2018 Water and Wastewater Budget Summary

Transcription

1 2018 Water and Wastewater Budget Summary Each day, clean, safe water travels through the City s watermains for use by residents and businesses. Similarly, wastewater flows through the City s sewer system to the Wastewater Treatment Plant for enhanced secondary treatment before it is released into the St. Lawrence River. Safe drinking water and effective wastewater collection and treatment are cornerstones of a sustainable and healthy community. Because of their importance to the health of the public and the environment, these services operate with Level of Service and infrastructure standards, as well as financial frameworks, that are highly-regulated by the provincial and federal governments. The Administration recommended 2018 Water and Wastewater budgets provide funds to support the City s Water and Wastewater services by moving towards financial sustainability in accordance with the Safe Drinking Water Act (SDWA), Municipal Drinking-Water Licence Program, Financial Plan Regulation, and the Sustainable Water and Sewage Systems Act. Strategic Priorities The Administration recommended 2018 budgets are based on the priorities and initiatives of a number of plans that, taken together, provide City Council with the information they need to proactively ensure the long-term integrity of these essential services. These plans include Asset Management Plans (2014-Dillon and Watson; 2016-FCapX), the Water and Wastewater Financial Plan (Watson, 2015), and the Long Term Financial Plan (LTFP) (KPMG, 2016). Water and Wastewater initiatives planned for 2018 align with the City's Strategic Plan: Pillar 2: Economic and Financial C. Infrastructure Strategy, vi.: Continue Linear Asset Management Pillar 3: Environment A. Water and Waste, ii.: Urban Water Strategy (Cornwall s Blueprint). Page 1 of 7

2 Key Service Deliverables for 2018 The undertakings associated with the 2018 Operating and Capital Budgets will: Strive for the continuous delivery of water and wastewater services for over 47,000 residents as well as numerous institutional, commercial and industrial customers, Provide flow for fire protection, Enable the continuance of environmental monitoring, Continue with on-going public consultations and awareness programs, Invest and improve infrastructure renewal to ensure that water and wastewater services are sustainable in the future, and Meet legislative requirements and comply with Provincial and Federal regulations. Regulatory Requirements and Oversight As outlined in a presentation to Council on May 11, 2015 (by the Walkerton Clean Water Centre), through the Standard of Care provisions of the SDWA, the water and wastewater industry continues to experience increased legislative and regulatory reform. Water and Wastewater are regulated services and must meet legislated requirements of the Safe Drinking Water Act, the Sustainable Water and Sewage Systems Act, and the City s Municipal Drinking-Water Licence. The purpose of the Acts and Licence are to protect human health through the control and regulation of drinking water systems, ensuring operator training and certification, and drinking water monitoring, as well as ensuring the financial viability to finance the full cost of providing these services. Cornwall s Water and Wastewater Services at a glance Serves more than 47,000 residents and business in Cornwall, Operates 24 hours a day, 365 days per year, Service is customer-financed no property tax dollars are used to fund Water and Wastewater operating and capital budgets, Treatment, storage, and distribution of over 35,000,000 litres of potable water daily is delivered to all industrial, commercial, institutional, and household water users in the City of Cornwall, from over 15,000 service connections. Page 2 of 7

3 Over 45,000,000 litres of wastewater is collected and treated per day, from residential and non-residential properties in Cornwall Over $679M in infrastructure assets (2016 replacement value) WATER - $183 million Water Purification Plant 2 reservoirs and 1 elevated storage tank 280 km of distribution watermains 1,903 valves 1,322 hydrants more than 16,000 water laterals WASTEWATER - $496 million Wastewater Treatment Plant 440 km of sewer mains (storm, sanitary and combined) 4,622 catch basins 1,780 sewer access points 5 lift stations approximately 15,000 sewer laterals Financially Sustainable Water and Wastewater Systems The Water and Wastewater service areas continue to strive towards an efficient and effective system while achieving financial sustainability. The 10-year LTFP and the Water and Wastewater Financial Plan established a comprehensive revenue framework to sustain continued operations and infrastructure investment and to ensure healthy water and wastewater reserve balances. The Municipal Act, 2001 requires that all municipal user fees be established in a way that there is a transparent and direct relationship between the fees being charged and the full cost accounting of the service being provided. Revenue collected must be utilized to meet the needs of these services - and not other services. In Cornwall, Water and Wastewater budgets are customer-financed based on comprehensive life-cycle planning and management of those assets. Water and Wastewater services are funded through the water and wastewater billing revenue from approximately 18,500 flat rate customers and approximately 220 metered accounts. A detailed Water and Wastewater Financial Plan (as stipulated by the Province's Financial Plan Regulation) was presented to, and endorsed by, Council at the November 9, 2015 Council meeting. To support operating and capital expenditures associated with managing, operating and maintaining the municipality s Water and Wastewater systems, the Financial Plan outlined a 5.27% annual increase for water billings and a 6.13% annual increase for wastewater billings (an annual combined rate increase of 5.73%). The Page 3 of 7

4 proposed 2018 operating and capital budgets have been prepared using a combined rate increase 7.65%. The increase to the water and wastewater billings for 2016 and 2017 were 1.88% and 0.82% respectively - both below long term financial targets. For a residential property, it is estimated that in 2018 this would reflect an annual increase of $45 - $64 (depending on number of water fixtures). The homeowner s cost for clean, safe water delivered to a typical household and wastewater collected and treated is summarized below: Residential Property Cost per year $585-$832 $630-$896 Cost per day $1.60-$2.28 $1.73-$2.45 The 2016 BMA Municipal Study indicates that the annual user fees for Water and Wastewater services in Cornwall are among the lowest compared to the 105 Ontario municipalities (representing in excess of 85% of the Province's population) included in the survey: Residential - Cornwall: $713; average $976 Commercial - Cornwall: $10,057; average $32,430 Industrial - Cornwall: $30,172; average $93, Operating Budget Highlights The 2018 net Operating Budget for Water and Wastewater is $11M. This represents an increase of $499,861 (4.77%) when compared to the 2017 net operating budget. The increase is related to debt financing charges of $340,888 (3.25%), as debt financing from prior years is committed. This debt supports the Brookdale North Channel Bridge project and the continued flood reduction and Page 4 of 7

5 management initiatives that began in 2014 after the City experienced catastrophic flooding events in 2010 and The City has not incurred any debt related to its Water service and there is no new debt planned for Water or Wastewater in the 2018 budget submission. The City remains within its annual debt and financial obligation limit. Based on the 2016 Financial Return, the City s annual debt repayment limit is calculated at $24M. The City s annual debt for 2016 was $3.8M. In order for debt to be affordable and sustainable, the LTFP sets a maximum of 10% of net own-source revenues (approximately $10M) as the City s maximum annual debt repayment limit. The increase in net operating costs for Water and Wastewater services excluding debt is $158,973 (1.52%) Capital Budget Highlights Water and Wastewater capital initiatives need to be proactive to ensure that these services continue to meet the demands and expectations of customers. Cornwall has stewardship of Water and Wastewater capital assets valued at $679M. The City maintains two categories of capital assets: linear infrastructure such as distribution watermains and sewer mains; and facilities/plant assets such as the Water Purification Plant (WPP), Wastewater Treatment Plant (WWTP), water tower, wastewater lift stations, reservoirs, storage and detention tanks. The City s aging infrastructure has an accumulated repair or replace backlog, particularly for linear infrastructure, estimated at $48M ($41.2M water, $6.8M wastewater). Asset renewal remains a priority otherwise Level of Service reductions (eg. service interruption) and failure to achieve financial and regulatory plan targets can occur. The gross capital requirement for Water and Wastewater is stable at $6,745,000 when compared to the 2017 gross capital budget - though the net cost for capital in 2018 reflects an increase of $800,000 ($630K Water, $170K Wastewater). In the 2017 capital budget, the City budgeted to finance the final phase of the Brookdale North Channel Bridge project. In 2018, there are no capital initiatives that would meet the City s debt strategy. The LTFP recommends financing only one-time projects where insufficient life-cycle funds are available. Currently, there are no senior government funding programs. In previous years, the City was able to access funding under the Infrastructure Stimulus Fund to assist in funding critical infrastructure works. The 2018 Capital budget is focused on the maintenance and replacement of the current infrastructure and addressing backlog. Major capital projects in 2018 Page 5 of 7

6 include regular on-going watermain rehabilitation improvements, WPP upgrades, sewer network improvements, combined sewer separation, and WWTP system upgrades. A complete reconstruction of York Street from Fifth to Seventh is recommended as a joint infrastructure project. The project is planned over two years and will be funded by Water in 2018 and Wastewater in Engineering and design work will be completed in 2018 for reconstruction in Reserves The Water Works Reserve and the Wastewater Works Reserve were established to provide funding to mitigate the impact of significant increases or unforeseen issues in the rates charged to users and to fund any annual deficits. The LTFP included a life-cycle costing model for the reserves in order to fund projects that are not typically funded by long-term financing. The reserve would be managed in such a way in order to ensure positive reserve balances during major capital spending years. In 2018, and outlined in the LTFP, both the Water and Wastewater services will require support from reserves in the first number of years of the plan. In later years, regular, appropriate contributions to reserves can be used to support asset rehabilitation, the replacement of infrastructure, and unforeseen circumstances. Water & Wastewater Reserves 2018 Forecast of Reserves December 31, 2018 (estimated) Opening Closing Balance Withdrawals Additions Balance Water Works Reserve 3,954,548 Budgeted Contribution 250,000 Interest Earned - Dec 31, ,469 System Growth - New Watermain (550,000) WP Plant (40,000) 3,674,017 Wastewater Works Reserve 3,385,340 WWTP Treatment System (320,000) Upgrades Interest Earned - Dec 31, ,433 3,115,773 TOTAL Reserves 7,339,888 (910,000) 359,902 6,789,790 Page 6 of 7

7 As the City moves forward, financial sustainability must continue as one of Cornwall s key priorities. Reserves are a critical component of the City s longterm financing plan. Continued infrastructure renewal investment will ensure that Water and Wastewater services are sustainable in the future and meet the citizen s Level of Service expectations. Adequate reserves will position the City to be able to meet these future infrastructure needs. Presentation to Council A presentation to Council will provide a full financial outlook and discussion of the Administration recommended operating budgets and capital projects planned for Page 7 of 7