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To: Chair and Members Finance and Corporate Services Committee

From: Suzanne Olimer Commissioner of Finance and Corporate Services

Date: May 19, 2021

Subject: Operating Budget Variance Report – December 31, 2020

Report: FCS-4-2021-2 ______________________________________________________________________

Recommendation

THAT the Operating Budget Variance Report as at December 31, 2020 be received.

Origin

Policy AD:52 Operating Budget Administration requires the Commissioner of Finance and Corporate Services to provide each Standing Committee and Council with a written status report on the yearly budgets for the quarters ending in June, September and December.

More detailed variance analysis is completed by staff in order to manage operations and to provide the summarized information presented in this report.

Analysis

Attached to this report are schedules that outline the significant forecasted year-end budget variances as at the period ending December 31, 2020. The schedules provide a summary view by program net levy for both the tax and rate supported operating budgets.

The Tax Supported Operating Variance Net Levy Summary shows the year-to-date (YTD) actuals ending December 31, 2019 and the annual revised budget for 2019, YTD actuals ending December 31, 2020 and the annual revised budget for 2020. The next two columns compare the YTD actuals to the annual budget in terms of dollars remaining in the budget and the percentage of budget spent.

• The second and third pages are the Rate Supported Operating Variance Net Levy Summaries, which are in the same format as the first summary, and show the

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bottom line net levy for each program/division within Water, Wastewater and Solid Waste.

Financial Considerations

The following chart summarizes the projected variances in each section.

Department Net Levy Variance

Favourable/ (Unfavourable)

Finance and Corporate Services and Non-Program $454,525 Public Works - including Administration, Transportations - Roads, Port Carling Locks and Environment General $293,791

Community and Planning Services $928,916 Health Services ($801,739) Airport ($154,560)

Total Tax Supported Budget Variance $720,933 Public Works - Water and Wastewater $677,386 Public Works - Solid Waste ($120,148)

Total Rate Supported Budget Variance $557,238 Total Corporate Budget Variance $1,278,171

Overall, there is a favourable operating variance at year-end of $1,278,171 across the organization (0.7% of expenditures). The Tax Supported operations are expected to be favourable to budget by $720,933 or 0.6% of expenditures. The Rate Supported operations are expected to be favourable to budget by $557,238, which is comprised of favourable variances for Water and Wastewater of $677,386 or 2.3% of expenditures and an unfavourable variance for Solid Waste Operations of $120,148 or -0.7% of expenditures. All of these variances reflect results prior to applying eligible Safe Restart Municipal funding for COVID-related pressures. The major contributors to the variances are noted by Department or Service below.

Tax Supported Budget Variance

Within Finance and Corporate Services and Non-Program, there is a favourable variance of $454,525 being forecast for year-end. The most significant contributors to this net variance are outlined below:

• Provincial Offences is over budget by $364,211 as a result of a shortfall of $504,645 in Fines revenue. Of this revenue shortfall, $404,890 will be offset by Phase I COVID-19 funding, as it is attributable to COVID-19 restrictions on collections and the extension of limitation periods. Although volume increased in 2020, the associated revenue will be deferred until the second quarter of 2021. Offsetting this unfavourable shortfall are cost savings of $98,421 related to

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decreases in Adjudication, Prosecution Services, Collection costs and other court fees. Additional cost savings of $42,013 is related to vacancy gapping and other miscellaneous cost savings including travel-related expenses for meals, conferences and courses.

• Human Resources has a favourable variance of $95,113 based on cost savings for training, consulting and development that Human Resources facilitates for the organization.

• Corporate Administration is projecting a favourable variance of $137,539 as a result of deferring the hiring for the Director position as well as a gapping vacancy for the Commissioner position. Cost reductions for travel-related training and development expenses have also contributed to the favourable variance within this division, offset by increases for advertising and legal costs.

• Finance Services is favourable to budget by $80,981 due to staff vacancies during the year, a staff reassignment to The Pines LTC home as well as reductions in travel-related costs for training and development.

• Police Services is over budget by $251,555 which mainly relates to the year end adjustment following the reconciliation of the 2019 actuals compared to the amount that was billed.

• Office Services and Fleet Operations will be unfavourable to budget by $118,482 and $22,796 respectively as a result of a combination of additional resources required to accommodate COVID-19 distancing requirements as well as reductions in service requirements and hence cost recoveries due to COVID-19 impacts.

• Elected Officials is under budget by $62,432 mainly related to travel related expenses due to COVID-19 restrictions.

• Continuous Improvement Unit is favourable to budget by $75,374 mainly due to vacancy and rate gapping.

• Non-Program is currently showing a favourable variance of $729,473, however this includes a transfer in of $750,000 from the Tax Stabilization Reserve related to the interest free District loan to Muskoka Futures for the Muskoka Business Recovery Fund. The year-end entry to record this loan of $750,000 will eliminate the favourable variance reported above. Additional Supplementary Taxes of $368,879 are favourable to budget reflecting growth in assessment in 2020 and is partially offset by an unfavourable variance in tax write-offs of $115,204. Similar to prior years, there is an unfavourable variance for gapping of $340,000. The District budgets at full job rate for wages in each division and then includes an overall reduction in personnel costs that is called personnel gapping in Non-Program. As the year proceeds and staff are hired at less than job rate or positions are filled later than anticipated, the favourable personnel variance is recorded in each division. For 2020, there is significant personnel gapping that has been noted throughout this report as there were many positions that were deferred or delayed to help mitigate pandemic costs. Lastly, Investment income is favourable to budget by $120,457 and reflects funds held in the high interest saving account (HISA) through ONE Investment.

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In summary, the Finance and Corporate Services and Non-Program departments are currently showing a favourable year-end variance of $454,525. As noted above, the recording of the loan to Muskoka Futures remains outstanding and will shift this to an unfavourable variance of $295,475.

Within Public Works Tax Supported, there is a favourable variance of $293,791 at year-end, which is comprised of the following significant items:

• Design/Survey has an unfavourable variance of $86,260 due to lack of internal recoveries.

• Within Transportation - Roads, there is an overall favourable variance of $412,525. Traffic has an unfavourable variance totalling $164,104 in large part due to over run in line painting contract and subcontract work of $204,136 and in supplies of $34,173 primarily for audible pedestrian signals and these are partially offset by favourable personnel costs of $63,010. Paved Roads has an unfavourable variance of $141,628 which is all attributed to increased Area Service costs. Staff reduced spending to mitigate the overruns with savings in contracted services for Structures of $223,383. In addition, the last quarter weather resulted in Winter Control contracted services closing out the year favourably by $309,837. Personnel overall was favourable by $183,134 due to vacancies as well as staff allocating time to Port Carling Locks. Roads Admin revenue had a shortfall for Development Fees compared to the budget but it is largely offset by an increase in aggregate resources payment.

• Port Carling Locks variance is unfavourable by $109,335. Personnel costs are $59,118 over budget, which includes the cost of pairing staff to avoid certain working alone situations. Contracted services costs and supplies are unfavourable by $37,541 due to maintenance issues with small locks and lighting at large locks. It was necessary to waive lock fees for several weeks at the start of the season as measures were put into place to protect staff from potential pandemic exposure which contributed to an unfavourable variance for locks revenues of $9,433.

• Hauled Sewage Operations has an overall favourable variance of $76,861 primarily for projected lower Personnel costs of $37,759 and contracted service and chemical costs totalling $48,841. Internal charges were favourable by $37,886 for fleet as well as increase recovery from landfill leachate charges. These favourable variances are partially offset by an unfavourable variance for user fees related to lower hauler volumes of $45,911.

In summary, the Tax Supported Public Works budgets are favourable by $293,791.

Within Community and Planning Services, there is a favourable variance of $928,916 for year-end consisting of the following significant items:

• The Ontario Works Program section is favourable to budget by $497,541 primarily due to the reduction in OW Program Delivery Funding. Staffing costs decreased significantly as part of the employment services transition. With the closure of the Community Offices and client services and supports being primarily delivered

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virtually, the majority of the Ontario Works client life stabilization and employment readiness and preparation programs were put on hold. Community partners’ programs were also limited due to the pandemic and as a result, program supplies, program services other as well as the supports for program delivery decreased including administration, travel, office expenses, education and staff training.

• Community Initiatives will be underspent by $81,737 due to a reduction in program services and program supplies as a result of the pandemic.

• Child Care is under budget by $79,852 as the requirement of operators and service providers to leverage federal COVID-19 funding supports resulted in decreased spending from the Ministry of Education funding allocation.

• Community Housing has a favourable variance of $71,256. The Portable Housing Benefit program was not implemented in 2020 resulting in a savings in the current year of $45,000. It is anticipated that this program will proceed in 2021. Utilities were significantly underspent, partially offset by a decrease in miscellaneous fees as well as an increase in unit turnover and grounds maintenance costs.

• Planning and Policy is favourable to budget by $110,990 primarily as a result of vacancies and rate gapping. Cost reductions for travel-related training and development expenses as well as reduced miscellaneous office expenses have also contributed to the favourable variance within this division.

• Water Strategy has a favourable variance of $86,153 primarily due to staffing and student vacancies in the current year, as well as travel-related cost savings for training and development due to the pandemic.

In summary, at this time, the Community and Planning Services department is ending the year in an overall favourable position of $928,916.

Within Health Services, there is an unfavourable variance of $801,739, which is mainly comprised of the following:

• Paramedic Services is unfavourable to budget by $484,744 mainly due to Personnel costs which are over budget by approximately $800,000 due to the impacts associated with the pandemic. Approximately $209,225 is related to shifts worked at The Pines LTC home by Paramedic staff and $280,845 is related to Pandemic Pay which has been funded by the Province. Through a combination of funding sources, the budget variance in Pandemic Services is expected to be minor once to final year-end entries are completed.

• Emergency Planning is over budget by $154,362 mainly due to pandemic costs such as Assessment Centre rent and tents for drive-through testing, as well as other associated supplies including hand sanitizer and masks. These costs will be financed through one-time funding received to support additional costs due to the pandemic resulting in no net unfavourable variance.

• The Simcoe Muskoka District Health Unit budget has an unfavourable variance of $11,952 based on the annual funding notice, which was received after the budget was approved.

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• Health Strategies and Initiatives is under budget by $53,384 mainly due to delaying the hiring of a new Manager for this division, which is partially offset by an unfavourable grant revenue variance of $18,849.

• Pines Operations is unfavourable to budget by $210,599 at year-end due to the pandemic, mainly for Nursing personnel costs and operating supplies. The Pines LTC home has received and fully utilized $557,000 in Pandemic Funding, as well as $638,000 in Pandemic Premium Funding. Revenue from Resident Fees is unfavourable to budget by $54,277 due primarily to lower admittances during the pandemic.

In summary, the Health Services department is in an overall unfavourable position of $801,739 at year-end before Safe Restart and other pandemic related funding is applied.

Within Airport, there is a reduction of $249,833 in ramp fees and other revenues, including advertising and scheduled service. Additionally, net fuel sales are below budget by $133,288 due to the Canada/U.S. border being closed because of the pandemic. These unfavourable variances are partially offset by favourable variances for personnel of $173,049 for new positions that were delayed due to the pandemic and $21,454 in savings for travel-related costs for training and development. Overall, the net unfavourable variance within Airport of $154,560 is COVID-19 related and will be fully financed by Safe Restart Municipal funding.

Overall the tax supported operating budget has a favourable variance at year-end of $720,933 before applying Safe Restart Municipal Funding.

Rate Supported Budget Variance

Solid Waste Management

Within Public Works Rate Supported – Solid Waste, there is an unfavourable variance of $120,148 at year-end before Safe Restart Municipal Funding is applied, noting that some year-end entries are not yet recorded.

Overall, expenditures are $782,367 above budget. Personnel costs are unfavourable by $144,167, primarily related to the Engineering and Public Works Committee approval of a number of emergency staffing positions in Report PW-5-2020-8. The curb related service issues requiring subcontracted collection resulted in an unfavourable variance of $419,640. Recycle processing fees are $133,120 over budget, the result of higher recyclable tonnage collected as well as curb service issues. Waste and recycle haulage is $83,438 unfavourable overall, including the Lakeside pilot, due in part to increased tonnage. Fleet is unfavourable by $44,373 due to increased use of heavy equipment as well as additional short-term rentals required to manage physical distancing. Increases in Tax Write-offs account for $52,705 of the variance. There is a favourable variance of $60,769 for hazardous waste disposal mainly attributed to the closure of the main site for April through early May and reduction in operation to 3 days per week since that time. Organics collection at transfer stations did not commence resulting in $86,220 of

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savings. Remaining expense variances totalling $51,913 account for the balance of expenditure variance.

Total revenues are $662,219 more than budget. Landfill tip fee revenues are favourable by $520,687, mainly under Waste tip fees and Wood Chipping tip fees. Scrap metal sales are favourable by $82,381 as a result of the new contract. Offsetting this is recyclables sale rebates which is unfavourable by $29,656 due to the continued decline of market rates. Supplementary taxes were $59,367 over budget. Remaining variances totalled $34,531.

In summary, Rate Supported Solid Waste budget is unfavourable by $120,148 before Safe Restart Municipal Funding is applied, noting that some year end entries are not yet recorded.

Water and Wastewater

Within Public Works Rate Supported – Water and Wastewater, there is a favourable variance of $677,386 at year-end, subject to change with some year-end entries not yet recorded.

Total expenditures are favourable by $87,470. Personnel is favourable by $286,824 due primarily to vacancies and rate gapping throughout the year. Utilities are $176,299 under spent, with the majority of saving within the wastewater division. Biosolids disposal is favourable by $163,229 due to improved plant processes and centrifuge replacement at the Golden Pheasant plant and alternative measures in place at the Bracebridge plant resulting in reduced disposal. Supplies are favourable by $98,938 primarily for meter replacements which were instead contracted out. Unfavourable variances include subcontractor cost over runs of $246,502 from a combination of locate costs, failed water line in December in Huntsville, watermain breaks and restoration costs in Bracebridge as well as contracting out the meter replacement work. Chemical cost increases are resulting in over spend of $171,978, primarily within wastewater division. Tax write-offs came in at $248,624 over budget. The remaining variances tally to $29,284 favourable overall.

Total revenues are favourable by $589,916 overall. Consumption revenues are favourable by $328,666 due primarily to 2.4% higher volumetric charges. Hauler User Fees are favourable by $64,487 due to higher volumes disposed at wastewater treatment plants. Supplementary taxes have a favourable variance of $231,166. However, penalty waivers and other miscellaneous fees are projected to under budget by a total of $34,403 and reflect Council decision to waive penalties during the beginning months of the pandemic.

In summary, the Rate Supported Water and Wastewater budgets are favourable by $677,386 at year-end, subject to change with some year-end entries not yet recorded.

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COVID-19 Pandemic Funding

The Federal and Provincial governments have provided an unprecedented level of funding to municipalities to help mitigate the impacts of the COVID-19 pandemic and provide necessary funding to residents, businesses and organizations. The following table highlights the funding received for 2020:

Funding Program 2020 $ Safe Restart - Municipal Operating Funding 3,002,100 Social Services Relief Funding Phases 1 and 2 2,345,293 Safe Restart - Transit Funding and MTO Transit Cleaning Fund (METC) 25,841 Safe Restart - Childcare Sector 602,460 MOHLTC - LTC Pandemic Pay and Outbreak Prevention and Containment Funding for The Pines 1,296,625 MOHLTC - Pandemic Pay and one-time COVID-19 Funding for Paramedic Services 928,659 Total 8,200,978

The majority of the funding received is for municipal operations such as The Pines, Paramedic Services and other services that were negatively impacted by the pandemic. In contrast, a significant amount of the funding received under the Social Service Relief Fund and Safe Restart Fund - Childcare has been transferred to organizations within Muskoka that are delivering critical services to our residents.

The funding received under the Safe Restart - Municipal Operating Funding may be used for either 2020 or 2021 which provides flexibility to municipalities. In the other programs identified, the funding must be utilized by March 31, 2021 to align with the Province’s fiscal year end. Of the total funding received in 2020 for Paramedic Services, $179,132 was not utilized and was returned to the Ministry. Additionally, due to the very small transit program that the District operates, this program funding may not be fully utilized.

Staff are reviewing expenditures related specifically to COVID-19 impacts and are in the process of allocating funding as appropriate. Estimates for Safe Restart Municipal Operating Funding currently total $1.9 million and include $789,868 for Solid Waste, $403,720 for The Pines and $170,071 for Community Emergency Plan and other remaining departments for COVID-19 related costs. In addition, $404,890 for Provincial Offences and $154,561 for Airport will be allocated for lost revenue for the period ending December 31, 2020.

It should be noted that there is additional funding allocated in 2021 for COVID-19 related impacts that has not been included in this report.

Summary

In summary, the Tax and Rate Supported operating budgets are reporting an overall favourable variance at year-end of $1,278,171 or 0.7% of expenditures across the

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organization. Approximately $1.9 million of the $3.0 million in Safe Restart Municipal funding will be utilized in 2020 as detailed above.

Communications

Operating Budget Variance Reports are submitted to the Standing Committees and Council for results as at June 30th, September 30th and December 31st of each year.

Strategic Priorities

Click on the icons below to view strategies under each priority area.

s 2.2, 2.3, 2.9

Respectfully submitted,

Suzanne Olimer, CPA, CMA, Commissioner of Finance and Corporate Services; Julie Stevens, CPA, CA, Chief Administrative Officer

Run Date: 5/5/21 1:35 PM

Tax Supported Operating Variance Net Levy Summary

All General

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Tax Supported Operating Variance Net Levy Summary

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Rate Supported Operating Variance Net Levy Summary

Solid Waste Levy Run Date: 28/04/21 9:12 AM

2019

December

YTD Actuals

2019

Annual

Budget

2020

December

YTD Actuals

2020

Annual

Budget

Budget

Variance

Percent

Spent

Solid Waste Administration and Financing 7,370,514 4,053,245 4,434,436 4,338,301 (96,135) 102.2%

Landfill Sites (1,719,300) (1,341,490) (1,897,442) (1,498,635) 398,807 126.6%

Transfer Stations 2,773,794 2,882,880 3,036,985 2,937,143 (99,842) 103.4%

Depots 140,363 185,127 159,001 175,577 16,576 90.6%

Remote Bins 862,750 1,059,626 1,043,783 1,050,046 6,263 99.4%

Curbside Collection 4,106,418 4,105,427 4,726,687 4,248,683 (478,004) 111.3%

Recycling and Diversion 659,181 245,090 586,138 718,325 132,187 81.6%

Total Solid Waste Levy 14,193,720 11,189,905 12,089,588 11,969,440 (120,148) 101.0%

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Run Date: 5/5/21 1:40 PM

Rate Supported Operating Variance Net Levy Summary

Water and Wastewater Levy

RS Variance Net Levy Summary

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