Third Quarter Budget Update

At the next Committee of the Whole Council meeting on December 7, Treasurer Ian Davey will present a report on operating budget performance up to the end of the third quarter – September 30.  Since the budget is annual with no quarterly breakdown, Ian presents performance in terms of percent of the budget remaining.  If there were no seasonal factors, then the remaining budgets for both revenue and expenditures should be 25%.  There are of course seasonal factors so this measure is not much use.  Instead, Ian also provides last year’s report at the same point.  According to my analysis, there is a shortfall in revenue compared to 2019 of approx. $3.5M.  But expenditures have been reduced and Ian’s numbers show that compared to 2019, spending has reduced by $1.4M.  So the net problem up to the end of the third quarter is a deficit of $2.1M.  That is, the Town will have to borrow $2.1M with a possible additional amount during Q4.

In the links below I have included Ian’s full report plus my summary Excel spreadsheet with the same numbers.

Q3 2020 YTD Budget Summary

  2020 Budget YTD Actual Remaining $ Remaining % Differences to 2019
Revenue $15M $8.3M $6.7M 44.9% $3.5M less revenue
Expenditures $39.7M $26.3M $13.4M 33.8% $1.4M less spent
Levy $24.7M     Net Shortfall $2.1M

Notes:

  • Revenue refers to income NOT raised from taxes (Levy) but instead from user fees, grants etc.
  • Annual Budget Revenue plus Levy must equal budgeted Expenditures.
  • Ian reports that “property tax collections remain strong” – that is, the budget for the tax levy should be met or at least close to 100%.
  • Comparing to 2019 is not 100% accurate since the 2020 budget is not identical to the 2019 budget.
Ian Davey
Ian Davey

But there is still a shortfall of approx. $2.1M.  When preparing the budget for 2021, it will have to be assumed that at least some of the revenue shortfall will be repeated – at least in the first three quarters of the year since Prime Minister Trudeau recently said it would be September before all who want it will be vaccinated.  And that includes the peak summer revenue season.  Together with the announced budget target of 0 to 1%, that means a reduction in spending compared to 2019 of several million.  One unknown is quite how much the Federal and Provincial Governments are going to send the Town’s way.  And how can the Town predict what’s coming next year?

Ian said that his report on Capital expenditure variances will be presented as part of 2021 budget deliberations which start on December 8.

Links

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Liz Taylor
1 December 2020 7:19 am

On the 2.1 Revenue Shortfall and Deficit – I am confused by the report by Ian Davey, see link, that at this point we are actually in a surplus position after all grant money is counted so far for 2020. Excerpt “While that number seems high for a smaller community, Davey reassured council that it’s not as bad as it seems.
“The net financial impact without any assistance from the federal or provincial programs would’ve been a net deficit of $416,902 but when we add in the funding, that leads us to a surplus, if you will, of $261,000,” Davey said.”

Therefore presently we aren’t in deficit currently but in suplus according to this information and Ian Davey’s statement.

2021 remains an unknown factor. Ian Davey further stated ““My understanding of the Safe Restart Phase Two funding is strictly on the need for 2020,” added Davey. “That’s why we continue to work on those projections and schedules and if we come to a new conclusion in the next 10 days, we will apply for the funding. It’s not meant to give us a surplus to carry forward to 2021.”
https://globalnews.ca/news/7408238/coronavirus-cobourg-ont-2020-revenue-shortfall/

Sandpiper
Reply to  Liz Taylor
1 December 2020 8:32 am

Ian Davey is a well known spender over the years he has stated debt is not a bad thing
May be now he could Quit while we are ahead !

Dunkirk
Reply to  Sandpiper
1 December 2020 9:45 am

While that could be true, I think there has been some dramatic improvement in the timeliness of this reporting.(if that is because of the necessity for Federal Funding, that’s okay)

Liz Taylor
Reply to  Liz Taylor
2 December 2020 8:56 am

Now we wait for the 4th quarter to come out and the final result as to whether Cobourg will be eligible to apply for further assists. Ian Davey reports you can’t if you prove you are managing and a surplus as reported finally will exclude further funding. Should money be spent on various needs in Cobourg now will that then push us into deficit creating eligibility or is that considered a different area and still preclude Cobourg from further funding?

Liz Taylor
Reply to  Liz Taylor
2 December 2020 3:52 pm

I was looking for a reply on the above not votes. No takers apparently.

Suzanne Seguin
Reply to  Liz Taylor
3 December 2020 11:23 am

Hello Liz, Cobourg received $669,580 in funding under Phase 1 of the Safe Restart Agreement. To be considered for Phase 2 funding, municipalities were required to submit reports to the ministry outlining their COVID-19 operating costs and pressures by October 30, 2020. Under the advice of our Treasurer, Cobourg did not apply for additional funding under Phase 2 of this program.

Liz Taylor
Reply to  Suzanne Seguin
3 December 2020 12:52 pm

Thank you Suzanne – I must have missed the part that said the final quarter did not factor in as October was the deadline to apply. Your taking the time to reply is very much appreciated.

I was thinking of compensation for 2020 should the final quarter not be as positive and end Cobourg in a deficit.

Last edited 1 month ago by Liz Taylor