Item - 2024.EX17.12

The Chief Financial Officer and Treasurer recommends that:

1. City Council approve the budget adjustments and any associated complement changes detailed in Appendix D to amend the 2024 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, 2024, as well as projections to the year-end, December 31, 2024. This report also requests City Council's approval for amendments to the 2024 Approved Operating Budget that have no impact on the City's Net Budget.

The following table summarizes the year-to-date financial position and year-end projections for the City's Tax-Supported Operations as of June 30, 2024.

Table 1: Tax-Supported Operating Variance Summary

As detailed in Table 1 above, for the six-month period, Tax-Supported Operations experienced a favourable net variance of $246.7 million. A favourable net variance is projected at year-end of $138.3 million. These figures are adjusted for Toronto Building, City Planning, which have surplus allocated to reserves by legislation or reserve draws if a deficit is experienced. It is important to note that the financial information presented is as of June 30, which is a snapshot in time and the year-end projection is based on current and expected future activities as known and anticipated as at June 30, 2024.

Of the $138.3 million year-end net favourable variance, $117.0 million or 84.6% of the overall variance can be attributed to net favourable variances arising from the following three key drivers:

-Toronto Shelter and Support Services whose expenditures are projected to be $34.6 million lower than budgeted primarily due to reduced costs for the temporary hotel program, driven by negotiated longer-term contracts;

- Toronto Transit Commission (Conventional Service) that is projecting a $54.1 million positive net variance that is largely driven by increased passenger revenue from more leisure trips; and

- Interest/Investment Income which are expected to be $28.3 million greater than budgeted earning estimates.

- The remaining $21.3 million reflects the consolidated favourable variance projection across all other Divisions and Agencies.

The funding provided by the New Deal struck with the Province of Ontario makes significant contributions towards transit and shelter related services. To date, $300.0 million has been received for Subway and Transit Safety, Recovery and Sustainable Operations, $200.0 million for Shelters and Homelessness, and $6.9 million related to operating costs of the Gardner Expressway and Don Valley Parkway, which are all reflected in the City’s year-to-date results.

The City continues to advocate to the Federal government for ongoing funding for the refugee claimants in the City’s shelter system. Included in the 2024 Operating Budget, Toronto Shelter and Support Services has a budgeted recovery of $250 million in the Interim Housing Assistance Program (IHAP) funding. Projection to year-end indicates that the actual costs for refugee claimants in 2024 will increase above $250 million in 2024 due to ongoing refugee arrivals. The City has submitted claims for expenses incurred through June 30, 2024 and will submit reimbursement claims for the final yearend actuals costs. As of today, Immigration, Refugees and Citizenship Canada (IRCC) has provided the City with $47.6 million in reimbursements for expenses incurred in 2024 Q1.

Rate-Supported Programs:

Rate-Supported Programs reported a favourable year-to-date net variance of $16.6 million. At year-end, Rate-Supported Programs are projecting a favourable variance of $38.1 million.         

Table 2: Rate-Supported Operating Variance Summary

While the favourable year-to-date variance was driven by all three programs, Toronto Parking Authority accounts for over fifty percent of the variance. The year-end projection of $41.1 million is the net revenue amount from the Toronto Parking Authority. Of this amount, a dividend of $30.8 million would be paid to the City based on the new Income Share Agreement, adopted by City Council on June 26, 2024 (https://secure.toronto.ca/council/agenda-item.do?item=2024.EX15.9), which changed the dividend contribution rate from 85 percent to 75 percent.

The year-end projections forecast all programs seeing a favourable net variance with Toronto Water accounting for over fifty percent of the variance.

Rate-Supported Programs are funded entirely by 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 Waste Management Reserve Fund and the Wastewater and Water Stabilization Reserves respectively, to finance capital investments and ongoing capital repairs and maintenance.

When adjusted for Toronto Building and City Planning, for the six months ended June 30, 2024, the City experienced a favourable net variance in Tax-Supported programs of $246.7 million and is projecting a favourable net variance of $138.3 million for December 31, 2024.

Appendices

Appendices A, B and C provide a detailed summary of Net Expenditures, Gross Expenditures, Revenue for the six-month results and projections to year-end by City Program and Agency, respectively. Appendix D details the recommended in-year budget adjustments that are financially neutral to the 2024 Approved Operating Budget. Appendix E and F outline Donations and Sponsorship funds respectively, that have been provided to the City, and Appendix G provides a dashboard with information for each City Program and Agency.