Item - 2026.EX33.9

The Chief Financial Officer and Treasurer recommends that:

1. City Council approve the budget adjustments detailed in Appendix D – Pending Budget Adjustments to amend the 2026 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 results for the four months ended April 30, 2026, as well as projections to the year-end. This report also requests City Council's approval for amendments to the 2026 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 April 30, 2026.

Table 1: Tax-Supported Operating Variance Summary

As detailed in Table 1 above, for the four-month period, Tax-Supported Operations experienced an unfavourable net variance of $4.6 million. An unfavourable net variance is projected at year-end of $97.4 million.

It is important to note that the financial information presented is as of April 30, which is a snapshot in time and the year-end projection is based on current and expected future activities as known and anticipated.

Rate-Supported Programs:

Rate-Supported Programs reported a favourable year-to-date net variance of $27.7 million. At year-end, Rate-Supported Programs are projecting a favourable variance of $32.7 million.     

Table 2: Rate-Supported Operating Variance Summary

The favourable year-to-date variance and favourable year-end projection is primarily driven by Toronto Water.

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. One hundred percent (100%) of Toronto Parking Authority’s surplus is allocated to the City, which is consistent with the Income Sharing Agreement.

For the four months ended April 30, 2026, the City experienced an unfavourable net variance in Tax-Supported programs of $4.6 million and is projecting an unfavourable net variance of $97.4 million for December 31, 2026.

The projected year-end unfavourable variance is $97.4 million. The key drivers of the variance are rooted in legislative, policy and economic changes, quasi-judicial settlements and unexpected financial implications of geopolitical disruptions.  These key drivers have manifested in added expenses across various City operations for fuel and labour; as well as impacting both transit costs and ridership revenues. Additional information on these key drivers is outlined in the body of the report.

Divisions and Agencies are expected to ensure expenditures do not exceed approved program budgets and to review expenditure levels to address revenue shortfalls. Work is underway in Divisions and Agencies with unfavourable variances to identify actions to manage their shortfalls consistent with their obligations under the Financial Control By-Law, related to deficit management.

Appendices

Appendices A, B and C provide a detailed summary of Net Expenditures, Gross Expenditures, Revenue for the year-to-date results and year-end projections by City Program and Agency, respectively. Appendix D details the recommended pending budget adjustments that are financially neutral to the 2026 Approved Operating Budget. Appendix E provides a dashboard with information for each City Program and Agency. Donations and Sponsorship funds are itemized by program in Appendix F and G respectively.