At this week’s Council Meeting, Gary Scandlan of Watson Associates presented a Water and Wastewater Rate Study outlining the implications of compliance with the Water Opportunities Act of 2010 which requires among other things, a detailed water financial plan for all municipal water and waste water services.
With current infrastructure in the village dating from the 1970’s, significant capital investment is required to sustain the current services. Coincidentally, new development in the municipality also require new infrastructure to provide municipal water services. While the new development will ultimately cover the cost of this new infrastructure, there is a timing gap as the service capacity expansion must occur prior to the introduction of user fees as new users come on stream. It makes economic sense to address the upgrade and the expansion infrastructure expenses at the same time, so the township is facing significant capital expenditures over the next ten years in order to bring these services on line.
In his report, Scandlan outlined the capital spending requirements for new and existing infrastructure for both Water and Wastewater services, and indicated how these expenses might be funded. Total capital spending for Water Services is projected to reach $8.6 million. Of this total, $5.1 million is related to demand stemming from growth. For Wastewater systems, the numbers are higher: total expenditures are forecast at $25.3 million, almost $22 million of that is for growth. Total capital expenditures for the period are projected to approach $34 million. These expenditures include expanding and upgrading the Millbrook Wastewater Treatment Plan, upgrading of the Tupper Street Primary Sewage Pumping Station, replacement of the existing standpipe, construction of a second storage facility and the extension of water and wastewater services along County Road 10.
How will the township pay for these capital expenses? The good news is the township has received funding for a significant portion of these expenses from the Canada Build Fund, totalling almost $ million. An additional $5.6 million is available in reserves earmarked for water services and the remaining $14.4 million will be raised through 10 year debt provided by the Ontario government Infrastructure fund.
The financing of water services is governed by the Safe Drinking Water Act, which requires that municipalities charge the full cost of providing safe water, preparing the cost recovery plan, providing a long term financial strategy to their customers through user fees. In other words, Water & Wastewater services are fully funded through the user fees and do not affect the taxes paid by those outside the service area. Working with Township staff, Scandlan recommended new user rates that would meet this legislative requirement. The proposed changes to existing Water will increase the base and volume charges by 20% per year from 2016-2020, with no increases thereafter. The Wastewater User Fees will increase at 15% per year from 2016 to 2020 with no increases thereafter. The rate increases will be applied to the first Water and Wastewater billing cycle of 2016, and were approved by Council on Monday. The stable rates after 2020 are possible because operating expense increases will be offset in the later years as new users come on stream and offset the rising costs.
Other communities are facing similar funding issues and rate increases of 10-12% in water service rates over ten year periods are the norm. The proposed financing and rate increases can be viewed as aggressive, but as Finance Director Kimberley Pope explained, lower rate increases over longer periods of time, or extending the debt maturity beyond the contemplated 10 year horizon will only increase the ultimate cost of these mandatory projects. Councillor Belch summed up the situation by saying the municipal rate payers would receive “Short term pain for long term gain.” At the end of this infrastructure spend, Millbrook residents will enjoy sustainable, reliable water services with drinking water of the highest quality which will meet the standards of pending legislation.
While Councillor Huntley was uncomfortable with the magnitude of the rate increases, Deputy Mayor Fallis commented that those not on municipal services must absorb the entire cost of wells, septic and water purification systems and pumps for their water usage which can easily approach over $40,000 to install. Ms. Pope concluded that there was no way to avoid this significant capital investment, and the timing of the expenditure is good because of the user growth. Mayor McFadden also acknowledged that the spending is unavoidable, and by law must be absorbed entirely by the service users, but the new debt issued to pay for it will absorb 60% of the township’s current debt capacity which could limit capital investments in other parts of the township.