Capital Variance Report for the Twelve months Ended December 31, 2022

- Tax Supported Programs and Agencies reported capital expenditures of $2.524 billion representing 62.3% of their collective 2022 Approved Capital Budget of $4.051 billion. - Rate Supported Programs reported capital expenditures of $1.078 billion, representing 69.7% of their collective 2022 Approved Capital Budget of $1.546 billion. Table 1 : Capital Variance Summary Table 1 Corporate Capital Variance Summary for the Period Ended December 31, 2022 2022 Approved Budget* 2022 YE Actual Expenditures $M $M % City Operations 2,380.3 1,219.1 51.2% Agencies 1,670.3 1,305.2 78.1% Tax Supported: 4,050.6 2,524.3 62.3% Rate Supported: 1,546.4 1,078.0 69.7% TOTAL 5,596.9 3,602.3 64.4% *Note: Includes 2021 carry forward funding The City's actual capital spending through the twelve months of 2022 is $3.602 billion. This represents a higher dollar value than the $3.545 billion spent in 2021, partially as a result of cost escalation driven by inflation. However due to a materially larger base budget in 2022 compared to the prior year, coupled with $300 million in paused capital spending initiated to help address the remaining 2022 COVID-19 funding shortfall, the spending rate is lower in 2022 compared to 2021. The $300 million pause in capital spending to address the COVID-19 funding shortfall that is further detailed below, accounts for roughly 7.4% of the 2022 tax supported capital budget, adjusting for this factor the 2022 spend rate would increase to 70.7%. 2022 spend rates were further impacted by ongoing significant global supply chain issues triggered by COVID-19 were worsened by the conflict in the Ukraine. In addition the labour market has made access to skilled trade workers more challenging which severely impacted capital delivery, these supply chain and labour market challenges were experienced in all sectors, all markets and jurisdictions. Impacts resulting from the inter-governmental funding shortfall In 2022, the City actively engaged with Federal and Provincial counterparts at all levels to secure continued COVID-19 funding support. The City continued to experience significant and unprecedented financial impacts, both in the form of added costs and revenue losses as a direct result of the COVID-19 pandemic. The 2022 Operating Budget was balanced based on the expectation of continued COVID-19 support funding from the Government of Canada and Province of Ontario with a total amount of $1.4 billion. The City has received $850 million in federal and provincial support funding and has generated internal savings of $154 million compared to budgeted estimates, resulting in a remaining COVID-19 funding shortfall of $395 million in 2022. To address the remaining $395 million shortfall, a backstop strategy is required to offset the COVID-19 related 2022 operating budget deficit. This includes a $300 million adjustment to the 2022 Capital Budget consistent with the paused capital projects summarized below and detailed in appendix 6; as well as a further $95 million one-time draw from the COVID-19 backstop. Due to the absence of further Federal and Provincial contributions, the COVID-19 backstop will now be reduced to $1.039 billion, which remains sufficient to manage 2023 budgeted COVID-19 impacts of $933 million but absent further 2023 funding supports would be insufficient to address continued COVID-19 impacts expected in 2024 and future years, with 2024 impacts currently estimated to be $720 million to $927 million. $300 million Required Capital Adjustment As previously reported to Council, the backstop strategy included the requirement to pause and potentially reduce up to $300 million in approved 2022 Capital projects. The $300 million reflected 7.4% of the 2022 Tax Supported Capital Budget and was proportionately allocated across all City Programs and Agencies based on the level of Debt/Capital from Current (CFC) or Provincial Gas Tax funding within the 2022 Capital Budget. The allocation predominantly impacts the City's capital investments for Toronto Transit Commission (TTC); Transportation Services; Parks, Forestry & Recreation; and Corporate Real Estate Management, which combined, reflect $236.0 million or nearly 80% of the total $300 million impact. Appendix 6 of this report provides further details on impacted projects and notes the impacts by program or agency across the following three categories: 1. Cancelled or Permanently Reduced Projects ($97.9 million) - Capital projects or programs initially paused to now be permanently reduced. - For reductions to capital programs (i.e. major road rehabilitation), specific capital work or discrete locations were not necessarily eliminated, rather 2023 work plans were developed with reduced available funds based on the requirement for paused capital work. 2. 2022 Budget Reductions with Initiatives Incorporated in Future Capital Plans ($188.3 million) - Projects reduced from the 2022 Capital Plan and subsequently added back in futures years either through additions approved as part of the 2023 - 2032 Capital Plan or accommodated within approved and available future year funding. 3. Other Adjustments ($13.7 million) - Predominantly reflects adjustments in available funding sources enabling new non-debt funding to be added to existing projects, freeing up CFC funding to be eliminated from the Capital Plan, without an overall change to total project funding. 2022 will mark the second instance since the start of the pandemic where capital projects were reduced or adjusted to offset COVID-19 impacts with the first occurrence applying $263 million in 2020 capital underspending to the COVID-19 backstop. There is currently no further direction to pause or reduce any 2023 Capital work that was approved as part of the 2023 budget process.