Appendix A
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5. OPERATING
STATUS REPORT - MARCH 31 2006
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Que le Conseil approuve la contribution d’un montant de 9,8 millions de dollars au Fonds de réserve de stabilisation des taxes de la Ville, qui représente le financement supplémentaire reçu de la province pour les services municipaux d’ambulances terrestres (5,3 millions de dollars) et du Fonds de partenariat avec les municipalités de l’Ontario (4,5 millions de dollars), à la suite des annonces budgétaires de la province.
DOCUMENTATION
1. Chief
Corporate Services Officer’s report dated 29 May 2006
(ACS2006-CRS-FIN-0026).
Report
to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels
et du développement économique
and Council / et au Conseil
Submitted by/Soumis par : Greg Geddes, Chief Corporate Services
Officer/Chef des Services généraux
Contact
Person/Personne ressource : Marian Simulik, Acting Director, Financial
Services and City Treasurer/Directrice des services financiers et Trésorière municipale par intérim
Financial Services/Services financiers
580-2424, Ext./poste 14159,
Marian.Simulikl@ottawa.ca
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SUBJECT: |
OPERATING STATUS REPORT – MARCH 31, 2006 |
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OBJET : |
RAPPORT
D’ÉTAPE DES DÉPENSES DE FONCTIONNEMENT – 31 MARS 2006 |
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Que le Comité des services organisationnels et
du développement économique recommande au Conseil d’approuver la contribution
d’un montant de 9,8 millions de dollars au Fonds de réserve de stabilisation
des taxes de la Ville, qui représente le financement supplémentaire reçu de la
province pour les services municipaux d’ambulances terrestres (5,3 millions de dollars) et du Fonds de
partenariat avec les municipalités de l’Ontario (4,5 millions de dollars), à la
suite des annonces budgétaires de la province.
This report represents the first of three “Quarterly Operating Status” reports that will be prepared during 2006 showing actual spending and revenues against amounts budgeted. In keeping with the recommendations of the “It’s About Accountability” report, a forecast of the 2006 is not provided at this point in the year, but will be included in the June 30th and September 30th reports.
As part of the City’s commitment towards improved financial transparency and accountability, the presentation of the financial information in the 2006 quarterly operating status reports are being modified. The reports previously provided to Council and the public in 2004 and 2005 compared the year-to-date actual expenditures and revenues against the annual budget provision. Therefore, for programs that are not seasonal in nature, the actual spending and revenues at the end of March 31st would be expected to be approximately 25% of the total budget, 50% at June 30th and 75% at September 30th.
As was stated in the March 31,
2005, Operating Status Report, a system to “calendarize” the 2006 budget has
been implemented for 2006.
Calendarization will account for the seasonal nature of various City
services and allow for the matching of actual spending or revenues against the
budget for the same time period, instead of against the whole year’s
budget. The objective with this format
change is to allow City management to detect potential spending or revenue
issues at an earlier point in the year and implement corrective actions.
1st Quarter
Results
Departments have allocated their 2006 budgets on a monthly basis based primarily on past experience. A large majority of City spending, such as salary and compensation costs, occurs evenly on roughly a 1/12th basis through the year. Other programs such as winter maintenance and outdoor pools / beaches have definite seasonal spending patterns.
There are other program expenditures or revenues which are not seasonal in nature or do not occur evenly through the year. These are therefore more difficult to allocate to a specific month or months. These types of program costs or revenues may occur at specific time periods during the year. For example, a maintenance contract may be expected to be paid by the end March – therefore the budget is reflected in March. However, delays in the receipt of the invoice or payment delays may result in the actual posting of the expenditure in April resulting in a misalignment of the actuals with budget.
Appendix A to this report shows the first quarter actual expenditures
and revenues compared to the same period budget. For reference purposes, the annual budget for the branch or
program area is also provided. At this
early point in the year, it would be expected that the actual results against
the first quarter budget would be in the 95% to 105% range. As the year progresses, this percentage
range should decrease. The June 30th
Status Report will include a forecast to year-end which will provide a better
indication as to whether spending and revenues are tracking to budget.
As can be seen from the schedule, the majority of departmental and
non-departmental programs are within this range. Departments have been asked to review their first quarter results
to ensure that their respective spending and revenue results are not indicative
of any underlying issues that need to be highlighted or addressed at this
time.
In the 2006 Draft Budget Summary document, staff identified a number of “assumptions and risks” that were incorporated in the 2006 budget. The following provides a brief update on a number of the items listed in the document.
• Inflation at 2% for non-energy related
items
During the review of the 2006 budget, a general
inflation provision totaling $3.9 million was eliminated from departmental
budgets. Departments will therefore
need to absorb this reduction from within their existing budgets. As background, the Consumer Price Index for
Ottawa, as reported by Statistics Canada, was 2.08% between March 2005 and
March 2006. The forecasts that will be
provided in the June and September Status reports will address the ability of
departments to absorb this reduction.
• Ability to lock in fuel prices at 78.64¢ per litre for the last 6 months
of 2006
The City is
currently benefiting from the diesel fuel lock-in price agreement of
78.64¢. Since July 2005, the difference
between the lock-in price and the floating price has saved the City
approximately $550,000. Staff are
monitoring the market situation to ensure that the City will be able to
minimize fuel costs in the second half of 2006. An update of the fuel price situation will be provided in the
June 30th Status Report.
• Electricity at an average of 6.87 cents per kilowatt hour
Staff are reviewing the total hydro rate - electricity
charge plus the delivery and regulatory charges – and will provide an update of the price situation in the June 30th
Status Report.
• No increase in Ontario Works caseload and 2.9% caseload increase in Ontario Disability Support
Payments (ODSP).
Current caseload statistics are on track with these
assumptions. An update will be provided
in the next quarterly report.
• Collective bargaining agreements in line with the mandate set by Council
Settlements to date have been in line with the Council
mandate.
The Library pay equity program as approved by Council on April 12, 2006,
identified the financial impact of this agreement on the Library’s 2006
operating budget to be approximately $1 million. This additional requirement will be identified as part of the
2007 budget. As stated in the Financial
Implications section of the report, Library staff will be exploring options to
mitigate the impact of this settlement on the 2006 budget. However, it is projected that the Library
Service will incur a deficit in 2006.
• Interest rates rising in 2006
Since the beginning of the year, the Bank of Canada
rate has risen a full 1 percentage point.
This is in line with the assumptions used in developing the 2006
investment income budget.
• Average winter in terms of number and type of storm events
This
winter season the City received again a wide range of Winter Precipitation. Above average
rain and precipitation days coupled with numerous freeze thaw cycles required
the extra treatment of ice build up conditions requiring additional salting
operations and snow removal to alleviate drainage issues. Assuming a normal November and December 2006
winter season, a deficit of $5.0 million is projected.
• New revenue from the Province.
The 2006 draft budget reflected $20 million in new
revenue from the province. Specific
funding measures were announced by the Province prior to the adoption of the
City budget and have been incorporated into the final approved budget.
Since the adoption of the City budget in December, the Ontario Minister of Finance presented the government’s third budget on March 23, 2006. A summary of the budget announcements that will impact on the City of Ottawa was prepared and provided by the Chief Corporate Services Officer to all members of Council on April 3.
There were 2 specific announcements that will have a direct impact on the City’s 2006 operating budget.
Last year, it was announced by the Province
that Ottawa’s funding share from this program would be declining and eventually
ceasing. As part of the 2006 Provincial
budget, this program will now be increased by $107 million in 2006, to assist
municipalities with high social program costs relative to their residents’
household incomes. As a result, the
City will receive an additional $4.5 million in 2006 in quarterly instalments
from the OMPF above the 2006 base budget amount of $1.5 million.
The Province will spend an additional $300 million over three years in a move toward 50/50 cost sharing of land ambulance costs. For 2006, the City will receive an additional $5.3 million towards achieving the 50/50 cost-sharing objective.
The City has
received an arbitration
decision dealing
with the issue of meal periods during the paramedics’ shift period. Details of the decision and its financial
implications will be submitted to Council.
Potentially, a significant portion of the additional funding received
from the Province may be required in 2006 to address any funding implications
arising from this decision.
In total, in 2006 the City will receive an additional $9.8 million in provincial funding. The 2006 City budget, as adopted on December 15, 2005, did not include this additional funding and is therefore not reflected in the 2006 tax rates as adopted by Council. It is recommended that these additional funds be transferred to the City’s Tax Stabilization Reserve Fund. As mentioned above, some of these funds may be required to address the arbitration decision on paramedics’ meal periods. Any remaining funds will be available to address any 2006 operational deficits.
Also included in the 2006 budget were the following two specific efficiency targets to be achieved during the year.
1) Corporate Efficiency Savings – The 2006 budget established a $14.5 million annual savings target. As a result of adopting a self-insured Long Term Disability Insurance model, the City has been able to identify $5 million in savings which have been applied against this target.
To address the remaining balance, the Branch Process Review Program has been initiated to identify major areas where savings, business process improvements and efficiencies can be achieved. For 2006, a pilot program will be implemented and assessed using a process review template applied to the Real Property & Asset Management and By-Law Services branches. Based on the results of this pilot, the process review template will be used and applied to other City branches as the basis for generating future savings.
With almost half of the year completed, it is anticipated that only part-year savings will be achieved through this process over the remaining months. Therefore, any portion of the efficiency target that is not achievable in 2006 will be funded from the Tax Stabilization Reserve Fund in 2006.
2) Overtime Efficiency – As part of the 2006 budget,
Council set a $3.5 million overtime efficiency target. Based on the findings as presented by the
Auditor General, a comprehensive
review of overtime is being undertaken in order to identify where and how
maximum savings can be achieved. This
report and its recommendations are expected to be completed and submitted to
Council within the next month.
The 2006 Draft Budget Summary document included a section that provided
Council with a two-year operating budget forecast and its potential impact on
property taxes. Based on the
assumptions listed in the document, the tax increase was projected to be 8.1%
and 7.1% for 2007 and 2008 respectively.
During the first quarter of 2006, Council has approved a number of
reports that have funding implications for the 2007 operating budget. In order to keep Council apprised of their
decisions and the impacts on the 2007 budget, the following lists the reports
and the financial impact:
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Report / Recommendations |
CouncilDate |
2007Impact $000 |
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Budget 2006 – Information on Budget Reductions and
Service Delivery Improvements / Overtime Savings Targets |
Feb
20
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Services identified for reduction which were reinstated with 1 time funding |
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· Parks & Recreation – various programs |
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292 |
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· Public Health – children / youth programs |
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112 |
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· Cultural Services & Community Funding – Museum Sustainability Plan / Arts Court, Arts funding |
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83 |
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· Financial Services – tax clerks |
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212 |
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· Planning, Environment & Infrastructure Approvals – Forester position |
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82 |
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· Surface Operations – Shrub maintenance |
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55 |
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· Transit Services – route reinstatements |
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206 |
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· Wastewater Services – sewer lateral investigations (rate supported) |
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73 |
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1,115 |
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Canadian Tulip Festival Request for Emergency Funding |
April 12 |
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OC Transpo shuttle service |
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23 |
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Creation of the Rural Affairs
Office and Rural Summit Workplan Status Update |
April 26 |
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Agriculture & Rural Affairs Committee support |
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100 |
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Ottawa Public Library - Pay Equity Program |
April
12
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1,000 |
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Total Impacts |
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2,238 |
In addition to the above items, there are a number of other issues that will have 2007 budget implications. The specific financial impacts will be identified during the development of the 2007 draft budget.
Ottawa Hospital fees reimbursement
- building permit fee relief for hospital construction
Charitable and Non Profit Housing Fee reimbursement
- building permit fee relief for non-profit housing construction
Solid Waste Post Closure Liability
- annual reserve fund contributions to address the projected landfill closure / post closure liability.
Solid Waste ongoing fee administration costs
- additional resources required to support the new billing and collection process
Ethical Procurement Policy
- additional resources required to implement Council approved policy.
All departments were consulted in the
preparation of this report.
The additional operating pressures as identified in the report will be included in the development of the 2007 draft budget.
Appendix A – 2006 Operating Status Report as of March 31, 2006.
Appendix A