Report to: General Committee Report Date: August 1, 2008

SUBJECT: Waterworks Service Fees

PREPARED BY: Noris Dela Cruz, Ext. 4800

RECOMMENDATION:

THAT the Report titled “Waterworks Service Fees”, dated August 1, 2008, be received;

And that the proposed fees outlined in Attachment ‘A’ for services provided by the Waterworks Division be approved effective October 1, 2008;

And that By-Law No. 2002-276 be amended to update the fees set under Community Services – Water section of Schedule ‘A’, with fees outlined in Attachment ‘A’;

And further that Staff be authorized and directed to do all things necessary to give effect to this resolution.

EXECUTIVE SUMMARY:

Not applicable.

PURPOSE:

The purpose of this report is to propose amendments to Fee By-Law 2002-276 with fees outlined in Attachment ‘A’ effective October 1, 2008.

BACKGROUND:

On December 10, 2002, service fees and water/wastewater consumption rates were incorporated under the Town combined Fee By-law #2002-276. Since 2002, only the combined water and wastewater rates have been updated periodically. Most fees are outdated and services are generally subsidized by water consumers at large and do not reflect the user pay principle.

OPTIONS/ DISCUSSION:

Waterworks fees are necessary to recover the costs associated with the services provided to assure operational efficiency, water quality, and regulatory compliant operation of its system. Similar to water rates, service fees require periodic review and amendments, as necessary, to ensure equitable rates & fees, sustain adequate reserve funds and maintain fiscal balance.

Waterworks has reviewed all of the services that are provided to water system customers and stakeholders. Waterworks calculated the cost of providing these services and compared Markham’s costs to the fees charged for similar services in other municipalities. Several significant gaps were found between the costs incurred and the fees recovered. In some cases the cost of providing these services to individual customers or stakeholders was being subsidized by the general water/wastewater rate with the little benefit to the general user. The existing and proposed rates for these service fees are provided in Attachment “A”. Significant new fees are being proposed for turning private water service lines On or Off.

Survey of neighbouring municipalities indicates that the Town of Markham is the only municipality that does not charge service fee for turning water service to ON/OFF during regular hours. The cost of providing this service is calculated at $121.00 per completed service request. This alone translates into revenue loss of about $50,000.00 per annum. Waterworks is also providing services to the development community that are not being fully recovered. These services include:

1. Review of subdivision and site plan designs and agreements with respect to operational requirements; water sampling; operational inspections (Building Permit, Acceptance for Maintenance, Final Assumption); hydrant inspection & painting; and administration. Costs of these services would be recovered through item 22 in Attachment “A”.

2. Unassumed subdivision response. Cost of this service would be recovered through item 23 in Attachment “A”.

3. Anti-tamper device repair/reinstallation. Cost of this service would be recovered through item 24 in Attachment “A”.

4. Maintain chlorine residual on unassumed water main. Cost of this service would be recovered through item 25 in Attachment “A”.

The cost recovery initiative was presented to the stakeholders’ attention at the December 5, 2007 “Developers’ Round Table (DRT)” meeting. Developers group did not object to the fees in principle but asked that they be reviewed by their Representatives. A break-out group of five DRT industry representatives (Messrs. Bobby Boolah, Scott Cole, Sal Crimi, Dave Stewart, Nick Mracic) was assigned to work with the Town on the Waterworks Fees.

This group scrutinized the fees during the January 11^th, March 17^th and May 9^th meetings that were attended by Finance, Engineering and Waterworks staffs. During the process, the method of calculating the costs and fees was discussed and accepted by the Developers’ Representatives.

The fees proposed for review of subdivision and site plan designs includes costs for inspection services that developers previously paid directly to private inspection contractors. Waterworks will assume responsibility for provision of these services. A comparable service level will be provided, and this service will be fully under control of the Town.

FINANCIAL CONSIDERATIONS AND TEMPLATE: (external link)

Implementation of these service fees will result in an estimated increase in revenue of $65,000 in 2008. The 2008 Waterworks Operating Budget has not taken into consideration the increased revenues resulting from these amended fees. Any surplus resulting from these fees will be transferred to Waterworks reserve fund.

The 2009 increase in revenues is estimated to be approximately $ 291,000.

At present, residential subdivision development has slowed down. As a result, Waterworks expects to recover relatively little development fee revenue for the next 2-3 years.

The increased revenue is comprised of approximately $128,000 from fees for services recovered directly from users. In addition, $163,000 will be recovered from development. The service fees are based on a 5-year historical average of service volume provided. The fees recovered from development are based on as anticipated volume of 477 residential units in subdivision, and 25 site plans.

The estimates are based on new development projections that were provided by Development Services. It should be noted that although development services are being provided, fees may not be paid in lump sum or disbursed on the same year. There is approximately three (3) years time lag between revenues collected and expenditure for the same activity.

Waterworks and Finance will develop and implement a collection mechanism for tracking services, fees invoice and revenue using existing Hansen IMS and Cayenta Financial System Databases. Waterworks and Engineering will integrate applicable new development fees into the Development Agreement Fee. The fees will be reviewed and updated annually as necessary to assure full recovery of Waterworks services cost.

ENVIRONMENTAL CONSIDERATIONS:

Not Applicable.

ACCESSIBILITY CONSIDERATIONS:

Not Applicable.

ENGAGE 21^ST CONSIDERATIONS:

Engage 21^st also identifies the Town’s corporate goals of fiscal stewardship…to ensure that resources are managed responsibly and taxpayers receive the best value for their money. Through this initiative, Waterworks is responsibly accounting for the true cost of its services and service delivery, tracking and allocating funds and resources to its intended use and supporting the user pay principle.

BUSINESS UNITS CONSULTED AND AFFECTED:

The following departments and business units were consulted during the preparation of this report and their comments have been considered and incorporated into the report:

1. Engineering Department

2. Strategy and Innovation

3. Corporate Services

4. Financial and Client Services

5. Clerks Department

6. Legal Department

RECOMMENDED

BY: _________________________

Jerry Klaus

General Manager, Waterworks

________________________

Peter Loukes, P. Eng.

Director, Operations

________________________

Brenda Librecz

Commissioner of Community and Fire Services

ATTACHMENT:

Attachment A – Proposed Waterworks Service Fees