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 2003

 

RECOMMENDATION

A. THAT Council approve an increase in water rates for 2003 of approximately 2.5% as detailed in this report:

· for single dwelling units be increased from $264 to $271,
· other flat water service charges for residential properties (Schedule "B"),
· charges for metered water service (Schedule "D"), and
· charges for temporary water service during construction (Schedule "F")

B. THAT fees for the following services be increased by 3% for 2003 as detailed in this report:
· flat rate water connection and removal fees (Schedule "A")
· service pipe removal fees (Schedule "A.1")
· flat service charges for unmetered fire service pipes (Schedule "C"),
· meter service charges (Schedule "E"), and
· flat rate fees for installation of water meters (Schedule "G").

C. 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 and to clarify service charge requirements as described in this report.

COMMENTS

POLICY

PURPOSE

The purpose of this report is to recommend a general increase in water charges for 2003 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.

The utility operation is managed using a Revenue Stabilization Fund which enables the City to match revenues and expenditures each year and to plan for future rate increases.

In developing the water rates for 2002, Council approved a strategy of building the Water Rates Stabilization Reserve to provide funding to "smooth" future increases in water rates. These increases will come primarily from the capital costs of regional water quality initiatives to be undertaken through 2008 and could result in increases in water costs in the region by up to 80%. By providing sufficient funding in the reserve, staff anticipate that water rate increases can be held to the range of 2.5% to 3.0% through this period.

DISCUSSION

1. 2002 Waterworks Operating Budget

A projection of the 2002 waterworks operating budget is included in Table 1. The waterworks budget is dominated by debt charges and water 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.
It is anticipated that 2002 revenues will exceed expenditures by approximately $2.1 million resulting in a transfer to the stabilization reserve. This surplus, which was largely anticipated in the 2002 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
2003 and 2002 Water Budget Projection

 

2003
Projected Budget

2002
Estimated

Inc/(Dec)

%

Expenditures

        

Debt Charges

$24,644,400

$22,897,900

$ 1,746,500

7.6

Water Purchases (GVWD)

24,425,100

23,368,800

1,056,300

4.5

Water Rates Billing

627,300

622,800

4,500

0.7

Operating & Maintenance

6,765,400

6,548,600

216,800

3.3

Total Expenditures

$56,462,200

$53,438,100

$3,024,100

5.7

         

Revenue

        

Flat Rate Revenues

$23,106,100

$22,509,200

$596,900

2.7

Service Charges

2,218,300

2,185,500

32,800

1.5

Metered Rate Revenues

31,779,000

30,849,200

929,800

3.0

 

57,103,400

55,543,900

1,559,500

2.8

Transfer from/(to) Reserve

(641,200)

(2,105,800)

1,464,600

  

Total Revenues

$56,462,200

$53,438,100

$3,024,100

5.7

2. 2003 Waterworks Operating Budget Projection

Table 1 also summarizes the projection of operating expenditures for the waterworks utility for 2003. The table includes estimates of City operating and debt costs as well as the costs of purchasing water from the Greater Vancouver Water District.

The increase in water costs in 2003 is driven by the requirement to fund:

· the projected 4.5% increase in water purchase costs from the GVWD. This increase is a combination of a 4.0% increase in the water rate and a 0.5% increase in consumption within the City.
· the projected 3.3% increase in waterworks operating costs as a result of salary, equipment and material costs increases.
· the projected 7.6% increase in the City's debt charges for water purposes. This increase reflects the costs associated with the large debenture issue in 2002.

In addition to these cost increases, it is recommended that the water budget be established with budgetted contribution to the Water Rates Stabilization Reserve of approximately $650,000. This contribution will ensure the reserve has sufficient funding to allow the City to smooth the increase in water rates through 2008 as the GVWD completes its major water quality upgrade program at the Seymour and Capilano reservoirs.

This expenditure projection indicates that an increase in user fees of 2.5% would be required to balance the water utility in 2003. This increase will bring the flat rate for residential properties to $271, up from $264 in 2002. Charges for metered service will also increase by approximately 2.5% over the 2002 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.

As noted, over the next six or seven years, the GVWD is projecting significant increases in water costs. In anticipation of these increases, the City has increased the Water Stabilization Reserve to provide a means of "smoothing" the impact on our water users. The following table summarizes the status of this reserve based on anticipated changes in expenditures to 2007 and on holding water rate increases in the range of 3.0% after 2003.

Forecasted Water Stabilization Reserve ($ millions)

 

2003

2004

2005

2006

2007

GVWD Projected Water Rate
$/cubic metre for base option

$.197

$.212

$.238

$.272

$.325

% Increase in GVWD Water Rate

4.0%

7.7%

12.6%

14.0%

19.7%

% Increase in City Water Rate

2.5%

3.0%

3.0%

3.0%

3.0%

City Water Rates Reserve

          

Reserve Balance Beginning of Year

$ 16.78

$ 17.42

$ 18.17

$ 16.96

$ 11.23

Operating Surplus / (Deficit)

.64

.75

(1.21)

(5.73)

(8.31)

Reserve Balance End of Year

17.42

18.17

16.96

11.23

2.92

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 connection 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 these fees be increased by 3% to accomodate inflationary increases in labour, materials such as asphalt. This recommended inflationary rate is further discussed in the Sewer Rates Report (Companion Report) as much of this work is performed by the combined sewer/water crews. The proposed fees are included in Appendix A, attached.

Finally, Section 3A of the Water Works By-law regulates the use of an existing water service connection. Staff reccomend that this section be ammended to clarify that if the City has installed a new water service pipe connection at the City's expense, which a property owner subsequently wishes to reuse, the property owner must pay the City the full connection fee.

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 2003, it is recommended that consumption based fees be increased by approximately 2.5% and service and connection fees be increased by 3%, as described in this report.

- - - - -

APPENDIX A
SCHEDULES OF RATES AND CHARGES

SCHEDULE A: Flat Rate Connection Fees

Service Pipe Size

Single-Family & Two-Family Dwellings

All Others

 

20mm

  

    $ 2,430.00

$4,862.00

25mm

  

    $ 2,528.00

$5,060.00

40mm

  

    $ 2,845.00

$5,698.00

50mm

  

    $ 2,845.00

$5,698.00

 

Service Pipe Size

  

Connection Fee (all customers)

 

100mm

  

    $ 8,439.00

150mm

  

    $10,438.00

200mm

  

    $11,399.00

300mm

  

    $16,042.00

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

    Two Monthly Period

Four Monthly Period

Rate In Cents
per Unit (2831 Litres)

 

All units used

All units used

131.1

 

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

Monthly Period  Monthly Period                                        Per Two     Per Four

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)

Building Size in Square Meters

Rate in Dollars of Gross
Floor Area Per Building

 

Up to and including 500 sq.m

$120.00

Over 500 but not exceeding 2,000

235.00

Over 2,000 but not exceeding 9,000

353.00

Over 9,000 but not exceeding 24,000

592.00

Over 24,000 but not exceeding 45,000

887.00

Over 45,000

1,176.00

 

SCHEDULE G: Fees for Installation of Water Meters

Size of Meter

on City
Property

on Private
Property

 
 

20 mm (¾")

$ 1,987.00

$251.00

 

25 mm (1")

2,043.00

265.00

 

40 mm (1½")

2,112.00

265.00

 

50 mm (2")

2,112.00

377.00

 

75 mm (3")

7,523.00

583.00

 

100 mm (4")

7,523.00

583.00

 

150 mm (6")

25,963.00

651.00

 

200 mm (8")

25,963.00

754.00

 

250 mm (10")

31,147.00

982.00

 

300 mm (12")

31,147.00

982.00

SCHEDULE H: Miscellaneous Fees for Water Users

Cross Connection Control Administration Fees

First Assembly

$20.00

Additional Assembly

$10.00

 

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

 

Original calculation

$35.00

 

Additional copies for same location

$10.00

Miscellaneous water information requests (per hour)       $40.00

* * * * *

csb021212.htm

Comments or questions? Send us e-mail at info@city.vancouver.bc.ca
© 2002 City of Vancouver