New Crew Costing Causes Questions

The new crew being deployed to help catch up with the backlog of repairs to the water distribution system and how it was financed caused a few questions from Council when they popped up in the Waterworks Utility’s budget documents.

The crew is being financed through $500,000 in savings realized by moving engineering design services in-house instead of paying nine percent of engineering works budgets to outside consultants caused a bit of confusion during budget deliberations.

The new waterworks crew is being deployed to initially catch up on the large backlog of repairs in the utility and then later will be deployed as a construction crew as part of cast iron water main replacement. The current repair backlog is 140 repairs but because of the dynamic number of repairs the expected date of the crew’s conversion is unknown.

During the December 11th special Council meeting focusing on 2020 Budget deliberations Councillor Brian Swanson first asked about the drop in the 2020 reserve contribution in the Waterworks Utility budget.

That budget shows a projected reserve contribution of $2,213,204 down from a 2019 budgeted amount of $3,066,104. The 2020 Waterworks Utility budget for capital reserves is 2,420,976 or a drop of $645,128 (21 percent) from its 2019 budgeted amount.

“The surplus in the Waterworks Utility goes into the capital and I just note that we are reducing our budgetted capital from the wateworks utility by $500,000, $600,000 this year,” Councillor Swanson said.

Finance director Brian Acker said it was to offset the costs of the new crew hired to catch up with the backlog of repairs the Waterworks Utility is facing.

“We are certainly not intentionally reducing it it is because of the increased costs that utility is facing. Part of those increased costs is that new crew it is operating for waterworks so it does force down that reserve contribution but as we have shown as we reduce the capital spend those two years to offset that. Although our reserve contribution might be down we have reduced our capital spend because we have a saving there as we don’t have to pay consultants to do our design,” Acker said.

The City had previously hired it’s own internal engineering design team which reduced costs by $500,000 the savings were transferred to hire a second crew to do water utility repairs. Once the crew catches up on the repair backlog they are to be redeployed as a construction crew on the cast iron wate main replacement program.

It needs to be noted although the backlog of repairs is 140 the number is not static but it is dynamic one. The repair backlog can go up or down given the number of breaks and repairs required.

There is an estimated tipping point, where the number of water main breaks drops due to new cast iron water main replacement, and money can be moved from repairs to replacement now sits at seven years. In 2017, 2018 and 2019 the tipping point was publicly estimated to be five years. The seven years number was mentioned by Mayor Fraser Tolmie as part of the debate surrounding the new Infrastructure Levy.

“So we are basically hiring a crew and not having to pay more for it as we have just reduced the capital contribution to the water utility,” Acker said, adding “we are using the savings from the design team, our internal design team to be able to have an additional crew and I believe that was in the motion Council had approved.”

“So why would we have to reduce the capital contribution budgetted?” Councillor Swanson asked.

Acker said the reduction in the Utility’s capital contribution was spent elsewhere in the budget to pay for the second crew.

“Because if you dont reduce the capital contribution you have spent your money twice. You have spent it in operating for that additional crew and you spent it in capital…You have in effect spent it twice and put additional pressures on the utility, we need to borrow more and we have difficulty meeting our cash requirements,” he said.

“I think that what we are saying is we are getting the same amount of work done for that same dollar because we are not spending nine percent on external engineering and consulting fees,” city manager Jim Puffalt said.

It needs to be noted during debate surrounding implementing a new Infrastructure Levy Councillor Swanson pointed out $600.000 was being removed from waterworks to subsidize the Operating Budget.

He reiterated the point later when the budget was being finalized saying the City was taking funds from all utilities and transferring the money to the Operating Budget so as to hide the true property taxation rate.

“It is budgeted in the year 2020 that $1,225,067 will be paid by water, sewer and garbage customers above the cost of providing that service and those funds are transferred to the Operating Budget to basically subsidize the Operating Budget…the major problem we face in our city is the lack of capital in our utilities and we are taxing our utilities to subsidize the Operating Budget…so we cannot accurately reflect our property taxes the cost of providing services

Later, while finalizing the budget Councillor Chris Warren asked for an explanation of the significant increases in house connections, valves and hydrants.

“I noticed some significant increases to the budgets in 2020 in regards to house connections, to valves and to hydrants…the rationale was the creation of the waterworks crew basically the new waterworks crew that basically was funded by capital and of course had some offsetting savings to our budgets is the reasoning for the three increases in these three line items.,” Councillor Warren said before asking Administration to provide an explaination of the increases.

“What occured in the Waterworks Utility is $497,000 was increased in the various budgets. The intent of that new crew was to do more of that work. You will recall in our quarerly report how many house connections are backlogged and done and that sort of thing so that is why you see an increase in those areas. It was also hoped that new crew would be able to put significant efforts towards valves and hydrants in terms of maintainence of those and work on those so that is why you see increases there,” Acker responded.

The budget showed $180,000 was projected to be spent on valves in 2019 while the 2019 budgeted amount was $121,430. The 2020 Budget calls for $283.271 to be spent on valves an increase of 133.4 percent or $161,941 more than what was budgeted in 2019.

The budget showed $200,000 was projected to be spent on hydrants in 2019 while the 2019 budgeted amount was $182,961. The 2020 Budget calls for $274,638 to be spent on hydrants an increase of 50.1 percent or $91,677 more than what was budgeted in 2019.

The budget showed $85,000 was projected to be spent on house connections in 2019 while the 2019 budgeted amount was $616,587. The 2020 Budget calls for $729,350 to be spent on house connections an increase 18.3 percent or $112,763 more than what was busgeted in 2019.