3. CAPITAL ADJUSTMENTS AND CLOSING OF PROJECTS – TAX SUPPORTED

AJUSTEMENT DU BUDGET DES IMMOBILISATIONS ET CESSATION DE PROJETS FINANCÉS PAR RECETTES FISCALES

COMMITTEE RECOMMENDATIONS AS AMENDED

That Council:

1. Approve the budget adjustments as detailed in revised Document 1;

2. Authorize the closing of capital projects listed in revised 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 $16.833 million as a result of recommendations 1 and 2;

4. Permit those projects in Document 3 that qualify for closure, based on the policy adopted by Executive Management Committee (EMC), to remain open;

5. Authorize the funding of the Library’s one-time operating cost of $120,000 from the Library Reserve Fund; and

6. Receive the budget adjustments in Document 5 undertaken in accordance with the Delegation of Authority By-law 2005-503, as amended, as they pertain to capital works.

RECOMMANDATIONS MODIFIÉES DU COMITÉ

Que le Conseil :

1. approuve les ajustements budgétaires décrits dans le document 1 révisé;

2. autorise la cessation des projets d’immobilisation énumérés dans le document 2 révisé, le financement des déficits indiqués et la remise des fonds restants aux sources de financement;

3. approuve une diminution nette du pouvoir d’endettement de 16,833 millions de dollars, par suite des recommandations 1 et 2;

4. permette que, en vertu de la politique adoptée par le Comité de la haute direction (CHD), les projets mentionnés dans le Document 3 qui se qualifient pour une cessation, restent ouverts;

5. autorise le financement de coûts de fonctionnement ponctuels de 120 000 $ à la Bibliothèque municipale, à même le fonds le Fonds de réserve de la Bibliothèque; et

6. prenne connaissance des ajustements budgétaires décrits dans le document 5, apportés aux termes du Règlement municipal 2005-503 sur la délégation de pouvoirs, modifié, et ayant trait aux travaux d’immobilisation

DOCUMENTATION

1. City Treasurer’s report dated 14 April 2009 (ACS2008-CMR-FIN-0016).

2. Extract of Draft Minutes.

Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council / et au Conseil

14 April 2009 / le 14 avril 2009

Submitted by/Soumis par: Marian Simulik, City Treasurer/Trésorière municipale

Contact Person/Personne ressource: Tom Fedec, Manager, Budget and Financial Planning, Finance/ Gestionnaire, Planification budgétaire et financière, Finances

(613) 580-2424 x, 21316

City wide / À l’échelle de la Ville

Ref N°: ACS2009-CMR-FIN-0016

SUBJECT:	CAPITAL ADJUSTMENTS AND CLOSING OF PROJECTS – TAX SUPPORTED

OBJET :	AJUSTEMENT DU BUDGET DES IMMOBILISATIONS ET CESSATION DE PROJETS FINANCÉS PAR RECETTES FISCALES

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development 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 $17.15 million as a result of recommendations 1 and 2;

4. Permit those projects in Document 3 that qualify for closure, based on the policy adopted by Executive Management Committee (EMC), to remain open;

5. Authorize the funding of the Library’s one-time operating cost of $120,000 from the Library Reserve Fund; and

6. Receive the budget adjustments in Document 5 undertaken in accordance with the Delegation of Authority By-law 2005-503, as amended, as they pertain to capital works.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services organisationnels et du développement économique 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 nette du pouvoir d’endettement de 17,15 millions de dollars, par suite des recommandations 1 et 2;

4. de permettre que, en vertu de la politique adoptée par le Comité de la haute direction (CHD), les projets mentionnés dans le Document 3 qui se qualifient pour une cessation, restent ouverts;

5. d’autoriser le financement de coûts de fonctionnement ponctuels de 120 000 $ à la Bibliothèque municipale, à même le fonds le Fonds de réserve de la Bibliothèque;

6. de prendre connaissance des ajustements budgétaires décrits dans le document 5, apportés aux termes du Règlement municipal 2005-503 sur la délégation de pouvoirs, modifié, et ayant trait aux travaux d’immobilisation.

BACKGROUND

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.

The Delegation of Authority By-law 2005-503, as amended, specifies those 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 the 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;

· A reduction of or increase in funding authority; and

· Project closures.

This report includes those capital budget adjustments that require specific Council approval (Document 1) as well as those that have been made as a result of delegated authority provisions (Document 5). The latter is provided for the information of Council, while adjustments in the former document are being recommended for approval. Capital project closures are also recommended in this report with details provided in Document 2.

As in the past, surplus funds from project closures and reductions are applied to those projects being closed that are in deficits. In more recent years, surplus funds returned to reserves have also been applied to fund one-time operating costs that have been approved in the budget.

In addition, as reported to Council during the 2009 budget process, funds returned to reserves as a result of project closures and adjustments will be required to address the 2008 year-end deficit. Details on the City’s 2008 year-end operating results are contained in the staff report “Disposition of 2008 Operating Deficit”.

Funds in the amount of $12.7 million are required to be returned to the City Wide Reserve Fund through project closures and adjustments in order to fund both the 2008 City Wide deficit of $7.7 million and the one-time operating costs of $5.0 million. The 2008 Transit deficit requires $7.7 million to be returned to the Transit Reserve Fund through project closures and adjustments.

As in 2008 and in keeping with Council’s direction to separately table and approve the tax and rate supported budget requirements, two separate “Capital Adjustments and Closing of Projects” reports have been prepared. The “Capital Adjustments and Closing of Projects – Rate Supported” report will be sent to the Planning and Environment Committee on April 28.

The integrated service area is included in both the tax supported and rate supported “Capital Adjustments and Closing of Projects” reports. This is because both tax and rate sources of funding are affected if there is a budget adjustment or if there is a deficit or surplus when these projects are closed. Although this report seeks Council approval for the tax-supported portion of these projects only, it is with the understanding that there will also be an impact on the rate- supported portion.

DISCUSSION

Recommendation 1 – Budget Adjustments Requiring Council Approval

As indicated above, the detail of those capital budget adjustments that require Council approval because they are not within the delegated authority limits of the City Treasurer for the transfer of funds is provided in Document 1. An explanation for why each budget adjustment is required, as provided by the submitting department, is also included.

Document 1 separates those budget adjustments requested by project managers from administrative adjustments. Unlike those requested by departments, administrative adjustments do not have an impact on scope or nature of work, nor do they involve transfers between projects. Generally, they revise financing of a project and require Council approval because they either involve debt or exceed the City Treasurer’s delegated authority limits.

. Rose - Not sure I understand what this paragraph is saying – I can see from Document 1 that we are eliminating a lot of DC debt and replacing it with DC cash. On the Armstrong bridge – I’m sure that there is a logical reason, but why would we replace DC debt with DC cash?

~~Do you think the following describes these adjustments?~~

TThe majority of the administrative adjustments involve the refinancing of projects. The use of debt financing on several projects is recommended to be replaced with development charge revenues per the Background Study or with reserve funds. In addition, previously approved Child Care projects funded from the City Wide Reserve Fund are recommended to be funded from the Child Care Reserve Fund, as uncommitted funds are now available.

Recommendation 2 – Capital Projects Recommended For Closure

The capital projects listed in Document 2 have been completed and are therefore recommended for closure. Also provided is information related to the adjustments required that will return excess funds to source or fund project deficits. As part of this process, explanations are required from project managers for those projects recommended for closure that had deficits in excess of $100,000.

For those integrated projects that will be closed, the information provided includes both tax and rate funding. This is because both tax and rate 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 tax supported portion of these projects only, the impact on the rate is also shown for information purposes. Similarly, the “Capital Adjustments and Closing of Projects – Rate Supported” report will show the same integrated projects, but will make recommendations related to the rate portion of the projects while the tax portion will be included for information.

Recommendation 3 – Decrease in Debt Authority

Changes in debt authority require the specific approval of City Council. As a result of project closures, reductions, and project refinancing, there has been a net reduction of debt authority of $17.15 million. This reduction is primarily due to administrative adjustments resulting in the elimination of development charge debt as discussed previously. The funding principles as adopted by Council for the financing of growth related road and transit projects states that the balance in the Development Charge accounts for these services can not be in a cash deficit position. Therefore, growth projects approved in previous budgets required debt financing. Sufficient funds are now available in the Development Charge accounts to replace the debt financing.

Debt Not Required

($000)

Tax supported debt

Federal/provincial gas tax debt

Development charges debt

Total

439

624

16,087

17,150

Recommendation 4 – Capital Projects Requiring Council Approval to Remain Open

In August 2008, Executive Management Committee (EMC) revised the policy for the closure of capital projects. Until that time, capital projects that had been open longer than three years or had no spending within the last year were considered candidates for closure. A justification for each project as to why it needed to remain open was provided to EMC for approval.

The revised policy focuses on the year of project completion as identified by project managers. Capital projects will now be closed the year following the identified year of completion; that is, if a project is identified as being completed in 2008, then it will be closed in 2009. If the project manager deems the project not complete, an explanation will be provided and a new year of completion recommended to City Council. The current policy is provided for information as Document 4.

Document 3 lists those capital projects that qualify for closure under the revised policy, but are recommended to remain open based on the rationale provided by the project managers. Upon Council approval of this recommendation, the year of completion for these projects will be revised accordingly.

Recommendation 5 – Funding the Library’s One-Time Operating Cost from the Library Reserve Fund

During the 2009 budget deliberation process, Council approved that one-time operating costs be funded from capital project closures and reductions. The list of these costs is provided as Document 6. There are insufficient funds generated in this process to fund the Library’s one- time operating cost of $120,000 for the sick bank payout resulting from the contract settlement. It is, therefore, recommended that the Library’s one-time operating cost be funded from the Library Reserve Fund.

Recommendation 6 – Capital Budget Adjustments Processed Under Delegated Authority

Those capital budget adjustments processed under the authority delegated to the City Treasurer (By-law 2005-503) for the period, January 1, 2008 to March 15, 2009 are provided in Document 5 for the information of Council. Included in this list are adjustments made to reflect the procurement savings that have been realized in support of the Management Efficiency target.

CONSULTATION

The purpose of this report is administrative in nature and therefore no public consultation is required. All departments have been involved in its preparation.

LEGAL/RISK MANAGEMENT IMPLICATIONS:

There are no legal/risk management impediments to implementing the recommendations of this report.

FINANCIAL IMPLICATIONS

Recommendations 1, 2 and 3

The impact of the budget adjustments recommended in Document 1 and the closing of capital projects recommended in Document 2 are summarized in the chart below.

Budget Adjustments

(Document 1)

$000

Return to Source/ (Funding Required)

Project Closures

(Document 2)

$000

Return to Source/ (Funding Required)

Total

$000

Return to Source/ (Funding Required)

Tax supported reserve funds

· City wide

· Transit

· Library

· Child care

· Social housing

Subtotal

8,279

8,884

(1,718)

15,445

4,000

107

(290)

(6)

3,841

12,279

8,991

(290)

(1,688)

(6)

19,286

Other non-tax reserves

· Cash in lieu of parkland

· Cash in lieu of parking

· Solid waste compensation

Subtotal

200

(166)

390

500

890

590

500

(166)

924

Federal / Provincial gas tax

933

934

Development charges

(14,600)

714

(13,886)

Debt

· Tax supported

· Federal/provincial gas tax

· Development charges

Subtotal

(346)

623

16,056

16,333

785

817

439

624

16,087

17,150

Revenue not realized

28,079

Total

46,224

6,263

52,487

The staff report, “Disposition of 2008 Operating Deficit”, identified a tax supported year-end operating deficit of $15.4 million of which $7.7 million would be funded from the City-Wide Reserve Fund and $7.7 million from the Transit Reserve Fund. There is sufficient funding being returned to both Reserve Funds to offset these deficits.

During the 2009 budget deliberation process, City Council directed that one-time operating costs also be funded from project closures and reductions, subject to availability of funds. After offsetting the operating deficit identified above, a funding shortfall of $371,000 exists ~~c wrf~~to cover all the 2009 one-time operating requirements. To address this shortfall, the one-time requests have been reduced on a pro rata basis excluding those that represent contractual obligations or those that have been specifically approved in Council reports. Document 6 lists all the original one-time operating amounts requested along with the revised amounts.

Recommendation 5

The budget reductions and project closure exercise results in a net draw on the Library Reserve Fund. Therefore, it is recommended that the Library’s one-time operating cost of $120,000 for the sick bank payout resulting from the contract settlement be funded from the existing balance in the Library Reserve Fund.

A Reserve Fund Status schedule is attached as Document 7, and provides an update to the tax supported reserves and other capital related accounts. The schedule reflects and incorporates the recommendations contained in this report.