2014 Water and Sewer Rates
PURPOSE:
This report is prepared in order to obtain approval for the 2014 water and sewer rates.
The City of Timmins is required by law, to address all aspects of sustainability with respect to its water and sewer infrastructure.
For most communities across Ontario, financial sustainability is achieved by establishing the appropriate water and sewer rates to the local users.
EXPLANATION: For 2014, we recommend that an increase of $45 be considered on the sewer rate and $ 5 on the water rate.
WATER ACCOUNT Under this option, we project the water account to achieve a debt free position by 2020. It is important to note that no major water capital projects have been undertaken in the last two years and as a result, our debt position in the water account has improved significantly. The municipal water debt in 2008 approached $ 10 million and is expected to be approach $2 million by the end of 2013.
SEWER ACCOUNT With regards to sewer account, the debt will continue to grow over the next 5 years and a debt free position is forecasted by the end of 2034. The debt free position for the sewer account will be highly dependent on the final cost of the Mattagami Water Pollution Plant Upgrade and the Whitney-Tisdale Lift Station upgrades.
The selected option that has been approved over the last three years has been to have an annual increase of $50 for a 5 unit residential home. As proposed, a 5 unit residential home will see its 2014 water/sewer invoice go from $904.62 to $954.62. Smaller homes will see a smaller increase and larger homes will experience a larger increase. It is important to note that in comparison to other Ontario municipalities, Timmins ranks in the second quartile with regards to cost for water and sewer (37 out of 98).
With regards to water consumption, the City of Timmins average household use of water is conservatively estimated to be 350m3/ year. Our annual water production suggests that the household water consumption figure is likely above 400 M3/year. Municipalities with metering programs typically have an average residential consumption rate in the vicinity of 200m3/year to 250m3/year.
For comparison, we also have shown below the 2012 water and sewer cost for Northern Ontario municipalities (based on a water consumption of 350m3/year).
Sault Ste Marie $991* - 2012* Timmins $855 - 2012 North Bay $841 - 2012 Thunder Bay $1,164 - 2012 Sudbury $1,243 - 2012
Based on the recommended rate increase of $50, the City of Timmins will continue to fund the necessary major capital projects by borrowing money from the Ontario Infrastructure Fund. To support these capital investments, we have estimated that a total of $ 25.8 million dollars of interest (@ 3.5%) will be paid over the next 21 years in the water and sewer accounts. While we recognize the significant investment we are making to improve our infrastructure, we do continue to strive to maintain a reasonable annual increase, while trying to minimize interest costs over this period.
To compare other rate setting options, the department has prepared a few different scenarios.
Option 2 — Minimize interest payments
Option 2 - In 2014, the Province may be introducing infrastructure funding programs that will be based on asset management criteria. Assuming the implementation of a rate increase of $45 and receiving this $ 4 million grant, the interest (@ 3.5%) that would be paid over the next 19 years would be $22 million. A net benefit of$ 3.8 million compared to option 1.
Option 3— Minimize interest payments
Option 3 — Over the next four years, the existing rate plan proposes a total increase of $ 140 (50-$30-$30-$30). In 2013, a one-time water and sewer rate increase of$ 140 ($ 105 sewer and 35 water) could be considered and would boost revenues and reduce our borrowing needs. This one time increase would be contingent on providing 0% increases for the following 3 years. The interest (@ 3.5%) paid over the next 21 year period with this scenario would be $24 million. A net benefit of$ 1. 8 million compared to option 1.
Option 4— Extend the amortization period and minimize rate increases (40 years +)
For municipalities that carry a small debt load, borrowing over a longer period of time is a viable option. Amortizing a large capital project over a longer period of time ( 40 to 50 years) is often the preferred course of action. This approach results in less aggressive rate increases, a significant delay in building adequate reserves and it entails more interest to be paid over a longer period of time. As an example, we analyzed the scenario of increasing rates by a total of 20 per year ($ 10 sewer and $ 10 water). This assumption would represent an annual increase in the range of 2%, which is reflective of the national cost of living index. Under this scenario, the sewer account is forecasted to be in a positive position in 2052 and the interest paid ( @ 3.7%) over that period of time would equal to $ 57.8 million. A negative impact of $ 32 million compared to option 1.
Option 5— Reduce the amortization period and increase rates ( 10 years)
The option of considering $ 110 increase per year in the sewer budget was analyzed. It was estimated that such an increase would be required for a period of 4 consecutive years in order to be in a positive balance by 2023. This scenario would create an amortization period of 10 years. The interest paid under this shorter amortization period is estimated to be equal to $ 10.3 million. Following 4 years of increases, the 2016 sewer rates could remain the same for the next 30 years. A net benefit of$ 12.5 million compared to option 1.
Council is leaning towards option 1 . Councillor Doody says that gold is at $1250 and his concern is that people are edgy. He feels that people couldn't afford the larger increases.
Councillor Scripnik feels that there is only so much money in the "well" meaning in the pockets of the public and that longer term financing is the better option.
Mayor Laughren shared what he saw from the past to the present with previous investments in water and the fact that financially, it has been managed well. Presently, we are dealing with sewer .
Not being cruel during an election year
