HomeMy WebLinkAboutINS-17-070 - Water Infrastructure Program Summary and Rate Options
REPORT TO:Special CouncilStrategic Session
DATE OF MEETING:September25,2017
SUBMITTED BY:Cynthia Fletcher, Interim Executive Director, INS (741-
2200 x4424)
Justin Readman, Interim Executive Director, INS (741-
2200 x7646)
PREPARED BY:Denise McGoldrick, Director of Operations – Env.
Services (741-2600 x4657)
Alicia Bennett, Business Analyst, Infrastructure Services
(741-2600 x4423)
WARD(S) INVOLVED:All
DATE OF REPORT:September 8, 2017
REPORT NO.:INS-17-070
SUBJECT:Water Infrastructure Program Summary and Rate Options
___________________________________________________________________________
RECOMMENDATIONS:
For discussion.
EXECUTIVE SUMMARY:
The Water Infrastructure Program (WIP) was initiated in spring 2017 to evaluate variables
that influence the water, sanitary sewer and stormwater rates with the intent of providing
rate options for Council consideration to support the 2018 budget process. The WIP review
involved collaboration between various divisions within the City including Asset
Management, Engineering, Kitchener Utilities, Operations – Environmental Services,
Operations – Roads and Traffic, Financial Planningand Communications.
The key activities of the WIP review include:
Statistically valid survey of Kitchener residents’ awareness and attitudes towards
infrastructure and rate increases;
Council strategic session to obtain feedback on guiding principles and variables that
influence rates;
Special Council meeting to tour the water infrastructure;
Detailed review of the capital program including analysis of current pipe condition
data and estimated life of pipe;
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
Detailed review of the maintenance program including a gap analysis and phase-in
strategy to address the gap;
Review of other variables that may influence the rates;
Review of other municipal practices and rate comparisons;
Development of rate options based on the outcomes of capital, maintenance and
other variables review; and
Development of a communication plan.
Council, as the owner of the water, sanitary sewer and stormwater system, has oversight
responsibilities and a standard of care to ensure the following:
All standards and regulatory requirements are met;
Maintenance and capital activities ensures the infrastructure is in a state of good
repair;
That the systems are appropriatelystaffed and supervised with qualified persons;
In large part, these responsibilities are met through the approval of budgets and associated
utility rates.
The purpose of the Strategic Session is to provide Council with combined rateoptions and
obtain feedback on which combined rate option to bring forward through the 2018 budget
process.
BACKGROUND:
The drinking water, sanitary and stormwater systems are critical infrastructure that deliver
essential services such as reliable and safe drinking water, sanitary sewer collection,
protection of our source waterand reduced risk from weather-related incidents like flooding.
These services provide the backbone for the high quality of life that City of Kitchener
residents enjoy. Asafe and healthy city relies on strong, reliable infrastructure.
The A
ccelerated Infrastructure Replacement Program(AIRP) was launched in 2002. The
purpose of the program was to evaluate the age and useful life of our water infrastructure
and plan for replacement funding until 2032. During the 30 year program, the plan
originally identified the need to replace 260 km of water, sewer and stormwater pipes by
2032. The AIRP program goal was to provide both physical and financial sustainability to
our water infrastructure.
Since 2002, there has been an increase in the growth ofwaterinfrastructure and
heightened regulatory requirements for drinking water, sanitaryand stormwater systems.
Construction costs have inflated faster than the consumer price index (CPI)inflation rate.
In addition, asset management practices have matured to a point of being able to collect
quality condition data and an increased understandingofthe cause and effect of
maintenance activities as they relate to the overall condition of the infrastructure.
Through the 2017 budget process, staff heard two key feedback themes:
A need to provide a clearer understanding of the water utility rates and variables
which influence rate recommendations; and
Concerns regardingthe current combined water rate projections and the impact on
long term affordability to customers.
In response to the feedback, staff committed to providing Council with more information
and rate options to consider prior to the 2018 budget process.
The Water Infrastructure Program was initiated in spring 2017 to review the capital and
maintenance programs, as well as, evaluate other variables that influence the water,
sanitary sewer and stormwater ratesand includes:
Review of other municipalities’ practices
Development of rate options based on review of variables and guiding principles,
Development of a framework for WIP future review and updates
Development of an ongoing communication plan
Communication/Consultation
Communication efforts were made during the 2017 budget process and subsequent first
billing cycle to assist ratepayers in understanding that the key drivers of rate increases are
regional costs related to water & sewage processing, capital infrastructure replacement,
and operating maintenance costs.
Feedback was tracked through the budget survey, social media comments, and direct
contact through phone or email. The main themes of this feedback included:
Affordability concerns
Lack of understanding on what is driving rates (e.g. comments about Light Rail
Transit)
Support for infrastructure investment
In order to better understand Kitchener residents’ awareness and attitudes towards rate
increases and infrastructure investment, a statistically valid, representative survey of 600
households was conducted in April 2017. Some highlights of the survey include:
More than 70% ofKitchener residents are satisfied with the reliability of their water,
sanitary sewer andstormwater services and approximately two thirds are happy with
the quality of their drinking water.
Approximately one-half of residents (47%) are aware of the City of Kitchener’splan
to maintain and replace water-related infrastructure.
When asked to express a preference for managing the City’s water-related
infrastructure or keeping rates as low as possible, residents are more likely to opt for
maintaining and replacing infrastructure.
When asked how concerned they are of experiencing a service issue in the future,
39% report that they are very or somewhat concerned.
The feedback received is helpful to understand resident priorities related to the Water
Infrastructure Program and confirm guiding principles to provide an evaluation lens for WIP
options.
Guiding Principles
To assist in the development and evaluation of infrastructure investment options and
associated combined rate optionsthe following guiding principleswere followed:
Ensure regulatory requirements are met or exceeded
Consider the likelihood of infrastructure failure and the financial and service delivery
impact.
Ensure the City is able to deliver consistent, quality service to customers today and
into the future.
Consider customers’ ability to pay.
Information about the Water Infrastructure Program (including what makes up water
utility rates and any rate changes) is clearly communicated to customers.
Water Infrastructure ProgramVariables
At the May 15, 2017 Council Strategic Session, Council provided feedback on the variables
that have the potential to affect water infrastructure rates and identified their top three
rd
priority areas (note that the two variables were tied for 3place). Feedback from the
Council Strategic Session is provided in Table 1.
Table 1: Ranking of Variables
VariablesRank
Estimated Useful Life of Infrastructure
1
Maintenance Program
2
Customer Financial Assistance
3
Project Estimation
3
Inflationary Factors
4
Reserve Levels
4
Climate Change Impacts
5
Growth Forecasts
6
Debt Tolerance
6
Asset Sale
6
Council’s ranking of variables aligned with staff’s prioritization, which ranked “estimated
useful life of infrastructure” and“maintenance program” as the two most important variables
on which to conduct a thorough analysis. The variables “debt tolerance” and “asset sale”
were removed from further consideration because they were the lowest ranked variables
andat the Strategic Session several members of Council provided feedback that they
should be removed. Further, staff provided information on asset sale and debt tolerance
through the 2017 budget process and the information is still valid.
This report provides summary information from the detailed review on the top two variables
with options for Council to provide feedbackon today. The remaining variables are
discussed under the section “Other Variables”.
REPORT:
The purpose of this report, INS-17-070, is to provide a summary of the Water Infrastructure
Program (WIP) review and provide rate options for Council’s consideration. The water,
sanitary and stormwater utilities generate all of the funds required for their operations,
maintenance and capital projects from utility rates, service charges and external grant
opportunities (no revenue is generated from property taxes). The utility rates include
various factors that influence the rate; both controllable (internal) and uncontrollable
(external). Figure1 provides a breakdown of the combined water, sanitary and stormwater
rate. The single largest factor is the Region’s wholesale rate, applied to the water and
sanitary sewer rate, which is an uncontrollable rate driver and accounts for nearly 50% of
the City’s combinedrate.When forecasting rates, it is important to incorporate the impacts
(both positive and negative) of external and internal drivers, even though the City’s ability to
influence the rates is limited to internal drivers whichare the focus of the Water
Infrastructure Program (WIP).
Figure 1: Breakdown of Combined Water, Sanitary and Stormwater Rate
9%
Other
13%
Maintenance
32%
Capital
46%
Regional
Variable #1 WIP Capital Program
As a component of the WIP, investigation and analysis has been performed on the long-
term capital projection of the water, sanitary, and stormwater networks (formerly named the
AIRP). Much of this work has focused on refining staff’s understanding of the needs
surrounding when and how much capital remediation work is required to be performed on
this infrastructure.
EstimatedLife
The long term capital replacement accomplishment objectives (and budget) identified
previously through the AIRP, were driven by a replacement-needs model of an estimated
80 years of useful life for the water, sanitaryand stormwater pipes. The estimated useful
life of 80 yearswas applied to all pipe materials andwas based on data and best
professional judgment available at the time of program development at it’sinception in the
early 2000’s. Analysis methodologiesand the quality and quantity of data have matured
significantly since this time. More accurate descriptions of infrastructureinventories,
condition, and performance behaviors can now be used to predict long term (25+ years)
replacement needs.
As such, the estimated useful life of infrastructurehas been refined based on the material
type of the pipe and analysis of local performance data to estimatewhen there will be
significant risk of failure. Local factors that influence the lifecycle of underground
infrastructure include:
soil type/corrosivity;
weather (frost penetration depth and freeze/thaw cycles); and
installation practices
The estimated useful life of infrastructurehasbeen modified based on additional criteria of
material type and infrastructurecondition and performance. A review of estimated useful
life utilized by other municipalities was also conducted to confirm that local observations
were within the range observed by other municipalities. Based on this analysis, the
following estimated useful life of pipe infrastructure was applied to Kitchener’s inventory:
cast iron pipe – 50 years
ductile iron pipe – 80 years
plastic pipe – 100 years
Other pipe (e.g. concrete)– 80 years
Figure 2 provides a schematic of how assets deterioratewith age and illustrates the
importance of preventative maintenance and rehabilitation activities to prolong the life of
assets and decrease risk of failure. In evaluating capital replacement scenarios, the
relationship between maintenance program, capital replacement and risk management
were considered.
Figure 2: Relationship between Capital and Maintenance Activities
Time-based Preventative
Maintenance
Excellent
Condition
Rehabilitation with
$$$$
the potential of
extending the useful
Preventative Trigger
life
$$
Optimize activities to
maximize the life of the
asset
Rehabilitation Trigger
Increased
reactionary costs
Replacement Trigger
Risk of failure is
high
$$$
Poor/Failed
Condition
New
Expected
Asset Age
Lifecycle
Long-term Capital Projection Scenarios
As of 2017, there is a backlog of infrastructure replacement needs compared to the
projected replacement target. Figure 3 demonstrates the cumulative replacement need
projection based on the analysis of estimated life of infrastructureand the gap between the
replacement need and replacement accomplished. In building the future Water
Infrastructure Program, staff hasconsidered scenarios to close the backlog gap and
maintain an ongoing replacement target.
Scenario 1: Status Quo – Replacement Needs Gap Closed by 2032
This scenario uses the previously forecasted replacement projection based on
estimated useful life of 80 years and provides 171km of road reconstruction
projected tobe accomplished between 2018-2032.
To achieve this target, funding for the capital replacement program will increase by
13% annually.
Represents the lowest risk of infrastructure failure and associated service impacts of
the three scenarios.
Represents the scenario that is the least affordable for ratepayers.
Scenario 2: Replacement Needs Gap Closed by 2037
This scenario uses the updated useful life information based on material type and
provides 195km of road reconstruction projected to be accomplished between 2018
to 2037.
To achieve this target, funding for the capital replacement program will increase by
9.5% annually.
This scenario attempts to balance risk of infrastructure failure with customer
affordability
While it is recognized that scenario 2 extends the time to address the infrastructure
backlog from the current target of scenario 1, risk mitigation has been considered
through the maintenance program.
The proposed maintenance programfor water, sanitary and stormwater has
incorporated programs that either have a positive contribution to prolonging the life
of infrastructure and/or are service oriented to minimize risk and impacts to service
levels. The relationship between capital and maintenance programs is provided in
figure 2.
Scenario 3: Replacement Needs Gap Closed by 2044
This scenario uses the updated useful life information basedon material type and
provides 195km of road reconstruction projected to be accomplished between 2018-
2044.
To achieve this target, funding for the capital replacement program will increase by
6.1% annually.
Represents the highest risk of infrastructure failure and associated service impacts
of the three scenarios.
Represents the scenario that is the most affordable for ratepayers.
While risk mitigation has been considered through the maintenance program,
additional costs may be incurred for reactive maintenance activities such as
watermain breaks and sewer breaks.
Figure 3: Long-term Capital Replacement Scenarios
Variable #2 WIP Maintenance Program
A maintenance program review and gap analysis was conducted for the water, sanitary and
stormwater maintenance programs. In reviewing and refining annual maintenance
programs for the three utilities, the following was identified:
The sanitary maintenance program is in a fairly stable position and there were no
maintenance program gapsidentified.
The water maintenance program review identified a $1.3M annual maintenance gap.
The stormwater maintenance program is relatively new and has a larger annual
maintenance gap of $2.0M.
While the majority of maintenance programs are mandatory for the water and stormwater
utilities, staff evaluated program areas that would be considered best practice, but are not
necessarily mandated, for Council’s consideration. Insome cases, staff identified where
reductions to program frequencies may also be a consideration.
Key maintenance program gapsand best practice costsfor water and stormwaterare
described in Table 2 and 3 respectively.
Table 2: Summary of Water Key Maintenance Program Gaps
ProgramBenefits of ProgramTotal Best
Financial Practice
GapCost
Watermain Removal of iron and manganese build-up to $389,000$0
cleaning decrease reactive discoloured water flushing,
programreduce iron-bacteria related corrosion, improve
water quality and increase customer confidence
in the water.
Valve Ensure that valves will work to isolate mains in $755,000$61,500
maintenance & emergencies and for construction to minimize
replacement disruption length, number of customers affected
programand reduce watermain break repair costs.
Cross Decrease the number of potential cross $60,000$0
Connection connections in the system to prevent drinking
Control water contamination.
program
Hydrant Regulatory requirement to test hydrants $21,000$21,000
operation and annually, winterize to ensure they don’t freeze,
maintenanceclear of snow, maintenance of painting for
corrosion protection and customer confidence in
the only visible water infrastructure.
Underground To prevent damage to underground $75,000$0
utility locatesinfrastructure, potential injuries and fines by
marking out underground mains for
construction.
Total$1.3M$82,500
Table 3: Summary of Stormwater Key Maintenance Program Gaps
ProgramBenefits of ProgramTotal Best
Financial Practice
GapCost
Watercourse Prevents blockages to reduce the risk of $449,200$103,500
inspection & flooding, damage to the downstream
maintenanceenvironment and maintains channel capacity for
increased flows during large rain events
Sediment Provides for proper testing and disposal to meet $155,400$0
managementregulated requirements for sediment
management
Catchbasin/ Inspection and maintenance of catchbasinsand$393,400$0
maintenance maintenance holes to ensure proper drainage
hole inspection and that the structure is not a hazard in the right
andof way (per provincial maintenance standards)
maintenance
Low Impact Ensures LID infrastructure (e.g. infiltration $45,000$15,000
Developmentfacilities, permeable pavement, etc.) are
(LID) functioning as intended and prevents blockages
maintenancethat could cause flooding and water quality
impairment.
Storm main Protects the integrity of the storm sewer main $626,800$0
repairand prevents main breaks that have the
potential to cause sinkholes and flooding to
public and private property.
Leaf collectionProvides leaf collection in mature treed areasto $210,000$210,000
prevent leaves from covering the catchbasins
and decreases risk of flooding
Other Includes various other program areas such as $120,200$0
programssweeping, culvert maintenance, storm sewer
maintenance, spill response
Total$2.0M$328,500
Staff evaluated how to best address the maintenance gap from an implementation
feasibility perspective. It is recommended that the maintenance program gap be phased-in
over a 5 year timeframe to allow time for programs to be developed and resourced and to
align with the 5 year rate forecast. Table 4 provides the recommendedimplementation of
the required maintenance program to address the total financial gap.
Table 4: 5 Year Phase-In of Annual Maintenance Program Gap
20182019202020212022Total
Stormwater$400,000$400,000$400,000$400,000$400,000$2.0M
Water$260,000$260,000$260,000$260,000$260,000$1.3M
Sanitary$ 0$ 0$ 0$ 0$ 0$ 0
Total$660,000$660,000$660,000$660,000$660,000$3.3M
The previously projectedmaintenance increase for water, sanitaryand stormwater for 2018
was 2% of the total rate increase which equated to $2,025,000 combined. The
recommended phase-in identified in table 4, equates to a 2018 combined maintenance
increase of $660,000, representing a reductionof $1,365,000 or 67% from the previous
2018 forecast.
As noted above some maintenance program elements are discretionary and considered
best practiceactivitiesto reduce risk to the city. The total annual maintenance cost of best
practice items for stormwater is $328,500 and for water is $82,000, implemented over a 5
year period. Table 5 provides a summary of the one year impact of removing these
maintenance items over the 5 year phased implementation.
Table 5: Annual Impact of the Best Practice Activities over the 5 year Phase-in Period
UtilityItem Description$ Amount% Change % Change
per UtilityCombined
StormWatercourse Maintenance$20,7000.16%0.02%
StormLow Impact Development (LID) $3,0000.02%0.00%
Maintenance
StormLeafCollection$42,0000.32%0.05%
WaterHydrant Maintenance$4,2500.01%0.00%
WaterValve Maintenance$12,3000.03%0.01%
Other Water Infrastructure Program Variables
In addition to the capital and maintenance variables, other WIP variables identifiedby
Council (seetable 1) were reviewed. Summary information is provided for each variable
below.
Customer Financial Assistance / Affordability
Potential programs are being explored to support low income residents in their efforts to
pay water, sanitary sewer and stormwater expenses. A working group, consisting of
representation from area municipalities and the Region has been formed and isdeveloping
more detailed analysis, criteria and options for Council consideration in 2018.
Project Estimation
Development of the 10-year capital forecast requires cost estimates in order to establish
the appropriate budget for a project. Depending on the stage of the project, this cost
estimate may be derived in different ways and include varying levels of contingency
(typically from 5-10% of overall project costs). A review of project estimation methods and
contingency thresholds confirms that the estimationprocess is based on industry best
practices and incorporates an annual review process to annually update industry costing
trends. As budgets are refined through the design process, contingency levels are also
refined. There is always risk ofunforeseen factors which complicate water infrastructure
replacement projects (e.g. weather, material costs, etc.).
Reserve Levels
Reserve funds are created to set aside funds to be used to buffer abnormal program scope
or costing variations and/or to accumulate financial resources for future use.
Municipalities should strive to maintain an appropriate level of reserve funds to ensure
future liabilities can be met, capital infrastructure are properly maintained and sufficient
financial flexibility exists to respond to economic cycles or unanticipated financial
requirements. Reserves are typically used for both operating (rate stabilization reserve) and
capital (capital reserve).
Staff reviewed current reserve policies to determine if the minimum/maximum target levels
need to be adjusted. Staff are not recommending changes to the reserve policy at this time
however recognize that while reserve levels remain below the minimum target level for the
water, sanitary and stormwater utilities, that any new revenueshould be directed to
address existing capital and maintenance gap and not to the reserves. Staff will re-
evaluate every 5 years, as part of the comprehensive review for the WIP and once the WIP
is in a better financial situation it is recommended that minimumtargets are met.
Climate Change Impacts
Localized climate projections for Waterloo Region (2015) indicate that there will be an
increase in intensity, duration, and frequency of rain events, increased temperatures and
wind events, and extreme weather fluctuations (e.g. freeze/thaw). These climate change
projections have implications for the water, sanitary sewer and stormwater systems. The
City is currently examining risk, mitigation and adaptation measures through the Corporate
Climate Action Plan (CORCAP). The WIP is participating in the CORCAP and any
recommendations related to addressing climate change impacts will be provided through
the CORCAP and incorporated into future WIP reviews.
Grant Opportunities
The WIP review considered how best to incorporate grant opportunities to minimize rate
impacts to Kitchener’s ratepayers. The unpredictability of external grant opportunities
cannot be forecasted adequately to be applied to the WIP rate forecast in a meaningful
way. For example, in2017, Kitchener was awarded $3.6M from the Clean Water
Wastewater Fund Phase 1 for capital replacement, but it was only provided as a one-time
allocation. Future funding of this type has been announced, but no details are available, so
it is premature to include it in budget forecasts. As external grants are realized, the
additional capital work accomplished will be applied to subsequent WIP reviews to evaluate
accomplishment targets and ongoing capital needs.
Inflationary Factors
Inflation is incorporated into annual budget increases and used to forecast costs over
longer period of time (e.g. capital and operating forecasts). Inflation applied to capital
programs is 2% however as cost estimates are refined, inflation is also factored into new
unit costs to be applied to detailed design estimates. No changes are recommended to the
application of inflation to the capital program.
In terms of the operating budget, inflationary factors are not consistently applied across the
three utilities and ranged from 2% to 3%. Through the WIP review it was determined that a
2% inflation factor would be applied to the operating budget for all of the utilitiesto provide
a consistent factor and to align with the CPI target for the Bank of Canada.
Growth
Staff reviewed growth forecasts with the objective to align projected customer and
infrastructure growth based on the Growth Management Plan, the annual growth
monitoring report, and the five year average growth realized. Based on the analysis of 5
year average growth and future growth forecastsand associated infrastructure growth, staff
have applied a growth factor of 2% (water, sanitary sewer) and2.5%(stormwater)to the
maintenance program in WIP.
Rate Options
Rate optionsfor the combined water, sanitary sewer and stormwater utilitieshave been
developed utilizing thethree differentcapital scenarios presented in this report. It should
be noted thatthe maintenance programhas a 0.57% total rate impact for all options.
Should Council want to removesome or all of the best practice maintenance program
items, staff isprepared to calculate associated rate impacts at the September 25 Council
Strategic Session.For comparison purposes, staff hasalso provided the previously
approved rate forecast inAppendix A and summarized the proposed rate increases over 5
years in table 6.
Table 6:Previous Combined Rate Forecast 2018-2022
20182019202020212022
9.20%9.30%9.40%9.40%9.40%
Option 1 (status quo)
Option 1 represents the capital program projection (Scenario 1) as previously provided
through the AIRP andincorporates the reduced maintenance program funding described in
this reportphased in over five years.The five year rate forecast and the average
household impact is provided in Appendix B and summarized in table 7. Table 8 provides
the2018 total rate increase and the allocation between the various components of regional
rate increase, capital, maintenance and other program areas.
Table 7: Option 1 Combined Rate Forecast 2018-2022
20182019202020212022
8.00%8.00%8.00%6.50%6.50%
The key highlights of option 1 include:
2018 combined rate increase is 8.00%
The 2018 average household increaseis $90.94
The difference from the previous 2018 rate forecast provided through the 2017
budget process results in areductionof $13.34to the average household in 2018.
The change in the five year forecast from the previous rate forecast results in a total
cumulative reductionof $151.16.
Table 8: Option 1 – 2018 Rate Increase broken into component parts
Regional
Rate Total Rate
UtilityIncreaseCapital MaintenanceOtherIncrease
Water0.95%7.99%0.59%-4.23%5.30%
Sanitary4.27%4.43%0.00%0.30%9.00%
Stormn/a11.60%2.59%-2.19%12.00%
Total2.42%6.91%0.57%-1.90%8.00%
Option 2
Option 2 incorporates the capital scenario 2, addressingthe capital needs gap by 2037,
and incorporates the maintenance program funding needs phased in over five years. The
five year rate forecast and the average household impact is provided in Appendix C and
summarized in table 9 below. Table10provides the 2018 total rate increase for rate option
2 and the allocation between the various components of regional rate increase, capital,
maintenance and other program areas.
Table 9: Option 2 Combined RateForecast 2018-2022
20182019202020212022
7.00%7.00%7.00%5.00%5.00%
The key highlights of option 2 include:
2018 combined rate increase is 7%
The 2018 average household increase is $79.61
The difference from the previous 2018 rate forecast provided through the 2017
budget process results in areductionof $24.67to the average household in 2018.
The change in the five year forecast from the previous rate forecast results in a total
cumulative reductionof $239.30.
Table10:Option 2 – 2018 Rate Increase broken into component parts
Regional
Rate Total Rate
UtilityIncreaseCapitalMaintenanceOtherIncrease
Water0.93%7.10%0.57%-3.90%4.70%
Sanitary4.12%3.38%0.00%-0.20%7.30%
Storm0.00%10.03%2.56%-1.69%10.90%
Total2.42%6.00%0.57%-1.99%7.00%
Option 3
Option 3 incorporates the capital scenario 3, addressing the capital needs gap by 2044,
and incorporates the maintenance program funding needs phased in over five years. The
five year rate forecast and the average household impact is provided in Appendix D and
summarized in table 11 below. Table 12provides the 2018 total rate increase for rate
option 3 and the allocation between the various components of regional rate increase,
capital, maintenance and other program areas.
Table 11: Option 3 Combined Rate Forecast 2018-2022
20182019202020212022
6.50%6.50%4.50%4.50%4.50%
The key highlights of option 3 include:
2018 combined rate increase is 6.5%
The 2018 average household increase is $73.94
The difference from the previous 2018 rate forecast provided through the 2017
budget process results in areductionof $30.34to the average household in 2018.
The change in the five year forecast from the previous rate forecast results in a total
cumulative reductionof $302.87.
Table 12: Option 3 – 2018 Rate Increase broken into component parts
Regional
Rate Total Rate
UtilityIncreaseCapitalMaintenanceOtherIncrease
Water0.89%6.21%0.55%-3.65%4.00%
Sanitary4.07%2.48%0.00%0.35%6.90%
Storm0.00%8.49%2.52%-1.11%9.90%
Total2.42%5.12%0.57%-1.61%6.50%
Review of Other Municipal Practices and Rate Comparisons
The City of Kitchener is a member of the National Water and Wastewater Benchmarking
Initiative which provides a strategic management model and benchmark data to help
Canadian Water, Wastewater and Stormwater utilities improve operational performance.
Comparison of key benchmarking metrics provides the following observations for Kitchener:
The number of watermainbreaks experienced are higher than the national median;
The number of emergency storm sewer repairs are the highest amongst participating
municipalities;
The preventative maintenance programs of watermain flushing and valve exercising
are significantly below the national median;
The total number of staff (full-time equivalents) isbelow the national median;
The stormwater operations and maintenance costs are below the national median;
The capital program reinvestment is slightly above the national median;
The total cost to provide water is slightly below the national median
In addition to municipal comparison through the National Water and Wastewater
Benchmarking Initiative, comparison of area municipalities’average annual household
impact for water and sanitary sewer costs from 2014 to 2017 are provided in figure 4.
Figure 4 illustrates the following:
There is an increasing trend in annual household water and sanitary sewer costs for
all area municipalities; and
City of Kitchener average household costsare comparable to other area
municipalities.
Figure 4: Average Annual Household Costs for Area Municipalities
Source: Area Municipality Water/Sewer Best Management Practice Group
Water Infrastructure ProgramComprehensiveReview Frequency
The WIP review is a collaboration of many different divisions including Asset Management,
Engineering, Kitchener Utilities, Operations-Environmental Services, Operations-Roads
and Traffic, Financial Planning, and Communications. A key benefit of the WIP
comprehensive review is the collaboration and information sharing provided through the
process.
It is recommended that the WIP comprehensive review occurs every five years for the
following reasons:
The quality and quantity of infrastructure data will continue to improve andfurther
refinements to the program are anticipated;
The condition and performance of the water infrastructurewill change over time;
Best practices and regulatory requirements will change over time; and
Additional funding opportunities may be realized that influence the WIP.
To support the WIP five year comprehensive review process, a standard operating
procedure will be developed at the completion of the 2017 WIP Reviewto document the
review process and define roles and responsibilities.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Strategic Priority:Sustainable Environment and Infrastructure
Strategy:
4.5 Strengthen the capability and capacity within the organization to manage all of the
city’s assets so thatthey are affordable, dependable and sustainable in the long-
term.
4.6 Improve the City of Kitchener’s ability to leverage funding opportunities for the
development and renewal of infrastructure through federal or provincial programs
and other partnerships
Strategic Actions:
Work towards developing asset management plans for all asset categories enabled
by organizational structure and business processes.
Explore options to accelerate capital funding for the renewal of roads, water and
sewer infrastructure.
FINANCIAL IMPLICATIONS:
Financial implications are discussed throughout the report.
COMMUNITY ENGAGEMENT:
Community engagement completed through the 2017 budget process and the 2017
resident survey informed the Water Infrastructure Program, particularly the guiding
principles and communication program.
A Special Council meeting to tour the water infrastructure was conducted August 30, 2017
and was open to members of the public and the media.
Communication and awareness of the Water Infrastructure Program and this report INS-17-
070 was provided via:
City’s website: http://www.kitchenerutilities.ca/en/ourcompany/Investing-in-
Infrastructure.asp
social media
local media outlets (e.g. CTV, the Records, Kitchener Post)
ACKNOWLEDGED BY:
Cynthia Fletcher, Interim Executive Director, Infrastructure Services
Justin Readman, Interim Executive Director, Infrastructure Services
Appendix A: Previous Rate Forecast from 2017 Budget
Appendix B: Rate Option 1 – 5 year rate forecast
Appendix C: Rate Option 2 – 5 year rate forecast
Appendix D: Rate Option 3 – 5 year rate forecast