November 17, 1998
To:Budget Committee
From:Chief Administrative Officer
Subject:Water Services
1999 - 2003 Capital Works Program
Purpose:
The report presents a 1999 - 2003 Capital Works Program for Water Services and
recommends for approval projects and cash flow for 1999. The report also summarizes the
various issues and challenges currently faced by the program.
Financial Implications:
Approval of the 1999 capital component of the recommendations will add $78.171 million in
gross capital expenditures to the 1999 Capital Budget and will encumber a cashflow of
$13.803 million in 2000; $6.289 million in 2001; and $131 thousand in 2002.
Approval of the recommendations will save $3.368 million in operating costs in 1999, $3.783
million in 2000, $6.352 million in 2001, $7.670 million in 2002, and up to $7.637 million in
2003 once expected savings from the Best Practices Program are fully realized.
Recommendations:
It is recommended that:
(1)The 1999 - 2003 Capital Works program of Water Services Division of $526.175 million
as outlined in Appendix A and Appendix B be received.
(2)The 1999 Capital Budget for Water Services consisting of 18 projects as recommended in
Appendix A totalling $98.394 million consisting of 1999 cash flow of $78.171 million, 2000
cash flow of $13.803 million, 2001 cash flow of $6.289 million, and 2002 cash flow of $131
thousand be approved.
(3)The 1999 Capital Budget for Water Services consisting of 70 sub-projects as
recommended in Appendix B be approved.
(4)The Water Efficiency Study in the Engineering Studies Project be undertaken jointly with
the Finance Department and such study include both wholesale and retail rate analysis.
(5)The funding for the Revenue Metering Study in the Engineering Studies Project ($55
thousand) be deferred until 2000, at which time a detailed business case can be prepared to
accompany the request.
(6)For the Water Efficiency Project, although the Standing Committee has deferred
consideration of the policy decision regarding Water Efficiency Kits, funding be maintained in
the program pending a final Council decision in regards to the Universal Metering Program
and the Water Efficiency Program.
(7)The McPherson, Davenport to Darnel Water Main ($3.338 million) in the Distribution
System Improvements Project be retained in the program subject to the presentation of a
revised business case.
(8)The expenditure for the Valve Chamber Cover Replacement Project be transferred to the
1999 operating budget.
(9)The total authorized funding for the Dufferin Water Main be rescinded to a level of $9
million.
(10)For the Water Main Reconstruction and Rehabilitation Project:
(a) although a policy decision regarding the Universal Metering Program is still subject to
Council approval, funding be retained in the estimates. Authorization to spend is however,
contingent upon final Council approval; and
(b)as part of the Infrastructure Needs Assessment activity included in this project, staff report
back to Budget Committee regarding a long term plan addressing requirements, timing of
expenditures, and funding implications.
(11)the Chief Financial Officer and Treasurer confirm amounts identified as future years'
commitments and report back to Budget Committee.
Discussion:
Water Services has requested a five year capital program with 26 projects totalling $542.229
million in gross expenditures and cash flow requirements over the five year period. The chart
in Appendix D(i) compares the 1998 - 2003 expenditure request.
The previous five year program of Water Services (1998 - 2002) contained 26 projects
totalling $345.986 million in gross expenditure and cash flow requirements over the forecast
period. The current five year program has increased by $196.243 million or 57% over the
previous five year program. The increase stems largely from the District Watermain
Rehabilitation and Replacement Project ($141.6 million), the Horgan Filtration Plant
Expansion ($36 million), the Clark Residue Management Project ($8.4 million) and the Plant
Process Additions Project ($5.3 million).
In order to meet the challenges of managing the capital program, the Finance Department
proposed a preliminary 1999 target of $69.7 million gross. The target was based primarily on
historical averages and projected 1999 program requirements arising from prior year project
commitments. The target has now been revised to reflect the transfer of $8 million from the
operating budget for water main relining & reconstruction and water service repairs. The
revised target total is therefore $77.7 million and the resulting requested increase over the
target is $11.3 million. The table in Appendix E(i) outlines the 1999 Program Request
Compared to Target. The main reasons for the variance are: $2 million resulting from a carry
forward from 1998, and increases from various projects such as Best Practices ($6.31 million),
Universal Metering ($6.14 million) and Distribution System Improvements ($5.663 million).
Offsetting these are reductions of $1.793 million for Electrical Equipment Replacement,
$1.885 million for the Markham/Sheppard to Bayview/Finch Water main and $3.768 million
for the Dufferin/Finch Water main.
The Chart in Appendix E(ii) provides a breakdown of the 1999 gross expenditure request by
project category. 50% of the 1999 capital program request pertains to Asset Rehabilitation and
Asset Replacement projects. The remaining amount is required for Service Improvements and
Growth.
Approval of the 1999 capital project requests totalling $78.171 million would also impact in
future years. This impact totals $20.2 million over the 2000 - 2003 forecast period as follows:
$13.803 million in 2000; $6.289 million in 2001; and $131 thousand in 2002. These
projections include approximately $1.317 million for Equipment Replacement and
Rehabilitation, $1.978 million for Additional Pumping Equipment, $3.318 million for
Markham/Sheppard to Bayview/Finch Water main, $1.237 million for Harris Improvements,
$7.698 million for Warden Danforth Water main, $2.067 million for Best Practices, $133
thousand for Engineering Studies, $656 thousand for Distribution System Improvement, $296
thousand for the Security Protection Program, $750 thousand for Remote Meter Reading,
$1.241 million for Harris Residue Management, $42 thousand for Toronto Island
Winterization and $38 thousand for the Filtration Plant Process . The table in Appendix D(ii)
outlines the 1999 Program Summary and Future Year Impact of the 1999 request.
After a careful review and analysis by the Finance Department, Budget Services Division, it is
proposed that 18 projects totalling $95.262 million with 1999 cash flow of $78.171, 2000 cash
flow of $13.803 million, 2001 cash flow of $6.289 million, and 2002 cash flow of $131
thousand, be approved. Further detail and analysis on future years' commitments are needed.
Operating savings resulting from the 1999 recommended program are projected at $3.4
million in 1999 and increase to $7.0 million in the year 2003. These are largely from the full
implementation of the Works Best Practices Program off-set by increases in other costs.
Appendix A highlights those projects recommended for approval as compared to the program
request while Appendix B highlights the sub-projects. Appendix C provides a detailed
explanation of the adjustments made to the original submission in order to arrive at the
recommended budget. This schedule will be used by the Budget Services Division to track
subsequent adjustments and amendments resulting from the political reviews.
Analysis:
The review considered the priority of projects as requested by the program with particular
emphasis on health and safety issues, followed closely by next prioritizing Asset
Rehabilitation and Asset Replacement projects. Service Improvements and Growth/Expansion
projects are only recommended when resulting in efficiencies or when cost shared.
The 1999 recommended gross budget of $78.171 million is $10.824 million lower that the
request of $88.995 million and $471 thousand above the revised target. The reductions from
the request are noted below:
a.$55 thousand relates to the deferral of funding for Revenue Meter Study;
b.$48 thousand relates to the funding transfer to the operating budget for the Valve Chamber
Cover Replacement Project;
c.$5.399 million relates to the deferral of cashflow to future years for the Best Practices
Program;
d.$1.009 million represents the revision to cost estimates and deferral of work to future years
for the Water Efficiency Program;
e.$69 thousand represents the revision to cost estimates for the New Water Mains Districts
Program;
f.$2.387 million relates to the revision to cost estimates and deferral of work to future years
for the Water Main Replacement and Rehabilitation Program;
g.$1.527 million relates to the revision to cost estimates and deferral of work to future years
for the Island Winterization Program; and
h.$330 thousand relates to the revision to cost estimates and deferral of work to future years
for the Horgan Expansion Program.
It should be noted that, although captured corporately, the costs for the Year 2000 Compliance
Project have not been included in the 1999 request. The projections for this initiative amount
to $13 million in total between both Water and Wastewater. Staff have advised that they are
currently reviewing this amount. It is recommended that, prior to the approval of the Capital
Program, the General Manager of Water and Wastewater and the Chief Financial Officer and
Treasurer report to the Budget Committee on the financial implications of incorporating this
cost into the 1999 Water and Wastewater capital estimates.
Conclusions:
The Water Services Capital Works Budget includes projects that are ongoing in nature and
allow the City to maintain and marginally improve its aging infrastructure. Approval of the
1999 recommended expenditures will permit the continuation of the Best Practices Program
which will render operations more efficient in the future. Also many projects will proceed
which are required to maintain a state of good repairs. Finally, the Program will also permit
the study of various water efficiency initiatives intended to conserve and therefore avoid
additional infrastructure costs in the future.
Contact Names:
Robin Richardson, 397-4202
Carmela Romano, 392-5053
Shekhar Prasad, 392-8095
Wanda Liczyk, 392-8773
Finance Department
Michael R. Garrett
Chief Administrative Officer
/rr
Attachments:
Appendix ARecommended Budget by Project
Appendix BRecommended Budget by Sub-project
Appendix CSummary of Budget Review Process
Appendix DAnalysis of Program Requests
Appendix EProgram Request Compared to Target
