Water torture

A comparison of municipal waterworks bills assembled by Watson and Associates, a consultancy. It shows that Prince Edward County has among the most expensive water services in the province, according to this representative sample.

Rates must rise nearly 50 per cent over next five years: consultant

It is a grim story. So grim that several councillors pleaded with the consultant to write a different ending. One councillor wanted to know if the consultant had a “purple cow” —a magical way to avoid the pain and suffering that was sure to result from a massive hike to the County’s waterworks rates and connection charges the consultant was proposing.

Andrew Grunda is paid to forecast the future. He starts with the County’s 20-year-plan to fix, rebuild and maintain the water and wastewater systems—the pipes, the pumps and the treatment—everything that goes into delivering safe, clean water to County homes, institutions and businesses and then taking it away, filtering it and sending it back out into the world. Grunda looks at the County’s spending plans and figures out a way to pay for them through a mix of user fees, connection charges, debt and predictions of provincial and federal funding support the County might get to rehabilitate some of its aging waterworks infrastructure.

His report, delivered to council last week, points to five years of near double-digit increases in water bills and a massive increase to connection charges, as well as more debt and withering reserves. This is in addition to water bills that have been spiralling higher for years.

Ten years ago the municipality spent $3.2 million to operate its waterworks system. This year it will spend $5.2 million—a 62 per cent increase.

Grunda says it wasn’t enough. He say water user rates must rise by an average of 9.4 per cent each year for the next five years. Connection charges—those fees builders must pay when building a home on a municipal water system— must rise, according to Grunda, from $14,260 now to $18,170 beginning in the new year. He recommends adding $12.1 million to the waterworks debt to fund the plan. Reserves would be depleted until at least 2025.

Already among the highest-paying waterworks users in Grunda’s sampling of 20 other municipalities, the proposed new spike in water rates will put the County second from the top of the most expensive water rates. Some municipalities such as Loyalist, just across the ferry, deliver waterworks services to Bath and Amherstview for less than a quarter the cost of the County.

Grunda wasn’t asked to explain the difference, nor was he available to answer the question posed to him by the Times.

Similarly, connection charges in the County were already on the high end of the sample list Grunda provided. Increasing these charges by 27 per cent will thrust Prince Edward County to the top of the ranking—giving the County the most expensive connection charges outside York Region of the GTA, according to Grunda’s sampling.

Grunda did this same analysis for the County in 2010. But his rate calculations missed by a wide margin—resulting in a shortfall of $2.3 million to the plan over the five years. Costs were higher than forecast, revenue was lower. Consumers used much less water—an average of 116 cubic metres per year compared to 151 cubic metres per year predicted in Grunda’s forecast.

Despite a 23 per cent drop in water consumption compared with his 2010 forecast, Grunda figures water consumption likely can’t drop much further.

Councillor Dianne O’Brien asked Grunda what informed his assumption—since it runs counter to a decade of experience in which water use has declined steadily in Prince Edward County.

“The consumption levels I see here are lower than I have seen elsewhere,” Grunda responded.

While lower water consumption in other contexts might be viewed as a good thing, in the County’s waterworks world it spells trouble. In response to lower demand, Grunda is recommending a higher proportion of a consumer’s water bill be composed of base costs—and less by actual consumption.

Those folks who travel to warmer climes in the winter and complain loudly about water bills for months of service they don’t use, may be in for another rude awakening upon their return in the spring.

Council struggled to know what to do about Grunda’s recommendations. Anticipating some of their questions, Grunda identified the potential effect of limiting rate hikes to the cost of living increases as well leaving connection charges at current levels. In both scenarios, much more debt financing would be needed and reserves would remain depleted for many years. But if rates aren’t ramped up substantially, according to Grunda, the general taxpayer will have to help pay the operating costs of the County’s waterworks— a municipal service most don’t use.

There are other variables that council will have to consider before it takes the harsh steps suggested by Grunda’s analysis. The length of term for the debt financing might be extended, lowering the annual expense but raising the overall cost of this borrowing. Further, the County is still well within the debt ceiling imposed by the province, leaving—even in Grunda’s worstcase scenario—the opportunity to disperse the pain over a couple of generations.

The County can, and should, re-examine its 20-year plan. It is doubtful that needs identified in 2010 have gone away or their solutions have become cheaper. But if water rates and connection fees make the County unaffordable to residents and not viable to builders, scaling back these needs or extending the life of plant and equipment must be looked at again.