| (In thousands of dollars) |
March 31, 2016 Actual |
2016 Budget |
March 31, 2015 Actual |
| Revenue |
31,407 |
31,268 |
31,583 |
| Expenses: |
|
|
|
| Operating & administration |
6,601 |
7,272 |
7,056 |
| Maintenance |
2,837 |
3,082 |
3,293 |
| Amortization of property and equipment |
6,156 |
8,292 |
7,793 |
| Loss on disposal |
357 |
- |
- |
| Total Expenses |
15,951 |
18,646 |
18,533 |
|
|
|
|
| Operating Income |
15,456 |
12,622 |
13,050 |
|
|
|
|
| Net Finance Costs |
896 |
1,015 |
4,017 |
|
|
|
|
| Comprehensive Income |
14,560 |
11,607 |
9,033 |
HHB’s 2015-2016 audited financial statements are found at www.hdbc.ca/publications
HHB derives 100% of its revenue from tolls collected on the two bridges and user fees. Total revenue in fiscal 2016 remained relatively stable despite the overnight closures on the Angus L. Macdonald Bridge required by the Big Lift project. The decline in revenue from the prior year was largely due to the elimination of the water pipe and utility cables from the Macdonald Bridge from which HHB had earned other rate revenue.
Operating and administrative (O&A) expenses include the costs to staff the toll facilities, bridge patrol and MacPass customer service. Costs also include maintaining toll equipment, information technology platforms as well as accounting and treasury functions, public relations and professional fees. Fiscal 2016 O&A expenses were lower than 2015 primarily due to reduced consulting and legal fees as the prior year saw completion of several significant projects that did not repeat in 2016. The 2016 O&A expenses came in under budget due to; wage savings as a budgeted headcount went unfilled, lower professional fees as a possible contingency did not materialize and the timing of certain budgeted repairs were deferred.
The maintenance expenses include costs of maintaining the structural integrity of the bridges and upkeep of buildings and equipment. Costs include snow removal, corrosion protection through painting, consulting engineering fees and operational costs of buildings, the vehicle fleet and properties. Fiscal 2016 maintenance costs were lower than the prior year primarily due to reduced labour costs following a restructured paint program initiated due to the Big Lift project. These savings were partially offset by increased road surface repair costs incurred in the first part of fiscal 2016 due to damage from the harsh winter of fiscal 2015.
Amortization of property plant and equipment is a non-cash charge that represents the cost of HHB’s fixed assets over their expected useful life. Amortization was lower in fiscal 2016 because of accelerated charges taken in prior years including fiscal 2015 to recognize the decommissioning of significant portions of the Macdonald Bridge prior to the start of the Big Lift project. The 2016 budget over-estimated the expected amortization expense.
Net finance costs consist of interest costs for HHB’s long term debt offset by interest income earned on cash held in operating and loan reserve accounts. Net finance costs were lower in fiscal 2016 compared to fiscal 2015 as HHB repaid a significant amount of debt in 2015 to save on future interest costs. Further, the 2015 early debt repayment required the payment of a market rate adjustment that increased net finance costs in 2015. Net finance costs were below budget in fiscal 2016 due to higher cash balances than forecast as the Big Lift project billings were initially lower than budgeted.
Financial Highlights
Statement of Financial Position
| (In thousands of dollars) |
March 31, 2016 |
March 31, 2015 |
March 31, 2014 |
| Current Assets |
90,609 |
57,377 |
9,759 |
| Restricted Funds and Property Plant and Equipment |
207,309 |
221,982 |
114,303 |
| Total Assets |
297,918 |
279,359 |
124,062 |
|
|
|
|
| Current Liabilities |
20,195 |
13,728 |
9,836 |
| Long term debt and other liabilities |
179,183 |
181,621 |
39,249 |
| Equity |
98,570 |
84,010 |
74,977 |
| Total Liabilities and Equity |
297,918 |
279,359 |
124,062 |
HHB’s 2015-2016 audited financial statements are found at www.hdbc.ca/publications
The impact of the Big Lift on HHB can be seen in changes to the statement of financial position over the last three years as assets and liabilities have increased significantly.
Total assets jumped in fiscal 2015 with both the start of on-site construction activity and the completion of a $160 million loan to finance the project. The loan proceeds inflated the total assets. During the course of the project, loan proceeds move from a reserve account to the property plant and equipment account. In Fiscal 2016, total assets increased further as HHB also invested a portion of current year toll revenues to fund the Big Lift.
Similarly, total liabilities and equity have increased in fiscal 2015 and 2016 due to the Big Lift project. The $160 million loan is included in long term debt with repayments scheduled to begin following the completion of the project. The increase in current liabilities is also directly attributable to the Big Lift project and the timing of payments.
Outlook
When the Big Lift project is substantially completed, for accounting purposes, there will be significant impact to HHB’s Statement of Comprehensive Income. Future amortization costs will increase by an estimated $2.8 million per year initially and future finance costs will increase an estimated $4.3m per year initially. In fiscal 2016 the Big Lift is in construction phase with related finance charges recorded on HHB’s Statement of Financial Position as part of the cost of that asset.
Substantial completion of the Big Lift, for accounting purposes, is estimated as the point where all deck segments are installed and in use along with the sidewalk and bikeway. Currently, substantial completion is forecast to be achieved near the end of fiscal 2017.
Wayne F. Mason,
Steve Snider
