ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services & Budget

FROM:

General Manager of Engineering Services
General Manager of Corporate Services

SUBJECT:

Establishment of 2003 Sewer Rates

 

RECOMMENDATION

A. THAT 2003 sanitary sewer user fees be set as per Appendix 1.

B. THAT 2003 public sewer connection fees be set as per Appendix 2.

C. THAT the Sewer and Watercourse By-law be amended to allow billing for industrial wastewater dischargers to be based on flow and loading rates for the first year of operation and to clarify connection charge requirements as described in this report.

D. THAT the Director of Legal Services be instructed to bring forward for enactment such amendments to the Sewer and Watercourse By-law as are required to implement Recommendations A, B and C of this Report.

GENERAL MANAGER COMMENTS

COUNCIL POLICY

Sanitary sewer user fees and public sewer connection fees are reviewed annually by Council to establish the following year's rates.

PURPOSE

The purpose of this report is to recommend revised sanitary sewer user fees for 2003, a general increase in the public sewer connection fees for 2003 and some amendments to the Sewer and Watercourse By-law.

BACKGROUND

The City sewer system has two main components: The sanitary system collects wastewater from homes and business, while the storm system handles surface run off from properties in the City. The system delivers this liquid waste to the treatment facilities operated by the Greater Vancouver Sewerage and Drainage District.

The City recovers the costs of the sewer system, including its share of regional treatment costs through two vehicles. The operating costs of the sanitary sewer system have been recovered through user fees since July 1, 2000, using water consumption as the proxy for consumption. In 2002, about 47% of the system costs were recovered from user fees in the form of flat fees (residential properties) or metered fees (properties with water meters). The balance of the system costs, comprising infrastructure costs of the sanitary sewer system and the entire storm sewer component are more closely related to lot size than consumption and Council has not extended user fees to these costs. As a result, the balance of system costs, about 53% in 2002, are recovered through the general purposes tax levy.

More detailed background on the sewer utility is provided in Appendix 3 of this report.

DISCUSSION

1. 2002 Sewer Utility Operations

A projection of the 2002 sewer utility operation is included in Table 1. It is anticipated that the Sewer Utility will incur a shortfall in 2002 of $199,000 (0.7% of total costs). The shortfall is mainly attributed to lower than projected revenues from metered properties. This is due to lower metered water consumption in 2002 than had been anticipated when the fees were established. Some fluctuation in consumption occurs from year to year and the projection is based on a seven year average of overall water consumption and metered water consumption. A transfer from the Sewer Rates Stabilization Reserve will cover this deficit. This will reduce the Sewer Stabilization Reserve from the current balance of $2.2 million to about $2 million by the end of 2002.

2. 2003 Sewer Budget and Rates

In developing the 2003 Sewer budget, there are three major components that will affect the allocation of costs between property taxes and user fees and will ultimately affect rates. These are:

· an increase in the requisition from the Greater Vancouver Sewerage and Drainage District (GVS&DD) for sewage treatment, pumping stations and collection systems. This requisition will increase by 9.6% in 2003 reflecting changes in regional costs,
· an increase in debt service costs related to the City's sewer capital program. These costs are anticipated to increase by 3.9%, and
· inflationary and other adjustments in City sewers and drainage operating costs. These costs are anticipated to increase by 2.7% reflecting increased wage and equipment costs and general inflation.

The cost allocation methodology utilized to distribute costs between user fees and property taxes indicates that there will also be a shift of costs from property taxes to user fees in 2003. This change is due to a much higher percentage increase in the regional costs in 2003 than in City costs. This change will move approximately $545,600 of sewer costs from the general tax levy to sewer fees.

Table 2 summarizes the 2003 budget for the sewer utility with comparative information for 2002. It is important to note that the City's operating costs represent only about 8% of the total system costs with the balance being committed to funding the debt charges associated with the City's sewers capital program (34%) and the regional treatment costs (58%).

Table 2 - 2003 Budget Projections

 

2002 Budget

2003 Forecast

Inc/(Dec)

% Change

GVS&DD Sewer Levies
City Debt Servicing Costs
City Sewers & Drainage Operating Total Costs

Sewer Costs allocated to:

(a) Sewer Fees:

(b) General Tax Levies:

Total Revenues

$31,962,600
$19,825,800
$4,853,700

$56,642,100

47.3%
$26,791,700

52.7%
$29,850,400

100%
$56,642,100

$35,033,400
20,604,000
$4,984,000

$60,621,400

48.2%
$29,219,500

51.8%
$31,401,900

100%
$60,621,400

$3,070,800
$778,200
$130,300

$3,979,300

$2,427,800

$1,551,500

$3,979,300

9.6%
3.9%
2.7%

7.0%

9.1%

5.2%

Based on the 2003 budget summarized above and on other factors that affect sewer user fees, including overall and metered water consumption, and the projected number of residential dwelling units over which costs are allocated, key 2003 sewer fees are shown in Table 3 below (see Appendix 1 for full listing of 2003 sewer fees).

3. Public Sewer Connection Rates for 2002

Connections to the City's sewer system (public sewer connections) are provided by the City through a cost-recovery program. Under the City Building By-law, new developments are required to pay for the renewal of the sewer and water connections servicing their property. Fees for this program are adjusted annually to reflect costs required to provide the services. Staff estimate that an increase of 3% will be required to maintain cost recover in 2003. This increase is to cover general inflation including wages, materials and equipment rental costs.

4. Amendments to the Sewer and Watercourse By-law

The Sewer and Watercourse By-law contains sewer utility and connection rates and regulates the disposal of wastewater and stormwater and the use of watercourses.

In addition to bringing forward necessary amendments to the Sewer and Watercourse By-law that will put the 2003 sewer rates in place, staff recommend two revisions be made to the By-law.

The first revision relates to the billing practice for industrial wastewater permit holders. Under the current By-law, permit holders are billed in each current year based on the prior year's discharge volumes and loading data because this information is not available in a timely manner for billing purposes. The current practice does not require the new permit holder to pay these special charges until the beginning of the second calendar year of the permitted operation. A new permit holder is billed at a regular sewer rate during the first year of the permit operation. Staff feel a more equitable way to distribute sewage treatment costs would be to have the new permit holder liable to pay the loading based rates as soon as their permit is valid. During the first year, billing can be based on an estimate and the necessary adjustments made when the actual discharge data is collected in the following year. Accordingly, staff recommend an amendment be made to the by-law to effect this.

Staff recommend a second revision to clarify connection charges in Section 2.9 of the by-law where the City has installed a new sewer connection prior to the owner being required to pay for a new connection. This will clarify that if a property owner is required to pay for the upgrading of the connection, as required under the by-law, then the owner must pay the full connection fee even if the City has previously upgraded the connection, at the City's expense, and has not been reimbursed by the property owner.

- - - - -

APPENDIX 1

2003 SEWER RATES

APPENDIX 2

2003 SEWER CONNECTION RATES

Description

Current Fee

Recommended
Fee - 2003

Public Sewer Connection for One and Two Family Dwellings

$5,105

$5,258

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

$6,669
$8,049
$9,105
$10,505
$11,936
$13,347

$6,869
$8,290
$9,378
$10,820
$12,294
$13,747

Connections greater than 15 inch/375 mm diameter plus variable costs pursuant to Section 2.7(2) of Sewer and watercourse By-law

$13,347

$13,747

New Fittings - Twin Sewer
New Fittings - Single Sewer

$2,487
$1,096

$2,562
$1,129

Inspection Fee for Connection to a Public Sewer

$173

$178

APPENDIX 3

SEWER UTILITY BACKGROUND INFORMATION

1. Establishment of the Sewer Utility

Until July 2000, all of the costs of the City's sewer system were charged to property owners through the assessment based property tax system. Each property contributed to these costs based on its assessed value. However, assessed value has little to do with the way properties consume sewer services and Council determined that establishing user fees that reflect the impact individual properties have on the system would ensure property owners paid the appropriate share of costs.

In early 2000, City Council approved the establishment of a sewer utility with a phased implementation.

The first phase involved the removal of costs associated with the operation of the sanitary system (pumping stations, flushing and cleaning of mains, etc.) and the sewage treatment system from the general property tax levy. As these costs are a function of sewage volume, they were then charged to users based on water consumption as a proxy for sewer use. These "consumption based sanitary sewer costs" accounted for about 43% of the total sewer costs in 2000.

The remainder, such as storm drainage system costs and collection system capital costs, continue to be funded from the general tax levy. These costs are largely a function of lot size and the amount of impervious area (using zoning as a proxy) and are defined as "lot size based sewer costs". Lot size based sewer costs accounted for about 57% of total sewer costs in 2000. In late 2000, City Council elected to defer the implementation of the second phase of the sewer utility.

In 2000, City Council also approved implementation of Biochemical Oxygen Demand/Total Suspended Solids/Flow (BOD/TSS/Flow) charges for permitted industrial sewer users. The BOD/TSS/Flow charges are a special pricing scheme designed to assess industry for the costs of the GVS&DD treatment facilities which they use based on the quality and quantity of their effluent. As BOD/TSS/Flow charges consist of only the GVS&DD costs component, a separate sanitary fee covering the City cost component is calculated for permitted industrial sewer users. An industry may require an industrial wastewater discharge permit if it discharges more than 300 cubic metres of wastewater over a thirty day period or if it discharges restricted waste as specified in the GVS&DD Sewer Use By-law. There are currently sixty-one permitted industries in the City of Vancouver and the special fees recovered from them represent about 3% of our total GVS&DD costs.

Appendix 3/Page 2

2. Sewer Services Cost Allocation Model

The sum of GVS&DD costs, less direct BOD/TSS/Flow charges, and City costs ( "total sewer costs") are recovered from sewer utility fees and general tax levies based on the percentages of costs related to sewage volume and lot size respectively. In 2000, the model calculated that 43% of the total sewer costs should be recovered from sewer utility fees and 57% from the general tax levy.

Based on the consumption and lot size definitions, about 10% of the City sewer costs and 76% of GVS&DD costs are presently recovered from the utility. The remaining 90% of City sewer costs and 24% of GVS&DD costs are related to lot size and are recovered through the general property tax levy.

Since the implementation of sewer utility in 2000, the annual percentage increase in GVS&DD costs has been notably larger than the percentage increase in City costs. An update is therefore required each year to adjust the allocation percentages between the amount that should be recovered from utility fees and from general tax levy. For 2003, the amount recommended for recovery from fees has increased to 48%, up from the original 43% when the utility was established in 2000.

3. Sewer Rates Calculation

Consumption based sanitary sewer fees are calculated using 85% of actual measured water reflecting that not all water purchased is discharged to the sewer system. For metered properties including the permitted industrial sewer users (for the City cost component) the per unit charge is calculated by dividing the costs allocated to the metered properties by 85% of total consumption by these properties. The 2003 cost allocation model shows that metered properties accounted for about 59.6% of total water consumption and therefore the same percentage of costs were allocated to these properties. There are about 13,800 water meters in the City of Vancouver.

For non metered properties, such as single family home and duplexes, the charge consists of a flat fee based the costs allocated to the non metered properties and number of dwelling units being billed. The 2003 cost allocation model shows that flat rated properties accounted for about 40.4% of the total water consumption and therefore the same percentage of sewer costs were allocated to these properties. 90,062 dwelling units were used for 2003 rate calculation purposes.

4. Sewer Rates Review

Consumption based sanitary sewer fees are reviewed annually with new rates established for January 1st implementation each year.

BOD/TSS/Flow rates for the industrial users are reviewed in a separate report with new rates established for July 1st implementation each year. This is because staff rely on GVS&DD unit rate and measured 2002 flow and loadings from each industry to calculate the rates.

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