Capital Variance Report for the Four Months Ended April 30, 2022

Table 1 : Capital Variance Summary Table 1 Corporate Capital Variance Summary for the Period Ended April 30, 2022 2022 Approved Budget* 2022 4M Actual Expenditures 2022 Projected YE Expenditures $M $M % $M % City Operations 2,089 243 11.6% 1,555 74.4% Agencies 1,851 255 13.8% 1,562 84.4% Tax Supported: 3,940 497 12.6% 3,117 79.1% Rate Supported: 1,555 171 11.0% 1,282 82.4% TOTAL 5,495 669 12.2% 4,400 80.1% * Note: Includes 2021 carry forward funding The City's actual capital spending in the first four months is $668.8 million or 12.2% of the approved capital budget of the year. The projected spending rate of the year is 80.1% by year-end. Both the year-to-date spending and the year-end projection reflect the capital spending impacts resulting from paused 2022 capital projects, pending confirmation of full 2022 COVID-19 support funding from the federal and provincial governments, to ensure the City maintains a balanced 2022 Operating Budget while addressing the financial impacts continuing to arise from the pandemic. Potential impact from the inter-governmental funding shortfall The City continues to actively engage with Federal and Provincial counterparts at all levels to secure continued COVID-19 funding support. From March 2020 to year-end 2021, the City has benefited from nearly $2.9 billion in COVID-19 related emergency funding commitments from the federal and provincial governments, with additional estimated $525 million in funding support in 2022.The remaining 2022 COVID-19 related funding gap is currently estimated to be $875 million, however the gap decreases to $815 million if the City receives the continued full reimbursement of public health costs. In the event that continued COVID-19 funding is not forthcoming or adequate to fully address the financial impacts arising from the pandemic, the City's capital program will be materially impacted. In such case, a draw of up to $515 million from the City's COVID-19 Backstop and a $300 million reduction to the 2022 Capital Budget would be required to ensure the City maintains a balanced 2022 Operating Budget while addressing the financial impacts continuing to arise from the pandemic. Delays in receiving funding commitments will continue to impact the City's ability to award and deliver capital projects in 2022. Programs and Agencies have already begun preparing for the potential reduction to their capital budgets, and at this stage have identified or committed a total of $260 million of projects that are either paused or can be reduced as a result of 2022 underspending. Below are the main areas with the largest reductions accommodated (see appendix 6): - TTC plans to reduce a total of $87.0 million, and is in the process of compiling a final list of capital projects which will be directly impacted, based on the $241.7 million in total projected 2022 underspending as detailed in Appendix 5. - Transportation Services has identified $87.0 million in 2022 projected underspending based on paused capital projects, mainly impacting transportation infrastructure rehabilitation projects. Projected underspending by project is detailed in Appendix 6. - Corporate Real Estate Management has identified $34.2 million in reductions on capital projects, mainly impacting state of good repair projects across various locations. - Parks, Forestry and Recreation has identified $27.7 million in reductions on capital projects, mainly impacting park site rehabilitation and state of good repair projects for various buildings and structures. High inflation and global supply chain challenges continue to increase the cost escalation on capital project delivery. As well, a steep rise in prevailing interest rates has been increasing capital financing costs for new debt issuances. With the increasing financial pressure added to the uncertainty of the intergovernmental funding commitments, the projected spend rate continues to be impacted in 2022. Despite the challenges mentioned, the City will continue to plan annual capital projects in line with both affordability and achievability, based on the historical actual capacity and in consideration of emerging challenges such as inflationary impacts and supply chain disruptions. The strategy is to build on improvements experienced to date and improve the capital spend rate in future years; fully utilizing approved funding and enabling any excess funding capacity to support additional capital priorities, while promoting realistic capacity to spend in light of external factors and challenges.