Planning and
Environment Committee
and Council / et au Conseil
Date report is
approved May 1, 2008 / le 1 mai 2008
Submitted
by/Soumis par : Marian Simulik, City Treasurer, Trésorier municipal
Contact
Person/Personne ressource : Tom Fedec, A/Manager of Financial Planning
Financial
Services/Services financiers
(613)
580-2424 x 21316, Tom.Fedec@ottawa.ca
SUBJECT:
|
Capital
Adjustments and Closing of Projects – rate supported |
|
|
|
OBJET :
|
ADJUSTEMENTS DU BUDGET DES
IMMOBILISATIONS ET CESSATION DE PROJETS FINANCÉS PAR REDEVANCES |
That Planning and
Environment Committee recommend Council:
1.
Approve the budget adjustments as detailed in
Document 1;
2.
Authorize the closing of capital projects listed
in Document 2, the funding of deficits as identified and the return of balance
of funds to funding sources;
3.
Approve a net decrease in debt authority of
$5.319 million; and
4. Receive the budget adjustments in Document 3 undertaken in accordance with the Delegation of Authority By-law 2005-503, as amended, as they pertain to capital works.
Que le Comité de l'urbanisme et de
l'environnement recommande au Conseil :
1.
d’approuver les ajustements budgétaires décrits dans le document 1;
2. d’autoriser la cessation des projets
d’immobilisation énumérés dans le document 2, le financement des déficits
indiqués et la remise des fonds restants aux sources de financement;
3. d’approuver une diminution du
pouvoir d’endettement de 5,319 millions de dollars;
4.
de prendre connaissance des ajustements budgétaires décrits dans le
document 3, apportés aux termes du Règlement municipal 2005-503 sur la
délégation de pouvoirs, modifié, et ayant trait aux travaux d’immobilisation.
Generally, budget adjustments to capital projects are required to:
· Adjust for increases or decreases in project costs;
· Consolidate similar accounts to facilitate issuing of contracts;
· Create separate accounts to facilitate project tracking;
· Account for the receipt of revenues not previously anticipated or for the over / underestimation of revenues; and
· Adjust project financing.
In its Delegation of Authority By-law 2005-503, as amended, City Council included parameters in which budget adjustments may be made if authorized by the City Treasurer. Those capital budget adjustment requests that do not meet the delegated authority limits of the City Treasurer require approval of City Council. Generally, Council authority is required for those capital budget adjustments involving:
· Transfers between programs or internal orders in excess of 10% or $100,000 whichever is the lesser;
· Transfers of debt authority between programs with previously approved debt authority, regardless of amount;
· Establishment of new projects outside the budget process; and
· A reduction of or increase in funding authority.
As in the past, this report includes those capital adjustments that require specific Council approval (Document 1), as well as those that have been made as a result of the delegated authority provisions (Document 3). The latter is provided for the information of Council, as these adjustments have already been processed, while the adjustments in the former document are being recommended for approval.
Capital project closures are also included in this report with details provided in Document 2. In closing these projects, surplus funds are firstly applied to those projects being closed that are in deficits and the net surplus is returned to source.
In previous Capital Adjustments and Closing of Projects reports, adjustments to both tax supported and rate supported capital projects were presented in a joint report.
In keeping with Council’s direction to separately table and approve the tax and rate supported budget requirements, two separate reports have been prepared. The tax supported report was submitted to Corporate Services and Economic Development Committee on May 6.
As indicated above, those capital budget adjustments that require Council approval because they are not within the delegated authority limits for the transfer of funds are detailed in Document 1. An explanation for why each budget adjustment is required, as provided by the submitting department, is also included.
Document 1 includes those adjustments requested by project managers as well as administrative adjustments. Unlike those requested by departments, administrative adjustments do not have an impact on the scope or nature of the work, nor do they involve transfers between projects or change total project authority. Generally, they revise the financing of a project and require Council approval because they either involve debt or exceed the authority limits provided to the City Treasurer as identified in the delegation of authority by-law.
Some of the administrative adjustments relate to the refinancing of pre-amalgamation projects to be consistent with current funding practices. At one time development charge funding was considered to be revenue from developers. Council approval is required to change the different presentation of development charge funding from revenue to a draw from a development charge reserve. Another budget adjustment is required to refinance the ROPEC Plant Digester Expansion. During the deliberations of the 2004 capital budget, Council approved that the ROPEC Plant Digester Expansion would be funded with development charge debt, and that it should be refinanced with development charge revenues as they are collected (Motion 27/138). Because of the magnitude of the project, the administrative adjustments will be included in several reports as funding becomes available.
In March 2006, Executive Management Committee (EMC) approved a policy for the closure of capital projects. Generally, capital projects that have been open longer than three years or have had no spending within the last year are considered candidates. In the absence of a justification to EMC for keeping the projects open, the policy directs that these projects will be recommended to Council for closure. Document 2 includes those project closures that are the result of the application of this policy as well as others that are deemed complete by project managers.
Document 2 also provides information related to the adjustments required that will return excess funds to source or to fund deficits. In closing these projects, explanations are provided for those projects with deficits that exceed $100,000. However, none of the projects recommended for closure have deficits exceeding this amount. The same project may be included in both documents 1 and 2 with the understanding that the adjustment will occur prior to closure. The financial information provided on the list of recommended closures is based on the assumption that the adjustment has been made.
The integrated program is shown in both the tax supported and rate supported Capital Adjustments and Closing of Projects reports. This is because both rate and tax sources of funding are affected if there is a deficit or surplus when these projects are closed. Although this report seeks Council approval for the rate supported portion of these projects only, the impact on the tax side is also shown for information purposes.
All changes in debt authority require the specific approval of City Council. The change in debt authority resulting from the budget adjustments in Document 1 and project closures in Document 2 is a net decrease of $5.319 million.
|
Debt not
required $000 |
|
|
Rate supported debt |
2,829 |
|
Development charge debt |
2,490 |
Total |
5,319 |
Those capital budget adjustments processed under the authority delegated to the City Treasurer for the period May 1, 2007 to December 31, 2007 are detailed in Document 3. This document is provided for the information of Council as these adjustments have been processed.
Capital Budget Status
The capital budget status report showing capital projects that were open as of March 31, 2008 is posted on the City’s website. Excluded from this status report are the adjustments related to the recommendations in this report except for the adjustments made on authority delegated to the City Treasurer.
The purpose of this report is administrative in nature and therefore no public consultation is required. All departments have been involved in its preparation.
The impact of the budget adjustments recommended in Document 1 and the closing of capital projects recommended in Document 2 are summarized in the following chart.
|
|
Budget Adjustments (Document 1) $000 |
Project Closures (Document 2) $000 |
Total $000 |
|
Rate Supported Reserve Funds · Water · Wastewater SubtotalDebt · Rate supported · Development charges SubtotalRevenue (2) |
1,026 3,493 4,519 (10,310) 2,829 2,490 5,319 8,340 |
2,383 1,798 4,181 107 - - - - |
3,409 5,291 8,700 (10,203) 2,829 2,490 5,319 8,340 |
Total |
7,868 |
4,288 |
12,156 |
(1) The large draw on development charge authority is primarily due to refinancing of Stormwater Ponds. In accordance with Council policy, funds are not expended until the revenues are collected.
(2) This is a net decrease in revenue.
In approving these recommendations, the reserve fund balance for rate supported reserve funds remains above the City’s policy limit of $20 million. An update to the City’s reserve fund position will be provided in the first Quarter Status report.
Document
1 – Budget Adjustments Requiring Council Approval
Document
2 – Capital Projects Recommended for Closure
Document
3 – Budget Adjustments Processed Under Delegated Authority
Upon approval of this report, Financial Services will process the necessary adjustments.