|
2.
2009
WATER AND WASTEWATER RATE–SUPPORTED DRAFT OPERATING AND CAPITAL BUDGETS,
HIGH-LEVEL 2010 AND 2011 BUDGET FORECASTS PROJETS DE BUDGET DE FONCTIONNEMENT ET
D'IMMOBILISATIONS 2009 SOUTENUS PAR LES TARIFS D'EAU ET DES AUX USÉES,
PRÉVISIONS BUDGÉTAIRES 2010 ET 2011 DE HAUT NIVEAU |
Committee recommendations as
amended
That Council approve:
1. The 2009 Operating and Capital Budget Estimates, including
$6.6M of funding in the Water and Wasterwater rate-supported budget for Phase
II construction of Wellington Street (Parkdale to Bayview).
2. The Rate-supported 2010 and 2011 budget forecasts, which
incorporate the high-level budget directions provided by Council.
RecommandationS modifiÉeS du Comité
Que
le Conseil approuve :
1.
les
prévisions budgétaires de fonctionnement et d’immobilisations de 2009, y
compris le financement de 6,6 M$ du budget soutenus par les tarifs d’eau et
d’eaux usées pour la Phase II des travaux de construction de la rue Wellington
(entre Parkdale et Bayview).
2. que soient reçues les prévisions
budgétaires 2010 et 2011 soutenues par les tarifs, qui tiennent compte des
orientations budgétaires de haut niveau fournies par le Conseil.
Documentation
1.
Deputy
City Manager's report, Infrastructure Services and Community Sustainability,
dated 14 October 2008 (ACS2008-ICS-WWS-0025).
2. Extract of Draft Minutes, 29 October
2008, following the French version of the report.
Report
to / Rapport au:
Planning
and Environment Committee
Comité de l'urbanisme et de
l'environnement
and Council / et au Conseil
14 October 2008 / le 14 octobre 2008
Submitted
by / Soumis par: Nancy Schepers and
Marian Simulik,
Infrastructure Services and Community Sustainability
/ Services d’infrastructure et Viabilité des
collectivités
City Treasurer / trésoričre municipale
Contact Person / Personne ressource:
Dixon Weir, Director / Directeur
Water and Wastewater Services / Services de l’eau et des eaux usées
613-580-2424, x22002
Dixon.Weir@ottawa.ca
|
City-Wide / Ŕ l’échelle de la Ville |
|
Ref N°: ACS2008-ICS-WWS-0025 |
SUBJECT: 2009
WATER AND WASTEWATER RATE-SUPPORTED DRAFT OPERATING AND CAPITAL BUDGETS,
high-level 2010 and 2011 buDget forecasts
OBJET: ProjetS de budget de
fonctionnement et d’immobilisations 2009 SOUTENUS par les tarifs d’eau et
d’eaux usées, prévisions budgétaires 2010 ET 2011 de haut niveau
REPORT RECOMMENDATIONS
1. That the
2009 Operating and Capital Budget Estimates be received and tabled at the
meeting of the Planning and Environment Committee to be held on October 14,
2008 for subsequent consideration by the Planning and Environment Committee at
a Special Meeting to be held on October 29, 2008 and Council on November 12,
2008; and
2.
That the Rate-supported 2010 and 2011 budget forecasts,
which incorporate the high-level budget directions provided by Council be
received.
RECOMMANDATIONS DU RAPPORT
1.
Que
les projets de budget de fonctionnement et d’immobilisations 2009 soient reçus
et déposés ŕ la réunion du 14 octobre 2008 du Comité de l’urbanisme et de
l’environnement pour qu’il les étudie ensuite ŕ sa réunion extraordinaire du 29
octobre 2008 et au Conseil le 12 novembre 2008.
2. Que
soient reçues les prévisions budgétaires 2010 et 2011 soutenues par les tarifs,
qui tiennent compte des orientations budgétaires de haut niveau fournies par le
Conseil.
EXECUTIVE
SUMMARY
The draft Operating and Capital Budgets covering the provision of drinking water, wastewater and municipal drains services is being tabled for Committee’s consideration following the directions that were approved by Council on September 25, 2008.
The draft gross 2009 drinking water services operating resource requirements are comprised of $51.8 million in direct operating costs and $81.2 million in non-departmental services of which $60.2 million is a contribution directed to a dedicated Water Capital Reserve Fund. In 2009, the total draft resource net operating requirement to provide drinking water services will be $45.2 million. This approximate overall budget will increase to approximately $49.1 million in 2010 and $53.1 million in 2011.
Similarly, in wastewater services, the 2009 draft gross operating resource requirement is comprised of $42.3 million in direct operating costs and $82.5 million in non-departmental services of which $45.4 million is a contribution directed to a dedicated Wastewater Capital Reserve Fund. In 2009, the total draft resource net operating requirement to provide wastewater and drainage services is proposed at $36.2 million. In 2010 and 2011 respectively, these budget requirements are forecast to increase to approximately $37.9 million and $39 million.
A major proposal contained within this draft budget is the creation of the Ottawa River Fund. This initiative will provide a comprehensive, integrated assessment of City impacts on the environment, and will result in the development of a long-term strategy to reduce the City’s impact on the Ottawa River. The budget for this program has been established at $139 million with $73 million funding by the City, of which $53 million will be taken from Water and Wastewater Reserves. To cover the road rehabilitation costs associated with integrated program elements of this initiative, $20 million in funds will be taken from tax capital reserves. The federal and provincial governments have provided equal and matching $33 million commitments to support this initiative.
The costs for these services are recovered primarily from the water rate and corresponding sewer surcharge paid only by those Ottawa residents receiving the service. In order to provide these services in a financially sustainable manner, staff are proposing net 9% rate increases for 2009 and 2010, and a 5% increase for 2011. These rate increases are the same water rate and sewer surcharge recommendations approved as high-level fiscal directions in 2008 and contained within the Long Range Financial Plan III. Other less significant sources of revenue, such as cost recovery services on hauled liquid waste charges will increase as per CPI or previously approved increases. Based upon these rate increases, it is projected that $46.7 million in incremental revenue will be generated in 2009 and 2010.
With the approval of the 2008 budget, Council directed staff to address a number of associated issues, all of which are addressed in this report.
The funding strategy for water and wastewater programs support Council’s strategic direction to close the gap on sanitary, storm sewer and watermain replacement by 2015 and to ensure that the City infrastructure required for new growth is built or improved as needed to serve growth. An important element of this strategy is the review and development of a long-term assessment of cost, revenue and rate. With capital authority provided in April 2008, staff have begun working on this initiative with the intent that the resulting work will support the modified accounting and reporting practices as a part of the requirement to move to Public Sector Accounting Board reporting for the 2010 budget cycle, and to comply with the Municipal Drinking Water Licensing requirement for a dedicated Financial Plan for drinking water services in July 2010.
RÉSUMÉ
La version préliminaire des budgets de
fonctionnement et d’immobilisation affectés ŕ la prestation des services de
gestion de l’eau potable, de traitement des eaux usées et d’égouts municipaux
est présentée au Comité aux fins d’étude comme suite aux directives approuvées
par le Conseil le 25 septembre 2008.
Le montant brut provisoire des besoins en
ressources de fonctionnement pour les services de gestion de l’eau potable
comprend 51,8 millions de dollars en coűts directs d’exploitation et 81,2
millions de dollars pour les services non-liés aux Services, dont 60,2 millions
sont une contribution versée au fonds de réserve pour immobilisations de
gestion de l’eau. En 2009, le besoin net total provisoire en ressources de
fonctionnement pour la prestation des services de gestion de l’eau potable
s’élčvera ŕ 45,2 millions de dollars.
Ce budget global approximatif augmentera ŕ environ 49,1 millions en 2010
et ŕ 53,1 millions de dollars en 2011.
De la męme façon, le montant brut
préliminaire des besoins en ressources de fonctionnement pour les services de
traitement des eaux usées se compose de 42,3 millions de dollars en coűts
directs et de 82,5 millions pour les services non-liés aux Services, dont une
contribution de 45,4 millions versée au fonds de réserve pour immobilisations
de traitement des eaux usées. En 2009,
le besoin net total préliminaire en ressources de fonctionnement pour la
prestation des services de traitement des eaux usées et des égouts municipaux
s’élčve ŕ 36,2 millions de dollars.
En 2010 et 2011 respectivement, ces besoins budgétaires devraient
augmenter ŕ environ 37,9 millions et 39 millions de dollars.
Les prévisions budgétaires
comprennent une proposition importante : la création du fonds pour la
rivičre des Outaouais. Cette initiative
fournira une évaluation intégrée complčte de l’incidence de la ville sur
l’environnement et mčnera ŕ l’élaboration d’une stratégie ŕ long terme pour
réduire l’impact municipal sur la rivičre des Outaouais. Le budget de ce programme se chiffre ŕ 139
millions de dollars, dont 73 millions financés par la Ville qui puisera 53
millions des fonds de réserve pour la gestion de l’eau et pour le traitement
des eaux usées. 20 millions de dollars
proviendront des réserves pour immobilisations constituées ŕ partir des taxes
pour supporter les coűts de réfection des routes associés aux éléments intégrés
du programme de cette initiative. Les gouvernements fédéral et provincial se
sont tous les deux engagés ŕ verser chacun une somme égale de 33 millions de
dollars pour soutenir cette initiative.
Le recouvrement des coűts pour ces
services s’effectue principalement par le biais de la redevance d’eau et de la
surtaxe d’égouts correspondante payée seulement par les citoyens d’Ottawa qui
reçoivent le service. Afin de fournir
ces services d’une maničre soutenable sur le plan financier, le personnel
suggčre une hausse nette des redevances de 9 % pour 2009 et 2010, et une
augmentation de 5 % en 2011. Ces
hausses sont identiques aux recommandations relatives ŕ la redevance d’eau et ŕ
la surtaxe d’égouts approuvées comme directives budgétaires de haut niveau en
2008 et contenues dans le Plan financier ŕ long terme III. D’autres sources de recettes de moindre
importance, par exemple les frais de services contre remboursement des déchets
liquides transportés augmenteront selon l’indice des prix ŕ la consommation ou
des hausses approuvées antérieurement.
En fonction de ces augmentations de redevances, les recettes
supplémentaires prévues pour 2009 et 2010 s’élčvent ŕ 46,7 millions de dollars.
Aprčs l’approbation du budget 2008,
le Conseil a chargé le personnel de s’attaquer ŕ certaines préoccupations
connexes; elles se trouvent toutes dans ce rapport.
La stratégie de financement des
programmes de gestion de l’eau potable et de traitement des eaux usées
s’harmonise avec l’orientation stratégique du Conseil qui consiste ŕ combler le
retard pris en matičre de remplacement des égouts séparatifs, des égouts
pluviaux et des conduites d’eau principales d’ici 2015 et ŕ s’assurer que les
infrastructures municipales requises pour toute nouvelle croissance sont
construites ou actualisées de façon ŕ répondre aux besoins. La révision et l’établissement d’une
évaluation ŕ long terme des coűts, recettes et redevances constituent des
éléments importants de cette stratégie. Aprčs l’octroi de l’autorisation
budgétaire d’immobilisations en avril 2008, le personnel a commencé ŕ
travailler ŕ cette initiative en ayant comme objectif d’ętre en mesure de
satisfaire aux exigences relatives aux méthodes comptables et aux pratiques
d’établissement de rapports imposées pour passer au modčle de présentation de
rapports du Conseil sur la comptabilité dans le secteur public lors du cycle
budgétaire 2010 et pour se conformer ŕ la directive du Programme de délivrance
des permis de réseaux municipaux d’eau potable de présenter un plan financier
sérieux pour les services de gestion de l’eau potable en juillet 2010.
BACKGROUND
In the spring of 2008, the Water and Wastewater
Services Branch presented its first Rate-supported Budget. This represented one of the key steps in laying a solid
foundation for financial sustainability of water and wastewater
infrastructure. As outlined the City’s
Long Range Financial Plan III, financial sustainability within the municipal
government context is defined as:
"…a government's ability to manage its finances so it can meet its
spending commitments, both now and in the future. It ensures future generations
of taxpayers do not face an unmanageable bill for government services provided
to the current generation."
This practice of preparing the 2009 Water and
Wastewater Services Budget also includes the provision of high-level fiscal directions
for 2010 and 2011.
Organizational
/ Operational Overview
The contributions of the Water and
Wastewater Services Branch to the City of Ottawa and its residents rest within
the fields of public health protection, environmental protection and economic
development. The major service
contributions in these fields are:
Public health protection:
·
Deliver
safe, reliable and high quality drinking water to the community;
·
Collect and
transport sanitary and storm wastes from homes, businesses and properties
across the City; and
·
Provide an
adequate and reliable supply of drinking water and associated infrastructure for fire
protection and suppression purposes.
Environmental protection:
·
Treatment
and discharge of combined and separated sanitary and hauled liquid wastes at
the R. O. Pickard Environmental Centre;
·
Treatment
and beneficial reuse of biosolids;
·
Treatment
and discharge of collected stormwater at stormwater treatment facilities across
the City; and
·
Monitor the
general water quality in rivers and streams in Ottawa.
Economic development:
·
Provide
adequate water, wastewater and storm services in order to meet the current and
future requirements of the community;
·
Provide a
Municipal Drain program in support of Agri-business; and
·
Provide a
stable and consistent rate structure.
These services are provided in a
reliable, cost-effective and customer focused manner.
While it is recognized that the Water and
Wastewater Services Branch is often the City’s ‘public face’ with respect to
the delivery of many of these services, it must also be recognized that the
delivery of these services is largely dependent upon the combined knowledge and
expertise of a number of supporting departments and branches. Among the primary contributors are:
· Infrastructure Services – through Infrastructure Management and Construction Services;
· Planning Services – through Development Approvals, Infrastructure Approvals, Community Planning and Design, Transportation and Infrastructure Planning; and through the programs delivered through the Economic and Environmental Sustainability Branch;
· Financial Services – through Revenue, Financial Planning, Supply Management, Treasury Services; and
· City Operations – through Employee Services, Corporate Communications and Customer Service, Information Technology and Real Property Asset Management.
The operating costs to deliver these
services and many others are recovered through administration and cost
transfers. The services and operating
budgets for these service areas will be reviewed as a part of the 2009
tax-based budget review, and as a result, will not be discussed in detail as a
part of this budget discussion.
However, the cost transfer required to cover the delivery of these
services is included.
DISCUSSION
The Water and Wastewater Services Branch
is comprised of four divisions:
Drinking Water Services, Wastewater and Drainage Services, Customer
Services and Strategic and Environmental Services. The Drinking Water and Wastewater and Drainage Services Divisions
provide direct services, while the Customer Services and Strategic and
Environmental Services Divisions provide those services that are common across
the Branch.
*Includes $ .371M for
Director’s Office
Note: All references to Net Operating Expenditures
Drinking Water Services
The Drinking Water Services ranks among
the top producers and distributors of safe, high quality drinking water in the
world and over the past two years the City’s drinking water has been rated
exceptional by the Ontario Ministry of the Environment’s Chief Drinking Water
Inspector, having achieved perfect water quality scores at four of the city’s
six municipal water systems.
The division treats and distributes 328
million litres of high quality drinking water per day to 807,118 customers
through the operation and maintenance of two water purification plants, 14
pumping stations, 9 reservoirs and over 2,660 kilometres of watermains, 39,960
valves, 16,770 hydrants and over 200,000 water meters. Over 100,000 water quality analyses are
conducted every year through a combination of laboratory services, the bulk of
which are performed at the R.O. Pickard Environmental Centre Laboratory.
The major strategic directions for the
Branch in regard to the provision of Drinking Water Services in 2009 are to:
· Conduct a Cost, Rate and Revenue Study;
· Conduct a review of services with Council as part of a Strategic Branch Review;
· Apply for and obtain the first Municipal Drinking Water License for the City of Ottawa’s six (6) Drinking Water Systems. A major component of this application will be to obtain the endorsement by Council of the Operational Plan in late 2008;
· Participate in an external third party accreditation of the City’s Drinking Water Services Operational Plan as a regulatory requirement under the province’s new Municipal Drinking Water Services licensing scheme;
· Participate in a Branch-wide strategic alignment/organizational development initiative;
· Continue to contribute to the Rideau River/Mississippi River and South Nation/Raison Region Source Protection Authorities’ development of Source Water Protection planning initiative;
·
Continue to
participate in the development of a comprehensive asset management strategy;
·
Renew and
upgrade the existing Supervisory Control and Data Acquisition (SCADA) system
serving both water plants, the communal well systems, the pump stations and
storage facilities;
·
Commence a
multi-year review of disinfection processes through a microbial risk
assessment;
·
Continue to
implement the Water Loss Control Strategy through a proactive leak detection
program;
·
Continue
the implementation of an Automated Water Meter Reading system to reduce the
cost of meter reading, and monitor customer consumption patterns in order to
improve system management;
·
Continue to
develop and implement training associated with the City’s Operational Plan in
compliance with the province’s Drinking Water Quality Management Standard;
·
Continue to
demonstrate the City’s commitment to water conservation through implementation
of the Water Efficiency Strategy and three-year Water Efficiency Plan; and
·
Develop,
seek Council approval and implement a Cross Connection Control program and
Private Fire Hydrant Maintenance program in response to Council direction and
the Auditor General’s recommendations.
Operating Budget Pressures – Drinking
Water
The total 2009 net operating requirement
associated with the delivery of drinking water services (inclusive of the
customer services and strategic and environmental services net expenditures) is
$45.2 million dollars.
The associated operating pressures are
captured in the following Table:
Table # 1: Budget Pressures – Drinking Water
|
|
Adjustments To Base Budget $000 |
Maintain Existing $000 |
Provincial Legislated $000 |
Growth $000 |
New Operating
Needs $000 |
Efficiency Savings $000 |
User Fees &
Charges |
|
|
Operating Budget Pressures |
|
|||||||
Director’s/Manager’s
Office
|
- |
114 |
- |
- |
- |
(9) |
- |
|
Production
|
- |
921 |
820 |
340 |
30 |
(260) |
- |
|
|
Distribution |
- |
636 |
- |
176 |
218 |
(30) |
(32) |
|
|
Water Quality Assurance |
|
111 |
65 |
- |
- |
(88) |
|
|
|
Customer Services/ Strategic & Environmental Services |
143 |
551 |
- |
324 |
27 |
(208) |
(8) |
|
|
Productivity Improvements |
- |
- |
- |
- |
- |
(2,182) |
- |
|
|
Operating Sub-total |
143 |
2,333 |
885 |
840 |
275 |
(2,777) |
(40) |
|
|
SUB-TOTAL |
|
1,658 |
||||||
|
Non-Departmental Services |
|
|||||||
|
Water Billing Revenues |
- |
- |
- |
- |
- |
- |
(18,720) |
|
|
Capital Formation |
|
17,062 |
|
|
|
|
|
|
|
Cost Transfers |
|
|
|
|
|
|
|
|
|
Non-Departmental Sub-Total |
- |
17,062 |
- |
- |
- |
- |
(18,720) |
|
|
SUB-TOTAL |
|
(1,709) |
||||||
|
Overall Total Pressures |
TOTAL |
|
0 |
|||||
|
Total by Category |
143 |
19,395 |
885 |
840 |
275 |
(2,777) |
(18,760) |
|
A more detailed explanation of these budget pressures is explained
below:
Adjustments to Base Budget: $0.1
million
- Reduction in recoveries from Sewer Fund
Maintain Existing Services: $2.33 million
- Estimated compensation, benefits and increment provision
- Inflationary increases related to fleet, chemicals, hydro, laboratory services etc.
- Inflationary increases to cost recovery services
Provincial/Legislated: $0.9 million
·
Final
element of full year annualization of water treatment plant waste management
costs, including chemical, hydro and sewer surcharge increases
·
Requirements
for external audit of DWQMS
Growth: $0.8 million
·
Compensation
costs associated for various growth related costs including:
o
Customer
Service – 2 Customer Service Person positions to respond to increasing number
of customer calls
o
Water
Treatment Process Operations - 2 new Operator positions. Increased costs
partially offset by a corresponding reduction in overtime
o
Water
Distribution Maintenance and Repair program – 1 additional Maintenance Worker
position
o
Maintenance
Management Services – 2 additional positions
·
Increased
hydro costs associated with expanded and enhanced operations at Lemieux WPP and
anticipated 2009 commissioning of Leitrim Pumping Station
·
Fleet Operating
costs to support above requirements
New Services Requirements: $0.3 million
·
Expand
Water Loss Control Program - 3 FTEs
·
Graffiti
Removal services costs
2009
Productivity/Efficiency Savings: ($2.8) million
·
Allocation
of 2009 and advancement of 2010 Productivity/Efficiency targets
2008 Drinking Water Operating Budget
Forecasted Year-end Variances
In 2008, the Drinking Water Services
approved net budget is projected to be under spent by a total of $0.44
million. This under-expenditure was
principally in the following categories:
Compensation – $1.4 million:
· Delays in filling April approved 2008 positions.
· Delay in AMR project has resulted in postponed hiring of 4.5 FTEs.
This has no net impact on
Operating Budget as compensation costs are recovered from capital project
authority.
Purchased Services – $1.8 million:
· Reduced hydro and chemical costs due to lower than anticipated drinking water production levels. Production levels on average are approximately 2.5% lower than anticipated.
· Reduced number of watermain failures forecast. Year to end of August 10% lower than the 10 year average for the same period.
· Six month delay in implementing Customer Outreach and Information program.
· Delay in Waste Management Facility commissioning and resultant delay in sewer surcharges. Only 5 of 12 months in operating costs.
· Twelve month delay in implementation of Automated Meter Reading program.
Over Expenditures - $0.9 million:
·
Hydrant
snow clearing due to significant amount of snowfall.
· Less anticipated recoveries from capital due to delay in implementation of the AMR project.
· Water Billing Revenues - $1.8 million
· Forecasted deficit in water billing revenues due to lower volumes of water billed.
The 2008 target in Productivity/Efficiency
target for the Drinking Water Fund is $0.8 million. To date the Branch has achieved $0.5 million in efficiency
savings through:
·
Projected
reductions in chemical and hydro expenditures through reduced demands in water.
·
Reduced
costs in purchased and professional services, materials and supplies.
It is anticipated that the
Branch will meet its Productivity/Efficiency target for 2008.
In those areas that these assumptions are
expected to affect future year budgeting, reductions have been made in the
baseline budget and listed in Table #1 as 2008 Adjustments. These changes represent approximately $0.1
million in reductions to the baseline budget.
Per Council policy, year-end surpluses or
deficits in the water rate-supported service areas are settled to the Capital
Reserve Fund. In 2009, the contribution
to the Water Capital Reserve Fund from the 2008 surplus is forecast to be $0.44
million.
2009 Capital Budget
The infrastructure required to provide a
highly reliable level of service and a high quality product delivered to each
home and business is extensive. For the
City of Ottawa, the asset value for all drinking water facilities and
infrastructure is currently estimated to have a replacement value of some $6.8
billion.
A key component of being
able to continue to provide this service in a reliable manner is to continually
re-invest in this critical infrastructure.
The Capital Budget is the City’s means of accomplishing that task. The following table represents the breakdown
of water facility and infrastructure valuations and the value of this year’s
capital works programs by category. The
total 2009 gross Capital Budget associated with drinking water (inclusive of
customer services and strategic and environmental services requirements is $89.4
million dollars.
|
|
Estimated Asset Replacement
Value (2008$) ($1,000s)* |
Renewal
Projects ($1,000s) |
Regulatory ($1,000s) |
Growth ($1,000s) |
Strategic
Initiative ($1,000s) |
Total ($1,000s) |
|
Water General |
N/A |
$6,054 |
$780 |
$1,150 |
$445 |
$8,439 |
|
Water Treatment
Facilities |
$ 630,000 |
$7,713 |
- |
$2,500 |
- |
$10,213 |
|
Water Pumping
Stations |
$90,000 |
$1,700 |
- |
$1,200 |
- |
$2,900 |
|
Water
Distribution |
$5,970,000 |
$34,920* |
- |
$32,650 |
- |
$67,570* |
|
Water
Reservoirs |
$85,000 |
|
- |
- |
- |
|
|
Communal Well
Systems |
$9,000 |
$242 |
- |
- |
- |
$242 |
|
Sub-Total by
Category |
$6,784,000 |
$50,639 |
$780 |
$37,500 |
$445 |
$89,364 |
*Includes $11.5 million water
services proportion of City-wide Integrated Renewal program
Contained within the capital allowances
of this budget is an annual $1 million commitment to a Lead Service Replacement
program. As per Council direction, and
summarized in a separate report ACS2008-PWS-WWS-0022-IPD which has been
previously distributed under separate cover, staff have revisited the concept
of an Accelerated Lead Services Replacement program. It is staff’s recommendation that the City’s Corrosion Control
program, consisting of:
· Water treatment, including corrosion control processes, resulting in compliance with Federal Guidelines and Provincial Standards;
· Ongoing automatic replacement of the City portion of lead services as part of the asset management strategy and watermain replacement projects;
· A $1 million annual customer-initiated Lead Service Replacement program;
· Ongoing customer information and education; provides an excellent and appropriate level of service. Staff will continue to remain very involved in ongoing research and regulatory change and will inform Council and the public of any significant changes in either area.
Wastewater and Drainage Services
The Division maintains 2,350 kilometres of sanitary
sewers, 145 kilometres of combined sewers, 1,870 kilometres of storm sewers,
186,000 service connections and 56,000 catch basins. In addition, it operates and maintains 77 wastewater and
stormwater pumping stations and 194 stormwater management facilities.
The Division operates and maintains the Robert O.
Pickard Environmental Centre (ROPEC) in the treatment of over 150 billion
litres of wastewater per year and oversees the beneficial re-use of over 42,000
tonnes of biosolids.
Largely in support of the rural community, the
Division manages a Municipal Drain program, including the maintenance of 1,200
kilometres of drains.
The major strategic directions for the
Branch in regard to wastewater and drainage services in 2009 are to:
· Lead in the development of a comprehensive, integrated hydraulic model of the Ottawa River;
· Conduct a review of services with Council as part of a Strategic Branch Review;
· Prepare and submit the first Annual Environmental Compliance report;
· Participate in the strategic alignment/organizational development initiative;
· Develop a Quality Management System for Wastewater Services;
· Commission the first 3 regulators of the Real Time Control program;
· Conduct a Cost, Rate and Revenue Study;
· Continue to participate in the development of a comprehensive asset management strategy;
· Review and further optimize all maintenance programs;
· Assess, and where required, implement new flow monitoring at critical wastewater collection system manholes and outflow structures;
· Continue reinvestment in treatment plant, pumping station and stormwater management facilities;
· Continue with the beneficial reuse of wastewater treatment generated biosolids;
· Continue to work closely with local Conservation Authorities and other regulatory bodies to improve the delivery of municipal drain maintenance, and the creation of best practices and procedures; and
· Continue to provide operational assistance to major capital works programs.
Operating Budget Pressures – Wastewater
The total 2009 net Operating
Budget requirement associated with the delivery of wastewater services
(inclusive of the customer services and strategic and environmental services
expenditures) is $36.2 million dollars.
The associated operating
pressures are captured in the following Table:
|
|
2008 Adjustments $000 |
Maintain Existing $000 |
Provincial Legislated $000 |
Growth $000 |
New Services $000 |
Efficiency Savings New $000 |
User Fees and Charges |
||||
|
Operating Budget
Pressures |
|||||||||||
Manager’s Office
|
- |
7 |
- |
- |
- |
- |
- |
||||
Wastewater Treatment
|
- |
616 |
496 |
- |
- |
(75) |
(2) |
||||
|
Wastewater Collection |
- |
771 |
- |
200 |
10 |
(60) |
- |
||||
|
Stormwater Treatment |
- |
32 |
- |
8 |
25 |
(180) |
- |
||||
|
Municipal Drainage |
- |
50 |
- |
- |
- |
- |
- |
||||
|
Operational Engineering |
- |
33 |
- |
- |
186 |
- |
- |
||||
|
Customer Services/ Strategic & Environmental Services |
502 |
245 |
(653) |
101 |
- |
(253) |
(118) |
||||
|
Productivity Improvements |
- |
- |
- |
- |
- |
(3,079) |
- |
||||
|
Operating Sub-total |
502 |
1,754 |
(157) |
310 |
221 |
(3,646) |
(120) |
||||
|
SUB-TOTAL |
|
(1,136) |
|||||||||
|
Non-Departmental Services |
|||||||||||
|
Sewer Surcharge Revenues |
- |
- |
- |
- |
- |
- |
(6,583) |
||||
|
Capital Formation |
|
7,720 |
|
- |
- |
- |
|
||||
|
Cost Transfers |
|
|
|
- |
- |
- |
|
||||
|
Non-Departmental Sub-Total |
- |
7,720 |
- |
- |
- |
- |
(6,583) |
||||
|
|
SUB-TOTAL |
|
1,137 |
||||||||
|
Overall Total Pressures |
TOTAL |
|
0 |
||||||||
|
Total by Category |
502 |
9,474 |
(157) |
310 |
221 |
(3,646) |
(6,703) |
||||
Table #2: Budget Pressures – Wastewater
A more
detailed explanation of these budget pressures is explained below:
Adjustments to Base
Budget: $0.5 million
· Decrease in sewer use revenues due to reduction in volume of liquid hauled waste received at ROPEC
Maintain Existing
Services: $1.8 million
- Estimated compensation, benefits and increment provision
- Inflationary increases affecting fleet, hydro, utilities, contracted services etc.
- Expand strategic and environmental studies project management - 1 additional FTE
- Inflationary increases to cost recovery services
Provincial/Legislated: ($0.2) million
·
Final
element of full year annualization of wastewater treatment plant operational
costs associated with receiving water treatment plant wastes, including chemical,
hydro and sewer surcharge increases
Growth: $0.3 million
·
Compensation
costs associated for various growth related costs including:
o
Sewer
Lateral Repair/Customer Service program - Conversion of 2 temporary positions
to full time permanent - No financial budget implications
o
Wastewater
Collection Maintenance Program - 2 new maintenance staff
o
Laboratory
Services - 1 additional Laboratory Technologist
o
Project
Management - 1 additional student - 0.33 FTE
o
Fleet
Operating costs to support above requirements
·
Additional
operating costs for new Lebreton Flats Pumping Station
New Services Requirements: $0.2 million
·
Develop and
implement Quality Management System - 2 new FTEs
·
Graffiti
Removal services costs
2009
Productivity/Efficiency Savings: ($3.6) million
·
Allocation
of 2009 and advancement of 2010 Productivity/Efficiency targets
2008 Wastewater Operating Budget
Forecasted Year-end Variances
The 2008 wastewater services approved net
budget is forecast to be over spent by a total of $167,000. The most significant areas of
under-expenditure were in the following categories:
Compensation: $1.1 million:
·
Delays in
filling April approved 2008 positions
Purchased Services and Materials: $0.7 million
·
Delay in
Digester commissioning and Water Treatment Plant waste management has resulted
in avoided operating costs for hydro, chemical and biosolids disposal
Recoveries: ($0.77) million:
Delay in Digester commissioning has reduced sewer surcharge recoveries from water
Revenues: ($1.2) million:
·
Lower than
anticipated hauled liquid wastes received at ROPEC
·
Lower sewer
surcharge revenues due to less than planned water billing revenues
In the area of revenues from Hauled
Liquid Wastes, the 2009 baseline budget has been reduced by $502,000 and listed
in the budget document as a 2009 Revenues Adjustments, Adjustments to Base
Budget.
2008
Productivity/Efficiency Savings
The target in Productivity/Efficiency
savings for the Sewer Fund is $1.089M.
To date the Branch has achieved $0.75M in efficiency savings through:
· Reduced biosolids hauling cost and beneficial use reduction of approximately 1,852 wet tonnes through a performance-based competitive process;
·
Reduced
operational costs for wastewater treatment operations as a result of the
expanded digester capacity at the R.O. Pickard
Environmental Centre;
·
Reduced
costs in purchased and professional services, materials and supplies; and
·
Reduction
in the Drainage program - two seasonal inspectors.
It is anticipated that the
Branch will meet its Productivity/Efficiency target for 2008.
Per Council policy, year-end surpluses or
deficits in the wastewater rate-supported service areas are settled to the
Sewer Capital Reserve Fund. In 2009,
the reduction to the Sewer Capital Reserve Fund from the 2008 deficit is
forecast to be $0.167 million.
2009 Capital Budget
Key to continuing to deliver wastewater,
stormwater and municipal drain services is the infrastructure. Overall, the asset value for all wastewater
facilities and infrastructure is estimated at $9.2 billion. Continued re-investment into this
infrastructure ensures that these services can be delivered in an appropriate
manner.
For asset management purposes, the 2009
Capital Budget has been developed into five (5) different service areas, each
representing a separate class of facility or infrastructure, each with its own
renewal and reinvestment strategy. The total 2009 gross Capital
Budget associated with wastewater (inclusive of customer services and strategic
and environmental services requirements) is $91.4 million dollars. The following table represents the breakdown
of wastewater facility and infrastructure valuations and the value of this
year’s capital works programs by category:
|
|
Estimated Asset Replacement Value (2008$) ($1,000s)* |
Renewal Projects ($1,000s) |
Regulatory ($1,000s) |
Growth ($1,000s) |
Strategic Initiative ($1,000s) |
Total ($1,000s) |
|
Wastewater
General |
N/A |
$1,104 |
$950 |
$297 |
- |
$2,351 |
|
Wastewater
Treatment Facilities |
$1,080,000 |
$9,773 |
$1,940 |
$4,800 |
- |
$16,513 |
|
Wastewater and
Stormwater Collection |
7,950,000 |
$70,346* |
- |
$500 |
- |
$70,846* |
|
Stormwater Treatment
Facilities |
160,000 |
$500 |
- |
$858 |
- |
$1,358 |
|
Municipal Drains |
N/A |
- |
$330 |
- |
- |
$330 |
|
Sub-total by
Category |
$9,190,000 |
$81,723 |
$3,220 |
$6,455 |
- |
$91,398 |
*Includes $27.3 million wastewater services proportion of City-wide Integrated Renewal Program
New to this year’s capital program is the creation of an Ottawa River Fund. The following table illustrates the source of the contributions to the Fund and the associated year-by-year spending plan.
Ottawa River Fund
|
|
2009 ($1,000s) |
2010 ($1,000s) |
2011 ($1,000s) |
2012 ($1,000s) |
2013 ($1,000s) |
TOTAL ($1,000s) |
|
Federal |
$6,250 |
$7,083 |
$7,083 |
$6,917 |
$5,667 |
$33,000 |
|
Provincial |
$6,250 |
$7,083 |
$7,083 |
$6,917 |
$5,667 |
$33,000 |
|
Wastewater |
$6,250 |
$7,084 |
$7,084 |
$6,917 |
$5,667 |
$33,000 |
|
Water |
$500 |
$5,000 |
$5,000 |
$5,000 |
$4,500 |
$20,000 |
|
Tax - Roads |
$500 |
$5,000 |
$5,000 |
$5,000 |
$4,500 |
$20,000 |
|
Total |
$19,750 |
$31,250 |
$31,250 |
$30,750 |
$26,000 |
$139,000 |
The purpose of this program is to reduce the City’s impact on the Ottawa River. For 2009, the major capital works for which project authority has been requested include:
· Real Time Control Project, West End Regulators – The final $10 million element of the overall strategy;
· Critical Outfall Monitoring – This $5 million allowance will assess and implement real time monitoring of a number of critical outflow structures that will not be monitored as a part of the Real Time Control;
· Integrated Sewer Separation program – A further $2 million capital authority to advance separation projects; and
· Inlet Control Devices – A $1.8 million in capital authority to provide inlet control devices within the collection system.
This program has attracted equal $33 million commitments from both federal and provincial governments to support this important initiative.
Staff has already initiated the development of a longer-term strategy associated with protecting the Ottawa River. Staff will return to Council in late 2008 with an interim progress report on this initiative intended to provide conceptual level estimates of both benefits and costs of alternative or accelerated service level enhancements in areas of combined sewage capture, sewer separation, stormwater capture and treatment, wastewater treatment enhancements and environmental effects monitoring. In the spring of 2009, staff will provide a comprehensive multi-year program for Council’s consideration.
Reserve Funds Assessment and Rate Determination
It is important that the drinking water and
wastewater services take a long-term view of the necessary capital spending to
ensure reliable service delivery. This review takes into consideration a number
of factors, including spending requirements, potential revenue sources balanced
against overall service affordability.
This multi-year forecast of required net capital
spending in each service area is shown on the attached graphs.
As compared to the Long Range Financial Plan III
capital forecasts, the proposed gross capital requirements are:
Drinking Water
· LRFP III 10 Year Capital Plan - $822.2 million
·
2008
Rate Budget Capital Plan - $788 million
·
2009
Rate Budget proposed Capital Plan - $931 million
Wastewater
·
LRFP
III 10 Year Capital Plan - $1,042 million
·
2008
Rate Budget Capital Plan - $825 million
·
2009
Rate Budget proposed Capital Plan - $850 million
The 10 year capital spending in the LRFP III document
presented the 2007-2016 capital requirements, while this budget covers the 2009
– 2018 period.
Water and Wastewater Reserve Funds
In LRFP III, debt financing was utilized to fund
long-term growth related projects and other capital works which would benefit
future users of the utility system.
This strategy continues to be used to manage the Reserve Funds. Examples of capital projects that fall
within this category of funding include the Lemieux Island WPP Expansion,
currently underway, and the future R. O. Pickard Environmental Centre
Expansion.
With the approval of the 2008 Rate Budget, Council
approved the use of debt financing for those projects that are beneficial to
multiple generations of water and/or wastewater customers. These types of projects are analogous to the
“Legacy” type of projects approved for debt financing by Council’s Financial
Framework. Staff recommends that this
source of funding be limited to those projects that are primarily associated
with increasing the reliability of service delivery. Examples of long-term capital projects approved in 2008 for this
type of funding were the 1W/2W Watermain Project, the 2W Water Pumping Station and
2W/2C Feedermain projects. For 2009, staff proposes that the Ottawa River Fund
projects be funded from this source.
The 10 Year review of projected annual contribution
to the Capital Reserve Funds, the forecasted funding requirements of the
Capital program and the resulting yearly Reserve Fund balances for each of the
Water and Wastewater Funds are shown on the attached graphs.
Revenues
There has been a
steady decline in water consumption over the past five years as was recently
reported in the City of Ottawa 2007 Annual Report.
Source: 2007
Annual Report
Reduced water
consumption has a direct impact on revenues for both water and wastewater. A declining trend in water production over
the past five years has resulted in declining revenues as explained by the
following graph. Average water
production and average billing has declined steadily over the 2003 to 2007
period. It should be noted that the
2008 production data is reflective of the period January 1 to September 30 and
care must therefore be taken when considering the demonstrated trend.
Cost, Revenue and Rate Study
The City’s water, sanitary and storm
sewer systems are primarily funded through a combination of Development Charges
and Water Rate and corresponding Sewer Surcharge. On occasion, and the Ottawa River Fund is one such initiative,
more senior levels of government direct funds toward municipalities for certain
programs.
In accordance with the requirements
of the Safe Drinking Water Act, the Branch has begun a Cost, Revenue and
Rate Study that will review current full-cost recovery plans for the
delivery of water and wastewater services. Important contributing elements to
this cost recovery strategy are the to-be renewed Development Charge By-law,
along with its growth related projects, the water and wastewater asset
management plans, and the provincially mandated changes to tangible capital
asset reporting.
This Study will also be reviewing
the City’s long-term funding strategies, including the Water Rate, the Sewer
Surcharge, the structure and current and forecast trends in consumer
consumption, as noted above. With this
information, staff will prepare a six year funding strategy, taking into
consideration the investment requirements of the next fifty years. The interim results of the Study will be
reported in 2009 and the final recommendations tabled in the first quarter of
2010. Following the receipt of
Council’s approval in 2010, the drinking water service aspect of the financial
plan will be provided to the Ministries of the Environment and Municipal
Affairs and Housing as the final required element of the Municipal Drinking
Water Licensing program, in July 2010.
An important part of ensuring
sustainable water service delivery is protecting water sources. The important
Source Protection Planning work being led by the Rideau River/Mississippi and
South Nation/Raison Region Source Protection Authorities is not likely to be
incorporated into this first Financial Plan as the development of these Plans
will not be completed by July 2010, the regulated date of the first submission
of the City’s Financial Plan. However,
staff will develop these financial plans with this in mind and with the intent
of being able to incorporate any eventually identified source protection plan
implementation costs within the Plan, when they become known, likely in 2012.
Comparison with Other Ontario
Municipalities
Operating Cost Comparison
The Ontario Municipal Benchmarking Initiative (OMBI) exists to allow municipalities to improve service through comparison with other municipal service providers. Annually, the organization publishes a report made available to all participants, of which the City is one.
Described below
are the results taken from the most recent version of OMBI’s 2007 Annual
Report.
In the drinking water service area, the OMBI performance measures included:
- The cost to treat a megalitre of drinking water:
· Ottawa 2007 Result - $191
· Ontario Median - $226
Discussion: Ottawa compares very favourably with similar sized and aged municipalities.
2. The cost to distribute drinking water per kilometre of distribution pipe:
· Ottawa 2007 Result - $7,328
· Ontario Median - $7,677
Discussion: Ottawa is below the overall Ontario Median by 4.5%. It compare very closely with similar sized and aged municipalities, such as Hamilton and London.
In the wastewater service area, similar OMBI performance measures included:
- The annual cost of treating wastewater and disposing of the resulting biosolids per kilometre of wastewater pipe:
· Ottawa 2007 Result - $140
· Ontario Median - $262
Discussion:
Ottawa compares very favourably with similar sized and aged municipalities in
large part because of the efficiency of the R.O. Pickard Environmental
Centre. This Centre has a sophisticated
SCADA system, optimized unit processes, highly skilled and trained staff and a
best-in-class energy management system.
- The annual cost of wastewater collection per kilometre of collection pipe:
· Ottawa 2007 Result - $5,852
· Ontario Median - $5,701
Discussion: Ottawa is above the Ontario Median by 3%. The level of service and commitment of financial and human resources in this service area are expected to be a major source of review in 2009.
Generally speaking, the OMBI benchmarks indicate that services are provided to Ottawa residents in a cost effective manner when compared with similar sized service providers in Ontario.
Rate Increase Comparison
Municipalities across Ontario, Canada and North
America are struggling to continue to provide a high-level of service in the
face of increased customer expectation, increased government regulation and
oversight and the difficulty of maintaining an extensive and aging
infrastructure. All municipalities are having to increase revenue to meet these
demands.
Unfortunately, a diverse system of rates, fees and
charges across the province make it difficult to compare actual charges across
municipalities. Therefore, the best
alternative is to compare based upon charge or rate increases.
Listed below is a review of the 2009 water and/or
combined rate increases proposed or accepted in similar sized municipalities
across Ontario.
Comparative Water Sewer Rates
|
|
Drinking Water |
Wastewater |
|
Ottawa |
9% |
|
|
Toronto |
9% |
|
|
Peel |
9% |
4% |
|
Durham |
8.8% |
10.2% |
|
London |
8% |
9% |
Source: Regional Public Works Commissioners of
Ontario - Comparative Water Sewer Rates
Generally speaking, the
proposed rate increases for Ottawa are very consistent with rate increases in
similar sized municipalities in Ontario.
2008 Council Directions
City Council approved the 2008 Operating and Capital
Budget Estimates in March 2008, subject to the following recommendations:
1. “The Name change to a Water
Account Fee be eliminated and that the water/wastewater rate be adjusted
accordingly.”
Effective May 1, 2008, the name change fee was
removed and the rate adjusted.
2. “The City Manager review opportunities
for the 2009 and 2010 Budgets to streamline service and process activities to
eliminate any possible overlap and duplication between all Water and Wastewater
Services branch service providers (i.e. Utilities, Public Works, Corporate) and
report back to Committee with recommendations, including commentary from the
Auditor General.”
In May 2008, Council approved an outcome based
planning and review process aimed at improving achievement of municipal
business and strategic objectives, referred to as Strategic Branch Reviews
(SBR). Water and Wastewater Services
Branch will bring its first report on this initiative to the Committee of the
Whole on November 26, 2008.
Independently of this corporate SBR initiative, the
Branch is proceeding on a number of initiatives intended to determine and
confirm that the appropriate combination of services and authorities
exist. These include:
a) An
Organizational Alignment review with an external consultant to assess the
Branch’s ability to meet its fundamental service delivery criteria.
b)
A
departmental wide initiative to work with Employee Services to ensure a
compatible, complementary and effective combination of services from the
Department and Centre of Expertise.
c)
The
development of a branch-focussed Strategic Service Delivery Assessment.
The implementation of the recommendation to be developed
from all of these initiatives will ensure that Council’s direction is
addressed.
3. “The increase in the water
rate for those households within the City of Ottawa without a sewer surcharge
be phased in over three years by whichever method is determined by Financial
Services to be the most cost-effective and that the resulting loss of $174,000
in water revenue in 2008 and $88,000 in 2009 be covered by reducing the
contribution to capital.”
The programming for the water rate phase-in for
households without sanitary sewer connections will be in place by the end of
October for current billing. A credit
will be given on each account for previous water billing retroactive to May 1st. The 2008 equivalent credit for the 2008
phase-in is 18.37% of the water charge.
In 2009, the credit will be 9.19% of the water charge. The credit will then be eliminated in 2010
once the phase-in period is complete.
4. Council approved
the Rate-supported 2009 and 2010 budget forecasts subject to the review of
administrative services to be undertaken as part of the water/wastewater rate
reviews.
This draft budget has been developed based upon a
full review of these administrative services.
5. In 2008, Council also approved the establishment of separate Wastewater and Water Fleet Reserves and the modification of the Corporate Fleet Reserve Fund to redirect fleet depreciation charges into the appropriate dedicated reserves.
By-laws No.
138-2008 and 139-2008 were enacted by City Council on April 23, 2008, and the
appropriate amounts have been transferred from the City Wide Fleet Reserve Fund
to the new Reserve Funds.
CONCLUSION
The purpose of this report is to seek the approval
of Committee and Council of the Rate-supported Draft 2009 Operating and Capital
Budget Estimates for Water and Wastewater Services, the 2010 and 2011 budget
forecasts.
CONSULTATION
Consultation will occur through tabling of the report and any delegations at the Special Planning and Environment Committee meeting on October 29, 2008.
LEGAL IMPLICATIONS
PSAB/Financial Plan Regulation.
FINANCIAL IMPLICATIONS
Financial implications are identified within the report.
From an overall budget perspective,
as is shown in the table below, the proposed budget increase is intended to
direct more funds towards capital renewal and maintaining our existing
infrastructure. In fact, for 2009,
approximately 8% of the proposed rate increase is directed towards capital
programs with less than 1% directed to operating increases. As noted below, that trend continues in 2010
and 2011.
Allocation
of Annual Rate Increases between Operating and Capital Pressures
|
|
Operating |
Capital |
Total |
|
2008 |
2% |
7% |
9% |
|
2009 |
<1% |
8% |
9% |
|
2010 |
2% |
7% |
9% |
|
2011 |
2% |
3% |
5% |
It is also important to understand how these proposed rate increases affect service delivery costs of customers. To develop this forecast, staff reviewed the records for individual residential customers receiving both water and wastewater services. The City’s billing records indicate that, on average, residential customers use 0.60 m3/day or 220 m3 of drinking water per year. Based on the rates as recommended in this report, the annual costs to an average residential homeowner will be:
|
|
2008 |
2009 |
2010 |
2011 |
|
Volume (m3/yr) |
220 |
220 |
220 |
220 |
|
% Increase |
9% |
9% |
9% |
5% |
|
Cost |
$510.65 |
$556.61 |
$606.71 |
$637.04 |
|
$ Increase |
|
$45.96 |
$50.10 |
$30.34 |
SUPPORTING DOCUMENTATION
Document 1 – 2009 Draft Operating and Capital Budgets – Rate Supported Programs
http://www.ottawa.ca/city_hall/budget/budget_2009/index_en.html
DISPOSITION
Budgets will be amended as per Council deliberation and
adoption.