Planning and Environment Committee
and Council / et au Conseil
1 April 2010 / le 1 avril 2010
Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière municipale
Contact Person/Personne ressource : Ken Hughes, Deputy City Treasurer, Revenue/
Trésorier Municipal Adjoint
Finance Department/Service des finances
(613) 580-2424 x 13485, Ken.Hughes@ottawa.ca
Ref N°: ACS2010-CMR-FIN-0019
That the Planning and Environment Committee recommend Council:
1. Approve a credit program for current owners to offset or adjust the sewer service charges collected by property taxes for the period of ownership between 2001 and 2009 to be applied to the 2010 Final Tax Bills issued in May 2010.
2. That such credit program include interest and provision in the same manner as authorized by the Municipal Act Section 345 and Education Act Section 257.11 for overpayments.
3. That the estimated cost of this program in the amount of $797,000 be funded by the Sewer Reserve.
Que le Comité de l’urbanisme et de l’environnement recommande au Conseil que:
1. soit approuvé un programme de crédit pour les propriétaires actuels, afin de compenser ou d’ajuster les redevances de services d’égout, prélevés par les taxes foncières pour la période de possession de 2001 à 2009, devant s’appliquer à la facture finale de taxes 2010 envoyée en mai 2010;
2. ce programme de crédit comprenne les intérêts et les provisions de la façon autorisée par l’article 345 de la Loi sur les municipalités et par l’article 257.11 de la Loi sur l’éducation pour les trop-perçus;
3. le coût estimatif de ce programme, au montant de 797,000 $, soit financé à même les fonds de réserve des égouts.
In the 1980’s Regional sewer mains were extended to the Richmond and Carp areas to address issues with failing septic systems. All new home construction in those areas have been required to connect to city sewer services for more than 10 years. Approximately 1,200 properties are now connected to city sewer services while still maintaining working wells. By default, they have no water account or water meter to record consumption to calculate payment for sewer services.
With the inability to measure or bill for sewer services from a water account, a different methodology was required to assess a charge for sewer only services. A flat-tax rate applied to assessment was developed and approved by By-Law with the resulting annual charges being levied on the property tax bill. Over the years, this rate has been recalculated during assessment cycles and updated annually to reflect any inflationary increases.
For several years prior to and following amalgamation, 1 cubic meter per day was used as the average consumption for reporting purposes for urban and suburban properties with water accounts. Although the historical 1 cubic meter may have been relevant in the 1980’s, the average consumption for single detached family dwelling on water has been on a slow but steady decline for quite some time. In 2006 a comprehensive historical consumption profile of water accounts was undertaken. The cross-linking in 2007 of the tax and water billing systems provided City additional specific consumption averages by property type and dwelling.
From 2001 to 2009, the average daily consumption for a single family dwelling has steadily declined from 0.760 cu/m per day to 0.586 cu/m per day. This is the result of a combination of factors, such as new homes being built with more water efficient showers, toilets and appliances, retrofitting of existing homes, the toilet replacement program and less watering in the more recent years due to wetter and colder summers. Water conservation has also become a higher priority with the increasing rates for water and sewer services.
Due to the lack of any measurement data, staff are unable to establish if un-metered properties have also experienced a drop in sewer effluents. Without the mounting pressure of rising water and sewer bills, as has occurred in areas with water meters, it is difficult to gauge if homeowners would invest in water conservation appliances and devices or not in areas with sewer service alone.
The annual volume of the Richmond and several other pumping stations has also been analyzed over the last five years. The results are inconclusive primarily due to annual variations in the infiltration level of snow melt and rainfall into the sewer lines in any given year. There was no significant drop in volume being pumped for these stations for the years 2006, 2008 and 2009. Even without seasonal fluctuations, the gradual drop in volume, if any, could easily be offset by the construction of new homes being built in the area and would not in itself be easily apparent.
Following a request by a member of Council, staff have modelled a revised rate based on the reduction experienced by the average urban/suburban family dwelling with a water meter. This revised formula would have yielded a reduced charge that varies from $47 to $137 per year from 2001 to 2008 for the average home in this area. Since the rate is applied to the Current Value Assessment, the amount will vary depending on the value of the property. It should be noted that the revised rate based on an estimated 2009 average consumption was utilized for the 2009 charge included on that final tax bill. The updated 2009 average consumption is now available resulting in a small adjustment to the 2009 charge.
All rates and charges have been applied correctly as per the approved Council tax by-laws for any given year based on the original calculations and the method of billing for each of these years. The Municipal Act, various legislations, regulations and by-laws limit the application of tax assessment, water billing adjustments, supplementary taxation, fees and charges to the current and previous 2 years. For example, supplementary tax bills issued in 2010 would only go back as far as 2008. The Limitation Act also prescribes a two-year limitation for various actions. There is no mandatory obligation to approve retroactive credits calculated using this reduced rate. Nonetheless, staff are proposing that the credits generated by this reduced rate be provided for the period of 2001 to 2008. Table 1 illustrates the charges and the potential credits that would be generated from the recalculation of these charges. With the corresponding adjustment for 2009 based on the final average consumption, the amount of the program is estimated at $665,802 plus $131,039 in interest for a total of $796,841.
There have been numerous ownership changes for these properties over the last 10 years. It is recommended that the credits applicable for each property be applied to the existing tax account of current owners as of the date of Council approval for the period of ownership of any qualifying year.
For example, if the current owner bought the property in 2008, they would be entitled for a credit from 2008. Such credit would be reflected on the final 2010 tax bill issued in May for all applicable properties.
Since 2003, the Municipal Act Section 345 and the Education Act Section 257.11 prescribes interest and rates for any tax overpayments at the bank prime rate reported to the Bank of Canada. Staff are proposing that these amounts going back to 2001 be subject to the same interest provision. The interest of $131,039 would also be credited directly to the tax account.
It is proposed that the 2010 rate calculation be established with the updated 2009 average consumption and sewer surcharge of similar single family dwellings with water accounts. With the current rate review of the water and sewer rate structure to be implemented for 2011, staff will review the impact of the proposed changes on this group of properties. Alternative models such as a flat fee per dwelling will also be considered for 2011.
Staff contacted and consulted with other staff in the Corporate Budget, Financial Services and Environmental Services Department and Branches. Staff also consulted with Councillors Glenn Brooks and Eli El-Chantiry for the affected Wards 21 and 5.
There are no legal or risk management impediments to approving the recommendations in this report.
The estimated cost of this program in the amount of $797,000 is to be funded by the Sewer Reserve.
Finance staff are to apply a credit to the tax accounts for the period of ownership of current owners to offset or adjust the sewer service charges collected by property taxes for 2001 to 2009.