Special update: Water rate structure review
Happy Friday!
Sending out an extra newsletter issue this week, because staff have completed a fulsome review of water, sewer, and stormwater rates, including how they are structured and determined.
This update was originally a part of next Tuesday’s regular newsletter, however, the item will be at Council for discussion and a vote next Wednesday, and given its importance and potential impact, I decided to send it separately ahead of time.
Background
In 2016, the City Council of the day completed the first-ever review of the water rate structure since amalgamation.
Along with the introduction of fixed service delivery fees and a tiered water rate, there was the separation of stormwater and sewer charges. The City also began charging properties not connected to the sewer network for stormwater.
Residential properties went to fixed stormwater rates, while the stormwater charges for non-residential properties were based off the assessed property value.
At the time, staff noted basing stormwater charges on assessed property values was unfair, as value is not always a reflection of the demand placed on the stormwater system by a property. Staff considered a model using impervious surface area, but data and technology was not yet at a point where it was suitable for billing.
Understanding that, plus years of resident feedback (including from Barrhaven East residents), the current City Council directed staff in December 2023 to review the water rate structure, including a fairer method of charging for stormwater.
Results and recommendations went to a joint session of the Environment-Climate Change and Agriculture-Rural Affairs committees, where it passed, and will rise to next Wednesday’s City Council meeting for further discussions, amendments, and a vote.
Summary of changes and impact
If approved, the new rate structure will take effect spring 2027.
The overall impact to non-residential water bills will be an average increase of five per cent. Multi-residential water bills will average around zero per cent, while residential water bills will decrease by an average of two per cent.
(Disclaimer: Despite average increase and decrease percentages, actual billed amounts are still subject to overall annual increases between now and 2027 and assumes your usage habits don’t change.)
The redistribution of fixed service delivery charges will make it more even between property types, while the fire supply fixed charge and the water fixed charge will combine into one.
The City will introduce a new levy to rural water bills to fund rural ditch maintenance, while a part of stormwater charges collected in urban and suburban communities will go to ditch maintenance inside of the urban boundary.
Culvert maintenance funding is moving from stormwater to the general property tax levy for road maintenance. The impact of this shift will be neutral, as it’s a funding source shift from the water bill to the general property tax levy.
A detailed breakdown of the changes follows.
Water and sewer
Currently, there are four tiers of drinking water rates for all properties:
Tier 1 – first six cubic metres
Tier 2 – seven to 25 cubic metres
Tier 3 – 26 to 180 cubic metres
Tier 4 – more than 181 cubic metres
The existing tiers are unfair, considering the typical residential property uses about 15 cubic metres of water, while usage by multi-residential and non-residential properties typically exceeds 181 cubic metres by a significant amount.
That means residential properties currently pay higher per-cubic-metre rates than other property types (since Tier 4 pricing doesn’t change regardless of how much more than 181 cubic metres of water a multi- or non-residential property uses).
Under the new structure, there will be two tiers, but various categories: residential, multi-residential, and non-residential properties.
Drinking water usage charges for residential properties will fit into two tiers, Tier 1 for the first 15 cubic metres and Tier 2 for anything more.
Tier 1 for multi-residential and non-residential properties will be up to 250 cubic metres, with Tier 2 for anything more. The only difference is the non-residential use rate decreases from Tier 1 to Tier 2 to offset the higher fixed charges for those properties.
Sewer usage charges will also realign with the new tiers.
Water and sewer usage fees in a residential water bill will decrease by an average of four per cent, while multi-residential and non-residential properties will see an increase to their water and sewer usage fees by an average of three per cent.
Stormwater
The determination of stormwater charges is the most notable change out of the water rate structure review. Currently, stormwater charges are fixed charges based on the assessed property value alone.
In their report, staff note the general unfairness of the current method, considering only five per cent of properties are non-residential, yet they make up 45 per cent of the City’s impervious surface area.
Impervious surfaces are hard surfaces that create runoff during rainfalls and snow melts, including the dwelling structure, driveways, and pool decks (pools excluded).
Runoff creates demand on the stormwater system of catch basins, pipes, and ponds. Since larger impervious surfaces generate more runoff, the current model burdens residential and multi-residential properties with disproportionate stormwater rates.
At the time of the 2016 water rate structure review, available data, and technology to find impervious surface areas was not yet at a suitable state for billing purposes.
Technological advancements since then have now given staff a complete picture of the City’s impervious surfaces, using aerial images and artificial intelligence-enhanced data processing.
Staff explored four options for stormwater rates: status quo, exact, tiered, and blended. The status quo was for reference, but not considered.
The exact measurement method multiples the exact square metreage (rounded to the nearest square metre) of each property’s impervious surface area by one set stormwater rate. The rate, $0.67/square metre, is based on 2024 costs.
The tiered method takes the exact measurement, but places properties into tiers, each with a progressively higher rate.
However, property owners would be able to appeal the stated square metreage of impervious surface of their property. Given the number of properties across the City, staff noted the exact and tiered methods may become administratively burdensome and did not consider them.
Thus, staff recommended the blended model.
The blended model groups residential properties (95 per cent of all properties in Ottawa) into fixed categories, detached, semi-detached, townhouse, and apartment, based on their MPAC assessment property code.
A different stormwater flat rate applied to each category based on that category’s citywide average impervious surface area:
Detached (252 square metres) – about $168 annually, average decrease of 20 per cent.
Semi-detached (167 square metres) – about $111 annually, average decrease of 45 per cent.
Townhouse (127 square metres) – about $85 annually, average decrease of 15 per cent.
Apartment unit (55 square metres) – about $37 annually, average decrease of 65 per cent.
The decreases noted above include a decrease due to changes in ditch maintenance funding structure, explained in the next section.
An exact rate charge of $0.67/square metre will apply to residential properties with more than 500 square metres of impervious surface, being 198 residential properties in Barrhaven East.
Non-residential properties with less than 15 square metres of impervious surface will receive a $10 base rate charge, while those with more than 15 square metres will have an exact rate, also $0.67/square metre.
The blended rate model accounts for differences between residential and non-residential properties, making stormwater charges more equitable based on actual demand each property type places on the system.
Property owners billed under exact measurements will have the choice to appeal the stated square metreage of impervious area on their water bill after the new structure takes effect in spring 2027.
Ditch and culvert maintenance
Roadside ditches play a crucial role in managing stormwater runoff. They primarily serve as drainage to prevent roadway flooding, damage, and base erosion, but ditches also filter runoff water, improving its quality.
Roadside ditch maintenance is important to ensure proper function, but has declined since amalgamation, especially in rural areas.
Currently, 95 per cent of stormwater revenues are from communities inside of the urban boundary (downtown and all suburbs), yet 15 per cent of total revenues go to the rural area.
In response, a separate rural ditch maintenance levy will apply to properties outside of the urban boundary, which will fund rural ditch maintenance.
Effectively, this means stormwater charges inside of the urban boundary will decrease by 15 per cent. Additionally, urban stormwater revenue will include a new dedicated roadside ditch maintenance fund for roads inside of the urban boundary, like Prince of Wales drive.
To reflect these changes, as part of the 2026 budget process, the City will create two ditch maintenance programmes, one rural and one urban, with service beginning in 2027.
Culvert maintenance, meanwhile, will shift to a road maintenance responsibility. The culvert funding source will also shift from the stormwater charge into the general property tax levy (subtraction from the water bill offset by an equal addition to the general tax levy starting in 2027).
Fixed charges
Aside from the water and sewer usage rates, and stormwater charges, the rate review will also adjust the fixed charges.
Fixed charges (sometimes called service delivery charges) primarily fund water infrastructure maintenance, including static costs, which make up about 90 per cent of costs.
A small part of the fixed charges also contributes to a stabilisation reserve fund, in case of an emergency repair or fluctuations in usage rates, as to soften or absorb unexpected cost increases.
Water meter size decides the fixed charges. Currently, 20 per cent of all water bill revenue comes from fixed charges, with an uneven application.
On average, 39 per cent of a residential water bill is fixed charges, compared to five per cent on multi- and non-residential bills. That means residential properties pay an average of seven per cent more per cubic metre of water.
As part of the water rate structure review, staff have recommended increasing the part of revenues from fixed charges from 20 to 35 per cent, along with an update to fixed charge ratios to ensure a more even distribution across property types.
Additionally, the fire supply fixed charge will combine with the water delivery fixed charge, mostly because the water flows from the same pipes, making it incredibly challenging to measure hydrant supply.
Next steps
Committee approved the staff report earlier this week and will rise to Council for another round of discussion, potential amendments, and a final vote on Wednesday, May 28.
If approved as is, the new water rate structure will begin in spring 2027.
Flow monitoring devices
Separate from the water rate structure review, City staff also amended the Water By-law to add language prohibiting the attachment of flow monitoring devices to water metres without the express consent of the City.
Flow monitoring devices come in all sorts of shapes and sizes and are useful for conservation and early detection of leaks. They are simple attachments to/near a water metre and are not intrusive or damaging to the device and pipe, when used properly.
However, during the Committee meeting, staff clarified that the language was not a total ban on those devices — rather, it is a need for permission since water meters are the property of the city.
Out of that meeting, the City will begin due diligence work on different devices currently available and work with manufacturers for a solution that may be less administratively burdensome. The solution could include blanket “pre-approval” of certain device types.
An update by memo will follow that work, though there currently is no timeline.
The original water rate review staff report is 77 pages long (Joint Agriculture and Rural Affairs and Environment and Climate Change Committees↗), so I hope I have explained it clearly and concisely. Please reach out by replying to the newsletter or by emailing Wilson.Lo@ottawa.ca if you have any questions or feedback!
Thanks, and we’ll return to our regularly scheduled Tuesday newsletter on…well, Tuesday.
-Wilson