Report to / Rapport au:
Planning and Environment Committee/
Comité de l'urbanisme et
de l'environnement
and/ et au
Agriculture and Rural Affairs Committee /
Comité de l'agriculture
et des affaires rurales
and Council / et au
Conseil
6 April 2010 / le 6 avril 2010
Submitted by/Soumis par: Nancy Schepers, Deputy City Manager/Directrice
munipale adjointe, Infrastructure Services and
Community Sustainability/Services d’infrastructure et Viabilité des
collectivités
Contact Person/Personne ressource : Dixon Weir, General Manager/Directeur général
Environmental Services Department/Services environnementaux
(613) 580-2424 x22002, Dixon.Weir@ottawa.ca
SUBJECT:
|
REVIEW OF THE WATER,
SANITARY AND STORMWATER RATE STRUCTURE
|
|
|
|
OBJET:
|
EXAMEN DE LA STRUCTURE DE
REDEVANCES POUR L’EAU, LES EAUX-VANNES ET LES EAUX PLUVIALES
|
REPORT RECOMMENDATIONS
That the Planning and Environment
Committee recommend that Council approve:
2. Full
cost recovery by service area, specifically:
different rates for the provision of drinking water services, and
sanitary and stormwater services.
3.
That staff further examines options for the
recovery of stormwater and drainage costs in 2010, for report back to Council
in 2011.
4.
That staff further examine options for the
recovery of costs from Russell Township and report back in Q4, 2010.
RECOMMANDATIONS DU RAPPORT
Que le Comité de
l’urbanisme de l’environnement recommande au Conseil d’approuver :
1.
L’application d’une structure
tarifaire « de base et volumétrique » à partir de 2011, selon la
description de « l’option A » en page 12 du présent
rapport.
2.
Le recouvrement complet des coûts
par secteur de service, en particulier : différentes redevances pour la
prestation des services de l’eau potable, des eaux-vannes et des eaux
pluviales.
3.
L’examen plus approfondi des options
de recouvrement des coûts des services des eaux pluviales et de drainage en
2010 et le personnel fera rapport au Conseil en 2011.
4.
L’examen plus approfondi des options
de recouvrement des coûts au canton Russell et le personnel fera rapport au T4
en 2010.
EXECUTIVE SUMMARY
The City is carrying out a Cost, Revenue and Rate Study in order to meet provincial regulations requiring the submission of a Council-approved Financial Plan for Ottawa’s drinking water system by 01 July 2010. A key element of the study has been the examination of the existing “Water & Sewer” rate structure, and the review of alternative rate structures for opportunities to improve financial sustainability.[1]
Approximately 75 per cent of drinking water, sanitary and
stormwater/drainage costs are paid directly from rates.[2] The City’s heavy reliance on this revenue
source necessitates a rate structure designed to ensure fairness, transparency,
cost recovery and revenue stability.
Unfortunately, the existing rate structure has weaknesses that undermine
revenue stability.
Currently, the City uses a “volumetric” rate structure whereby users pay
by the cubic metre consumed, plus a small Fire Charge. This rate
structure is easy to understand and administer, however, many of the City’s
costs for delivery of these services are “fixed”, and do not vary significantly
with changes in the volume of water billed.
The City's water and wastewater infrastructure comprises one of the largest industrial complexes in Eastern Ontario with an estimated replacement value of roughly $17 billion. Costs for operating, maintaining and, in particular, renewing these systems are not so much a function of their output, but rather their size, age and complexity. These costs increase annually simply due to continual growth and aging of the systems, regardless of whether water sales increase. Despite this, the City’s water and sewer revenues are directly tied to water sales. The goal of changing the rate structure is to lessen the vulnerability of revenues to fluctuations in water sales.
“Water & Sewer” rates are established at the beginning of the year based upon a forecast of water sales (i.e. the examination of consumption trends and growth rates.) Actual sales are dependent upon rainfall patterns, the economy, actual growth and the degree to which water is used efficiency. Unfortunately, even small deviations between predicted and actual sales can have large financial consequences.
The current rate structure exacerbates the challenge of
dealing with this uncertainty, and was identified by the Auditor General as a
weakness in his 2008 Review of the Water
Rate, which recommends that the City consider adoption of “water rates
based on a fixed meter charge plus a consumption charge as this will provide…a
more predictable and stable cash flow.”
Adding
a “base” charge to the Water and Sewer Bill will help to ensure recovery of a portion of fixed costs
that do not vary according to the volume of water or wastewater managed, and
mitigate revenue shortfalls in years where actual sales are less than
forecasted.
That said, a change in the rate structure does not in itself increase
revenues - the proposed rate is revenue neutral - it only guarantees
that a certain amount will be collected each year regardless of the volume of
water sold. Rate increases will continue
to be required due to rising costs, regardless of whether the City changes the
rate structure. This will be the subject
of future reports.
Most customers will see modest changes in their water bills as a result
of the recommendations in this report, and will benefit from greater price
stability in response to fluctuations in their consumption.
Other commonly used rate structures were
examined that would better allow the City to meet key rate setting
objectives. Four options were tabled at
Planning and Environment Committee in June 2009 for public consultation. Staff met with several community
associations, attended ward meetings and hosted seven Open Houses in September
and October 2009 to inform the public of the potential changes, and to solicit
feedback. In general:
·
Participants understood the reasons for moving
to a “base plus volumetric” rate structure and were supportive of such.
·
Participants understood the reasons for moving
to separate accounting of water and sewer costs, and were supportive of
different rates for the two service areas.
·
Participants were not supportive of Options B and C that would
transfer roadside drainage costs from the Water and Sewer Bill to the Tax Bill.
Accordingly, this report recommends:
· Implementation of a new rate structure commencing in 2011 that will consist of the following:
o
A drinking
water Base Rate and Volumetric Rate.
o
A
wastewater and drainage Base Rate and Volumetric Rate.
·
Further study of how best to manage the
recovery of stormwater and roadside drainage costs in 2010, for report back to
Council with recommendations in Q1, 2011.
·
Further study of how best to recover costs for
bulk water sales to Russell Township.
Legal/Risk Management Implications
There are no legal/risk management impediments
to implementing any of the recommendations in this report.
Financial Implications
There are no current financial implications as a result of this
report. Impacts to ratepayers and the
total water bill that would have resulted in 2009 are outlined in Table 2. Rate structure changes do not unto themselves
increase revenues. Future rate increases will need to be set to
meet the revenue requirements of the City, regardless of the rate structure in place.
Assignments related to implementing changes to the billing system,
educating the public on the changes and to further investigate stormwater cost
recovery and cost recovery from Russell Township are scheduled in 2010. Funding from this work is currently available
in capital internal orders 904 174 Water Rate Review and 904 176 Sewer Rate
Review.
Public Consultation/Input
The following activities were carried out to
raise awareness of the study, and of the rate structure options under
consideration:
·
Public
Meeting Notices were published in the major daily newspapers and all community
papers, meetings.
·
The
options were presented to two Standing Committees of Council: Planning and Environment Committee and the
Agricultural and Rural Affairs Committee.
·
Rural
Councillors were invited to provide a list of groups they wished to be
contacted for one-on-one meetings regarding possible changes in the recovery of
roadside drainage costs.
·
E-notices
were sent to a list of over 200 stakeholder groups including all community and
business associations.
·
Meetings
were held with representatives from individual groups as follows:
o
July 21,
Rural Issues Advisory Committee (RIAC);
o
July 27,
North-West Goulbourn CA;
o
August 11,
Carlsbad Springs CA;
o
September
14, Glens CA, Orchard Estates CA and Merivale Gardens CA;
o
September
19, Cumberland Village Association; and,
o
September
28, Rideau Goulbourn Ward Meeting.
·
Open
Houses were held as follows:
o
September
15, Manotick;
o
September
22, Nepean Sportsplex and Kanata Recreation Complex;
o
September
23, Jim Durrell Arena and St. Laurent Complex;
o
September
30, Carp Fairgrounds and City Hall; and,
o
October 1,
Navan Arena.
·
Briefings
were provided to both the Environmental Advisory Committee and the Business
Advisory Committee.
·
Over 300
surveys were completed at the Open Houses or submitted thereafter.
·
There have
been over 2325 hits on the project web page Ottawa.ca/ratestudy.
·
Over 200
comments were received via the project email ratestudy@ottawa.ca.
RÉSUMÉ
La Ville fait une étude des coûts, des revenus
et des redevances en réponse aux règlements provinciaux exigeant la
présentation d’un plan financier approuvé au Conseil pour le réseau d’eau
potable d’ici le 1er juillet 2010. Un élément important de
l’étude a été l’examen de la structure tarifaire actuelle « de l’eau et
des égouts » et l’examen de structures tarifaires de rechange, afin de
trouver des occasions d’améliorer la viabilité financière[3].
Les redevances règlent directement environ
75 % des coûts des services d’eau potable, des eaux-vannes et des eaux
pluviales – du drainage[4]. Étant donné que la Ville compte énormément
sur cette source de revenus, il faut une structure tarifaire conçue pour
garantir l’équité, la transparence, le recouvrement des coûts et la stabilité
des revenus. La structure tarifaire actuelle a malheureusement des faiblesses
qui minent la stabilité des revenus.
La Ville utilise actuellement une structure
tarifaire « volumétrique » selon laquelle les utilisateurs paient au
mètre cube consommé, à laquelle on ajoute une petite redevance d’eau-incendies.
Cette structure tarifaire est facile à comprendre et à administrer, mais de
nombreux coûts engendrés par la Ville pour la prestation de ces services sont
« fixes » et ne varient pas énormément quand le volume d’eau facturée
change.
L’infrastructure des
services d’eau et d’égouts de la Ville constitue l’un des complexes industriels
les plus importants de l’Est de l’Ontario, dont la valeur de remplacement est
estimée à environ 17 milliards de dollars. Les coûts d’exploitation,
d’entretien et, plus particulièrement, de renouvellement de ces réseaux ne
tiennent pas tant à leur production qu’à leur taille, à leur âge et à leur
complexité. Ces coûts augmentent chaque année simplement en raison de
l’expansion et du vieillissement des réseaux de la ville, sans égard à
l’augmentation des ventes d’eau. Malgré ces facteurs, les revenus des services
d’eau et d’égouts de la Ville sont directement liés aux ventes d’eau. Le
changement de la structure tarifaire vise à réduire la vulnérabilité des
revenus aux fluctuations des ventes d’eau.
Les redevances d’eau et
d’égout, basées sur les prévisions des ventes d’eau, autrement dit, sur
l’examen du taux de croissance et des tendances constatées dans la
consommation, sont déterminées au début de l’année. Les ventes réelles
dépendent de la pluviosité, de l’économie, de la croissance réelle et de
l’efficacité avec laquelle l’eau est utilisée. Malheureusement, des variations
minimes entre les ventes prévues et les ventes réelles peuvent avoir
d’importantes répercussions sur le plan financier.
La
structure tarifaire actuelle accentue le défi que constitue cette incertitude
et le vérificateur général a constaté que c’est une faiblesse dans sa Vérification
de la redevance d’eau en 2008. Il recommande que la Ville considère adopter
« des redevances d’eau basées sur une facturation fixe au compteur et une
facturation à la consommation, ce qui fournirait […] un flux de trésorerie plus
prévisible et plus stable ». L’ajout d’une redevance « de base »
à la facture de l’eau et des égouts aidera à garantir le recouvrement d’un
pourcentage des coûts fixes qui ne varie pas selon le volume d’eau et d’eaux
usées gérées, et à atténuer le manque de revenus pendant les années où les
ventes réelles sont inférieures à celles prévues.
Cela dit, un changement de structure tarifaire n’augmente pas les
revenus en soi, puisque le tarif proposé n’engendre aucun revenu. Il garantit
seulement qu’une somme relative sera perçue chaque année, peu importe le volume
d’eau vendue. Des augmentations des redevances continueront d’être nécessaires
à cause des coûts à la hausse, peu importe si la Ville change la structure
tarifaire. Cela fera l’objet de rapports ultérieurs.
La plupart des clients ne verront qu’un léger changement dans leur
facturation d’eau et ils profiteront d’une certaine régularité dans le montant
à débourser malgré la fluctuation de leur consommation en eau.
D’autres
structures tarifaires habituellement appliquées ont été examinées et elles
aideraient la Ville à mieux atteindre ses principaux objectifs pour établir les
redevances. Quatre options ont été déposées au Comité de l’urbanisme et de
l’environnement en juin 2009 pour consultation publique. Des membres du
personnel ont rencontré plusieurs associations communautaires, ils ont assisté
à des réunions de quartier et ont organisé sept réunions publiques en septembre
et octobre 2009 pour informer les citoyens des changements éventuels et
obtenir leur réaction. En général :
·
Les participants
comprennent pourquoi nous voulons adopter une structure tarifaire « de
base et volumétrique », et nous avons leur accord.
·
Les participants
comprennent pourquoi nous voulons adopter une comptabilité distincte pour les
coûts de l’eau et des égouts, et ils soutiennent les redevances différentes
pour les deux secteurs de service.
·
Les participants ne
soutiennent pas les options B et C qui transféreraient les coûts de
drainage en bordure de route de la facture d’eau et d’égouts à la facture de
taxe foncière.
Ce rapport recommande
donc :
·
L’application
d’une nouvelle structure tarifaire à partir de 2011 qui comprendra les points
suivants :
o
Une
redevance fixe pour l’eau potable et une redevance volumétrique.
o
Une
redevance fixe pour les eaux usées et le drainage et une redevance
volumétrique.
·
Une étude plus poussée pour
déterminer comment gérer au mieux le recouvrement des coûts des eaux pluviales
et du drainage en bordure de route en 2010 pour faire rapport au Conseil et
présenter des recommandations au T1 en 2011.
·
Une étude plus
approfondie pour déterminer comment recouvrer au mieux les coûts pour les
ventes d’eau au volume au canton Russell.
Répercussions
juridiques – sur la gestion des risques
L’application des recommandations du
présent rapport ne pose pas d’embuches juridiques –à la gestion des
risques.
Répercussions financières
Aucune répercussion financière ne découle
actuellement du présent rapport. Les répercussions sur les contribuables et la
facture d’eau totale éventuelles en 2009 sont décrites au tableau 2.
Les changements de structure tarifaire n’augmentent
pas les revenus en soi. Il faudra déterminer les augmentations tarifaires à
l’avenir pour obtenir les revenus dont la Ville a besoin, peu importe la
structure tarifaire appliquée.
Une somme de 150 000 $ est nécessaire
en 2010 pour apporter les changements au système de facturation, informer le
public sur les changements et faire une enquête plus approfondie sur le
recouvrement des coûts des eaux pluviales et le recouvrement des coûts au
canton Russell. Le financement est actuellement disponible dans les ordres
internes d’immobilisations 904 174 de la Vérification de la redevance
d’eau et 904 176 de la Vérification de la redevance des égouts.
Consultation publique – réactions
Les activités suivantes ont été
faites pour sensibiliser les citoyens à l’étude et aux options de structure
tarifaire considérées :
·
Des
avis de réunion publique ont été publiés dans les principaux quotidiens, aux
réunions et dans les journaux communautaires.
·
Les
options ont été présentées à deux comités permanents du Conseil : Le
Comité de l’urbanisme et de l’environnement et le Comité de l’agriculture et
des affaires rurales.
·
Les
conseillers en milieu rural ont été invités à dresser une liste des groupes qui
veulent qu’on les invite à des réunions en personne sur les changements
éventuels du recouvrement des coûts de drainage en bordure de route.
·
Des
messages électroniques ont été envoyés à plus de 200 groupes
d’intervenants, y compris tous les syndicats professionnels et les associations
communautaires.
·
Il
y a eu des réunions avec les représentants des groupes suivants :
o
Le
21 juillet, Comité consultatif sur les questions rurales (CCQR)
o
Le
27 juillet, AC de Goulbourn Nord-Ouest
o
Le
11 août, AC de Carlsbad Springs
o
Le
14 septembre, AC de Glens, AC d’Orchard Estates et AC de Merivale Gardens
o
Le
19 septembre, Association du village de Cumberland
o
Le
28 septembre, réunion du quartier Rideau Goulbourn
·
Il
y a eu les réunions publiques suivantes :
o
Le
15 septembre, Manotick
o
Le
22 septembre, Sportsplex de Nepean et complexe récréatif de Kanata
o
Le
23 septembre, aréna Jim Durrell et complexe Saint-Laurent
o
Le
30 septembre, champ de foire et hôtel de ville de Carp
o
Le
1er octobre, aréna de Navan.
·
Le
Comité consultatif de l’environnement et le Comité consultatif sur les affaires
ont obtenu des comptes rendus.
·
Plus
de 300 questionnaires ont été remplis aux réunions publiques ou présentés
par la suite.
·
Il
y a eu plus de 2 325 visites à la page Web du projet
Ottawa.ca/résidents/water/cost_revenue/index_fr.html.
·
Plus
de 200 commentaires ont été envoyés au courrier électronique du projet redevanceseau@ottawa.ca.
BACKGROUND
Ontario Regulation
453/07 requires municipalities to
submit a Council-approved Financial Plan for their drinking water systems no later
than July 2010. In preparing the Plan,
municipalities must demonstrate that funds collected through rates and other
revenue sources will allow for the sustainable planning, design, operation,
maintenance and renewal of their drinking water system(s) over time.
In the 2008 report, Review of the City’s Water Rate, the City’s
Auditor General makes several recommendations regarding the existing “Water
& Sewer” rate structure.
Specifically, that the City:
·
Establish “water rates based on a fixed meter
charge plus a consumption charge as this will provide…a more predictable and
stable cash flow”;
·
Review
“the method for establishing fire protection costs”; and,
·
Revise
“the water rate to ensure full cost recovery”.
Figures 1 and 2 illustrate two key facts about existing cost recovery:
·
In recent
years, drinking water and wastewater/drainage costs have been steadily
increasing while water sales have declined.
Over the 2008-2009 period, actual water sales were approximately
six per cent (6%) less than projected.
While this is not a significant deviation given the uncertainty in
consumption variables (such as weather and the economy), it represented a $16
million loss in revenues.
·
In 2009,
approximately $240M or 75 per cent of total service delivery costs were directly
derived from rates (i.e. the Water & Sewer Bill).
For these reasons a review of the rate
structure was essential, not just for drinking water services, but also for
wastewater and drainage services, as these service areas are subject to the
same vagaries in water sales and revenue shortfalls. Accordingly, the same cost of service
analysis and financial planning activities were carried out for wastewater and
drainage services as were done for drinking water services.
FIGURE 1:
Annual Costs versus Volumes Sold[5]
FIGURE 2: Drinking Water & Wastewater Funding
Sources
In carrying out a review of the rate structure, consideration was given
to relevant directives contained in the City’s 2007 Fiscal Framework:
·
Capital
and operating costs for water and sewer must be 100 per cent recovered;
·
Sufficient
revenues must be raised to fund operations, while maintaining appropriate
levels of debt and equity;
·
Changes in
user fees should be transparent; and,
·
Recovery
rates for services should consider the extent of private, commercial and
community benefit (including environmental considerations).
On this basis, four rate structures were tabled
in June 2009 at Planning and Environment Committee for public consultation. The following section presents the four
options and public feedback to them.
DISCUSSION
Development of the Options
The following
rate setting priorities were considered during development and assessment of
alternative rate structures, and reflect policies contained in the 2007 Fiscal Framework:
·
Revenue stability;
·
Improved transparency and defensibility;
·
Long-term
financial flexibility and resiliency;
·
Stable rates; and,
·
Simple to
understand and update.
Other important
principles that were considered included the following:
·
Adverse financial impacts to each customer group should be minimized;
·
Rates should be affordable within the Ottawa economic climate; and,
·
Rates should discourage wasteful consumption and discharge practices.
The Options
Under the Current Rate Structure, listed as Option D in Table 1
below, the City applies a “volumetric” charge whereby customers pay a fixed
rate for every cubic metre of drinking water purchased ($1.264 m3 in 2009)[6], plus a fire service
charge. Wastewater costs are also
recovered using a volumetric rate on the assumption that discharges roughly
equal the amount of water purchased (100 per cent surcharge in 2009).[7] Stormwater management costs are recovered via
the sewer rate, however, there is no correlation between water consumption and
stormwater management requirements.
Table 1 illustrates this, and compares the current rate structure
against the three other options (A, B and C) that underwent public
consultation. Note that Options A, B and
C only differ in how they recover stormwater costs.
Table
1: Rate Structure Options
|
|||||
|
Service |
Rate Structure |
Option
A Base
+ Volumetric |
Option
B Base
+ Volumetric |
Option C
Base + Volumetric |
Option D
Current
Rate Structure |
|
Drinking Water |
Base Charge |
ü
|
ü
|
ü |
Fire Charge |
|
Volumetric Charge |
ü
|
ü
|
ü |
ü |
|
|
Sanitary |
Base Charge |
ü |
ü |
ü |
|
|
Volumetric Charge |
ü |
ü |
ü |
100% surcharge on the
water volumetric charge |
|
|
Stormwater |
Incl. in Water and Sewer Bill |
Those on central
services |
|
Those
on central services |
Incl. in the above
surcharge |
|
Tax Bill |
|
Applied City-wide |
Those on private
services |
|
|
|
Total
Revenue |
$240.9 M |
$240.9 M |
$240.9 M |
$240.9 M |
|
Option A differs from the current Rate Structure in that it introduces a “base” charge, which would recover a portion of the fixed costs incurred by the City that have no relationship to the volume of water purchased (e.g. customer and billing service costs.) Customers would be charged a fixed amount based upon the size of their water service line, and then an additional amount per cubic metre purchased (i.e. metered.) This “Base plus Volumetric” approach provides for greater revenue stability by guaranteeing minimum revenues per customer.
Like Option A, Option B also introduces a base
charge, but differs by moving stormwater costs off of the Water and Sewer Bill and
onto the Tax Bill. This would result in
all landowners in the City sharing in stormwater costs. The rationale for this is that all landowners
benefit from stormwater services.
Option C is the same as Option B except that
stormwater costs would be divided between those on central water and sewer
services, and those who are on private services. Generally, those on central water and sewer
receive a higher level of stormwater service than those on private services;
and under this option would be responsible for paying a greater proportion of
stormwater costs.
Other rate structures and features that were considered and eventually
eliminated, included the following:
Flat Fees – A fixed
rate is charged, independent of usage (e.g. City of Gatineau). Although a flat fee
for all customers would provide revenue and rate stability, this type of
structure is not as defensible from a cost of service perspective and does not
encourage or reward conservation
Inclining/Declining Block Rates – Volumetric charges can also vary according to the amount, or
“blocks”, of usage. Under declining
block rates, the charge per unit consumed ($/m3) would decrease as
the volume consumed increases (e.g. City of Toronto). As economic
development was not a key rate setting objective and would threaten revenues,
declining block rates do not fit the City’s objectives. While an inclining block rate (where the
water rate increases at certain thresholds) would meet the City’s objective for
conservation/demand management, it is also less revenue and rate stable and
more complex and difficult to implement.
Fees and Charges per Customer Class – Several rate structures can be refined to allocate specific costs
among different customer classes to allow for greater “user pay.” Customer classes can be defined along
different lines, for example: a)
residential, commercial, industrial; b) inside the Greenbelt, outside the
Greenbelt; c) by water pressure zones or sewer catchment areas. With the exception of
establishing different rates by service type (i.e. water and wastewater), rate
differentiation per other customer distinction adds complexity to the rate
structure and can decrease revenue and rate stability. Furthermore, a base charge per meter size,
combined with the volumetric charge, inherently provides a level of
equitability by customer type.
Stormwater Specific Rates
– Other methods for recovering stormwater costs were considered including:
·
Property
tax through the surface operations budgets; and,
·
Property-based
fees based on an assessment of the impervious area or property size.
Greater investigation is required before implementing a stormwater
specific rate, which is discussed in greater detail further on in this report.
Public Consultation
The following activities were carried out to
raise awareness of the study, and of the rate structure options under
consideration:
·
Public
Meeting Notices were published in the major daily newspapers and all community
papers.
·
The
options were presented to two Standing Committees of Council: Planning and Environment Committee and the
Agricultural and Rural Affairs Committee.
·
Rural
Councillors were invited to provide a list of groups they wished to be
contacted for one-on-one meetings regarding possible changes in the recovery of
roadside drainage costs.
·
E-notices
were sent to a list of over 200 stakeholder groups including all community and
business associations.
·
Meetings
were held with representatives from individual groups as follows:
o
July 21,
Rural Issues Advisory Committee (RIAC);
o
July 27, North-West
Goulbourn CA;
o
August 11,
Carlsbad Springs CA;
o
September
14, Glens CA, Orchard Estates CA, and Merivale Gardens CA;
o
September
19, Cumberland Village Association; and,
o
September
28, Rideau Goulbourn Ward Meeting.
·
Open
Houses were held as follows:
o
September
15, Manotick;
o
September
22, Nepean Sportsplex and Kanata Recreation Complex;
o
September
23, Jim Durrell Arena and St. Laurent Complex;
o
September
30, Carp Fairgrounds and City Hall; and,
o
October 1,
Navan Arena.
·
Briefings
were provided to both the Environmental Advisory Committee and the Business
Advisory Committee.
·
Over 300
surveys were completed at the Open Houses or submitted thereafter.
·
There have
been over 2325 hits on the project web page Ottawa.ca/ratestudy.
·
Over 200
comments were received at the project email ratestudy@ottawa.ca.
Public
Feedback
Most public feedback was from the rural
community. Less than 5 per cent of those
who phoned or responded to the survey or to ratestudy@ottawa.ca were from the urban/sub-urban area.
Rural interest in this issue was largely due to the potential
consequences of shifting roadside drainage costs from the Water and Sewer Bill
to the Tax Bill.
Several issues were raised within the rural
community that either directly or indirectly related to the Cost, Rate and
Revenue Study, and how costs should be apportioned and recovered. Specifically, the following issues were
raised by the rural community:
·
Rural landowners pay for the installation, maintenance and renewal of
driveway culverts, which are felt to be more costly than the proportion of
taxes and development charges paid by urban landowners for the same or better
service.
·
Rural
landowners pay the same proportion of taxes as urban landowners for road and
snow removal service but receive a lower level of service.
·
Roads and
roadside ditch levels of service dropped post amalgamation.
·
Most felt
that roadside drainage costs should never have moved off of the Tax Bill at
amalgamation.
·
There appears to be limited coordination of maintenance and renewal of
driveway culverts and roadside ditches, which results in system failure.
·
Urban expansion is believed to be causing increased frequency and
duration of flooding of downstream rural drains and properties, which is a
problem in agricultural areas in particular.
·
Less care appears to be taken to notify the rural community of planned
works and to mitigate impacts than is done in urban communities.
·
Concerns were expressed regarding the quality of road works in the rural
community, including roadside drains.
·
Landowners
do not want to be double charged for Municipal Drains.
·
Some
landowners object to paying for the optional enclosure of roadside ditches
(i.e. for the installation of culverts along road frontage on either side of a
driveway.)
·
Some
landowners objected that they are responsible for the aesthetic maintenance of
the roadside ditch.
In the absence of resolving several or all of the above issues, most
rural landowners felt that Option A was preferable.
In discussing the relative merits of Options B and C, many felt that
Option B was preferable because it would have less of an impact on Tax
Bills. However, others expressed concern
that if roadside drainage costs remained pooled with urban stormwater costs,
that there would be greater likelihood of cost escalation over time, therefore
Option C was preferable in the long-term.
In a limited number of cases, rural landowners identified Option D as the
preferred alternative.
From the urban area, concern was expressed that moving from a
“volumetric” charge to a “base plus volumetric” rate structure would penalize
those with low consumption rates, i.e. small households, “snow birds” or those
who are water efficient. Furthermore,
those with high consumption rates could see a drop in their total bill.
NEW - Option E
Several rural landowners suggested another option that entails
reclassifying roadside drainage as a “road” service instead of a “stormwater”
service. This would achieve four things:
·
It would
put these service costs where rural residents thought they were, and most felt
they should be, that is, on the tax levy.
·
It would
allocate the costs on the City-wide basis as is the case with all other road
services, and mitigate significant tax increases to rural property owners.
·
It would
improve the linkage between those paying for the service and those delivering
it.
·
It would
allow for fuller debate of roadside drainage services at budget.
Based upon the range of comments received in response to Options A, B, C
and D, it is reasonable to believe that many residents would view Option E as a
good compromise, with the qualifying statement that the aforementioned concerns
regarding roadside drainage need to be addressed in some manner to improve
public confidence in the service.
Russell Township
In 2010, the 400mm feedermain to Russell
Township will be commissioned and the Township will be billed on a volumetric
basis. Russell Township has requested
that it be given a wholesale rate under the new rate structure, as it will not
receive some of the services currently recovered through the City’s water
rate. Staff is reviewing the matter to
determine if a wholesale rate is warranted, and if so, what that rate might be
and whether it should be aligned to any changes to the rate structure, or
managed separately. Staff will report
back with a recommendation on this matter in Q1, 2011.
Recommended Approach
Based upon analysis of the alternatives and consideration of public
feedback, staff recommend the following:
1. That the current rate structure remain in place
in 2010. Changing the rate structure requires changes
to the City’s billing system that will take six to eight months to
complete. Furthermore, the public will
require adequate notice of the change.
2. That separate rates be established for drinking
water and wastewater services. Full cost accounting has been carried out for
both service areas and wastewater costs (including stormwater) are not 100%
of drinking water costs; nor are they likely to be over time. Furthermore, several areas of the City have
only one of two services. Tracking and
recovering them as a separate fee from drinking water would achieve greater
transparency of wastewater and drainage charges. A separate “sewer” rate would address all
three of these matters.
3. That a “base plus volumetric” rate structure be
introduced in 2011. The current rate structure does not yield
stable revenues, and causes significant operating losses in both the drinking
water and wastewater and drainage service areas when “projected” sales do not
meet “actual”. A “base plus volumetric”
charge will provide greater revenue stability by guaranteeing recovery of
20-30% of annual projected rate
revenues, regardless of actual
water sales. This stabilization in
revenues is illustrated in Figure 3, and is explained in greater detail in
Document 2, attached.)
4. Options for recovering stormwater and roadside
drainage costs should be studied further; and in the meantime remain embedded
in the “sewer rate”. Those on private services, largely in the
rural area, raised several issues regarding roadside drainage that warrant
further investigation. The City needs to
better demonstrate value for money to unserviced landowners before transferring
any or all roadside drainage costs back to the Tax Bill. Most jurisdictions in Canada and the United
States recover stormwater costs separately from taxes, and recover roadside
drainage costs as part of the Tax Bill.
However, many are experimenting with alternative cost recovery
mechanisms, including reduced charges for those with properties that have
higher infiltration rates. Further
examination of the options, and of existing challenges in the rural area are
needed before implementing any change.
Customer Impact Analysis
The cost implications of implementing Option A were analyzed for key
user groups using the 2009 water and wastewater rates, as presented in Table 2.
In most cases, this will mean that the larger portion of the bi-monthly
“Water and Sewer” Bill will be attributable to volumetric charges, thus
providing average consumers with ample opportunity to influence their Water and
Sewer Bills through conservation, while reducing the vulnerability of the City
to fluctuations in water sales.[9]
Table 2:
Comparison of Average Monthly Charges
Option A (Recommended) versus Existing
Rate Structure
(Theoretical impacts
using 2009 revenue requirements[10])
|
||
|
Service |
Option A Base + Volumetric |
Option D
Existing Rate
Structure |
|
RESIDENTIAL - LOW CONSUMPTION (<10m3/month;
~20% of customer accts.) |
||
|
Drinking Water |
$16.44 |
$15.28 |
|
Sanitary |
$16.29 |
$12.64 |
Stormwater
|
Incl. in Sanitary |
Incl. in Sanitary |
|
Monthly
Total |
$32.73 |
$27.92 |
|
RESIDENTIAL - AVERAGE CONSUMPTION (18m3/month; >30% of customer accts.) |
||
|
Drinking Water |
$24.60 |
$25.39 |
|
Sanitary |
$23.57 |
$22.75 |
Stormwater
|
Incl. in Sanitary |
Incl. in Sanitary |
|
Monthly Total |
$48.17 |
$48.14 |
|
HIGH DENSITY RESIDENTIAL - AVERAGE (625m3/month) |
||
|
Drinking Water |
$723.92 |
$808.79 |
|
Sanitary |
701.62 |
$790.00 |
Stormwater
|
Incl. in Sanitary |
Incl. in Sanitary |
|
Monthly Total |
$1,454. |
$1,598.79 |
|
COMMERCIAL - AVERAGE LOW (65m3/month;
< 2% of customers) |
||
|
Drinking Water |
$87.45 |
$86.85 |
|
Sanitary |
$83.52 |
$82.16 |
Stormwater
|
Incl. in Sanitary |
Incl. in Sanitary |
|
Monthly Total |
$170.98 |
$169.01 |
|
COMMERCIAL – AVERAGE HIGH (3,500m3/month;
< 1% of customers) |
||
|
Drinking Water |
$4,723.65 |
$4,541.45 |
|
Sanitary |
$4,514.29 |
$4,424.00 |
Stormwater
|
Incl. in Sanitary |
Incl. in Sanitary |
|
Monthly Total |
$9,237.94 |
$8,965.45 |
|
UNSERVICED PROPERTIES (private well
and/or private septic) |
||
|
Drinking Water |
$0 |
$0 |
|
Sanitary |
$0 |
$0 |
Stormwater
|
$0 |
$0 |
|
Monthly Total |
$0 |
$0 |
Refer to
Attachment B for theoretical rates and impacts to other customer groups.
The
fire service fee is included in the new base rate.
As shown in Table 2, most ratepayers would experience a change in their
monthly charges. Residential customers
with very low average monthly water consumption would experience an increase in
their total Water and Sewer Bill of approximately $4.12 - $6.00 per month
(depending upon their actual usage.)[11] This reflects the additional cost they would
pay to cover their share of the fixed costs for providing drinking water and
sanitary sewer services. Increases in
this range would be experienced by up to 20 per cent of residential water and
sewer customers.
All customers would experience stabilization of their Water & Sewer
Bills over time. As illustrated in
Figure 3, not only would the City’s revenues stabilize under the new rate
structure, so too would costs to consumers.
For example, if an industry experienced a spike in demand for process
water, only the volumetric portion of its Water & Sewer Bill would
increase.
As is shown in
figure three below, the recommended rate structure change will stabilize both
revenue for the City and total costs billed to customers. The figure shows that if the City projected
revenues of $255 million based on estimated volume consumed, and actual
consumption was 10 per cent lower than expected, revenue would drop to $230
million under the current rate structure, but only $236 million under the
recommended new structure. Conversely,
if actual consumption was 10 per cent higher than projected, customers would
pay $281 million under the current structure, but only $274 million under the
recommended new structure.
FIGURE
3: Comparison of revenue impacts using
the Existing and Option A rate structures, assuming actual sales 10% +/-
from projected
It is important to assess this proposed change in rate structure from an
affordability perspective. Assuming an
average income of approximately $20,000[12]
for low-income households, those consuming less than 10m3 per month
would pay less than 2 per cent of their annual income on the combined services
of drinking water, sanitary and stormwater.
Industry benchmarks suggest that Municipal Water and Sewer Bills are
affordable if they constitute less than 4 per cent of the average household
income of a community. The average
after-tax household income in the City of Ottawa in 2005 was $68,288 (Source:
2006 Census). In short, projected increases
are considered to be reasonable, and would not unfairly affect low-income
households.
A number of industrial, commercial and
institutional (IC&I) accounts, determined to be less than 1% of all water
customers, would see an increase in their water bill greater than 10% because
they have large water meters but low water consumption. An investigation of those accounts has
commenced, and will be completed between now and implementation of the rate
structure changes in 2011. In many
cases, this impact can be mitigated through ‘right sizing’ of the water meter.
ENVIRONMENTAL IMPLICATIONS
The purpose of carrying out this study is to ensure sustainable funding
for essential infrastructure that is designed, operated and replaced over time
to protect natural resources and public health.
So, to the extent that stable revenues will allow the drinking water,
wastewater, stormwater and drainage services to be delivered in an
environmentally sustainable manner, the proposed changes to the rate structure
will assist in protecting our environment.
The existing “volumetric” rate structure encourages water conservation
because consumers pay for every cubic meter purchased—the more that is used,
the more that is paid. Under the
recommended “base plus volumetric” rate structure, people will continue to pay
for every cubic meter purchased, thereby maintaining the Waterwise emphasis and
consumer benefit.
Currently, the
Fire Charge is the only cost recovered via a service fee on the Water and Sewer
Bill. The new “base” drinking water fee
will recover not only fire service costs but also other costs, which combined
would constitute 20-30 % [13]
of annual rate revenues. Accordingly,
these fixed costs will be deducted from the “volumetric” rate, and lower the
portion of the bill tied to consumption.
However, on average,
between 70-80% of revenues will still be recovered through the volumetric rate,
therefore, the new rate structure will continue to encourage water
conservation, particularly amongst high volume users.
RURAL IMPLICATIONS
Based upon the results of consultation, additional work is required to
determine the most appropriate means of recovering stormwater quantity and
quality control costs versus roadside drainage costs. Furthermore, the City needs to assess the
various quality and level of service issues raised by the rural community
during consultations on this matter.
Accordingly, details regarding the issues raised were forwarded to the
General Manager of Public Works, the Director of Infrastructure Services and
the General Manager of Planning and Growth Management.
CONSULTATION
As described above.
LEGAL/RISK MANAGEMENT IMPLICATIONS
There are no
legal/risk management impediments to implementing any of the recommendations in
this report.
CITY STRATEGIC DIRECTIONS
Infrastructure Renewal Objective 5 of the City’s 2007-2010 Strategic Plan is to “Close the gap on sanitary and storm sewer and water line replacement by 2015.”
The City’s 2007 Fiscal Framework sets out the following strategic objectives and guiding principles for financial planning.
·
Capital assets are maintained
and/or replaced using models of best economy;
· Capital and operating costs for water and sewer to be 100 per cent recovered;
· Sufficient revenues are raised to fund operations, while maintaining appropriate levels of debt and equity;
· Equity (reserves) provides flexibility to respond to economic cycles and manage financial risk;
· Financial decisions based on a multi-year forecast;
· Changes in user fees to be transparent; and
· Recovery rates for services to consider…extent of private, commercial and community benefit (including environmental considerations).
The recommendations of this report will help the City to achieve the renewal objective, and to ensure long-term financial stability.
FINANCIAL IMPLICATIONS
As this rate structure was developed on a “revenue neutral” basis, there
are no current financial implications as a result of this report. However, over time, these charges will
improve rate transparency and revenue stability as prescribed by the City’s
2007 Fiscal Framework and as recommended by the City’s Auditor General.
Impacts to ratepayers and the total water bill that would have resulted
in 2009 are outlined in Table 2. Rate
structure changes do not unto themselves increase revenues, but rather provide
a guaranteed cash flow.
*Future rate increases will need to be set to meet the revenue
requirements of the City, regardless of the rate structure in place. Projected increases will be identified in the
draft Water and Wastewater Financial Plan to be tabled in Q2 2010, and that
must be submitted to the province by July 1, 2010.
In 2010, $150,000 is needed to implement changes to the billing system,
educate the public on the changes, and to further investigate stormwater cost
recovery and cost recovery from Russell Township. Funding is currently available in capital
internal orders 904 174 Water Rate Review and 904 176 Sewer Rate Review.
SUPPORTING DOCUMENTATION
Document 1 – Details of Theoretical Rate
Changes, 2009
Document 2 – Cost Allocation Discussion
DISPOSITION
1.
That
Environmental Services Department and Financial Services carry out the
activities required to implement rate structures for drinking water and for
wastewater and drainage services in 2011, with communications to the public to
commence in Q4 2010.
2.
That
Environmental Services and Financial Services carry out the investigation of
stormwater and drainage cost recovery; and the investigation of potential
alternative rate structure or rate for Russell Township and report back with
findings in Q1 2011.
Document 1
Details of Theoretical
Rate Changes, 2009
