Keating’s Friday Short Blog – Water Rate Hikes
Keating’s Friday Short Blog:
My thoughts on increasing water and wastewater rates to meet growing demand…
After three straight years of 7.5-per-cent water rate hikes, Administration plans to ask for another $350 million over 10 years for annual water and sewage infrastructure maintenance and upgrades. These water and wastewater investments are needed to meet growing demands including:
- Maintaining, protecting and extending the life of our assets.
- Meeting increasing stringent regulatory requirements.
- Keeping pace with growth (i.e. Bonnybrook Wastewater treatment plant needs a $117 million capacity upgrade in coming years and a $690 million expansion in the next decade.
- Continuing to provide high quality water services to meet the needs of citizens.
Property owners in Calgary are billed directly for their water services—referred to as “user rates”. This method of billing for water is intended to promote greater water conservation, as residents can avoid higher charges by controlling how much water they use on a monthly basis.
In other words this means the more you use, the more expensive it becomes. The process is meant to be revenue-neutral. This means our water utility is completely self-funded and receives no funding from property taxes. Accordingly, all investments and operating costs need to be funded through the user rates.
This wasn’t always the case. Prior to 2000, the City of Calgary collected acreage assessments for offsite water and wastewater infrastructure. At the time the levies for water and wastewater was $9,174/HA. According to Water Resources, capital costs for this infrastructure is now over $31,000/HA. Taking water and wastewater infrastructure out of acreage assessments (this was done in order to increase the Transportation portion of the acreage assessment) has resulted in capital funding gaps (borrowing money to pay for expansions and life cycle fees) and pressure on the City’s utility rates over the last two decades.
Every 10 years, or roughly 250,000 people, Calgary will need to expand its water facilities. I find it difficult to continually increase fees based on the fact alone that Calgary’s population is growing. The Pine Creek wastewater treatment plant was recently completed in 2010 and was plagued by soaring costs. The total cost of the plant was $463 million—almost double the original estimate of $240 million. The Pine Creek wastewater plant is expected to meet Calgary’s future population growth of up to 1.75 million. Since the completion of Pine Creek facility Calgary’s population has increased from 1.0 million to 1.2 million. Why is the increase in population and the resulting generated user-pay revenue not enough money to cover life-cycle and upgrade costs?
Is it because administration wants to try and put money aside for future growth 10 years from now? Or, is it because we have an older, aging system that we hadn’t been funding at sustainable rates in the past? In terms of water delivery, do we have a capital back log, and if so, how much is it? Is the City’s average water consumption increasing each year and how does this compare to the growth of the population over the same time period?
Until we have this discussion I find it very hard to support a 7.5–per-cent water rate.
