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General Manager of Engineering Services
SUBJECT: Implementation of Solid Waste and Sewer Utilities
A. THAT the Solid Waste Utility be implemented effective January 1, 1998, and THAT the Director of Finance and General Manager of Engineering Services report back in November, 1997 with a proposed rate structure.
B. THAT the Director of Legal Services be instructed to bring back the necessary bylaw to implement the Solid Waste Utility on January 1, 1998.
C. THAT staff report back on the financial impacts on property of the Solid Waste and Sewer Utilities, as well as strategies to mitigate these impacts, as part of the overall review of 1998 tax policy.
D. THAT staff report back on a communications program to advise taxpayers of the changes associated with the implementation of the utilities.
E. THAT the Director of Finance and General Manager of Engineering Services be instructed to work toward a July, 1998 implementation of the Sewer Utility with a report back on implementation issues and impacts by March 1998.
The General Manager of Corporate Services and the General Manager of Engineering Services note that the work leading to introduction of the Solid Waste and Sewer Utilities has been ongoing for more than five years and that information about the implementation plans and the possible impacts have been reported to Council on several occasions during this period. However, it is worth reminding
Council at this time that the change from an assessment-based to a user fee-based system of charging for these services will involve shifts of costs from higher value to lower value properties in the City, most markedly for sewer services. Without intervention, these impacts will be passed through to taxpayers; however, there are mitigation strategies that can be utilized to provide some transition relief. Both staff and the Citizens Advisory Group on Property Taxation will be reporting on these mitigation strategies in March 1998, as part of the annual review of property taxation policy.
When Council last considered implementation of the utilities, staff were instructed to report back with implementation plans following the necessary amendments to the Vancouver Charter. With those amendments in place, the final obstacle to implementation has been removed and if Council wishes to proceed within the time frame outlined in this report, it is important to make that decision for Solid Waste now and for Sewer early in the new year. Following from Council’s ongoing support for implementation of the utilities, the General Manager of Corporate Services and the General Manager of Engineering Services RECOMMEND approval of A, B, C, D and E.
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.
On February 8, 1996 Council deferred the implementation of the Solid Waste Utility until the City was able to secure the appropriate amendments to the Vancouver Charter from the Provincial Government (originally requested in 1994). These amendments were required to enforce the collection of the user fees. The expectation was that the amendments would be received in the summer of 1996 so that the Solid Waste Utility could be implemented in January of 1997.
Subsequently, on July 30, 1996, Council passed a motion 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 were secured, and that staff be instructed to report back on a revised utility implementation timetable at that time.
The amendments to the Vancouver Charter were passed by the Legislature and given Royal Assent on July 28, 1997. Staff advised Council by memo on July 29 that there would be a report back to Council in early October with proposed implementation dates and updated tax impacts.
The purpose of this report is to obtain approval to implement the Solid Waste Utility effective January 1, 1998, and to present timing options for establishing the Sewer Utility.
The City has been working towards implementing user fees for residential solid waste services and for sewers for several years, extending the user fee principle now applied to water consumption. User fees for these services demonstrate clearly to consumers the costs of providing the services, as well as providing the opportunity to offer incentives to limit their use. Implementation of the utilities would also put Vancouver on the same basis as most other North American cities, including those around the GVRD, that have had user fees for utilities for many years.
The Solid Waste and Sewer Utilities will function in a similar manner to the City’s existing Water Utility. Solid waste and sewer costs will be removed from the general property tax levy and be replaced with fees based on consumption, or a proxy for consumption, rather than on assessed value of property. The new utilities will function as self-sustaining operations, with fees based on full cost-recovery, reviewed annually by Council.
There has been support for establishing these utilities from citizen groups established to review tax policy. The 1989 Municipal Taxation Commission (the Leckie Commission) found that the City could benefit by increasing diversity in its revenue sources and identified a self-funding Sewer Utility as the strongest option for reducing the dependence on the property tax. Further support came from the Task Force on Property Taxation which presented its report to Council on April 22, 1994. While discussing options for adjusting the tax burden among property classes, the Task Force identified user fees for sanitation and sewage services as a main alternative to funding these activities through property taxes.
More recently, the Citizens Advisory Group on Property Taxation (CAGPT) has reviewed proposals for both of the utilities. The Advisory Group has endorsed the underlying principles for the utilities as well as the methodology adopted to set rates and to unburden the general purposes tax levy. In recent months the group has begun a review of the impactsof the transition to user fees on property in the City so that they will be in a position to make recommendations to Council about measures necessary to mitigate the impacts of the change from value-based to consumption based fees. These recommendations will be conveyed to Council with the staff report called for in Recommendation C.
Implementation of the Solid Waste Utility will have its biggest impacts on residential properties because non-residential properties already pay for solid waste services through user fees. Implementation of the utility will result in the costs of residential garbage collection and disposal being removed from the Class 1 (Residential) tax levy, reducing taxation for all residential properties.
On the service side, most residential solid waste customers will see no change in the level of service they receive from the City through implementation of the utility. Single family residential properties which currently receive ‘can service’, will continue to have their garbage collected weekly with the costs of these services being distributed by way of a new annual fee, estimated at $99 (1997). In addition, the costs of residential blue box recycling, now paid for through the Solid Waste Capital Reserve, will be replaced by a user fee, estimated at $45 annually.
Stratified residential properties, for which ‘can service’ is not now viable, currently have the option to receive ‘equivalent to can’ container service as part of their property taxes. Under the utility, these properties would see the same reduction in property taxes as other residential properties and would continue to have the choice of contracting with the City or with a private hauler for collection and disposal services. Multi-family rental buildings which now pay the same taxes as other residential properties but which receive no ‘equivalent to can’ service will benefit from the removal of costs from the tax levy and will also continue to have the option of contracting with the City or a private hauler for service. Recycling services to multi-family residential properties will be the subject of a separate report to Council.
While the costs of solid waste collection and disposal will be more equitably distributed under the Utility, there will be some shifts involved in the transition because the basis for charging for the service would change. Instead of paying a share of the costs that varies according to the assessed value of their property, residents will all pay the same user fee for the same level of service. This means that some higher valued residential properties will see a larger reduction in their taxes than those experienced by lower valued properties while all properties would pay the same user fee for residential garbage service.
A detailed analysis of these tax impacts by neighbourhood was distributed to Council in 1995. Based on the current situation, introduction of the Solid Waste Utility will result in a reduction in the general purposes component of individual residential tax bills of about 5.75%, replaced with an estimated annual fee of $144 for both garbage and recycling services. While these one-time shifts remain a concern, it is recommended that Council approve the establishment of the Solid Waste Utility effective January 1, 1998 and instruct staff to report back on the impacts and possible mitigation strategies, as part of Council’s normal overall review of taxation policies for 1998. This report, which would normally be considered in March 1998, will allow Council to consider all factors affecting property taxation, including assessment averaging and utility implementation issues, at one time. Council will also have the opportunity to consider input from the CAGPT, which will complete its assessment of these impact in time for a March 1998 report.
The implementation of the Sewer Utility will impact on all properties in the City. As is the case with the Solid Waste Utility, sewer costs will be removed from the tax levy based on the distribution of sewer system costs with the utility in place. The tax levy would be replaced with user charges based on water consumption (metered properties) or water flat charges (non-metered properties) and a lot charge based on area. As sewerage costs, including regional charges, are significantly higher than solid waste costs, the impacts of this transition will be proportionately higher. For example, it is currently anticipated that removal of sewer costs from the residential class of property will result in a reduction in the average residential tax bill of about 26%. This tax reduction would be replaced with a user fee of $96 (1997) based on water consumption and a variable charge based on lot size. For a normal City lot (33 feet by 120 feet) the total annual charges would be $327. The non-residential property classes would see a smaller percentage reduction in property taxes because the cost to service these classes is lower, however, the impact of user charges on individual properties will vary depending on water consumption and lot size.
When the utilities were originally approved in 1995, the intent was to have a phased, two-step implementation with the Solid Waste Utility in place for 1996 and the Sewer Utility for 1997. This schedule was delayed by the failure to achieve the necessary amendments to the Vancouver Charter until July of this year.
Early in 1997, with the expectation that the Charter amendments would be in place before 1998, staff took steps to be in a position to implement both utilities on January 1, 1998. As noted above, the Solid Waste Utility is ready to proceed, however, there will have to be some delay for the Sewer Utility. The recent labour dispute has made it impossible to resolvesome data issues that are critical to the sewer utility billing process, to complete the necessary programming and to undertake a test billing to ensure the process works satisfactorily. We are also unable to complete the analysis of impacts of the transition from value-based to consumption-based billing in time for the Citizens Advisory Committee and Council to deal with mitigation strategies prior to a January 1998 start up.
Having missed the planned January 1998 start-up, staff have been examining other implementation options, including a partial implementation in January 1998, a full start up in mid 1998 or a delay until January 1999. The most promising of those would be a mid-year, 1998 start-up for all properties and the recommendation of this report is that staff pursue that option with a final decision to be made in March.
Delaying the Sewer Utility until July 1998 would mean that charges for half the year would be based on property values and included in the property tax levy, while charges for the balance of the year would be levied on a user fee basis. For single family properties on flat water rates, the entire annual cost would appear on the July tax bill, calculated partly as property taxes (first six months) and partly as a user fee (second six month). For those properties on metered water service, the lot size charge would appear on the tax bill and the consumption charge would appear on water bills starting in July 1998.
There are several advantages to pursuing a mid-year implementation for the Sewer Utility. This option would provide for a transition to full consumption-based fees and perhaps reduce the need for additional mitigation measures. It would also allow staff, the Citizens Advisory Group and Council to consider the implementation issues and impacts and to make decisions within the context of overall taxation policy for 1998. Finally, a 1998 implementation would allow separation of the utility implementation issues and the introduction of BODS/TSS charges proposed by the regional district in 1999.
UTILITIES IMPLEMENTATION COMMUNICATIONS PLAN
It is crucial that the City carry out a thorough communication plan to explain the changes in the way businesses and residents will be billed for solid waste and sewer services under the utility model. A plan had been prepared based on implementing both utilities in January, 1998. The timing of this plan will need adjustment to fit a revised implementation date for the Sewer Utility. Recommendation D directs staff to report back on the communications program, which will be updated to reflect Council’s direction on the Sewer Utility.
The proposed communications plan has several components. It will include advertisements in the local papers, news releases to all forms of media, and coverage in the issue of CityNews to go out with the December tax bill (to advise of the change in the May bill). The 1998 water and tax bills showing the new utility fees will include reminder notices which once again explain how the new charge was calculated. Staff also plan on more directed communication for specific groups including a separate letter to strata corporations to go out in October, and direct contact with the larger water consumers (for the sewer charge).
With recently approved amendments to the Vancouver Charter, the City is in a position to implement utilities for sewer and solid waste services. Staff report that development of the Solid Waste Utility has reached the point where a January 1, 1998 implementation can be achieved. Development of the Sewer Utility has been delayed by the recent labour dispute and cannot be ready for a January start-up. As a result, it is proposed that Council instruct staff to work toward a mid-year, 1998 start up for the Sewer Utility, with a report back by March 1998 on final implementation details.
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