June 30, 1999
To:Works Committee
From:Commissioner of Works & Emergency Services
Chief Financial Officer and Treasurer
Subject:Water Rate Harmonization and Universal Metering in the Former Cities of Toronto and Etobicoke
Purpose:
To respond to Council's request for a report on funding and implementation options available for the water meter
conversion program and the implications on water rates in the former City of Toronto.
Funding Sources, Financial Implications and Funding Impact:
All options presented in this report continue to provide full funding for the water and wastewater program through the
water and sewer rates. The 1999-2000 water and sewer rates for the former cities of East York, Etobicoke, North York,
Scarborough and York have already been adopted by Council (a four-year phase-in to the competitive rate structure), and
as such, will not be affected by any of the options discussed in this report.
Funding in the amount of $21.0 million for the conversion of flat-rate accounts to metered service for the former City of
Toronto is contained in the 1999-2003 Capital Works Program previously received by Council however, this amount was
held in reserve pending a resolution on an appropriate Universal Metering strategy. New funding sources for this
conversion, such as that available through the deferral of decreases that would be realized by former Toronto water
customers and/or a rate increase specific to flat-rate customers, will have a favorable impact on the 1999-2003 Capital
Works Program Budget.
Recommendations:
It is recommended that:
(1) With respect to the implementation of the Universal Metering Program, a voluntary program be implemented over a
four year period to convert the remaining 85,000 flat rate accounts in the former City of Toronto and 1,500 flat rate
accounts in the former City of Etobicoke, subject to the following conditions:
(i) the City install water meters free of charge to homeowners and provide one water efficiency kit per home;
(ii) as an incentive to installing a water meter, the flat-rate customers in the former City of Toronto and the former City
of Etobicoke be eligible for a $60.00 subsidy towards the installation of a low flow toilet;
(iii) on January 1, 2004, the rate charged to flat-rate customers in existence at that time be increased by 100 percent, and
by a further 100 percent in each successive year; and
(iv) effective January 1, 2004, any flat-rate customers that have not voluntarily participated in the meter conversion
program be required to pay for the cost of the water meter if the customer then so chooses to convert to a metered service;
(2)with respect to funding the Voluntary Meter Conversion Program:
(i) the rate charged to flat-rate customers in the former City of Toronto and the former City of Etobicoke be increased by:
- 5.0 percent effective January 1, 2000;
- a further 10.0 percent effective January 1, 2001;
- a further 15.0 percent effective January 1, 2002;
- a further 20.0 percent effective January 1, 2003; and
- a further 100.0 percent effective January 1, 2004, and a further 100.0 percent in each subsequent
year;
(ii) the rate decrease that would be realized by former City of Toronto's metered customers under the phased-in
competitive rate structure be deferred for a period of three years, and effective November 1, 2002, the harmonized
competitive rate structure be applied for metered customers in the former City of Toronto; and
(iii) the anticipated new revenue from the former City of Toronto, in the amount of $14.6 million from the three-year
deferral of decreases respecting metered customers, and $11.6 million from the increases in flat-rate charges, be used to
fund the Universal Metering Program ($21.0 million), and the balance be used to fund an incentive program directed at
facilitating the conversion of residential flat-rate customers to metered service ($5.2 million or approximately $60.00 per
residential flat-rate customer), and such an incentive program to include consideration of a subsidy towards low-flow
toilets;
(3) a list of flat rate customers requesting conversion to metered service be established on a first come basis and tendered
as a priority each year;
(4) the following be established as mandatory water meter installation criteria for the City to install a free of charge meter
where no meter exists:
(i) homeowners who take out a plumbing permit to upgrade their household plumbing;
(ii)new home construction; and
(iii) purchasers of properties which are on a flat rate billing system agree, as a condition precedent to receiving a
clearance letter from the City at the time of property ownership transfer, to having a water meter installed; and
(iv) as a condition of the City's Water Service Connection Repair Program, flat rate customers agree to having a water
meter installed;
(5) Council redirect the provision of $21.0 million contained the 1999-2003 Capital Works Plan of the Water and
Wastewater Program respecting Universal Metering to providing funding to the City's water efficiency programs and that
the Commissioner of Works and Emergency Services report to Works Committee in the fall of 1999 on a Water Efficiency
Plan for the new City and the use of these funds;
(6)the Commissioner of Works and Emergency Services and the Chief Financial Officer and Treasurer prepare an annual
report to the Works Committee and the Policy and Finance Committee on the annual progress and financial impact of the
Voluntary Universal Metering Program and recommend any modifications to the financing and/or implementation plan
described herein;
(7)the effective date for the first year water and sewer rates (of the four-year phase-in plan) for the former cities of East
York, Etobicoke, North York, Scarborough and York, be amended by changing the words "Effective September 1, 1999" to
read "Effective November 1, 1999", to coincide implementation of the new water billing system;
(8)that a public awareness program be carried out over a 4 year implementation period of the Universal Metering
Program at an estimated cost of $100,000.00 to inform homeowners of the benefits of a metered water supply and the
metering incentives, described herein;
(9)the Chief Financial Officer and Treasurer report to the Works Committee in the fall of 1999 regarding joint meter
reading and billing opportunities and financing options for automated meter reading technologies;
(10)due dates for water billing be set at the discretion of the Treasurer, at least 21 days after the billing dates; and,
(11)the appropriate City Officials be granted the authority necessary to give effect thereto.
Council Reference:
At its meeting of April 26 to 28, 1999, during consideration of water rate harmonization, Council adopted
Recommendation No. 233 of Report No. 8 of the Strategic Policies and Priorities Committee, respecting the phasing-in of
the competitive rate structure for all of the former cities with the exception of the former City of Toronto, with the
following amendment:
"the Commissioner of Works and Emergency Services and the Chief Financial Officer and Treasurer be requested to
submit a joint report to the Works committee, for subsequent submission to Council by the end of July, 1999, on all funding
options for the meter conversion program, such report to also consider the issue of freezing water rates in the former City
of Toronto"
This report also addresses issues raised by the Works and Utilities Committee and the Toronto Community Council
respecting the implementation of the Universal Metering Program as contained in the October 19, 1998 report from the
General Manager of Water and Wastewater Services "Universal Metering Program", to which the responses to these
motions are summarized in Appendix A along with appropriate responses.
Comments/Background:
This report presents options for funding the Universal Metering Program. The key decision to be made is who should pay
for the cost of converting the 85,000 flat rate customers in the former City of Toronto and the 1,500 flat rate customers in
the former City of Etobicoke to metered service. Funding may be provided via:
(1) the Capital Works Program, whereby water customers from all of the former municipalities share in the cost of meter
conversion;
(2) flat rate customers, whereby increases to the flat rate charges would be used to obtain the required funding;
(3) metered customers in the former City of Toronto, whereby the decreases that would be entitled to these customers
under water rate harmonization would be deferred, and the surplus revenue would be used to fund the conversion program;
and
(4) a combination of flat rate customers and metered customers, whereby a combination of increases in flat rate charges
and a deferral of decreases that would be realized by former Toronto metered customers would be used to provide the
necessary funding.
Although each of these options are viable, various stakeholders have raised concerns with respect to each of the options.
With respect to funding the Universal Metering Program from the Capital Works Budget, stakeholders from all of the
former municipalities except Toronto have expressed concern that it was unfair for them to share in the cost of converting
the former City of Toronto to metered services, as the cost of meters in their municipalities were paid by the residents
historically through higher development fees.
With respect to funding through increases in flat rate charges, stakeholders expressed concern that this would require
sizeable increases in these charges, which may result in a hardship to some customers, and further that, while some
customers may wish to accelerate the timing of their conversion in order to avoid the rate increases, the logistics involved
in such a large conversion program may result in customers having to wait for a significant period of time to receive a
meter.
With respect to funding from metered customers in the former City of Toronto, these customers have indicated that this
approach is punitive, as they have, in the past, voluntarily installed water meters and should not be punished by deferring
the decreases they would otherwise be entitled to under rate harmonization. A contrary view is that, had amalgamation not
taken place, all customers in the former Toronto, metered and unmetered, would have shared in the cost of conversion for
the rest of the customers.
The combination approach attempts to balance the interests and concerns of both the metered and unmetered customers in
the former City of Toronto.
Universal Metering in the former City of Toronto:
A customer on a flat rate account is generally charged in accordance with the number of rooms and fixtures installed in the
building, or in some cases, on a per-building basis. Flat rate accounts predominate in the former City of Toronto, within
which there are approximately 85,000 flat rate accounts verses 46,000 metered accounts. Generally, flat-rate accounts are
scattered throughout the former City of Toronto with the exception of the former communities of Forest Hill and Swansea
which have a higher concentration of metered customers. The former City of Etobicoke also has a few remaining flat rate
accounts (less than 1,500), which is not significant compared to its 66,000 metered accounts. These accounts are generally
located in the older part of the City, south of Lake Shore Boulevard between Royal York Road and Kipling Avenue.
A preliminary review of the billing data indicates that the average annual flat-rate bill is $348.00 whereas the average
annual bill for metered residential customers is $286.00. Over the years, the rate charged to flat-rate water users has
increased in proportion to rate increases for metered customers.
In 1990, the former City of Toronto adopted a policy of universal water metering whereby all new buildings and buildings
where the water service or the plumbing in the basement is being replaced are to be metered. The City also installed free of
charge water meters and provided a water efficiency kit to homeowners who voluntarily requested a water meter. Further,
homeowners were required to install water meters as a condition of the City's Water Service Repair program. The
universal metering program has been promoted through an ongoing education program to make homeowners aware of the
benefits and cost saving opportunities which can result from a metered water supply. Since 1990, approximately 23,000
water meters have been installed under these programs. The former City of Etobicoke had no formal program for meter
conversion, however, the City installed approximately 30 to 50 meters per year for flat rate customers who requested it.
The estimated average cost for each water meter retrofit installation including a water efficiency kit amounts to $247.00
including GST, and based on current prices, the estimated total cost of retrofitting the 85,000 remaining buildings on
flat-rate billing amounts to approximately $21.0 million.
In November 1998, the General Manager of Water and Wastewater Services reported to the Works and Utilities Committee
on the program of Universal Metering as part of the service leveling process across the new City of Toronto. The report
recommended the mandatory metering of all buildings in the former City of Toronto with a five-year implementation plan.
The report further recommended that the flat-rate charges be increased by 100 percent for customers who have received
adequate notice (minimum three written notices and have been provided with sufficient time to arrange for the mandatory
installation of a water meter but continue to refuse to cooperate) and that the flat-rate charges be increased an additional
100 percent every three months thereafter.
While the Committee endorsed the program, a number of questions were raised and the report was referred to the Toronto
Community Council for consideration, which in turn raised additional questions particularly regarding the use of incentives
such as water efficiency initiatives. Further, the Community Council discussed the feasibility of further cost sharing
incentives under the Water Service Repair Program for the private side portion of the water service which would result in
additional meter installations. City Council at its meeting of June 9, 1999, approved a harmonized Water Service Repair
Program, in which substandard water service connections are replaced at no cost to homeowners within the road allowance.
Under the harmonized program, homeowners are responsible for the cost of repairing the private side portion of their water
service.
Funding in the amount of $21.0 million for the conversion of flat-rate accounts to metered service for the former City of
Toronto was requested under the Universal Metering Project in the 1999 to 2003 Capital Works Program. At the time of
the capital budget review, the strategies for water conservation and universal metering were yet to be finalized, and the
Budget Committee recommended that the expenditures earmarked for 1999 be put on hold until a formal direction in this
matter was set by Council.
Water Rate Harmonization:
The report from the Chief Financial Officer and Treasurer, dated March 22, 1999, provided a comprehensive review of the
current practices and rate structures respecting the water and wastewater program, and an analysis of a number of options
to provide a harmonized rate across the new city. The report recommended the competitive pricing structure (Option 3).
Addendum (1), dated March 31, 1999, provided additional options respecting water rate harmonization in response to the
motions raised by the Community Councils at their meetings of March 26 to 30, 1999. In particular, a four-year phase-in of
the competitive pricing strategy was presented.
Addendum (2), dated April 12, 1999, provided further options regarding the water rate harmonization initiative, which
addressed issues raised respecting funding for the conversion of flat-rate (unmetered) accounts to metered services, in
response to the discussions of the Budget Committee at its meeting of April 6, 1999. The options presented in that
addendum included funding the Universal Metering Project through a rate increase specific to flat-rate water users, funding
the project through a two-year deferral of the decreases that water customers in the former Toronto would realize under rate
harmonization while the competitive rate would be phased-in over two years for all other users, and funding the project
through a four-year deferral of decreases for the former Toronto while phasing-in increases and decreases for all other users
over a four-year period.
Funding Options Respecting Universal Metering:
In general terms, the water rate setting process is premised upon the objective that the program remain fully self funding
with a high degree of financial stability for both operating and capital needs over the long term. The approach taken with
respect to the harmonization of the differing rates of the former municipalities was that the anticipated revenue increase
from those former municipalities whose rates would increase under harmonization would be balanced with the anticipated
revenue decreases from those municipalities who would be experiencing rate decreases under harmonization (i.e. the
exercise would be revenue neutral).
Council at its meeting of April 26 to 28, 1999, during consideration of the matter of water rate harmonization, adopted the
phasing-in over four-years of the competitive rate structure for all of the former cities with the exception of the former
Toronto, leaving open the option for funding the Universal Metering Program from the deferral of the decreases that would
be realized by the former Toronto under rate harmonization. Having adopted the rates for the other cities, the monies
available from the deferral of Toronto's decreases is now fixed. Table 1 shows the potential funding available from the
deferral of Toronto's decreases. For example, deferring the decreases for one year would result in the accrual of
approximately $2.4 million in surplus funds; two years would result in the accrual $7.3 million in surplus funds; three years
in $14.6 million; and a deferral of three-and-one-half years would accrue in the order of $21.0 million, which would be
sufficient to fund the entire Universal Metering Program.
Table 1
Potential Funding Available from the Deferral of former Toronto's Metered Customer Decreases ($000's)
No. of Years Decrease12345
Deferred
Four Year Phase-In of Incremental Incremental Incremental Incremental Incremental
Harmonized Rate Impact Impact Impact Impact Impact
Sep/99-Sep/00 Sep/99-Sep/01 Sep/99-Sep/02 Sep/99-Sep/03 Sep/99-Sep/04
East York (435) (435) (435) (435) (1,741)
Etobicoke 212 212 212 212 847
North York (17) (17) (17) (17) (70)
Scarborough 2,975 2,975 2,975 2,97511,899
York (304) (304) (304) (304)(1,217)
Incremental/Annual Impact 2,430 2,430 2,430 2,430 9,719
to City
Toronto Incremental/Annual (2,430)(2,430)(2,430)(2,430) (9,719)
Decreases Deferred
Cumulative Revenue Impact* 2.430 7,28914,57824,297**34,016
*Interest not accrued as it is anticipated additional revenue would be expended as incurred to cover the costs of Universal Metering
**assuming 3.5 year deferral to the harmonized rate for the former City of Toronto instead of four years would result in the accrual of $20,682,223,
which would be sufficient to fund the Universal Metering Project
It should be noted that the above analysis is premised on the deferral of the decreases that is to be realized by former
Toronto's metered customers. Another source of funding is potentially available through increasing the rates charged to
flat-rate customers. Table 2 shows the potential funding available from increases to former Toronto's flat-rate charges. For
example, a 15.0 percent annual increase in the flat rate charges will provide an additional $21.2 million in revenue to the
City over the projected four-years that it may take to phase-out flat-rate accounts. The recommended 5% incremental
annual increase in flat rates will provide an additional $11.6 million in revenue. Such an approach will result in the average
flat-rate bill increasing from the current $348.00 to approximately $554.00 in the fourth year.
Table 2
Potential Funding Available from Rate Increases on Toronto's Flat-Rate Customers Assuming 4-Years to Implement
Conversion ($000's)
Funding Available from Rate Increases on Flat Rate Customers over the 4-Year
Implementation Period
Year1234
Cumulative Cumulative Cumulative Cumulative Funding Funding Funding Funding
Impact Impact Impact Impact
Sep/99-Sep/00 Sep/99-Sep/01 Sep/99-Sep/02 Sep/99-Sep/03
No. of Conversions*10,000**25,00025,00025,000
Projected Number of75,00050,00025,000 0
Flat-Rate Accounts Remaining
Annual Increase to Flat-Rate Charges:
Option B 5% per annum 1,392 3,621 5,678 6,616
Option C 10% per annum 2,784 7,35211,671 13,690
Option D 15% per annum 4,176 11,19017,988 21,246
Option E 20% per annum 5,568 15,13824,638 29,309
Variable Rate Increases:
Option F 5% 1st year, 1,392 4,763 9,047 11,630
10% 2nd year, 15% 3rd year
20% 4th year,***
Option G 20% 1st year, 5,568 15,13820,880 22,794
20%2nd year, 0% 3rd year
0% 4th year,****
*assumes a planned and orderly conversion of flat rate accounts to metered service over a 4 year period, and that flat rate customers continue to pay
the increased flat rate charges until meter conversion
**assumes 10,000 customers converted in start-up year of program
***rate increases in each successive year
****Councillor Prue moved a motion at Council's meeting of April 26, recommending that conversion be implemented over two years, to be funded
from a two-year deferral of former Toronto's decreases ($7.2 million from column 2 of Table 1, and a 20% per annum increase in flat rate charges over
the two year implementation plan ($15.1 million from column 2 above), for a total of $22.0 million.
The above analysis is premised upon a planned and orderly conversion of flat-rate accounts to metered service over a
four-year period. It is noted that some customers may wish to accelerate the timing of their conversion in order to avoid the
rate increases. Such an acceleration would have a direct negative impact on the projections of incremental revenue from the
rate increase, and a further indirect impact through higher conversion costs associated with a more demographically
fragmented response to conversion.
It is recognized that in spite of the flat rate charge increases referred to in Table 2, there may be a small percentage of
customers who will resist installation of a water meter. To reach closure with respect to Universal Metering and achieve
full participation, it may be necessary to significantly increase flat rate charges for the few remaining customers. In the City
of Niagara, which recently adopted a mandatory metering program, customers who refuse the installation of a water meter
are subject to a 300 percent increase in their flat rate charge. The withdrawal of the offer of a free meter after a
well-advertised cut-off date would be further encouragement for customers.
Table 3 below shows the potential funding available from a combination of rate increases on flat-rate customers and the
deferral of the decreases that would be realized by metered customers in the former Toronto. Combinations that
approximately result in the $21.0 million required for the Universal Metering program included:
- Funding solely from the deferral of decreases that would otherwise be realized by former Toronto's metered customers,
which would mean former Toronto's metered rate would remain at the current level for three-and-one-half years, before
moving to the lower harmonized rate; or
- Funding from a 5.0 percent per annum increase in the flat-rate charges in combination with the deferral of the decreases
for a three year period for former Toronto's metered customers; or
- Funding from a 10.0 percent per annum increase in the flat-rate charges in combination with the deferral of the
decreases for a two year period for former Toronto's metered customers; or
- Funding solely from a 15.0 percent per annum increase in the flat-rate charge over the four year implementation plan; or
- Funding solely from increases of 20.0 percent in flat rate charges for the first two years; or
- Some other combination, such as that moved by Councillor Prue at the Council meeting of April 26, whereby funding
would be obtained through a 20.0 percent per annum increase in flat-rate charges over the first two years, in
combination with the deferral of former Toronto's metered customers decreases for two years (this motion assumes that
meter conversion would be over an accelerated two year plan).
Table 3
Potential Funding Available from a Combination of Rate Increases on Flat-Rate Customers* and the Deferral of Decreases
of Metered Customers ($000's)
No. of Years Deferral of Decreases011.522.533.545.5
for Former Toronto's metered
customers
Annual Increase in Flat Rate Charge
Option A 0% (i.e. Funding from 0 2,430 4,859 7,28910,93414,57819,43824,29738,875
Deferral of Decreases of
metered accounts
Option B 5% 6,616 9,20411,63414,06417,70821,35326,21231,07245,650
Option C10%13,69016,49818,92821,35825,00228,64733,50638,36652,944
Option D15%21,24624,34226,77229,20232,84636,49141,35046,21060,788
Option E20%29,30932,76835,19837,62841,27244,91749,77654,63669,214
Variable Rate Increases:
Option F 5%, 10%, 15%, 20%**11,63014,06016,49018,91922,56426,20931,06835,92850,506
Option G 20%, 20%, 0%, 0%**22,79425,20027,60030,10033,70037,40042,20047,10061,678
*Assumes that implementation of meter conversion occurs over 4-years regardless of deferral option
**flat rate charge increases in each successive year
Universal Metering Implementation Options and Issues:
Implementation options fall into two general categories i.e. voluntary programs and mandatory programs. The following
presents numerous options respecting the rolling-out of the Universal Metering program and implementation issues.
(A)Voluntary Programs:
Voluntary programs depend on the good will of the customers towards converting to metered service. Voluntary customer
participation may be facilitated through financial motivation, such as through increases in the flat-rate charges, or through
incentive programs. The following sections provide a description of several voluntary implementation programs.
(1)Status Quo:
This approach continues the 1990 policy adopted by the former City of Toronto whereby all new buildings and property
owners who undertake plumbing upgrades are required to install a water meter along with those participating in the Water
Service Repair program. In addition, homeowners are encouraged to voluntarily install a meter all of which is done at no
cost to the homeowner. Historical experience suggest that approximately 2,000-4,000 conversions per year may be
achieved, notwithstanding any other policy interventions such as rate increases specific to flat-rate customers. At this rate,
the funding requirement would be approximately $500 thousand to $1.0 million per year, and it would take more than 25 to
40 years to achieve universal metering.
(2)Voluntary with Incentive Program:
This approach utilizes financial motivation and/or incentives to increase the voluntary participation rate. One means to
motivate flat-rate customers to convert to metered service would be to increase flat-rate charges. It is recommended that the
flat rates increase incrementally each year from 5% to 20% over the 4 year metering program. Such increases should not be
punitive to those flat-rate customers who wish to accelerate their conversion, but may have to wait due to the logistics
involved in coordinating such a large number of conversion. One approach to alleviate this concern would be to establish a
priority list of flat-rate customers requesting conversion, and as such, those customers who are more motivated to convert
may avoid some of the rate increases.
Incentives are another means to encourage conversion. Many incentives are available in this respect, including providing a
full or partial subsidy towards a low-flow toilet, or a subsidy towards the repair of deficient water service (i.e., lead or
galvanized pipes) on the private side of a customers property.
The Works and Utilities Committee at its meeting in November, 1998, in considering the Universal Metering Program,
requested among other things, a report on the issue of the use of incentives such as free water saver kits and/or low flow
toilets to reduce water use, and on opportunities to combine Universal Metering with the Water Services Program.
Of the 85,000 flat rate customers in the former City of Toronto, approximately 33,000 have been identified as substandard
and in need of replacement. The Harmonized Water Services Program recently adopted by Council provides for the City to
replace/repair substandard services on the road allowance, and to advise the customer of a competitive quote for the
repair/replacement of the private-side water service. In the past, this section of upgrade has been totally funded by the
homeowner. The average cost of the upgrade on the private portion of the water service ranges from $800.00 to $1,000.00.
An incentive program where by the City subsidizing the full cost of repairing the water services on the private side would
achieve a greatly accelerated Water Service Repair program and consequently an accelerated water meter installation
program however the implications of such a fully subsidized program is prohibitive due to the cost (estimated at $33.0
million in the former Toronto). A more modest subsidy program may be considered whereby the homeowner pays a flat fee
of $500.00 for upgrading the private portion of the water service and the City provides a subsidy of approximately $400.00.
This subsidy program will require further funding of approximately $13.2 million and necessitate a longer deferral of the
harmonized rate for the metered customers in former City of Toronto. Legal Services has advised that Municipal Act and
Public Utilities Act provide authority to implement a cost sharing program for upgrading the private portion of the water
service providing the City obtains a consent waiver from the property owner and a warranty and indemnification provision
from the contractor undertaking the work.
It is estimated that the remaining flat rate customers in former cities of Etobicoke and Toronto which are approximately
53,500 may have a reasonably adequate supply of water and consequently may not be interested in the private side water
service repair incentive. Alternatively, the City may choose to install a low flow toilet for these homeowners as an
incentive to installing a water meter. A number of Canadian municipalities (City of Barrie, Durham Region, Region of
Waterloo and City of Victoria) have implemented low flow toilet change-out programs as a water efficiency initiative. Low
flow toilets are required in all new home construction under the current Ontario Plumbing Code and Ontario low flow
toilet manufacturers are required to meet the standards established by the Canadian Standards Association, which exceeds
other manufacturers such as ASTM. These cities have found that the complaint frequency regarding the operation of low
flow toilets which are CSA approved is less than 1%. The cost of a CSA standard low flow toilet is approximately $300.00
per toilet, or approximately $15.6 million for the remaining flat rate customers.
These major incentive programs will require additional funding in the amount of approximately $29 million. One possible
source of funding is to defer the rate decreases in the former City of Toronto for 5.5 years, plus a 4 year increase in flat rate
fees would generate funding in the amount of $50.5 million. This funding would be sufficient to fund the $21 million cost
of universal metering and the $29 million in major incentives. Alternatively, the $21.0 million which has been held for
Universal Metering in the 1999 Capital Budget plus a 3.5 year deferral in the rate decrease, combined with a 4 year
increase in flat rate fees will provide sufficient funding for the major incentive programs.
This deferral of decreases will however, have an impact on the four year water rate harmonization strategy which Council
has adopted and further may be considered an unfair hardship on the former City's metered customers to defer the water
rate decrease for a longer period to fund the major incentive programs. Consequently, the three year rate deferral for the
former City of Toronto metered customers is being recommended along with a four year 5% per annum increase on the
un-metered customers rates as the financing strategy. This funding option will generate approximately $26.2 million, thus
providing funding for the Universal Metering Program and a further $5.2 million towards a water efficiency incentive
program. The additional revenues will be sufficient to provide a $60.00 incentive for flat rate customers to install an ultra
low flush toilet. Flat rate property owners will be eligible to apply for this incentive by showing a proof of purchase receipt
for the ULF toilets. This incentive is consistent with that offered under the Ultra Low Flush Program for the
multi-residential sector which has been recommended under a separate report on this agenda.
(B)Mandatory Programs:
A mandatory program assumes that customers cannot be sufficiently motivated to convert to metered service, and that
mandatory conversion would be enforced by by-law. Mandatory conversion programs have been utilized by other cities.
The Region of Niagara recently adopted a by-law requiring that their 24,000 flat-rate customers be metered within
one-year. Customers who refuse entry to permit conversion, after sufficient notice is given, will be subject to a flat-rate
charge increase of 300%.
If a mandatory program is adopted, then incentives may be considered as unnecessary. Thus any of the funding options
described in the previous section that provide the necessary $21.0 million in funding may be used.
As previously discussed, the former City of Toronto enforced a minimum mandatory program where by new home
construction, homeowners undertaking plumbing upgrades and homeowners participating in the water service repair
program were required to have a meter installed. It is proposed that these mandatory requirements continue and further that
purchasers of homes which are currently on a flat rate system agree to allow the City to install a water meter, free of
charge, as a condition of the City providing a clearance letter at the time of ownership transfers.
Installation of Water Meters Evenly Throughout all Neighbourhoods:
One means to ensure that water meters are installed evenly throughout all neighbourhoods is to specify that work be
undertaken in designated geographic areas with a large number of installation crews, with first priority given to customers
on a waiting list. It may be possible to assign one or more crews per Ward for those Wards which have a large number of
flat rate properties. The 1,500 flat rate customers in Etobicoke could be included with the crew responsible for the Toronto
High Park Ward, which has a large number of existing metered properties throughout the Swansea area. In the past,
approximately 5 to 7 contracts were called annually under the former City of Toronto Water Service Repair Program, and
the same number could be called for the meter conversion; there may also be opportunities to combine contracts for both
programs. The number of flat rate customers by geographic area is estimated as follows:
Geographic AreaEstimated Number of Flat Rate Customers
Ward 19 and Part of Ward 212,400
Ward 20 9,010
Ward 2113,300
Ward 2212,600
Ward 23 and 2413,250
Ward 2510,870
Ward 2615,070
Total86,500
Billing Due Dates & Meter Reading
The existing water by-law for the former City of Toronto allows an early payment discount if the account is paid in full one
calendar month from the due date and the due date is the last day of the month in which the account is billed.
Most water billing systems in the other former municipalities allow customers between 15 and 21 days to pay and qualify
for the discount.
With the new water billing system, the billing of accounts will be done evenly throughout the month. In order to
accomplish this, the existing by-laws must be amended to allow for flexible due dates within the existing cycles and to
allow the former City of Toronto water customers at least 21 days to pay the bill in full to qualify for the early payment
discount.
With respect to meter reading, the Finance Department and Works and Emergency Services Department are jointly
investigating a full range of meter reading and billing options and automated meter reading technologies, and will prepare a
service rationalization report for a harmonized meter reading system(s) which will be presented to the Budget Committee
and the Works Committee in the Fall of 1999.
Conclusion:
This report presents various funding and implementation options available for the water meter conversion program for flat
rate customers in the former Cities of Toronto and Etobicoke. Funding may be achieved by the deferral of the decreases
that the former City of Toronto customers would have realized under water rate harmonization and/or by rate increases
specific to flat rate customers. The amount of funding depends on the length of term that the decreases are deferred and on
the degree of increases to flat rate charges.
Implementation can be made through a voluntary or a mandatory program. Participation rates in voluntary programs may
be increased through the use financial motivation and/or incentives. One means to motivate flat rate customers to convert
to metered service would be to increase flat rate charges. However, such increases should not act as punitive measures to
those customers who wish to accelerate their conversion, but may have to wait due to the logistics involved in coordinating
such a large number of conversions. Establishing a priority list based on first-come first-served, and ensuring that meters
are installed evenly throughout all neighbourhoods can alleviate much of this concern.
Incentives are another means to motivate customers in a voluntary program. Incentives can included a subsidy towards
water efficient low flow toilets, or a subsidy towards the repair of deficient water service on private property. Offering the
full cost of these incentives would be prohibitively expensive for the City's water customers. Mandatory programs render
incentives as unnecessary, as conversion would be mandated by by-law.
This report recommends a voluntary program with modest subsidies and escalating increases to the flat charges as an
appropriate means to achieve the necessary participation. Such a program would be entirely funded by former City of
Toronto water customers through a three-year deferral of the decreases that would be realized by their metered customers
under water rate harmonization, in conjunction with escalating increases in flat rate charges. It is believed that, as flat rate
charges escalate, most customers will be motivated to convert as their awareness of the benefits of metered service
increase.
To successfully implement this type of voluntary metering program, it will be necessary to initiate a comprehensive public
education program explaining the benefits of the "User Pay" principle and the opportunities to reduce water charges
through indoor and outdoor water conservation practices. Further, the communication program will explain the water
efficiency measures contained in the recommended program along with the sign-up procedures for having a meter installed.
Contact Names:
Joe Farag
Director - Development Policy & Research, Finance Department
Tel: 392-8108
Michael A. Price, P.Eng., FICE
General Manager, Water and Wastewater Services
Tel: 392-8200
Wanda A. LiczykBarry H. Gutteridge
Chief Financial Officer and TreasurerCommissioner, Works and Emergency Services
