In May, Ian Davey, Cobourg’s treasurer, reported on the financial impact of the pandemic plus he forecast the impact for the year. In September, he reported on the numbers for the first two quarters. On Tuesday, October 20, he will report the status up to October 15 – and it looks good. Although revenue is down by $2M, expenses are also down by $2M. Add back $400K in extra expenses because of virus protection measures and the net loss is $417K. But from a Town’s finances point of view, this is more than compensated by Federal/ Provincial funding to date of $678K leaving a net surplus of $261K. Needless to say, the Town will not be applying for the second phase of the Provincial/ Federal “Safe Restart” program.
So how did this happen? See the full report in the links below but let me summarize.
Revenues – summary of losses – highlights
| Reduced Parking Revenue | $516K |
| Cobourg Community Centre reduced revenue | $980K |
| Concert Hall reduced revenue | $163K |
| Other items | $329 |
| Total | $1,988K |
Expenses – summary of reductions – highlights (excludes some items, see overview summary below).
| Transit – Reduced Service | $250K |
| No beach Lifeguards | $105K |
| Community Centre – reduced costs | $166K |
| Concert hall – reduced costs | $60K |
| Tourism – reduced advertising | $50K |
| Special Events – reduced costs | $19K |
| Seniors’ Activity Centre – reduced costs | $44K |
| Other reductions | $448K |
| Total reductions | $1,142K |
Additions
| Tax Cancellations – above budget | ($175K) |
| Other additions | ($87K) |
| Total additions | ($262K) |
Total net Reduction in Expenses $880K
Overview
| Reduction in Revenue | $1,988K |
| Reduction in Expenses | ($880K) |
| Reduced spending on conferences | ($80K) |
| Staffing savings – Details not provided | ($1010) |
| Covid-19 expenses | $324K |
| Estimated Covid-19 Expenses Oct to Dec. | $75K |
| Total | $417K |
Offset by Provincial/ Federal Funding to date $678K
Net estimated position as of 15 October, 2020 $261K
That’s right, more than a quarter million surplus.
This is the first time (in my recollection) that “staffing” has been reported as a separate line item. Mostly we get reporting by department where staffing costs are buried. In the first half report, the biggest saving was in Community Services, so it’s likely that some of the Staffing savings are due to a reduction in hiring of summer students (and perhaps no replacements of turnover). Ian’s report labels additional details on Staffing as Confidential. But whatever was done, this reduction in spending was successful in managing the financial problem caused by the pandemic.
Perhaps more details will be provided at Tuesday’s special Council meeting although a closed session is scheduled to discuss this item.
Links
- Financials for First Half – 27 September 2020
- Financial impact of pandemic – initial review 22 May 2020
- Covid-19 Financial Update #2 – Download Ian’s report
Another View
20 October 2020: The Cobourg Taxpayers Association has another view of this. From a cash standpoint, the surplus is $91K, not $261K. Download their analysis here.
Print Article:
Rather than an updated budget, the report outlines a number of changes to the Town’s revenues and expenditures.
The report indicates that the Town should expect a $261K surplus. This is misleading in that a number of departmental and reserve transactions are included. These transactions are non-cash and do not affect the Town’s financial status.
The following analysis of the C19 Financial Update #2 adjusts for these internal non-cash transactions and shows a projected surplus of $91,370 instead of $261,445
https://cobourgtaxpayers.ca/2020/10/20/covid-19-financial-update-2/
Thanks for this alternative viewpoint. I have now added a link (above) to the CTA analysis.
Hopefully, Mr. Davey has adequately allowed for potential tax revenue losses in his calculations which will result from deferred tax collection policies.
According to the report we saved $50K or 10% on utility costs at the CCC. Looked at differently, we wasted $450K to make ice and cool/heat an unused building. That is true management expertise!
The CCC appears to have almost 50,000 ft² of solar panels on its roof. What effect do they have on mitigating energy costs?
Good question JimT.
The Town doesn’t seem to report the solar revenue in the budget. Perhaps you could ask CFO Davey.
Do they really and truly save any money until they have paid off their actual cost including installation???
Proper accounting requires that the cost be spread out over the life of the asset, using accrual accounting, otherwise the cost is all up front and any benefit in ensuing years seems to be totally free of cost, which is not really true.
Tell that to the average homeowner.
JimT & cornbread,
You are correct regarding asset costs being amortized over the asset’s useful life. This is how it is done in the private sector.
In the municipal government world, depreciation and amortization are used only for the financial statements. For budgets and management purposes, accounting is done on a cash basis, without depreciation, amortization or accruals.
When the Town buys a truck, the cost is fully allocated to the current year and matched against the revenue source (property tax, development funds, user fees) that paid for it.
This is much the same method that most people use to manage their home “budget”
The federal and provincial governments now use accrual accounting with depreciation and amortization.
A bit of light reading for you. The CD Howe Institute has published research papers on municipal accounting that may be of interest
https://www.cdhowe.org/public-policy-research/fuzzy-finances-grading-financial-reports-canada%E2%80%99s-municipalities
https://www.cdhowe.org/public-policy-research/what-you-see-not-what-you-get-budgets-versus-results-canada%E2%80%99s-major-cities-2019
https://www.cdhowe.org/public-policy-research/two-sets-books-city-hall-grading-financial-reports-canada%E2%80%99s-cities
Insofar as I know the Town of Cobourg has no roof top solar panels. The roof of the CCC is leased to Advanced Solar Investments. See https://cobourg.civicweb.net/document/21741 for information on the lease.
The roof of Northam Building 3 is leased to Orillia Power Corporation. See http://www.ieso.ca/-/media/files/ieso/document-library/power-data/supply/ieso-active-contracted-generation-list.xlsx
From the links provided above by Ken Strauss, it appears that the Town has simply leased roof space to the owners of the solar panels.
There are questions however:
Does the Town incur additional insurance costs?
Is the Town responsible for roof repairs related/due to the solar panels?
Is the Town responsible for damage to tenants’ property?
Perhaps CFO Davey has the answers.
That is very helpful. Thank you both for your informative replies.