and felt surely he must have his managers report to him on their budgets, on a monthly basis. 


In concluding his remarks, Mr. Romanow stated it was unfortunate that Council has not got a handle on the budget.  He made reference to reports in the media that Council has difficulty establishing its priorities and devotes too much time discussing meaningless issues.  Mr. Romanow pointed out in the last two years there have been three sewage back-ups (one very close to his home) and felt this begged the question “Where are Council’s priorities?”


There being no further delegations, the Committee approved the staff recommendation.


That the Corporate Services and Economic Development Committee and Council approve the 2005 City of Ottawa Consolidated Financial Statements.