Tuesday, August 24, 2010

A discussion paper on fair water pricing.

Greater Vernon Water Utility has the official policy of charging consumption based rates to its customers. This policy is to foster fairness, encourage water conservation and ensure that high water users pay more for their extra water use.

In theory this should mean that 100 m3 of water should cost ten times more than 10 m3.

In reality the opposite is true. The more water one uses the cheaper the unit cost of water is. Let me present some examples. Let us look at the unit cost of water for an individual using 100 m3 per year versus one who consumes 1,000 m3 per year.

Consumption of 100 m3 costs $219.08. Unit cost: $2.19

Consumption of 1000 m3 costs $1,047.08. Unit cost: $1.05

The difference is $1.14 m3 or 109%.

What it means is that low water users subsidize high water users.

There is no incentive to conserve since unit price decreases as consumption increases.

This is the opposite of what was intended to achieve, that is reducing consumption and making high users pay disproportionally more!

A high water consumer only pays five times as much for ten times the amount of water consumed.

What is the cause of this inequity?

It is the boogie word: tax.

While many politicians insists that we should only rely on water rates in financing water service costs, such as operation and maintenance and infrastructure financing, the reality is that we charge $200.68 annually to each customer that can only be characterized as a parcel tax. It is paid by all property owners who could connect to the water service even if there is no connection.

For the $200.68 we may consume 80 m3 of water annually. Deducting the value of this water leaves a net tax of $127.08 per customer. What does this tax cover?

To be sure I am not opposed to taxation but this thinly veiled taxation is unfair. Let’s analyze the situation a little further.

Everyone would agree that water service increases property values. The better the quality of the service the higher is the value increase.

Properties on the Rise and Turtle Mountain were worth next to nothing until water service was provided. Those property values went through the roof while they contributed nothing to the infrastructure costs as those costs were financed through water rates and initially they used no water. In fact, many of the vacant lots are still not using water. Was that a fair arrangement? I think not.

Fair financing would have been if all properties benefitting from the improvements were to be taxed accordingly. The present system is an improvement but it is still unfair to low water users. Property values increased proportionately, thus, taxes should have been levied proportionately as well. The ad valorem taxation is used for other infrastructure financing, such as the Multiplex and the Theatre with no apparent opposition from taxpayers. In my opinion that is the fair method of financing water infrastructure.

Taxpayers approved borrowing $35 million for financing needed infrastructure improvements. Annual financing costs of this borrowing is about $2,400,000.

Now, let’s examine how much the “access fee tax” brings into the coffers of GVWU. There are roughly 21,000 customers at $127.08 yielding an estimated $2,668,680. That’s about $218,680 more than needed for the infrastructure financing.

Could it be that staff considered the infrastructure financing when deciding the “access fee tax”?

The only problem with this tax is that low water users contribute significantly higher proportion of financing than do high water users.

I call upon both staff and politicians to enter into a dialogue to develop a fair and equitable water pricing system for 2011 and subsequent years.

Gyula Kiss

I invite comments on the discussion paper from everyone. Budgeting time is fast approaching and staff and politicians should be aware of your thoughts.



Anonymous said...

Are developers currently contributing to infrastructure?

Was Turtle Mountain and the Rise a special case or were all previous developments not required to pay for infrastructure?

Anonymous said...

The difference is $1.14 m3 or 109%.

but chart shows 109 ???

Coldstreamer said...

You were correct, the dollar value difference is $1.14 and the percentage difference is 109%. It was a misprint.

Coldstreamer said...

The developers do contribute to the infrastructure through Development Cost Charges but that is to pay for the privilege of connecting to the system and contributing to the need to increase capacity. They are also required to install their own water and sewer lines.

However, until they started paying for water they did not contribute to the system improvements (the borrowed $35 million) until they started paying for water. We are all paying for those improvements through our water rates.

VernonResident said...

There is ZERO incentive for conservation with today's billing structure.

There needs to be a better way to manage the financing needed to accomplish what was promised under the Master Water Plan.

Even back in 2004 when we were asked to vote in a referendum, the numbers did not add up correctly - the theory at the time was that rates should not increase, hence the borrowing. So what happened? We borrowed money, but our rates have only increased.

How about some public meetings regarding the MWP and where we are at, exactly? Who is making all these important decisions and when will we unwashed masses get to hear about it?

Why do we strike a drought management committee when we don't have an official drought? We don't have a committee reviewing our Master Water Plan and the $105 million+ price tag for the system improvements that we are required to undertake? What about system separation decisions?

How about adding in the cost of the reclaimed water utility ($1.5 million per year) that allows the large consumers of water in our area, the golf courses and hilltop resorts, to purchase cheap treated wastewater for their irrigation, which does ABSOLUTELY NOTHING to financially support our regional water utility - that responsibility falls solely on the backs of all regular joe residents, taxpayers and water users of Greater Vernon.

The problem here is not just drinking water. Water and wastewater are undoubtedly interconnected, and until the system is considered as a whole, we won't be able to secure a better future.

Coldstream Ratepayers News! All Coldstream residents are ratepayers!

The opinions expressed by "Coldstreamer" are strictly his own and do not represent the opinions of Coldstream Council!

Because I value your thoughtful opinions, I encourage you to add a comment to this discussion. Don't be offended if I edit your comments for clarity or to keep out questionable matters, however, and I may even delete off-topic comments.

Gyula Kiss


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About Me

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I have been a resident of Coldstream since 1976. I have had 15 years of experience on Council, 3 years as Mayor. As a current Councillor I am working to achieve fair water and sewer rates and to ensure that taxpayers get fair treatment. The current direction regarding water supply is unsustainable and I am doing all I can to get the most cost effective water supply possible.