1. 2008 WATER AND WASTEWATER RATE-SUPPORTED DRAFT OPERATING AND CAPITAL BUDGETS, HIGH-LEVEL 2009 AND 2010 BUGET FORECASTS

PROJETS DE BUDGET DE FONCTIONNEMENT ET D’IMMOBILISATIONS 2008 SOUTENUS PAR LES TARIFS D’EAU ET D’EAUX USÉES, PRÉVISIONS BUDGÉTAIRES 2009 ET 2010 DE HAUT NIVEAU

Committee recommendationS AS AMENDED

That Council approve

1. Approve the 2008 Operating and Capital Budget Estimates as tabled at the meeting of the Planning and Environment Committee on February 26, 2008 and considered on March 4, 2008, subject to the following:

a. The Name Change to a Water Account Fee be eliminated and the water/wastewater rate be adjusted accordingly.

b. The City Manager review opportunities for the 2009 and 2010 Budgets to streamline service and process activities to eliminate any possible overlap and duplication between all Water and Wastewater Services branch service providers (i.e. Utilities, Public Works, Corporate) and report back to Committee with recommendations, including commentary from the Auditor General.

c. The increase in the water rate for those households within the City of Ottawa without a sewer surcharge be phased in over three years by whichever method is determined by Financial Services to be the most cost-effective and that the resulting loss of $174,000 in water revenue in 2008 and $88,000 in 2009 be covered by reducing the contribution to capital.

2. Approve the Rate-supported 2009 and 2010 budget forecasts, which incorporate the high-level budget directions provided by Council, subject to the review of administrative services to be undertaken as part of the water/wastewater rate reviews;

3. Establish the Water Fleet Reserve Fund and the Wastewater Fleet Reserve Fund and enact reserve fund by-laws in the form attached as Document 1;

4. Amend the existing Corporate Fleet Reserve By-law No. 2003-274 in the form attached as Document 2 to exclude future water and wastewater fleet depreciation charges from the Corporate Fleet Reserve Fund.

RecommandationS modifiÉeS du Comité

Que le Conseil :

1. Approuve les prévisions des budgets de fonctionnement et d’immobilisation pour 2008, présentées à la réunion du 26 février 2008 du Comité de l’urbanisme et de l’environnement et examinées le 4 mars 2008, sous réserve des conditions suivantes :

a. Que les droits à verser pour le changement de nom d’un compte d’eau soient supprimés et que le tarif d’eau et d’eaux usées soit ajusté en conséquence.

b. Que le directeur municipal recherche dans les budgets de 2009 et 2010 des possibilités de rationaliser les services et les processus, de manière à éviter toute possibilité de chevauchement et de double emploi entre tous les fournisseurs de services de la Direction des services de l'eau et des eaux usées (Services publics, Travaux publics, Services généraux) et qu’il remette au Comité ses recommandations, notamment les commentaires du vérificateur général.

c. Que la hausse de la redevance d’eau pour les ménages d’Ottawa qui ne sont pas soumis à une surtaxe d’égout soit introduite progressivement sur trois ans, selon la méthode jugée la plus rentable par les Services financiers, et que la perte de recettes en redevances d’eau qui en résultera, de 174 000 $ en 2008 et de 88 000 $ en 2009, soit couverte par une réduction de la participation au capital.

2. Approuve les prévisions de 2009 et 2010 des budgets financés par les tarifs, qui intègrent les orientations budgétaires de haut niveau fournies par le Conseil, sous réserve que l’examen des services administratifs soit entrepris dans le cadre des examens du tarif d’eau et d’eaux usées;

3. Établisse le fonds de réserve du parc automobile des services d’eau et le fonds de réserve du parc automobile des services d’eaux usées et adopte des règlements relatifs aux fonds de réserve selon le modèle présenté dans le document 1;

4. Modifie le règlement no 2003 274 actuel relatif au fonds de réserve du parc automobile de la Ville selon le modèle présenté dans le document 2 ci-joint, de façon à exclure du fonds de réserve du parc automobile de la Ville les frais d’amortissement futurs du parc automobile du Service de gestion de l’eau et des eaux usées.

Documentation

1. Deputy City Manager Public Works and Services and City Treasurer’s report dated 25 February 2008 (ACS2008-CMR-FIN-0008).

2. Extract of Draft Minutes, 26 February 2008.

3. Extract of Draft Minutes, 4 March 2008.

Report to / Rapport au:

Planning and Environment Committee

Comité de l'urbanisme et de l'environnement

and Council / et au Conseil

25 February 2008 / le 25 février 2008

Submitted by / Soumis par: R.G. Hewitt and Marian Simulik,

Deputy City Manager / Directeur municipal adjoint

Public Works and Services / Services et Travaux publics

City Treasurer / trésorière municipale

Contact Person / Personne ressource: Dixon Weir, Director / Directeur
Water and Wastewater Services / Services de l’eau et des eaux usées

613-580-2424, x22002 Dixon.Weir@ottawa.ca

City-Wide / À l’échelle de la Ville

Ref N°: ACS2008-CMR-FIN-0008

SUBJECT: 2008 WATER AND WASTEWATER RATE-SUPPORTED DRAFT OPERATING AND CAPITAL BUDGETS, high-level 2009 and 2010 buget forecasts

OBJET: ProjetS de budget de fonctionnement et d’immobilisations 2008 SOUTENUS par les tarifs d’eau et d’eaux usées, prévisions budgétaires 2009 ET 2010 de haut niveau

REPORT RECOMMENDATIONS

1. That the 2008 Operating and Capital Budget Estimates be received and tabled at the meeting of the Planning and Environment Committee to be held on February 26, 2008 for subsequent consideration by the Planning and Environment Committee at a Special Meeting to be held on March 4, 2008; and

2. That the Rate-supported 2009 and 2010 budget forecasts, which incorporate the high-level budget directions provided by Council be received; and

That the Planning and Environment Committee recommend Council:

3. Establish the Water Fleet Reserve Fund and the Wastewater Fleet Reserve Fund and enact reserve fund by-laws in the form attached as Document 1; and

RECOMMANDATIONS DU RAPPORT

1. Que les projets de budget de fonctionnement et d’immobilisations 2008 soient reçus et déposés à la réunion du 26 février 2008 du Comité de l’urbanisme et de l’environnement pour qu’il les étudie ensuite à sa réunion extraordinaire du 4 mars 2008.

2. Que soient reçues les prévisions budgétaires 2009 et 2010 soutenues par les tarifs, qui tiennent compte des orientations budgétaires de haut niveau fournies par le Conseil.

Que le Comité de l’urbanisme et de l’environnement recommande au Conseil :

3. d’établir le fonds de réserve du parc automobile des services d’eau et le fonds de réserve du parc automobile des services d’eaux usées et d’adopter des règlements relatifs aux fonds de réserve selon le modèle présenté dans le document 1 ci-joint;

4. de modifier le règlement n^o 2003‑274 actuel relatif au fonds de réserve du parc automobile de la Ville selon le modèle présenté dans le document 2 ci-joint, de façon à exclure du fonds de réserve du parc automobile de la Ville les frais d’amortissement futurs du parc automobile du Service de gestion de l’eau et des eaux usées.

EXECUTIVE SUMMARY

The draft Operating and Capital Budgets covering the provision of drinking water, wastewater and municipal drains services is being tabled for Council’s consideration following the directions that were approved by Council on September 26, 2007 for 2008. Part of that direction was that those services cost-recovered from water and wastewater surcharges, were to be considered separately from the tax-based budget. As a part of the move towards financial sustainability, Council is looking at the budget from a multi-year perspective and therefore the draft Rate-Budget includes the high-level directions for 2009 and 2010.

The draft 2008 drinking water services operating resource requirements are comprised of $51.2 million in direct operating costs and $64.3 million in non-departmental services of which $46.6 million is a contribution to dedicated Water Capital Reserve Fund. In 2008, the total draft operating resource net requirement to provide drinking water service will be $110.0 million. This approximate overall budget will increase to approximately $129 million in 2009 and $140 million in 2010.

Similarly, in wastewater services, the draft operating resource requirement is comprised of $44.1 million in direct operating costs and $75.4 million in non-departmental services of which $37.8 million is a contribution directed to a dedicated Wastewater Capital Reserve Fund.

In 2008, the total draft operating resource net requirement to provide wastewater and drainage services is proposed at $115.9 million. In 2009 and 2010 respectively, these budget requirements are forecast to increase to approximately $123 million and $134 million.

The costs for these services are recovered primarily from the water rate and corresponding sewer surcharge paid only by those Ottawa residents receiving the service. In order to provide these services in a financially sustainable manner, it will be necessary to increase the net water rate and sewer surcharges by a combined 9% in each of 2008, 2009 and 2010. These rate increases are the same water rate and sewer surcharge recommendations contained within the Long Range Financial Plan III. Other less significant sources of revenue, such as cost recovery services on hauled liquid waste charges will increase as per CPI or previously approved increases.

The funding strategy for these programs supports Council’s strategic direction to close the gap on sanitary, storm sewer and watermain replacement by 2015 and to ensure that the City infrastructure required for new growth is built or improved as needed to serve growth.

The City will soon be required to comply with modified accounting practices as a part of the requirement to move to Public Sector Accounting Board (PSAB) reporting for the 2010 budget cycle, and to comply with the Municipal Drinking Water Licensing requirement for a dedicated Financial Plan for drinking water services in July 2010. In 2007, Council approved the establishment of separate Water and Wastewater Reserves as a part of the Amendments to Reserve and Reserve Fund By-laws (ACS2007-CRS-FIN-0011). Approval is now being sought for the establishment of separate water and wastewater Fleet Reserve Funds and the modification of the Corporate Fleet Reserve Fund to redirect fleet depreciation charges into the appropriate dedicated reserves.

RÉSUMÉ

Les projets de budgets de fonctionnement et d’immobilisations concernant la prestation de services d’eau, de traitement des eaux usées et de drains municipaux sont soumis à l’étude du Conseil conformément aux instructions approuvées par ce dernier le 26 septembre 2007 pour l’année 2008. Ces instructions prévoyaient notamment que les services dont les coûts sont recouvrés à même les surcharges pour services d’eau et d’eaux usées devaient être examinés séparément du budget financé à même les taxes foncières. Dans le cadre de ses efforts visant à assurer la viabilité financière de la Ville, le Conseil examine le budget dans une perspective pluriannuelle et il inclut par conséquent les prévisions budgétaires de haut niveau pour 2009 et 2010.

Selon le projet de budget de fonctionnement des services d’eau pour 2008, les ressources financières requises s’établissent comme suit : 51,2 millions de dollars pour les coûts de fonctionnement directs et 64,3 millions de dollars pour les services non liés au Service, dont 46,6 millions de dollars constituant une contribution destinée à un fonds de réserve dédié pour immobilisations liées aux services d’eau.

Les crédits de fonctionnement totaux qui seront nécessaires pour assurer le service d’eau potable en 2008, selon le projet de budget, sont de 110,0 millions de dollars. Ce budget global approximatif passera à environ 129 millions de dollars en 2009 et à 140 millions de dollars en 2010.

Parallèlement, le projet de budget de fonctionnement pour les services d’eaux usées prévoit des besoins en ressources de $44,1 millions de dollars pour les coûts de fonctionnement directs et de 75,4 millions de dollars pour les services et frais non liés au Service, dont 37,8 millions de dollars constituant une contribution destinée à un fonds de réserve dédié pour immobilisations liées aux services d’eaux usées. Les crédits de fonctionnement totaux qui seront nécessaires pour assurer les services d’eaux usées et de drainage en 2008, selon le projet de budget, sont de 115.9 millions de dollars. D’après les prévisions budgétaires, cette somme devrait passer à environ 123 et à 134 millions de dollars respectivement en 2009 et en 2010.

Le coût de ces services est recouvré principalement au moyen de la redevance pour services d’eau et des surcharges correspondantes pour les services d’égouts, que paient uniquement les résidents d’Ottawa qui bénéficient du service. Afin de pouvoir fournir ces services d’une manière viable sur le plan financier, il faudra augmenter les surcharges nettes pour services d’eau et d’égouts d’un pourcentage combiné de 9 % par année en 2008, en 2009 et en 2010. Ces augmentations correspondent aux recommandations contenues dans le Plan financier à long terme III concernant la redevance pour services d’eau et les surcharges pour les services d’égouts. D’autres sources de revenus moins importantes, comme celles liées aux services avec recouvrement des coûts pour le transport des déchets liquides, augmenteront en fonction de l’indice des prix à la consommation, conformément à des hausses déjà approuvées.

Le soutien financier prévu pour ces programmes va dans le sens de l’orientation stratégique du Conseil visant à combler l’écart dans le remplacement des égouts sanitaires et pluviaux et des conduites d’eau principales d’ici à 2015 et à faire en sorte que l’infrastructure municipale requise par la croissance de la ville soit construite ou améliorée pour répondre aux besoins engendrés par cette croissance.

La Ville devra bientôt adopter des méthodes comptables modifiées en raison de l’obligation de produire des rapports correspondant aux normes du Conseil sur la comptabilité dans le secteur public (CCSP) pour le cycle budgétaire 2010. La Ville devra aussi se conformer au Programme de délivrance des permis de réseaux municipaux, qui, en juillet 2010, exigera l’établissement d’un plan financier dédié pour les services d’eau potable. Dans 2007, le Conseil a approuvé l’établissement de réserves distinctes pour les services d’eau et d’eaux usées, au moyen de modifications aux règlements municipaux sur les réserves et les fonds de réserve (ACS2007-CRS-FIN-0011). Le présent rapport demande l’autorisation d’établir des fonds de réserve distincts pour les services d’eau et d’eaux usées et la modification du fonds de réserve de la Ville afin de réorienter les frais d’amortissement vers les réserves dédiées appropriées.

BACKGROUND

In the spring of 2007, Council embarked on a series of strategic planning sessions to set its objectives and priorities for the remainder of its three-year term of office. The results of these sessions were to allow Council to be better positioned to begin a transformation process that will result in improved delivery of municipal services, new Council governance and financial stability for the City of Ottawa along with setting the groundwork for the creation of multi-year budgets.

One of Council’s key focal points during these sessions was financial sustainability. As outlined the City’s Long Range Financial Plan III document, financial sustainability within the municipal government context is defined as:

"…a government's ability to manage its finances so it can meet its spending commitments, both now and in the future. It ensures future generations of taxpayers do not face an unmanageable bill for government services provided to the current generation."

In July, Council approved over 40 priorities for the remaining term of Council. The priorities identified under the category of sustainable finances that have a direct impact on the provision of drinking water and wastewater services include:

· Fund infrastructure renewal, including closing the gap (through a combination of capital levy, pay-as-you-go and debt) and rate supported funding streams in the 2008 budget;

· Develop a tax policy that recognizes inflation beginning in 2008;

· Become a financially sustainable City by 2010; and

· Following the principles of Ottawa 20/20, ensure the review of the Official Plan includes; the impact on the Operating and Capital Budgets and a review of the effective measures to direct growth.

In reference to tax-based budgets, Council also directed that in addition to providing 2008 draft budgets, that staff provide high-level fiscal directions for 2009 and 2010, developed in accordance with the recommendations of the Long Range Financial Planning Sub-Committee. This same practice has been followed in preparing the 2008 Water and Wastewater Services Budget.

Organizational / Operational Overview

The contribution that the Water and Wastewater Services Branch make to the City of Ottawa and its residents are in the fields of public health protection, environmental protection and economic development. The major service contributions in these fields are:

· Public health protection:

· deliver safe, reliable and high quality drinking water to the community;

· collection and transportation of sanitary and storm wastes from homes, businesses and property across the City; and

· provide an adequate and reliable supply of drinking water and associated infrastructure for fire protection and suppression purposes.

· Environmental protection:

· the treatment and discharge of collected liquid wastes at the R. O. Pickard Environmental Centre;

· the treatment and beneficial reuse of biosolids; and

· the treatment and discharge of collected stormwater at stormwater treatment facilities across the City.

· monitor general water quality in rivers and streams in Ottawa.

· Economic development:

· adequate water, wastewater and storm services are available to meet the current and future requirements of the community;

· Municipal Drain program in support of Agri-business; and

· stable and consistent rate structure.

These services are provided in a reliable, cost-effective and customer focused manner.

While it is recognized that the Water and Wastewater Services Branch is often the City’s ‘public face’ on the delivery of many of these services, it must also be recognized that the delivery of these services is largely dependent upon the combined knowledge and expertise provided by a number of supporting departments and branches. Among the primary contributors are:

· Infrastructure Services – in the fields of Infrastructure Management and Construction Services;

· Planning Transit and the Environment – in Planning Branch’s Infrastructure Approvals, Transportation and Infrastructure Planning, Community and Design Planning groups and in Economic and Environmental Sustainability Branch’s Environmental Sustainability program;

· Financial Services, in the fields of Revenue, Financial Planning, Supply, Financial Services Deputy Treasurer; and

· Business Transformation Services in the fields of Employee Services, Corporate Communications, Information Technology and Real Property Asset Management.

The operating costs to deliver these services and many others are recovered through administration and cost transfers. The operating budgets for these service areas have been reviewed previously as a part of the 2008 tax-based budget review, and as a result, will not be discussed in detail as a part of this budget discussion.

DISCUSSION

The Water and Wastewater Services Branch is a new Branch formed from the City’s previous Utility Services Branch. The new Branch is comprised of four divisions: Drinking Water Services, Wastewater and Drainage Services, Customer Services and Strategic and Environmental Services.

The Drinking Water and Wastewater and Drainage Services Divisions provide direct services while the Customer Services and Strategic and Environmental Services Divisions provide common services across the Branch.

In 2008, the services of the Branch will be provided through the support of 558.93 full time equivalents (FTEs) with a total operating expenditures of $95.2 million. The distribution of personnel and operating budgets are as shown below:

Drinking Water Services

The Drinking Water Services Division treats and distributes 310 million litres of high quality drinking water per day to 795,000 customers through the operation and maintenance of two water purification plants, 14 pumping stations, 9 reservoirs and over 2,700 kilometres of watermains, 39,960 valves, 16,770 hydrants and 197,000 water meters. Over 125,000 water quality analyses are conducted every year through a combination of laboratory services, the bulk of which are performed at the R.O. Pickard Environmental Centre Laboratory.

The strategic directions for the Branch in regard to Drinking Water Services in 2008 are to:

· optimize the operation of the new waste management facilities serving both the Britannia and Lemieux Island Water Purification Plants;

· continue to facilitate the expansion of the Lemieux Island Water Purification Plant;

· upgrade the existing Supervisory Control and Data Acquisition (SCADA) system serving both water plants, the communal well systems, the pump stations and storage facilities;

· commence a multi-year review of disinfection processes through a microbial risk assessment;

· continue to implement the Water Loss Control Strategy through a proactive leak detection program;

· select and implement an automated water meter reading system to reduce the cost of meter reading;

· continue to develop and implement training associated with the Drinking Water Quality Management Standard;

· continue to demonstrate the City’s commitment to water conservation through implementation of the Water Efficiency Strategy and three-year Water Efficiency Plan;

· commission the new Shadow Ridge Municipal Drinking Water System;

· initiate a water rate cost recovery assessment review;

· respond to the Auditor General reports related to Cross Connection Control program and Private Fire Hydrant maintenance practices; and

· confirm the service levels through participation in the Strategic Branch Process Review.

Operating Budget Pressures – Drinking Water

The total 2008 operating requirement associated with the delivery of drinking water services (inclusive of the customer services and strategic and environmental services net expenditures) is $51.2 million dollars.

The associated operating pressures are captured in Table #1:

Table # 1: Budget Pressures – Drinking Water

	2007 Adjustments $000	Maintain Existing $000	Provincial Legislated $000	Growth $000	New Operating Needs $000	Efficiency Savings $000
Operating Budget Pressures
Production	(1,156)	990	1,424	125		(335)
Distribution	(83)	880		163		(243)
Water Quality Assurance	(6)	20	93
Customer Services	(12)	534		61	157	(190)
Strategic & Environmental Services	(14)	61				(61)
Client Recoveries		(104)
Operating Sub-total	(1,271)	2,381	1,517	349	157	(829)
SUB-TOTAL						2,304
Non-Departmental Services
Unrealizable Revenues	1,500
Capital Formation		17,213
Cost Transfers		356
Non-Departmental Sub-Total	1,500	17,569	0	0	0	0
Sub-total by Category	229	19,950	1,517	349	157	(829)
Sub-total by Service	SUB-TOTAL					$19,069
Overall Total Pressures	TOTAL					$21,373

A more detailed explanation of these budget pressures is explained below:

2007 Budget Adjustments: $0.2 million

Reduced chemical and other variable costs due to lower than forecast growth in demand for drinking water;
Reduced compensation budget due to over-estimated benefits allowance;
Adjustment for unrealizable interest revenues – Decreased revenue projection for interest in funds held in reserves.

Maintain Existing Services: $19.9 million

Inflation (hydro, natural gas, chemicals, fleet operating costs, contracts, materials and supplies and labour) $1,283,000;
Compensation increases due to collective agreement settlements and additional 11.32 FTEs $1,074,000;
Increased contribution to capital reserve.

Provincial/Legislated: $1.5 million

· Waste Management program - Additional part year charges as a result of commissioning waste treatment facilities at Lemieux Island and Britannia WPPS. Includes sewer surcharge, hydro and chemical costs;

· Occupational Health and Safety – Training program – Provide additional FTE to assist with coordinator of a regulatory compliant training program in these fields;

· Lead in Drinking Water Community Sampling program – An additional Water Quality Technician to conduct In Home Sampling program required by new provincial regulations.

Growth: $0.3 million

· Customer Services, First Response program – Three (3) additional FTEs to support Meter Maintenance and Pipe Locates services;

· Operating costs for new vehicles for additional FTEs;

· Hydro costs for two (2) new water-pumping stations expected to come online in 2008.

New Operating Needs: $0.2 million

· Public Information, Customer Information program – One (1) additional FTE and resources to support Public Information and Customer Outreach program;

· New Home Dialysis Grants program.

Efficiency Savings: $0.8 million

· Allocation of 2008 productivity improvements through ongoing administrative and service delivery operations. Final allocation against programs not yet determined.

2007 Drinking Water Operating Budget Year End Variances

In 2007, the Drinking Water Services approved expenditure budget was under spent by a total of $4.4 million. This under-expenditure was principally in the following categories:

· Compensation – $1.8 million:

· Automated Meter Reading project – implementation delayed to 2008;

· Proactive Lead Service program – program administration contracted in 2008;

· Water Efficiency program – Heavy Volume User (HVU) program delayed to 2008;

· DWQMS program – Management Representative hiring delayed until 2008;

· Customer Service re-organization delayed.

· Materials and Services – $2.2 million:

· Water treatment chemicals – overly conservative allowable for inflation – 2007 baseline adjusted;

· Waste management facilities and processes were not commissioned as originally anticipated. As a result, sewer surcharges, hydro and chemical costs were not incurred. Costs to be incurred in 2008.

In those areas that these assumptions are expected to affect future year budgeting, reductions have been made in the baseline budget and listed in Table #1 as 2007 Adjustments. These changes represent approximately $1.3 million in reductions to the baseline budget.

Per Council policy, Year End surpluses in the rate supported service areas are contributed to the Capital Reserve Fund. In 2007, the contribution to the Water Capital Reserve Fund was $30.6 million. An additional $2.9 million will be contributed as a result of 2007 Year End surplus.

2008 Capital Budget

The total 2008 capital budget associated with drinking water (inclusive of customer services and strategic and environmental services requirements) is $71.3 million dollars.

	Asset Value($1,000s)	Renewal Projects($1,000s)	Regulatory($1,000s)	Growth($1,000s)	Strategic Initiative($1,000s)	Total($1,000s)
Water General	N/a	275	1,505	958	-	2,738
Water Treatment Facilities	$500,000	8,640	250	-	-	8,890
Water Pumping Stations	$75,000	9,816	-	2,900	-	12,716
Water Distribution	$4,190,000	45,539	-	150	-	45,689
Water Reservoirs	$70,000	194	-	-	-	194
Communal Well Sytems	$8,000	1,045	-	-	-	1,045
Sub-Total by Category	$4,843,000	65,509	1,755	4,008	-	71,272

The 2008 Capital Budget has been developed into six (6) different service areas, each representing a separate class of facility or infrastructure. Overall, the asset value for all drinking water facilities and infrastructure is estimated at $4.8 billion.

Wastewater and Drainage Services

The Branch maintains 2,220 kilometres of sanitary sewers, 230 kilometres of combined sewers, 2,150 kilometres of storm sewers, 186,00 service connections and 56,000 catch basins. In addition, it operates and maintains 75 wastewater and stormwater pumping stations and 194 stormwater management facilities.

The Division operates and maintains the Robert O. Pickard Environmental Centre (ROPEC) in the treatment of over 150 billion litres of wastewater per year and oversees the beneficial re-use of over 42,000 tonnes of biosolids.

Largely in support of the rural community, the Branch manages a Municipal Drain program, including the maintenance of 1,200 kilometres of drains.

The strategic directions for the Branch in regard to wastewater and drainage services in 2008 are to:

· optimize and complete the commissioning of the expanded anaerobic digester complex at ROPEC;

· continue optimization of the Sewer Maintenance program;

· continue reinvestment in treatment plant, pumping station and stormwater management facilities;

· continue with the beneficial reuse of wastewater treatment generated biosolids;

· implement the Drainage on Private Property program;

· commission the new Shadow Ridge Communal Wastewater Treatment system;

· continue to work closely with local Conservation Authorities and other regulatory bodies to improve of the delivery of municipal drains maintenance and creation practices and procedures;

· conduct a wastewater and stormwater cost recovery assessment study; and

· confirm the service levels through participation in the Strategic Branch Process Review.

Operating Budget Pressures - Wastewater

The total 2008 operating budget requirement associated with the delivery of wastewater services (inclusive of the customer services and strategic and environmental services expenditures) is $44.1 million dollars.

The associated operating pressures are captured in Table #2:

Table #2: Budget Pressures – Wastewater

	2007 Adjustments $000	Maintain Existing $000	Provincial Legislated $000	Growth $000	New Operating Needs $000	Efficiency Savings New $000
Operating Budget Pressures
Wastewater Treatment	(1,197)	680	612	166		(500)
Wastewater Collection	(462)	682		228		(418)
Stormwater Treatment	(59)	20		105
Municipal Drainage	(62)	12
Water Environment Protection		57
Customer Services		8				(92)
Strategic & Environmental Services	404	245				(79)
Client Recoveries	300		(1,088)
Operating Sub-total	(1,076)	1,704	(476)	499		(1,089)
SUB-TOTAL						(438)

Non-Departmental Services
Capital Formation		(2,528)
Cost Transfers		982
Non-Departmental Sub-Total	0	(1,546)	0	0	0	0
Sub-Total by Category	(1,076)	158	(476)	499	0	(1,089)
Sub-Total by Service	SUB-TOTAL					(1,984)
Overall Total Pressures	TOTAL					(2,422)

2007 Budget Adjustments: $1.1 million

· Increase PILTs;

· Reduction in hauled liquid waste revenues;

· Reduced purchased services and materials and supplies to reflect historical spending;

· Reduced compensation budget due to over-estimated benefits allowance.

Maintain Existing Services: $0.2 million

· Inflation (chemicals, biosolids disposal costs, water usage, contracts and materials and supplies, fleet operating costs and labour);

· Compensation increases due to collective agreement settlements and one (1) additional FTE (Treatment and Collections Asset Management).

Provincial/Legislated: ($0.5 million)

· Waste Management program - final part year increment of increased waste management costs associated with handling water treatment plant wastes. (treatment, biosolids disposal costs and sewer surcharge recoveries);

· Occupational Health and Safety – provide one (1) additional FTE to assist with regulatory compliance with safety and miscellaneous environmental regulations.

Growth: $0.5 million

· Stormwater Management Facility growth – one (1) Field Technician to accommodate growth in treatment facilities;

· Pumping Station program – two (2) FTEs to accommodate operation and maintenance of new pumping stations and odour control facilities;

· Fleet growth - operating costs for new vehicles for additional FTEs.

Efficiency Savings: $1.1 million

· Allocation of 2008 productivity improvements through ongoing administrative and service delivery operations.

2007 Wastewater Operating Budget Year End Variances

In 2007, the wastewater services approved expenditure budget was under spent by a total of $4.6 million. The most significant areas of under-expenditure were in the following categories:

· Compensation - $1.1 million:

· Management of Drainage on Private Property – program implementation delayed until 2008;

· Sewer Use program – staffing turnover – shortfall decreased ability to monitor and audit existing dischargers;

· Water Environment program – staffing turnover – limited staffing resulted in reduced monitoring, investigations and Westboro Beach Study.

· Materials and Services - $2.8 million:

· Quebec PST Recovery – one time, multi-year recovery of PST charges on biosolids;

· Biosolids Utilization program – contingency surplus;

· Collection System Maintenance contracts – competitive pricing.

In those areas that these assumptions are expected to affect ongoing budgeting, reductions have been made in the budget and listed in the previous section as 2007 Adjustments. These changes represent just over $1.0 million in baseline budget reduction.

Per Council policy, Year End surpluses in the wastewater rate supported service area contributed to the Capital Reserve. In 2007, the contribution to the wastewater Capital Reserve amounted to $39.6 million. An additional $3.3 million will be contributed as a result of 2007 surpluses.

2008 Capital Budget

The total 2008 capital budget associated with wastewater (inclusive of customer services and strategic and environmental services requirements) is $116.9 million dollars.

	Asset Value ($1,000s)	Renewal Projects ($1,000s)	Regulatory ($1,000s)	Growth ($1,000s)	Strategic Initiative ($1,000s)	Total ($1,000s)
Wastewater General	N/a	4,985	975	387	-	6,347
Wastewater Treatment Facilities	$850,000	2,138	-	6,700	-	8,838
Wastewater and Stormwater Collection	$6,700,000	72,581	-	-	24,630	97,211
Stormwater Treatment Facilities	$135,000	500	-	3,721	-	4,221
Municipal Drains	N/a	-	330	-	-	330
Sub-total by Category	$7,685,000	80,204	1,305	10,808	24,630	116,947

The 2008 Capital Budget has been developed into five (5) different service areas, each representing a separate class of facility or infrastructure. Overall, the asset value for all wastewater facilities and infrastructure is estimated at $7.7 billion.

Reserve Funds Assessment and Rate Determination

It is important that the drinking water and wastewater services take a long-term view of the necessary capital spending to ensure reliable service delivery. This review takes into consideration a number of factors, including spending requirements, potential revenue sources balanced against overall service affordability.

This multi-year forecast of required capital spending in each service area is shown on the attached graphs.

As compared to the Long Range Financial Plan III capital forecasts, the proposed gross capital requirements are:

· Drinking Water

· LRFP III 10 Year Capital Plan - $822.2 million

· 2008 Rate Budget proposed Capital Plan - $859 million

· Wastewater

· LRFP III 10 Year Capital Plan - $1,042 million

· 2008 Rate Budget proposed Capital Plan - $825 million

The 10 year capital spending in the LRFP III document presented the 2007-2016 capital requirements, while this budget covers the 2008 – 2017 period.

In LRFP III, debt financing was utilized to fund long-term growth related projects and other capital works which would benefit future users of the utility system. The recently approved Financial Framework supported this approach. Examples of capital projects that fall within this category would be the Lemieux Island WPP Expansion, currently underway, and the R. O. Pickard Environmental Centre Expansion.

The Financial Framework also suggested that there were benefits for the City to utilize debt financing to lessen the impacts on future utility rate increases. For this reason, we recommend that Council approve of the approach that would see debt financing also approved for those projects that are beneficial to multiple generations of water and/or wastewater customers. These types of projects would be analogous to the “Legacy” type of projects contemplated and approved for debt financing in the Financial Framework. For projects in this field, we are recommending that they be limited to those projects that are primarily associated with increasing the reliability of providing service. They would be neither directly growth related projects nor infrastructure renewal type projects. Examples contained within this long-term capital program would be the 1W/2W Watermain Project, the 2W Water Pumping Station and 2W/2C Feedermain projects.

The regulatory framework associated with drinking water has changed dramatically in the past few years. Most of these changes have been associated with water quality standards, customer communications and accountability. A change that is necessitating some financial management changes at the City is the pending Financial Plan Regulation (O. Reg. 453/07), which is a component part of the Municipal Drinking Water Licensing program implemented under the Safe Drinking Water Act. This will require the City to prepare and submit 6 year sustainable financing plans. In preparation for this change in reporting, and as previously approved by Council (see ACS2007-CRS-FIN-0011), separate reserve funds have been created for the City’s water and wastewater business lines. However, the separation of the reserves is causing the City to revise the manner in which the necessary rate increases are distributed between the drinking water and wastewater reserves.

In order to avoid a long-term deficit position in the Water Reserve Fund, and to take advantage of the positive Wastewater Reserve Fund position, it is recommended that the distribution of the overall 9% net rate increase be adjusted in the drinking water rate and the wastewater surcharge as described below:

	Drinking Water		Wastewater		Overall
	% Increase	Rate	% Increase	Surcharge	% Increase
2007	12%	$0.868/m³	(4.6%)	145%	9%
2008	33.5%	$1.159/m³	(30.9%)	100%	9%
2009	9%	$1.264/m³	0	100%	9%
2010	9%	$1.377/m³	0	100%	9%

It is important to note that, in general, ratepayers will not be affected by this adjustment of the distribution of individual rate changes as the overall change will remain as 9%, as previously proposed in LRFP III.

Under the proposed changes to the water rate and sewer surcharges, the projected annual contribution to the Capital Reserve Funds and the forecasted funding requirements of the Capital program will result in the yearly Reserve Fund balances shown on the attached graphs.

One of the initiatives proposed by this draft budget is a comprehensive water and wastewater rate review study. This work, when coupled with Tangible Capital Asset reporting requirements are expected to provide a full assessment of longer term financing requirements necessitated by Regulatory Reporting Requirements.

Comparison with Other Ontario Municipalities

Operating Cost Comparison

The Ontario Municipal Benchmarking Initiative (OMBI) exists to allow municipalities to improve their service through comparison with other municipal service providers. Annually, the organization publishes a report made available to all participants, of which the City is one.

At the Council meeting of September 26 the following motion was adopted:

That the 2008 Budget include an analysis of the reasons for higher costs in some OMBI measures and recommend, where higher costs are not the result of specific situations in Ottawa such as higher snowfall, measures to bring those program costs that exceed the OMBI median in line with the OMBI median.

Described below are the results taken from the most recent version of OMBI’s Annual Report.

In the drinking water service area, the OMBI performance measures included:

The cost to treat a megalitre of drinking water:

· Ottawa 2006 Result - $151

· Ontario Median - $206

Discussion: Ottawa compares very favourably with similar sized and aged municipalities. In 2008, Ottawa’s operating costs are expected to increase significantly with the commissioning of waste management facilities.

The cost to distribute drinking water per kilometer of distribution pipe:

· Ottawa 2006 Result - $7,782

· Ontario Median - $7,528

Discussion: Ottawa is within 3% of the overall Ontario result. We compare very closely with similar sized and aged municipalities, such as Hamilton and London.

In the wastewater service area, similar OMBI performance measures included:

The annual cost of treating wastewater and disposing of the resulting biosolids per kilometer of wastewater pipe:

· Ottawa 2006 Result - $122

· Ontario Median - $204

Discussion: Ottawa compares very favourably with similar sized and aged municipalities in large part because of the efficiency of the R.O. Pickard Environmental Centre. This Centre has a sophisticated SCADA system, optimized unit processes, highly skilled and trained staff and a best-in-class energy management system.

The annual cost of wastewater collection per kilometer of collection pipe:

· Ottawa 2006 Result - $5,333

· Ontario Median - $5,547

Discussion: Ottawa is within 4% of the Ontario Median. New programs in 2007 and 2008 are expected to increase our costs in this measure.

Generally speaking, the OMBI benchmarks indicate that services are provided to Ottawa residents in a cost effective manner when compared with similar sized service providers in Ontario.

Rate Increase Comparison

Municipalities across Ontario, Canada and North America are struggling to continue to provide a high-level of service in the face of increased customer expectation, increased government regulation and oversight and the difficulty of maintaining an extensive and ageing infrastructure. All municipalities are having to increase revenue to meet these demands.

Unfortunately, a diverse system of rates, fees and charges across the Province make it difficult to compare actual charges across municipalities. Therefore, the best alternative is to compare based upon charge or rate increases.

Please find listed below a review of the 2008 water and/or combined rate increases proposed or accepted in similar sized municipalities across Ontario:

	Drinking Water	Wastewater
Ottawa	9.0%
Toronto	9.36%
Peel	9%	4%
Hamilton	8.9%
Durham	8.8%	10.2
London	8%	9%

Generally speaking, the proposed rate increases for Ottawa are very consistent with rate increases in similar sized municipalities in Ontario.

As has been noted previously, regulatory changes associated with the manner in which the City reports on assets and how sustainable financing is to be developed as a part of the Municipal Water System Licensing program is creating a need to create fleet reserves separate from the Corporate Fleet Reserves and unique to both the water and wastewater service areas. By-laws have been included that will create these reserves and mandate that all vehicles purchased after 2005 will contribute to its own reserve. Vehicles purchased prior to 2005 will continue to be replaced from the Corporate Fleet Reserve. This approach to transitions between the two reserve approaches will satisfy the need for separate reserves while minimizing the disruption to the Corporate Fleet Reserve.

CONCLUSION

The purpose of this report is to seek the approval of Committee and Council of the Rate-supported Draft 2008 Operating and Capital Budget Estimates for Water and Wastewater Services, the 2009 and 2010 budget forecasts and recommend amendments to the City’s Reserve and Reserve Fund By-laws for the creation of the Water Fleet Reserve Fund and the Wastewater Fleet Reserve Fund.

CONSULTATION

Consultation will occur through tabling of the report.

LEGAL IMPLICATIONS

PSAB/Financial Plan Regulation

FINANCIAL IMPLICATIONS

Financial implications are identified within the report.

In forecasting the financial impacts on individual residential customers, the City’s billing records indicate that, on average, residential customers use 0.60 m³/day or 220 m³of drinking water per year. Based on the rates as recommended in this report, the annual costs to an average residential homeowner will be:

	2007	2008	2009	2010
Volume (m³/yr	220	220	220	220
% Increase	9%	9%	9%	9%
Cost	$468	$510	$556	$606
$ Increase	$38	$42	$46	$50

SUPPORTING DOCUMENTATION

Document 1 - Water Fleet Reserve Fund and Wastewater Fleet Reserve Fund By-laws

Document 2 - Amendment to Corporate Fleet Reserve By-law No. 2003-274

Document 3 - 2006 OMBI Results for Water and Wastewater

Document 4 - 2008 Draft Operating and Capital Budgets – Rate Supported Programs

(under separate cover)

DISPOSITION

Budgets will be amended as per Council deliberation and adoption.

Document 1

BY-LAW NO. 2008 -

A by-law of the City of Ottawa to establish the Water Fleet Reserve Fund for the City of Ottawa and to transfer and consolidate water rate related depreciation charges from the Corporate Fleet Reserve Fund to the Water Fleet Reserve Fund.

WHEREAS section 10 of the Municipal Act, 2001, S.O. 2001, c. 25, as amended, (the “Municipal Act, 2001”) provides that a municipality may pass by-laws respecting the financial management of the municipality;

AND WHEREAS section 418 of the Municipal Act, 2001 provides that a municipality may invest in prescribed securities in accordance with the prescribed rules;

AND WHEREAS it is desired to establish and maintain a Water Fleet Reserve Fund for the City of Ottawa;

THEREFORE the Council of the City of Ottawa enacts as follows:

WATER FLEET RESERVE FUND ESTABLISHED

1. A reserve fund to be known as the Water Fleet Reserve Fund is hereby established.

PURPOSE

2. The Water Fleet Reserve Fund is established to provide funding for the replacement of vehicles purchased after January 1, 2005 in the corporation where such vehicles are utilized in the collection, production, treatment, storage, supply or distribution of water.

TRANSFER FROM RESERVE FUNDS

3. The reserve funds for water fleet purposes for vehicles purchased after January 1, 2005 held currently held in the Corporate Fleet Reserve Fund are to be transferred to and shall form part of the Water Fleet Reserve Fund as hereby established.

INVESTMENT

4. The funds in the Water Fleet Reserve Fund shall be held in a special account and may be invested in accordance with the prescribed securities in accordance with the prescribed rules pursuant to provisions of the Municipal Act, 2001, and its regulations, as may be amended from time to time.

OPERATION OF THE RESERVE FUND

5. The Water Fleet Reserve Fund shall be operated, managed and maintained by the City Treasurer from:

(a) a portion of the charge to users of the water system based on a charge out rate to City departments that includes an amount for depreciation;

(b) the earnings derived from the investment of moneys held in the Water Fleet Reserve Fund; and

EXPENDITURES

6. The Water Fleet Reserve Fund shall be used for the following purposes:

(a) for financing the replacement of vehicles in the corporation purchased after January 1, 2005 and utilized in the collection, production, treatment, storage, supply or distribution of water; and

(b) for such other purposes as may be approved by the Council of the City of Ottawa.

ACCOUNTING REPORTS

7. The City Treasurer shall report annually on the position of the Water Fleet Reserve Fund to Council.

ENACTED AND PASSED this day of , 2008.

CITY CLERK MAYOR

2008 WATER AND WASTEWATER RATE-SUPPORTED DRAFT OPERATING AND CAPITAL BUDGETS, high-level 2009 and 2010 budget forecasts

PROJETS DE BUDGET DE FONCTIONNEMENT ET D’IMMOBILISATIONS 2008 SOUTENUS PAR LES TARIFS D’EAU ET D’EAUX USÉES, PRÉVISIONS BUDGÉTAIRES 2009 ET 2010 DE HAUT NIVEAU

ACS2008-CMR-FIN-0008 City-wide / À l’échelle de la ville

Dixon Weir, Manager of Water and Wastewater Services, Public Works and Services provided a detailed and extensive PowerPoint presentation, which is held on file with the City Clerk. Staff from his branch, Infrastructure Services, Financial Services, and Planning accompanied him.

Councillor Feltmate inquired on the impact, effectiveness and expansion of conservation efforts. Mr. Weir explained the City has a number of programs (water conservation, water wise and toilet replacement) that have been very effective, resulting since 2005 in a decrease in peak demand and day production. He said water conservation and efficiency efforts would continue and are regulatory requirements as part of Permit to Take Water renewal. He noted that the success of conservation efforts is evidenced by the decrease in water bill revenues over the last few years. Such efforts contribute to an overall extension in the life of infrastructure. A report will follow, dealing with water conservation and efficiency programs.

In response to questions from Councillor Bellemare with respect to organisational activity charts, Mr. Weir provided the following points of clarification:

· The diagrams provide the breakdown of provider services offered by the branch, as well as other branches and departments. Some elements are shared between Drinking Water Services and Wastewater and Drainage Services.

· SCADA stands for Supervisory Control and Data Acquisition, which is the computer control program that allows operational monitoring.

· Occupational health and safety is done at the corporate level and within the branch. The corporate centre of expertise provides high-level direction and compliance. Due to the nature of work sites, on the ground support is also provided within the branch. The Ministry of Labour requires each site to have a joint occupational health and safety committee.

· With respect to streamlining services and eliminating duplication, such opportunities are part of an on-going exercise with a longer-term goal of developing service-level agreements between contributing parties.

Richard Hewitt, Deputy City Manager of Public Works and Services, explained that the Department does not have direct control over other corporate service providers, but this model was adopted at amalgamation to facilitate a collaborative approach. This model seeks to avoid silos and maximize efficiencies.

Councillor Hunter indicated the rate increases represent close to a thirty per cent compounded upward adjustment. Mr. Weir confirmed the increase would be allocated with seven per cent to capital and two per cent to operating. He also outlined capital reserve balances for wastewater ($26 million) and drinking water ($5 million). With respect to the use of debt in 2008-2012, repayment is part of the on-going contribution to capital formation costs. More debt is utilised on the wastewater side. On the issue of unaccounted water loss, a report will be coming forward in May 2008 on the control program, which will be expanded to the newer areas of the distribution system, serviced by PVC pipe. Good progress has occurred with a reduction of real losses in the water distribution system.

Mr. Weir confirmed the Water Environment Protection Program undertakes surface water quality testing. Councillor Hunter commented that such testing has occurred for many years with very little progress and asked whether the Department has evaluated the worth of continuing the program.

Councillor Doucet focussed on the Ontario Municipal Benchmarking Initiative (OMBI), noting Ottawa’s great performance with respect to producing drinking water. He noted the cost for distribution did not fare as well and asked whether the built landform and sprawl contribute to the cost.

Mr. Weir responded distribution costs are within two or three percentage points of the provincial median. He explained a number of contributing factors, including built form, growth, service level, age of infrastructure and typography. He said intensification does allow a reduction of per kilometre cost, confirming pumping stations are scattered throughout the system.

At Councillor Doucet’s request, Mr. Weir agreed to provide a breakdown of distribution costs prior to consideration by Council and drew the Committee’s attention to Document 3, which provides more information with respect to compounding factors.

In response to a question from Councillor Cullen on the water and sewer rate reviews, Mr. Weir stated they would be undertaken concurrently through a consultant with public participation. The reviews will also assist with meeting new legislative and reporting requirements.

With regard to reserves, Mr. Weir specified the direction to maintain a combined reserve balance above $20 million in the ten-year period. This is not achieved in 2010-2012, but the rate reviews would provide direction in outer years.

Responding to a series of questions from Councillor Wilkinson, the following information was provided:

· More than $14 million is directed to other departments on the drinking water side.

· Customer Service is responsible for first response on situations such as a watermain break. The division oversees meter maintenance, contract management, lead pipe program coordination, and infrastructure location.

· Strategic and Environmental Services is responsible for laboratory services, maintenance management support services, water environment protection, and the sewer use by-law.

· With respect to 2007 adjustments, programs delayed to 2008 were partially funded in the previous year with some costs to follow at implementation.

· Capital projects are financed either by the rate or through development charges. Funding for projects in the outlying areas is mostly from development charges as a result of growth. Some projects benefit the entire city, such as the Rideau Overflow Regulator Chamber.

· The net rate increases over the longer term were proposed previously through LRFP III to address the long-term capital program.

· New legislative and reporting requirements will assist in providing a context to the rate increases with the overall infrastructure value.

· The infrastructure capital levy does not fund sewer and water works, which must be funded through the rate or development charges.

The Committee heard the following public delegation.

Dale Harley, National Capital Heavy Construction Association provided a PowerPoint presentation (held on file with the City Clerk), touching on the consequences of not investing in water and sewer infrastructure. His recommendations were as follows:

1. Move towards financial sustainability;

2. Build the Water and wastewater Capital Reserve Funds;

3. Support the strategic direction to close the gap on sanitary, storm sewer and watermain replacement by 2015;

4. Continue with the nine per cent overall increase for drinking water and wastewater for the next three years;

5. Adopt the staff report.

In response to a question from Councillor Cullen on the status of the Stormwater Master Plan, Mike Wildman, Manager of Infrastructure Approvals, reported the project is in its second of three phases to be completed in the next year and a half.

Marian Simulik, City Treasurer; Wayne Newell, Director of Infrastructure Services; Michel Chevalier, Manager of Customer Service and Operations Support; and Mr. Weir replied to a series of questions from Councillor Wilkinson. The following information was provided:

· In 2006, $2.5 million of the Drinking and Wastewater Reserve was used and was repaid almost immediately with the closing of capital projects. It is up to Council to determine if such a measure is necessary or desirable in the future. Pursuant to existing policy, the 2007 surplus will be directed to the reserves.

· At the time of amalgamation, it was determined rural drainage would be funded from the sewer surcharge. The rate reviews will look into the most appropriate funding mechanism. Costs associated with municipal drains are charged back to the benefiting residents.

· With respect to villages with communal systems, residents receiving either drinking or wastewater services are charged the same rate as urban residents.

· The construction of the Greely communal system will be funded through development charges and residents will then be charged the water and wastewater rates.

· With respect to sanitary and water servicing of the Village of Manotick, local improvements will fund the works with the benefiting property owners and the City paying their respective shares. The City will front-end the project. The charge back to benefiting landowners includes the carrying costs for the City (i.e. interest charges on debt). The road portion of the rehabilitation works will be funded through tax.

· Leak detections are acted upon immediately. The budget contains additional staff and resources to focus on non-metallic sections of the City, which are much more labour intensive due to sound carrying capacity. The City has the best equipment on the market to assist with detection.

· With regard to tax efficiencies, the branch will participate in the corporate initiative.

· Lawn watering should be discouraged and residents are charged both the sewer surcharge and water rate. Rain barrels should be promoted instead.

Councillor Desroches noted growth was identified as a pressure, stating that development charges and new ratepayers would offset it. Mr. Weir responded long-term financial sustainability is based on revenue increases resulting from growth. The projected increases on the water rate were reduced to 0.25 per cent consistent with trends.

Councillor Desroches stated he did not support the recent extension of the lead pipe replacement program. Mr. Weir indicated the budget contains $1 million allowance for the pro-active program and staff will be coming forward with an evaluation of an accelerated program for the 2009 budget.

Councillor Desroches asked if funds raised through the infrastructure capital levy could be used for water and sewer works, noting some of the projects funded in 2008 are not priority. Ms. Simulik explained that the road component of the integrated program has slowed down rehabilitation of the water and sewer works. The capital levy on the tax side provides an opportunity to catch up. With regard to works in progress, Mr. Weir confirmed a rate-supported review would be undertaken with Infrastructure Services with a report coming forward in the spring.

With regard to provincial and federal funding for water and sewer works, Ms. Simulik responded there is no confirmation of such funding at this time. The City allocated gas tax funding for transit initiatives. She advanced that one of the intents of the Clean Water Act was to ensure municipalities were collecting what is required from the users to properly maintain and operate the system. She noted Russell received some funding from a funding envelope dedicated to rural municipalities. Chair Hume explained that no agreement has been arrived at between the provincial and federal governments with respect to Build Canada.

Councillor Desroches said it is difficult to justify increasing the rate when the program is in a surplus position. Mr. Weir emphasized a commitment to not incur expenses unless the funding is required to deliver the service. He noted the 2007 surplus was largely due to projects that were delayed in their implementation to 2008.

With regard to water conservation programs, Mr. Weir described tremendous gains, specifically evidenced with a steady decline in peak demand. Revenues from the rate are linked to demand.

In response to questions from Councillor Qadri, Ms. Simulik explained account reviews are undertaken regularly to deal with gaps in billing. Recently such a review was done when solid waste was added to the tax bill. At that time, some 300 accounts were identified, back charged, and reflected in the water revenue line in the budget.

Responding to questions from Councillor Hunter with regard to the increase in full-time equivalents in Drinking Water Services, Mr. Weir reported that these new positions are required as a result of new legislative and monitoring requirements and to maintain existing services.

He provided a breakdown of new staffing requirements. Some positions are not filled but remain as requirements and are reflected in the full-time equivalent (FTE) complement. Councillor Hunter commented on the public perception on the 16 per cent increase in FTEs from 2005 to 2008.

The Committee recessed until 12:30 p.m.

Chair Hume focussed on the $41 million general administration allocation as contained in the draft budget. The Chair highlighted the following information and Ms. Simulik, Mr. Wildman, and Mr. Newell provided responses:

· The Revenue Division’s budget totals more than $12 million. 1.4 million water bills are sent out each year, as compared to 500,000 tax bills. The water bill is disproportionate in terms of cost and time in comparison to the tax side. 50 per cent of the budget is charged back to the rate budget. Only one section (assessment) within the Division is not involved with water billing and represents $2 million of the Division’s budget.

· Water and Wastewater Services does undertake payment in lieu of taxes for its assets, totalling $1.2 and $1.4 for both services. This will be reviewed as part of a municipal capital facilities agreement.

· Recoveries represent over 46 per cent of the Planning branch’s budget.

· The charge back represents facility costs, as compared to the Planning branch’s budget, which only encapsulates direct costs (salaries and expenses). The charge back is based on estimated time associated with rate-supported services.

· The new Planning branch is working on a comprehensive review of costs. With respect to Planning and Infrastructure Approvals, full cost-recovery is nearly achieved through fees collected, with Development Approvals now at 85 per cent. The policy component, which does not recover fees, adds to the overall charge back.

· Staff is moving toward full cost accounting with a fully functionalised budget. At the present time, the charge back only includes direct and facility costs.

· The work undertaken by Planning is not limited to the operating budget, as it is also influenced by the capital budget.

· $8.2 million is transferred to Infrastructure Services to support capital programs. 50 per cent of staff time is not recoverable from capital projects. There is justification for 75 per cent of non-recoverable time to be funded through the rate budget. Infrastructure Services utilises a time reporting tool to track staff time.

· Water and Drinking Water Services pay Real Property Asset Management as part of secondary charges. Charge backs occur for general administrative costs and an additional $27,000 for office space at Constellation.

· Close to $10 million in additional full allocation costs are associated with general services, including for example Council, City Manager, City Clerk, Client Service Centres, and public affairs.

At Chair Hume’s direction, staff will provide further clarification and justification with respect to the recoveries associated with the Planning branch and general services. Mr. Weir confirmed such additional information would also be beneficial to meet new legislated reporting requirements.

Responding to questions from Councillor Cullen with respect to the integrated road, sewer and water project for Pinewood (Richmond to Harwood), Mr. Newell confirmed the Queensway Terrace North Community Association would be consulted as part of the design phase. Mr. Newell explained that surface works represent $25 million of an approximately $250 million program. As an example, the Bank Street project totalled $8.8 million, of which $2.5 is allocated for roads.

In response to further questions from Chair Hume, Mr. Weir indicated Customer Service within the branch costs $7.4 million for Drinking Water Services. He also explained how the unit works with other corporate groups, such as the Call Centre, in providing information and responding to queries from the general public.

Mr. Weir noted service level agreements exist with different corporate service providers and some must be updated. He took direction from the Chair to undertake service-level agreements where appropriate.

With regard to the use of consultants, Mr. Weir said Drinking Water Services utilises in-house services to a greater extent to ensure direct control, because of its direct and closer impact on customer service and public health. On the wastewater side, a higher proportion of contracted services is employed. Due to the technical nature of certain projects and the type of equipment required, outside consultants must be used.

Councillors Bellemare and Feltmate introduced motions based on previous interventions on reviewing administrative costs and eliminating nuisance fees.

Chair Hume proceeded to call the vote on the components of the Water and Wastewater Services draft budgets as presented.

That the 2008 Operating and Capital Budget Estimates as tabled at the meeting of the Planning and Environment Committee on February 26, 2008 and considered on March 4, 2008 be approved:

· Drinking Water Services

CARRIED

· Wastewater and Drainage Services

CARRIED

· Other Capital Requirements – Integrated Roads, Sewer and Water

CARRIED

The following motion was introduced in substitution to report Recommendation 2.

That the Rate-supported 2009 and 2010 budget forecasts, which incorporate the high-level budget directions provided by Council, be approved subject to the review of administrative services to be undertaken as part of the water/wastewater rate reviews.

CARRIED

The Committee then considered other motions put forth by Councillors, including one to deal with exclusive drinking water ratepayers.

Councillor Hunter expressed support for Councillor Feltmate motion. Councillor Desroches questioned whether such fees could be reduced and the possible impact on other City fees.

Moved by P. Feltmate:

WHEREAS the City has introduced a number of fees for maintaining customer water accounts which are used to offset the costs within the Revenue Division for providing account maintenance service;

AND WHEREAS the various fees will be reviewed as part of the Water and Wastewater Rate Review Study to be initiated in 2008;

AND WHEREAS the Name Change to an Account Fee of $35 generates approximately $36,000 in revenue but is a major source of complain from residents;

AND WHEREAS for each cent of water rate approximately $900,000 is raised, thus the effect on the rate is miniscule;

THEREFORE BE IT RESOLVED that the Name Change to a Water Account Fee be eliminated and that the water/wastewater rate be adjusted accordingly.

CARRIED, with S. Desroches dissenting.

Moved by M. Bellemare:

WHEREAS the general administration allocation for Drinking Water Services amount to $14.3 million and $26.7 million for Wastewater Services, for a total of $41 million;

THEREFORE BE IT RESOLVED THAT the City Manager review opportunities for the 2009 and 2010 Budgets to streamline service and process activities to eliminate any possible overlap and duplication between all Water and Wastewater Services branch service providers (i.e. Utilities, Public Works, Corporate) and report back to Committee with recommendations, including commentary from the Auditor General.

CARRIED

Moved by G. Hunter:

WHEREAS the City of Ottawa provides water services to approximately 3,300 households that do not have a sanitary sewer connection and therefore do not pay a sewer surcharge;

AND WHEREAS the City of Ottawa is proposing to increase the water rate by 33.5% and decrease the sewer surcharge by 30.9 % for a new increase of 9% for those households that receive both services as of May 1, 2008;

AND WHEREAS the residents without a sewer surcharge will see their water bills increase by 33%;

THEREFORE BE IT RESOLVED THAT the increase in the water rate for those households within the City of Ottawa without a sewer surcharge be phased in over three years by whichever method is determined by Financial Services to be the most cost-effective and that the resulting loss of $174,000 in water revenue in 2008 and $88,000 in 2009 be covered by reducing the contribution to capital.

CARRIED

That the Planning and Environment Committee recommend Council:

1. Approve the 2008 Operating and Capital Budget Estimates as tabled at the meeting of the Planning and Environment Committee on February 26, 2008 and considered on March 4, 2008, subject to the following:

a. The Name Change to a Water Account Fee be eliminated and the water/wastewater rate be adjusted accordingly.

3. Establish the Water Fleet Reserve Fund and the Wastewater Fleet Reserve Fund and enact reserve fund by-laws in the form attached as Document 1;

CARRIED as amended

Legend
	Within 4.9% of the OMBI median or better
	5% to 19.9% worse than the OMBI median
	More than 20% worse than the OMBI Median
	A context measure – results are largely outside municipal control
N/A	Not Applicable
N/R	Not Reported

Measure Type	Measure Name (page in 2006 OMBI report)	Description	2005	2006	What this means for Ottawa
Service Level	Volume of drinking water treated per 100,000 persons (in millions of litres) (page 91)	Ottawa Result:	15,860	15,157	The lower the volume, the better the result. The volume of water treated in 2006 decreased both province-wide and in Ottawa relative to 2005. In Ottawa, a number of innovative initiatives are currently being implemented (Water Loss Control Program, Water Conservation Program, and the "Wise Use of Water" initiative), which have contributed to the reduced amount of drinking water produced.
		Median:	17,427	16,470
		Indicator:
Customer Service	Number of times in a year that a water main breaks per 100 kilometres of water distribution pipe (page 92)	Ottawa Result:	10.1	9.8	Despite registering water main breaks that were higher than the median, the City’s Active Leak Detection Program, which began in 2006, proactively identified 29 leaks. Removing these from the total brings down the number of breaks to the same level as the OMBI median. The number of water main breaks is linked to the age of the water main. As such, Ottawa generally registered more water main breaks than municipalities with younger infrastructure and fewer than those with older infrastructure. Continued investment in water main rehabilitation will allow the City to provide a high level of service.
		Median:	11.2	9.0
		Indicator:
Efficiency	Cost to treat a megalitre (1 million litres) of drinking water (page 93)	Ottawa Result:	$150	$151	Ottawa’s cost was approximately 26% below the OMBI median. Looking more closely at comparable sized municipalities, Ottawa’s unit cost is close to a similar sized municipality such as Hamilton, and slightly above that of London. Ottawa’s use of alternative sources of energy to reduce electricity consumption has been a contributor to the lower cost. In 2008, unit rates are expected to go up significantly as costs for waste management are included in this measure.
		Median:	$175	$206
		Indicator:
	Cost to distribute drinking water per kilometre of water distribution pipe (page 94)	Ottawa Result:	$6,932	$7,782	Operating costs are close to the OMBI median. Increased costs are due to inflation and expanded work on water loss control initiatives within the water distribution system compared to 2005.
		Median:	$7,502	$7,528
		Indicator:

Legend
	Within 4.9% of the OMBI median or better
	5% to 19.9% worse than the OMBI median
	More than 20% worse than the OMBI Median
	A context measure – results are largely outside municipal control
N/A	Not Applicable
N/R	Not Reported

Measure Type	Measure Name (page in 2006 OMBI report)	Description	2005	2006	What this means for Ottawa
Service Level	Volume of wastewater treated per 100,000 persons (in megalitres – 1 million litres) (page 86)	Ottawa Result:	19,622	20,798	The lower the volume, the better the result. Minimizing the volume of excess water helps to ensure that the sewer system is not overwhelmed. This measure is influenced by: weather; the extent of the combined sewer system; the percentage of residences with downspout connections; illegally connected sump pumps; storm connections to sanitary sewers; and, the relative contribution of industrial, commercial and institutional volumes. Ottawa's total wastewater flow is always above the median due to having a combined sewer system. Also, the 2006 rainfall was higher than average.
		Median:	19,088	19,952
		Indicator:
Customer Service	Number of times in a year that a municipal wastewater main (sewer) backed up per 100 kilometres of wastewater main (page 87)	Ottawa Result:	4.8	1.9	The number and intensity of storms, the structural condition of the mains, the amount of grease discharged into the collection system, and the effectiveness of the sewer cleaning program affect this measure. The sewer-cleaning program had been reduced for a few years due to budget cuts and staff reductions. These reductions limited the ability to supervise contracted forces. Increased funds for the sewer cleaning program and additional staff to oversee the contractors were secured in the 2005 and 2006 budgets, and the number of main backups decreased in 2006 as a result.
		Median:	3.1	1.9
		Indicator:
Efficiency	Annual cost of treating wastewater and disposing of bio-solids per kilometre of wastewater pipe (page 88)	Ottawa Result:	$129	$122	Ottawa’s costs are the second lowest among OMBI municipalities due to the efficiency of the Robert O. Pickard Centre. This wastewater treatment plant has a sophisticated SCADA (System Control and Data Acquisition) system, optimized unit processes, highly trained staff, and a best in class energy management system.
		Median:	$193	$204
		Indicator:
	Annual cost of wastewater collection per kilometre of wastewater pipe (page 89)	Ottawa Result:	$4,692	$5,333	Ottawa’s cost is low compared to the OMBI median due to the level of maintenance on the wastewater collection system. A low number can mean that insufficient maintenance is being done to ensure system reliability. Ottawa’s level of service in most areas is lower than in other comparable cities. The extensive use of contracted forces is thought to be a major factor in keeping costs down.
		Median:	$5,647	$5,547
		Indicator:

Committee recommendationS AS AMENDED

That Council approve

25 February 2008 / le 25 février 2008

Public Works and Services / Services et Travaux publics

City Treasurer / trésorière municipale

Contact Person / Personne ressource: Dixon Weir, Director / Directeur
Water and Wastewater Services / Services de l’eau et des eaux usées

613-580-2424, x22002 Dixon.Weir@ottawa.ca

REPORT RECOMMENDATIONS

RECOMMANDATIONS DU RAPPORT

EXECUTIVE SUMMARY

RÉSUMÉ

Production

Wastewater Treatment

Comparison with Other Ontario Municipalities

Generally speaking, the proposed rate increases for Ottawa are very consistent with rate increases in similar sized municipalities in Ontario.

CONCLUSION

CONSULTATION

LEGAL IMPLICATIONS

FINANCIAL IMPLICATIONS

SUPPORTING DOCUMENTATION

DISPOSITION

Enacted by City Council at its meeting of

LEGAL SERVICES

Enacted by City Council at its meeting of

LEGAL SERVICES

Dixon Weir, Manager of Water and Wastewater Services, Public Works and Services provided a detailed and extensive PowerPoint presentation, which is held on file with the City Clerk. Staff from his branch, Infrastructure Services, Financial Services, and Planning accompanied him.

In response to a question from Councillor Cullen on the status of the Stormwater Master Plan, Mike Wildman, Manager of Infrastructure Approvals, reported the project is in its second of three phases to be completed in the next year and a half.

CARRIED, with S. Desroches dissenting.

CARRIED

Committee recommendationS AS AMENDED

That Council approve

25 February 2008 / le 25 février 2008

Public Works and Services / Services et Travaux publics

City Treasurer / trésorière municipale

Contact Person / Personne ressource: Dixon Weir, Director / Directeur Water and Wastewater Services / Services de l’eau et des eaux usées

613-580-2424, x22002 Dixon.Weir@ottawa.ca

REPORT RECOMMENDATIONS

RECOMMANDATIONS DU RAPPORT

EXECUTIVE SUMMARY

RÉSUMÉ

Production

Wastewater Treatment

Comparison with Other Ontario Municipalities

Generally speaking, the proposed rate increases for Ottawa are very consistent with rate increases in similar sized municipalities in Ontario.

CONCLUSION

CONSULTATION

LEGAL IMPLICATIONS

FINANCIAL IMPLICATIONS

SUPPORTING DOCUMENTATION

DISPOSITION

Enacted by City Council at its meeting of

LEGAL SERVICES

Enacted by City Council at its meeting of

LEGAL SERVICES

Dixon Weir, Manager of Water and Wastewater Services, Public Works and Services provided a detailed and extensive PowerPoint presentation, which is held on file with the City Clerk. Staff from his branch, Infrastructure Services, Financial Services, and Planning accompanied him.

In response to a question from Councillor Cullen on the status of the Stormwater Master Plan, Mike Wildman, Manager of Infrastructure Approvals, reported the project is in its second of three phases to be completed in the next year and a half.

CARRIED, with S. Desroches dissenting.

CARRIED

Contact Person / Personne ressource: Dixon Weir, Director / Directeur
Water and Wastewater Services / Services de l’eau et des eaux usées