HomeMy WebLinkAboutFIN-07-039 - 2007 Water & Sewer Budgets & Rates (Supplementary)
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KITCHENER
Financial Services
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Report To:
Date of Meeting:
Submitted By:
Prepared By:
Ward(s) Involved:
Date of Report:
Report No.:
Subject:
Mayor Carl Zehr and Members of Council
March 19, 2007
Pauline Houston, General Manager of Financial Services & Treasurer
Dan Chapman, Director of Financial Planning & Reporting (2347)
All
March 12, 2007
FIN-07-039
RECOMMENDATION:
2007 Water and Sewer Budgets and Rates (Supplementary)
That the municipal enterprise budgets for the Waterworks and Sanitary Surcharge utilities be
approved as follows for 2007 ($OOO's):
Revenues
Waterworks $26,914
Sanitary Surcharge $25,646
and further,
Expenses
$26,933
$24,905
Surplus/(Deficit)
($19)
$741 ;
BACKGROUND:
That, effective April 1, 2007, the water rate be set at $1.1827 per cubic metre and the sewer
rate be set at $1.1920 per cubic metre.
On January 22, 2007 the Finance and Corporate Services Committee reviewed the proposed
2007 water and sewer budgets and rates. At that time, staff recommended that the rate
decision be deferred to February 26 as Regional rate increases were expected to be finalized at
the end of The rate decision was subsequently deferred by Council to March 19 to
provide staff with to update the City's projections to include approved Regional rates and
the five-year projection for the City's accelerated infrastructure program.
REPORT:
An updated five-year projection for the water and sewer utilities is attached. This projection
incorporates the following elements:
· The rate forecast approved by Regional Council on February 28,2007, comprised of
annual rate increases of 9.9% for water and 14.9% for sewer, effective April 1. The
water rate increase is consistent with the Region's original rate proposal, and the
sewer rate increase has been scaled back from a starting point of 19.9%.
· The impact of the City's existing projections for the accelerated infrastructure
program. It should be noted that this program is scheduled for review in 2007 and
the projections may ultimately change from those presented.
· A reduction in the triple-funded capital program in the amount of $1.4 million in 2007
to avoid a deficit in either utility, as proposed in the original utility budgets. Staff
recommends that the City not budget a deficit in view of the significant existing deficit
balances in both utilities, as well as the fact that the date for anticipated recovery to a
surplus position is later than originally contemplated in the infrastructure model. It is
felt that balancing the budget is prudent until such time as the infrastructure model
can be reviewed and updated.
· The assumption that the City would maintain the existing rate proposal of $1.1827 for
water and $1.1920 for sewer, resulting in a net increase of 7.99% in the rate or an
additional $3.66 per month for the average residential ratepayer, broken down as
follows (based on comparison of 2006 budget to 2007 budget):
Regional rate increase
City accelerated infrastructure program
City operations
Reduced volumes
City utility deficit reduction
$2.85
2.37
0.11
(0.16)
-11.M)
3.66
If Council approves the rates as recommended for 2007, the five-year projection shows that
combined rate increases of approximately 9.5% per year for the remaining four years of the
projection would be required to provide for operating and capital costs as well as the elimination
of accumulated deficits. This is due, in large part, to the substantial increases projected by the
Region for treatment costs, which account for 53% of the water operating budget and 42% of
the sanitary operating budget. In addition, these increases are necessary to eliminate the
accumulated deficits of approximately $9.3 million (water - $1.2 million; sewer - $8.1 million).
Staff continues to support the original rate recommendation as it ensures that the impacts of the
significant increases in Regional rates are not deferred, resulting in a compounded impact on
City ratepayers in subsequent years. The recommended approach also has the effect of
reducing the $8.1 million sewer operating deficit by $0.7 million in 2007. The rate projection
assumes more aggressive deficit reduction in the period from 2008 to 2011. A lower water or
sewer rate in 2007 would only worsen the impact in future years.
FINANCIAL IMPLICATIONS:
The proposed combined increase in water and sewer rates of 7.99% will result in an increase in
monthly charges of $3.66 for the average residential ratepayer. These rate increases are due in
large part to substantial increases in Regional wholesale rates and will provide for modest deficit
reduction in the sewer utility.
Pauline Houston
General Manager of Financial
Services & City Treasurer