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Guiding principles developed to draft utility fiscal policy

Draft utility fiscal policy to come back to council committee in September

By: Victoria Paterson

  |  Posted: Wednesday, Jun 11, 2014 06:00 am

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Progress was made Monday night as council continues work on developing a new utility fiscal policy for the city.

Council’s standing committee on finance committee gave a green light for staff to draft a policy based on guiding principles presented at Monday’s meeting.

The guiding principles, and the utility rate model proposed at the meeting, represent a change in direction from previous discussions about the development of a utility fiscal policy that were based on a consultant’s report.

“I’m confused on the 180 degree turn,” said Coun. Cathy Heron.

That consultant’s report was presented to council in early 2013 and suggested the city stop using Municipal Sustainability Initiative (a grant from the provincial government) money and consider allowing debt for growth projects.

The guiding principles presented to the council committee included a rate setting model, using a rolling 10-year capital plan, using provincial and federal grants for utility capital projects, using debt only for repair, maintain and replace projects, not seeking a dividend and other administrative principles.

After recent confusion at a standing committee on finance meeting earlier this spring over the numbers outlined in the utility model, city staff worked to overhaul their proposal.

City manager Patrick Draper presented the results of that work on Monday as an attempt to simplify the rate model.

“It’s a concept of incremental allocation of funds,” Draper said.

The proposed rate model would use 2014 utility rates as the base, and would break down increases by category – flat rates, variable rates and a suggested supplemental capital contribution fee – throughout each of the four utilities.

Draper said each of the four utilities – water, wastewater, storm water and solid waste – should be treated as four distinct business units.

The new model would show a straight pass through of costs.

And the supplemental capital contribution fee would incorporate the money needed to fund the rolling 10-year capital plan for that utility. Under the currently used model, there is an issue with some projects being unfunded.

The model calls for the use of a 10-year capital plan because beyond that it gets difficult to forecast construction costs, Draper said.

The new guiding principles and proposed rate models drew praise from some councillors.

“I liked the transparency,” said Coun. Sheena Hughes.

Coun. Cam MacKay said he was impressed with the quality of the product supplied by staff.

“I think we got something that we can work with,” he said.

Coun. Tim Osborne said he feels like the guiding principles are on the right track.

Not everyone was thrilled with all of the guiding principles, and Heron put forward a motion to remove the principle which would allow provincial and federal grants to be used.

Others weren’t comfortable with the increases pulling MSI out of the utility capital pot could mean – taking it out immediately would mean a $170 annual increase per customer, and Draper had suggested if federal grants were taken out too, the increases could total over $400.

“That’s not something I’m going to take home to the public and support today,” MacKay said.

That motion was defeated 5-2, with Heron and Mayor Nolan Crouse in the minority.

Heron pointed out she had given notice of motion to vote on the idea of phasing out MSI use slowly.

“The reason I’d like to remove this one mostly … mostly it was because our consultant had recommended it and because it is a best practice in our region,” Heron said.

A background report was not provided on the implications of phasing out MSI or several other motions Heron had given notice for. She plans to bring some of the motions back for discussion in September.

When council went to vote on a motion to direct administration to draft a utility fiscal policy based on the guiding principles and bring it back to the standing committee on finance in September, the mayor said he’d support it but offered some cautionary comments.

“This is an example where we have to be, I’ll use the word careful, we have to as council be careful of any short-term ideology,” Crouse said.

The vote was 6-1, with Heron the lone opposing vote.


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