Item - 2023.EX1.7

The Executive Committee recommends that:

1. City Council approve the budget adjustments and any associated complement changes detailed in Appendix D1, to the report (November 25, 2022) from the Chief Financial Officer and Treasurer, to amend the 2022 Approved Operating Budget, with no impact on the Net Operating Budget of the City, as well as recommended expenditure authority as detailed in Appendix D2 to the report (November 25, 2022) from the Chief Financial Officer and Treasurer.

The purpose of this report is to provide City Council with the Operating Variance for the nine months ended September 30, 2022; as well as projections to year-end. This report also requests City Council approval for amendments to the 2022 Approved Operating Budget that have no net impact on the City's approved Budget.

In 2022, the City continues 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. As a result, 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.

It is currently anticipated that $567 million in 2022 COVID-19 support funding will be announced. Meanwhile, the City is expecting to generate internal savings associated with actual COVID-19 impacts compared to budgeted estimates to further reduce COVID-19 pressures, resulting in a revised $734 million COVID-19 funding shortfall in 2022. When including further funding expectations of $31.4 million for the anticipated but not yet recieved Provincial reimbursement of extraordinary COVID-19 related Public Health costs, the remaining 2022 COVID-19 funding shortfall is further reduced to $703 million.

• The current anticipated 2022 COVID-19 funding shortfall of $703 million reflects a reduction of $112 million from the $815 million funding shortfall previously reflected in the Four Month Operating Variance reported to Council in July 2022.

• The change in the anticipated 2022 shortfall results from $14 million in new COVID-19 funding for Senior Services and Long-term Care costs; and favourable variances on anticipated COVID-19 impacts, specifically $21 million in lower than anticipated Transit impacts and $77 million predominantly from a greater than anticipated recovery in Corporate Revenues such as the Municipal Accomodation Tax, Casino Woodbine, Parking Tags and our Hydro Dividend.

Table 1 below details the budgeted 2022 City-wide COVID-19 related financial impacts against secured/anticipated and assured COVID-19 support funding; and the resulting financial position that is reflected in the year-end variance projections:

Table 1: 2022 Anticipated COVID-19 Financial Impacts

*Reflects preliminary City allocation estimate of Federal/Provincial transit funding commitments

**$14M fully attributable to Seniors Services and Long-Term Care

For details regarding expected COVID funding from other levels of governments as well as the current status of committed funding, refer to the following report titled "2022 COVID-19 Intergovernmental Funding Update" submitted to the City Council in May:

https://www.toronto.ca/legdocs/mmis/2022/cc/bgrd/backgroundfile-225633.pdf 

Tax Supported Programs:

The following table summarizes the projected year-end financial position of the City's Tax Supported Operations as of September 30, 2022.

Table 2: Tax Supported Operating Variance Summary

*Total projected variance includes $703 million remaining COVID funding shortfall as detailed in Table 1

Nine Month Year-to-Date and Projected Year-End Spending Results:

As noted in Table 2 above, for the nine months ended September 30, 2022, Tax Supported Operations experienced an unfavourable net variance of $352.1 million or -3.8% of planned expenditures adjusted for Toronto Building and City Planning. It is important to note that the September 30th experience is a snapshot in time and the year-end projection is based on current and expected future impacts.  The continued impact of COVID-19 and any deviation from expectations to year end will impact variance projections.  Any changes will be reflected in variance reporting for the twelve months ending December 31, 2022.

For year-end, the City is projecting an unfavourable variance of $784.9 million or -5.9% of the 2022 Gross Operating Budget, adjusted for Toronto Building and City Planning. The projected unfavourable variance is attributed to two key factors:

• $703 million COVID-19 funding shortfall as detailed in Table 1 above; and

• A further $82 million in refugee response costs, reflecting both added response actions ($60 million) and added use of the City's base shelter system to meet increased refugee response demands ($22 million), which have been further impacted by supports provided to those affected by the ongoing crisis in Ukraine.

Rate Supported Programs:

Rate Supported Programs reported a favourable year-to-date net variance of $63.6 million. The favourable variance is attributed to favourable expense variances in all three programs, and revenues close to budget.  Year end results are projecting a net variance of $69.4 million.

Rate Supported Programs are funded entirely by the user fees that are used to pay for the services provided and the infrastructure to deliver them. Solid Waste Management Services and Toronto Water's respective year-end surpluses, if any, must be transferred to the Wastewater and Water Stabilization Reserves and Waste Management Reserve Fund, respectively, to finance capital investments and ongoing capital repairs and maintenance

Table 3: Rate Supported Operating Variance Summary