On Wednesday, two-thirds of the letters to the editor in the London Free Press focussed on the possible change in how water rates are calculated. Not surprisingly, the authors of those letters were not happy; they felt they had been sold a bill of goods.
Since 1988, when water consumption had hit an all time high, residents had been told they had to use less. In 1991, the rate structures had been amended to encourage conservation by providing modest water use at a low rate and then hiking the rates with heavier consumption.
The impact was dramatic; conservation became the order of the day as residents did their best to keep their bills low. Although the city continued to grow, and new users were invoiced for their water use, the total usage declined year after year. Water consumption has fallen to 1982/3 levels. The goal of the rate structure has been accomplished.
This has led to a new concern. Typically, water purchase makes up a very small portion of the overall cost of providing a water distribution and wastewater system. Most of the costs are in the maintenance, repair and replacement of the infrastructure. Usage has little impact on the condition of the pipes that carry the water and sewage. They still need to be inspected, repaired and after 80 or more years, to be replaced.
Early in the last decade, city engineers had finally gotten council to understand the urgency of setting aside enough money in the reserves to undertake a programme of infrastructure replacement and renewal. It called for 15-20 years of significant rate hikes until all the work was caught up. Each year, the plan would be re-affirmed and the new rates put into place. The plan seemed to be working.
But there was a catch. Each year, we learned, there was a shortfall in the revenues. Since almost the entire rate was based on declining consumption, not enough money was being pumped into the reserves to meet the projections. That meant that either the rates had to be increased even more or a new formula had to be devised. Maybe a rate structure designed to curb usage doesn’t adequately address the costs of the system.
Last year, the shortfall was nearly $1M. That had staff worried. The city has assets of $5.4B in water/wastewater infrastructure. It needs to be protected. Clearly a new system was in order.
The city retained BMA consultants to conduct a review of the rate structure to address the dilemma. The report came before the Civic Works Committee earlier this week.
The main issue, the report pointed out, is that most of the costs of the system, between 60 and 80%, are fixed but about 99% of the rate is variable. There has to be a closer fit in the form of a flat rate. BMA recommended that 30% of the bill be in the form of a flat rate, with 70% as a variable rate based on usage.
That was for starters. In the long run, an even great proportion of the total bill should be fixed. That would result in an increase for single occupant households, or households in which the residents spend their winters in sunnier locations. It would reduce the total for many others, such as large families. In fact, 58% of Londoners would see a reduction in their bills.
But ultimately, the crux of the matter is that the infrastructure has to be looked after and that costs money. Although individuals may want to pay as little as possible, the bills have to be paid. We need to find a way to ensure that happens and does that fairly.
BMA surveyed 13 other Ontario municipalities and found that London’s rates for all but the highest water users are well below the median. For the lowest users, Londoners were charged 31% less than the average; even with the proposed fixed rate in place, their costs would still be 21% below average.
But you wouldn’t know that from the outrage expressed in the letters to the editor, nor by the comments of some of the members of the Civic Works Committee.
Steve Orser kicked it off. He didn’t want to talk about rates, he wanted to discuss fluoride. How much did the chemicals in the water cost? he wanted to know. Chair Harold Usher ruled him out of order. But Orser persevered, suggesting that perhaps people were reducing their water consumption and turning to bottled water in order to avoid the chemicals in the water.
That shouldn’t be a factor, he was informed, since most bottled water is just municipal water in bottles.
Joni Baechler was more concerned about the average yearly shortfall. Losing $600K annually constituted a massive problem. She understood the 30% fixed rate in Phase 1, but she wanted to wrap her head around what would happen in Phase 2. What was that about?
Phase 2 would consist of restructuring to balance the costs, she was told, to get closer to the 60-80% as a fixed rate. They didn’t want to implement it all at once; they were waiting for the economy to improve. They also wanted to move to greater fairness in allocation of costs. Currently, the residential sector was subsidizing business, industry and institutional users. Despite repeated recommendations from staff, council had turned down any attempt to redress the imbalance for the last three or four years.
“Are the financial consequences [of not changing the rate] very dire?” Baechler asked.
“Yes”, she was told.
But Paul VanMeerbergen wasn’t convinced. The rates were continually increasing. Now they were “robbing individuals of their opportunity to conserve.” He was worried about seniors living alone. They couldn’t afford it. Although the consultant had examined ten models, he wasn’t satisfied. He wanted to refer it back to staff to “see something more creative.”
“Water consumption does not imply economic status,” staff informed him. Furthermore, “We’re in the sale of water business, not in the social services business.”
“The path we are on was caused by councils who paid no attention,” said Baechler, pointing out that water standards are not optional, they are a matter of law.
“Our future has been set by decades of neglect by council,” she continued. And then there were “two zeros”, referring to the previous year when no increases were provided for water or wastewater. “We are setting table for future Londoners.”
As to VanMeerbergen’s request for more models, could they present more models? With pros and cons?
“Any previous model would take us further from where we want to go,” city engineer John Braam replied.
“We can’t bring back a model with no impact,” added water division manager Roland Welker. “The reserve funds are challenged. This was the fairest model.”
“Do we have enough water?” Orser asked, facetiously. He was implying that under the new model people would stop conserving.
“We have a legal obligation [to meet provincial standards],” the committee was informed. The challenge would be over next five or ten years.
“Why weren’t we told this before?” VanMeerbergen wanted to know. Of course he had been; the information had come forward every year several times a year. But he hadn’t been listening.
Apparently, neither had Usher. He didn’t like having to raise the rates every year. He thought that if they moved to adopt the new model, it would solve the problem once and for all. He clearly had forgotten that it was a long term plan to get to sustainability. And here he was thinking it would be a permanent rate freeze. Where had he been all these years?
VanMeerbergen’s referral, supported by Orser, lost on a tied vote. Sandy White had left earlier in the evening without asking any questions or offering any opinion.
Baechler moved to support the recommendation with a request that staff provide a chart of other models for the public meeting that would be held prior to adoption. Her motion, supported by Usher, also lost since VanMeerbergen and Orser voted against it.
That leaves it to council to come up with a solution. It’s not a reassuring thought.