St. Albert residents will still face a 9.5-per-cent increase in their utility bills from the city, but it wasn’t for lack of trying on the part of one councillor.
Coun. Cam MacKay brought forward a motion to cut the proposed increase by five per cent but it was defeated during budget deliberations Monday night. While he was the only member of council to vote for his proposal, MacKay laid out the groundwork not just for cutting the increase in 2012, but revisiting how St. Albert pays for utility infrastructure.
“The question becomes, how do you charge residents and how do you determine their payments?” he said.
St. Albert operates a 100-year utility model in which it saves money for costly capital replacements over a 100-year term to avoid using debt for large infrastructure costs. In MacKay’s presentation, he pointed out that model gives some certainty the money will be there when the time comes, but it also dings homeowners that move into a home twice on move-in day — the cost of the utility infrastructure is included in the cost of their home and they are charged for it from the city. The result, MacKay argues, is a rapidly growing escalation in utility bills to replace infrastructure the bulk of residents will never live to see.
“One hundred years ahead, you don’t know what’s coming,” MacKay said. “One hundred years ago, your utilities were a dirt road, a place to tie up your horse and an outhouse.”
But moving to a purely debt-financed model is not without its disadvantages. While the homeowner would pay only when something needs to be replaced, the developer has already paid for the pipes in ground, which is passed onto the homeowner in the cost of the house. No additional payments are required until something needs replacing, at which point the city passes the cost of the new infrastructure and subsequent debenture to the resident, which leads to larger payments until the debt is paid off. The model also presents a risk when it comes to knowing when a component will need replacing.
“In theory, the cost of doing this model is a bit higher, but countermanded by the lack of uncertainty,” MacKay said. “You perfectly match usage to user.”
The municipality could blend the two, which would lead to increases, but these would be lower than in the savings model without the enormous spikes in the debt model.
“This balances the idea of fairness for a person using a utility and paying for it at the same time without being burdened by both. It’s a very equitable way to distribute costs to residents.”
St. Albert’s 100-year model is slightly more cumbersome for homeowners because it is not just paying for what is in the ground today and what will come a century later — the model is also paying off past expenditures before the model was adopted.
“So putting all of the costs of the future, past and present on a very short period of time, that’s why this goes up steeply. That shows the rates you have to charge every year. You don’t have to pay the interest, but really that is one of the few benefits.”
While councillors praised MacKay for his presentation and arguments, no one was willing to change how St. Albert does business, especially with a report due later this year reviewing the 100-year utility model.
“We need to wait until that is done,” Coun. Cathy Heron said, who described herself as debt-averse. “I see utilities as a pretty easy thing to predict. I don’t have any problems paying for that for my future grandchildren.”
Coun. Len Bracko praised the theory but wanted to see the practice.
“With the aging population, they want stable funding, not peaks and valleys that go along with [a debt model]. We need to know more of what’s involved over 100 years.”
