A full audit of the city’s electrical costs will be conducted after a review of the city’s quarterly expenses has shown electricity coming in over its $3.1-million budget by more than $500,000.

Valerie Anderson, the city’s manager of financial services, presented council with its second quarter variance reports at its meeting Monday evening. The reports examine whether revenues and expenses are meeting budget projections.

An overall projected operating shortfall of $293,509 “represents far less than one per cent of the city’s revised operating budget of ($69 million),” Anderson stated.

However, she cited electrical costs as a major concern. She noted an audit of those expenses will be conducted before officials do the third quarter report.

“Electrical expenses are by far the highest area projected to be over-budget,” Anderson stated in her report, which noted electrical expenses are now expected to come in at $528,298.

While the city had increased its budget for electricity by 10 per cent when it approved the 2014 budget to reflect rising rates, electrical costs are still expected to be over-budget, mainly in the water and waste areas.

That’s prompted the audit of the city’s electrical use, which Anderson committed to having done and presented to council prior to the third quarter report, expected at the end of October or early November.

Acting mayor Betty Irwin commented she was “shocked” to learn of the higher electrical costs, noting it points out just how dependent the city is on electrical power.

While there are other alternatives that should be explored, there’s nothing the city can do right now to change what it has to pay to power its facilities.

It appears the city is “just going to have to eat it” for now when it comes to those expenses, Irwin said.

Meanwhile, Coun. John Streicker stated he’s “very glad” an audit will be done to examine the electrical expenses.

On the overall operating budget, Anderson said the shortfall comes due to revenues being under budget by $563,844 while total expenses are also under budget by $270,335, indicating the anticipated shortfall of $293,509.

A major shortfall on the revenue side comes from operating grants being lower due to changes in funding arrangements.

Changes to the gas tax funding system mean it will no longer be used to fund positions. That will mean a drop in wage expenses in some areas of the planning department.

A number of vacancies across numerous departments – ranging from fire to bylaw to engineering and finance – also means the city is spending less on wages.

It’s also expected revenue from reserve transfers will be lower, but they will be offset by a decrease in the reserve transfer expenses.

Development activity is lower than expected, with building permits, therefore, bringing in less than anticipated.

A slowed real estate market is also taking its toll on revenues, with searches and certificates projected to bring in less than expected due to a slower housing market.

While a minor shortfall is anticipated in the operating budget, it’s expected changes in capital spending will see more money remain in the city’s reserve accounts.

In presenting the second quarter variance report on the capital budget, Anderson brought forward four recommendations that funds allocated but no longer required for certain projects remain in the city’s reserves.

It’s proposed, for example, that $6,381 remain in the capital reserve after a project for EMO equipment worth $11,381 has been deemed no longer needed, but the crosswalk installation at Second Avenue and Shipyards Park came in $5,000 over budget.

Another $6,970 is proposed to be kept in the city’s equipment reserve after the purchase of lawn tractors came in under budget.

A total of $272,032 that was planned to be spent would remain in the water and sewer reserve after the Hillcrest water supply project and the replacement of the Two Mile Hill booster station came in under budget by $200,000 for the Hillcrest work and $72,032 for the booster station.

Another $41,000 that would have been spent is suggested to stay in the city’s general reserve after the $30,000 land development strategy was cancelled and Takhini North surveys were $31,000 under budget, but the organizational review came in $20,000 over budget.

Along with the recommendations around the city’s own reserve accounts, Anderson also brought forward a proposal that the city return $223,051 to the city’s gas tax allocation to be available for other projects.

The money had been proposed for well development, but the project came in under budget and the city didn’t require the gas tax funding, Anderson explained this morning.

Finally, another $575,000 the city had planned to use from territorial grants will not be required, with the $500,000 planning for phase eight of Whistle Bend deferred until 2015 and $75,000 in funding unavailable for a quarry inventory.

Streicker pointed out the “good news” is the city being under budget in a number of areas, saving more money than it had planned to spend on a number of projects.

Council will vote next week on the recommendations for changes to the capital budget.

Mayor Dan Curtis as well as councillors Kirk Cameron and Dave Stockdale were absent from Monday night’s meeting.