POLICY REPORT
UTILITY IMPLEMENTATION
Date: July 15, 1996
TO: Vancouver City Council
FROM: General Manager of Corporate Services and
General Manager of Engineering Services
SUBJECT: Solid Waste and Sewer Utilities -
Implementation Update
RECOMMENDATION
A. THAT Council approve January 1, 1997 as the revised
implementation date for the Solid Waste Utility on the
condition that the applicable amendments to the Vancouver
Charter are secured by September 1, 1996.
B. THAT the implementation date for the Sewer Utility be
deferred by one year from January 1, 1997 to January 1,
1998, on the condition that the applicable amendments to the
Vancouver Charter are secured by September 1, 1996.
C. THAT, should the proposed utility amendments to the
Vancouver Charter not be secured by September 1, 1996, the
implementation of both the Solid Waste and Sewer Utilities
be deferred until such time as the amendments are secured,
and that staff be instructed to report back on a revised
utility implementation timetable at that time.
COUNCIL POLICY
On September 12, 1995, Council approved the creation of a Solid Waste
Utility to be implemented on January 1, 1996, and a Sewer Utility to
be implemented the following year. Establishing utilities for these
services means they will be paid for by fees based on estimated usage
rather than by taxes based on assessed values. The general tax levy
will be reduced by the amounts to be raised through the utilities.
On February 8, 1996, Council passed the following resolution:
THAT the implementation of the Solid Waste Utility,
previously approved for start up on January 1, 1996, be
deferred until the City is able to secure the appropriate
Charter amendments from the Provincial Government. The
revised implementation date will likely be January 1, 1997.
The issue of whether the implementation date for the Sewer Utility
should be changed as a result of delaying the Solid Waste Utility was
not discussed at that time.
PURPOSE
The purpose of this report is to update Council on the status of the
Charter amendments and to recommend revised implementa-tion dates for
the Solid Waste and Sewer Utilities.
BACKGROUND
Council approved the creation of both a Solid Waste Utility and a
Sewer Utility on September 12, 1995. The City already has a Water
Utility in place. Through the utility structure, solid waste and
sewer costs will be removed from the general levy, with a
corresponding decrease in tax rates. These costs will then be placed
in separate funds to be recovered through fees based on estimated
usage rather than on assessed property values. The new utilities will
function as self-sustaining operations, like the existing Water
Utility, with fees based on full cost-recovery.
Usage-based fees are considered more equitable, as well as more
predictable, since they do not vary with market-driven shifts in the
value of a property. These fees more clearly reveal the true cost of
the services to users, and encourage them to reduce their levels of
consumption. Finally, removing solid waste and sewer costs from the
general levy will mean that the tax rates will not be skewed by the
above-inflation cost increases anticipated from the GVRD s
environmental initiatives and from the addition of expanded recycling
programs in the City.
The Solid Waste Utility report noted that amendments were required to
the Vancouver Charter in order to facilitate the billing and
collection of the utility user fees. These amendments would bring the
Charter in line with existing powers available to every other
municipality through the Municipal Act.
The report noted that it was not clear whether or not the Province
would be able to amend the Charter in time to bill the fees on the tax
notice. If the Charter was not amended, the fees would be billed
through a separate utility bill. Such a bill would mean additional
administrative costs, would have collection problems, and would be
further complicated by a mix of tenant and property owner customers.
After Council approved the utilities, the Law Department drafted the
requisite Charter amendments and forwarded them to the Province for
consideration and implementation at the earliest possible date. Staff
also began notifying users of the upcoming change in solid waste
charges.
On February 8, 1996, Council approved a staff recommendation to defer
the implementation of the Solid Waste Utility until the City was able
to secure the appropriate Charter amendments from the Province. This
recommendation was based on the delay expected following the
resignation of the Premier and the anticipated Provincial election.
The February report also noted that there was a significant business
risk to the City in proceeding without the Charter amendment, and that
deferral would be a more prudent course of action. January 1, 1997,
was given as the likely date for implementation.
STATUS OF CHARTER AMENDMENTS
Since the February report to Council, the City s legal staff have been
reviewing the proposed Charter amendments with the Ministry of
Municipal Affairs. At the request of the Province, background
material was sent to the Ministry demonstrating that utility fees do
not represent a new tax but rather a different means of recovering the
cost of existing services. Ministry staff indicated they would
attempt to schedule these amendments on the next legislative agenda.
The latest advice from Ministry staff is that the Charter amendments
have become a lower priority on the agenda for the summer session.
This means the consideration of the Charter may be deferred until a
fall session (if one is held), next spring or even later.
NOTIFICATION OF IMPLEMENTATION
The timing of the Charter amendments and a decision about whether to
proceed in their absence has implications for plans to notify our
customers. We will need to start advising users well before the end
of the year about whether or not the Solid Waste and/or the Sewer
Utilities will go ahead in 1997. This is particularly relevant for
customers such as strata buildings who may choose to go with private
waste disposal once the City switches from its current tax funded
system to a fee-for-service approach.
Good communication is especially important because of the confusion
arising from last year s anticipated implementation and subsequent
deferral. This means delaying any notification process until we are
absolutely certain of whether or not we will be going ahead in 1997.
The majority of the strata buildings contacted by the City advised
that they set their budgets early in the fall. To fit into this
timeframe, we would need to let them know about the City s
implementation plans by September 1.
SEWER UTILITY
The implementation of the Sewer Utility is currently approved for
January 1, 1997, which was to be one year after the original start-up
date for the Solid Waste Utility. The decision was made to stagger
the introduction of the utilities to minimize the tax implications of
doing both together, as well as to make it easier for both staff and
the public to adjust to the new billing procedures.
The following table illustrates some of these tax implications. The
analysis is for single-family residences and shows the impact of
putting either utility in place on its own as well as the effect of
putting both in place during the same year.
In each case, the comparison is between the total charges to be paid
with the utilities (new user fees and reduced taxes) vs. the taxes
which would result if the City did not implement the utilities. Only
the impact on general property taxes is examined; all other property
tax charges, water fees and the Homeowner Grant are not included in
this analysis.
% of properties % of properties % of properties average average
increasing by increasing by increasing by % $
less than 10% less than $100 less than $200 change change
Solid Waste Utility only 90% 100% 3% ($2)
Sewer Utility only 57% 62% 98% 8% $38
Both Utilities 51% 52% 89% 11% $36
The analysis reflects estimates of the costs and tax rates
for 1997 (based on 1995 figures). These costs include the
single-family and multi-family recycling programs, and the
anticipated sewage costs for the secondary treatment works
being carried out by the GVRD.
We note that properties with lower assessed values will tend
to face higher increases. This is because the reduction in
general taxes for those properties will not be enough to
offset the new user fees which will be tied to consumption
rather than assessed value.
Staff will be reporting back to Council in the Fall with a
similar analysis of the tax implications of the utilities for
multi-family residences as well as for commercial and
industrial properties. The focus of the analysis will be on
the Sewer Utility as these property classes are largely
unaffected by the Solid Waste Utility. This analysis will be
part of a report which discusses options for phasing the
impacts of the utilities in gradually through adjustments to
the tax levy and/or the utility rates.
CONCLUSION
Based on an optimistic expectation that the amendments will
be received in the summer session, staff recommend planning
to proceed with the Solid Waste Utility for 1997 and the
Sewer Utility for 1998. This is consistent with the two-step
approach to phasing in the utilities as originally approved
by Council.
We will continue to prepare the billing systems and a
notification plan, but will hold off until the Charter
amendments are secured. If the Charter amendments are not
received by September 1, the recommendation is to defer the
implementation of both utilities until the amendments are
secured, at which time we will report back to Council with
revised implementation dates.
As noted in the February report to Council, proceeding with
the utilities without the amendments to the Charter in place
is not recommended. While the City does have the authority
to charge utility fees, the amendments are required to allow
the billing to be done through the tax notice and to address
collection problems in the event of non-payment. These are
powers for administering a utility which are currently
available to other municipalities through the Municipal Act.
Since the City has been asking for essentially the same
powers as other municipalities now have, we did not expect to
run up against this series of delays. Further deferring the
implementation of the utilities is not desirable, but is
recommended as the prudent course of action.
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