Council Report: Fees and Charges Bylaw Amendment – Sewer User Fees

TOWN OF VIEW ROYAL COUNCIL REPORT

TO: Council DATE: August 30, 2024 FROM: D. Christenson, Director of Finance and Technology MEETING DATE: September 24, 2024

FEES AND CHARGES BYLAW AMENDMENT – SEWER USER FEES

RECOMMENDATION:

THAT the report dated August 30, 2024, from the Director of Finance and Technology titled “Fees and Charges Bylaw Amendment – Sewer User Fees” be received.

ALTERNATIVE OPTIONS:

Council may choose to keep sewer rates at 2023 levels or increase or decrease the rates by an amount other than the amount recommended. Doing so will result in a deficit or surplus to the extent that sewer user fee revenue is sufficient to recover the costs of operating and maintaining both View Royal’s and the allocated share of CRD’s sanitary sewer systems. Any deficit or surplus in sewer revenue is funded or retained by the Sanitary Sewer Fund.

PURPOSE:

To consider an amendment to Fees and Charges Bylaw No. 958, 2016 to authorize the collection of sewer user fees to recover the estimated costs to operate and maintain the sanitary sewer service to connected View Royal constituents.

BACKGROUND:

Per Community Charter Section 194, Council may, by bylaw, impose a fee payable in respect of a municipal service. The municipality must make available to the public, on request, a report respecting how a fee imposed under this section was determined.

The 2024-2028 Financial Plan established sewer user fee revenue targets based on 2024 estimated costs for operating and maintaining View Royal’s and the Capital Regional District’s (CRD’s) sanitary sewer systems, net of other revenue or cost recoveries. Projected allocated costs for the CRD component are $1,556,900, based on the 2024 invoiced amount, as anticipated in the budget, and represent 62% (2023 – 61%) of the total projected service operating costs. View Royal’s sewer system costs at $936,296 are also projected to be as originally estimated and comprise 38% (2023 – 39%) of the total.

A total of $2,493,196 is required from sewer user fees to recover the costs of both View Royal’s and CRD’s sanitary sewer systems. In 2020, View Royal established a sewer user fee structure based on both water consumption (year-round consumption for institutional users and annualized winter consumption for non-residential and residential users) and a three-tier progressive rate structure for institutional and non-residential users (see Sanitary Sewer Rates and Regulations Bylaw No. 397, 2000).

ANALYSIS:

The total billable water consumption for the 2024 billing cycle has decreased nearly 5% year over year, from 1,030,772 m³ in 2023 to an estimated 980,377 m³ in 2024. All user classes consumed less water in 2024, with the residential and non-residential classes experiencing the greatest decrease (5%), while the institutional class decreased by 2%.

Bylaw 1148, (Attachment 1 – Fees and Charges Bylaw No. 958, 2016, Amendment Bylaw No. 1148, 2024) if adopted, would increase the sewer user fees total volumetric rate by 12% to recover projected sewer system costs for 2024. The rate increase is required in part to compensate for the 5% reduction in total consumption, as well as fund the increase in estimated sewer costs over 2023 (6.6%). This increase was required primarily to incorporate recommendations from the Asset Management Strategy to gradually increase funding for reserves that support future sewer system asset replacements.

The recommended amendment does not change the $100 total minimum fee, however the split between View Royal’s and CRD’s component shifted by $1 – View Royal’s component decreased from $39 to $38 and CRD’s component increased from $61 to $62, based on the component cost percentage. A similar effect is seen in the volumetric component rates. Sewer user rates proposed in Bylaw 1148, with the prior year rates for comparison, are shown in Attachment 2 – Sewer User Rates Year-Over-Year Comparison.

Projected revenue from each user class, based on the proposed rates, is shown below. Non-residential and institutional user classes contribute a slightly higher proportionate share of the total revenue due to the progressive tiered rate structure.

The projected revenue total of $2,516,892 provides an allowance (about $23,700) for potential reductions for leak adjustments that property owners may apply for after receiving their sewer utility invoice (see Policy #1600-016 Sewer User Fee Adjustments due to Water Leaks). Leak adjustments can vary significantly from year to year and have averaged about $15,000 annually in recent history. Any revenue shortfall due to leak adjustments would be funded by the Sanitary Sewer Fund accumulated surplus, and any revenue excess would contribute to the accumulated surplus, with no impact on property taxes.

No changes to the sewer user rate structure as established in 2020 and consolidated in Sanitary Sewer Rates and Regulations Bylaw No. 397, 2000 are proposed at this time.

Property owners can access their sewer utility account information online, such as viewing water consumption and yearly variances, and may opt to receive their invoice via email. The fall newsletter, website and social media messaging will advise property owners to watch for their sewer utility invoice, how to pay their invoice and how to access their account information online. Messaging will also include information about how their invoice is calculated and how consumption affects the amount they pay.

Impacts and implications can be summarized as follows:

ALIGNMENT:

The recommended option aligns with the Town’s following core guiding documents as follows:

Strategic Plan: Financial Sustainability and Service Excellence: Financial sustainability is supported when recurring operating costs are recovered through recurring and predictable revenue sources, such as user fees, over which Council has a measure of control. View Royal’s sanitary sewer service operating costs are funded almost entirely by user fee revenue, and therefore are sustainable to the extent that user fees don’t exceed the consumer’s ability to pay.