0 Watson. Township of Severn. Water. Ontario Regulation Financial Plan. Financial Plan # A. Associates ECONOMISTS LTD.

Transcription

1 . & November 17, 215 Financial Plan # A Water Township of Severn Ontario Regulation Financial Plan PIanning for growth Associates ECONOMISTS LTD. I u: Plaza Three 11 2 Argentia Rd. Mississauga, Ontario Canada LSN 1V9 Phone: (95) Fax: (95) info@watson-econ.ca wwwwatson -econ ca Watson

2 Contents Page Study Purpose Background Financial Plan Defined Financial Plan Requirements New System Financial Plan Requirements Existing System Financial Plan Requirements General Public Sector Accounting Board (P.S.A.B.) Requirements 1-4 Introduction. 2. Sustainable Financial Planning Introduction Sustainable Water and Sewage Systems Act Water Opportunities Act, 21 (Bill 72) Water and Wastewater Rate Study Approach Overview Conversion Process Calculate Tangible Capital Asset Balances Convert Statement of Operations Convert Statement of Financial Position Convert Statement of Cash Flow and Net Financial Assets/Debt Verification and Note Preparation Financial Plan 4-i 4.1 Introduction Water Financial Plan Statement of Financial Position (Table 4-1) Statement of Operations (Table 4-2) Statement of Change in Net Financial Assets/Debt (Table 4-3) Statement of Cash Flow (Table 4-4) Process for Financial Plan Approval and Submission to the Province Recommendations 6-1 Appendix A 215 Water and Wastewater Rate Study Water Summary Tables A-i Final. dccx H:\Severn2Ol4 W&WW Rate Study and O.RegOReg\Severn OReg Repofl

3 List of Acronyms O.Reg. P.S.A.B. S.D.W.A. S.W.S.S.A. Ontario Regulation Public Sector Accounting Board Safe Drinking Water Act Sustainable Water and Sewage Systems Act FinaL docx fj15&vern214 W&MA/ Rate Study and O.RegiORegSevern Ofleg Report

4 1.1 Study Purpose 1. Introduction is to convert the findings of the 215 Rate Study into the prescribed reporting No person shall, In order to become licensed, a municipality must satisfy five key requirements as per 1. Obtain a drinking water works permit; H:Severn\2O14 W&WW Rate Study and O.RegORegSovern OReg Report FinaL doax Quality Management Standard; 2, Acceptance of the operational plan for the system based on the Drinking Water Section 44 (1): out an alteration to a municipal drinking water system except under this Part or municipal drinking water licence. the authority of and in accordance with an approval under this Part under the authority of and in accordance with an approval under established before or after this section comes into force except or a drinking water works permit; or b) use or operate a municipal drinking water system that was a) establish a new municipal drinking water system or replace or carry One of the main requirements of the Act is the mandatory licensing of municipal water address some of the recommendations made by the Walkedon Inquiry Part II report. The Safe Drinking Water Act (S.D.W.A.) was passed in December, 22 in order to providers. Section 31(1) specifically states, 1.2 Background supply, and consideration of available funding sources. This detailed financial planning Safe Drinking Water Act, 22. In general, a financial plan requires an in-depth Wastewater Rate Study (215 Rate Study). The objective of the report provided herein Severn (the Township) to prepare a water financial plan as part of the five submission requirements for the purposes of obtaining a municipal drinking water license as per the analysis of capital and operating needs, a review of current and future demand versus requirements for a financial plan as defined by Ontario Regulation 453/7 (O.Reg. (Watson) was retained by the Township of and forecasting in regards to the Townships water systems has already been completed and documented by Watson within the 215 Township of Severn Water and 453/7). Page 1-1

5 Page Accreditation of the Operating Authority; 4. Prepare and provide a financial plan; and 5. Obtain permit to take water. The preparation of a financial plan is a key requirement for licensing and be undertaken by all water providers. as such, must Financial Plan Defined Section 3 (1) of the S.D.W.A. provides the following definition of financial plans: financial plans means, a) financial plans that satisfy the requirements of subsection (2), but only if, (i) Bill 175 (Sustainable Water and Sewage Systems Act, 22, introduced on September 23, 22) receives Royal Assent, and (ii) sections 3 and 9 of Bill 175 (Sustainable Water and Sewage Systems Act, 22) are in force, or b) financial plans that satisfy the requirements prescribed by the Minister, in any other 22, c. 32, s. 3 (1 ). case. As of time of writing, the Sustainable Water and Sewage Systems Act, 22 cited above been repealed (see Section 2.2 of this report); however, the standards that it directs underpin the specific requirements of s.3 (1) part b they are outlined in O.Reg. 453/7 and which will be examined in detail below. has as Financial Plan Requirements New System O.Reg. 453/7 provides the following parameters with regard to s.3 (1) part b of the S.D.W.A. for water systems: Financial plans must be approved by Council resolution (or governing body) indicating that the drinking water system is financially viable; Financial plans must include a statement that the financial impacts have been considered and apply for a minimum six-year period (commencing when the system first the public); serves Financial plans must include detail regarding proposed or projected financial operations itemized by total revenues, total annual surplus/deficit and accumulated surplus/deficit (i.e. the components of a Statement of Operations expenses, Watson & Associatos Economists Ltd. FinaL dccx H:iSevern2O14 W&WW Rate Study and Q.Reg\ORegSevecn OReg Report

6 Page 1-3 as per the Public Sector Accounting Board (P.S.A.B.) for each year in which the financial plans apply; Financial plans applicable to two or more solely-owned drinking water systems can be prepared as if they are for one drinking water system; Financial plans are to be made available to the public upon request and at no charge; If a website is maintained, financial plans are to be made available to the public through publication on the Internet at no charge; Notice of the availability of the financial plans is to be given to the public; and Financial plans are to be submitted to the Ministry of Municipal Affairs and Housing Financialpian Requirements Existing System O.Reg. 453/7 also provides details with regard to s.3 (1) part b of the S.D.W.A. for existing water systems. The requirements for existing systems are summarized as follows: Financial plans must be approved by Council resolution (or governing body); Financial plans must include a statement that the financial impacts have been considered and apply for a minimum six-year period (commencing in the year of licence expiry); Financial plans must include detail regarding proposed or projected financial operations itemized by total revenues, total expenses, annual surplus/deficit and accumulated surplus/deficit (i.e. the components of a Statement of Operations as per the P.S.A.B.) for each year in which the financial plans apply; Financial plans must present financial position itemized by total financial assets, total liabilities, net debt, non-financial assets, and tangible capital assets (i.e. the components of a Statement of Financial Position as per the P.S.A.B.) for each year in which the financial plans apply; Gross cash receipts/payments itemized by operating transactions, capital transactions, investing transactions and financial transactions (i.e. the components of a Statement of Cash Flow as per the P.S.A.B.) for each year in which the financial plans apply; Financial plans applicable to two or more solely-owned drinking water systems can be prepared as if they are for one drinking water system; Financial plans are to be made available to the public upon request and at no charge; Final. dccx H:Severn2O14 W&WW Rate Study and O.RegOReg\Severn DReg Report

7 Page 1-4 If a website is maintained, financial plans are to be made available to the public through publication on the Internet at no charge; Notice of the availability of the financial plans is to be given to the public; and Financial plans are to be submitted to the Ministry of Municipal Affairs and Housing FinancialPian Requirements General Given that the legislation falls under the S.D.W.A., a financial plan is mandatory for water systems and encouraged for wastewater systems. The financial plans shall be for a forecast period of at least six years but longer planning horizons are encouraged. The financial plan is to be completed, approved and submitted at the time of licence renewal (i.e. six months prior to licence expiry). Financial plans may be amended and additional information beyond what is prescribed can be included if deemed necessary. The financial plans must contain, on the front page, the appropriate financial plan number as set out in Schedule A of the Municipal Drinking Water Licence document Public Sector Accounting Board (P. L.A. B.) Requirements The components of the financial plans indicated by the regulation are consistent with the requirements for financial statement presentation as set out in section Psi 2 of the Chartered Professional Accountants Canada (previously Canadian Institute of Chartered Accountants) Public Sector Accounting Handbook: Financial statements should include a Statement of Financial Position, a Statement of Operations, a Statement of Change in Net Debt, and a Statement of Cash Flow. Both the Statement of Financial Position and the Statement of Operations were required for financial reporting purposes in pre-29 reporting years; however, the format changed in 29 to conform to the requirements of PSi2 and PS315O (see Figures 1-1 and 1-2). Financial statements are now reported on a full accrual accounting basis, which will continue in future years. The accrual accounting method recognizes revenues and expenses in the same period as the activities that give rise to them regardless of when they are actually paid for. Since an exchange of cash is not necessary to report a financial transaction, the accrual method is meant to provide a more accurate picture of financial position. Before 29, financial results were reported on a modified cash basis of accounting, whereby revenues and expenses are recognized when cash is paid or received and only certain accrual-type items such as payables and receivables are recognized at year-end. The difference between the FinaL docx H:Sevem2Ol4 W&MfV Rate Study and O.Reg\ORegSevern OReg Report

8 Page 1-5 methods is in the timing of when transactions are reported. This timing difference has impacted the presentation of the statements in that various accounts have been added or deleted in order to properly report the transactions. Moreover, since the 29 fiscal year, additional information relating to the accounting treatment of tangible capital assets is included in annual reporting, as indicated by the requirements under section P5315. Pre-29, the costs to acquire, develop and/or construct capital assets were expensed in the year in which they occur. Going forward, tangible capital assets are capitalized so as to create an inventory of the assets owned and to account for their ability to provide future benefits. The reporting of tangible capital assets required further changes to the format of existing financial statements. From a financial planning perspective, this change is significant for water assets as they can represent a significant portion of the Township s total assets. The Statement of Cash Flow and the Statement of Change in Net Financial Assets/Debt (which is a new statement as of 29) are required statements going forward. The Statement of Change in Net Financial Assets/Debt reports on whether enough revenue was generated in a period to cover the expenses in the period and whether sufficient resources have been generated to support current and future activities (see Figure 1-3). The Statement of Cash Flow reports on how activities were financed for a given period providing a measure of the changes in cash for that period (see Figure 1-4). It should be noted that the Statement of Reserves and Reserve Funds and the Statement of Capital, as used by the public sector pre-29, have been eliminated by the new reporting format. The balances and transactions that make up these two statements have been transferred to either the Statement of Operations or the Statement of Financial Position depending on the nature of the account. FinaL docx H:Severn\2 14 W&WW Rate Study and O.RegRegSovem OReg Report

9 Page 1-6 Statement OLD FORMAT (PRE-29) Figure 1-1 of Financial Position 29 AND FUTURE Assets Financial Assets Cash Accounts Receivable Investments Inventory for resale Other Assets Total Financial Assets Financial Assets Cash Accounts Receivable Investments Inventory for resale Other Assets Total Financial Assets Non-Financial Assets Inventory of Supplies Prepaid Expenses Total Non-Financial Assets Liabilities Accounts Payable & Accrued Liabilities Debt (Principal only) Other (DC Reserves-Deferred Revenue) Total Liabilities NET ASSETS Municipal Position Fund Balances Current Fund Capital Fund Reserves and Reserve Funds Liabilities Accounts Payable & Accrued Liabilities Debt (Principal only) Other (DC Reserves-Deferred Revenue) Total Liabilities NET FINANCIAL ASSETSI(DEBT) Non-Financial Assets Tangible Capital Assets Inventory of Supplies Prepaid Expenses Total Non-Financial Assets Amounts to be Recovered From Future Revenues From Reserves & Reserve Funds TOTAL MUNICIPAL POSITION ACCUMULATED SURPLUSI(DEFICIT) FinaL dccx H:Severn2O14 W&WW Rate Study and O.RegRegSevern OReg Report

10 Page 1-7 Statement Figure 1-2 of Operations OLD FORMAT (PRE-29) 29 AND FUTURE Revenues Base Charge Revenue Rate Based Revenue Transfers from Reserves Other Revenue Total Revenues Expenditures Operating Expenses Capital Total Expenditures Net Revenues for the year Increase (decrease) in amounts to be recovered Change in fund balances Revenue Base Charge Revenue Rate Based Revenue Earned DC Revenue Other Revenue Total Revenue Expenses Operating Expenses Interest on Debt Amortization Other Total Expenses Annual Surplus/(Deficit) Accum. Surplusl(Deficit), beg. of year Accum. Surplusl(Deficit), end of year FinaL docx H:Severn\2 14 W&WW Rate Study and ORegQRegSevern OReg Report

11 29 AND FUTURE Statement of Change in Net Financial AssetslDebt Figure 1-3 HASevem2O14 W&WW Rate Study and O.RegOReg\Severn DReg Report FinaL docx Net financial assets((net debt), beginning of year Net financial assets!(net debt), end of year Sub-total Add: Consumption of supplies inventory Add: Use of prepaid expenses Less: Acquisition of supplies inventory Less: Acquisition of prepaid expenses Sub-total Less: Acquisition of tangible capital assets (Gain)/Loss on disposal of tangible capital assets Annual Surplus/(Deflcit) Add: Write-downs of tangible capital assets Add: Amortization of tangible capital assets Add: Proceeds on sale of tangible capital assets Page 1-8

12 Page 1-9 Statement Figure 14 of Cash Flow1 DIRECT METHOD INDIRECT METHOD Qperating Transactions Cash received from: Water Operations Less: Cash paid for: Operating expenses Finance charges Cash provided by operating transactions Capital Transactions Proceeds on sale of tang,le capital assets Less: Cash used to acquire tarctle capital assets Cash applied to capital transactions investino Transactions Proceeds from bwestments Less: Cash used to acquire investments Cash provided by (applied to) investing transactions Financing Transactions Proceeds from debt issue Less: Debt repayment (Principal only) Cash applied to financing transactions increase in cash and cash equivalents Cash and cash egulvaients, beginning of year Cash and cash egulvaients, end of year Operating Transactions Annual Surplts/(Delicit) Add: Amortization of Tangible Capital Assets Lossl(Gain) on sale of Tangible Capital Assets Decreasef(lncrease) in Accounts Receivable lncrease/(decrease) in Accounts Payable Decreasef(lncrease) in Inventories for sale Other items Cash provided by operating transactions Capltai Transactions Proceeds on sale of tangible capital assets Less: Cash used to acquire tangible capital assets Cash appiled to capital transactions investing Transactions Proceeds from investments Less: Cash used to acquire investments Cash provided by (applied to) investing transactions Financing Transactions Proceeds from debt issue Less: Debt repayment (Principal only) Cash applied to financing transactions Increase In cash and cash equivalents Cash and cash equivalents. beginning of year Cash and cash equivalents, end of year statement 1 The of Cash flow can be prepared using either the direct or indirect methods. The indirect method derives cash flow by making adjustments to the net surplus/deficit reported on the statement of operations. The direct method calculates cash flow identifying the direct sources and of cash. uses Final. docx H:iSevern2Ql4 W&VVW Rate Study and O.RegOReg\Severn OReg Report

13 Page Sustainable Financial Planning 2.1 Introduction In general, sustainability refers to the ability to maintain a certain position over time. While the S.D.W.A. requires a declaration of the financial plan s sustainability, it does not give a clear definition of what would be considered sustainable. Instead, the Ministry of the Environment released a guideline ( Towards Financially Sustainable Drinking-Water and Wastewater Systems ) that provides possible to achieving sustainability. The Province s Principles of Financially Sustainable Water and Wastewater Services are provided below: approaches Principle #1: Ongoing public engagement and transparency can build support for, and confidence in, financial plans and the system(s) to which they relate. Principle #2: An integrated approach to planning among water, wastewater, and storm water systems is desirable given the inherent relationship among services. Principle #3: Revenues collected for the provision of water and wastewater services should ultimately be used to meet the of those services. Principle #4: Lifecycle planning with mid-course corrections is preferable to planning over the short term, or not planning at all. Principle #5: An plan. Principle #6: A sustainable level of revenue allows for reliable service that meets or environmental protection standards, while providing sufficient for future rehabilitation and replacement needs. Principle #7: Ensuring pay for the services they are provided leads to equitable outcomes and can improve conservation. In general, metering and the use of rates can help ensure pay for services received. Principle #8: Financial plans are living documents that require continuous improvement. Comparing the accuracy of financial projections with actual results can lead to improved planning in the future. Principle #9: Financial plans benefit from the close collaboration of various groups, including engineers, accountants, auditors, utility staff and municipal Council. needs these asset management plan is a key input to the development of a financial exceeds resources users users Final. docx H:\Severni2Ol4 W&VW /Rate Study and ORegORegSevern OReg Report

14 Page Sustainable Water and Sewage Systems Act The Sustainable Water and Sewage Systems Act (S.W.S.S.A.) was passed on December 13, 22. The intent of the Act was to introduce the requirement for municipalities to undertake an assessment of the full cost of providing their water and the wastewater services. In total, there were 4 areas within the Act to which the Minister could have made regulations. It is noted that, the regulations, which accompany the Act, were not issued and the Act was repealed on December31, Water Opportunities Act, 21 (Bill 72) Since the passage of the Safe Drinking Water Act, changes and refinements to the legislation have been introduced, including Bill 72. Bill 72 was introduced into legislation on May 18, 21 and received Royal Assent on November 29, 21 as the Water Opportunities Act. The purposes of the Water Opportunities Act are to foster innovative water, wastewater and storm water technologies, services and practices; to create opportunities for economic development and clean-technology jobs; and to conserve and sustain water resources. To achieve this, Bill 72 provides for the creation of performance targets (financial, operational and maintenance related) which will vary by service type and location, and the required submission of conservation and sustainability plans for water, wastewater and storm water. The sustainability plan in Bill 72 expands on interim legislation for financial plans included in O.Reg 453/7, to include the following: an asset management plan for the physical infrastructure; financial plan; water conservation plan (for water service only); a risk assessment; a strategy for maintaining and improving the services; and additional information considered advisable. Where a Board has jurisdiction over a service, the plan (and any plan amendments) must be approved by the municipality in which the municipal service is provided, before submission to the Minister. The Minister may also direct preparation of joint or partially joint plans. FinaL docx H:Severn2Ol4 W&VvW Rate Study and ORsgOReglSevern OReg Report

15 Page 2-3 Regulations (still forthcoming) will prescribe details with regard to any time periods or time limits, contents of the plans, identifying which portions of the plan will require certification, the public consultation (if required), limitations updates and refinements. process 2.4 Water and Wastewater Rate Study As noted above, Watson has already completed extensive financial planning as documented in the 215 Rate Study conducted on behalf of the Township. The study process was designed to full cost principles and reflect the guiding principles toward sustainable financial planning. Figure 2-1 below summarizes the process. address Water Figure 2-1 and Wastewater Rate Calculation Process As a result of employing this process, the 215 Rate Study provides a sound financial plan for the Township s water systems by providing: FinaL docx ftlsevem2o14 W&L4M/ Rate Study and ORegOReg\Severn OReg Report

16 will be impacted by evolving infrastructure needs and system growth; of potential funding sources; A detailed assessment of current and future capital needs including an analysis An analysis of fixed and variable operating costs in order to determine how they Watson & Economists Ltd. H:Severn¾2O14 W&WN Associates Rate Study and O.Reg\ORegSevern DReg Report FinaL docx Appendix A. The details of the financial plan arising from the 215 Rate Study are contained in sustainability of the financial plan. the system) and others, with the aim of gaining input and collaboration on the including the Township staff, Council, the general public (specifically the users of A public process that involves ongoing consultation with the main stakeholders equitable and sufficient to meet system needs; and A review and recommendation on rate structures that ensure revenues are Page 2-4

17 Page Approach 3.1 Overview The 215 Rate Study has been prepared on a modified cash basis; therefore, a conversion was required in order to present a full accrual financial plan for the purposes of this report. The conversion process used will help to establish the structure of the financial plan along with the opening balances that will underpin the forecast. This chapter outlines the conversion process utilized and summarizes the adjustments made to prepare the financial plan. 3.2 Conversion Process The conversion from the existing modified cash basis financial plan to the full accrual reporting format required under O.Reg. 453/7 can be summarized in the following steps: 1. Calculate Tangible Capital Asset Balances; 2. Convert Statement of Operations; 3. Convert Statement of Financial Position; 4. Convert Statement of Cash Flow and Net Assets/Debt; and 5. Verification and Note Preparation Calculate Tangible CapitalAsset Balances In calculating tangible capital asset balances, existing and future purchased, developed, and/or contributed assets will need to be considered. For existing water assets, an inventory has already been compiled and summarized within the 215 Rate Study as well as part of the Township s annual P.S.A.B. 315 compliance processes. Given the prospective nature of the 215 Rate Study, replacement cost is provided for each asset; however, historical cost (which is the original cost to purchase, develop or construct each asset) is required for financial reporting purposes. Once historical cost is established, the following calculations are made to determine net book value: Accumulated amortization up to the year prior to the first forecast year; Amortization expense on existing assets for each year of the forecast period; Acquisition of new assets for each year of the forecast period; and Disposals and related gains or losses for each year of the forecast period. FinaL docx H:Sovern2O14 W&WW Rate Study and O.RegORegSevern OReg Report

18 Page 3-2 Future water capital have also been determined and summarized within the 215 Rate Study. These estimates, however, only represent future that the Township anticipates purchasing or constructing without consideration for that are contributed by developers and other parties (at no cost or partial cost to the Township). contributed could form a significant part of the infrastructure going forward in terms of the sustainability of the system as a whole and despite their non-monetary nature; the financial plan may need to be adjusted in order to properly account for transactions. Once the and total acquisition has been determined for the forecast period, annual amortization of for each year is calculated in a similar manner that used for existing These as needs assets sequence asset these assets assets. assets assets Once the historical cost, accumulated amortization and amortization calculated described above, the total net book value of the tangible capital can be determined and recorded on the Statement of Financial Position. as expenses are assets these Convert Statement of Operations As per subsection above, the new Statement of Operations eliminates and/or adds certain transactions that have been reported differently by municipalities since 29 Figure 3-1). A wide range of adjustments will be considered and will depend on the size and complexity of the system. For example, the revenues and with the now obsolete Statement of Capital and Statement of Reserves and Reserve Funds (see subsection 1.2.5) will need to be adjusted for and included within the Statement of Operations. This includes all non-tangible capital costs previously included in the capital statement (i.e. related to various studies) while at the same time eliminating all expenditures incurred to acquire tangible capital balance discussed in subsection Transfers to and from reserves are no longer explicitly reported on the Statement of Operations. Instead, transactions are represented by in cash and accumulated surplus. Also, debt repayment costs relating to the principal payment portion only need to be removed, they no longer qualify an for reporting purposes. Principal payments will now be reported as a in debt liability on the Statement of Financial Position. Finally, relating to tangible capital such as amortization, wñte-offs and (gain)iloss on disposal of will be reported on the Statement of Operations in order to capture the allocation of the cost of to operating activities over their useful lives. (see associated assets which will now form part of the tangible capital assets, these assets these as expenses asset expenses asset as decrease expenses changes expense assets, Final.docx HiSevern2O14 W&VM/ Rate Study and.regoregsevern OReg Report

19 Increase (decrease) in amounts to be recoered - 18,466,671 Accumulated Surplus/(Deflcit), beginning of year Change in Fund Balances - 296,75 18,169,966 Accumulated Surplu&(Deficit), end of year Page 3-3 Figure 3-1 Conversion Adjustments Statement of Operations (Water) Full Accrual Budget Adjustments Modified Cash Basis Budget Accrual Basis 215 DR CR 215 Revenues Revenues Base Charge Re%enue ,255,372 Base Charge Reenue Rate Based Re\enue 14,836 14,836 Rate Based Re enue Transfers from Reseres 16, 16, Contributions from Ratepayers 244,73 78, Interest Earned on Long-term Accounts Recei%eble Other Revenue 41,568 6,315 47,883 Other Re%enue Total Revenues Total Revenues Expenditures Expenses Operating 1,259, 38. 1,297, Operating Expenses Capital Transfers to ReseRes 338, Debt Repayment (Principal & Interest) 244, ,498 Interest on Debt 443, ,796 Amortization Total Expenditures 1841,849 1,96,294 Total Expenses Net Expenditures - (296,75) Annual Surplu&(Deficit) ITOTAL ADJUSTMENTS I 1 72,371 I 72,371 Ii Note: The combined adjustments aboe should be balanced and net to $ (i.e. Total DR = Total CR) H:Sevemi2O14 W&L4W Rate Study and Q.RegQRegiSevem OReg Report FinaL docx

20 Page Convert Statement of Financial Position Once the Statement of Operations been converted and the net book value of tangible capital has been recorded, for the remaining items on the Statement of Financial Position are determined and recorded Figure 3-2). As noted earlier, the applicable balances from the Statement of Capital and the Statement of Reserve and Reserve Funds will need to be transferred to this statement. The opening/actual for the remaining accounts, such accounts receivable, inventory, accounts payable and outstanding debt (principal only), are recorded and classified according to the structure of the Statement of Financial Position as outlined in PS 12. assets balances has balances It is acknowledged that some of the balances required on the Statement of Financial Position will be consolidated across the Township and, such, will be difficult to isolate the information that is relevant to water. An example of this is accounts receivable which may be administered centrally by the Finance Department. Ontario Regulation 453/7 allows for the exclusion of numbers if they are not known at the time of preparing the financial plan. refer to the Financial Plan Notes in Chapter 4 for more details. Please these as as (see Convert Statement of Cash Flow and Net Financial Assets/Debt The Statement of Cash Flow summarizes how the Township financed its activities or, in other words, how the costs of providing services were recovered. The statement is derived using comparative Statement of Financial Position, the current Statement of Operations and other available transaction data. The Statement of Change in Net Financial Assets/Debt is a new statement which reconciles the difference between the surplus or deficit from current operations and the change in net financial for the year. This is significant, as net debt provides an indication of future revenue requirements. In order to complete the Statement of Net Financial Assets/Debt, additional information regarding any gains/losses on disposals of assets/debt assets, asset write-downs, acquisition/use of supplies inventory and the acquisition use of prepaid is (if applicable). Although the Statement of Change in Net Financial Assets/Debt is not required under O.Reg. 453/7, it has been included in this report as a further indicator of financial viability. expenses, necessary Final. docx H:Severn2O14 W&VvW Rate Study and. RegRegSevern OReg Report

21 Other Page 3-5 Figure 3-2 Conversion Adjustments Statements of Financial Position (Water). Modified Cash Bass Budget. Full Accrual Adjustments Budget Accrual Bass 215 DR j CR 215 ASSETS ASSETS Financial Assets Financial Assets - Cash Cash - Accounts Receivable ,277 Accounts Receivable Long-term Accounts Receivable 3,75,253 3,75,253 Long-term Accounts Receivable Accounts Receheable - 637, ,284 Accounts Receivable - Other Total Financial Assets 3,871,814 3,871,814 Total Financial Assets LIABILITIES Liabilities Bank Indebtedness 217,96 217,96 Bank Indebtedness Accounts Payable & Accrued Liabilities 151,32 151,32 Accounts Payable & Accrued Liabilities Gross Long-term Liabilities 3,75,253 3,75,253 Debt (Principal only) Total Liabilities 3,444,461 3,444,461 Total Liabilities Net Asset&(Debt) 427, ,353 Net Financial AsseW(Debt) Municipal Position Water ReseRes 427, ,353 DeeIopment Charge Reserw Fund ( ) 637,284 Amounts to be Recoered 637, ,284 Non-Financial Assets 17,78,613 38, 17,742,613 Tangible Capital Assets 17,742,613 Total Non-Financial Assets Total Municipal Position 427,353 18,169,966 18,169,966 Accumulated Surplu&(Deficit), end of year IITOTAL ADJUSTMENTS liii 18,845,25 18,845,25 Note: The combined adjustments aboe should be balanced and net to $ (i.e. Total DR = Total CR) HlSevemi2Ol4 W&WW Rate Study and O.RegRegSevem OReg Report Final.docx

22 the resources and obligations of the Township at a set point in time. The Statement of by the previous steps are in balance. The Statement of Financial Position summarizes The final step in the conversion process is to ensure that all of the statements created 3.25 Verification and Note Preparation b) Amortization Expense a) Opening cash balances Opening The H:Severn2O14 W&WIA/Rate Study and O.RegRegSevern OReg Report FinaL docx made and applied consistently throughout the financial plan. on the Township s amortization policy. Otherwise, an assumption will need to be method and timing of amortization should be based Less: Ending Accounts Receivable Balance Equals: Approximate Ending Cash Balance Ending Reserve/Reserve Fund Balance Plus: Ending Accounts Payable Balance Statement of Cash Flows and balance the Statement of Financial Position. balances. The following equation ouflines this approach: proxy will be needed. One approach is to assume that opening cash balances for accrual-based transactions reflected by accounts receivable/payable cash balances are necessary to complete the Preferably, opening cash balances should be derived from actual information equal ending reserve and reserve fund balances from the previous year adjusted contained within the Township s ledgers. It may not be possible, however, to extract this information from the ledgers for water alone; therefore, a reasonable significant assumptions that need to be addressed within the financial plan are as the assumptions and estimates made in preparing the financial plan. Some of the While not part of the financial plan, the accompanying notes are important to summarize follows: between financial assets and liabilities and should equal net financial assets/debt as Statement of Financial Position, net financial assets/debt is equal to the difference Position are also linked in terms of reporting on net financial assets/debt. On the The Statement of Change in Net Financial Assets/Debt and the Statement of Financial calculated on the Statement of Net Financial Assets/Debt. Statement of Operations. of Financial Position should equal the accumulated surplus/deficit reported on the reporting period. To this end, the accumulated surplus/deficit reported on the Statement Operations summarizes how these resources and obligations changed over the Page 3-6

23 Page 3-7 c) Accumulated Amortization Will be based on the culmination of accumulated amortization throughout the life of each however derived, along with information on construction/acquisition date and useful life obtained from the 215 Rate Study. expenses asset d) Contributed Assets As noted earlier, contributed could represent a significant part of the Township s infrastructure acquisitions. As such, a estimate of value and timing of acquisition/donation may be required in order to adequately capture In the are deemed to be insignificant or unknown, an assumption of no contributed reasonable assets these assets. assets assets within the forecast period will be made. case where contributed e) Accumulated Surplus The magnitude of the surplus in this area may precipitate the need for additional explanation especially in the first year of reporting. This Accumulated Surplus captures the historical infrastructure investment which has not been reported in the past but has accumulated to significant levels. It also includes all water reserve and reserve fund balances. f) Other Revenues Will the recognition of revenues previously deferred (i.e. development charge revenues) and/or accrued revenues (developer contributions) and/or other minor miscellaneous revenues. represent FinaL docx H:Severn2Ol4 W&MN Rate Study and O.RegORegSevern ORog Ropod

24 Page Financial Plan 4.1 Introduction The following tables provide the complete financial plan for the Townships water systems. A brief description and analysis of each table is provided below. It is important to note that the financial plan that follows is a forward look at the financial position of the Township s water systems. It is not an audited document1 and contains various estimates as detailed in the Notes to the Financial Plan section below. 4.2 Water Financial Plan 4.21 Statement of Financial Position (Table 4-1) The Statement of Financial Position provides information that describes the liabilities, and accumulated surplus of the Township s water systems. The first important indicator is net financial assets/(debt), which is defined the difference between financial and liabilities. This indicator provides an estimation of the system s future revenue requirement. A net financial position is where financial are greater than liabilities and implies that the system has the resources to finance future operations. Conversely, a net debt position implies that the future generated by the system will be to finance transactions as well future operations. Table 4-1 indicates that at the end of 215, the Township s water systems will be in a net financial position of approximately $43,. From 216 to 223, the financial plan forecasts a generally improving net financial position achieving just over $1.3 million in 223. However, net financial are projected to to just under $93, in 224. This is due to the use of significant reserve/reserve fund amounts, some anticipated debt, to pay for anticipated capital projects in that year. assets revenues as decrease assets asset as well as needed asset past as assets assets, Another important indicator on the Statement of Financial Position is the tangible capital balance. As noted earlier, providing this information is a requirement for municipalities part of PS315 compliance and is significant from a financial planning perspective for the following reasons: asset as Tangible capital delivery; assets such as water mains are imperative to water service 1 O.Reg. 453/7 does not require an audited financial plan. Watson & Associates Econcmists Ltd. FinaL docx H:Severffl2O14 W&VW/Rate Study and C.Reg\ORegSevern OReg Repod

25 Page 4-2 These assets represent significant economic resources in terms of their historical and replacement costs; therefore, ongoing capital asset management is essential to managing significant replacements and repairs; and The annual maintenance required by these assets has an enduring impact on water operational budgets. In general terms, an increase in the tangible capital asset balance indicates that assets may have been acquired either through purchase by the Township or donation! contribution by a third party. A decrease in the tangible capital asset balance can indicate a disposal, write down, or use of assets. A use of assets is usually represented by an increase in accumulated amortization due to annual amortization expenses arising as a result of allocating the cost of the asset to operations over the asset s useful life. Table 4-1 shows tangible capital assets are expected to decrease by approximately $2.3 million over the forecast period. This indicates that the Township s projected amortization and asset disposals are expected to be higher than the planned investments in tangible capital assets over the forecast period Statement of Operations (Table 4-2) The Statement of Operations summarizes the revenues and expenses generated by the water systems for a given period. The annual surplus/deficit measures whether the revenues generated were sufficient to cover the expenses incurred and, in turn, whether net financial assets have been maintained or depleted. Table 4-2 illustrates the ratio of expenses to revenues, improving from 118% in 215 to 14% in 224. As a result, annual deficit decreases from just under $3, in 215 to just under $8, by 224. It is important to note that an annual surplus is beneficial to ensure funding is available to non-expense costs such as tangible capital asset acquisitions, reserve! reserve fund transfers and debt principal payments. Another important indicator on this statement is accumulated surplus/deficit. An accumulated surplus indicates that the available net resources are sufficient to provide future water services. An accumulated deficit indicates that resources are insufficient to provide future services and that borrowing or rate increases are required to finance annual deficits. From Table 4-2, the financial plan indicates that accumulated surplus is projected to decrease by approximately $1.9 million over the forecast period from a 214 accumulated surplus of approximately $18.5 million. This accumulated surplus, as indicated in Table 4-2, is predominantly made up of reserve and reserve fund balances as well as historical investments in tangible capital assets. Watson & Associates Economists LW. FinaL docx H:Severn2Ol4 W&WW Rate Study and O.RegORegSevern OReg Report

26 Page Statement of Change in Net Financial Assets/Debt (Table 4-3) The Statement of Change in Net Financial Assets/Debt indicates whether revenue generated was sufficient to cover operating and non-financial asset costs (i.e. inventory supplies, prepaid expenses, tangible capital assets, etc.) and in so doing, explains the difference between the annual surplus/deficit and the change in net financial assets/ debt for the period. Table 4-3 indicates that in 215, 216 and 224, the forecasted tangible capital asset acquisitions (net of amortization for the year) exceed the forecasted annual surplus/(deficit) resulting in a decrease to net financial assets in each year. This is a result of more significant capita) asset acquisitions forecasted in those years. In each of the other years (i.e. 217 to 223), forecasted annual surplus exceeds forecasted tangible capital asset acquisitions (net of amortization for the year) resulting in annual increases in net financial assets. This allows for a long-term plan of funding capital through accumulated surplus (i.e. reserves). This is evidenced by the ratio of cumulative annual surplus before amortization to cumulative tangible capital asset acquisitions increasing from Q.48 in 215 to 1.15 by Statement of Cash Flow (Table 44) The Statement of Cash Flow summarizes how water systems are expected to generate and use cash resources during the forecast period. The transactions that provide/use cash are classified as operating, capital, investing and financing activities as shown in Table 4-4. This statement focuses on the cash aspect of these transactions and thus is the link between cash and accrual based reporting. Table 4-4 indicates that cash from operations will be used to fund capital transactions (i.e. tangible capital asset acquisitions), make debt principal payments and build internal reserves and reserve funds over the forecast period. The financial plan projects the Township s water systems to be in a deficit cash position at the end of 215 through to the end of 219. However, for the remainder of the projection period (i.e. 22 to 224) a positive cash position is projected, improving from just under $97, at the end of 22, to just over $88, by 223, before decreasing to approximately $58, by the end of 224. For further discussions on projected cash balances, please refer to the Notes to the Financial Plan. A desirable ratio is 1:1 or better. Final.docx H:\Sevem2Ol4 W&WW Rate Study and ORegORegSevern OReg Report

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29 8, ,9 26,9-7. Page 4-6 TOTAL OPERA11NG EXPENSES ,7 1,34,8 1374,1 1,4,5 1443,7 1,44. t , ,595,5 Schedule 4-1 Statement of Operating Expenses: Water Services UNAUDITED: For Financial Planning Purposes Only Notes. Foreceal OcenUno Expenses hiemet Comedian (6 Sites) ,3 7,4 7,5 7, , 1 8,39.5 Data Plans (8 Tablets) , , 11,2 Regular Salaries & Wages , , , eflime-shift-recal Etc , 27, , ,1 31,7 Lost lime Sick Vacn Etc ,3 19,7 2,1 2,5 2, ,19 22,59 Employer Health Tax 8,2 8, , C.P.P , ,3 17,6 18, 18,4 15,69 E.t. 7,39 7, ,7 7,99 8,1 8, ,7 8,99.M.E R,S. 32,3 32, , 35,79 36, ,8 38,6 GrOL Lie Insurance 31,6 32,2 32, ,99 35, ,7 Workplace Satoity hsunnce , 9,2 9,4 9,6 9,8 1 1,2 1,4 Ctothing Allowance , ,2 Genera) , ,69 53,79 uitds & Pzeny Maint , ,7 48,79 Fuel-Oiead Pads 91, ,5 97, ,3 13, ,59 19,7 SoffienerSati ,3 1,49 1,5 1, ,99 2. Sodium Silicate 3,29 3, , ,6 4,8 5, SLppate 5,5 58 6,1 6, ,69 Chemicals 2, 21,9 22, ,49 25,6 26, ,6 31,19 Office Suppiies 2,9 3. 3,19 3, , Hydra , , , , Heat - Natural Gas ,9 6, ,89 7, ,9 8,3 Unctassited Materials ,8 3,99 4,9 4,19 4, ,4 4,59 Misc&taneoua ,59 5,69 5, ,99 6, Membererups 1,89 1,8 1, , 1.8 1, ,89 1,89 Tmitir Course Expenses 8, ,79 8,99 9,19 9,3 9, ,19 Joint Health 8 Satety ,39 2, , ,39 2,3 Tetephone 12, ,69 12, ,59 13, , Adwilising ,9 3,1 3, , Legal 2, 2, ,9 2. 2,9 2, 2. 2, 2. Er9neehng ,4 3,59 3,6 3, Consultants 59, ,39 64,6 65, ,99 71,39 MOE, Testing 34, , 3, ,99 38, ,39 41,1 Eipment Reper& Maintenan 29, ,6 31,4 32, 32, , Source Water Pratection ,99 16, ,9 17, , Other Contracts 65, ,99 69, ,19 73, ,5 78,9 hsumnce Premiums , ,59 29, ,39 3,99 Misc Senlcas 31,39 31,99 32,59 33,2 33,9 34,6 35, ,79 37,49 Township Vehicle Rental 1, ,49 112, ,2 119,59 121,9 124,39 126,89 Nan ThA - Expenses from Capital BUlges 7 38,9 8,9 2. 2, , 2. HiSevem2O14 W&WN Rate Study and O.RegiQReglSevem DReg Report FinaL dccx

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32 Page 4-9 Water Notes to Financial Plan The financial plan format, as outlined in Chapter 4, closely approximates the full accrual format used by municipalities (29 onward) on their audited financial statements. The financial plan, however, is not an audited document and contains various estimates. In this regard, Section 3 (2) of O.Reg. 453/7 states the following: Each of the following sub-subparagraphs applies only if the information referred to in the sub-subparagraph is known to the owner at the time the financial plans are prepared: 1. Sub-subparagraphs 4 i A, B and C of subsection (1) 2. Sub-subparagraphs 4 hi A, C, E and F of subsection (1). The information referred to in sub-subparagraphs 4 i A, B and C of subsection (1) includes: A. Total financial assets (i.e. cash and receivables); B. Total liabilities (i.e. payables, debt and deferred revenue); and C. Net debt (i.e. the difference between A and B above). The information referred to in sub-subparagraphs 4 Hi A, C, E and F of subsection (1) includes: A. Operating transactions that are cash received from revenues, cash paid for operating expenses and finance charges; B. Investing transactions that are acquisitions and disposal of investments; C. Change in cash and cash equivalents during the year; and D. Cash and cash equivalents at the beginning and end of the year. In order to show a balanced financial plan in a full accrual format for the Township of Severn, some of the items listed above have been estimated given that the Township does not maintain all financial asset and liability data separately for water. Usually, this type of data is combined with the financial assets and liabilities of other departments and services given that there is not a current obligation to disclose this data separately (as there is with revenue and expenses). The assumptions used have been documented below: Fina.docx H1Sevorn2O14 W&WW Rate Study and.rogoregsevern OReg Report

33 Page Cash, Receivables and Pavables It is assumed that the opening cash balances required to complete the financial plan are equal to: Ending Reserve/Reserve Fund Balance Plus: Ending Accounts Payable Balance Less: Ending Accounts Receivable Balance Equals: Approximate Ending Cash Balance Receivable and payable balances were estimated for each year of the forecast based on the following factors: 2. Debt a) Receivables: Based on historical levels of water receivables and accrued receivables as a percentage of annual water revenues, applied to projected water revenues (source: Township staff); b) Payables: Based on historical levels of Township-wide payables as a percentage of Township-wide expenses incurred, applied to projected water expenses (source: prior years audited financial statements). Outstanding water related debt at the end of 214 was $3,153,828. It is anticipated that additional debt proceeds will be required over the forecast period. Principal repayments over the forecast period are estimated as follows: Year Principal Payments , , , , , , , , , ,598 Total $ 1,4,587 Final. docx H:Severn\2O14 W&WW Rate Study and OReg\OReg\Sevem OReg Roped

34 Page 4-11 In situations where landowner contributions offset annual debt payments, a long term accounts receivable was established in Table 4-1 to offset the lang-term debt obligation. For financial reporting purposes, debt principal payments represent a debt liability and the interest payments represent a current year operating expense. decrease in 3. Deferred Revenue/Accounts Receivable - Other Deferred revenue is made up of water development charge reserve fund balances which are considered to be a liability for financial reporting purposes until the funds are used to emplace the works for which they have been collected. In years when the water development charge reserve fund balance is negative, it is shown an ( accounts receivable other ) for financial reporting purposes, representing future amounts to be collected from developers. as 4. Tangible Capital Assets assets as asset Opening net book value of tangible capital includes water-related in the following categories: i. Infrastructure; ii. Vehicles; iu. Equipment; iv. Land; and v. Facilities. Amortization is calculated based on the straight-line approach. Given the planned replacement forecast in the 215 Rate Study, useful life on acquisitions is to be equal to typical values assigned by the Township for each category. Write-offs are to equal $ for each year in the forecast period. Tangible capital are shown on a net basis. It is that disposals occur when the is being replaced, unless the is documented a new The value of each disposal is calculated by estimating the original purchase/construction date and deflating current replacement cost values to those estimated in order to calculate original historical cost. Gains/losses on disposals are to be $ (it is assumed that historical cost is equal to accumulated amortization for all disposals). asset assumed assets asset. assumed asset asset assumed assets asset assumed asset dates FinaL docx H:iSevern2O14 W&WW Rate Study and.regoreg\severn OReg Report

35 Page 4-12 Residual value is assumed to be $ for all assets contained within the forecast period. Contributed Assets, as described in subsection 3.2.1, are shown as Developer Contributions, a revenue, on the Statement of Operations in the year of contribution, if applicable. The Township is unaware of any specific lead service piping in the Township water systems. The balance of tangible capital assets is summarized as follows: Asset Historical Cost Opening Tangible Capital Asset Balance ,152 22,943, ,68 23,352,194 23,561,657 23,653, ,774,1 23,82824 Acquisitions 34, 151, 186, 188, 217, flood Disposals , , , ,698 59,576 Clo&ng Tangible Capital Asset Balance ,33 23,79, ,68 23,382,14 23, , ,714,22 23,774, ,24 24, Opening Accumulated Amortization 4,785, ,599 6, , ,972 7,289,593 7,7, Amortization Expense 443, , ,56 442, Amortization on Dlssal 28, ,179 47,414 37,337 58,198 34,457 13,12 21, Ending Accumulated AmofllzeUon 5,2,89 5,87,599 6,41,86 6, , ,269,593 7,7,642 8,129, ,91 8,923,943 Net Book Value 17, ,472,188 17,199,726 18, ,668,665 15,364,66 16, ,337 15,263,113 15,65, Accumulated Surplus Opening accumulated surplus for the forecast period is reconciled as follows: 215 Opening Water Accumulated Surplus Reserve Balances Reseftes: Development charges (658,92) Reseftes: capital/other 584,262 Total Reserves Balance (74,658) Less: Debt Obligations and Deferred Re%enue (2,494,98) Add: Long-term Accounts ReceNble 3.153,828 Add: Tangible capital Assets 17,882,49 Total Opening Balance 18,466,671 The accumulated surplus reconciliation for all years within the forecast period is contained in Table Other Revenue Other revenue includes flat rate revenues, penalties and interest, as well as other non-operating general revenues. Final,docx H:lSevernl2Ol4 W&MV Rate Study and O.RegOReg\Sevem OReg Report

36 Page Operating Expenses Capital expenditures for items not meeting the definition of tangible capital assets have been reclassified as operating expenses and have been expensed in the year in which they occur. Finai.docx H;\Sevem2Ol4 W&MA/Rate Study and ORegOReg\Severn OReg Report

37 Page Process for Financial Plan Approval and Submission to the Province As mentioned in Section 1.2, the requirement to prepare the financial plan is provided in Section 32 (5) 2 N of the S.D.W.A. Proof of the preparation of a financial plan is one of the submission requirements for municipal drinking water licensing and, upon completion, must be submitted to the Ministry of the Environment. As part of O.Reg. 453/7, the process established for plan approval, public circulation and filing is set out follows: as 1. The financial plan must be approved by resolution of the municipality who owns the drinking water systems or the governing body of the owner. (O.Reg. 453/7, Section 3(1)1) 2. The owner of the drinking water systems must provide notice advertising the availability of the financial plan. The plans will be made available to the public upon request and without charge. The plans must also be made available to the public on the municipality s website. (O.Reg. 453/7, Section 3 (1) 5) 3. The owner of the drinking water systems must provide a copy of the financial plan to the Director of Policy Branch, Ministry of Municipal Affairs and Housing. (O.Reg. 453/7, Section 3(1)6) 4. The owner of the drinking water systems must provide proof satisfactory to the Ministry of the Environment that the financial plans for the system satisfy the requirements under the Safe Drinking Water Act. (S.D.W.A. Section 32 (5) 2 ii) FinaL docx H:ISevern¾214 W&MA/ Rate Study and O.RegQRegSevern OReg Report

38 Page Recommendations This report presents the water financial plan for the Township of Severn in accordance with the mandatory reporting formats for water systems as detailed in O.Reg. 453/7. It is important to note that, while mandatory, the financial plan is provided for Council s interest and approval; however, for decision making purposes, it may be more informative to rely on the information contained within the 215 Rate Study. Nevertheless, Council is required to pass certain resolutions with regard to this plan and regulations and it is recommended that: 1. The Township of Severn Water Financial Plan prepared by Watson & Associates Economists Ltd. dated November 17, 215 be approved. 2. Notice of availability of the Financial Plan be advertised. 3. The Financial Plan and the Council Resolution approving the Financial Plan be submitted to the Ministry of Municipal Affairs and Housing. (O.Reg. 453/7, Section 3(1)6). 4. The Financial Plan and the Council Resolution approving the Financial Plan be submitted to the Ministry of the Environment, satisfying the requirements under the Safe Drinking Water Act. (S.D.W.A. Section 32 (5) 2 ID). FinaL dccx H:Severn2O14 W&WW Rate Study and O.RegORegSevern OReg Report

39 Page A-i Appendix A 215 Rate Study Water and Wastewater Water Summary Tables FinaL docx H:Severn2O14 W&WV/ Rate Study and O.Reg\ORegSevern DReg Roped

40 5-1, , Page A , 16, H:iSevem2 14 W&¼WRate Study and O.RegtoRegiSevem GReg Report FinaL docx Table 41 Township of Severn Water Service Capital Budget Forecast Inflated $ Description Total Forecast Capital Expenditures Township-wide Upgrades to high speed internet remote communication Tablets for Utilities Technicians , - Computer Replacement (every5years) 13. 6, 7, Enerygy Management for SCADA , Bass Lake Woodlands General Building Maintenance 5, 5, Roof reshingled 6, 6, Flow Maters replaced 8, 8 Upgrade to Full SCADA 4, 4, Chemical pump panel replacement/upgrade 1, Variable Frequency Drive replacements 22, Online Fvtnitohng equipment replacement 11, , Valve Replacement 2, 2, 2, 2. 2, 2, 2, 2, 2, 2, 2. SCADA computer replacement (every 3 years) 22, 5, - - 5, - - 6, - - 6, High lifts rebuild (3 pumps) 49, , Well pump rebuild/replace (3 pumps) 33, , 11, Other process pump replacement (backwwash, sump, etc.) 2, 2, - - Coidwater , , - General Building Maintenance 8, 8, Roof reshingled 11, , Flow Maters replaced 19, 19, Chemical pump panel replacement/upgrade 1, - - 1, Online Ntnitoring equipment replacement , Looping watennain from George St. to Fire Hall Lane 81, , Replacing watermain on Anderson Line 6, Swabbing watermain in Coldwater 2, 2, Valve Replacement 44, 4, 4, 4, 4, 4, 4, 5, 5, 5, 5, SCADA computer repacement (every 5 years) 11, , - Annual rebuild of sample stations 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, High lifts rebuild (4 pumps) Well pump rebuild/replace (3 pumps) 32, - - 1, - 11, 11, Other process pump replacement (backwwash, sump, etc.) (4 pumps) 14, Hydrant rebuild/replace 32. 3, 3, 3, 3, 3, 3, 3, 3, 4, 4.

41 - - 3, , Page A H:tSeveml2Ol4 W&WW Rate Study and O.RegiORegSevem Okeg Report FinaL dccx Description , Total Forecast Capital Expenditures Sandcastle Estates General Building Maintenance 3 3, Flow Maters replaced 6, , Chemical pump panel replacement/upgrade 21, , Online Monitoring equipment replacement 11, 11, Upgrade to Full SCADA 1 1, Madia Fifter replacement 123, 4, 41, 42, Variable Frequency Drive replacements 25, Replace UV units 34, 34, Valve replacement 1, 1, 1, 1, 1, 1, 1, 1, 1. 1, 1, SCADA computer replacement (every 3 years) 17, , - - 6, - - 6, Annual Rebuild of sample stations High lifts rebuild (3 pumps) 24, 8, 16, Low lift pump rebuild/replace (2 pumps) 13, 6, 7, Other process pump replacement (backwwash, sump, etc.) (2 pumps) I Severn Estates General Building Maintenance 2, 2, Reshingle roof 3, , - Flow Malers replaced 4, - - 4, Chemical pump panel replacement/upgrade 1, 1, Online monitoring equipment replacement 11, , Valve replacement 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, SCADA compuler replacement (every 3 years) 17, - - 5, - - 6, - - 6, - nnual rebuild of sample stations High lifts rebuild/replace (2 pumps) 6, 3, 3, Welt pump rebuildlreplace (1 pump) 3, Rebuild/replacefifterheads 1, 1, 1. 1, 1, 1, 1, 1, 1, 1, 1, shago General Building Maintenance 6, - 6, Flow meters replaced 19, , Chemical pump panel replacement/upgrade 6, - - 6, Online monitoring equipment replacement 17, , Valve replacement , 3. 3, 3, 3, 3, 3, 3, 3, 4. 4, SCADA computer replacement (every 5 years) , , Annual rebuild of sample stations High lifts rebuild (3 pumps) 27, - 9, 9, - Low lift pump replace (2 pumps) 25, 25, Hydrant rebuild/replace 1, 1, 1, 1, 1, 1, 1, 1, 1, 1. 1,

42 Page A4 l.stshore Coldwater 43, 1, H:Sevem2O14 W&MtVRate Study and O.RegOReg\Sevem DReg Repoa Finatdocx Capital Expenditures Description Total Forecast General Building Meintenance (5%) , , 5, , Roof rebuild/replace (5%) 24. Ditching and grading work (5%) 21, , SCADA computer replacement (every 5 years) (5%) 6, - - 3, , - - Flow Meters replaced 11, , Chemical pump panel replacement/upgrade 29, Online Fvtnitohng equipment replacement 16, , Variable Frequency Drive replacements 43, - - Valve replacement 65, 6, 6, 6, 6, 6, 7, 7, 7, 7, 7. Annual rebuild of sample stations 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1. High lifts rebuild (3 pumps) 49, , 16, 17, , Low lift pump rebuild/replace (3 pumps) 15, Other process pump replacement (backwwash, sump, etc.) (4 pumps) 19, Air Scour blower rebuild/replace (1 blower) 7, , GAC media replacement 143, Filter media replacement 1, f4drant rebuild/replace 32, 3, 3, 3, 3, 3, 3, 3, 3, 4, 4, Growth Related: , Severn Estates 448, Total Capital Expenditures 2,293, , , , 78, 763, Capital Financing Growth Related Debenture Requirements - Sevem Estates 74, ,667 Operating Contributions Water Reserve - 2,218, , , , 152, 97, 75, 78, 688,333 Total Capital Financing 2,293, 342, 189, 188, , 152, ,

43 Page A-5 Debenture Principal Forecast Year (Inflated) Description Opening Balance 584, , , , ,49 626,64 822,548 1,65,384 1,331,41 Transfer from Operaling 335, , , , ,935 44, , ,212 Transfer to Capital 342, 1 89, 188, 19, 219, 152, 97, 75, 78, 688,333 Transfer to Operating 16, 16, 16, 16, 16, 16, 16, 16, , Closing Balance 421,37 419,43 437, ,274 51,88 617,344 81,392 1,49,64 1,311, Interest , ,528 9,26 12,156 15,745 19,671 14,834 H:lSevemi2Ol4 W&VWRate Study and O.RegOReglSevem OReg Repoft FinaL docx Table #2 Township of Severn Water Service Schedule of Growth Related Debenture Repayments Inflated $ ,667 Total Annual Debt Charges 74, Table 43 Township of Severn Water Service Coldwater Water Reserves! Reserve Funds Continuity Inflated $

44 Page A-6 H:tSevemi2Ol4 W&WWRate Study and O.Reg¾OReglSevem OReg Report FinaL docx Severn Estates - Water Table A-4 Debenture Water Service Developrrmnt Charges Reserve Fund Continuity InHaled $ Description Opening Balance ,331 35,851 36, ,81 Development Charge Proceeds Transfer to Capital Transfer to Operating Closing Balance 34, ,861 36,399 36,945 37,499 38,62 38, Interest Required from Developmenl Charges - I 74, Westshore - Water Table 45 Township of Severn Water Service Deveiopnwnt Charges Reserve Fund Continuity Inflated $ DescriptIon I Opening Balance (693,73) (572,615) (65.552) (627,522) (63.479) (578.46) ( ) (525.71) (496,743) (467,253) Development Charqe Proceeds ,678 32,34 32, ,282 34,974 35,669 36,396 35,991 Transfer to Capital Transfer to Operating Closing Balance ( ) (64,938) (618,248) (594,56) (569,858) (544,124) ( ) (489,42) (46,348) (431,262) Interest (9,94) (9,614) (9,274) (8,918) (8,548) (8,162) (7.76) (7.341) (6.95) (6,469) Required from Development Charges

45 Page A-7 HlSevemi2Ol4 W&WW Rate Study and O.Reg\ORegiSevem OReg Report Final docx Table A 6 Township of Severn ter Services Operating Budget Forecast Inflated $ Forecast Description j j Expenditures Operating Costs INTERNET CONNECTION (6 SITES) ,4 7,5 7,7 7,9 8,1 8,3 8.5 DATAPLM JS (8TASLETS) 9,6 9,8 1, 1,2 1, ,8 11, 11,2 REGULAR SALARIES & WAGES 325, ,5 345,3 352,2 359,2 366,4 373,7 381,2 388,8 R4RT-TINE SALARIES & WAGES OVERTIFvE-SHIFT-RECALETC, 26,5 27, 27,5 28,1 28,7 29,3 29, LOST TIPvE: SICK VACN ETC 18,9 19,3 19,7 2,1 2,5 2,9 21,3 21,7 22,1 22,5 ENFLOYER HEALTH TAX 8, 8,2 8,4 8,6 8,8 9, 9,2 9,4 9,6 9,8 C.P.P. 15,8 16,1 16,4 16,7 17, 17,3 17,6 18, 18,4 18,8 El. 7,3 7,4 7,5 7,7 7,9 8,1 8,3 8,5 8,7 8,9 O.ME.R.S. 32,3 32,9 33,6 34,3 35, 35,7 36, ,8 38,6 GROUP LIFE INSURANCE 31,6 32,2 32,8 33,5 34,2 34,9 35,6 36,3 37, 37,7 WORKPLACE SAFETY INSURANCE 8,6 8,8 9, 9,2 9,4 9,6 9, 1, 1,2 1,4 CLOTHINGALLOWANCE 1,2 1,2 1,2 1,2 1,2 1,2 1,2 1,2 1,2 1,2 GENERAL 44,9 45,8 46,7 47,6 48,6 49,6 5,6 51,6 52, BUILDING & PROPERTY MAINT 4, 41,6 42, ,1 45, 45,9 46, ,7 FUEL - DIESEL PARTS 91,8 93,6 95,5 97,4 99,3 11,3 13,3 15,4 17,5 19,7 SOFTENER SALT 1,1 1,2 1,3 1,4 1,5 1,6 1,7 1,8 1,9 2, SODIUM SILICATE 3,2 3,4 3,6 3,8 4, 4,2 4,4 4,6 4,8 5, SULPRATE 5,5 5,8 6,1 6,4 6,7 7, 7,4 7,8 8,2 8,6 CHEMICALS 2, 21, 22,1 23,2 24,4 25,6 26,9 28,2 29,6 31,1 OFFICE SUPPLIES 2,9 3, 3,1 3,2 3,3 3,4 3,5 3,6 3,7 3,8 FWDRO 158,6 166,5 174,8 13,5 192,7 22,3 212,4 223, ,9 HEAT - NATURAL GAS 5,3 5,6 5,9 6,2 6,5 6,8 7,1 7,5 7,9 8,3 UNCLASSIFIED rvtkterlals 3,5 3,7 3,8 3,9 4, 4,1 4,2 4,3 4,4 4.5 MISCELLANEOUS 5,1 5,2 5,3 5,4 5,5 5,6 5,7 5,8 5,9 6. ENBERSHIPS 1.8 1,8 1,8 1,8 1,8 1,8 1, 1, 1, 1,8 TRAiNING COURSE EXPENSES 8,3 8,5 8,7 8,9 9,1 9,3 9,5 9,7 9,9 1,1 JOINT HEALTH & SAFETY 2,3 2,3 2,3 2,3 2,3 2,3 2,3 2,3 2,3 2,3 TELEPHONE 12,2 12,4 12,6 12,9 13,2 13,5 13,8 14,1 14,4 14,7 ADVERTISING 2,7 2,8 2,9 3, 3,1 3,2 3,3 3,4 3,5 3,6 LEGAL 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, ENGINEERING 3,2 3,3 3,4 3,5 3, ,8 3,9 4, 4,1 CONSULTANTS 59,7 6,9 62,1 63,3 64,6 65,9 67,2 68,5 69,9 71,3 M,O.E. TESTING 34,4 35,1 35,8 36, ,9 38,7 39,5 4,3 41,1 EQUIPNENT REPAIR & MAINTENAN 29,6 3,2 3,8 31,4 32, 32,6 33,3 34, 34,7 35,4 SOURCE WATER PROTECTION 15,3 15,6 15,9 16, ,8 17,1 17,4 17,7 18,1 OTHER CONTRACTS 65,3 66,6 67,9 69,3 7,7 72,1 73,5 75, 76,5 78,

46 Metered Westshore Page A-8 Penalty 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 Debenture Proceeds (Landowner Recovery) 244,73 244, , ,73 244,73 244,73 244,73 244,73 Contributions from Reserves I Reserve Funds 16, 16, , , 16, 16. Total Operaling Revenue 1,71,13 1,747, ,645,794 1,696,876 1,949,43 2,3, ter Billing Recovery-Total 14, , ,12 153,19 156, , , ,544[ 168,633 H1Sevem2Ql4 W&WW Rate Study and ORegloRegiSevem OReg Report Fin at docx Forecast Description Expenditures Operaling Costs INSURANCE PREMIUMS 25,9 26,4 26,9 27, ,5 29,1 29,7 3,3 3,9 kisc SERViCES ,9 32,5 33,2 33,9 34,6 35,3 36, 36,7 37,4 TOWNSHIP VEHICLE RENTAL ,4 112, ,2 119,5 121, ,8 Sub Total Operating 1, ,7 1,338,8 1,372, , , ,553,8 1,593,5 Capital-Related Existing Debt (Principal) - Non-Growth Related - 78,575 82,778 87,27 91,872 96,787 11,965 17, , ,22 125,598 Existing Debt (Interest) - Non-Growth Related -Westshore 165, , , ,21 147, ,19 136,654 13,97 124, ,475 Transfer to Capital Transfer to Capital Reserve (Coldwater) 338, , ,986 56,212 Sub Total Capital Related 582, ,123 64, , ,8 684,861 76, ,59 75,285 Total Expenditures 1,841,849 1,891,823 1, ,995,896 2,5,66 2,15,78 2,162,861 2,221,565 2, ,343,785 Revenues Base Charge - Customers 1,246,475 1, , ,55 1,439,373 1,491,149 1,544,419 1,599, ,64 1, Base Charge - Ramara 8,897 9,75 9,257 9,442 9,631 9,824 1,2 1,22 1,425 1,633 Flat Rate - Washago Flat Rate-Coldwater 5,552 5,663 5, , ,253 6,378 6,55 6,635 FlatRate-Westshore 2, ,662 22,95 22,537 22,988 23,448 23,917 24,395 24,883