Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services & Budget

FROM:

General Manager of Engineering Services
General Manager of Corporate Services

SUBJECT:

Establishment of 2001 Sewer Rates

 

RECOMMENDATION

GENERAL MANAGER COMMENTS

COUNCIL POLICY

On March 9, 2000, the Standing Committee on City Services and Budgets approved the rate structure and implementation schedule of BOD/TSS/Flow direct charges.

On April 4, 2000, Council approved the phased implementation of user fees for the consumption based sanitary sewer services effective July 1, 2000, with 50% of the annual costs to be distributed as user fees in 2000 and 100% of the costs to be distributed as user fees beginning January 1, 2001.

PURPOSE

The purpose of this report is to recommend sanitary sewer user fees for 2001 and to recommend a 4.9% increase in the public sewer connection fees for 2001.

BACKGROUND

The City implemented the consumption based sanitary sewer services fees and BOD/TSS/Flow direct charges effective July 1, 2000. When fully implemented approximately 43% of sewer costs are to be recovered from user fees with the balance of costs continuing to be recovered from the general purpose taxes. In 2000, fifty percent of program costs was removed from the general tax levy and replaced with a user fee. Beginning in 2001, 100 percent of these costs will be removed from the general tax levy and replaced with a user fee. Full year BOD/TSS/Flow charges will also be implemented starting in 2001.

The remaining 57% of sewer costs, comprising the infrastructure costs of the sanitary sewer operation and the entire storm sewer component continue to be funded from the general tax levy. Although staff had proposed to assign these costs to properties on the basis of lot size and a number of other factors, Council instructed staff to report back before January 1, 2001 on the timing of and options for implementation of the user fees relating to these costs. While the intention was to bring that information to Council before the approval of the 2001 sewer fees so that any implementation could begin as early as 2001, the labour disruption has made it impossible to meet that time line.

DISCUSSION

1. Review of 2000 Sewer & Drainage Operations

The introduction of user fees for the consumption-based sanitary sewer costs has gone reasonably well. Flat rate billing of residential properties was included with the main tax bill in July and charges to metered customers have been billed with periodic water bills since July 1. There were a number of comments from citizens and in all cases, staff have responded as appropriate. Generally, property owners were supportive of user fees although many argued that using average consumption to assign costs to unmetered residential properties was not a good proxy for full metering. This was noted as a shortcoming in the proposal put forward by staff in March, however, this method of billing on average consumption is considered to be preferential than billing for these services on the basis of assessed value.

Staff have received requests from staff members of the Vancouver School Board, Vancouver Hospital and the Children’s and Women’s Health Centre asking for an exemption from the new sewer user fees. These organizations are among a number of exempt properties that had not been subject to charges for sewer services before the user fees were introduced. Staff reviewed the user pay concept with these organizations and maintained the position that exempt properties should participate in the sewer user pay system in accordance with Council’s instruction on April 4, 2000. It is uncertain at this time whether these organizations will bring their appeal forward for Council consideration, however, because of the financial and conceptual impacts the exempt properties have on the sewer costing model, staff intend to report back in early February to seek further direction, if necessary.

The phased approach to implementing user fees and the recent labour dispute make it very difficult to report on the actual financial performance of the new sewer utility. Billing of the BOD/TSS charges to permitted industries has proceeded and recoveries are expected to be at budget levels. Flat or average charges to single family residential properties were billed with the main property tax billing and are also expected to be on target. About 50% of the user fee revenues comes from charges to metered properties that are being billed with periodic water bills, a process that was delayed during the labour dispute. As a result, it is not yet possible to determine year-end results, although it is anticipated that metered revenues will be close to those projected.

On the expenditure side, most costs (92%) are related to regional treatment activities and City debt charges, neither of which were impacted by the work stoppage. Some City operating costs were saved as a result of the labour dispute. The anticipated savings related to the maintenance work is estimated at $250,000. About 43% of these savings and any

anticipated salary savings (net of cost allocation) from CUPE 15 will be transferred to the Sewer Rates Stabilization Reserve at year end and will be available in future to offset fee increases. Staff intend to provide a complete review of the sewer utility at the end of 2001.

2. 2001 Sewer & Drainage Budget Projection

In order to establish sanitary sewer fees for 2001, staff have developed a projection of the operating expenditures for the sewer and drainage operations as shown in the table below. This projection indicates that sewer costs will increase on average by 2.7%. The increase is driven by the following factors:

· a projected 6.0% increase in the GVS&DD costs. Regional staff have advised that this increase is required to fund approximately $700,000 of additional repair work and new debt charges on an additional $10 million worth of capital work required at the Iona Plant during 2001.
· a projected 3.6% increase in the City's sewer and drainage operating costs. This increase is to fund the increases in several key cost components in sewer operations. In addition to a general inflationary provision of 1.5%, a provision for wage increases has also been added. Some other cost increases are attributable to fuel costs (up by 32%) as well as the transfer of six City vehicles from the general revenue fund to the utility because they are used for the sewer design and survey functions.
· a projected reduction of 1.7% in City debt charges as a result of the replacement of mature debenture debt with the anticipated 2000/2001 debenture issue.

BOD/TSS/Flow rates for 2001 will not be made available by GVS&DD until March 2001. However, staff have observed significant efforts by most of the heavy wastewater dischargers throughout the year to decrease the volume and deleterious effects of their effluent. As a result, staff project that the BOD/TSS/Flow rates for 2001 will be approximately 28% lower than in 2000. A separate report on BOD/TSS/Flow rates will be prepared once the necessary data is received from GVS&DD.

The following table summarizes the sewer budget for 2000 and 2001 and indicates the way in which costs are allocated between user fees and the general tax levy. This table indicates an overall increase in sewer costs of 2.7% over 2000.

 

2001 Forecast

2000 Budget(1)

Inc/(Dec)

% Change

Expenditures:
City Debt Charges
City Operating & Maintenance
GVS&DD Costs

Total Sewer Costs:

$23,129,900
4,842,700
31,476,800

$59,449,400

$23,533,600
4,674,800
29,687,300

$57,895,700

$(403,700)
196,500
1,789,500

$1,582,300

(1.7)%
3.6%
6.0%

2.7%

BOD/TSS/Flow Direct Charges:

$928,800

$1,290,000

($361,200)

(28.0)%

Sewer User Fees:
Flat Rate Revenue
Metered Rate Revenue
Permitted User Fees

Total Sewer User Fees
(43.4% of total Sewer Costs)

$10,930,600
14,459,300
131,500

$25,521,400

$10,664,200
14,106,600
176,200

$24,947,000

$259,800
343,900
(44,700)

$559,000

2.5%
2.5%
(25.4)%

2.3%

Tax Supported Sewer Costs:
(56.6% of the total sewer costs)

$32,999,200

$31,658,700

$1,384,500

4.2%(2)

Sewer User Fees: $12,473,500

(2): The sewer pricing model distributes the sewer fees supported sewer costs and the general tax supported sewer costs after accounting for the BOD/TSS/Flow direct charges and the sanitary costs that are attributable to BOD/TSS/Flow. Because of the different sanitary and storm splits in the GVS&DD and City costs, the reduction in BOD/TSS/Flow charges in 2001 has an opposite impact on the general tax supported sewer costs whereas the sewer fees supported sewer costs show a small percentage reduction when compared to the 2000 costs.

3. Sanitary Consumption Based Sewer Rates for 2001

Applying the 2001 budget projection to the sewer rates pricing model approved by Council on April 4, 2000, staff have calculated the 2001 sewer fees as shown in the table below. Staff note that the rate modelling is based on 1999 water consumption data. Accordingly, any changes in consumption patterns will impact sewer user fee revenue in 2001. The Sewer Rate Stabilization Reserve is intended to absorb any shortfalls or surpluses which arise from such changes in consumption so that rates can be stabilized in subsequent years.

 

2001 Rates

2000 Rates
(annualized)

Inc/(Dec)

%
Change

Metered rate per unit:

Non metered (flat rate):
Single Family Dwelling
Extra Unit
Duplex (each unit)
Vacant Lot

$0.827

$132
$46
$89
$75

$0.798

$126
$44
$86
$72

$0.039

$6
$2
$3
$3

3.6%

4.8%
4.5%
3.5%
4.2%

The Rate Table above shows that both the metered properties and the non metered (flat rate) properties have a slightly higher percentage increase than the percentage increases in Sewer User Fees as shown in the table on page 5. This is because staff revised the number of billable units downward in the rate calculation to bring the billable units closer to the 2000 actual experience. Also, the 2001 rates for the non metered (flat rate) properties have been rounded up to the nearest dollar.

4. Public Sewer Connection Rates for 2001

Public sewer connection is a cost-recovery program. Fees for this program are adjusted annually as necessary to reflect actual costs incurred in the previous years as well as anticipated inflationary increases in the following year. An annual adjustment of 1 to 1.5% was made to the sewer connection rates in the last few years.

The public sewer connection program has recently experienced higher than usual cost increases. These are attributable to increases in wages as well as price increases for

asphalt (up 8%), aggregate (up 38%) and fuel (up 32%). Staff have projected that the 2001 sewer connection fees need to be increased by 4.9% if these higher costs are to be fully recovered. Accordingly, staff recommend the 2001 sewer connection rates be increased by 4.9%.

5. Technical Amendments to the Sewer and Watercourse By-law

In addition to bringing forward the necessary amendments to the Sewer and Watercourse By-law for approval of the 2001 sewer rates, staff recommend making a number of technical changes to the By-law in order to explicitly disallow any attempt by industrial wastewater permittees to circumvent the By-law by engaging in non-arms length transfers of their assets in order to apply for a new GVS&DD discharge permit and therefore defer payment of BOD/TSS/Flow rates for up to one year. Since this recommended amendment is technical in nature and must be enacted prior to January 1, 2001 in order to achieve its objective, the enactment form of this by-law has already been prepared by the Director of Legal Services and will be presented concurrently with this Report for enactment by Council.

6. Sanitary and Storm Sewer Lot Size Charges

Staff propose to defer the report back to Council on the timing of and options for implementation of the lot size fee at this time due to the interruption of regular work tasks caused by the recent labour dispute.

* * * * *

cs001214.htm

APPENDIX 1

2001 SEWER FEES

APPENDIX 2

2001 SEWER CONNECTION RATES

Description

Current Fee

Recommended
Fee - 2001 *

Public Sewer Connection for One and Two Family Dwellings

$4,470

$4,690

Public Sewer Connection for other than One and Two Family Dwellings:

4 inch/100 mm diameter
6 inch/150 mm diameter
8 inch/200 mm diameter
10 inch/250 mm diameter
12 inch/300 mm diameter
15 inch/375 mm diameter

$5,840
$7,050
$7,970
$9,200
$10,460
$11,690

$6,130
$7,400
$8,370
$9,660
$10,980
$12,270

Manhole Installation in conjunction with a Public Sewer Connection

$3,520

$3,700

Connections greater than 15 inch/375 mm diameter

$11,690

$12,270

New Fittings - Twin Sewer
New Fittings - Single Sewer

$2,170
$950

$2,280
$1,000

Inspection Fee for Connection to a Public Sewer

$140

$150

* 2001 fee represents a 4.9% increase rounded up to the nearest 10 dollars

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