HomeMy WebLinkAboutFCS Agenda - 2017-11-20 - 2018 Operating Budget
Special Finance & Corporate Services Committee
Agenda
Office of the City Clerk
2018 Operating Budget
Kitchener City Hall
nd
200 King St.W. - 2 Floor
Kitchener ON N2G 4G7
Monday, November 20, 2017
9:30 a.m. - 4:30 p.m.
Council Chamber
Page 1 Chair - Councillor S. Davey Vice-Chair Councillor D. Schnider
1. FCS-17-188 2018 Operating Budget (6 hrs)
Introduction from the CAO
General Overview
Boards
Tax Supported Operating Budget
Community Grants
Enterprise Operating Budgets
Resolution
NOTE: final approval of the 2018 Operating Budget will take place as part of Final Budget Day, scheduled for
January 22, 2018.
** The Committee will recess for lunch at 12:00 noon.
Jeff Bunn
Manager, Council & Committee Services/Deputy Clerk
** Accessible formats and communication supports are available upon request. If you require assistance to
take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994 **
REPORT TO:Finance and Corporate Services Committee
DATE OF MEETING:November 20, 2017
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:October 16, 2017
REPORT NO.:FCS-17-188
SUBJECT:2018 OperatingBudget
___________________________________________________________________________
RECOMMENDATION:
For Discussion
Note: Final approval of the 2018 Operating Budget will take place as part of Final
Budget Day, scheduled for January 22, 2018.
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 toprovide:
Highlights of the 2018 Operating Budget
Overview of the Tax Supported Operating Budget
Overview of the Enterprise Operating Budgets
REPORT:
1)Highlights of the 2018 Operating Budget
The City’s operating budget funds the ongoing costs of valued public services citizens
use every day. Examples include offering a multitude of programming at the City’s 13
community centres, having drinkablewater available at theturnof a tap, and
maintainingroads in a way they are safe to drive on all seasons of the year.
The City’s operating budget also funds a number of services citizens may not think of
when they consider what the City offers them for the taxes and fees they are charged.
These services are nonetheless crucial in ensuringthe City runs efficiently and
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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effectively. Examples include operatingrobust information technology systems so
citizens are able to sign up for the programming offered at theircommunity centre,
maintaining proper records about the City’s water system to ensure compliance with
applicable legislation, and having a proper process to purchase the rightvehicles and
equipment to make the city’s roadways driveable, even throughout a Canadian winter.
The 2018 operating budget provides funding for all the City’s services. It doesn’t matter
if the service is delivered by frontline staff directly to citizens, or is needed behind the
scenes in asupporting role.Funding in the operating budget is used to maintain the
City’s current service levels, and is used to improve them based on Council direction.
The major highlights of the 2018 operating budget include:
Affordability and Sustainability
Investing in Infrastructure
Creating Community
Each of these highlights is explored below.
Highlight #1 – Affordabilityand Sustainability
In order to enjoy being part of a sustainable community, citizens must be able to afford
living there. Affordability is an issue that has been acknowledged in the 2018budget for
both property taxes, and utility rates.
The proposed net tax levy increase for 2018 is 1.7% and approximates the rate of
inflation. The majority of programs and services supported by property taxes remain at
current service levels, although there are requests for very limited enhancements to
select City services. City staff have been able to propose an increase at the rate of
inflation, despite significant cost increases due to Provincial legislative changes in
minimum wage, and increased costs related to a newly negotiated animal control
contract with the Humane Society. These cost increases have been largely offset by an
increase to the City’s investment income budget, which carries some risk, but which
staff believe is reasonable. These three changes are summarized in the chart below.
Significant Cost Increases Largely Offset by Increase to Investment Income
20172018 Tax LevyTax Levy
Budget Item
BudgetBudget$ Impact% Impact
Provincial Minimum Wage Changes$0$840,000$840,0000.72%
Humane Society Contract$341,000$626,000$285,0000.24%
Expense Subtotal$1,125,0000.96%
Investment Income Revenue ($2,150,000)($3,000,000)($850,000)(0.73%)
Total$275,0000.23%
The proposed utility (water, sanitary, stormwater) rate increase is a combined 6.5%,
which reflects the direction provided by Council earlier this year when they considered
the Water Infrastructure Program (WIP) as presented in report INS-17-070. This rate,
while higher than the rate of inflation, is a considerable decrease from the projected
utility rate increase of 9.2% forecasted for 2018 as part of last year’s budget process.
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In previous budget presentations, City staff have identified the tension between
affordability and sustainability. If you swing toofar in either direction, you either have
poor quality service levels that are cheap, or extravagant service levels that are
expensive. The City’s aim for several years, based on resident feedback, has been to
balance affordability and sustainability.
The 2018 operating budget supports sustainability by being financially viable and not
deferring deficits to future generations of ratepayers. It also supports sustainability by
continuing to invest in the maintenance of City infrastructure and even making small
increases to maintenance budgets in the areas of water and stormwater as noted in the
Water Infrastructure Program report and discussion.
Highlight #2 – Investing in Infrastructure
Infrastructure is typically associated with the capital budget, as it is the budget that
provides funding to create and replaceassets (infrastructure) used to deliver City
services. Examples of City infrastructure includeparks, community centres, and
sanitary sewer pipes.
The 2018 operating budget invests in infrastructure as it includes additional funding to
better maintain existing assets, specifically in the City’s water and stormwater systems.
Increased maintenance funding in the operating budget helps preservetheCity’s
infrastructure, which means it is in better shape to workproperly for alongerperiod of
time. This helps sustain existing service levels for citizens and postponesthe need for
capital replacement further into the future.Examples of 2018 investments include:
Additional locating of infrastructure,whichhelpsavoid damage to the City’s
underground infrastructure fromuninformed digging
Improved planning, schedulingand supervising ofwork required to reduce the
backlog of maintenance workon theCity’s watermain distribution system
Reducingthe number of cross-connections between the drinking water system
and pollution or contamination
Highlight #3 – Creating Community
While infrastructure is important to keep a city running, citizens are often looking for
more than just a place to live, they are looking for a community to which they can
belong. This concept is important to Kitchener and is reflected in the vision of theCity’s
recently adoptedNeighbourhood Strategy “Helping people connect and work together to
do great things in their neighbourhood”
The 2018 operating budget supports the creation of community by maintaining funding
for a number of valued community programs and services (e.g. community gardens,
community parks, and community events) and also by adding new resources to help
deliver on Council and community priorities. Examples include investments in
resources forthe:
Design and implementation of parks and trailsprojects
Delivery of more grassroots, neighbourhood-led projects, programs and events
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Planning, design and implementation ofbetter cycling facilities across the city
andthe ability to seek out grant funding to help pay for it
2) Overview of the Tax Supported Operating Budget
The proposed net tax levy increase for 2018 is 1.7% and would amount to an additional
$18per year, or $1.50 per month on the average Kitchener home (assessed at
$300,000). The proposed tax rate increase includes cost increases related to collective
agreements and utility rates, and additional revenues from assessment growth, user fee
increases, and the anticipated strong performance of the City’s investment portfolio.
An appendix to this report shows the 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 prior year’s budget.
The proposed net tax levy increase for 2018 balances the competing interests of
affordability and sustainability as described below.
Affordability in the Tax Supported Operating Budget
As noted in the highlights section of the report, the proposed tax rate increase of 1.7%
acknowledges affordability as it mirrors the current rate of inflation. This limited
increase has been achieved despite significant budget pressures related to Provincial
minimum wage increases and achange to the animal control contract with the Humane
Society. The proposed budget also includes a considerable increase to the City’s
investment income budget. This increase bears risk, but staff believe it is reasonable
based on the current investment climate and should be sustainable overthe long run.
While keeping tax rate increases around the rate of inflation is one of the measures of
affordability used by the City, it is not the only consideration.Budget affordability means
the budget approved by Council supports the strategic directions for financial
management. Property taxpolicy has been a long standing part of the City’s Strategic
Plan and is 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
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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, consistent with the other cities the
Region of Waterloo. The graph below shows the 2016 results of BMA’s annual tax
burden analysis for the same bungalow property in each of Ontario’s largest
municipalities. Kitchener holds the sixthlowest ranking in the province, meaning it is
one of the most affordable cities in Ontario.
Annual Tax Burden of a Bungalow in
Large Ontario Municipalities (>100,000 people)
Based on early indications, it is expected that Kitchener’s proposed2018tax rate
increase will help it maintain its low tax burden amongst large Ontario municipalities,
and will likely beamongst the lowest proposed tax rate increasesof all municipalities in
the Region of Waterloo.
Inflationary Factors, Including Those Unique to Municipalities
The proposed 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)
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Year-to-date Ontario CPI inflation to the end of Septemberis 1.7% and is projected to
bein that range at the end of the year. The following graph shows the cumulative tax
rate increase during this term of Council which is below the cumulative rate of CPI
inflation in Ontario. This meansthe tax rate increases in this term of Council are
affordablein that they are following the general trend of costs and incomes.
Cumulative CPI Ontario Inflation versus
Cumulative Tax Rate Increase in This Term of Council
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 2017budget
process is 2.2%, meaning that inflation pressures on the City of Kitchener budget are
higher than the typical Ontario household.
In setting divisional budget targets, inflationary increases are limited to a few select cost
types. For instance, budgets for compensation are increased according to collective
agreements, but budgets for supplies, and contracted services are held flat. If
increases are required in those budget lines, divisions are required to find savings, or
new ways to generate revenues to offset the increased costs. Rigorous budget review
leading to savings, reductions, and efficiencies allows the City to deliver a budget below
MPI.
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Balance of service levels versus affordability
The proposed 2018tax 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 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 enough residents to be considered
statistically significant, the 2013 Environics survey interviewed more than 1,000
residents and the findings are statistically significant.Citizen preferences towards tax
rate increases and service levels will be tested during another statistically
representativecommunitysurvey scheduled for 2018.
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
Sustainability in the Tax Supported Operating Budget
Budget sustainability means that the budget approved by Council is adequate to fund
desired 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.
Recent Operating Budget Results
The City of Kitchener had along history of operating budget deficits, but this trend
ended in 2015 with a yearend surplus for the first time in 10 years.This positive trend
continued in 2016, which ended in a surplus as well. In 2017, the August variance
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report showed a projected deficitas at the end of the year, so while tax supported
operations have recently been positive, the projected result for 2017 shows this is not a
certainty.
For the decade prior to 2015, the City had finished each year with an operating budget
deficit (before applying funds from one-time capital closeouts). In essence, the City’s
operating budget wasnot truly balancedand the cost of providing services was larger
than revenues to fund them.Over the course of several budgets, Council made
eliminating ongoing operating deficits a priority, and chose to allocate funding to budget
areas that were regularly over budget. So while full funding levels appear to have been
achieved, there is a very small margin of error between ending the year in a surplus or
deficit position. Council needs to ensure their earlierefforts to pass a sustainable
budget are not eroded by budget reductions which are not supported by underlying
operating conditions.
The table below shows the yearend history dating back to 2013.These yearend results
demonstrate the thin margin of error operating divisions have in their Council approved
budgets.
Tax Supported Operating Budget ResultsBefore Capital Closeouts
2017
2013201420152016
(projected)
(Deficit)/Surplus
Before Capital -$0.44M -$0.32M $0.98M $0.94M -$0.49M
Closeouts
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. At the end of 2017, the TSRF is projected to have a
balance of $1.7M after funding the projected yearend deficit.
Maintaining a balance in the TSRF is important as these funds are used to fund deficits
andavoid tax rate increases caused by deficits in prior yearsas prescribed in the
Municipal Act. 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 inthe
Square in 2018and possibly beyond.
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3) 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 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.
City of Kitchener Enterprises
GolfNatural Gas
BuildingWater
ParkingSanitary 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-17-171). 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; 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
areas follows:
If anenterprise has a positive stabilization reserve balance, the goal of staff is to
propose a budget (and any associated rate increase) thatensuresthe 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
annual operating deficitsin 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 enterprises are provided below.
Golf
Poor weather causing a delay in opening the golf coursesand flood events during the
season are creating a projected deficit in 2017. The Golf stabilization reserve balance
will remain in a negative balance, but is expected to improve starting in 2021 when
some existing debt is paid off, resulting in lower principal and interest payments.It is
not expected the accumulated deficit in Golf will be fully paid off until 2038 which is four
years after all the Doon Expansion debt is paid off.
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The 2018 budget for Golf is largely status quo. Some fees are being increased by 2%,
while others are being held flat to remain competitive. Overall, a positive result of
$12,000 at the end of the yearis expected, which is identical to the 2017 budget.
Budget Summary –Golf
2017Projected Actual$63,000 deficit
2017Accumulated Stabilization Reserve Balance$997,000 negative
2018Budgeted Rate Increase2%
2018Budgeted Result$12,000 surplus
2018Accumulated Stabilization Reserve Balance$998,000 negative
Building
Decreasedbuilding permit activity in 2017 is causing a projected deficitof $391,000by
the end of the year. Lower than expected results in residential projects (singles,
townhomes, and apartments) has led to lower revenues.
After reducing many Building fees by 5%in 2017, no rate increase is projected for the
next few yearsbased on the health of the stabilization reserve. This approach has been
vetted by the Waterloo Home Builders AssociationWHBAearlier this fall.No rate
increase over the next few years will reduce the funding in the stabilization reserve,
which is above the maximum target level, but is projected to be within the target range
by 2020.
Budget Summary –Building
2017Projected Actual$391,000 deficit
2017Accumulated Stabilization Reserve Balance$8,051,000 positive
2018Budgeted Rate Increase0%
2018Budgeted Result$70,000 deficit
2018Accumulated Stabilization Reserve Balance$8,091,000 positive
Parking
The 2017 projected surplus of $645,000 in Parking is betterthan budget due to
increased monthly parking revenues during garage repairs at some neighbouring
residential buildings.
Rate in the City’s parking garages are being held flat in 2018, while surface parking
rates are increasing 1.5%.
The Parking stabilization reserve is forecast to be positive in the short term, but is
projected to become negative in 2020 when the enterprise is scheduled to bear the full
costs of Traffic Demand Management and Cycling Masterplan programswhich are
currently funded by the tax base.
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Budget Summary –Parking
2017Projected Actual$645,000 surplus
2017Accumulated Stabilization Reserve Balance$109,000 negative
2018Budgeted Rate Increase0%(garages)
1.5% (surface lots)
2018Budgeted Result$409,000 surplus
2018Accumulated Stabilization Reserve Balance$519,000 negative
Gas
In 2017, Gas Delivery is projecting a surplusof $2,091,000 which is lower than the
expected surplus of $3,715,000. The lower than expected results are due to lower
revenues caused by warmer than normal temperatures at the beginning of the year.
For 2018, Gas Delivery is expected to have a surplus of $1,189,000, which will bring the
stabilization reserve very close to its minimum target balance.
Budget Summary –Gas Delivery
2017Projected Actual$2,091,000 surplus
2017Accumulated Stabilization Reserve Balance$2,062,000 positive
2018Budgeted Rate IncreaseSet outside of budget
2018Budgeted Result$1,189,000 surplus
2018Accumulated Stabilization Reserve Balance$3,280,000 positive
Water, Sanitary & Storm Water
The budgets for these three utilities are being discussedtogether as they were the
combined subject of a comprehensive review called the Water Infrastructure Program
(WIP). The WIP review took several months to complete and involved collaboration
between severaldivisions within the City including Asset Management, Engineering,
Kitchener Utilities, Operations – Environmental Services, Operations – Roads and
Traffic, Financial Planning and Communications.
The findings of the WIP review were presented and discussed by Council in September
2017 as part of report INS-17-070 Water Infrastructure Program Summary and Rate
Options. This report provided information about the infrastructure in each of the utilities
and provided Council with investment options for both capital replacement and
increased maintenance spending. All of the optionsprovided to Council were viable
alternatives that would ensure the continued safe operation of these valued utilities.
The options offered different alternatives for Council to consider, depending on their
attitudes towards cost of service and risk tolerance. Council’s consensus from that
discussion is reflected in the proposed 2018utility rate increases as shown in the chart
below.
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Proposed Utility Rate Increases Broken Into Component Parts
Regional CapitalTotal Rate
UtilityMaintenanceOther
Rate Increase(WIP)Increase
Water1.0%7.1%0.6%-4.7%4.0%
Sanitary4.2%1.9%0.0%0.8%6.9%
Storm Water0.0%9.7%2.5%-2.3%9.9%
Total2.5%5.4%0.6%-2.0%6.5%
Regional Rate Increase – Impact on the utility rate of the change in Regional
water/sanitary rates. This assumes the volumes or water/sewage processing
remain constant year to year.
Capital (WIP) – Impact of increased investment in the capital program.
Maintenance – Impact of increased investment in maintenance activities.
Other – Impact of all other changes.Examples include inflationary increases for
existing budget items,changes to water/sewage processing volumes,and
changes to net revenue/(expense).
Looking to the longer term, the combined rate increasefor these utilities are also
consistent with the consensus of the WIP review, and are projected to be considerably
lower than during the 2017 budget process. The table below shows significant
reductions to the projected combined utility rates as a result of Council’s direction during
the WIP review.
ProjectedCombined Utility Rate Increases
20182019202020212022
2017 Budget Projection9.2%9.3%9.4%9.4%9.4%
2018 Budget Projection6.5%6.5%4.5%4.5%4.5%
Further reductions to the combined utility rate arenot possible without impacting the
underlying capital and maintenance programsthat were the focus on the WIP review.
The one exception would be if the City receivedgrantfunding thatcould be used to
reduce the City’s cost of providing service. The Federal government has announced
upcoming grant funding through their Investing In Canada Plan – Phase 2, but program
details are not yet available. Depending on the parameters of the program, the City
may be able to further reduce the projected utility rate increases, but it is wholly
dependent on the specificsof the grant program.
The summary charts below show these utilities have modest surpluses budgeted in
2018, and in the case of Sanitary and Stormwater, their surpluses are required to return
their stabilization reserves to a positive balance.
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Budget Summary –Water
2017 Projected Actual$3,359,000 surplus
2017 Accumulated Stabilization Reserve Balance$1,288,000 positive
2018 Budgeted Rate Increase4.0%
2018 Budgeted Result$23,000 surplus
2018 Accumulated Stabilization Reserve Balance$1,328,000 positive
Budget Summary –Sanitary
2017 Projected Actual$853,000 deficit
2017 Accumulated Stabilization Reserve Balance$185,000 negative
2018 Budgeted Rate Increase6.9%
2018 Budgeted Result$329,000 surplus
2018 Accumulated Stabilization Reserve Balance$141,000 positive
Budget Summary –Stormwater
2017 Projected Actual$807,000 surplus
2017 Accumulated Stabilization Reserve Balance$460,000 negative
2018 Budgeted Rate Increase9.9%
2018 Budgeted Result$585,000 surplus
2018 Accumulated Stabilization Reserve Balance$119,000 positive
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 of services provided to citizens by the
City of Kitchener are shown in the chart below. The impacts are shown by budget (e.g.
tax, water, sanitary, storm water, gas) as well as by level of government (City, Region,
Province).It should be noted that the impacts attributed to the Region of Waterloo are
only for the additional costs of water supply and sewage processing that must be
absorbed within City of Kitchener utility rates. Impacts related to changes in the
Regional net tax levy are notincluded, as they are decided on by Regional Council.
The breakdown by level of government shows the City of Kitchener is responsible for
$39(or 53%) of the proposed increase, while the Region of Waterloo and Province of
Ontario are responsible for $34(or 47%) of the proposed increase. The Regional
portion of the impactrelates to increased costs for supplying water and processing
sewage. The Provincial portion of the impact relates to the costs of implementing cap
and trade legislation for natural gas.
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Impact on Homeowner
Change
20172018$%
Taxes$1,086$1,104$181.70%
Storm Water$148$162$149.90%
Water$452$472$204.00%
Sanitary$532$571$396.90%
Subtotal (pre Gas)$2,218$2,309$914.10%
Gas$788$770$(18)-2.28%
Total$3,006$3,079$732.43%
Impact by Level of Government
City of Kitchener$391.30%
Region of Waterloo$280.93%
Provincial Carbon Tax$60.20%
Total$732.43%
NOTE: The budget impact attributed to the Region of Waterloo does notinclude the
impact to taxpayers related to changes in the Regional net tax levy.It only includes the
additional costs of water supply and sewage processing that must be absorbed within
City of Kitchener utility rates.
Assumptions:
City Taxes:Current Assessed Value (CVA) of $300,000
Storm Water: property classified as Residential Single Detached Medium
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Water & Sanitary: water consumption of 204m
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Natural Gas: gas consumption of 2,100m
COMMUNITY ENGAGEMENT:
Citizens have an opportunity to provide input about priority areas of the Operating
Budget through a number of processes. Their input comes through public consultation
efforts for comprehensive master plans (e.g. Leisure Facilities Master Plan), strategies
(e.g. Neighbourhood Strategy, Customer Service 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 2018budget process, staff will continue to 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,
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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 15, 2018
Responding to the City’s Facebook/Twitter posts about the budget
Utilizing Engage Kitchener
Contacting their ward councillor
ACKNOWLEDGED BY: Michael Goldrup,Interim Deputy CAO (Finance and Corporate
Services)
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
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 6 years.
st
* 2017 – Year-To-Date (YTD) January 1 to June 30th
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
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 2017 Year-To-Date (Jan. 1-June 30th) breakdown of Building’s
customer base is 82% residential, 12% industrial/commercial and 6% 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.
The challenge continues to be remaining adequately resourced to meet provincially legislated
time frames for permit decisions and inspections. Permit activity spiked in 2016 and, as
expected, is trending slower in 2017. It is important to note that not all inspections for a permit
are completed and signed-off in the same year and do-it-yourself projects require more time to
explain how to-do-it and how to-repair-it.
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 the approval to upgrade the existing public portal for online
applications, upgrading field technology for the site inspectors and promoting Building Safety
Month (May).
The Building enterprise recognized the need to implement electronic plan review on large scale
projects including high rise buildings. The implementation is expected to be completed before
2018.
rdnd
The Building enterprise administered the termite pilot project for the 3year, and for the 2
year organized the Canstruction Fundraiser for the Waterloo Region Food Bank.
Lastly, through ongoing and prudent financial measures including high activity levels, the
Building Stabilization Reserve remains positive and sustainable over the 5 year projection time
frame including an unplanned economic downturn.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
GolfEnterprise
Operating Model/Philosophy:
Kitchener Golf provides an affordable golf experience for all.
Services Provided:
Kitchener Golf operates golf propertiesandfacilities at both Doon Valley and Rockway Golf
Courses offering affordable recreational golf opportunities, as well as facilitated camps and
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 publicspace 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 PuslinchElmira
Primetime $47$39 $57 $50 $53
Off-Peak $37$28 $45 $46 $40
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:
Aging infrastructure of club houses, maintenance and storage building.
Experienced greater than normal rainfall throughout the season. This includedperiods of
extremely heavy rain resulting in closing both courses from May 5-7 and the closure of
Doon Valley G.C. for an extended period at the end of June as a result of flooding.
Recent Successes:
Secured a donation for a 2017 youth focused golf program, which allowed 50 youth to
access Golf academy programs that would not have normally experienced golf.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
Parking Enterprise
Operating Model/Philosophy:
The Parking Enterprise’s goalis 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, 19 surface lots, on-street meters and free parking
spaces (totaling 3,939 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.
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 1,973monthly parkers and almost 450,000 daily
customers per year.The total number of monthly parkers has remained relatively stable, 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 70%.
Recent Challenges:
ION light rail transit construction activity has affected travel patterns in and around the
downtown. The ION construction is scheduled to continue until the end of 2017 and may
continue to impact parking facilities immediately adjacent to construction zones along Charles
and Duke Streets.
In 2017, the City’s monthly garage 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
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
suit with the City’s aggressive parking rate increases and contribute to eroding the
City’s marketshare.
Increased demand for surface parking spaces throughout the downtown and specifically in the
Innovation District is forecasted. In addition, supply of surface parking spaces is being reduced
as planned redevelopment of surface lots occurs. An increase to monthly surface rates and
hourly rates are warranted as demand for convenient and cheaper spaces increase and
inventory decreases.
Based on anecdotal evidence, staff anticipates increasing monthly parking rates in garage
facilities at this time will result in less overall revenue as current customers will seek out
cheaper alternatives. Increased parking rates in surface lots but not in garage facilities will
narrow the price gap enticing long-stay parkers to use garages. It is forecasted this will freeup
valuable surface spaces for short-stay customers. Increased monthly garage parking rates also
influence Downtown Kitchener’s competitive advantage. High parking prices can directly
impact current and future economic development in the downtown.
Recent Successes:
The Parking Enterprise is forecasted to achieve net revenue significantly better than budgeted
in 2017. Expenses estimates are very close to budget, but projected revenues are much higher
than budgeted. This is due mainly to a number of short term parking arrangements with
neighbouring apartments and condominiums while they complete major garage repairs.
The parking stabilization reserve fund is forecasted to be in a surplus by the end of 2017 and
continue with a small positive balance for the remainder of the 5 year forecast.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
Gas Utility
Operating Model/Philosophy:
Provide customers with quality, dependable and economical distribution of natural gas.
Provide prompt, cost effective and professional servicesrelated to rental water heaters, and
appliance servicing.
Services Provided:
Gas Supply: Kitchener Utilitiespurchases and manages the gas supply to meet customer
requirements.
Gas Distribution: As a natural gas distributor, Kitchener Utilitiesdelivers natural gas to
consumers. Work includes installingand replacing meters, underground pipe installation,
services, responseto gas emergencies involving gas line hits, gas odour, carbon monoxide, and
line locates.
Regulatory Affairs: Ensuringcompliance 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. This includes items 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
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fallen from 295,733,000 m in 2005, to 250,375,000 m projected for 2017.This can be
attributed to efficiency improvements, a decline in large industrial use, conservation
awareness, and weather.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
3
Gas Volumes - (m)
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
Primary Legislation:
Technical Standards and Safety Act 2000
Ontario Regulation 210/01 Oil & Gas Pipeline Systems
Canadian Standards AssociationZ662-11 Pipeline Systems Essentials Code
Canadian Standards AssociationZ246.1-09 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
Measurement Canada – Gas Meters
Electricity and Gas Inspection Act
Ontario Energy Board – Gas Distribution Access Rule, Demand Side Management Guidelines,
Code of Conduct, Storage and Transportation Access Rule
Climate Change Mitigation and Low-Carbon Economy Act, 2016, S.O. 2016, c. 7
Ontario Regulation 143/16: Quantification, Reporting and Verification of Greenhouse Gas
Emissions
Ontario Regulation 144/16: The Cap and Trade Program
Customer Base:
Natural Gas: 71,000
Rental Water Heaters: 42,000
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
Recent Challenges:
Construction associated with the ION light rail transit project is substantially complete, however
ongoing increased workload is anticipated due to increased administrative and safety
requirements associated with routine maintenance in the ION corridor, and increased growth
and redevelopment in the ION corridor.
Recent Successes:
The unique partnership between Kitchener-Wilmot Hydro and Kitchener Utilities, in regard to
conservation and public outreach, continues to allow Kitchener Utilitiesthe 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 the 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.
Gas main replacements associated with the ION light rail transit project are complete.
Gas Pipeline Inspectors completed a successful test on GPS equipment. This technology will be
rolled out to new and replacement gas main projects for the 2018 construction season, to
improve efficiency of collecting asset information and accuracy of as-built drawings.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
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
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of Kitchener has fallen from 22,500,000 min 2005, to a projected amount of 18,913,000min
2017. This is attributed to a decreasein industrial demand, increased water efficiency
measures, and greater conservation awareness.
3
Metered Water (m)
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2005200620072008200920102011201220132014201520162017P
Year
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
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
Customer Base:
Water: 68,000
Recent Challenges:
Addressing the maintenance backlog associated with watermains and valves within the City.
This includes valve operating checks, repair and replacement, valve chamber inspections and
repair, and watermain cleaning. Changing the focus to more proactivemaintenance requires
up-front planning, scheduling and managing of work and to follow-up on repairs.
Recent Successes:
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. The work included a survey of residents, a review of the capital program, analysis of
estimated life of pipe, and a detailed review of the maintenance program and a communication
strategy. The WIP review was presented to Council in September 2017, and resulted in Council
endorsement of one of the proposed rate options.
The 2017 watermain cleaning program involved cleaning 160 km of watermain and operation of
1,300 valves. Prior to cleaning the mains, all valves within the area needed to be exercised,
repaired and replaced (if required) so they would isolate. It is anticipated that this program will
have the following benefits by having functioning valves and removal of buildup:
Decrease the number and length of both planned and unplanned customer water
disruptions
Decrease the length of time without water
Decrease the number of customers impacted
Faster watermain repairs
Less risk of claims
Decrease reactive flushing
Increase customer confidence in the safety of the drinking water; and
Increase the reliability of the water system.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
Sanitary Sewer Utility (Wastewater)
Operating Model/Philosophy:
Removing wastewater generated in the city inan 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 900 kilometers of
pipes and 23 pumping stations to a Regional wastewater treatment facility, where the City pays
the Region for ultimate treatment and disposal. Such activities and programs include:
Pumping station rehabilitation and replacement
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 and Risk assessment, scoring, and system analysis
System for the remote control of and data acquisition from pumping stations (SCADA)
Benchmarking:
The SanitarySewer utility is participating in the National Water and Wastewater Benchmarking
Initiative which looks at key performance indicators for municipalities across the country. Data
for 2016is being gathered and will be processed to compare to previous years.
Primary Legislation:
Clean Water Act
Environmental Protection Act
Ontario Water Resources Act
Environmental Assessment Act
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.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
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. Utility rate increases will result in improvedbudgets for both maintenance and
replacement of sanitary infrastructure, and thus contribute toreduced risk to the utility.
Budgetary:
1) Construction costs for replacement and rehabilitation of infrastructure from 2004 to 2017
were significantly greater than the CPIrate of inflation.
2) Unit costs of sewage processing have been, and are expected to, increase at rates well above
the rate of inflation (these costs are controlled by the Region).
Recent Successes:
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 is now complete thereby
permitting the development of the Doon South Community Plan area.
:
Analysis
1) Development of a risk analysis software tool for use in the enhanced prioritization of
remediation work to the sanitary sewer network.
2) Development of a flow analysis tool for use in analyzing the capacity of individual pipe
sections within the sanitary sewer network for both existing and future proposed flows.
Administration:
1) New cross border servicing agreements have been established with Woolwich Township and
the City of Waterloo.
2) Transfer of the Mannheim SPS to Wilmot Township has occurred.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
Stormwater Utility
Operating Model/Philosophy:
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 kilometers of open watercourses in 20 subwatersheds, 610kilometersof
sewers, 12,000 catch basins, 16,000 manholes, 65 hydrodynamic separators, 1,200 storm sewer
outfalls and 142 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:
Stormwater Management (SWM) Monitoring Program
Sediment Management Program
Watercourse Improvement Program
SWM Facility Retrofit Program
Drainage Improvement Program
SWM Infrastructure Implementation Program
Accelerated Infrastructure Replacement Program (AIRP)
Low Impact Development (LID) AIRP
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.
Benchmarking:
The stormwater utility finalizedtheIntegratedStormwater Management Master Plan (ISWM-
MP) to replace the 2001 SWM Policy I-1135with policy MUN-UTI-2003. The master plan
establishes goals and objectives as well as provides direction to the utility until the year 2030.
There will be an annual process of measuring progress against planned progress in the ISWM-
MP.
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 2016 is being gathered and will be processed to compare results to previous years.
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CITY OF KITCHENER
ENTERPRISE OVERVIEW
Primary Legislation:
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,Ontario Water Resources Act,
Water Opportunities Act,Canadian Environmental Protection Act,
Environmental Assessment Act, Canadian Fisheries Act, etc.
Customer Base:
Every property owner in the city that has impervious surfaces on their property that contributes
to the overall stormwater runoffthat 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 ofexisting 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.
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 needed to maintain current service levels versus
the current budget allocations for such activities. This does not take into consideration the need
for additionalbudget to facilitate the transition to a more preventative maintenance approach.
3) The stormwater utility is currently looking 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 5,000tonnes of sediment from stormwater ponds in 2016/2017
returning them to their design condition to improve water quality. A total of 32 out of 146
ponds have now been cleaned out.
Capital Works:
1) The construction of Stormwater Management Facilities 10 and 66 as well as Balzer Creek is
underway and will be completed in 2017.
2) Sediment will be sampled in over 10 additional SWM ponds to complete chemical analysis
and determine the correct disposal methodology for future works.
3) Land near Idlewood Creek has been purchased for the removal of two dams and restoring
fish habitat and detailed design is currently underway.
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Committee
Operating Budget
November 20, 2017
Finance & Corporate Services
2018
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Agenda
Presentation
Introduction from the CAO General Overview Boards Tax Supported Operating Budget Community Grants Enterprise Operating Budgets Resolution
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Introduction
from the CAO
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,
budget.
affordable
An
sustainable
2018 Operating Budget:
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General
Overview
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Topic User Fees and Charges Operating Budget Capital Budget Public Input Budget Approval
Budget Calendar
Date October 30 November 20 November 27 January 15, 2018 January 22, 2018
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#kitbudget
CityofKitchener
or
-2200 x 7700
www.kitchener.ca/citybudget
CityKitchener
741
Facebook.com/
-
@
at
519
budget@kitchener.ca
us
Keep upTweetEmail PhoneSee more at
Connect to the Budget
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Highlights of the
Affordability and Sustainability Investing in Infrastructure Creating Community
2018 Operating Budget
The 2018 Operating Budget highlights include: 1.2.3.
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Sustainability
#1 Affordability and
Proposed tax rate increase of 1.7% is at the rate of CPI inflation Combined utility rate increase of 6.5% is much lower than previously forecast Forecasted rate increases are similar
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Infrastructure
#2 Investing in
Locating of infrastructure Improved planning, scheduling and supervising of work on the Water system Reducing the number of cross-connections between the drinking water system and pollution
or contamination
More funding to maintain existing City assets, specifically in the Water and Stormwater systems
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Community
#3 Creating
Parks and trails projects Grassroots, neighbourhood-led projects, programs and events Better cycling facilities across the city
Maintaining funding for existing programs and services Investing in new resources for:
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Budget Increases
Summary of Proposed
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Kitchener Budget Process Timeline
Budget direction development Departments prepare budgets Internal administrative review Council committee review Council approval
-Oct
Aug
Jan
Jul-
Mar-Jun Sep
Nov-Dec
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to the Budget
Increases for staff compensation and utilities as required No increase for administration, materials and contract services Increase for user fee revenues Find savings in existing budgets
Generate more revenue
Budget targets provided to divisions which included: If divisions need funding for items held flat in the targets, they must:
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Boards
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to $10.82M in
2017
(KPL)
Increase of 2.0% as per City guidelines
2018 budget is status quo Operating grant increased from $10.61M in 2018Expenditures have been flat lined, adjusted to reflect costs including cost of living as per City guidelines
Kitchener Public Library
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(KPL)
Kitchener Public Library
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provides more information
(CITS)
Op 01
Centre in the Square
Increase of 2.0% as per City guidelines Third year requesting transition costs Decrease of 16.3% from 2017 Issue Paper
Development Focus (Mandate B) approved in March 2015 Management change October 2015 Progress jointly with City defining needs and responsibilities all through 2016 Operating grant increased
from $1.781M in 2017 to $1.817M in 2018 CITS anticipates needing additional funding of $182,870 from the City in 2018 to fund transitional costs
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(CITS)
Centre in the Square
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Tax Supported
Operating Budget
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Budget needs to support the strategic directions for financial management Budget needs to fund existing service levels and avoid deficits
Affordability Sustainability
Two Contrasting Themes
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Affordability
Comparison to other municipalities Inflationary factors, including those unique to municipalities Balance levels of service provided with
Strive for competitive, rational and affordable taxation levels, taking into consideration the following when setting tax rates:
Strategic Plan Direction
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Affordability
Comparative Taxes
2016 property taxes (for municipalities with populations >100,000 3 Bedroom, 1.5 bathroom, single garage, 1,200 sq. ft. bungalow on 5,500 sq. ft. lot Source: BMA Management Consultants
Inc. 2015 Annual Study
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Affordability
2017 Household Comparisons
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Affordability
Ontario Inflation
Year to Date Average Consumer Price Index (CPI) = 1.7% Year to Date Average Municipal Price Index (MPI) = 2.2%
Inflation as at September 2017 Inflation pressures on Kitchener are higher than the average consumer
2017
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2016
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2015
2014
2013
2012
2011
2010
Affordability
2009
2008
2007
Inflation vs. Tax Rates
Percentage Increase
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-date figure for CPI and proposed
to
CPI & Tax Increase This Term
Affordability
Inflation vs. Tax Rates
:
Note2018 figures based on year-tax rate increase.
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Affordability
Taxes and Service Levels
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Sustainability
Projected 2017 balance is $1.7M after funding the projected deficit
Year-end results have been very close to budget in recent years Indicates there is a fine line between a surplus and a deficit City maintains a Tax Stabilization Reserve Fund to fund
deficits
Recent Operating Results
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A 1% Change
$1,166,083 $10.86
Value of 1% on the Net Tax Levy Value of 1% on average home (assessed value of $300,000)
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Percent
Assessment Growth
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(excluding Enterprises)
Department
Net Expenditure by
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Change Detail
2018 Tax Levy
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Expansion business case
Aud
Aud
*Debt Reduction &
Work included suites, restaurant & concessions 100% of new revenue streams funded the debt costs City is honouring its contractual commitment to the Rangers
Rangers Commitment
In 2002, debt was issued for a renovation to the Debt matured in 2017 2012included a split of the new revenue streams from the 2002 renovation once debt matured
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Ten Year
Tax Rate Projection
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for Parks & Trails, Neighbourhoods
Issue Papers
Title
Increasing Support and Active Transportation Increasing Exposure to Workplace Safety Insurance Board (WSIB) Costs Funding Extraordinary Items
Other Tax Supported
IP#Op 02Op 03Op 04Op 05
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Grants
Community
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Community Grants
Process Changes to
Tier 1 & 2 grant appeals will be considered by a staff committee Council will approve final Tier 1 amounts on Final Budget Day Council will approve final Tier 2 amounts through a staff
report in March
Changes approved by City Council on August 28, 2017
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$8,119
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$213,939$182,797
Estimate
$1,178,479$1,583,335
2018 Grant Increases
Overall grant budget to be increased by 2% Generally, Tier 1 groups will receive an inflationary increase of 1.7% No increase for In-Kind Facility & Travel Assistance Grants
Kind Facility / Travel Assistance
-
Grant TypeTier 1 (Community Groups)Tier 1 (Sports Groups) Tier 2 InTotal
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Budgets
Enterprise Operating
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Reserve
ve
-BalanceGolfSanitaryStorm Water
Reserve
ve
+BalanceParkingGasBuildingWater
City Dividend AllowedCity Dividend Not Allowed
This is a problem, but better than last year
Enterprise Summary
Three are allowed by legislation to pay a dividend to the tax base
Three of seven enterprises are projected to have a negative stabilization reserve at the end of 2017 Goal should be to return all enterprises to a positive position within the short
term planning horizon Enterprise Overviews included in package provide highlights about each enterprise
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Revenues have been lower than expected in new low rise residential projects including singles, townhomes and apartments Permit fees were reduced by 5% for 2017 and are planned to be
held flat until 2021
Building Enterprise
2017 permit revenues are lower than budget and are projected to be $4.1M by year end Direct expenses are projected to be $108,000 lower than budget by year end due to staff vacancies
Building stabilization reserve fund is expected to remain above the maximum benchmark in the near term but will decline in the later part of the forecast No dividend allowed as per
legislation
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Building Enterprise
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Golf Enterprise
Deficit projected to be eliminated in 2038
2017 projection is unfavourable to due later opening, closure at Doon for flooding and closures at both courses due to water saturation Memberships remain stable Increase in demand for
specials, unique golf experiences, and loyalty programs Dividend amount based on the property and income taxes as per Level Playing Field agreement with the golf industry Golf stabilization
reserve fund expected to improve once part of debt is retired after 2020
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Golf Enterprise
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surplus of $645,000
end
Parking Enterprise
Monthly parking revenues are higher than budget due to short-term gains to accommodate Starting in 2020, the Parking enterprise will once again fund the Traffic Demand Management (TDM)
and Cycling programs which will result in ongoing deficits and a declining reserve balance
Projecting a year-which is $589,000 higher than budgeted Parking stabilization reserve fund is forecasted to be in a surplus in all years of the forecast however, with the exception
of 2019 it remains below the minimum benchmark.
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Parking Enterprise
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Modified cost of service approach)
Delivery
Gas Works Utility
Warmer than normal weather (lower revenues) A change in the T3 Union Gas contract (higher expenses)
2017 actuals are less than budget due to: Gas Delivery stabilization reserve fund is expected to be lower than the minimum benchmark due to lower than expected net revenue, but is continuously
improving Dividend represents maximum allowable return based on OEB approved rates and capital structure (
82
-
O
Delivery
Gas Works Utility
3
83
-
3
O
074
-
17
to
Gas Works Utility
Includes one-time set up of inventory and consolidation of stabilization reserves Transportation Rate Combined Rate Reference Report # INS-
Supply and Transportation
Supply and Transportation are being combined as of November 1, 2017 Effective November 1, 2017, Council has approved the following rates:Stabilization fund balance is adequate
84
-
O
Gas Works Utility
Supply & Transportation
85
3
-
O
per m
074
-
17
2017
st
Cap and Trade
Reference Report # INS-
Gas Works Utility
Ontario Cap and Trade is a provincially legislated program which started January 1Effective November 1, 2017 Council has approved the following rates:
86
-
O
Cap and Trade
Gas Works Utility
87
-
O
-070, Water Infrastructure
17
Water, Sanitary, and
Report INS-Program Summary and Rate Options
Storm Water Overview
Budgets are discussed together during the budget and in other reviews Most recently (Sept 2017), these services were reviewed as part of the Water Infrastructure Program (WIP) Next few
slides provide highlights of the WIP report & presentation
Rate
Region
Wholesale 88
Wastewater
Best Practice
Other Capital
-
O
+++
Road
Region
Wholesale
Water Rate
Regulatory
Overhead, rebates, other revenues
Reconstruction
%
%
%%
3246
Capital
Region
Other 9
WIP: Breakdown of
Maintenance 13
Combined Utility Rate
Increasing risk of infrastructure failure
89
-
risk
Risk
may be
reactive
program
O
through the incurred for
maintenance maintenance
No increase to
Risk mitigation
Additional costs
Least
customers
affordable to
to customers
Affordability
Customers see
relief with rates
Most affordable
20322044
between
--
2037
195 km
20182018
KM total road
between 2018-
reconstructed
171 km between 195 km
Scenarios
years
type type
material material
80
Based on Based on
useful life
Estimated
WIP: Capital Program
13%
9.5% 6.1%
capital
Annual
increase
by 2032 by 2037 by 2044
Scenario
Scenario 2 Scenario 3
Status Quo
Scenario 1-
Gap Closed Gap Closed Gap Closed
90
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O
$0
WIP: Maintenance
Water: $1.3M Stormwater: $2.0M Sanitary:
A maintenance gap exists in two of the three utilities Staff recommended (and Council endorsed) a 5 year phase in of maintenance funding increases
Program Review Findings
2022
9.40% 6.50% 5.00% 4.50%
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2021
9.40% 6.50% 5.00% 4.50%
2020
9.40% 8.00% 7.00% 4.50%
2019
9.30% 8.00% 7.00% 6.50%
2018
9.20% 8.00% 7.00% 6.50%
Move to Option 2 accomplishments with the assistance of Federal Grant funding
Three options presented to Council Council supported Options 2 & 3 Consensus was Option 3 for 2018
Option 1Option 2Option 3
Previous Forecast
WIP: 5 Year Rate Options
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O
Water, Sanitary, and
Stormwater Rate Increase
Proposed rate increases for Water, Sanitary, and Storm Water are: This is consistent with increases presented during the Water Infrastructure Program review
93
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O
outline how increased
08
Op 06
Water Utility
Less water usage compared to budget Recovery from Region for prior period shared maintenance and water main break repairs Administration costs and water main break repairs were also
lower than budget.
Projected 2017 results are favourable compared to budget 2018 to 2022 rate forecast is based on WIP review and ranges from 3.7% to 4.5%. Water stabilization reserve fund remains positive,
but does not meet minimum balance within this 5 year forecast No dividend allowed as per legislation Issue papers maintenance funding will be used
94
-
O
Water Utility
95
-
O
Sanitary Utility
-2022, but does not meet minimum
Causes processing costs to exceed budget
Projected 2017 results are unfavourable compared to budget due to a very wet year 2018 to 2022 rate forecast is based on WIP review and ranges from 4.0% to 8.0%. Water stabilization
reserve fund is positive in 2018balance within this 5 year forecast No dividend allowed as per legislation.
96
-
O
Sanitary Utility
97
-
O
outlines how increased
Op 09
Stormwater Utility
Projected results for 2017 are unfavourable compared to budget due to high maintenance costs
2018 to 2022 rate forecast is based on WIP review and ranges from 6.0% to 9.9%. Storm Water stabilization reserve fund expected to be in a positive position for 2018 to 2022 No dividend
allowed as per legislation Issue paper maintenance funding will be used
98
-
O
Stormwater Utility
99
-
O
Resolution
100
-
O
Resolution
Operating Budget
Resolution to be passed by Committee regarding follow up items for staff
CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 01 – Continuing Transitional Funding for Centre In The Square (CITS)
FUND: Operating
DEPARTMENT: Centre In The Square
PREPARER: Deborah Daub, Director of Finance, CITS
BUDGET IMPACT: $182,870
BACKGROUND:
In 2016, Centre In The Square (CITS) was allotted $250,000 for transition funding due to the
change to Mandate B that became a new policy from the City of Kitchener for CITS to follow.
This transition funding increased the total funding for CITS to $2,000,000 when it was added to
the $1,750,000 operating grant that was approved for 2016. In 2017, this transition funding
was continued but was decreased from $250,000 to $218,500.
RATIONALE / ANALYSIS:
The request reflects the decision taken 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
Kitchener-Waterloo Symphony (KWS) is implemented over a 2 – 4 yeartimeframe,and to
continue to make the necessary adjustments for the Mandate fiscally possible, CITS is asking for
a continuation of this transition funding with a decrease of $35,630 from the 2017 amount.
This would amount to an additional transitional funding of $182,870. With the increase of CITS’
operating grant by inflation to $1,817,130, this additional funding will leave the total funding
provided by the City to CITS at $2,000,000 matching the total amount received in 2016 and
2017.
FINANCIAL IMPLICATIONS:
This money will continue the funding of the Front of House costs for our community partners,
the KWS and the Grand Philharmonic Choir, that started in 2016 and will allow CITS to continue
to work with other smaller arts presenting organizations within Kitchener by working out a way
to cover the costs of their usage within the Studio and Main Theatres at CITS.
RECOMMENDATION:
That approval be granted for additional transitional funding of $182,870 for the CITS to be
disbursed from the Tax Stabilization Reserve Fund at the request of the CITS Board, with
Council being notified by email of the request, and that any yearend surplus be split 50/50
between the CITS and the City.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 02– Increasing Support for Parks & Trails, Neighbourhoods and
Active Transportation
FUND: Operating & Capital
DEPARTMENT: Infrastructure Services & Community Services
PREPARER: Cynthia Fletcher, Justin Readman, & Michael May
BUDGET IMPACT: None (seeking approval of FTEs only)
BACKGROUND:
The creation of new permanent full time equivalent positions (FTEs) within the organization
requires City Council approval. This issue paper is seeking approval of three FTEs which are
closely connected to Council priorities and to the City’s Strategic Plan (parks, trails,
neighbourhoods and active transportation). Funding for all three FTEs already exists within the
City’s Operating or Capital budgets.
RATIONALE / ANALYSIS:
Landscape Architect
Lifecycle needs of park and trail related infrastructure and feedback from residents consistently
identify demand for park and trail improvement works. To address the capital needs for parks
and trails improvements there has been a corresponding growth in the capital budget of 240%
over the past 10 year with no increase to permanent FTEs. These include Council priorities such
as the Iron Horse Trail improvements; McLennan Park Great Lawn; South Kitchener District
Park; Huron Natural Area and the community gardens strategy. Temporary contracts have
helped to address staffing needs, however this does not provide a sustainable approach in the
long term.
Landscape Architects have responsibility for several functions including: park & trail initiatives
(master planning, design, public consultation, contract drawings, tendering, construction
administration, and inspections), development review (subdivision, site plan, zoning, and
official plan) as well as the work associated with neighbourhood led initiatives driven by the
City’s #lovmeyhood strategy.
The funding of the Landscape Architect FTE would be through existing park & trail capital
budgets with no increase to capital or operating budgets.
Neighbourhood Liaison Coordinator / Project Manager
The City has four part-time Neighbourhood Liaison positions that are meant to spend the vast
majority of their time in the community, working to help residents and partners to plan,
promote and execute grassroots neighbourhood-led projects, programs and events. Since these
positions were created, the response from the community has been very positive. Some
examples of projects the Neighbourhood Liaisons have supported include: the Wilson Avenue
Public School resident-led traffic calming project; the Chandler Mowat Festival of
Neighbourhood capital grant project; the Stanley Park Community Centre community garden;
the Cherry Park shade structure; additional amenities at Max Becker Park; the Riverwood
Community Block Party, and the Victoria Park Neighbourhood Action Plan.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
Staff has determined that the Liaisons are spending too much time working ‘behind the scenes’
on project management and other internal requirements. This has meant they have not been
able to spend as much time as they should working directly with residents. The addition of a full
time FTE to coordinate the work of the Neighbourhood Liaisons, and provide internal project
management support will free-up the Liaisons to spend more time to working directly with
residents to support their projects. This change will increase the level of support City staff can
provide to residents, while helping to move neighbourhood projects forward faster.
Funding for this position has been reallocated from lower priority areas within the Community
Services Department operating budget.
Active Transportation Planning Project Manager
The City has one full time Active Transportation Planning Project Manager responsible for
seeking out and applying for grant opportunities, refreshing the long-term cycling master plan,
engaging the community, planning, designing and implementing cycling facilities as well as
promoting active transportation and transportation demand management initiatives. The City’s
2012 Cycling Master Plan identified the need for a second FTE in order to assist with delivering
on all of the recommended actions. For the past two years the staffing gap has been filled by
hiring a student to assist with some elements of program delivery, which creates risks and
limitations to program delivery. When the cycling master plan was first adopted, much of the
work being delivered focused on marketing and promotion. In recent years, more focus has
been on infrastructure design and implementation; however, implementation has not kept up
with the pace required to complete a minimum grid of cycling infrastructure, which is required
to make cycling a viable mode of transportation.
This new position will ensure that the City is maximizing funding opportunities from other levels
of government. In addition, and as other cities have proven, real increases in cycling mode
share happen when a complete, connected, and properly designed minimum grid of
infrastructure is completed. This position will help ensure the minimum grid is designed
properly and implemented in a timely manner so that the program is delivered while
maximizing funding from other levels of government. In addition, this position will play an
active role in working with new office development in the downtown core to promote active
transportation so the City can defer and/or eliminate the need for additional and costly parking
structures.
Funding for this position will be provided through the Transportation Demand Management
capital account.
FINANCIAL IMPLICATIONS:
No new funding is required for these FTEs.
RECOMMENDATION:
That a total of three FTEs for the following fully funded positions be approved:
Landscape Architect, Neighbourhood Liaison Coordinator/Project Manager, and Active
Transportation Planning Project Manager.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 03– Increasing Exposure to Workplace Safety Insurance Board (WSIB)
Costs
FUND: Operating (WSIB reserve funded through fringe benefits)
DEPARTMENT: FCS –Human Resources
PREPARER: Michael Goldrup, Director, Human Resources
BUDGET IMPACT: None
BACKGROUND:
During 2017 budget discussions, it was identified that the estimated value of future benefits
costs for Workplace Safety and Insurance Board (WSIB) claims has increased significantly over
time mainly due to changes legislatively in claim coverage. This value is estimated each year-
end by the WSIB and represents both the value of existing claim costs, future costs of existing
claims and potential future liability of presumptive and Post Traumatic Stress Disorder (PTSD)
claims.
The “presumptive legislation” implemented by the Provincial Government for illness/injury
which is deemed to be occupational for fire fighters allows for claims dating back to 1960 to be
submitted retroactively, meaning, if approved, large cost claims in the $700k to $1M range
now have the potential of being approved by the WSIB and funded from the WSIB reserve.
These large claims could outpace growth or funding provided in the current reserve and will
result in a large unfunded deficit and instability in the WSIB reserve if not addressed. The
potential for these large claims has increased over time since the first presumptive legislation
was enacted in 2008 and the related potential for liability increased from 2014 to 2017 as new
cancers were added to the legislation, as well as post-traumatic stress disorder (PTSD)
coverage.
The City funds all WSIB costs directly as a “schedule 2” employer. In 2016, the balance in the
City’s WSIB reserve, which represents the monies set aside to cover the costs of WSIB claims,
was projected to be $1.3M at year end. At that time the reserve balance was not growing
sufficiently to cover potential large retroactive claim costs as annual contributions were being
offset by annual costs. As part of the 2017 budget process, Council made the following
additional contributions to the WSIB reserve:
$109,000 one-time
$439,000 ongoing
Since the last full actuarial valuation performed at the City was from December 31, 2014, there
was no credible experience data specific to the newer presumptive legislation availableat the
time of the 2017 budget discussion in 2016. As a result, the full impact of the presumptive
legislation was not included in the independent actuarial estimate. An updated actuarial review
was commissioned in 2017 for year-end 2016 to properly inform future decisions regarding
WSIB Reserve funding, as requested by Council during the 2017 budget.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
RATIONALE / ANALYSIS:
This actuarial valuation has now been completed by Mondelis. A 2016 actuary report on WSIB
benefits analysis (actuary report)and WSIB estimated value of future benefits (WSIB report)
have been received. Both reports are calculated based on 2016 data.
The actuary report estimated the City’s current liability for existing WSIB claims to be $9.6M.
This is very close to the WSIB report which is $10.1M. Minor differences between the WSIB
report and the actuary report liability amounts are attributed to differences in assumptions
used for calculation purposes such as differences in discount rate used based on cost of
borrowing, and differing estimation of inflation.
The actuarial liability does not represent a projection of the full future cost of potential WSIB
claims. Neither liability report attempts to project future potential claims, nor the costs
associated with those claims.
The actuary report recommends that the future liability of $9.6M be funded in the WSIB
reserve. It is recommended through the actuary report that annual contributions over a 10 –
15 year period would be appropriate to grow the reserve to achieve this balance, noting the
potential for volatility in the reserve as new claim costs and large retroactive claims cannot be
projected or anticipated with precision.
FINANCIAL IMPLICATIONS:
Based on the current reserve projection for yearend and average annual expenditures, the
ongoing funding to the WSIB reserve has been reduced by $89,000 (from $439,000 to
$350,000). Based on current projections, this will achieve the recommended funding level in
the WSIB reserve within the actuary’s recommended timeframe of 10 – 15 years.
RECOMMENDATION:
For information.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 04- Ensuring Accuracy of the City’s Assessment Base
FUND: Operating
DEPARTMENT: Finance and Corporate Services - Revenue
PREPARER: Joyce Evans, Directors of Revenue/Deputy City Treasurer
BUDGET IMPACT: None (costs covered through new revenue generation)
BACKGROUND:
The City has historically used a retired Municipal Property Assessment Corporation (MPAC)
Assessor to help ensure accuracy of the City’s assessment base. This includes undertaking a
range of activities to ensure that new assessment is accurately picked up by MPAC as soon as
properties change use, as well as auditing proposed downward adjustments (e.g., rebates and
write-offs) to ensure that they are accurate. This role also entails representing the City’s
position with MPAC and the Assessment Review Board (ARB) as required. It provides value to
the community by maximizing in-year supplementary taxes from new development and
minimizing the potential for excessive reductions.
Other cities typically have full-time staff members that perform these essential functions. The
City has been able to manage with part-time hours from a retiree to this point but, for reasons
outlined below; this approach is no longer feasible. The City should convert this long-standing
informal role into core complement. While there is no net financial impact associated with the
change, additions to core complement require Council approval.
RATIONALE / ANALYSIS:
Property taxes received by the City are levied against its “assessment base”. Property
assessments for each individual property are calculated by the Municipal Property Assessment
Corporation (MPAC) and, collectively, all assessments for Kitchener are known as its assessment
base. Kitchener’s assessment base is continually growing and changing. For example new
assessment should be added as new buildings are constructed, enlarged or renovated. Existing
assessments should change as property uses change. Rebates and write-offs should only be
paid where the requirements of the Municipal Act are met. Failure to capture these changes on
an accurate and timely basis could result in under billed property taxes and excessive rebates
which impacts in-year City revenues. In addition, MPAC’s changes to assessment are
increasingly being challenged and appealed by property owners to the Assessment Review
Board (ARB) with the help of assessment consultants, which requires an expert City presence at
the hearing in order to ensure that the City’s interest is represented. It is not MPAC’s role to
represent the municipality.
To give a sense as to the extent of the assessment base to be managed, the City has 76,000
properties on the assessment roll. It is estimated that there are approximately 4,000
adjustments made to individual assessments each year because in-year changes to properties
(i.e., for supplementary taxes, rebates, appeals, etc.). This does not include the 4-year
reassessment cycle which sees every assessment value changed, adding an extra layer of
complexity.
Because of the sheer volume of changes happening to Kitchener’s assessment base each year, it
is not feasible for MPAC to capture and record every change correctly or in a timely manner.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
While the City supplies MPAC with building and planning data sets to identify property changes
for assessment purposes, the data doesn’t cover every scenario. There can be a timing lag in
new assessment coming onto the roll and MPAC cannot physically view every property to
validate the assessment. In the past, the City has lost tax revenues due to the inability to
manage a continuous audit of MPAC values and to determine whether their information is
accurate and complete.
As an example, farmland awaiting development is taxed at a reduced level. When the land is
scraped to begin site servicing, it becomes taxable at a higher level. The trigger for MPAC to
capture this change is typically when the property is inspected by MPAC. If MPAC is not aware
of this change, the property may continue to be taxed at the lower level, potentially until
development of the land happens. To mitigate this, the City conducts an annual physical
inspection of farmland awaiting development and flags for MPAC any properties which have
commenced grading or servicing. This results in additional in-year supplementary tax revenue
for the City.
The City has used the services of a retired MPAC Assessor for approximately 20 years to provide
limited internal assessment expertise, but the role is becoming more demanding and time
consuming to resolve issues. As well, the incumbent has signaled his intention to fully retire.
Further, regarding ARB hearings, the number of hearings is increasing and new rules of the ARB
require the person attending ARB hearings to be licensed by the Law Society of Upper Canada.
This qualification would be a requirement of any position attending ARB hearings going
forward.
As part of the 2018 budget process, staff are proposing two new full time equivalents (FTEs) be
hired to ensuring accuracy of the City’s assessment base. Formalizing theseroles on a
permanent basis would allow the City to review assessment information at an in-depth level
and catch incorrect/omitted assessments in a timely manner. This will help ensure that in-year
net supplementary tax revenues are maximized, and the City has a more accurate assessment
base. Some of the duties for these roles include:
Reviewing MPAC information to ensure it is accurate and complete
Monitoring building/occupancy permits to ensure properties are added to the
assessment roll in a timely manner and that the assessment amounts are reasonable
Inspecting properties to ensure they are recorded accurately on the assessment roll
(e.g. vacant properties, farmland awaiting development)
Notifying MPAC of issues with the assessment roll
Representing City interests on City-owned assessment issues
Representing the City at ARB hearings
Staff is confident that the costs related to the two positions will be offset through gains in
supplementary taxes or reduced write-offs. A few examples to demonstrate the savings that
can be achieved are below:
The retired assessor identified that anoccupancy permit related to a commercial
property had been missed by MPAC. As a result, the City was able to recover $17,000 in
taxes.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
As a result of an onsite visit and inspection related to an application for a vacancy rebate
of a commercial property owner, approximately $85,000 was saved in 2017.
It is important to note that there have been instances where the City has lost tax revenueas
staff have not been able to inspect or investigate assessment discrepancies due to a lack of in-
house expertise.
FINANCIAL IMPLICATIONS:
None. The increased cost associated with this change (estimated at $175,000) can be offset
through modest gains in supplementary taxes and reduced write-offs. The minimum efficiency
gain which is required to be cost-neutral is 5% against gross supplementary/write-off budgets
of $3.4M. This is an attainable target and one against which performance will be measured.
RECOMMENDATION:
That one Property Assessment Analyst position and one Property Assessment Review
Administrator position be approved to ensure accuracy of the City’s assessment base and
protection of the City of Kitchener’s assessment base.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 05– Funding Extraordinary Items
FUND: Operating
DEPARTMENT: General Expense & Revenue
PREPARER: Ryan Hagey, Directorof Financial Planning
BUDGET IMPACT: $275,000 (included in budget)
BACKGROUND:
The City’s operating budget funds the day-to-day costs of all the services provided by the City.
Typically these costs increase by an inflationary amount every year, as the costs of staffing,
program materials, and contracted services increase. Occasionally, extraordinary items need to
be included in the budget, as these items are more than just an inflationary change to an
existing program budget.
Three extraordinary items of note in the 2018 budget are:
Increased costs related to changes in Provincial minimum wage legislation
Increased costs of a newly negotiated service contract with the Kitchener Waterloo
Humane Society
Increased investment income
RATIONALE / ANALYSIS:
Provincial Minimum Wage Legislation – budget impact of $840,000
Earlier this year, the Provincial government released Bill 148, also known as the Fair
Workplaces, Better Jobs Act. The Bill includes several changes such as personal emergency
leave, on-call provisions, and equal pay for part-time employees, but the most significant
change impacting the costs of City programs and services is an increase to minimum wage.
Under the Bill, the hourly rate for minimum wage will increase from $11.60 to $14.00 on
January 1, 2018, with a further increase to $15.00 on January 1, 2019. The estimated cost to
the City’s tax supported services in 2018 related to all aspects of Bill 148 is $840,000 (includes
applicable fringe benefit costs). There will also be additional costs to the 2019 budget based on
the further increase of minimum wage.
Humane Society Contract – budget impact of $285,000
In September 2017, Council approved a new multi-year contract for the Humane Society. This
involved a one-time correction of the cost sharing between the City and Humane Society (in
2018) to be followed by inflationary increases in future years. The 2018 budget impact as
outlined in report CSD-17-079 is $285,000, or an increase of nearly 84%.
Investment Income – budget increase of $850,000
After several years of interest rates being held at historically low levels, the Bank of Canada
increased interest rates twice in 2017. This has led to higher interest rates in the overall
market, meaning higher returns for the City’s investment portfolio. The 2018 investment
income budget has been increased by $850,000 based on expected investment balances and
projected interest rates. The proposed 2018 investment income budget is $3M, which is the
highest budget amount in the past 10 years (as shown in the graph below).
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
Relying on increased investment income bears some risk, since investment returns are not
guaranteed and global economic conditions can impact the City’s investments. The City has
experienced this in the past when interest rates decreased rapidly in 2009/2010. At the end of
2008, City investment yields were around 2.40%, but just one year later they had fallen to
under 1%. The graph below shows how a change in interest rates reduced the City’s
investment income from $3.5M in 2008 to $1.2M in 2009…a $2.3M reduction.
Multi-Year History of Investment Income Budget versus Actual
Staff have reviewed the City’s investment portfolio and projected returns for 2018. Staff
believe increasing the investment income budget by $850,000 (from $2.15M to $3M, or a 39%
increase) is reasonable and should be achievable. Increasing the budget above $3M is not
advised as it bears additional risk, and makes the City more susceptible to sudden rate changes
in the market.
FINANCIAL IMPLICATIONS:
The overall impact on the tax supported budget is $275,000 or 0.23% as shown in the table
below.
2017 2018 Tax Levy Tax Levy
Budget Item
BudgetBudget $ Impact % Impact
Provincial Minimum Wage Changes $0 $840,000 $840,000 0.72%
Humane Society Contract $341,000 $626,000 $285,000 0.24%
Expense Subtotal $1,125,000 0.96%
Investment Income Revenue ($2,150,000) ($3,000,000) ($850,000) (0.73%)
Total $275,000 0.23%
RECOMMENDATION:
For information.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 06– Protecting the Water System from Cross Contamination
FUND: Operating
DEPARTMENT: Infrastructure Services - Utilities
PREPARER: Matt Ryan, P.Eng – Supervisor, Loss Prevention & Maintenance
BUDGET IMPACT: $67,000 (included in budget)
BACKGROUND:
In 2002 the City of Kitchener passed a Cross Connection Control/Backflow Prevention By-law
(2002-135) to support the movement in protecting our source of potable (drinking) water from
being contaminated. As part of a multi-barrier approach to drinking water, it is the City’s
responsibility to help protect the citizens from potential cross contamination in the drinking
water.
Backflow is defined as any actual or potential cross-connection between a potable (drinking)
water system and any source of pollution or contamination. Cross-connections are present in
every drinking water supply system, and depending on the size of the system, hundreds or
thousands of potential cross-connections can exist. The terms cross-connection control and
backflow prevention are often used interchangeably.
RATIONALE / ANALYSIS:
The Water Infrastructure Program (WIP) report (INS-17-070) presented in September 2017,
identified gaps in the Water utilities maintenance program, including resourcing of the Cross
Connection Control Program. Currently, there is one Cross Connection Control Specialist
managing the entire program. This staff person currently performs both the technical and
administrative components of the program.
Backflow prevention devices are required to be checked and certified yearly. This requires a
significant amount of administrative work to track, send notifications, and follow up with
property owners. The need for backflow prevention devices will continue to increase as more
properties are developed or homeowners install irrigation systems, which also require a cross
connection devise.
A dedicated Cross Connection Control Clerk is required to manage the growing administrative
requirements of the program. This would allow the Cross Connection Control Specialist to focus
on the technical and in-field service aspects of the program and less time on day-to-day
administrative functions. The Clerk would be the first point of contact for the
plumbers/customers, and would complete data entry into the system.
FINANCIAL IMPLICATIONS:
The cost of the new Cross Connection Control Clerk position is $67,000 and has been included
in the 2018 Water operating budget.
RECOMMENDATION:
That one Cross Connection Control Clerk position be approved in order to better protect the
water system from cross contamination.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 07– Locating Underground Infrastructure
FUND: Operating
DEPARTMENT: INS - Utilities
PREPARER: Matt Ryan, Supervisor- Loss Prevention and Maintenance
BUDGET IMPACT: $150,000 (included in budget, split 50/50 between Water & Gas)
BACKGROUND:
Bill 8, an Act Respecting an Underground Infrastructure Notification System for Ontario came
into effect June 2012. The act states “the member shall make all reasonable attempts to do the
things required by subsection (1) within five business days…”, and further that “A person or
entity who does not comply with section 5, 6 & 7 is guilty of an offence and on conviction is
liable to the fine set out in the regulations made under this Act.”
Kitchener Utilities and their Locating Contractor physically locate gas and water infrastructure
for contractors when they plan on excavating. When infrastructure is not properly located, the
contractor may damage the infrastructure. Gas escapes can result in explosions/evacuations as
well as claims and lawsuits. It is essential that experienced personnel (with drawings and
locating equipment) be responsible for locating infrastructure.
RATIONALE / ANALYSIS:
Kitchener Utilities employs two full-time staff as well as a contracted locating firm to manage
the cyclical volume of locates. An increase in the locating contract is required to meet the
demand and turnaround for locates. The factors contributing to the need for an increased
budget are:
Increased number of locate requests; due to an increase in locate awareness (via the
Ministry of Labor and the Technical Standards and Safety Authority) and general
construction within the City. From 2009 to 2016, there has been an increase in the
number of yearly locate requests from 9,076 to 17,098.
Locates expire after 30 days so remarks are necessary. Each excavator is required to have
their own locates, so the same stretch of road has several locate requests. The
infrastructure is constantly changing so the infrastructure has to be physically located.
FINANCIAL IMPLICATIONS:
Additional funding of $150,000 has been included in the 2018 operating budget. The funding is
split evenly between Water and Gas, so each utility has budgeted an additional $75,000 for
locates.
RECOMMENDATION:
For information.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 08- Reducing the Backlog of Maintenance Work on the Watermain
Distribution System
FUND: Operating
DEPARTMENT: Infrastructure Services– Utilities
PREPARER: Angela Mick, Utilities Water Engineer
BUDGET IMPACT: $118,000 (included in budget)
BACKGROUND:
The Water Infrastructure Program (WIP) report (INS-17-070) presented in September 2017)
identified gaps in the Water utilities maintenance program, including resourcing of the
maintenance programs. These programs are vital because they ensure proper operation of the
City’s water system, in compliance with provincial legislation.
RATIONALE / ANALYSIS:
As outlined in the WIP report, there is a backlog of work to do in the annual maintenance of
watermains and valves within the City. A partial list of maintenance activities that have a
backlog includes:
Watermain flushing program
Valve and large service valve operating checks, repair and replacement outside of the
cleaning zone, including critical valves
Valve chamber inspections and repair
Dead end main flushing to increase chlorine residuals
Subdivision/reconstruction inspections
Hydrant maintenance, fire flow tests
There are currently 45 construction and maintenance staff positions that are supervised by four
full time supervisors. One additional full time position is required based on a continuing
increase in infrastructure related work. The supervisor will focus on proactive maintenance
which requires up-front planning, scheduling and managing of work, and to follow-up on
repairs. This proactive maintenance will result in long-term annual savings and extend the
useful life of the water distribution system assets.
Implications of not having appropriate supervision on maintenance programs include:
Increased safety risk to staff, the water distribution system, and the citizens
Increased risk of follow-up not being completed
Increased risk in mandatory compliance paperwork not being submitted/monitored.
FINANCIAL IMPLICATIONS:
The cost of the new Supervisor, Utilities Operations (Technical) position is $118,000 and has
been included in the 2018 Water operating budget.
RECOMMENDATION:
That one Supervisor, Utilities Operations (Technical) position be approved in order to plan,
schedule and supervise work required to reduce the backlog of maintenance work on the
watermain distribution system.
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
ISSUE: Op 09– Increasing Stormwater Maintenance Program
FUND: Operating
DEPARTMENT: Infrastructure Services – Operations, Environmental Services
PREPARER: Denise McGoldrick
BUDGET IMPACT: $400,000 Stormwater Utility
BACKGROUND:
The Water Infrastructure Program (WIP) review and rate options were presented to Council at a
strategic session on September 25, 2017. As a component of WIP, a maintenance program
review was conducted for the stormwater program which considered the Integrated
Stormwater Management Master Plan, asset management principles, regulatory requirements
and industry best practices. It was identified that the stormwater program has a maintenance
gap of $2.0M. Key stormwater maintenance program gaps identified in report INS-17-070 are
summarizedin table 1 below.
Table 1: Summary of Stormwater Maintenance Program Gaps
ProgramBenefits of Program Total Financial
Gap
1) Watercourse Prevents blockages to reduce the risk of flooding, $449,200
inspection & damage to the downstream environment and
maintenance maintains channel capacity for increased flows
during large rain events
2) Sediment Provides for proper testing and disposal to meet $155,400
management regulated requirements for sediment management
3) Catchbasin/ Inspection and maintenance of catchbasins and $393,400
maintenance maintenance holes to ensure proper drainage and
hole inspection that the structure is not a hazard in the right of way
and (per provincial maintenance standards)
maintenance
4) Low Impact Ensures LID infrastructure (e.g. infiltration facilities, $45,000
Development permeable pavement, etc.) are functioning as
(LID) intended and prevents blockages that could cause
maintenance flooding and water quality impairment.
5) Storm main Protects the integrity of the storm sewer main and $626,800
repair prevents main breaks that have the potential to
cause sinkholes and flooding to public and private
property.
6) Leaf Provides leaf collection in mature treed areas to $210,000
collection prevent leaves from covering the catchbasins and
decreases risk of flooding
7) Other Includes various other program areas such as $120,200
programs sweeping, culvert maintenance, storm sewer
maintenance, spill response
Total $2.0M
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CITY OF KITCHENER
2018 BUDGET ISSUE PAPER
Staff evaluated how to best address the maintenance gap from an implementation feasibility
perspective and recommended the maintenance program gap be phased-in over a 5 year
timeframe (i.e. an increase of $400,000 annually to the stormwater budget). Phasing in the
increase allows time for programs to be properly developed and resourced and also aligns with
the 5 year rate forecast. Council endorsed the 5 year funding phase-in for the maintenance
gap.
RATIONALE / ANALYSIS:
Staff has prioritized the maintenance gaps identified in Table 1 and identified storm main
repairs (item #5) as the most critical funding need for the 2018 budget. Currently, Kitchener
has over 600 km of storm sewer mains and only 58% of the system has been inspected. As
inspections occur, defects and failure risks are identified and there are currently approximately
850 known issues identified that require repair.
The outcome of this program will be better conveyance of stormwater, reduced back-
ups/flooding, regulatory compliance, reduced risk of litigation and improved stormwater
service to customers. In addition, by repairing/replacing sections of pipe that are in poor
condition, the life of the pipe is extended.
FINANCIAL IMPLICATIONS:
Additional funding of $400,000 has been included to the 2018 operating budget for increasing
storm main repairs.
RECOMMENDATION:
For information.
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