The URL can be used to link to this page

Home My WebLink AboutINS-14-008 - Financial Plan - Kitchener Water Distribution System StafRe r s .!department partment www1itchenera REPORT TO: Community & Infrastructure Services Committee DATE OF MEETING: February 24, 2014 SUBMITTED BY: Pauline Houston, Deputy CAO, Infrastructure Services, X 4646 PREPARED BY: Angela Mick, P.Eng. Utilities Water Engineer, X 4408 Sheri Brisbane, Supervisor of Financial Reporting Susan White, Senior Financial Analyst WARD(S) INVOLVED: All DATE OF REPORT: February 3, 2014 REPORT NO.: INS-14-008 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 and Regulation 188107, required the City of Kitchener to become licenced to operate and maintain Kitchener's Water Distribution System. The City became licenced on August 20, 2009. As a condition of the licence, a Financial Plan was approved by resolution and submitted to the Province in 2010 (FIN-10-074). A renewal licence application must be made by February 17, 2014, a condition of which is an updated Financial Plan with 2014 as the first year that the Plan needs to apply (covers 2014-2019). 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 2014 budget process (except for year 2019, 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) and those costs to maintain the capital assets (included as Other Expenses in Schedule 2). 4 - 1 Staff Re wry Infrastructure 5er�rrres department www1itchener ra 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 • Details of the drinking water system's proposed or 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 each year 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 Financial Plan relates to the Foundation Plan — Efficient and Effective Government— "We strive to ensure long term corporate financial stability and fiscal accountability to our taxpayers" FINANCIAL IMPLICATIONS: None COMMUNITY ENGAGEMENT: 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: Pauline Houston, Deputy CAO, Infrastructure Services Department 4 - 2 Kitchener Utilities Drinking Water Distribution System Financial Plan (019-301) Municipal Drinking Water Licence 019-101 January 2014 r6 KIOTCHENEB, Kitchener Financial services Utilities 4 3 City of Kitchener Water Distribution Financial Plan TABLE �� T��~� ^ r�^�� ^ CONTENTS �^ � ^ � Sectionl: Introduction........................................................................................................................ 3 Section 2: Regulatory Requirements.................................................................................................... 3 Section 3: Aaset$liabi|ities/Net Debt/Tangible Capital Assets...............................................................4 Section 4: Revenues/Expenses/Surp|us/Defdt......................................................................................5 Section6: Lead Services....................................................................................................................... 7 Section7: Summary ............................................................................................................................ 7 Page 2of7 4 — 4 City of Kitchener Water Distribution Financial Plan Section 1: Introduction The Drinking Water Quality Management Standard (DWQMS), under the Safe Drinking Water Act, 2002 and Regulation 188107, required the City of Kitchener become licensed to operate and maintain Kitchener's Water Distribution System. The City was licenced on August 20, 2009 and as a condition of the licence, a Financial Plan was approved by resolution at that time. The City's licence expires in August 2014 and a requirement for renewal is a revised Financial Plan. The initial Financial Plan (019-301) applied for the six year period 2010 to 2015. This Financial Plan applies for the six year period starting in year 2014 through to 2019. Section 2: Re ulatory 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 Page 3 of 7 4 - 5 City of Kitchener Water Distribution Financial Plan Details of the drinking water system's proposed or projected gross cash 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) 2014 2015 2016 2017 2018 2019 Financial Assets 10,005 8,577 7,812 7,563 7,373 7,389 Liabilities 4,233 4,328 4,426 4,525 4,627 4,731 Net Financial Assets 5,772 4,249 3,386 3,038 2,746 2,658 Non-financial Assets Tangible Capital Assets 63,504 64,467 64,808 65,293 65,495 65,758 Additions' 4,460 4,458 8,9(34 4,191 3,974 4,158 -portion related to'led replacement 52 52 52 52 52 52 Donations 268 272 278 284, 291 297 Disposals' 2,294 2,345 2,398 2,462 2,507 2,563 Write-dow s'ond Deped 1f330 ' 1,,422 1f473, 1,539, 1,556 1,628 Assets Under Construction 16,425 16,794 17,172 17,559 17,954 18,358 Inventory of supplies 134 137 140 144 147 150 Prepaid expenses 9 9 9 10 10 10 Accumulated Surplus 85,844 85,657 85,516 86,042 86,351 86,934 Page 4 of 7 4 - 6 I— LO N M 00 M M —(D O M LO N — 00 Q> 00 O I— LO — ' O M qqt L C � N N O N CO N 00 N N O O r— LO �1 — `-'LO I— — M LO O CO co 00 aA 1-- 00 N ' LO CO L, O M aA CV CV N N M V1 � ..r ® L L N `'LO O 00 N LO I-- M N � V 1,. 00 O r— I-- ' LO M M C N N 000 N (0 C: N .� aJ f.r V O O CO M M O CO �' Q� 0 N LO O M N r- M M C4 00 O r— qqt N ' — O L- T- Q 00 O M M 00 N M M N M LL L V � O M LO N M 00 N N O =, CO qqt aA LO O N qqt LO LA CO —0') LO LO O ' O LO L" I— 00 N M � N 40 M M N M �F•+ O � � I-- O M O M � 0') O I� M O V I* M OM LO ' M N C CO r— 04 L N L aJ N M M N — M W C Q O w Q) � i C: N U X w > O LL W Q � a) .� .c cn v) U)c W L W D O M a) a) Z ayi Z a_ w U E W y � cn W C,4 i a a�i cn o > Q) o aa) o X cp C� a) o o W L X � C 3 N � . L W X N J Q O �Ee d d o a) a) o L Q L U Q t� Q N y 5 0 � s a- O o Q � Q 4 - 7 ,qt O co co M 00 T- r- (O ' i - i i i i i i L O N M .1 .1 N M N M N 00 00 r— C ) ' r- CF) CF)T- N r— LO .� O M M M M N M co r— O N N (D co co CF) CF) — 00 1-- 1,. I— co ' 00 ' ' ' ' ' ' ' M O r— C O (O M LO N M (O r— C LO r— N ® to � ( — � ' � co N CF) O p G CO M M M LO LO ^� M M N L N co co r— qqt r— O CF) N r— LO LO 00 CF) O �o M Lf) N Ln C N CV) M p� 'E �r r � (O (O — O CF) M I-- ' LO i CF) M M '0 N M M M a0 L •� O CU t0 L- CU .� L- S LL L V _ a) E (n o L co co cm a) O a a) co a) a O N N Q CO a) � U N V (0 O) +N (0 C C Q O U C N cu a) a) cu DC N U- cn o O > (n a) aa)i cu O V �. cn w � (n y � E c� O U 0 y o c O U o 0 cu cu cu C O U c U U C� N CO 0) O O) U O N O O 0) (n a) .0 "O "O C 7 N U :� "� :� .6 "� C C cu cu N N L 10 — L O Cn O O CO C Q) a) m Q U a) Q m U � Co fn fn O Q C aS ET OL Uts.N �_ OL a) L Co Co Q co co O OIL UQd = Q0 u- da� UUU 4 - 8 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 Infrastructure Services Department: 2014 — 2023 Capital Infrastructure Works 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 licence renewal. 4 - 9