The two-week honeymoon period has drawn to a close for St. Albert’s newly elected politicians. The election signs, the euphoria of victory and the good wishes from supporters are becoming distant memories.
This Monday’s council meeting will be momentous on two counts: It marks the first official time the new council will get together; and it’s the last relatively stress-free meeting council will enjoy for some time.
Budget season officially kicks off Nov. 12 and there are myriad issues to discuss. One that came up repeatedly is the issue of utility rates – how the city will fund future utility infrastructure, to be precise. Before readers take a collective sigh, consider this: Whatever your newly-elected council chooses to do, utility rates are going up. It’s just a matter of degree.
Back in April, council delayed consideration of the 2014 utility rate increase and how future utility capital projects should be funded – by debt or by user fees padding reserves. Several of the funding scenarios outlined by staff show 2014 utility rate increases ranging from 12.8 per cent all the way to 39.7 per cent.
At issue is the funding model. Council will have to decide if it sticks with the current 100-year model, where reserves are built up ahead of time so big projects can be paid for without debt, or switch to a “pay as you benefit” model which would result in having to borrow the money.
Council was presented with a consultant’s report in February that showed the council its options and their impacts. In 2008, the 100-year model predicted future rate increases of 9.5 per cent over the next 10 years to fund utility projects. However, this year council only passed a 6.5 per cent increase, and as the new council debates the 2014 rate, it will have to be aware that continued 6.5 per cent utility rate increases per year will dry up utility reserves by 2016.
In the “pay as you benefit” model, the city would take on debt as a funding source for utilities. Under this model, current ratepayers aren’t required to pay for future development.
Whichever route council chooses, it must consider the Municipal Sustainability Initiative (MSI) grant. The city receives over $11 million each year under this grant. Of that, nearly $3.5 million goes towards St. Albert’s utility capital projects. If council adopts the consultant’s recommendation to fund the utility operations without the MSI grant, then utility rates will have to increase to make up the $3.5 million annual difference.
So, do we pay it forward and buy a coffee for the guy behind us in the drive-thru, or do we ask him to borrow the money and buy his own coffee when he gets to the window? It’s an important decision. Ratepayers need to discuss this with their elected officials to ensure a sustainable utility fiscal policy moving forward.
