WATER AND WASTEWATER FINANCIAL PLAN

Transcription

1 Township of Dubreuilville WATER AND WASTEWATER FINANCIAL PLAN In accordance with O. Reg. 453/07 Project No

2 April 15 st, 2015 Infrastructure Solutions (Engineering) Inc. 968 Winterton Way Mississauga, ON L5V 1M6 Telephone: (905) Mrs. Suzanne Bouchard Treasurer Township of Dubreuilville 23, rue des Pins., P.O. Box 367 Dubreuilville, ON P0S 1B0 Re: Water/Wastewater Financial Plan Dear Mrs. Bouchard: We are pleased to submit our report for the above captioned report. We appreciate the opportunity to be of assistance to the Township of Dubreuilville with this undertaking and look forward to working again with you and your staff in the future. Please call if you have any questions. Yours truly, Neil Roberts President ISI Infrastructure Solutions Inc. 1 P age

3 TABLE OF CONTENTS 1 INTRODUCTION AND PROJECT SCOPE... 4 OBJECTIVES... 4 STUDY AREA... 5 WATER SYSTEM... 5 WASTEWATER SYSTEM PROVINCIAL REQUIREMENTS... 6 FINANCIAL PLAN REQUIREMENTS GENERAL... 7 FINANCIAL PLAN REQUIREMENTS EXISTING SYSTEM... 7 SUSTAINABLE FINANCIAL PLANNING KEY CONSIDERATIONS... 8 CUSTOMER GROWTH... 9 OPERATING AND MAINTENANCE (O&M) COST PROJECTIONS WATER SYSTEM WASTEWATER SYSTEM CAPITAL FORECAST REVENUE PROJECTIONS DEBT REPAYMENT WATER AND WASTEWATER RESERVES TANGIBLE CAPITAL ASSET (TCA) ANALYSIS LEAD PIPE REPLACEMENT WATER / WASTEWATER FINANCIAL PLAN STATEMENT OF FINANCIAL POSITION STATEMENT OF OPERATIONS STATEMENT OF CHANGE IN NET FINANCIAL ASSETS/DEBT STATEMENT OF CASH FLOW NOTES TO FINANCIAL PLAN CASH, RECEIVABLES AND PAYABLES DEBT DEFERRED REVENUE TANGIBLE CAPITAL ASSETS (TCA) INTEREST EARNED OPERATING EXPENSES OTHER REVENUE ACCUMULATED SURPLUS RECOMMENDATIONS PROCESS FOR APPROVAL AND SUBMISSION APPENDIX A: STATEMENT OF FINANCIAL POSITION APPENDIX B: STATEMENT OF OPERATIONS APPENDIX C: STATEMENT OF CHANGE IN NET FINANCIAL POSITON APPENDIX D: STATEMENT OF CASH FLOW APPENDIX E: MUNICIPAL COST INDEX APPENDIX F: CAPITAL PROJECTS ( ) APPENDIX G: UNOFFICIAL FINANCIAL BUDGET (2014) P age

4 LIST OF FIGURES: FIGURE 1 Study Area LIST OF TABLES: TABLE 3-1 Customer Growth TABLE 3-2 O&M Costs Projections (Water) TABLE 3-3 O&M Costs Projections (Wastewater) TABLE 3-4 Water Flat Rate Fees TABLE 3-5 Revenue Projections (Water) TABLE 3-6 Wastewater Flat Rate Fees TABLE 3-7 Revenue Projections (Wastewater) TABLE 3-8 Water Capital Reserve TABLE 3-9 Wastewater Capital Reserve TABLE 3-10 TCA Consolidated (Water) TABLE 3-11 TCA Consolidated (Wastewater) 3 P age

5 1 INTRODUCTION AND PROJECT SCOPE OBJECTIVES Infrastructure Solutions Inc. (ISI) was retained by the Township of Dubreuilville ( the Township ) to prepare a Water/Wastewater Financial Plan for the communal water system. The Financial Plan has been developed and prepared with a forward looking approach at the financial position of the Township s water and wastewater systems. The Plan is not audited, and it does contain various estimates and assumptions as explained in Section 5: Notes to the Financial Plan. The Water Financial Plan fulfills one of the five submission requirements for the purposes of obtaining a municipal drinking water license as per the Safe Drinking Water Act 2002 (SDWA). The Financial Plan also includes the calculations for the wastewater system, as is encouraged under the SDWA. The prescribed reporting requirements for a financial plan are defined by Ontario Regulation 453/07 (O. Reg.453/07). In general, a financial plan requires an in-depth analysis of capital and operating needs, a review of current and future demand versus supply, and consideration of available funding sources. The Financial Plan under O. Reg. 453/07 is required to cover a period of six (6) years, from 2015 to 2020 inclusive. The Township of Dubreuilville is a municipality with a population of approximately 635 according to the 2011 Canada census. The water users in Dubreuilville are non-metered, with 362 active units and on flat rate and a water capital charge of $50 per customer that is applied to 415 active and inactive customers. The Township has undertaken this Water/Wastewater Financial Plan in order to ensure that sufficient funds will be in place to cover the short-term water and wastewater system operating costs and full water and wastewater system life-cycle asset renewal and replacement costs over a 6 year time period. This Water and Wastewater Financial Plan completes the following requirements: Compilation of the current and projected operating costs for the period Projections of capital renewal and replacement costs to 2020 Revenue projections Debt requirements and projections Tangible Capital Asset projections Statement of Financial Position, Statement of Operations, Statement of Change in Net Financial Assets/Debt, and Statement of Cash Flow The intent of the project is to develop a sustainable financing plan that will fully meet the current financial needs, as well as make full provision for renewing all water system financial assets. The cost of renewing financial assets has been identified for the 2015 to 2020 period. For each year, from , user fees have been set such that funds will be available when needed to meet future projected capital renewal and replacement needs. The costs of the identified short-term capital renewal needs have been combined with projections of the operating costs to produce an overall projection of the system costs. Various methods have been utilized to supply the necessary financial resources to pay for the operations & maintenance (O&M) and the capital projects. User fees are the key component of the financial plan as they pay down any loan and build up reserves. 4 P age

6 STUDY AREA The Township of Dubreuilville is located between Thunder Bay and Sault Ste. Marie in the heartland of Northwestern Ontario. The Township is responsible for a water supply, treatment and distribution within the Township s site. Municipal services, including water and wastewater are supplied to 362 customers. The Township s major industry was the forest industry until 2007, when the Dubreuil Forest Product Mill shut down. There are efforts underway to restart operations. Figure 1 - Study Area WATER SYSTEM The Township of Dubreuilville has two (2) drilled wells located within the Pumphouse. The production well (well no. 2) is equipped with a 150mm submersible turbine Pleuger pump (5- stage, 3450 RPM, model Q65) driven by a 25 HP submersible motor (model V6-64). The pump discharge rate is controlled at 19.0 l/s at a 55m Total Dynamic Head (TDH) and has a rated capacity of 1170 l/min. The standby well (well no. 1) is equipped with a 100mm submersible turbine Pleuger pump (5- stage, 3450 RPM, model Q63) driven by a 17.5 hp submersible motor (model M6-42). The pump discharge rate is controlled at 12.3 l/s at 55m TDH. Both well pumps were installed in 1986 and the existing 75mm riser pipe was replaced in A concentric reducer was also installed just above the finished floor to increase the pipe size from 75mm to 100mm. Flow from Well no. 1 discharges through a dedicated 100mm ABB electromagnetic flow meter, flow control valve and gate valve. Well no. 2 discharges through a similar 150mm header, with the exception that flow from well no. 2 is measured by the common 140mm ABB electromagnetic flow meter at the Pumphouse discharge header. Each raw water header equipped with a sample tap and pressure gauge assembly, and a common air release valve is located at the system high point, just downstream of ultra violet (UV) disinfection units. The Dubreuilville Well Pumphouse 5 P age

7 uses UV irradiation for primary disinfection of the raw water supply, and sodium hypochlorite for secondary disinfection and to remain free chlorine residual in the distribution system. One (1) 200 litre solution tank is located inside an 800 litre secondary containment tank to control any accidental spills and allow for extra storage of chemical and equipment. WASTEWATER SYSTEM Discharges from the sink and floor drains are directed via 100mm building drain to a small sanitary pumping station (SPS) approximately 15 meters east of the pumphouse. All wastewater is pumped to a sanitary manhole located to the west of the Pavilion by a 50mm polyethylene forcemain. This manhole drains directly to the sanitary system on Magpie Road. The SPS is comprised of a fiber reinforced plastic (FRP) tank, submersible pump, level monitors and dedicated controls. The tank has an 817 liter (180IG) sump capacity, is 750mm in diameter, and buried to a depth of 2.1m below grade. It is equipped with a watertight access hatch, ladder and fabricated gooseneck vent, and electrical and control conduits are installed from junction box at the SPS to the panel inside the pumphouse. The submersible pump (60Hz, 2.7hp, 600 Volt, 3- phase) is capable of discharging 2.2 l/s at 17m TDH. 2 PROVINCIAL REQUIREMENTS The Safe Drinking Water Act (SDWA) was passed in December, 2002 in order to address some of the recommendations made by the Walkerton Inquiry Part II report. One of the main requirements of the Act is the mandatory licensing of municipal water providers. Section 31 (1) specifically states, No person shall, a) establish a new municipal drinking water system or replace or carry out an alteration to a municipal drinking water system except under the authority of and in accordance with an approval under this Part or a drinking water works permit; or b) use or operate a municipal drinking water system that was established before or after this section comes into force except under the authority of and in accordance with an approval under this Part or municipal drinking water license. One of the main requirements of the SDWA is the mandatory licensing of municipal water providers, as per section 31 (1). In order to become licensed, a municipality must satisfy five key requirements as per section 44 (1): 1. Obtain a drinking water works permit. 2. Acceptance of the operational plan for the system based on the Drinking Water Quality Management Standard. 3. Accreditation of the Operating Authority. 4. Prepare and provide a financial plan. 5. Obtain a permit to take water. The preparation of a financial plan is a key requirement for licensing and as such must be undertaken by all water providers. 6 P age

8 FINANCIAL PLAN REQUIREMENTS GENERAL Under the SDWA, a financial plan is mandatory for water systems and encouraged for wastewater systems. The financial plans shall be for a period of at least six years, but longer planning horizons are encouraged. The financial plan is to be completed and approved by the later of July 1, 2010 and the date that is six months after the first license is issued. Once a water system is licensed, the Township s Water Financial Plan is required to be updated every five (5) years, in conjunction with the application for license renewal. Financial plans may be amended, and additional information beyond what is prescribed can be included if deemed necessary. FINANCIAL PLAN REQUIREMENTS EXISTING SYSTEM O. Reg. 453/07 provides details with regards to s.30 (1) part b of the SDWA for existing water systems: Financial plans must be approved by Council resolution (or governing body). Financial plans must include a statement that the financial impacts have been considered and apply for a minimum six year period (commencing when the system first serves the public, or at renewal starting with the year in which the license expires). Financial plans must include detail regarding proposed or projected financial operations itemized by total revenues, total expenses, annual surplus/deficit and accumulated surplus/deficit (i.e. the components of a Statement of Operations as per Public Sector Accounting Board (PSAB)) for each year in which the financial plans apply. Financial plans must present financial position itemized by total financial assets, total liabilities, net debt, non-financial assets, and tangible capital assets (i.e. the components of a Statement of Financial Position as per PSAB) for each year in which the financial plans apply. Gross cash receipts/payments itemized by operating transactions, capital transactions, investing transactions and financial transactions (i.e. the components of a Statement of Cash Flow as per PSAB) for each year in which the financial plans apply. Financial plans applicable to two or more solely-owned drinking water systems can be prepared as if they are for one drinking water system. Financial plans are to be made available to the public upon request and at no charge. If a website is maintained, financial plans are to be made available to the public through publication on the Internet at no charge. Notice of the availability of the financial plans is to be given to the public. Financial Plans are to be submitted to the Ministry of Municipal Affairs and Housing. SUSTAINABLE FINANCIAL PLANNING In general, sustainability refers to the ability to maintain a certain position over time. While the SDWA (Safe Drinking Water Act) requires a declaration of the financial plan s sustainability, it does not give a clear definition of what would be considered sustainable. Instead, the Ministry of the Environment released a guideline ( Towards Financially Sustainable Drinking-Water and Wastewater Systems ) that provides possible 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. 7 P age

9 Principle #2: An integrated approach to planning among water, wastewater, and storm water systems is desirable given the inherent relationship among these services. Principle #3: Revenues collected for the provision of water and wastewater services should ultimately be used to meet the needs of those services. Principle #4: Life-cycle planning with mid-course corrections 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 #6: A sustainable level of revenue allows for reliable service that meets or exceeds environmental protection standards, while providing sufficient resources for future rehabilitation and replacement needs. Principle #7: Ensuring that users pay for the services they are provided leads to equitable outcomes and can improve conservation. In general, metering and the use of rates can help ensure users pay for services received. Principal #8: Financial plans are living documents that require continuous improvement. Comparing the accuracy of financial projections with actual results can lead to improved planning in the future. Principle #9: Financial plans benefit from the close collaboration of various groups, including engineers, accountants, auditors, utility staff, and municipal council. The principles help form the framework for a sustainable financial plan. The substance of the financial plan may be derived from SWSSA (Sustainable Water and Sewage Systems Act) which will require, once in force, municipalities to assess the full cost of providing water and wastewater services. Full cost as defined in subsections 3(7) and 4(7), and includes: source protection, operating costs, financing costs, renewal and replacement costs and improvement costs associated with extracting, treating or distributing water to the public and collecting, treating or discharging waste water, and such other costs which may be specified by regulation. Furthermore, municipalities will be required to inventory and report their current infrastructure and how it will be maintained and managed going forward. Municipalities will then be required to report on the full cost of services and how these costs will be recovered and paid for. The principles of SWSSA ensure that a long-term plan for sustainable asset management is developed and that all costs for providing water and wastewater services are assessed so that there is sufficient funding for system needs. Although SWSSA has not yet come into force, the Financial Plan has been prepared such that the Township will be both SDWA and SWSSA compliant. 3 KEY CONSIDERATIONS This section presents the projections settled for key items over the six (6) year period and the assumptions made in order to prepare this Financial Plan. These include: Customer growth Operations & Maintenance (O&M) Capital budget forecasts Revenue requirements Debt requirements and repayment Capital reserves and operating reserve projections Tangible Capital Asset (TCA) projections 8 P age

10 The recommendations from the Township s 2015 Water/Wastewater Rate Study were used for the financial projections. The rate study projects future rates and provides other relevant information. CUSTOMER GROWTH The Township does not currently measure water/wastewater consumption as all customers are charged a flat rate. Therefore, no data on consumption volume were available for consideration. The number of total units has declined from 472 in 2013 to 415 in This characterizes a decrease of roughly -13%. It is assumed that there is no growth over the next years and eventually level off by 2014 since some homes have been torn down and water connections still remain. For the purposes of this water financial plan, there is no growth after 2014, as show in Table 3-1. Table 3-1: Customer Growth Description No. Total Units Open Water Units on Dec 31st % Increase in Total units 0% 0% 0.2% -13% 0% 0% 0% 0% 0% 0% OPERATING AND MAINTENANCE (O&M) COST PROJECTIONS Water System The Township s annual operating budget for water includes costs related to the following: Water Treatment Plant operations and maintenance. Water capital expenditures. Transfers to the water capital reserve. Transfers to capital to undertake the annual capital improvement projects. The Township mostly follows a pay-as-you-go approach to capital financing, as capital programs are funded from the user rate revenues each year. The following assumptions were made for projecting the gross costs and rate revenues over the six (6)-year period from 2015 to 2020 using 2015 as the base budget year (see Appendix G): The annual water operating and maintenance costs for water treatment and distribution would increase by 2.0% per year. There is no debt financing for the period. Any year-end surplus would be transferred to the operating reserve at the end of the year and returned to the operating budget as revenue in the subsequent year. Interest earned by the reserve funds would remain in the respective reserve. Non-metered rate revenues are composed of interest on water charges, unexpended revenue, and user fees services. The revenue was determined by adding the user fees, water capital, water services, user fees water on/off, miscellaneous water, OSWAP, capital reserves, interest on revenues, and any unspent funding. Capital projects for the water system in the period are shown in Appendix F. Table 3.2 condenses the gross operating costs and net costs to be recovered from the annual flat user water rate and water capital rate. 9 P age

11 Table 3-2: O&M Cost Projections (Water only) Revenues Current User Fees Water Revenue 144, , , , , , , , , , ,954 User Fees Water Capital 9,460 9,460 23,604 22,944 20,925 20,925 20,925 20,925 20,925 20,925 24,900 User Fees Water Sup User Fees Services User Fees Tax Cer. Ins User Fees Water On/Off 1, ,190 1,025 1,000 1,000 1,000 1,000 1,000 1,000 1,000 OSWAP Grant 29,373 29,373 29, , Revenue - Unspent funding in ,000 Reserves Interest on Water Charges 1,604 1,673 2,218 2,753 2,700 2,700 2,700 2,700 2,700 2,700 2,700 Miscellaneous Others - 1, ,294 4,859 Total Revenues 187, , , , , , , , , , ,664 Expenditures Hydro 4,307 3,902 2,894 6,001 6,000 6,120 6,242 6,367 6,495 6,624 6,757 Administration 8,834 12,808 12,609 9,123 3,450 3,519 3,589 3,661 3,734 3,809 3,885 Telephone 1,041 1,289 1, ,005 1,025 Miscellaneous - Courier Miscellaneous - Provision Reserves ,859 Misc. Service OIC Treat. 103, , , , , , , , , , ,887 Misc. Ser. OIC Dist. 4,497 4, Misc. Serv. Prof.Adv , Misc. Serv. Others 32,876 6,196 6,800 2,579 3,500 3,570 3,641 3,714 3,789 3,864 3,942 Misc. Serv. Bakoe & Op Misc. Cxl Water Charge 1, Misc. Service ORO 12,573 12,879 13,210 21,418 24,040 24,521 25,011 25,511 26,022 26,542 27,073 Rental Equipment 6,826 1, ,200 1,224 1,248 1,273 1,299 1,325 1,351 Insurance Build. - Treat. 1,214 1,240 1,125 1,003 1,125 1,148 1,170 1,194 1,218 1,242 1,267 Insurance Build. - Distrib. 1,214 1,240 1,125 1,003 1,125 1,148 1,170 1,194 1,218 1,242 1,267 Insurance Liability - Treat Insurance Liability - Distrib Travelling 3,598 1,759 2, ,000 2,040 2,081 2,122 2,165 2,208 2,252 Subscription Assoc Subscription Certific 115 2, Supplies Operations - Treatment 3, Supplies Operations - Distrib. 2, ,000 1,020 1,040 1,061 1,082 1,104 1,126 Buying Equipment 7,193 18,231 36, ,643 Maintenance 17,385 17,597 1,196 7,149 20,707 21,121 21,544 21,974 22,414 22,862 23,319 Amortization Expenses - Treatment 38,109 38,021 38, Amortization Expenses - Distrib. 17,434 3,682 3, Operating Cost Subtotal 270, , , , , , , , , , , Wastewater System The Township s annual operating budget for wastewater includes costs related to the following: Wastewater Treatment Plant operations and distribution. Water capital expenditures. Sewer cover maintenance. Transfers to the wastewater capital reserve. Transfers to capital to undertake the annual capital improvement projects. The following assumptions were made for projecting the gross costs and rate revenues over the period from 2015 to 2020, using 2015 as the base budget year (see Appendix G): The annual operating costs for wastewater treatment and distribution would increase by 2.0% per year. There is no debt financing for the period. Any year-end surplus would be transferred to the operating reserve at the end of the year and returned to the operating budget as revenue in the subsequent year. Interest earned by the reserve funds would remain in the respective reserve. Revenues are composed of user fees, miscellaneous sewer fees, and capital reserves. Capital projects for wastewater in the period are shown in Appendix F. Table 3.3 condenses the gross operating costs and net costs to be recovered from the annual flat user wastewater rate. 10 P age

12 Table 3-3: O&M Cost Projections (Wastewater Only) Revenues Current User Fees Sewer Revenue 36,680 41,442 66,916 58,844 69,946 72,743 75,653 78,679 81,827 85,100 88,504 User Fees Water/Sewer Sup Interest on Wastewater Charges Reserves Miscellaneous Reserves to Revenue 21,429 23,974 Total Revenues 38,070 41,820 67,825 81,492 94,750 73,543 76,453 79,479 82,627 85,900 89,304 Expenditures Sewer - Travel Train 4, ,708-1,075 1,097 1,118 1,141 1,164 1,187 1,211 Sewer - Subscription Certific Sewer - Salaries 4,998 12,330 12,780 4,516 3,450 3,519 3,589 3,661 3,734 3,809 3,885 Insurance Build/Cont 1,618 1,654 1,500 1,338 1,500 1,530 1,561 1,592 1,624 1,656 1,689 Insurance Liability Supplies Operations 1, , ,500 8,670 8,843 9,020 9,201 9,385 9,572 Supplies P/R Supplies Postage Phone Cellular Supplies Fuel Maintenance Contract CPU 812 1, Maintenance Outside Force ,448 5,178 1,382 11,200 11,424 11,652 11,886 12,123 12,366 12,613 Misc. Service Courier Misc. Service Hydro 2,741 3,492 3,260 3,438 3,550 3,621 3,693 3,767 3,843 3,919 3,998 Misc. Service ORO 15,000 15,264 2,544 25,000 24,000 14,000 14,280 14,566 14,857 15,154 15,457 Misc. Servi.Prof. Adv ,500 1,530 1,561 1,592 1,624 1,656 1,689 Misc. Serv. Bako & Ope Heavy Equipment Rental Equipment 2,447 5,525 5,076 2,466 2,000 2,040 2,081 2,122 2,165 2,208 2,252 Miscellaneous Provision Reserves ,224 19,664 Miscellaneous Cxl Sewer Charge 1,402 2, Amortization Expense 90,612 54,164 54, Operating Cost Subtotal 128, ,013 90,211 66,378 80,250 51,318 52,344 53,391 54,459 55,548 56,659 CAPITAL FORECAST The capital program includes amounts required for life cycle asset replacement or renewal. For the period the TCA projects have been incorporated into the capital improvement plan. The capital needs have been inflated using the MCI of 2.40% (Appendix E). REVENUE PROJECTIONS Each year, the Township amends its fees and charges to customers such that the annual costs are recovered in the water system. The Township presently have 321 connections. There is a flat rate user fee charged to 362 active customers and a water capital charge of $50 per customer that is applied to 415 active and inactive customers. For the purposes of this financial report the water capital charge would remain constant as these have not been increased over several years. The rates must be set to cover both operational and capital program costs. Rates were developed by applying the required percentage increase to each year, as compared to the previous year. The projected rate increases start in 2015, and continue to Table 3-4 Flat Rates Fees Inflated in $ ( ) Actual Budget Forecast Description Proposed Water Residential Rate Proposed Water Capital % Increase in Water Rates -4% 13% 6.9% 5% 5% 5% 5% 5% 5% % Increase in Water Capital 250% 0% 0% 0% 0% 0% 0% 0% 120% Water Capital Rate 9,460 23,604 22,944 20,925 20,925 20,925 20,925 20,925 20,925 24,900 The current annual fee at February of 2014 is $ Also the water capital rate from 2014 is $50. The table 3-4 shows that the percentage increase in water rates ranges from -4% in 2012, 11 P age

13 13% in 2013, and up to 6.9% in For the period , a flat user rate increase of 5% is applied, compared to the previous year. The annual revenue for each was projected by increasing prior year s flat rate user fees to offset the annual costs plus annual surplus each year. The projected annual revenue for water are summarized in Table 3-5. Table 3-5 Revenue Projections Water ( ) Actual Budget Forecast Description Revenue from flat rate 162, , , , , , , , , ,954 Water Capital Rate 9,460 23,604 22,944 20,925 20,295 20,295 20,295 20,295 20,295 24,900 Total Water Revenue from flat rate 172, , , , , , , , , ,854 These show annual revenues increasing from $219,384 in 2014 to approximately $291,000 in Likewise, each year, the Township amends its wastewater rate fees and charges to customers such that the annual costs are recovered in the wastewater system. The forecast annual wastewater rate fee is shown on Table 3-6. Table 3-6 Flat Wastewater Rates Fees in $ Projected ( ) Actual Budget Forecast Description Proposed Wastewater Residential rate % Increase in Wastewater Rates 60% -16% 20% 4% 4% 4% 4% 4% 4% The current annual fee at February of 2014 is $ The table 3-6 shows that the flat user rate ranges from 60% increase in 2011, 16% decrease in 2013, and went up again to 20% in For the period , a flat user rate increase of 4% is applied. The annual revenue for each was projected by increasing prior year s flat rate user fees to offset the annual costs plus annual surplus each year. The projected annual revenue for wastewater are summarized in Table 3-7. Table 3-7 Revenue Projections Wastewater ( ) Actual Budget Forecast Description Revenue from flat rate 41,442 66,916 58,844 69,946 72,743 75,653 78,679 81,827 85,100 88,504 These show annual revenues increasing from roughly $70,000 in 2014 to $88,504 in DEBT REPAYMENT The Township does not have existing external debt related to water and wastewater systems for the period. The Township wants to keep a no-debt policy agenda in place. If new debt is required in the upcoming years for major capital projects, the Township intends to depend on user fees and reserves. WATER AND WASTEWATER RESERVES As noted in Table 3.5 and 3.7, the revenue increases over the forecasted period create an annual surplus that would be transferred to the water and wastewater operating reserves at year-end and returned to the operating budget as revenue in the following year. The opening balance of the water capital reserves will be the ending balance in 2013, and it is for $13,532. This reserve balance is projected to range between $13,532 in 2014 and $127,209 in The projected 12 P age

14 transfers to and from the water and wastewater reserves are shown in Tables 3-8 and 3-9. For projections purposes, ISI used a 4% rate or return per annum on the reserve fund balance. Table 3-8 Water Capital Reserve Description Opening Value 13,532 13,532 18,528 28,323 44,463 67,826 97,188 Transfer to Operating - 4,455 9,054 15,007 21,584 26,649 30,021 Transfer to Capital Close Balance 13,532 17,987 27,582 43,330 66,047 94, ,209 Interest ,133 1,779 2,713 3,888 Table 3-9 Wastewater Capital Reserve Description Opening Value 14,494 14,494 38,189 64,790 94, , ,258 Transfer to Operating - 22,226 24,109 26,088 28,168 30,352 32,645 Transfer to Capital Close Balance 14,494 36,720 62,298 90, , , ,903 Interest - 1,469 2,492 3,635 4,907 6,318 7,876 Likewise, the wastewater capital reserve, as of December 2013, is $14,494. The reserve balance of the wastewater capital reserves is projected to range between $14,494 in 2014 and $196,903 in TANGIBLE CAPITAL ASSET (TCA) ANALYSIS The Township s PSAB 3150 TCA was used to develop the financial material related to the following water and wastewater assets: Treatment plant assets including the land, buildings and equipment. A breakdown of the equipment of the water treatment plant is necessary to determine the depreciation expense of every component instead of taking one historical cost. Linear assets such as watermains, valves, hydrants and service connections were taken into consideration. Likewise, for wastewater, sewer covers, sewer liner assets, pumping stations were considered as well. The useful life of the assets was taken from the TCA policy and corroborated with engineering experience. TCA policy was followed for the amortization of new assets and straight line depreciation was used at the beginning of the year of acquisition. Fully depreciated assets are being used with no asset removals. New assets were acquired for the water and wastewater system in period. Table 3-10 TCA (Water Only) TCA Historical 2,754,096 2,953,981 3,003,082 3,054,412 3,107,066 3,160,894 Cost 3,217,907 Acquisitions 199,885 49,101 51,330 52,654 53,828 57,013 66,393 Disposals Closing TCA Balance 2,953,981 3,003,082 3,054,412 3,107,066 3,160,894 3,217,907 3,284,300 Accumulated Amortization (Begin.) 1,915,994 1,957,697 2,004,397 2,052,016 2,100,105 2,148,679 2,197,745 Amortization Expense 41,703 46,700 49,155 51,722 54,354 57,046 59,896 Accumulated Amortization (Ending) 1,957,697 2,004,397 2,053,552 2,105,274 2,159,628 2,216,674 2,276,571 Net Book Value 996, ,685 1,000,860 1,001,792 1,001,266 1,001,233 1,007, P age

15 The TCA consolidated information is summarized in Tables 3-10 and The current book value of the water assets is about $996,284 increasing to $1,007,729 by Therefore, the water system would be 69% depreciated by This suggests the assets are approaching to their useful life expectancies. Table 3-11 TCA (Wastewater Only) TCA Historical Cost 3,405,824 3,420,324 3,420,324 3,420,324 3,420,324 3,420,324 3,420,324 Acquisitions 14,500 Disposals Closing TCA Balance 3,420,324 3,420,324 3,420,324 3,420,324 3,420,324 3,420,324 3,420,324 Accumulated Amortization (Begin.) 3,284,593 3,338,757 3,392,921 3,399,123 3,405,325 3,411,527 3,417,729 Amortization Expense 54,164 54,164 6,202 6,202 6,202 6,202 2,595 Accumulated Amortization (Ending) 3,338,757 3,392,921 3,399,123 3,405,325 3,411,527 3,417,729 3,420,324 Net Book Value 81,567 27,403 21,201 14,999 8,797 2,595 - The current net book value of the wastewater assets is $81,567 decreasing to $0 by Therefore, the wastewater system would be fully depreciated by LEAD PIPE REPLACEMENT The Township water supply system has no lead pipes. The water system is constantly tested for lead and other impurities and tests results show no lead contamination exists in the system. 4 WATER / WASTEWATER FINANCIAL PLAN The financial plan guidelines were used to select the method for preparing the Township of Dubreuilville Drinking Water/Wastewater System Financial Plan. These steps include the determination of the current period expenses and forecast future period expense; determination and forecasting capital expenditure needs; the identification of all current revenue sources and forecast revenues; and the preparation of the financial statements. For the current expenses, three categories were included for the purpose of this financial plan: operating costs, interest, and amortization. The current period operating expenses were determined from the Township s 2014 unofficial budget, which also included expense details for the years 2010, 2011, 2012, and Further information relating to the assumed rates of increase for future operating expenses can be found in the Notes to the Financial Plan. In the event that the Township should determine that there is a need to incur new debt, then the forecasted interest expense will require revision. The annual amortization expenses were calculated using the straight-line method and were based on PSAB information provided by the Municipality, as well as the estimated useful lives and historic costs of the assets. Last but not least, the capital expenditures and the useful lives of all the assets included in the projections were provided by the Township. STATEMENT OF FINANCIAL POSITION The Statement of Financial Position shows the assets, liabilities, and accumulated surplus of the Township s water and wastewater systems. The net financial assets/debt is defined as the difference between financial assets and liabilities; which provides an indication of the system s future revenue requirement. Appendix A indicates that from 2014 to 2020, the net financial asset position of the Township s water system is expected to increase from $18,488 in 2014 to a net 14 P age

16 financial asset position of $125,259 in In addition to this, the total change in net financial asset has an asset position of $81,225. A net financial asset position means that the financial assets are greater than liabilities, and it implies that enough resources exist in the system to finance future operations within the time period of these projections. The tangible capital asset balance is another important indicator. Generally, an increase in the tangible capital asset balance indicates the acquisition of assets either through purchase by the municipality or contribution/donation by a third party. A decrease in the tangible capital asset balance can indicate a disposal, write down, or use of assets. A use of assets usually results in an increase in accumulated amortization where annual amortization expenses arise as a result of allocating the cost of the asset to operations over the asset s useful life. Also, in Appendix A, the net financial asset position of the Township s wastewater system is expected to increase from $14,013 in 2014 to a net financial asset position of $177,601 in In addition to this, the total change in net financial assets has an asset position of $130,943. Finally, Appendix A shows that tangible capital assets for the wastewater system are expected to decrease by $118,636 over the 6-year forecasted period. STATEMENT OF OPERATIONS The Statement of Operations is a summary of the revenues and expenses generated by the water and wastewater systems for a given period. The annual surplus/deficit determines whether the revenues generated were enough to meet the expenses incurred and in turn, whether net financial assets have been maintained or depleted. The Statement of Operations (Appendix B) shows an annual surplus in 2014 of $ 247,386 increasing to an annual surplus of $258,146 in Similarly, accumulated end of year surplus is projected to increase from 2014 to An annual surplus provides sufficient funding to manage non-expense costs such as tangible capital asset acquisitions, reserve/reserve fund transfers and debt principal payments. The accumulated surplus/deficit is a significant indicator that measures whether the available net resources are enough to provide future water services. An accumulated deficit means that resources are insufficient to provide for such services. As a result, borrowing or rate increases are needed to finance annual deficits. From Appendix B, it can be seen that the water financial plan proposes to add $280,873 to a 2013 accumulated surplus of $852,115 over the forecasted period. This accumulated surplus, as indicated in Appendix B, primarily comprises reserve and reserve fund balances as well as historic investments in tangible capital assets. In addition to this, the wastewater system in Appendix B provides an annual deficit forecasted to increase from an annual deficit of $39,664 in 2014 to an annual surplus of $30,050 in The accumulated surplus/deficit is a significant indicator that measures whether the available net resources are enough to provide future water services. An accumulated deficit means that resources are insufficient to provide for such services. As a result, borrowing or rate increases are needed to finance annual deficits. From Appendix B, it can be seen that the wastewater financial plan proposes to increase approximately $42,357 to a 2013 accumulated deficit of $135,244 over the forecasted period. STATEMENT OF CHANGE IN NET FINANCIAL ASSETS/DEBT The Statement of Change in Net Financial Assets/Debt indicates whether the revenue generated was sufficient to provide for operating and non-financial asset costs such as prepaid expenses, inventory supplies, tangible capital assets, etc. This Statement explains the variance between the annual surplus/deficit and the change in net financial assets/debt for the period. The Statement 15 P age

17 of Change in Net Financial Position (Appendix C) indicates that tangible capital asset acquisitions (net of amortization) exceeds the forecasted accumulated annual surplus for 2014 through 2020, resulting in a decrease in net financial assets. A decrease in the net financial assets decreases the opportunity for a long term plan of funding tangible capital asset acquisitions through accumulated surplus (i.e. reserves and reserve funds). As noted in the Statement of Financial Position, the total change in net financial asset has a net asset position of $130,943. This implies that enough resources exist in the system to finance future operations through an accumulated surplus such as revenues or reserve funds. A split of 50% of net financial assets were made for water and wastewater system. The net financial assets for water and wastewater at the end of 2013 were $28,026. Equally, in Appendix C for the wastewater system, it indicates that tangible capital asset acquisitions (net of amortization) exceeds the forecasted accumulated annual surplus for In each of the other forecast years, forecasted annual surplus exceed forecasted tangible capital asset acquisitions resulting in a decrease in net financial assets. This implies that enough resources exist in the system to finance future operations in that year. STATEMENT OF CASH FLOW The Statement of Cash Flow is a summary of the way in which the water system is projected to generate and use cash resources during the planning period. The transactions that provide/use cash are categorized such as operating, capital, investing, and financing activities as shown in Appendix D. Since this statement focuses on the cash aspect of these transactions it is the linkage between cash and accrual based reporting. Appendix D illustrates that cash from operations will fund capital transactions (i.e. tangible capital asset acquisitions), pay down any debt, and build enough reserve funds over The financial plan projects the cash position of the Township s water system to decrease from a balance of $0 at the beginning of 2014, to a surplus position just under $110,000 by the end of Similarly, in Appendix D for the wastewater system, the Statement of Cash Flow illustrates that cash from operations will fund capital transactions (i.e. tangible capital asset acquisitions), pay down any debt, and not build enough reserve funds over period. The financial plan, projects the cash position of the Township s wastewater system to increase from a deficit balance of approximately $210 at the beginning of 2014 to a surplus balance of $162,049 by the end of NOTES TO FINANCIAL PLAN The financial plan format above approximate the full accrual format, however the financial plan is not an audited document and contains various estimates. In order to show a balanced financial plan in full accrual format for the Township, some items have been estimated. The assumptions used have been documented below. CASH, RECEIVABLES AND PAYABLES Opening cash balances are necessary to complete the Statement of Cash Flows and balance the Statement of Financial Position. Actual information of cash balances in the water and wastewater systems may not be fully found in the Municipality s ledgers. Therefore, one possibility is to assume opening cash balances equal ending reserves and cash funds from previous year. 16 P age

18 Historical water account receivables and payables were identified by the Town s staff, which were used to project system cash, receivable and payable balances throughout the forecast period. A split of 50% of account receivables were made for water and wastewater system. The account receivable for water and wastewater at the end of 2013 was $11,937. A multiplier equal to the average 2013 and 2012 ending Accounts Receivable balances as a percentage of revenues was calculated and then applied to projected revenues in each year of the forecast period to determine annual Accounts Receivable balances. Similarly, projected accounts payable were valued based on a multiplier equal to the average 2013 and 2012 ending Account Payable balances as a percentage of expenditures. DEBT The outstanding water-related debt at the end of 2013, in terms of accounts payable and accrued liabilities was determined to be $0. A water tank and a reservoir mixer will be acquired by This is considered in the capital budget. DEFERRED REVENUE Deferred revenue is made up of gas tax reserve and water development charge reserve fund balances which are considered to be a liability for financial reporting purposes until the funds are used to emplace the works for which they have been collected. TANGIBLE CAPITAL ASSETS (TCA) The amortization of existing assets is a non-cash annual cost that mirrors the annual use of assets until the end of their respective useful lives. It should be distinguished that since amortization is based on the historical cost at the time the asset was placed in service, it does not account for inflation since the year of installation. Therefore replacement cost estimates based on indexing historical costs to the replacement year are used for projecting future asset replacement costs. The Township s PSAB 3150 TCA data was used to develop the financial information an asset replacement forecasts related to the Water system. The TCA projections are based on the following: Amortization is calculated based on using the straight-line approach with no amortization in the year amortization in the year of acquisition or construction. The Town staff provided the useful life on acquisitions. Write-offs are assumed to equal $0 for each year in the forecast period. Tangible capital assets are shown on a net basis. It is assumed that disposal occur when the asset is being replaced. Gains/losses on disposal are assumed to be $0. Residual value is assumed to be $0 for all assets contained within the forecast period. Contributed Assets, are deemed to be insignificant or unknown during the forecast period and are therefore assumed to be $0. The summary of balance of tangible capital assets is presented in presented in Tables 3.10 and P age

19 INTEREST EARNED Interest earned, represents the interest earned on the Township s bank account. OPERATING EXPENSES Capital expenditures not meeting the definition of tangible capital assets are classified as operating expenses and are expensed in the year in which they occur. OTHER REVENUE Other revenue includes interest, service, charges, connection fees, penalties and other nonoperating general revenues. ACCUMULATED SURPLUS Accumulated Surplus for the initial year of the forecast period is reconciled as follows: Water 2014 Opening Reserve Balance Reserves 14,494 Total Reserves Balance 14,494 Less Debt Obligations and Deferred Revenue - Add Adjustments for TCA (2013) 838,102 Total Opening Balance 852,596 Add Contributions to/(from) Reserves and interest 3,994 Add Transfers from Reserves - Total Change in Reserves 3,994 Add Capital Assets Purchased (net of disposals) 199,885 Amortization of Capital Assets (41,703) Total Changes in TCA 158,182 Less New Debt - Total Ending Balance 1,014,772 Likewise, the Accumulated Surplus for the initial year of the wastewater system is reconciled as follows: Wastewater 2014 Opening Reserve Balance Reserves 13,532 Total Reserves Balance 13,532 Less Debt Obligations and Deferred Revenue - Add Adjustments for TCA (2013) 121,231 Total Opening Balance 134,763 Add Contributions to/(from) Reserves and interest 481 Add Transfers from Reserves - Total Change in Reserves 481 Add Capital Assets Purchased (net of disposals) 14,500 Amortization of Capital Assets (54,164) Total Changes in TCA (39,664) Less New Debt - Total Ending Balance 95, P age

20 6 RECOMMENDATIONS As presented in this report, capital and operating expenditures have been identified and forecasted over a six-year period for the water/wastewater rate service consistent with the requirements of O. Reg. 453/07 and SWSSA. While a financial plan is mandatory, the Township should rely on the information contained in the 2015 Water/Wastewater Rate Study because it is establishes the Township s requirements in the long-term. Our recommendations are as follows: The Township approve the full cost recovery rates set out in Tables 3-4 and 3-6, to provide a self-sustainable water/wastewater infrastructure consistent with O. Reg. 453/07 and SWSSA for the forecasted period. Once the Council approves the financial plan, it should be submitted to the Ministry of the Environment, satisfying the requirements under the Safe drinking Water Act. The Township continue to revise the Water Rate By-Law every five years as per provincial requirements. 7 PROCESS FOR APPROVAL AND SUBMISSION The requirement to prepare the Financial Plan is provided in Section32 (5) 2 ii of the SDWA. Proof of the preparation of a financial plan is one of the submission requirements for municipal drinking water licensing, and upon completion must be submitted to the Ministry of the Environment. As part of O. Reg. 453/07. The process established for approval of the plan, public circulation, and filing is provided as follows: 1. The financial plan must be approved by resolution of the municipality who owns the drinking water system, or the governing body of the owner (O. Reg. 453/07, Section 3 (1) 1). 2. The owner of the drinking water system must provide a notice advertising the availability of the financial plan. The plan must be made available to the public upon request and free of charge. The plan must also be made available to the public on the municipality s website (O. Reg. 453/07, Section 3 (1) 5). 3. The owner of the drinking water system must provide a copy of the financial plan to the Director of Policy Branch, Ministry of Municipal Affairs and Housing (O. Reg. 453/07, Section 3 (1) 6). 4. The Council Resolution approving the financial plan shall be submitted to the Ministry of the Environment as part of the application for a municipal drinking water license (SDWA, Section 32 (5) 2 ii). All of which is respectfully submitted, Infrastructure Solutions Inc. Per: Neil Roberts President Infrastructure Solutions Inc. 19 P age