Item - 2019.BU7.2

The Chief Financial Officer and Treasurer recommends that:

1.  City Council receive this report and attached Appendices for information

The purpose of this report is to provide City Council with the City of Toronto capital performance for the year ended December 31, 2018. Actual capital expenditures for 2018 totalled $3.594 billion or 63.0 percent of 2018 approved Capital Budget of $5.752 billion (see Table 1).

For the year-ended December 31, 2018, Tax Supported Programs and Agencies reported capital expenditures of $2.799 billion representing 61.1 percent of their collective 2018 approved Capital Budget of $4.578 billion. Rate Supported Programs reported capital expenditures of $795.4 million, representing 67.7 percent of their collective 2018 approved Capital Budget of $1.174 billion.

Table 1: Summary of Capital Spending

*2018 Approved Budget includes $1.656 billion 2017 Carry Forward Funding

The report also provides details on the 140 completed capital projects that have a combined budget of $204.9 million that were completed in the fourth quarter of 2018 and are ready to be closed. They have been completed with a total realized underspending of $27.0 million. The permanent underspending which has associated funding of $0.5 million in Federal Subsidy, $2.6 million in Capital from Current, $2.3 million in debt, $4.9 million in reserves/reserve funds, $16.6 million in Recoverable Debt and $0.1 million in other internal/external funds will be returned to their original Council approved funding sources.

In 2018, a total of 184 capital projects were completed with a combined capital budget of $366.4 million and an actual combined expenditure of $323.4 million, resulting in a total underspending of $43.0 million returned to the original funding sources.

In 2018, 18 of 31 Programs/Agencies have spending rate lower than 70 percent of their total approved Capital Budget. Among them Toronto Transit Commission, Transportation Services, Facilities Management, Real Estate, Environmental and Energy and Waterfront Revitalization Initiative have the highest approved budget and the highest unspent amount and highlighted below:

Toronto Transit Commission

The 2018 approved Capital Budget for Toronto Transit Commission totals $2.288 billion includes Toronto Transit Commission Base Projects, Toronto York Spadina Subway Extension, Scarborough Subway Extension and Transit Studies for Relief Line and Waterfront Transit. Toronto Transit Commission base projects have a spending rate of 76.5 percent while Toronto York Spadina Subway Extension, Scarborough Subway Extension and Transit Studies have spending rate of 38.0 percent, 63.5 percent and 15.3 percent respectively. The low spending rate for Toronto York Spadina Subway Extension is due to deferral of property settlements, holdback releases, contingencies and claims resolutions, and for Scarborough Subway Extension is due to revised City acquisition plan while Transit Studies are new initiatives supporting future transit expansions as part of the Public Transit Infrastructure Fund program.

Transportation Services

Transportation Services have a total 2018 Capital Budget of $565.9 million and a year-end spending of $313.9 million or 55.5 percent of its approved capital budget. Most of the $252.0 million year-end under-spending is in capital projects that require third party coordination and/or funding, community consultation, issues with site conditions and/or are development/transit dependent.

Facilities Management, Real Estate, Environment and Energy

The Facilities Management, Real Estate, Environment and Energy Program has spent $188.2 million or 57.7 percent of the total 2018 approved Capital Budget. Most of the $137.8 million year-end under-spending is due to coordination of legal agreements, insufficient funding, client issues, coordination of building requirements across multiple stakeholders, coordination with other projects and delays in Request for Quotation/Request for Proposal process.

Waterfront Revitalization Initiative

The Waterfront Revitalization Initiative Program spent $60.3 million or 28.8 percent of total approved Capital Budget. $149.0 million remained unspent primarily due to underspending in the Portland Flood Protection Project and the Cherry Street Stormwater Lakefilling Project caused by site conditions and winter shut-down.

 Further details on the progress of all approved capital projects for each City Program and Agency can be found in Appendix 4 of this report.

Total capital expenditure in 2018 totalled $3.594 billion or 62.5 percent of the total 2018 Approved Capital budget. Table 3 below outlines capital spending for Tax and Rate Supported Programs for the year ended December 31, 2018:

Table 3: Capital Year-end spending by Cluster

Figure 1 below shows the actual year-end spending rate from 2013 to 2018 as well as the 5-year average spending rate for 2013 to 2017.

Figure 1: 2013 - 2018 Capital Spending Rate

(See Figure 1 titled "2013 - 2018 Capital Spending Rate in the Financial Impact section of the report dated June 14, 2019 from the Chief Financial Officer and Treasurer)

As illustrated in the Figure 1 above, both the approved Capital Budget (including carry forward funding) and actual capital expenditures have been steadily trending upwards over the last 5 years. Actual capital spending has increased from $2.386 billion in 2013 to $3.594 billion in 2018 and the spending rate for 2018 is slightly higher compared to the last 5 year's average.

The 2018 Capital Budget of $5.752 billion represents the highest Capital Budget the City has ever had for its Tax and Rate Supported Programs. This reflects a Council approved Capital Budget of $4.011 billion plus a combined adjustment for 2017 carry forward funding and 2018 in-year budget amendments of $1.741 billion.

Appendix 1 summarizes the actual year-end spending and spending rate by City Program and Agency.

Projects to be closed

A capital project is considered fully closed when all its subsidiary projects/subprojects are completed. 141 capital projects were completed in the last quarter of 2018 that have a combined budget of $303.9million. They have been completed under budget realizing an underspending of $27.7 million. Throughout 2018, a total of 184 projects were completed of which 167 were Tax Supported and 17 were Rate Supported.

Table 4 below outlines the projects that have been completed in the four quarters of 2018:

Table 4: 2018 Closed Projects

In the fourth quarter of 2018, the permanent underspending of $27.7 has associated funding of $0.5 million from Federal Subsidy, $2.6 million in Capital from Current, $3.9 million in debt, $4.9 million in reserves/reserve funds, $16.6 million in Recoverable Debt and $0.1 million in Other Revenue will be returned to their original Council approved funding sources.
  

Table 5 below outlines the associated underspending by funding sources for Tax Supported and Rate Supported projects completed in 2018:

Table 5: 2018 fourth quarter underspending by funding sources

Appendix 2 details 141 capital projects that have been completed in the fourth quarter of 2018 by various City Programs and Agencies which can now be closed.