Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services and Budgets

FROM:

Director of Finance and General Manager of Engineering Services

SUBJECT:

Annual Review of Water Rates for 2001

 

RECOMMENDATION

A. THAT Council approve an increase in water rates for 2001 of approximately 2% as detailed in this Administrative Report dated November 29, 2000:

B. THAT flat rate water connection and removal fees for 2001 (Schedule “A” and Schedule “A.1”) be increased by 5% as detailed in this Administrative Report dated November 29, 2000.

C. THAT Council approve an increase to the building site threshold to $95,000 consistent with the Sewer and Water Course By-law (No. 8093),

D. THAT the Director of Legal Services be instructed to bring forward the necessary amendments to the Water Works By-law for approval, including the rate changes and related revisions in this Administrative Report dated November 29, 2000.

GENERAL MANAGER COMMENTS

The General Manager of Corporate Services and the General Manager EngineeringServices RECOMMEND approval of A, B, C and D.

COUNCIL POLICY

Water rates for both metered and non-metered customers are specified in the Schedules of Rates and Charges included in the Water Works By-law. These schedules are updated annually by Council to establish the following year’s water rates.

PURPOSE

The purpose of this report is to recommend a general increase in water charges for 2001 to fund GVWD and City water system costs.

BACKGROUND

The waterworks distribution system of the City of Vancouver operates on a utility basis, with the City purchasing water from the Greater Vancouver Water District (GVWD) supply system and distributing it to water consumers within the City on a cost-recovery basis, including debt charges.

DISCUSSION

1. 2000 Waterworks Operating Budget

A projection of the 2000 waterworks operating budget is included in Table 1. This projection was developed prior to consideration of the recent labour disruption. An estimate of the impact of the labour disruption is also included.

The Waterworks budget is dominated by Debt charges andWater Purchase costs which account for 87% of total expenditures. The balance of the expenditure budget is variable and is comprised of the cost of operation and maintenance of the water system and of water billing. Prior to consideration of the impacts of the labour disruption, it was anticipated that these expenditures will exceed revenues by approximately $135,900 (0.2%) resulting in a transfer from the stabilization reserve.

The labour dispute did not impact on the delivery of water to our customers. Any cost savings resulting from the labour disruption will be uncertain until year-end because some work delayed by the strike will be completed before the end of the year. Based on aproration of costs, the seven week strike could result in savings of up to $600,000, less any additional costs incurred to maintain services during the strike. As the Water Utility is funded entirely from user fees and is managed separately from the Operating Budget, any surplus that arises from the labour disruption will be transferrd to the WaterRates Stabilization Reserve and will be available to mitigate against fee increases in future years.

Table 1
2001 and 2000 Water Budget Projection

 

2001
Projected Budget

2000
Estimated

Inc/(Dec)

%

Expenditures

        

Debt Charges

$24,042,200

$24,685,600

($643,400)

(2.6)

Water Purchases (GVWD)

24,292,600

22,848,200

1,444,400

6.3

Water Rates Billing

853,700

818,100

35,600

4.4

Operating & Maintenance

6,271,000

6,070,700

200,300

3.3

Total Expenditures

$55,459,500

$54,422,600

$1,036,900

1.9

         

Revenue

        

Flat Rate Revenues

$22,251,100

$21,836,500

$414,600

1.9

Service Charges

$2,096,100

2,055,300

$40,800

2.0

Metered Rate Revenues

$31,248,000

30,394,900

$853,100

2.8

 

55,595,200

54,286,700

$1,308,500

2.4

Transfer from/(to) Reserve

(135,700)

135,900

($271,600)

  

Total Revenues

$55,459,500

$54,422,600

$1,036,900

1.9

2. 2001 Waterworks Operating Budget Projection

Table 1 also summarizes the projection of operating expenditures for the waterworks utility in 2001. The table indicates estimates of City operating and debt costs as well as the cost of purchasing water from the GVWD.

This increase in water rates is driven by the requirement to fund:

· the projected 6.3% increase in GVWD water costs. This increase is a combination of a projected 5.8% increase in GVWD water rates along with a 0.5% projected increase in consumption. The GVWD rates are expected to increase substantially over the nextten years, due to an extensive water transmission capital program to address regional growth, and implementation of the Drinking Water Treatment Program.

· the 3.3% projected salary and inflationary increase in waterworks operations costs.

· the projected 2.6% decrease in the City’s debt required to fund the 2000-2002 Waterworks Capital Plan. This plan included funding for a 1.0% annual waterworks infrastructure replacement program as well as the development of the Dedicated Fire Protection System which will start to increase the City’s total debt level in 2002 and beyond.

This projection indicates that an increase in user fees of 2% would be required to maintain the utility in a balanced postion in 2001. This compares with an increase of 4.9% in 2000 and increases in the 10% range in prior years.

In proposing a 2% increase in water rates for 2001, staff note that there will be increased pressure on water costs in future years as a result of the capital programs being undertaken by the Greater Vancouver Water District and by City debt charges as a result of the increase in the Water Capital Plan. The GVWD Long Range Plan anticipates that water costs will increase by as much as 20% by 2003 as a result of the following capital programs to improve the water delivery system: The Greater Vancouver Water District capital program includes:

The City utilizes the Water Rates Stabilization Reserve as a “shock absorber” to smooth significant year-over-year increases in water expenditures and to stabilize the changes in water rates. The following table summarizes the status of this reserve based on anticipated changes in expenditures to 2005 and on holding water rate increases to 4% after 2001.

Forecasted Water Stabilization Reserve ($ millions)

 

2000

2001

2002

2003

2004

2005

Reserve Balance Beginning of Year

$ 5.59

$ 5.45

$ 5.58

$ 6.23

$ 4.71

$ 5.30

Operating Surplus / (Deficit)

$ (0.14)

$ 0.13

$ 0.65

$ (1.52)

$ 0.59

$ (0.43)

Reserve Balance End of Year

$ 5.45

$ 5.58

$ 6.23

$ 4.71

$ 5.30

$ 4.87

The impact of the proposed water budget and a 2% increase in rates will be to bring the flat water rate for a single family dwelling to $261 per year, up from $256 in 2000. Charges for metered service will also rise by approximately 2% over the 2000 levels.

The proposed fees are included in Appendix A, attached.

3. Other Water Fees and Charges

In addition to consumption based charges, the water bylaw includes fees and charges for a variety of services provided by the City, including service connections fees, unmetered fire service fees and meter installation and service charges. These are detailed in Schedules
A, A.1, C, E and G of the bylaw. It is recommended that all fees, with the exception of connection and removal fees, increase by 2% to accommodate salary and inflationary cost increases anticipated in 2001.

Connection and removal fees are recommended to be increased by 5% to cover the anticpated increase in the cost of labour and materials such as asphalt and fuel.

The proposed fees are included in Appendix A, attached.

4. Related By-law Revisions:

Changes are made to the Water Works By-Law (No. 4848) annually to reflect the water rates established for the coming year. In addition to those changes, two housekeeping items require attention:

a. The definition of a “building site” includes both new construction and major renovations. Major renovations are described as those where the “estimated value of the construction is more than the greater of $65,000 or 100% of the building’s latest assessed value according to the records of the British Columbia Assessment Authority”. The $65,000 threshold has not been revised for many years and does not reflect current market conditions. Therefore, it is recommended that building

b. Effective January 1, 1997, Council eliminated the subsidy for single-family and duplex water services. Full water service fees have been collected since that date, however, Section 18 of the Water Works By-Law still contains reference to the previous 50% subsidy. Therefore, the reference to the subsidy needs to be be deleted from the By-Law to reflect current Council policy.

CONCLUSION

Rates for water consumption and services are adjusted annually to offset cost increases in the water utility, including operating and debt charge costs and the costs of purchasing water from the GVWD. Based on a review of the waterworks costs for 2001, it is recommended that consumption based fees and service fees be increased by approximately 2% and connection fees be increased by 5%.

* * * * *

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APPENDIX A
SCHEDULES OF RATES AND CHARGES

SCHEDULE A: Flat Rate Connection Fees

Service Pipe Size Fee

SCHEDULE A.1: Removal Fees

Service Pipe Size Fee

SCHEDULE B: Flat Service Charges for Residential Properties

(Applicable to Single Family Dwellings and Dwellings comprising not more than two separate
dwelling units.)

SCHEDULE C: Flat Service Charges for Unmetered Fire Service Pipes

Pipe Size Rate in Dollars per Year

SCHEDULE D: Consumption Charges for Metered Water Service

SCHEDULE E: Charges for the Use of Each Meter
(in addition to water consumption charges under Schedule D):

Monthly Period Monthly Period
Size of Meter Services with Standard Type Meters

Services with Low Head Loss Meters /
Detector Check Valves

SCHEDULE F: Temporary Water Service During Construction Charges
(This charge is additional to any charge needed to provide a temporary service pipe)

SCHEDULE G: Fees for Installation of Water Meters

SCHEDULE H: Miscellaneous Fees for Water Users

Cross Connection Control Administration Fees

Charges when service pipes are shut off for more
than ninety days for 15mm, 20mm or equivalent
unmetered services, for each month or part thereof $ 2.00

SCHEDULE I: Miscellaneous Charges

Charges for Returned Cheques $20.00
Residual Water Pressure Estimate Fee

Miscellaneous water information requests (per hour) $40.00

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