Staff Report #6
March 27, 2019
To All Commissioners
Re: Recosted 2019 Budget Program
Recommendation
That the Commission APPROVE the recosted 2019 capital budget of $10,868,500 as summarized below noting the recosted budget reflects the previously approved 2019 capital budget program (Staff Report #2, August 29, 2018), updated pricing for 2019 bus replacement/expansion programs (Staff Report #2, November 28, 2018), and carry forward amounts relating to deferred or active 2018 capital projects.
2019 Recosted Capital Budget
| Description | Source of Investment | Total | |||
| Capital Program Reserve | City of London | Federal Gas Tax | Provincial Gas Tax | ||
| Stop Upgrades | $ 37,000 | $ – | $ – | $ – | $ 37,000 |
| Service Fleet | 40,000 | – | – | – | 40,000 |
| Shop Equipment | 200,000 | – | – | – | 200,000 |
| Software and Hardware | 390,000 | – | – | 210,000 | 600,000 |
| Facility Upgrades | – | 500,000 | – | – | 500,000 |
| Bus Replacements (8) | – | 2,224,800 | 1,500,000 | 1,023,200 | 4,748,000 |
| Bus Expansion (1) | – | 300,100 | – | 323,400 | 623,500 |
| Fleet Radio Replacement | – | 312,500 | – | 312,500 | 625,000 |
| TMP 2030 – BRT Strategy | – | – | – | 1,500,000 | 1,500,000 |
| Fare Processing Equipment | – | 747,500 | – | 747,500 | 1,495,000 |
| Smart Card Program | – | – | – | 500,000 | 500,000 |
| $ 667,000 | $ 4,084,900 | $ 1,500,000 | $ 4,616,600 | $ 10,868,500 | |
Background
At the August 29, 2018 Commission meeting, the 2019 Operating and Capital budget programs were approved (Staff Reports #1 & #2, August 29, 2018). Consistent with established practices, the 2019 budget is subject to a recosting exercise for both capital and operating budgets. The exercise takes into consideration significant trends and/or emergent issues that have developed since the budget was first prepared, including 2018 results, price changes, revenue/ridership trends and program updates. The City of London requested and approved investment is not subject to recosting consideration unless an amendment business case for material items is submitted and approved by Municipal Council.
Capital
At the August 29, 2018 Commission meeting, the 2019 capital budget program of $6,137,900 was approved. A recosting exercise for both capital and operating budgets occurs at the beginning of the year after all City of London funding is confirmed and takes into consideration pricing updates as well as any prior year projects that have not been completed or deferred to the future. The following table provides a summary by project of the proposed updated capital budget highlighting the original approved budget, pricing updates and 2018 carry forwards together with identified funding sources.
Summary of 2019 Recosted Capital Budget
| Description | Original Approved Budget | Adjustments | 2018 Carry Forward | Total |
| Program: | ||||
| Stop Upgrades | $ 37,000 | $ – | $ – | $ 37,000 |
| Service Fleet | 40,000 | – | – | 40,000 |
| Shop Equipment | 200,000 | – | – | 200,000 |
| Software and Hardware | 200,000 | – | 400,000 | 600,000 |
| Facility Upgrades | 500,000 | – | – | 500,000 |
| Bus Replacements (8) | 4,560,800 | 187,200 | – | 4,748,000 |
| Bus Expansion (1) | 600,100 | 23,400 | – | 623,500 |
| Fleet Radio Replacement | – | – | 625,000 | 625,000 |
| TMP 2030 – BRT Strategy | – | – | 1,500,000 | 1,500,000 |
| Fare Processing Equipment | – | – | 1,495,000 | 1,495,000 |
| Smart Card Program | – | – | 500,000 | 500,000 |
| Total | $ 6,137,900 | $ 210,600 | $ 4,520,000 | $10,868,500 |
| Funding: | ||||
| Provincial Gas Tax | $ 1,136,100 | $ 210,600 | $ 3,269,900 | $ 4,616,600 |
| Capital Program Reserve | 477,000 | – | 190,000 | 667,000 |
| City of London | 3,024,800 | – | 1,060,100 | 4,084,900 |
| Federal Gas Tax | 1,500,000 | – | – | 1,500,000 |
| Total | $ 6,137,900 | $ 210,600 | $ 4,520,000 | $10,868,500 |
The capital budget for the 2019 expansion and replacement buses required a recosting increase of $210,600. Pricing updates from New Flyer reflect a 4.2% increase over 2018 prices for 40’ buses and was arrived at by applying the price escalation formula included in the contract. Note, the 2018 price was the value included in the 2019 original budget. Updates to this price were approved by the Commission at its November 28, 2018 meeting (Staff Report #2, Contract Award – 2019 Replacement & Expansion Buses). The following table summarizes the unit price comparison and resulting increases.
Unit Price Comparison
| Bus
Size |
Buses | Budgeted
Price |
2018
Price |
2019
Price |
Price
Increase |
| 40′ | 9 | $ 545,800 | $ 545,800 | $ 568,800 | $ 23,000 |
Set out in Enclosure I is the Capital Program Summary for the twelve months ending December 31, 2018. As indicated in the Enclosure, a number of the projects planned for and included in the 2018 capital budget program were not completed in 2018 or have been deferred to future years. Given funds have been approved the outstanding amounts are carried forward to 2019 where necessary. The following table summarizes the 2018 capital expenditures for outstanding projects and the corresponding carry forward amounts, including funding source, for inclusion in the 2019 Capital Program.
Summary of 2018 Carry Forward Capital Projects
| Description | 2018
Actual |
2018
Budget |
Variance | 2018
Carry Forward |
| Program: | ||||
| Software and hardware | $ 192,843 | $ 600,000 | $ 407,157 | $ 400,000 |
| Fleet radio replacement | – | 625,000 | 625,000 | 625,000 |
| TMP 2030 – BRT strategy | – | 1,500,000 | 1,500,000 | 1,500,000 |
| Smart card program | 97,963 | 605,000 | 507,037 | 500,000 |
| Fare processing equipment | – | 1,495,000 | 1,495,000 | 1,495,000 |
| $ 290,806 | $ 4,825,000 | $ 4,534,194 | $ 4,520,000 | |
| Funding: | ||||
| Provincial Gas Tax | $ 165,866 | $ 3,415,000 | $ 3,249,134 | $ 3,269,900 |
| Capital Program Reserve | 124,940 | 350,000 | 225,060 | 190,000 |
| City of London | – | 1,060,000 | 1,060,000 | 1,060,100 |
| Total | $ 290,806 | $ 4,825,000 | $ 4,534,194 | $ 4,520,000 |
The current recommendation has the recosted increases funded by the Provincial Gas Tax Reserve and the carry forwards funded by the original funding sources identified in 2018.
Operating
The Commission confirmed the 2019 Operating Budget Submission, as previously approved on August 26, 2015 as part of the multi-year budget submission at the August 29, 2018 Commission meeting, noting the 2019 Operating Budget consists of the following:
| Conventional | Specialized | Total | |
| Total Operating Expenditure | $ 74,688,400 | $ 9,281,800 | $ 83,970,200 |
| Total Operating Revenue | 47,332,600 | 3,763,400 | 51,096,000 |
| Total City of London Investment | $ 27,355,800 | $ 5,518,400 | $ 32,874,200 |
The process to recost the operating budget for 2019 was undertaken similar to that of prior years. 2018 final year end results were compared to the 2018 projected actual used in the creation of the 2019 budget, with particular attention paid to trends relating to ridership and revenue, fuel pricing and volume fluctuations, as well as labour and benefit trends and service update impacts. The review did not result in the identification of any known factors or trends that would lead to the need to recost the operating budget.
The Commission will be provided with regular updates on the status of the programs included in the 2019
Operating and Capital budgets through the regular monthly reporting process.
Enclosure
I – 2018 Capital Program Summary (below)
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager
2018 Capital Program Summary – Twelve Months Ending December 31, 2018
| Description | Total | Note | |||
| Capital
Program Reserve |
City of
London |
Prov Ont
Gas Tax Prog |
|||
| Stop Upgrades | |||||
| Actual to-date | $ 210,301 | $ – | $ – | $ 210,301 | |
| Budget | 37,000 | – | 73,000 | 110,000 | |
| Variance | (137,301) | – | 73,000 | (100,301) | 1 |
| Service Fleet | |||||
| Actual to-date | 33,971 | – | – | 33,971 | |
| Budget | 40,000 | – | – | 40,000 | |
| Variance | 6,029 | – | – | 6,029 | 2 |
| Shop Equipment | |||||
| Actual to-date | 131,916 | – | – | 131,916 | |
| Budget | 200,000 | – | – | 200,000 | |
| Variance | 68,084 | – | – | 68,084 | 2 |
| Software and Hardware | |||||
| Actual to-date | 124,940 | – | 67,903 | 192,843 | |
| Budget | 350,000 | – | 250,000 | 600,000 | |
| Variance | 225,060 | – | 182,097 | 407,157 | 3 |
| Facility Upgrades | |||||
| Actual to-date | – | 244,502 | – | 244,502 | |
| Budget | – | 300,000 | – | 300,000 | |
| Variance | – | 55,498 | – | 55,498 | 2 |
| Bus Replacements (8) | |||||
| Actual to-date | – | 3,724,800 | 823,224 | 4,548,024 | |
| Budget | – | 3,724,800 | 836,000 | 4,560,800 | |
| Variance | – | – | 12,776 | 12,776 | 2 |
| Bus Expansion (4) | |||||
| Actual to-date | – | 1,200,200 | 1,143,238 | 2,343,438 | |
| Budget | – | 1,200,200 | 1,178,200 | 2,378,400 | |
| Variance | – | – | 34,962 | 34,962 | 2 |
| Fleet Radio Replacement | |||||
| Actual to-date | – | – | – | – | |
| Budget | – | 312,500 | 312,500 | 625,000 | |
| Variance | – | 312,500 | 312,500 | 625,000 | 4 |
| TMP 2030 – BRT Strategy | |||||
| Actual to-date | – | – | – | – | |
| Budget | – | – | 1,500,000 | 1,500,000 | |
| Variance | – | – | 1,500,000 | 1,500,000 | 4 |
| Fare Processing Equipment | |||||
| Actual to-date | – | – | – | – | |
| Budget | – | 747,500 | 747,500 | 1,495,000 | |
| Variance | – | 747,500 | 747,500 | 1,495,000 | 4 |
| Smart Card Program | |||||
| Actual to-date | – | – | 97,963 | 97,963 | |
| Budget | – | – | 605,000 | 605,000 | |
| Variance | – | – | 507,037 | 507,037 | 3 |
| Total program | |||||
| Actual to-date | 501,129 | 5,169,502 | 2,132,328 | 7,802,959 | |
| Budget | 627,000 | 6,285,000 | 5,502,200 | 12,414,200 | |
| Variance | $ 125,871 | $ 1,115,498 | $ 3,369,872 | $ 4,611,241 |
Notes:
- Program completed, over budget, due to additional stops/cement pads required for significant service changes in 2018
- Programs completed, slightly under budget with no carry forward to 2019
- Programs not completed. Amount to be carried forward to 2019
- Programs deferred, amount to be carry forward to 2019