The City of Thompson’s water and sewer utility rate application for 2017 to 2019 will see the average annual cost of water distribution and wastewater collection services increase about one per cent in the first year, 15 per cent in the second year and 11 per cent in the third year if the Public Utilities Board (PUB) approves it as is.
The application was outlined at a public hearing at City Hall Sept. 20 with about 15 members of the public in attendance.
The water and sewer rate application study was presented by Derek Ali of DFA Infrastructure International, who indicated that the annual cost for an average residential user would rise to about $1,280 in 2017 from $1,263 this year, then increase to about $1,468 in 2018 and $1,627 in 2019.
The rates were calculated to include a $278,000 annual contribution to the water treatment plant reserve in the second and third years, to cover one-third of the annual estimated equipment replacement cost of $834,000 that will become the city’s responsibility once it takes ownership of the water treatment plant over from Vale in 2017. It is also based on the city’s assumption that it will be able to convince the provincial government not to make the city pay land transfer taxes of $137,500 and provincial sales tax of $1,189,000 on equipment included in the sale. The proposed rates, which are subject to approval and/or alteration by the PUB, do not include the cost of the city’s borrowing to pay its one-third share of construction costs for a new wastewater treatment plant, other than some interest costs in 2018 and 2019. Council is still considering how to finance the $12,166,167 the city will need to borrow for that project, which is expected to be repaid at a rate of about $952,000 a year for 25 years. That cost will be borne through property taxes, a rate rider or a combination of the two.
The city faces “a perfect storm,” said Mayor Dennis Fenske, taking over the water treatment plant and its associated costs from Vale at the same time that it has to help pay for a new sewage treatment plant. In addition, water consumption will have dropped about 30 per cent from 2012, when Thompson residents used 1,780,000 cubic metres, to where it is expected to bottom out around 1,230,000 cubic metres in 2019. The city is also assuming that the number of customers, currently about 4,000, will drop by about 250 when Vale closes its smelter and refinery operations by the end of 2018.
The transition of the water treatment plant from Vale to city ownership will result in new costs for the city’s water and sewer utility in 2017, when Vale will still own the plant and the city will pay 25 per cent of the costs of treating raw water. That will rise to 50 per cent in 2018, when the city assumes treatment plant ownership, and to match the actual percentage of the treated water that is used to supply the city water system in 2019, which is currently estimated to be about 75 per cent. The city’s water and sewer utility is expected to use about 68 per cent of the treated water produced in 2017 and 2018.
Vale will maintain ownership of the river pump house that supplies raw water to both its operations and the water treatment plant. The cost of supplying the city’s share of that water is expected to be about $50,000 in both 2017 and 2018 and $80,000 in 2019.
New water treatment plant costs that the city’s water and sewer utility will have to pay for through its rates over the next three years will total $486,636 in 2017, about $736,454 in 2018 and $1,118,026 in 2019. The $278,000 equipment reserve contribution is included in the latter two of those years. The total costs of water treatment and distribution and wastewater collection that the water and sewer utility will have to cover through its rates will be about $2.8 million for water and $1.2 million for sewer in 2017, $3.1 million for water and $1.67 million for sewer in 2018, and $3.6 million for water and $1.4 million for sewer in 2019.
Under the rate application the city will submit to the PUB, the minimum quarterly charge will rise to $82.58 in 2017 from $77.80 this year, while the water rate per cubic metre above the 14 cubic metres included in the minimum quarterly charge will increase from $1.45 this year to $2.14. The wastewater rate per cubic metre, currently $1.64, will go down to 95 cents, meaning that the only effective difference between 2016 and 2017 is the increase in the minimum quarterly charge.
In 2018, the minimum quarterly charge would be $84.23, the water rate $2.40 per cubic metre and the wastewater rate $1.28 per cubic metre. In 2019, those charges would be $91.62, $2.92 and $1.17, respectively.
Following the presentation, Ali, the mayor and city staff responded to public questions and comments. Chiew Chong asked how overall consumption was measured and Ali told him that it is the cumulative total recorded by individual water meters and does not include water breaks. Keith MacDonald of the Chamber of Commerce asked if the city was confident that infrastructure funding to cover two-thirds of future water treatment plant equipment replacement costs would be available and Fenske said they were. Randy McKay asked why repayment of costs for the wastewater treatment plant was not included in the rate application and Ali responded that until the city received approval to incur the debt from the Municipal Board the PUB would consider that a speculative cost. McKay also asked what the city would do if the provincial government does not forgive the $1.3 million potential tax bill related to transferring ownership of the water treatment plant. City manager Gary Ceppetelli said in a worst-case scenario that the city would have to cover those costs through a debenture or payments over a period of time since the rates cannot be altered once the PUB approves them.
Ali’s presentation can be viewed on the city’s website at http://www.thompson.ca/modules/showdocument.aspx?documentid=887. The city is collecting public comments on the proposed rates until Friday, Sept. 23. They can be emailed to the city’s chief financial officer Jenny Krentz at [email protected] or to Ali at [email protected]. First reading of a bylaw approving the rate application is expected to take place at council’s Oct. 3 meeting. The deadline for submitting the rate application to the PUB is Oct. 31.
