Supplemental capital contribution fee biggest change on utility bills

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Fee attempts to make up shortfall in capital funds for infrastructure projects

Changes to the city’s utility fiscal policy will make rate increases easier to understand and justify, says St. Albert’s new director of finance and utilities.

“We can very clearly justify the increases from now on, on a year-to-year basis with real costs, rather than just applying a percentage increase over the prior year. It will actually be driven by real numbers,” said Diane McMordie.

The difference on 2015 utility bills can be spotted in a new line that will be part of each utility fee – the supplemental capital contribution fee. The other lines will be the same, which show the fixed rates and the variable rates.

“A portion of the fixed rates that have been included in people’s utility bills up until now, a portion of them was to go towards capital, but there’s a shortfall,” McMordie said. The supplemental fee will address the shortfall and be calculated based on the 10-year utility capital plan.

If there is no shortfall in the 10-year capital plan the fee won’t be present, though McMordie acknowledged that it’s unlikely to go away altogether.

“It could vary from year to year,” she said.

Nothing much else will change on the bill, but McMordie said how the rates are calculated is more transparent under the new model.

The rates will be adjusted incrementally year to year based on the costs.

Each of the four utilities – water, wastewater, storm water and solid waste – will be calculated based on the actual costs to the city both for variable costs, contract costs and administrative costs.

The supplemental fee will be divided among the four utilities, but is estimated to cost about $23 a month in 2015, forecasted to increase to more than $26 monthly by 2020.

McMordie reminded customers that since their bills are bimonthly, that $23 fee would likely be about $46 on the actual bill.

The point of the supplemental capital fee is to try and stabilize the costs by averaging them out over a 10-year period for consumers. This could be disrupted if there was an urgent unforeseen project.

“The intent is we shouldn’t have wild swings,” McMordie said.

Repair, maintenance and replacement of utility capital projects over the next 10 years are estimated to cost about $161-million, she said, and the supplemental fee will be put toward that. McMordie noted that Municipal Sustainability Initiative (MSI) grant money from the provincial government will be part of the funds put toward those projects until it is phased out by 2020.

Growth-related utility capital projects will be largely funded through new development, she said.

While they’re still waiting to get some numbers such as the water contract from Epcor, McMordie said early estimates show the fixed and variable rates aren’t showing a large jump.

“The increases or decreases in the actual variable and fixed costs this year are actually only sitting around 2.6 per cent,” McMordie said. But that doesn’t include the new supplemental capital fee’s impact.

Additional notices of motion

On Tuesday, Coun. Tim Osborne sent out a notice of motion that will see council’s finance committee discuss the idea of having a reserve to help low or fixed-income residents with their utility bills in the wake of the coming increase resulting from the phase-out of MSI from utility capital project funds.

On Wednesday, Coun. Gilles Prefontaine shared his own notice of motion, which, if passed, would ask administration to recommend a business case to decrease the capital funding formula as a result of the redistribution of the MSI funds. MSI funds being phased out of utility capital projects will go to other municipal capital projects.

“That should also lead to some tax relief,” Prefontaine.

Prefontaine said utilities should be self-sustaining but, since the money will be redirected, they should ensure they’re not collecting more than needed for other projects.

Prefontaine said he and some other councillors had spent some time surveying other municipalities about their use of MSI capital grants during this week’s Alberta Urban Municipalities Association conference.

“We have not yet found another municipality that uses MSI for its utilities,” Prefontaine said, adding the new municipal affairs minister had offered no commitments on MSI beyond 2017.

“We have to be ready to really ensure that we’re not counting on things that may not be available next year or in three years.”

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