HomeMy WebLinkAboutDTS-10-016 - Stormwater Utility & Rate ImplementationREPORT
REPORT TO:
Councillor B. Vrbanovic, Chair, and Members of the Finance
and Corporate Services Committee
DATE OF MEETING:
January 11, 2010
SUBMITTED BY:
Grant Murphy, Director Engineering Services
PREPARED BY:
Grant Murphy, Director Engineering Services
WARD(S) INVOLVED:
All
DATE OF REPORT: January 4, 2010
REPORT NO.: DTS-10-016
SUBJECT:
STORMWATER UTILITY AND RATE IMPLEMENTATION
RECOMMENDATION:
That the sustainable level of service of $9.9M (2007 dollars) be annually
funded as outlined in DTS Report 09-042;
That the principle of shifting the stormwater program from a property tax
supported program to a user rate funded program be approved;
That the “Tiered Flat Fee” stormwater funding rate model as outlined in DTS
Report 09-042 be adopted for implementation beginning on January 1, 2011;
That a ten (10) year capital and operating forecast, a stormwater rate schedule
and a phased-in rate implementation schedule is presented to Council for
consideration, on or before May 30, 2010.
BACKGROUND:
In November 2004, Council directed staff to proceed with undertaking a Stormwater
Management Program and Funding Review Study (Study) collaboratively with the City of
Waterloo as part of the Shared Services Initiative. The Study purpose is to identify the City’s
current level of service, compare this to the legislated requirements and guidelines, develop a
suggested level of service, and to evaluate appropriate funding mechanisms to support these
needs.
The interim findings of the Study were presented to Council (DTS Report 07-073) in April 2007;
which identified the City’s current level of service, as well as a sustainable level of service based
on Federal and Provincial legislative requirements and guidelines. The report acknowledged the
concern that a sustainable level of service was not being delivered with respect to SWM. This
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component of the study reviewed operations and maintenance frequencies compared to
available guidelines — it is evident that Kitchener is falling short on many of its practices.
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On October 5, 2009, Council received the Stormwater Management Program and Funding
Review (DTS Report 09-042) and concluded that an equitable and defendable rate structure for
stormwater is feasible. The Study recommended that a utility structure and user rate approach
be implemented in order to fully fund SWM programming within the City of Kitchener. DTS
Report 09-04 was received for information by Council and staff were directed to report on this
matter to Council by May 2010 seeking further direction at that time.
Over the past several years, there have been many studies which made recommendations to
Council about required infrastructure improvements or established the need for the City to put
into place long-term preventive system maintenance and monitoring programs, in order to
provide source water protection and protect the local environment.
One such study, initiated in 2008, is the Victoria Park Lake Class Environmental Assessment
(EA) Study. It explored alternatives and provided a preliminary design that addressed Victoria
Park Lake’s sediment accumulation and water quality problems. The Class EA Study Report
was received and approved by Council on June 15th 2009 (DTS Report 09-096).
As part of the 10 year (2010 to 2019) capital forecast process, staff analyzed options to
implement the Class EA Study Report recommendations. The Class EA Study Report estimated
the cost of these projects to be $9.45M (Class “C” estimate). The cost estimate was revised to
approximately $16M based upon additional information from other stormwater management
pond retrofit work already tendered and taking place in the City in 2009. Based on these
estimates, it was determined that the Victoria Park Lake and associated works could not be
included in the forecast until 2019. On November 23, 2009 Council provided further direction to
staff to develop an implementation plan which would see phasing of the preferred alternative of
the Victoria Park Lake Class EA Study much sooner than 2019.
On January 11, 2010, staff presented to Council a budget issue paper under the cover report
Victoria Park Lake – Implementation of Class EA Study (DTS Report 10-015). The budget issue
paper provides recommendations associated with phasing of implementation and funding
options for Council’s consideration. It must be stressed that there is currently no funding
available in the current 2010-2019 capital forecast in order to carry out this set of projects —
expediting these projects is contingent upon securing a new sustainable funding source.
This report provides recommendations to move forward with the stormwater utility
implementation program be moved forward in order to address pressing issues related to a
variety of stormwater management needs, including Victoria Park Lake remediation and
upstream stormwater management improvements.
REPORT:
A primary purpose of the Stormwater Management Program and Funding Review Study (Study)
was to review options and identify a sustainable manner to fund the SWM program needs.
Further to this point, the Study considered if the funding of the current SWM program can be
modified to reflect the public service values of fairness and equity. In other words, is there an
advantage in adopting a different funding model for a SWM program that involves charging
property owners a rate based on how much they use the SWM system?
The consultant (AECOM Canada Ltd) and Study team reviewed approaches to fully fund SWM
programming within the City of Kitchener and the City of Waterloo, and the following funding
mechanisms were investigated:
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Taxes;
Fees and special charges;
Special levies that have specific designations and limitations for usage;
Other means i.e. fines, debentures, grants, bonds, and loans
Combinations of the above
The Study investigated various funding mechanisms that will support a sustainable level of
service and includes taxes, fees, and special charges or other means such as partnerships,
grants, etc. Options were presented for Council’s consideration in DTS Report 09-042 and
reference should be to this report and the Study for more detail about the benefits and costs.
As mentioned in DTS Report 09-042, the current service level for the SWM program budget
(2007) is pegged at $5,820,910 and proposed rate structures were based on this service level.
The service level includes both operating and capital budget requirements, such as SWM pond
clean-outs, street sweeping, leaf collection, stream and water course maintenance, spill
response, SWM pond retrofits, and replacing of aging storm sewer pipes.
However, the Study concludes that Kitchener is falling short on many of its practices and
recommends an increase to the current service level in order to better address changing facility
monitoring and maintenance and sediment removal from SWM ponds and oil/grit separators.
Further the current service level is unable to accommodate the proposed remediation and
upstream SWM works, identified in the Victoria Park Lake Class EA Study Report.
As such, it is recommended that a sustainable level of service be increased from $5,820,910 to
$9,910,590 (2007). Beginning in 2001, a rate structure would be initiated and based on the
sustainable level of service. Staff are recommending that the “tiered flat fee” structure made up
of four (4) tiers (single family, multi-family, non-residential, and tax-exempt non-residential) be
adopted for implementation. The principle is that if a property owner was served by the local
water utility through a water meter, that the amount of stormwater service being charged would
be based on land parcel usage.
The “flat fee” stormwater funding mechanism would enable a shift from residential users to the
non-residential sector, where taxable non-residential properties would be paying their fair share
of stormwater services, due to the amount of stormwater run-off generated from their properties.
Reflecting the sustainable service level for the stormwater program ($9.9M in 2007 dollars), an
estimated fee
for each tier is shown in Table 1. For the purposes of this report, the fee for each
tier is determined based on overall impervious area contribution determined in the 2008 Study.
That is, the water rate revenue distribution among the four (4) tiers matches the tiered SFU
revenue distribution identified in the Study.
Tax-exempt properties would be required to contribute to the municipality’s SWM Program. Tax
exempt properties include governmental parcels (e.g. municipal, regional, provincial, and federal
buildings) as well as institutional parcels (e.g. schools, hospitals, and churches) and other
charitable organizations that are registered with the Canada Revenue Agency and therefore
exempt from taxation under the Income Tax Act.
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Table 1 – Estimated Kitchener Stormwater Rate by Property Type with Increased
Service Level (tiered flat fee method)
133
Property Type Stormwater Stormwater Rate Stormwater Rate
2
Portion of Tax Bill$/month$/year
$/month
Single Family$5.46 $7.92 $95.04
$62.36 $113.63 $1,363.54
Multi-Family
Non-residential$65.75 $126.89 $1,522.69
Tax Exempt or Payment
$81.66 $979.90
in Lieu of Taxes $0.00
Notes
1. Rate revenue proportioned by parcel type to match Tiered SFU revenue distribution from 2008 Study.
2. Tax levy revenue based on 2007 tax information and is based on current service level of $5.8M
annually (2007 dollars).
3. Average impact (per water account per month) for a water rate stormwater charge and is based on
sustainable service level of $9.9M annually (2007 dollars).
This option offers efficient administrative costs and may remove many of the obstacles in
obtaining buy-in from the public. The rate charged would appear as a separate charge on the
monthly water bill for Kitchener Utilities customers and itemized as stormwater management
service. This rate structure has been adopted by several communities in Canada and it is
consistent with the approach that the City of Waterloo is adopting in 2011.
The Study recommends that a utility structure and user rate approach be implemented in order
to fully fund SWM programming within the City of Kitchener. It has demonstrated that an
equitable and defendable rate structure for stormwater is feasible. Staff are in agreement with
the Study recommendations also recognize that moving to this model represents a philosophical
shift in how stormwater is viewed by the community, as well as an economic impact to the tax-
exempt sector of the community.
Based on Council approval, staff would begin work on the stormwater utility implementation
program and would build on the detailed financial analysis completed in the Study. In May 2010,
Council would be presented with a rate structure to implement the ten (10) year operating and
capital forecast, and a rate implementation phase-in period to deliver a sustainable level of
service for stormwater management which will enable the City to better protect the environment.
FINANCIAL IMPLICATIONS:
Staff have recommended that a stormwater utility implementation program be funded during
2010, in order to further advance the concept of having all property owners contribute financially
into the SWM program. In the 2010 capital budget, staff have included funding of $80,000 to
initiate the stormwater utility implementation program and these would be utilized develop a
rationalized fee structure, implementation phasing and supporting policies.
CONCLUSION:
The purpose of the Stormwater Management Program and Funding Review Study has
demonstrated and concluded that an equitable and defendable rate structure for stormwater is
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feasible. Through the adoption and implementation of the stormwater rate, it is estimated that
there will be an average annual tax levy savings of $5.8M or equivalent to a one-time reduction
in the tax levy of 6.24%.
Staff are recommending that a service level be adopted that takes into consideration the
proposed remediation and upstream SWM works, identified in the Victoria Park Lake Class EA
Study Report, starting in 2011. The sustainable level of service of $9,910,590 (2007) would be
adopted by the City and the recommended rate structure would be based on this service level.
Staff would begin work on the stormwater utility implementation program — building on the
detailed financial analysis completed in the Study. In May 2010, Council would be presented
with a rate structure to implement the ten (10) year operating and capital forecast, and a rate
implementation phase-in period to deliver a sustainable level of service for stormwater
management which will enable the City to better protect the environment.
ACKNOWLEDGED BY:
Jeff Willmer, General Manager, Development and Technical Services
Appended Report - Stormwater Management Program and Funding Review (DTS Report
09-042)
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REPORT
Report To:
Development and Technical Services Committee
Date of Meeting:
October 5, 2009
Submitted By:
Grant Murphy, Director of Engineering Services
Prepared By: Grant Murphy, Director of Engineering Services
Ward(s) Involved:
All Wards
Date of Report:
September 25, 2009
Report No.:
DTS-09-042
Subject:
STORMWATER MANAGEMENT PROGRAM AND FUNDING
REVIEW
RECOMMENDATION:
That Council receive the findings of the Kitchener-Waterloo Stormwater Management
Program and Funding Review: Stormwater Funding Analysis, October 2008 for
information, and
That Council direct staff to report on this matter to Council on or before May 1, 2010
seeking further direction on the adoption of a specific stormwater rate approach at
that time, and
That Council direct staff to include the Stormwater Utility Implementation Project in
the 2010 capital budget for the amount of $80,000.
EXECUTIVE SUMMARY:
Stormwater management (SWM) systems represent valuable public assets that provide a
number of community benefits. By controlling floodwaters and preventing pollutants from
reaching our rivers, lakes, and coastlines, stormwater management systems protect the health
and safety of the public and the environment. These clean and healthy water resources support
public drinking water supplies and stimulate local investment through increased land values.
Furthermore, clean and healthy water resources support recreation, tourism, and basic
manufacturing activities that rely on clean water. The City of Kitchener has SWM assets valued
at approximately $300M. Nonetheless, the operation of stormwater management systems is a
service that keeps a low profile in the City and if not properly funded, can cause serious future
problems.
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In November 2004, Council directed staff to proceed with undertaking a Stormwater
Management Program and Funding Review Study (Study) collaboratively with the City of
Waterloo as part of the Shared Services Initiative. The Study purpose is to identify the City’s
current level of service, compare this to the legislated requirements and guidelines, develop a
suggested level of service, and to evaluate appropriate funding mechanisms to support these
needs.
In April, 2007 the interim findings of the Study were presented to Council (DTS Report 07-073);
which identified the City’s current level of service, as well as a sustainable level of service based
on Federal and Provincial legislative requirements and guidelines. The report acknowledged the
concern that a sustainable level of service was not being delivered with respect to SWM and
that the following objectives need to be addressed:
Provide a more proactive and preventative maintenance program;
Provide additional activities to meet provincial and federal water quality
requirements;
Manage assets in a more sustainable manner; and
Meet service level expectations of the public.
The 2007 Stormwater Management Program Budget was pegged at $5,820,910 (while the 5
year average between 2003-2007 is $4,495,037). The study also identified the sustainable level
of service as being $9,910,590 (2007). This means that currently the City only allocates enough
funds to meet 59% of the sustainable level of service to ensure that stormwater management
facilities are functioning to provide adequate flood control and acceptable levels of water quality
enhancement.
Successive studies, such as the 2008 SWM Audit (DTS Report 09-131), Upper Blair Creek
Functional Drainage Study (DTS Report 09-010), Victoria Lake Remediation Class
Environmental Assessment Study (DTS Report 09-096), and the Alder Creek Watershed Study
and Upper Strasburg Creek Subwatershed Plan Update (DTS Report 08-032), either make
recommendations about required infrastructure improvements or establish the need for the City
to put into place long-term preventive system maintenance and monitoring programs. As such
these future program needs will present additional challenges to the City in its attempts to
deliver a sustainable level of SWM service.
A primary purpose of the Study was to review options and identify a sustainable manner to fund
the SWM program needs. Further to this point, the Study considered if the current SWM
program can be modified to reflect the public service values of fairness and equity. The
consultant (AECOM Canada Ltd) and Study team reviewed approaches to fully fund SWM
programming within the City of Kitchener and the City of Waterloo, and the following funding
mechanisms were investigated:
Taxes;
Fees and special charges;
Special levies that have specific designations and limitations for usage;
Other means i.e. fines, debentures, grants, bonds, and loans
Combinations of the above
In October 2008, the final draft report of the Study was completed — recommending that a utility
structure and user rate approach be implemented in order to fully fund SWM programming
within the City of Kitchener. The Study has demonstrated that there are a number of public
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service values that can be brought into the system by introducing a stormwater rate structure,
such as:
1. A dedicated funding source to stormwater management, hence sustainability;
2. A rate based on the user’s amount of runoff contribution as opposed to property value;
3. A mechanism to charge tax-exempt properties for municipal stormwater management
services, resulting in an increased customer base which would then lower the rate of the
average household contribution;
4. A potential incentive for property owners to reduce stormwater runoff and pollutant
discharge.
The Study recommends that a “tiered single family unit (SFU)” rate structure be implemented.
This rate structure takes into consideration the amount of impervious area (i.e. surfaces
resistant to water penetration) that a citizen or business owns as opposed to the current method
of apportioning stormwater funding based on property assessment values for eligible taxpayers
(many properties are tax-exempt). The more impervious area an individual property owner has,
the greater the demand on the City’s SWM system, either for flood control or water quality
treatment purposes.
Staff are supportive of the Study recommendations to implement the “tiered single family unit”
rate based funding model. This form of user rate approach has been successfully applied in
hundreds of municipalities in the United States and in some jurisdictions in Canada, such as
Alberta. For an average residential property owner the annual SWM rate would be
approximately $79 or $6.50 a month. For non-residential property owners the amount would be
2
based on a base rate of $6.56 per 290 mof impervious area on their properties. The Study
sampled various non-residential and tax-exempt properties and these results are identified in
Table 6 of this report.
As part of the study a Stormwater Advisory Committee was formed consisting of various
stakeholders from across the Cities of Kitchener and Waterloo. Representation has included the
school boards and universities, the Chamber of Commerce, other business representation and
members of the public. Eight meetings over the last 4 years have been held with the SWAC, as
well as individual meetings with the various stakeholders to identify issues and concerns. A
Public Open House and research focus groups were also held for the general public to provide
comment and insight as well.
During the public consultation process, it was apparent that there were significant concerns from
the institutional, industrial and tax-exempt property owners related to implementation of the rate
structure, and the affects that it would have on their bottom-line. But it was also clearly noted
that there was significant support from the residential property owners for this rate approach.
Staff recognize that moving to this model represents a significant philosophical shift in how
stormwater is viewed by the community, as well as an economic impact to citizens, business
and industry and the current tax-exempt sector of the community. It is recommended that the
Study and report be received for information by Council and that staff be directed to report on
this matter to Council by May 2010 seeking further direction at that time.
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As such, staff are recommending that a stormwater utility implementation program be funded
during 2010 and 2011 in order to further advance the concept of having all property owners
contribute financially into the SWM program. The stormwater utility implementation program
would build on the detailed financial analysis completed in the Study to provide a rationalized
fee structure approach, an updated financial analysis, a draft of the enacting by-law, drafts of
the supporting rate and credit policies. These would be brought forward for Council’s
consideration and adoption in early 2011.
Further that staff be directed by Council to develop a budget issue paper as it relates to the
stormwater utility implementation program and that this be considered as part of the Council‘s
2010 budget deliberations with a decision being made on January 18, 2010.
BACKGROUND:
The City of Kitchener currently maintains approximately 690 km of storm sewer, 10,400
catchbasins, 73 ponds, 17 oil grit separators, and 95 km of watercourses (2007). The total asset
value of the Storm Drainage System is approximately $300,000,000. The City of Kitchener
current stormwater management (SWM) program consists of four general components—
operation and maintenance, environmental compliance, capital improvement projects, and
planning and management.
Many of the best management practices (BMPs) that have been constructed within the City (e.g.
storm ponds, oil/grit separators, etc.), are not only designed to prevent against flooding and
erosion, but improve water quality for aquatic and terrestrial habitat and downstream drinking
water recipients. All of the stormwater flow within the City of Kitchener is directed towards the
Grand River with the ultimate receiver being Lake Erie.
Stormwater-related works are subject to such legislation as the Ontario Water Resources Act,
Canadian Environmental Protection Act, the Federal Fisheries Act, and several guidelines
published through the Ministry of Environment and Ministry of Natural Resources. The Grand
River Conservation Authority (GRCA) also provides a significant role in the permitting and
approvals process as well as being a lead on the new Clean Water Act which will have
municipal effects as work related to this Act evolves.
Totten Sims Hubicki Associates (now known as AECOM Canada Ltd) was retained in June
2005 to conduct the study following a formal consultant selection process. This study was
prompted by a variety of SWM program needs, including:
Identification of deficiencies in the current levels of service and with respect to legislative
requirements, where new and more stringent regulatory requirements are continually being
introduced
Urbanization and intensification is exceeding the capacity of the existing system, not only
making profound changes on the area being developed but also causing significant impact
of the downstream natural surface water bodies (i.e. streams and creeks)
Aging infrastructure priorities taking precedence, resulting in an inability to fund current
SWM infrastructure needs (both construction and maintenance);
Rapidly evolving types of “state of the art” infrastructure requiring more frequent monitoring,
maintenance, and specialized staff knowledge;
Need to improve the existing level of service, and better plan, schedule, and proactively
manage respective SWM programs;
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Desire to consolidate and coordinate SWM activities and services that are currently spread
across multiple departments and budgets; and
Increasing environmental awareness and public expectation regarding the quality of
receiving wetlands and streams.
Sustainable Service Level for Stormwater Management
In May, 2007 City staff presented the interim findings of the study which identified the City’s
current level of service and identified a sustainable level of service based on Federal and
Provincial legislative requirements and guidelines (DTS Report 07-073). This component of the
study reviewed operations and maintenance frequencies compared to available guidelines — it
is evident that Kitchener is falling short on many of its practices. A review of the current City
practices and programs identified the following elements that require improvement:
Facility inventory, monitoring and maintenance
Sediment removal from SWM ponds and oil/grit separators
SWM asset management
Development of operation and maintenance programs, procedures and
schedules
Annual audit/cash-in-lieu implementation and follow-up
Table 1 shows a comparison between the current level of service and the sustainable level of
service required. The 2007 Stormwater Management Program Budget is pegged at $5,820,910
(while the 5 year average between 2003 and 2007 has only been $4,495,037). The study
identifies a sustainable level of service as being $9,910,590 (2007). This means that currently
the City only allocates enough funds to meet 59% of the sustainable level of service to ensure
that stormwater management facilities are functioning to provide adequate flood control and
acceptable levels of water quality enhancement.
Table 1 – SWM Program Expenditures Comparison of Current and Sustainable Level of
Service (LOS)
Activity2007 Level of Sustainable Level Funding% Current to
Serviceof Service DeficitSustainable Target
Operation and
$ 1,591,015 $ 2,523,615 $932,600 63%
Maintenance
Environmental
$ 90,000 $ 97,000 $7,000 93%
Compliance
Capital Improvement
$ 4,085,380 $ 6,862,869 $2,777,489 60%
Projects
Planning and
$ 54,515 $ 427,106 $372,591 13%
Management
SWM Program Total $ 5,820,910 $ 9,910,590 $4,089,68059%
Additionally, in 2008 and 2009, three significant studies were completed by City staff and
approved by Council:
The Upper Blair Creek Functional Drainage Study (UBCFDS) relating to the development
potential within the Doon South Community Plan – Phase 2 (DTS Report 09-010),
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The Victoria Lake Remediation Class Environmental Assessment Study, relating to the
dredging and reconfiguration of the lake and upstream water quality facilities (DTS Report
09-096),
The Alder Creek Watershed Study and Upper Strasburg Creek Subwatershed Plan Update,
relating to management strategies that will support the long-term preservation and
protection of the existing natural features within the study area, while permitting
development to proceed on lands where deemed appropriate (DTS Report 08-032).
The City has had a stormwater management policy since 2001, and part of its role is to provide
guidance and direction on protection of watercourses. The policy includes an annual SWM audit
which monitors water quality parameters in watercourses, evaluates the effectiveness of
stormwater ponds, and prioritizes maintenance activities to be conducted.
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On October 5, 2009, Council received the 2008 SWM audit (DTS Report 09-131) for their
consideration and adoption. The Audit identifies that more than $120M of stormwater pond
retrofits and watercourse capital works are necessary over the next 20 years in order to meet
water quality targets.
These studies have wide-ranging effects on water quality improvements of source water and the
local environment. Importantly, these studies either make recommendations about required
infrastructure improvements or establish the need for the City to put into place long-term
preventive system maintenance and monitoring programs. As such these programs will present
additional challenges to the City in its attempts to deliver a sustainable level of SWM service.
Funding Mechanisms
A primary purpose of the Study was to review options and identify a sustainable manner to fund
the SWM program needs. Further to this point, the Study considered if the funding of the current
SWM program can be modified to reflect the public service values of fairness and equity. In
other words, is there an advantage in adopting a different funding model for a SWM program
that involves charging property owners a rate based on how much they use the SWM system?
The consultant (AECOM Canada Ltd) and Study team reviewed approaches to fully fund SWM
programming within the City of Kitchener and the City of Waterloo, and the following funding
mechanisms were investigated:
Taxes;
Fees and special charges;
Special levies that have specific designations and limitations for usage;
Other means i.e. fines, debentures, grants, bonds, and loans
Combinations of the above
In October 2008, the final draft report of the Study was completed — recommending that a utility
structure and user rate approach be implemented in order to fully fund SWM programming
within the City of Kitchener. The executive summary of this Study is attached for Council’s
reference in Appendix A. The study findings have demonstrated that there are a number of
public service values that can be brought into the system by introducing a stormwater rate
structure, such as:
1. A dedicated funding source to stormwater management, hence sustainability;
2. A rate based on the user’s amount of runoff contribution as opposed to property value;
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3. A mechanism to charge tax-exempt properties for municipal stormwater management
services, resulting in an increased customer base which would then lower the rate of the
average household contribution;
4. A potential incentive for property owners to reduce stormwater runoff and pollutant
discharge.
The Study investigates various funding mechanisms that will support a sustainable level of
service and includes taxes, fees, and special charges or other means such as partnerships,
grants, etc. Property taxes are the primary source of funding for SWM programs in Ontario. At
least three municipalities (i.e., London, St. Thomas, and Aurora) have implemented a special
stormwater user fee that charges a flat rate to residential properties and an area-based charge
to commercial/industrial properties.
Other municipalities in Ontario are known to be evaluating various stormwater rate structures.
There are approximately a dozen municipalities in western Canada that have either adopted a
flat rate user fee or have implemented a stormwater rate based on zoning and intensity of
development. Over 600 stormwater rates based on measured impervious area, have been
implemented in communities throughout the United States.
The following four (4) options are presented for Council’s consideration and explained in more
detail – including the identification of strengths and weaknesses and potential costs to
ratepayers:
I. Stormwater Management User Rate
II. Dedicated Tax Levy for Stormwater Management
III. Stormwater Management Tiered Flat Fee
IV. Do Nothing – Maintaining the Status Quo Approach
Option 1 – Stormwater Management User Rate
A stormwater management user rate is calculated based on the contribution of stormwater
runoff from each property to the municipal drainage system (ditches, sewers) and end of pipe
infrastructure (i.e. ponds or creeks), as measured by the amount of impervious area contained
on each property.
The primary advantage of a user rate is that it is a more equitable funding mechanism than any
other funding source. Rates are assessed to each parcel of land based on usage of the
drainage system rather than on property value.
The secondary advantage associated with a stormwater rate is that all parcels (including tax-
exempt properties) can be assessed a user rate that reflects their relative stormwater run-off
contribution to the municipal SWM system. Table 1 provides a summary of the advantages and
disadvantages of the SWM user rate option.
The rate is typically applied on a monthly basis and would appear as a separate charge on the
monthly water bill for Kitchener Utilities customers, itemized as stormwater management
service. Revenues generated through the rate can be used for any SWM program related costs.
Tax-exempt properties would be required to contribute to the municipality’s Stormwater
Management Program. Tax exempt properties include governmental parcels (e.g. municipal,
regional, provincial, and federal buildings) as well as institutional parcels (e.g. schools,
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hospitals, and churches) and other charitable organizations that are registered with the Canada
Revenue Agency and therefore exempt from property taxation under the Income Tax Act.
Table 1: Summary of Advantages and Disadvantages of a Stormwater Management User Rate
Advantages Disadvantages
Dedicated funding source and therefore a Additional implementation costs (e.g.
stable funding source for all SWM program database management, billing, and customer
activities to allow long-range planning, large-service). However, this could be minimized
scale capital improvements, and leverage for through the use of other existing billing
debentures. systems such as water/sewer.
Fair and equitable rate that is based on runoff New rate may not be well received by the
contribution rather than property value. public.
Costs for municipal SWM services are There is no way to remove or discontinue
equitably distributed to all privately and publicly services for non-payment.
owned developed properties.
The service is provided to all properties
A credit program could induce incentive to without choice.
property owners to reduce stormwater runoff
The actual service rendered to each individual
and pollutant discharge.
property is often difficult to quantify.
Provides a mechanism to help ensure privately
owned SWM infrastructure is properly
maintained.
Option 2 – Dedicated Tax Levy for Stormwater Management
A dedicated tax levy can be administered specifically to raise revenue for stormwater services,
as a fixed property tax rate is applied and itemized on the property owner’s annual tax bill.
Unlike a stormwater rate based on impervious area, the dedicated tax levy has inherent
weaknesses in achieving the principles of fairness and equity. In addition, there are no financial
incentives for property owners to provide onsite controls to reduce stormwater and pollutant
loads to the municipal SWM system. However, this option is easier to implement as it offers
significantly lower administrative costs. Table 2 summarizes the advantages and disadvantages
of this option.
Table 2 - Summary of Advantages and Disadvantages of a Dedicated Tax Levy for Stormwater
Management
Advantages Disadvantages
Property-tax-based revenues are already Property taxes are based on a property’s
accepted as the primary existing source of assessed value, which may not equate to its
revenue for municipalities. runoff contribution, so the fairness and equity
of this revenue source is low.
Can be used to fund all SWM program
activities. Property owners have limited ability to reduce
their charge (i.e. no incentive to adopt source
The billing system is already established for
controls).
property taxes.
Tax-exempt properties contribute very little or
Maintains status quo for property owners
nothing to support the SWM program.
Maintains tax exemption and payment-in-lieu-
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of-taxes (PILOT) contributions for currently
Inequitable among parcels, since charge is
eligible properties.
based on property value not runoff.
Additional administration costs are negligible.
When revenue requirements change, it is
Maintains constant revenue stream for the difficult to equitably increase the charge
City’s SWM program. commensurate with runoff.
No additional database management system
required to implement the charge.
Option 3 – Stormwater Management Flat Fee
Staff also considered the option of a “flat fee” stormwater funding mechanism. This option was
not originally explored in the Study Terms of Reference and is presented for Council’s
consideration. The principle is that if a property owner was served by the local water utility
through a water meter, that the amount of stormwater service being charged would be based on
land parcel usage.
The “flat fee” stormwater funding mechanism would enable a shift from residential users to the
non-residential sector, where taxable non-residential properties would be paying their fair share
of stormwater services, due to the amount of stomrwater run-off generated from their properties.
Tax-exempt properties would be required to contribute to the municipality’s SWM Program. Tax
exempt properties include governmental parcels (e.g. municipal, regional, provincial, and federal
buildings) as well as institutional parcels (e.g. schools, hospitals, and churches) and other
charitable organizations that are registered with the Canada Revenue Agency and therefore
exempt from taxation under the Income Tax Act. Table 3 summarizes the advantages and
disadvantages of this option.
This option is easier to implement as it offers lower administrative costs and may remove many
of the obstacles in obtaining buy-in from the public. The rate charged would appear as a
separate charge on the monthly water bill for Kitchener Utilities customers and itemized as
stormwater management service. This approach has been adopted by several communities in
Canada, but this option has inherent weaknesses in achieving the principles of fairness and
equity.
Table 3 - Summary of Advantages and Disadvantages of a SWM Flat Fee
Advantages Disadvantages
Low administration cost (i.e. compared to an
Charge does not correlate with the runoff
impervious area based stormwater rate).
contribution from each property.
Maintains constant revenue stream for the
Inequitable among parcels since all customers
City’s SWM program.
are charged the flat fee equally (i.e. parcels
Minimal database management system
with the largest runoff contribution pay an
required to implement the charge.
identical charge to the smallest contributors).
Tax exempt properties would contribute,
Property owners have limited ability to reduce
reducing the overall burden on residential
their charge (i.e., no incentive to adopt source
property owners.
controls).
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Subject to legal challenges, since no rational
nexus exists between the service provided and
the allocation of charges.
Option 4 – Do Nothing – Maintaining the Status Quo Approach
The “do nothing” option maintains the status quo and makes no change to the funding
mechanism in order to increase the service levels associated with the SWM Program. More
revenue would ultimately need to be generated from the tax base in address long term SWM
program needs as it maintains the current property tax funding model. However, tax increases
in order to accommodate for a sustainable level of SWM programming would only amplify the
current inequity between different property classes.
Tax-exempt properties would continue not to contribute to the municipality’s Stormwater
Management Program. The Municipal Act authorizes a “heads and beds” charge to institutions
(e.g. hospitals, postsecondary schools, and correctional facilities), where payments of $75 per
person/year or per bed/year in lieu of taxes are made under this program.
Unlike a stormwater rate based on impervious area (option #1), there are no financial incentives
for property owners to provide onsite controls to reduce stormwater and pollutant loads to the
municipal SWM system. This option would not likely face opposition from various stakeholders
in the public, as nothing changes. Table 4 summarizes the advantages and disadvantages of
this option.
Table 4: Summary of Advantages and Disadvantages of Maintaining the Status Quo
Advantages Disadvantages
Property-tax-based revenues are already Property taxes are based on a property’s
accepted as the primary existing source of assessed value, which may not equate to its
revenue for municipalities. runoff contribution. Fairness and equity of this
revenue source is low.
Can be used to fund all SWM program
activities. There is no incentive for property owners to
reduce stormwater runoff and pollutant
The billing system is already established for
discharge.
property taxes.
Tax-exempt properties contribute very little or
nothing to support the Stormwater management
program.
It is not a dedicated funding source.
There is annual competition for general tax
funds to support other community services and
can therefore prove difficult to sustain the SWM
program.
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FINANCIAL IMPLICATIONS:
As mentioned previously the current SWM program budget (2007) is pegged at $5,820,910 with
a sustainable level of service of $9,910,590 (2007). Rate or tax levy calculations associated with
the various funding mechanism options utilize the current SWM program budget (2007), but the
Study does go into additional detail around what the calculations would look like relative to the
sustainable level of service of $9,910,590 (2007). A brief summary of this analysis is provided
below.
Financial Analysis of Option 1 - Stormwater Management User Rate Structure
The Study has demonstrated and concluded that the “tiered single family unit (SFU)” rate
structure is an equitable and defendable rate structure. The “tiered SFU” rate structure takes
into consideration the amount of impervious area (i.e. surfaces resistant to water penetration)
that a citizen or business owns as opposed to the current method of apportioning stormwater
funding based on property assessment values for eligible taxpayers (many properties are tax-
exempt). The more impervious area an individual property owner has, the greater the demand
on the SWM system, either for flood control or water quality treatment purposes.
Impervious areas include all surfaces that water cannot penetrate such as roofs, driveways,
parking lots and sidewalks. Water travelling over these surfaces is transported to the City’s
stormwater infrastructure system, moving more quickly and accumulating more pollutants than
from an equivalent, more natural area such as a lawn, garden, or green roof. If the water could
be slowed down it could absorb into the ground, and the pollutants could settle out before they
reach the City’s storm sewer system or watercourse.
The estimated rate structure was based on the total impervious areas of selected land parcels.
The analysis provided estimated rates however further precise measurements of individual
properties would be required at the time of implementation. The estimated values are adequate
for the purpose of evaluation and is based on the “tiered SFU” method. The estimated
stormwater rate is provided in Table 5.
In order to determine the estimated stormwater rate for different types of properties for the
purposes of the feasibility study, the following steps would be taken:
I. Parcel Analysis - determines the impervious characteristics of a sampling of properties
to determine the estimated number of billing units
II. Stormwater Billing Unit Analysis - uploads of the customer information database and
coding for rate structure
III. Sample Property Impacts - a sample of specific properties were analyzed to compare
financial impacts of a stormwater rate versus tax.
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Table 5 - Estimated Stormwater Rate by Property Type (tiered single family unit method)
1
Property TypeKitchener Stormwater Rate- Waterloo Stormwater Rate-
$/month$/month
2
Single Family small
$3.94$4.09
2
(<170 m impervious area)
2
Single Family medium$6.56$6.82
2
(170 - 340 m impervious area)
2
Single Family large
$8.53$8.87
2
(>340 m impervious area)
Duplex (per dwelling unit) $2.62$3.41
Townhouse (per dwelling unit) $4.59$2.05
Multi-Family 3-5 Units (per $2.62$3.41
dwelling unit)
Multi-Family >5 Units (per $1.31$1.36
dwelling unit)
2
Non-residential (per every 259 m$6.56$6.82
2
(2,788 ft) of impervious area)
Notes:
1. Residential property owners would be charged these rates on a per-dwelling unit basis. Non-residential
property owners would be charged by impervious area (rate times measured impervious area divided by
2
259 m).
2. The SFU method includes three tiers for single family detached homes:
2
Single Family (small): the smallest 10 percentile of impervious area (i.e., <170 m);
o
Single Family (medium): the middle 80 percentile of single family homes; and
o
2
).
Single Family (large): the largest 10 percentile of impervious area (i.e., >340 m
o
For the typical residential property owner (using $6.56 per month) this would equate to about
$79 annually. Additional analysis was performed on random sample properties to provide
examples of individual property monthly rate contribution. A summary of this analysis is
provided in Table 6.
There would be an implementation cost for the initial programming of GIS software applications
and other technological changes for grouping of account numbers and incorporating GIS
property information. There would also be ongoing administrative support (customer service)
and billing costs for the program that can be minimized by deploying existing staff and retooling
the existing water and gas utility billing format. There would be a one time implementation cost
to upload the tiered flat rate structure in the existing water meter billing data of $250,000.
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Table 6 - Comparison Showing Monthly Rate Charges versus Tax Charges for Selected
Properties
Item100% Tax 100% Rate
Total Stormwater Program
$5,820,000 $6,070,000
Expense
Program Expense paid by Tax Levy
$5,820,000 $0
Program Expense paid by
$0$6,070,000
Stormwater Rate
Stormwater Portion of Tax Levy
6.6%0.0
Stormwater Rate Charge
n/a$6.56
($/SFU/mo)
12
Sample Property / Monthly Charge TaxRateDifference %
Res’l Taxpayer (Single Family –
Small)$2.4 $3.9$1.563%
Res’l Taxpayer (SF Medium,
$150,000) $3.6 $6.6$3.083%
Res’l Taxpayer (SF – Medium,
$250,000)
$6.0$6.6$0.610%
Res’l Taxpayer (SF – Medium,
$350,000) $8.4$6.6 $(1.8) -21%
Res’l Taxpayer Single Family –
Large) $9.6$8.5 $(1.1) -11%
Res’l Taxpayer (Mulit-Family)$582.3$225.6 $(356.7) -61%
Tax Exempt (Church #1) $ - $86.6$86.6n/a
n/a
Tax Exempt (Church #2) $ - $350.2$350.2
n/a
Tax Exempt (Fire Station) $ - $48.5$48.5
n/a
Tax Exempt (elementary school) $ - $287.2$287.2
n/a
Tax Exempt (secondary school #1) $ - $985.6$985.6
n/a
Tax Exempt (secondary school #2) $ - $775.1$775.1
Non res’l Taxpaper (Commercial #1) $19.8$37.4$17.689%
Non res’l Taxpaper (Industrial #1) $730.6$851.4$120.817%
Non res’l Taxpaper (Industrial #2) $1,729.5 $6,240.6$4,511.1261%
Non res’l Taxpaper (Commercial #2) $723.3$46.6$(676.7) -94%
Non res’l Taxpaper (Commercial #3) $209.3$63.6$(145.7) -70%
Notes:
1. Current 100% tax funding scenario.
2. Scenario in which the entire SWM program is funded through a stormwater rate using the tiered SFU
method. These are base charges and do not include potential credits for on-site source controls.
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3. Monthly charges have been rounded to the nearest decimal place, stormwater program expenses
rounded to the nearest ten thousand dollars (a $250,000 rate admin charge has been added).
4. The tax charge is based on 2007 Assessed Values, 2007 Final Tax Rates, and the 2007 total Tax
Levy.
Financial Analysis of Option 2 - Dedicated Tax Levy for Stormwater Management
A dedicated tax levy would be a fixed property tax rate of 6.6% and itemized on the property
owner’s annual tax bill. The amount paid by the taxpayer would be based on the value of the
land. Tax-exempt properties would continue not to contribute to the municipality’s Stormwater
Management Program. The Municipal Act authorizes a “heads and beds” charge to institutions
(e.g. hospitals, postsecondary schools, and correctional facilities), where payments of $75 per
person/year or per bed/year are made in lieu of taxes under this program.
Financial Analysis of Option 3 - Stormwater Management Flat Fee
This option presents a “tiered flat fee” structure made up of four (4) tiers (single family, multi-
family, non-residential, and tax-exempt non-residential). The fee for each tier is determined
based on overall impervious area contribution determined in the 2008 Study. That is, the water
rate revenue distribution among the four (4) tiers matches the tiered SFU revenue distribution
identified in the 2008 Study.
Table 7 - Estimated Stormwater Rate by Property Type (tiered flat fee method)
122
Kitchener Stormwater RateWaterloo Stormwater Rate
Property Type
$/month$/month
Single Family4.646.86
Multi-Family66.5754.64
Non-residential74.3466.41
Tax Exempt + PILOT 47.8467.50
Notes
1. Rate revenue proportioned by parcel type to match Tiered SFU revenue distribution from 2008 Study.
2. Average impact (per water account per month) for a water rate stormwater charge
Table 8
compares the dedicated tax levy and tiered flat fee option for the City of Kitchener for
the revenue requirement scenario described above.
Table 8 - Tiered Flat Fee versus Dedicated Tax Levy Comparison
Table 4-10a City of Kitchener Annual Tax versus Water Rate Comparison (distributed by SFU proportion)
Water
Tax Levy Water Water RateRate vs.
26
ParcelRevenueRateRateRevenue Tax Average
345
Type Amount %AccountsChargeAmount%Annual $ %(account/mo)
-
Single Family $3,526,000 60.6%53,795 $4.64$2,993,000 51.0%$533,000 -15.1%-$0.8
Multi-Family $785,000 13.5%1,049$66.57 $838,000 14.3%$53,000 6.8%$4.2
Non-Residential $1,324,000 22.7%1,678$74.34 $1,497,000 25.5%$173,000 13.1%$8.6
Tax Exempt + PILOT $185,000 3.2%944$47.84 $542,000 9.2%$357,000 193.0% $31.5
Total $5,820,000 100.0% 57,466 $5,870,000 100.0% $50,000 0.9% $0.07
$8.51
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Notes
1. All dollars have been rounded to the nearest thousand.
2. Tax levy revenue based on 2007 tax information.
3. Water rate accounts by parcel type are based on actual current water customers for each parcel type.
4. Base charge per water meter per month and assuming 100% collection rate.
5. Rate revenue proportioned by parcel type to match Tiered SFU revenue distribution from 2008 Study.
6. Average impact (per water account per month) for a water rate stormwater charge compared to tax levy
funding.
Financial Analysis of Option 4 - Do Nothing – Maintaining the Status Quo Approach
The current situation would be retained, variable tax rates would be applied to tax classes and
the SWM program would be funded from the general tax levy fund. A move towards a
sustainable level of service for the stormwater program would equate to a $4.1M annual
increase to the general tax levy fund and would account for an increase of about 4% from
current levels.
Legal Analysis
If a rate or a dedicated tax levy approach is implemented there needs to be a by-law enacted in order
to charge special rates or taxes and then allocate these to the stormwater management program.
Under the authority of the Municipal Act (2001) the City has authority to pass a “Fees and Charges”
By-law for the purpose of funding stormwater management. As such, tax exempt property owners
would be required to pay the stormwater management fee. Additionally staff have retained external
legal counsel to seek advice on this matter and their opinion supports the user rate option
recommended in the Study.
COMMUNICATIONS:
In November 2004, Council approved Engineering staff to proceed with undertaking a Storm
Drainage Utility Feasibility Study collaboratively with the City of Waterloo as part of the Shared
Services Initiative. Totten Sims Hubicki Associates was retained in June 2005 to conduct the
study following a formal consultant selection process. This is a Citywide study, is being
conducted jointly with the City of Waterloo, and the costs for the project to date have been
shared equally by both Kitchener and Waterloo.
As part of the study a Stormwater Advisory Committee (SWAC) was formed consisting of
various stakeholders from across the Cities of Kitchener and Waterloo. Representation has
included the school boards and universities, the Chamber of Commerce, other business
representation and members of the public. Eight meetings over the last 4 years have been held
with the SWAC, as well as individual meetings with the various stakeholders to identify issues
and concerns. A Public Open House and research focus groups were held for the general public
to provide comment and insight as well. As a result of the input received, the study name was
changed from the Stormwater Utility Feasibility Study to the Stormwater Management Program
and Funding Review study.
The project team circulated the Draft Final Report to the SWAC members on October 22, 2008
th
for their review and comments. At the December 4, 2008 SWAC meeting, these comments
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were addressed, the Final Study Report was presented, and the consultation process formally
concluded.
In written submissions by members of the Stormwater Advisory Committee (SWAC), specifically
the Region of Waterloo, Waterloo Catholic District School Board and University of Waterloo are
not in favour stormwater rate funding model option. Their preferred option is to maintain the tax-
based status quo, of which they are currently exempted or make payments in lieu of taxes to the
City. Representation from the GRCA and the community at large members preferred the user
rate model (refer to Appendix B and C).
The City’s Communications Division is committed to developing a full communications plan to
ensure public education and awareness about any future decisions of Council that would affect
the funding of the City’s SWM program.
CONCLUSION:
The purpose of the Stormwater Management Program and Funding Review Study is to identify
the deficiencies within the Stormwater Management Program, develop a suggested level of
service with respect to stormwater, and explore and recommend a preferred funding mechanism
to fund the suggested program.
The Study has demonstrated and concluded that an equitable and defendable rate structure for
stormwater is feasible and identifies the “tiered single family unit” method as preferred approach
to establish a SWM rate structure. Staff are in agreement with the Study recommendations also
recognize that moving to this model represents a philosophical shift in how stormwater is viewed
by the community, as well as an economic impact to the tax-exempt sector of the community. It
is recommended that the Study and report be received for information by Council and that staff
be directed to report on this matter to Council by May 2010 seeking further direction at that time.
Staff are also recommending that a stormwater utility implementation program be funded during
2010 and 2011 in order to further advance the concept of having all property owners contribute
financially into the SWM program. The stormwater utility implementation program would provide
to Council for their consideration and approval; a rationalized fee structure approach, an
updated financial analysis, a draft of the enacting by-law, drafts of the supporting rate and credit
policies.
Further that staff be directed by Council to develop a budget issue paper as it relates to the
stormwater utility implementation program and that this be considered as part of the Council‘s
2010 budget deliberations with a decision being made on January 18, 2010.
ACKNOWLEDGED BY: Jeff Willmer
General Manager, Development and Technical Services
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