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Posted: February 3, 2017 at 9:00 am   /   by   /   comments (1)

Committee member feeling obstructed in pursuing answers in waterworks meeting

As the committee tasked with examining the County’s waterworks system nears an April deadline, tension is building, and patience around the table is wearing thin. Frustration built up during the meeting and culminated near the end of last Wednesday’s session at Shire Hall sparking an angry exchange between chair, Janice Maynard, and committee member, Graham Shannon.

Shannon felt he had been shut down prematurely in his questioning of the County’s consulting economist Andrew Grunda— and that the chair was obstructing due process.

MATTER OF INTERPRETATION
Since 2007, Grunda has advised the County on development charges and waterworks rates and charges. Essentially, his job is to take the total amount the County figures it needs for things like development infrastructure for new homes and waterworks and calculate a fair and reasonable way to allocate these costs to consumers and taxpayers—following rules prescribed by the province.

Underlying Grunda’s work and modelling are assumptions and variables he uses based on his experience and training. Some of these assumptions and variables are ultimately subjective— meaning that they are his opinion. It is not always apparent to the observer which are opinion and which are fact.

Shannon has been the leading voice on the waterworks committee challenging the consultant’s opinion. That is when he runs afoul of the chair.

Grunda appeared at the committee last week to explain his methodology and answer questions. He is a professional and accustomed to defending his work and methods. Yet Maynard felt it necessary to intervene repeatedly between Shannon and Grunda.

Some of Shannon’s questions were rather pointed. This is because the implications are massive. The County already has one of the most expensive waterworks systems outside the Greater Toronto Area—much higher than any neighbouring jurisdictions. Proposed new rates and connection charges will amplify the relative disadvantage of building and developing in the County. This is Shannon’s main concern as president of Sandbank Homes. But his questions mirror the concern many homeowners have, which is: Why are my waterworks rates so much higher than other communities?

Specifically, Shannon and Grunda squared off on a key principle underlying the consultants’ analysis—a principle that proved, under close examination and questioning, to be more an issue of philosophy and interpretation than a hard and fast rule.

PAST CONSTRUCTION, FUTURE BENEFIT
In overly simple terms, the issue deals with unused capacity in the waterworks system—and how much future homeowners should pay for this in-the-ground capacity. Grunda noted that under the guiding legislation, this excess capacity represents a benefit to future homeowners and therefore they should pay for it. But how much?

Grunda feels future homeowners should pay today’s replacement costs for this excess capacity—even though it has already been paid and is sitting in the ground. Costs, in this context, are always replacement costs.

But Shannon argues a fairer way to value this benefit is to discount the actual cost—not today’s replacement cost— by deducting the used portion and any grants or senior government money. This, he says, is closer to the real cost of the benefit being transferred to future homeowners.

Shannon contends that replacement costs may be useful for unbuilt plant capacity—because that money will have to be spent. But existing excess capacity has already by bought and paid for.

Using Grunda’s approach loads the model with millions of costs that, Shannon says, is wrong and unnecessarily punitive to new development.

But he struggled to make his point due to frequent interruptions by the chair. Maynard accused him of badgering the consultant. At one point Maynard looked to CAO James Hepburn for support in shutting down Shannon’s line of inquiry. Hepburn said they were fair questions and deserved answers.

Councillor Maynard did not respond to request for comment for this story.

CAO James Hepburn offered the following comment in the councillor’s stead.

“The chair allowed for considerable debate to take place prior to calling for the vote to receive Mr. Grunda’s presentation,” wrote Hepburn. “The Ad-Hoc Committee is not restricted from inviting Mr. Grunda to attend a future meeting to discuss further the methodology used or the alternate experts that Mr. Shannon has referenced.”

He added the committee would consider hearing from other consultants when it meets next on February 8.

WHICH CHARGE FITS
Grunda acknowledged, however, that the value attached to the excess capacity was indeed subject to interpretation.

This was key, because the County is one of only a small number of municipalities that collect waterworks connection charges outside of the development charges act. Put another way, nearly every municipality follows the rules prescribed by the province’s development charges act to fund capacity for future residential development.

The County chose to go its own way in 2007, based on Grunda’s advice. This municipality had come very late to development charges— many jurisdictions had had them in effect for nearly a decade by the time the County got around to it. The County’s waterworks were a mess. Picton, in particular, had come to amalgamation with a sewage treatment plant at the end of its life and terribly leaky water system and a vulnerable intake pipe in Picton Bay. Worse, the town had failed to put aside any money to repair and replace these aging and decrepit systems—priding itself on keeping rates low.

The County’s marriage also brought with it an underfunded system in Ameliasburgh and an obscenely expensive water deal with Belleville to serve Rossmore and Fenwood Gardens. Then there are the 19 homes served by the well at Peat’s Point—by far the most expensive water system per capita in the region.

The big losers in this arrangement were the residents of Wellington with a nearly new water and sewage treatment system with extra capacity and the ability to grow as demand increased.

COSTLY CONNECTIONS
The size of the funding gap is too great to be filled by development charges—which were strictly prescribed by the province for future development. Grunda advised counsel to pursue connection charges instead, because the rules aren’t as restrictive—allowing the municipality to charge massively more for new development.

Currently, the County charges $12,295 for connection to the water and sewer system. This compares to $8,789 in Quinte West and $3,577 in Belleville. But it gets worse. According to a 2015 rates study prepared by Grunda, the consulting economist is recommending the County’s connection charges increase to an eyewatering $18,171. This is why interpretation has become an important matter for this committee. The difference of interpretations between Grunda and Shannon adds up to millions of dollars—money that is loaded into connection charges.

“I’m disappointed the chair was actively trying to limit discussion and meaningful questions,” said Shannon. “This is fundamental. It should concern all County residents that the pursuit of important questions is being discouraged.”

Hepburn says the committee is still working and open to entertaining alternate opinions and discussion.

Comments (1)

  • February 17, 2017 at 9:06 am Mark

    This issue is so critical that the Chair should allow every stone to be turned in order discover solutions. Current charges discourage growth and the proposed astronomical connection charges will kill new growth all together. The Chair needs to promote more discussion and other opinions not less.

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