VARIANCE DESCRIPTION

The total departmental year-end variance is projected to be approximately:$1,624,000 Surplus

OLGC Casino Revenue: ($8,700,000)

Caesars Windsor, along with many other establishments in the city, has been closed during the pandemic. It is estimated that the City will lose approximately $8.7M in slot revenue in 2020. The forecast of foregone revenue assumes that casino revenue will begin to increase gradually in October and possibly reach 25% capacity in December. Depending on the actual opening date of the casino, revenue losses for the balance of 2020 may be materially different depending on the impacts of social distancing on Caesar Windsor’s operations.

YQG and Windsor Detroit Border Link Dividends: ($2,000,000)

Cross border and air travel has been severely restricted during this period resulting in significant revenue losses for tunnel toll revenues and airport operations. It is expected that the $1M dividends received from each of these entities will not materialize for 2020. This would result in a $2M variance in the City’s operating budget.

Interest & Penalties: ($1,470,000)

The foregone revenue due to Covid-19 on waived interest and penalties for property taxes until the end of June 30, 2020 is estimated to costs ($1.2M) and is expected to be offset by $600,000 which will be levied against taxpayers who have remained or who have subsequently fallen into arrears. The lost interest revenue due to investment returns was mitigated through the deferral of outgoing cash flows and strategic investment opportunities.

A deficit of ($870,000) is projected in Interest Income. As a result of COVID-19, the City undertook proactive measures to ensure that sufficient liquidity in terms of working capital was available to support ongoing municipal operations. Investments which matured where not renewed in full and portions of available funds were invested at lower yields than previous available. Funds retained in bank accounts were also subject lower yields as a result of the Federal Governments actions to drop interest rates of total of three (3) times since January 1, 2020. The current Federal overnight rate is 0.25%.

Municipal Accommodation Tax (MAT): ($1,300,000)

The COVID crisis has had a severe impact on the hotel industry with many facilities being partially or fully closed beginning on or around mid-March. Occupancy rates for the 1st quarter of 2020 are typically lower than in the spring and summer months where travel is more prominent due to vacations and sports travel. Based upon the quarterly results from 2019, Administration has projected a decline in revenues of 15% during this 1st quarter and further reductions for both the 2nd and 3rd quarter. The actual gross revenue decline for the 1st quarter (Jan to March) as compared to 2019 was approximately $140,000. The actual gross revenue decline for the 2nd quarter (April to June) as compared to 2019 was approximately $585,000. With the City moving into Phase 3 of the Provincial reopening, it is hoped that some of the revenue loss can be mitigated. Current projections, which are based upon prolonged periods of low occupancy for this industry, suggest that the total shortfall could be in the range of $1.3M. Any shortfall may limit future investments in the tourism industry as the MAT tax revenues are shared equally between TWEPI and the City’s Tourism Development Infrastructure and Program Reserve.

Property Tax Vacancy Rebates: ($500,000)

The City of Windsor maintains a property tax rebate program that provides commercial and industrial property owners with an annual tax rebate on occupied property that meets the conditions of being vacant. Property owners have until February of the year following the taxation year in which to apply for the property tax rebate. As such, Administration must estimate the current year rebate based upon current economic conditions. Given the impact of COVID-19 on many commercial business operators, many of which were forced to cease operations, Administration conservatively projects that an increase of approximately $500,000 which will be required to be set aside to fund applications for the vacancy rebate in addition to what is generally received each year.