Universal Water Metering: Financial analysis

Several requests have been made for additional information to assist on decision making for the upcoming referendum on water meters. Below is a financial analysis.

A. Project costs:

1. Installation: Water meters must be placed in new, larger boxes within a local environment that may range from loose soil to conglomerate. Based on quotes received, we estimate that the average installation cost will be $1000 per household.  
2. Hardware: Several types of meters were considered. The selected meter communicates usage information to a remote server, eliminating the need for drive-by or walk-by readings. The cost is $300 per unit. The cost for a new, larger box and miscellaneous equipment another $100. An additional charge of $20 annually per unit for data storage is offset by eliminating the need for VPID staff to read such meters on-site. For 250 meters, the annual cost is $5,000.
3. Total Capital Cost: The total capital cost for 250 meters is 250 X $1,400 = $350,000.

B. Potential Savings and Economics:

• The annual cost to borrow $350,000 at 2.0% over 15 years is $29,000, resulting in an annual tax increase of $106 for all properties, connected or not.
• The majority of operating costs are fixed (such as daily labour, insurance, audit fees) regardless of the volume of water consumed. A 15% reduction in water usage will only affect hydro and chlorine costs. The annual savings are estimated to be $1,000.
• Potential labour savings in finding leaks on private property is estimated to be $1,500 per year.
• Over the last 4 years, the cost to truck in water averaged $2,000 per year. Assuming meters would eliminate the need to truck in water results in a $2,000 annual saving.
• The cost to collect and administer data is estimated to be $7,500 per year in addition to the $5,000 mentioned above in A.2.
• In summary:      
  • Annual savings            =   $  4,500 
  • Annual costs                 =     41,500    
  • Net increase in costs =   $ 37,000

Conclusion: 

1.    There is no economic benefit to installing water meters since the total annual cost for water would increase an estimated $37,000 per year.

2.    The only justification for installing meters is to allow VPID to move towards a consumption-based invoicing system whereby full-time residents would pay considerably more and part-time residents slightly less for water.

3.    Note that all property owners not yet connected to water would have a tax increase of $106 per year. 

C. Consumption Based Invoicing:

• The current system recognizes that most operating costs for providing water are fixed no matter what volume of water is produced and consequently each connected property is charged the same toll. Suppose instead that all operating costs, fixed or otherwise, are charged to a residence according to how much water is consumed. Three alternative scenarios for consumption-based invoicing are analyzed:

1.    A couple living full-time on Mayne and consuming 120 gallons per day.

2.    A couple uses their residence only during the summer or 62 days.

3.    A couple uses their residence all year but are there only 30% of the time.

• The below calculations are based on tolls reverting to normal rates after the accumulated operating deficit eliminated and operating costs for water become $.0306/ gallon:

	Base case	Meters added	Full time	Summer only	Part-time
Tolls	$500	$534	$1,340	$228	$402
Taxes	$400	$506	$506	$506	$506
Total	$900	$1,040	$1,846	$734	$908

• The conclusion is: that full time residents would see a significant increase in water costs, while summer only residents will save in the range of $166 per year and those who use their properties part-time year-round would see little change.