1. 2012
WATER AND WASTEWATER RATE-SUPPORTED RECOMMENDED OPERATING AND CAPITAL BUDGETS
ProjetS de budget de fonctionnement et d’immobilisations 2012 SOUTENUS par les tarifs d’eau et d’eaux usées
RECOMMANDÉS
REPORT RECOMMENDATIONS AS AMENDED
1.
That Council
approve the draft 2012 Rate Operating and Capital Budgets; and,
2. That staff be directed to prepare a
report on the establishment of a multi-year rate budget for Committee and
Council consideration by Q3; and
3. That the review of the Sewer Use By-law include an assessment of
the process used to determine the fees and charges associated with the use of
the wastewater system; and
That staff report back to Committee and Council in
May with any recommended changes to the current program needed to ensure
consistency in fee calculations and that all costs associated with conveying
and process these wastes are recovered through fees; and
4. That
the City Treasurer be delegated the authority to make the necessary adjustments
to the 2012 Rate Operating Budget and to make any necessary authority and debt
financing adjustments to the 2012 Rate Capital Budget to reflect the decisions
of City Council; and
That the City Manager or his delegate
be authorized to make application for any subsidies or grants on the City's
behalf; and that any requirements for by-laws to implement the budget decisions
be forwarded directly to Council.
RecommandationS MODIFIÉES DU
Comité
1.
Que le Conseil approuve les budgets préliminaires de fonctionnement et
d’immobilisations de 2012 soutenus par les redevances; et,
2. Qu’on
demande au personnel de préparer un rapport sur l’établissement d’un budget
pluriannuel soutenu par les tarifs, qui sera ensuite examiné par les comités et
le Conseil par le troisième quartier; et
3. Que l’examen du
Règlement de l’utilisation des égouts comprendra une évaluation du processus
adopté pour déterminer les redevances
et les frais associés à l’utilisation du système d’élimination des eaux usées;
et
Que le personnel
fera rapport au Comité et au Conseil en mai prochain sur les modifications
recommandées à apporter au programme en vigueur afin d’uniformiser le calcul
des redevances et d’assurer que les coûts d’acheminement et de traitement des
déchets sont recouvrés grâce aux redevances; et
4. Que la trésorière municipale reçoive le
pouvoir de modifier au besoin le budget de fonctionnement de 2012 soutenu par
les tarifs et d’apporter les modifications nécessaires en matière de pouvoirs
et de financement de la dette au budget d’immobilisations de 2012 soutenu par
les tarifs en fonction des décisions du Conseil municipal; et
Que le directeur municipal ou son délégué soit
autorisé à effectuer des demandes de subsides ou de prêts au nom de la Ville et
que les besoins en matière de règlements municipaux pour mettre en vigueur les
décisions budgétaires soient transmis directement au Conseil.
DOCUMENTATION :
1.
Deputy City
Manager, Infrastructure Services and Community Sustainability report dated 31 January
2012(ACS2012-ICS-ESD-0002);
2. Extract of Draft Minute 21 February
2012, follows the French report
Report
to/Rapport au :
Environment Committee
Comité de l'environnement
31 January 2012 / le 31 janvier 2012
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 : Dixon Weir, General Manager /
Directeur général
Environmental Services / Services environnementaux
(613) 580-2424 x22002, dixon.weir@ottawa.ca
|
Ref N°: ACS2012-ICS-ESD-0002 |
REPORT RECOMMENDATIONS
That the Environment Committee:
1.
Receive and
table the draft 2012 Rate Operating and Capital Budgets at its meeting of
January 31, 2012; and
2.
At its meeting
of February 21, 2012, recommend Council approve the draft 2012 Rate Operating
and Capital Budgets at its meeting of February 22, 2012.
RECOMMANDATIONS DU RAPPORT
Que le
Comité de l’environnement:
1.
Reçoive et
dépose les budgets préliminaires de fonctionnement et d’immobilisations de 2012
soutenus par les redevances à sa réunion du 31 janvier 2012; et
2.
Recommande au
Conseil d’approuver, à sa réunion du 21 février 2012, les budgets préliminaires
de fonctionnement et d’immobilisations de 2012 soutenus par les redevances à sa
réunion du 22 février 2012.
EXECUTIVE SUMMARY
The
City of Ottawa’s water and wastewater system has a replacement value of
approximately $18 billion and requires significant on-going investment to
maintain it was well as to meet the growing needs of the community. The Rate
Budget pays for all water, wastewater and stormwater system improvements,
infrastructure renewal, and operational needs of the City.[1]
In
order to take advantage of the best interest rates in decades, the 2012 draft
Rate Budget will make the largest infrastructure renewal investment ever in to our system through a combination of regular
planned works and projects being advanced under the Council approved Ottawa on
the Move Program.
These
works will not only improve the performance of the City’s water and wastewater
systems, but they will also serve vital economic development and job creation functions.
Customers
receiving water and wastewater systems receive a Water & Sewer Bill that
levies three charges:
§
A water charge, currently $1.32/m3 (per thousand litres) based
upon actual meter readings or estimates;
§
A sewer surcharge, currently set at 117 per cent of the water charge; and
§
A fire charge that varies according to meter size.
The Draft 2012 Rate Budget proposes the
following:
§
A water charge of $1.40/m3(per thousand litres);
§
Sewer surcharge of 117 per cent remain unchanged; and
§
And increase to individual fire charges of 3.9 per cent.
For the average household, this represents an increase of 6 per cent
over 2011 rates, or roughly $0.75/week.
The draft budget also contains Fee Schedules for services rendered on a
cost recovery basis.
The purpose of this report is to present the draft 2012 Rate Budget and
to outline the rationale for investing now for future benefits.
Assumptions
and Analysis:
The rates and fees associated
with the Water and Waste Water Budget support a 2012 overall operating budget
request of $278 million, which includes total contributions of $110.8 million
to the water and sewer capital reserve funds. These reserve funds will, among
other funding sources, allow for $389.7 million to be spent on capital projects
such as the following infrastructure improvements:
§ Ottawa on the Move program, with an overall capital outlay of
$340.2 million, of which $178.3 million would be sourced from rate funding;
§ Continued implementation of the Ottawa River Action Plan, including the design
of the new combined sewer storage facility, an expanded number of sewer separation projects and the
commencement of improvements affecting the Pinecrest Creek sub-watershed area;
§ A major capital commitment to the West-end Flood Relief program including
the commencement of the design of the Glen Cairn Stormwater Pumping Station,
the Hazeldean Pumping Station Upgrade, the installation of backflow prevention
valves and sump pumps, and the design of several other improvement initiatives.
Further, the budget
will also allow for increased ditch and swale maintenance, and address operating
budget pressures such as inflation and compensation increases set out in collective
agreements.
The City’s rate budget is set
using a full-cost accounting approach.
This means that operating costs include both the “direct” cost incurred
by the Environmental Services Department — the operating arm of these programs,
as well as “indirect” costs — those incurred by other departments that support
delivery of the City’s drinking water, sanitary, and stormwater programs, e.g.
Infrastructure Services Department. The operating budget is funded directly from
rates and service charges.
Capital costs largely consist of the cost to renew infrastructure, with over 96 per cent of the 2012 capital program directed towards replacement of existing infrastructure. The capital budget is funded from contributions to capital, balances available in the Water and Sewer reserves, development charges, the issuance of new debt, and other sources such as government grants and transfers.
More than 96 per cent of the 2012 capital budget will be expended on maintaining the condition and serviceability of the drinking water, sanitary and stormwater systems’ assets. The 2012 draft operating and capital budget is needed to mitigate against infrastructure failure and potential harm to people, property, and the natural environment, and to ensure the continued delivery of what has been rated as some of the cleanest, safest and most reliable drinking water in the world. Also, many of the positions and works supported by this budget allow the City to maintain compliance with provincial regulations, which have increased significantly in the past decade.
In 2012, annual debt payments for water and wastewater services will be approximately 7.9 per cent of 2012 city-source revenues[2].
The
operating budget details how much revenue
is required in 2012 to pay for the 2012 operating costs and contributions to
the capital reserve funds.
Figure 1 illustrates how the water and wastewater revenues
will be directed in 2012.
Figure 1: 2012 Water &
Wastewater Operating Budget ($278 million)
Figure 2 illustrates the various sources of funds that together support the 2012 water and wastewater capital program.
Figure 2: 2012 Water &
Wastewater Capital Program Funding ($389.7
million)
Financial Implications:
Table 1 shows how the net operating budget has
increased since 2010, and the 2012 net change over 2010 and 2011.
|
Table 1:
Draft 2012 Budget vs. Previous Spending (in $ millions) |
|
|
|||
|
Item |
2010 Actual |
2011 Actual |
2012 Budget |
||
|
Water |
115.8 |
126.0 |
134.5 |
|
|
|
Wastewater |
123 |
131.1 |
143.5 |
|
|
|
Total |
$238.8 |
$257.1 |
$278 |
|
|
|
|||||
When comparing 2011 and 2012 net operating budgets, 75 per cent of the
year-to-year increase is due to increased contributions to capital formation to
support the expanded capital renewal programs.
Public Consultation/Input:
Public notifications of this report will occur through normal notification processes. Consultation will occur through tabling of the report and any delegations received at the Environment Committee meeting on February 21, 2012.
BACKGROUND
The Environmental Services Department (ESD) is accountable to Council and the public for the operation and integrity of the City’s drinking water, wastewater, and stormwater systems. While ESD is the “public face” of these services, it relies upon several other departments with specialized knowledge and expertise for their delivery, including:
§ Infrastructure Services – through Asset Management and Construction Services;
§ Planning and Growth Management – through Development Approvals, Infrastructure Approvals, Policy Development and Urban Design;
§ Financial Services – through Revenue, Corporate Finance and Supply; and,
§ City Operations – through Human Resources, Corporate Communications and Customer Service and Information Technology.
Over the past years, significant efforts were made through the department’s Strategic Alignment Initiative to enhance ESD’s ability to deliver on its commitment to service excellence and ensure clear delineation of roles and responsibilities amongst its corporate service delivery partners. The 2012 Rate Budget is based upon “full cost accounting” principles and supports all of the above activities.
DISCUSSION
The goals of the City’s Drinking Water, Wastewater, and Stormwater programs are to protect public health, responsibly maintain our infrastructure, protect the natural environment, and to foster economic development. Continued reinvestment in these assets and the people who manage and care for them is essential to maintain their functionality, optimize the investments made by previous generations, and ensure that successive generations inherit assets that are not a net liability. The following sections describe how the 2012 budget will be expended in support of these objectives.
Ottawa
on the Move
As has been approved by Council during the 2012 Tax Supported Operation and Capital Budgets approval process, the draft 2012 Rate Supported Capital Budget contains significant debt supported spending of $178 million under the Ottawa on the Move Project. This is a three-year, $340 million tax and rate budget integrated initiative designed to deal with a backlog of road works, and water and wastewater infrastructure renewal projects by advancing them such that we ensure maximum capacity is available to buses, cars and cyclists along key transportation corridors when the transit way is closed to accommodate construction of the City’s light rail project.
The Ottawa on the Move project has total authority
of $340 million including significant integrated roads/sewer/wastewater
projects, which require funding from water and wastewater sources. A total of $125 million in authority to fund
the road renewal aspect of the project was approved by Council in November 2011
during the 2012 Tax Supported Operating and Capital Budget approval process. As
was outlined in the 2012 Tax Supported Budget Treasurer’s report, the rate
supported portion of Ottawa on the Move is to be confirmed by Environment
Committee and Council as part of the 2012 Rate Budget. The remaining spending to complete the Ottawa
on the Move program will be made up from provincial revenues or development
charge applicable for certain projects.
The following are examples of projects that
have been advanced as a result of the Ottawa on the Move initiative.
§ Ottawa River Action Plan Sewer Separation Projects
o
Sussex
Drive from St. Patrick Street to King Edward Avenue
o
Rockcliffe
West II
o
Rideau
Street reconstruction from Chapel Street to the Rideau River
o
Booth
Street from Primose to Albert Street
§ Integrated
Road-Water-Sewer Projects
o
Churchill
Avenue from Carling Avenue to Bryon Avenue
o
Bronson
Avenue from Laurier Avenue West to Arlington Avenue
o
Albert
Street and Scott Street
o
Woodroffe
Avenue from Baseline Road to Highway 417
Drinking Water Services
For the past five years the City’s drinking water system has been rated “exceptional” by the Ontario Ministry of the Environment’s Chief Drinking Water Inspector. This success is attributable to a team of dedicated people in 376 full-time equivalent positions in Drinking Water Services, along with their service delivery partners in ESD and throughout the corporation. Together, they are responsible for the delivery of an average 290 million litres of high-quality drinking water every day to residents and businesses.
This team designs, manages, maintains and operates two (2) water purification plants, five (5) well systems, 16 pumping stations, nine (9) reservoirs and over 2,907 kilometres of watermains, 42,587 valves, 18,942 hydrants and 213,330 water meters. As well, they administer over 200,000 customer accounts, and the City’s Water Efficiency program, water loss program, and the lead service replacement program. Over 125,000 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.
In order to maintain this high level of service, it is recommended that the capital program set out in Document 1 be approved, including the following example programs and projects.
§ Britannia Water Purification Plant – Filter Upgrade Project - $22M.
§ Lemieux Island Clearwell Renewal - $8M.
§ Commencement of design for major water transmission links, including:
o Orleans Reliability Link; and
o Hurdman – St. Laurent Relocation project.
§ A multi-year Major Transmission Mains program, with program authority of $4.6M in 2012, for:
o A multi-year Large Diameter Transmission Main Condition Assessment program;
o On-going Transmission Main Contingency Planning; and
o Transmission Main Renewal program.
§ Munster Hamlet Well System Renewal project - $1.4M.
Furthermore, it is recommended that the
following inflationary and other operational pressures be addressed, as set out
in the Draft 2012 Operations Budget:
§
Inflationary
pressures to annual infrastructure renewal and replacement program.
§
Inflationary
pressures on water treatment chemicals, Fleet (fuel and maintenance), Hydro,
and corporate support services.
§ Increased Debt
Servicing Costs from previous years’ capital programs.
§
Contract
settlements and annual increments and benefits adjustments.
Wastewater Services
The Robert O. Pickard Environmental Centre (ROPEC) is the largest industrial site in Ottawa, and treats an average of 389 million litres of sewage per day. It is a secondary treatment plant, meaning it provides both physical and biological treatment of the waste — discharging water that meets all provincial standards and directing over 54,000 tonnes of biosolids for beneficial reuse.
The Wastewater Services team, consisting of 221 full-time equivalent positions and its service delivery partners in ESD and throughout the corporation are responsible for the planning, design, operation, maintenance, and management of ROPEC, as well as 2,595 kilometres of sanitary sewers, 115 kilometres of combined sewers, 2,588 kilometres of storm sewers, 203,660 service connections, 84,500 catch basins, 59 pumping stations, and five real-time control facilities. As well, they administer the City’s Protective Plumbing program and the Sewer Lateral Replacement program.
In 2010, Council approved the multi-year West End Flood Protection program to address chronic flooding problems in Kanata and Stittsville. The 2012 capital program identifies more than $23 million in works to remediate problem flooding in these communities.
In order to improve system integrity and meet Council’s strategic and environmental goals as articulated by the Term of Council priorities, it is recommended that the draft 2012 capital program be approved, including the following example projects.
§ Preliminary design of the Combined Sewer Overflow (CSO) control storage facility.
§ Design of the Hazeldean Pumping Station Upgrade, the new Glen Cairn Pumping Station and various other capital works to improve overall system drainage in the City’s west end.
§ A number of
major infrastructure renewal projects at the R. O. Pickard Environmental Centre,
including Primary Clarifier and Co-Generation Equipment replacement projects.
§ Commissioning of
the Pickard Centre’s Dechlorination Facility,
§ Conversion of
the March Pump Station.
§ Oversizing of the Barrhaven South Collector Sewer.
Furthermore, it is recommended that the inflationary operational pressures such as those identified above for drinking water services be addressed, as set out in the Draft 2012 Operations Budget.
Stormwater Services
In 2010, the Environmental Services Department carried out a review to determine how to better align resources to improve surface water management services and the protection of water resources. The reorganization, which is in its final stages of implementation, resulted in the creation of a Surface Water Management Services with 53 full-time equivalent positions, which will be responsible for overseeing the planning, design, operation, and maintenance of the City’s 194 stormwater management facilities, 1,200 km of municipal drains, and management of all surface water in the city.
In February 2010, Council approved the multi-year Ottawa River Action Plan (ORAP) to improve the wastewater system and better manage surface water in the city, with a target of “virtually” zero combined sewer overflows (CSOs) per year. Major projects or milestones to be reached in 2012 include:
· Construction of a number of sewer separation projects completed under the Ottawa on the Move initiative;
· Commencement of design for the Combined Sewage Storage Tunnel project;
· Increased monitoring of critical combined sewer outfalls;
· Development of a Wet Weather Infrastructure Master Plan; and
· Commencement of Pinecrest Creek/Westboro Beach Storm Retrofit program.
Beyond these ORAP capital projects, the Branch will also be responsible for the following projects:
· Identification and removal of cross connections discharging to Sawmill Creek;
· Implementation of storm water quality treatment improvements within the Monahan Drain;
· Stream Restoration projects, including Carp River and Mud Creek projects;
· Approximately 50 km in municipal drains improvements.
As the department transitions to fully separated service areas for wastewater and stormwater service areas, not all stormwater service costs can be broken out from wastewater costs, which is why they are reported jointly under the heading “wastewater”.
Analysis
The previous section set out the budget pressures and requirements of each program. This section explains the proposed funding strategy that underlies the recommended rate increases.
Projected Water Sales and Customer Accounts
Over 93 per cent of annual revenues are attributable to the volumetric
charge of the Water & Sewer Bill, therefore, projecting water sales is a
critical step in the rate setting process.
Unfortunately, neither the volume of water to be sold nor the number of
customers serviced can be predicted with 100 per cent accuracy as they depend
upon the following variables:
§ New home
construction;
§ Population
changes;
§ Economic changes;
§ Weather patterns;
and
§ Changes in
consumer behaviours.
Not unlike several other jurisdictions in Ontario, the City of Ottawa has witnessed a decrease in water sales in recent years due to the following matters.
§ Reduced per
capita demand due to changes to the provincial plumbing code for new
construction.
§ Reduced per
capita demand due to the downsizing of yards in new residential construction,
and the retrofitting of existing homes and buildings with water efficient
fixtures.
§ Increasing
environmental awareness and adoption of naturalized gardens and other water
efficient practices.
Figure 3 illustrates predicted versus actual water sales for the past six years. On average, staff have predicted within 2 per cent of the actual sales, which is reflective of the industry norm. Based upon available information, historic trends, and the average of the past two years of billed water data, it is estimated that 2012 water sales will be approximately 88 million m3. Last year’s sales were lower than projected and the long-term trend shows a continuing gradual decline in demand that has been taken into consideration in order to mitigate against revenue shortfalls.
FIGURE 3: PREDICTED VERSUS
ACTUAL WATER SALES, 2005-2012
In 2009, a Cost Rate &
Revenue study considered alternative rate structures that would reduce the
City’s financial risk arising from the dependence upon fluctuating volumetric
sales. Council determined that changes
to the rate structure should be delayed until the new Advanced Metering
Infrastructure system is in place, and customers will have improved information
from which to monitor their water use. This AMI program is advancing well, with
the contractor projecting to complete contracted project installations by year
end 2012. In parallel to this work, City staff are following with a similar
program for metering and installations that are out of scope of the contracted program.
Human Resources
As part of the department’s commitment to Service Excellence principles, during the development of this draft budget ESD management examined all FTE positions to determine if any could be eliminated while still maintaining the high standard of service delivery and quality as well as meeting all regulatory obligations associated with the City’s water and wastewater system.
As a result of this review, and in keeping with the mandate of delivering continued efficiencies, this draft budget proposes a reduction of nine (9) rate supported staff position in Drinking Water (5 FTEs), Wastewater (3 FTEs) and Stormwater (1 FTE) services. Management is confident these staffing reductions can be made without jeopardizing the quality of services provided to residents.
Major ongoing projects aimed at improving overall service delivery efficiencies, such as the Service Ottawa and Enterprise Asset Management programs, will continue to be applied and are expected to improve overall service efficiencies in future years.
Along with Service Excellence programs, Council has instituted a policy direction that requires departments to seek Council approval for any positions that remain vacant for 24 months or greater prior to filling.
Environmental Services has three such positions to staff and, through
approval the 2012 Draft Rate Budget, seeks Council’s direction to do so. These
positions are:
·
Coordinator,
Customer Information; and
·
Coordinator,
Occupational Health & Safety (2 positions).
The filling of these positions has been delayed for a number of reasons—most significantly the strategic re-alignment of the Department that was implemented in November 2010, the subsequent corporate staffing freeze, and competing workload demands due to the Woodroffe Watermain break emergency repair and related South Ottawa outdoor water-use ban during the spring and early summer of 2011.
Through the Department’s strategic realignment, various customer information roles and efforts have been integrated into a single new customer outreach program. This Customer Information Coordinator role has already proven successful in coordinating the Municipal Waste Management Master Plan Phase 1 consultation program and Eco-Fairs and will be extremely important as the Department moves through important initiatives such as implementation of 2012 solid waste service level changes and development of the Ottawa Waste Plan implementation strategy. This new and expanded role has been temporarily staffed since June as the position and program was developed and defined. From a position management perspective, the Department has held vacant the Coordinator, Customer Information position while the new role was defined with the intent of deleting the position for the newly defined role. This new role has been submitted for Job Evaluation and when the evaluation is completed, the Department will proceed immediately into a standard job competition process in order to staff this position as quickly as possible.
Staffing the two Occupational Health & Safety Coordinator position is of high importance because the working environment of drinking water, wastewater, stormwater and solid waste service delivery is hazardous. This risks that must be managed on a continual basis include repetitive strain for solid waste collection staff, chemical and electrical hazards for drinking water staff, and chemical, electrical and biological hazards for staff in the wastewater field. To ensure regulatory compliance, identify and avoid hazards, improve the overall work environment, and reduce injuries to city workers. While the Department has previously obtained Council approval to staff these position, unfortunately for the reasons mentioned above, staff are only now in a position to fill these vacancies. With Council’s continued support for this initiative, we are in a position to proceed immediately to the staffing of these positions.
RURAL IMPLICATIONS
Rate increases will impact rural residents living in the serviced villages of Carp, Vars, Munster Hamlet, Kings Park subdivision in Richmond, and Shadow Ridge subdivision in Greely that received drinking water services. Richmond residents will also see increases to wastewater charges on their Tax Bills.
CONSULTATION
Public notifications of this report will occur through normal notification processes. Consultation will occur through tabling of the report and any delegations received at the Environment Committee meeting on February 21, 2012.
LEGAL IMPLICATIONS
There are no legal impediments
to implementing any of the recommendations in this report.
RISK MANAGEMENT IMPLICATIONS
There are no risk management impediments to implementing any of the recommendations in this report.
FINANCIAL IMPLICATIONS
This draft budget also includes total forecasted water and sewer capital budget of $186.4 million for 2013, $317.9 million for 2014 and $216.5 million for 2015. All current assumptions, estimates and projections will be reviewed as part of future annual Water and Wastewater rate Budgets and any necessary changes will be identified than.
If this budget is approved the water rates will increase on May 1, 2012. The rate increase will result in an additional $0.75 per week for the average residential customer.
TECHNOLOGY IMPLICATIONS
There are no technical implications to implementing any of the recommendations in this report.
STRATEGIC PRIORITIES
This report supports a
number of the City’s Term of Council Priorities, including the following:
·
Environmental Stewardship
o
Improve
stormwater management
o
Enhance
and protect natural systems
o
Reduce
our environmental impact
·
Service
excellence
o
Improve
operational performance
·
Governance,
Planning and Decision Making
o
Make
sustainable choices
·
Financial
Responsibility
o
Maintain
and enhance the City’s financial position
ACCESSIBILITY
IMPACTS
There are no accessibility impacts to implementing any of the recommendations in this report.
DISPOSITION
Budgets will be amended per Council deliberation and adoption.
ATTACHMENT
Document 1 –
Draft Operating and Capital Budgets – Rate Supported Programs (Distributed separately and held on file
with the City Clerk)