There might be no shutoff valve to stem the rising tide of potential water and sewage rate increases here.
Many at a public meeting held recently here were either staff members or councillors; however there was also representation by local residents and the business community.
Mayor David Anderson said there have been a lot of changes in the past five years in the area of water and wastewater costs. He said that in 2005, Minto undertook a full cost water and wastewater rate study That report resulted in a 10-year rate forecast to recover anticipated capital and operating costs of water and wastewater services.
However, in recent years, the town experienced lower than expected revenues, resulting from increased capital needs and the transition from a non-metered system to meters.
As a result, council again brought in Watson & Associates to review the water and wastewater rate forecast.
Anderson said the idea is to determine the costs to maintain the current system and be prepared for future costs as well.
Andrew Grunda, of Watson & Associates Economist Ltd., presented the report on the current status of costs and what will be needed for full cost recovery. Under provincial legislation, he said, municipalities must do studies to consider full cost recovery for water and sewage systems.
He said capital needs forecasts have increased dramatically over what was identified in the 2005 study for water and wastewater.
In water, the study projects a $4.5-million increase (62%) based on:
– Clifford water system, which included construction of a new water tower and watermain construction, and
– Harriston water system, which included a pumphouse contact chamber and Arthur Street connections.
Wastewater capital costs jumped $7.7-million (114%) which includes Harriston sewage plant upgrades and capacity expansion and wastewater main works for King Street, Prospect Street and York Street.
In addition, costs predicated by the Safe Water and Clean Drinking Water Acts will have additional impact in the areas of monitoring of water and sewage works in the town.
Grunda said fiance options include :
– an up to date capital financing strategy;
– water capital needs increase that will be financed through debenture;
– wastewater capital needs that will be financed through debenture; and
– increased operating fund contributions.
Operating costs
Water costs were projected to increase from $1.1-million to $1.2-million by 2014.
If agreed to implement the full extent of the proposed rates, the current flat water rates could jump from $33 per month to $54.38 in 2014, and sewage rates rise from $27.50 to $78.33 over the same period.
Elsewhere, he noted that some users who had moved from flat fees to metered rates ended up consuming less of the service.
However, there are certain fixed costs to operate the system.
Grunda added that an important part of determining the costs is a forecast of future needs. While Minto has some metered customers, he said the industrial and commercial use accounts for only 17% of the overall use between those 73 customers.
Most business and residences are charged flat rates per month. He explained the capital needs forecast does not reflect the day-to-day operations, but rather the costs associated with the assets themselves.
He said that even though council can consider financing, it must take into consideration other capital assets of the municipality such as roads, community centres, and other portions of its infrastructure which may require upgrades or repairs.
Assuming some money is borrowed, Grunda said those funds could be used to smooth out initial rate increases.
“But where the rubber hits the road,” he said, is the area of salaries and ongoing monitoring and testing.
Those are annual costs.
He said that while costs in 2008 were relatively consistent with previous years, new regulations will require more testing and monitoring, which means less revenue will be available to cover capital costs.
“In short, at the end of the year the municipality needs to ensure that it can collect enough money to sustain the current assets and provide for future needs.”
He said the study considered those needs and to cover those needs, a substantial amount of revenue is required.
He projected sewage rates increasing at roughly 20% per year between now and 2014, with water rates increasing, but at a slightly lower rate.
Grunda said council could use debt financing to offset some of the initial impact and to gradually increase the rates to make the process more affordable and equitable.
He added the municipality could also choose to implement rates lower than the report recommends.
However, that approach, he said, only defers upfront costs and would ultimately end up affecting future water and sewer rates.
He agreed not all municipalities implement full cost recovery for water and sewer rate – but all municipalities are required to file financial plans outlining the full costs and how it plans to address those costs.
Grunda said Minto is taking a proactive approach by looking at this earlier.
He agreed that while some grant monies are available – not all municipalities are treated equally.
Minto applied for Canada Ontario Municipal Rural Infrastructure Funding grants three times for assistance with water and sewage-related issues, only to be turned down three times.
He added that sometimes the shear size and density of a municipality can affect costs.
Grunda said larger urban centres with integrated water and sewage systems can sometimes integrate larger projects at lower costs, unlike municipalities such as Minto which has a number of small systems over a wide geographic area.
When asked if businesses have the choice of operating under flat or metered rates, Treasurer Gord Duff, said currently it is only an option for buildings with three or more units.
Grunda noted that use forecasts are based on estimates while implementing metering would provide more empirical data to work with.
Residents and business owners at the meeting questioned why the municipal had not already implemented metering throughout the urban areas of the township, since it would provide more equitable billing.
Many had a real concern of some rates potentially doubling in the next several years.
Grunda again pointed out that at the end of the day, the municipality still needs to collect the same amount of funds to sustain its water and sewage treatment system.
“Obviously in a user pay system, metering is a good approach to better serve the users.” At the same time, he warned that there are additional costs to install, maintain, and read the meters.
“I’ve found that in smaller systems, municipalities need to weigh the benefits versus the additional costs.”
While he said he believes moving to metering would be a prudent move, it does not always encourage conservation. But, when individuals can see the impact to their personal bills, they have the choice of choosing to conserve water or not. For those cases, he has observed more sustained conservation.
Duff said “we agree that the flat rates are not fair,” but he added they are less expensive to administer.
Concerns were raised that the projected costs are going up 20% per year while residents would be lucky to see increases of 3% to their wages.
Duff added the municipality is still lobbying for funds for its various infrastructure costs – which would in turn affect the need for rate increases.
While the municipality considers the funds as investments within the community, the response they had received from their funding applications was that their water and sewer systems are not in critical need.
He estimated that on the various COMRIF applications, Minto spent over $15,000 in engineering fees to fill out those application.
“It’s a double whammy when you don’t get the grant.”
