Through its water and wastewater rates, the municipality of Grey Highlands has not been adequately funding the annual requirements to its Asset Management Plan.
Now, according to a new study, increases to water and wastewater rates will be inevitable in order to recover the full operational costs and plan for the future. In fact, a consultant is suggesting an increase of 50 per cent for both rates.
The 2020 study, which was conducted by DFA Infrastructure International Inc., included an assessment of the full cost of managing the water and wastewater systems with projections of customer growth and consumption, an update of the current rates that will recover the full cost of managing the systems, proposed development of connection fees and an update of the financial plan.
The rate study considers full costs associated with managing the systems over 21 years, from 2020 to 2041, taking into account operating and maintenance costs, debt principal and interest repayment and capital asset replacement costs.
Through the report, the consultant group made the following recommendations to Grey Highlands council:
- Implement a 50 per cent increase in water and wastewater rates in 2022
- Implement connection fees in 2022
- Reserve targets should be established at five to 10 per cent of asset replacement values
- The municipality’s financial plan should be prepared based on the rate study
- Consider another review of the rates in 2025
The study was presented to the council at a committee of the whole meeting held on Tuesday.
“Certainly getting a 50 per cent increase in your bills instantly would be a shock to the system for most of our ratepayers,” said Councillor Tom Allwood.
The study presented council members with two options for implementing an increase: a 50 per cent rate hike in 2022 or incremental increases of 10 per cent a year for five years, beginning in 2022.
“If you bite the bullet and do it now, at the end of this plan, you will be in a little bit better position. You'll have a lower rate, but you'll be meeting the target. However, if you take it incrementally and slower, the rate will be a little higher, we all meet the target as well, and then hopefully be able to keep it level across the board,” said Shawn Moyer, director of public utilities for Grey Highlands.
For the Grey Highlands water system, the average annual operating cost is $3,185,675 and in 2020 it served 867 customers. The utility is projected to service 2,280 residents by 2041.
The recent study estimates the municipality should be putting aside $556,001 per year for capital replacement costs.
Based on residential consumption of 180 cubic metres of water or less, the current approved 2021 rates produce an annual water bill of $807.59.
For comparison the consultants reported Collingwood residents pay $390.12 for water under 180 cubic metres and the Town of the Blue Mountains residents pay $643.56 annually.
The proposed 50 per cent rate increase would produce an annual water bill for Grey Highlands residents, with the same consumption rate, of $1,211.39.
A 10 per cent increase would produce a bill of $887.99 in the initial year. Every year following the rate would increase by an additional 10 per cent for five years, resulting in an annual bill of $1,300.52 in 2026.
For the Grey Highlands wastewater system, the average annual cost is $3,029,723 and in 2020 it served 1,106 customers. The utility is projected to service 1,932 residents by 2041.
The recent study estimates the annual funding requirement for capital replacement costs to be $563,880.
Based on residential consumption of 180-cubic-metres or less, the current approved 2021 rate produces an annual bill of $559.84.
For comparison, Collingwood residents pay $633.63 and the Town of the Blue Mountains residents pay $276.24 annually for wastewater.
The proposed 50 per cent rate increase would produce an annual bill of $840.66.
A 10 per cent increase would produce a bill of $615.60 in the initial year. The rate would continue to increase by 10 per cent every year for five years and would result in an annual bill of $902.18 in 2026.
“I'm suggesting that if we went to a phased-in program, that there would be some incremental costs to our long-term debt program. But given the interest rates and the dollars that we're talking about funding to get to that target at the end of this plan, they're relatively insignificant,” said Allwood.
Council members are now weighing the options on how quickly and when to increase the rates.
“I understand that a 50 per cent increase right off the bat is harder to sell. At the same time, it's the fiscally responsible thing to do for the municipality, and the majority of the residents on these water systems, or else, they're paying more than they would in perpetuating and we have to consider the burden of the interest rates that we would be putting on the residents,” said Deputy Mayor Aakash Desai.
Councillor Dane Nielson agreed, stating that if the larger increase was made from the start, “the final bill at the end of the five years is lower almost by $100, or possibly more, depending upon usage per year, per resident.”
He also noted that if council decided to go with the 50 per cent increase, the funds in the reserves will develop faster, which would put the municipality in a more favourable position by the time the next report on the water and wastewater system is generated.
“The next time the increase of the rate would actually be lower, because we have already increased our reserves and have our reserves higher than if we went with the percentage increase year-over-year,” he said.
However, council members brought up concerns about how a large increase in W&WW rates could affect residents who have been financially impacted by the COVID-19 pandemic.
“This is a pretty significant amount of money. All of a sudden the residents are bearing the burden of that. However, the other way of doing it, where we phase it in, there's an amount of debt repayment in there that's borne by everyone across the system,” said Councillor Cathy Little.
“But by phasing it in, I think it reduces the hardship on individuals who are suffering. Either way we're going to meet our target, but I think we have to do it with consideration for those people who need help right now,” Little continued.
Following the Nov. 10 committee of the whole meeting, council members asked the consulting group for further details on the notable differences from the previous 2016 report and what the rates and impacts would be with different percentages ranging from five to the full 50 per cent.
The additional information from the consultants will be brought back to a future committee of the whole meeting where the council will discuss and prepare a resolution for final consideration.
The initial Grey Highlands 2021 draft budget also suggested a large rate increase of 14.8 per cent, however council has requested staff to revise the draft before making any further considerations.
With the recommendation from committee, council members will then make a decision at a council meeting that is expected to be scheduled before the end of the year.
Once scheduled, the committee of the whole and council meetings will be posted to the municipality’s meeting portal. Public input can be submitted to the municipality for council consideration to [email protected].
