HomeMy WebLinkAboutCS 07-02
071
Ciú/ o~
REPORT TaCO UN ClL
-
FROM:
Gillis A. Paterson
Director, Corporate Services & Treasurer
DATE: June 17,2002
REPORT NUMBER: CS 07-02
SUBJECT:
2001 Pre-Audit Balances of Reserves and Reserve Funds
RECOMMENDATION:
It is recommended that Report CS 07-02 of the Director, Corporate Services & Treasurer be received
by Council for infonnation.
ORIGIN:
Director, Corporate Services & Treasurer
AUTHORITY:
-
Municipal Act, R.S.O. 1990, as amended, Section 163
Ontario Regulation 438/97
FINANCIAL IMPLICATIONS:
Not applicable.
EXECUTIVE SUMMARY:
Based on the preliminary 2001 results, we can now report on the pre-audit actual activities within the
reserves and reserve funds for 2001.
The "purpose" and the "recommended maintenance level" for each reserve and reserve fund are set
out in Appendices Band C respectively.
BACKGROUND:
-
As in previous reports filed over the last four years, this report provides specific infonnation on each
of the City's reserves and reserve funds, including year-end balances. The 2001 pre-audit reserves
and reserve funds balance of $27,227,687 is one of the highest balances ever reported in Pickering.
Please bear in mind that this balance is different, and may change in 2002 due to two main reasons:
the continuing appeal of assessment of properties belonging to Ontario Power Generation (OPG);
and, the new treatment for unspent capital commitments.
The receipt of $3,750,000 from OPG credited to the Reserve for Contingencies is related to the
assessment appeal and is pending final result. Thus at this juncture we are unable to confinn the
availability of these monies for corporate purposes.
0 7 2 Report to Council CS 07-02
Subject: 2001 Pre-Audit Balances of Reserves and Reserves Fund
June 17, 2002
Page 2
-
"
It has always been o~r practice to account for committed unspent projects by transferring funds out
of the reserve funds,ás of Dec. 31 year-end closing. These committed capital projects are in essence
earmarked when funds are transferred out. However, these same reserve funds must earn interest
income even when the unspent funds are not in its' custody. Based on our auditor's recommendation,
we have re- instated the 2001 opening balance for 2000 unspent carry-over and likewise not booked
any unspent commitments for capital projects in 2001. The unspent amounts are $1,007,505 and
$321,539 respectively. The total of this commitment together with the GPO collection totaled
$5,079,044 making the true balance of reserves and reserve funds available at $22,148,643. Fund
balances at this value approximate fund balances in the last three years. Future pressure on these
balances will be experienced as the trend to keep up with the replacement costs and construction of
infrastructure to keep pace with the growth of the City. Also, declining developer contributions and
lower interest income based on current economic conditions, all contribute to an ever challenging
financing picture.
In addition, for 2001 the internal borrowings from the Reserve Funds for projects were formally set
up in the books of the City. These funds were borrowed from the Development Charges and
Parkland Reserve Fund and you will note interest earned on the loan amount is reflected in the
activities accordingly.
ATTACHMENTS:
1.
2.
3.
Appendix A
Appendix B
Appendix C
Summary of Reserves and Reserve Funds
Description of Reserves
Description of Reserve Funds
-.
Prepared By:
Approved / Endorsed By:
):?~~
~p-----",
é . ~
=---- .
Gillis A. Paterson,
Director, Corporate Services & Treasurer
Caryn Kong,
Senior Financial Analyst
GP:vw
Attachments
Recommended for the consideration of Pickering
City Council
,I.
-
APPENDIX A
073
SUMMARY
-
CITY OF PICKERING
SUMMARY OF RESERVE AND RESERVE FUND PRE-AUDIT ACTUALS
DECEMBER 31,2001
Pre Audit Actuals
Appendix B Summary of Reserves 2001(3) 2000 1999 1998
4610/4617 Working FundsNacation Pay $400,000 $841,350 $841,350 $841,350
4611 Replacement of Capital
Equipment 1,083,837 2,153,816 2,521,806 1,829,610
4612 Contingencies (2) 5,277,795 1,371,295 1,381,295 786,318
4613/4614 Self Insurance/Inventories (2) 972,489 776,410 713,080 579,124
4619 Rate Stabilization 2,104,410 249,139 2,981,232 1,786,232
4620 Dev.Charges-City's portion (2) 2,765,000 1,889,000
Total Reserves $12,603,531 $7,281,010 $8,438,763 $5,822,634
Appendix C Summary of Reserve Funds 2001 2000 1999 1998
4225 Community Facilities $69,102 $282,569 $219,209 $773,483
4227/4229 Development Charges (1) (2) 10,198,207 7,586,550 6,744,603 5,874,293
4228 Capital Works 499,540 850,630 826,082 613,464
- 4230 Parkland (1) (2) 2,483,562 3,875,813 4,242,340 5,778,228
4232 Public Works 1,365,285 1,304,410 1,194,655 1,185,154
4233 Pickering Baseball Assoc (2) 1,228 60,789
4234 Workers Safety Insurance Brd
(WSIB) (2) 7,232
Total Reserve Funds $14,624,156 $13,960,761 $13,226,889 $14224,622
Total Reserves and Reserve Funds $ 27.227.687 $21.241.771 $21.665.652 $20.047.256
Notes
(1) Obligatory
(2) Committed
(3) The restatement of2001 opening balances forunspent funds committed to projects is reflected in 2001
balances only. The 2000 balances have not been restated to reflect the change in reporting treatment.
-
074
APPENDIX B (Page 1)
RESERVE FOR WORKING FUNDSN ACATION PAY G/L 4610/4617
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve
$841,350
Transfers out of the Reserve
Closed-out Vacation Pay Reserve
(441,350)
Pre-Audit Actual Balance December 31, 2001
$400.000
1.
Purpose of the Reserves:
The reserve for working funds is used to provide operating cash to assist in avoiding short
tetID interest expenses incurred on operations, typically during the first months of the year
prior to tax billing and at other times when cash inflows and outflows do not match as occurs
in any corporation,
The interest income on this fund fonn part of the annual Current Budget General
Government Revenue.
-
The reserve for vacation pay was established to ensure that the cost of vacation pay earned,
but not taken, is correctly allocated to the taxpayers of that year and the Council of that
period. However, the vacation pay reserve is no longer needed as vacations are taken in the
year earned, Further to the recommendation in the Report to Council CS 44-01, dated
November 19, 2001, this reserve has been closed-out and the funds transferred to the Self-
Insurance Reserve.
2.
Recommended Maintenance Levels of the Reserve:
Reserve for Working Funds - It is recommended as a "rule-of-thumb" that this reserve be 2%
to 3% of total revenues.
-
075
APPENDIX B (Page 2)
RESERVE FOR REPLACEMENT OF CAPITAL EQUIPMENT G/L 4611
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve
2001 Budget Provision
Various Recreation Revenues
$ 2,153,816
100,000
Transfers out of the Reserve
Transfer to Capital Fund
- Cotp. Efficiency, Roads, & Transit,
- Recreation, Municipal Building
(1.169,979)
Pre-Audit Actual Balance - December 31, 2001
$1.083.837
1.
Purpose of this Reserve:
Th~ purpose of this reserve is to reduce the need to levy for the full cost of major equipment
in the year of acquisition. The reserve acts as a stabilization factor and helps to avoid both
tax rate fluctuations and the issuance of long tenn debt or other means of financing.
~
The interest income on these funds fonn part of the annual Current Budget General
Government Revenue.
2.
Recommended Maintenance Levels of this Reserve:
This reserve should be kept at a level which is equivalent to the replacement cost of the
assets for which they were established. The reserve balance has fluctuated from the low of
$1,829,610 as at Dec, 31, 1998 to a high of $2,521,806 as at Dec. 31, 1999. The draw of
$1,169,979 in the current year has caused a significant decline in the balance of funds as at
Dec. 31, 2001. Furthennore, there has been no large contribution to this reserve provided for
in the current budget for several years. This account continues to be under funded. Major
additional contributions will be required in future years.
-
076
APPENDIX B (Page 3)
RESERVE FOR CONTINGENCIES G/L 4612
-
Actual Balance December 31,2000
2001 Transactions
Transfers into the Reserve
200 I Budget Provision
- General Government - Assessment Appeals
- General Government - Elections
$1,371,295
$ 85,000
71,500
Ontario Power Generation
3,750,000
3,906,500
Transfers out of the Reserve
Pre-Audit Actual Balance - December 31, 2001
$5,277.795
1.
Purpose of this Reserve:
Like the capital equipment replacement reserve, this reserve acts in a tax stabilization
capacity. It was established in anticipation of unknown, unusual or extraordinary
expenditures which occur from time to time.
-
The interest income on these funds form part of the annual Current Budget General
Government Revenue.
2.
Recommended Maintenance Levels of this Reserve:
The funds received from Ontario Power Generation (OPG) in the amount of $3,750,000 are
supplementary taxes for properties currently under an assessment appeal. Caution should be
used with regards to the availability of these funds as the appeal is outstanding. Staff
continue to monitor the balance of this reserve. .
-
or??
APPENDIX B (Page 4)
RESERVE FOR SELF INSURANCE/INVENTORY G/L 4613/4614
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve
- Funds from Vacation Pay Reserve
$ 776,410
441,350
Transfers out of the Reserve
- Closed-out Inventories Reserve
(245,271)
Pre-Audit Actual Balance - December 31, 2001
$972.489
1.
Purpose of this Reserves:
Reserve for self-insurance
This reserve was established as a necessary form of asset protection. Specifically, it is to
cover insurance claims resulting from the increase in deductible levels. The higher
dedltctible reduced insurance premiums. Significant savings can be realized through reduced
premium costs and staff analyze the costslbenefits of such actions on an annual basis.
-
The interest income on these funds form part of the annual Current Budget General
Government Revenue.
Reserve for Inventory
This reserve was established to ensure that the cost of revolving inventories is correctly
allocated to the taxpayers of that year and the Council of that period.
Further to the Report to Council dated November 19, 2001, the Treasurer has reviewed
inventory activities level over the last few years and has concluded that the use of this reserve
is minimal and is no longer required. The Reserve for Inventory was closed and surplus funds
transferred to the Reserve for Rate Stabilization
2.
Recommended Maintenance Levels of this Reserve:
Reserve for Self Insurance
This reserve should be maintained at a level to ensure that the funding is adequate to meet
future liabilities. This situation is analyzed by staff on a regular basis, '
-
078
APPENDIX B (Page 5)
RESERVE FOR RATE STABILIZATION G/L 4619
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve
Revenue Fund Contribution
Funds from Inventory Reserve
$249,139
$2,010,000
245,271
2,255,271
Transfers out of the Reserve
2001 Current Budget Provision
(400,000)
Pre-Audit Actual Balance - December 31,2001
$2.104.4] 0
1. Purpose of this Reserve:
The purpose of this reserve is to act as a tax rate stabilization factor for annual current budget
funding,
The interest income on these funds form part of the annual Current Budget General Government
Revenue.
-
2. Recommended Maintenance Levels of this Reserve:
The excess funds available from the closeout of the Inventory Reserve have been transferred
here. This is further to the recommendation outlined in the Report to Council dated November
19, 2001. Surplus funds from the 2001 Current operations have been transferred as per Report
CS 12-01, resulting in a pre-audit balance of $2,104,410. The fund balance should be
maintained at a level of 3 to 5 per cent oftax revenues to provide tax rate stabilization for annual
current budgeting purposes
,-
079
APPENDIX B (Page 6)
RESERVE FOR DEVELOPMENT CHARGES - CITY SHARE G/L 4620
--
Actual Balance December 31, 2000
2001 Transactions
$1,965,000
Transfers into the Reserve
- 2001 Current Budget Provision
800,000
Transfers out of the Reserve
0
Pre-Audit Actual Balance - December 31, 2001
$2.765.000
1. Purpose of this Reserve:
This reserve has been established to set aside funds for projected growth in the City, From the
1999 Development Charges Study it was approved that a Reserve Fund be established for the
City's share i.e. the non development charge portion, of the costs of services included in the
Development Charges study and that contributions be included in the annual CUITent Budget for
consideration by Council. For the City to meet its obligations for the various capital projects an
annual contribution of $2.4 million is required,
-
The interest income on these funds form part of the annual CuITent Budget General Government
Revenue.
2. Recommended Maintenance Levels of this Reserve:
This reserve should be maintained at a level to ensure that the funding is adequate to meet future
capital growth in the City.
-
080
APPENDIX C (Page 1)
RESERVE FUND FOR COMMUNITY FACILITIES G/L 4225
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve Fund
Interest Earned
$ 282,569
11,649
Transfers out of the Reserve Fund
Transfer to Capital Fund:
- Corporate Efficiency
- Parks
- Community Centres
$ (107,593)
(115,415)
(2.108)
(225.1 16)
$ 69.102
Pre-Audit Actual Balance - December 31, 2001
1.
Purpose of this Reserve:
This is a "discretionary" reserve fund established by Council to attempt to avoid both tax rate
fluctuations and the need for issuing long tenn debt for major expenditures required for
community facilities.
The interest income on these funds fonn part of the Reserve Fund as per the Municipal Act.
-
2.
Recommended Maintenance Levels of this Reserve:
The balances of this fund have fluctuated from the 1999 year low of $219,209 to the high in
1998 of $773,483. As discussed in the "Background" infonnation, this is one of the reserve
funds affected by unspent committed projects. The value of the 2001 unspent committed
projects is $30,461. Taking into account this unspent commitment, the true balance of funds
available is $38,641. This pre-audit balance has declined to the lowest level in 2001, as there
has been no provision made in the current budget for several years. Additional amounts must
be allocated to this fund.
-
081
APPENDIX C (Page 2)
RESERVE FUND FOR DEVELOPMENT CHARGES G/L 4227/4229
-
Actual Balance December 31, 2000
Prior year adjustment for unspent commitments
Revised opening balance
2001 Transactions
Transfers into the Reserve Fund
Interest Earned
Net Developer Contributions
Interest earned on Internal Loans
$7,586,550
1,005,063
$8,591,613
$ 75,526
1,308,740
393,065
1,777,331
Transfers out of the Reserve Fund
Transfer to Capital Fund
- Roads - External Subdivision Works
- Libraries - Materials
(106,625)
$ (64,112)
(170,737)
Pre-Audit Actual Balance - December 31, 2001
$10.198.207
1.
Purpose of this Reserve:
-
This is an "obligatory" reserve fund and as such is govemed by Provincial legislation,
regulation, City by-Law or agreement and requires revenue received for the special purposes
to be segregated from the general revenues of the municipality. Obligatory reserve funds
must be created whenever a statute requires revenue received for a special purpose to be
segregated from the general revenues of the municipality and the revenue is to be used solely
for the purpose prescribed by statute, i.e. in this case the monies charged to developers must
be held in trust and used to fund capital services required for new growth.
The interest income on these funds fonn part of the Reserve Fund as per the Municipal Act.
2.
Recommended Maintenance Levels of this Reserve:
In accordance with development charge legislation, all development charge revenue must be
held within separate reserve funds and can only be used for the financing of growth-related
projects. As such, no reserve fund limits are appropriate for development charge reserve
funds because they are tied to growth-related capital requirements,
.-
This reserve fund by far is most affected by the impact of prior period adjustments related to
the unspent commitment. The value of unspent commitments for 2000 is $1,005,063 and for
2001 is $142,695 giving a total of $1,147,758. The above pre-audit fund balance of
$10,198,207 would have to be reduced by $1,147,758 to reflect a true balance of funds
available at only $9,050,449.
082
APPENDIX C (Page 3)
RESERVE FUND FOR CAPITAL WORKS G/L 4228
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve Fund
Interest Earned
Developer Contributions (refund)
$850,630
$ 35,035
(885)
34,150
Transfers out of the Reserve Fund
Transfers to Capital Fund
- Recreation Complex-Core
- Recreation Complex-Pool.
$(150,000)
(235,240)
(385,240)
Pre-Audit Actual Balance - December 31, 2001
$499.540
1.
Purpose of this Reserve:
This Fund is a "discretionary" one and is established pursuant to subsection 163(2) of the
Municipal Act for specified purposes by Council related to the acquisition of assets.
The interest income on these funds fonn part of the Reserve Fund as per the Municipal Act.
-
2.
Recommended Maintenance Levels of this Reserve Fund:
Between the years of 1998 to 2000, the balances have been maintained at $600,000 to
$800,000. In 2001, there was a 50% draw on this fund balance without a colTesponding
contribution to this fund. As discussed in the "Background" information, this is one of the
funds that have unspent commitments. The value of the unspent commitments for 2001 are
$14,760 and is included in the above fund balance. Consequently, the true balance of funds
available is $484,780. Major additional contributions will be required in future years.
-
083
APPENDIX C (Page 4)
RESERVE FUND FOR PARKLAND G/L 4230
-
Actual Balance December 31, 2000
Prior year adjustment for unspent comnútments
Revised opening balance
2001 Transactions
Transfers into the Reserve
Interest Earned
Recreational Land (cash-in-lieu)
hlterest Earned on Internal Loans
$3,875,813
2.442
3,878,255
$ 132,303
134,450
54,288
321,041
Transfers out of the Reserve Fund
Transfer to Capital Fund
- Parks Development
- Playground Equipment
- Millennium Trail-Phase 1
- Millennium Trail- Phase 2
- Brockridge Park Baseball Field house
$(174,534)
(312,598)
(583,602)
(600,000)
(45,000)
0,715,734)
Pre-Audit Actual Balance - December 31, 2001
$ 2,483.562
-
1.
Purpose of this Reserve Fund:
This is an "obligatory" reserve fund and it has been established pursuant to subsection
163.(2) of the Municipal Act as required by subsections 42.(1), (5), (6), (7), (8) and (9) of the
Planning Act. This fund is governed by legislation, regulation or agreement and requires
revenues received for the special purposes to be segregated from the general revenues of the
municipality. Obligatory reserve funds must be created whenever a statute requires revenues
for a special purpose to be segregated from the general revenues of the municipality and the
revenue is to be used solely for the purpose prescribed by statute,
The interest income on these funds form part of the Reserve Fund as per the Municipal Act.
2,
Recommended Maintenance Levels of this Reserve Fund:
Due to the obligatory nature of this fund, there are no limits on this fund.
As discussed in the "Background" information, this is one of funds that are affected by
unspent commitments, The 2001 opening balance was adjusted to reflect 2000 unspent
commitments and likewise 2001 unspent commitments were not transferred out of the
reserve fund. The total value of the 2000 & 2001 unbooked commitments are $136,065.
Thus the true balance of funds available for this reserve fund is $2,347,497.
-
084
APPENDIX C (Page 5)
RESERVE FUND FOR PUBLIC WORKS G/L 4232
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve Fund
Interest Earned
Developer Contributions
$1,304,410
$54,123
6,752
$1,365,285
Transfers out of the Reserve Fund
Pre-Audit Actual Balance - December 31, 2001
$1.365,285
1.
Purpose of this Reserve Fund:
This fund has been established by Council pursuant to subsection 163.(2) of the Municipal
Act. The purpose of the reserve fund is to acquire fixed assets, e.g, stonn sewers, without the
need to fund on a long term nature through the issue of debentures. The main purpose at this
time is to fund the City's share of the cost of subdivision works committed to under various
subdivision agreements.
The interest income on these funds form part of the Reserve Fund as per the Municipal Act.
-
2.
Recommended Maintenance Levels of this Reserve Fund:
The "average" annual balance of this fund over the last four years has been approximately
$1.25 million. This reserve fund should be kept at least at this level in the future. Staff will
periodically review the need for this level with the requirements contained in the capital
budget and four year program and report any different findings to Council.
-
APPENDIX C (Page 6)
n85
RESERVE FUND FOR PICKERING BASEBALL ASSOCIATION
G/L 4233
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve Fund
Interest Earned
Pickering Baseball Association Contribution
$ 60,789
$ 2,991
15.000
78,780
Transfers out of the Reserve Fund
Transfer to Capital Fund
- Cost of Construction
(77.552)
Pre-Audit Actual Balance - December 31, 2001
$ 1.228
1. Purpose of this Reserve Fund:
This Reserve Fund has been established for the construction of the Brockridge Park
Clubhouse. The funding for this Reserve Fund was initially by contribution from the
Pickering Baseball Association, and thereafter from any other donors or contributors or from
such funds as the Council of the City of Pickering may from time to time approve.
The interest income on these funds fonn part of the Reserve Fund as per the Municipal Act.
-
2,
Recommended Maintenance Levels of this Reserve Fund:
Funds collected for this reserve fund together with the City's contribution were used towards
the cost of construction of the clubhouse.
The construction was completed in 2001. The reserve fund contribution of$77,552 together
with the City's contribution of$53,791 were required to pay for the total costs of $131,343
for this project in 2001. The balance of funds available will be used to pay for the remaining
unpaid invoice in 2002,
-
q~ß
APPENDIX C (Page 7)
RESERVE FUND FOR WORKERS' SAFETY INSURANCE BOARD
G/L 4234
-
Actual Balance December 31, 2000
2001 Transactions
Transfers into the Reserve Fund
Payroll Contribution
NEER Surcharge Rebate
$
nil
$ 262,611
14,082
276,693
Transfers out of the Reserve Fund
Cost to Transfer from Schedule 1 to 2:
- Insurance Cost
- Consultant Fees
- Health & Safety Program
- Claim Costs
- WSIB Schedule 1 Departure Fee
- Schedule 2 Prepayment Requirement
$ 6,555
10,300
20,000
8,622
179,583
44,401
Pre-Audit Actual Balance - December 31, 2001
269,461
$ 7.232
2.
Purpose of this Reserve Fund:
-
This Reserve Fund has been establìshed to capture the initial costs of transferring Workers Safety
Insurance policy ITom Schedule 1 to Schedule 2, the annual costs of insurance coverage,
contributions towards the health and safety program, and the payment of claims and other,related
costs. This Reserve Fund is newly created in 2001 further to the recommendation passed in
Council Resolution#127/01 and in compliance with Workvlace Safetv & Insurance Act.
The interest income on these funds form part of the Reserve Fund as per the Municipal Act.
2.
Recommended Maintenance Levels of this Reserve Fund:
Costs incurred in the first year of transfer have been covered from savings generated from
transferring from Schedule 1 to 2. This results in a fund balance of only $7,232 for the first
year.
Projected savings generated by the transfer to Schedule 2 are estimated to be in excess of
$190,000 per annum for 2002 and beyond. As Schedule 2 operates on the self-insured principle,
the savings in 2002 and 2003 will be transferred to this reserve fund to build up the fund
balance in the event of any catastrophic claim-related costs, which may occur. It is anticipated
that the savings in 2004 and beyond will be reflected in the departmental budgets and an annual
transfer to maintain an appropriate balance in the fund will be included in the Current Budget
process.
.-