Strathcona REGIONAL DISTRICT STAFF REPORT DATE: June 1, FILE: Board TO: Chair and Directors Regional Board FROM: Dave Leitch
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1 Strathcona REGIONAL DISTRICT STAFF REPORT DATE: June 1, 2018 TO: Chair and Directors Regional Board FROM: Dave Leitch RE: AREA D WATER RATES - BYLAW AMENDMENT FILE: Board PURPOSE To consider first three readings and adoption of Bylaw No. 320 which would amend the rates applicable to the Area D water service to recover the cost of providing the service as identified in the Financial Plan. EXECUTIVE SUMMARY The attached report was considered at the last meeting of the Regional District Board, at which time the following resolution was passed: Samson/Wright: SRD 419/18 THAT Bylaw No. 2838, being Electoral Area D Water Regulation, Fees and Charges Bylaw 2005, be updated to reflect the rate increases identified in the May 3, 2018 report from the Chief Administrative Officer. If approved, the attached bylaw will generate sufficient revenue to meet the cost recovery target as identified for 2018 in the Financial Plan for this service. Other amendments designed to improve the clarity of various regulatory provisions will be dealt with by separate bylaw as directed by the Board. RECOMMENDATIONS 1. THAT the report from the be received. 2. THAT Bylaw No. 320, being a bylaw to amend the rates charged for use of the Area D water system, be now introduced and read a first time. 3. THAT the rules be suspended and Bylaw No. 320 be given second and third readings. 4. THAT Bylaw No. 320, being Electoral Area D Water Regulation, Fees and Charges Bylaw 2005, Aperrrnent No. 7, be reconsidered, finally passed and adopted. Respectfully Dave Leitch, Prepared by: Jenny Brunn, Environmental Services Coordinator
2 Strathcona REGIONAL DISTRICT BYLAW NO. 320 A BYLAW TO AMEND THE RATES CHARGED FOR USE OF THE ELECTORAL AREA D WATER SYSTEM WHEREAS the former Comox Strathcona Regional District has, by Bylaw No. 2838, established rates for the use of the Electoral Area D community water system; AND WHEREAS a bylaw of the former Comox Strathcona Regional District that imposes fees or charges for a service within the area comprising the Strathcona Regional District remains in force until amended or repealed; AND WHEREAS the Regional District wishes to amend the rates charged for use of the Electoral Area D water system: NOW THEREFORE the Board of Directors of the Strathcona Regional District, in open meeting assembled, enacts as follows: Amendment 1 Bylaw No is hereby amended by deleting Schedule 'B' in its entirety and substituting therefor a new Schedule 'B', attached to and forming part of this bylaw. Effective Date 2. This bylaw is effective on the date of adoption. Citation 3. This bylaw may be cited for all purposes as Bylaw No. 320, being Electoral Area D Water Regulation, Fees and Charges Bylaw 2005, Amendment No. 7. READ A FIRST TIME ON THE DAY OF 2018 READ A SECOND TIME ON THE DAY OF 2018
3 BYLAW NO. 320 PAGE 2 READATHIRDTIME ON THE DAYOF,2018 RECONSIDERED, FINALLY PASSED AND ADOPTED ON THE DAY OF, 2018 Chair Corporate Officer
4 BYLAW NO. 320 PAGE 3 Schedule 'B' 1. Metered Consumption Charges (a) The following rates are applicable for each premise, dwelling unit or household, as the case may be: User Category Residential uses (per household) Rate per cubic metre $1.36 (minimum $ per year) $1.45 Non Residential uses (per business premise) (minimum $ per year) (b) The minimum consumption charge for a billing period shall be prorated in the event service is provided for only a portion of the billing period. (c) If consumption cannot be conclusively determined as a result of meter malfunction, the consumption will be estimated on the basis of historical consumption and other information. 2. Non-Metered Consumption Charges The following rates are applicable for each premise, dwelling unit or household, as the case may be: User Category Rate Residential uses $ per dwelling unit per year All other uses $1, per year 3. Extra Charges Failure to Provide Access Each call after the first of each month if access has not been provided is charged at $25.00 per call. The actual cost to gain access to the meter that is incurred by the Regional District will be charged to the owner I occupier of the premises. 4. Connection Charges The following charges apply to service connections: (a) 19 mm connection - $ ; (b) 25 mm and greater at cost (minimum $1,000.00); and (c) water turn off or turn on fee - $25.00.
5 Strathcona REGIONAL DISTRICT STAFF REPORT May 17, 2018 TO: Chair and Directors Regional Board FROM: Dave Leitch RE: AREA D WATER SYSTEM RATES 2018 FILE: Board O PY DATE: PuRPOSE/PROBLEM To set the user rates for the Area D water service to recover the anticipated costs of operating the system in accordance with the Financial Plan. EXECUTIVE SUMMARY The attached report dealing with fees and charges for use of the Area D water system was considered at the May 9, 2018 meeting of the Electoral Areas Services Committee, at which time the Committee passed the following resolution: Whalley/Leigh: EASC 171/18 THAT the Board not consider Area D water rates until the legal opinion is considered by the Board. Subsequent to the Committee's deliberations on this matter the Board adopted a resolution to deal with the matter of Area D water system rates at the May 24, 2018 meeting. Accordingly, this matter is now presented to the Board for further consideration. C RECOMMENDATION 1. THAT the report from the be received. 2. THAT Bylaw No. 2838, being Electoral Area D Water Regulation, Fees and Charges Bylaw 2005, be updated to reflect the rate increases identified in the May 3, 2018 report from the. Respectfuily: Dave Leitch Prepared by: T. Yates, Corporate Services Manager Attachments: Copy of May 2, 2018 report to the Electoral Areas Services Committee
6 Strathcona REGIONAL DISTRICT STAFF REPORT DATE: May3, 2018 TO: Chair and Directors Electoral Areas Services Committee FROM: David Leitch RE: ELECTORAL AREA D WATER RATES 2018 PY FILE: EASC PURPOSE To set Electoral Area D water user rates to meet required revenue amounts as adopted in the Financial Plan. POLICY ANALYSIS C O The Local Government Act requires the Board to set fees and charges at rates that will recover the anticipated expenditures within an adopted financial plan. The Regional District must make available to the public a report respecting how the fees were determined. Bylaw 2838 (Electoral Area D Water Regulation, Fees and Charges Bylaw 2005) establishes the rates applicable for users of the Area D water system based on residential and non-residential user classes. EXECUTIVE SUMMARY Revenues from water user rates in 2017 were $522,475 (a shortfall of $221,390), which is half of what is required in 2018 to cover the current year's expenses and the 2017 deficit. The adopted Financial Plan requires revenues of $1,001,951 from user rates in It is recommended that the metered rates be proportionally increased in 2018 to rates of $1.36/m3 for non-commercial and $1.45/m3 for commercial users, which will generate revenue of approximately $60,000. The remaining $936,245 must be recovered from the 1170 unmetered residential connections. This requires residential flat rates to be increased from $402 to $800 per dwelling unit serviced in RECOMMENDATIONS 1. THAT the report from the be received. 2. THAT the Committee recommend that the Bylaw 2838, Electoral Area D Water Regulation, Fees and Charges Bylaw 2005" be updated to reflect the rate increases identified in the May 3, 2018 report from the. Respeeffully: David Leitch
7 Staff Report Electoral Area D Water Rates Bylaw Amendment Page 2 BACKGROUND The Regional District is responsible for the delivery of safe potable drinking water to approximately 1,200 property owners in the northern part of Electoral Area D. On March 7, 2018, the Financial Plan was adopted by the Board detailing the operating costs and revenue sources for this service. ANALYSES OF 2018 EXPENDITURES The 2018 Expenditures are summarized as follows: Bulk Water Costs $1,145,245 Management Costs Administration $89,784 Studies and Engineering Fees $80,000 Other Studies $105,000 System Operations Maintenance and Operation $102,000 Emergency Repairs $75,000 Transfer to Reserve for Capital Work $0 Deficit prior year $221,390 Total Expenses $1,818,491 Bulk Water Costs Over 75% of the total cost of this service is for the purchase of bulk water. There are two factors that affect this. The first is the cost of bulk water rate which is identified in the City of Campbell River fees and charges Bylaw No An alternative water source study is also underway. This will evaluate alternatives based on all the factors required for the delivery of safe, potable water including costs for treatment, source water protection, and any additional distribution system infrastructure to ensure adequate pressure and storage (pump stations and reservoirs) for residential demands and fire protection. If an alternate water source is determined to be more cost effective, overall water system costs will still be directly related to the amount of water consumed by users. Therefore, it is important to focus on the second factor that affects current bulk water cost; water consumption. COPY Water consumption has been steadily increasing over the past five years and is projected to continue increasing in 2018 (see graph below).
8 Staff Report Electoral Area D Water Rates Bylaw Amendment Page 3 950,000 Total Water Consumption (m3/day) 900, , , , , , , , , The multiplying of these two factors has resulted in an compounded increase in bulk water costs. Bulk Water Rate $/m3 Consumption m3 Bulk Water Costs ,664 $ 391, ,788 $ 472, ,241 $ 582, ,220 $ 766, ,639 $ 864, ,547 $ 1,145, An example to highlight the importance of reducing water use: If the water consumption in 2018 can be reduced to what it was in 2013, the bulk water cost would only be $733,563 which is a 40% reduction in costs. COPY Management Costs Administration costs pay for a portion of the Environmental Services Coordinator position, support services, insurance and permits, legal fees, security and miscellaneous office costs. These costs have remained relatively static over the last number of years. Studies and engineering fees include design of system infrastructure, renewal planning and various studies to evaluate alternate water sources, address the pressure challenges in the south end of the system and other system needs. There is also an allocation of $100,000 in the 2018 budget for demand management which is subject to external grant funding. System Operations These costs make up approximately 20% of the overall cost of the service. The maintenance contract has only increased slightly each year by 3%, but emergency and corrective maintenance costs have gone up from approximate $50,000 to almost $80,000 in The biggest factor affecting this is increased infrastructure breaks and leaks needing repair. Transfer to Reserve for Capital Work There is currently no money allocated to be put away for capital projects. Capital work includes new infrastructure as well as renewal and replacement of failing water mains.
9 Staff Report Electoral Area D Water Rates Bylaw Amendment Page 4 Deficit Prior Year Revenues from water user rates in 2017 were $522,475 (a shortfall of $221,390), which is half of what is required in 2018 to cover the current year s expenses and the 2017 deficit. ANALYSES OF 2018 REVENUES The 2018 Revenues are as follows: Conditional Grants and Gas Tax $120,000 Transfer from Appropriated Surplus $184,916 Service Fees $1,624 Tax Requisition $510,000 Water Rate Fees $1,001,951 Total Revenue $1,818,491 Conditional Grants and Gas Tax This revenue can only be applied to specific eligible studies and engineering fees. If the projects do not receive funding or are not completed in 2018, the associated expenditures will not be incurred, or the project will be carried forward to Transfer from Appropriated Surplus This transfer from the appropriated surplus has depleted this account and there are no additional funds available for future years. As mentioned in the expenses analysis, there are no funds being contributed to either the operating or capital reserves this year. Service Fees Under existing bylaw rates, there is little revenue expected to be generated. In 2017, there was a total of $425 received in service fees. Tax Requisition 34% of the total revenue for this service is generated through taxation at a rate of $1 per $1000 assessed value for all properties in the service area including those properties that are currently not receiving water but are within the service area. The average house in the service area is valued at $350,000 and would pay $350 on their taxes for this service. The charge is based on the assessed value of the property, not the amount of water that is consumed WATER RATE FEES COPY Based on the adopted Financial Plan, the Regional District is required to recover $1,001,951 from user rates in Metered Water Rates Metered users make up less than 4% of all water users and are a very small portion of water use consisting of 42 connections (of which 12 are commercial). This user group consistently uses only 5% of the total water consumed. The 2017 revenue was $50,000 at a water rate of $1.1705/m³ for all residential metered properties and $1.2873/m³ for commercial. As this is a small user group that is relatively conservative with their water use, it is recommended that the rate be proportionally increased to cover the increase in the bulk water rate in 2018 to a rate of $1.36/m³ for metered non-commercial users and $1.45/m³ for metered commercial users,
10 Staff Report Electoral Area D Water Rates Bylaw Amendment Page 5 which will generate revenue of approximately $65,500. This will represent 6% of the total revenue needed to be recovered through water rates. To simplify the rate schedule and billing, the nominal $1/month fee for meters will also be removed. Commercial Residential CCR Bulk Rate Minimum Rate Minimum Water Rate 2018 $1.45 $455 $1.36 $ $ $ $ $ met.copy $ $ $ $ The average commercial metered water use is approximately 348 m3/year. Under the new rates they will pay $505 in user rates compared to $ ($ plus $12 rental fees) in This is an increase of 10%. The average residential metered water use was approximately 350m3/year in Under the new rates they will pay $476 in user rates compared to $ ($ plus $12 rental fees) in This is an increase of 13%. Those using less than 330 m3 will pay the minimum of $415 compared to $414 in 2017 an increase of $1. Only those with high consumption will see an increase in their bills of approximately 16%. Flat Water Rates The remaining $936,245 will need to be recovered from the unmetered residential water users of which there are currently 1170 connections. This means that rates will need to be increased to $ per connection. This is essentially doubling 2017 rates which were $402 per connection and do not include the amount being paid through taxes for this service. Multiple Billings Periods for unmetered residential users Due to the dramatic increase in the residential flat rate, we anticipate difficulty for some residents to pay the entire amount at once. To reduce the burden of one large bill, a bill has been sent out for May 1, 2018 of $402 based on the 2017 bylaw rates. It is recommended that the remaining amount be staggered over two more billing periods in August and November. Residents can pay these bills online through their bank, by mail with a cheque or in person with any form of payment at the Regional District office. FINANCIAL IMPLICATIONS The recommended rates are set to recover the expenditures for This has resulted in a doubling of flat residential rates from $400 to $800. In addition to the flat-water rate, homeowners will pay the taxable amount of an average of $350 resulting in a total cost of water service of $1,150. ensure current needs are LEGAL IMPLICATIONS The Regional District is required by legislation to operate services on a balanced budget basis while adhering to the requirements of its operating permit and its own bylaws. The Local Government Act allows the imposition of fees to be established for different classes. Additionally, it requires that the Regional District make available to the public a report that explains how rates are determined. The existing 2005 Bylaw 2838 with amendments thereto, needs to be updated to
11 Staff Report Electoral Area D Water Rates Bylaw Amendment Page 6 INTERGOVERNMENTAL/REGIONAL IMPLICATIONS The cost of the Electoral Area D water service is borne entirely by property owners within the boundaries of the local service area, and provincial statutes require that all funds raised for the service be used exclusively for the benefit of the water system and its users. CITIZEN/PUBLIC RELATIONS IMPLICATIONS Staff are currently fielding customer inquiries on 2018 water rates. Until new rates are adopted, staff are unable to provide clarity to citizens on the amount that they will pay for the remaining months of service in Staff are using the opportunity to educate residents on the need to conserve water and impact of their water use on their water bills. When amendments to the bylaw water rates are adopted, staff will communicate to the public on the changes and when and how this will impact them. INTERDEPARTMENTAL INVOLVEMENT/IMPLICATIONS Front line staff will be thoroughly informed of the rate changes and their relation to the water conservation program. Background information, handouts and FAQs will be prepared to assist them in responding to queries from Area D water system customers. Submitted by: Ralda Hansen Community Services Manager Prepared by: J. Brunn, Environmental Services Coordinator COPY
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