HomeMy WebLinkAboutFIN-08-113 - Referral of Projects to the 2009-2018 Capital Forecast - Financial Services DeptI L REPORT 74
Report To:
Councillor B. Vrbanovic, Chair, and Members of
$ 325•••
the Finance and Corporate Services Committee
Date of Meeting:
October 20, 2008
Submitted By:
Dan Chapman, General Manager of Financial Services
Prepared By:
Rosemary Upfold, Director of Accounting
$ 5455•••
Joyce Evans, Director of Revenue
$ 5565000
Wally Malcolm, Director of Utilities
Ward(s) Involved:
ALL
Date of Report:
September 30, 2008
Report No.:
FIN-08-113
Subject: REFERRAL OF PROJECTS TO THE 2009-2018 CAPITAL
FORECAST — FINANCIAL SERVICES DEPARTMENT
111 11 0
THAT the following capital projects be included in the 2009-2018 capital forecast for
consideration by the Finance and Corporate Services Committee as part of the 2009 budget
deliberations, as outlined in staff report FIN-08-113:
General Expenses
SAP/Cityworks Software Upgrade
$ 2755000 2014
$ 2855••• 2018
Ppvpni ip
Point of Purchase System Upgrade
$ 505000 2012
$ 505000 2016
Development and Maintenance of the Tax/Utility System (CIS)
$ 1005000
2009
$ 325•••
2010
$ 1645000
2011
$ 2985000
2012
$ 5325•••
2013
$ 5455•••
2014
$ 5565000
2015
$ 5655•••
2016
$ 5655•••
2017
'� • � 111
Utilities — Water
Uncommitted Water
$ 995000
2•••
$ 485000
2• •
Trenchless Pipe Rehabilitation
$ 2505000
2009
Main Replacement —
Tyson Avenue
$ 805000
2•
Main Replacement —
Bridge Street
$ 3005000
2009
Main Replacement —
Vict• South
' 3505000
2010
Main Replacement —
Frederick Street
' 1005000
2010
Main Replacement —
Victoria Park
$ 1255000
2009
Utilities — Gas
Demand Side
$
925000
2009
$
885000
2• •
$
845000
2•
$
805000
2•
•••
2013
• •••
2014
$
655000
2015
$
605000
2• .
•••
2017
$
3005000
2018
Replacement
$
1025000
2009
1045000
2010
1065000
2011
1065000
2012
$
1085000
2013
• •••
2014
•••
2015
•••
2016
•••
2017
$
2385000
2018
11ew Large 1T.1,,e_te__xJnsta_Ls__
$
365000
2009
$
345000
2010
$
335000
2011
$
325000
2012
$
305000
2013
$
295000
2014
$
285000
2015
$
275000
2016
$
255000
2017
$
1005000
2018
New Gas Meter Sets
�`` 1005000 2 //•
AND FURTHER THAT the contract for the CIS consultant (John Little) be extended by 6 months
to June 30, 2009 to complete the "Multi-Tiered Delivery Rates Project" and assist with the
technical requirements for the Gas Distribution Access Rules (GDAR) Phase 11
All new capital projects with budgets in excess of $50,000 are referred to the City's ten-year
capital forecast by a resolution of Council. They are then evaluated during the budget approval
process against all other project priorities and funding constraints. This report provides
information and recommendations with respect to new project priorities for the Financial
Services Department.
�014
SAP/Cityworks Software Upgrade
The Delta Project is implementing software including SAP, Cityworks and RIVA. Software
upgrades will be provided by each of the vendors as part of the annual maintenance
agreement. In order to keep the software current, capital funds are being allocated for a major
system upgrade in 2014 and 2018, consistent with industry practice. The upgrade costs include
consulting fees and staff salaries. It is anticipated that over time less reliance will be placed
on consultants as staff knowledge increases. The cost is estimated to be $275,000 in 2014
and $285,000 in 2018 and funding is provided by the tax-supported budget and City enterprises
in proportion to transaction volumes.
Point of Purchase System Upgrade
The Point of Sale system is being implemented in 2009 and is expected to require upgrading on
a periodic basis. The amounts included in the capital budget, $50,000 both in 2012 and 2016,
are estimates to allow for these upgrades. 20% of the cost is funded through the tax base with
80% funded through utilities.
Development and Maintenance of the Tax/Utility System (CIS)
The majority of the CIS budget (88%) funds the full-time staff team that maintains and upgrades
the system. While the 2008 capital budget provided sufficient funding ($1.6 million) for the CIS
team, the funding was projected to decline beyond 2008. In light of increasing regulatory and
system functionality requirements and a significant backlog of work, it is recommended that the
2009 capital budget be maintained at the 2008 level and inflated at a rate of 2% thereafter. The
funding split for the CIS capital budget is made up as follows:
• Gas Utility
60%
• Water Utility
13%
• Sewer Utility
13%
• Tax Base
14%
The Ontario Energy Board (OEB) introduced the Gas Distribution Access Rules (GDAR) in
December 2002. The implementation deadline set by the OEB was June 1, 2007. In order to
meet the anticipated tight deadlines in an environment where the specifications were still
changing, the CIS project team started work on GDAR in January 2004. As anticipated, the
final specifications for the system were not known until mid-March 2006, resulting in some
unavoidable redesign/rework being required for Phase I. As well, some system requirements
were delayed until Phase 11 and some temporary manual "work-arounds" were put in place, with
the automated solution for these components being delayed until Phase 11.
CIS consultant assistance in transitioning to a self-sufficient model and developing system
design documents has been invaluable since the City became self-supporting for the CIS
system in May 2000. The succession plan over the last several years has been to increase the
capacity of the internal staff project team to allow for the phasing out of the use of the external
consultant. That plan has been working very well to date, resulting in all support and much of
the design for smaller modules in the system, and all development of new modules now being
completed by the internal staff project team.
In reviewing the options of completing the "Multi-Tiered Delivery Rates Project" and assisting
with the technical requirements of GDAR Phase 11, Staff has concluded that use of the CIS
consultant (John Little) to lead the design component for this phase is the most effective
approach to take, for the following reasons:
• Earlier expected completion date of May 1, 2009, compared to a completion date of
September 2009 using only internal staff resources; and
• Kitchener Utilities was unable to mirror the Union Gas structure of multi-delivery rates in
2008 due to system limitations, resulting in potential new revenue being foregone by the
Utility. The same issue can be anticipated in 2009 if the functionality is not implemented
on a timely basis.
Uncommitted Water Mains
This budget is a provision for unforeseen replacements (including City infrastructure on
Regional roads), including water mains as well as hydrants, valves, chambers, etc. that are
found to be faulty once a project starts. The budget for this line is proposed to increase for 2009
and 2010 as there are currently more demands on the account because of increased
infrastructure renewal. Staff will continue to evaluate the sufficiency of the budget over the next
two years.
Trenchless Pipe Rehabilitation
$250,000 is proposed for a pilot on trenchless rehabilitation of water pipe to be done in
conjunction with a similar project on the sewer side in 2009. This will be done in an area where
it benefits both Utilities and then the road work can go forward without the need to excavate and
deal with the deep underground. This project is funded through water rates.
Water Main Replacements
The following water mains are proposed for replacement, funded out of water rates:
• Tyson Avenue ($80,000 in 2011) —This project runs off Bridge Street, where the work
referenced immediately below is happening. There is a long dead end and no
redundancy in this pocket so this addition should help both water quality and security of
supply.
• Bridge Street ($300,000 in 2009) —This is part of the Lancaster Street roundabout
project. Bridge Street is being repaved as part of the project and the City has had
multiple breaks on the water main so it should be replaced while the road is being
constructed. The PRV is needed as pressures constantly run in excess of 700 Kpa.
• Victoria Street South ($350,000 in 2010) —This is the last westerly phase of the Region
transmission main strategy that has a 600 mm main going from the 600 mm on Fischer-
Hallman through to Lancaster Street. While the Region is installing the 600 mm the City
will replace the 300 mm where all the services connect. This has been done all along
the Victoria Street project.
• Frederick Street ($100,000 in 2010) —This project is timed to coincide with the
construction of the new courthouse. This project is somewhat dependent on the extent
of surface work that is required.
• Victoria Park ($125,000 in 2009) —This project will replace an old section of various
sized water main that runs between Dill Street and Roland Avenue through Victoria
Park. This corner is being reconstructed (all infrastructure) but there is a looping main
that runs through the park. This may be a candidate for trenchless replacement.
Traditionally, small water main replacements (not part of a full road reconstruction) have been
funded through the uncommitted water mains account. However, the historical level of funding
in this account has been $50,000 annually, which is not sufficient to fund the major works that
are contemplated over the next several years as itemized above.
The proposed increase in this budget will establish a provision of $300,000 per year for demand
side management programs. This is required due to the increasing volumes for REEP energy
audits, increase in partnership opportunities with other energy service providers, increasing
volumes for furnace rebates and new rebates for tank-less water heaters.
In order to determine a long-term budget target for DSM initiatives staff has reviewed
submissions from Union Gas and Enbridge to the Ontario Energy Board with respect to their
requirements for residential programs. Those utilities typically set aside 2-3% of gas delivery
revenues for DSM. If Kitchener Utilities is to mirror the approach of these other utilities,
approximately $10-12 per customer would be allocated to the program per year, which
equates to approximately $600,000 per year for DSM. The current $300,000 budget is focused
on residential programs, but there is potential to evolve the program to incorporate non-
residential customers in the future. Staff is currently exploring opportunities to cooperate with K-
W Hydro on DSM programs and to co -brand and co- sponsor to mutual customers. Staff is
seeking clarification and input from the OPA to determine if there is an interest or opportunity to
work with the OPA and K -W Hydro to expand their proposed energy audits and rebates geared
to industrial and commercial customers by adding gas and water to the audits and potential
rebates. Staff will report to Council as part of a future budget process should there be additional
budget requirements associated with an expansion of the program.
• Energy efficient thermostat replacement ($5,500)
• Advertising and Media Tools to promote energy efficiency, provide tips and advise of
grants available ($60,000)
• Funding for the Residential Energy Efficiency Program (REEP) to provide rebates for
customers to complete home energy audits ($65,000)
• Kitchener Utilities Rebate Programs to upgrade to more energy efficient water heaters
and furnaces ($160,000)
• Other ($9,500)
Replacement Gas Mains
The budget for this line has been doubled for all years (current budget is $100,000 annually).
As the accelerated infrastructure program is ramped up, more funds are required for those
streets that require upgrading of the gas plant. This project is funded through gas rates.
New Large Meter Installs
The budget for new large meter installs has been increased to $100,000 in all years of the
forecast to more accurately reflect the current level of activity related to oil to gas conversions
and the construction of new developments.
New Gas Meter Sets
An additional $100,000 is requested for 2009 to fund new small meter installations based on the
projected requirements of the capital account.
FINANCIAL IMPLICATIONS:
If supported, the capital projects proposed in this report will be referred to capital budget
deliberations on November 24, 2008. They will then be evaluated against all other capital
projects and funding constraints within the ten -year forecast. The following table represents the
funding splits for these proposed additions to the 2009 -2018 capital forecast:
Staff recommends that the projects referenced in this report be included in the 2009-2018
capital forecast for consideration by the Finance and Corporate Services Committee as part of
the 2009 budget deliberations
Dan Chapman, CA MPA
General Manager of Financial Services
Rosemary Upfold, CA
Director of Accounting
Joyce Evans, MPA CGA
Director of Revenue
Wally Malcolm, PEng MBA
Director of Utilities
DC/mf