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 2002

 

RECOMMENDATION

A. THAT Council approve an increase in water rates for 2002 of approximately 1.0% as detailed in this report:

B. THAT fees for the following services be increased by 3.1% as detailed in this

C. THAT flat rate water connection fees for 2002 (Schedule "A") be increased by 3.1% to 8.1% depending on size, and a new fee structure be established for 20mm through 50mm service installations for multi-family and commercial developments, as detailed in this report.

D. THAT the connection fee for 40mm water services be made the same as the fee for 50mm services, to reflect the nominal cost difference to install the two sizes.

E. THAT the fee for visits to premises to turn off or turn on water as a result of late payments be increased from $25 to $50.

F. 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 report.

GENERAL MANAGER COMMENTS

The General Manager of Corporate Services and the General Manager Engineering Services RECOMMEND approval of A through F.

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 2002 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. 2001 Waterworks Operating Budget

A projection of the 2001 waterworks operating budget is included in Table 1. The waterworks budget is dominated by debt charges and water purchase costs which account for 86% 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.
It is anticipated that 2001 revenues will exceed expenditures by approximately $2,964,800 resulting in a transfer to the stabilization reserve. This surplus, which was largely anticipated in the 2001 budget, was intended to help build the water rates stabilization reserve which will be used to mitigate future increases in the water rates which are expected as a result of the current GVWD capital program.

Table 1
2002 and 2001 Water Budget Projection

 

2002
Projected Budget

2001
Estimated

Inc/(Dec)

%

Expenditures

        

Debt Charges

$22,831,000

$22,002,900

$828,100

3.8

Water Purchases (GVWD)

23,860,100

22,943,400

916,700

4.0

Water Rates Billing

882,700

864,500

18,200

2.1

Operating & Maintenance

6,137,500

6,389,300

(251,800)

-3.9

Total Expenditures

$53,711,300

$52,200,100

$1,511,200

2.9

         

Revenue

        

Flat Rate Revenues

$22,502,100

$22,246,400

$255,700

1.1

Service Charges

2,165,600

2,098,500

67,100

3.2

Metered Rate Revenues

31,284,300

30,820,000

464,300

1.5

 

55,952,000

55,164,900

787,100

1.4

Transfer from/(to) Reserve

(2,240,700)

(2,964,800)

724,100

  

Total Revenues

$53,711,300

$52,200,100

$1,511,200

2.9

2. 2002 Waterworks Operating Budget Projection

Table 1 also summarizes the projection of operating expenditures for the waterworks utility in 2002. 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 4.0% increase in GVWD water costs. This increase is a combination of a projected 0.5% increase in GVWD water rates along with a 3.5% increase inconsumption (back to the level experienced in 2000). The GVWD rates are expected to increase substantially over the next ten years, due to an extensive capital program to address regional growth and implement the Drinking Water Treatment Program.

· a projected 3.9% decrease in waterworks operations costs which includes an inflationary increase of 3.1% along with a reduction in program costs of $442,200. Engineering Services has achieved these savings by restructuring the Waterworks Operations Branch, including replacing nine Foreman positions with six Superintendent I positions; combining the meter and welding shops; and efficiency improvements ranging from 15% to 55% in the flushing, hydrant maintenance, and leak detection programs.

· the projected 3.8% increase in the City's debt required to fund the 2000-2002 Waterworks Capital Plan. This plan includes funding for a 1.0% annual waterworks infrastructure replacement program as well as the development of the Dedicated Fire Protection System.

This projection indicates that an increase in user fees of 1% would provide a $2,240,700 surplus which will be used to mitigate against future rate increases. In proposing a 1% increase in water rates for 2002, 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.

The impact of the proposed water budget and a 1% increase in rates will be to bring the flat water rate for a single family dwelling to $264 per year, up from $261 in 2001. Charges for metered service will also rise by approximately 1% over the 2001 levels.

The proposed fees are included in Appendix A, attached.

3. Water Rates Stabilization Reserve

The City utilizes the Water Rates Stabilization Reserve as a "shock absorber" to stabilize the water works expenditures and to smooth significant year-over-year increases in water rates.

Over the next six or seven years, the GVWD is projecting significant increases in water costs related to the implementation of its filtration strategy for the regional water supply. In anticipation of these increases, which could increase the cost of purchasing water from the GVWD by 80% by 2008, the City has increased the Water Stabilization Reserve to provide a means of "smoothing" the impact on our water users. The following table summarizes thestatus of this reserve based on anticipated changes in expenditures to 2007 and on holding water rate increases in the range of 3.0% after 2002.

Forecasted Water Stabilization Reserve ($ millions)

 

2002

2003

2004

2005

2006

2007

GVWD Projected Water Rate
$/cubic metre for base option

$.189

$.190

$.204

$.230

$.263

$.322

% Increase in GVWD Water Rate

0.6%

0.2%

7.5%

12.8%

14.4%

22.6%

% Increase in City Water Rate

1.0%

3.0%

3.0%

3.0%

3.0%

3.0%

City Water Rates Reserve

            

Reserve Balance Beginning of Year

$ 10.02

$ 12.26

$ 14.74

$ 16.94

$ 16.54

$ 10.91

Operating Surplus / (Deficit)

2.24

2.48

2.20

(0.40)

(5.63)

(9.72)

Reserve Balance End of Year

12.26

14.74

16.94

16.54

10.91

1.19

The success in achieving the anticipated result indicated above will depend on the ability of the region to complete its capital program as anticipated.

4. Connection Fees and 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.

With the implementation of SAP, connection fees (contained in Schedule A) have been reviewed in greater detail based on data from the last two years of work. Methodologies for the installation of water and sewer services have also changed significantly over that period. Most small water services (50mm diameter and smaller) are now installed by combined crews which construct both the water and sewer connections at the same time, for each development site. The greatest proportion of this work is the installation of the sewer connections, as they are deeper and larger-diameter; therefore these crews are managed by the Sewer Operations Branch. A detailed discussion of the issues affecting these costs is contained within today's companion report on 2002 Sewer Rates.

As discussed in the Sewer Rates report, up-to-date costs indicate that the fees for 20mm through 50mm water services for single-family and duplex homes should be increased by 4%, plus inflation of 3.1%. In addition, it has become evident that the cost savings for 40mm versus 50mm services are nominal, and the same fee should be charged for both sizes. (The service size is determined by Engineering Services based on local system pressure, and customers with either pipe size receive similar levels of service.)

Traditionally, 20mm through 50mm water services for multi-family and commercial customers have been charged the same rates as single-family and duplex water services. A blended rate has been used because the number of multi-family/commercial services installed each year is small compared to those for single-family and duplex homes (averaging about 40 per year, compared with 500 to 1700 per year for homes). However, since transferring the single family/duplex service installations to the combined sewer/water crews, it has become evident that we have significantly undercharged for 20mm though 50mm multi-family/commercial water services. Upon close examination, it is reasonable that these services are more expensive to install, because they are frequently located in arterial streets with their heavier pavements, busy traffic, and fully-paved concrete boulevards. Also, the cost of 50mm copper material is very similar to the cost of 100mm ductile iron, so the previous three-fold fee difference for similar jobs ($2541 for 50mm, versus $7829 for 100mm) did not reflect their actual costs.

Clearly, the water utility has been subsidizing the installation costs for 20mm through 50mm multi-family/commercial water services. On average, the multi-family/commercial fees are about one half the actual installation costs. It is therefore recommended that Schedule A of the Waterworks By-law be modified to include different rates for 20mm through 50mm water services, depending on customer type. The recommended rates, including 3.1% inflation for 2002, are as follows:

Service Pipe Size Single-Family & Two-Family Dwellings All Others

20mm $2324.00 $4650.00
25mm $2418.00 $4840.00
40mm $2721.00 $5450.00
50mm $2721.00 $5450.00

We have also reviewed costs for large-diameter water services (100mm through 300mm). Cost data for the last two years indicate that the current fees for 100mm and 300mm services are adequately recovering costs, but the fees for 150mm and 200mm service connections have under-recovered by about 5%. As a result, it is recommended that the fees for 100mm and 300mm services installations be increased by 3.1%, to reflect anticipated inflation, and 150mm and 200mm fees be increased by 8.1%, to reflect their actual installation costs plus anticipated inflation. The resulting rates are as follows:

Service Pipe Size Connection Fee (all customers)

100mm $8072.00
150mm $9984.00
200mm $10,903.00
300mm $15,345.00

It is recommended that the remainder of the fees contained in Schedules A.1, C, E, and G, increase by 3.1% to accommodate salary and inflationary cost increases anticipated in 2002.
The proposed fees are included in Appendix A, attached.

Finally, Section 34(d)(ii) of the Water Works By-law (Penalties for Late Payment) specifies that "the sum of $25 (must be paid) for each visit to the premises for the purpose for turning off or turning on the water". It is recommended that this charge be updated to $50 to match current call-out charges in the Sewer & Watercourse By-law (8903) and the amount presently charged for private-property trouble-calls by Waterworks Operations.

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 2002, it is recommended that consumption based fees be increased by approximately 1%, service fees be increased by 3.1% and connection fees be increased by 3.1% to 8.1% depending on size, as described in this report.

* * * * *

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APPENDIX A
SCHEDULES OF RATES AND CHARGES

SCHEDULE A: Flat Rate Connection Fees

Service Pipe Size Single-Family & Two-Family DwellingsAll Others

20mm $2324.00$4650.00
25mm $2418.00$4840.00
40mm $2721.00$5450.00
50mm $2721.00$5450.00

Service Pipe Size Connection Fee (all customers)

100mm $8072.00
150mm $9984.00
200mm $10,903.00
300mm $15,345.00

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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