Two questions that have been frequently asked of me as I’ve canvassed our city are:
- What are you prepared to do to manage the escalation of water rates?
- What can be done to mitigate the release of raw sewage into our river?
Needless to say, my response to both questions required me to first do some homework to better understand the state of our water service and the rationale behind some of the decisions made to increase water rates and continue to release raw sewage.
I have now completed that work and rather than send a single response to those who first asked the questions, I’ve prepared this blog to provide a synopsis of the issues and outline my proposed approach to address them.
I apologize for the length of this post, but complex issues often require a thorough, thoughtful response.
Water Rates
First a brief history.
In 2002, the Ontario Government ushered in new regulations to increase the level of transparency and accountability around the management of municipal water assets. The regulations were in response to the Walkerton tragedy, and designed to ensure that in the future, municipalities plan for the public health and safety as well as the long-term financial sustainability of their drinking water supply and distribution systems.
A year later, the City of London’s regional water board prepared a plan to satisfy the new regulations and maintain a safe, secure and reliable water supply for Londoners both now and in the future. Both this Council and the last took these responsibilities very seriously; and to their credit, the City has done an impressive job of delivering on its water supply plan. This included providing redundant access to both Lake Huron and Lake Eric to ensure a reliable supply steam. The sound planning approach also included the following principles:
- Ensuring that growth pays for growth;
- Implementing a pay-as-you-go financing for operating and routine life cycle expenditures;
- Striving for inter-generational equity to avoid burdening future generations in order to benefit current ratepayers;
- Using debt to smooth out cash requirements for large, infrequent life cycle or system/service improvement projects;
- Building reserve funds to provide cash for emergency repairs and/or moderating cash requirements for intermittent medium-sized projects;
- Using reserve funds to balance annual revenue fluctuations resulting from weather,
- Setting rates to achieve financial sustainability in the “near” term;
- Addressing cash requirements for new legislation-driven improvements at the time that they are known, and using reserve funds or debt as appropriate;
- Committing to life cycle infrastructure renewal needs, irrespective of water usage trends, because (1) pipe deterioration is generally insensitive to the amount of water consumed, and (2) it is less expensive to renew infrastructure that is approaching failure than to attempt to maintain and repair it.
In addition to the above, the City decided to charge for water through the London Hydro bill, detailing each charge as a separate line item in order to improve transparency. For example, a homeowner’s hydro bill includes the following:
- a monthly water connection charge;
- a minimum usage charge regardless of the homeowner uses that much water;
- a sanitary charge;
- a storm sewer charge;
- a fire protection charge and a consumer relief charge to assist customers who cannot pay their bill.
During the initial years of this plan, the water rate was increased substantially to accumulate the necessary reserves and ensure financial sustainability. The City also introduced a mix of fixed infrastructure and service charges to improve cost transparency and offset declines in consumption. The annual water run rate, which previously was absorbed through property taxes but is now listed as an expense line on your electricity bill, saw an annual 8% increase for the years 2010-2015 inclusive (save one), with most of this increase directed at acquiring capital and building reserves. Beginning in 2016, the City then reduced the level to 3% annually, a run rate that they expect to continue through to 2020.
While the City deserves credit for improving transparency and accumulating the necessary reserve funds to protect its water infrastructure, unfortunately, the cumulative financial impact to the ratepayer has been significant, as the average homeowner has seen their water bill increase by over 50%. And while the rate increases have dropped considerably from the initial five year run rate, the current 3% annual rate increase is still a full percentage point over average inflation. This is an expense borne by us ratepayers over and above the 15% cumulative increase the current Council has imposed on our property taxes during their term.
Given this excessive cost pressure and the fact that the City has now accumulated most if not all of the necessary reserves, it would make sense to find a way to reduce this collective tax impact and give ratepayers a bit of a break; something that should happen more often. Another possibility is that we may not have a revenue problem, but a spending problem.
Raw Sewage
Unfortunately, we have an equally serious water problem that needs addressing: the practice of draining of raw and partially treated sewage into our river during periods of intense storms and flooding.
London releases an average of 800 million liters of untreated or partially treated sewage into the Thames River each year, or the equivalent of 320 Olympic-sized swimming pools. The practice is necessary because London still operates several kilometers of combined storm/sewage pipes throughout the city that periodically overwhelm London’s sewer and wastewater treatment capacity during high volume stormwater surges. The risks associated with sewage backup force the City to choose between multimillion dollars in-home flooding costs, or dumping the combined stormwater/sewage into the river at an environmental cost to our riverfront ecosystem.
To their credit, the City has invested heavily in a sanitary sewer separation program, and plans to continue to do so as need and funds allow. However, the replacement process will take time and the number of kilometers still to be completed is significant.
In speaking with subject matter experts in the wastewater management field, London could resolve this issue through the installation of additional storage and treatment systems at specific locations within the City. However, the price tag is significant. Experts tell me that it would cost approximately $45 million to install the treatment equipment necessary to protect our river in the near term, while the separation program proceeds over the longer term. There are also alternatives to the separation program which can be implemented more quickly.
The necessary equipment will not completely resolve the problem, but it will make a measurable faster improvement in the quality and grades attributable to our river, which routinely scores poorly when assessed by the Conversation Authority. The Ontario Ministry of the Environment can also impose fines and legal penalties https://lfpress.com/news/local-news/so-so-report-cards-for-thames-river-prompt-call-for-more-action. The City has also spent millions of dollars on engineering studies over the last seven years – funds that could have been spent resolving the problem instead of studying it.
The Proposed Solution
I would very much like to see our ratepayers receive some sort of relief from this excessive run up in water and sewer rates. However, I am equally concerned with the economic, social and environmental consequence of continuing a sewage flow management program that we know to be harmful to our basements and natural assets.
The tipping point for me is that when there is a mess to clean up, it is better to clean it up now, because the cost will only increase and the problem will be left to future generations. There are also sections of the old sewer system that are over 100 years old and could experience catastrophic failure, similar to what we recently witnessed happen in Montréal. The good news is that the extra storage and treatment systems can be installed at the same locations as the sewer structures, and flow performance modernized at the same time. The scope of the planned sewer separation and lifecycle renewal program can also be slowed to free up the necessary funding while still providing some ratepayer relief.
So, if elected, I shall recommend that we first try to find the funds within the City’s existing capital asset pool to install the storage and treatment equipment necessary to mitigate the sewage backup and dumping problem. If the funds are not available, I would then recommend extending the wastewater rate increase, albeit at a lower rate, beyond its 2020 expiration date until the new equipment is paid for.
The expenditure will be neither sexy nor completely solve the problem. However, in my view, it is the right thing to do and therefore our responsibility to do it.