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2007/10/15CORPORATE SERVICES COMMITTEE AGENDA ELEVENTH MEETING Monday, October 15, 2007 Committee Room 2 - 6:00 p.m. 1. 2. a) b) c) 3. 4. Approval of the September 24, 2007 Corporate Services Meeting REPORTS: CPS-2007-03 Water and Sewer Rates Review F-2007-37 PSAB 3150 F-2007-38 Municipal Credit Card NEW BUSINESS: ADJOURNMENT: STAFF CONTACT Ken Burden Todd Harrison Todd Harrison ~~ Niagara~alls CANADA MINUTES OF CORPORATE SERVICES COMMITTEE MEETING MONDAY, SEPTEMBER 24, 2007, CITY HALL, ROOM 2 AT 5:00 P.M. PRESENT: Mayor Ted Salci, Councillor Victor Pietrangelo, Chair; Councillors Jim Diodati, Shirley Fisher, Carolynn loannoni, Vince Kerrio, Bart Maves, Wayne Thomson and Janice Wing. STAFF: John MacDonald, Geoff Holman, Ed Dujlovic, Ken Burden, Ken Beaman, Denyse Morrissey, Todd Harrison, Alex Herlovitch, Dean lorfida, Lisa Wall, Joanna Daniels -Secretary. PRESS: Corey Larocque, Niagara Falls Review Rob Lapensee, Niagara This Week 1. MINUTES It was ORDERED on the motion of Councillor Thomson and seconded by Councillor Maves that the minutes of the July 23, 2007 meeting be adopted as recorded. 2. a) F-2007-33 REPORTS Financial Policies That the financial policies be adopted as presented. Motion: Carried Action: Recommendation submitted to Council 2007-09-24 b) CPS-2007-03 Water and Sewer Rates Review It was ORDERED on the motion of Councillor Thomson and seconded by Councillor loannoni, that Report CPS-2007-03 be deferred to the next scheduled meeting. Motion: Carried Action: Recommendation submitted to Council 2007-09-24 -2- c) F-2007-36 2008 Budgets The Chief Administrative Officer presented the proposed 2008 Budget Schedule for Committee's approval. He also presented an overview of some of the challenges the City will face in preparing the 2008 Budget. It was suggested that a tax increase in line with inflation would be acceptable; it was also suggested that staff start with a zero percent budget. Councillor Thomson recommended that grant recipients be given some indication prior to the end of the year as to whether their funding requests will be approved. The Chief Administrative Officer advised that budget updates would follow the proposed 2008 Budget Schedule. It was ORDERED on the motion of Councillor Thomson and seconded by Councillor Fisher that the 2008 Budget Schedule be approved. Motion: Carried Action: Recommendation submitted to Council 2007-09-24 3. ADJOURNMENT 6:15 p.m. It was ORDERED on the motion of Councillor loannoni and seconded by Councillor Maves, that Committee enter into an In-Camera Session. Motion: Carried October 15, 2007 ~~ Niagara~alls Councillor Victor Pietrangelo, Chair and Members of the Corporate Services Committee City of Niagara Falls, Ontario Members: Re: CPS-2007-03 Water and Sewer Rates Review RECOMMENDATION: CPS-2007-03 That the information provided in response to "Water Rate Study" be received and filed, 2. That the Corporate Services Committee authorizes Staff to engage consulting services to review the City's water and sewer rates. BACKGROUND: On July 23, 2007, Staff presented report CPS-2007-02, BMA Management Consulting Inc. Proposal, that requested the Committee to authorize Staff to engage the consultant to review the City's water and sewer rates. During the Committee's consideration of this report, the Committee also heard a deputation from Mr. Ed Bielawski, who presented several conclusions in a handout document, entitled "Water Rate Study". The deputation made reference to staff reports and awater/sewer rate study done by Loudon & Fortin (November 2000). Following the deputation, the Committee approved the following four recommendations which were ratified by City Council: 1) That Staff report back to Committee on the report provided and presented by Mr. Ed Bielawski, 2) That Staff contact Mr. Michael Loudon as a follow-up to his 2000 report, 3) That Staff provide Committee with a copy of the Loudon report, and 4) That Staff undertake a water and sewer rates review in time for consideration of the 2008 utility budget. Staff has contacted Mr. Michael Loudon regarding the Niagara Falls Rate Report, prepared and submitted by Loudon and Fortin in November 2000. This report focused on the existing water and sewer rates and made recommendations on future rates as a result of WOPkl71g TOgethel' t0 Serve Our Community ' Corporate Services Department Finance October 15, 2007 - 2 - CPS-2007-03 the newly implemented metering program Committee's information. A copy of the report is attached for the Staff requested Mr. Loudon to prepare and submit afollow-up to the November 2000 report. Staff also sent a copy of Mr. Bielawski's Water Rate Study document to Mr. Loudon for information. Mr. Loudon is willing to prepare afollow-up to his November 2000 report, which also addresses the conclusions raised by Mr. Bielawski. Mr. Loudon advised the follow-up report would incur some cost. Staff believes the follow-up report could be undertaken by a qualified consultant during the engagement for a review of the water and sewer rates. Consequently, Staff did not pursue the follow-up report from Mr. Loudon. Staff has not yet proceeded with undertaking a water and sewer rates review. As the Committee was interested in the Loudon report and the conclusions raised by Mr. Bielawski, the rate review was postponed pending the Committee's further consideration of the proposal from BMA Consulting Inc. Staff continues to recommend the proposed engagement of the consultant as presented in the earlier report CPS-2007-02. Information provided in response to "Water Rate Study" Staff has investigated and prepared the following information that responds to the seven conclusions raised in Mr. Ed Bielawski's deputation as they appear in his "Water Rate Study" document. 1. Conclusion -The City has no water/sewer utility Mr. Bielawski observed that a city report dated March 27, 1995, provided several objectives, one of which was that the city establish awater/sewer utility. Mr. Bielawski commented that awater/sewer utility if it is going to be run like a business, then it would be no different than the Niagara Falls Hydro. His conclusion states the City does not have a separate authority (such as NFH) responsible for the water/sewer utility and that as a result the utility is fragmented by having several functional parts reporting to the Council. The report which Mr. Bielawski referenced was MW-95-58 Water/Wastewater Utility. The recommendation from the Community Services Committee to and approved by Council was as follows: "That endorsement be given to the establishment of aSelf-Supporting, User-Pay Water/Wastewater Utility, including Universal Water Metering, effective January 1997; "That a Public Education/Awareness Program, including a public Attitude Survey, on the Utility Concept and its impacts be undertaken with the results of same to be reported to Council before any implementation action; and "That Staff be directed to develop an Implementation Strategy for the Water/Wastewater Utility with periodic Status Reports orApproval Reports for the various components. " For the years 1995-2000, Staff undertook the directions of Council in an exhaustive effort to encourage as much Public Participation as possible. One of the foremost concerns of ratepayers was the ability to control the costs of water and sewer service. At that time, the City was using a flat rate billing structure for residential ratepayers. Residents were concerned that there was no ability to reduce their individual water billing by reducing their October 15, 2007 - 3 - CPS-2007-03 consumption of water. This concern also raised the significant issue of water conservation. On December 11, 2000, Council approved the following recommendations from the Corporate Services Committee which were based on the Loudon & Fortin November 2000 report: "That the proposed use-based billing structure be adopted for determining water/sewer utility rates, and "That the proposed use-based billing structure be applied to the 2000 Budget Expenditures to set rates for the new Water By-Law; and "That the Updated Water By-Law be adopted." Staff advises that the City has operated a water system as aself-supporting fund up until 1999, when the existing fund was expanded to include the operation of the sanitary sewer system. The self-supporting fund is separate from the General Purposes Operating Fund. Although the water and sewer system was renamed Municipal Utility, staff notes that Council has not approved the implementation of an appointed/elected authority that was separate from and reporting to the City Council. In 2004, the water/sewerfund was separated into two funds; one each for the water system and the sanitary sewer system. The separation was done in compliance to the current legislation wherein the water and sanitary sewer services must have separate fund entities. Staff advises that today's presentation of the water and sanitary sewer budgets has used the header "Municipal Utility" in continuance of the familiar identity for the water and sewer systems. City Council is the management authority and is responsible for the water and sewer systems. Staff administrates this responsibility in two parts: the operations part is administrated by the Municipal Works Division, the billing/collection part is administrated by the Finance Division. Staff advises that Mr. Bielawski's comparison of the water/sewer system to Niagara Falls Hydro as a utility may not be applicable. The operating structure for an electricity utility versus the operating structure for a water or sewer utility is identified by the legislation that governs each service. The Niagara Falls Hydro, which was incorporated under provincial legislation, falls under special business corporation legislation. Its governance and structure must adhere to the Electricity Act. Water and sewer services also comply with provincial legislation, mainly the Municipal Act, as well as other specific legislation such as the Safe Drinking Water Act, and the Sustainable Water and Sewage Systems Act. Staff advises that the Loudon report in November 2000, did not address the governance structure for awater/sewer utility. Council has always maintained that the water and sewer funds would be directly controlled by the Council and not be managed by an appointed/elected Board or Commission reporting to Council. 2. Conclusion -The use-based principle for water billing is applicable only for the consumption charge Mr. Bielawski, in his comments, stated that the more you use, the less you pay. In his Water Rate Study, he combined the fixed monthly charge with the consumption charge for October 15, 2007 - 4 - CPS-2007-03 increasing amounts of water usage. He showed that the combined charge decreases on a per unit basis as the consumption of water increases. He showed that the annual percentage increase for high consumption was less than the percentage increase for low consumption. Mr. Bielawski's analysis basically shows the inverse cost relationship of a fixed charge being applied to a variable factor. Staff advises the water and sewer billing is composed of fixed and volumetric charges. The two part charges were implemented in 2001, when metering was fully implemented. Each charge is designed to collect sufficient revenues to offset the relevant direct costs. Staff advises that the fixed monthly charge is not related to the direct costs of consumption. The fixed charges are intended to offset the fixed costs of maintaining the water and sanitary sewer systems. The City has the responsibility to provide safe potable water in sufficient supply for all users including fire suppression. The City is responsible for providing the collection of sanitary sewage. The direct operating costs of labour and materials, and the direct construction costs of repairs and maintenance are incurred regardless of the users' consumption. The fixed monthly charges are not dependent upon or related to the amount of consumption incurred. The volumetric charge is a per cubic meter rate that is the same for every user. The rate does not decrease or increase with the amount of consumption. The revenues collected from the consumption charges are intended to offset the costs of water purchased from the Region and the sewer treated by the Region. These costs are also based on a volumetric charge, whose rates are the same for all the municipalities in the Region of Niagara. Staff understands that the use-based principle can apply to both a fixed charge and a consumption charge. The use-based principle applies to a fixed charge because the user is connected to water and sewer systems that are always ready to serve the user. The user pays for the right to draw water and/or to flush sewage. The use-based principle also applies to a consumption charge because the quantity of usage is measured and billed to the user. 3. Conclusion -The use of meter size for allocation of service charge is totally flawed During the meetings that Mr. Bielawski attended with staff, his comments cited that the use of meter sizing for the allocation of monthly service charges is flawed. His comments are directed at the City's use of the AWWA standard for differentiating between the sizes of meters and using the differences to allocate costs. Staff advises that the size of a water meter relates to the size of the demand flow for water provided to the user. Some users require a larger demand flow than others. Both the water and sanitary sewer systems are engineered to accommodate the variant sizes of both water flows and sewer usage. Staff advises that the AWWA standard is recognized and approved in municipalities throughout Ontario, Canada and the United States. As this standard is recognized and used, Staff believes it is an appropriate standard by which to allocate fixed costs to users having different sizes of meters. Mr. Bielawski commented that allocating fixed costs on the basis of meter size is also flawed. His comments were directed at users who consume large quantities of water in comparison to residents who use very little water. He suggested that the basis for the October 15, 2007 - 5 - CPS-2007-03 allocation of fixed costs should reflect the amount of water usage and not the size of the water demand flow. Staff advises that the fixed monthly charges for maintaining the water and sewer systems include all of the infrastructure costs. The systems are composed of different sizes of pipe, valves, pumps, and meters. Infrastructure costs can be significantly different for repairing the various components of the systems. Tracking and allocating these costs to individual users based on their actual usage would present a significant mathematical undertaking. For example, the actual repair for a section of water-main pipe can be easily costed, but very difficult to determine which downstream users should be charged and how much. The use of the AWWA standard provides an efficient engineering approach to allocate the infrastructure costs using the size of a meter to estimate the user demand on the systems. 4. Conclusion -All multi-unit structures that have a single meter are significantly subsidized by residential customers In Mr. Bielawski's Water Rate Study document, he provided an analysis named "Customer Service Charge Cost/Unit". The analysis compared the fixed monthly charge for customers who have different sizes and quantities of water meter service. The analysis calculates the monthly fixed cost per customer based on the quantity of customers being serviced by the quantity and size of meter. He concludes that the cost/unit varies in accordance with these factors, and further concludes that the higher cost/unit customers are subsidizing the lower cost/unit customers. Staff advises that acost/unit analysis may be interpreted as a Poll tax. The emphasis of the analysis is focused on the number of customers served, even though some of the customers are not separately served by the water and sewer systems. The analysis could be expanded to any water meter that serves more than one identifiable customer, e.g. hotel rooms, retail mall tenants, business mall tenants, apartment building units. A poll tax, which is not allowed by the Municipal Act (Sec.393), imposes a charge on the reason that persons/businesses are simply resident in the municipality or a part of it. Mr. Bielawski's analysis assumes that the City has the right to impose a charge simply because a City resident uses the water and sewer systems. In general, the Municipal Act (Sec.391) only allows a municipality to impose fees and charges for services or activities provided or done by or on behalf of the municipality. To impose a fixed monthly water charge, the municipality must identify to whom the water service is being provided. Currently the City's fixed monthly charges are being billed to the customer who has the direct responsibility for the water/sewer account. Staff advises that this same concern is evident in other municipalities where water services to condominium units are charged differently. The differences result from the same engineering disparity. Some condominium units have individual water services, while others have a single service for all the units. In Staffs report CPS-2007-02, Staff recommends that a full review of water/sewer rates be undertaken. A review would address the concerns that Mr. Bielawski has raised. 5. Conclusion -The pricing for water and sewer service is unfair and not equitable Mr. Bielawski's conclusion refers to the structure for the City's water/sewer rates. The rates October 15, 2007 - 6 - CPS-2007-03 are billed in two parts: a fixed monthly charge and a volumetric charge. His conclusion directs attention to the low volume user whose minimum monthly billing is the monthly service charge, even if the user has not used any water. His concern is that the City's fixed monthly charge has increased significantly over the past years, and has resulted in unfair/not equitable charges to low volume users. He believes the water/sewer rate should be totally volumetric with no fixed charges. Staff advises that the water/sewer rate structure was established in 2001 when metering was implemented. The structure was recommended in the Loudon & Fortin report which Mr. Loudon addresses in his follow-up report. The report did examine a variety of methods to charge for water and sewer services. Although Mr. Bielawski recommends a simple volumetric charge, he concurs with Staffthat several methods exist. In Staffs report CPS- 2007-02, Staff recommends that a full review of water/sewer rates be undertaken. A review would address the concerns that Mr. Bielawski has raised and would compare the simple volumetric charge method to other methods of charging for water/sewer services. 6. Conclusion -Yearly percentage rate increases as reported are not factual In Mr. Bielawski's Water Rate Study, he provides an analysis of the 2007 percentage increase for homeowners whose monthly usage of water is different. His conclusion references Staff's report on the percentage increase, stating that the City's reported increase is not a singular percentage, but is actually a range of percentage increases as water usage decreases. Staff advises that the referenced report, F-2007-07 2007 Municipal Utility Budget, does provide individual percentage comparisons forthe fixed monthly charge and the volumetric charge. The report also provides a percentage comparison for the combined charges based on 30 cubic meters of water used per month. The amount of 30~ms was chosen by Staff to represent the average monthly usage of water; a factor used by other municipalities for comparison purposes. In Staffs report CPS-2007-02, Staff recommends that a full review of water/sewer rates be undertaken. A review would address the concerns that Mr. Bielawski has raised, especially the need to inform ratepayers of the impact of increasing rates in relation to variant water and sewer usage. 7. Conclusion -The factor used to calculate weighted meter is unrealistic and thus totally f/awed During the meetings with Mr. Bielawski, his comments cited that the current weighting for meters is flawed. His comments were directed at the use of the AWWA standards for differentiating between the sizes of meters. As stated earlier, Staff advises that the size of a water meter relates to the size of the demand flow for water provided to the user. Some users require a larger demand flow than others. Both the water and sanitary sewer systems are engineered to accommodate the variant sizes of both water flows and sewer usage. Staff advises that the AWWA standard is recognized and approved in municipalities throughout Ontario, Canada and the United States. As this standard is recognized and used, Staff believes it provides the appropriate factors by which to weight the different sizes of meters. In Staff's report CPS-2007-02, Staff recommends that a full review ofwater/sewer rates be undertaken. A review would address the concerns that Mr. Bielawski has raised with regard to the current practice of using the AWWA standard. October 15, 2007 - 7 - CPS-2007-03 Conclusion Mr. Bielawski has provided significant concerns in his deputation to the Corporate Services Committee, as presented in his document "Water Rate Study", and directly to Councillors and Staff over the past year. Although Staff has provided some commentary on Mr. Bielawski's conclusions, the need for a water and sewer rate review is only made more apparent. Staff and Mr. Bielawski concur that there are different methods to structure water and sewer rates. A water and sewer rate review would not only address the concerns raised by Mr. Bielawski but also the concerns of other residential, commercial, industrial and institutional ratepayers. The reviewwould evaluate the different methods for structuring rates as well as focus on other challenging issues. The review would provide options for the City to address the issues, apply the current legislation to the City's rate structure, and compare the advantages and disadvantages of applicable rate structures. As the Committee was interested in the Loudon report and the conclusions raised by Mr. Bielawski, the rate review was postponed. The Committee's further consideration of the proposal from BMA Consulting Inc. as presented in the earlier report CPS-2007-02, is appreciated. Recommended by: Respectfully submitted: K. E~,,,Burden, Acting Executive Director of Corporate Services MacDonald, Chief Admin Officer Attach. City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report CITY OF NIAGARA FALLS STUDY OF WATER & SEWER RATES FOLLOWING METERING SYNOPSIS This report reviews the current water and sewer rates and makes recommendations on future rates to be implemented as a result of the metering program. The level of the rates is based on preliminary budget data and should be reviewed and revised based on final budget data once it is available. The following summarizes the report findings: Metering Program -The City has completed the metering of approximately 22,500 customers billed flat rates. Most of these are residential, but there are a few commercial customers. • Current Situation -There are approximately 3,100 customers currently billed metered rates. The current rates are two-part with a fixed charge variable by meter size and a volumetric charge with 6 declining rate blocks. Proposed Two Part Rates -The proposed rates are also two-part with a fixed charge variable by meter size and a volumetric charge. The proposed volumetric charge is single block -there are no reduced volumetric rates for large volume users. This proposed change to a single rate block is recommended due to the fact that water is purchased wholesale from the Region at a constant rate for all usage and as a result there are no large-volume savings realized by the City that could be passed on to large volume users. Water/Sewer Combined -The sewer charges are currently billed as a 150% surcharge on the water bill. The City 2000 water and sewer budgets are prepared with the water and sanitary sewer costs combined. As a result, a single combined water and sewer rate has been calculated. This approach is increasingly used as it simplifies the customer billing and improves the flexibility of financially managing the water and sewer utilities. Toronto has followed this approach for years. Recommended Volumetric Rate Option -Two options are provided for the volumetric rates. Option 1 links the retail volumetric charge to the Region's volumetric charges. The volumetric charge would recover about two-thirds of the user rate revenues. Option 1 is recommended since it minimizes revenue uncertainty while maintaining a high enough proportion of charges based on volume to encourage conservation. Option 2 is provided as an alternative. It allocates 80% of the costs to the volumetric charge, which would increase the conservation element, would allow more control by customer's of their water bills, but would decrease revenue security during years with low seasonal use. Recommended Service Charge Option -Two service charge alternatives are provided. Alternative A is a single service charge for all customers. It has the advantage of simplicity. Alternative B has service charges variable by meter size. This is recommended as it more closely allocates the costs to each customer. This is the same approach as is currently used, except that the service charges proposed are higher for larger sized meters than those currently applied. NFRateReport.doc 1 Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report • Implementation - An implementation plan is suggested in Section 8 of the detailed report. Proposed 2001 Water/Sewer Rates (monthly) -Recommended in Bold Italics Option 1 (Volumetric rate recovers Regional charges) Option 2 (Volumetric rate recovers 80% of costs) Volumetric Rates ($/cubic metre) $1.309 $1.549 Service Charges - A -Single Uniform Charge $26.235 $16.182 - B -Charge Variable by Meter Size 15 mm $22.54 $13.90 18 mm $22.54 $13.90 25 mm $22.54 $13.90 37 mm $56.35 $34.75 50 mm $135.23 $83.41 75 mm $270.46 $166.82 100 mm $495.84 $305.83 150 mm $946.61 $583.85 200 mm $1,690.37 $1,042.59 NFRateReport.doc 2 Loudon & Fortin Novernber 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report CITY OF NIAGARA FALLS STUDY OF WATER & SEWER RATES FOLLOWING METERING DETAILED REPORT INTRODUCTION During 1999 and 2000, the City of Niagara Falls has carried out a program of installing meters on the water services to all customers. Formerly only non-residential customers were metered. The metering program mostly is for single family dwellings, but has had the benefit of identifying some other larger customers that escaped metering in the past and that are also now being metered. A previous study was carried out of water rates following meteringl that provided preliminary rates recommendations. That study recommended two-part water rates with a single volumetric charge and a service charge variable by meter size. The method used was as set out in the Canadian Water & Wastewater Association Municipal Water Rate Manual. In the following study, the estimate of water consumption following metering has been refined based on preliminary readings taken on the newly metered customers. Expenditure data is also based on preliminary 2001 budgets. 2 CURRENT WATER & SEWER RATES The 2000 water and sewer rates are as follows: Exhibit 1 2000 Volumetric Water User Rates (quarterly basis) Block limits (gallons/quarter) Industrial $/000 gallons Commercial & Residential $/000 gallons 0 to 99,000 $3.13 $3.52 100,000 to 199,000 $2.74 $3.13 200,000 to 299,000 $2.35 $2.74 300,000 to 499,000 $2.20 $2.35 500,000 to 699,000 $2.04 $2.20 700,000 & over $1.87 $2.04 ~ City of Niagara Falls Residential Water Metering Study Financial Analysis -prepared by Fortin & Loudon in conjunction with Acres & Associated Limited -August 1998 NFRateReport.doc 3 Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report Note that some larger metered customers are billed monthly rather than the quarterly basis used for most metered customers. Exhibit 2 2000 Service & Minimum Charges (quarterly) Meter Size Service Charge Minimum Bill (millimetres) ($/quarter) Charge ($/quarter) Nominal Volume Allowance (m3 /quarter) -see note 15 mm $1.25 $43.00 11,000 18 mm $2.00 $57.00 15,000 25 mm $2.50 $95.00 26,000 37 mm $3.00 $155.00 44,000 50 mm $4.00 $231.00 66,000 75 mm $7.50 $385.00 125,000 100 mm $12.00 $768.00 285,000 150 mm $30.00 $1,158.00 529,000 200 mm $50.00 $1,932.00 967,000 NOTE: The minimum consumption allowance volume is approximate only. The dollar volume is applied rather than the published volume. The metered rates are mostly applied every three months (quarterly). The flat rate charge is billed every four months at $82.46. Sewer charges are levied on the water bill as a surcharge. The sewer surcharge is currently 150% of the water charge. 3 CUSTOMERS By the time the metering program is complete, about 22,500 unmetered customers are expected to be converted to meters. When added to the-3,100 customers previously metered, this will bring the total number of meters to the following: NFRateReport.doc 4 Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report Exhibit 3 Number of Metered Customers by 2001 Meter Size (millimetres) Number 15 mm 24,250 18 mm 387 25 mm 343 37 mm 221 50 mm 291 75 mm 52 100 mm 42 150 mm 18 200 mm 3 Total 25,607 4 CONSUMPTION Wholesale -The City pays wholesale charges for the volume of water supplied and the sewage treated by the Region of Niagara, which is responsible for this service. The City only has jurisdiction over the retail operation of distributing water and collecting sewage. The Region charges the same wholesale rates year-round and to all of the area municipalities. The wholesale rates over the past 3 years are as shown below in Exhibit 4. Exhibit 4 Niagara Region Water & Sewer Charges ($/m3) Water Sewer 1998 $0.275 $0.465 1999 .$0.291 $0.479 2000 $0.300 $0.489 The 1999 water and sewage volumes which the Region billed the City are summarized in Exhibit 5 below: NFRateReport.doc 5 Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report Exhibit 5 1999 Water & Sewage Volumes Billed to Niagara Falls by Region (m3) Month Water Sewer January 1,269,279 1,821,812 February 1,122,577 1,754,075 March 1,233,599 1,836,082 April 1,274,006 1,738,828 May 1,746,304 1,616,411 June 2,242,640 1,582,608 July 2, 820,323 1,723,472 August 1, 849,745 1, 814, 831 September 1,661,525 1,666,689 October 1,441,157 1,697,414 November 1,297,101 1,739,527 December 1,315,656 1,747,952 Total 19,273,912 20,739,701 The monthly-water and sewage flows billed by the Region starting in 1998 and up to September 2000 are graphed in Exhibit 6. This graphically illustrates the normal seasonality of the water purchases. Monthly water flows in the summer of 1999 reached almost three times the spring level. There was much less of an increase in 2000, a wet year. The sewage flows, on the other hand, show less variation, with only a modest decrease in the summer and occasional higher flows in the spring and fall, no doubt due to inflow and infiltration. There are sewage flow variations in the summer of 2000 are not consistent with historical trends, but could relate to the dates that the meters were read. Consumption by Currently Metered Customers -There are about 3,100 customers currently charged metered rates. Most are billed quarterly, but the larger customers are billed monthly. Their consumption for the past 2 years is as shown in Exhibit 7. NFRateReport.doc 6 Loudon & Fortin November 2000 City of Niagara Falls Study of YYater & Sewer Rates Following Metering Final Report Exhibit 7 1998 & 1999 Metered Customer Consumption (m3) 1998 1999 Quarterly metered 7,172,986 6,736,805 Monthly metered 671,582 699,483 Total metered 7,844,568 7,436,288 Pumpage 19,541,564 19,646,127 Unmetered use 11,696,996 12,209,839 Unmetered Use - To narrow down the likely range of unit consumption by the newly metered customers, meter readings were specially taken in May and June of all meters installed to that point. There were 17,823 meters read. There were 105 customers with meter reading dates errors. There were some very large meter readings -the largest 10% or 178 customers were as a result treated separately. The results of the reading program are summarized in Exhibit 8. Exhibit 8 Newly Metered Customer Consumption Results Summary to June 2000 Description Number of Customers Average Total Monthly Consumption (m3 /month) Unit Consumption (rn3/month customer) Date errors (note 1) 49 N/a N/a 0 reading 56 0 N/a Normal residential 17,540 431,865 24.6 Larger customers 178 38,158 214.4 Normal + Larger 17,648 470,023 26.5 Note: The reading dates were not feasible such as1980 installation or installation date after the date of the latest meter reading The customer name and address, meter serial number, meter installation and reading dates and volumes were input in Excel spreadsheet format. Meter installation was spread out from about May 1999 until the date of the special readings. The average monthly usage for all customers was 26.5 m3/month. Much of this consumption was not in the summer. Only about 20% of the customers had been metered by the end of last summer. The customers are mostly residential, but there are some non-residential customers including some larger users. If the largest 1 % of users is removed from the calculation, the average use drops to 24.5 m3/month. 99% of the customers used less than 90 m3/month. Usage by the top 1% ranged up to in excess of 1,000 m3/month, NFRateReport.doc 'J Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report Exhibit 9 illustrates the average consumption by customers and includes the variance in level depending on how long customers have been metered. Customers that have been metered the longest include both summer and winter usage. These are plotted on the right hand side of the graph. The average monthly consumption level of customers that were metered prior to July 1999 was about 29.5 m3/month. These customers were metered for a full year. But as customers are progressively metered and customers with only winter consumption are included in the average, the level drops. This can be seen by as the vertical bars get shorter during the winter since usage by these customers only includes winter usage. Based on the initial consumption levels, and recognizing the fact that summer usage is much higher than winter, it seems feasible that the average usage for these newly metered customers might well be about 28 m3/month. Unmetered use is a combination of unaccounted for water (UFW) losses such as watermain leakage, hydrant flushing, sewer flushing etc plus water used by unmetered customers (i.e. flat rate customers). Exhibit 10 illustrates possible combinations of UFW and unmetered customer consumption in 1998 and 1999 based on 22,500 unmetered customers. An average level of 28 m3 /month /customer over a full year is equivalent to 23%UFW. This is relatively high, but not unreasonable compared to previous staff estimates of about 19% UFW. Full meter reading will clarify this calculation. If the top 1 % of newly metered customers are excluded, then this is equivalent to about 26 m3 /month /customer for residential customers. In the original metering financial study2 it was concluded that residential usage by unmetered residential customer is about 27 m3 /month /customer. That conclusion was based on other municipalities as well as a small sample of metered flat rate customers in the City. Impact of Metering -Experience with the impact of metering varies. There are many influences, primarily cost level and amount of discretionary use (primarily summer use). Often there is an initial impact followed by a rebound, since the water is not really high compared to other utilities. Water and sewer combined is less than cable television charges. A typical residential customer is likely to use in the range of 18 to 22 m3/month, based on experience in other similar Ontario municipalities. Excluding the 1 % largest users in the newly metered group, the likely consumption now is about 26 m3/month. According to research by Environment Canada3 reduction in water use doe to metering is likely to be 30% or more. A drop to 20 m3/month after metering would represent a decrease from 26 m3/month of 23%. Combining this information, it is assumed that consumption will drop by 25% in the first year. The level of consumption following metering is calculated in Exhibit 12. 5 Financial The 2001 draft water and sewer budget has been prepared with water and sewer costs combined. In the past these costs have been kept separate and the water and sewer tariffs set z City of Niagara Falls Residential Water Metering Study Financial Analysis -Draft Discussion Paper -Fortin & Loudon in association with Acres & Associated Ltd. -August 1998 page 14 s Guidelines for Municipal Water Pricing -Environment Canada - McNeill and Tate -page 7 NFRateReport.doc $ Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report separately. There is a trend in Ontario towards issuing a single combined water and sewer charge -see Section 6 below. The water and sewer budgets are summarized in Exhibit 11. 6 Tariff Calculations The current water tariffs are two-part with both fixed (variable by meter size) and volumetric (decreasing block). The following is recommended: • That water and sewer tariffs be billed as one combined rate. This is done in several municipalities in Ontario, the largest being the City of Toronto. This was also the practice followed in many of the six local municipalities in Metropolitan Toronto previously. The Town of Markham has also followed this practice for many years. The Town of Markham is similar to the City of Niagara Falls with respect to their being the retail provider of water and sewer services inside the Region of York which bills for both wholesale services based on volume (both water and sewer are billed based on water volumes at the wholesale level, however). This year the Town of Newmarket has also switched to a combined water /sewer charge. The use of a combined charge provides much greater flexibility with regard to budgeting these services and allowing for annual revenue fluctuations. • Eliminate Declining Block Rates -There is little or no cost justification for declining block rates in Niagara Falls. There are economies of scale for large water users, but these occur mostly in the water production area, which is a Regional responsibility. It does not affect the City's costs. The following comments are also added regarding the water and sewer rates: • Note that the use of water consumption as a basis for billing sewer charges is common in Ontario. This is the most feasible way of approaching user pay for recovering sewer costs. Water meter readings are a surrogate for measuring sewage flows. During 1999, total Niagara Falls sewage flows billed by the Region were close to total water flows, only about 6% higher and in 1998 sewage flows were about 10% higher than water flows. In Niagara Falls, as in most other municipalities, customer metered water flows are used in the calculation of a customer's sewage charges. Overall this is a fair way of achieving user pay for the sewage costs. It is meant to allocate sewer costs in proportion to each customer's use of the system. Although there are flow differentials between water and sewer systems due to seasonal water use in the summer and for sewer due to inflow and infiltration, these variations more or less even out over the year. The use of water consumption is a reasonable surrogate for sewage flows and is the only practical way of achieving user pay for sanitary sewer charges. • Seasonal Charges -Note that water consumption normally has a very high seasonal component in Niagara Falls. Water consumption in the summers of 1998 and 1999 exhibited very high increases -see Exhibit 6. The wet summer of 2000 showed very little increase. Since the cost of meeting summer peaks occurs at the Regional level, there is NFRateReport.doc 9 Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final Report little justification for the City to consider seasonal rates. This may have to be reconsidered if the Region decides to utilize some form of seasonal rates to moderate the high summer peak water flows. The combined water and sewer rates are calculated in Exhibit 12. Two options are provided: • Option 1 -Recover Regional Volumetric Charges from Volumetric Rate -This approach is based on revenue security plus relating obviously variable charges to the volumetric rate and largely fixed charges to the fixed service charge. It is a fair approach. Unfortunately, the conservation aspect of metering is weakened since only about two-thirds of costs in the volumetric rate. • Option 2 -Recover 80% of Costs in the Volumetric Rate -This alternative would recover all of the Regional costs in the volumetric rate, plus some of the City costs. It would have a higher conservation element, which may translate into reduced usage and reduced Regional charges as a result. The service charge is calculated both as (A) a single charge for all customers and (B) one variable by meter size. The volumetric rates and service charges are provided in Exhibit 12. 7 Impact The impact of the proposed rates compared to the current rates is provided in Exhibit 13. For flat rate customers, those that use below average volumes pay less and above-average users pay more. The average customer pays slightly less. For currently metered customers, most pay more due to the elimination of the volume discounts. Implementation The following suggestions for implementation are made. • There should be public notices in advance of the impending rates and how they might affect customers. • The bill should include a phone number where customers can ask questions about their bill. • The new tariffs should not be first applied during the summer season as the differential from the flat rate charges will highest at that time. • The billing staff should be prepared to answer questions about why customers' bills have changed. They should also be helpful in suggesting ways to reduce usage. NFRateReport.doc 1 Q Loudon & Fortin November 2000 City of Niagara Falls Study of Water & Sewer Rates Following Metering Final • Also there will be high residential water users who will not be happy with paying for what they use. It must be emphasized that this is now a user pay system and that customers have a measure of control over the size of their bill. • For larger customers, notification should go out in advance of their expected increase. This will often avoid adverse reaction once the bills are received. Some municipalities choose to initially send out demonstration bills to illustrate the potential impact of the metered rate charges, so that customers can adjust usage before the real billings start. NFRateReport.doc 11 Loudon & Fortin November 2000 October 15, 2007 Councillor Victor Pietrangelo, Chair and Members of the Corporate Services Committee City of Niagara Falls, Ontario Members: Re: F-2007-37 PSAB 3150 RECOMMENDATION: For the information of the Corporate Services Committee. BACKGROUND: F-2007-37 As staff is compiling the 2008 General Purposes Budget, it is important to bring to Committee's attention the accounting changes that will impact the 2009 fiscal year. As Council is aware, the Canadian Institute of Chartered Accountants (CICA) has made changes to the Public Sector Accounting Board (PSAB) financial reporting requirements. Specifically PSAB regulation 3150 is being introduced for all government organizations and these directives provide the financial rules for municipalities in the compilation of its financial statements. Our auditors use these regulations to perform their audit. The changes that are scheduled to be undertaken for 2009 are the most significant financial changes to occur in the municipal sector. The new legislation requires that municipalities present information on all the City's assets. This information includes the asset value, its accumulated amortization and expected life. Full compliance is required for January 1, 2009, and is expected to establish the framework for asset management plans. The reference material on this matter is quite extensive and is available to Council by request. City staff in Municipal Works, Finance and Information Services have been working towards the achievement of these goals since early 2007. Municipal Works staff has initiated the inventory process. This is an encompassing task to identify, value and rate condition of all City assets. Municipal Works has engaged an outside expert to assist in this matter. Information Services has been implementing the Cartegraph Information System which will be the primary record keeper of the capital assets controlled by the municipality. Lastly, Finance staff are entrusted with ensuring that the inventory gathered is complete and in adherence with the regulations of PSAB 3150. During 2008, the need for additional resources will be required in both staffing and the use of outside experts. These needed initiatives will result in increased financial resources of approximately $200,000. Working Together to Serve Our Community Corporate Services Department Finance ,. ~« _... , _a - _ ~ ,~-pia, .. ~_ ~~ -2- Li Fr ~:~ughout the budget process and throughout next year, staff will continue to keep the ~~,t,~.~, t~ittee apprised of the status of our progress and the impacts on the Corporation's ~~~ ~_ :.c:~~l position. ~~:.~~~~mended by: t~~~ Todd Harrison, Acting Director of Financial Services K =~'~-vk`~eFStfully submitted: Burden, Acting Executive Director of Corporate Services n MacDonald, Chief Administrative Officer October 15, 2007 Councillor Victor Pietrangelo, Chair and Members of the Corporate Services Committee City of Niagara Falls, Ontario Members: Re: F-2007-38 Municipal Card RECOMMENDATION: F-2007-38 That staff monitor the implementation of the Muni-Card in other municipalities and report to Council on the successfulness of the program. BACKGROUND: At the Council Meeting of September 24, 2007, Council requested that staff investigate and report back on the Muni-Card that is presently being introduced by municipalities in Ontario. As the Committee is aware, the Muni-Card was announced as being introduced for residents of the City of Vaughan. The City of Oshawa has been reported as possibly issuing a card in 2008. Staff's preliminary investigation indicates that the Mastercard Muni-Card works as follows: • available to all residential property owners of the City of Vaughan on a voluntary basis • rewards are earned on worldwide purchases using the Mastercard • no annual fees to cardholders • rewards in a calendar year are paid onto the property tax account of the cardholder the next February • Point of Sale discounts and merchant discount programs exist for local businesses • the Mastercard is administered by GE Money Trust Company, a financially-regulated financial institution and Civic Strategies Inc., the card developer. • the City has no direct administrative role and is reported to have no costs Working Together' to Serve Out' Community Corporate services Department Finance ~` _ ~ =~'s ,- e ~t::~~~E~e~ 15, 2007 - 2 - F-2007-38 i~~ce the Muni-Card is new in the marketplace, City staff believe that it is prudent to ~~~~nitor the implementation of the card in Vaughn with the intention of providing Council urfuher information on the viability on this program for the municipality and its residents. ~~ecommended by: <`approved by: Todd Harrisa~, Acting Director of Financial Services K. E. Burden, Acting Executive Director of Corporate Services respectfully submitted: ` ~E' ,~'' Jo acDonald, Chief Administrative Officer