Fluoride Action Network

Sudbury: Rates set to jump

Source: The Sudbury Star | March 4th, 2011 | By Mike Whitehouse
Location: Canada, Ontario

Greater Sudbury ratepayers could be hit with an average annual 7.4% increase in costs to maintain the city’s water and sewer pipes and plants, much of which is crumbling, city council has heard.

Capital spending will need to more than triple to $65 million annually by 2021 just to maintain the city’s aging water and wastewater infrastructure, staff said. In 2010, the city spent only $20.3 million for capital projects.

To achieve that level of spending will require some significant increases in rates duringthe coming 10 years. However, to lessen the shock to ratepayers, staff recommend council adopt a 10-year financial plan and proposed a flat rate hike of 7.4% during that period to pay for it.

It would not be a commitment to set the rate at that level, Paddy Buchanan, the city’s manager of accounting, said. While 7.4% sounds like a lot, it’s merely a guideline and council will have to consider its needs and financial position every year.

“The approval of the plan is not fixing rates for the future,” Buchanan said. “It provides a financial strategy.”

Oscar Poloni, a consultant with KPMG, described setting the rates as a balancing act. Skimping on capital investments in the future will just add to the operating costs over the same period of time.

“It’s a sustainability issue,” Poloni said. “You will shock the system if you introduce this all at once,” but it does have to be paid for.”

The good news for the division’s finances is that water consumption, which has fallen by 8% during the past five years, is projected to fall by only an additional 2% during the next 10 years.

While the city is happy to promote conservation, success does, in the end, drive up rates. Diminished consumption means diminished revenues, but, because roughly 75% of water and wastewater operation costs are fixed, costs remain the same, even as consumption falls.

One area where costs may be cut is the application of chemicals to city water. In particular, Mayor Marianne Matichuk asked staff about the cost of fluoride.

An expensive chemical to handle, fluoride also damages city pipes and could cost the city in the area of $200,000 a year, council heard.

Aware that fluoride is a hot-button issue — it is staunchly recommended by the medical community — Matichuk asked staff for an unbiased assessment of fluoride treatment, including the practices of other communities.

Council will be asked to approve the 10-year financial plan during this budget year, perhaps as early as next week. It will kick in beginning in 2012.

In the meantime, councillors also got a look at the water and wastewater operating budget for 2011, and the news is no better.

Staff presented a base budget increase of 3.4% for 2011, which would amount to about $40 a year for the average household.

That increase, however, would not address the capital deficit identified in the 10-year financial plan. The $23.5 million allocated for maintenance is $3.5-million below the $27-million minimum prescribed in the long-term plan.

Staff presented council with enhancement options to close the gap, ranging from $875,000 to $1.75 million, which would result in an overall increase of 3.4% to 6.9% in user fees.

Council will set its water rates at the end of March.