TAMRMS#: B06
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COVID-19 Financial Scenarios
Presented by: Diane McMordie, Director, Finance & Assessment/CFO
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RECOMMENDED MOTIONS
recommendation
1. That the report titled “COVID-19 Financial Scenarios” be received for information
2. That the portion of Council Motion AR-20-144 that reads “That Administration provide monthly financial updates as more revenue and expense data becomes available and modeling is refined to inform any further financial management decisions required of Council”, be rescinded and that the City revert back to regular quarterly financial reporting as required under Council Policy C-CAO-01 Section 5 (b)(iii).
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PURPOSE OF REPORT
To provide Council with updated information related to the re-opening of civic facilities and programs including a review of utilization statistics and any significant risks to the most recent forecast presented to Council on August 17, 2020.
ALIGNMENT TO PRIORITIES IN COUNCIL’S STRATEGIC PLAN
N/A
ALIGNMENT TO LEVELS OF SERVICE DELIVERY
This report links to a vast variety of services and service levels traditionally provided by the City. Many services were completely suspended upon the declaration of the COVID-19 pandemic in March 2020. Since that time, the Province of Alberta under the guidance of the Medical Officer of Health, has approved the reopening of specific services under defined operating restrictions. It is unknown at this time whether current operating restrictions will remain in place, be expanded or be loosened in the future.
ALIGNMENT TO COUNCIL DIRECTION OR MANDATORY STATUTORY PROVISION
On April 20, 2020 Council approved the following motion:
(AR-20-144)
That the April 20, 2020 agenda report titled "COVID-19 Financial Scenarios" be received as information.
That Administration provide monthly financial updates as more revenue and expense data becomes available and modeling is refined to inform any further financial management decisions required of Council.
That Council continue to implement the budget approved on December 16, 2019, subject to Administration's recommended amendments being presented on May 4, 2020.
BACKGROUND AND DISCUSSION
Subsequent to the release of the Provincial Relaunch Strategy on April 30, 2020 the province announced the move to stage 2 of the plan effective June 12, 2020.
In response to the phase 2 plan and corresponding operating restrictions, on June 29 and July 6, 2020 Council received for information a detailed plan for the re-opening of various facilities and services in a phased approach between mid-July and mid-October.
Upon Council approval of the proposed timetable for re-opening, Administration worked to refine the financial impacts and complete a more robust financial forecast which was presented to Council on August 17, 2020. There were many things to consider when trying to understand and forecast financial impacts. These included such things as:
- Guidance documents in relation to things like physical distancing, sanitation, gathering sizes, and cohort rules.
- Sport and community partner organization readiness to return to sport/activity.
- Engineered and administrative controls that would be required in each individual facility to support re-entry in a safe manner and consistent with provincial guidelines.
- Customers readiness to return to facilities/programs.
- Residents may be facing financial challenges.
- Advertising/sponsorship revenues may be impacted due to the financial challenges facing many businesses.
- Increasing numbers of cases or a full “Second Wave” which could cause facilities to operate under stricter guidelines or to close again.
Based on the above, conservative but realistic assumptions were developed to forecast the pace that we would have to start re-incurring expenses in order to provide the planned level of service. There is a base level of facility/staffing/operating expenses that are required for a facility/program, regardless of the participation level. That being said, these expense projections were carefully analyzed to ensure we were being as efficient as possible while covering operational needs and managing risk for the City.
The other side of the forecast, that being revenues, were also conservatively but realistically forecasted as there was immediate recognition that we were limited by capacity restraints and that we would be impacted by resident’s and sports groups willingness to return.
Including the shut-down period and the gradual return of facilities and program, the City has estimated the total net impact (lost revenues & additional expenses) for 2020 to be $14.4 Million.
Within days of the pandemic forcing the closure of our facilities, administration began identifying and making decisions on services and service levels and other measures that could be employed to mitigate the financial impacts identified above. This quick and financially prudent action along with strong support from Council has enabled us to reduce the overall projected financial deficit down to $500 Thousand.
As mentioned, this forecast was based on a series of assumptions related to utilization upon re-opening. Now that some of the facilities and programs have been operating for several weeks, we have the ability to compare our actual experiences with the original assumptions to understand if we should expect any significant change to our year end forecast.
As the organization reverts back to robust regular quarterly financial updates, the next detailed forecast will be provided to Council in November (based on actuals to September 30, 2020).
Given that the utilization statistics provided in this report support our original assumptions to a large degree, we do not anticipate the Q3 forecast to be impacted negatively.
Summary of Utilization and Financial Impacts
Recreation & Parks
Recreation programs, both indoor and outdoor, experienced some of the deepest financial and service impacts due to COVID-19. Indoor facilities and programs, in particular, face unique challenges and there are complex issues to be overcome when contemplating re-opening. Forecasting of revenues and utilization will continue to be challenging into the future as the COVID-19 numbers fluctuate around the region. Residents who are utilizing the facilities today may opt out if numbers continue to rise and others may develop a higher comfort level. Regular and consistent monitoring of utilization will continue to inform our service offerings.
For our various facilities that have now been open for many weeks, updated utilization estimates and financial impacts can be found in the attachment titled “Recreation Facilities Re-entry Reporting”. Overall, we are very close to our original assumptions around utilization and do not anticipate a significant change to the year end forecast in these specific areas.
Culture
As most cultural programs and services were not scheduled to resume until October, it is difficult to understand the success of the relaunch and the accuracy of the original financial assumptions presented in the August report.
One virtual event has already been presented and tickets for a second event are underway. Additional acts are in the process of being confirmed, with the goal of 10 live events by the end of December.
Performing Arts classes have just begun however enrollment has been slow. Two classes are currently running and we will be offering a shorter ‘semester’ of classes come November with a selection of ‘one off’ workshops and classes as well as a few open house days. Classes will only be run when cost recovery can be assured through adequate enrollment.
Transit
Financial forecasts for Transit services remain relevant. Ridership to the end of August is up slightly from the original forecast of 15% pre-covid levels and currently sit at approximately 20%. September ridership is also trending slightly above forecast therefore we do not anticipate a negative variance from the original year end forecast. Transit ridership is expected to remain significantly lower than typical until such time post-secondary institutions resume in-person classes. For purposes of the upcoming 2021 budget this is assumed to occur in the Fall of 2021.
Administration will continue to monitor utilization and financial results on these areas on a continuous basis to inform quarterly financial forecasts for Council. The next complete quarterly report is scheduled to be presented to Council on November 16, 2020.
STAKEHOLDER COMMUNICATIONS OR ENGAGEMENT
None
IMPLICATIONS OF RECOMMENDATION(S)
Financial:
None at this time
Legal / Risk:
None at this time
Program or Service:
Managing facilities and services during the pandemic will require us to be cautious and nimble as the situation can change very quickly depending on the path of the virus. There is no way to understand what the future will look like so we need to be prepared to quickly shift course yet remain financially prudent.
Organizational:
None at this time
ALTERNATIVES AND IMPLICATIONS CONSIDERED
N/A
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Report Date: October 19, 2020
Author: Diane McMordie
Department: Finance & Assessment
Deputy Chief Administrative Officer: Kerry Hilts
Chief Administrative Officer: Kevin Scoble