Item - 2023.EX8.3

The Executive Committee recommends that:

1. City Council approve the budget adjustments and any associated complement changes detailed in Appendix D to the report (September 18, 2023) from the Interim Chief Financial Officer and Treasurer to amend the 2023 Approved Operating Budget, with no impact on the Net Operating Budget of the City.

The purpose of this report is to provide City Council with the Operating Variance for the six months ended June 30, 2023 as well as projections to year-end. This report also requests City Council's approval for amendments to the 2023 Approved Operating Budget that have no impact on the City's Net Budget.

In 2023, the City continues to experience significant financial impacts, both in the form of added costs and revenue losses as a direct result of the lasting impact of the COVID-19 pandemic. As a result, the 2023 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 budget amount of $932.8 million.

To date, $53.7 million in 2023 COVID-19 support funding has been committed specific to Public Health costs with an additional $4.5 million committed related to Seniors Services and Long Term Care. In addition to COVID-19 support funding, the City has generated $33.7 million in offsets associated with projected COVID-19 impacts compared to budgeted estimates, resulting in a $840.9 million remaining COVID-19 funding shortfall in 2023.

Table 1 below details the budgeted 2023 City-wide COVID-19 related financial impacts against secured and assured COVID-19 support funding; and the resulting financial position that is reflected in the year-end variance projections:

Table 1: 2023 Anticipated COVID-19 Financial Impacts

Tax Supported Programs:

The following table summarizes the projected year-end financial position of the City's Tax Supported Operations as of June 30, 2023.

Table 2: Tax Supported Operating Variance Summary

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

As noted in Table 2 above, for the six months ended June 30, 2023, Tax Supported Operations experienced an unfavourable net variance of $231.6 million or (9.3%) of planned expenditures adjusted for Toronto Building and City Planning. It is important to note that the June 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 the third quarter, and year end variance report.

For year-end, the City is projecting an unfavourable variance of $816.9 million or (16.6%) of the 2023 Gross Operating Budget, adjusted for Toronto Building and City Planning. The projected unfavourable variance results from:

- $840.9 million COVID-19 funding shortfall;

- $31.9 million projected unfavourable variance within Shelter Services attributed to the Refugee Response funding shortfall of $103.0 million;

- $55.9 million projected favourable variance across all other divisions and agencies.

Rate Supported Programs:

Rate Supported Programs reported a favourable year-to-date net variance of $26.0 million.  At year end, rate programs are projecting a favourable variance of $45.2M.      

Table 3: Rate Supported Operating Variance Summary

The favourable year to date variance is driven by all three programs fairly evenly with expense savings in Solid Waste Management, and favourable revenue in Toronto Water.

The year end is projecting similar drivers with Toronto Water, then Solid Waste showing the largest favourable variance.

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.