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HomeMy WebLinkAboutINS-18-029 - Financial Plan - Kitchener Water Distribution SystemREPORT TO: Community & Infrastructure Services DATE OF MEETING: June 18, 2018 SUBMITTED BY: Greg St. Louis, Director, Utilities 519-741-2600 X4538 PREPARED BY: Angela Mick, Utilities Water Engineer 519-741-2600 X4408 Sheri Brisbane, Supervisor of Financial Reporting Susan White, Senior Financial Analyst WARD(S) INVOLVED: All DATE OF REPORT: May 23, 2018 REPORT NO.: INS-18-029 SUBJECT: Financial Plan Kitchener Water Distribution System ___________________________________________________________________________ RECOMMENDATION: THAT the"Financial Plan Kitchener Water Distribution System" be approved as it demonstrates the financial viability of the Kitchener drinking water system in accordance with Ontario Regulation 453/07 (Financial Plans) under Subsection 30 of the Safe Drinking Water Act. BACKGROUND: The Drinking Water Quality Management Standard (DWQMS), under the Safe Drinking Water Act, 2002 andRegulation 188/07, required the City of Kitchener to become licensed to operate istribution System. The City became licenced on August 20, 2009. As a condition of the license, a Financial Plan was approved by resolution and submitted to the Province in 2010 (FIN-10-074) and renewed in 2014 (INS-14-008). A renewal license application must be made by December 2018, a condition of which is an updated Financial Plan with 2018as the first year that the Plan needs to apply (covers 2018-2023). There have been numerous reports to council regarding the DWQMS commencing in 2008, including on-going annual Management reviews and the initial Financial Plan. Financial information contained in the report has been approved as part of the 2018 budget process (except for year 2023, which was forecasted). The amounts in the schedules agree to the operating forecast plus capital forecast. Amortization expense has been added and the capital forecast has been divided between amounts that will create tangible capital assets (included as Additions under Tangible Capital assets on Schedule 1 in the attached Financial Plan) and those costs to maintain the capital assets (included as Other Expenses in Schedule 2). *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 5 - 1 REPORT: The requirements of the Financial Plan are outlined in Ontario Regulation 453/07 (Section 3) as follows: Details of the proposed or projected financial position of the drinking water system Details of the proposed or projected financial operations of the drinking water system projected gross cash receipts and gross cash payments Details of the extent to which the information described in the above relate directly to the replacement of lead service pipes The financial plan has been developed using Council-approved budgets, capital asset data and other financial forecasts. The highlights of the Financial Plan are as follows: An annual operating surplus and accumulated surplus is expected for each of the six years covered by the plan, primarily as a result of the significant prior and ongoing investment in capital assets Cash flow is slightly negative for certain years of the forecast this is as a result of continued spending on the accelerated infrastructure program. In light of the above, the drinking water system is considered to be financially viable as required by Ontario Regulation 453/07 (Financial Plans). Refer to the attached Financial Plan for the detailed analysis. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the vision through the delivery of core service. The Financial Plan relates to the Foundation Plan Efficient and Effective Government Proactively communicate with Kitchener residents in an effortto share information; educate and engage the public, and promote enterprises, programs and services; to create a corporate culture where internal communications is FINANCIAL IMPLICATIONS: None. COMMUNITY ENGAGEMENT: INFORM advance of the council / committee meeting. 5 - 2 Regulations require the owner of the drinking-water system to: Make the Financial Plan available, on request, to members of the public who are served by the drinking water system without charge Make the Financial Plan available to members of the public without charge through publication on the internet Provide notice advising the public of the availability of the Financial Plan Provide a copy of the Financial Plan to the Ministry of Municipal Affairs and Housing Staff will ensure that these requirements are met subsequent to Council approval. ACKNOWLEDGED BY: Denise McGoldrick,General Manager, Infrastructure Services Department 5 - 3 Kitchener Utilities Drinking Water Distribution System Financial Plan (019-301) Municipal Drinking Water Licence 019-101 June 2018 P age 1 of 7 5 - 4 City of Kitchener Water Distribution Financial Plan TABLE OF CONTENTS Section 1: Introduction ........................................................................................................................ 3 Section 2: Regulatory Requirements .................................................................................................... 3 Section 3: Assets/Liabilities/Net Debt/Tangible Capital Assets ............................................................... 4 Section 4: Revenues/Expenses/Surplus/Deficit ...................................................................................... 5 Section 6: Lead Services ....................................................................................................................... 7 Section 7: Summary ............................................................................................................................ 7 P age 2 of 7 5 - 5 City of Kitchener Water Distribution Financial Plan Section 1: Introduction The Drinking Water Quality Management Standard (DWQMS), under the and , required the City of Kitchener become licensed to operate The City was licensed on August 20, 2009 and as a condition of the license, a Financial Plan was approved by resolution at that time. The e expires in 2019 and a requirement for renewal is a revised Financial Plan. The initial 2010 Financial Plan (019-301) applied to the six year period 2010 to 2015, the 2014 version applied to 2014 to 2019. This Financial Plan applies to the six year period starting in year 2018 through to 2023. Section 2: Regulatory Requirements Ontario Regulation 453/07 requires that financial plans include the following: Details of the proposed or projected financial position of the drinking water system itemized by: A.Total financial assets B.Total liabilities C.Net debt D.Non-financial assets that are tangible capital assets, tangible capital assets under construction, inventories of supplies and prepaid expenses E.Changes in tangible capital assets that are additions, donations, write downs and disposals Details of the proposed or projected financial operations of the drinking water system itemized by: A.Total revenues, further itemized by water rates, user charges and other revenues B.Total expenses, further itemized by amortization expenses, interest expenses and other expenses C.Annual surplus or deficit D.Accumulated surplus or deficit P age 3 of 7 5 - 6 City of Kitchener Water Distribution Financial Plan h receipts and gross cash payments itemized by: A.Operating transactions, that are cash received from revenues, cash paid for operating expenses and financial charges B.Capital transactions, that are proceeds on the sale of tangible capital assets and cash used to acquire capital assets C.Investing transactions, that are proceeds from the issuance of debt and debt repayment D.Changes in cash and cash equivalents during the year E.Cash and cash equivalents at the beginning and end of the year Details of the extent to which the information described in the above relate directly to the replacement of lead service pipes. Section 3: Assets/Liabilities/Net Debt/Tangible Capital Assets A summary of the Assets, Liabilities, Net Debt and Tangible Capital Assets are provided in Schedule 1. Schedule 1 Statement of Financial Position - Water (in thousands) 201820192020202120222023 Financial Assets11,23711,55811,46811,83711,94111,841 Liabilities6,7977,2527,7428,2978,8749,470 Net Financial (Debt) Assets4,4404,3063,7263,5403,0672,371 Non-financial Assets Tangible Capital Assets91,85596,013100,506105,121110,201115,850 Additions5,6795,8056,2186,3936,9207,559 -portion related to lead replacement525252525262 Donations154157160164168172 Disposals212121212121 Write-downs and Depr'n1,7081,7831,8641,9211,9872,061 Assets Under Construction7,4337,5977,7647,9348,1098,287 Inventory of supplies203208212217222227 Prepaid expenses899193959799 Accumulated Surplus104,020108,214112,301116,907121,696126,834 P age 4 of 7 5 - 7 n o i t u b i . r 2 t s e l i u d D e n r h a c l e S t P a l a i W c r age 5 of 7 n P e a n n e i h F c t i K f t i c o i f e y D t / i s u l C p r u S / s e s n e p x E / s e u n e v e R : 4 n o i t c e SA summary of the Revenues, Expenses and Surplus are provided in 5 - 8 n o i t u b. i 3 r e t l s u i age 6 of 7 d e P D h n c r a S l e t P a l a i W c r n e a n n e i h F c t i K f o y t i C A summary of Receipts and Payments are provided in 5 - 9 City of Kitchener Water Distribution Financial Plan Section 6: Lead Services Lead services are replaced as part of road reconstruction projects. The City of Kitchener Engineering Services Road & Utility Capital Forecast outlines the proposed reconstruction projects for the next 10 years. Although not all the streets contain lead services, all of the water services are replaced for every reconstruction project. Financial details relating to the reconstruction projects are included in Schedule 1. Lead services are also replaced individually when they are found in the field, if the full reconstruction project has not been identified in the capital forecast and if the new service can be connected to the customer side. The budget for individual lead service replacement is included under Schedule 1 (portion related to lead replacement). Section 7: Summary The Financial Plan indicates the drinking water system is financially viable as required by Ontario Regulation 453/07 Financial Plans and under Subsection 30 of the Safe Drinking Water Act. The updated Financial Plan is required as a condition of license renewal. P age 7 of 7 5 - 10