Item - 2019.EX7.15

City Council considered Items EX7.14, EX7.15 and EX7.18 together.

The Executive Committee recommends that:

1.  City Council approve the transfer of $8.000 million from the Water (43 percent) and Wastewater (57 percent) Stabilization Reserves to Toronto Water's Vehicle and Equipment Replacement Reserve (XQ1012) to fund future year vehicle purchases.

2.  City Council approve the withdrawal from Emergency Human Services Reserve (XQ1111) of $0.077 million to supplement funding in the Emergency Human Services Expense Account to mitigate the deficit position in 2018.

The purpose of this report is to provide Council with the City of Toronto's Operating Variance results for the year ended December 31, 2018 and the disposition of the 2018 year-end operating surplus.

As of December 31, 2018 the City experienced a favourable variance of $147.200 million net. The following table summarizes the financial position of the City's Tax Supported Operations at year-end:

Table 1: Tax Supported Operating Variance Summary ($ Millions)

In accordance with Council and legislative requirements, a portion of the surplus, $21.434 million net, will be allocated to reserve funds primarily for the following Programs and Agency: Toronto Building, City Planning, and Exhibition Place.

As noted in Table 1 above, for the year ended December 31, 2018 Tax Supported Operations experienced a favourable net variance of $147.200 million or 1.3 percent of budgeted gross expenditures. The key factors contributing to the favourable year-end variance are lower than planned salary and benefits from vacant positions, and revenue driven by volume in City Operations, as well as under spending in employee benefits, utility costs, non-labour costs by Toronto Transit Commission. It is important to note lower than budgeted Municipal Land Transfer Tax revenue of $82.403 million net due to lower residential market activity. 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 E.

Consistent with the Council approved Surplus Management Policy, at least 75 percent or $94.324 million will be allocated to the Capital Financing Reserve and the remaining $31.441 million will be allocated to underfunded liabilities and/or reserve funds.

Rate Supported Programs:

Rate Supported Programs reported a favourable year-end variance of $65.414 million. The favourable variance is primarily attributed to both underspending and over achieved revenue in Toronto Water.

Table 2: Rate Supported Net Variance Summary ($ Millions)

For the year ended December 31, 2018 Tax Supported Operations experienced a favourable variance of $147.200 million net. After meeting Council and legislative requirements, the year-end surplus available for distribution is $125.765 million net. As per City Council's Surplus Management Policy, 75 percent of the 2018 final year-end surplus of $94.324 million will be allocated to the Capital Financing Reserve and the remaining 25 percent or $31.441 million will be allocated to underfunded liabilities and/or reserves/reserve funds.