2016 Preliminary Budget – Update #2 Combined (Water & Sewer Rates)

I’m calling this budget update Combined because while the proposed water and sewer rate increase is NOT part of the 2016 budget, funding from the proposed rate increase would be used to support 2016 roads infrastructure and operating costs.

Details at the end of this page reflect the impact of combining the water and rate increase on the 2016 budget and ultimately the fee (tax) you will be paying for City services. 

 

The Practice of Using the Water Dividend to Fund Infrastructure & Operations

The chart below reflects how the dividend has been used to fund City infrastructure and operations over past years. This is not a new practice by Winnipeg City Council.  For details, See the Public Utilities Board review in 2012.   This year, I believe media enabled the public to become more aware of this practice. There is only one tax payer. You can call it a ‘property tax’, a ‘frontage fee’ a ‘utility dividend’ or whatever.  Ultimately, it’s each of us paying one fee for services the City provides.

 

2016-2018 WATER AND SEWER RATES

The 2016 to 2018 Water and Sewer Rates Report provides a good explanation of the proposed water and sewer rate increase.  I’ve prepared the following summary and perspectives on the proposed rate increase. Your input is appreciated. I represent YOU at City Hall. Please tell me what you think: Contact me.

Water and sewer rates are designed to fund all costs of operations and capital projects related to the quality of water and wastewater, city growth and regulatory requirements.  It’s important to understand that the City is mandated by the Province of Manitoba to make improvements under strict deadlines in order to enhance environmental protection.  Environmental and public health concerns are driving more stringent standards in the water and sewage industry, and these standards are very costly to implement.

NOTE: 84% of Winnipeg’s Water and Sewer projects are legislated by the Province of Manitoba, and the City is legally obligated to implement these projects.  In particular, regulations under the Province’s Environment Act Licenses for Winnipeg’s three sewage treatment plants have necessitated large increases in capital and operating costs.   The overview of sewage treatment facilities provides details regarding Winnipeg’s significant sewer and water projects:

Significant Sewer & Water Investment Highlights

1. North End Sewage Treatment Plant (NEWPCC) Biological Nutrient
   • $569.37 Million estimate is based on “Class 5” cost estimate (estimate has an accuracy range of between -50% and +100%; to be completed in 2019+).
2. 2. South End Sewage Treatment Plant (SEWPCC) Upgrading and Expansion
   • $335.6 Million by 2019 (Class 3 Estimate)
3. West End Sewage Treatment Plant
   • $33 million (completed in 2010)
4. Bio Solids (poop) Management Program
   • $274 Million estimate – awaiting Provincial report
5. Combined Sewer Overflow
   • $1.2 billion estimated – awaiting Provincial report
6. Waste Management at Brady Resource Management Centre
7. Water Treatment Plant
   • $300 Million (completed in 2009)
8. Water Supervisory Control and Data Acquisition Upgrade (SCADA)
   • $3.9 Million in 2016 – which completes a $12.3M investment controlling and monitoring the operation of the Drinking Water Treatment Plant and the Water supply and Distribution system.
9. Ongoing upgrades and maintenance of sewer and water pipes

 

WATER & SEWER RATES FOR RESIDENTIAL CUSTOMERS 

For a residential customer (based on a family of four) with a quarterly consumption of 60 cubic metres, the recommended water and sewer rate increases result in a 9.2%, 8.9% and 7.4% impact for each of 2016, 2017 and 2018.

Daily Rate

• For 2016, the recommended increase for residential customers is approximately 25 cents per day.  This means that a litre of water will cost less than one-half of a penny.

 

Schedule of Quarterly Rates 2015-2018

Annual Rate Comparison 

Why Base Rates Over 3 Years vs Annual Approval?

The Department is recommending a 3-year rate approval (see Page 22 of 2016 to 2018 Water and Sewer Rates Report).  This process is common practice in Canada, supports transparency and consistency for customers, and provides financial stability for the utility. Bond rating agencies look more favourably upon utilities which have adopted multi-year plans as it demonstrates a commitment to the financial planning process.  Cities across Canada utilize varying frequency rates for approval:

• Calgary                    4 yrs
• Edmonton               Annual
• Regina                      2 yrs
• Saskatoon               3 yrs

Why Is the City Proposing to Take Funding (a dividend) from Water and Waste (the utility)?

Water and sewer rates are designed to fund all costs of operations and capital projects related to water and wastewater quality, city growth and regulatory requirements.  The City of Winnipeg has used dividends from the utility since 2011 to support city growth and balanced budgets. Winnipeg is not unique to this practice, as utility dividend policies are typical within Calgary, Edmonton, Regina and Saskatoon.

On March 3, 2015, Winnipeg City Council approved that the utility dividend policy be amended and the annual dividend payment to the City increase from 8% to 12% of budgeted gross water and sewer sales.

For 2016, the dividend would be $32,174 million (12% of $268,116 million)

• $32,174 million will be invested in 2016 City of Winnipeg roads infrastructure and operating costs
• $235,942 million will be invested in water and sewer operations and capital (See Pages 26-27 in 2016 to 2018 Water and Sewer Rates Report for details on the 10 yr financial plan)

 

PERSPECTIVES ON THE RATE INCREASE 

Winnipeg is facing multiple challenges and multiple priorities, and decisions are not simple.

The “Significant Sewer & Water Investment Highlights” summary above represents billions that we must invest in the coming years. Ensuring safe clean drinking water and safe disposal of human waste is very costly, but critical – 84% of the projects are mandated by the Provincial Environmental Licensing Act.

The City of Winnipeg is almost 150 years old and our infrastructure deficit is estimated at $7.4+ billion.  These funds are needed to upgrade our sewer and water systems, the roads/bridges network, buildings, and transit requirements. For details, SEE Council Report

The City of Winnipeg receives 8 cents of each Provincial tax dollar (PST) to put towards infrastructure work.  However, the City is responsible for 60% of infrastructure costs.  

Winnipeg has little power to establish new sources of revenue, based on Provincial regulations. As outlined in FairShareFairSay, many mayors have been trying to secure more funding from Provincial governments for many years. Until we see a ‘new deal’, we must strategically prioritize our needs and reduce our ‘wants’ within the existing revenues we have.

There is only one tax payer. You can call it a ‘property tax’, a ‘frontage fee’ a ‘utility dividend’ or whatever. It’s each of us paying ultimately one fee for services the City provides.

 

2016 BUDGET IMPACT ON HOMEOWNERS (Including Water & Waste)

On an average assessed Winnipeg home ($288,190), the 2016 proposed increases are

• Water and waste rate increase    $ 92
• property tax increase                    $ 38
• frontage levy                                   $ 92
• Total 2016 increase                     $185

In comparison, the chart below illustrates the cost of City services (2015) and how they were allocated/prioritized:

 

 

Balancing a budget to needs, wants, and affordability in a progressive, growing city requires difficult decisions.  I have prepared this Budget Update for purposes of greater transparency, and to enhance communication with residents.  Your input is appreciated.   I represent YOU at City Hall, so please tell me what you think: Contact me.

 

 

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