MAPLETON – A plan to postpone the pain of a large rate increase for water system users here was approved on Jan. 18, with some members of council expressing hope that new funding sources can be found to keep rates lower long term.
During a special meeting, council approved a 10.53 per cent increase in base 2022 charges for local water and sewage system users in Drayton and Moorefield.
The impact for the average residential rate payer is expected to be a monthly increase of $12.14.
While that’s a big drop from the increase proposed to council on Dec. 20, finance director John Morrison says an additional increase will likely be necessary in 2023.
In a report to council, Morrison provided council with two options for setting rates.
He explained water and wastewater rates are being driven up by debt charges required to finance the escalation in construction costs of key capital projects, including the Drayton water tower.
The initial option provided to council in December was a 22.1% increase in the rates for 2022. The impact for the average residential rate payer would have been a monthly increase of $25.48.
“Recently, staff has learned that a 2021 capital project, sludge removal from the lagoons, will not cost its budgeted $500,000,” Morrison stated.
“A savings of $400,000 has been factored back into the rates. Option one reflects this savings and builds immediate financial flexibility into the rates.”
The increase in the rates if option one is adopted would be 20.24%, resulting in a monthly increase of $23.34.
Option two defers the transfer of a $2.1-million loan from the township’s capital reserves to the environment services discretionary reserve fund by one year.
“Therefore, the rates would not be burdened by the carrying cost of this loan until 2023. The yearly debt charges are $131,460 per year. The increase in the rates would be 10.53%,” Morrison explained in the report.
“The impact for the average residential rate payer would be a monthly increase of $12.14.”
“If we do option two, which is the deferral option, and nothing else changes in the plan or there’s no new sources of funding or grants, are we looking at re-evaluating the rates again in 2023 to make up for this deferral?” asked councillor Paul Douglas.
“In all likelihood? Yes, you would have to,” replied Morrison.
“Once we make a commitment, and we’re going to use the taxpayers money, the rate payer is on the hook to start paying that back over the next 25 years and there will be a cost of carrying that. So you would have to increase the rates so that it would reflect the 20% increase that is in option one,” Morrison explained.
“So you’re making a decision and buying yourself a little bit of time to figure out: Are there other funding sources? What’s the master plan going to say? How expensive is it? What do we really need to raise as we’re moving forward? Because this is … I imagine to the ratepayer, getting kind of annoying.”
“So we do 10 per cent this year and we find no other sources of funding, we need to find that 12% … probably 12% or more, which would be [what we’ll] be asking for in 2023?” asked Mayor Gregg Davidson.
“I believe that would be correct,” Morrison responded.
“Would it be reasonable to suggest that instead of a 20 or 22% increase, instead of 10%, could we go in the middle at 15%? Would that make it any better at all?” asked councillor Dennis Craven.
“That’s up to council … if you want to go up by anywhere in between, I can figure out the math,” said Morrison.
Councillor Marlene Ottens suggested option two resulted in a reasonable increase for ratepayers.
“That’s what? Fifty cents a day? Sixty cents a day?” she observed.
“I came up with 40 cents a day, but … yeah, you’re reading it correctly. It’s about 40 cents a day,” said Morrison.
“When you break it down like that, does that sound so terrible?” Ottens wondered.
“I guess it’s easy for me to say when I’m the only one on council here who doesn’t have to pay that (Ottens lives in the rural area of Mapleton), but 40 cents a day for fresh, clean water … sometimes I think we underestimate the value of water and the we really have to remember that it’s probably one of the most important things that we’re putting our money towards.”
Councillor Michael Martin asked if the anticipated $2-million contribution to the water tower project from development charges was a realistic figure.
“Is that everything that was in the development charge reserve? Or is that all that the growth-related allocation (formula) would come up with?” he asked.
Morrison replied, “Based on the … DC study that was pretty well what you can get out of the DC is $2 million for the water tower.
“We’d have to reopen the bylaws, redo the studies – and maybe once the master plan is completed, that can be revisited in terms of how much money the development community should be contributing.”
“I think that’s a good idea too,” said Davidson.
“And I know that Mr. Baron (CAO Manny Baron) and I have talked about reopening the DC charges, because it is important.:
The mayor added, “I know that other areas are doing the exact same thing with the price increases that are going on out there in the community. And when those charges were put in place, we didn’t have the high costs that we’re seeing now.”
In July, council awarded the contract for the Drayton water tower at a bid price of more than $6 million, about 50% higher than an earlier design cost estimate of around $4 million.
At the time, a report from engineering consultants CIMA noted the significant price difference was predominately driven by the pandemic-related global escalation in construction material costs.
The report pointed out the price of steel rebar increased by approximately 76% between May 2020 and May 2021, and approximately 30% just within the six-week tendering period for the Drayton elevated tank. Prices of other construction materials including wood, copper and stainless steel were at an all-time high, the report noted.
“We’re setting these rates for Drayton and Moorefield and the water and wastewater system we have is for both areas and we do have significant amounts of work to be done in both areas,” said Davidson.
“I know the water tower is a significant undertaking that we’ve done … but we also know that in Moorefield, they have about four or five million worth of projects that need to be done.”
Davidson continued, “We are one system and we have to be one system, because there is no way that 100 users in Moorefield could pay for $5 million, that’s for sure.
“So it’s a good thing. We actually moved it to one system and everybody’s paying the same rates.”
In a recorded vote, a motion to accept the staff report as information and direct staff to amend the township’s fees and charges bylaw based on option two for setting the water and wastewater rates for 2022, effective Feb. 1, was approved unanimously.
