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Home My WebLink AboutCS 13/01 - ~ REPORT TO COUNCIL FROM: Gillis A. Paterson Director, Corporate Services & Treasurer DATE: May 28,2001 REPORT NUMBER: CS 13-01 SUBJECT: 2000 Pre-Audit Balances of Reserves and Reserve Funds RECOMMENDATION: It is recommended that Report CS 13-01 of the Director, Corporate Services & Treasurer be received by Council for information. ORIGIN: Report submitted annually to Council. - AUTHORITY: Municipal Act, R.S.O. 1990, as amended, Section 163 Ontario Regulation 438/97 FINANCIAL IMPLICATIONS: Not applicable. EXECUTIVE SUMMARY: As in previous reports filed over the last three years, this report provides specific information on each of the City's reserves and reserve funds, including year end balances. The current year end balances have declined slightly overall from the 1999 highs due to tight budgetary restrictions to keep tax increases to zero and lessen the need for debt financing. BACKGROUND: Based on the preliminary 2000 results, we can now report on the pre-audit actual activities within the reserves and reserve funds for 2000. Caution must be exercised in using this information, as the City Auditors have not yet finished their annual review. ,-.. The "purpose" and the "recommended maintenance level" for each reserve and reserve fund are set out in Appendices B and C respectively. Report to Council CS 13-01 Date: May 28,2001 Subject: 2000 Pre-Audit Balances of Reserves and Reserve Funds Page 2 It is anticipated that a report will be filed with Council later this year rationalizing the different funds, balances and including a review of any underlying by-laws. ATTACHMENTS: 1. 2. 3. Appendix A Appendix B Appendix C Summary of Reserve and Reserve Funds Description of Reserves Description of Reserve Funds Prepared By: Approved / Endorsed By: ~~ Caryn Kong, Senior Financial Analyst ~c~~- ...... Gillis A. Paterson, Director, Corporate Services & Treasurer GP:vw Attachments Recommended for the consideration of Pickering City Council - Thomas J. Quinn, Chief Administrative Officer - ATTACHMENT#..L TO REPORT#~-ol APPENDIX A - SUMMARY CITY OF PICKERING SUMMARY OF RESERVE AND RESERVE FUND PRE-AUDIT ACTUALS DECEMBER 31, 2000 Pre Audit Actuals Appendix B Summarv of Reserves 2000 1999 1998 1997 4610/4617 Working FundsNacation Pay 841,350 841,350 841,350 841,350 4611 Replacement of Capital 2,153,816 2,521,806 1,829,610 175,914 Equipment 4612 Contingencies 1,371,295 1,381,295 786,318 264,319 4613/4614 Self Insurance/Inventories 776,410 713,080 579,124 452,207 4618 Reskilling 83,900 4619 Rate Stabilization 249,139 2,981,232 1,786,232 4620 Dev. Charges - City's portion 1.889.000 7 .281.010 8.438.764 5.822.634 1.817 .690 Appendix C Summary of Reserve 2000 1999 1998 1997 Funds - 4225 Community Facilities 282,569 219,209 773,483 447,280 4227/4229 Development Charges 7,586,550 6,744,603 5,874,293 6,145,652 4228 Capital Works 850,630 826,082 613,464 403,758 4230 Parkland 3,875,813 4,242,340 5,778,228 4,161,322 4232 Public Works 1,304,410 1,194,655 1,185,154 1,096,536 4233 Pickering Baseball Assoc. 60.789 13.960.761 13.226.889 14.224.622 $12.254.548 Total Reserve and Reserve Funds $21.241.771 $21.665.652 $20.047256 $14.072.238 - ATTACHMENT#L TO REPORT#~.J3-01 APPENDIX B - RESERVE FOR WORKING FUNDSN ACATION PAY G/L 4610/4617 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve Working Funds Vacation Pay $841,350 o o Transfers out of the Reserve o Pre-Audit Actual Balance December 31, 2000 Working Funds Vacation Pay $400,000 441.350 $841 350 1. Purpose of the Reserves: _. The reserve for working funds is used to provide operating cash to assist in avoiding short term interest expenses incurred on operations, typically during the first months ofthe year prior to tax billing and at other times when cash inflows and outflows do not match as occurs in any corporation. 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. The Vacation Pay Reserve is no longer needed as such and it will be recommended that it be collapsed and rolled into the Working Funds Reserve. A report will be forthcoming later this year and this reserve will be recommended to be transferred to Working Funds to provide a more appropriate balance in that Reserve. The interest income on these funds form part of the annual Current Budget General Government Revenue. 2. Recommended Maintenance Levels of the Reserves: Reserve for Working Funds - It is recommended as a "rule-of-thumb" that this reserve be up to 2% - 3% of total revenues. - APPENDIX B (Page 2) RESERVE FOR REPLACEMENT OF CAPITAL EQUIPMENT G/L 4611 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve 2000 Budget Various Recreation Revenues $ 2,521,806 104.962 104.962 Sub-total $2,626,768 Transfers out of the Reserve 2000 Contribution to Capital Fund Finance, Roads, & Transit (472.952) Pre-Audit Actual Balance - December 31, 2000 $2.153816 1. Purpose ofthis Reserve: - The purpose of this reserve is to eliminate 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 mill rate fluctuations and the issuance of long term debt or other means of financing. The interest income on these funds form 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 has fluctuated from the low as at December 31, 1997 of $175,914 to a high of $2.52 million at the end of 1999. No additional provision has been provided for in the current budget for several years and this account continues to be under funded. Major additional contributions will be required in future years. - APPENDIX B (Page 3) ,- RESERVE FOR CONTINGENCIES G/L 4612 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve 2000 Budget - General Government - Assessment Appeals $1,381,295 150,000 Sub-total 150.000 1,531,295 Transfers out of the Reserve 2000 Cont to General Fund - Western Branch Books - Election Provision (50,000) 010.000) (160.000) Pre-Audit Actual Balance - December 31,2000 $1.371.295 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: Staff continue to monitor the balance of this reserve and the need for long term contributions required. - APPENDIX B (Page 4) - RESERVE FOR SELF INSURANCE/INVENTORY G/L 4613/4614 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve - Inventory Adjustment - Insurance Premiums Under Budget Provisions $ 713,080 o 63.330 63.330 776,410 ~ Transfers out of the Reserve Pre-Audit Actual Balance - December 31, 2000 $776.410 1. Purpose ofthis 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 deductible reduced insurance premiums. Significant savings can be realized through reduced premium costs and staff analyze the costslbenefits of such actions on an annual basis. .if!'....... Reserve for Inventory This reserve has been established to ensure that the cost of revolving inventories is correctly allocated to the taxpayers of that year and the Council of that period. The interest income on these funds form part of the annual Current Budget General Government Revenue. 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 actuarial liabilities. This situation is analyzed by staff on a regular basis. Reserve for Inventory The maintenance level required is explained in the description of the purpose for this reserve. - APPENDIX B (Page 5) - RESERVE FOR RATE STABILIZATION G/L 4619 Actual Balance December 31, 1999 2000 Transactions Transfers into the Reserve $2,981,233 o Transfers out of the Reserve to Current Budget (2,732,094) Pre-Audit Actual Balance - December 31, 2000 $249.139 1. Purpose of this Reserve: The purpose of this reserve is to act as a mill 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 level of this reserve will continue to be monitored. - - APPENDIX B (Page 6) RESERVE FOR DEVELOPMENT CHARGES - CITY SHARE GIL 4620 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve - 2000 Provision - Surplus $ o 400,000 1,489,000 Transfers out of the Reserve o Pre-Audit Actual Balance - December 31, 2000 $1 889.000 1. Purpose ofthis 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 Current 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 Current 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. - ATTACHMENT # L TO REPORT #~3- 01 APPENDIX C - RESERVE FUND FOR COMMUNITY FACILITIES G/L 4225 Actual Balance December 31, 1999 2000 Transactions Transfers into the Reserve Interest Earned Contribution from Capital Fund $ 219,209 9,021 54,339 282,569 Transfers out of the Reserve o Pre-Audit Actual Balance - December 31, 2000 $~ 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 term debt for major expenditures required for community facilities. The interest income on these flmds form part of the Reserve Fund as per the Municipal Act. 2. Recommended Maintenance l,evels of this Reserve: The balances of this fund have fluctuated from the 1999 year low of$219 thousand to the high in 1994 of $5.1 million. Additional amounts must be allocated to this fund. - APPENDIX C (Page 2) - RESERVE FUND FOR DEVELOPMENT CHARGES GIL 4227/4229 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve Capital Fund Contribution Interest Earned Net Developer Contributions $6,744,603 4,638 366,765 2.309,371 9,425,377 Transfer to Capital Fund 2127 -Finance 2240 - Fire 2321 - Roads - External Subdivision 2321 - Roads - Vehicle 2360 - Specialized Transit 2718 - Parks - Development 2745 - Libraries - Materials 2745 - Libraries - Fixed Assets 2610 - Planning - Studies $ (40,000) (400,000) (617,412) (14,000) (64,800) (143,000) (88,000) (468,000) 0,615) (1.838,827) - Pre-Audit Actual Balance - December 31,2000 $7.586.550 1. Purpose ofthis Reserve: This is an "obligatory" reserve fund and as such is governed 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 form 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. ,...-. APPENDIX C (Page 3) - RESERVE FUND FOR CAPITAL WORKS G/L 4228 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve Interest Earned Developer Contributions (refund) $826,082 $33,798 (9.250) 24.548 Transfers out of the Reserve o Pre-Audit Actual Balance - December 31, 2000 $~ 1. Purpose of this Reserve: - This Fund is a "discretionary" one and is established pursuant to subsection 163.(2) ofthe Municipal Act for specified purposes by Council related to the acquisition of assets. 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: This reserve fund has its lowest balance at the end of 1997 of $404 thousand, with the highest balance in the last 4 years being $1.495 million at the end of 1995. The level of this reserve will continue to be monitored. - APPENDIX C (Page 4) -- RESERVE FUND FOR PARKLAND G/L 4230 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve Interest Earned Recreational Land (cash-in-lieu) Capital Fund Contribution $4,242,339 188,724 114,400 6.563 4,552,026 Transfers out of the Reserve Transfer to Capital Fund 2132 -Town Property - Trackless Tractor 2718 -Parks - Land Purchase 927 Tullo St. - Ford Packer/Compactor - Farm Tractor - Playground Equipment & Misc Park Development $(69,577) (118,750) (23,011) (7,875) (457.000) (676,213) Pre-Audit Actual Balance - December 31, 2000 $3.875.813 - 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. - APPENDIX C (Page 5) - RESERVE FUND FOR PUBLIC WORKS G/L 4232 Actual Balance December 31,1999 2000 Transactions Transfers into the Reserve Interest Earned Developer Contributions - (Refund) Capital Fund Contribution $1,194,655 48,819 ( 683) 70.1 19 $1,312,910 Transfers out of the Reserve Transfer to Capital Fund 2321 - External Subdivision Works - Rosebankl Strouds Lane (8.500) Pre-Audit Actual Balance - December 31, 2000 $1.304.410 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 funds is to acquire fixed assets, e.g. storm 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 filllds 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 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 budgets and four year program :md report any different findings to Council. - APPENDIX C (Page 6) - RESERVE FUND FOR PICKERING BASEBALL ASSOCIATION GIL 4233 Actual Balance December 31, 1999 2000 Transactions Transfers into the Reserve Interest Earned Pickering Baseball Association $ 0 789 60,000 60,789 Transfers out of the Reserve ~ Pre-Audit Actual Balance - December 31, 2000 ~ 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 shall initially be by contribution from the Pickering Baseball Association, and thereafter from any other donors or contributors or from such funds as the Council ofthe City of Pickering may from time to time approve. The interest income on these funds form part of the Reserve Fund as per the Municipal Act. 2. Recommended Maintenance l,evels of this Reserve Fund: Due to the obligatory nature of this fund, there are no limits on this fund. ,-