This is a follow up to the public meeting held Monday, February 6th that presented the Water and Wastewater User Rate Study. This report is available from the Parry Sound Town Office in electronic form; I encourage you to request a copy and review it.
The presentation basically was a condensed version of the report. The key topics covered were operation costs, capital costs and options for passing costs on to the users. The numbers speak for themselves and questions from council focused on how the capital costs could best be managed and suggestions on the allocations of costs between the various user groups (residential, business and adjacent municipalities).
Only two members of the audience asked questions or offered a position. My comments addressed the thought that metering all residential users was likely to increase costs by more than a trivial amount (meter installation, meter reading and individual billing) that would need to be passed on to the residents. Metering is a reasonable approach when there is a relative shortage of water and/or water processing capacity. Neither of these situations are currently faced by Parry Sound. In fact, the consultant suggested that metering might well result in reduced consumption that would reduce revenue and create a revenue shortfall unless rates were increased across the board.
The mayor of McDougall Township, Dale Robinson, requested that any increase in water rates required to meet the increasing capital and operational costs of operation not be unfairly apportioned to McDougall. He reminded Parry Sound council and staff that McDougall had originally entered into the water supply agreement with the expectation of fair and reasonable costs. For those not aware of the agreement, Parry Sound provides McDougall with their water supply. This amounted to a little less than 23 million gallons, about 14% of the town’s output in 2011. However McDougall only pays 7.4% of the operating costs of producing the total output. This 7.4% does not include any of the capital costs of water production and delivery. On balance then McDougall is getting a very favourable deal from Parry Sound with respect to water supply, much less than half the price charged to Parry Sound residents. On the flip side it can be suggested that Parry Sound is getting a good deal because the incremental cost of providing water to McDougall is less than what the town receives in revenue. This is one of the many issues the town balances in its relationships with the neighbouring municipalities. One point seems clear to me, the cost of water in McDougall would be much higher if it were required to cover the costs of producing its own water.
A few additional points. Please see my pre-meeting post for additional information:
1. The value of the town’s water and waste water capital assets is $126 million. This is an astounding figure. With some 6,191 residents (latest 2011 figures) that amounts to about $20,350 of value per person. But like owning an expensive car the maintenance and repair costs can be very high.
2. The presentation pegged a figure of $16.7 million in capital upgrades will be required over the next ten years (2011-2020). Water accounts for $6.7 million and waste water $10 million of this total.
3. These capital costs and the inflation related increases in operating costs will mean higher costs to the consumer. There are no provincial or federal grants available to cover the significant capital costs the town faces. In my earlier post I suggested the increase in overall cost for the users of water and waste water would be 80% by 2020. After attending the meeting I have come to understand the increase will likely be on the order of 50-60%.
4. There seems to be little opportunity to reduce the costs, although council asked about the possibility of deferring some of the capital costs. There was also discussion of debenture financing for some of these capital expenses. This of course doesn’t reduce the cost, it just pushes the cost out a little later and spreads it over a larger number of years. There is ‘no free lunch’. Debentures actually increase costs because of the associated interest costs. But like a car loan, debentures allow you to ‘get it now’ and pay for it later.
5. The answer to lowering our individual cost of water and waste water doesn’t involve cutting corners to reduce costs. The answer is to spread the costs over a larger population and business base. And yes this means more people and more business in our little town.
Read the report, it’s an investment in understanding our future.