Report to/Rapport au :

Planning Committee

Comité de l'urbanisme

and Council / et au Conseil

March 29, 2011 / le 29 mars 2011

Submitted by/Soumis par : Nancy Schepers, Deputy City Manager/Directrice municipale adjointe, Infrastructure Services and Community Sustainability/Services d 'infrastructure et Viabilité des collectivités

Contact Person/Personne ressource : Michael Murr, Manager/Gestionnaire, Sustainability Planning & Development/Planification et développement de la viabilité

(613) 580-2424 x 25195, Michael.Murr@ottawa.ca

City Wide/à l'échelle de la Ville

Ref N°: ACS2011-ICS-CSS-0003

SUBJECT:	City of ottawa Underground Wiring Policy

OBJET :	POLITIQUE SUR LE CâBLAGE SOUTERRAIN de la Ville d’Ottawa

REPORT RECOMMENDATION

That Planning Committee recommend Council:

1. Receive the report entitled Underground Wiring Policy: Cost-Benefit Analysis Framework as prepared by HDR Corporation, dated 11 March 2011, a copy of which is on file with the City Clerk; and

2. Direct that the undergrounding of overhead wires on City right-of-ways be undertaken only when the full cost of burial is paid for by the requesting party.

RECOMMANDATION DU RAPPORT

Que le Comité de l’urbanisme recommande au Conseil :

1. De recevoir le rapport intitulé Politique sur le câblage souterrain – Cadre de l’analyse coûts-avantages, tel que rédigé par HDR Corporation, en date du 11 Mars 2011, une copie duquel ayant été déposée auprès bureau du greffier municipal;

2. De demander que l’enfouissement des câbles aériens sur les emprises de la Ville ne soit entrepris qu’une fois que le coût total de la mise en terre aura été payé par la partie requérante.

EXECUTIVE SUMMARY

Assumptions and Analysis:

Council directed staff to develop a formal policy for the burial of overhead wires and new power lines on City roadways. This direction was in response to a number of requests the City had received for burial, the high cost of undergrounding, and the recognized need to formalize the City’s approach so that it is clear to all.

The burial of existing overhead electrical systems is very expensive with the cost being typically $2-5M per kilometre or four to ten times more than rebuilding an overhead system. There can also be significant costs to abutting property owners and to third parties, such as telecommunication companies. Moreover, the funding mechanisms through which underground conversions and installations can be done are limited, and for those that do exist, there may not be a willingness or ability to pay. Currently, burial of existing overhead wires is only funded at the expense of the requestor (generally a developer or households/businesses in some cases).

A cost-benefit analysis of eight sample streets considered to be representative of the main street types and profiles in Ottawa was undertaken. Based on net present value, the results show that the undergrounding of overhead wires cannot be justified based on direct financial return on investment (ROI), either as a stand-alone project or in combination with other street work. When broader socio-economic benefits and costs are included, the undergrounding of overhead wires is justified in some cases, with Traditional Main Streets (represented by Elgin and Bank at Glebe) and Mixed Use (represented by St. Joseph) having a strong NPV compared to other street sections.

The cost of undergrounding should also be considered in the context of the City’s ability to meet its existing infrastructure renewal needs and other funding priorities. A review of potential funding options shows that while there are a few financial tools available to the City, none should be considered ‘new’ and therefore could not be used without impacting either general property tax rates or other City spending priorities.

Given the high cost associated with undergrounding, the on-going challenge to meet current infrastructure renewal needs and other priority needs, and in the absence of any new City funding source, it is recommended that the City should only consider the burial of overhead wires when the full cost is paid for by the requesting party.

Legal/Risk Management Implications:

There are no legal/risk management impediments to implementing the recommendations in this report.

Technical Implications:

N/A

Financial Implications:

The report recommends that undergrounding of overhead wires on City right-of-ways be undertaken only when the full cost of burial is paid for by the requesting party. If Planning Committee and Council approve this recommendation, there is no financial impact on the City.

Public Consultation/Input:

The project steering committee comprised of five City Councillors, development industry representatives, Hydro Ottawa staff and City staff has been consulted during this project.

A meeting with Bell Canada representatives was also held to discuss the project.

RÉSUMÉ

Hypothèses et analyse :

Le Conseil municipal a chargé le personnel de rédiger une politique officielle sur l’enfouissement des câbles aériens et des nouvelles lignes électriques dans les rues de la Ville. Ce mandat se veut une réponse à un certain nombre de demandes d’enfouissement reçues par la Ville, compte tenu du coût élevé du câblage souterrain et de la nécessité établie de systématiser l’approche de la Ville afin qu’elle soit claire pour tous.

L’enfouissement des réseaux électriques aériens existants coûte très cher, soit habituellement de 2 à 5 millions de dollars par kilomètre ou de quatre à dix fois le coût de la reconstruction d’un réseau aérien. Des coûts importants peuvent s’ajouter à cela pour les propriétaires de terrains adjacents ou pour des tierces parties, comme des entreprises de télécommunications. Par ailleurs, les mécanismes de financement des conversions et des installations souterraines sont limités, et lorsqu’ils existent, ils ne s’accompagnent pas toujours de la volonté ou de la capacité de payer. À l’heure actuelle, l’enfouissement des câbles aériens existants se fait uniquement aux frais de la partie requérante (habituellement un promoteur immobilier ou, dans certains cas, des ménages ou des entreprises).

Une analyse coûts-avantages de huit rues témoins considérées comme représentantes de divers types et profils de rue à Ottawa a été entreprise. D’après la valeur actuelle nette (VAN), les résultats montrent que l’enfouissement des câbles aériens ne peut pas se justifier en fonction du retour sur l’investissement financier (ROI) direct, qu’il s’agisse d’un projet autonome ou en conjonction avec d’autres travaux de voirie. Si l’on inclut de plus vastes avantages et coûts socio-économiques, l’enfouissement des câbles aériens se justifie dans certains cas, les rues principales traditionnelles (représentées par Elgin et Bank, dans le Glebe) et à vocation mixte (représentée par Saint-Joseph) ayant une VAN élevée par rapport à d’autres tronçons de rues.

Le coût de l’enfouissement doit également être envisagé dans le contexte de la capacité de la Ville à répondre aux besoins de renouvellement de son infrastructure et d’autres priorités de financement. Un examen des options de financement possibles montre que si la Ville a certains outils financiers à sa disposition, aucun d’entre eux ne doit être considéré comme « nouveau » et ne pourrait donc être utilisé sans avoir d’incidence sur les taux d’impôts fonciers généraux ou sur d’autres priorités de dépenses municipales.

Étant donné le coût élevé lié à l’enfouissement, le défi continu de répondre aux besoins actuels en renouvellement des infrastructures et d’autres besoins prioritaires, et en l’absence de nouvelle source de financement pour la Ville, il est recommandé que la Ville envisage uniquement l’enfouissement des câbles aériens lorsque la partie requérante en assume totalement le coût.

Incidences juridiques / concernant la gestion des risques :

Aucun obstacle lié aux incidences juridiques ou à la gestion des risques n’empêche la mise en œuvre des recommandations contenues dans ce rapport.

Incidences techniques :

Sans objet.

Répercussions financières :

Le rapport recommande que l’enfouissement des câbles aériens sur les emprises de la Ville soit entrepris seulement lorsque le coût au complet de l’enfouissement est assumé par les parties requérantes. Si le Comité d’urbanisme et le Conseil municipal approuvent cette recommandation, elle n’aura aucune répercussion financière sur la Ville.

Consultation publique / commentaires :

Le comité de direction du projet qui se compose de cinq conseillers municipaux, de représentants de l’industrie du développement immobilier, de membres du personnel d’Hydro Ottawa et d’employés de la Ville a été consulté au cours de ce projet.

De plus, une réunion avec des représentants de Bell Canada a eu lieu pour discuter du projet.

BACKGROUND

In October 2009, Council directed staff to develop a formal policy for the burial of overhead wires and new power lines on City roadways (ACS2009-ICS-CSS-0033). This direction was in response to a number of requests the City had received for burial, the high cost of burial, and the recognized need to formalize the City’s approach so that it is clear to all.

Currently, burial of existing overhead power lines is only funded at the expense of the requesting party, which is normally a developer or in some cases households/businesses.

The specific direction to staff was as follows:

1. Develop a formal policy, guided by the objectives set out in the City’s Official Plan, that establishes criteria and priority for the burial of:

a. Existing overhead power lines within the City; and,

b. New power lines on the City’s roadways.

2. Direct staff to conduct public consultations as part of the development of the policy described in Recommendation 1, and

3. Direct staff to work with both Hydro Ottawa and Hydro One to identify funding models for any incremental costs associated with Recommendation 1 above, including contributions from the electricity companies, project requestors, the municipality, and other sources.

It should be noted that the scope of this work did not include undergrounding in new residential greenfield subdivisions and new collector roadways which is already being done. In this case, Developers install the ducts and transformer bases and pay Hydro Ottawa for all electrical installation. In return, the Developers receive a Net Present Value credit related to anticipated revenue to Hydro Ottawa from the new residential customers. This formula for cost allocation is per an Ontario Energy Board formula.

In accordance with Council direction the following actions have been undertaken to date:

· A project steering committee was established to guide the work, comprised of five City Councillors, Development Industry representatives, Hydro Ottawa staff, and City of Ottawa staff. A full list of steering committee members is attached as Document 1.

· HDR Corporation was engaged to develop a cost-benefit analysis framework for the burial of overhead wires and illustrate its application for a set of streets considered to be representative of the main streets types and profiles in Ottawa.

· A review of potential funding options was undertaken for the burial of overhead wires.

This report presents the findings of the cost-benefit analysis, reviews the funding options that were examined, and in absence of any identified new City funding source, provides the rationale for why the City should only consider the burial of overhead wires when the full cost is covered by the requesting party.

DISCUSSION

Requests to bury existing overhead wires generally relate to either aesthetic concerns, or to the development of properties that have wires in close proximity. In a number of cases, the ability to implement intensification and smart growth policies at the site level have been constrained by the costs and complexities associated with the burial of overhead wires.

A policy to bury overhead wires generally takes into account three main perspectives – affordability, desirability, and technical feasibility. The cost is often the most prominent consideration as burying overhead wires is very expensive, typically in the range of $2-5 M per kilometre, or four to ten times more than the cost to rebuild an overhead system. There can also be significant costs to abutting property owners and third parties such as telecommunication companies. Moreover, the funding mechanisms through which underground conversions and installations can be done are limited, and for those that do exist, the willingness and capacity to pay must also be considered.

The desirability of undergrounding is also a key factor. For this report, desirability is being assessed by modeling the various costs and benefits associated with undergrounding. Technical feasibility is also important, as there may be times when there are constraints within the right-of-way or timing issues relative to other City works that may make undergrounding unfeasible.

Currently, burial of existing overhead wires is funded by the requesting party. On a very limited basis, there are times when Hydro Ottawa will contribute to the cost of undergrounding but only in situations when the existing overhead infrastructure has reached its end-of-life. In such cases, Hydro Ottawa may pay what would have been the cost to rebuild the overhead infrastructure with the requestor paying the difference.

Cost-Benefit Analysis Framework and Analysis

To help understand the desirability and economics of undergrounding, HDR Corporation was retained to develop a cost-benefit analysis framework for the burial of overhead wires, and to use this framework to evaluate a set of sample streets that were considered to be representative of the main street categories in Ottawa.

For this assignment, HDR Corporation used its sustainable return on investment (SROI) framework which evaluates a wide spectrum of benefits and costs over the project’s lifecycle. All costs and benefits were classified as either:

· Financial – where there is an immediate flow of cash (either positive or negative) to an affected stakeholder; or

· Sustainable – which captures the broad community/societal impacts of a project, including welfare and other non-financial impacts on organizations, people, and the environment.

This classification of costs and benefits leads to two sets of results and evaluation metrics. The metrics corresponding to the first category of costs and benefits are referred to as financial return on investment, and the metrics corresponding to the combined first and second category of costs and benefits are referred to as sustainable rate of return on investment, or SROI.

The principal output of the analysis is the Net Present Value (NPV), which shows the present-day value of the project’s net benefits (i.e. present value of benefits minus present value of costs) over the entire project life-cycle stream. An NPV larger than zero indicates that the project is worthwhile as it generates benefits in excess of total costs. An NPV less than zero means the opposite, as the benefits generated by the project do not outweigh the associated costs. Other frequently used evaluation metrics derived from the values of costs and benefits include rate of return over project life, average annual rate of return, internal rate of return, cost-benefit ratio, and discounted payback period.

Evaluation Criteria

A total of eleven evaluation criteria were identified and included in the cost-benefit assessment - five benefits and six costs. The project steering committee felt that this combination of financial and sustainable criteria represent the main factors that would contribute to the cost-benefit of undergrounding.

The following five benefit criteria were used for modeling purposes:

· Improved streetscape aesthetics due to removal of overhead wires (sustainable)

Generally determined by the increase in average property value within the neighbourhood.

· Reduction in tree trimming costs (financial)

Trees growing under power lines no longer need to be trimmed once they reach mature size in order to avoid contact with the wires and potential damage to the wires that this may cause.

· Reduction in number of outages and improvement in reliability of power supply to residential and non-residential customers (sustainable)

Reviewed studies tend to agree that underground systems generally have fewer interruptions and outages.

· Intensification of redevelopment (sustainable)

The property owner is not limited by the setback requirements associated with overhead wires, and utilize the property as effectively or intensively as in the absence of the wires.

· Reduction in service restoration costs (sustainable)

Undergrounding of the power distribution system should prevent most outages due to severe weather events.

The following six cost criteria were used:

· Initial capital costs of construction/installation (financial)

Represents a range of costs, such as: excavation and civil works; removal of existing infrastructure; surface restoration; transformers and other equipment needed for service provisions; and, customer service connections.

· Travel time disruption costs during construction when traffic is obstructed (sustainable)

Travel delays may result during the construction period, in particular if construction requires lane reductions, or entire street closure.

· Additional operation and maintenance costs (financial)

Additional operation and maintenance costs associated with an underground system compared to an overhead system.

· Additional utility easement rental costs (financial)

Undergrounding of overhead utility lines requires easements and transmission vaults to provide appropriate operation and maintenance services.

· Installation of dedicated street lights (financial)

Given that some utility poles also support city street lights, when overhead wires are buried underground and utility poles removed, new poles for dedicated street lights, traffic lights, and signage will have to be installed.

· Additional mapping and graphing of underground utilities (financial)

Represents initial one-time cost of mapping and graphing the wires that were just buried so as to create reference maps for any future plans and work that may involve digging the ground.

It should also be noted that a number of criteria were identified but ultimately not used, as they had a very small impact, were difficult to quantify, or had very low probability. Examples of these criteria include motor vehicle collisions, accidents involving overhead wires, utility relocation costs, impacts on parking revenue, impact on street trees and future utility coordination costs. These criteria and the rationale for why they were not used are described in more detail in the HDR report.

Sample Streets

Eight sample streets considered to be representative of the main street types and profiles in Ottawa were selected for the analysis. The specific streets analyzed were as follows (classified by category):[1]

· Central Area: Metcalfe Street (Isabella St to Nepean St)

· Traditional Main Streets:

o Elgin Street (Lisgar Street to Catherine Street)

o Bank St (McLeod St to Rideau Canal)

· Arterial Main Streets: Bank Street (Rideau Canal to Queensdale Ave)

· Mixed Use/Town Centre/Suburban Arterial:

o St. Joseph Boulevard (Belcourt Boulevard to Maisonneuve Street)

o Strandherd Drive (Jockvale Road to Longfields Drive)

o Eagleson Road (Queensway to Terry Fox Drive)

· Rural Village: Perth Street (Lundys Lane to Rochelle Drive), Richmond Village.

Two model scenarios were developed:

1) undergrounding as a stand-alone project; and

2) undergrounding in combination with other street work.

The specific data for each cost and benefit input was provided by Hydro Ottawa and various departments in the City of Ottawa. All future costs and benefits were discounted at an annual real discount rate of five per cent.

The cost-benefit model was estimated over a period of 31 years.[2] Uncertainty as to the values of various inputs to the cost-benefit model is accounted for using risk analysis techniques which takes into account the probability distribution of model inputs. In its essence, the risk analysis process involves an analysis and assumptions regarding the probability distribution of each uncertain model input (its average value, standard deviation, minimum, maximum, degree of skeweness, etc.) based on all available information. The final model outcomes are produced with traditional mean values as well as ranges of the corresponding probability distribution.

Results of Cost-Benefit Analysis

The following tables show the results of the analysis, by street, based on net present value (NPV) in $millions per km. Each table has been further divided into financial return on investment and overall sustainable return on investment (which includes both financial ROI and broader community benefits and costs). A full summary of the results are shown as part of the HDR cost-benefit analysis framework executive summary in Document 2 attached.

Cost-Benefit Analysis Outcomes, Undergrounding as a Stand Alone Project

Evaluation Metrics	Central Area	Traditional Main Streets			Arterial Main Streets	Mixed Use/ Town Centre/ Suburban Arterial			Rural Village
Evaluation Metrics	Metcalfe	Elgin	Bank @Glebe		Bank St. S.	St. Joseph	Strandherd	Eagleson	Perth
*Stand Alone Undergrounding - FINANCIAL ROI*
Net Present Value per km, NPV per km, $M	-$7.03	-$6.40		-$6.19	-$5.53	-$3.80	-$4.03	-$3.17	-$2.19
*Stand Alone Undergrounding - SUSTAINABLE ROI*
Net Present Value per km, NPV per km, $M	$0.94	$7.39		$4.88	$2.39	$9.68	-$0.35	$0.07	-$0.08

Cost-Benefit Analysis Outcomes, Undergrounding in combination with other Street Work

Evaluation Metrics	Central Area		Traditional Main Streets		Arterial Main Streets	Mixed Use/ Town Centre/ Suburban Arterial			Rural Village
Evaluation Metrics	Metcalfe		Elgin	Bank @Glebe	Bank St. S	St. Joseph	Strandherd	Eagleson	Perth
*Undergrounding with Other Work - FINANCIAL ROI*
Net Present Value per km, NPV per km, $M	-$6.47	-$5.60		-$5.55	-$4.86	-$2.85	-$3.28	-$2.99	-$1.72
*Undergrounding with Other Work - SUSTAINABLE ROI*
Net Present Value per km, NPV per km, $M	$1.50	$8.20		$5.51	$3.06	$10.64	$0.40	$0.26	$0.39

Overall, the results show that the undergrounding of overhead wires cannot be justified based on only financial ROI, either as a stand-alone project or in combination with other street work. This can be seen in the negative NPV for all street sections.

When broader socio-economic benefits and costs are included (i.e. sustainable ROI), the undergrounding of overhead wires is justified in some cases. The main observations are as follows:

· Metcalfe, Elgin, Bank at Glebe, Bank Street S., and St. Joseph all have a positive sustainable NPV under both scenarios. Traditional Main Streets (represented by Elgin and Bank at Glebe) and Mixed Use (represented by St. Joseph) have a particularly strong NPV compared to other street sections ($8.20, $5.51 and $10.64 respectively).

· Strandherd and Perth have a negative sustainable NPV if undertaken as a stand-alone project, and are only marginally positive if undertaken with other City works.

· Eagleson has a marginally positive sustainable NPV under both scenarios.

While not shown in the table, the results of the analysis indicate that for both scenarios, the biggest benefit criteria are:

· Reduction in number of power outages and cost-avoidance to non-residential customers;

· Intensification of redevelopment; and

· Value of improved streetscape aesthetics to non-residential customers.

In contrast, other categories of benefits are very small with only a few exceptions that relate to the value of increased streetscape aesthetics to residential customers on some of the street sections.

When looking at the costs of undergrounding, the analysis shows that the single biggest cost criteria is, not surprisingly, the initial capital cost of construction/installation which accounts for nearly all of the total costs. Other costs are relatively small. When done in conjunction with other street work, the costs of undergrounding are somewhat smaller than the costs for stand-alone projects, with the difference due to the avoidance of street reinstatement costs and travel disruption costs.

Based on the cost-benefit analysis, streets with a high potential for strong benefits have one or more of the following characteristics:

o Significant potential for redevelopment as manifested by a large number of redevelopment properties (or properties slated and designated as potential redevelopment properties);

o Space limitations on the street section as manifested by a relatively small size of the redevelopment properties, and in particular a relatively small depth of those properties; and

o Large number of existing businesses, commercial or non-commercial/industrial establishments.

The above characteristics are likely to lead to high redevelopment benefits (due to a relatively large increase in the amount of space that could effectively be built up by residential units) and high benefits due to more reliable power supply.

Review of Potential Funding Options

In parallel with the cost-benefit modeling, work was also undertaken to identify the range of funding options that are either available now, not available, or could be available if certain conditions were met. It is important to note that these funding options do not address the willingness or capacity to pay, only whether there is a financial mechanism to do so.

A total of fourteen options were identified. A summary of the funding options is attached as Document 3 which outlines the type of funding option; who would pay; whether the option is currently available for either “retrofit” or “greenfield” locations; what would be required to use the option; and if available, an example of where the option has been used.

Options Not Available

A number of options that were identified as being available in the past to support undergrounding activity are no longer possible as the Ontario legislative environment would not permit their use today. Examples of these funding options include a specific levy within a municipal development charge fee for the cost of burying overhead wires (#1); and those options where Hydro Ottawa would pay for the conversion or retro-fitting of overhead wires to underground wires or for new Greenfield underground wire construction (#11 and #12).

In the case of Hydro Ottawa, the Ontario Energy Board Act, which governs local power utilities, explicitly outlines that these entities cannot increase rates amongst its ratepayers, or collect any levies or development charges from a requestor interested in burying wires along their properties, for the purposes of funding burial of overhead lines. Therefore, when a request is made to Hydro Ottawa, the requester must pay 100 per cent of the costs, as per the terms set out in Hydro Ottawa’s Conditions of Service.

Available Options

Three of the funding options involve using provisions under the Planning Act, as part of a Community Improvement Plan (#4) or under the Municipal Act to provide either financial assistance to encourage the undergrounding as part of a development grant application or through the use of a special service levy applied against all benefitting properties in a petition area (Local Improvement Charge) to pay for the project undergrounding costs (#3, #5).

Some of the funding options identify third parties being directly responsible for undergrounding. Three include developers (Greenfield and retrofit locations) paying (# 5, #6) and in a limited way, Hydro Ottawa Ltd. for system rebuild at the end of asset life of overhead wires in very limited circumstances (#13).

A range of four options involve the City paying for the undergrounding funded through property taxes, either directly or through city-wide capital reserves (#7, #8); through the use of the Hydro Ottawa Ltd. Dividend (#9); or through cost-sharing with other funding parties (#10).

The final option identifies the possible opportunistic use of Federal or Provincial grants or loans if and when they become available (#14).

It is important to note that many of the options could involve the City being a co-shared funding partner even though only one option is identified as such.

During the course of the financial review, staff was unable to identify a City of Ottawa funding source that would be considered ‘new’ and that therefore could be used without impacting either general property tax rates or other City funding priorities.

Capacity of the City to Fund Underground Wiring

While there are a number of financial tools that are available for the City to support the burial of overhead wires, the capacity of the City to fund this activity also needs to be considered. As previously mentioned, the cost to bury overhead wires is very expensive. For example, the estimated capital cost to bury overhead wires on the sample streets chosen for this study is approximately $100M. This cost does not include additional costs for abutting property owners and third parties such as telecommunication providers.

Even if the City considered only the streets with a strong sustainable NPV (e.g. Elgin, Bank at Glebe and St. Joseph) the cost would still be more than $18M. This estimate does not include other streets within the traditional main street designation or mixed use areas that still have overhead wires.

Street Segment Name	Estimated Total Cost ($)	Length of Street Section (km)	Estimated (Initial) Capital Cost, With Other Street Work, $/km
Metcalfe	$6,930,000	0.95	$7,295,000.
Elgin	$5,766,000	0.912	$6,322,000.
Bank @ Glebe	$11,190,000	1.77	$6,322,000.
Bank St. S	$43,964,000	6.62	$6,640,000.
St. Joseph	$1,150,000	0.35	$3,290,000.
Strandherd	$4,478,000	1.17	$3,830,000.
Eagleson	$23,347,000	6.10	$3,830,000.
Perth	$3,071,000	1.43	$2,150,000.
Total	$99,896,000	19.300	N/A

The cost of undergrounding should also be considered in the context of the City’s ability to meet its existing infrastructure renewal needs and other funding priorities. For example, over 20 per cent of roads are in need of resurfacing or reconstruction and the annual budget typically allows less than two per cent of these needs to be addressed. Without a new source of funding, adding the cost of hydro burial would further impact the City’s ability to plan and carry out infrastructure renewal projects in a timely manner or fund other City Capital and service delivery priorities.

Given the high cost associated with undergrounding, the on-going challenge to meet current infrastructure renewal needs and other funding priorities, and in the absence of any new City funding source, it is recommended that the City should only consider the burial of overhead wires when the full cost is paid for by the requesting party.

Implications for City Planning Policy

Consistent with the Provincial Policy Statement (PPS) issued under the Planning Act, the City’s Official Plan identifies a minimum overall intensification target and has designated Intensification Target Areas to accommodate projected intensification. Several of the target areas include Traditional and Arterial Mainstreets and Mixed-Use Centres, with existing overhead power lines and poles.

As per provincial regulations, Hydro Ottawa requires a five-metre setback between new buildings and overhead wires. In many target areas, this setback requirement, when combined with a smaller lot fabric, often makes it difficult for developers to meet the City’s intensification goals and urban design objectives.

While the City will not be actively removing overhead wires, it is not expected to have a significant impact on the City’s ability to meet its intensification targets. The City will continue to work with developers and other interested parties to encourage the undergrounding of overhead wires.

RURAL IMPLICATIONS

As in the urban area, the undergrounding of overhead wires in the rural area will be undertaken only when the full cost of burial is paid for by the requesting party.

CONSULTATION

The project steering committee, comprised of five City Councillors, development industry representatives, Hydro Ottawa staff and City staff has been consulted during this project.

A meeting with Bell Canada representatives was also held to discuss the project.

Further public consultation has not been undertaken to date given the very high cost of burial and the recommendation being made.

COMMENTS BY THE WARD COUNCILLORS

The Councillors on the project steering committee (Councillors Bloess, Harder, Holmes, Monette and Qadri) appreciate the work completed in this review and while we are disappointed that no alternate funding source could be identified and that a pilot project couldn't be completed we are realistic in understanding the high cost of underground wiring and the City's limited financial resources.

LEGAL/RISK MANAGEMENT IMPLICATIONS

There are no legal/risk management impediments to implementing the recommendations in this report.

CITY STRATEGIC PLAN

This initiative is aligned with both the Planning and Growth Management priority and Sustainable Finances priority.

TECHNICAL IMPLICATIONS

N/A

FINANCIAL IMPLICATIONS

SUPPORTING DOCUMENTATION

Document 1 – Underground Wiring Policy – Project Steering Committee Members

Document 2 – HDR Corporation Results of Cost-Benefit Modeling – Executive Summary

Document 3 – Summary of Funding Options

DISPOSITION

Subject to approval of this report, Infrastructure Services and Community Sustainability staff in consultation with the appropriate electrical distributor (Hydro Ottawa or Hydro One) will report back to Planning Committee on the intake process developed to consider requests for burial from interested property owners.

UNDERGROUND WIRING POLICY – PROJECT STEERING COMMITTEE MEMBERS DOCUMENT 1

Underground Wiring Policy – Project Steering Committee

Name	Organization
City Councillors
Councillor Jan Harder (Chair)	City of Ottawa
Councillor Rainer Bloess	City of Ottawa
Councillor Diane Holmes	City of Ottawa
Councillor Bob Monette	City of Ottawa
Councillor Shad Qadri	City of Ottawa
City Staff
John Moser,General Manager Planning and Growth Mgmt.	City of Ottawa
Alain Gonthier, Manager Asset Management	City of Ottawa
Michael Murr, Manager Sustainability Plan. and Dev.	City of Ottawa
Development Industry
Ian Donnelly Director	Brookfield Properties
Cal Kirkpatrick Vice President	Colonnade Development
Jack Stirling Vice President	Minto
Hydro Ottawa
Rosemarie Leclaire President and CEO	Hydro Ottawa
Norm Fraser Chief Operating Officer	Hydro Ottawa

Updated 30 Sep 2010

Technical Committee

Linda Carkner

Program Manager

Utility Develop Co-ordinator

Casey Malone

Hydro Ottawa

Summary Table 1: Cost-Benefit Analysis Outcomes, Undergrounding as a Stand Alone Project

Evaluation Metrics	Central Area	Traditional Main Streets		Arterial Main Streets	Mixed Use/ Town Centre/ Suburban Arterial			Rural Village
Evaluation Metrics	Metcalfe	Elgin	Bank @Glebe	Bank St. South	St. Joseph	Strandherd	Eagleson	Perth
*Stand Alone Undergrounding - FINANCIAL ROI*
Total Net Present Value, NPV, $M	-$6.68	-$5.84	-$10.95	-$36.60	-$1.33	-$4.72	-$19.33	-$3.14
Net Present Value per km, NPV per km, $M	-$7.03	-$6.40	-$6.19	-$5.53	-$3.80	-$4.03	-$3.17	-$2.19
Rate of Return over Project Life, %	-99.8%	-99.9%	-100.0%	-99.9%	-99.9%	-99.6%	-99.9%	-99.8%
Average Annual Rate of Return, Post-Construction, %	0.0%	0.0%	0.1%	0.2%	0.2%	0.2%	0.2%	0.2%
Internal Rate of Return, %	NA	NA	NA	NA	NA	NA	NA	NA
Benefit-Cost Ratio	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Discounted Payback Period, Years	NA	NA	NA	NA	NA	NA	NA	NA
*Stand Alone Undergrounding - SUSTAINABLE ROI*
Total Net Present Value, NPV, $M	$0.89	$6.74	$8.63	$15.84	$3.34	-$0.41	$0.45	-$0.11
Net Present Value per km, NPV per km, $M	$0.94	$7.39	$4.88	$2.39	$9.54	-$0.35	$0.07	-$0.08
Rate of Return over Project Life, %	13.2%	113.0%	77.3%	40.5%	218.4%	-8.7%	2.3%	-3.2%
Average Annual Rate of Return, Post-Construction, %	6.1%	10.6%	8.7%	8.1%	14.2%	4.2%	4.8%	5.3%
Internal Rate of Return, %	6.9%	30.1%	21.3%	10.4%	68.9%	3.2%	5.5%	4.6%
Benefit-Cost Ratio	1.1	2.1	1.8	1.4	3.2	0.9	1.0	1.0
Discounted Payback Period, Years	19.2	4.1	4.3	9.1	3.6	30.1	15.1	28.1

Summary Table 1: Cost-Benefit Analysis Outcomes, Undergrounding in Combination with Other Street Work

Evaluation Metrics	Central Area	Traditional Main Streets		Arterial Main Streets	Mixed Use/ Town Centre/ Suburban Arterial			Rural Village
Evaluation Metrics	Metcalfe	Elgin	Bank @Glebe	Bank St. South	St. Joseph	Strandherd	Eagleson	Perth
*Undergrounding with Other Work - FINANCIAL ROI*
Total Net Present Value, NPV, $M	-$6.15	-$5.10	-$9.83	-$32.19	-$1.00	-$3.84	-$18.22	-$2.46
Net Present Value per km, NPV per km, $M	-$6.47	-$5.60	-$5.55	-$4.86	-$2.85	-$3.28	-$2.99	-$1.72
Rate of Return over Project Life, %	-99.8%	-99.9%	-100.0%	-99.9%	-99.9%	-99.5%	-99.9%	-99.8%
Average Annual Rate of Return, Post-Construction, %	0.0%	0.0%	0.1%	0.3%	0.2%	0.2%	0.2%	0.3%
Internal Rate of Return, %	NA	NA	NA	NA	NA	NA	NA	NA
Benefit-Cost Ratio	0.002	0.001	0.000	0.001	0.001	0.005	0.001	0.002
Discounted Payback Period, Years	NA	NA	NA	NA	NA	NA	NA	NA
*Undergrounding with Other Work - SUSTAINABLE ROI*
Total Net Present Value, NPV, $M	$1.42	$7.47	$9.75	$20.26	$3.72	$0.47	$1.57	$0.56
Net Present Value per km, NPV per km, $M	$1.50	$8.20	$5.51	$3.06	$10.64	$0.40	$0.26	$0.39
Rate of Return over Project Life, %	22.9%	143.0%	97.0%	58.4%	325.5%	12.0%	8.4%	19.9%
Average Annual Rate of Return, Post-Construction, %	6.6%	12.0%	9.7%	9.1%	18.5%	5.1%	5.1%	6.4%
Internal Rate of Return, %	8.4%	37.7%	26.2%	12.4%	93.8%	7.4%	6.8%	7.3%
Benefit-Cost Ratio	1.2	2.4	2.0	1.6	4.3	1.1	1.1	1.2
Discounted Payback Period, Years	15.1	4.0	4.2	9.0	3.5	14.6	14.6	15.7

SUMMARY TABLE OF FUNDING OPTIONS DOCUMENT 3

	Funding Option	Description	Who Pays?	Currently Permitted?	Currently Permitted?	What would be required to use?	Example
	Funding Option	Description	Who Pays?	Greenfield	Retrofit	What would be required to use?	Example
1.	Municipal Development Charges	A specific levy within the development charge fee for the cost of burying overhead power lines	Developer as part of a development application generally at time of building permit	No	No	The development-related cost of electrical substations, distribution system and rolling stock is no longer eligible for development charge recovery. Bill 35, which received Royal Assent on October 30, 1998, required restructuring of municipal hydro utilities to business corporations within two years of proclamation (November 7, 1998). Since this has occurred, neither the new municipal electrical corporation, nor the municipality on its behalf can levy a development charge for this purpose, primarily because the new corporation is not a "local board," under any Act.	Was available prior to changes to Electricity Act
2.	Special Services Levy	Imposition of a special service levy to properties within a benefitting area	Initially funded from City debt but repaid through the special service levy against all properties in benefitting area	Yes	Yes	Available under Section 326 of the Municipal Act. Requires approval by Council	Burying of Hydro Lines on Kanata Avenue approved by Council May 25, 2010
3.	Local improvement charge	Levy a local improvement charge (LIC) for specified works (which can include electrical buried conduit and wires), generally on the basis of metres of frontage though can be by zone/lot assessment or a combination thereof.	Initially funded from City but repaid through a levy against benefitting properties in the petition area.	Yes	Yes	Available under Part XII (Section 400) of the Municipal Act & O. Reg. 586/06. Implementation of a LIC requires approval of the majority of benefitting property owners. To be successful a petition requires support of two thirds of the property owners representing 50% of the value of all lands in the petition area.	Former City of Nepean used an LIC for the Carleton Industrial Park for street lighting and Hydro installation. Manotick sanitary sewer installation program used a LIC. Approved by Council April 23, 2008
4.	Community Improvement Plan	Once a CIP has been approved for a CIP project area allows City to offer grants or loans to property owners to assist with improvement activities in the project area to encourage redevelopment, rehabilitation of land and buildings and improvements to works which could burying of overhead wires.	City though direct grants or loans or through property tax rebates (TIEG) based on tax increment equivalent financing[5]	No	Yes	Available under Section 28 of the Planning Act. Requires approval by Council.	Development Incentive Grant Program offered within the St. Joseph Blvd CIP, adopted by City Council Jan 28, 2009. Eligible costs can include burial of hydro service on and off-site.
5.	Developer Pays- Greenfield - initial construction as part of subdivision	Compel developer to pay for the cost of burying wires at time of construction of subdivision for the burial of wires outside of internal subdivision roads which would include to the site and along collector/arterial roads.	Developer	No policy established		Establish a policy and implementation strategy which could include changes to the subdivision approval process and the establishment of a site-specific private proponent cost sharing & recovery program.
6.	Developer Pays-Retrofit- as part of redevelopment project	Compel developer to pay for the cost of burying wires at time of construction	Developer	No policy established		Establish a policy and implementation strategy. Note that some developers do undertake the burial of wires voluntarily as a selling feature of the project (aesthetics) or due to technical limitations posed by overhead wires to the building design and location on infill sites. The benefits are project & site- specific and do not address broader community regarding burial of overhead wires.	Bank Street at Gladstone Avenue. Central I and II (Urban Capital) project includes burial of wires.
7.	City Pays-capital project- financed directly through property taxes	City would budget and pay for burial of wires as a capital project part of an infrastructure renewal initiative. An increase in taxation to cover the funding for the wiring.	City	No policy established		Develop a Council policy and long-term Implementation Strategy
8.	City Pays-capital project- financed through use of City-Wide Capital Reserves	City would budget and pay for burial of wires as a capital project part of an infrastructure renewal initiative. Use a portion of the existing contribution base to fund this new requirement (effectively, less funds available for normal capital rehab/growth program)	City	No policy established		Develop a Council policy and long-term Implementation Strategy. This option is essentially the same as the property tax option. A portion of the property tax gets contributed to the capital reserve fund and then gets used to fund capital projects.
9.	City Pays-capital project- financed through use of dividends collected from Hydro Ottawa Ltd.	City would budget and pay for burial of wires as a capital project part of an infrastructure renewal initiative	City using Hydro Ottawa Ltd. dividends	No policy established		Develop a Council policy and long-term Implementation Strategy. Currently the City uses the Hydro dividends as a general revenue to reduce the amount raised from property taxes. Using the dividends as a funding source for underground wiring purposes would create a tax pressure. If the amount of the dividend were increased to cover these projects, the Ontario Energy Board and interveners would probably notice it thorough Hydro’s rate filing and request to stop such funding allocation.	.
10.	City cost-shares with other interested funding parties	City would share in the wire burial costs with third party funding sources such as BIA/Developer(s)/others/ /Hydro Ottawa?	City and other funding participants in the program to bury wires	No policy established		Develop a Council policy and long-term Implementation Strategy	U. of Ottawa and the former City of Ottawa cost-shared some of the burial costs within the campus c.1984
11.	Hydro Ottawa Ltd. Pays -Greenfields	Hydro would pay for the new underground construction outside of the internal subdivision.	Hydro Ottawa	Not supported by Hydro Ottawa’s technical standards and distribution system operating codes under the Electricity Act and the Ontario Energy Board Act and with Ontario Energy Board’s regulated rate structure regime.		Changes to the Ontario Energy Board Act and maybe to the Electricity Act
12.	Hydro Ottawa Ltd. Pays-Retrofit	Hydro would pay for the conversion from overhead to underground construction in existing built-up areas.	Hydro Ottawa	Not supported by Hydro Ottawa’s technical standards and distribution system operating codes under the Electricity Act and the Ontario Energy Board Act and with Ontario Energy Board’s regulated rate structure regime.		Changes to the Ontario Energy Board Act and maybe to the Electricity Act
13.	Hydro Ottawa Ltd. Pays-System Rebuild at end of asset life	Apply Hydro Ottawa overhead system rebuild funding (end of asset life within the next 10 years) for that specific street to the underground conversion project.	Hydro Ottawa	No policy established.		?
14.	Senior Levels of Government- Special Funding (grants or loans)	Time to time special funding and loan programs offered to encourage infrastructure renewal and/or provide an economic stimulus	Government of Canada Province of Ontario	Grants not currently available. Loans may be available from Infrastructure Ontario to eligible municipalities and municipal corporations which could include costs for burial of wires.		Grant funding is unpredictable and may not include the burial of electrical wires. Difficult to develop an implementation plan in the abstract. Would have to be prepared for the possibility and be opportunistic. Requires Council to endorse a strategy in the context of possible competing infrastructure priorities. May still require residual funding from the City or repayment if in the form of a loan.	Federal and Provincial Infrastructure Stimulus Fund (2009)~ though burial of wires was not an eligible project under this program. Infrastructure Ontario loans to municipalities and municipal corporations (Hydro Ottawa?) can include burial of wires.

[1] New and residential streets were not studied.

[2] The analysis period of 31 years selected for this cost-benefit model is based on the typical life of underground wiring systems (estimated to be about 30 years) extended by one year that accounts for preliminary planning, design, and coordination that takes place in the first year of construction before the actual road work and electrical engineering work start.

[3] New and residential streets were not studied.

[4] The analysis period of 31 years selected for this cost-benefit model is based on the typical life of underground wiring systems (estimated to be about 30 years) extended by one year that accounts for preliminary planning, design, and coordination that takes place in the first year of construction before the actual road work and electrical engineering work start.

[5] A Tax increment equivalent grant (TIEG) is a grant equal to the full amount or a portion of the amount of the estimated property tax increase after the property is redeveloped.

SUBJECT:

OBJET :

REPORT RECOMMENDATION

RECOMMANDATION DU RAPPORT

EXECUTIVE SUMMARY

RÉSUMÉ

BACKGROUND

DISCUSSION

RURAL IMPLICATIONS

CONSULTATION

COMMENTS BY THE WARD COUNCILLORS

LEGAL/RISK MANAGEMENT IMPLICATIONS

CITY STRATEGIC PLAN

TECHNICAL IMPLICATIONS

FINANCIAL IMPLICATIONS

SUPPORTING DOCUMENTATION

DISPOSITION

EXECUTIVE SUMMARY