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HomeMy WebLinkAboutFCS-15-164 - 2016 Operating Budget Staff Report rTC.�r R finance and Corporate Services Department www.kitchener.ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: November 23, 2015 SUBMITTED BY: Ryan Hagey, Director of Financial Planning, 519-741-2200 x 7353 PREPARED BY: Ryan Hagey, Director of Financial Planning, 519-741-2200 x 7353 WARD(S) INVOLVED: All DATE OF REPORT: November 3, 2015 REPORT NO.: FCS-15-164 SUBJECT: 2016 Operating Budget RECOMMENDATION: For Discussion Note: Final approval of the 2016 Operating Budget will take place as part of Final Budget Day, scheduled for January 18, 2016 BACKGROUND: The budget is the City of Kitchener's annual financial plan, and is the primary basis of financial decision making. The budget process allows Council to prioritize the programs and services delivered by the City and sets direction for the work to be completed over the upcoming year as well as future years referenced in the budget forecast. The operating budget funds the day-to- day costs of the municipality such as salaries, utilities, and operating supplies. The objectives of this report are to: • Highlight the Key Notes of the 2016 Operating Budgets • Provide an Overview of the Tax Supported Operating Budget • Provide an Overview of the Enterprise Operating Budgets REPORT: Key Notes of the Operating Budget During 2016 Operating Budget deliberations Council will be considering funding for all of the services the City provides as well as funding the City provides to other organizations. Since this is such a broad scope of services, three areas are being highlighted as the key notes regarding the 2016 Operating Budget. The three key notes are: • The proposed budget holds tax supported City services status quo • The proposed budget includes increased investments in arm's length organizations • The proposed budget includes increased investments in utility infrastructure Each of these areas is described further below. O - 1 Key Note # 1 —Status Quo Tax Supported City Services The proposed tax rate increase for 2016 is 1.50% and approximates the rate of inflation. The tax rate increase for City services is 0.93%, while the remaining increase (0.57%) is a result of investments to arm's length organizations outside the control of City administration. Within the programs and services supported by property taxes, there are no new requests for additional City staffing or for enhancements to City services. It is anticipated that requests for new City staff or service enhancements will be proposed as part of the 2017 budget in order to implement aspects of the 2015-2018 Strategic Plan. Key Note #2— Increased Investments in Arm's Length Organizations The City of Kitchener supports a number of arm's length organizations that cover topics like arts & culture, and economic development. In advance of the 2016 budget, Council pre-committed $470,000 to increase grant funding to the Centre in the Square (CITS) and the newly formed Waterloo Region Economic Development Corporation (WREDC). The increased investments were approved by Council in the spring of 2015 (CITS), and as part of passing the 2015 budget (WREDC). In addition, the 2016 budget includes an inflationary increase of $154,000 to the Kitchener Public Library grant. These increased investments for arm's length organizations equal a tax rate increase of 0.57% compared to the 0.93% increase for all tax supported City services. Increased Investments to Arm's Length Organizations Organization Funding Increase Tax Rate in 2016 Budget Increase % Centre in the Square $350,000 0.32% Waterloo Region Economic Development Corporation $120,000 0.11% Kitchener Public Library $154,000 0.14% TOTAL $624,000 0.57% Key Note #3— Increased Investments in Utility Infrastructure Much like the 2015 budget discussions, City owned utilities will again be the focus of the 2016 Operating Budget. Proposed rate increases in Water (7.6%), Sanitary Sewer (10.8%), and Storm Water (9.2%) are well beyond the rate of inflation. The proposed rate increases are consistent with the rates presented to Council in August 2015 as part of the State of the Infrastructure Update. Increasing the utility rates will provide short term funding for increased maintenance as well as long term funding for increased infrastructure replacement. Overview of the Tax Supported Operating Budget The proposed tax levy increase for 2016 is 1.5%. A tax rate increase of 1.5% on the average Kitchener home (assessed at $280,000) would amount to $16, or $1.33 per month. An increase of this amount balances the competing interests of affordability and sustainability as described below. An appendix to this report shows the 2016 tax supported operating budget in the same format as the variance report. Like the variance reports, comments have been provided for variances that are more than $50,000 and/or 10% compared to the 2015 budget. O - 2 Affordability in the 2016 Tax Supported Operatin_a Budget Budget affordability means the budget approved by Council supports the strategic directions for financial management. Tax rate policy has been a long standing part of the City's Strategic Plan and is once again included in the 2015-2018 Strategic Plan approved by Council. Kitchener's direction says the City will strive for competitive, rational and affordable taxation levels. To determine this, the City must consider the following when setting tax rates: • Comparison to other municipalities; • Inflationary factors, including those unique to municipalities; and • Balance of service levels versus affordability Comparison to Other Municipalities The City of Kitchener is already one of the most affordable cities in Ontario. It has one of the lowest tax burdens of large cities in Ontario, and has the lowest tax burden amongst cities in the Region of Waterloo. The graph below shows the 2014 results of BMA's annual tax burden analysis for the same bungalow property in each of Ontario's largest municipalities. Kitchener holds the third lowest ranking in the province, meaning it is one of the most affordable cities in Ontario. Annual Tax Burden of a Bungalow in the Large Ontario Municipalities (>100,000 people) 5,000 $4,281 $4,500 4,000 ...,, . ......_ l ....... .. $3,574 3,500 3,07 ... ....... X3,033 .......... ..... ..... Viz,®� 0 ,, ..... i 1„500 $1,000 $500 ....... .tl II...............II ......... .............. .............. 7 C QY L C W C 7- 7 C OY OY C fr C M M X 0 C C) = c ° -7 4a Lo M 5 x �: > a� ~ n Based on early indications from some comparator municipalities, it is expected that Kitchener's proposed tax rate increase of 1.5% will help it maintain its low tax burden amongst large Ontario municipalities, and will be the lowest tax rate increase of large municipalities within the Region of Waterloo. O - 3 Inflationary Factors, Including Those Unique to Municipalities The proposed 2016 tax rate increase approximates the anticipated rate of inflation. Inflation considerations for setting tax rates are in two parts: • Typical consumer inflation, represented by the Consumer Price Index (CPI) • Unique municipal inflation, represented by the Municipal Price Index (MPI) Ontario CPI inflation to the end of September is 1.2% and is projected to be in that range at the end of 2015. The following graph shows the cumulative tax rate increase during this term of Council is below the cumulative rate of CPI inflation in Ontario, which means the tax rate increases in this term of Council are affordable. Cumulative CPI Ontario Inflation versus Tax Rate Increase in This Term of Council 5.00° 4.00° ° "OHM a mime 3.00 00a 000 2.00° ouu"" uuuiwuummiww 0u 'uuwuuum um 1.00° minim 110 0.00% muuu 2014. 2015. 2016. CP) OIRtdlrlo duuuuuuuuuuuuuuuuuuuuuuuuuuTax.Rate Increase In addition to CPI inflation, the City of Kitchener calculates a municipal price index (MPI), which accounts for the fact that the "basket of goods" the City purchases is considerably different than the basket of goods used to calculate CPI inflation figures. For instance, the top three components of the CPI calculation are shelter, transportation and food which do not apply the same way to a municipality as they do an individual. The MPI calculation accounts for the different costs of a municipality such as staffing, operating supplies, and capital construction. The MPI figure for the 2016 budget process is 1.4%, meaning that inflation pressures on the City of Kitchener budget are slightly higher than the typical Ontario household budget in 2015. Balance of service levels versus affordability The proposed 2016 tax rate reflects citizen preferences related to service levels and affordability. The proposed tax supported budget maintains existing City services at an increase near the rate of inflation. These preferences have been reaffirmed recently through citizen surveys conducted in 2012 and 2013. In the summer of 2012 (as part of the 2013 budget process) the City commissioned a telephone survey of Kitchener residents regarding their opinions on tax rate increases and service levels. In the phone survey, the majority of respondents (62%) said they prefer an inflationary tax rate increase that maintains current service levels. As part of the 2013 Environics survey, a similar majority of respondents (61%) said the same thing. While the 2012 phone survey did not reach O - 4 enough residents to be considered statistically significant, the 2013 Environics survey interviewed more than 1,000 residents and the findings are statistically significant. The graph below shows that Kitchener citizens prefer increasing taxes at the rate of inflation in order to maintain existing services over other alternatives. Citizen Preferences Regarding Tax Increases and Service Levels ■2013 Environics 2013 Budget Increase taxes at the rate of 61% inflation to maintain services 62% Maintain taxes and possibly cut 23% services 30% Increase taxes to expand or 11% improve services a°a ® f.�on't know/No answer 6% 0% Sustainability in the 2016 Tax Supported Operating Budget Budget sustainability means that the budget approved by Council is adequate to fund existing service levels and avoid deficits. Tax supported operating budget sustainability has been an ongoing issue within the tax supported budget for a number of years, but significant progress has been made in recent budgets. Sustainability will be considered in terms of: • History of operating deficits; • Chronic deficits; and • Status of the Tax Stabilization Reserve Fund History of Operating Deficits The City of Kitchener has a recent history of operating deficits. For the past number of years, the City has finished the year with an operating budget deficit (before applying funds from one- time capital closeouts). In essence, the City's operating budget has not truly been balanced. The table below shows the history of operating deficits dating back to 2011 and includes the projected 2015 deficit as of the last variance report. The average annual deficit over this time is $328,000. Tax Supported Operating Budget Deficits Before Capital Closeouts 2011 2012 2013 2014 2015 (projected) Deficit Before -$0.24M -$0.51 M -$0.44M -$0.32M -$0.13M Capital Closeouts These deficits have occurred over a number of years and through varying weather conditions and economic circumstances, which means the deficits are not temporary. They point to the fact O - 5 that there has been a disconnect between the amount of funding provided to deliver City services and the actual amount of work required to deliver expected service levels. In recent budgets, Council has made eliminating these ongoing operating deficits a priority by allocating funding to areas of chronic deficit. Now that full funding levels appear to have been achieved, Council needs to ensure these efforts are not eroded by budget reductions focused on affordability. Chronic Deficits Over the past few budgets, staff has highlighted a few select areas that have consistently produced negative variances and have been an ongoing contributor to annual operating deficits. These have included areas such as Bylaw fine revenues, water & electricity costs, and postage. As of the 2015 budget, all of the areas of chronic deficit have been addressed. This means that expected service levels for tax supported City services were fully funded and no deficit was expected in 2015. The minor projected deficit at the end of 2015 is proving this expectation to be true. Status of the Tax Stabilization Reserve Fund (TSRF) The City maintains a Tax Stabilization Reserve Fund (TSRF) which is used to fund any operating deficits (or receive funds from any operating surpluses) within the tax supported operating budget. As shown in the chart below, the balance in the TSRF has decreased significantly over the past five years and is well below the minimum target balance. This means that funds have been drawn from the reserve fund over this time to help keep taxes low (improving affordability), but the funds have not been replenished (decreasing sustainability). Maintaining a balance in the TSRF is of critical importance to help avoid tax rate increases to pay for deficits in prior years. It is also important to maintain a balance in the TSRF going forward as it is planned to be the funding source for transitional costs incurred by Centre in the Square in 2016 and possibly beyond. Summa of the Tax Stabilization Reserve Fund 2011 2012 2013 2014 2015 Projected Ending Balance $3,596,967 $1,695,198 $317,944 $338,611 $681,400* Target Balance (Minimum) $4,749,802 $4,951,223 $5,104,543 $5,222,519 $5,402,760 *NOTE: The projected balance in the TSRF increases between 2014 and 2015 as Council approved two one-time transfers (totaling $450,000) into the TSRF as part of the 2015 budget process as noted in the table below. One-Time Transfers to Tax Stabilization Reserve Fund Approved b Council Transfer from Tax Capital reserve •$250,000 Transfer from Fleet budget due to lower fuel prices in 2015 $200,000 TOTAL $450,000 O - 6 Overview of Enterprise Operating Budgets The City operates seven enterprises, which are self-sufficient business lines that raise their own revenues through user rates instead of being funded through property taxes. As part of the 2016 budget package, "Enterprise Overviews" have been provided for each of the enterprises. These overviews describe the main purpose of the enterprise, provide some benchmarking information, and describe recent challenges/successes. The seven enterprises are noted in the table below. Enterprises City of Kitchener • Golf • Natural Gas • Building • Water • Parking • Sanitary Sewer • Storm Water Rates for the enterprises listed on the left of the table have already been considered by Council as part of the annual user fee review (report FCS-15-104). The enterprises listed on the right are commonly referred to as the utilities and do not have their utility rates set until Final Budget Day (with the exception of Natural Gas which happens outside of the budget process). While each of the enterprises is managed separately as its own business line, one significant principle is followed by each of enterprises; namely ensuring financial sustainability. Each enterprise has its own stabilization reserve fund that is used to manage fluctuations in financial operating results from year to year. In years that end with positive results, the surplus funds are held in reserve and are used to fund deficits that may arise in future years. The general guidelines for managing these reserve balances is as follows: • If an enterprise has a positive stabilization reserve balance, the goal of staff is propose a budget (and any associated rate increase) to ensure the reserve does not become negative, and ideally would achieve the minimum target threshold for the reserve. • If the stabilization reserve balance is already negative, the goal of staff is to propose a budget (and any associated rate increase) that reduces/eliminates the deficit in each year of the forecast and returns the reserve to a positive balance within the 5-year forecast. Budget highlights and reserve balances for each of the seven enterprises are provided below. Golf Uncertain weather in 2015 had a slight negative effect on the Golf enterprise and is resulting in a break-even position at the end of the year instead of a small budgeted surplus. The Golf stabilization reserve balance will worsen slightly in 2015 as it is in a negative position and will incur interest charges. The 2016 budget for Golf is largely status quo. Staff is not budgeting rate increases in Golf fees to maintain competitiveness in the industry, but expect to see a positive result of$12,000 at the end of the year, assuming slightly better weather in 2016. Budget Summary—Golf 2015 Projected Actual $0 (break-even) 2015 Accumulated Stabilization Reserve Balance $918,000 negative 2016 Budgeted Rate Increase 0% 2016 Budgeted Result $12,000 surplus O - 7 Building Increased building permit activity in 2015 is causing a projected surplus of$330,000 by the end of the year. Low interest rates and consumer preference for the Waterloo Region have caused revenues to be higher than budget in all categories except government/institutional. For 2016, staff has held building permit fees flat, which will generate a modest surplus of $148,000 based on projected volumes. The surplus will be added to the stabilization reserve which is at its target balance. Budget Summary— Building 2015 Projected Actual $330,000 surplus 2015 Accumulated Stabilization Reserve Balance $5,459,000 positive 2016 Budgeted Rate Increase 0% 2016 Budgeted Result $148,000 surplus Parking The 2015 projected surplus of $148,000 in Parking is slightly better than budget based on increased demand for City-owned parking locations. Consistent with the rate plan that began in 2015, staff have budgeted no increase to parking rates in 2016. The City's parking rates are higher than local and other benchmarks, so staff believe holding rates flat is the appropriate course of action until other rates catch up to City rates. The 2016 budget for Parking projects a surplus of $672,000 which will be applied against the negative balance in the Parking stabilization reserve balance. It is anticipated, the reserve will return to a positive position by 2017 due in part to one-time revenues. Budget Summary— Parking 2015 Projected Actual $148,000 surplus 2015 Accumulated Stabilization Reserve Balance $1,558,000 negative 2016 Budgeted Rate Increase 0% 2016 Budgeted Result $672,000 surplus Gas In 2015, Gas Delivery is projecting a deficit of $4.5M once it transfers a dividend to the Gas Investment Reserve. For 2016, Gas Delivery is expected to have a surplus of $616,000 after paying the dividend. The difference is largely caused by the decreased need for capital funding. Recent Gas budgets have included significant costs for the replacement of the utility billing system, but will be returning to more typical levels as this project heads towards implementation. Budget 2015 Projected Actual (after transfer to Gas Investment Reserve) $4,545,000 deficit 2015 Accumulated Stabilization Reserve Balance $1,020,000 positive 2016 Budgeted Rate Increase Set outside of budget 2016 Budgeted Result (after transfer to Gas Investment Reserve) $616,000 surplus O - 8 Water, Sanitary & Storm Water The budgets for these three utilities are linked together as they are the primary funding source for the City's Accelerated Infrastructure Replacement Program (AIRP) which funds the capital replacement of the water and sewer infrastructure that is most in need of repair. This infrastructure was the subject of a special report and presentation (INS-15-075, State of the Infrastructure Update) made to Council in August 2015. The conclusion of the report stated: A realistic and strategic approach to funding both capital replacement and preventative maintenance activities will ensure the reliability, safety and sustainability of existing and future assets for the City of Kitchener. To ensure a go-forward strategy to address the backlog and on-going replacement, substantial annual rate increases for both replacement and maintenance activities for an extended period of time will be required. The recommended rate increases for these utilities as noted in the presentation are shown in the table below and are consistent with the rates proposed in the 2016 budget. Utility Rate Increases utility Rate Increase Water 7.6% Sanitary 10.8% Storm Water 9.2% Rate increases of this extent will improve the resiliency of these systems as it will allow for more proactive maintenance activities that will reduce the likelihood of unpredictable failure in the short term, and will lead to increased replacement of problem pipes over the long term. Looking to the finances of these utilities, significant deficits are projected for Water ($2.1 M) and Sanitary ($1.7M) in 2015, with a small surplus ($136,000) projected for Storm Water. Water consumption has been below budget in 2015, which negatively affects both Water and Sanitary revenues as both utilities are billed based on the amount of water consumed. Storm Water revenues are very close to budget as they are billed monthly based on property type/size characteristics that do not change. Reactive maintenance expenses in the Water utility have been significantly above budget in 2015, but have been relatively close to budget in both the Sanitary and Storm Water utilities. Each of these utilities is projected to have a substantial negative balance in its stabilization reserve at the end of 2015, which means the current rates are not sufficient to support the current service levels. The table below shows the projected negative balances in each of these utilities is between 3% and 8% of their annual revenues. By comparison, the Council approved reserve fund policy says each of these reserves should maintain a positive balance of at least 10% to help reduce the need for significant rate increases. Reserve Balances as a Percentage of Annual Revenues Projected 2015 Projected 2015 Reserve as % of Minimum Reserve utility Reserve Balance AnnualRevenues AnnualRevenues Balance as % of AnnualRevenues Water -$2,476,000 $35,591,000 -7.0% +10% Sanitary -$1,209,000 $39,650,000 -3.0% +10% Storm Water -$1,039,000 $13,241,000 -7.8% +10% O - 9 For 2016, each of the utilities is budgeting a modest surplus of$205,000 to $410,000 which will help reduce the negative balance in their stabilization reserves. Budget 2015 Projected Actual $2,095,000 deficit 2015 Accumulated Stabilization Reserve Balance $2,476,000 negative 2016 Budgeted Rate Increase 7.6% 2016 Budgeted Result $236,000 surplus Budget 2015 Projected Actual $1,719,000 deficit 2015 Accumulated Stabilization Reserve Balance $1,209,000 negative 2016 Budgeted Rate Increase 10.8% 2016 Budgeted Result $410,000 surplus Budget Summary—Storm Water 2015 Projected Actual $136,000 surplus 2015 Accumulated Stabilization Reserve Balance $1,039,000 negative 2016 Budgeted Rate Increase 9.2% 2016 Budgeted Result $205,000 surplus ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: The financial impacts on the average homeowner are shown in the chart below. Impact on • - • Change 2015 2016 $ % Taxes $ 1 ,050 $ 1 ,066 $ 16 1 .50% Storm Water $ 125 $ 137 $ 12 9.20% Water $ 386 $ 415 $ 29 7.60% Sanitary $ 434 $ 481 $ 47 10.80% ,Subtotal • re Gas) $ 1 ,995 $ 2,099 14 5.21 % Gas $ 841 $ 681 $(160) -19.02% Assumptions: City Taxes: Current Assessed Value (CVA) of$280,000 Storm Water: property classified as Residential Single Detached Medium Water & Sanitary: water consumption of 204m3 (reflects regional average water consumption) Natural Gas: gas consumption of 2,100m3 0 - 10 COMMUNITY ENGAGEMENT: Citizens have an opportunity to provide input about priority areas of the Operating Budget through different processes. Their input comes through public consultation efforts for comprehensive master plans (e.g. Leisure Facilities Master Plan), strategies (e.g. Neighbourhood Strategy), or specific projects (e.g. Kiwanis Park Pool). As part of those processes, staff considers the feedback received from the public as they make their recommendations and share it with Council when those recommendations are presented for approval. The budget is the process whereby Council affirms the various approved priorities and allocates funds to bring concepts into reality. For the 2016 budget process, staff will again employ a suite of traditional and electronic engagement methods in an effort to effectively inform and consult citizens. Staff will proactively provide information about the budget process via media outreach, the city's website and through Your Kitchener. Citizens are encouraged to provide their input by: • Writing, emailing or phoning City Hall • Attending the public input session planned for January 12, 2016 • Responding to the City's Facebook/Twitter posts about the budget • Contacting their ward councillor ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services) 0 - 11 N i T Y OU) C O O U O O O U1 p U U CCc 00 U C Y C C O N N y N p N J C 0q '^ � � Q � _ E h0 Q x O J U C C O L C c a 3 0 o o v o c� o 0 0 c > c c c c O v O O o 0 0 0 v " io 0 U OC Cc OC f0 OC Cc c '�, E c c v c v c c °- o c a a c a c a a E o E E > E > E E O v o o v O v O O v c ro c ro ro ro ro c ro ro ro ro v v v v v v ro v v v v U 0 U U U U C � C C C C N C C C C 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O N N 00 N N l0 I, W m O m to N m to N V1 O 7 00 n N N O O �/1 V1 m N M n 00 O O v 0)C , O l0 M Gl n al M V1 al Vf N O N N l0 Gl N V1 I� O V1 N N N 00 7 l0 M N I� Gl N n 00 L }+ 3 ^ O O M N O N O N - .--I - W m U K o j F '6 M I� n M l0 V1 m O Vf 7 M N I, 00 n N N M V1 r, t V1 O O 7 to O N M M N N m 00 N 0, 0) 7 O N M V1 O m M w N V1 to I, n O to 00 m �f1 m n N O M V1 I, to O N O V1 �f1 00 M tl0 R M Il 01 V1 00 V1 O c-I 00 V1 V1 M 00 Il O 11 C 11 00 C 00 c-I V1 M ai t M l R 00 O L ++ tl0 n M. 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N 6.6 O 00 M N 3 aD O l0 O N O Ol 7 M O1 7 0 N N �/1 O1 00 V1 O1 V w 7 V1 Ol O N N p C W O W al l0 N 7 I� O al N M W O Il N M M n N a m N O N V M N rl N O V " N ""� N N N N C 0 .N 2 0 w w wt Z O o w pb0 Q H V z m 0 W W LU z 0 O d W m m m > m m 0 W a z o 0 0 0 NO N J Q m m W W F In W ~ m LL W 3 Z m U w N m 0 W In Z } z O z N W m X m w U > O Q Z W w > O J¢ 7 Z Z 0 0 0 w m a CL IR O O W a d (J O N ~ O In X W W d V z W W In ~ ~ Z O W N Q u w Z m = W z J w J¢ w W g W m m } O cc G N 1� H W m Z U Q z N m O m Z W w d Q w m w Q Z Z Z Q 0 tko Z 2 W d - H H Z > W Q W Z o_ U W > Z Z Z Z Z 'a W Q U Z x o_ m o_ Z Q x O Z ~O w Q C7 v) OU Q F Z o_ OV OV in ON W z 7 m e w Q w Q O m ¢ m w — C7 C7 v� m (7 0 Y V 0 V V Q (D O CITY OF KITCHENER ENTERPRISE OVERVIEW r` Golf Enterprise Operating Model/Philosophy: Kitchener Golf provides an affordable golf experience for all. Services Provided: Kitchener Golf operates golf properties and facilities at both Doon Valley and Rockway Golf Courses offering affordable recreational golf opportunities, as well as facilitated clinics, leagues, tournament and events. Kitchener Golf facilities are open from dawn to dusk seven days a week during the golf season, which can run anytime between April-November dependent upon weather. During the off season, the facilities can be utilized for special occasions and provide a public space for winter walking and cross country skiing. Benchmarking: The chart below outlines the prices at a number of privately owned public golf courses in the area. Kitchener Golf's prices are at the low end of the spectrum. Kitchener Merry Hill Cambridge Puslinch Elmira Primetime $46 $45.20 $56 $48 $52 Off-Peak $36 $39.55 $44 $44 N/A Primary Legislation: A Level Playing Field agreement signed with National Golf Course Owners Association states that municipal golf courses will pay a dividend to their municipality equal to the sum of property and income taxes. This ensures that municipal golf courses are not at an unfair advantage. Customer Base: Both courses are open to everyone. Recent Challenges: • Increased environmental restrictions and constraints for maintaining golf courses. • Increased competition for discretionary spending and a decrease in time available to play. • Aging infrastructure of club houses, maintenance and storage buildings. Recent Successes: • A new partnership between Kitchener Utilities, Kitchener Sports Association, and Family and Children Services has been developed that will provide golf clubs and access to golf to local youth. • Launch a new midday membership, full cart membership and a corporate discount card for corporate groups and businesses. 0 - 15 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Building Enterprise Operating Model/Philosophy: The Building enterprise is responsible for the administration and enforcement of the Building Code Act and Building Code. The mandate of the Building enterprise is to ensure construction within the City meets the minimum requirements as detailed in the Building Code. Services Provided: The Building enterprise provides a majority of its services to external customers for building permit issuance and on-site inspections. Building also supports the AMANDA software system and administers the final grading approvals for new low-rise residential buildings. Benchmarking: The charts below outline the total number of building permits issued and fees collected over the past 5 years. 2500 Total Building Permits Issued 2011-2015 192 192 2 )O v��r> .......... 1ax1t .., 500 ,,,,. 3�) 282 287 j 292 j / 48 21? / .. � �s j 1.0 .:...... 2011,., 2t�1�f............. � eA............... 011 2012 2013 4WO 4nd ustnalfUnarm ierdA 11 Institutional iii Roidoitiol $4,0t Total Building Fee Revenues 2011-2015 852 $3,500 $3,0 ..,m.�. 1�2 .e 1,67'7 52.say $2,000 j $500 / 11111JJJJJJJJ///// � ,,' 2011 2012'. 20,13 2014 *2015 uuvlwlosslu�t�iulfG�or�Adnr;rrhrel uu�lu��litutioin,zl u�aRa�itloiapis�U *2015—Year-To-Date(VTD)January 151 to September 30th 0 - 16 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Primary Legislation: The Building enterprise is governed by the Provincial Building Code including referenced legislation such as Planning Act, Development Charges Act, and other construction standards. The main purpose of the Building Code is to ensure the buildings citizens work, live and play in are safe through the issuance of building permits and site inspections. Building permit revenues must only be used for the administration and enforcement of the Building Code. Customer Base: The majority of Building's customers are the private sector, and their experience in building regulations is diverse; from minimal to knowledgeable. Building's customers include single time users such as do-it-yourself home owners, repeat homebuilders, and non-residential applicants who build 1-2 times per year. The 2015 Year-To-Date (Jan. 1-Sept. 30) breakdown of Building's customer base is 84% residential, 11% industrial/commercial and 5% institutional. Recent Challenges: Although Building staff regularly monitor economic trends to forecast permit activity levels, it is difficult to predict permit activity because staff do not control when owners decide to build. Further, not every permit generates the same amount of revenue or work effort by staff. Another challenge is to be adequately resourced to meet Provincially legislated time frames for permit decisions and inspections. All municipal building officials must be Provincially qualified, which includes passing multiple examinations and training requirements. Therefore, laying off staff and re-hiring them when workload increases is not a realistic option as it would increase costs, downtime, and liability (i.e. the risk of lawsuits & claims). Recent Successes: Building successes are attributed to a technically skilled professional staff with proven customer service skills. Customer feedback on Building staff services continues to be positive. Building enterprise processes are not stagnant, and evolve to meet the needs of the customers. Recent examples include Tuesday Night Express Service for do-it-yourself owner projects and maximizing use of technology such as Online Permit Applications and Permit Status. In 2015, Building administered a new Termite Pilot Program in the Laurentian area of Kitchener. This included hiring outside contractors for nematode application, borate rod treatment, and monitoring traps installed weekly from May-November. Staff also scheduled two Neighbourhood Yard Waste clean-up weekends. Lastly, through ongoing and prudent financial measures the Building Stabilization Reserve remains positive through the economic downturn and is projected to remain positive for the foreseeable future. This ensures that building permit fees remain stable, consistent with customer preference, and are not subject to rate shocks during economic cycles. 0 - 17 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Parking Enterprise Operating Model/Philosophy: The Parking Enterprise's goal is a self- funded, financially sustainable enterprise providing accessible and convenient parking in the downtown core at a fair price. It is very important to the core as it helps the City achieve and balance its economic development growth management and transportation objectives. Services Provided: The Parking Enterprise manages and operates the City's downtown parking portfolio, which currently consists of five parking garages, 18 surface lots, on-street meters and free parking spaces (totaling 3,530 spaces). It has direct responsibility for the operation, maintenance, capital rehabilitation and fiscal management of the City's public parking infrastructure. Benchmarking: The table below outlines current prices of monthly parking for surface and garage facilities in the downtown. The City's monthly parking prices are at the high end of the spectrum. Current Monthty Parking, ire -before HS Provider Surface Gara e Major 3rd Party Pdva e Business $55.801 $11.3.40 Independent Parking Provider $105,16 N/A Technology Area $1, 5.00 N/A City of Waterloo, $11114 City of iKitchener 1.34.2 154.87 Primary Legislation: Not applicable. Customer Base: All garage and surface facilities are open to anyone living, working or visiting the downtown. The customer base currently includes 1,951 monthly parkers and over 400,000 daily customers per annum. The total number of monthly parkers has remained relatively stable year over year, but inventory has increased in the last four years by 1,129 spaces with the addition of two new garages and the Bramm Street surface lot. The percentage of monthly customers over the current supply is approximately 55%. Recent Challenges: ION construction activity is affecting travel patterns and downtown businesses are experiencing less foot traffic as a result. The ION construction is scheduled to continue until the end of 2017 and may impact parking facilities immediately adjacent to construction zones along Charles and Duke Streets. Conflicting priorities and expectations exist within Parking including expectations to enhance revenues, support the economic development of the downtown and promote a balanced 0 - 18 CITY OF KITCHENER ENTERPRISE OVERVIEW r` transportation system. Parking is a component of The City of Kitchener's Transportation Master Plan (TMP) and it supports Transportation Demand Management (TDM) initiatives that can have an adverse effect on bottom line results. From 2010 to 2013 the City has adopted aggressive annual parking rate increases as its primary tool to affect parking demand and has developed TDM programs that assist downtown employees in shifting away from auto dependency. In 2015, the City's monthly parking rate of$154.87 + HST ($175.00) is the highest being charged within the downtown business area. Competitors in the downtown have not followed suit with the City's aggressive parking rate increases and contribute to eroding the City's market share. Based on anecdotal evidence, staff anticipates increasing parking rates at this time will result in less overall revenue as current customers will seek out cheaper alternatives. Further parking rate increases are expected to continue to soften results as auto dependent customers search for cheaper parking. Increased parking rates also influence Downtown Kitchener's competitive advantage. High parking prices can directly impact current and future economic development in the downtown. The parking revenue assumptions contained in report INS-11-005 (January 5, 2011) have not been achieved as a result of lack of anticipated new demand from the private sector and timing lags in redeveloping surface lots (i.e. parking supply has not been reduced). Cash flow projections indicate the Parking Enterprise will be in a deficit position at the end of 2015 and is forecasted to continue to be in a deficit until 2017 The Parking Enterprise has an accumulated deficit of$1.6M. The implementation of the Cycling Master Plan and the Transportation Demand Management initiatives was to be funded from the Parking Enterprise, but could be in jeopardy based on the current financial performance of the enterprise. Recognizing the high priority Council has placed on these two programs, the costs of TDM and cycling infrastructure will be funded from the tax-supported capital budget for the next three years so the programs continue uninterrupted. The accumulated deficit is anticipated to be eliminated within two years. Recent Successes: The Parking Enterprise is projecting a year end surplus of approximately $148,000 ($71,000 higher than budgeted). Overall the net revenues are tracking slightly ahead of budget as a result of fluctuations in demand throughout various parking lots and garages. 0 - 19 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Gas Utility Operating Model/Philosophy: Provide customers with quality, dependable and economical distribution of natural gas. Provide prompt, cost effective and professional services related to rental water heaters, and appliance servicing. Promote conservation and to operate in an environmentally sensitive manner. Services Provided: Gas Supply: As a natural gas distributor in Ontario, Kitchener Utilities is required to provide a default "system supply" option to its customers at cost. Kitchener Utilities purchases and manages the gas supply to meet customer requirements. Gas Distribution: As a natural gas distributor, Kitchener Utilities delivers natural gas to consumers. Work includes installing and replacing meters, underground pipe installation, services, response to gas emergencies involving gas line hits, gas odour, carbon monoxide, and line locates. This service area pays a fixed dividend to the City which is set using a modified cost of service approach. Regulatory Affairs: Ensuring compliance with codes, rules and regulations imposed by government agencies and regulators. Appliance Service: Providing specialized services that focus on heating and cooling equipment inspection and maintenance, such as central air conditioning units, furnaces, hot water heaters, clothes dryers, fireplaces, pool heaters, ranges, etc. Conservation: Developing and promoting conservation programs which help customers save money and conserve energy. Water Heater Rentals & Service: Supply and service water heaters on a rental basis, including 24/7 service for repair and replacement of tanks. Benchmarking: While the population of Kitchener continues to grow, natural gas use has been declining over the past 10 years. The graph below shows that the volume of gas consumed in Kitchener has fallen from 295,733,000 m3 in 2005, to 196,342,499 m3 through September 2015. This can be attributed to efficiency improvements, a decline in large industrial use, conservation awareness, and weather. 0 - 20 CITY OFKITCHENER ENTERPRISE OVERVIEW Gas Volumes [M3) 2004 2005 2006 2007 2008 2009 2010 20,11 20,12 2013 20,14 2015 Primary Legislation: Technical Standards and Safety Act 2000 Ontario Regulation 210/01 [>i| & Gas Pipeline Systems Canadian Standards Association Z662-11 Pipeline Systems Essentials Code Canadian Standards Association Z246.1-09 Security Management for Petroleum and Natural Gas Industry Systems Code Canadian Standards Association B149.1-10 Natural Gas and Propane Installation Code Ontario Regulation 212/01 Gaseous fuels Ontario Regulation 184/03/215 Fuel industry certificates MeasurennentCanada —GasMeters Electricity and Gas Inspection Act Ontario Energy Board —Gas Distribution Access Rule, Demand Side Management Guidelines, Code of Conduct, Storage and Transportation Access Rule Customer Base: Natural Gas: 69,000 Rental Water Heaters: 42,000 Recent Challenges: Increased customer level of service demands and expectations; financial constraints; aging infrastructure; security and emergency response; growth; evolving business model; climate change; stricter regulatory requirements; retirements of senior experienced staff and related workforce shortages and gaps; utility support services. The Light Rail Transit project hassubstantia||yinoreasedvvork|oadthroughnnajorre|ooation work, locates, valve operation and inspection services. � ,� � "��� �� CITY OF KITCHENER ENTERPRISE OVERVIEW r` Recent Successes: The unique partnership between Kitchener-Wilmot Hydro and Kitchener Utilities, in regard to conservation and public outreach, continues to allow Kitchener Utilities the flexibility to enhance existing program offerings and create new program opportunities that reflect evolving market needs specific to Kitchener. These programs also help Kitchener customers save natural gas, electricity, and water. Work has commenced on a new meter inventory management system. The new system, when implemented, will improve the management of gas meters, increase administrative efficiencies, as well as meet our regulatory requirements with Measurement Canada. Kitchener Utilities continues to expand the use of mobile technology in field operations related to gas emergencies. The technology provides the mobile work force with access to key field information required to address and locate areas impacted by an emergency. 0 - 22 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Water Utility Operating Model/Philosophy: Provide customers with quality, dependable, and economical distribution of water. Promote conservation and to operate in an environmentally sensitive manner. Services Provided: Water Distribution: Monitoring, installing and repairing the network of water mains, meters and services to ensure a reliable and safe supply of water. Provide a bulk water facility. Conservation: Developing and promoting conservation programs which help customers save both money and conserve energy. Benchmarking: While the population of Kitchener continues to grow, water use has been declining over the past 10 years. The graph below shows that the amount of water metered and billed by the City of Kitchener has fallen from 22,500,000 m3 in 2005, to a projected amount of 18,800,000 m3 in 2015. This is attributed to a decrease in industrial demand, increased water efficiency measures, and greater conservation awareness. Metered Water (M3) 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015P Year Primary Legislation: Safe Drinking Water Act, 2002. Ontario Regulation 170/03 Drinking Water Systems Ontario Regulation 128/04 Certification of Drinking Water System Operator and Water Quality Analysis Ontario Regulation 169/03 Ontario Drinking Water Quality Standards Ontario Regulation 188/07 Licensing of Municipal Drinking Water Systems 0 - 23 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Customer Base: Water: 64,000 Recent Challenges: The primary challenge experienced by the Water utility is the aging infrastructure. The City's water rate is based 100% on water consumed, even though the utility has significant capital costs to maintain the infrastructure that do not change based on the amount of water consumed. As noted in the graph above, for the past decade water consumption has been declining. This means the fixed costs must be spread over less water consumed, which puts upward pressure on the water rate. In addition, Regional water purchases make up more than half of the cost of the Water utility and have been increasing by at least twice the rate of inflation in recent years. Meanwhile, the City-controlled costs of the Water utility have been limited to inflation or below, limiting the City's ability to perform infrastructure replacement. For the past two years, the extreme cold winter has caused a significant number of main breaks, resulting in increasing costs as the mains must be repaired before service can be restored. (2014 - 123, 2015 - 120 as of September; the benchmark for 2015 is of 74) The culmination of decreased revenues (declining water usage) and increased costs (watermain breaks and capital infrastructure replacement) has caused a significant variance that has eliminated the stabilization reserve fund created to deal with deficits in the Water utility. 2015 saw a rate increase of 9.9% and 2016 proposes a rate increase of 7.6%. The Light Rail Transit project has substantially increased workload through major relocation work, locates, valve operation and inspection services. Recent Successes: Kitchener Utilities continues to enhance existing conservation and public outreach opportunities to assist our customers in reducing their water consumption. A successful rebate program for showerheads was well received by customers. Kitchener Utilities continues to expand the use of mobile technology in field operations. Technology has enabled the mobile work force to better serve the needs of customers as well as attain better efficiencies in work processes. 0 - 24 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Sanitary Sewer Utility(Wastewater) Operating Model/Philosophy: The Sanitary Sewer utility performs the service of removing wastewater generated in the city in an efficient, cost effective, and environmentally responsible manner. The Sanitary Sewer utility also ensures this is done in compliance with legislative and regulatory requirements. Services Provided: The Sanitary Sewer utility performs a wide range of activities and programs that together supports the provision of safe and reliable collection of raw sewage generated within Kitchener and neighbouring municipalities, and its subsequent conveyance through 819 kilometers of pipes and 22 pumping stations to a Regional wastewater treatment facility, where the City pays the Region for ultimate treatment and disposal. Such activities and programs include: • The Accelerated Infrastructure Replacement Program (AIRP) • Pumping station rehabilitation and replacement • The trenchless sewer rehabilitation program • Trunk sewer replacement • Spot repair program • Pumping station maintenance • Flow monitoring program • Closed Circuit Television (CCTV) inspection program • Flushing programs • Emergency repair work • Service connection blockage clearing • Hydraulic modeling • Condition assessment, scoring, and system analysis • System for the remote control of and data acquisition from pumping stations (SCADA) Benchmarking: Sanitary sewer main rehabilitation or replacement statistics for 2014: City Rehabilitation Replacement Cambridge 2.1 kilometers 1.8 kilometers Waterloo 0.0 kilometers 2.1 kilometers Kitchener 1.2 kilometers 5.6 kilometers Primary Legislation: Clean Water Act Environmental Protection Act Ontario Water Resources Act Environmental Assessment Act 0 - 25 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Customer Base: The owners, residents, and users of nearly all facilities in the city are generators of raw sewage. This would include nearly every residential, and every significant commercial, industrial, and institutional building in the city. In total, this equates to over 60,000 customers billed for this service. Recent Challenges: Operational: Significant amounts of Kitchener's sanitary assets have reached, or are nearing, the end of their lifecycle. As these assets deteriorate, the need for ongoing, regular maintenance increases, resulting in a requirement for more funding and resources for preventative and corrective maintenance. If approved, the proposed sanitary utility rate increase will result in improved budgets for both maintenance and replacement of sanitary infrastructure, and thus contribute to reduced risk to the utility. Budgetary: (1) Construction costs for replacement and rehabilitation of infrastructure from 2004 to 2015 were significantly greater than the CPI rate of inflation. (2) Increasing unit costs of sewage processing continue, and are expected to do so into the future (these costs are controlled by the Region). Recent Successes: Capital Works: Furthering the goals of the Accelerated Infrastructure Replacement Program through the replacement of sanitary sewer mains and services: by the end of 2015, 7.7 kilometers of sewer main replacement are anticipated to have been accomplished (including portions of the LRT route), along with 1.5 kilometres of sewer main rehabilitation. Capital Works: (1) Replacement of the Freeport sewage pumping station (SPS) is complete. Associated forcemain construction is now underway. The completion of this work will continue toward the lifting of a development freeze that has existed in this area for over a decade. (2) Construction of the new Doon South Sewage Pumping Station will permit development of the Doon South Community Plan area. Inspections: 32.4 kilometres of sanitary sewer main are anticipated to have been inspected in 2015. 1,740 monitor-days of flow monitoring are anticipated to have been accomplished. Maintenance: 17 spot repairs to sanitary sewer mains were successfully performed in 2015. Analysis: Development of a risk analysis software tool for use in the enhanced prioritization of remediation work to the sanitary sewer network. Administration: (1) New cross border servicing agreements established with Woolwich Township and the City of Waterloo. (2)Transfer of the Mannheim SPS to Wilmot Township 0 - 26 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Stormwater Utility Operating Model/Philosophy: The Stormwater utility performs the service of treating and controlling stormwater generated in the city in an efficient, cost effective and environmentally responsible manner to comply with legislative and regulatory requirements. Services Provided: The utility provides the necessary funding to operate, maintain, rehabilitate, replace and build stormwater infrastructure across the City. The stormwater system is comprised of approximately 100 kilometres of open watercourses, 700 kilometres of sewers, 10,000 catch basins and 100 stormwater ponds with a total replacement value of$705M (2013). Services include new capital projects identified by the annual water quality audit that is conducted on local watercourses to determine where additional stormwater controls are required to improve water quality. Other projects are required to address flooding in various parts of the City. In addition to discreet capital projects, annual programs are established to address recurring activities. These include: • Storm Infrastructure Maintenance Program • Watercourse Improvement Program • Storm Water Management (SWM) Pond Retrofit Program • Drainage Improvement Program • Storm Infrastructure Rehabilitation Program • Accelerated Infrastructure Renewal Program • Sewer & Manhole Maintenance and Repair • Watercourse/Bridge/Culvert Maintenance and Repair • Street Sweeping • Leaf Pickup • Spills Finally, the utility also funds a credit program to provide an incentive to private property owners to control stormwater at the source where it falls on private property with the intended result of a long term cost saving to the City due to less loading on the municipal stormwater system. Benchmarking: The stormwater utility is currently in the process of developing an Integrated Stormwater Management Master Plan (ISMP) to replace the 2001 SWM Policy I-1135.The master plan will establish goals and objectives as well as provide direction to the utility until the year 2030. There will be an annual process of measuring progress against planned progress in the ISMP. Additionally, the utility is participating in the National Water and Wastewater Benchmarking Initiative which looks at key performance indicators for municipalities across the country. Data for 2014 is being gathered and will be processed to compare results to previous years. 0 - 27 CITY OF KITCHENER ENTERPRISE OVERVIEW r` Primary Legislation: I"(.1-11;Tfl; There is existing legislation that dictates certain requirements for stormwater management which impacts almost every facet of the services the utility provides ranging from new construction to operations and maintenance. The key pieces of legislation include: • Clean Water Act, • Water Opportunities Act, • Environmental Assessment Act, • Ontario Water Resources Act, • Canadian Environmental Protection Act, • Canadian Fisheries Act, and • Various supporting Ontario Regulations, etc. Customer Base: Every property owner in the city that has impervious surfaces on their property that contributes to the overall stormwater runoff that is managed by the municipality. In total this equates to over 70,000 customers billed for this service. Recent Challenges: Operational: The nature of storm events becoming more severe and intense due to climate change has a direct impact to the stormwater management system, by either causing damage to, or exceeding the capacity of existing infrastructure in an unpredictable manner. Legislative: The new legislation for the Sewer Safety Inspections process, and for an increased level of service that is now required for the locating of utilities prior to construction activities taking place. Budgetary: (1) There is an existing backlog of legacy projects identified in previous stormwater audits that still need to be completed. These can only proceed as budget becomes available. (2) Operations and maintenance requirements necessary to maintain the current service levels versus the current budget allocations for such activities. This does not take into consideration the need for additional budget to facilitate the transition to a more preventative maintenance approach. (3) The ISMP is currently underway to look at alternative strategies to enhance the lifecycle of stormwater infrastructure to help address the looming deficit. Recent Successes: Operations and Maintenance: Operations staff removed over 4,000 tonnes of sediment from stormwater ponds returning them to their design condition to improve water quality. A total of 9 out of 100 ponds have now been cleaned out. Capital Works: (1) The construction of an overflow sewer in Rothsay Avenue increases the capacity of Kolb Creek and will reduce flooding onto private property and eliminate flooding in the road right of way. 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Following a series of reviews, the City Council proposed an increase to the base subsidy to CITS of$1,750,000 plus transitional costs while a new agreement was put in place between the Kitchener-Waterloo Symphony (KWS) and CITS around shared calendar management and usage of the venue. While KWS and CITS have started to negotiate new terms for the shared agreement, FY16 does not alter the historical arrangement and therefore follows the structure of FY15. As a result, CITS is requesting an operating grant of$1,750,000 plus transitional costs of$250,000 for a total of$2,000,000 to balance the budget for FY16. RATIONALE The request for transitional funding reflects the decision made by City Council in March 2015 tied to the new mandate and the subsequent financial implications for CITS. As the new agreement between CITS and KWS is fully implemented over the next 4 years, it is expected that CITS will operate to a balanced budget based on an annual operating grant of$1,750,000 and no longer require any further transitional costs. This is based on supporting KWS to continue performing in the venue under their historical arrangement for the majority of their performances while also achieving a more balanced calendar of commercial and non- commercial activities to meet the yearly costs of operating and maintaining the facilities. CITS has already taken a number of measures over the last 3 years to improve efficiencies and minimize expenditures. • Through negotiating new contracts and service terms, CITS has cut the administrative budget permanently by more than $221,000. • Salaries and wages have significantly decreased since 2012 through restructuring the organization and working with a skeleton staff during this period. • Expenditures largely relate to fixed costs, such as electricity, water, gas, audit fees, insurance and annual maintenance inspections. • Major capital upgrades are underway which are also anticipated to reduce annual occupancy costs in the next 2-3 years. IMPLICATIONS:FINANCIAL As the transitional costs of$250,000 for FY 16 are not ongoing expenses, City of Kitchener Financial Planning staff recommend funding these costs from the Tax Stabilization reserve fund. This will not have any impact on the 2016 tax rate. RECOMMENDATION: That in addition to the ongoing $1,750,000 operating grant provided by the City, the 2016 transitional costs of$250,000 for CITS be funded from the Tax Stabilization reserve fund. 0 - 88 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: Op 02— Insourcing: Public Building Gas Leak Survey& Gas Service Installation FUND: Operating DEPARTMENT: Infrastructure Services - Utilities PREPARER: Les Jones, P. Eng. — Utilities Engineer (Gas) BUDGET IMPACT: None BACKGROUND: Public Building Gas Leak Survey Kitchener Utilities uses the services of a contractor to conduct the Public Building Gas Leak Survey program in compliance with CSA Z662. The intent of the Public Building Gas Leak Survey is to have specifically trained personnel checking the underground gas services and meter sets outside the building, as well as, checking the interior foundation walls of the public buildings for leaks migrating from the natural gas distribution system. Public buildings are defined as buildings where people are expected to gather such as schools, hospitals, day cares, churches, etc. There are approximately 4,000 buildings in Kitchener. This survey is usually conducted during periods of frost (December to March) when ground conditions are more susceptible to migrating natural gas entering the building if there is a leak from adjacent underground piping. Gas Service Installation Since early December 2014, Gas Distribution Technicians' (GDT) have been installing new gas services. Installation of new gas services has historically been given to contractors. By October 2015, the GDT's have installed 56% of the new services and they are on track to install approximately 500 gas services by the end of 2015. The number of services has exceeded initial expectations with considerable savings to the corporation. RATIONALE Public Building Gas Leak Survey Due to increased requirements from the Technical Standards & Safety Authority (TSSA) requiring a valid Gas Fitter License (G2), there will be an increased cost for a contractor to complete the Public Building Gas Leak Survey for Kitchener Utilities. . Based on the TSSA's requirements, staff has determined the most cost effective and efficient method of completing the gas leak survey is to have internal staff with the required G2 license, Gas Distribution Technicians, complete the work. The cost of these additional staff is completely offset by a reduction in the contracted services budget. New Gas Service Installation Based on the work completed to date, staff has seen for every one dollar ($1) spent on wages for a Gas Distribution Technician, the corporation is seeing a cost savings of $1.93 in displaced work from the City's Gas Pipeline Installation Contractor. 0 - 89 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER The added benefit of this shift in work includes: • Having the ability to set a gas meter and inspect all installed appliances on start-up, directly following the completion of the gas service installation, therefore improving customer service. • More control over work and flexibility of scheduling to manage installation timing issues such as quick closing dates for new homes. • Having internal staff equipped and experienced in performing work, such as electro- fusions on primarily polyethylene gas pipe systems. IMPLICATIONS:FINANCIAL There is no budget impact of creating these four new full time positions. The proposed 2016 Gas utility budget has reallocated funds for these new positions from the following accounts: • Gas Leak Survey Contractor (operating) • New Gas Mains account (capital) RECOMMENDATION: That four full time Gas Distribution Technician positions be approved for the Public Building Gas Leak Survey and for installation of New Gas Services. 0 - 90 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: Op 03 -Water Utility Operating Maintenance Increase FUND: Operating DEPARTMENT: Infrastructure Services - Utilities PREPARER: Matt Ryan, Utilities Water Engineer BUDGET IMPACT: $852,500 BACKGROUND: The State of the Infrastructure report (INS 15-075) identified that due to aging infrastructure, more maintenance and operational activities are required. As the infrastructure ages and deteriorates, the need for ongoing maintenance increases. The increase in preventative maintenance requires additional funding. Additionally, rates of unanticipated failure of water mains will increase as the system ages, requiring additional funding. RATIONALE Kitchener Utilities provides customers with quality, dependable, and economical distribution of water, in compliance with significant legislation such as the Safe Drinking Water Act, 2002. Water is purchased from the Region of Waterloo and is distributed through 893 kilometres of watermain infrastructure to customers. Failing watermains has been a focus in recent budget years, as there has been a trend to an increasing number of breaks in general, as well as multiple breaks occurring at the same time, which increases complexity in managing repairs. The graph below shows the number of watermain breaks for each of the years dating back to 2010 (note: 2015 is year-to-date). Number of Watermain Breaks by Year 160 140 120 L m 100 E 80 d 3: 60 0 d 40 E z 20 0 2010 2011 2012 2013 2014 2015 Year The water infrastructure in the City is aging and despite an accelerated replacement program, watermain breaks continue to occur frequently over the winter months. Availability of safe drinking water is a necessity, which is often taken for granted, until it is unavailable. Kitchener 0 - 91 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER Utilities strives to restore safe drinking water as soon as possible to affected residents. This means completing watermain/valve repairs in a timely fashion. The Safe Drinking Water Act, 2002 requires safe drinking water delivery—a watermain break is a potential risk of contamination if not repaired efficiently and effectively. There is the potential for back siphonage, road cave-ins, damage of other utilities and flooding. Part of risk mitigation is completing repairs in a timely fashion. Increased maintenance funding in the Water utility will be used for high priority activities such as watermain repairs, repairing frozen services, and increased pipeline inspections. This additional funding will help avoid deficits in the operating budget, as have been experienced in both 2014 and 2015. IMPLICATIONS:FINANCIAL The State of the Infrastructure report suggested a Water Utility rate increase of 7.6%, of which 2%was to go towards funding increased maintenance activities. Additional maintenance funds of$852,500 for the Water utility has been built into the proposed budget. RECOMMENDATION: For information. 0 - 92 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: Op 04— Insourcing: Water Service Leaks & Frozen Services FUND: Operating DEPARTMENT: Infrastructure Services - Utilities PREPARER: Matt Ryan—Water Utilities Engineer BUDGET IMPACT: None BACKGROUND: Service Leaks Kitchener Utilities has dealt with approximately 150 suspected water leak service calls from January 1 to October 1, 2015. Of these 150 calls, approximately 30 are private side customer leaks at or near the water shut-off valve. This location is the dividing line between the municipally owned water service and the customer's privately owned water service pipe. When a leak has been determined to be on the customer's side of the water service, they are notified by letter explaining their responsibility in repairing the service. Frozen Services Kitchener Utilities has dealt with fixing 250 frozen services in 2014 and over 350 frozen services so far in 2015. Approximately 42% of this work is sent to contracted plumbers. RATIONALE One new Water Distribution Technician is being requested in order for Kitchener Utilities (KU) to offer the following services to the customer in relation to the customer's private service line: 1. Repairs within 1 foot of the water shut-off valve at the City's incurred cost plus 15% administration. • KU would already be on site having investigated the original leak call. • Less stress on the customer to complete the repair to their private side service line, • Repairs completed sooner which leads to a reduction of un-metered water (revenue loss) for the City • Based on reported costs charged by private contractors to repair/replace the private side line , it is expected KU would be able to offer a lower cost to repair the service 2. Thawing of frozen water services • The higher incidences of frozen water services have left some citizens without their water service for weeks. Staff was required to connect the water service from the neighbor, or once thawed the homeowner would have to continually run water to avoid a re-freeze. • It is expected that the Water Distribution Technician would be able to spend up to 6 weeks thawing frozen services. IMPLICATIONS:FINANCIAL There are no financial implications to the budget as the cost of the new position is being recovered by external charges to homeowners (service leaks) and recovery of work currently contracted out (thawing frozen services). RECOMMENDATION: That one Water Distribution Technician positions be approved to help perform the repair of water service leaks and the thawing of frozen services. 0 - 93 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: Op 05—Sanitary Utility Operating Maintenance Increase FUND: Operating DEPARTMENT: Infrastructure Services—Sanitary Utility PREPARER: Steve Allen, Manager of Engineering Design and Approvals Scott Berry, Interim Associate Director of Operations BUDGET IMPACT: $706,000 increase BACKGROUND: The State of the Infrastructure report (INS 15-075) identified that more maintenance and operational activities are required due to aging infrastructure. As infrastructure ages and deteriorates, the need for ongoing maintenance increases. This requires ongoing funding for preventative and corrective maintenance. Additionally, rates of unanticipated failure of sewers will increase as the system ages, further requiring funding. RATIONALE The Sanitary Sewer utility performs a wide range of activities and programs that together supports the provision of safe and reliable collection of raw sewage generated within Kitchener and neighbouring municipalities, and its subsequent conveyance through 819 kilometers of pipes and 22 pumping stations to a Regional wastewater treatment facility, where the City pays the Region for ultimate treatment and disposal. Preventative maintenance ensures failure rates are minimized, which in turn increases the ability for the City to further extend the life of the asset at a lower cost than full replacement. The additional funding will be applied to the areas in need, such as scheduled lateral and sewer main repairs, flushing programs, pumping station upkeep, and emergency repair work. IMPLICATIONS:FINANCIAL The State of the Infrastructure report suggested a Sanitary Utility rate increase of 10.8%, of which 2%was to go towards funding increased maintenance activities. This 2% equates to additional maintenance funds of$706,000 in 2016, which has been built into the proposed budget. RECOMMENDATION: For information. 0 - 94 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: Op-06— Insourcing: Sewer Utility Locates FUND: Operating DEPARTMENT: Infrastructure Services -Asset Management PREPARER: Greg McTaggart, Manager of Infrastructure Asset Planning BUDGET IMPACT: None BACKGROUND: As an owner and operator of underground utilities, the City of Kitchener performs a public service known as utility locates. The purpose of this service is to inform excavators of the existence and location of underground utility infrastructure so that proposed excavation work does not strike and damage the buried infrastructure. In June of 2012, the provincial government passed the Underground Infrastructure Notification System Act, 2012. This required all utility owners in Ontario (including municipalities) to provide a "full-service level" model of full utility locating services to the public by June of 2014. This service must be provided at no charge to the public, and costs to provide this service instead are to be recovered through the utility's general fee structure. When the act came into effect, Kitchener adhered to these compliance requirements by raising its level of service for storm and sanitary sewer locates. In order to accomplish this, greater resources to deliver this service were required, including creating a new staff position to perform this function. This position was created as temporary contract status in order to determine the workload demands for a dedicated position to deliver this service. If actual demand met or exceeded expectations, then steps would be taken for approval to transition this role from contract to a permanent status. RATIONALE The contract position has been performing the function of delivering storm and sanitary sewer locates for over a year. Workload statistics from this period show a very strong public demand for this legislated service, and represent the workload limit of what can be performed by one individual at a pace that gives a reasonable assurance that the work will be performed at an acceptable quality level. As such, the experiences and statistics of the past months bear out the requirement for a position solely dedicated to performing this legislated function on an ongoing, permanent basis. Going forward, there is no realistic scenario that envisions the demand for this service to significantly decline in the future. Costs charged by a private company for locating services for a single gas and/or water locate request is approximately$42 per response. Sewer locating costs would be similar or more expensive due to technical considerations. Using these benchmark costs and known public demand for this service, an annual cost for outsourcing sewer utility locates could be expected to be in excess of$300,000/year. As a result, it is significantly more cost-effective to retain this function in-house. IMPLICATIONS:FINANCIAL There is no budget impact of making this position full-time. Funding is provided evenly from the Sanitary and Stormwater utilities and has been reallocated from the contract staff line to fund this full time position. RECOMMENDATION: That the full time position be approved. 0 - 95 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: Op 07—Stormwater Utility Operating Maintenance Increase FUND: Operating DEPARTMENT: Infrastructure Services—Stormwater Utility PREPARER: Melissa Ryan, Design and Construction Project Manager Scott Berry, Interim Associate Director of Operations BUDGET IMPACT: $224,000 increase BACKGROUND: The State of the Infrastructure report (INS 15-075) identified that more maintenance and operational activities are required due to aging infrastructure. As the nature of storm events become more severe and intense due to climate change, this has a direct impact to the stormwater management system, by either causing damage to, or exceeding the capacity of existing infrastructure in an unpredictable manner. Furthermore, much of the stormwater management infrastructure is regulated and there are legislated requirements to maintain them in good working order and to inspect and clean them on a frequent basis. RATIONALE The utility provides the necessary funding to operate, maintain, rehabilitate, replace and build stormwater infrastructure across the City. The stormwater system is comprised of over 100 kilometres of open watercourses, 700 kilometres of sewers, 10,000 catch basins, over 85 Oil and Grit Separators (manholes that provide water quality) and over 100 stormwater management facilities. The total replacement value of this infrastructure in 2013 dollars was estimated at $705M (2013). Historically, stormwater maintenance has been reactive and based on an "as needed" basis as a result of flooding, failures on linear infrastructure, etc. As the Stormwater Utility continues to evolve, more emphasis on preventative maintenance will be placed in order to minimize reactive issues and assist with extending the life of the asset which will be at a lower cost than a full replacement. Such maintenance activities include sewer and manhole maintenance and repair, cleaning out catch basins and oil and grit separators on a more regular basis, addressing culvert maintenance and repair as well as removing debris from watercourses. IMPLICATIONS:FINANCIAL The State of the Infrastructure report suggested a Stormwater Utility rate increase of 9.2%, of which 2%was to go towards funding increased maintenance activities. This 2% equates to additional maintenance funds of$224,000 in 2016, which has been built into the proposed budget. RECOMMENDATION: For information. 0 - 96 CITY OF KITCHENER 2016 BUDGET ISSUE PAPER ISSUE: OP 08—Permanent Part-Time Constituency Assistant FUND: Operating DEPARTMENT: CAO- Office of the Mayor and Council PREPARER: Jana Miller, Executive Director, CAO's Office BUDGET IMPACT: $32,000 increase for wages and fringe benefits BACKGROUND: During the audit committee meeting of October 5, Council directed staff to develop an issue paper outlining the costs for an additional part-time Constituency Assistant, for consideration during the 2016 budget process. This request was also considered by council during the 2012 budget process. RATIONALE Given Kitchener's growing population, in 2010, City Council size increased from 7 to 11 members. An additional staff position was proposed at that time but eliminated and, since then, the staff component within the Office of the Mayor and Council has not been increased to accommodate additional workload created by a larger council. A recent internal audit of the Office of the Mayor and Council, which looked at divisional structure and roles, highlighted that, due to workload, several councillors feel there is a need for an additional part-time position. The current staff component does not accommodate councillors' need for more proactive planning, analysis, citizen engagement and outreach. An additional part-time position would enable existing CIVIC staff to provide this more comprehensive and proactive support to councillors by alleviating some of their administrative duties. The audit acknowledged that there is no new operating funding planned for additional positions in 2016. Recognizing these budget constraints, the audit recommended that capacity for new work be achieved through the use of paid co-op students. At the October 5 Audit Committee meeting, some councillors expressed a need for more immediate support as well as concerns with constant turnover and the lack of consistency that comes with rotating the role through co-op placements. IMPLICATIONS:FINANCIAL As this position would likely be more administrative in nature, it is likely that it would be rated at an estimated Grade 5 level. Based on the first step of Grade 5 ($24.72 per hour), a position with a 20-hour week schedule, plus fringe benefits (25% of salary), would cost approximately $32,000 a year initially. RECOMMENDATION: Through the audit report, staff has previously recommended to council that this request wait until future budget years when funding is available and that consideration be given to increasing the use of paid co-op student placements which come at a lower cost and do not require permanent funding. 0 - 97