Operating Variance Report for the Nine-Month Period Ended September 30, 2018

A list of in-year budget adjustments approved as part of the Chief Financial Officer's delegated authority can be found in Appendix F2 of this report. As of September 30, 2018 the City experienced a favourable variance of net revenues and expenses of $99.549 million. The City is projecting for December 31, 2018 a favourable variance of net revenues and expenditures of $14.668 million. The following table summarizes the financial position of the City's Tax Supported Operations as of the third fiscal quarter and the projection at year-end: Table 1: Year-To-Date Tax Supported Operating Variance Summary Variance ($M) Favourable/ (Unfavourable) 2018 Q3 YTD 2018 Year-End Budget Actual Var Budget Actual Var City Operations 1,639.7 1,531.0 108.7 2,254.2 2,193.1 61.1 Agencies 1,495.5 1,433.9 61.6 1,997.0 1,973.4 23.6 Corporate Accounts (27.4) 20.3 (47.8) (75.0) (30.7) (44.2) Total Variance 3,107.8 2,985.2 122.6 4,176.2 4,135.7 40.4 Less: Toronto Building* (7.6) (30.6) 23.0 (10.7) (36.5) 25.8 Adjusted Variance 3,115.4 3,015.9 99.5 4,186.9 4,172.2 14.7 % of Gross Budget 1.2% 0.1% * In accordance with the Building Code Act, any surplus from Toronto Building must be contributed to the Building Code Act Service Improvement Reserve Fund. Year-to-Date and Year-End Spending Results: As noted in Table 1 above, for the nine months ended September 30, 2018 Tax Supported Operations experienced a favourable net variance of $122.555 million or 3.9% of planned expenditures. The key factors contributing to the favourable year-to-date variance are lower than planned salary and benefits from vacant positions in City Operations, utility costs, non-labour costs, and accident claims experienced by Toronto Transit Commission. For year-end, the City is projecting a net favourable variance of $40.438 million or 1.0% of the 2018 Approved Operating Budget. There has been overspending of $18.610 million in Hostel Services as a result of the demand for shelter beds. The ongoing expenditure pressure for emergency shelter beds in Shelter, Support & Housing Administration is expected to continue to year-end. The federal-provincial assistance funding of $16.000 million received in the 2nd quarter of 2018 has partially offset this demand, as well as the overall under spending in Social Housing. Continued pressure is expected to the end of the year. The year-to-date revenue is under achieved by $115.362 million which is mainly attributed to the decline in Municipal Land Transfer Tax revenue receipts. It is primarily driven by lower residential market activity. Based on the current trend, Municipal Land Transfer Tax revenue is expected to continue to decline by year-end, resulting in an unfavourable variance of $99.241 million net. An overview of the key variance drivers can be found in the "Comments" section of this report as well as in a detailed summary provided in Appendix G. At its meeting of July 23, 2018 City Council adopted item EX36.17 "Operating Variance Report for the Five Months Ended May 31, 2018" with a recommendation directing that Heads of City Divisions and Agencies projecting year-end unfavorable variances must continue to monitor the year-end projections and implement mitigation strategies. Rate Supported Programs: Rate Supported Programs reported a favourable year-to-date variance of $32.829 million. The favourable variance is attributed to over achieved revenue in Toronto Water that more than fully offsets revenue pressures in Solid Waste Management Services and Toronto Parking Authority. Consistent with year-to-date results, the favourable year-end projected variance of $34.543 million is primarily driven by Toronto Water. Table 2: Year-To-Date Rate Supported Operating Variance Summary Variance ($M) Favourable / (Unfavourable) 2018 Q3 YTD 2018 Year-End Budget Actual Var Budget Actual Var Solid Waste Management Services (15.2) 4.7 (19.8) 0.0 10.6 (10.6) Toronto Parking Authority (49.1) (47.6) (1.5) (66.5) (62.3) (4.2) Toronto Water (3.7) (57.8) 54.1 0.0 (49.3) 49.3 Total Variance (67.9) (100.8) 32.8 (66.5) (101.1) 34.5 Solid Waste Management Services is experiencing a decline in revenue from the sale of recyclable materials due to global market changes, resulting in a $5.478 million year-to-date shortfall. Solid Waste Management Services is forecasting a continued revenue decline for recyclable materials of $8.208 million due to changing global markets causing a decline in the demand and prices of recyclables. The remaining year-to-date revenue shortfall is attributed to the delay in the receipt of collection fees and Stewardship Ontario funding, which will be reflected in the year-end projection. Rate Supported Programs are funded entirely by the user fees that are used to pay for the services provided and the infrastructure to deliver them. Solid Waste Management Services and Toronto Water's respective year-end surpluses, if any, must be transferred to the Wastewater and Water Stabilization Reserves and Waste Management Reserve Fund, respectively, to finance capital investments and ongoing operations.