Saint John Water 2017 Operating Budget5,7 J` P`,;�','J,`
M&C No. 2016-268
Report Date November 08, 2016
Meeting Date November 14, 2016
Service Area Saint John Water
His Worship Mayor Don Darling and Members of Common Council:
OPEN OR CLOSED SESSION
This matter is to be discussed in open session of Common Council.
AUTHORIZATION
Primary M::a:r:y: Author
Commissioner/Dept. Head
City AVlanager
� J. Brent McGovern
J. Brent McGovern
Jeff Trail
The following resolutions are in order provided Council is supportive of the
recommended attached budgets.
It is recommended that Common Council adopt the following:
1. RESOLVED that the estimated revenue for the Water and Sewerage
Utility for the year 2017 in the amount of $45,250,000 be adopted
2. RESOLVED that the estimate of expenses for the Water and Sewerage
Utility for the year 2.017 in the amount of $45,250,0100 be approved
(Appendix "A"); and
3. RESOLVED that the By -Law entitled A By -Low to Amend a BY -Low
Respecting Water & Sewerage (Appendix "C") be given first and second
reading:
A By -low to amend a By -low respecting Water and Sewerage be
amended by repealing Schedules "A' and "B" in Section 44, and
substituted by the submitted 2017 Schedules "A" and "B". and
4. RESOLVED that Common Council approve the 2017 Capital Budget for the
Utility Fund in the amount of $38,440,875 (gross) with contributions from
other sources of $31,832,125 resulting in a Capital budget in the amount
of $6,608,750 (net) as per the attached report.
Mus
A1the October 13,2OlGmeeting nfthe Finance Committee, Saint John Water
presented in detail the 2017 Service Based Budget (Operating) complete with an
overview of the 2817 Capital Utility Program and at the meeting, it was
" RESOLVED that the Finance Committee recommend thiat the submitted Saint
John Water Utility budget bepresented toCommon Council with a
recommendation toreceive and N]e."
At the October 31, 2016 meeting of Common Council, an, overview of the 2017
Water 0^ Sewerage Utility Budgets were provided to Council along with an
opportunity for Council to ask questions, the accompanying report was received
and filed.
Provided Council issupportive ofthe recommended attached budgets
(Operating and Capita|),|tisrecommended that Common Council proceed with
first and second reading.
"RESOLVED that Common Council review the attached documents, advise staff
mfany questions orrecommendations; and receive and file thisnaport."
SfRWYCEA8AD FINANCIAL OUTCOMES
See enclosed Service -Based Budget 2017-2019
ATTACHMENTS
M&C 2016-258 c/w associated attachments
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Tht, Gi,), of S,�;rt john
October 26, 2016
Your Worship Mayor Don Darling
& Members of Common Council:
Re: Saint John Water— 2017 Water& Sewer UtHRK 40A!ets
As Chairman of the Finance Committee, I am writing on behalf of the Committee to advise that at a
meeting of October 13, 2016, Saint John Water presented the 2017 Service Based Budget Operating)
complete with an overview of the 2017 Capital Utility Program.
At that meeting, it was "RESOLVED that the Finance Committee recommend that the submitted Saint
John Water Utility Budget be presented to Common Council with a recommendation to receive and file."
Please find attached a copy of M&C 2016-258 which includes the 201.7 Saint John Water Operating and
Capital Budgets.
Yours sincerely,
David Merrithew
Chairman, Finance Committee
City of Saint John
Encl.; M&C 2016-258 c/w supporting documents
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SAn',. Jcj,n, ',,,J,,
(!�injdi E,)! 41, 1 Canad�l t'l 4LI
271
'
M&C No,
2016-258
Report Date
October 31, 2016
Meeting Date
October 24, 2016
Service Area
Saint Jo -hr Water__
His Worship Mayor Don Darling and Members of Common Council
SUBJECT.
OPEN URCLOSED SESSION
This matter istobediscussed inopen session of Common Council,
AUTHORIZATION
Primary Author iCommissioneir/Dept. Head I City Manager
J. Brent McGovern I J. Brent McGovern
RECOMMENDATION
It is recommended that Common Council review the attached documents, advise
staff ofany questions orrecommendations; and receive and file this report.
EXECUTIVE SUMMARY
The proposed 2017 Operating budget holds a service level that is similar to the
service levels in the 2016 budget osdetailed inthe attached Service Based
Budget document.
The net result ofthese proposed changes is recommended overall Operating
budget increase of $1,303,000. Absent the increased investment in Capital from
Operating and the decrease in fiscal charges, the increase in the Operating
budget for 2O17is$1B1,0OO or0.896year over year,
The recommended CapitaKbudget for 2U17is$38.44Million; $5.D1 Million being
the Utility cost and $31,83 Million being a contribution from the other levels of
government. The Operating and Capital budget as being presented for 2017 will
not result in any increased debt for the Utility. Included in the 2016 Budget was
$2.3 Million and included in the 2017 Budget is a recommended $6.0 Million
dollar investment imthe Safe, Clean Drinking Water capital asset reserve,
Council is required to set the water rates that recover the Operating and Capital
costs of the UU|ity. It is important that rates are affordable, although it is
challenging given the financial obligations facing the Utility in the coming years
(Safe, Clean Drinking Water Project) and those incurred in the recent past
(Harbour Clean-up). A focus on strategic spending, continuous
improvement/revenue generation initiatives, operational cost reductions,
leveraging of funding from other levels of government along with a focus on
272
paying dum/m debt can, ensure that our water rates s1abi0ze and become more
affordable in the long term.
The Oat rate being recommended for 2017 is$12961.This rate is consistent with
forecasted rates over the past 4years and it represents an annual increase of
$72im2U27or$6.0Oper month, per residential flat rate user.
m/a
STRATEGIC ALIGNMENT
Saint John Water inalignment vvitNCounc||'oneoantk/discussed priorities is
taking a strategic approach 10financial management nfthe Utility bvincreasing
the contribution offunding from capital tooperating and the Safe, Clean
Drinking Water reserve fund while also adhering to Utility's financial model'.
Attached to this narrative are draft documents for Council's consideration.
These include:
1) Proposed Water & Sewer Utiiity Operating Budget 2017;
Z\ Proposed By-law amendment which vvNK sat the rates for 2017
(includes a 2 -year projection); and
3) Proposed Water & Sewer Utility Capital Budget 2017.
It is anticipated that Council, having reviewed the documents and being satisfied
with the information contained therein, vviN give consideration to adopting the
recommendations set out ata subsequent Common Council meeting proposed
for November l4,2O1O.
I Annual Rate for flat rate for a single family dwelling including both water and sanitary sewerage
273
-3 -
The proposed 2017Operating budget ho]dsaservice level that issimilar Lothe
service levels imthe 2016budget asdetailed imthe attached Service Based
Budget document. The more significant changes are detailed be|ovv.
2017 Proposed 2016 Appiroveyfl
Wages &Eenc0ts
Capital from Operating
Debt Servicing
Electricity
Chemicals
Professiona|Semilces
Asset Management
(Video Inspection)
Description of Variances,
1. Wages and Benefit:
Variance %|ncrease
$I,308,000 2.96%
$109,O@U
$1,4Q6'OU8
($42O,O0O)
($42,OUU)
$1O5/O00
($35,8pO)
�
Necessary increases associated with Collective Agreements and annual
cost ofliving increases.
0 Overtime to adequately cover service area needs.
I. Capital from Operating
Aligning with Council's recently discussed priority for fiscal responsibility, the
increased investment in Capital from Ope/at�ng continues the strategy
introduced in the 2014 Budget to deliberately fund renewal capital out of
the Operating Fund while at the same time increasing the reserve funds for
the Safe, Clean Drinking Water Project. This reduces the amount of
borrowing required in future years, reducing debt servicing costs.
3. Debt Servicing
Funding received from other levels of 8mvennnnmmt combined with lower
interest rates is resulting in lower debt servicing costs for 2017,
4. Electricit
Estimated decrease inelectricity cost is based onefficiencies being gained as
m result of energy efficiency initiatives undertaken along with a budget
under expenditure inthe previous year.
274
'4-
S. Chemicals
This increase represents an anticipated 3% increase in chlorine for water
treatment and the introduction of chemical for pH adjustment in advance
of the commissioning of the new water treatment facility (as part of the
Safe, Clean Drinking Water Project).
6. Professional Services
Professional services vary depending on annual projects and in 2017 there is
anexpected reduction.
7. Asset M
As part of the asset management initiative commence a video inspection
program to assess the condition, of the sewer infrastructure (on a 10 year
cycle) and Lu allow the appropriate level of infrastructure repair.
The net result of these proposed changes is o recommended overall operating,
budget increase of $1,303,000, Absent the increased investment in Capital from
Operating and internal charges and the decrease infiscal charges, the increase |n
the Operating budget for 2017is$191,800,o/O.896year over year.
CoumdL during the approval process, is required to set the water rates that
reflect budgeted expenditures sothat rates charged to ratepayers inthe coming
year equal the cost ofoperating (Operating and Capital) the Ud|by,
It is important that rates are affordable, although it is challenging given the
hmamda| obligations facing the Ut|Nty in the coming years (Safe, Clean Drinking
Water Project) and those incurred in the recent past (HarbourC|ean-up), Afocms
on strategic spending, continuous improvement/revenue generation initiatives,
operatioma8 cost reductions, leveraging of funding from other levels of
government along with a focus on paying down debt can ensure that our water
rates staWNzeand become more affardabKeinthe long term.
The flat rate being recommended for 2Q17is$1386u This rate isconsistent with
forecasted rates of 21013, 2014, 2015 and 2016. |trepresents an annual increase
of$72imZO17nr$6.D0per month per residential flat rate user.
THE CAPITAL BUDGET
As Council is aware, the continued investment in infrastructure renewal is
fundamental to sustainable, acceptable sem/ice delivery that meets the service
levels as well as Provincial and Federal requirements. The continued investment
(Harbour Clean-up, Safe Clean Drinking Water) comes with financiaV
zAnnual Rate for flat rate for asingle family dwelling Including both water and sanItarysewerage
- J'
commitments. The ongoing investment in infrastructure renewal must be
managed such that rate payers receive a reliable and suaLaimabUe |owe] of service
that meets regulatory requirements at an affordable cost. The attached
proposed Capital b�udget for 2016 reflects that philosophy which will further
evo|veasasset nmanoBementiafurther implemented,
The recommended Capital budget for 2017is $38,44 Million; $6.51 Million being
the Utility cost and $31.83 Million being the share of other levels of government,
The Operating and Capital budget as, being presented for 2017 vvi|y not result in
any increased dlebtfor the Utility.
The 2017 Budget continues the strategy of sustainability; m long term focus on
sustainable reinvestment in infrastructure balanced with a targeted plan for long
term debt reduction. The 2017 budget includes appropriate funding to ensure all
Utility renewal capital isfunded out mfthe operating budget and not through the
issuance of long term debt. In 3014 Council authorized the establishment of
Safe, Clean Drinking Water capital reserve fund. Included inthe 2OI6Budget was
$2.3 Million and included in the I017 Budget is a recommended $6.0 Million
dollar investment in the Safe, Clean Drinking Water capitaU asset reserve. By
Council making this investment in the reserve it will reduce the overall debt
service pressure and drive positive returns in the long term for all ratepayers.
The Operating budget will also continue to provide funding for debt retirement,
thereby reducing the overall debt and debt servicing costs.
The recommended 2017 Saint John Water Utility capital budget is attached,
SER0CEA0DFINANCIAL OUTCOMES
The 2017Budget isproposed tofund the capital budget from operating while
also contributing 66.0 Million dollars tnthe Safe, Clean Drinking Water capital
asset reserve.
The flat rote being recommended for 2017 is $I296'. This represents an annual
increase of$72inZQ17or56.O8per month.
INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS
Finance Department is supportive of the 2017 Operating and Capita� Budgets.
ATTACHMENTS
Appendix A
Appendix
Appendix[
Seeomcume*s
Capital Budget
By-law —SwintJohnWater
3 Annual Rate for flat rate for a single family dweHing including both water and sanitary sewerage
W.
27.-Zi c�
Saint John Water - Expenditure Budget
277
Operating Expenditures
Drinking Water
Watershed Management
262,000
229,000
235,000
241,000
Water Treatment
2,382,000
2,455,000
3,742,000
10,173,000
Water Pumping & Storage
1,158,000
1,086,000
1,113,000
1,141,000
Transmission & Distribution
5,172,000
4,992,000
5,117,000
5,245,000
Customer Metering
716,000
750,000
769,000
788,000
Industrial Water
Watershed Management
487,000
467,000
479,000
491,000
Water Pumping & Transmission
1,000,000
942,000
966,000
990,000
Customer Metering
147,000
110,000
113,000
116,000
Wastewater
Wastewater Pumping
2,821,000
3,005,000
3,080,000
3,157,000
Wastewater Collection
2,906,000
3,192,000
3,272,000
3,354,000
Wastewater Treatment
4,405,000
4,367,0100
4,476,000
4,588,000
Infrastructure Management
Municipal Engineering
1,278,000
1,330,000
1,363,000
1,397,000
Other Internal Charges
650,000
750,000
770,000
780,000
Net Pension Costs
1,410,000
1,392,000
1,422,000
1,434,000
Fiscal Charges
Debt Servicing
7,874,000
7,458,000
8,572,000
10,155,000
Capital from Operating
11,279,000
12,725,000
12,055,000
5,000,000
Total Fiscal Charges
Total Expenditures Elm
ME
277
Appendix "B"
Saint John Water - Revenue Budget 2017
Key Metrics:
Flat Rate-- Water & Sewerage
1,224
1,296
1,368
1,440
Meter Rates:
Block 1
13824
1.4633
1.5445
1.6256
Block 2
0.8803
0,9318
0.9935
1.0351
Revenues
0,3106
0,3288
0,3471
0.3653
Flat Rate Accounts
19,759,000
20,687,021,946,000
Debt Service Ratio
23,106,000
Metered Accounts 1
19,213,000
19,463,000
20,420,000
21,028,000
Fire Protection Levy,
2,400,000
2,300,000
2,500,000
2,500,000
Storm Sewer Levy
995,000
965,000
955,000
945,000
Other Revenues
566,000
671,000
685,000
802,000
Previous Year's Surplus
— 1,014,000
1,16 4,000
1,038,000
669,000
Total Revenues
!
Key Metrics:
Flat Rate-- Water & Sewerage
1,224
1,296
1,368
1,440
Meter Rates:
Block 1
13824
1.4633
1.5445
1.6256
Block 2
0.8803
0,9318
0.9935
1.0351
Block 3
0,3106
0,3288
0,3471
0.3653
Debt Service Ratio
17.92%
16,4810
18.0310'
M.,