User Pay Model To Allow For Cost Recovery Of Wastewater Services
Written by: Kevin Latimer, KC.
Facing daunting capital and operational challenges, Cape Breton Regional Municipality (CBRM) has amended its wastewater discharge bylaw to allow for cost recovery of wastewater services through a user pay model. The municipality sees this as the first step in a larger transformation.
Like many Canadian municipalities, CBRM had aging wastewater infrastructure and faces more stringent, but necessary, federal regulations for discharging wastewater. The municipality has also been challenged by a declining population as its historic coal mining and steel industries have disappeared. This declining population left fewer taxpayers to fund increasing costs.
“Since COVID, we’ve stemmed the population decline,” CBRM Mayor Amanda McDougall-Merrill said. “More Cape Bretoners have come home, Baby Boomers are retiring here, and we’re attracting more immigrants – many of whom were attracted to Cape Breton University and who decided to stay in Cape Breton after graduation.”
In the face of these challenges, municipal staff advised council that new federal wastewater discharge regulations would obligate the municipality of about 100,000 people to spend roughly $156 million to upgrade infrastructure. In turn, that would create increases in annual operating expenses of close to $4 million.
Looking ahead for a further 15 to 20 years, council was told future capital expenditures of about $360 million would be required. Doing nothing was not an option.
“While we’re seeing modest growth – water consumption has been growing by about 1.5 per cent in recent years – we recognize that we need to modernize our approach to water and wastewater,” McDougall-Merrill said. “The problem of under-investment in infrastructure, and the challenge of meeting new federal guidelines, is not going away. We need a new approach.”
Restructuring Water Supply
Historically, CBRM’s engineering and public works department delivered wastewater services with costs recovered through property taxes approved by regional council and with no regulatory oversight. Potable water, on the other hand, was delivered under the general authority provided under provincial legislation with water rates reviewed and approved by the Nova Scotia Utility and Review Board.
CBRM’s challenge is not unique. Historically, investment in underground infrastructure has not been a priority for municipalities that now face challenges brought on, largely, by rapid growth in the Canadian population and more demanding guidelines imposed by the federal government. While the regulation of wastewater differs across jurisdictions, federal data from 2022/2023 shows that many municipalities, particularly coastal communities, will face similar challenges to meet the new federal regulations.
Contemplating changes, the municipality considered guidelines provided by Karen Bakker, assistant professor of geography, University of British Columbia. Jointly commissioned by the Federation of Canadian Municipalities and the Program on Water Issues, “Good Governance in Restructuring Water Supply: A Handbook” suggests three reasons for restructuring:
- to improve performance
- to better access financing
- to better meet new legislative requirements
All three came into play in CBRM’s case.
The Commission Model
CBRM spent more than a year exploring options, but the preferred path forward was to establish a water and wastewater commission. This was an approach considered by many to be “best practice.” Such a commission would operate at arm’s length from the municipality and would own and operate water and wastewater systems in CBRM.
Under the commission structure, council would have representation on the commission but retain only indirect accountability for system operations and environmental compliance.
One of the benefits of the commission model would be regulatory oversight by the review board. The commission would propose rates for wastewater. The board, the province’s independent utility regulator, would have the responsibility to finalize the rates, balancing the needs of ratepayers with the need to ensure efficient utility service delivery over the long term.
As it turned out, the special provincial legislation required to establish a commission to provide water and wastewater services subject to the mandate of the review board was not forthcoming. The municipality responded by amending its existing wastewater discharge bylaw to provide for a new user fee model.
The User Fee Model
CBRM adopted a model based on the Water Environment Federation approach to wastewater user fee and cost recovery, an approach considered industry best practice for equitable cost recovery of wastewater service. It is believed that the switch to a user fee, when coupled with significant federal and provincial contributions, offers the best opportunity to provide wastewater services in a sustainable and affordable manner, given the new federal regulations.
Greg Campbell, P.Eng., CBRM’s manager of technical support services – utilities, said adoption of the commission model remains the preferred approach. But he acknowledges there will be a new mayor after the municipal election in October, as McDougall-Merrill has decided not to reoffer. The new council will undoubtedly want to consider whether to again ask the provincial government for legislation creating an arm’s-length commission to manage water and wastewater services.
“We had hoped the province would grant us approval to establish the commission,” Campbell said. But the requested legislation did not fit with the provincial government’s legislative agenda and timeline. “As far as we know, the province is still supportive.”
It will be up to the new council elected in October to decide whether to again ask for the legislation. In the meantime, Campbell said the new system being introduced with current bills will be fairer to taxpayers and water users.
System to Protect Essential Infrastructure
A 19.1 cent charge per $100 of assessment will disappear from annual property tax bills. Instead, water users will see a new charge for wastewater that will correlate with the amount of water used. The charge will be based on a “water in, water out” calculation, with costs being paid by water users and not by property taxpayers. CBRM council will continue to be responsible for setting wastewater rates without board oversight.
“The new system will be better all around. It will be more equitable with users being responsible for the actual costs,” Campbell said. “Wastewater services will no longer be subsidized by those who use little or no water, and users will have greater control of their costs because they control their usage. And, if users better manage their consumption, the environment will benefit.”
Campbell also said the system is sufficiently flexible so that, for example, a brewery or bottling plant that does not discharge water proportionate to its intake will be accommodated.
Over the longer term, CBRM recognizes that the arm’s-length commission approach to management of both potable water and wastewater is the preferred way to go.
“The commission model is really the only way we can reasonably proceed to meet the federal guidelines,” Campbell said. While it may be difficult for those on the outside to see the forest for the trees, Campbell said, “We know the wastewater cost recovery model is a good step toward creating a system that’s fair and one that protects essential infrastructure.”
As published in Municipal World Magazine (November, 2024)