Three days after taking office, city councillors will be asked to approve the water-sewer budget to the tune of half a billion dollars. That’s a particular steep learning curve especially for the council newbies but they have little choice about recommendations that project much higher debt whose repayment depends on growth fees.
Spending plans for 2019 include $222 million to operate the city’s water, wastewater and stormwater services, and $273 million in capital spending. Its approval will mean a 4.66 percent increase in residential water/sewer rates – an average of $64 per household.
The decision process begins on December 6 at the general issues committee that is made up of all members of council. Ratification is scheduled for the December 19 city council meeting. Provincial law requires this budget to be finalized before January unlike the operating budget for other city spending which usually doesn’t get approved until a quarter or even a third of the year is already over.
A ten-year capital budget is also being recommended for approval in principle but it comes with warnings about the “significant risk” the city is facing with its expansion of the Woodward Avenue sewage treatment plant. That $800 million project has now been divided into two parts with the first phase intended to improve water quality in the harbour, and the second designed to accommodate expected substantial population growth.
The first part is being paid for from city funds including about a third of the water-sewer reserves that will be consumed over the next three years – about $45 million. The second phase “with 100 percent of the cost funded by development charge debt” is set for 2026 to 2028 with a warning that “the levels of debt supported by development charges represent a significant risk if future growth does not materialize as planned.”
Funding with development charge debt essentially means the city borrows the monies with the expectation/hope that the growth fees from future development will be enough to repay the loans. The amount of debt these development charges are being counted on to cover is over $700 million but staff are promising to “adjust the plant expansion project and associated financing plan to align with growth” based on the experience of the next few years.
The staff report also acknowledges that a good chunk of this growth spending is actually being paid for out of water rates rather than growth fees because the city only collects some of the fees that it could.
“The capital program includes $713 million for growth infrastructure related to Growth Related Integrated Development Strategy (GRIDS) which will be funded from development charges, except for $81 million in development charge exemptions which the City is legislatively required to fund from rate revenues if Council chooses to discount its development charges or recover less than 100% of growth-related capital costs,” states the staff report.
That translates into a nine million dollar payment in this year’s budget from water rates and that is expected to be in each of future year budgets. Residents are paying a similar amount into each year’s budget for the rest of city spending to cover other discounts on growth fees.
Current discounts in development charges include 70 percent for all new buildings in the downtown core, and 40 percent for new industrial facilities. There are also 25-75 percent discounts for smaller new commercial development and for the expansion of commercial and industrial facilities. Review of these discounts is now underway with changes possible when a new bylaw is approved next summer.
This year’s budget does include other significant spending on growth projects including over $20 for stormwater infrastructure for residential expansion in Waterdown. There is also over eight million for sanitary sewers to service waterfront development at Pier 8, and two million to extend water pipes along Upper Wentworth to Twenty Road East.