September 30, 2005 Projected Year-end Operating and Capital Results

Recommendation:
That the November 4, 2005, Corporate Services Department report 2005COF101 be received for information.

Report Summary

This report outlines the 2005 financial year-end operating and capital projections as at September 30, 2005.

Report

Tax-Supported Operations

As of September 30, 2005, tax levy operations are projecting a year-end surplus of $9.4 million as compared to $3.5 million reported to City Council with June results.

The year-end projected surplus of $9.4 million is primarily due to:

  • $11.8 million increased corporate revenues resulting from higher investment earnings, gas franchise fees, tax penalties and realty taxes.
  • $2.0 million net Financial Strategies budget released as certain contracts have been settled and other amounts are not anticipated to be required.
  • $2.0 million net favourable variance forPolice.
  • $1.8 million net increase in development and compliance revenues resulting from increased residential development.

These positive variances are offset by:

  • ($6.0) million increased costs due to higher winter road maintenance costs in the first part of 2005.
  • ($1.9) increased claims in Risk Management.
  • ($0.3) net other variances.

Edmonton Police Service has indicated that the $2.0 million favourable variance it has projected relates primarily to unspent provincial grant funding from 2004 approved for carry-forward to 2005. The Edmonton Police Service and Edmonton Police Commission are currently developing strategies and plan to request that funds be carried over to 2006 or to the conclusion of the projects. City Council has the authority under the Traffic Safety Act, RSA-2000(TSA), to approve the use of any excess fine revenues. TSA revenues at September 30 are $0.9 million favourable. The projection is for $1.3 million favourable in TSA revenues for 2005. The Edmonton Police Service has indicated a plan to offset these revenues within its program with related expenditures and other revenue shortfalls.

September projections provide for the application of $1.3 million of the Financial Strategies budget to cover expenditures relating to Hall D, as approved by City Council.

Potential risks going forward into the last quarter of 2005 include:

  • Possible weather patterns more severe than the norm.
  • Any impact of volatile fuel prices.
  • Any adjustments identified in completing the yearend.

Attachment 1 outlines the projected operating variances by program. Year-to-date results have been provided as a reference point. Attachment 3 provides more detailed operating variance explanations as provided by program managers.

Enterprise and Utility Operations

Mobile Equipment Services is projecting a net favourable variance of $0.3 million. Recoveries are expected to be $0.7 million higher due to additional DATS vehicles in service. An unfavourable expenditure variance of ($0.4) million is projected as a result of increased fuel prices for portions of the year.

Land Enterprise is projecting a $5.3 million favourable variance. Revenues are $12 million higher from sales anticipated to be completed in 2004 closing in 2005, and from increased industrial land sales. Related cost of land from the increased volume will be ($6.7) million over budget.

Drainage Services is projecting a favourable variance of $3.6 million. Domestic and sanitary drainage revenues are projected to be $2.6 million higher from increased consumption and greater than planned customer growth. Expenditures are expected to be $1.0 million favourable due to higher short-term interest earnings.

Attachment 2 outlines the projected year-end variance as of September 30, 2005, for enterprise and utility operations.

Capital Results

As of September 30, 2005, the Corporation is projecting $504.3 million in capital expenditures for the year against a budget of $711.2 million, a variance of $206.9 million (29.1 percent). Reporting and projections by program and financing source are provided in Attachment 4. Further details on the projected capital variances are outlined within Attachment 5.

Significant factors contributing to the projected variance are:

  • $190.5 million in project delays due to:

$68.4 million awaitingreview or changes to customer and project requirements.

$41.8 million for timing of approvals and agreement with internal and external partners.

$33.8 million for tendering or land negotiation issues.

$24.9 million for unavailability of internal and external resources.

$18.4 million in outstanding external commitments.

$6.1 million as the capital item has been ordered, but will not be received before year-end.

$3.1 million resulting from weather and ground conditions.

  • $10.6 million savings due to reduced project scope or costs, and reduced demand for local improvements.
  • ($15.5) million as project costs or project scope has increased.
  • $15.3million net other variances.

The related financing sources for the projected variance of $206.9 million are from general financing as well as more specific funding sources such asutility and enterpriseretained earnings or debentures, tax-supported debt and grants.

Capital projections for September 2005 have been continually reassessed against those provided with the June results. The variance projection has increased by $142.0 million. While some capital projects are experiencing cost escalation, many projects are delayed due to a number of factors. Any available funds, or overall project cost overruns identified will be addressed in the upcoming 2006 capital plan and budget. A review and budget adjustment for projects requiring carry-forward will be completed in early 2006.

Background Information Attached

  1. September 30, 2005, Actual Year-to-Date and Projected Year-end Operating Results – Tax Supported Operations
  2. September 30, 2005, Actual Year-to-Date and Projected Year-end Operating Results – Enterprise and Utility Operations
  3. Detailed Projected Operating Results by Program
  4. September 30, 2005, Actual Year-to-Date and Projected Year-end Capital Results
  5. Detailed Capital Results by Program

(Page 1 of 3)

Attachment 1

September 30, 2005, Actual Year-to-Date and Projected Year-end Operating Results – Tax Supported Operations

Attachment 1 - Page 1 of 1

Attachment 2

September 20, 2005, Actual Year-to-Date and Projected Year-end Operating Results – Enterprise and Utility Operations

Attachment 2 - Page 1 of 1

Attachment 3

Detailed Projected Operating Results by Program

(in millions)

Waste Management
Year-end Variance $-
  • $1.7 increased processing and disposal operational revenues due to increased customer counts.
  • ($1.7) increased transfer to Waste Management Stabilization Reserve for rate requirements, operational contingencies, and future planned capital projects.

Social, Recreation and Cultural Services
Year-end Variance $0.7 2.5%
  • $1.5 increased grants and revenues due to additional demands on service (i.e. Community Partnership Enhancement Fund, Safer Cities Initiatives, registered programs).
  • $0.7reduced expenditures for personnel costs, Out of School Care subsidies, and social housing debt repayments.
  • ($1.5) increased expenditures related to additional demand for program levels, facilitation training, and branch reorganization.

Parks, RiverValley & Natural Areas
Year-end Variance $-
  • $0.7 expenditure reductions from reduced tree pruning, recruitment and other activity delays.
  • $0.3 from unbudgeted contributions for West Nile Virus monitoring, June flood damage recoveries, increased sports field rentals, inspection fees and reserve transfers.
  • ($1.0) increased costs due to drought mitigation efforts, increased snow and ice control early in the year, and June flood damage costs.

Recreation and Cultural Facilities
Year-end Variance $-
  • $0.3 unanticipated Community Initiative Program grant funding.
  • ($0.3) additional expenditures related to the additional grant funding.

Emergency Response
Year-end Variance ($0.3) (0.3%)
  • $0.7 reduced expenditures for personnel costs due to delays in hiring.
  • ($0.5) anticipated Fire Rescue statutory holiday pay is higher than budget.
  • ($0.5) increased bad debt expense on ambulance billings.

Corporate Services
Year-end Variance $0.4 0.6%
  • $0.8 additional revenue from surplus sales, external Hired Equipment revenue, and increased volumes of payments processed for EPCOR.
  • $0.5 personnel cost savings due to vacancies and delays in hiring, along with higher than expected Partners Injury Reduction rebates.
  • ($0.9) additional material, contract, and equipment costs in the Finance Branch, Strategic Services and Law.

Office of the City Manager
Year-end Variance $0.25 3.2%
  • $0.2savings for the Office of the City Clerk related to costs for the Census and hiring delays.
  • $0.05 savings for the Office of the City Manager for training, hosting, and personnel costs due to hiring delays.

Planning and Development
Year-end Variance $1.8 12.1%
  • $2.7 development and compliance revenues from increased activity, particularly in residential development.
  • ($0.9) additional temporary staffing, overtime, advertising, and credit card service charges resulting from the increased activity.

Police Service
Year-end Variance $2.0 1.3%
Projections have been based on June 30, 2005 actual results as reviewed by the Police Commission.
  • $1.3 favourable Traffic Safety Act (TSA) revenues due to higher volumes and a higher average penalty rate than budgeted. Under the TSA, RSA-2000, City Council has the authority to approve the use of any excess TSA fine revenue.
  • $0.8 revenues from an increased number of school resource officers, security clearance checks, specialevent policing, and receipt of unbudgeted grants and donations.
  • $0.7 non-personnel cost savings primarily due to delays in projects funded from the 2004 surplus (attributed to 2004 unspent provincial funding).
  • ($0.8) increased overtime and delays in hiring 85 new positions.

Roads
Year-end Variance ($6.0) (7.7%)
  • $0.8 additional permit and parking meter revenue in Traffic Operations.
  • $0.7 additional Roadway Operations revenues due to extra utility cut revenue.
  • ($0.8) in Traffic Operations for one-time programs, safety initiatives, and higher damage claim costs.
  • ($0.7) additional costs due to increased volume for utility cut work.
  • ($6.0) for the winter road maintenance program, provided that fall winter conditions are normal. Costs for the first part of the year were higher than budget as the actual snowfall to the end of March was 74.5 cm which is 30 percent more than the ten year average for this period of 57.1 cm. The heavy snowfall, along with three freezing rain occurrences necessitated major plowing utilizing graders, critical residential spot plowing to deal with ice and snow ruts, and more street sand. With the amount of sand distributed, cleanup costs were greater than normal.

Transit
Year-end Variance$-
  • $2.2 in revenues from higher ridership levels.
  • ($1.1) in Bus Fleet and Facilities due to higher diesel fuel prices, plant maintenance costs, and anticipated increased costs from Mobile Equipment Services.
  • ($1.0) for Bus Operations due to additional special events and slightly higher average operator rate than budget.
  • ($0.1) minor variance for DATS.

Capital Project Financing
Year-end Variance ($0.5) (0.6%)
  • ($0.5) increase in transfer to the Tax-Supported Debt reserve as the 1% from taxes for capital (debt charges) was larger than anticipated.

Corporate Expenditures
Year-end Variance ($0.2) (1.5%)
  • $3.2released in the Financial Strategies budget with settlement of certain contracts and other amounts not anticipated to be required.
  • ($1.9) for Risk Management resulting from liability claims that are anticipated to be greater than budget.
  • ($1.2) related to the overall reduction for Civic Programs where strategies have not been specifically identified.
  • ($0.2) due to additional unplanned expenditures for the screen and stage in Churchill Square for the Royal Visit.
  • ($0.1) net other variances

Corporate Revenues
Year-end Variance $10.4 4.0%
  • $5.7 from increased investment earnings due to bond, equity, and money market yields all higher than budgeted.
  • $4.3additional gas franchise fees as a result of growth and EUB approved increases to ATCO eligible costs on which the franchise fee is based.
  • $0.4 from the Ed Tel Endowment Fund based on the actual measures applied to the dividend formulaas per the Bylaw.
  • $0.5 increased tax penalty revenue.
  • ($0.5) as compliance tag revenue less than expected.

Taxation Revenues
Year-end Variance $0.9 0.2%
  • $0.9 net increase in Realty Taxes.

2005 World Masters
Year-end Variance $-
  • Financial results relating to the 2005 World Masters Games are being finalized

Attachment 3 - Page 1 of 4

Attachment 4

September 30, 2005, Actual Year-to-Date and Projected Year-end Capital Results

Attachment 4 - Page 1 of 1

Attachment 5

Detailed Capital Results by Program

(in millions)

Land and Buildings
Projected Year-end Variance $58.9 49.0%
Buildings $44.4
  • The following projects will not proceed in 2005. A budget adjustment to reallocate $39.4 million to future years has been approved in October 2005:
  • $14.9 due to delays on the four fire stations (Belle Rive Stn/ #10 Stn on 127 Ave and 101 St/ #5 Stn on 112 Ave and 101 St/ #11 Stn on 101 Ave and 67 St) resulting from land negotiation issues and increased construction costs.
  • $12.8 for ME First! Energy Management Program mechanical and electrical upgrades resulting from the timing of energy audit requirements, and project design.
  • $7.0 for the Kinsmen Aquatic HVAC Replacement due to design/planning issues resulting from stakeholder input.
  • $3.5 for the Millwood’s Arena Ice Plant Replacement due to unavailability of internal and external resources.
  • $1.2 for EMS Stations in the northwest and Millwoods, due to timing of Provincial funding approval.
  • $3.1 for Londonderry Arena Ice Plant Replacement as tenders higher than estimated resulting in delays in awarding of construction contracts.
  • $1.9 net other project variances.
Land $14.5
  • $6.6 for New Commercial/Industrial Development due to delay of an Industrial Area Structure Plan for Pylypow which is pending resolution of city and private owner conflicts.
  • $2.9 for Pilot Sound Residential Lot Development due to delays in subdivision approval and faster than anticipated cost recoveries from other developers in the area.
  • $1.7 Residential Land Development due to delays in finalization of recreation needs in the Leger neighbourhood of Terwilleger, and no surplus school sites being available for residential development.
  • $1.3 for Fort Road redevelopment due to delays in property acquisition.
  • $2.0 net other project variances.

Waste Management
Projected Year-end Variance $3.0 38.5%
  • $2.2 Compost Plant projects due to delays in obtaining contractors.
  • $0.6 Waste Management Infrastructure delays due to the integration of changing priorities and the outcome of strategic studies.
  • $0.2 net other project variances.

Parks, RiverValley and Natural Areas
Projected Year-end Variance $7.7 19.6%
  • $6.8 Neighbourhood/District park developmentdelay due to the unavailability of internal resources.
  • $0.9 net other project variances.

Recreation and Cultural Facilities
Projected Year-end Variance $21.8 78.9%
  • $12.0 delay in the Senior Centre Consolidation and Upgrading project as a result of tendering issues.
  • $5.5 delay in the WhitemudEquineCenter project due to pending reviews of project considerations and conditions.
  • $2.7 delay to 2005 Enterprise Facilities due to unavailability of internal and external resources.
  • $1.6 net other project variances.

Corporate Services
Projected Year-end Variance $3.8 22.6%
  • $2.6 for Information Technology projects carried forward to 2006 due to unforeseen technology changes, the need for inter-connection with other corporate initiatives and the opportunity to re-evaluate current strategies with emerging technologies to implement more effective solutions.
  • $0.7 Enterprise Resource Planning delays due to outstanding external commitments and limited internal resources.
  • $0.5 net other project variances.

Drainage
Projected Year-end Variance $47.2 34.9%
  • $18.7 West Edmonton Sanitary Sewer W12, South Edmonton Sanitary Sewer SW2 to SW5, Double Barrel Sewer Rehabilitation and Sanitary Servicing Strategy projects delayed due to changes in project and customer requirements.
  • $13.1 Combined Sewer Overflow Enhanced Primary Treatment project delayed due to changes in customer requirements (access, security, permit requirements, and final effluent requirements).
  • $8.1 Development Sewer projects behind schedule as a result of consultant delays, fewer projects than anticipated and norequests for local improvements.
  • $4.3 due to difficulties in land acquisitions and zoning issues for the Gold Bar Waste Water Treatment Plant Upgrading and the Stormwater Infrastructure projects.
  • $2.3 Construction Facility and Equipment project’s purchase of tunnel boring machine delayed.
  • $2.1 Structures Rehabilitation experienced delays due to the need for synergy with the Quesnel outfall flooding project.
  • $1.2 Sewer System Upgrading delayed due to changes in project requirements.
  • $1.1for the Tertiary Treatment (Phase 2) to be completed in early 2006.
  • ($6.0) Water Recycling project scope increased in concurrence with Petro Canada.
  • ($1.8) for Sewer Infrastructure Rehabilitation project increased costs resulting from the addition of four urgent locations in local sewer rehabilitation and the addition of closed circuit television (CCTV) for five neighbourhoods in area infrastructure rehabilitation.
  • $4.1 other net project variances

Mobile Equipment Services
Projected Year-end Variance $9.2 13.3%
  • $6.0 for Fire Fleet Replacement. Purchase orders have been placed and funds committed. Delivery of fire apparatus such as aerial trucks and pumps can take more than a year.
  • $1.7 for 2004 Bus Replacement project as the total budget required by MES to match the contribution from Transit is less that anticipated.
  • $1.5 net other project variances.

Office of the City Clerk
Projected Year-end Variance $0.4 24.8%
  • $0.4 hardware and software purchases for the Records Management System are outstanding due to interface and design issues.

Public Library
Projected Year-end Variance $7.1 80.0%
  • $3.0 delay in the Self-service checkout project due to outstanding external commitments.
  • $2.8 delay in the Lois Hole Branch relocation project resulting from a change in project requirements.
$1.3 delay in the Strathcona branch renovations due to changing ground conditions.
Roads
Projected Year-end Variance $9.7 6.3%
  • $7.0 Fort Road land acquisition is delayed to future years.
  • $4.0 local improvement demand is less than anticipated.
  • $1.5 costs are less than anticipated for the Whitemud Drive East 34 Street Interchange project.
  • ($2.8) other capital projects resulting in higher than anticipated costs.

Transit
Projected Year-end Variance $32.9 33.6%
  • $26.9 South LRT due to rescheduling of installation of new signalling system equipment to future years.
  • $3.7 outstanding commitments for Transit Safety, LRT Systems, CTC System, LRT Ticket Machines, and Transit Vehicles Growth.
  • $2.3 other projects due to timing of internal resources and tendering issues.

Attachment 5 - Page 1 of 4