Table of Contents Report Introduction 1 Water/Wastewater Long Range Financial Planning 2 Principles of Financial Sustainability 4 Importance of a Long Range Financial Plan 5 General Approach to Preparing the County's LRFP 5 The LRFP is Dynamic Regular Updates Will Be Undertaken 6 Water and Wastewater Model and Situational Analysis 7 Model Development 7 Challenges, Risks and Opportunities 8 Key Assumptions 9 Water Capital Budget 10 Wastewater Capital Budget 11 Reserves Strategies 12 Debt Strategies 13 Reporting Requirements O. Reg. 453/07 17 Water and Wastewater Financial Plan O.Reg. 453/07 Introduction 18 Water Statement of Financial Operations 21 Water Statement of Cash Flows 22 Water Statement of Financial Position 23 Wastewater Statement of Financial Operations 24 Wastewater Statement of Cash Flows 25 Wastewater Statement of Financial Position 26 Operating Budget Forecast 15 Forecast for Water and Wastewater Rates 2014 16 Ratepayer Impact 16 Long Range Financial Plan 27
Water and Wastewater Long Range Financial Plan Forecast Water and Wastewater Long Range Financial Plan Forecast Long Range Financial Plan 1
Introduc on to Long Range Financial Planning Water/Wastewater Long Range Financial Planning The Ministry of Environment (MOE) passed the Safe Drinking Act, 2002 (SDWA). It requires owners of municipal drinking water systems to apply for and obtain a Municipal Drinking Water Licence. There are five elements that must be in place in order for the owner of a drinking water system to obtain a licence: 1. A Drinking Water Works Permit to establish or alter drinking water system 2. An accepted opera onal plan. The Drinking Water Quality Management Standard (DWQMS) is the standard upon which opera onal plans are based. The plan documents an opera ng authority s quality management system (QMS). 3. An Accredited Opera ng Authority. A third party audit of an opera ng s QMS will be the basis for accredita on. 4. A Permit to Take Water. 5. A Financial Plan that must be prepared, based on up to date rates, and approved in accordance with the prescribed requirements in the Financial Plans Regula on. This is one of the main purposes of this project. While the regula ons are directed at water systems, the approach undertaken by the County was to undertake a similar process for the County s wastewater systems. This Financial Plan has been prepared in accordance with the Financial Plan regula on (O. Reg. 453/07) made under the Safe Drinking Water Act, as well as the provisions of the financial planning guidelines published by the MOE in August 2007, en tled Toward Financially Sustainable Drinking Water and Wastewater Systems. Several other provisions are also set out in the regula on that must be met by a municipality: Financial plan must be approved by Council resolu on (or governing body) indica ng that the drinking water system is financially viable; Financial plan must include a statement that the financial impacts have been considered and apply for a minimum six year period (commencing when the system first serves the public); Financial plan must include detail regarding proposed or projected financial opera ons itemized by total revenues, total expenses, annual surplus/deficit and accumulated surplus/ deficit (i.e. the components of a Statement of Opera ons as per PSAB) for each year in which the financial plans apply; 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 publica on on the Internet at no charge; and No ce of the availability of the financial plans is to be given to the public. Long Range Financial Plan 2
Introduc on to Long Range Financial Planning Once a system is licensed, the municipality s Financial Plan is required to be updated every 5 years, in conjunc on with every applica on for licence renewal. The components of the financial plans indicated by the regula on are consistent with the requirements for financial statement presenta on as set out in sec on PS1200 of the Canadian Ins tute of Chartered Accountants (CICA) Public Sector Accoun ng Handbook. The categories can be found in three statements; Statement of Opera ons, Statement of Cash Flows and Statement of Financial Posi on. These will be discussed later in the report. The categories of financial informa on have been developed: to ensure that they provide a sound picture of the financial posi on of a drinking water system; The goal is to provide the County with a realis c and informed view of opera ng and capital expenditures needed over me to maintain the integrity and health of its physical infrastructure and to accommodate growth and new environmental standards. As such, a Long Range Financial Plan (LRFP) creates a more purposeful approach to long term financial management and helps align short term ac ons with long term financial strategies. This document puts the County s water and wastewater financial condi on in perspec ve, discusses the current challenges and risks and provides a financial forecast, consistent with the strategic direc on of the County. The plan also provides a framework for guiding the annual budget and the financial planning over a longer horizon. The LRFP helps to understand the implica ons that today s decisions have on future budgets. to ensure that they are aligned with municipal financial statements prepared on a full accrual accoun ng basis, beginning on January 1, 2009; and to be a balance between encouraging more comprehensive and consistent financial planning for municipal water services, and accommoda ng exis ng municipal prac ces. Long Range Financial Plan 3
Introduc on to Long Range Financial Planning Principles of Financial Sustainability The Ministry of the Environment released a guideline ( Towards Financially Sustainable Drinking Water and Wastewater Systems ) that provides possible approaches to achieving sustainability. The Province s Principles of Financially Sustainable Water and Wastewater Services are provided below: 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 #6: A sustainable level of revenue allows for reliable service that meets or exceeds environmental protec on standards, while providing sufficient resources for future rehabilita on and replacement needs. Principle #7: Ensuring users pay for the services they are provided leads to equitable outcomes and can improve conserva on. In general, metering and the use of rates can help ensure users pay for services received. Principle #2: An integrated approach to planning among water, wastewater, and storm water systems is desirable given the inherent rela onship among these services. Principle #3: Revenues collected for the provision of water and wastewater services should ul mately be used to meet the needs of those services. Principle #4: Life cycle planning with mid course correc ons is preferable to planning over the short term, or not planning at all. Principle #5: An asset management plan is a key input to the development of a financial plan. Principle #8: Financial Plans are living documents that require con nuous improvement. Comparing the accuracy of financial projec ons with actual results can lead to improved planning in the future. Principle #9: Financial plans benefit from the close collabora on of various groups, including engineers, accountants, auditors, u lity staff, and municipal council. The LRFP will be instrumental in the County s ability to meet the Provincial repor ng requirements included in O.Reg. 453/07 for water opera ons and has been developed in recogni on of the above noted principles. Long Range Financial Plan 4
Introduc on to Long Range Financial Planning Importance of a Long Range Financial Plan General Approach to Preparing the County s LRFP A LRFP is a framework to guide the County in planning and decision making to help ensure that the County: Has a plan to protect and maintain its assets; Has a reasonable degree of stability and predictability in the rate burden; Has a fair sharing in the distribu on of resources between current and future ratepayers; Has sustainable cash flows in the long term; Maximizes its financial flexibility; Minimizes financial vulnerability during economic downturns; and Maintains programs and services at their desired levels. The LRFP iden fies the key financial strategies that will influence the building of a sustainable long term financial future and takes into account: Expected expenses and capital outlays for each year of the plan; Expected revenues for each year and their source; Performance measures to enable assessment of the Council s strategic priori es; Assump ons that have been used in the development of the LRFP; and Sensi vity analysis on key assump ons most likely to affect long range financial planning and sustainability to ensure that the County is aware of the key levers that will impact the LRFP and that should be monitored over me Long Range Financial Plan 5
Introduc on to Long Range Financial Planning The LRFP is Dynamic Regular Updates Will Be Undertaken Although great effort has been made to present accurate financial projec ons, based upon the data available at this me, a LRFP is a dynamic document and should be updated and re evaluated, on an ongoing basis. As such, the 2014 Water and Wastewater LRFP should be considered a work in progress. It is not an exercise in precision, rather it is intended for use as a forecas ng tool to ensure that the County is on the right course to meet its financial obliga ons and future challenges. The intent is to provide Council with regular updates to this document, so it will be useful in the ongoing cycle of business planning and budge ng. Financial plans are only required to be updated in conjunc on with every applica on for licence renewal (i.e. every 5 years), however, there are many poten al circumstances that could occur within the short to medium term that would affect the assump ons in the projec ons for opera ng and capital. Council priori es, planning policies, changes to service levels, consump on projec ons and infrastructure requirements, will certainly lead to changes and the LRFP should be adjusted to reflect these changes as they occur. It is an cipated that updates to the LRFP will: Amend the assump ons, projec ons and strategies, as required, based on changes in the municipal environment; Con nue building awareness of future changes in current opera ng and capital spending and funding levels; Assist the County in determining the extent of its financial challenges; Reconfirm the key financial goals and strategies that should guide future planning; and Spur the development of ac ons in future business plans that would respond to the long term strategies. Long Range Financial Plan 6
Water and Wastewater Model and Situa onal Analysis Water and Wastewater Model and Situa onal Analysis Model Development The LRFP is developed based on an analysis of all factors impac ng the capital and opera ng budget, including financing plans, consump on and wastewater flow forecasts. This forecast also includes assump ons with respect to growth and development charge revenues, interest rates impac ng reserves and debt issuance. As shown below, due to the inter rela onship between all components of the plan, changes in any of the assump ons will poten ally have an impact throughout the LRFP. Developers Grants & Subsidies Indexes CPI Salary Negotiations Operating Budget Expenditures/ Revenues Reserves Capital Reserves Stabilization Reserves CAPITAL FINANCE DECISIONS Capital CAPITAL REQUIREMENTS Benefit Negotiations Dev Charges Utilities Debt Chemicals Old Debt Rates Consumption Etc. New Debt WW flows Long Range Financial Plan 7
Water and Wastewater Model and Situa onal Analysis Challenges/Risks/Opportuni es The following summarizes the key challenges, risks and opportuni es to long term financial sustainability which have been addressed as part of the plan: Complex Water and Wastewater System There are 6 water service areas and 4 sewage collec on systems which is more costly to operate and monitor than a municipality with one urban area to service. Availability of Capital Reserves While the Capital Reserves are rela vely healthy due in part to surpluses that have been generated, with significant capital requirements over the next six years, there is a need to gradually increase the water and wastewater capital reserve contribu ons to support the replacement and refurbishment of assets and opera ng budget shor alls. DC Reserves and Reserve Funds The ending balances in 2012 for the Water and Wastewater DC Reserves were in a nega ve posi on and there are risks, moving forward, as to whether the DC revenues will be sufficient to offset the planned capital expansions. New Provincial Standards and Regula ons The O.Reg. 453/07 requires municipali es to demonstrate full cost recovery for all water services and provide a capital asset management plan. Increased Reliance on Debt Financing The plan includes the issuance of debt in both water and wastewater opera ons to address capital needs. In addi on to future debt requirements, the plan also includes debt yet to be issued for completed projects or projects already approved ($4.5 million and $0.7 million in water and wastewater respec vely). Interest Rates Under the exis ng economic condi ons, interest rates have been rela vely low. While the exis ng borrowing rates are favourable, it is unknown how long these condi ons will con nue. This is a risk in terms of future debt financing. Rela vely High Fixed Monthly Charge The County has a rela vely high propor on of the water/ww bill that is recovered from the fixed monthly fee. This provides improved revenue stability but contributes to higher residen al costs. Affordability Residen al Water and wastewater costs in the County of Brant are higher than the survey average of 97 Ontario municipali es surveyed for Residen al customers. This is driven in part by the complexity of the system, increased debt charges and a higher than average fixed por on of the monthly bill. Revenue Challenges Related to Consump on Water consump on is difficult to predict and is impacted by weather condi ons as well as County programs and the rate structure. The County has experienced fluctua ons in consump on from year to year which requires reserve funds to be available to fund any revenue shor alls. Long Range Financial Plan 8
Water and Wastewater Forecast Water and Wastewater Key Assump ons The following provides the key assump ons in the Forecast: Capital Projects The six year Water and Wastewater Capital Budget is $24 million and $36.6 million respec vely. Reserve Contribu ons Reserve contribu ons vary annually but are generally increasing at a level that is considered affordable and ensures that reserves remain in a posi ve posi on. Debt Terms Water and wastewater projects have been financed over a period of 15 years at an assumed rate of 3.72%. Water & Wastewater Capital Reserves The opening balance for 2014 Water and Wastewater Capital Reserves and Reserve Funds are based on the year end es mated balance for 2013 ($5.9 million for water and $1.3 million for wastewater). Sources of Financing Capital Reserves, Development Charges and Debt were the sources of financing available, as defined in the County s Capital Budget document. Note: Due to the ming of the report, year end balances of reserves are unaudited. Service Standards Water and wastewater programs are maintained at their current service levels. Opera ng Budget Assump ons Expenditure increases for the majority of municipal services is based on the a 2.5% infla on. Long Range Financial Plan 9
Water and Wastewater Forecast Water Capital Budget Type of Project and Financing Plan The following graphs reflect the capital plan for the next six years to address the replacement of exis ng infrastructure as well as the growth related capital for water and the associated sources of financing. As shown below, the six year capital forecast is $24 million, with significant upfront needs in 2014 2015. The major project impac ng 2015 is $8 million for addi onal water source (St. George) and the watermain replacement program $1.5 million. Financing over the next 6 years is primarily from Capital Reserves and Development Charge Reserves, with debt financing required in 2014. Water Capital Budget and Financing Plan Water Capital Budget Water Capital Financing $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 2014 2015 2016 2017 2018 2019 Long Range Financial Plan 10
Water and Wastewater Forecast Wastewater Capital Budget Type of Project and Financing Plan It is essen al for Wastewater Services to balance their capital budgets in terms of infrastructure renewal and replacement, and preparing for con nued growth. As shown below, the six year capital forecast is $37.6 million. The Wastewater Capital Budget is driven by the St. George WPCP Twinning/ Expansion ($10 million in 2015) and the Cainsville construc on of a new WPCP in 2018. Financing over the next six years is primarily from Development Charge Reserves Funds and Debt, with limited funding from Capital Reserves. Debt accounts for $21.1 million of the financing plan and Development Charges account for $13 million, with the remaining $3.5 million from Capital Reserves. The following graphs reflect the capital that can be undertaken to address the replacement of exis ng infrastructure as well as the growth related capital for water and the associated sources of financing. Wastewater Capital Budget and Financing Plan Wastewater Capital Budget Wastewater Capital Financing Long Range Financial Plan 11
Water and Wastewater Forecast Reserve Strategies Adequate reserves are important to mi gate the County s financial risk and to strengthen the County s ability to withstand nega ve impacts on revenues from economic fluctua ons and unforeseen expenditure requirements. Reserves and reserve funds are accumulated net revenues which are set aside for future expenditures. Reserves and reserve funds are a cri cal component of a municipality s long term financing plan. The importance of maintaining reserves is to: Provide stability of tax rates and user fees in the face of variable and uncontrollable factors (e.g. interest rates, changes in subsidies, increase in fuel prices); Provide financing for one me or short term requirements without permanently impac ng the u lity rates; Make provisions for acquisi on and replacement of assets and infrastructure that are currently being consumed and depreciated; Avoid spikes in funding requirements of the capital budget by reducing reliance on long term debt borrowing; Provide a source of internal financing; Ensure adequate cash flows; Provide flexibility to manage debt levels and protect the municipality s financial posi on; and Provide for liabili es that have been incurred in the current year but will not be paid for un l future years. As iden fied in the last long range financial plan report, op mally, for Brant County, because the water and wastewater reserves are used for both opera ng budget shor alls (stabiliza on) and capital replacement it is recommended that the reserves should not fall below 15% of the gross expenditures. This will help ensure that there is a reasonable level of funds available for unforeseen expenses, reduc ons in consump on and the associated revenues. In addi on, the target annual contribu ons to the Water and Wastewater Reserves be at least equal to the annual amor za on amount of the underlying tangible capital assets. Water and WW Reserves as a % of Gross Expenditures minimum As shown above, the consolidated reserve balances remain above the recommended minimum target over the forecast period. Wastewater, with significant capital requirements, falls below the threshold from 2015 2016 but is above the threshold in the other years. Internally borrowing between the reserves may be required, with repayments made. Long Range Financial Plan 12
Water and Wastewater Forecast Debt Strategies While debt is o en considered to be a financing source of last resort and something to be avoided, it is also an appropriate way of financing longer life items since future ratepayers that receive the benefit of the items also pay through future debt charges. Debt can provide capital funding flexibility by allowing certain infrastructure to be built and used before sufficient revenue has been accumulated to offset the needed investment. However, high debt levels reduce flexibility and could impair financial sustainability if debt repayments cause or contribute to future revenue inadequacies. The Government Finance Officers Associa on (GFOA) recommends that municipali es iden fy the maximum amount of debt and debt service that should be outstanding at any me. Debt policies guide the amount of debt that may be issued to help ensure that outstanding and planned debt levels do not exceed an amount that can be supported by the exis ng and projected revenue base and provide ra ng agencies a picture of a County s discipline. The Provincial Government regulates the level of debt that a municipality may incur (no more than 25% of the total Own Purpose Revenue can be used to service debt and other long term obliga ons). This is measured on a consolidated basis for all debt against own purpose revenue. Debt management may be defined as the process of providing for the payment of interest and principal payments on exis ng debt, and the planning for new debt issuance at a level which will op mize borrowing cost and not impair the financial posi on of the municipality. (Ministry of Municipal Affairs and Housing). Together with the General Reserve and Reserve Fund Policy, the Debt Management Policy sets fiscally prudent financial targets to ensure that the County can adequately plan for and fund future capital needs in a responsible manner. Given the high capital requirements for the water/wastewater opera ons, the proposed target for debt con nues to be that water and wastewater debt charges not exceed 25% of own source revenues. 40% 35% 30% 25% 20% 15% 10% 5% 0% Debt Charges as a % of Own Source Revenues Water WW Combined 2014 2015 2016 2017 2018 2019 Long Range Financial Plan 13
Water and Wastewater Forecast As shown on the previous page, the consolidated debt charges as a percentage of own source hits the target ceiling by 2019, mainly driven by wastewater capital requirements. There is the poten al to internally finance some of the debt in wastewater from reserves to help alleviate this challenge. It should also be noted that the plan assumes significant Development Charge funding will be available for the growth related por on of the capital plan. Debt Outstanding As shown on the above, the debt outstanding for water declines over the forecast period, however the debt for wastewater increases. On a consolidated basis, the debt outstanding by 2019 is es mated to be $35 million. Long Range Financial Plan 14
Water and Wastewater Forecast Summary of Opera ng Budget Requirements The County s objec ve in establishing the Water and Wastewater rates is to avoid large fluctua ons from year to year and are set at a level to adequately cover current opera ng costs, maintain and repair the County s exis ng asset base and replace assets where appropriate. Efforts are being made in this plan to gradually grow/maintain the Reserve Funds to provide a source of funding for the ongoing replacement/ refurbishment of capital assets and provide a reasonable level of stabiliza on funds to deal with future opera ng fund deficits and emergency situa ons. The following tables reflect the forecast expenditures. Water Operating Expenditures 2013 2014 2015 2016 2017 2018 2019 Operating Expenses $ 4,257,849 $ 4,065,963 $ 4,167,612 $ 4,271,802 $ 4,378,597 $ 4,488,062 $ 4,600,264 Transfers to Reserves $ 146,877 $ 891,471 $ 871,899 $ 877,426 $ 1,224,343 $ 1,600,233 $ 2,007,240 Debt Charges $ 955,076 $ 770,603 $ 1,085,020 $ 1,399,439 $ 1,399,439 $ 1,399,439 $ 1,399,439 Total $ 5,359,802 $ 5,728,037 $ 6,124,532 $ 6,548,668 $ 7,002,380 $ 7,487,735 $ 8,006,943 % Change in Expenses 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% WW Operating Expenditures 2013 2014 2015 2016 2017 2018 2019 Operating Expenses $ 2,087,100 $ 2,265,376 $ 2,322,010 $ 2,380,061 $ 2,439,562 $ 2,500,551 $ 2,563,065 Transfers to Reserves $ 186,855 $ 350,000 $ 460,000 $ 505,000 $ 636,000 $ 745,000 $ 290,000 Debt Charges $ 622,545 $ 611,171 $ 679,479 $ 829,942 $ 909,312 $ 1,032,777 $ 1,738,289 Total $ 2,896,500 $ 3,226,547 $ 3,461,490 $ 3,715,003 $ 3,984,874 $ 4,278,328 $ 4,591,354 % Change in Expenses 11.4% 7.3% 7.3% 7.3% 7.4% 7.3% Combined Expenditures $ 8,256,302 $ 8,954,583 $ 9,586,021 $ 10,263,670 $ 10,987,254 $ 11,766,062 $ 12,598,297 8.5% 7.1% 7.1% 7.0% 7.1% 7.1% As shown above, there are significant requirements to fund the capital program which are impac ng the expenditures over the forecast period. Note, as will be described in the next sec on of the report, due to one me adjustments in the rate model to reflect increases in the number of meters and consump on adjustments, the impact to the customer will not be as significant as the expenditure requirement increase in 2014. Long Range Financial Plan 15
Water and Wastewater Forecast Forecast for Water and Wastewater Rates 2014 An analysis was undertaken on the consump on and number of water meter accounts using the data provided by the County (using the billing system). The number of accounts that are currently being billed has increased and has not yet been built into the rate structure. Growth has been reflected in the new rates. In addi on, the policy that was implemented to stop charging the minimum to all tenants and move to a charge per meter was es mated during the 2011 review by the County. This number has since been updated, reflec ng a higher number of meters than originally an cipated. This provides a one me benefit on the 2014 rates. 2014 2014 Water WW Volumetric Rate (m3) $ 1.10 $ 1.27 Fixed Monthly 5/8" $ 40.89 $ 19.35 3/4" $ 60.21 $ 29.03 1" $ 98.85 $ 48.38 1 1/2" $ 195.44 $ 96.77 2" $ 311.35 $ 154.84 3" $ 349.99 $ 329.03 Bulk Rate $ 2.17 Ratepayer Impact The following summarizes the rate impact on Residen al customers from 2013 2014. Consumption m 3 200 250 300 2013 $ 1,157 $ 1,272 $ 1,387 2014 $ 1,198 $ 1,316 $ 1,435 Difference $ 40 $ 44 $ 48 % Difference 3.5% 3.5% 3.4% As shown above, the an cipated impact on a customer is approximately 3.5% in 2014. Assump ons: 2014 Water Opera ng Budget of $5.728 million 2011 Wastewater Opera ng Budget of $3.227 million Number of water and ww accounts 6,769 and 5,407 (ww) Annual water billable consump on of 1.79 million m 3 Annual wastewater billable flows of 1.36 million m 3 Long Range Financial Plan 16
Repor ng Requirements Reporting Requirements O.Reg. 453/07 Long Range Financial Plan 17
Repor ng Requirements and Statements Water and Wastewater Financial Plan O.Reg. 453/07 Introduc on The Financial Plan has been prepared in accordance with the Financial Plan regula on (O.Reg. 453/07) made under the Safe Drinking Water Act. While the O. Reg. 453/07 only applies to Water, the County has prepared statements for both water and wastewater opera ons. Paragraph 4 of subsec on 3(1) of the regula on requires that financial plans include three statements including the Statement of Opera ons, the Gross Cash Receipts and the Financial Posi on. The financial statements have been included at the end of the report for water and wastewater. The Financial Plan regula on requires that the plans be updated every five years along with the request for the renewal of the drinking water license. This ongoing update will assist in revisi ng the assump ons made to develop the opera ng and funding plans as well as reassessing the needs for capital renewal and major maintenance expenses. The following sec on provides a summary of the principle features concerning the current and future state of the water and wastewater systems contained in the projected financial statements (2014 2019). Statement of Financial Opera ons Highlights This statement summarizes the revenues and expenditures. The expenditures include ongoing opera ng costs plus asset amor za on. This statement indicates that the system and its asset base are projected to be maintained with funds being available each year for future capital renewal or major maintenance. As shown in the statements of financial opera ons, the County of Brant is genera ng excess revenues over expenses including amor za on for water and wastewater throughout the forecast period. Excess Revenues over Expenses $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 Water WW $- 2014 2015 2016 2017 2018 2019 Long Range Financial Plan 18
Repor ng Requirements and Statements Cash Receipts or Gross Cash Payments (Cash Flows) Highlights The cash flow statement summarizes how the water and wastewater system is expected to generate and u lize cash resources. The transac ons that generate and use cash include the projec on of cash to be received from revenues, cash to be used for opera ng expenditures and financing charges, cash projected to be used to acquire capital assets and projected financial transac ons that are the proceeds from debt or debt principal repayment. As illustrated below, cash and cash equivalents for water and wastewater build annually in water from 2016 2019. In wastewater where capital requirements are significant, cash and cash equivalents remain rela vely low. Cash and Cash Equivalents $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- $(500,000) Water WW 2014 2015 2016 2017 2018 2019 Long Range Financial Plan 19
Repor ng Requirements and Statements Financial Posi on Highlights There are three important indicators to review in the Statement of Financial Posi on described as follows: 1. Net Financial Assets An important feature of a water and wastewater system is its net financial assets. A posi ve number indicates that the system has the resources to deal with future capital and other needs. A nega ve number indicates that past capital and other investments must be financed from future revenues. Significant debt is required, par cularly in wastewater which reflects a nega ve net financial asset posi on. 2. Tangible Capital Assets (Net Book Value) Water and wastewater systems have a great deal of resources ed up in tangible capital assets and managing these assets is cri cal to maintaining current and future levels of service. An increase in net book value of tangible capital assets is an indica on that assets have been renewed faster than they were used. A decrease in net book value indicates that assets are being used, or amor zed, faster than they are renewed. As shown in the tables, the net book value is projected to increase for water and wastewater indica ng that assets are being renewed faster than they are being used, as substan ated in the water and wastewater capital renewal plan. 3. Accumulated Surplus A third financial indicator that is reflected in the financial posi on statement is the accumulated surplus. This indicator represents cash on hand plus the net book value of tangible capital assets less debt. As shown below, the accumulated surplus is forecast to increase from 2014 to 2023 for both water and wastewater. The increasing projected surpluses in water and wastewater opera ons indicates that if the County adheres to the Financial Plan, it will strengthen its combined cash and asset posi on. Long Range Financial Plan 20
Repor ng Requirements and Statements Statement of Financial Opera ons Water 2014 2015 2016 2017 2018 2019 Water Total Revenues Rate Revenues $ 5,628,735 $ 6,022,746 $ 6,444,339 $ 6,895,442 $ 7,378,123 $ 7,894,592 Miscellaneous Revenues $ 99,302 $ 101,785 $ 104,329 $ 106,937 $ 109,611 $ 112,351 Interest Revenues $ 146,830 $ 122,537 $ 64,898 $ 17,956 $ 33,514 $ 74,357 Total Revenues $ 5,874,867 $ 6,247,068 $ 6,613,566 $ 7,020,336 $ 7,521,248 $ 8,081,301 Water Total Expenses Operating Expenses Salaries, Wages & Benefits $ 1,522,252 $ 1,560,308 $ 1,599,316 $ 1,639,299 $ 1,680,281 $ 1,722,288 Contracted Services $ 832,900 $ 853,723 $ 875,066 $ 896,942 $ 919,366 $ 942,350 Utilities Hydro $ 378,681 $ 388,148 $ 397,852 $ 407,798 $ 417,993 $ 428,443 Collection Charges $ 241,000 $ 247,025 $ 253,201 $ 259,531 $ 266,019 $ 272,669 Materials and Supplies $ 271,190 $ 277,970 $ 284,919 $ 292,042 $ 299,343 $ 306,827 Administrative Overhead $ 242,180 $ 248,235 $ 254,440 $ 260,801 $ 267,321 $ 274,004 City of Brantford Cost Sharing $ 353,600 $ 362,440 $ 371,501 $ 380,789 $ 390,308 $ 400,066 Miscellaneous Expenses $ 224,160 $ 229,764 $ 235,508 $ 241,396 $ 247,431 $ 253,616 Total Operating Expenses $ 4,065,963 $ 4,167,612 $ 4,271,802 $ 4,378,597 $ 4,488,062 $ 4,600,264 Debt Charges Debt Charges Interest Payments $ 296,207 $ 413,279 $ 516,295 $ 485,629 $ 453,870 $ 420,979 Amortization Expense Water Assets $ 1,241,894 $ 1,356,494 $ 1,610,494 $ 1,666,894 $ 1,697,294 $ 1,742,094 Total Expenses $ 5,604,064 $ 5,937,386 $ 6,398,591 $ 6,531,121 $ 6,639,226 $ 6,763,337 Annual Surplus/(Deficit) $ 270,803 $ 309,683 $ 214,975 $ 489,216 $ 882,022 $ 1,317,963 Long Range Financial Plan 21
Repor ng Requirements and Statements Statement of Cash Flow/Cash Receipts Water 2014 2015 2016 2017 2018 2019 Total Revenues $ 5,874,867 $ 6,247,068 $ 6,613,566 $ 7,020,336 $ 7,521,248 $ 8,081,301 Cash Paid For Operating Costs $ 4,065,963 $ 4,167,612 $ 4,271,802 $ 4,378,597 $ 4,488,062 $ 4,600,264 Debt Repayment Debt Interest $ 296,207 $ 413,279 $ 516,295 $ 485,629 $ 453,870 $ 420,979 Cash Provided From Operating Transactions $ 1,512,697 $ 1,666,177 $ 1,825,469 $ 2,156,110 $ 2,579,316 $ 3,060,057 Capital Transactions Acquisition of TCA $ 5,410,000 $ 10,500,000 $ 2,820,000 $ 1,520,000 $ 2,240,000 $ 1,500,000 Finance Transactions Proceeds from Debt Issues $ 2,500,000 $ $ $ $ $ Proceeds from DCs $ 900,000 $ 7,200,000 $ $ 900,000 $ 2,240,000 $ Debt Repayment Principal $ 474,396 $ 671,741 $ 883,145 $ 913,810 $ 945,569 $ 978,460 Increase/(Decrease) in Cash Equivalents $ (971,699) $ (2,305,564) $ (1,877,676) $ 622,299 $ 1,633,746 $ 581,597 Cash and Cash Equivalents at Beginning Balance $ 5,873,191 $ 4,901,492 $ 2,595,927 $ 718,252 $ 1,340,551 $ 2,974,298 Cash and Cash Equivalents at Ending Balance $ 4,901,492 $ 2,595,927 $ 718,252 $ 1,340,551 $ 2,974,298 $ 3,555,895 Long Range Financial Plan 22
Repor ng Requirements and Statements Statement of Financial Posi on Water 2014 2015 2016 2017 2018 2019 Financial Assets Cash $ 4,901,492 $ 2,595,927 $ 718,252 $ 1,340,551 $ 2,974,298 $ 3,555,895 Liabilities Debt Principal Outstanding $ 8,176,161 $ 14,634,970 $ 13,751,825 $ 12,838,015 $ 11,892,446 $ 10,913,986 Net Financial Assets $ (3,274,669) $ (12,039,042) $ (13,033,573) $ (11,497,464) $ (8,918,148) $ (7,358,091) Non Financial Assets Tangible Capital Assets $ 63,938,123 $ 69,348,123 $ 79,848,123 $ 82,668,123 $ 84,188,123 $ 86,428,123 Additions to Tangible Capital Assets $ 5,410,000 $ 10,500,000 $ 2,820,000 $ 1,520,000 $ 2,240,000 $ 1,500,000 Accumulated Amortization $ 13,039,489 $ 14,395,983 $ 16,006,477 $ 17,673,371 $ 19,370,665 $ 21,112,759 Tangible Capital Assets $ 52,140,528 $ 56,308,634 $ 65,452,140 $ 66,661,646 $ 66,514,752 $ 67,057,458 Accumulated Surplus $ 48,865,859 $ 44,269,592 $ 52,418,567 $ 55,164,182 $ 57,596,604 $ 59,699,367 Cash as a % of Net Fixed Assets 9.4% 4.6% 1.1% 2.0% 4.5% 5.3% Debt as a % of Net Fixed Assets 15.7% 26.0% 21.0% 19.3% 17.9% 16.3% Long Range Financial Plan 23
Repor ng Requirements and Statements Statement of Financial Opera ons Wastewater 2014 2015 2016 2017 2018 2019 Wastewater Total Revenues Rate Revenues $ 3,091,047 $ 3,322,602 $ 3,572,643 $ 3,838,955 $ 4,128,761 $ 4,438,048 Miscellaneous Revenues $ 135,500 $ 138,888 $ 142,360 $ 145,919 $ 149,567 $ 153,306 Interest Revenues $ 32,277 $ 34,246 $ (1,897) $ 10,680 $ 20,597 $ 39,737 Total Revenues $ 3,258,824 $ 3,495,736 $ 3,713,105 $ 3,995,554 $ 4,298,925 $ 4,631,091 Wastewater Total Expenses Operating Expenses Salaries, Wages & Benefits $ 19,158 $ 19,637 $ 20,128 $ 20,631 $ 21,147 $ 21,676 Contracted Services $ 1,001,000 $ 1,026,025 $ 1,051,676 $ 1,077,968 $ 1,104,917 $ 1,132,540 Administrative Overhead $ 437,441 $ 448,377 $ 459,586 $ 471,076 $ 482,853 $ 494,924 Utilities Hydro $ 390,244 $ 400,000 $ 410,000 $ 420,250 $ 430,756 $ 441,525 Miscellaneous Expenses $ 417,533 $ 427,971 $ 438,671 $ 449,637 $ 460,878 $ 472,400 Total Operating Expenses $ 2,265,376 $ 2,322,010 $ 2,380,061 $ 2,439,562 $ 2,500,551 $ 2,563,065 Debt Charges Debt Charges Interest Payments $ 252,500 $ 310,922 $ 365,833 $ 379,876 $ 408,271 $ 679,299 Amortization Expense Wastewater Assets $ 616,630 $ 702,930 $ 946,930 $ 999,430 $ 1,082,730 $ 1,382,730 Total Expenses $ 3,134,506 $ 3,335,862 $ 3,692,823 $ 3,818,868 $ 3,991,553 $ 4,625,094 Annual Surplus/(Deficit) $ 124,317 $ 159,874 $ 20,282 $ 176,686 $ 307,372 $ 5,997 Long Range Financial Plan 24
Repor ng Requirements and Statements Statement of Cash Flow/Cash Receipts Wastewater 2014 2015 2016 2017 2018 2019 Total Revenues $ 3,258,824 $ 3,495,736 $ 3,713,105 $ 3,995,554 $ 4,298,925 $ 4,631,091 Cash Paid For Operating Costs $ 2,265,376 $ 2,322,010 $ 2,380,061 $ 2,439,562 $ 2,500,551 $ 2,563,065 Debt Repayment Debt Interest $ 252,500 $ 310,922 $ 365,833 $ 379,876 $ 408,271 $ 679,299 Cash Provided From Operating Transactions $ 740,947 $ 862,804 $ 967,212 $ 1,176,116 $ 1,390,102 $ 1,388,727 Capital Transactions Acquisition of TCA $ 4,215,000 $ 11,450,000 $ 1,800,000 $ 4,165,000 $ 15,000,000 $ 1,000,000 Finance Transactions Proceeds from Debt Issues $ 3,300,000 $ $ 1,800,000 $ 1,000,000 $ 15,000,000 $ Proceeds from DCs $ 611,500 $ 9,510,000 $ $ 2,915,000 $ $ Debt Repayment Principal $ 358,670 $ 368,557 $ 464,109 $ 529,436 $ 624,505 $ 1,058,990 Increase/(Decrease) in Cash Equivalents $ 78,777 $ (1,445,754) $ 503,103 $ 396,680 $ 765,597 $ (670,263) Cash and Cash Equivalents at Beginning Balance $ 1,291,082 $ 1,369,859 $ (75,894) $ 427,209 $ 823,889 $ 1,589,486 Cash and Cash Equivalents at Ending Balance $ 1,369,859 $ (75,894) $ 427,209 $ 823,889 $ 1,589,486 $ 919,223 Long Range Financial Plan 25
Repor ng Requirements and Statements Statement of Financial Posi on Wastewater 2014 2015 2016 2017 2018 2019 Financial Assets Cash $ 1,369,859 $ (75,894) $ 427,209 $ 823,889 $ 1,589,486 $ 919,223 Liabilities Debt Principal Outstanding $ 5,337,382 $ 8,938,355 $ 8,474,246 $ 9,744,810 $ 10,120,305 $ 24,061,315 Net Financial Assets $ (3,967,522) $ (9,014,249) $ (8,047,038) $ (8,920,921) $ (8,530,819) $ (23,142,092) Non Financial Assets Tangible Capital Assets $ 32,265,809 $ 36,480,809 $ 47,930,809 $ 49,730,809 $ 53,895,809 $ 68,895,809 Additions to Tangible Capital Assets $ 4,215,000 $ 11,450,000 $ 1,800,000 $ 4,165,000 $ 15,000,000 $ 1,000,000 Accumulated Amortization $ 9,556,145 $ 10,259,075 $ 11,206,005 $ 12,205,435 $ 13,288,165 $ 14,670,895 Tangible Capital Assets $ 26,924,664 $ 37,671,734 $ 38,524,804 $ 41,690,374 $ 55,607,644 $ 55,224,914 Accumulated Surplus $ 22,957,142 $ 28,657,485 $ 30,477,766 $ 32,769,453 $ 47,076,825 $ 32,082,822 Cash as a % of Net Fixed Assets 5.1% 0.2% 1.1% 2.0% 2.9% 1.7% Debt as a % of Net Fixed Assets 19.8% 23.7% 22.0% 23.4% 18.2% 43.6% Long Range Financial Plan 26