Council primes pump on next Water Financial Plan

(Gazette file photo)


Prince Edward County’s municipal water license will be renewed later this year in light of new water and wastewater rates.

Andrew Grunda, Watson & Associates Economists Ltd representative, presented the Water Financial Plan to Council during Tuesday’s regular council meeting.

A Water Financial Plan is one of the submission requirements for the purpose of obtaining or maintaining a municipal drinking water license as per the 2002 Safe Drinking Water Act, according to the
Watson & Associates presentation.

In preface to the presentation, CAO Maria Wallace explained in light of recent conversations surrounding water and wastewater rates as well as infrastructure, there are mandatory timelines the County must meet.

CAO Maria Wallace. (Submitted Photo)

“We have some obligations every five years under the drinking water act in order to bring forward a financial plan that shows you understand the obligations as a municipality in operating your drinking water system to properly fund it,” she explained. “This presentation is an informational item so that council can see this and the public is aware of it.”

Wallace said they will be bringing back a staff report in February that will lay out the details of the Water Financial Plan.

She said over the next several months, there will be a multi-stepped conversation with the community and council around a revised rate study on water as well as big infrastructure decisions in Wellington and elsewhere.

“We understand this is a complicated area, we are going to be making some recommendations on how to engage with the public in a transparent and open way and that will come forward in the staff report in February,” Wallace said.

Grunda reiterated Wallace’s explanation that the requirement of the Water Financial Plan must be comprehensive of financial forecasts.

To maintain the municipal drinking water license, the County must approve and submit the financial plan by Feb. 12, 2021, Grunda said.

Watson & Associates previously prepared the County’s 2016 Financial Plan based on the County’s 2015 Water and Wastewater Rate Study, which included a 10-year financial plan and rate forecast to 2025. The County is currently completing a comprehensive Rate Study that is scheduled to be under consideration by council and the general public later this year, Grunda said.

Since the completion of the 2016 Financial Plan, the County adopted a new rate study which is the basis for an updated and resubmitted financial plan at the conclusion of the 2021 Rate Study.
The last forecasted water rates were those of a 2017 Water and Waste Water Rate Connection Study that was prepared, he said.

“While the County’s ongoing with updating those assumptions as was mentioned in the introduction – and that will be coming forward later in this year – there’s still this regulatory requirement that this financial plan be submitted,” Grunda continued. ”In talking with staff, the plan which we’ve seen used in a number of other municipalities who find themselves in a similar situation, is to take that most recent expression of Council – that being the 2017 study – maintain that forecast, update the starting point to reflect your current budgets and financial state so that Council can then approve that plan and submit it for compliance purposes to maintain the Drinking Water License.”

Along with the 2017 study, the financial plan also looked at the amount of capital spending that was expected over the forecast period to 2030. It had maintained that in accordance with the plan, providing some updates for deferred capital, Grunda said. He said capital spending at a cost of $26 million would be undertaken over the period – about half of that would be funded through the use of debt, and the other half from water revenues either in the form of direct contributions from operating or in reserve contributions. The reserves, he added, were updated to reflect the current opening balance of just under roughly $1 million in the water system and with that financial plan and the underlying rate increases of that rate study, it would see that reserve balance would increase by about $1 million to the end of 2030 in addition to the funding.

“When we now convert that into a full cost basis, or full accrual basis, we have to prepare these four statements – Statement of Financial Position, Statement of Operations, Statement of Changes in Net Financial Assets, and Statement of Cash Flows.”

This indicates it is greater than the accumulated surplus, Grunda said.

According to figures supplied in Grunda’ s presentation, the forecasted Acquisition of Tangible Capital Assets between 2021 and 2030 is figured to be $26,830,734. That’s over $21,130,517 in Annual Surplus/Deficit before Amortization (Cumulative).

“That’s where we see this increase in net debt of $5.7 million and that means you are investing more in capital assets – that you’re using debt for those investments and some of those future costs of the service will have to fund those historic funding decisions that are being made,” he said.

Grunda said the net financial position of the municipality in terms of its water system improved over the forecast period.

“The intent is for Council to adopt this and send it to the province before February 12 so that it can maintain its municipal drinking water license and operate the system accordingly. In addition to doing that submission, there must also be a notice that the financial plan is posted to the municipality’s website,” Grunda explained. “After this has been submitted and the water financial plan is completed
or 2021, this financial plan will be updated to reflect that more recent expression of Council and revise this plan accordingly.”

Neiman-McMahon motion that the presentation was received.