Which way from here?

Much is riding on the outcome of two committees set to begin work

Over the next few weeks, folks will gather to consider key structural changes to the municipality of Prince Edward County. The decisions two groups of residents, representatives and municipal staff reach, subject to approval and alteration by council, will largely define who can afford to live in Prince Edward County and who can’t.

The stakes are high.

One committee will look at residential development: the barriers to entry as well as the extraordinarily high cost of navigating the regulatory maze in the County.

The other committee will look at the County’s waterworks system—among the more expensive water and wastewater services in the province. These costs are set to get much higher, no matter what the committee decides.

This committee will have to figure out who should pay. And how much. And when is too much, simply too much?

A misstep by either group holds the potential for huge negative consequences. A mistake can fundamentally change this community. These are likely the most important decisions to be made in this term of council.

BACKDROP
The municipality got off to a rocky start after amalgamation in 1998. Lacking both experience and expertise, it delayed consideration of a comprehensive set of development and connection charges for a decade. When it got around to adopting these charges in 2008, it tried to make up for lost time by imposing some of the highest fees in Ontario. Suddenly, Prince Edward County was no longer competitive within the region—or much of the GTA.

A housing market that had been surging in the County, abruptly weakened. The decline was made worse by a global financial crisis that autumn. But while Quinte West and Belleville managed to sustain new home building more or less at pre-2008 levels, County home starts continued to slide dramatically lower.

By 2013, municipal leaders realized they had made a mistake and agreed to reduce development charges by half. It would leave waterworks connection fees unchanged even though, on their own, these fees were much higher than the regional average.

Council is expected to extend this discount at a meeting today, pending the outcome of the committee tasked with considering these fees. But that is just the beginning.

While these fees have made headlines, other issues, including a cumbersome, unnecessarily slow, and often erratic planning process, have discouraged residential building investment in the County. Demands that developers tie up extraordinary amounts of capital for years as security for the municipality have further dissuaded investment.

LEAKY SYSTEM
Similarly, the newly formed County struggled with its convoluted water and wastewater system’s finances. Neither the County nor the townships and wards had put much money away for repairs and replacement—depending largely on provincial largesse for upgrades and modernization. New regulations and standards stemming from deaths attributed to a broken municipal water system in Walkerton in 2000 further worsened an already higgledypiggledy system in the County.

By 2010, the County, facing soaring operating and capital costs, assembled a committee of residents, council members and staff to stake out a rate structure that would fund the moving parts and replacement of pipes and pumps when they became worn out. Though well-intentioned and a great advance over previous waterworks systems planning, he committee badly underestimated the downturn in new home building. It also misjudged the province’s willingness to continue to fund these system upgrades and replacements.

Half a decade later and the system, that by provincial edict is supposed to pay for itself, is now regularly dipping into reserves to remain solvent. Something must give. Costs must be curbed or rates must be pushed higher. It will likely be both.

WHAT’S NEXT?
There is tension on both sides of the debate. The County’s waterworks officials are reluctant to reopen the 20-year plan to restore the system to self-sustainability. Meanwhile, residents and businesses are feeling squeezed and increasingly hostile toward rising utility costs when, for most, their income has remained flat or fixed for a decade.

As well, developers complain their development and connection charges are 10 times greater than they were a decade ago. They say they are carrying enough.

The County’s consulting economist, Andrew Grunda, says his financial modelling points to big increases in both connection charges and waterworks rates. But Grunda is starting from the premise that the 20-yearplan is untouchable. However, most observers suggest tht everything must be on the table.

The hard lesson of the past six years is that the County isn’t an island—not, at least, in terms of the new homebuilding market.

Builders acknowledge that new homebuyers will pay a premium to live in Prince Edward County—but that this preference isn’t boundless. On a 1,500- square-foot home, most buyers will happily pay $15,000 to $20,000 more to live in the County. Any more than that and homebuyers find Quinte West, Brighton and Belleville become more attractive places than they first thought.

Even Grunda will admit his model doesn’t work without a healthy and robust residential building sector bringing new waterworks users to the system.

So the future of Prince Edward County is deeply entwined in the deliberations of these two committees. They must carefully consider whether it is justifiable to simply pass along rising costs upon a shrinking or, at best, flat-lined population—particularly one defined largely by retirement savings and fixed incomes.

Is it morally acceptable that waterworks rates determine who can live in the County’s urban areas and who has to live elsewhere?

Some council members and others suggest the elimination of waste in the operations will, at least in part, address these structural problems. They point to a quantity of pick-up trucks, or underutilized staff. This argument misses, by a wide mark, the scale of the challenges facing the waterworks system and its users.

While there may well be waste and inefficiencies, fixing these entirely might produce thousands of dollars of savings. But the problems facing the County’s waterworks system are measured in the tens of millions.

It is why most observers contend the long-term viability of this system depends on growth in residential housing. New users mean new streams of revenue. Every month. Every year.

Investors and builders, however, need more certainty. They need to see that the County is making the changes needed to become truly competitive in the region once more. They need to see a reasonable shot at earning a return on their investments.

As one investor noted, once they’ve constructed the stormwater swales on a new subdivision, there is only one way forward—to build homes. Otherwise, that cost and millions of dollars more are lost. In order to make that investment, they need to know they can navigate the local regulatory process within a reasonable timeframe, without tying up capital in pointless securities.

It is why, they suggest, vast tracts of approved subdivisions remain dormant year after year.

WATERWORKS UNPLUGGED
The waterworks committee is set to kick off on May 18. The committee is composed of four members of the public, one member of the building sector, four municipal staff persons, three councillors (Treat Hull, Janice Maynard and Brad Nieman) and Mayor Robert Quaiff.