ADMINISTRATIVE REPORT

Date: November 10, 1997

CC File No. 1755

TO: City Services & Budgets Committee

FROM: Director of Finance and General Manager of Engineering Services

SUBJECT: Annual Review of Water Rates for 1998

RECOMMENDATION

A. THAT flat water rates for single dwelling units be increased from $218 to $231 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 6.0%, and that the rates as detailed in this report be approved effective January 1, 1998.

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 1.2% to reflect cost increases including inflation, and the rates as detailed in this report be approved effective January 1, 1998.

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

(Schedules A-I inclusive on file in City Clerk's office)

MANAGERS’ COMMENTS

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

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 rates.

PURPOSE

The purpose of this report is to recommend a general increase in water charges for 1998 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.

1. REVIEW OF 1997 OPERATIONS

The following table shows the projected results of waterworks operations for 1997 using actual data to the end of October. These projections indicate that expenditures will be $819,800 (1.7%) under budget while revenues will be $776,800 (1.7%) under budget. The expenditure variances are due to lower than anticipated water consumption and maintenance expenditures not incurred due to the civic strike. Revenues were down as well, primarily due to lower consumption by the metered water customers.

1997 OPERATIONS

	1997	1997	Increase/
	Projected	Budget	(Decrease)	%
Expenditures
Debt Charges	$22,814,600	$22,814,600	$0	0.0%
Water Purchases (GVWD)	$17,093,900	$17,434,700	($340,800)	-2.0%
Water Rates Billing	$714,300	$771,800	($57,500)	-7.5%
Operating & Maintenance	$5,653,300	$6,074,800	($421,500)	-6.9%
Total Expenditures	$46,276,100	$47,095,900	($819,800)	-1.7%
Revenue
Flat Rate	$18,530,000	$18,600,700	($70,700)	-0.4%
Meter Service Charge	$1,969,000	$1,914,300	$54,700	2.9%
Metered Rate	$25,305,400	$26,066,200	($760,800)	-2.9%
	$45,804,400	$46,581,200	($776,800)	-1.7%
Transfer from (to)
Stabilization Reserve	$471,700	$514,700	($43,000)
Total Revenues	$46,276,100	$47,095,900	($819,800)	-1.7%

2. 1998 ESTIMATED BUDGET

It is recommended in this report that the 1998 waterworks budget be balanced by a 6.0% increase in flat and meter water rates along with a 1.2% increase in other water charges (Appendix 1). The increase in water rates will be used to:

1. Fund the 2.9% increase in expenditures.

2.Offset revenue shortfalls due to projected reductions in water consumption by metered water users.

Expenditures:

The major factor driving the increase in expenditures is a projected 12.0% increase in the GVWD water rates. Offsetting this rate increase, is lower projected water consumption when compared to the 1997 budget. This reduction in water consumption came predominantly from the metered water users.

The operating and maintenance costs are expected to increase by 1.2% in 1998, most of which is attributed to inflation.

City debt charges will drop by 2.3% in 1998. The 1997 budget included a one-time charge of $746,000 relating to the recall of by-law #5257 which will not recur in 1998. Otherwise, new debt charges have been largely offset by maturities of older issues.

Revenues:

Flat rate revenues are projected to be about 0.4% under budget for 1997. This is due to growth in the user base that had been anticipated but did not occur in 1997. Therefore a 6% increase in the flat rate with a lower expected user base will result in a 5.6% increase in flat rate revenues for 1998.

Flat Revenues 1997 budget $18,600,700

User growth in 1997 doesn’t occur (70,700)

1998 Base before Rate Increase 18,530,000

1998 Rate Increase (6%) 1,105,000

Flat Revenues 1998 Budget $19,635,000

Metered service charges are largely affected by activity levels and are expected to increase by 4.9% in 1998.

Metered water revenues are projected to be under budget in 1997 due to an unanticipated decline in metered consumption. The 6% increase in rates combined with lower expected consumption in 1998 results in a 2.9% increase in revenues.

Meter Revenues 1997 budget $26,066,200

Lower consumption in 1997 (760,800)

1998 Base before Rate Increase 25,305,400

1998 Rate Increase (6%) 1,517,000

Meter Revenues 1998 Budget $26,822,400

1998 BUDGET

	1998	1997
	Estimated	Budget	Increase	%
Expenditures
Debt Charges	$22,282,200	$22,814,600	($532,400)	-2.3%
Water Purchases (GVWD)	$19,240,900	$17,434,700	$1,806,200	10.4%
Water Rates Billing	$781,100	$771,800	$9,300	1.2%
Operating & Maintenance	$6,147,700	$6,074,800	$72,900	1.2%
Total Expenditures	$48,451,900	$47,095,900	$1,356,000	2.9%
Revenue
Flat Rate	$19,635,000	$18,600,700	$1,034,300	5.6%
Meter Service Charge	$2,008,400	$1,914,300	$94,100	4.9%
Metered Rate	$26,822,400	$26,066,200	$756,200	2.9%
	$48,465,800	$46,581,200	$1,884,600	4.0%
Transfer from/(to)
Stabilization Reserve	($13,900)	$514,700	($528,600)
Total Revenues	$48,451,900	$47,095,900	$1,356,000	2.9%

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 1.2% 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 to stabilize year over year changes in the water rates. With the transfer from the reserve of approximately $471,700 in 1997, the balance will be decreased to $2,060,700. The $13,900 transfer to the reserve in 1998, will balance the Waterworks budget and will leave the reserve with $2,074,600 at the end of 1998.

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(c) 1997 City of Vancouver