1. Declarations of Pecuniary Interest under the Municipal Conflict Of Interest Act. Consent Agenda Items

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1 Regional Municipality of Waterloo Administration and Finance Committee Agenda Tuesday, Approximately 11:00 a.m. (Following Planning and Works) Regional Council Chamber 150 Frederick Street, Kitchener, Ontario Media Release: Friday, June 14, 2018, 4:30 p.m. 1. Declarations of Pecuniary Interest under the Municipal Conflict Of Interest Act 2. Delegations Consent Agenda Items Items on the Consent Agenda can be approved in one motion of Committee to save time. Prior to the motion being voted on, any member of Committee may request that one or more of the items be removed from the Consent Agenda and voted on separately. 3. Request to Remove Items from Consent Agenda 4. Motion to Approve Items or Receive for Information 4.1 COR-TRY-18-64, Green Procurement Initiatives (Information) 4.2 COR-FSD-18-15, 2019 Budget Process & Timetable (Information) Page 5 Page 10 Should you require an alternative format please contact the Regional Clerk at Tel.: , TTY: , or regionalclerk@regionofwaterloo.ca

2 A&F Agenda /06/ COR-TRY-18-66, 2018 Fall Debenture Issue Authority and Delegation By-law Recommendation: Page 28 That the Regional Municipality of Waterloo take the following action regarding the proposed 2018 fall debenture issue as described in report COR-TRY dated : a) Approve a fall 2018 debenture issue for Regional and Area Municipal purposes in an amount not to exceed $ million for a term not to exceed 20 years with all-in rates not to exceed 4.00% for 10 year debentures and 4.75% for 20 year debentures; and b) Pass a by-law to delegate authority to the outgoing Council to approve the required debenture by-laws prior to the closing of the fall debenture issue. 4.4 PDL-CAS-18-10, Reappointment of the Ombudsperson Contract ( ) Recommendation: Page Reports That the Regional Municipality of Waterloo reappoint Agree Incorporated as the Ombudsman for the Region of Waterloo for the period June 1, 2018 to May 31, Regular Agenda Resumes 5.1 COR-FFM-18-11, Voice Radio System Replacement Contract Amendments Recommendation: Page 35 That the Regional Municipality of Waterloo take the following action with respect to the Waterloo Regional Voice Radio System Replacement Project as set out in report COR-FFM dated : 1) Increase the contract with Motorola Solutions Canada Inc. for P Supply, Installation and Fifteen (15) years of Maintenance for a P25 Voice Radio System in the amount of $5,228,900 plus all applicable taxes; 2) Authorize staff to negotiate the necessary change order and contract amendments with Motorola Solutions Canada Inc. subject to the approval of the Regional Solicitor; 3) Increase the contract with CIMA+ for supply of additional construction inspection services and voice radio technical assistance under C

3 A&F Agenda /06/19 Consulting Services for Voice Radio in the amount of $155,990 plus all applicable taxes; 4) Include additional funding requirements in the Preliminary 2019 Capital Budget as outlined in Tables 5 and 6; 5) Authorize the Commissioner of Corporate Services/Chief Financial Officer to sign agreements related to the long term lease or licencing of telecommunication sites required for the P25 Voice Radio System, with such agreements being satisfactory to the Regional Solicitor; 6) Forward COR-FFM to the Waterloo Region Police Services Board and all Area Municipality councils for information. 5.2 COR-FSD-18-16, Capital Asset Renewal Funding Strategy Recommendation: Page 50 That the Regional Municipality of Waterloo take the following action with respect to a capital asset renewal funding strategy as set out in report COR-FSD dated : 1. Approve in principle the implementation of a capital asset renewal funding strategy starting in 2019, subject to annual budget approval; and 2. Forward a copy of this report to the Waterloo Regional Police Services Board. 5.3 COR-TRY-18-65, Consolidated Investment Policy Housekeeping Updates and Prudent Investor Standard Page 60 Recommendation: That the Regional Municipality of Waterloo approve the following housekeeping amendments to the Region s Consolidated Investment Policy effective July 1, 2018 as set out in Report COR-TRY dated : 1) Adjust minimum credit ratings for investments in eligible Schedule I and II Banks and eligible loan and trust corporations to reflect recent amendments to Ontario Regulation 438/97; 2) Increase the maximum investment holdings in securities issued or guaranteed by certain Provinces and Territories excluding Ontario, British Columbia and Alberta from 25% to 40% of the invested portfolio with no more than 15% to be held in securities of any one Province or Territory; 3) Allow investments in eligible School Boards, Universities, Colleges and Public Hospitals to a combined maximum of 10% of the invested portfolio with no more than 5% invested in any one School Board, University, College or Public

4 A&F Agenda /06/19 Hospital all subject to the minimum ratings set out in Ontario Regulation 438/97; 4) Include, as eligible investments, deposit receipts, deposit notes, certificates of deposit or investment acceptances or other similar instruments issued by Credit Unions that are subject to the Credit Unions and Caisses Populaires Act, 1994 for terms that exceed two years subject to the Credit Union meeting the specific requirements related to financial indicators set forth in Ontario Regulation 438/ PDL-LEG-18-48, Proposed By-Law to Repeal, Amend and Consolidate Execution of Documents By-Law on behalf of The Regional Municipality of Waterloo Page 75 Recommendation: That The Regional Municipality of Waterloo repeal Execution of Documents By- Law , as amended, and pass a by-law in the form attached hereto as Appendix A to Report PDL-LEG to amend and consolidate Execution of Documents By-Law , as amended, which governs the execution of documents and provides for delegation of execution of certain documents to certain Regional staff on behalf of the Region, pursuant to Report PDL-LEG-18-48, dated. 6. Information/Correspondence 6.1 Council Enquiries and Requests for information Tracking List No items pending 7. Other Business 8. Next Meeting August 14, Motion to go into Closed Session That a closed meeting of the Planning and Works and Community Services Committees be held on Tuesday,, immediately following the Administration and Finance Committee meeting in the Waterloo County Room in accordance with Section 239 of the Municipal Act, 2001, for the purposes of considering the following subject matters: 10. Adjourn a) negotiations pertaining to terms of an agreement b) negotiations pertaining to terms of an agreement

5 5 5 Region of Waterloo Corporate Services Treasury Services (Procurement) Report: COR-TRY To: Chair Sean Strickland and Members of the Administration and Finance Committee Date: File Code: F18-40 Subject: Green Procurement Initiatives Recommendation: For Information Summary: Nil Report: Background: At the February 7, 2018 Planning and Works Committee a question was raised by Council in regards to green procurement and local preference. This report is written to provide Council with information regarding green procurement initiatives and the treatment of local preferences. Tenders and Requests for Proposals Tenders are competitive bids which specify the scope of work and the terms under which the Region will contract for the goods and services. Compliance and price are the determining factors. A Request for Proposal (RFP) is a competitive bid outlining a need and inviting proponents to submit plans to fulfill that need. The RFP specifies in general terms what the Region wants but provides flexibility for respondents to propose a solution. RFPs include an evaluation criteria and scoring matrix. While price is part of the evaluation criteria and scoring, award is made to the vendor with the highest overall score Page 1 of 5

6 6 6 Local Preference as an Environmental Tool Report: COR-TRY The Region s Purchasing By-law governs the Region s acquisition of goods and services. A primary goal of the Purchasing By-law is to create a fair and transparent procurement process that provides the Region with the best overall value. The Purchasing By-law, for good reasons, does not contain any provision which allows the Region to give preference to local businesses and suppliers as a way to either economically benefit the local economy or to create a more environmentally friendly procurement process by encouraging reduced transportation emissions. The first reason is the concern that a local preference provision would be contrary to the Discriminatory Business Practices Act and trade agreements. The second reason is that a local preference in Waterloo Region could cause other municipalities to implement their own local preferences thus creating barriers between municipalities that may ultimately hurt area businesses and the overall Ontario economy. The third reason is that a local preference provision may not ultimately result in a more environmentally friendly acquisition by the Region. For example, a business in Wellington County may actually be closer to a Regional project in Elmira than a local business in Cambridge. Further, the neighbouring business may use more environmentally friendly vehicles. Green Procurement Initiatives While the Region of Waterloo has many green initiatives that are taken into consideration when purchasing goods and services, the focus of bid award reports is often on the total costs for the project, number of bidders and budget. The story not often told is the energy savings, recycled content and other environmental considerations that are used in evaluating bid submissions, and in particular with Requests for Proposals. It should be noted that section 40 of the Purchasing By-law requires that the Region seek to use recyclable products wherever possible and economical. Some examples of such initiatives are provided below: a) Water & Waste Water The procurement of the following Waste Water Treatment plant mechanisms through an RFP process for the Kitchener Waste Water Treatment plant had an energy savings component calculated as part of the proposal evaluation: Primary digester mixers, tertiary disk filters; installation of an energy center, high efficiency blowers, gas fired heating system, hydronic heating system, biofilter heat exchanger Page 2 of 5

7 7 7 Report: COR-TRY The replacement of pumps and motors at various well sites and the rehabilitation of the Turnbull Pumping station all contributed to the reduction in energy consumed. b) Facilities Furnace, window, hot water tank, kitchen and bathroom replacements for Waterloo Regional Housing were tenders that were called for new equipment, to replace older equipment which was far less energy efficient. Lighting retrofits at 29 Regional sites through a tender process reduced the amount of electricity consumed. Implementation of the Leadership in Energy and Environmental Design (LEED) program for Regional facilities to a minimum of Silver LEED for new buildings over 500m2 (5,400 ft2) of occupied space. LEED certification leads to environmental and occupant wellbeing related benefits, such as better indoor air quality, less waste generated and reduced energy costs. c) Corporate Fleet Management Corporate Fleet Management has adopted a Fleet vehicle procurement procedure that focuses on defining and validating business and functional needs, to ensure the appropriate type and number of vehicles are available to support Regional business activities. Greening the fleet, right sizing, safety and minimizing total life cycle costs are key considerations in the procurement process. Examples of greening the fleet include rightsizing, vehicle modernization, piloting or implementation of vehicle solutions like on-board telematics, anti-idling devices, hybrid and electric vehicles, GPS and hybrid technologies. d) Design and Construction Tenders allow for recycled aggregate, concrete and asphalt in new construction projects. e) Waste Management Blue boxes, green bins and rain barrels are procured through an RFP process, for which the evaluation criteria include the requirement of post industrial/ consumer recycled material Page 3 of 5

8 8 8 f) Transportation Report: COR-TRY In 2017, the Region of Waterloo administered a contract that replaced 43,000 High Pressure Sodium street lights on Regional and Area Municipal roads with Light Emitting Diode (LED) street lights. This project is expected to reduce energy consumption and related carbon emissions by approximately 50%. g) Grand River Transit Transit Services has several greening initiatives which are considered when procuring vehicles. All new conventional transit buses have anti-idling programing capabilities and Transit Services uses these features to automatically shut down buses when idling parameters are exceeded. Since 2011 Transit Services has acquired buses which use electric engine cooling fans verses hydraulic fans. The operation of electric fans reduces fuel consumption for these parts by 8-10%. GRT operates a fleet of 12 hybrid vehicles primarily assigned to routes with low operating speeds and higher stop density such as Route 7 Mainline. The hybrid buses operating on this corridor use approximately 16 percent less diesel fuel when compared to the same model diesel vehicles. GRT will assess the need for more hybrid buses and consider these vehicles in the next procurement cycle ( ). At this time the Region is considering possible projects for the second round of funding under Municipal GHG Challenge Fund. Transit Services has recommended a pilot project of fully electric buses for h) Office and Other Supplies The request for proposal for janitorial cleaning supplies includes scoring for environmentally preferred product certifications. The majority of photocopy paper purchased contains 30% recycled fibre. Toner cartridges when empty are returned to the vendor for re-use. i) Procurement The implementation of the electronic bidding system eliminates the need for contractors to drive to and from the Region to pick up and drop off bid documents. The acceptance of electronic submissions cuts down on the amount of paper used Page 4 of 5

9 9 9 Report: COR-TRY A significant amount of surplus goods are sold through an on-line auction service. As a result of this on-line service we have often sold products that would have ended up in the landfill, which is a win-win, as the products are re-purposed and the Region is paid for the surplus products. There are many more examples of green initiatives however this provides a breadth of examples across the Region. Conclusion The Region actively strives to carry out its procurement process in an environmentally friendly manner when possible through a request for proposal process, where scoring for recycled content, energy savings and other environmental provisions can be taken into account. The tender process does not allow for the scoring of environmental considerations. That being said, products are often pre-purchased (such as the equipment for the wastewater treatment plants) and novated into the construction tender. This prepurchase allows staff to make awards for the equipment based on certain criteria which may contain energy efficiencies, as an example. Corporate Strategic Plan: The information contained in this report meets the Corporate Strategic Plan to ensure Regional programs and services are efficient, effective and provide value for money under Focus Area 5, Responsive and Engaging Government Services. Financial Implications: Nil Other Department Consultations/Concurrence: Staff from Transportation and Environmental Services, Corporate Services and Legal Services were consulted in the preparation of this report. Attachments: Nil Prepared By: Lisa Evans, Manager Procurement/Chief Purchasing Officer Approved By: Craig Dyer, Commissioner, Corporate Services/Chief Financial Officer Page 5 of 5

10 10 10 Region of Waterloo Corporate Services Financial Services and Development Financing Report: COR-FSD To: Chair Sean Strickland and Members of the Administration & Finance Committee Date: File Code: F05-20 Subject: 2019 Budget Process & Timetable Recommendation: For Information Summary: The development of the 2019 Operating Budget and Capital Program is underway. This report provides Council with: An overview of key economic indicators; A summary of the major factors that staff expect will impact the 2019 Budget; An overview of the general approach that Regional staff will be taking when preparing 2019 budget estimates; and An outline of the budget review process. Staff will work to present a budget that strikes an appropriate balance between meeting strategic plan goals, responding to service level demands and expectations, recognizing the need for new or expanded services and infrastructure, and achieving manageable tax and user rate impacts. Major factors expected to impact the 2019 Regional Budget include: Annualization of service enhancements approved in the 2018 budget Capital project financing including debt servicing costs for a variety of capital projects Page 1 of 18

11 11 11 Waterloo Region Housing move-out/unit refurbishment costs Funding for the Regional Transportation Master Plan (RTMP) Fuel costs Report: COR-FSD Staff are reviewing the form, content and timing of public engagement in development of a public engagement strategy for the 2019 Budget and will report back on a proposed strategy to Administration and Finance Committee later in The 2019 Budget schedule will be finalized with the incoming Regional Chair and Council. Final approval is anticipated for January for the user rate budgets and February for the Tax Supported budget. Report: 1. Budget Context 1.1 Previous approvals A brief review of recent budget approvals serves as a good starting point for consideration of the 2019 budget. Schedule A provides a summary of operating budget approvals during this term of Council. The Regional tax levy comprises approximately 52% of the total residential property tax bill. Total tax supported expenditure in 2018 is $950 million with a Regional property tax levy of $514 million. Approximately $353 million (69%) of the 2018 property tax levy is for direct Regional Services and $161 million (31%) for Police Services. Total budgeted expenditure in 2018 for water and wastewater is $132 million. 1.2 Year to date results The recent periodic financial report COR-FSD Year End Projections Based on Financial Results to April 30, 2018 dated May 29, 2018 indicates that a modest surplus of $1.3 million is anticipated for property tax supported budgets due primarily to higher than anticipated supplementary taxes. For the user rate budget, a surplus is projected for the Water Supply budget with operating savings of approximately $700,000 and a small revenue surplus of $300,000 for a net amount of $1 million. The Wastewater Treatment budget is projecting a shortfall. Savings in operating expenditures are projected to be $1.2 million which will help offset a projected revenue shortfall in the range of $3.8 million. Current Economic Environment The Region s budget is impacted by a number of economic factors which are discussed below Page 2 of 18

12 Economic Growth Report: COR-FSD Estimates of domestic economic growth projections federally and provincially are summarized as follows: Federal and Provincial real GDP growth projections 2017 (actual) Canada 3.0% 2.0% 2.1% 1.8% Ontario 2.7% 2.2% 1.8% 1.9% Sources: Bank of Canada April 2018 Monetary Policy report, 2018/19 Province of Ontario Budget 2.2 Federal and Provincial Budgets and Funding Based on their most recent budgets, both the Federal Government and Ontario have projected deficits for the foreseeable future, as set out below: Federal and Provincial surplus (deficit) projections, in $ billions Estimated Forecast 2017/ / / / /2022 Canada (19.4) (18.1) (17.5) (16.9) (13.8) Ontario 0.6 (6.7) (6.6) (6.5) n.a. Source: 2018/19 Government of Canada Budget, 2018/19 Government of Ontario Budget Federal funding for municipalities comes in the form of subsidy for housing programs, the Federal Gas Tax Transfer and targeted, time limited infrastructure programs. Federal funding for housing programs is expected to be reduced in , resulting in a Regional tax levy impact of approximately $230,000. The Region will receive $16.2 million from the Federal Gas Tax Transfer in 2019 and will apply the funding to the Roads Rehabilitation Capital Program. The Region expects to receive $341 million in Federal and Provincial infrastructure funding through Phase 2 of the Public Transit Infrastructure Fund (PTIF2) and additional funding (which has not yet been announced) through the Clean Water and Wastewater Fund (CWWF) over a 10 year period. Given the recent change in government at the provincial level, these funding allocations will be monitored and any updates will be provided to Council as they occur Page 3 of 18

13 13 13 Report: COR-FSD A number of Regional programs are cost shared with the Province, with annual provincial operating subsidies totalling approximately $250 million. The recent change in government may affect funding levels for programs receiving provincial subsidy such as Ontario Works, Children s Services, Seniors Services, Public Health, Paramedic Services, and Transit, and to a much lesser extent Police, Museum and Library. Provincial funding represents a greater risk to the Region than federal funding, as the amount of provincial funding is significantly higher. Clarity with respect to policy and funding direction from the new Provincial Government over the coming weeks will be essential to developing 2019 Budget estimates. 2.3 Inflation The most recent Consumer Price Index (CPI) figures (April 2018) show inflation running at 2.2% year over year for Canada and 2.1% for Ontario. Average CPI over the first four months of 2018 was 2.1% for both Canada and Ontario. Federal and provincial governments and most financial institutions are predicting inflation rates at or above 2.0% for 2019: Inflation (CPI) Projections 2019 forecast (%) Canada 2.0 Ontario 2.2 Bank of Canada 2.0 National Bank Financial 2.1 CIBC 2.1 RBC 1.9 Scotiabank 2.3 Sources 2018/19 Government of Canada Budget, 2018/19 Government of Ontario Budget, Bank of Canada, National Bank Financial, Canadian Imperial Bank of Commerce, Royal Bank of Canada, Scotiabank It is noted that CPI figures reflect a basket of consumer goods which does not necessarily reflect municipal government expenditures. 2.4 Interest Rates Over the past year, the overnight interest rate set by the Bank of Canada climbed from 0.5% (May 2017) to its current position of 1.25% (January, 2018). Long term borrowing rates for the Region have been trending upward since June 2017 and Page 4 of 18

14 14 14 Report: COR-FSD currently sit at approximately 3% for a typical 10 year serial debenture issue. Long term borrowing costs are expected to continue to rise over the next 6-12 months and, having recently completed a $25.6 million spring debenture issue (see report COR-TRY Regional Debenture Issue Dated June 11, 2018 presented to Council on June 6, 2018), the Region will monitor the rates in anticipation of a second debenture issue in the fall of The Region continues to maintain an Aaa credit rating from Moody s Investors Service, with a stable outlook. The following graph shows recent trends in borrowing rates and highlights the points in time in which the Region issued debentures: 2.5 Unemployment Rates and Ontario Works Caseload Levels The unemployment rate in May 2018 was 5.6% in Ontario (May 2017 was 6.2%) and 5.7% in Waterloo Region (May 2017 was 5.3%). Ontario Works (OW) caseload levels continue to trend upward with the January - March 2018 caseload averaging 9,370 cases. The cost per case is expected to increase due to planned increases in the OW benefit rates. Since this program is now funded 100% by the Province, there will be no additional benefit costs to be assumed by the Region, although the OW administration costs are still partly funded by regional property taxes Page 5 of 18

15 Oil and Fuel Prices Report: COR-FSD As the following chart indicates, the price of crude oil has risen significantly over the past ten months and has fluctuated sharply in recent weeks. The current price of crude is approximately $66 USD/barrel (down from $73 in early May and up from $44 USD/barrel at this point last year). $USD/barrel The price of oil and fuel affects the Region s budget in a number of areas including public transit, paramedic services, police services, roads maintenance, waste management, and support vehicles in other Regional departments. The 2018 operating budget was approved using a fuel price strategy whereby the price of fuel was set at $0.92/L for diesel and $0.95/L for gasoline (from an initial price of $1.07 in 2014 for both fuel types). The following graph depicts year to date weekly, average and budgeted diesel prices for 2018: $1.10 Weekly Diesel Price per Litre YTD 2018 $1.05 $1.00 $0.95 $0.90 $ Jan 8-Jan 15-Jan 22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 5-Mar 12-Mar 19-Mar 26-Mar 9-Apr 2-Apr Weekly price 2018 average price 2018 budget 16-Apr 23-Apr 30-Apr Page 6 of 18

16 16 16 Report: COR-FSD The strategy provides that 64% of fuel price savings are reflected in fuel budgets and 36% of the savings are redeployed as a transfer to the GRT Bus Replacement reserve. The year to date average annual price for diesel is $1.06/L and for gasoline is $1.08/L. The capacity in the budget of $738,000 allows prices to increase to $0.98/L for diesel and $1.00/L for gasoline before budgetary shortfalls would be experienced. 2.7 Building Trends Recent building permit activity in Waterloo Region is summarized as follows: Building Permit Activity * Jan Apr # of Residential units 1, Jan Apr Value of residential permits $249.6m $222.2m $144.4m $179.3 Annual # of Residential units 3,553 5,361 3,229 n.a. Annual Value of residential permits $750.8m $1,166.6m $719.1 n.a. Jan Apr Non-residential square feet (million) Jan Apr Value of nonresidential permits $86.8m $103.1m $127.0m $19.0m Annual # of Non-residential square feet (millions) n.a. Annual Value of nonresidential permits $293.8m $224.8m $354.2m n.a. *preliminary information; more detailed analysis performed in June and at year-end Building permit activity is one indicator of the strength of the local economy. Total residential activity in 2017 remained strong. In 2017, permits were issued for 3,229 new residential units with the value of $719.1 million. This included 253 apartment units, which amount to over to a third of the newly created units. The non-residential building permits were issued for 2.19 million square feet of floor space, valued at $354.2 million. The total value of both residential and non-residential permits issued in 2017 was almost $1.1 billion. January to April 2018 indicates a weaker start to the year, particularly in nonresidential building activity. In 2018, 0.14 million square feet of non-residential square footage has been added, which is lower than the 0.67 million square feet in the same period last year. Staff will continue to monitor this item and provide update in the mid-year building permit activity report to be presented in the fall of The number of residential units added in 2018 is consistent with the Regional trend, but Page 7 of 18

17 17 17 Report: COR-FSD is slightly lower than the number of building permits issued last year in the same period. The combined value of residential and non-residential permits year-to-date in 2018 is $198.3 million, compared to $271.4 in the same period of It should be noted that not all building permit applications are related to new development requiring a development charge payment and accordingly, there is a difference between the number of building permits issued and the number of units for which Regional Development Charges are collected. 2.8 Development Charges Regional Development Charges (RDC) are a significant source of funding for growth related capital projects undertaken by the Region. Recent RDC activity is summarized in the following table: Regional Development Charge Summary Estimate Residential Jan-Apr units Jan-Apr revenue $8.8m $14.1m $9.9 m $9.3 m Annual equivalent single detached units** 1,882 3,720 2,009 n.a. Annual revenue $33.9m $67.3m $42.9 m n.a. Non-residential Jan-Apr square feet 50, , ,220 69,445 Jan-Apr revenue $0.5m $7.0m $3.3 m $0.8 m Annual square feet 1,014,373 1,284,801 1,150,954 n.a. Annual revenue $10.4m $13.5m $14.4 m n.a. **includes DC collections and funded exemptions only Estimated year to date 2018 RDC Revenue (excluding interest) at the end of April 2018 is $10.1 million ($9.3 million residential and $0.8 million non-residential), which is a decrease of $3.1 million compared to the same period in Collections prior to June in 2016 were higher than usual due to several large non-residential permits as well as increased numbers of residential permits. The increased activity was also Page 8 of 18

18 18 18 Report: COR-FSD attributable to the rush by developers to make permit applications before June 1, 2016 in order to avoid increases to the Education Development Charges which came into effect for both local school boards on that date. 2.9 Assessment Growth Assessment growth in 2017 (and reflected in the 2018 Budget) was 1.93%. The following table provides a summary of assessment growth and the equivalent amount of property taxes over the last ten years: Budget year Assessment growth Levy equivalent ($million) % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ * 1.70% $8.7 *estimated The estimated 2019 budget impacts set out in this report are based on an assumed level of assessment growth of 1.7%. This assumption will be reviewed over the summer as additional information from the Municipal Property Assessment Corporation (MPAC) becomes available Page 9 of 18

19 Capital Planning and Financing Report: COR-FSD The Region of Waterloo s $3.5 billion 10 year capital program includes both infrastructure required to accommodate growth in the residential and non-residential sectors, as well as lifecycle work to maintain existing infrastructure in a state of good repair. The Region remains in a period of significant capital expansion with construction of new infrastructure including major upgrades to water and wastewater facilities, significant road network projects, major new facilities such as the Paramedic Services Headquarters and the Northfield Drive Transit Maintenance Facility, as well as completing asset renewal work at regional facilities and housing properties. A review of the capital program is being undertaken by staff in July. The purpose of these capital reviews is to: Ensure the Region s ten year capital program is affordable, achievable and sustainable; Understand the scope of debenture financing required in the fall of 2018 and the subsequent impact on future operating budgets; Establish projections for capital expenditures to year end; and, Provide the basis for drafting 2019 capital plans. Staff has previously reported to Council on the extent of the Region s reliance on debenture financing in various program areas and the low level of regional reserve and reserve fund balances relative to other regional municipalities. While the capital program for certain regional services is largely funded through annual contributions to reserves (water, wastewater and roads for example), certain program areas have little or no access to reserve funding, notably waste management, public transit and Regional facilities (including Housing). The following graph depicts the sources of financing for major infrastructure over the next 10 years: Page 10 of 18

20 20 20 Report: COR-FSD Capital Plan Sources of Financing for Major Infrastructure ($millions) Housing Waste Management Transit Facilities Grants, subsidies, recoveries Tax levy reserves User rate reserves Development charges (reserves & debt) Debt (user rates/tax levy) Transportation Water & Wastewater $0 $200 $400 $600 $800 $1,000 $1,200 In the absence of adequate reserve contributions and funding, debenture financing is the only alternative. While long term borrowing for capital works is appropriate in many circumstances, the resulting debt servicing costs can place a significant burden on future operating budgets. To the extent that debenture financing can be reduced or avoided, then future debt servicing costs will be mitigated. Limiting debenture financing to fund significant property acquisition, facilities and fixed infrastructure is a strategic attempt to manage debt servicing costs. Projects included in the capital program that are debenture financed may not proceed as scheduled unless funding from other levels of government (i.e. federal and/or provincial) is available or unless a sustainable source of funding for resulting debt servicing costs is identified. Staff report COR-FSD Capital Asset Renewal Funding Strategy on this agenda highlights the need to introduce a sustainable funding strategy in order to deal with the under-funding of capital asset renewal works and consequent overreliance on debt as a financing instrument to bridge the funding gap. The proposed funding strategy would provide additional direct tax levy funding for asset renewal works in a number of program areas over time until a sustainable level of funding is reached Page 11 of 18

21 Preliminary 2019 Budget Projections 4.1 Tax Supported Operating Budget Direct Regional Services Report: COR-FSD With the above context and economic climate in mind, there are certain factors and initiatives that will impact the 2019 operating budget. A description of the major budget drivers is provided in the following section. Preliminary estimates of the year over year regional tax levy increase required to support current service levels are in the range of 4.9% for Regional services in This would translate to a tax impact (net of the Region s share of assessment growth estimated at 1.7%) in the range of 2.2%. These estimates reflect service levels currently funded through base budgets, and therefore exclude any impacts resulting from the implementation of master plans, business plans, or service expansion requests, all of which would come in the form of budget issue papers. These estimates also exclude the Waterloo Regional Police Service budget. Major 2019 Budget Drivers Annualization of service enhancements approved in the 2018 budget: The base budget for tax supported areas will include a property tax levy increase of $2,234,000 for annualization of budget issue papers approved in the 2018 budget. The 2019 debt servicing component of the GRT master plan budget issue paper ($144,000) has been included in debt servicing costs identified separately. Debt Servicing Costs: The Region s tax supported capital plan totals $2.4 billion. Approximately 37% of the Region s tax supported capital plan is financed through debentures. As noted earlier in the report, staff will be conducting a capital plan review to identify options for reducing the impact of new debt servicing costs in the immediate five years of the capital plan. Current estimates of incremental debt servicing costs with a tax levy impact are in the range of $1.4 million based on an assumption of 65% of debt projected to be required will be issued. These estimates will be validated through capital reviews in June and July. Regional Transportation Master Plan (RTMP): Regional Council s approved funding strategy for the RTMP (which funds the Rapid Transit project through 2018 and GRT service expansion through 2016) includes a 0.75% annual urban property tax levy increase in 2019 which equates to a levy increase of approximately $3.4 million. Staff will prepare an update of the RTMP funding model in the fall of 2018 to be presented as part of the 2019 budget Page 12 of 18

22 22 22 Report: COR-FSD Community Housing move-in/move-out costs: Move-out/unit refurbishment costs (flooring, painting and plumbing) were higher than budget by $1,821,000 in Move-out/unit refurbishment cost increases are, in large part, due to efforts to better align unit occupancy, size, and configuration with current client needs, updated for changes in life circumstances, i.e., family size, economic need, etc. as well as the general condition of units upon move out. The 2018 budget was increased by $500,000 for move-out costs and, as reported in COR- FSD Periodic Financial Report Projection of Year End based on Financial Results to April 30, 2018 dated May 29, 2018, costs are expected to exceed budget by $975,000 million for An additional adjustment of $0.5 million has been made to the preliminary 2019 budget position provided in this report. Fuel costs given the trends in world oil prices and significantly rising fuel costs, it is proposed to increase fuel estimates for The preliminary base position includes a provision to increase fuel prices by approximately 20%. This increase has been offset by $738,000 through unwinding the fuel price strategy and repurposing the transfer from the bus replacement reserve back to fuel budgets. Capital asset renewal funding strategy: COR-FSD on this agenda proposes the implementation of a capital asset renewal funding strategy to fund asset renewal projects without relying on debt as a funding source. The strategy proposes to include a provision of $1.7 million in the preliminary 2019 base budget and incremental provisions of up to one per cent (1%) of the prior year s tax levy for direct regional services in 2020 and future years to fund capital asset renewal work. RDC exemption funding: as described in staff report COR-FSD Downtown Core Regional Development Charge Exemptions Funding Strategy, an additional $750,000 is required to be added to the RDC exemption funding strategy in This would bring the operating budget provision to $1.5 million in RDC exemptions under the strategy are planned to be funded over a ten year time period. Unknowns: Several factors that may affect base budgets and the ten year capital program are unknown at this point in time and include: 1. Policy and funding directives from the new Ontario Government; 2. Future large property assessment appeals; 3. Future master plan updates and approvals; 4. Federal and Provincial infrastructure funding programs Page 13 of 18

23 23 23 Report: COR-FSD The unknown items above have not been included in 2019 projections at this time. However, staff will monitor these items, and to the extent possible, make reasonable assumptions regarding the impact of each in the development of base budgets. Budget Issue Papers New programs and program expansions are presented in the form of budget issue papers. Examples of planned budget issue papers for 2019 include: Implementation of the Paramedic Services master plan Implementation of the GRT business plan Project delivery resources in Information Technology Services and Facilities Management The estimated 2019 tax impact of proposed service and funding enhancements is expected to be in the range of 0.5%. This would bring the 2019 tax impact for Regional Services excluding Police to the 2.7% range. 4.2 Tax Supported Operating Budget Police Services The following table summarizes the 2018 approved WRPS operating budget as compared to the 2017 approval: Waterloo Regional Police Service 2018 Budget Summary $ Change % Change Expenditure $170,908,241 $177,651,559 $6,743, % Revenue 15,106,701 16,458,408 1,351,707 (0.49)% Property Tax Requirement $155,801,540 $161,193,151 $5,391, % Tax Rate Impact 0.64% 0.47% Factors expected to impact the 2019 Police Services budget include the annualization of 2018 service expansions, movements through the salary grids, and debt servicing costs for capital projects financed in Water and Wastewater Operating Budgets and Capital Plans Staff are also developing the 2019 Water and Wastewater operating budgets and capital plans. The model that was used to develop 2018 user rates and subsequent year projections estimated a rate increase of 2.9% in 2019 for water supply (1.9% in 2018) and 6.9% for wastewater treatment (7.9% in 2018). Although Page 14 of 18

24 24 24 Report: COR-FSD key inputs such as electricity and chemicals are large factors in these operating budgets, the component that has the most impact in determining user rates is the capital plan. Factors impacting the 2019 user rate estimates include: The Wastewater stabilization reserve has a balance near $0 following significant draws of $3.6 m in 2016 and $1.7 m in 2017 due to rate revenue shortfalls. The reserve balance is insufficient for mitigating the level of operating expenditures and revenues supported by this reserve, which are $41 m and $73 m, respectively. The 2018 target balance for this stabilization reserve, calculated as 15% of own-source revenue, is $10 m. A large proportion of Wastewater operating expenditures are fixed in nature, providing limited ability to reduce costs when revenues are lower than anticipated. Capital expenditures supported by the Wastewater capital reserve are in the range of $30.1 million annually. The projected 2018 Wastewater capital reserve balance is expected to be adequate at $29 m. The Wastewater RDC reserve fund remains at a very low level due to lower collections while supporting an increasing level of debt servicing costs. Another factor that impacts the user rate operating budget are water and wastewater flows. The following table provides the annual flows over the past few years in comparison to budget: Water and Wastewater Historical Flows Variances (million cubic metres) Water Wastewater Year Budget Actual Variance Budget Actual Variance (0.6) (7.4) (1.1) (4.1) (2.0) (2.6) Flow trends and other factors will be taken into account as staff continues to refine the rate budget models for both Water and Wastewater. Staff will assess these and other issues in developing recommended user rate increases for 2019 and will report back to Committee in the fall of 2018 on recommended rate projections Page 15 of 18

25 Budget Preparation Report: COR-FSD In order for staff to deliver a budget that is reasonable and reflective of critical Regionspecific objectives to Council, the budget preparation process will include the following measures: A review of the 10 year capital plan. The ten year forecast is being reviewed with each department, with discussions covering the full range of project need, scope, timing, cost and sources of financing. Staff is in the process of developing the updated 10 year capital plan. User fees and charges will be reviewed to ensure that such fees are at appropriate levels and inflationary adjustments are made where required. Regional staff will complete operating budget review meetings this fall with the Chief Administrative Officer and Chief Financial Officer. These sessions will include a detailed review of the 2019 base budget, a historical budget-to-actual review of spending and revenues, proposals for user fees for 2019 and proposed 2019 service levels. 6. Public engagement The public engagement strategy for the 2018 budget included two public input meetings which coincided with Budget Committee meeting dates in November and December as well as an online tool that was focussed on obtaining public feedback on whether or not the Region s services provided good value for money. The online tool was launched on October 6, 2017 and remained live for approximately six weeks. An update on public engagement feedback was provided to Budget Committee through a budget information paper presented at the December 5, 2017 Budget Committee meeting. Staff are reviewing the form, content and timing of public engagement in development of a public engagement strategy for the 2019 Budget and will report back on a proposed strategy to Administration and Finance Committee later in Budget Timetable In order to make the process more efficient and effective from both a Council and staff perspective, the 2018 budget schedule was condensed from 11 weeks to approximately seven weeks. The schedule allowed for adequate budget review and a December 2017 approval while preventing a holiday break which was seen to break the continuity of the process Page 16 of 18

26 26 26 Report: COR-FSD Given that a municipal election is occurring in the fall of 2018, staff will work with the incoming Regional Chair and Council to establish the 2019 Budget Review Schedule. It is anticipated that the User Rate and Property Tax Supported budgets will be approved in January and February of 2019, respectively. Corporate Strategic Plan: The budget process enables Council to achieve its Corporate Strategic Plan by allocating appropriate resources to each focus area. Financial Implications: The Region s tax supported services represent approximately 52% of the total residential property tax bill. In 2019, it is estimated that a 1% impact on regional taxes will equate to $5.2 million. Other Department Consultations/Concurrence: All departments and the Waterloo Regional Police Service contribute to the development of the Regional budget. Attachments: Schedule A Budget Approvals Prepared By: Cheryl Braan, Manager of Corporate Budgets Approved By: Craig Dyer, Commissioner, Corporate Services/Chief Financial Officer Page 17 of 18

27 27 27 Schedule A Budget Approvals During Term of Council Report: COR-FSD Budget $m % change $m % change $m % change $m % change Tax Supported Budget Operating Expenditures Regional Services $ % $ % $ % $ % Library Services 2.7 8% 2.8 4% 3.0 5% 3.1 2% Police Services % % % % Total $ % $ % $ % $ % Net Levy Regional Services $ % $ % $ % $ % Library Services % 2.6 4% 2.8 5% 2.9 4% Police Services % % % % Total property tax levy requirement $ % $ % $ % $ % Tax Rate Impact* 2.58% 2.89% 2.95% 2.74% User Rates (Wholesale & Retail) Water Operating expenditure $30.8 2% $31.4 2% $32.8 2% $35.3 8% Capital financing % % % % Total revenue requirement $52.9 7% $54.8 4% $57.8 1% $58.5 1% Wastewater Operating expenditure $27.0-4% $27.8 3% $27.3 0% $29.1 7% Capital financing % % % % Total revenue requirement $63.1 8% $65.6 4% $71.1 7% $73.9 4% User Rate Increases (effective March 1) Water 4.9% 2.9% 1.9% 1.9% Wastewater 7.9% 6.9% 7.9% 7.9% Retail Water 8.9% 8.9% 8.9% 7.9% Retail Wastewater 5.9% 5.9% 5.9% 5.9% * Excluding four-year reassessment impacts. Average tax impact; urban and rural tax impacts will vary Page 18 of 18

28 28 28 Region of Waterloo Corporate Services Treasury Services Report: COR-TRY To: Chair Sean Strickland and Members of the Administration and Finance Committee Date: File Code: F08-01 Subject: 2018 Fall Debenture Issue Authority and Delegation By-law Recommendation: That the Regional Municipality of Waterloo take the following action regarding the proposed 2018 fall debenture issue as described in report COR-TRY dated June 19, 2018: a) Approve a fall 2018 debenture issue for Regional and Area Municipal purposes in an amount not to exceed $ million for a term not to exceed 20 years with all-in rates not to exceed 4.00% for 10 year debentures and 4.75% for 20 year debentures; and b) Pass a by-law to delegate authority to the outgoing Council to approve the required debenture by-laws prior to the closing of the fall debenture issue. Summary: The Region of Waterloo recently completed its spring debenture issue and is now in the process of planning its fall debenture issue. This report sets out the planned process for issuing debentures during the municipal election period. Through this report, the current Regional Council will approve a fall debenture issue subject to maximum amounts, terms and interest rates prior to nomination day and pass a by-law authorizing the outgoing council to approve the housekeeping debenture by-laws once the debenture issue is complete Page 1 of 4

29 29 29 Report: Debenture Authority Report: COR-TRY Section 401 of the Municipal Act, 2001 provides that a municipality may incur debt for municipal purposes and that an upper-tier municipality may issue debentures for or in relation to the debt incurred in respect of capital works for its own purposes and for the purposes of its area municipalities. Region of Waterloo By-law , a By-law in Respect of Proposed Debenture Issues, authorizes the Regional Treasurer, now called the Commissioner of Corporate Services / Chief Financial Officer, to proceed with a debenture issue that best meets the requirements of the Region and then report the results of the issue to Regional Council at its next scheduled meeting. By-laws covering the administrative protocols to complete the debenture issue (debenture by-laws) are then passed by Regional Council following the CFO s report on the debenture issue. Debenture authority must be approved by Regional Council for each capital project that is to be funded by a Regional debenture prior to the issuance of debenture financing. This is typically done through the annual budget process. Fall Debenture Issue Authority Staff is currently planning a fall 2018 debenture issue. The process includes the current Council approving a fall 2018 debenture issue subject to upper limits on the amounts to be borrowed, limits on the term of the debentures and upper limits on the rates of interest for the debenture issue. The Regional projects to be included in the debenture issue and the amount of debenture financing for those projects have all received Regional Council approval as part of the 2018 or prior year s capital budgets. The amounts to be debentured this fall will also include requests for debenture financing from two area municipalities. The planned process also addresses the passing of the debenture by-laws, which set out the administrative protocols related to the issuing of the debenture certificate(s) and the related terms and conditions. Based on current planning, the reporting on the details of the debenture issue and the passing of the debenture by-laws will occur after the July 27 th final nomination date and before the inaugural of the new Council on December 5, This timing coincides with a time during which Council s actions relating to financial liabilities are restricted under Section 275 of the Municipal Act. To ensure that the existing Council can approve the debenture by-laws regardless of the status of the election, a by-law to delegate authority to the outgoing Council to pass bylaws to authorize the issue of debentures is proposed to be included in the June 27 th Regional Council agenda. The delegation is made in accordance with Section 275 (6) of the Municipal Act which states Nothing in this section prevents any person or body exercising any authority of a municipality that is delegated to the person or body prior to nomination day for the election of the new council. The delegation by-law will be very specific as it will reflect the upper limits or caps on the amount to be debentured, the Page 2 of 4

30 30 30 Report: COR-TRY term of the debentures and the cost of funds that the current Council is establishing per the recommendations in this report. The passing of a delegation by-law is a best practice supported by the Region s independent fiscal lawyer whose opinion is required to market a debenture issue. This is the same procedure that was followed during the previous election periods in 2003, 2006, 2010 and Proposed Fall 2018 Debenture Issue Limits The expected participants in the issue are the Region and the cities of Kitchener and Cambridge. The maximum amount of the debenture issue would be $ million including up to $75.0 million for the Region and up to $6.312 million for the Area Municipalities. The Regional projects to be debentured include capital works for Waste Management, Grand River Transit, Transportation, Facility Asset Renewal, Paramedic Services Facilities, Wastewater Treatment and capital works for the Waterloo Regional Police Service. The term of the debenture issue(s) vary but will not exceed 20 years. The upper limit for the all-in cost of funds, included in the recommendations and established in the bylaw, is 4.00% for a 10 year serial debenture and 4.75% for a 20 year serial or sinking fund debenture. The upper limits, which are approximately 1.0% above current rates and rates from the Region s recent 10 year debenture issue, provide a cushion for unexpected economic and interest rate impacts. The upper limits were determined in consultation with the lead fiscal agent for the 2018 fall debenture issue. The upper limits are conservative rates and actual rates at the time of issue are expected to be lower than the upper limits. The table below summarizes the maximum amounts to be debentured, the term and the upper limit for interest rates. The amounts established for the Region and the Area Municipalities are upper limits. The amount of debentures actually issued this fall for any of the participants can be less. Maximum Debenture Amounts, Term and All-in Rate Participant Maximum Amount of Debentures Term (Years) All-in Rate Upper Limit Region of Waterloo $32,000, % Region of Waterloo 43,000, % City of Kitchener 4,312, % City of Cambridge 2,000, % Total $81,312, Page 3 of 4

31 31 31 Report: COR-TRY The recommendations in this report establish the parameters for the fall 2018 debenture issue including upper limits or caps on the amount to be debentured, the term of the debentures and the cost of funds or interest rates. The recommended delegation bylaw will give the outgoing Council the authority to pass the debenture by-laws which address the administrative protocols to complete the debenture issue. Corporate Strategic Plan: One of the objectives of the Corporate Strategic Plan is to ensure Regional programs and services are efficient, effective and provide value for money. The Region s capital financing program, excellent credit rating and prudent use of debenture financing assist in meeting this objective. Financial Implications: Current all-in average ten year rates and twenty year rates for a Aaa municipal capital market issues are in the range of 3.0% and 3.6% respectively. Current 10 rates are very close to the recent 10 year issue which settled June 11 th of this year. The upper limits for the cost of funds for the by-law have been conservatively established at approximately 1.0% above current rates to provide a cushion for unexpected events. In the absence of any significant world shocks or economic crises, it is expected that rates at the time of issue will be lower than the upper limits established in the by-law and shown above. Debt servicing costs related to certain growth related projects will be funded from the respective Development Charges Reserve Funds. Debt costs associated with the Regional tax levy and user rate portions of the debenture issue will be included in the 2019 base budget. Other Department Consultations/Concurrence: Council and Administrative Services staff assisted with the passing of the required bylaws and the signing of the required documents. Attachments: Nil Prepared By: Angela Hinchberger, Director of Treasury Services/Deputy Treasurer Approved By: Craig Dyer, Commissioner, Corporate Services/Chief Financial Officer Page 4 of 4

32 32 32 Region of Waterloo Planning, Development and Legislative Services Council and Administrative Services Report: PDL-CAS To: Chair Sean Strickland and Members of the Administration and Finance Committee Date: File Code: A34-20 Subject: Reappointment of the Ombudsperson Contract ( ) Recommendation: That the Regional Municipality of Waterloo reappoint Agree Incorporated as the Ombudsman for the Region of Waterloo for the period June 1, 2018 to May 31, Summary: The purpose of this report is to reappoint Agree Incorporated as the Region s Ombudsman for additional 2 year term. The Region s current contract with Agree commenced in June 2016 for a 2 year term with an option to renew the contract for two additional two year terms (total of 6 six years). Fees for services under the agreement are increasing for the intake and early resolution consultant to $94.32 per hour and the conflict management professional/ombudsman Services to $ per hour. These increases to the fees are in accordance with the existing contract. Changes to the fee structure will have minimal if any impact to the budget. Report: Background Since 2016, the Region together with the cities of Cambridge and Waterloo and the Townships of Wellesley, Wilmot and Woolwich (ombud partners) have used the firm Agree Incorporated as the local Ombuds Office. The first two year term ends on May Page 1 of 3

33 33 33 Report: PDL-CAS , As part of the original contract there is the option to renew for two additional two year terms at the discretion of Council. This report is recommending that Council authorize a two year contract extension. Council may recall that the Ontario Ombudsman s jurisdiction was expanded to include the municipal sector. In October 2015, Council agreed to pursue the hiring of their own Ombudsman together with the ombud partners. As a result the partner municipalities entered into a contract with Agree Incorporated. to provide local services pursuant to the Municipal Act. The contract requires an annual report from the Office of the Ombudsman to each municipality. Council received its last annual report in September Contents of the report included the scope of work performed by the Ombudsman and a summary of details for the inquiries and complaints received by the Office. The total number of inquires/complaints to the Region in the first two years of service was 12. The inquiries range from municipal services involving housing, transit, Ontario Works, health care and light pollution. Agree has established policies and procedures for the resolution of matters that apply to the Office which are consistent with the Act and the terms of the contract. Based on the work performed to date, it is recommended that the Region exercise its option to renew the contract with Agree for an additional two year term. If the contract is not renewed the Provincial Ombudsman becomes the Ombudsman for the Region. The other ombud partners are also deliberating the extension of the contract. Cambridge has already agreed to an extension. Corporate Strategic Plan: The Region s Plan includes as a Strategic Focus Area of Responsive and Engaging Government Services. The appointment of a municipal ombudsman will support this focus area. As well, the appointment supports the Region s values of Service, Integrity and Respect and overall accountability and transparency. Financial Implications: The contract with Agree is on a set retainer basis (calculated on population with ombud partners) and a fee for service. The rates are adjusted by term using the consumer price index (Ontario). The proposed fees for the intake/early resolution consultant is $94.32 per hour (previously $90.00/hour) and the conflict management professional/ombudsman Services is $ per hour (previously $ per hour). In the first two year contract, the Region paid approximately $15,300 in retainer fees and $5,000 in report and investigation fees. The fees are provided for in the Council and Administrative Services operating budget. The proposed changes to the fees will Page 2 of 3

34 34 34 have minimal impact to the Region. Other Department Consultations/Concurrence: Report: PDL-CAS The Clerks from the partner municipalities have been consulted in the renewal process. Legal Services and Purchasing have also been consulted. Attachments None. Prepared By: Kris Fletcher, Director, Council & Administrative Services/Clerk Approved By: Rod Regier, Commissioner, Planning, Development & Legislative Services Page 3 of 3

35 35 35 Region of Waterloo Corporate Services Facilities and Fleet Management Report: COR-FFM To: Chair Sean Strickland and Members of the Administration and Finance Committee Date: File Code: A19-01 Subject: Voice Radio System Replacement Contract Amendments Recommendation: That the Regional Municipality of Waterloo take the following action with respect to the Waterloo Regional Voice Radio System Replacement Project as set out in report COR- FFM dated : 1) Increase the contract with Motorola Solutions Canada Inc. for P Supply, Installation and Fifteen (15) years of Maintenance for a P25 Voice Radio System in the amount of $5,228,900 plus all applicable taxes; 2) Authorize staff to negotiate the necessary change order and contract amendments with Motorola Solutions Canada Inc. subject to the approval of the Regional Solicitor; 3) Increase the contract with CIMA+ for supply of additional construction inspection services and voice radio technical assistance under C Consulting Services for Voice Radio in the amount of $155,990 plus all applicable taxes; 4) Include additional funding requirements in the Preliminary 2019 Capital Budget as outlined in Tables 5 and 6; 5) Authorize the Commissioner of Corporate Services/Chief Financial Officer to sign agreements related to the long term lease or licencing of telecommunication sites required for the P25 Voice Radio System, with such agreements being satisfactory to the Regional Solicitor; 6) Forward COR-FFM to the Waterloo Region Police Services Board and all Page 1 of 15

36 36 36 Report: COR-FFM Summary: Area Municipality councils for information. The Waterloo Regional Voice Radio System (WRVRS) provides reliable public-safety grade two-way voice radio communications for Waterloo Regional Police Service, all municipal Fire Departments, Regional Departments (principally Transit and Roads Operations) and various area municipality operations departments within the Region. It serves as the primary link between 911 dispatch and Police and Fire personnel for all dayto-day communications and provides critical interoperability between all users in the event of a Region-wide emergency. This report provides information on design and contract changes required for the voice radio system replacement project. The design-build contract for P Supply, Installation and Maintenance of a P25 Voice Radio System was approved and signed in March Staff have been working with Motorola to review the radio coverage, tower site selection, equipment design and layouts and are nearing conclusion of the detailed design process. The detailed design conclusion outlined in this report is dependent on obtaining access to one final tower site that may not be available for a few more months. To prevent further delays the project team is recommending construction proceed based on the design to date. A recommendation on a number of system design changes and associated contract impacts is contained in this report and a contingency budget has been included to address unknown costs related to obtaining access to the last tower site and completion of the detailed design. The original capital project budget for the Region was established by Council in the 2017 capital program at $31.1 million, and was reduced significantly at the time of the proposal award in March of The recommendations in this report bring the project capital budget to $27.4 million as set out in the table below: Table 1 Summary of Budget Approvals and Requirement Regional Budgets for Voice Radio ($000's) Infrastructure User Gear Total Original Budget (2017 capital program) $21,790 $9,336 $31,126 Revised Budget approved (March 2017) $17,237 $5,755 $22, Capital Plan (December 2017) $17,237 $6,088 $23,325 Revised Capital Budget (June 2018) $21,985 $5,413 $27,398 The revised capital project budget for infrastructure is approximately $200,000 above the original budget. Additional funding requirements will be incorporated into the 2019 Capital Budgets for the Region and Police, with no amendments to the 2018 Capital Budget being required. The extent of RDC financing will be determined through the 2019 RDC Background Study and By-law update. Subject to approval of this report, Motorola will proceed with construction, installation and Page 2 of 15

37 37 37 Report: COR-FFM testing of transmission infrastructure for the remainder of 2018 and into It is anticipated that the system cutover will occur in the second half of Once the transition for all users has been successful, the existing radio transmission equipment will be decommissioned. Report: Background The Waterloo Regional Voice Radio System (WRVRS) provides reliable public-safety grade two-way voice radio communications for Waterloo Regional Police Service, all municipal Fire Departments, Regional Departments (principally Transit and Roads Operations) and various area municipality operations departments within the Region. It serves as the primary link between 911 dispatch and Police and Fire personnel for all dayto-day communications and provides critical interoperability between all users in the event of a Region-wide emergency. The original analog system was installed in 1994 and has undergone several minor upgrades and one major upgrade in 2009/2010 to ensure optimum performance and coverage. The system currently has six towers operating as a simulcast ring infrastructure with approximately 2,500 user radios accessing the network. A listing of current users is provided in Appendix A. Several stakeholder groups have been established to plan for the voice radio system replacement and to allow participation of the impacted municipalities and users. The stakeholders include senior management representatives of all Voice Radio users including Waterloo Regional Police Service, all municipal Fire Departments, Grand River Transit, Paramedic Services and Regional and selected area municipal operations staff. In February 2014, a consultant was hired to assist with preparation of the RFP documentation. The consultant worked with Regional staff, the Steering Committee and technical representatives of all system users to identify the detailed system requirements to be included in the system RFP. The design-build contract with Motorola Solutions Canada Inc. for P Supply, Installation and Maintenance of a P25 Voice Radio System was approved and signed in March 2017 (COR-TRY dated March 22, 2017). The new system is a complete replacement, and complies with the radio transmission standard produced by the Association of Public-Safety Communications Officials (APCO) called Project 25 (P25) which is currently the North American standard for public safety communication. It is expected to be operational by the second half of System Design The design-build requirements included in the contract with Motorola were performance Page 3 of 15

38 38 38 Report: COR-FFM based and included a number of assumptions about the existing conditions that were then used by Motorola to achieve the required system coverage. To have each RFP proponent prepare a detailed and complete design as part of the RFP submittal would have resulted in high proposal costs and a substantial delay to the bidding process. To stay in line with rapid changes in technology and industry best practice within Ontario, the RFP design was based on meeting system design criteria of a base level of system coverage. The vendor based their proposal on known conditions to ensure that the system is able to meet those criteria. Once the contract was awarded, the detailed design process identified the need for certain design changes. Since the contract with Motorola was signed in March 2017, staff have been working with Motorola to review the radio coverage, tower site selection, equipment design and layouts and are nearing the conclusion of the detailed design process. Radio coverage is impacted by the location of the radio tower sites and the ability to place antennas at optimal heights designed to maximize coverage. Motorola has reviewed existing Regional tower sites and contacted existing tower and building owners for approvals to place WRVRS equipment on towers at their locations. Some proposed tower locations have not been available to the WRVRS equipment as it either has existing equipment at the optimal antenna height or required impractical structural modifications in order to support WRVRS equipment. Radio transmission modifications also need to be approved by the Federal government through Innovation, Science and Economic Development Canada (ISED). ISED have indicated in design reviews that modifications were required to Motorola s initial design to minimize radio frequency interference. These design conditions have required the movement of some tower locations to other sites and have increased the number of towers required to optimize the radio coverage for the Public Safety and Public Works users on the system. Staff have worked with Motorola and ISED to finalize the radio coverage, tower site selection, equipment design and layouts and have 7 of 8 tower sites identified (see Appendix B) and discussion with owners regarding leasing space are progressing. Staff and Motorola are nearing conclusion of the detailed design process. The detailed design conclusion is dependent on obtaining access to one final tower site, near the Waterloo Landfill, that is currently undergoing a property sale to another telecommunication provider. The sale of the site has been pending for eight months, and until the sale is completed access to the site cannot be confirmed, with the new owner, to complete the Page 4 of 15

39 39 39 Report: COR-FFM system design. Staff are reviewing the option of leasing land nearby and constructing a tower to provide the required radio system coverage. This option would result in additional costs not included in this report. Project Scope Changes Infrastructure changes for this design-build contract in the amount of $4,956,900 plus all applicable taxes have been identified and evaluated by staff to ensure they provide value and meet the needs of the project. These can be grouped into three categories: tower sites, additional operational requirements and civil construction work. 1. Tower sites ($1,612,000): Construction of the final tower site will involve infrastructure equipment, new microwave connections, shelter, generator, electrical services. This final site is needed to achieve the required radio system coverage in the contract. Motorola has agreed to a reduced price which reflects a significant discount for the infrastructure equipment related to this final site. 2. Additional operational requirements ($719,000): Voice Radio staff, the Waterloo Regional Police Service (WRPS) and Fire Dispatch users have identified the following additional requirements to safely and efficiently operate the system and meet the needs of the Public Safety and Public Works users: automated processes such as power monitoring to reduce the frequency of site visits and provide failure warnings in all potential backup power situations; antenna system modifications at dispatch sites to reduce risk of failure and provide operational flexibility; increased battery and power backup at the sites to reduce risk of failure; providing dispatchers with backup radios that are fully integrated with the radio consoles to reduce the risk of operator error or failures; and adding Text to Speech Over the Air to fire hall alerts to provide enhanced automation during the fire crew call out process, reducing call response times and reducing the risks of dispatch or equipment error (the cost for this option is being funded by the area municipal Fire Services). 3. Civil construction work ($2,625,900): an adjustment is required in the cash allowance required for civil construction work, as the scope of this work was not known prior to completion of the detailed design. In the original proposal, Motorola anticipated that a number of existing tower sites would be available to provide the required coverage for the radio system. As the detailed design of the system progressed, it was identified that some of the sites required significant structural and/or other construction improvements in order to support the new transmission equipment and that some tower sites needed to be moved to other locations. The civil construction costs reflect a best estimate of construction costs prior to completing the final design completion and costing of all items. The cash allowance Page 5 of 15

40 40 40 Report: COR-FFM for civil construction includes the following items new to the project: a 70m tall replacement radio tower at 100 Maple Grove; a 30m tall replacement radio tower at the main dispatch for Cambridge Fire; new shelter, generator and electrical supply at three relocated tower sites; structural improvements to existing leased towers at three relocated tower sites; and civil works at dispatch centers for items such as antenna support and electrical supply. Maintenance The agreement with Motorola includes a maintenance contract with upfront costs to cover a contract period of thirteen (13) years commencing on the completion of system warranty. A maintenance contract increase of $310,000 is included in the proposed change order to cover technical support, software support, maintenance services and all software and hardware upgrades for the final site, automated process equipment and backup dispatch radio items. User Gear Orders for user gear have been co-ordinated with the various Waterloo Regional Voice Radio User Groups (see Appendix A). The Region took delivery of the majority of the user gear, up to the original contract value, in December 2017 and is working with partner agencies to arrange payments and deliveries of user gear. Some user gear requirements have changed and a number of users have decided to take advantage of the discounts available with this initial order (from 2016) to request additional spare radios, batteries and accessories. The Region is purchasing radios for use during the radio system transition and in infrastructure disaster recovery. Staff have worked to refine the user gear order and have established the final cost of user gear at $8,015,000, plus all applicable taxes. Of this total $5,413,000 is for user gear related to the Region and Police with the remainder of the user gear ordered by the Area Municipalities using the radio system. Per Table 4 this results in a decrease of $39,000 (decreases of $375,000 for WRPS partially offset by increases of $303,000 for other user groups and $33,000 for the Region) over the initial order contained in the contract. Through negotiations with Motorola, the Region has been able to secure continuation of the significant user gear discount. This allows the Region to provide the same user gear prices to the Agencies that are participating in the Voice Radio System as originally secured in Page 6 of 15

41 41 41 Construction Inspection and Voice Radio Consulting Report: COR-FFM The Region s Consultant (CIMA+) was retained in February 2014 under Contract C Consulting Services for Voice Radio to prepare the RFP for the Voice Radio System. They were part of the team that prepared the RFP with the partner Agencies on the system and were part of the RFP Evaluation Team. In addition, CIMA+ has provided voice radio consultant services during Motorola s design of the radio system. CIMA+ has a good knowledge of the existing radio system and the proposed tower sites along with a familiarity with the Motorola contract and the WRPS consultant involved in the project. Staff believe engaging CIMA for the final remaining tasks of construction inspection and voice radio consulting represents a value for money proposition. The pricing has been reviewed and is believed to be fair and reasonable for the scope of work proposed. The contract with CIMA for the work completed so far is $280,500 plus taxes and, subject to approval of the recommendation in this report, will be extended by $155,990 plus all applicable taxes. Staff Recommendations To prevent any further delays, the project team is recommending construction proceed based on the design to date. Recommendations to amend the contracts with Motorola and CIMA+ as a result of the previously described system design changes are contained in this report. A formal governance committee represents all system users and makes critical decisions for the project and the operation of the system. The composition of this committee is as follows: Chief of Police, WRPS Chair Inspector, Information Technology, Voice Radio Unit, WRPS representing the user needs of Police Fire Chief, Cambridge representing the user needs of all Fire Services Director, Transit Services, ROW representing all Public Works users Director, Facilities and Fleet Management, ROW representing current system infrastructure responsibility and transition planning for WRPS responsibility. The Voice Radio Executive Committee has reviewed proposed contract amendments and recommends that the required change order be approved to ensure a safe and efficient operation of the Voice Radio System used by Public Safety and Public Works users within the Region of Waterloo Page 7 of 15

42 42 42 Lease Agreements Report: COR-FFM The proposed Waterloo Regional Voice Radio System has eight different tower sites, five dispatch locations and has additional equipment installed in multiple fire halls across the Region. In order to obtain access to non-region owned properties, the Region needs to sign new agreements or modify existing agreements related to the long term lease or licencing of approximately seven telecommunication sites required for the P25 Voice Radio System. A recommendation to authorize the Commissioner of Corporate Services/Chief Financial Officer to sign agreements related to the long term lease or licencing of telecommunication sites required for the P25 Voice Radio System is also contained in this report. Schedule Upon conclusion of the detailed design process, Motorola will proceed with construction, installation and testing of transmission infrastructure for the remainder of 2018 and into It is anticipated that the system cutover will occur in the second half of Installation of user gear in vehicles is anticipated to start in 2019 and be completed over approximately six months. With dispatch and user training on the new radio gear it is anticipated that the system cutover will occur in late After confirmation that the transition for all users has been successful the existing radio transmission equipment will be decommissioned. Corporate Strategic Plan: This project supports the Corporate Strategic Plan objective to ensure regional programs and services are efficient, effective and provide value for money under Strategic Focus Area 5, Responsive and Engaging Services. Financial Implications: The original project budget for the Region was established by Council in the 2017 capital program at $31.1 million, and was reduced significantly at the time of the proposal award in March of The recommendations in this report bring the project capital budget to $27.4 million as set out in the table below: Table 1 Summary of Budget Approvals and Requirement Regional Budgets for Voice Radio ($000's) Infrastructure User Gear Total Original Budget (2017 capital program) $21,790 $9,336 $31,126 Revised Budget approved (March 2017) $17,237 $5,755 $22, Capital Plan (December 2017) $17,237 $6,088 $23,325 Revised Capital Budget (June 2018) $21,985 $5,413 $27, Page 8 of 15

43 43 43 Report: COR-FFM A total of $23.3 million ($17.2 million for infrastructure including contract P and $6.1 million in user gear has been approved in the 2018 capital plan for the project as set out below: Table 2 Approved Voice Radio Budgets and Related Funding (March 2017) Voice Radio Infrastructure ($000's) Funding Source Total Division 2017 Actual 2018 Budget Total Debt PTIF RDC Region 4,318 4,139 8,457 3,946 3, ,457 Police 4,382 4,398 8,780 7,428 1,352 8,780 Total Contract Costs $8,700 $8,537 $17,237 $11,374 $3,793 $2,070 $17,237 Division 2017 Actual User Gear ($000's) 2018 Budget Funding Source Total Debt PTIF Equipment Reserve Gen Tax Supported Capital Reserve Other Reserves Region , $208 1,709 Police 3, , ,379 4,379 Total Contract Costs $4,636 $1,452 $6,088 $531 $530 $405 $35 $4,587 $6,088 Total The original contract P was $25,790,000 and is being revised to $31,111,000, inclusive of user gear, and the 13 year maintenance contract component (after the initial two year warranty) and net HST as set out in table below: Table 3 P Contract Costs for all participants Contract P ($000's) Original Contract Contract Total Revised Revisions Contract Contract P Infrastructure $15,202 $4,957 $20,159 Contract P User Gear 8,053 (38) 8,015 Contract P Maintenance (13 yr total) 2, ,399 Sub-total Contract P ,344 5,229 30,573 HST (net of rebate) Total $25,790 $5,321 $31,111 Summary by Expenditure Type: Infrastructure $15,469 $5,045 $20,514 User Gear 8,195 (39) 8,156 Maintenance 2, ,441 Total $25,790 $5,321 $31, Page 9 of 15

44 44 44 Report: COR-FFM Estimated user gear costs are detailed in Table 4 below and are based on radio gear orders placed by the Area Municipalities for their Fire Service and public works groups utilizing the system. Area Municipal staff will include the necessary budget provisions for additional user gear purchases in their budgets. Receipt of approximately 3,000 pieces of user gear is important for the project as staff require considerable time to program, test and install the user gear prior to roll out, as user gear requirements differ for each group. Table 4 - Estimated User Gear Costs ($000 s including HST): User Gear by Group ($000's including HST) Per Report Per Report Variance COR-TRY COR-FFM Waterloo Regional Police $4,070 $3,695 ($375) Direct Regional Services 1,685 1,718 $33 Subtotal Police and Region 5,755 5,413 (342) City of Cambridge ($132) City of Kitchener ($67) City of Waterloo $482 Township of North Dumfries ($11) Township of Wellesley ($7) Township of Wilmot $28 Township of Woolwich ($59) Other agencies 0 68 $68 Total $8,195 $8,156 ($39) The above table included credits for trade-in of user gear in the second column (COR- FFM-18-11) that were not applied to the original report pricing in the first column (COR- TRY-17-21), as well as any changes in the number of units required. A. Infrastructure Replacement The Region of Waterloo s approved 2017 and 2018 Capital Programs include a total of $17.2 million (per Table 1) for replacement of the voice radio infrastructure. The project is to be funded from property taxes (through the issuance of tax supported debentures), development charges and the Public Transit Infrastructure Fund Phase 1 (PTIF1) for the transit component. The recommended revised project budget is outlined in Table 5: Page 10 of 15

45 45 45 Table 5 Revised budget requirement for voice radio infrastructure Report: COR-FFM Budget Requirements for Voice Radio Infrastructure ($000's) Funding Source Division Total Debt PTIF RDC Total Actual Budget Budget Transit $3,784 $3,801 $2,089 $9,674 $4,800 $4,000 $874 $9,674 Facilities , ,121 Subtotal Regional 4,318 4,139 2,338 10,795 5,748 4,000 1,047 10,795 Police 4,382 4,398 2,410 11,190 9, ,723 11,190 Total Contract Costs $ 8,700 $ 8,537 $ 4,748 $ 21,985 $ 15,215 $ 4,000 $ 2,770 $ 21,985 Budget as amended COR-TRY-1721 $ 8,700 $ 8,537 $ - $ 17,237 $ 11,374 $ 3,793 $ 2,070 $ 17,237 Total Budget Adjustment $ - $ - $ 4,748 $ 4,748 $ 3,841 $ 207 $ 700 $ 4,748 Budget Adjustment Region $ - $ - $ 2,338 $ 2,338 $ 1,802 $ 207 $ 329 $ 2,338 Budget Adjustment Police $ - $ - $ 2,410 $ 2,410 $ 2,039 $ - $ 371 $ 2,410 Revised infrastructure costs inclusive of net HST, as shown in Table 5 above, are $22.0 million. As shown in Table 1, the original project budget was $21.8 million and was revised to $17.2 million at the time of the preliminary design-build contract award (Report COR-TRY dated March 22, 2017). The revised project is approximately $200,000 above the original budget for the infrastructure portion of the contract. Additional funding requirements will be incorporated into the 2019 Capital Budgets for the Region and Police, with no amendments to the 2018 Capital Budget being required. The extent of RDC financing will be determined through the 2019 RDC Background Study and By-law update. B. User Gear Replacement As shown in Table 2, the Region of Waterloo s approved 2017 and 2018 Capital Programs include $6.1 million for replacement of the voice radio user gear, to be funded from property taxes (through the issuance of debentures), PTIF1 and reserves (including $96,000 from the Water Capital Reserve) Page 11 of 15

46 46 46 Report: COR-FFM Table 6 Revised Budget requirement for Voice Radio User Gear (Police and Region only) Budget Requirements for Voice Radio User Gear ($000's) Funding Source Division 2017 Actual 2018 Budget Total Debt PTIF Equipment Reserve General Tax Supported Capital Reserve Other Reserves Transit $768 $304 $1,072 $536 $536 $0 $0 $0 $1,072 Other Regional Subtotal Regional , ,718 Police 3,756 (61) 3, ,695 3,695 Total Contract Costs $4,636 $777 $5,413 $536 $536 $403 $35 $3,903 $5, Capital Budget $ 4,636 $ 1,452 $6,088 $531 $530 $405 $35 $4,587 $6,088 Total Budget Adjustment $ - $ (675) ($675) $5 $6 ($2) $0 ($684) ($675) Budget Adjustment Region $ - $ 9 $ 9 $5 $6 ($2) $0 $0 $9 Budget Adjustment Police $ - $ (684) $ (684) $0 $0 $0 $0 ($684) ($684) Total As shown in Table 1 the original project budget for user gear was $9.3 million. The project is approximately $3.9 million below the original budget for the user gear portion of the contract as significant discounts were negotiated based on the bulk purchase of user gear in late Costs relating to Police user gear are well below Police Service budget estimates as the budget reflected a worst-case estimated cost that did not include any discounts and reflected potential costs for dispatch locations that ended up being included in the infrastructure costs of this contract and not as a separate user cost. C. Operating Costs Contract P includes a maintenance contract with an upfront cost of $2.4 million to cover the period (years 2018 and 2019 fall under the warranty period of the contract). These maintenance costs will be set up as a prepaid expense which will be charged to future operating budgets starting in At that time, the operating budget will be increased by $187,000 to reflect maintenance contract costs. Based on revised contract costs, incremental debt servicing costs to be reflected in future operating budgets are estimated to total $462,000 (Region $217,000 and Police $245,000) annually over a period of 10 years based on an estimated cost of borrowing of 3.5% Page 12 of 15

47 47 47 Other Department Consultations/Concurrence: Report: COR-FFM Finance staff, Legal staff, and Police Service staff were consulted in the preparation of this report. Attachments: Appendix A Waterloo Regional Voice Radio User Groups Prepared By: Jerry Biersteker, Manager, Facilities Planning and Performance Management Approved By: Craig Dyer, Commissioner, Corporate Services/Chief Financial Officer Page 13 of 15

48 48 48 Appendix A Waterloo Regional Voice Radio User Groups Report: COR-FFM The main member agencies using the Voice Radio System are (in alphabetical order): Cambridge By-Law; Cambridge Fire Department; Cambridge Public Works; Grand River Transit; ION (Region of Waterloo Light Rail Transit); Kitchener By-Law; Kitchener Fire Department; North Dumfries Township Fire Department; Waterloo By-Law; Waterloo Fire Rescue; Waterloo Public Works; Waterloo Regional Airport; Waterloo Regional Paramedic Services; Waterloo Regional Police Service (WRPS); Waterloo Region Emergency Measures Office; Waterloo Region Security Services (including security dispatch); Waterloo Region Transportation; Waterloo Region Waste Management; Wellesley Township Fire Department; Wilmot Township Fire Department; Wilmot Township Public Works; and Woolwich Township Fire Department. Other agencies and subgroups also use the legacy Voice Radio System, albeit with a lesser number of units Page 14 of 15

49 49 49 Report: COR-FFM Appendix B Region of Waterloo Voice Radio System Proposed Tower Sites Page 15 of 15