Municipal Monitor - March/April 2008 - (Page 9)

step. It’s an important step, but it is just a step.” For some Ontario municipalities the deadline to comply with the regulation comes as early as January 2009. It is by this date that larger municipalities need to have taken five of the six necessary steps to acquire a licence to provide water services. Smaller municipalities will have slightly more time. Regulation 188 of SDWA outlines a timetable for all Ontario municipalities to apply for their licences between January 2009 and July 2010. Although it may be the most important part of the process, the financial plans do not have to be submitted until July 2010, or six months following the application of a licence, whichever is later. This is because in June 2006, the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants approved new municipal financial accounting and reporting standards requiring that tangible capital assets, including water and wastewater systems, be included in municipal financial statements. The new accounting standard comes into effect on January 1, 2009, and the first financial statements reflecting this change are anticipated no later than May 31, 2010. Bhardwaj explains that it made sense to make sure municipal accounting methods first make a smooth transition to the new PSAB standard before submitting financial plans to the MOE. Otherwise, the MOE would be receiving a mixture of plans based on old and new accounting methods. Regulation 453 also stipulates the owner of the drinking water system must: • make the financial plans available, on request and without charge, to members of the public who are served by the drinking water system; • make the financial plans available to members of the public without charge through publication on the Internet, if the owner maintains a website on the Internet, and provide March/April 2008 notice advising the public of the availability of the financial plans. To help prepare cost recovery plans, many municipalities hire outside consultants, such as Watson & Associates Ltd. of Mississauga. Watson & Associates has 250 clients nationwide. According to the company website, there are several steps that must be taken in preparing the cost recovery plan. These include: • analyzing the immediate capital needs for infrastructure replacements and growth-related needs and how to finance them; • looking at longer term needs – up to 80 years – and developing life cycle replacement costs for the infrastructure and determining how much money needs to be reserved for those replacement costs; • assessing the costs of the water and sewer systems, including operating, inflation, growth, capital and debt carrying charges. range financial plan. Most (municipalities) are doing fine right now, but have a looming $15 to $20 million expense out there.” For larger communities, he says, that would work out to approximately $20,000 to $30,000 per customer, whereas in smaller municipalities it’s more like $30,000 to $40,000. Scandlan uses the analogy of buying a new car. It’s a major expense for an individual and while there are regular maintenance and repair expenses for that car, it is expected to last the owner several years. It may last eight years, or it may last 18 years, depending on various factors. But it will, eventually, need to be replaced and somehow the replacement will need to be paid for. “With younger systems you have more time to build up reserves and invest it,” he says. “For older systems you may not have 40 years to plan.” Scandlan says municipalities would benefit from having their water “It is unclear, the extent to which municipalities are currently providing adequate resources to support their water systems.” Gary Scandlan, associate director with Watson & Associates, is former manager of economic analysis and policy development with the Region of Halton and former supervisor of capital programs for the Region of Hamilton-Wentworth. He says most Ontario municipalities are doing an adequate job financing year-to-year operations of their water systems, but not all are looking far enough into the future. “When you’re sitting with inventory put in place 80 years ago, you really have to do an evaluation of how things are going to work over the next 80 years,” he says. “You’ve got all this infrastructure that needs to be replaced 20 or 30 years from now and you have to start socking away that money early.” “They have to come up with a long systems undergo a “rationalized engineering review” to see just how much mileage they have left on their systems. “A lot of municipalities have their inventory and most of that information in there. They do have a good handle on what they have, but they haven’t done the engineering of how they are performing.” Regulation 453 itself strongly encourages financial planners to look at the long-term view. “It is recommended that utilities adopt a planning horizon that encompasses the entire life cycle of the asset base when they undertake capital investment planning,” the regulations states. “Using a horizon that encompasses the full life cycle of all assets may not be immediately possible but is a good objective to strive towards over time. In the interim, a planning municipal MONITOR • 9

Table of Contents Feed for the Digital Edition of Municipal Monitor - March/April 2008

Municipal Monitor - March/April 2008 Contents President's Message: Stress and Change Viewpoint: Much Ado About Nothing? Covering the Cost: Tapping into Safe, Sustainable Water and Sewage Services Closed Session Investigations: What Do They Mean for Your Municipality? Subtle Sabotage: Female Bullying Trends in the Workplace Water Under the Bridge Municipal Memos Index to Advertisers

Municipal Monitor - March/April 2008

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