ADMINISTRATIVE REPORT

 

Date:

November 14, 2003

 

Author:

Liz Jones

 

Phone No.:

604.871-6169

 

RTS No.:

03751

 

CC File No.:

1755

 

Meeting Date:

December 2, 2003

TO:

Standing Committee on Transportation and Traffic

FROM:

Director of Finance and General Manager of Engineering Services

SUBJECT:

Annual Review of Water Rates for 2004

RECOMMENDATION

· Flat fees for single dwelling units (increase from $271 to $287) (Schedule B),
· 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")

· 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")

· The fee for returned cheques be increased to $35 (Schedule "I"), and
· The fee for special meter readings be increased to $75 (Section 3A(b))

GENERAL MANAGER'S COMMENTS

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

PURPOSE

The purpose of this report is to recommend a general increase in water charges for 2004 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 financial side of the utility operation is managed using a Revenue Stabilization Fund which enables the City to match revenues and expenditures each year and to manage year over year increases in water rates.

The cost of purchasing water from the regional district is expected to increase by up to 80% by 2007 primarily as a result of the capital costs of regional water quality initiatives. In anticipation of significant increases in costs, Council adopted a strategy of building the Water Rates Stabilization Reserve to provide funding to "smooth" future increases in water rates.

DISCUSSION

1. 2003 Waterworks Operating Budget

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 comprised of the cost of operation and maintenance of the City's water system and of billing.

A projection of the 2003 waterworks operating budget is included in Table 1. It is anticipated that 2003 expenditures will exceed revenues by approximately $0.1 million, mainly due to increased water consumption because of the unusually dry, hot summer. This operating shortfall will be offset by a transfer from the Water Rates Stabilization Reserve.

Table 1
2004 and 2003 Water Budget Projection

 

2003
Estimated

2004
Preliminary
Budget

Inc/(Dec)

%

Expenditures

        

Debt Charges

$24,194,400

$25,897,400

$1,703,000

7.0

Water Purchases (GVWD)

26,174,200

28,985,000

2,810,800

10.7

Water Rates Billing

629,300

630,100

800

0.1

Operating and Maintenance

7,114,400

7,297,500

183,100

2.6

Total Expenditures

$58,112,300

$62,810,000

$4,697,700

8.1

         

Revenues

        

Flat Rate Revenues

$23,130,600

$24,496,300

$1,365,700

5.9

Service Charges

2,229,400

2,262,800

33,400

1.5

Metered Rate Revenues

32,639,000

34,771,700

2,132,700

6.5

Other Revenues

4,600

4,600

0

0.0

 

58,003,600

61,535,400

3,531,800

6.1

Transfer from/(to) Reserve

108,700

1,274,600

1,165,900

  

Total Revenues

$58,112,300

$62,810,000

$4,697,700

8.1

2. 2004 Waterworks Operating Budget Projection

Table 1 also summarizes the anticipated operating expenditures for the waterworks utility for 2004. 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 2004 GVWD rate increase of 13.5% and an increase in debt charges related to the City waterworks capital program are the main drivers of the proposed increase in the City of Vancouver water rate.

Despite these increases, utilizing the Water Rates Stabilization Reserve will allow the City to hold its water rate increase to 6.0% in 2004. This increase is also projected to allow the increases in 2005 through 2007 to be held in the 5.5% range, while still maintaining a sufficient reserve balance to absorb any deficits caused by variances in the actual versus projected water consumption (and therefore costs) in future years.

This increase will bring the flat water rate for residential properties to $287, up from $271 in 2003. Charges for metered service will also increase by approximately 6.0% over the 2003 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 due to a major water quality initiative. In anticipation of these increases, the City has increased the balance in the Water Stabilization Reserve beyond that necessary to ensure operating variances can be accommodated. This extra funding is to be used to provide a "smoothing" of the impact of higher water rates on our water users over the next few years.

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 5.5% after 2004.

Forecast of Water Stabilization Reserve

Projected GVWD Water Rate

2004

2005

2006

2007

Expected cubic meter rate

$.2234

$.2440

$.2765

$.3327

% Increase in GVWD Water Rate

13.5%

9.2%

13.3%

20.3%

Planned Increase in City Water Rate

6.0%

5.5%

5.5%

5.5%

City Water Rates Reserve ($ millions)

        

Reserve Balance Beg. of Year

$15.20

$13.93

$11.95

$7.71

Operating Surplus / (Deficit)

(1.27)

(1.98)

(4.24)

(5.56)

Reserve Balance End of Year

$13.93

$11.95

$7.71

$2.15

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 Works By-law 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 provided though a cost recovery program and are detailed in Schedules A, A.1, C, E, and G of the by-law. It is recommended that these fees be increased by 4% to accommodate general inflationary increases in wages, equipment rental and materials.

The charge for a returned cheque in Schedule I is proposed to be increased from $20 to $35 to recover handling costs. This will be consistent with the fee charged by Revenue Services in 2004. The fee for requests for special meter readings, Section 32(5) of the Water Works By-Law, is proposed to be increased from $25 to $75, again to recover actual costs. This fee has not been increased since 1996.

Section 3A(b) of the Water Works By-Law provides for reuse of a an existing water service that is larger than 50mm and installed in 1961 or later. Staff propose that the installation date be revised to 1970 and that the pipe material be ductile iron. Recent data has shown that some thin walled services installed in the 1960's have not performed well and reuse would not be advisable.

The proposed fees are included in Appendix A, attached.

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 2004, it is recommended that consumption based fees be increased by approximately 6.0% and service and connection fees be increased by 4%, as described in this report.

* * * * *

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SCHEDULE A: Flat Rate Connection Fees

Service Pipe Size

Single-Family & Two-Family Dwellings

All Others

20mm

$2,527

$5,056

25mm

$2,629

$5,262

40mm

$2,959

$5,926

50mm

$2,959

$5,926

Service Pipe Size

Connection Fee (all customers)

  

100mm

$8,777

  

150mm

$10,856

  

200mm

$11,855

  

300mm

$16,684

  

SCHEDULE A.1: Removal Fees

Service Pipe Size Fee

  

20mm (3/4") to 50mm (2") inclusive

$636

100mm (4") to 300mm (12") inclusive

$1,906

SCHEDULE B: Flat Service Charges for Residential Properties
(Applicable to Single Family Dwellings and Dwellings comprising not more than two separate dwelling units.)

(I) Single Dwelling Unit

$287 per year

(II) For an Extra Dwelling Unit

$101 per year

(III) For Each Strata Title Duplex

$194 per year

SCHEDULE C: Flat Service Charges for Unmetered Fire Service Pipes

Pipe Size Rate in Dollars per Year

  

50mm (2")

$139

75mm (3")

$209

100mm (4")

$288

150mm (6")

$333

200mm (8")

$390

250mm (10")

$415

300mm (12")

$444

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

$138.9

A minimum of 8 units per month will be charged for, should a lesser quantity or no water be consumed.

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

Size of Meter Services with Standard Type Meters

Per Two Monthly Period

Per Four Monthly Period

17mm (1/2") and 20 mm (3/4")

$22

$27

25mm (1")

$24

$31

40mm(1 ½ ")

$27

$42

50mm (2")

$34

$56

75mm (3")

$70

----

100mm (4")

$85

----

150mm (6")

$110

----

200mm (8")

$171

----

250mm (10")

$210

----

300mm (12")

$251

----

Services with Low Head Loss Meters/Detector Check Valves

    

100mm (4")

$99

----

150mm (6")

$144

----

200mm (8")

$193

----

250mm (10")

$240

----

300mm (12")

$287

----

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

$127

Over 500 but not exceeding 2,000

$249

Over 2,000 but not exceeding 9,000

$374

Over 9,000 but not exceeding 24,000

$628

Over 24,000 but not exceeding 45,000

$940

Over 45,000

$1,247

SCHEDULE G: Fees for Installation of Water Meters

Size of Meter

On City Property

On Private Property

20mm (3/4")

$2,066

$261

25mm (1")

$2,125

$276

40mm(1 ½")

$2,196

$276

50mm (2")

$2,196

$392

75mm (3")

$7,824

$606

100mm (4")

$7,824

$606

150mm (6")

$27,001

$677

200mm (8")

$27,001

$784

250mm (10")

$32,393

$1021

300mm (12")

$32,393

$1021

SCHEDULE H: Miscellaneous Fees for Water Users

Cross Connection Control Administration Fees

  

First Assembly

$20

Additional Assembly

$10

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

SCHEDULE I: Miscellaneous Charges

Charges for returned cheques

$35

Residual Water Pressure Estimate Fee

  

Original calculation

$35

Additional copies for same location

$10

Miscellaneous water information requests (per hour)

$40

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