Water and sewer rate hikes will be phased in over 20 years to make sure the Town of Banff can adequately fund its utility reserves to pay for necessary future repairs and maintenance.
On Tuesday (Oct. 10), council unanimously agreed to phase in water and sewer rate increases from 2012 to 2031, with the average residence seeing about a $20 increase in 2012, assuming consumption levels stay the same.
“This is a small price to pay to guarantee our clean water and clean river into the future,” said Councillor Leslie Taylor.
The average hotel, with 135 rooms, will see a $2,500 hike. By 2013, the increase will be $25 for the average residence and $3,100 for the average hotel.
The rates will be reassessed in 2014 to ensure capital reserves are not being under or over funded once the new operating contract for the wastewater treatment plan is in place. (Administration is currently seeking a price from EPCOR for a new 10-year contract for the wastewater treatment plant, with the possibility of a 10-year extension, to compare against in-house provision of services.)
Fees paid by residents and businesses for water and sewer cover all the costs of operating the sewer and water systems, plus maintaining and renewing pipes, pumps and plants and so on.
However, an analysis of the Town of Banff’s water and sewer capital reserves earlier this year revealed the sewer reserve is alarmingly and significantly inadequate to fund the future replacement of capital assets.
Council considered a 10-year, 20-year or 40-year phase-in period, but, based on the advice of administration, decided to go with the 20-year option. All options aimed to build reserve balances up to a level where the annual contribution beyond the phase-in would be $3.2 million to the sewer reserve and $1.6 million to the water reserve.
As with the other options, there will be short-term projected shortfalls in the sewer reserve in the 20-year plan. With the 20-year scenario, the combined balance of the two reserves would be at a deficit of about $300,000 in 2014.
“Two options that could be used to address the short-term funding shortfall in the sewer reserves are to use debt financing for sewer capital projects, or borrow from the water reserve and then pay it back once the balance builds up effectively,” said senior accountant Chris Hughes.
“The long-term anticipated cash requirement pinch points for the sewer reserve are between the years 2110 and 2120 and for the water reserve between 2100 and 2110.”
