ADMINISTRATIVE REPORT

Date: October 21, 1998

Author/Local: G.Merchant/7250

RTS No. 199

CC File No. 1755

TO:	Vancouver City Council
FROM:	Director of Finance and General Manager of Engineering Services
SUBJECT:	Annual Review of Water Rates for 1999

RECOMMENDATION

A.THAT flat water rates for single dwelling units be increased from $231 to $244 and that 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") be increased by 5.6%, and that the rates as detailed in this report be approved effective January 1, 1999.

B.THAT flat rate connection and removal fees (Schedule "A" and Schedule "A.1"), flat water 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") be increased by 1.1% to reflect cost increases including inflation, and the rates as detailed in this report be approved effective January 1, 1999.

C.THAT the Director of Legal Services be instructed to bring forward the necessary amendments to the Water Works By-law for approval.

GENERAL MANAGER COMMENTS

The General Managers of Corporate Services and Engineering Services RECOMMEND approval of A, B and C.

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 1999 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.Review of 1998 Operations

The following table shows the estimated results of waterworks operations for 1998 using actual data to the end of September. These estimates indicate that expenditures will be $387,100 (0.8%) under budget while revenues will be $1,919,400 (4.0%) over budget. The expenditure variances are primarily due to the delay of the 1998 debenture issue, with the result that debt charges which were budgeted will not be incurred until 1999. This reduction in costs are offset to some extent by the cost of water purchases which are higher than budgeted. The higher revenues are the result of increased meter revenues which as in the case of the higher water costs are the result of a hot dry summer.

1998 Operations

	1998 Estimate	1998 Budget	Inc/(Dec)	%
Expenditures
Debt Charges	$22,575,300	$23,150,300	($575,000)	-2.5
Water Purchases (GVWD)	19,428,800	19,240,900	187,900	1.0
Water Rates Billing	783,600	783,600	0	0.0
Operating & Maintenance	6,525,200	6,525,200	0	0.0
Total Expenditures	$49,312,900	$49,700,000	($387,100)	-0.8
Revenue
Flat Rate Revenues	$19,676,800	$19,635,000	$41,800	0.2
Meter Service Charge	2,008,400	2,008,400	0	0.0
Metered Rate Revenues	28,700,000	26,822,400	1,877,600	7.0
	50,385,200	48,465,800	1,919,400	4.0
Transfer from/(to) Reserve	(1,072,300)	1,234,200	(2,306,500)
Total Revenues	$49,312,900	$49,700,000	($387,100)	-0.8

2.1999 Budget Forecast

It is recommended in this report that the 1999 waterworks budget be balanced by a 5.6% increase in flat and meter water rates along with a 1.1% increase in other water charges (Appendix 1). The increase in water rates will be used to:

a.Fund the projected 8.8% increase in City debt charges resulting from the 1998 debenture issue net of maturities. The 1998 debenture issue arises from the borrowing approved by Council for the 1997 - 1999 Waterworks Capital Plan. This plan included funding for a 1.5% annual waterworks infrastructure replacement program as well as the development of the Dedicated Fire Protection System.

b.Fund the projected 7.9% increase in GVWD water costs. This increase is a combination of a projected 8.7% increase in GVWD water rates along with a small (0.7%) projected decrease in consumption. The GVWD rates are expected to double over the next ten years, due to an extensive water transmission capital program to address regional growth, and implementation of the Drinking Water Treatment Program. This year’s increase is part of that overall trend, which could be reduced somewhat if growth related projects are deferred through water conservation or in response to slower development activity.

c.Fund the projected 1.1% increase in waterworks operations costs.

1999 Budget Forecast

	1999 Forecast	1998 Estimate	Inc/(Dec)	%
Expenditures
Debt Charges	$24,569,700	$22,575,300	$1,994,400	8.8
Water Purchases (GVWD)	20,963,200	19,428,800	1,534,400	7.9
Water Rates Billing	792,200	783,600	8,600	1.1
Operating & Maintenance	6,597,000	6,525,200	71,800	1.1
Total Expenditures	$52,922,100	$49,312,900	$3,609,200	7.3
Revenue
Flat Rate Revenues	$20,784,200	$19,676,800	$1,107,400	5.6
Meter Service Charge	2,048,600	2,008,400	40,200	2.0
Metered Rate Revenues	30,086,400	28,700,000	1,386,400	4.8
	52,919,200	50,385,200	2,534,000	5.0
Transfer from/(to) Reserve	2,900	(1,072,300)	1,075,200
Total Revenues	$52,922,100	$49,312,900	$3,609,200	7.3

3.Inflation Increase

Some services provided are not affected by the cost of water but are mainly dependent on general increases in the cost of goods and services. It is proposed that these services which include Schedules A, A.1, C, E and G be increased by 1.1% to cover inflation of material and labour costs.

4.Water Rates Stabilization Reserve

The water rates stabilization reserve is comprised of the accumulated surpluses of the waterworks operations over the years and is used mainly to stabilize year over year changes in the water rates. It is expected that there will be a surplus of $1,072,300 in 1998 which will increase the reserve to a balance of $3,409,100. The Director of Finance will be reporting to Council shortly on a recommended allocation for the excess funds in this reserve. * * * * *

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(c) 1998 City of Vancouver