Since I took office in November 2016, the issue people want to speak with me about the most has been our water and wastewater rates. They want to know why they are so high, and what can be done to reduce them.
After many discussions about this issue, I can boil down the current situation of high rates to a few causes:
- The previous generation of senior leadership (prior Director of Public Works, the old Treasurer, the old CAO) didn’t plan for the future. There wasn’t any money being set aside to repair or replace aging infrastructure, and we are now paying for their sins.
- We have multiple systems that are spread out across a geography more than 100 km² larger than the City of London, and much lower population density. This results in inefficiencies that we are slowly correcting, as the budget allows. For example, hooking up Delaware and Komoka together, and no longer relying on London’s connection to Delaware for water. That connection to London has preventing us from allowing any significant growth in Delaware.
- We’re ahead of the pack, when it comes to smaller municipalities, in bringing in the Infrastructure Life Cycle Funds. That money is set aside specifically for water and wastewater projects, which is good. The bad side is that it wasn’t phased in, and we didn’t have the resources to do it in a fairer way, like charging based on how much of your property is covered with non-permeable surfaces.
Most large cities have brought in those life cycle funds already, and lots of other places are also doing so. We are not alone and it will be more common as time goes on.
When you put all that together, it leads to high minimum charges, and you have the life cycle funds tacked on top of that. You end up with a minimum bill, for most homeowners, of around $100.22 per month. I don’t like it anymore than you do, but things have really stabilized over the last few years and I’m working hard to keep the rates from going up further.
What Has Been Done
The Long-Range Financial Plan has us on a good course, but we have been slipping behind the projections in order to maintain a reasonable cost for residents. It’s surely not the end of the world to be behind by $24,000 on a multi-million dollar reserve fund, but it helps illustrate that we are not where experts believe we should be. The reserve funds for water, wastewater, and storm water and designed to hold 10-15% of the funds required to replace the entire system if a catastrophe were to occur. That said, given how healthy the reserves currently are, I feel comfortable continuing to freeze the rates.
We cancelled our contract with American Water Canada in the fall of 2016, and brought that work in-house with many of the people working for American Water becoming Middlesex Centre employees. This lead to a savings of roughly $550,000 in 2017, which is great for all of us!
Thanks to that change, and some other minor tweaks and changes to help cut costs, we have been able to freeze the water and wastewater rates two years in a row. Middlesex Centre staff have said there is a chance we can keep them frozen for 2019 as well.
On January 25, 2017 I put forth a motion for staff to look at the implications of reducing the minimum water and waterwater rates by 2.5%, 5%, and 10% for 2018. This motion was approved by Council. I asked for targeted numbers because I didn’t want to see a report that simply said another freeze would be best. I wanted to see what would actually happen if we reduce the minimums by certain degrees, with 2.5% representing roughly $1 per month of the existing minimum.
The resulting report clearly illustrated the affect that reducing the minimum fees would have on our reserves. I was disappointed in the narrow interpretation of “ramifications” by BMA’s staff. I was hoping to see something akin to “If minimum monthly charges are reduced by 2.5%, the usage charge would have to increase by X amount to make up for the shortfall.” Alas, that did not occur, but it’s good to see the numbers fleshed out more thoroughly. You have to ask the right questions in order to get the answers you’re looking for.
What Can be Done?
Going forward, it’s important to keep on doing a number of things.
Further growth — including Edgewater Estates, Kilworth Heights West, and Clear Skies in Ilderton — reduces the pressure to increase water and wastewater rates.
Attracting a commercial or industrial development that uses a lot of water would help tremendously. If the new Foodland across from the Wellness Centre is making and baking bread on-site, and a cafe or restaurant does locate in that plaza, that brings in a larger-than-average water user and helps reduce pressure to increase rates.
Development charges typically cover between 80 and 90% of the cost to expand services. Where new or expanded services are needed exclusively to support growth, the development charges have covered 100% of the cost. With all the growth coming to Kilworth, Komoka and Ilderton, this brings new people onto the system and helps spread the fixed costs of operating the water/wastewater infrastructure, therefore making it easier to cap or reduce your costs in the near future.
Right now, that ultimately leaves us between a rock and a hard place and no easy answers. We are funding major construction projects through reserves, allowing for predictable utility and property tax rates instead of large increases or decreases each year. It also leaves us slightly behind the LRFP’s projections.
One thing we can do, and should be ready in early 2019, is a Union Gas-style Equal Billing Plan (EBP) to provide some predictability. This idea is a slight pivot from another one two residents have previously brought to me, and is doable with our existing billing system. I worked with Deputy Mayor DeViet on this to help massage and mature the idea before bringing it to staff. Thankfully we have been able to craft something that should be a win-win for anyone that opts-in!
What will happen, if you choose to opt-in, will be exactly what happens with Union Gas: your past history will be calculated, and a fixed monthly cost will be applied to your future water/wastewater bills. If you go over for the whole year, that overage will be covered at the end of the year. If you are under, you will receive a rebate! This has a few wins for everyone:
- More customers on pre-authorized payments (PAP) reduces administration costs
- More customers on PAP provides better cash flow
- More predictability for you allows you to budget more easily and have additional piece of mind that you won’t get socked with a big bill in the summer
What staff are currently working on is ensuring that people who opt-in to the EBP will still have a way to detect potential leaks!
I would really appreciate any feedback on the above information, and on the Equal Billing Plan as well! You can get a hold of me here.