TRANSFER OF SEWAGE TREATMENT PLANT COSTS FROM GENERAL TAXPAYER TO SEWER RATE PAYER. Charge user fees for costs of sewage treatment plant

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1 August 3, 2018 AGENDA OPEN COUNCIL SEPTEMBER 5, 2018 DATE REPORT TO: FROM: SUBJECT: PURPOSE: D. COMIS, CHIEF ADMINISTRATIVE OFFICER L. BUTTERWORTH, DIRECTOR OF FINANCE TRANSFER OF SEWAGE TREATMENT PLANT COSTS FROM GENERAL TAXPAYER TO SEWER RATE PAYER Charge user fees for costs of sewage treatment plant EXECUTIVE SUMMARY: General taxpayers are currently funding the French Creek sewage treatment plant rather than the actual purveyors to the treatment plant. It is proposed that the costs of the treatment plant be moved to the sanitary sewer fund over time in order to appropriately reflect the costs of sanitary sewer removal and to charge the users more appropriately than the assessed value of their property. A charge of $250,000 to the sanitary sewer fund is proposed for 2019 to reflect approximately 10% of the sewage treatment plant annual costs. A 20% sewer rate increase is proposed in order to cover the costs of this transfer and a property tax rate reduction of approximately 10% to the RDN Wastewater tax rate (about 1.8% less than the overall proposed tax increase) would be implemented to offset the sanitary sewer rate increases. The above rate increase does not include the 3% annual sewer rate increases proposed in the 5 year financial plan. RECOMMENDATIONS: 1. THAT the report from the Director of Finance dated August 3, 2018, entitled "Transfer of Sewage Treatment Plant Costs from General Taxpayer to Sewer Rate Payer" be received. 2. THAT sanitary sewer user rates as set by Schedule "C", clauses 1 and 2 of the "City of Parksville Sanitary and Storm Sewerage System Bylaw, 1999, No. 1319" be increased by 3% effective October 1, THAT sanitary sewer user rates be increased by a further 20% effective April 1, THAT the sewer parcel tax rates as set by Schedule "A" of the "Sewer Parcel Tax Bylaw, 2013, No. 1493" be increased by 23%. 5. THAT the amount of RDN Wastewater charged to the property taxpayer be reduced by $250,000 when calculating the 2019 property tax rates. 6. THAT the appropriate amendments to the "City of Parksville Sanitary and Storm Sewerage System Bylaw, 1999, No. 1319" and the "Sewer Parcel Tax Bylaw, 2013, No. 1493" be brought forward for Council s consideration.

2 Transfer of Sewage Treatment Plant Costs Page 2 of 4 BACKGROUND: The Regional District of Nanaimo (RDN) runs the French Creek Sewage Treatment Plant (the Plant) on behalf of the residents of the Oceanside area. A large invoice (now over $2.5 million) is received each year from the RDN to cover the City s share of the operating and capital replacement costs of the Plant. The City s portion of the Sewage Plant costs is based on the City s sewage flows into the plant in relation to the other areas that have sewage flows into the Plant. So it would be more appropriate for the individual users of the Plant to pay for allocated costs rather than on a property assessment which has no bearing on the sewage flows into the Plant. The annual sewer levies are budgeted at about $1.2 million for Adding in the full cost of the Treatment Plant of over $2.5 million would require the sewer rates to triple. Although there would be a corresponding decrease to the property tax revenues required (and tax rates), the shift in costs would not be equal for each taxpayer. Based upon an impacts study of a full transfer of Sewage Plant costs all occurring in 2019, it would likely be more palatable if this were shifted over a period of time. A shift over 10 years has been used for purposes of this report. Table 1 reflects the impacts of year 1 of a shift over 10 years and is discussed in the Analysis section. The current sewer rates have a fixed charge for the first 100 cubic meters of sewage disposal. Many households and a few businesses are under that threshold but are paying the same as someone disposing of 100 cubic meters. This has not been too much of an issue with the rate payers as the sewer rates are quite low. However, with the large increases required to the sewer rates, it would be fairer to reduce or eliminate that threshold and include a fixed charge and a usage charge as is done with the water fees. This change is not proposed at this time, but should be a consideration for the future as more of the RDN wastewater charges are allocated to the sewer ratepayers. OPTIONS: 1. Transfer the RDN Sewage Treatment Plant costs to Sewer users over a 10 year period. 2. Transfer the Sewage Treatment Plants costs to Sewer users over some other period. 3. Maintain the status quo. ANALYSIS: Option 1: Transferring the RDN wastewater charges over a period of time allows ratepayers, strata s and taxpayers to slowly adjust to the new rates. There is both a negative impact and positive impact to different rate payers depending on their water consumption and property assessed values. Adjusting this over a long period of time reduces the negative impact in a particular year and allows time for the businesses to adjust their revenue generating fees. Homeowners negatively impacted will have a much smaller impact than

3 Transfer of Sewage Treatment Plant Costs Page 3 of 4 adjusting this all in one year. It will also give them a chance to reduce their usage if it is currently high. Adjusting rates over time will also give the City time to change the rate structure to reduce the minimum charge from 100 cubic metres so that residents can further reduce their charges by reducing water consumption. Table 1 has a sample of different types of commercial operations, and residential properties and the impact this change has on their overall sewer and property tax billing. Generally speaking, taxpayers with high assessments and low water consumption will benefit from this change and those with lower assessments and/or higher water consumption may end up with a higher overall charge. A residential property assessed at the average residential assessment ($401,000) and using 100 cubic metres or less of water in the winter will see a slight decrease in their overall annual billings (before the annual inflationary increases approved by Council are factored in). Residential strata s who pay the utilities on behalf of the strata owners may see a fairly large increase in their utility bills but the reductions to property taxes will be to the individual strata owners. So this will likely lead to larger increases to the monthly strata fees (to be offset by the owners reduced property tax). Another consequence of this shift is that exempted properties will see no tax decrease (as they are exempt) but will see increasing sewer utility rates. The City s billing periods are October to March and April to September. Starting the rate increase for the RDN sewer charge on January 1 would be the preferred time to add the increase into the sewer bill since property taxes are billed on a calendar year basis, but there are a number of complications with our current systems to initiate this at that time. Also, strata s will need time for their AGM s to take place to increase their strata fees where the strata s are paying the utility bills on behalf of the strata owners (strata owners will get the tax decrease). Option 2: Option 3: The impacts of this are not quantifiable until the different period is indicated by Council. If Council were to make this change all in one year, the overall increases and reductions to the types of properties shown in Table 1 would be about 10 times what is shown in Table 1. Residents and commercial operations with high assessments will continue to pay more than their share of the RDN wastewater charge due to their high property assessments. Users of high quantities of water will not be paying their appropriate share of the RDN wastewater charge which is based on sewage flows into the plant. FINANCIAL IMPACT: The change proposed should be revenue neutral except for the annual inflationary increase.

4 Transfer of Sewage Treatment Plant Costs Page 4 of 4 STRATEGIC PLAN IMPLICATIONS: Maintain or Enhance Quality of Life - This is difficult to gauge. Some rate payers will see an overall decrease in their tax and utility bills and some will see an increase which could impact quality of life. Renewal and Maintenance of Infrastructure - No perceived impact as decision is revenue neutral. Maintain or Enhance Levels of Service - No perceived impact on service levels. Maintain or Reduce Actual Property Tax Burden - A reduction in RDN property tax burden is expected as the costs are transferred over to the Sewer rate payers. Environmentally Sustainable - No perceived impact. Economic Development - No perceived impact. REFERENCES: Council Resolution (2). Respectfully submitted, Original signed by L. Butterworth L. BUTTERWORTH, CPA, CGA Director of Finance CHIEF ADMINISTRATIVE OFFICER COMMENTS: Original signed by B. Russell on behalf of D. Comis D. COMIS Chief Administrative Officer F:\DATA\FINANCE\SEWER\Report on Transferring RDNWW Costs to Sewer-April start-final.docx

5 City of Parksville Table 1 Analysis of Change to RON Wastewater Recovery Charges Semi annual fixed charge amt up to base allowed - Current rates $ RDNWW charge on taxes $ 2,544,671 Sewer overcharge for> 100cm - Current rates $ Less: RDNWW charge to be transferred to Sewer Rates $ (250,000) Base amt of Cubic Meters allowed 100 Amended RDNWW charges on taxes $ 2,294,671 Current RDNWW rate/000 -Commercial $ residential $ Amended RDNWW rate - Commercial s Residential $ RDN Current Revised Annual Wastewater System: Estimated Estimated RDNWW Proposed Billing charge (based Total Paid Summer Winter charge (based System: Total lncr/(decr) Assessed on for Sewage Billing (with Billing (with on Paid for with 10% Sep-17 Mar 18 Sep-17 Mar 18 Value Assessment) Costs new rates) new rates) Assessment) Sewage Costs User Pay Consumption Sewer charge (2018 rates) 10% Wastewater Cost Recovery from Sewer Billing System Gas Stn with Car Wash 4,170 3,633 2, , ,262,000 2, , , , , , Gas Stn (no car wash) 806 1, ,408,000 2, , , , (6.56) Food Store 3,665 2,535 2, , ,794,000 16, , , , , , (936.58) Inn 6,778 4,594 3, , ,692,000 12, , , , , , Inn 3,339 1,415 1, ,619,091 4, , , , , Camping resort 5, , ,589,500 5, , , , , Pub 2,170 1,533 1, ,347,750 2, , , , , , Hair Salon ,012,000 1, , , , (99.35) Restaurant 2,045 1,708 1, ,682,000 3, , , , , , Restaurant 1, ,516,000 2, , , , (62.88) Restaurant 2,116 2,249 1, , ,564,000 4, , , , , , Restaurant 1,617 2, , ,000 1, , , , , , Restaurant ,000 1, , , , (94.55) Strip mall with Laundry 2,702 2,273 1, , ,088,000 2, , , , , , Car Dealership ,100,000 7, , , , (663.89) Bank ,912,000 7, , , , (698.52) Bank ,057,000 3, , , , (355.80) Dept Store 58 so ,000 1, , , , (123.24) Trailer Park Land 11,176 7,730 4, , ,655,000 3, , , , , , , Trailer Park Units combined ,645,500 3, , , , (330.62) SFD ,702,000 1, , , , (166.32) SFD , , , (8.71) SFD , (37.07) SFD , (21.42) 5FD , (20.49) SFD , !>7,67 (6.90) SFD , (3.91) SFD , (2.48) SFD , (0.63) SFD , SFD , F:\DATA\FINANCE\SEWER\2018 Sewer analysis.xlsx 03/08/20183:48 PM