cambridge water sewer rates increase report nov 5 2012

7/31/2019 Cambridge Water Sewer Rates Increase Report Nov 5 2012

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Recommendations:

THAT Council approve the budget complement for the Water & Waste Water staff inTransportation and Public Works including the addition of 2 Water Operators, 1 SewerLead Hand and 2 Sewer Operators to provide the total complement as follows:

Full Time Part Time TotalWater Budget 30.95 4.53 35.48

Waste Water Budget 24.67 0.00 24.6755.62 4.53 60.15

AND THAT Council approve the additional budget complement for 3 full time staff for theWork Management program and Mobile Computing support in the Asset Managementdivision and for 1 full time staff for Project Engineering in the Engineering division of theTransportation and Public Works department,AND THAT Council approve the 2013 Water Operating Budget with revenuerequirements of $27,264,300 and water volume rates of $1.6769 per cubic metereffective on all billings invoiced on or after January 1, 2013, as outlined in Report #TPW

47/12;AND THAT Council approve the 2013 Waste Water Operating Budget with revenuerequirements of $24,132,100 and sewer volume rates of $1.7608 per cubic metereffective on all billings invoiced on or after January 1, 2013, as outlined in Report #TPW47/12;AND THAT Council approve the 2013 Fixed Rates effective on all billings invoiced on orafter January 1, 2013, as outlined in Report #TPW 47/12.

REPORT

To: GENERAL COMMITTEE 2013 WATER &WASTEWATEROPERATIONS

BUDGET

Date of Meeting: November 5, 2012

Prepared By: George Elliott, P.Eng.

Department: Transportation & Public Works

Date to Management Committee: October 31, 2012

Report No.: TPW 47/12

File No.:

Ward No.: all

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Agenda Item # 7.

2013 WATER & WASTEWATER OPERATIONS BUDGET Page 171 of 215


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Fixed Charges:

Alternate (1) - rates for Fireline Meters for Condos/Housing Corps prior to Feb 1/10

AND THAT Council approve the 2013 Infrastructure Renewal Charge effective on allbillings invoiced on or after January 1, 2013, as outlined in Report #TPW 47/12 asfollows:

Infrastructure Renewal Charge (IRC):

AND THAT Council direct the City Clerk to prepare the necessary By-laws resultingfrom the approval of the 2013 Rate Review for Water and Waste Water;

Connection Size

2013 WaterProposed Fixed

Monthly MeterCharge

2013 Waste WaterProposed Fixed

Monthly MeterCharge


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Agenda Item # 7.



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Report - 2012 Water & Waste Water Operations Budget

Background

At the Council meeting of October 1, 2012 Council received Report #TPW 39/12regarding preliminary directions for the 2013 Water and Wastewater Operations Budgetand heard a presentation regarding the updating of the Long Range Financial Plan forthe Water and Wastewater Budget. Council directed staff to prepare the 2013 Waterand Wastewater Budget with a targeted increase of 9.5% in accordance with the currentapproved Long Range Financial Plan. Further, Council directed staff to undertake an

update of the Long Range Financial Plan and to prepare a formal submission to theProvince to enable modifications to the Plan to take effect in 2014. Staff are continuingto work with BMA Consultants to prepare the updated Long Range Financial Plan forCouncil consideration in the spring of 2013 following budget approvals. Upon Councilapproval of the updated Plan, the submission to the Province would follow to enablebudget deliberations for 2014 to consider a slower implementation to achieve fewerburdens on the rate payers.

The following report describes the details of the proposed 2013 Water and WastewaterOperations Budget with the targeted 9.5% increase in rates.

2013 Water & Waste Water Budget Submission

Attached in Appendix A is the complete budget documentation, and summary ofsignificant budget adjustments that outline the detailed information of all work programsand services delivered. However, as an executive overview, the following is provided.

Major Sources of Cost Increases Purchase of Water from Region (52% of water budget) rate increased by 6.9% Regional Charge Sewer Treatment (68% of waste budget) rate increase by 7.9% Contribution to Capital Reserve Fund for waterworks projects $160,000 Contribution to Water Reserve Fund for Backlog Works Projects $625,000 Contribution to Capital Reserve Fund for waste water works projects $200,000 Contribution to Sewer Reserve Fund for Backlog Works projects $175,000 Additional Equipment (vehicles, radio, pumps, restoration tools) $205,000 Engineering project management staff $114,000 Work Management & Mobile Computing support & implementation $264,000 Project inspector certification training $30,000 Water Service Connection Repairs (still primarily reactive) $240,000 Watermain repair (due to preventative inspections) $186,500 Hydrant inspections and preventative maintenance $98,000 Sanitary Manhole Maintenance program $200,000

Preventative water inspection & maintenance program $159,000 Preventative sewer service lateral CCTV inspections $154,000 Preventative sewer service lateral maintenance $229,000 Sewer service lateral blockage repair (due to preventative inspection) $114,000

Additional Resources

The additional resources of staffing and equipment included in this budget submissionare summarized below. The costs for these resources are embedded in the costs

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Agenda Item # 7.



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2013 Water and Waste Water Operations Budget

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shown above for the various programs. The equipment items were approved in theEquipment Budget on October 22, 2012 on the premise that the funding for the itemswould also be approved in the operating budget submission. The additional resourcesincluded are:

One lead hand (crew leader) in Sewer divisions for preventative works

Two sewer operators in Sewer division for preventative works Two water operators in Water division for preventative works One manager in Asset Management for Work Management & Mobile Computing One Asset Management technologist for implementation of Mobile Computing One coop student (3 students, 4 month terms each) in Asset Management One project management engineer in the Engineering division Crew Van in sewer division for preventative works Crew Truck in water division for preventative works 14 radios (vehicle and portable) - phased replacement & expansion of inventory Various tools, dewatering pump & landscaping trailer

Fixed Charges

The proposed fixed charges for water have been increased to reach the phasedprogram and inventory needs. The sewer charge rates from last year are adequate:

Connection Size

2013 WaterProposed FixedMonthly MeterCharge

2013 Waste WaterProposed FixedMonthly MeterCharge


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Volumetric Unit Rates

The proposed 2013 volumetric rates are:

2013 Water Proposed

Volumetric Rate per m

2013 Waste Water Proposed

Volumetric Rate per m$1.6769 $1.7608

Infrastructure Renewal Charge

The infrastructure renewal charge covers the debt repayment needs of the backlogelimination funding provided in 2010. This monthly charge is based upon a $5 million,15 year debenture. These remain unchanged and consistent with the debt collectionneeds.

Water ConnectionSize

MonthlyCharge


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continues to grow. The BMA update report presented to Council in October identifiedthat the growth in the backlog has slowed, but has still increased.

At this time the backlog has grown to $90.9 Million (water works is $69.4 Million andsewer works is $21.5 Million). The total backlog growth (until the break even point is

reached) while phasing in funding is included in the capital funding forecast.

Capital Replacement & Rehabilitative Programs

In accordance with the Long Range Financial Plan for the Water & Waste WaterSystems, the capital works initiatives to address the current & backlog infrastructureneeds are carried in the 2013 budget.

Revenue From Rates for Water System Capital $ 2,035,000Revenue From Rates for Water System Backlog $ 1,115,000Revenue From Rates for Meter Replacement $ 518,500

Revenue From Rates for Waste Water Capital $ 2,225,000Revenue From Rates for Waste Water Backlog $ 510,000Gas Tax Revenue - Capital Replacements $3,067,000Gas Tax Revenue - Ongoing Programs & Development $625,000

Total 2013 Capital Expenditures: Water & Waste $ 10,095,500

Reserve Funds

Prior to 2010, the City essentially had no reserve funds available in case of budgetshortfalls or significant emergencies. The Long Range Financial Plan included the

creation and contributions to various reserve funds. In addition to planned contributionsto reserve funds, due to Provincial Legislation that mandates all rates funding must beused for water and sewer uses, any end of year surpluses were also directed toreserves. The following is a listing of the reserve funds that are currently maintained insupport of the water and sewer operations. The balances shown reflect the July 2012status:

Reserve Title July 2012Balance

Water Capital Reserve Fund $2,114,738Water Rate Stabilization Fund (Capped at 5% of Annual Budget) $1,247,520

Water Meter Replacement Reserve Fund $663,120Wastewater Capital Reserve Fund $7,349,185Wastewater Rate Stabilization Fund (Capped at 10% of Annual Budget) $2,255,904

Total Reserves in Support of Water & Wastewater $13,630,467

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Discussion

Paradigm Shift to Preventative Maintenance Culture

The intent of the Safe Drinking Water Act requirement for a long range financial plan is

to demonstrate that municipalities are acting in a prudent manner to reach sustainability.The goal of sustainability is expected to be met through a phased in funding approachto enable the development of various maintenance programs, capital replacementstrategies and development of reserves. One of these key steps is to embrace aPreventative Maintenance Culture. The table below provides a few examples of therequired paradigm shift.

Reactive Approach Shift To Preventative Approach

Do Nothing. Avoidance ofconcerns, complacency withfailed systemsnegligence

Due Diligence. Implement longrange financial plans to identifyfailing systems and make repairs

Cut budgets, do more with less,degrade the level of service,ignore complaints of poor service

Provide adequate resources ofstaff and equipment to expandprograms to foster higher efficiencyand increased levels of service

Dont save for a rainy day.Hope that nothing bad happensand pat yourself on the backwhen you meet budgets because

nothing did happen

Establish and maintain reserves foroperational stability, plannedcapital renewal funding stabilityand emergency response needs

Crisis management of systemwithout any knowledge of needsor knowledge of backlog

Use Asset Managementphilosophies understanding whatwe need and how to get it

Ignore backlog needs andinfrastructure gap

Adequately fund infrastructurerenewal works to eliminate andprevent future backlogs

Repair only failed facilities with anopinion of just another one

Target the elimination of anysignificant failure occurring throughpreventative maintenance

Allow leakage and minor repairs

to go unattended because theyare not that bad yet

Proactively search for and identify

leakage and minor issues forimmediate repair

if it is not broke.dont fix it

Conduct regular inspections andundertake ongoing measures toprevent things from breaking

Fixing the leak is the mostimportant

Preventing the leak is the mostimportant

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Currently the Water & Wastewater industry across Canada remains in an almost entirelyReactive Maintenance Culture with only minor efforts in preventative maintenanceembedded in the annual programs. As an industry leader in Asset Management, theCity of Cambridge is positioned to evolve and manage the required paradigm shift froma reactive to preventative culture.

The recent success of City Council implementing a realistic, strong, long range financialplan over the past 3 years has started the required evolution from a reactive culture to apreventative culture. In the Report to Council #TPW 46/12 presented at the Councilmeeting of October 22, 2012, the comparison of Cambridge against the findings of theFCM Infrastructure Report Card revealed that Cambridge is well ahead of the averageCanadian City in leading this culture change.

Increased Resources towards Preventative Culture

The 2012 Water & Wastewater Budget included 9 additional staff resources of which 8

of these were to address reactive repair and maintenance shortfalls. The 9

th

positionapproved last year was for a Water Manager as the first advancement towardimplementing preventative maintenance programs as a focused, primary initiative. Theoperations were realigned to move the few existing staff and limited preventativeprograms under this managers control. Defining the full extent of the requiredpreventative programs is still underway with the Public Works managers using thebackground information update from BMA Consultants.

The 2013 Water & Wastewater Budget Proposal includes the addition of 5 staffresources in preventative programs as the recommended next step in providingpreventative maintenance at minimum levels. This addition will also enable Public

Works to consider the implementation of a maintenance shift in the evening hours toaddress public concerns at the time that many complaints are found by homeownersupon returning home for dinner & evening activities.

The Budget proposal also contains 3 additional FTEs in the Asset Management divisionas described below:

1. The operations support manager is a critical need for ensuring businesscontinuity. It was identified in our Drinking Water Quality Management Systemannual audit as a Critical Control Point. The support and continualdevelopment of our Work Management program to meet operations needsrelies essentially on one manager. This fact is a serious threat to ouroperations from a business continuity perspective as all our eggs are in onbasket and we have essentially no redundancy of operations. The loss orimpairment of that single staff resource would severely limit our ability to keepour systems functional without a severe impact and huge costs to get thingsunderway again. This additional manager will enable the expansion ofknowledge transfer within the department and reduce our reliance on a singleindividual.

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2. The asset management technologist role is an essential component of theplanned roll out of mobile computing to crews in the field. Since our mediarelease in the spring, we have continued to configure and prepare for theimplementation of mobile devices. As this rolls out to upward of 25 crews inthe field, the technician will be needed to ensure proper field staff training, and

responsiveness to the field issues including business process configurationimplementation and updates. The Mobile Computing expansion of the workmanagement system will add significant efficiencies toward improving theoverall level of service in the Water and Wastewater Operations.

3. The coop student position would be comprised of 3 four month postingsannually. These students will provide additional assistance on rudimentaryfunctions and issues to assist staff through their duties. The more importantissue with the coop students is to start to grow our own technical staff. Asthe asset management and work management abilities grow in municipalities,there is a significant lag time until these aspects are added to curriculum in the

technical courses of post secondary education. Having students involved at anearly stage in their development gives the greater opportunity for success infinding future staff resources with on the job knowledge that is currentlybeyond the scope of technical courses.

Lastly, the Budget proposal includes a project manager / engineer to address theexpansion of programs from funding increases and healthy reserves. We have reachedthe point in Engineering that staff can no longer expand the magnitude of works withoutadditional help. There are also many other preventative maintenance efforts that couldalso be undertaken within Public Works using outside contractors. This resource wouldalso be able to assist with the efforts to develop and administer new preventative

maintenance programs.

Use of Reserve Funds to Lower Impact of Rate Increases

At the Council meeting of October 1, 2012, questions regarding the magnitude andnature of the reserves were asked in response to the presentation confirming that theCity reserves are now in a healthy position. Further ongoing discussions havequestioned the possibility of using the reserve funds to help lower the 2013 Water andWastewater Rate increase impact on the rate payers. The reserves and their currentstatus are listed in the background section of the report with a total value of$13,630,467.

Financial Reserves are established for specific purposes. The Water and WastewaterRate Stabilization Reserves have been created and are controlled by City Bylaw for thepurpose of lessening rate increase impacts to the rate payers. The intent is to mitigateunforeseen impacts during the budget year to avoid a deficit position entering the nextyear. This controls and minimizes rate increase impacts. The intent of these reservesis not to offset planned rate increases under the approved Long Range Financial Plan.The use of the Rate Stabilization Reserves to lessen the impacts of the planned rateincreases is not recommended.

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The Meter Replacement Reserve is intended for specific needs to manage the life ofmeters to improve our cash registers to ensure continued revenues. This fund iscurrently funded appropriately to adequately address this need and is not in a surplusstate. Use of these funds for rate reductions of any kind is not recommended.

The Capital Reserve Funds for Water and Wastewater replacements have achievedhealthy states due to a variety of positive impacts of the implementation of theapproved Long Range Financial Plan and benefits of planned rehabilitation andpreventative measures. These reserve funds are not in a surplus state and still do notprovide adequate coverage for emergency response needs. In consideration of the $90Million backlog of works, these funds are still well below the full true needs. Thedescriptor healthy reflects the Citys ability to use these funds if necessary to lessenthe need for debt funding to either leverage other funding programs from the Federaland Provincial governments or to undertake larger infrastructure programs. The BMAupdate report and proposed future reductions to the Long Range Financial Plan relies

on these reserve funds to re-enforce the capital program to undertake two majorsewage pumping stations, each estimated at about $5 Million. At a cost of about $5Million, either of these station improvements exceed the total annual allocation toWastewater Capital improvements of $2,735,000. Without these reserves, a full twoyears capital funding would have to be assigned to these critical improvements and haltall progress on Capital Renewal in the Wastewater system for the interim. Overall, theapproved Long Range Financial Plan does not contemplate the use of Capital Reservesto artificially lower the impact of planned rate increases on the rate payers. The use ofCapital Reserves for rate reductions is not a recommended strategy.

Comparison of Monthly Billing Impacts to Rate Payers

The following table shows the financial impact to the average residential consumer thatuses 240 m per month.

Monthly CostAve Residential

Recommended 9.5%Budget Proposal

Proposed 2013 Rates $82.02Existing 2012 Rates $74.90

Net Increase Monthly $7.12

Summary

Staff have prepared a budget proposal based on the current approved financial planand Councils direction from October 1, 2012 for a 9.5% increase in rates. Therecommended budget proposal of 9.5% rate increase represents a monthly increase tothe average residential consumer of $7.12 monthly. Lastly and most importantly, thisyears rates increases and expansion of resources allows us to take a significant stepforward toward Preventative Maintenance. Additional preventative maintenance effortsworth $1,140,000 have been added to the Public Works operations.

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cambridge water sewer rates increase report nov 5 2012

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