Study Objectives 1. Rate Structure Review 2. Rate Setting and - - PDF document

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Study Objectives 1. Rate Structure Review 2. Rate Setting and - - PDF document

Mar 23, 2024 328 likes •533 views

L oyalist T ownship Wate r & Se we r Rate s Study Public Infor mation Se ssion Monday, Se pte mbe r 23, 2019 Study Objectives 1. Rate Structure Review 2. Rate Setting and Financial Analysis 3. Rate Results and Impact Per User

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SLIDE 1

L

  • yalist T
  • wnship

Wate r & Se we r Rate s Study Public Infor mation Se ssion Monday, Se pte mbe r 23, 2019

Study Objectives

  • 1. Rate Structure Review
  • 2. Rate Setting and Financial Analysis
  • 3. Rate Results and Impact Per User – Status Quo

Rate Structure

  • 4. Rate Results and Impact Per User – 40:60 Rate

Structure (transition)

1

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SLIDE 2

BACKGROUND INF ORMAT ION

2

Background Information

  • Since 2014, Township has increased water and sewer rates

generally in accordance with the rates outlined in the 2014 Rate Study

  • Rates were calculated to ensure the Township generates

sufficient revenues to fund costs

  • The 2014 Study calculated water and sewer rates for a 10-

year period (to 2024) with a view to update the study in 3 to 5 years.

– Given the 5-year timeframe is near complete, the Township initiated this update rate study

3

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SLIDE 3

Summary of Water and Sewer Infrastructure

  • Financial statements

indicate historical value

  • f assets to be about

$71.3 million

  • Actual replacement

value estimated over $243 million

– Water: $144.4 million – Sewer: $99.2 million

  • Township has a done a

good job of maintaining assets in state of good repair and saving for future replacement

4

Ve r y Poor , $6.7 M, 3% Poor , $1.4 M, 0% F air , $16.5 M, 7% Good, $25.1 M, 10% Ve ry Good, $193.9 M, 80%

Water and Sewer Infrastructure Total = $243.6 Million

2019 Bimonthly Water and Sewer Rates:

  • 1. Water Fixed Charge

Description Rate (bimonthly)

Flat charge per ERU $68.08

5

  • 2. Water Consumption Charge

Description Rate (per m3)

All consumption – constant rate $1.71

*Fixed Cost Recovery: 60% Variable Cost Recovery: 40% *Fixed Cost Recovery: 60% Variable Cost Recovery: 40%

  • 1. Sewer Fixed Charge

Description Rate (bimonthly)

Flat charge per ERU $60.44

  • 2. Sewer Consumption Charge

Description Rate (per m3)

All consumption – constant rate $1.51

*I de ntifie d c o st re c o ve ry targ e t

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SLIDE 4

Total Bimonthly Charge for a Range of Household Users (in 2019):

6

  • Total charge

dependent on the amount of water consumed

  • Residents have

control over their total bill

  • Existing structure

encourages conservation

Hig h Use r: 117m3 pe r 2 mo nths Me d-Hig h Use r: 50m3 pe r 2 mo nths T ypic al Use r: 27m3 pe r 2 mo nths L

  • w Use r: 13m3 pe r 2 mo nths

$- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 Low User Typical User Med-High User High User

Total Charge for Water and Sewer Services

Benchmarking Analysis: Cost per Typical Household (162 m3)

7

$- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 T

  • tal Char

ge (wate r & se we r ) pe r annum

No te *: Rate applie s to all c o mmunitie s in the Distric t o f Musko ka All rate s illustrate d I nc lude bo th wate r and se we r se rvic e s

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SLIDE 5

RAT E ST RUCT URE RE VIE W

8

Rate Structure Review

  • Hemson and Township staff have examined a

variety of rate structures

  • Intention is to examine the current rate structure

and provide options that reflect changing consumption patterns and demographic trends

  • Ensure fiscal stability and sustainability from a

service delivery standpoint

9

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SLIDE 6

Benchmarking Analysis: Rate Structure Review

10

  • Survey of 45

municipalities in Ontario that range in population from 15,000 to 25,000 people were considered (plus direct neighbours)

  • About 60% of

communities (including Loyalist) employ a constant rate structure for consumption based component

  • Inclining and

declining block structures are also common

5 10 15 20 25 30 Constant Rate Inclining Block Rate Declining Block rate Humpback Rate Flat Rate

# of municipalities Axis Title

Residential Rate Structure Comparison: Volumetric Rates

Rate Structure Review: Key Township Objectives

  • The rate structure should consider the

following factors:

– Cost recovery; – Equity; – Conservation; – Administration; – Transparency and efficiency; and – Economic Development

11

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SLIDE 7

Rate Structures Considered Under This Study

12

Rate Structure Alternatives General Impact and assessment

Scenario 1. Adjust the Fixed vs. Variable Rate Cost Recovery to 40:60 in 2020 Bill would be reduced for low volume water users. Typical households would pay marginally more relative to status quo scenario (60:40 Structure) The burden would largely be shifted to water users above the typical

  • household. Non‐residential users would also see higher rate increases.

Scenario 2. Adjust the Fixed vs. Variable Rate Cost Recovery to 40:60 over the planning period Bill would be reduced for low volume water users but the impact would be captured over a longer horizon relative to scenario 1 (40:60 Structure). Impact on a typical household would be moderated in early years relate to Scenario 1 (40:60 Structure) The burden would largely be shifted to water users above the typical

  • household. Non‐residential users would also see higher rate increases.

Scenario 3. Minimum Bill (includes 20m3 every 2 months) Each cubic meter charged above the minimum would be equal to the minimum bill $/m3 Bill would be reduced for low and typical volume water users relative to status quo (60:40 Structure) The burden would be shifted to water users above the typical

  • household. High volume non‐residential users would see higher rate

increases.

RAT E SE T T ING AND F INANCIAL ANAL YSIS

13

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SLIDE 8

14

Rate Setting Approach

WATER CONSUMPTION & WASTEWATER GENERATION FORECAST POPULATION & EMPLOYMENT GROWTH FORECAST WASTEWATER RATES WATER AND WASTEWATER FLOW FORECAST EXPENDITURES NON-USER RATE REVENUES OPERATING FORECAST DEV CHARGES/ GRANTS / DEV CONTRIBUTION REPAIR & REPLACEMENT OF EXISTING ASSETS CAPITAL ASSET LIFECYCLE PROVISION TO RESERVES FOR FUTURE REPAIR & REPLACEMENT OF EXISTING ASSETS CAPITAL FORECAST (Growth and Non-Growth) NON-USER RATE REVENUES (Penalties, connection fees etc) NET FUNDING REQUIREMENT WATER CONSUMPTION/ WASTEWATER GENERATION & USER PROFILE WATER RATES

Rate Setting Approach

15

  • Rates calculated based on the following:

1. Full recovery of operating costs

― Based on the Township’s 2019 budget ― Costs have been adjusted to account for inflation

2. Full recovery of annual capital needs

― In-year capital requirements identified by the 10-year capital plan and discussions with staff ― Financing costs required to carry out the capital plan have been included (where applicable) ― Only non-growth related costs have been included

3. Provision for future asset replacement

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SLIDE 9

How much Revenue Needs to be Collected from Water & Sewer Rates?

16

No te : T he ne t rate funding re quire me nt re pre se nts the amo unt o f funds that must be funde d thro ug h the wate r & se we r rate s $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Net Rate Funding Requirement (Water) Net Rate Funding Requirement (Sewer)

Allocation of Water and Sewer Expenditures – 2019 Budget

17

No te : Othe r e xpe nse s inc lude : c o ntrac te d se rvic e s, insuranc e and utility c o sts

Ope r ating Cost: Salar ie s & Wage s 20% Ope r ating Cost: Inte r nal Alloc ations 10% Ope r ating Cost: Mate r ials, Supplie s & E xpe nse s 25% Ope r ating Costs: Othe r E xpe nse s 6% Non-Gr

  • wth Capital

22% Annual De bt Payme nts 13% Ne t T r ansfe r s to Re se r ve 4%

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SLIDE 10
  • 200,000

400,000 600,000 800,000 1,000,000 1,200,000 1,400,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Water Sewer

Projected Consumption

18

No te 1: F

  • r the purpo se s o f se tting a utility rate , o nly the wate r that is distribute d to the e nd-use r is use d to de te rmine the

rate . T his is re fe rre d to as “billable ” wate r. No te 2: S e we r g e ne ratio n is base d o n wate r c o nsumptio n bille d by se we r use rs c o nne c te d to the wate r syste m.

  • Consumption is

anticipated to remain constant despite new units coming online

  • ver the period
  • Analysis assumes

declining consumption per capita

  • Non-billed water is

excluded from forecast

  • About 850 new

equivalent connections

  • ver the planning

periods

RAT E RE SUL T S AND IMPACT PE R USE R – ST AT US QUO RAT E ST RUCT URE (60:40)

19

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SLIDE 11

Rates Required to fund the 10-year Program (Status Quo)

Wate r & Se we r :

  • Fixed & Variable Rates:

– 6% annual increase from 2020 to 2023 – 4% annual increase from 2024 to 2025 – 3% annual increase from 2026 to 2029

  • An adjustment to the way the Township bills multi-

unit customers is assumed for 2020.

– Transition to “Actual ERUs”

20

Status Quo: 60:40 Structure

21 2019 2020 2021 2022 2023 2024 Fixed Charge Bimonthly – Water $68.08 $72.16 $76.48 $81.06 $85.92 $89.36 % Chang e 6.0% 6.0% 6.0% 6.0% 4.0% Fixed Charge Bimonthly– Sewer $60.44 $64.06 $67.90 $71.98 $76.30 $79.36 % Chang e 6.0% 6.0% 6.0% 6.0% 4.0% Charge per Cubic Meter – Water $1.710 $1.813 $1.922 $2.037 $2.159 $2.245 % Chang e 6.0% 6.0% 6.0% 6.0% 4.0% Charge per Cubic Meter – Sewer $1.510 $1.601 $1.697 $1.799 $1.907 $1.983 % Chang e 6.0% 6.0% 6.0% 6.0% 4.0% Bimonthly Char ge pe r T ypic al Use r (27m 3) 2019 2020 2021 2022 2023 2024 Bimonthly Charge – Water $114 $121 $128 $136 $144 $150 Bimonthly Charge – Sewer $101 $107 $114 $121 $128 $133

T

  • tal Bimonthly Char

ge $215 $228 $242 $257 $272 $283

$ Chang e $13 $14 $15 $15 $11 % Chang e 6.0% 6.0% 6.0% 6.0% 4.0%

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SLIDE 12

$215 $228 $242 $257 $272 $283 $- $50 $100 $150 $200 $250 $300 $350 2019 (Current) 2020 2021 2022 2023 2024 Water Sewer

22

T

  • tal Charg e s illustrate d are bimo nthly

No te 1: T ypic al Ho use ho ld c o nsuming 27m3 pe r 2 mo nths.

6.0% or $14

Status Quo: Typical Household Charge (1)

6.0% or $15 6.0% or $15 4.0% or $11 6.0% or $13 $- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 High User Med-High User Typical User Low User 2019 (Current) 2020 (Calculated)

Calculated Utility Rates (Water & Sewer) Range of Residential Users (Status Quo)

23

T

  • tal Charg e s illustrate d are bimo nthly

Hig h Use r: 117m3 pe r 2 mo nths Me d-Hig h Use r: 50m3 pe r 2 mo nths T ypic al Use r: 27m3 pe r 2 mo nths L

  • w Use r: 13m3 pe r 2 mo nths

$30/2 months OR 6.0% $17/2 months OR 6.0% $13/2 months OR 6.0% $10/2 months OR 6.0%

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SLIDE 13

$- $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 $14,000.00 $16,000.00 $18,000.00 Property 1 Property 2 Property 3 Property 4 2019 (Current) 2020 (Calculated)

Calculated Utility Rates (Water & Sewer) Range of Apartment Users (Status Quo)

24

T

  • tal Charg e s illustrate d are bimo nthly

Pro pe rty 1: 1,908m3 pe r 2 mo nths – 71 E RUs (2019) – 60 E RUs (2020) Pro pe rty 2: 1,148m3 pe r 2 mo nths – 35 E RUs (2019) – 46 E RUs (2020) Pro pe rty 3: 300m3 pe r 2 mo nths – 24 E RUs (2019) – 12 E RUs (2020) Pro pe rty 4: 347m3 pe r 2 mo nths – 15 E RUs (2019) – 13 E RUs (2020)

$582/2 months OR 3.8% $1,991/2 months OR 24.3% $1,392/2 months OR 34.4% $90/2 months OR 2.9%

NOT E : 2019 E RUs are units bille d 2020 E RUs re pre se nt ac tual E RUs base d o n an ave rag e

$- $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 $3,500.00 Property 1 Property 2 Property 3 Property 4 2019 (Current) 2020 (Calculated)

Calculated Utility Rates (Water & Sewer) Range of Commercial Users (Status Quo)

25

T

  • tal Charg e s illustrate d are bimo nthly

Pro pe rty 1: 377m3 pe r 2 mo nths – 15 E RUs Pro pe rty 2: 107m3 pe r 2 mo nths – 4 E RUs Pro pe rty 3: 96m3 pe r 2 mo nths – 4 E RUs Pro pe rty 4: 5m3 pe r 2 mo nths – 1 E RU

$189/2 months OR 6.0% $52/2 months OR 6.0% $49/2 months OR 6.0% $9/2 months OR 6.0%

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SLIDE 14

PRE F E RRE D SCE NARIO T O 40:60 GRADUAL L Y

26

Preferred Scenario: 60:40 to 40:60 (Gradual)

27 2019 2020 2021 2022 2023 2024 Fixed Charge Bimonthly – Water $68.08 $57.00 $57.00 $57.00 $57.00 $58.71 % Chang e

  • 16.3%

0.0% 0.0% 0.0% 3.0% Fixed Charge Bimonthly– Sewer $60.44 $51.00 $51.00 $51.00 $51.00 $52.54 % Chang e

  • 15.6%

0.0% 0.0% 0.0% 3.0% Charge per Cubic Meter – Water $1.710 $2.520 $2.772 $3.049 $3.354 $3.622 % Chang e 47.4% 10.0% 10.0% 10.0% 8.0% Charge per Cubic Meter – Sewer $1.510 $2.050 $2.337 $2.617 $2.853 $3.081 % Chang e 35.8% 14.0% 12.0% 9.0% 8.0% Bimonthly Char ge pe r T ypic al Use r (27m 3) 2019 2020 2021 2022 2023 2024 Bimonthly Charge – Water $114 $125 $132 $139 $148 $157 Bimonthly Charge – Sewer $101 $106 $114 $122 $128 $136

T

  • tal Bimonthly Char

ge $215 $231 $246 $261 $276 $292

$ Chang e $16 $15 $15 $15 $17 % Chang e 7.4% 6.3% 6.1% 5.6% 6.0%

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SLIDE 15

$- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 High User Med-High User Typical User Low User 2019 (Current) 2020 (Calculated)

Calculated Utility Rates (Water & Sewer) Range of Residential Users (Preferred)

28

T

  • tal Charg e s illustrate d are bimo nthly

Hig h Use r: 117m3 pe r 2 mo nths Me d-Hig h Use r: 50m3 pe r 2 mo nths T ypic al Use r: 27m3 pe r 2 mo nths L

  • w Use r: 13m3 pe r 2 mo nths

$137/2 months OR 27% $47/2 months OR 16% $16/2 months OR 7% $3/2 months OR 1%

Customer Profiles: Quantifying the # of accounts in each category

29

L

  • w Use r

s (13m3 or le ss Bimonthly) 29% Me dium (Be twe e n 13 and 27m3 Bimonthly), 39% High (Mor e than 27m3 Bimonthly) 32%

  • About 70% of

accounts consume 162m3 per year or less

  • About 30% of

customers will see a decrease in their total bill (from 2019)

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SLIDE 16

$- $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 $14,000.00 $16,000.00 $18,000.00 Property 1 Property 2 Property 3 Property 4 2019 (Current) 2020 (Calculated)

Calculated Utility Rates (Water & Sewer) Range of Apartment Users (Preferred)

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$70/2 months OR 0.5% $2,020/2 months OR 25% $56/2 months OR 2%

T

  • tal Charg e s illustrate d are bimo nthly

Pro pe rty 1: 1,908m3 pe r 2 mo nths – 71 E RUs (2019) – 60 E RUs (2020) Pro pe rty 2: 1,148m3 pe r 2 mo nths – 35 E RUs (2019) – 46 E RUs (2020) Pro pe rty 3: 300m3 pe r 2 mo nths – 24 E RUs (2019) – 12 E RUs (2020) Pro pe rty 4: 347m3 pe r 2 mo nths – 15 E RUs (2019) – 13 E RUs (2020)

$1,383/2 months OR 34%

$- $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 $3,500.00 $4,000.00 Property 1 Property 2 Property 3 Property 4 2019 (Current) 2020 (Calculated)

Calculated Utility Rates (Water & Sewer) Range of Commercial Users (Preferred)

31

T

  • tal Charg e s illustrate d are bimo nthly

Pro pe rty 1: 377m3 pe r 2 mo nths – 15 E RUs Pro pe rty 2: 107m3 pe r 2 mo nths – 4 E RUs Pro pe rty 3: 96m3 pe r 2 mo nths – 4 E RUs Pro pe rty 4: 5m3 pe r 2 mo nths – 1 E RUs

$201/2 months OR 6% $62/2 months OR 7% $48/2 months OR 6% $14/2 months OR 10%

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SLIDE 17

Summary of Key Outcomes and Concluding Comments

  • Any rate structure adjustment will lead to

changes in customers total bills – the total revenue requirement remains c onstant in all scenarios

  • Calculated rates continue to provide Township

with sufficient revenue to fund costs

  • This study should be reviewed every 3-5 years

(or earlier depending on the rate of growth, significant cost adjustments or changes to the pattern of consumption)

32

SUPPL E ME NT ARY SL IDE S

33

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SLIDE 18

How much Revenue Needs to be Collected from Water Rates?

34

$(6,000,000) $(4,000,000) $(2,000,000) $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $(6,000,000) $(4,000,000) $(2,000,000) $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Operating* Non-Growth Capital Contribution to Reserve Non-User Rate Revenue Debt Financing Received Transfer from Reserve (for capital) Net Rate Funding Requirement

How much Revenue Needs to be Collected from Sewer Rates?

35

$(3,000,000) $(2,000,000) $(1,000,000) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $(3,000,000) $(2,000,000) $(1,000,000) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Operating Non-Growth Capital Contribution to Reserve Non-User Rate Revenue Debt Financing Received Net Rate Funding Requirement

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SLIDE 19

Status of Reserve Funds: Short-term Snapshot

36

Service 2018 Year‐End Balance 2024 Year‐End Projected Balance Relationship to Replacement Value* Water $2.30 M $3.18 M 1.9% (of $168.1 M) Sewer $.3.21 M $6.97 M 6.3% (of $109.7 M) Total Combined $5.51 M $10.15 M 3.7% (of $277.8 M)

  • Summary of reserve funds in the short-term:
  • Wate r: reserves are projected to increase, although, the

projected balance is less than 2% of the total water system replacement value in 5-years.

  • Se we r

: reserves are projected to increase and the

projected balance is about 6% of the total sewer system replacement value in 5-years.

*T he c urre nt re plac e me nt value o f wate r and se we r infrastruc ture has be e n pro vide d by the T

  • wnship o f L
  • yalist and inflate d to 2024$ fo r

c o mpariso n purpo se s.

Average Cost per Actual ERU by Multi-Unit Property

37

$- $500 $1,000 $1,500 $2,000 $2,500 Property 1 Property 2 Property 3 Property 4 Property 5 Property 6 Property 7 Property 8 Property 9 Property 10 Property 11 Property 12 Property 13 Property 14 Property 15 Property 16 Property 17 Property 18 Property 19 Property 20 Property 21 Property 22 Property 23 Property 24 Property 25 Property 26 Property 27 Property 28 Property 29 Property 30 Property 31 Property 32 Property 33 Property 34 Property 35 Property 36 Property 37 Property 38 Property 39 Property 40 Property 41 Property 42

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