How much?

Bit by bit, the foundation supporting the expansion of Wellington’s waterworks is falling apart. Two weeks ago, a Shire Hall advisor threw cold water on forecasts of the County’s rapid population and new homebuilding growth.

Now, it seems few inside Shire Hall believe the massive infrastructure project can be contained at $100 million. Last week, a Shire Hall audit committee tried to get some answers. The committee sought a current project cost estimate from the County’s Director of Finance, Amanda Carter. Carter explained that while the cost was likely more than estimated, she didn’t know how much more. Nor did she see value in pursuing this question now since any new estimates were likely to be wrong.

It was a rare moment of clarity.

Carter explained that a project of this scale consists of components tendered and awarded over time—i.e., the water tower, the sewage overflow tank, the trunk lines, water and sewage plants and such. Only when each of these projects is completed—over several years and the bills tallied—will the actual costs be known with any certainty.

This, of course, is true. But it poses two impossible sets of problems for decision-makers.

First, how does Council assess the next part of the project without knowing how much the mega project will cost? How can they approve a part without a sense of the whole? What is the scale of the risk to waterworks users? How badly could overruns wreck financial and funding plans? What is the exposure for waterworks utility and the users who fund it? Who will be left with the bill?

Second, water rates and development charges are based on the numbers in the Master Servicing Plan. Shire Hall has sought cover in this debate, arguing that Wellington expansion plans are already in County waterworks rates—even as it has pushed water rates to become among the most expensive in the province. But what happens when the project costs $50 million more than planned? What happens when upfront development charge revenues fail to roll in as anticipated? How badly will cost overruns impact families on County water?

Decision-makers need these answers.

John Hirsch is chair of the audit committee.

“I see what the public is seeing,” said Hirsch, unravelling the problem. “We all know it is going to be more. It is entirely possible the sum of the tenders represented by the $100 million could be $130 million—I don’t know.”

Carter acknowledged the problem, but the finance director said there is a larger risk in putting out new estimates only to find out they were wrong, too.

“I don’t want to keep putting numbers out there and have to keep coming back to say, wait, we have to make an adjustment,” said Carter. “I think it is premature to give a costing.”

Hirsch explained why that answer wouldn’t suffice.

“It puts Council in a difficult position,” said Hirsch. “We know Council agreed in principle based upon a set of numbers. We all know those numbers are going to be higher, but we aren’t going to see the real numbers until we see the tenders and the contingencies attached to those tenders. The question then would be, would we change our minds? On whether we proceed. I am not sure we could.”

Carter acknowledged the conundrum, but countered that even if Shire Hall produced a new estimate, it couldn’t calculate the impact on water bills or development charges because it doesn’t own the financial model. It must contract with Watson and Associates to re-run new numbers to understand the impact on ratepayers.

So here is where we are today.

The water tower cost 45 per cent more than estimated. The current trunk line estimate— including an unplanned sewage pumping station— is already more than double the $12 million contained in the Master Servicing Plan. The contingency costs related to digging deep into bedrock across the length of the village could be spectacular, and may overrun all estimates.) The overflow tank is winding up construction. Its final cost has not been disclosed. Still ahead is a new water plant, perhaps a new water intake, a new sewage treatment plan, and an assortment of underground works, including Belleville Street. Again. The risks are mounting. So are the questions.

Municipal infrastructure projects always cost more than expected. But unlike large urban municipalities, Shire Hall can’t spread these costs over millions of residents. It can’t even spread them across the County tax base. Just 6,000 waterworks customers must bear the risk of these decisions. Every misstep is magnified because the denominator is so small. Every cost overrun adds to the burden of an already expensive water system.

The entire process requires more caution than has been shown to date. It requires much more rigour in its analysis and choices. Mostly, it requires governance that is more curious than it has previously demonstrated. The audit committee has provided a good start.

rick@wellingtontimes.ca