September 30, 2014 Projected Year-End

Financial Results
Third Quarter-Operating
Recommendation:
That an Interim Financing Reserve, as outlined in Attachment 3 of the November 19,
2014, Financial Services and Utilities report CR_919 to accommodate timing
differences between project operating expenses and the receipt of future revenue
intended to fund those expenses, be approved.
Report Summary
This report provides the September 2014 year-to-date operating financial results
and 2014 year-end projected results. Updates relating to economic conditions,
debt and debt servicing, and Community Revitalization Levy programs are also
provided. Arising out of the operating financial analysis, a recommendation is
made for approval of an operating Interim Financing reserve.
Report
This report presents the third quarter year-to-date operating results and projected
year-end results compared to the approved budget for tax-supported, enterprise/utility
and Community Revitalization Levy programs. The projections are based on the
September 2014 year-to-date results combined with other available information.
Projections are subject to change in future periods as additional information becomes
available.
The report also provides information related to the Citys debt position and an economic
update. A section, expanding on Community Revitalization Levy financial reporting and
related reserves, has been provided as Attachment 7 to this report.
A recommendation is made in this report for the approval of an Interim Financing
reserve. Further details are provided in Attachment 3.
A separate report providing a capital financial update as of September 2014 is also
being presented to City Council on November 19, 2014.
Tax-Supported Operations
As of September 30, 2014, tax-supported operations are projecting a net favourable
year-end variance of $14.1 million, or .7 percent of the overall expenditure budget.
The $14.1 million projected net favourable variance is a result of the following:

ROUTING City Council | DELEGATION - L. Rosen/T. Burge

November 19, 2014 Financial Services and Utilities CR_919
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September 30, 2014 Projected Year-End Financial Results - Third Quarter Operating
$9.9 million net favourable photo enforcement operations. (Traffic Safety &
Automated Enforcement, Transportation Services)
$6.7 million transfer from the recommended Interim Financing reserve. The transfer
from the proposed reserve will be used to offset debt servicing costs to be funded from
future revenues. (Capital Project Financing, Corporate Programs)
$6.4 million net reduction in personnel costs across tax-supported programs due to
unfilled vacancies. Deceased personnel costs of $9.5 million are partially offset by
increase in contractor costs of $(3.1) million.
$3.6 million Workers Compensation Board surplus distribution. (Corporate
Revenues, Corporate Programs)
$3.3 million decrease in uncollectible property taxes. (Taxation Expenses,
Corporate Programs)
$3.0 million increased gas franchise fees. (Corporate Revenues, Corporate
Programs)
$2.4 million cost savings due to delay in opening of Metro Line LRT. (Edmonton
Transit, Transportation Services)
$3.9 million other net favourable cumulative variances across tax-supported
departments.
The above favourable variances are partially offset by the following unfavourable
variances:
$(10.0) million more than expected snow removal costs. (Snow & Ice Control,
Transportation Services)
$(6.7) million debt servicing costs proposed to be offset by a transfer from the
recommended Interim Financing reserve as described above.
$(3.3) million higher than budgeted fleet fuel costs across tax-supported programs.
$(2.0) million increased road spring clean-up costs. (Transportation Operations,
Transportation Services)
$(1.9) million increase in forestry and other greening operations works across taxsupported programs. (Neighbourhood, Parks & Community Recreation, Community
Services)

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September 30, 2014 Projected Year-End Financial Results - Third Quarter Operating
$(1.2) million - Police Services projected net year-end deficit; arising from decreased
Traffic Safety Act fine revenue, partially offset by personnel savings.
Police Services financial projections reflect the information received for the period
ending August 31, 2014.
A table of year-to-date results and year-end projected results for tax-supported
operations is included as Attachment 1. Attachment 2 provides additional details on
projected year-end variances where revenues, expenses, transfers to/from reserves or
program variances in total exceed $.5 million.
Reserves
Interim Financing Reserve (Recommendation)
Administration is recommending the establishment of an Interim Financing Reserve.
The purpose of the Interim Financing Reserve is to accommodate timing differences
between project debt servicing and receipt of revenue intended to fund those costs.
These timing differences are effectively financed, on an interim basis, by the Citys
accumulated surplus (working capital). Attachment 3 provides more detail on the
Interim Financing Reserve.
Financial Stabilization Reserve
The Financial Stabilization Reserve was established in 1997 to provide flexibility in
addressing financial risks associated with revenue instability and unforeseen costs on a
transitional basis, and to ensure the orderly provision of services to citizens. The
unappropriated balance in the Financial Stabilization Reserve is $101.8 million. This is
above the minimum level of $88 million and below the target level of $146 million as set
in City policy C217B Reserve and Equity Accounts and based on the 2013 audited
financial statements.
Current Planning Reserve
The Current Planning Branch implemented a new cost-recovery business model in
2010, approved by City Council, with one objective being to ensure that reserves are in
place to maintain and enhance customer service regardless of transient economic
conditions. This year it is projected that higher than forecast development activity will
result in greater than budgeted funds being transferred to the Current Planning
Reserve. Rather than a budgeted transfer to the reserve fund of $1.5 million, a net
transfer of $2.5 million to the reserve is projected for 2014, creating a projected
year-end reserve balance of $26.4 million. This is above the minimum level of
$18.6 million and below the target of $46.5 million (75% of annual budgeted
expenditures) calculated in accordance with City policy C570 Current Planning

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September 30, 2014 Projected Year-End Financial Results - Third Quarter Operating
Reserve. Refer to Attachment 3 for an explanation of the Current Planning business
model and a further financial update.
Capital City Downtown Community Revitalization Levy Reserve
On October 31, 2012, (2012 Reserves Review) City Council approved the
establishment of reserves for any future community revitalization levies. The Capital
City Downtown Community Revitalization Levy Plan (Bylaw 16521) was adopted by City
Council on September 17, 2013, and approved by the Province on April 16, 2014. At
that time the related community revitalization levy reserve was established. The
reserve will accumulate the annual surplus/shortfall for the community revitalization levy
over the life of the levy (up to twenty years). Future net annual tax-levy revenues/
expenses will be transferred to/funded from this reserve. A transfer from the reserve of
$2.8 million is projected in 2014 to offset Downtown Arena debt servicing costs of
$2.8 million, creating a deficit reserve balance of $2.8 million. The deficit reserve
balance will be repaid from future incremental tax-levy in the community revitalization
levy area. Further details of this reserve are provided in Attachment 7.
A periodic review of the nature, magnitude and management policies related to the
reserve and equity accounts is important in order to ensure prudent financial
management and continued alignment with priorities. City Policy C217B Reserve and
Equity Accounts provides for a formalized review every three years for reserves and as
a minimum every five years for equity accounts. Administration will be conducting a
reserve and equity account review in 2015. The previous review was completed in
October 2012.
Investment Earnings
The Capital Project Financing program year-end projections, within Corporate
Programs, reflect additional investment earnings of $16 million. This is as a result of
higher than expected investment returns and gains on dispositions, as well as higher
than budgeted fund balances.
Administration initiated a strategy within the 2009-2011 capital budget cycle to fund a
portion of grant eligible projects with pay-as-you-go funding in order to receive matching
grant contributions from other orders of government. This effort to maximize grant
funding lead to an over commitment of pay-as-you-go funding. The deficiency is being
addressed in future capital budgets and by applying greater than budgeted investment
earnings towards the shortfall. This report assumes the additional investment earnings
of $16 million will be applied to the pay-as-you-go funding shortfall within the 2012-2014
capital budget.
After the application of the additional investment earnings, the shortfall is estimated to
be $13.8 million within the three-year 2012-2014 capital budget. This shortfall does not

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September 30, 2014 Projected Year-End Financial Results - Third Quarter Operating
assume any carry forward of unspent funds. The shortfall is being addressed through
the proposed 2015-2018 capital budget presented to City Council.
Potential Impacts to be Monitored
Tax-supported year-end projected results reflect the best information available to date.
Certain items involve a greater degree of uncertainty. Administration will continue to
monitor these matters and update projections if necessary.
All in-scope employee contracts, with exception of the Edmonton Fire Fighters Union,
expired by the end of 2013 and are in negotiations.
Snow and ice control expenditures are weather dependent and difficult to predict. Any
fluctuations from current assumptions may further impact the Transportation Services
Snow and Ice Control program projected expenditures. The current projection is for a
$10 million unfavourable expenditure variance. Year-to-date results reflect an
$11.8 million unfavourable expenditure variance.
Historically, fluctuating fuel costs may cause a negative impact to tax-supported
operations, the most significant user being the Edmonton Transit program within
Transportation Services. A hedging strategy covering approximately half of the
expected fuel volume in 2014 mitigates a portion of the risk. Year-end projections for all
users reflect $3.3 million in unfavourable variances due to net increases in fuel costs.
Foreign currency exchange rate fluctuations may cause an overall net cost increase
for vehicle maintenance parts.
Community Revitalization Levy Operations
The City invests in public infrastructure within a Community Revitalization Levy area,
which is intended to attract private investment, redevelopment and revitalization within
the defined Community Revitalization Levy area. The property tax revenue from the
new development, along with any revenue from property sales or property tax attributed
to the lift in the value of existing property within the area, is directed to paying the costs
of the infrastructure, including financing costs, for up to twenty years. Timing differences
between incurring costs and the collection of tax revenues have created deficit balances
in the Community Revitalization Levy reserves. Future Community Revitalization Levy
tax revenues will offset the existing shortfalls. The current existing Community
Revitalization Levies are for the Quarters, Belvedere and Capital City Downtown
projects.
Community Revitalization Levy reporting of year-to-date budget and actuals, budgets
and projections to year-end and cash flows over the term of the Community
Revitalization Levy is shown in Attachment 7.

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September 30, 2014 Projected Year-End Financial Results - Third Quarter Operating
Enterprise and Utility Operations
A table of year-to-date results and the projected year-end position for enterprise and
utility operations is displayed in Attachment 5. Attachment 6 provides details on
projected year-end variances where revenues, recoveries, expenses, transfers to/from
reserves or program variances in total exceed $.5 million.
Debt
The Municipal Government Act and related regulations establish limits for municipal
debt levels and annual debt servicing costs.
Attachment 8 provides an update on the Citys compliance with the Municipal
Government Act debt and debt servicing limits.
Debt Limits
Total Debt September 2014 - Based on borrowing and repayments to
September 30, 2014, the City has $2,701.2 million in total debt (net), 58.5% of the
Municipal Government Act debt limit.
Total Debt December 2014 (projected) - Borrowing and repayments for the remainder
of the year would result in the City having projected total debt (net) of $2,921.2 million,
63.2% of the Municipal Government Act debt limit.
Debt Servicing Limits
Debt servicing includes annual principal and interest on total outstanding debt.
Based on projected debt as at December 31, 2014, of $2,921.2 million the City expects
to utilize 41% of the maximum debt service limit for 2014 as set out in the Municipal
Government Act.
The internal Debt Management Fiscal Policy (C203C) sets more conservative debt
service limits than those established in the Municipal Government Act, with limits for all
City operations and tax-supported operations. For 2014, debt servicing is projected to
be 44% of the debt service limit for all borrowing and 51.2% of the limit for taxsupported operations, as defined under the Citys policy.
Debt servicing will increase significantly in 2015 and 2017 due to the repayment of
$60 million of short-term borrowing in each of the years. Short-term borrowing of
$120 million has been taken as of September 30, 2014, to finance fast-tracking of
capital expenditures for projects ultimately approved to be funded through Municipal
Sustainability Initiative grants and provincial fuel tax. The short-term borrowing is being
repaid as funding from these grant sources become available, thereby reducing the

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September 30, 2014 Projected Year-End Financial Results - Third Quarter Operating
availability of these grant funds in the next capital budget cycle. Based upon anticipated
expenditures and flow of grant funding, additional short-term borrowing is not projected
at this time.
Committed debt beyond 2014 includes construction of the Downtown Arena and related
development, Valley Line LRT, Walterdale Bridge, and the Northwest Police Campus.
Economic Update
An operating economic update for the third quarter of 2014 is provided in Attachment 9.
Policy
Financial Services and Utilities report 2014CR_919 meets the reporting requirements
outlined in the Municipal Government Act and complies with City policy C217B
Reserve and Equity Accounts.
Corporate Outcomes
This report supports the corporate goal of securing Edmontons financial sustainability
by helping ensure the City has well managed and sustainable assets and services, a
resilient financial position and on-going balanced revenue streams.
Justification of Recommendation
The Interim Financing reserve would accommodate timing differences between project
operating expenses and receipt of funding and will ensure that financial reporting of
City operations is not impacted by the timing differences. Furthermore, it would
provide for monitoring and reporting of the use of accumulated surplus (working
capital) to interim finance project operating costs.
Attachments
1. Tax-Supported Operations - September 30, 2014 Financial Results and
Projections
2. Tax-Supported Operations - Year-End Variance Explanations - September 2014
3. Proposed Interim Financing Reserve - Recommendation
4. Current Planning Financial Update - September 2014
5. Enterprise and Utility Operations - September 30, 2014 Financial Results and
Projections
6. Enterprise and Utility Operations - September - Year-End Variance Explanations
- September 2014
7. Community Revitalization Levy Financial Update - September 2014
8. Debt Update - September 2014
9. Economic Update - September 2014

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