St. Albert utility users should be prepared for their bills to start going up in 2015.
On Monday night, council approved a new utility fiscal policy and rate-setting model that will see ratepayers paying for what it costs to run the utilities in full.
Those changes include a five-year phase-out of using Municipal Sustainability Initiative funds – grant money from the provincial government – for utility capital projects.
The impact of the MSI change alone will be an estimated extra $112.68 in 2015, climbing to $151.08 by 2020 – if the 10-year capital plan remains the same as is currently predicted.
That hit will come in the form of an increased supplemental capital contribution fee. Since policy prohibits the city from taking on debt to pay for new utility capital projects, the supplemental fee has been developed to ensure those infrastructure projects can be paid for. It’s based on a 10-year capital plan.
With MSI as part of the funding structure that supplemental fee was predicted to be an extra $14.16 a month until 2020, but with council voting 5-2 to phase out MSI that fee’s projected to be $23.55 a month next year and $26.75 by 2020.
The new fiscal policy and rate-setting model generally drew praise from council for being more transparent and easier to understand than previously proposed policies. It separates the four utilities into separate sections and shows that rates will be determined based on variable costs and administrative costs divided by the number of customers, as well as the capital contribution fee.
Previously council had been warned that if they didn’t change how utilities were handled, they could be in deficit in a few years. There are concerns about addressing some aging infrastructure as well as needs for growth.
The sticking point in the drive to create a policy came when Coun. Cathy Heron proposed phasing out the MSI funds, which saw a split vote at standing committee on finance and again at the regular council meeting on Monday night.
Coun. Wes Brodhead, who presented the motions from the committee for council’s approval on Monday, noted that this means the utilities will be self-sustaining and the MSI funds could be used to address what he called a capital deficit in the community.
“We’re a fiscally conservative community and we’re debt-averse,” Brodhead said, noting that once “we get weaned off MSI it’ll be fairly predictable in how it goes forward.”
Coun. Tim Osborne noted “the politically safe decision would be to not make any changes” as the predicted shortfalls for utility infrastructure might not happen during this council’s term. But the new fiscal policy is needed, he said, pointing out the reasons for that were getting lost in the debate over MSI.
“The reality is our utilities are really under-funded,” Osborne said. “I think we all recognize we can’t keep ignoring the fact that we’re not collecting the money to support our infrastructure.”
Heron said the last council – which she was a part of – made a mistake in keeping the utility rate increase for 2014 to 6.5 per cent instead of the 9.5 per cent increase suggested by staff. The previous years’ rates had been raised by only 6.5 per cent as well, instead of the recommended higher increase.
“Good leadership is sometimes very difficult. This is not something that anyone wants to do,” Heron said about raising the rates. “But it’s the right thing to do … we’re here to make decisions for the long-term.”
Coun. Gilles Prefontaine noted that they can leverage other, utility-based grants. Prefontaine said using grants like MSI to subsidize utilities is not sustainable in the long term.
The vote split 5-2 on approving the policy, with Coun. Sheena Hughes and Coun. Cam MacKay in the minority.
Hughes, for whom utilities has always been a passionate topic, said while she liked the new policy, the phase-out of MSI funds over five years meant she couldn’t vote in favour of it.
“Removing all provincial funding is a guaranteed tax increase … only it is being hidden in our water bills,” she said.
Hughes said utility rate increases will hit those with lower or fixed incomes hard.
“St. Albert has a reputation of a land of high taxes,” she said, adding at this rate it will become the land of high utility rates as well.
MacKay echoed her comments, stating the vote seemed to favour the wealthy over the elderly or the not as well-off.
“Throughout this debate I’ve yet to hear a good reason for why we should do this,” he said, adding that the public should know what the transferred MSI funds will be used for instead.
Former mayor Richard Plain also appeared at council to address utility rates. He stressed the need to determine the methodology and cost basis for determining the 2014 base rates – rates that will be used going forward as the basis for next year’s rates – before going forward with policy approval. He also wanted the city’s share of storm water drainage separated out from the other users in the city.
On Tuesday morning, Osborne sent out a notice of motion to council that at October’s standing committee on finance meeting he’d like to debate the idea of taking $200,000 from the city’s stabilization reserve to create a utility relief grant aimed to help individuals with low or fixed-incomes with their bills.
Osborne said while he thought it was important to get the utility fiscal policy approved so some of the shortfalls can be addressed, it’s clear that some of the resulting changes will represent a hardship for people in the community.
“I think it’s important we mitigate some of the impact,” Osborne said.
