TAMRMS#: B06
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Financial Forecast Update - November/December Provincial COVID-19 Orders
Presented by: Diane McMordie, Director of Finance and Assessment/CFO
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RECOMMENDED MOTION
recommendation
That the December 21, 2020 agenda report titled “Financial Forecast update - November/December Provincial COVID-19 Orders”, be received as information.
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PURPOSE OF REPORT
To provide an update to Council on:
1. The 2020 year end forecast due to financial impacts related to complying with Provincial COVID-19 orders effective November 27 and December 13, 2020.
2. Commentary on the potential impacts into 2021
ALIGNMENT TO PRIORITIES IN COUNCIL’S STRATEGIC PLAN
N/A
ALIGNMENT TO LEVELS OF SERVICE DELIVERY
Based on Provincial COVID-19 orders effective on November 27 and December 13, 2020, some City services are prohibited from operating. These include all indoor recreation, culture and library services. Mandatory work-from-home orders will also prevent all front counter services from operating.
ALIGNMENT TO COUNCIL DIRECTION OR MANDATORY STATUTORY PROVISION
Current public health order that relate to activities and services offered directly by the City or offered directly or indirectly by community partners include the following:
CMOH order 26-2020 regarding mandatory physical distancing requirement of at least two metres from every other person (subject to exceptions, e.g. family cohorts);
CMOH order 41-2020 regarding prohibiting indoor and outdoor social gatherings and physical activities, and making the wearing of masks in indoor public places a mandatory requirement province wide subject to certain exceptions;
CMOH order 42-2020 regarding businesses and entities that must (a) be closed to the public, or (b) limit their capacity, or (c) schedule appointments in order to provide services.
BACKGROUND AND DISCUSSION
2020 has been a year of uncertainty around the world due to the devastating social and economic effects of the COVID-19 pandemic. As the situation changes on a weekly basis, those individuals, businesses, and governments that are able to demonstrate resiliency by being able to quickly adapt are more likely to be successful.
After the Spring 2020 lockdown/restrictions began to ease and facilities and businesses started operating again (albeit under specific restrictions), the community was feeling like we were at least in the beginning phases of recovery.
Unfortunately, it was not known that a resurgence of the virus in fall would see us facing record numbers of new infections, hospitalizations and ICU admissions leading the Province to impose another “Lock-down” with restrictions more severe than in the Spring. The intent, at this time, is that the measures are designed to be a “circuit breaker”, with the goal of reducing the growing pressure on the health care system and are intended to be in place for a minimum of 4 weeks. Depending on effectiveness of these measures in driving infections down, there is a possibility that the measures will remain in place longer than 4 weeks.
In mid-December, the first doses of a COVID-19 vaccine were received in Canada and distribution to the provinces has begun. The delivery of vaccines will take time as they are in demand all over the world. The logistics of administering the vaccine to millions of Albertans is also challenging and will take time. The Province of Alberta’s vaccine roll-out plan, while starting in late 2020 is anticipating that the vaccine will not be widely available to the general public until the fall of 2021.
This timeline is important to the City of St. Albert from a program delivery perspective and the potential impact on our 2021 budgets. Even if the circuit breaker measures are effective at bringing down the infections, they will likely not stay that way until a vaccine is in wide distribution. This means we need to continue our past successes and remain nimble and ready to respond as the situation continues to ebb and flow.
On November 16, 2020, Council was presented with the Quarter 3 Corporate Quarterly Report. Through active financial management by Council and Administration during 2020, based on actuals to September 30, the remaining 3 months were projected to result in an overall surplus for the City.
The current health orders, once again impacting our revenue streams, will impact our 2020 financial results by $500,000 for the remainder of 2020 in Recreation and Parks. However, given that our actual expenses in October and November were managed tightly and were less than we anticipated (vacancies, less re-call of casuals, supplies etc.) ($245K) and the fact that we are able to mitigate some direct program expenses during this last 2 weeks of December ($245K), we do not anticipate a significant impact to our 2020 year end results.
Financial Impact November/December 2020
Revenue losses ($500K) (Rentals, leases, membership fees)
Expense savings $245K (Casual wages for programming)
Net Loss of closure ($255K)
Oct/Nov Gain from forecast $245K (vacancies, casuals, supplies etc.)
Net 2020 impact ($10K)
2021 is another year in which we will need to remain nimble. Our budget has been based on the continued and gradual financial recovery of City operations mainly impacting Recreation, Culture and Transit. Before the year has even started, we are now faced with facility and program closures that are in effect until at least mid-January. While a 2 week closure will have a negative financial impact, it is not anticipated as a major financial risk in 2021 as we purposefully developed a budget using conservative estimates that should allow us to absorb some level of unanticipated changes, voluntary or imposed, to our operations.
Financial Impact Jan 1-15, 2021
Revenue losses ($280K) (Rentals, leases, membership fees)
Expense savings $100K (Casual wages for programming)
Net Loss ($180K)
*There will be some utility savings which have not been factored in at this point related to running the pool at a cooler temperature and the ice at a warmer temperature)
Restrictions beyond the mid-January timeframe, depending on their severity and duration, will require further analysis and mitigation strategies. One of the challenges in mitigating operating costs to help offset revenue losses is related to the Province of Alberta’s propensity to impose short duration restrictions (2-4 weeks). With our large pieces of infrastructure, such as ice surfaces and pools, an analysis has demonstrate that it is more expensive to remove/reinstall ice and drain/fill pools over the 4 week closure than it would be to keep the ice/water in for the duration. Adding to the challenge of not having a set re-opening date is the fact that announcements that will allow services to resume are typically only given a couple of days in advance however it would take up to 2 weeks for us to have that infrastructure back and ready for use if the ice was removed and the pools were drained. Pressure from the community and our sports partners for a quick opening will be substantial as will the financial advantage of being able to recover revenues on these facilities as soon as the restrictions are lifted.
Culture & Transit
Cultural programs and services were just starting to reopen on a very gradual basis in October and most of the services being offered were being done so on a cost recovery basis therefore, the closures generated from this round of restriction are not expected to significantly impact the bottom line in 2020 or 2021. Extended closures in 2021 will have more of an impact and more analysis will be done at that time.
There is also no significant net impact anticipated for Transit services. Ridership continues to be low (although growing) therefore there may be a slight delay in the growth projections due to the most recent restrictions. Extended closures in 2021 will have more of an impact and more analysis will be done at that time.
Summary
These late year changes in the growth of the pandemic, supports our prior assertion that COVID-19 will continue to impact the organization and community well into 2021 and there will likely be lingering impacts years into the future. It remains critical that we strive for resiliency and nimbleness as the situation continues to unfold to ensure we are providing the best services possible to our residents in a fiscally responsible and sustainable manner.
STAKEHOLDER COMMUNICATIONS OR ENGAGEMENT
None Required
IMPLICATIONS OF RECOMMENDATION(S)
Financial:
None at this time
Legal / Risk:
None at this time
Program or Service:
None at this time
Organizational:
None at this time
ALTERNATIVES AND IMPLICATIONS CONSIDERED
N/A
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Report Date: December 21, 2020
Author: Diane McMordie, Director of Finance and Assessment/CFO
Department: Finance and Assessment
Deputy Chief Administrative Officer: Kerry Hilts
Chief Administrative Officer: Kevin Scoble