Paul Lake sewer system taxes – a Q&A

Paul Lake sewer plant.

Paul Lake sewer plant.

PAUL LAKE — Changes for TNRD utility rates are in place or being finalized. At a meeting of Paul Lake residents called by the TNRD in December to explain how those changes affect the Paul Lake sewage system, a lot of questions were asked about what’s behind the changes.

I committed to talk further with staff and to provide more details that might help explain. I’ve put the information in the form of a Q&A based on conversations and emails with the TNRD, and my own understanding. While I’ve relied heavily on the expertise of staff and the answers they’ve provided me (and in some places the wording is verbatim), it’s a compilation, and any errors or emissions are my own.

However, I hope it helps. For more, please take a look at the Powerpoint that was presented to the meeting. It can be found on the tnrd.ca website or by clicking here — Paul Lake Community Sewer Service.

Q: What will we be getting for the extra taxes we’ll have to pay?

A: The first thing to be aware of is that it might not be $95 as earlier projected. This is being emphasized to me by TNRD finance director Doug Rae, who says the $95 was based on information available in October, but a surplus might serve to lower that number. Several things go into the increase. Direct labour cost has increased due both to annual inflation and to a change in the allocation of it to an average cost per connection throughout the TNRD. An increase in indirect administration costs resulted in approval of a $60 per year increase in parcel rates for all utilities. (Keep in mind, Paul Lake’s sewer service is the only one in the TNRD paid for via parcel tax only; others combine parcel tax plus quarterly tolls.) Indirect administration costs include equipment for utilities staff, vehicle operating costs, office supplies, phone, insurance and so on. So, the $95 is not set in stone, but basically includes direct labor, indirect administration costs, inflation and a guess on the surplus. We’ll have to stay tuned for the final number and hope it will be lower. (By the way, another wrinkle is that those properties that did not pre-pay on the 20-year loan at the time the system was built will see a drop as it gets paid off.)

Q: The rationale for changing from apportioning direct labour to each utility based on individual costs to an average for each connection is that it is more equitable. Why can’t labour costs for each utility be logged in detail and taxed to the users of each utility?

A: Accurate tracking isn’t impossible but it is difficult and costly. It would take significant time to collect and analyze the data for each system with very little benefit, if any.

The rationale behind the change is that every household receives the same benefit of having their water or sewer system maintained in good working order.  Averaging the direct labour costs so that one user pays the same as another is fair, and also efficient as resources can instead be directed into productive efforts on behalf of those services.  In addition, the change allows for more of the cost of labour to be borne by users of the utilities and not forced onto Electoral Area taxpayers who don’t receive the service.

(For utilities financed through monthly tolls on top of parcel taxes, a Board motion from 2010 put in place a “cap” on user fees of $100 per month in recognition of the challenges faced by utilities with small numbers of users. This policy also directed that any costs that could not be recovered from the service area properties because of that limitation would instead be recovered from Electoral Area taxpayers as a whole.  This was indeed the case with the smaller utility systems, where labour costs could not be fully recovered by the E/A Administration service.  By now apportioning labour cost based on the average cost per connection, overall there is less of this cost apportioned to the smaller systems than before, requiring much less subsidy from the E/A taxpayers who receive no utility services.  That’s more equitable for them.  Using the average cost per connection is becoming common in other regional districts. (By the way, the $100 cap has been raised.)

Q: In view of residents’ concern about differing direct labour costs for various utilities, could one community’s utility be removed from labour-cost averaging and continue to be assessed costs based on actual labour there?

A: Removing a single system from the calculation would not be possible, since by default all unallocated labour would accrue to that one remaining system, whatever the hours.  Residents shouldn’t be concerned that they will be “subsidizing” other systems due to the Paul Lake sewer system being less labour intensive than others, because it isn’t the case. And the amount of labour for the Paul Lake system is likely to increase over the next few years.

In 2016 when the allocation of direct labour costs was done based on staff time, Paul Lake’s share was 8.57 per cent of the total.  Under the new methodology of charging the average per connection, Paul Lake represents 8.75 per cent.  That’s a change of 0.18 per cent or $721 (divided by 106 properties, or $6.80) based on the 2017 costs to be allocated.  The reason that the cost increases by more than that from 2016 to 2017 is because the total cost being allocated has increased year to year.  In total, the two sewer systems operated by the TNRD required 28.57 per cent of the direct labour based on hours in 2016 while the 11 water systems required 71.43 per cent (note that this is what was budgeted for 2016, based on 2015 experience).  There would be some increase regardless due to other costs. Each system is unique, and Pritchard sewer takes more time than Paul Lake, but in general sewer systems take more staff time than most of our water systems, not less.  Tracking staff time systematically for Paul Lake would likely result in charging additional administrative fees to that service for the extra time and effort required.

Q: What is the “extra capacity” referred to with respect to future expenditures from the existing capital reserve? Since it’s currently at $171,000, isn’t that enough for the foreseeable future? Once money is put into a capital reserve, is it locked there forever or can it theoretically be refunded?

A: Currently the only funding being budgeted to go into the reserve is the interest that it earns on the funds at the bank.  Under the Local Government Act and Community Charter provisions, funds from the capital reserve can only be used for the purposes for which the reserve was established, and generally for capital reserves this means not for regular operating costs.  The process for drawing any funds would be to have the Board adopt a specific bylaw authorizing it each time.  In theory, if funds in the reserve are considered excessive then they could be refunded to the taxpayers.  The TNRD has done so before but only where the funds were never expected to be used at all.  This is not the case with the Paul Lake system. The TNRD is currently in the planning phase of projects to deal with increasing capacity of the system due in part to the ongoing transition from small seasonal cottage use to full-time residential. Any major utility project would likely involve application for federal-provincial infrastructure funding, with the reserve fund going towards the required one-third local share. As capital costs for utilities are very expensive, such projects can easily exceed $500,000. (As an example, in 2015 the TNRD successfully applied for funding from the Small Communities Fund of the infrastructure program for improvements to the Pritchard sewage disposal plant and was approved for contributions of $153,333 each from the federal and provincial governments. The share required from Pritchard residents was the remaining third, $153.333, which was covered by their reserve fund.)

 

 

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2 thoughts on “Paul Lake sewer system taxes – a Q&A

  1. So you take ownership of a community developed and payed for system that has a healthy fund for ongoing service and repairs so you can charge them more on average to help other communities that have not banded together in the tnrd who CHOSE not to bear the upfront costs of such a development. You are basically stealing from this community to give to others that to me sounds like another clueless move from the TNRD how do you think you can get away with this the is ZERO benefit to the community here #STOPSTEALING #TNRDTHEIVES

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    • Thanks for taking the time to read my post, and hopefully you’ve also been able to look at the Powerpoint presentation and the original staff report on the state of utility systems funding. Here are some points for you to consider. The TNRD’s current policy is to make each utility self-sustaining so that residents who don’t receive a service don’t have to pay for somebody else’s service. This policy direction was established before my time on the board but I agree with that goal, which has been undertaken in a measured manner. With respect to your comment about other communities choosing not to bear upfront costs, most of the utility systems operated by the TNRD were taken over at their request when they ran into financial problems. Many have borrowed for a local share of capital improvements, supplemented by provincial and federal funding. I understand the impression that Paul Lake residents might be paying more than they should for direct labour costs but the information I’ve gathered indicates this is not the case. The objective is equity, fairness and efficient use of tax dollars. My job as Electoral Area director is to bring the concerns of residents of the area to the TNRD and to get answers. I don’t always agree with the board or with administration, and feel the consultation process for adjusting utility rates could have been done better, but the fact is that labour costs, rising capital costs, supplies, repairs and maintenance have put pressures on the operation of these systems that must be met to keep them going.
      I should add to my original reply that, to be clear, I agree that an exact, accurate calculation of direct labour costs for each utility would be ideal, but I’m encouraged that averaging of those costs won’t of itself have a significant negative impact on Paul Lake. That’s something that needed to be cleared up after the discussion at the meeting.

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