2018-2022 Financial Plan

FINANCIAL PLAN OVERVIEW

Utilities & Recycling Utility user fees form a portion of the levies charged to our taxpayers. The next section provides some insight into these rates. Unlike the General Revenue Fund that includes separate reserves for revenue smoothing, capital purchases and infrastructure replacement, the Water and Sewer Funds use Accumulated Surplus for these purposes. As we start to set funds aside for water and sewer infrastructure replacement it may be worthwhile explicitly earmarking these funds in a reserve in order to be clear about the purpose of these funds. Water and sewer infrastructure have a fairly long life and we are fortunate that our infrastructure is relatively young. That being said, the costs are significant which is why it is important to start building the funds for the eventual replacement.

There are two graphs below. The first shows the revenues and expenditures and the impact this has on accumulated surplus. The accumulated surplus projected is heavily influenced by regional

costs. The second graph shows how the accumulated surplus compares to the

accumulated amortization for City assets. The accumulated amortization is the prorated cost of the portion of assets currently consumed. For example, if the useful life of asset was 50 years and it’s 25 years old the accumulated amortization would be about half of the original cost. The purpose of this graph is to show that we are getting closer to establishing the financial capacity to replace our assets by creating financially sustainable utilities. The region also has significant investments in water and sewer assets that will require replacement which will result in additional funding requirements for each member municipality.

Water Utility Rates The majority of the Water Utility revenue is from the flat rate water levy and charges for metered water assessed to individual properties. These revenues cover the costs associated with water purchases, maintenance and both regional and local capital infrastructure. The 2018 flat rate water fee is approximately $575, half of which is required just for the purchase of water from the region. When setting water rates, we need to consider not only our own planned expenditures and infrastructure requirements, but also those planned by the region. Several years ago, the Regional District had projected rate increases that were very significant with one year as high as 18%. Since that time they have deferred projects and water rates increases were only increased marginally. The municipal rate increase has been set at 4.5% for each of the next five years. This may need to be revisited depending on how quickly the region proceeds with projects that have been deferred. The other consideration is funding the replacement of water infrastructure and how long we take to address this funding gap.

Page 52 of 234