WATER. Approved.

Transcription

1 WATER Approved

2 Contents Water Budget Overview Recommendations... 1 Executive Summary... 2 Operating Budget 2015 Budget Highlights Object of Expenditure and Source of Revenue Summary Operating Program Budget Summary Overview of Program Changes Revenue Overview of Program Changes Expenditures Four Year Operating Forecast Performance Measures and Staffing Capital Budget Capital Expenditure Linkage to Safe Drinking Water Act Capital Program Capital Expenditure Summary by Classification Capital Source of Financing Summary Capital Expenditure Detail Reserve Funds and Reserves Debt Summary Appendix A Schedule of Rates and Charges Appendix B Business Plan... 64

3 2015 Budget and Forecast Recommendations Council resolved on January 27, 2015: That, on the recommendation of the Managing Director, Environmental and Engineering Services and City Engineer, with the concurrence of the Managing Director, Corporate Services & City Treasurer, Chief Financial Officer, the following actions be taken with respect to the 2015 Operating Budget, 2015 Capital Budget and associated forecasts for Water Services: (a) (b) (c) (d) the 2015 Operating Budget for Water Services BE APPROVED as submitted; the Operating Forecast for Water Services BE RECEIVED for information; the 2015 Capital Budget for Water Services BE APPROVED as submitted; the Capital Forecast for Water Services BE RECEIVED for information; it being noted that all rates and charges related to the provision of Water Services, with the exception of the Customer Assistance charge, will increase by 7% effective January 1, 2015 as approved by Council on November 25,

4 2015 Budget and Forecast Supporting Council s Strategic Plan by Responding to its Strategies A Strong Economy A Vibrant & Diverse Community A Green & A Sustainable Growing City Infrastructure A Caring Community A Strong Economy: Invest in infrastructure robust capital programs for growth, lifecycle renewal and system improvement Maintain competitive utility rates fair and equitable rate structure that supports both water conservation and low rates for industry Establish a focused strategy for the downtown capital investment in downtown infrastructure Build on the industrial land development strategy (ILDS) ILDS projects included in the capital program A Green and Growing City: Promote a green culture and the fundamentals of sustainability water conservation programs Reduce carbon footprint through wise actions that benefit our local, regional and global environment energy reduction projects with significant results Facilitate, plan and manage growth for the greatest long-term benefit for all updated Master Plan in 2014 Demonstrate environmental leadership in all municipal operations innovation and use of new technologies to reduce construction impacts Establish London as a leader in green technologies participation in research, testing and commercial validation A Sustainable Infrastructure: Invest in strong, safe, modern and efficient infrastructure networks a balanced watermain replacement program with cutting edge rehabilitation technologies 2

5 2015 Budget and Forecast Ensure affordability for users fair and equitable rate structure that supports both water conservation and low rates for industry Achieve effectiveness, economy and efficiency in operations achieving financial stability One of the most significant undertakings of the new Council will be to update the City s strategic plan that will cover the next 4 years. The newly elected Council will be establishing the vision and future direction for the City and the strategic objectives that support the vision. It is anticipated that the development of the new strategic plan will be completed in early Overview The approved 2015 Water operating and capital budgets represent the final step along the path to a sustainable water supply system for Londoners. Continuing the theme of the 2014 budget, the 2015 Water operating and capital budgets support 4 core business objectives: Compliance Growth Efficiency Best Management Practices Municipal Councillors and officials have oversight responsibilities under Section 19 of the Safe Drinking Water Act, which became a statutory requirement on January 1, Severe penalties are possible for municipal officials who fail to act in good faith and do not exercise honesty, competence and integrity to ensure the protection and safety of the users of municipal drinking water systems. A statutory standard of care is required on the part of our elected officials to prevent waterborne disease outbreaks. Considerable effort has been undertaken in the Water Service Area to assess risk and put in place management strategies to reduce risk and minimize the impact on our customers by addressing the 5 barriers to compliance outlined in the Safe Drinking Water Act: Source water protection Effective treatment Secure distribution Effective monitoring Effective management 3

6 2015 Budget and Forecast The financial sustainability plan endorsed by Council during the development of the 2013 budget and confirmed during 2014 budget deliberations continues to remain the foundation on which the 2015 operating and capital budgets were developed. Adherence to the plan will result in a 7% rate increase in Financial sustainability 1 continues to be projected in This is two years earlier than forecasted in the Financial Plan. The approved 2015 Water budget presents a balanced cost/revenue plan in the amount of $73.6 million. This represents an overall budget increase of 5.5% over Although rates are increasing 7%, lower water consumption is anticipated to partially offset the incremental revenue from the rate increase. Total 2015 Approved Budget = $73.6 million Capital & Debt Servicing $31.2 million Operating $42.4 million The approved operating portion of the budget totalling $42.4 million represents a 2.4% increase over There are a number of factors driving this 2.4% increase, including: $837,000 increase in the wholesale cost of purchasing water from the Elgin Area and Lake Huron Primary Water Supply Systems. Rates will increase by 9% and 5% respectively. This increase is partially offset by a reduction in the volume of water purchased; 1 Financial Sustainability is defined as the movement toward annual rate increases that can be maintained at or near the annual rate of inflation based on a combination of the Consumer Price Index (CPI) and the Construction Price Index with appropriate use of debt financing, adequate reserve funds and the appropriate investment in capital. 4

7 2015 Budget and Forecast $73,000 increase in purchased services, attributable to an inflationary increase in the charges to Water for restoration services performed by Transportation Operations, increasing utility locate costs, and a 12% forecasted increase in insurance premiums; $81,000 increase in administrative costs, driven by an inflationary increase in the charges to Water for corporate administrative services; $18,000 net decrease in personnel costs, materials and supplies and equipment rental costs. The approved 2015 capital budget totals $29.9 million, up from $27.7 million in The total 5 year capital plan for 2015 to 2019 amounts to $186.1 million, up from the $163.5 million that the 5 year capital plan outlined in the 2014 approved Water capital budget. Major factors contributing to the increase in the capital forecast include: $16 million of new projects added to the capital plan over the next 5 years to support the City s Industrial Land Development Strategy, two-thirds of which are assumed to be funded by senior levels of government. Changes to the timing of various capital projects in accordance with the 2014 Development Charges Background Study and Growth Management Implementation Strategy (GMIS). 5

8 2015 Budget and Forecast No rate supported debt is anticipated within the next 5 years, although approximately $10 million of debt is anticipated to support the proposed capital plan at the end of the 10 year window. Debt servicing costs are projected to decrease from $364 thousand to $350 thousand, while rate supported capital funding has increased by $0.2 million, from $16.9 million to $17.1 million. Ensuring adequate reserve funds in accordance with the 20 Year Water System Plan continues to be a priority. The new water rate structure, combined with the forecasted future rate increases, will enable reserve funds to be maintained at a more optimal level, recognizing that higher than average drawdowns are forecasted in the 2021 to 2023 timeframe to support the proposed capital plan. Impact on the Average Residential Ratepayer The average cost to the homeowner for 2015 is forecasted to increase by $24 per year (based on projected 2014 consumption of m 3 ). At the revised rates for 2015, the homeowner s cost for the year will be $367 or $1.01 per day. Budgeted Residential Cost at 2014 Rates (1) Forecasted Residential Cost at 2014 Rates (2) 2015 Increase (7%) Forecasted Residential Cost at 2015 Rates (3) $363 $343 $24 $367 (1) The budgeted residential cost in 2014 was based on an average residential consumption of m 3. (2) The forecasted residential cost in 2014 has been restated using a revised average residential consumption estimate of m 3. (3) The forecasted residential cost in 2015 is based on an average residential consumption of m 3. 6

9 2015 Budget and Forecast Recent Accomplishments The Water utility has successfully completed a number of initiatives in support of its 4 core business objectives Compliance, Growth, Efficiency and Best Management Practices. Selected highlights of recent accomplishments include: Compliance Continued compliance with the City s Water Operational Plan under the Drinking Water Quality Management Standard, and increased vigilance with respect to compliance under the Safe Drinking Water Act and the Fire Code. Received a 100% score on the Ministry of the Environment Report Card (audit) for Implemented a proactive preventative maintenance program for eliminating and/or substantively reducing the risk of drinking water contamination in flooded air and vacuum valve chambers within the distribution system. Continued the program for replacement of lead services, consistent with the recommendations of the Walkerton Inquiry. Growth Prepared the City s Water Growth Master Plan and the Water component of the new 2014 Development Charges Background Study. Provided input to the Industrial Land Development Strategy. These plans will form the roadmap for growth-related expenditures in the coming years. 7

10 2015 Budget and Forecast Efficiency Initiated the District Meter Areas (EW1630) capital project aimed at reducing London s non-revenue water by identifying and remedying leakage within the system in targeted areas of the City. This project will be expanded over the next 5 years to continue to reduce leakage in the system, while also potentially being implemented in new subdivisions to provide a mechanism to charge for construction water usage. This program addresses findings noted in PwC s 2011 Value for Money audit 2. Best Management Practices Implemented the new water and wastewater rate structure effective March 1, The new rate structure shifts a greater proportion of water revenues to fixed charges, making the utility less susceptible to changes in consumption. The rate structure also introduced the new Fire Protection Charge to recover for the costs associated with the provision of water for fire protection purposes. These changes were consistent with the recommendations of the PwC Value for Money audit conducted in Progressed towards implementation of a Computerized Maintenance Management System, to bring the utility s maintenance and work flow management up to industry standards. This will result in staff resource efficiencies, enhanced documentation, and cost tracking of maintenance activities, while also ensuring compliance with regulatory requirements. Economic Challenges Notwithstanding the recent successes of the Water service area, a number of economic challenges currently affect the 2015 budget as well as the forecast for the near future: Consumption Non-revenue water Wholesale purchase of water costs Inflation Energy prices Senior government funding programs Although these challenges are being managed, they could adversely affect future budgets. 2 A Value for Money audit is conducted to assess the effectiveness and efficiency of an organization s utilization of its funds. 8

11 2015 Budget and Forecast Consumption Despite the implementation of the new water and wastewater rate structure in March 2013 that shifted a greater proportion of total revenues to fixed charges, revenues continue to be heavily influenced by water consumption. Water conservation efforts, coupled with recent weather conditions that have not been conducive to water consumption, continue to drive water usage lower than Administration previously forecasted. The chart below illustrates the declining water consumption trend, as well as the savings that have been achieved by an average residential user as a result of conservation efforts. As the chart indicates, average residential consumption has decreased 30% in the past 12 years, from a peak of approximately 253 m 3 /year in 2001 to approximately m 3 /year in A significant reduction in forecasted consumption was made for the 2014 budget, reducing consumption forecasts from 43.2M m 3 in 2013 to 41.0M m 3 (5%) for A further anticipated reduction to 40.1M m 3 (2%) per year is the basis for the 2015 budget. If recent consumption trends are indicative of future water use patterns, the Water utility may be challenged to generate sufficient revenues to support current and future infrastructure needs under the current rate plan. 9

12 2015 Budget and Forecast Non-Revenue Water Notwithstanding abnormally high non-revenue water 3 experienced in 2014 from leakage resulting from watermain and water service breaks due to the harsh winter conditions, non-revenue water has averaged approximately 10-11% over the last 5 years, which is below the provincial average of approximately 15%. Enhanced leak reduction efforts (such as the 5 year District Meter Areas capital program initiated in 2014) and meter replacement strategy are being undertaken in order to reduce non-revenue water even further. The Water financial model assumes future non-revenue water of 10% based on these initiatives. Not achieving and maintaining this level of non-revenue water may require greater rate increases in the future. 16% Non-Revenue Water 14% 12% 10% 8% 6% 4% 2% 0% Provincial Average London's 5-year Average 3 Non-revenue water represents water purchased by the City of London but not billed to water users. Reasons for nonrevenue water include, but are not limited to, water lost in the system due to leakage, water consumed in firefighting activities, water meter inaccuracies, etc. 10

13 2015 Budget and Forecast Wholesale Purchase of Water Costs The cost of purchasing water from the Lake Huron and Elgin Area Primary Water Supply Systems is a significant component of the Water budget, comprising approximately 29% of the total Water operating budget. The Water financial model includes the most up-to-date rate plans from the water boards. Any changes to these rate plans may in turn affect the City s forecasted rates. Inflation The outcome of achieving financial sustainability in the context of the Water and Wastewater utilities is realizing future rate increases at or near the level of inflation. Administration is currently forecasting this future inflationary rate at approximately 3% based on a combination of consumer prices and construction price indices. 4 Should economic circumstances (nationally, provincially or locally) change, future rate forecasts could be positively or adversely affected. Energy Prices Although inflation is a significant factor in future rate forecasts, price increases in energy commodities specifically electricity and natural gas could have an impact on future rate forecasts. 4 This inflationary-level rate is based on the Bank of Canada s long-term inflation target of 2% and the historical nonresidential building price index which has traditionally averaged approximately 4%/year. 11

14 2015 Budget and Forecast Currently, electricity costs are forecasted to increase at an average of 6.2%/year from 2015 to 2019 (based on City of London forecasts); these increases are much higher than general inflation trends. While further energy efficiency projects are planned for the near future, increases in energy prices greater than forecasted above could adversely impact future budgets. Senior Government Funding Programs Outside of the annual federal gas tax funding currently allocated to the Water utility and the Huron Elgin London Project (HELP) that is winding down, there are currently no senior government funding programs assisting Water. Previously, Water was able to access funding under the Infrastructure Stimulus program to assist in funding critical infrastructure works. Included in the approved 2015 Water budget and described in further detail below are various projects related to the City s Industrial Land Development Strategy. The first phase of these projects has been included in the budget based on the assumption that two-thirds of the required funding would be provided by senior levels of government. Should this funding not materialize, the capital plan will be adversely affected. Revenue Overview The following chart outlines the key factors driving the $3.86M (5.5%) increase in revenues in the approved 2015 budget: Explanation of Changes in Revenue Change ($000's) Revenue impact of reduced water consumption. Water consumption forecast has been reduced from 41.0M m 3 in 2014 to 40.1M m 3 in 2015 as a result of the continuing trend of water conservation. Change in other revenues, primarily due to a larger than previously forecasted number of water service applications. (918) 58 7% rate increase for ,723 Total Change in Revenues 3,863 12

15 Operating Budget Overview Water 2015 Budget and Forecast The following chart outlines the key factors driving the $3.86M (5.5%) increase in expenditures in the approved 2015 budget: Explanation of Changes in Expenditures Increase in the wholesale cost of purchasing water from the Elgin Area and Lake Huron Primary Water Supply Systems. Rates will increase by 9% and 5% respectively. This increase is partially offset by a reduction in the volume of water purchased. Increase in purchased services, attributable to an inflationary increase in the charges to Water for restoration services performed by Transportation Operations, increasing utility locate costs, and a forecasted 12% increase in insurance premiums. Increase in administrative costs, driven primarily by a 1.9% inflationary increase in the charges to Water for corporate administrative services. Minor decrease in forecasted personnel costs, partially offset by small anticipated increases in materials and supplies and equipment rental costs. Operating Related Subtotal Increased contributions to reserve funds to reflect capital requirements outlined in the 20 Year Water System Plan and the objective of maintaining sufficient reserve fund balances to support an estimated asset base of $2.7 billion. Increase in capital levy required to achieve the average long-term target of 75% of life cycle projects funded on a pay-as-you-go basis, consistent with the corporate strategic financial plan. Decreased debt servicing costs resulting from debt issued for prior years approved capital projects. Capital Related Subtotal Total Change in Expenditures Change ($000's) (18) 973 2, (14) 2,890 3,863 Capital Plan Overview The Water Service Area remains proactive with initiatives to ensure that this service continues to meet the demands and expectations of customers. Existing infrastructure requires significant renewal (replacement and rehabilitation) work to ensure that future generations and businesses are not faced with a water system that is failing, unreliable and expensive to maintain. The City of London s State of the Infrastructure Report 2013 identified a current Water infrastructure gap of $1.9 million, which is forecasted to grow to $37.8 million in 10 years if not addressed. The Water 20 Year Plan reflects the investment required to address the current and future infrastructure gap. 13

16 2015 Budget and Forecast The following chart highlights the 2015 capital plan and forecast for : Category 2015 Approved Budget Forecast Lifecycle 5 $22.8M $279.6M Growth 6 $5.9M $67.1M Service Improvement 7 $1.3M $8.1M The 2015 capital plan breaks down into the following categories of spending: Category Watermains Meters Reservoirs & Pumping Stations Other Miscellaneous Capital Projects TOTAL 2015 Approved Budget $27.2M $0.4M $1.5M $0.8M $29.9M 5 Replacement or rehabilitation of existing infrastructure. 6 Provision of new services to growth areas of the city. 7 Initiatives to enhance the efficiency and/or effectiveness of services provided. 14

17 2015 Budget and Forecast Highlights of the 2015 capital plan are discussed in further detail below. Lifecycle 2015 Approved Budget Forecast Forecast $22.8M $116.8M $162.8M EW Main Rehabilitation Program (10 Year Program Forecast: $74.6M) The Main Rehabilitation Program is used for the cleaning and relining of watermains to maintain flow capacity and provide safe drinking water. The Main Rehabilitation Program targets areas of the City where water quality (taste, colour, chlorine residual) has deteriorated due to prolonged water detention time and internal corrosion of the watermain. Identification is driven, in part, by customer water quality complaints. Cleaning and relining restores water quality and improves fire flow, while extending the life of a watermain that would otherwise have to be replaced at a much higher cost, and also reduces social impacts and disruption by utilizing trenchless technologies. Trenchless technologies have been used by the Water Service Area since the mid 1990 s. Compared to open cut and surface restoration construction, trenchless methods minimize the amount of excavation required, minimize damage to surface structures, cause less traffic disruption and reduce noise and dust for homeowners. This technology also allows installations to be made in areas where open excavation is impractical, impossible, extremely difficult, or costly. Trenchless procedures are also more environmentally friendly because they produce less construction emissions. With continuously improving lining technology and increasing contractor competition in this area, the cost to rehabilitate watermains is expected to decrease somewhat, allowing more watermains to be renewed through rehabilitation rather than complete replacement. EW & EW Main Replacement Programs (10 Year Program Forecast: $114.2M) While main rehabilitation is preferred to pipe replacement, there are many instances where lining or relining is impractical or infeasible and replacement of the main is necessary. The Watermain Replacement Program is an annual program that is coordinated with sewer work, roadworks and other utility replacements. This program ensures that the water distribution system remains reliable, while coordination with other works ensures that the infrastructure is replaced as cost effectively as possible. 15

18 2015 Budget and Forecast EW Replacement of Water Services (10 Year Program Forecast: $20.0M) This program has traditionally been dedicated to the replacement of lead water services and was funded in the amount of $750,000 per year in recent years. One of the recommendations from the Walkerton Inquiry report was, lead service lines should be located and replaced over time with safer materials. The original intention of this program was to enhance the safety of the water distribution system by addressing that specific recommendation. In recent years, however, the Water service area has noted a substantial increase in the number copper water services that are experiencing premature failure well in advance of their anticipated life expectancy. As a result, funding for this program has been increased from the previous $750,000/year to $2.0 million/year in order to address the emerging challenge. Funding levels will be reviewed annually as more knowledge is obtained regarding the failure rate for copper water services. 16

19 2015 Budget and Forecast Growth 2015 Approved Budget Forecast Forecast $5.9M $35.8M $31.2M Industrial Land Development Strategy (10 Year Forecast: $23.8M) For more than 40 years, the City of London has been engaged in developing industrial land. This work supports City Council s priority of A Strong Economy by attracting investment and jobs to London. Council s Strategic Plan specifically recognizes the importance of industrial land to London s prosperity. Council directed the Civic Administration to develop a comprehensive strategy to guide industrial land development efforts. In March 2014, the Municipal Council adopted an Industrial Land Development Strategy (ILDS). The estimated cost for land servicing in the first of two phases of the Industrial Land Development Strategy over the next 5 years is $120 million. The City of London is to contribute $40 million and is requesting $40 million from each of the federal and provincial governments, a three-way split, to support this strategy. Of the $120 million estimated total servicing cost for the first phase of the ILDS, $16.0 million has been earmarked for water servicing works in the Water 5 year capital plan. One-third of these costs will be funded in the Water Budget through Water rates. A further $7.8 million for water servicing is included in the capital plan for the second phase of the ILDS beyond 5 years. Should funding from the federal and provincial governments not be available or not be provided to the extent envisioned, the capital plans will be adjusted accordingly to accommodate the funding available for the ILDS program. 17

20 Servicing for Infill and Intensification (10 Year Forecast: $5.5M) Water 2015 Budget and Forecast Infill and intensification, particularly in the downtown area, is a significant priority of Administration and Council. While infill 8 and intensification can be less expensive from a servicing standpoint than greenfield 9 development, it is not completely without cost. In many cases the existing infrastructure servicing the locations where intensification is planned is inadequate to manage the additional strain placed on it by the planned development. As a result, it is necessary to upgrade the infrastructure to support the intensification needs. Based on the estimates included in the 2014 Development Charges Background Study, a total of $11.0 million has been added to the Water 20 year capital plan ($5.5 million in the first 10 years) to address infrastructure needs associated with infill and intensification projects. The scheduling for these expenditures is still subject to actual development opportunities as they arise. Service Improvement 2015 Approved Budget Forecast Forecast $1.3M $3.5M $4.6M EW1630 District Meter Areas (10 Year Forecast: $2.0M) This innovative 5-year program was introduced as part of the 2014 budget and addresses recommendations in the Value for Money audit conducted by PwC in The objective of this program is to gradually reduce London s non-revenue water, which has averaged approximately 10-11% in recent years. Best practice indicates that considerable savings can result with the installation of properly designed District Meter Areas (DMA s) throughout the City dividing the City into zones (50+) where pressure and flow is monitored to determine if there are leaks. These savings in lost water will support ongoing operational costs of the program and pay back the initial capital costs incurred. This program also reduces the number of watermain breaks, property damage and customer inconvenience, while minimizing staff time (including overtime) to repair future breaks. An opportunity also exists to utilize DMA s in new subdivisions to provide a mechanism to charge for construction water usage. Future Regulations The City of London has responded to the Environmental Bill of Rights Registry on a proposal paper about Stewardship, Leadership, Accountability Safeguarding and Sustaining Ontario s 8 Infill is the use of lands within a previously developed area for further construction. 9 Greenfield development is construction on new lands that have not previously been developed. 18

21 2015 Budget and Forecast Water Resources for Future Generations. The main concern for London revolves around the point of whether London is undertaking a transfer of water across a Great Lake basin boundary. Staff at the City of London and Regional Water Supply Systems are fully engaged with the appropriate Ministries to ensure the best interests of the City of London and other regional municipalities are considered. A discussion document on the matter was issued in early 2014, which is the initial step in introducing related regulations. Although the preliminary interpretation of this discussion document is favourable for London, changes could still be made prior to final regulations being enacted. The long term cost impacts, if any, as a result of these regulations are not entirely known at this time. The Water Opportunities Act introduced mandatory legislation which was anticipated in the development of the Water Efficiency Program and Municipal Drinking Water Awareness Plan. Other key elements of the Act incorporated within a municipal water sustainability plan include an asset management plan and associated maintenance management system, a financial plan and a risk assessment. These initiatives are either complete or well underway, thereby putting the City in a good position to meet the requirements of the legislation and the subsequent enabling regulations. Any further impacts on staff resources and financial commitments will not be clear until the regulations of the Water Opportunities Act are put forward, but it is clear that more effort will be required than was previously budgeted. Future Forecasted Rate Increases The Water service area continues to strive towards an efficient and effective water supply system while achieving financial sustainability rate increases at or near the rate of inflation with appropriate use of debt financing, adequate reserves and appropriate investment in capital in accordance with the Financial Plan endorsed by Council. Consistent with the forecast presented in the 2014 budget, a 7% increase is required for 2015, with inflationarylevel increases forecasted for 2016 and beyond (currently anticipated to be around 3%) based on the information currently available. As discussed, there are a number of factors influencing the 2015 budget and forecasts which may have a positive or adverse impact on future rates. Conclusion The City of London s water distribution system has a replacement value of approximately $2.7 billion. Operating expenditures continue to be minimized in an effort to maximize capital funding so that the infrastructure gap is managed to a sustainable level. The Water service area remains committed to ensure that the citizens of London have access to reliable, high quality, abundant water to satisfy all their water needs (drinking, food 19

22 2015 Budget and Forecast preparation, sanitation, showers, laundry, outdoor water use, etc.). This essential service is an integral part of the City s strategic priorities regarding A Green & Growing City, A Sustainable Infrastructure and A Strong Economy. Becoming financially sustainable provides value for future generations and stable rate increases for current customers. The approved 2015 Water budget presents a balanced cost/revenue plan in the amount of $73.6 million based on a 7% rate increase for 2015, consistent with the financial sustainability plan endorsed by Council during the 2013 budget process and confirmed during 2014 budget deliberations. This represents an increase of $24/year for the average residential customer. At just $1.01/day for the average residential customer, the 2015 Water Budget ensures: Compliance with regulatory requirements; Capital investments in existing and future growth needs; Efficiency measures, now and in the future; Sound Financial Management; and, Achieving financial sustainability in 2016: o Meet license requirements / move towards a sustainable infrastructure; o Reserve fund balances approaching more adequate levels; and o Financial flexibility to accommodate future needs. 20

23 2015 Operating Budget With Forecasts

24 2015 Budget Highlights ($000's) ($000's) % 2015 Approved Budget $73, Approved Budget $69,705 Increase Over 2014 Budget $3, % Impact of Reduced Water Consumption & Increase in Other Revenues 1.5% Total Rate Increase 7.0% Revenue Budget $73,568 Expenditure Budget $73,568 Water Usage Charges 63% Other Revenues 1% Customer Assistance Charges 1% Water Infrastructure Charges 31% Fire Protection Charges 4% Capital Funding & Debt Servicing 43% Administrative Expenses 4% Purchase of Water 29% Billing & Customer Service 3% Purchased Services 4% Materials & Supplies 3% Equipment Rentals 2% Personnel Costs 12% 21

25 2015 Object of Expenditure and Source of Revenue Summary ($000's) Object of Expenditure and Source of Revenue 2013 Actuals Change Prior Revised Approved from Year Budget Budget 2014 Change Revenues Residential 7,154 Commercial, Institutional, Industrial & Multi Family Residential 4,955 Water Usage Charges (1) 32,565 44,821 46,858 2, % Water Infrastructure Charges (1) 15,555 21,047 22,602 1, % Fire Protection Charges (1) 1,991 2,529 2, % Customer Assistance Charges (1) % Other Revenues (2) 1,397 1,003 1, % Total Revenues 63,874 69,705 73,568 3, % Operating Related Purchase of Water 19,846 20,822 21, % Personnel Costs 8,042 8,318 8,260 (58) -0.7% Administrative, Other & Recovered Expenses 2,866 3,154 3, % Billing & Customer Service 2,337 2,407 2, % Purchased Services 2,832 2,810 2, % Materials & Supplies 1,896 2,223 2, % Equipment & Rentals 1,620 1,649 1, % Total Operating Related 39,439 41,383 42, % Financial Expenses Capital Levy 13,600 16,856 17, % Reserve Fund Contribution (3) 10,578 11,102 13,750 2, % Debt Servicing Costs (14) -3.8% Total Financial Expenses 24,435 28,322 31,212 2, % Total Expenditures 63,874 69,705 73,568 3, % (1) Reflects revised categorization of revenue accounts after the implementation of the new water rate structure effective March 1, (2) Prior to 2014, meter revenues were included in Other Revenues. These charges are now reflected in Water Infrastructure Charges. (3) Includes contributions to reserves for Local Improvements and Self Insurance. 22

26 Program Water 2015 Operating Program Budget Summary ($000's) 2013 Actuals Change Prior Revised Approved from Year Budget Budget 2014 Change Total Revenues 63,874 69,705 73,568 3, % Engineering & Operations Engineering 1,385 1,757 1,738 (19) -1.1% Water Operations 12,645 13,369 13, % Purchase of Water 19,846 20,822 21, % General Administration 3,226 3,028 3, % Billing & Customer Service 2,337 2,407 2, % Total Engineering & Operations 39,439 41,383 42, % Total Capital Contributions & Financial Expenses 24,435 28,322 31,212 2, % Total Expenditures 63,874 69,705 73,568 3, % 23

27 Overview of Program Changes - Revenue ($000's) Explanation of Changes in Revenue Revenue impact of reduced water consumption. Water consumption forecast has been reduced from 41.0M m 3 in 2014 to 40.1M m 3 in 2015 as a result of the continuing trend of water conservation. Change in other revenues, primarily due to a larger than previously forecasted number of water service applications. Change ($000's) (918) 58 7% rate increase for ,723 Total Change in Revenues 3,863 24

28 Overview of Program Changes - Expenditures ($000's) Explanation of Changes in Expenditures Increase in the wholesale cost of purchasing water from the Elgin Area and Lake Huron Primary Water Supply Systems. Rates will increase by 9% and 5% respectively. This increase is partially offset by a reduction in the volume of water purchased. Increase in purchased services, attributable to an inflationary increase in the charges to Water for restoration services performed by Transportation Operations, increasing utility locate costs, and a forecasted 12% increase in insurance premiums. Increase in administrative costs, driven primarily by a 1.9% inflationary increase in the charges to Water for corporate administrative services. Minor decrease in forecasted personnel costs, partially offset by small anticipated increases in materials and supplies and equipment rental costs. Operating Related Subtotal Increased contributions to reserve funds to reflect capital requirements outlined in the 20 Year Water System Plan and the objective of maintaining sufficient reserve fund balances to support an estimated asset base of $2.7 billion. Increase in capital levy required to achieve the average long-term target of 75% of life cycle projects funded on a pay-as-you-go basis, consistent with the corporate strategic financial plan. Decreased debt servicing costs resulting from debt issued for prior years approved capital projects. Capital Related Subtotal Total Change in Expenditures Change ($000's) (18) 973 2, (14) 2,890 3,863 25

29 Four Year Operating Forecast Revenue Rate increases of 7% in 2015 and 3% thereafter have been incorporated into the 20 Year Water System Plan. While the declining water consumption trend helps to postpone future works, it continues to place significant pressure on the City s capacity to raise funds to operate, maintain and improve the existing system. The implementation of the new water rate structure in 2013 partially offsets declining consumption by shifting a greater portion of total revenues to fixed charges. However, the City remains heavily dependent on water consumption to generate sufficient revenues. The projected rate increases are offset by an anticipated average annual net consumption reduction of 1% per year until An average net consumption increase of 0.75% per year is then forecasted until Deviations from these projections, changes to the economic climate or legislative requirements may result in modifications to the 20 Year Water System Plan to ensure sustainability is achieved and maintained. Fixed revenue streams (Water Infrastructure Charge, Fire Protection Charge, etc.) are forecasted to increase at 1% per year in addition to the approved rate increase for each respective year due to growth in the number of customer accounts. Engineering & Operations For 2016 to 2019, operating expenditures are projected to increase at an average annual rate of 2.1% per year. The main driver of these increases are Purchase of Water costs, which are forecasted to increase an average of 2.7% per year based on the current rate plans of the Lake Huron and Elgin Area Primary Water Supply Systems. Electricity costs are also expected to put pressure on operating budgets with a cumulative increase of almost 25% by 2019, assuming these costs are not curbed by further energy efficiency projects. 26

30 Four Year Operating Forecast The 2.1% average annual increase is consistent with various inflationary indicators published by the Bank of Canada and other financial institutions and aligns with the objective of maintaining operating-related increases at or below approximately 2%/year. With construction cost increases traditionally averaging approximately 4%/year over the past 10 years according to the Non-Residential Building Construction Price Index (NRBCPI), maintaining operating-related increases at 2%/year is critical to maintaining an overall blended increase of 3%/year. Capital Financing The forecast from 2016 to 2019 projects the lifecycle renewal program to be 75% funded through capital levy. Achieving the 75% capital levy is consistent with the Strategic Financial Plan to ensure that lifecycle renewal projects are primarily funded on a "pay-as-you-go" basis. Contributions to reserve funds will change depending on the timing of capital projects identified in the 20 Year Water System Plan. It is imperative that adequate reserve fund balances be maintained to support an asset base with an estimated replacement value of at least $2.7 billion. 27

31 Four Year Operating Forecast ($000's) Incr. /(Decr.) 2017 Incr. /(Decr.) 2018 Incr. /(Decr.) 2019 Incr. /(Decr.) Program Approved Budget Over 2015 Budget Over 2016 Budget Over 2017 Budget Over 2018 Budget Forecast $ % Forecast $ % Forecast $ % Forecast $ % Water Rate Increase Forecast 7.0% 3.0% 3.0% 3.0% 3.0% Revenues Water Usage Charges 46,858 47,904 1, % 48,964 1, % 50,038 1, % 50, % Water Infrastructure Charges 22,602 23, % 24, % 25, % 26,434 1, % Fire Protection Charges 2,740 2, % 2, % 3, % 3, % Customer Assistance Charges % % % % Other Revenues 1,060 1, % 1, % 1, % 1, % Total Revenues 73,568 75,654 2, % 77,796 2, % 79,995 2, % 81,998 2, % Engineering & Operations Engineering 1,738 1, % 1, % 1, % 1, % Water Operations 13,400 13, % 13, % 14, % 14, % Purchase of Water 21,659 22, % 23, % 23, % 24, % General Administration & Financial Expenses 3,152 3, % 3, % 3, % 3, % Billing & Customer Service 2,407 2, % 2, % 2, % 2, % Total Engineering & Operations 42,356 43,546 1, % 44, % 45, % 46, % Capital Funding Capital Levy 17,112 18,823 1, % 19, % 20, % 20, % Reserve Fund Contribution 13,750 12,874 (876) -6.4% 13, % 14,339 1, % 15,444 1, % Debt Servicing Costs % % % % Total Capital Funding 31,212 32, % 33,373 1, % 34,750 1, % 35,955 1, % Total Expenditures 73,568 75,654 2, % 77,796 2, % 79,995 2, % 81,998 2, % 28

32 Performance Measures and Staffing Performance Measures Actual Revised Approved Forecast Activity Measures Water sold in million cubic meters Lead services replaced Water meters installed 8,500 8,500 15,000 15,000 15,000 15,000 15,000 % of existing watermains renewed 1.20% 1.26% 1.25% 1.49% 1.41% 1.40% 1.40% Efficiency Measures Average cost for residential customer (1) $327 $343 $367 $378 $389 $401 $413 Average residential consumption (m 3 per year) Non revenue water (% of pumped) (2) Effectiveness / Quality / Satisfaction Measures # of boil water advisories # of watermain breaks per 100 km (3) # of customers with a service interruption of more than 2 hours 2,400 3,000 3,000 3,000 3,000 3,000 3,000 Ministry of Environment Report Card score (4) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Water quality complaints (5) Staffing Budget Budget Full-time equivalents # Increase / (Decrease) over previous year Full-time employees # Increase / (Decrease) over previous year Notes: (1) The average cost per household estimate for is based on 2014 forecasted consumption of m 3 and does not incorporate future projected consumption declines. Actual cost per household may be lower as a result. (2) Dependent on non-revenue usage (fire, flushing, meter inaccuracy), main breaks, and leakage. (3) Dependent on renewal programs and weather (temperature). (4) A score lower than 100% does not indicate that drinking water was unsafe at any time. (5) Number of complaints in 2013 is a mixture of "per event and individual complaints" versus absolute number of complaints. Process of complaints logging is under review from a "best practices" perspective complaints are expected to increase as more hydrants are flow tested, which may agitate rust sediment in cast iron watermains. 29

33 2015 Capital Budget With Forecasts

34 Capital Expenditure Linkage to Safe Drinking Water Act The Safe Drinking Water Act (2002) became a statutory requirement on January 1, The purpose of this Act is to ensure the provision of safe drinking water by regulating drinking water supply and testing. Elements of this legislation include accreditation of licensed operators, mandated training and certification, and prescribed testing standards. Additionally, a statutory standard of care is required on the part of elected officials and other individuals having oversight responsibility to prevent waterborne disease outbreaks. The Safe Drinking Water Act outlines 5 "barriers" that must be achieved to ensure compliance with the legislation: (1) Source Water Protection (2) Effective Treatment (3) Secure Distribution (4) Effective Monitoring (5) Effective Management The Water capital program is intended to address these "barriers". Some capital projects address multiple "barriers" while others address only one. Each capital project on the subsequent pages has been categorized according to the following legend to identify the "barriers" it is intended to address: SWP ET SD MON MGT Source Water Protection Effective Treatment Secure Distribution Effective Monitoring Effective Management 30

35 Service Grouping: Water 2015 Approved - Committee: Civic Works Committee Forecast - Objective: Page Number Project Number Water Capital Program ($000's) Project Life Cycle Renewal 35 EW Meters & Devices EW1630 District Meter Areas EW1631 Corporate Asset Management Contribution EW1632 Customer Billing Process EW Pumping Stations Major Repairs EW3525 Cathodic Protection Program EW3526 Arva Pumping Station Upgrades EW3527 Asset Maintenance Management System EW3528 Drinking Water Quality Management Standard EW3538 CPP AFO Monitoring Program EW3551 Hyde Park - Sarnia Road High Level Watermain Phase II EW Main Rehabilitation 5, EW3572 Commissioners Road Watermain Replacement 1,000 Growth 44 EW3582 Tillman Road High Level Watermain EW3590 Uplands Pumping Station Upgrade EW3591 Hyde Park Pumping Station Upgrade 645 $29,921 $156,185 The Water Capital program includes transmission and distribution piping, pumping stations, and reservoir storage to meet the growth demands of the city as well as repair and rehabilitation to extend the life cycle of existing infrastructure. The elements in this program are generally outlined in such engineering studies and documents as the London Water Master Plan or the Water Distribution System Needs Analysis, or resulting from ongoing modeling and analysis of the existing system. Service Improvement 31

36 Capital Program ($000's) Service Grouping: Water 2015 Approved - Committee: Civic Works Committee Forecast - Page Number Project Number Project Life Cycle Renewal 45 EW3592 Infill & Intensification Nodes Water Servicing EW3594 Industrial Water Servicing 1, EW3595 Hyde Park Road Feeder Watermain EW3624 Burbrook Watermain Upgrade Phase II EW3627 SCADA Equipment Replacement 105 Growth 46 EW3628 Expansion of Southeast Pressure Zone EW3694 Kilally Road (A30) Highbury Avenue to Clarke Road 130 $29,921 $156,185 Service Improvement 49 EW3697 Southdale Road (2030) Bostwick Road to Wonderland Road EW3702 Fanshawe Park Road Watermain Replacement EW3710 Downtown Watermain Replacement 1, EW Inspect Trunk Concrete Pressure Pipes EW3743 Watermain Extensions EW Main Replacement Engineering 7, EW Water Efficiency Program EW Main Replacement with Major Roadworks 2, EW3818 Watermain Internal Oversizing Subsidy EW Replace Lead and Copper Water Services 2,000 Total by Classification $22,766 $5,885 $1,270 Total 2015 Water Capital $29,921 32

37 Capital Expenditure Summary by Classification ($000's) Water Prior Years to 2024 Total Life Cycle Renewal 12,305 22,982 22,766 32,832 29,474 27,753 26, , ,675 Growth 12,706 4,144 5,885 7,452 7,321 4,593 16,482 31,203 89,786 Service Improvement 2, ,270 1, , ,600 12,130 Total Water 27,151 27,756 29,921 41,704 37,475 33,686 43, , ,591 (1) The 2014 Approved Capital Budget increased from $27.7 to $27.8 million mainly due to HELP funding in the amount of $1.6 million being reallocated to the Southeast Reservoir offset by a reduction to the rate supported budget by (-$1.1 million) for a net increase of $0.5 million, establishing a budget for the Watermain internal oversizing subsidy $0.1 million offset by the deferral of the Highbury Avenue watermain budget (-$0.5 million). Water Prior Years to 2024 Total Tangible Capital Asset 23,469 26,245 28,211 39,673 35,565 32,376 41, , ,097 Non-Tangible Capital Asset (2) 3,682 1,511 1,710 2,031 1,910 1,310 1,400 6,940 20,494 Total Water 27,151 27,756 29,921 41,704 37,475 33,686 43, , ,591 (2) A separate non-tangible capital asset (Non-TCA) section has been added because Non-TCA projects could be classified as Life Cycle, Growth, or Service Improvement. Non-TCA are expenditures that will not result in the creation of a tangible asset (having physical substance). It should be noted that the Non-TCA summary only includes projects that are 100% Non-TCA. 33

38 Water Capital Source of Financing Summary ($000's) Prior Years (1) to 2024 Totals RATE SUPPORTED Capital Levy 5,839 16,856 17,112 18,823 19,764 20,000 20, , ,309 Capital Water Reserve Fund 10,085 6,353 7,537 15,071 12,010 8,772 7,153 48, ,120 Industrial Oversizing Water Reserve Fund 5, ,930 Debenture 10,227 10,227 Total Rate Supported 21,631 23,432 24,649 33,894 31,774 28,772 27, , ,586 NON-RATE SUPPORTED Debenture - Non Rate Supported (City Services - Water Reserve Fund) 2,333 6,569 8,902 City Services Water Reserve Fund (2) 4,533 2,200 4,100 4,088 2,209 2,616 10,939 16,693 47,378 City Services Corporate Services Reserve Fund (2) ,165 Federal Gas Tax Grant ,625 4,626 Senior Government Funding 1, ,800 2,800 1,600 2,667 12,334 Other Contributions (Prov Grants, Cash Pmts) ,120 3,600 Total Non-Rate Supported 5,520 4,324 5,272 7,810 5,701 4,914 16,067 28,397 78,005 Total Sources of Financing 27,151 27,756 29,921 41,704 37,475 33,686 43, , ,591 (1) Prior years' totals only include projects with current or future budget allocations. (2) Growth splits for 2014 and beyond are consistent with the 2014 Development Charges Study. 34

39 Service Grouping: Water EW Meters & Devices Purchase and installation of new water meters, valves and related equipment. Includes cost of meters for all new development and for individual metering of existing condominiums as required. Ensures fair billing based on actual water consumption Financing: Capital Levy EW Meter Replacement Program Water Capital Expenditure Detail ($000's) Safe Drinking Water Act Classification Category: Life Cycle Renewal Prior Years to 2024 Total MGT ,000 4,400 MGT 1,800 1,800 1,800 1,800 1,800 9,000 18,000 Residential water meter replacement strategy to eliminate backlog of water meters that have surpassed their useful life. EW Pumping Stations Major Repairs Ongoing annual maintenance and upgrades to the water pumping stations and bulk water stations Financing: Capital Levy EW3525 Cathodic Protection Program To implement, test and monitor Cathodic Protection on steel, concrete and ductile iron watermains to prolong the lifespan of existing watermains Financing: Capital Levy EW3526 Arva Pumping Station Upgrades To undertake major pump and valve maintenance/ replacement. Equipment is 40 years old and requires ongoing repairs and/or is no longer performing effectively or efficiently Financing: Capital Levy SD ,650 SD ,500 6,675 SD 2, ,394 35

40 Capital Expenditure Detail ($000's) Service Grouping: Water * EW3528 Drinking Water Quality Management Standard The "Safe Drinking Water Act " and the "Drinking Water Quality Management Standard" legislation requires the City, as the operating authority, to be accredited. The requirements are fulfilled by establishing and maintaining a quality management system, including internal and external auditing Financing: Capital Levy EW3534 Boler Road Watermain Replacement To replace the watermain on Boler Road from Commissioners Road to Riverside Drive. New watermain required to replace existing main which has surpassed its useful life. EW3537 Dundas Redevelopment Watermain replacement will be undertaken in coordination with Transportation Project (TS1135) including significant streetscape improvements to renew Dundas Street from Talbot Street to Wellington Street. Exact phasing and scope of work is to be determined as part of the engineering predesign activities. * EW3538 CPP AFO Monitoring Program Annual monitoring costs associated with the installation of an acoustic fibre optic cable inside mains to alert City staff to potential failures of large diameter watermains Financing: Capital Levy Safe Drinking Water Act Classification Category: Life Cycle Renewal Prior Years to 2024 Total MON, MGT SD 1,000 1,000 SD ,000 SD, MON, MGT ,000 2,300 Note: * represents projects that are classified as non-tangible capital assets. These expenditures will not result in the creation of a tangible asset (having physical substance). 36

41 Capital Expenditure Detail ($000's) Service Grouping: Water EW3540 Elgin Middlesex Pumping Station - Capital Maintenance Project required for the ongoing, annual capital maintenance of London's components in the Elgin-Middlesex (London) Pumping Station at St. Thomas. EW3541 Elgin Middlesex Pumping Station - SCADA Upgrade To repair and upgrade equipment controllers and the computerized SCADA system at Elgin Middlesex Pumping Station. EW Main Rehabilitation An annual program for the rehabilitation of existing watermains throughout the City of London in order to maintain flow capacity and provide safe, cost effective water Financing: Capital Levy EW3572 Commissioners Road Watermain Replacement To replace the existing 300mm watermain on Commissioners Road from Topping Lane to Andover Drive with a new 300mm watermain. Also, to inspect the structural condition of the existing 900mm watermain on Commissioners Road West Financing: Water Reserve Fund Safe Drinking Water Act Classification Category: Life Cycle Renewal Prior Years to 2024 Total SD 1, ,950 SD ,200 SD 4,930 5,143 5,658 6,173 6,688 7,203 43,740 79,535 SD 50 1,000 1,050 37

42 Capital Expenditure Detail ($000's) Service Grouping: Water EW3580 Huron Street River Crossing Remedial Work Category: Life Cycle Renewal Safe Drinking Water Act Classification Prior Years to 2024 Total SD 570 3, ,270 To replace the existing 600mm trunk watermain under the Thames River between Huron Street and Philip Aziz Avenue by means of underground horizontal directional drilling at a greater depth to protect the watermain from erosion in the Thames River. EW3617 Long Term Water Storage Requirements SD ,025 17,463 In anticipation of Springbank Reservoir Cell #2 reaching the end of its service life, this project is to study London's water storage needs and ultimately construct a new reservoir. Study will assess the timing, amount and location for reservoir capacity. EW3624 Burbrook Watermain Upgrade Phase II SD 1, ,700 1,400 4,700 9,400 Replacement of watermain and water services in the existing Burbrook Trunk Storm Sewer and Burbrook Lateral area. New watermain required to replace undersized existing system which has surpassed its useful life. Coordinated with sewer projects ES3054 and ES Financing: Water Reserve Fund EW3627 SCADA Equipment Replacement SD, MON, MGT The planned replacement of existing SCADA equipment having exceeded its useful life Financing: Capital Levy 38

43 Capital Expenditure Detail ($000's) Service Grouping: Water EW Wellington Road Area Watermain Replacement - Phase II (Thames River to Base Line Road) To replace the watermain on Wellington Road from the Thames River to Base Line Road. New watermain required to replace existing system which has surpassed its useful life. Coordinated with sewer project ES Separation and CSO Program. EW3674 Wharncliffe Road Watermain Replacement To replace watermain on Wharncliffe Road between Becher Street and Springbank Drive. Coordinated with transportation project TS Wharncliffe Road Widening. EW3702 Fanshawe Park Road Watermain Replacement To replace the watermain on Fanshawe Park Road from Adelaide Street to Highbury Avenue. Coordinated with transportation project TS and sewer project ES Financing: Federal Gas Tax Grant EW3708 Trunk Watermain Valve Chambers To install new valves on existing trunk watermains. EW3710 Downtown Watermain Replacement Safe Drinking Water Act Classification Category: Life Cycle Renewal Prior Years to 2024 Total SD 752 1,100 1,000 2,852 SD SD 184 1,658 1,842 SD ,520 SD 1, , ,500 3,210 8,025 To replace deficient watermains and services. Watermain and water services undersized or useful life has been surpassed. Coordinated with sewer project ES Financing: Water Reserve Fund 39

44 Capital Expenditure Detail ($000's) Service Grouping: Water EW3713 Sarnia Road Watermain Replacement Category: Life Cycle Renewal Safe Drinking Water Act Classification Prior Years to 2024 Total SD 200 1,466 1,666 To replace the watermain on Sarnia Road from Wonderland Road to Sleightholme Road. New watermain required to replace existing system which has surpassed its useful life. * EW Inspect Trunk Concrete Pressure Pipes SD, MON ,750 8,120 Annual program to inspect existing large diameter watermains (450mm to 1,350mm) Financing: Capital Levy * EW Abandoned Wells Decommissioning SWP To decommission former London Public Utilities Commission production wells that are abandoned. Ontario Regulation 903.Section 21 (3) requires that the wells be properly decommissioned. Note: * represents projects that are classified as non-tangible capital assets. These expenditures will not result in the creation of a tangible asset (having physical substance). 40

45 Capital Expenditure Detail ($000's) Service Grouping: Water EW Main Replacement Engineering Category: Life Cycle Renewal Safe Drinking Water Act Classification Prior Years to 2024 Total SD 7,039 7,250 8,800 8,800 8,800 8,800 44,000 93,489 An annual program for replacement of watermains and water services as outlined in the Condition Assessment Program Needs Study. New watermain and water services required to replace existing systems which have surpassed their useful life. Water supply required to provide fire flows to the community. Coordinated with sewer project ES2414 Sewer Replacement Program Financing: Capital Levy $6,430 Water Reserve Fund 820 Total Financing $7,250 EW Main Replacement with Major Roadworks SD 2,605 2,574 2,800 2,800 2,800 2,800 14,000 30,379 Replacement of watermains that have reached their useful life. Coordinated with major roadworks Financing: Capital Levy EW Main Replacement Maintenance SD ,675 9,350 Watermain replacements in conjunction with sewer and road replacements. 41

46 Capital Expenditure Detail ($000's) Service Grouping: Water EW Replace Lead and Copper Water Services Safe Drinking Water Act Classification Category: Life Cycle Renewal Prior Years to 2024 Total SD 750 2,000 2,000 2,000 2,000 2,000 10,000 20,750 Fifteen year program to replace lead water services. Recommendation from the Walkerton Inquiry Report states "lead service lines should be located and replaced over time with safer materials". This work has been incorporated into our Lead Service Replacement Program. Concurrent program to replace leaking copper services which have been found to prematurely fail Financing: Water Reserve Fund Balance of approved projects for prior years comparison 1,558 1,558 Total Life Cycle Renewal 12,305 22,982 22,766 32,832 29,474 27,753 26, , ,675 42

47 Capital Expenditure Detail ($000's) Service Grouping: Water * EW1503 Development Charges Background Study Category: Growth Safe Drinking Water Act Classification Prior Years to 2024 Total MGT Background study to determine future watermain needs to service growth, including timing and growth splits. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). EW2310 Western Road Watermain Replacement (Oxford Street to Sarnia Road) SD 208 1,871 2,079 To replace the watermain on Western Road from Oxford Street to Sarnia Road. Growth splits are consistent with the 2014 Development Charges Study. 10% Growth Related (10% DC Rate Supported). * EW3312 Water Distribution System Master Plan MGT To update the City's Water Distribution System Master Plan to support the calculation of Development Charges. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (94.3% DC Rate Supported). EW3551 Hyde Park - Sarnia Road High Level Watermain Phase II SD 218 1, ,342 Construction of 400mm, 450mm and 600mm watermains in the high level area of northwest London. Watermain installation required to service customers in the Hyde Park High Level area. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported) Financing: Development Charges Note: * represents projects that are classified as non-tangible capital assets. These expenditures will not result in the creation of a tangible asset (having physical substance). 43

48 Capital Expenditure Detail ($000's) Service Grouping: Water EW3582 Tillman Road High Level Watermain Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total SD To install a 600mm watermain in the Talbot Area on Tillman Road from Southdale Road south to the end. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported) Financing: Development Charges EW3590 Uplands Pumping Station Upgrade SD To upgrade the Uplands Pumping Station to serve future growth in north London. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported) Financing: Development Charges EW3591 Hyde Park Pumping Station Upgrade SD To upgrade the Hyde Park Pumping Station to serve future growth in northwest London. Growth splits are consistent with the 2014 Development Charge Study. 100% Growth Related (100% DC Rate Supported) Financing: Development Charges 44

49 Capital Expenditure Detail ($000's) Service Grouping: Water EW3592 Infill & Intensification Nodes Water Servicing Contingency amount for the provision of growth triggered water servicing infrastructure. Future budget amounts to be verified through detailed engineering studies. Growth splits are consistent with the 2014 Development Charges Study. 95% Growth Related (95% DC Rate Supported). Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total SD ,750 5, Financing: Water Reserve Fund $28 Development Charges 522 Total Financing $550 EW3594 Industrial Water Servicing SD 1,200 4,200 4,200 2,400 4,000 7,775 23,775 For water servicing of future light and general industrial land to provide an adequate inventory of large block "shovel ready" land in strategic locations. Project coordinated with other industrial servicing accounts (Internal Servicing, Sanitary, Storm and Stormwater Management). Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported) Financing: Senior Government Funding $800 Development Charges 400 Total Financing $1,200 45

50 Capital Expenditure Detail ($000's) Service Grouping: Water EW3595 Hyde Park Road Feeder Watermain To construct a 750mm watermain on Hyde Park Road from Sarnia Road to Royal York Road. Watermain installation required for water supply to west London. Coordinated with sewer project ES2493 and transportation project TS Growth splits are consistent with the 2014 Development Charges Study. 35% Growth Related (35% DC Rate Supported). Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total SD 227 2, , Financing: Water Reserve Fund $247 Development Charges 133 Total Financing $380 EW3625 Dingman-Wonderland Feeder Watermain Phase I (Dingman Drive to Exeter Road) SD 1,681 1,681 To construct a new 400mm watermain on Wonderland Road between Dingman Drive and Exeter Road. Growth splits are consistent with 2014 Development Charges Study. 95% Growth Related (95% DC Rate Supported). EW3628 Expansion of Southeast Pressure Zone SD 2, ,700 To install pressure regulating valves and associated piping to delineate a new pressure zone to service portions of southeast London with the Southeast Reservoir & Pumping Station. Growth splits are consistent with 2014 Development Charges Study. 40% Growth Related (28.4% DC Rate Supported) Financing: Water Reserve Fund $360 Development Charges 240 Total Financing $600 46

51 Service Grouping: Water EW Wickerson High Level Watermain Phase II (Wickerson Road) Construction of 400mm watermain in the high level area of southwest London on Wickerson Road between Wickerson Gate and Southdale Road. Watermain installation required to service future customers in the Wickerson area. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). Water Capital Expenditure Detail ($000's) Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total SD 1,361 1,361 EW3654 Arva Pumping Station Upgrade Upgrades to the Arva Pumping Station, including pump replacements, will be required as water demand increases. Growth splits are consistent with the 2014 Development Charges Study. 50% Growth Related (50% DC Rate Supported). EW3657 Westmount Area High Level System Distribution Improvements Phase I To upsize the existing watermain to 450mm watermain on Viscount Road between Wonderland Road and Andover Drive. Project required to upgrade high level water supply. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). EW3658 Westmount Pumping Station to Viscount Road High Level Water Reinforcement To replace and upsize the existing 300mm and 400mm watermain on Wonderland Road (Westmount Pumping Station to Viscount Road) with 600mm watermain. Project required to upgrade high level water supply. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). SD 332 2,988 3,320 SD 1,427 1,427 SD 134 1,212 1,346 47

52 Capital Expenditure Detail ($000's) Service Grouping: Water EW Wonderland Road North Feeder Watermain Phase II (Gainsborough to Sunningdale) Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total SD 7,684 7,684 To construct a 900mm watermain on Wonderland Road North from Sunningdale Road to Fanshawe Park Road and a 750mm watermain from Fanshawe Park Road to Gainsborough Road. Project required to upgrade north London area water supply. Coordinated with transportation projects TS1156 and TS1354. Growth splits are consistent with the 2014 Development Charges Study. 45% Growth Related (45% DC Rate Supported). EW3675 Summercrest Southdale High Level (2004) To construct 400mm watermains in the high level area of southwest London on Southdale Road between Wickerson Road and Bramblewood Place. Growth splits are consistent with the 2014 Development Charge Study. 100% Growth Related (100% DC Rate Supported). EW3692 Medway - Wonderland Road Trunk Watermains To construct 1,500mm watermains from the Arva Pumping Station to the north London area. Trunk watermains required to supply future customers in north and west London. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). EW3694 Kilally Road (A30) Highbury Avenue to Clarke Road Installation of a new 400mm watermain on Kilally Road from Highbury Avenue to Clarke Road. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). SD 1,257 1,257 SD 100 1,103 9,928 11,131 SD 130 1,170 1, Financing: Development Charges 48

53 Capital Expenditure Detail ($000's) Service Grouping: Water EW3697 Southdale Road (2030) Bostwick Road to Wonderland Road To construct a 400mm watermain on Southdale Road from Bostwick Road to Wonderland Road. This watermain is required for growth in the Bostwick Area. Growth splits are consistent with the 2014 Development Charge Study. 100% Growth Related (100% DC Rate Supported) Financing: Development Charges EW3709 Green Valley Road at Hubrey Road Installation of a 600mm watermain at the intersection of Green Valley Road and Hubrey Road. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported). EW White Oak Road Watermain Upsizing Phase II (B5) Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total SD SD SD 2,030 2,030 To construct a new 450mm trunk watermain through the proposed subdivision east of White Oak Road between Dingman Drive and Exeter Road. Growth splits are consistent with the 2014 Development Charge Study. 100% Growth Related (100% DC Rate Supported). 49

54 Capital Expenditure Detail ($000's) Service Grouping: Water * EW Water Efficiency Program Safe Drinking Water Act Classification Prior Years Category: Growth 2020 to 2024 Total MGT ,750 3,850 To undertake a water efficiency strategy to promote awareness of water issues. Water efficiency/conservation program is a requirement of the new Municipal Water Licensing Plan. Growth splits are consistent with the 2014 Development Charges Study. 8% Growth Related (8% DC Rate Supported) Financing: Water Reserve Fund $322 Development Charges 28 Total Financing $350 EW3818 Watermain Internal Oversizing Subsidy SD, MGT Funding source for watermain oversizing claims by land developers. Claims are to be paid in accordance with Schedule 8 of the current Development Charges By-law. Review and approval of these claims is provided by the Development Finance Division. Growth splits are consistent with the 2014 Development Charges Study. 100% Growth Related (100% DC Rate Supported) Financing: Development Charges Balance of approved projects for prior years comparison 9, ,055 Total Growth 12,706 4,144 5,885 7,452 7,321 4,593 16,482 31,203 89,786 Note: * represents projects that are classified as non-tangible capital assets. These expenditures will not result in the creation of a tangible asset (having physical substance). 50

55 Capital Expenditure Detail ($000's) Service Grouping: Water EW1630 District Meter Areas Safe Drinking Water Act Classification Category: Service Improvement Prior Years to 2024 Total SD, MON, MGT ,500 Program to develop a City-wide leak detection system that incorporates elements of water modelling, fire hydrant management, and billing audit confirmation to enhance the cost effectiveness of water service delivery Financing: Water Reserve Fund *EW1631 Corporate Asset Management Contribution MON, MGT New project for the water component of the Council approved Corporate Asset Management Plan Financing: Capital Levy *EW1632 Customer Billing Process MON, MGT To perform audits and develop enhanced water billing reporting by London Hydro Financing: Capital Levy EW2405 New Vehicles & Equipment SD, MGT To purchase new vehicles to provide for planned maintenance and growth of the water distribution system. *EW3527 Asset Maintenance Management System MON, MGT 1, ,700 To develop and implement an electronic inventory and maintenance program for water and sewer infrastructure. Project is a requirement of new legislation passed, the "Sustainable Water and Sewage Systems Act" Financing: Capital Levy Note: * represents projects that are classified as non-tangible capital assets. These expenditures will not result in the creation of a tangible asset (having physical substance). 51

56 Capital Expenditure Detail ($000's) Service Grouping: Water EW3743 Watermain Extensions Safe Drinking Water Act Classification Category: Service Improvement Prior Years to 2024 Total SD ,680 4,200 Cost sharing project for the watermain extensions to unserviced parts of the urban growth area and beyond Financing: Water Reserve Fund $160 Other Contributions 160 Total Financing $320 EW3806 Local Improvement - White Oak Industrial Subdivision Water Cost Sharing Phase II and III SD 2,560 2,560 Cost sharing project for the installation of watermains in this existing industrial area. Coordinated with sewer project ES5246. City's share is approximately 25% of the total cost. Balance of approved projects for prior years comparison Total Service Improvement Total Water 2, ,270 1, , ,600 12,130 27,151 27,756 29,921 41,704 37,475 33,686 43, , ,

57 2015 Reserve Funds and Reserves

58 Reserve Funds and Reserves ($000's) New Capital Water Actual Projected Approved Forecast Reserve Fund (1) Opening Balance $20,201 $24,766 $14,843 $20,799 $17,395 $15,961 $17,439 $20,136 Contributions from Operating Water Rates 7,392 9,877 13,026 11,168 10,139 9,813 9,359 34,530 Additional Contribution (surplus) 2,938 Interest earned ,977 $30,914 $35,161 $28,336 $32,466 $27,971 $26,211 $27,289 $56,643 Drawdowns - Current Year 4,196 6,353 7,537 15,071 12,010 8,772 7,153 48,139 Drawdowns - Prior Year 1,952 13,965 Total Drawdowns (2) $6,148 $20,318 $7,537 $15,071 $12,010 $8,772 $7,153 $48,139 Ending Balance (3) $24,766 $14,843 $20,799 $17,395 $15,961 $17,439 $20,136 $8,504 Notes: (1) This reserve fund is intended to support the capital needs of the water system with an estimated replacement value of $2.7 billion. (2) Drawdowns are based on full capital needs and not intended to project the actual cash flow of funds being utilized in a particular year. (3) The reserve fund balance may increase/decrease subject to the 2014 year end operating position of the Water operating budget. City Services - Water Levies Actual Projected Approved Forecast Reserve Fund Opening Balance $10,847 $12,064 $7,831 $7,201 $6,637 $8,018 $9,023 $1,609 Levies 1,509 1,554 1,818 1,894 1,955 1,961 1,966 9,596 Tsf from Industrial DC Incentive Program RF 1,272 1,272 1,272 1,272 1,260 6,472 Tsf from DC Incentive Program RF (1) Interest earned $12,587 $13,878 $11,301 $10,725 $10,227 $11,639 $12,548 $18,855 Refunds 25 6 Forecasted Future Debt 268 Drawdowns - Current Year 527 2,200 4,100 4,088 2,209 2,616 10,939 16,693 Drawdowns - Prior Year (29) 3,841 Total Drawdowns (2) $523 $6,047 $4,100 $4,088 $2,209 $2,616 $10,939 $16,961 Ending Balance $12,064 $7,831 $7,201 $6,637 $8,018 $9,023 $1,609 $1,894 Note: (1) This transfer includes the Residential, Institutional and Commercial (DC) Incentive Program Reserve Funds. (2) Drawdowns are based on full capital needs and not intended to project the actual cash flow of funds being utilized in a particular year. 53

59 Reserve Funds and Reserves ($000's) Industrial Oversizing Water Actual Projected Approved Forecast Reserve Fund Opening Balance $5,910 $5,940 $83 $85 $87 $89 $91 $93 Contributions from Operating Water Rates 1,000 Interest earned $6,023 $7,019 $85 $87 $89 $91 $93 $107 Tsf to Industrial DC Incentive Program RF (1) 5,100 Drawdowns - Current Year 223 Drawdowns - Prior Year 83 1,613 Total Drawdowns $83 $6,936 $0 $0 $0 $0 $0 $0 Ending Balance $5,940 $83 $85 $87 $89 $91 $93 $107 Notes: (1) Reserve Fund is being phased out and available balance will be transferred to the Industrial DC Incentive Program Water Reserve Fund. This reserve fund will be closed once all commitments have been made. Industrial DC Incentive Program Actual Projected Approved Forecast Water Reserve Fund (1) Opening Balance $0 $0 $5,168 $4,523 $3,861 $3,181 $2,483 $1,779 Tsf from Industrial Oversizing Water RF 5,100 Contributions from Operating Water Rates ,200 Interest earned $0 $5,168 $5,795 $5,133 $4,453 $3,755 $3,039 $8,207 Tsf to City Services DC Water RF 1,272 1,272 1,272 1,272 1,260 6,472 Total Transfers $0 $0 $1,272 $1,272 $1,272 $1,272 $1,260 $6,472 Ending Balance $0 $5,168 $4,523 $3,861 $3,181 $2,483 $1,779 $1,735 Note: (1) This reserve fund is being established to support development charge exemptions contained in various Community Improvement Plans (CIP). The reserve fund will be funded annually from Operating Water Rates to support the industrial growth share of all water infrastructure projects. 54

60 Reserve Funds and Reserves ($000's) Lead Service Replacement Program Actual Projected Approved Forecast Reserve Fund (1) Opening Balance $103 $103 $112 $121 $130 $140 $150 $157 Contributions from Operating Water Rates Repayment of Lead Replacement Program Interest earned $112 $112 $121 $130 $140 $150 $157 $189 Loans - Lead Replacement Program 9 Total Loans $9 $0 $0 $0 $0 $0 $0 $0 Ending Balance $103 $112 $121 $130 $140 $150 $157 $189 Note: (1) The purpose of this reserve is to provide the funding mechanism for the Lead Service Extension Replacement Loan Program. Program is designed to assist with the private portion of lead service replacement. Repayment will be made over 10 years. The funding requirement is dependent on the number of households who take advantage of this pilot program. Any balance remaining in this reserve fund at the end of the Lead Service Replacement Loan Program will be returned to the New Capital Water Reserve Fund. Water Customer Assistance Actual Projected Approved Forecast Reserve Fund (1) Opening Balance $0 $30 $36 $45 $58 $75 $95 $119 Contributions from Operating Water Rates $ Interest earned $30 $36 $45 $58 $75 $95 $119 $297 Drawdowns - Current Year Drawdowns - Prior Year Total Drawdowns $0 $0 $0 $0 $0 $0 $0 $0 Ending Balance $30 $36 $45 $58 $75 $95 $119 $297 Note: (1) The Water Customer Assistance Reserve Fund was established in June 2013 to provide a source of funding for the Crisis Support, Crisis Prevention and Customer Assistance programs, as part of the new "value based" funding model for Water and Wastewater approved by Council on December 11, Residential customers are charged $0.25 per month to fund this program. Any annual surplus of revenues over expenditures for this program is contributed to this Reserve Fund to fund Crisis Support, Crisis Prevention or Customer Assistance initiatives or reduce future monthly Customer Assistance charges. 55

61 Reserve Funds and Reserves ($000's) Efficiency, Effectiveness and Actual Projected Approved Forecast Economy Water Reserve (1) Opening Balance $428 $557 $594 $594 $594 $594 $594 $594 Contributions $557 $594 $594 $594 $594 $594 $594 $594 Drawdowns Ending Balance $557 $594 $594 $594 $594 $594 $594 $594 Note: (1) Beginning in 2004, all positions with some exceptions are subject to 90 days savings corporately. The savings from these positions are contributed to Efficiency, Effectiveness and Economy reserves to be used as a one-time funding source for initiatives recommended by the Senior Leadership Team. 56

62 2015 Debt Summary

63 Debt Summary - Rate Supported ($ millions) The Water capital budget forecast for the capital plan includes rate supported debt financing of $10.2 million as outlined in the table below. Rate Supported - Projected Debt Financing Capital Projects Funded by Rate - Supported Debentures As at June 30, 2014, the authorized but unissued debt was $0.5 million. The outstanding debt level projected for the end of 2014 is $2.4 million. The long term financial goal is to continue to fund water system capital works using pay-as-you-go sources as the primary source of funding. For 2015, the annual debt servicing costs will be approximately $0.4 million as outlined in the table below. Annual Debt Servicing Costs (excluding Joint Boards) Rate Supported Principal and Interest Payments (1) (1) Debt servicing costs will be covered by operating revenue generated by water rates. The Water budget carries debt associated with the City's share of debt issued by the Joint Boards (debt issued for capital works necessary to bring potable water from Lake Huron and Lake Erie to the City system). This will be approximately $14.7 million at the end of Debt payments tied to the City's share of the Joint Board debt are made indirectly as the part of the purchase of water rate charged to the City by the Joint Boards and is estimated to be approximately $1.4 million in

64 Debt Summary - Non Rate Supported ($ millions) Non rate supported debt in the Water budget is funded through Development Charges (DC), in accordance with the 2014 DC Background Study, rather than water rates. The funding of this debt by the applicable reserve fund is identified in the reserve fund section of the 2015 Water budget. The Water capital budget forecast includes non rate supported (DC) debt financing of $8.9 million as part of the capital plan as highlighted below. Projected Debt Financing (Non Rate Supported) Capital Projects Funded by Non Rate Supported Debentures At June 30, 2014, there is no authorized but unissued debt and no outstanding debt. Annual Debt Servicing Costs funded through DC's Non Rate Supported (DC) Principal and Interest Payments The debt projections are based on a modest pace of spending against approved capital project budgets and the proposed capital plan. If the pace of spending increases, debt will be issued sooner, and the total debt outstanding along with the annual debt servicing costs could exceed current projections. 58

65 Appendix A 2015 Schedule of Rates and Charges

66 2015 Schedule of Rates and Charges Effective Date All 2015 rates and charges came into effect on January 1, Monthly Rates and Charges All Customers First 7 m 3 Next 8 m 3 Next 10 m 3 Next 10 m 3 Next 215 m 3 Next 6,750 m 3 Next 43,000 m 3 Over 50,000 m Approved Rates $0.00/m 3 $1.8688/m 3 $2.4028/m 3 $2.6698/m 3 $1.0146/m 3 $0.9611/m 3 $0.8758/m 3 $0.7797/m Approved Rates $0.00/m 3 $1.9996/m 3 $2.5710/m 3 $2.8567/m 3 $1.0856/m 3 $1.0284/m 3 $0.9371/m 3 $0.8343/m 3 59

67 2015 Schedule of Rates and Charges (cont'd) Water Meters / Water Infrastructure Charge Meter Size 16 mm 19 mm 25 mm 40 mm 50 mm 76 mm 100 mm 150 mm 200 mm 250 mm 2014 Approved Rates Monthly Rate $13.12 $19.68 $32.80 $65.61 $ $ $ $ $1, $1, Approved Rates Monthly Rate $14.04 $21.06 $35.10 $70.20 $ $ $ $ $1, $2, Monthly Fire Protection Charge Low-density Residential Institutional, Commercial, Industrial, Medium-density Residential, High Rise under 5.0 hectares Institutional, Commercial, Industrial, Medium-density Residential, High Rise 5.0 hectares and over Monthly Rate Monthly Rate $1.35 $1.44 $9.00 $9.63 $45.00 $48.15 Low Income Crisis Support, Crisis Prevention, and Customer Assistance Charge Residential Monthly Rate $0.25 Monthly Rate $

68 2015 Schedule of Rates and Charges (cont'd) Miscellaneous Rates and Charges Non-payment of account Late payment charge NSF cheques Collection charges Disconnection of service During regular hours After regular hours Change of occupancy/account set-up fee Arrears certificate charges (non-payment/arrears) Disconnect and reconnect meter at customer request 16 and 19 mm 25 mm and larger Install water meter and remote read-out unit at customer request 2014 Approved Rates As set by London Hydro As set by London Hydro As set by London Hydro $35.00* $185.00* As set by London Hydro $50.00 per property $ $ $ Approved Rates As set by London Hydro As set by London Hydro As set by London Hydro $35.00 $ As set by London Hydro $50.00 per property $ $ $ Repair damaged meter 16 and 19 mm 25 mm and larger $ $ Time and material Time and material Inspecting waterworks installations/disconnections * Updated to reflect charges established by London Hydro. $ per hour $ per hour 61

69 2015 Schedule of Rates and Charges (cont'd) Meter checked for accuracy at customer's request and found to be accurate 16 and 19 mm 25 mm and larger Watermain Tapping Charges Tap size of 50 mm or less Tap size of greater than 50 mm Tapping concrete mains or tap size of greater than 300 mm 2014 Approved Rates $ $ $ $ $1, Approved Rates $ $ $ $ $1, Water Rate for Temporary Connection for Construction Single family structure Duplex structure one service line Up to 4 units 5 to 10 units 11 to 15 units 16 to 20 units 21 to 25 units 26 to 30 units 31 to 35 units 36 to 40 units 41 to 50 units Over 50 units $48.60 $48.60 $60.73 $91.05 $ $ $ $ $ $ $ $6.15 per unit $52.00 $52.00 $64.98 $97.42 $ $ $ $ $ $ $ $6.58 per unit Other structures per 93 m 2 of floor space $12.36 $13.23 (minimum charge $30.89) (minimum charge $33.05) 62

70 2015 Schedule of Rates and Charges (cont'd) Bulk Water Users Smart Card (per card purchase cost) Cost of Water per 1,000 L Builder and Developer Charges Based on actual frontage which directly abuts City right-of-way Residential (maximum 50 meters) Commercial, Industrial and Institutional Illegal Hydrant Connection Charge 2014 Approved Rates $37.79 $3.12 $ per meter $ per meter $540.00/offence + water consumption 2015 Approved Rates $40.44 $3.34 $ per meter $ per meter $577.80/offence + water consumption Temporary Hydrant Connection Hydrant connection/disconnection $ Hydrant occupancy $37.80/week Water consumption: Minimum charge (up to 300m 3 ) $ All additional m 3 $2.89/m 3 $ $40.45/week $ $3.09/m 3 63

71 Appendix B 2015 Business Plan

72 Business Plan: Drinking Water Supply How does this service contribute to the results identified in the City of London Strategic Plan? A Sustainable Infrastructure Compliance with all regulatory requirements to operate, sustain, expand, and improve the waterworks infrastructure to efficiently deliver high quality and reliable water supply to London s customers for all drinking, recreational, irrigation, sanitary, fire protection, and institutional/commercial/industrial needs, while also providing education and encouraging water conservation. Name the main activities done to provide this service: Name The Activities Done To Provide This Service How Much Did We Do? (optional) 1. Water Quality Sampling and Reporting Approx. 12,000 tests per year plus continuous on-line testing at 10 locations 2. Operation, Maintenance and Repair of the System Approx. 40.1M m 3 of water sold per year 3. Renewal of Existing Infrastructure Approx. 20 km of existing watermains replaced or rehabilitated per year 4. Extension of Services for Growth Approx. 12 km of new watermains assumed per year 5. Water Meter Program (New & Replacement) Approx. 8,500 meters installed per year Is The City Mandated To Provide This Service? Yes Yes Yes Yes Yes (by resolution of Council) 6. Water Billing Services through London Hydro Approx. 1.2M bills per year Yes (by resolution of Council) Can The Level Of Service Be Changed? No Yes (with limitations) Yes (with limitations) Yes (with limitations) Yes (with limitations) Yes 64

73 Name The Activities Done To Provide This Service How Much Did We Do? (optional) 7. Customer Assistance Program At Your Service Approx. 50 customers assisted in paying large water bills Is The City Mandated To Provide This Service? Yes (by resolution of Council) Can The Level Of Service Be Changed? Yes (with limitations) What is the current state of this service? Current objectives of the Water utility include: Achieving a financially sustainable 1 utility and addressing lifecycle renewal, growth and economic development objectives of the City while ensuring regulatory compliance Maintaining / improving the existing level of service provided to the citizens and businesses of London Improving on lost water revenue (non-revenue water) Reducing the number of lead service connections Assisting in the implementation of Industrial Land Development These objectives are being driven by a number of factors, including: Customer expectations of the services that should be provided Council-approved level of service requirements Council-endorsed strategic initiatives City of London Strategic Plan A number of challenges are facing the Water service area in the achievement of these objectives: Declining revenue base, aging infrastructure (much of which is reaching the end of its useful life at the same time), increasing cost drivers over which the utility has no direct control (power, labour, etc.), an aging workforce, and everincreasing regulatory requirements Increasing customer expectations for improved service levels commensurate with the rising cost of the service Specific compliance issues drawing attention and effort away from overall compliance management 1 Financial Sustainability is defined as the movement toward annual rate increases that can be maintained at or near the annual rate of inflation based on a combination of CPI and the Construction Price Index with appropriate use of debt financing, adequate reserve funds and the appropriate investment in capital. 65

74 Some of the challenges noted above have been managed with positive results in 2014 through the following achievements: City-wide communication and education campaign on how customers can save on their water bill Revised revenue and expenditure forecasts Preparation of the City s Water Growth Master Plan, new 2014 Development Charges Background Study and input to the Industrial Land Development Strategy Compliance with the City s Water Operational Plan under the Drinking Water Quality Management Standard, and increased vigilance with respect to compliance under the Safe Drinking Water Act and the Fire Code. Achieved 100% score on MOE Report Card (audit) for 2013 Full implementation of a proactive preventative maintenance program for eliminating and/or substantively reducing the risk of drinking water contamination in all flooded air and vacuum valve chambers within the distribution system Continuation of the program for replacement of lead services Moved towards implementation of a Computerized Maintenance Management System, to bring the utility s maintenance and work flow management up to industry standards. This will result in staff resource efficiencies, enhanced documentation, and cost tracking of maintenance activities, while also ensuring compliance with regulatory requirements What has been done to manage the budget? The service area has been actively managing its budget by implementing management lead initiatives aimed at creating efficiencies, avoiding costs and generating revenue. These include the following: Efficiencies / Costs Avoided Previous 3 Years Energy efficiency improvements at the Elgin Middlesex Pumping Station will result in energy savings in the order $50,000/year while also receiving OPA grants totalling approximately $360,000 Energy efficiency improvements at the Arva Pumping Station will result in energy savings of approximately $10,000 per year while receiving London Hydro grants of approximately $18,000 Continued use of trenchless technologies including vaccuum excavation, directional drilling and watermain relining has avoided costs of approximately $4M (10,000 $400/m) 66

75 Revenue Generation / User Fee Increases Previous 3 Years Implemented a new Water and Wastewater rate structure effective March 1, The purpose of this new rate structure was to ensure fairness and equity for all customers while also balancing conservation efforts, economic development and the need to provide a more stable, predictable revenue stream in response to declining consumption. The new rate structure also included the implementation of the new Fire Protection Charge, generating approximately $2.5M of additional revenue per year, consistent with the PwC audit recommendation. Other rate increases over the past 3 years have been in keeping with the Council-endorsed rate plan in order to achieve financial sustainability by What is the future direction of this service? Core business objectives will remain consistent; however, specific attention will be given to opportunities for synergistic activities in four areas: regulatory compliance, growth, efficiency and best management practices, with sustainability being a common theme in all areas. The drivers for these four activity areas include: protecting public health and private property; meeting all regulatory requirements; ensuring the Standard of Care provision is met; supporting Council s objectives of economic development and growth; gaining efficiencies to reduce long term costs; investing in succession planning; harnessing innovative technologies; and maintaining a high level of service to consistently meet customers expectations. Continuing focus on delivering a financially sustainable utility in the near term and maintaining infrastructure levels of service at an appropriate level of risk as the 20-Year Capital Plan is implemented. Continuing efforts to meet new regulatory requirements under the Safe Drinking Water Act, Fire Code, Water Opportunities (and Conservation) Act, Clean Water Act (Source Water Protection Plans), and Green Energy Act (Electrical Efficiency). 67

76 What future initiatives can be contained within the existing service level budget? 2015 Budget Compliance Completion of visual flow identification/colour coding of fire hydrants owned and maintained by the Water utility, in accordance with the Fire Code, utilizing the City s computerized hydraulic model (requiring validation through a significant increase in field testing). Operate under the Source Water Protection Plan (in its first full year) as it relates to Risk Management Officer and Risk Management Inspectors liaison with private property owners within well-head protection areas as mandated under the Clean Water Act. Maintain 100% MOE Report Card score. Complete all works to implement the recently established air and vacuum valve chamber inspection program, including chamber rehabilitation and valve replacement to eliminate and/or substantively reduce contamination risk as required under the Safe Drinking Water Act. Continual improvement initiatives associated with the Drinking Water Quality Management System as required under our Utility Licensing requirements included in the Safe Drinking Water Act. The City s Council-endorsed Operational Plan mandates an annual review of activities/procedures, with an accompanying report to Council regarding its status, and identification of recommended improvement opportunities. Operate under a more rigorous Environmental Management approach to regulatory compliance by providing additional resources (previously budgeted and approved) to plan, monitor and document our Drinking Water Quality Management System. Develop a strategy to address abandoned water test wells which have not been properly decommissioned dating back to the 1940 s. Growth Assist in the undertaking of GMIS projects. Support the Industrial Land Development Strategy. Infill and intensification analysis of existing water distribution system utilizing the computerized hydraulic model. Efficiency Assessing energy conservation opportunities at the City s pumping stations, continuing to make energy efficiency gains through installation of new, more energy efficient equipment, and reviewing for operational optimization opportunities. 68

77 Continuing implementation of various leak detection strategies and technologies to reduce non-revenue water, to analyze for water leakage and identify/prevent future watermain breaks. Continue to effectively and efficiently exchange residential water meters by meeting the Water Meter Replacement Program targets. Best Management Practices Update Water Financial Plan including a strategy for achieving an appropriate minimum reserve fund balance for the water utility, consistent with corporate wide financial objectives. At full implementation of the new rate structure in January 2015, complete a review of 2013 rate structure implementation and determine if revenue targets are being met. Financial monitoring of the major factors in the financial forecast: rate structure changes, consumption forecasts, construction cost indexing, non-revenue water management and reserve fund balances. Initiate development of a Computerized Maintenance Management System, to bring the utility maintenance and work flow management up to industry standards. This will result in staff resource efficiencies, enhanced documentation, and cost tracking of maintenance activities, while also ensuring compliance with regulatory requirements. Continue with focused efforts in valve maintenance (rehabilitation, replacement, additions), to ensure operational reliability, reducing customer impacts, and reduced staffing costs for emergency repairs of watermain breaks. Develop capacity to support succession plans that ensure appropriately experienced and certified staff performs the necessary functions in accordance with regulatory requirements. Blend the approved Trunk Watermain Management Plan into the capital works and GMIS planning cycle in an effort to implement new technologies for condition assessment of critical infrastructure that support corporate asset management decision-making, optimize renewal efforts, and minimize the risks associated with the effects from large diameter transmission main failures. Build on existing customer service and communication successes and develop a customer service charter in conjunction with the At Your Service corporate service standards initiative. The charter will serve to limit the amount of time it takes to handle billing and service related issues; increase visibility in the community; provide additional avenues to find information and learn how to lower monthly bills; develop an enhanced customer contact website in conjunction with London Hydro. Development of targeted campaigns using information gathered from Customer Assistance Program to determine the most common issues affecting customers. 69

78 Develop teacher resource portal to allow TVDSB educators to find and incorporate water and water cycle related information into Ontario curriculum taught with a focus on local issues. Implement and measure benefits of drinking water education curriculum for local elementary and secondary schools. Build a database to analyze and manage water customer, water system, and urban planning data Forecast Compliance Achieving full compliance under the Fire Code with respect to colour coding of fire hydrants and maintaining the currency of the colour coding to reflect changes in the distribution system. Full operational implementation of the Source Water Protection Plan will achieved in 2015 within well-head protection areas. Additional consideration to be given to decommissioning of abandoned test wells. Undertaking of the air and vacuum valve ongoing maintenance program to eliminate and/or substantively reduce contamination risk. Continual improvement initiatives associated with the Drinking Water Quality Management System will be ongoing, summarized and reported to Council annually. Growth Implement various GMIS/Development Charges-funded growth projects, including waterworks to support the Industrial Land Development Strategy. Efficiency Complete the Water Meter Replacement Program by 2019, by eliminating the backlog of residential water meters requiring replacement and reach program sustainability going forward. Implement energy conservation projects at the City s water pumping stations. Continue deployment and monitoring of District Meter Areas and other leak detection strategies, by analyzing leakage rates, and to prevent future watermain breaks by identifying leaks prior to failure. Continue liaison with our large customers, using the water meter automated reading system to provide them with realtime consumption data. This data will also further assist in hydraulic model calibration accuracy, and reduce meter reading costs. Best Management Practices Explore utility management opportunities to operate effectively in the post-financial sustainability era and continue with infrastructure sustainability as the 20-Year Capital Plan is carried out. 70

79 Development and optimization of the Computerized Maintenance Management System. Initiate long-term strategic planning of assets based on preliminary results of the CMMS implementation. Continue with the program(s) for monitoring, analyzing, and assessing the condition of large diameter transmission mains, through full development of the implemented technologies. Fully integrate the corporate asset management decision-making process with current Water utility asset management practices. Renewal of cathodic protection systems for corrosion control, and installation of new systems on existing pipes done in conjunction with capital works projects. Fully design an operational hydraulic model and water quality model to support long term planning, subdivision development and servicing, intensification analysis, and operational planning and response to routine maintenance and emergency situations, including threats to water quality. Anticipated customer service initiatives will include: Develop business tools to measure and analyze water use and system data in conjunction with the hydraulic model. Enhancement of London Hydro customer portal that incorporates behavior change messaging and better recognition of customer water use. Development of interval water data portal for ICI customers through London Hydro meter reading contract. Expansion of ThirstMobile to include events outside of Victoria Park. Continued use of targeted value of water and conservation messaging. Develop a grey water/rainwater use strategy and program. What service adjustments do you plan to make? 2015 Budget None anticipated at this time Forecast None anticipated at this time. 71

80 Key Performance Indicators How Much? Description of measure Water sold in million cubic meters Percentage of existing watermains renewed (1) 1.20% 1.26% 1.25% 1.49% 1.41% 1.40% 3. Number of lead services replaced (2) Number of water meters installed (3) 8,500 8,500 15,000 15,000 15,000 15,000 How Well? Description of measure Non-revenue water (% of total pumped) (4) 8.9% 10.8% 10.6% 10.4% 10.2% 10.0% 6. Average annual cost for residential customer $327 $343 $367 $378 $389 $401 Is Anyone Better Off? Description of measure Number of boil water advisories Number of customers with service interruption of 2,400 3,000 3,000 3,000 3,000 3,000 more than 2 hours (5) 9. Number of watermain breaks per 100 km Water quality complaints (6) Ministry of Environment Report Card score 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% NOTES: 2013 values represent actual amounts; values represent forecasts (1) Renewal is defined as replacement or structural relining and does not include cement mortar relining or anode protection. (2) Delivery of the Corrosion Plan is being re-evaluated for (3) Meter replacement program delivery is being re-evaluated in (4) Reduction in non-revenue water is based on implementation of District Meter Areas City-wide over 5 years. (5) Number of customers out of service is an approximation based on watermain break records. (6) Number of complaints in 2013 is a mixture of "per event and individual complaints" versus absolute number of complaints. Process of complaints logging is under review from a "best practices" perspective complaints are expected to increase as more hydrants are flow tested, which may agitate rust sediment in cast iron watermains. 72

81 WATER 2015 Budget January 27, 2015