Item - 2014.BU55.4

The Budget Committee recommends to the Executive Committee that:

1.         City Council receive the item for information.

The purpose of this report is to provide Council with the City of Toronto's Operating Variance for the year ended December 31, 2013 and allocation of the 2013 year-end surplus.

The preliminary 2013 year-end operating position for Tax Supported Operations resulted in a net favourable variance of $168.084 million available for distribution after Council directions and legislative requirements are met.  Consistent with City Council's approved Surplus Management Policy, at least 75 percent of the surplus or $126.063 million of the 2013 final year-end operating results will be allocated to the Capital Financing Reserve and $42.021 million will be allocated to underfunded liabilities and/or reserve funds.  The 2013 Tax Supported Operating surplus represents only about 1.8% of the approved gross City Budget.

For the twelve-month period ended December 31, 2013, Tax Supported Operations are summarized in Table 1 below.

(See Table 1 of the Report dated June 4, 2014 from the Deputy City Manager and Chief Financial Officer)

Under-spending was driven largely by savings from:

•           Lower than budgeted Toronto Transit Commission Conventional Services' expenditures for various items such as depreciation on capital assets, diesel fuel, certain healthcare benefits, maintenance costs for buses and streetcars and vacancies;

•           Lower than planned Tax Deficiencies (i.e. write-offs from assessment appeals); and,

•           A reduction in caseload for Toronto Employment and Social Services.

In addition, higher than budgeted revenue realized from permit applications for Toronto Building, Payment in Lieu of Taxes and the Municipal Land Transfer Tax contributed to the favourable net variance.

One program area reported a significant unfavourable variances in 2013.  Court Services ended 2013 with a deficit of about $15.5 million net due to lower ticket issuance and resulting fine revenues.

Rate Supported Programs, excluding the Toronto Parking Authority, reported a year-end net favourable variance of $62.956 million which will be returned to their respective program reserve funds.  The Toronto Parking Authority reported an unfavourable variance of $3.187 million net.

Table 2 below summarizes Rate Supported Program net variances:

(See Table 2 of the Report dated June 4, 2014 from the Deputy City Manager and Chief Financial Officer)

The year-end favourable net variance of $59.769 million was driven by Toronto Water's net under-spending of $52.437 million, primarily due to:

•           Over-achieved revenues of $31.829 million from a less than expected decline in residential water consumption than originally forecasted;

•           Higher than expected recoveries for new water and wastewater service connections; and,

•           Lower gross expenditures of $20.608 million below expectations primarily due to under-spending in salaries and benefits for vacant positions.

Table 3 below summarizes the vacancy rate for the twelve months ended December 31, 2013. For year-end, the City recorded a vacancy rate of 2.6% after approved gapping which forms part of 2013 Budget adopted by Council.

(See Table 3 of the Report dated June 4, 2014 from the Deputy City Manager and Chief Financial Officer)