OSWCA wants Ontario to ensure municipal water services fully recover costs

The Ontario Sewer and Watermain Construction Association (OSWCA) is asking the provincial government to pass legislation that would require municipal and regional governments to mandate full-cost recovery for water and wastewater systems, to ensure infrastructure assets are being managed and invested in the most efficient and sustainable way possible.

The OSWCA says that Ontario’s municipal councils are not raising water user rates to necessary levels, creating a significant barrier to achieving financial sustainability. The lack of funds is also leading municipalities to defer maintenance, rehabilitation, and expansion of their water and wastewater infrastructure.

Ontario’s rates for residential and commercial users remain among the lowest levels in the country, says the association. The province ranks fourth in average price, only higher than British Columbia and Quebec, and decidedly lower than Alberta, Manitoba, and Saskatchewan.

It is all contributing to a growing water and wastewater infrastructure deficit estimated to be in the billions.

“While charging artificially depressed rates ensures the cost to the end user remains low, the subsequent underinvestment in the maintenance, rehabilitation and expansion of water and wastewater infrastructure that such depressed rates demand, results in a growing infrastructure deficit and much greater reactive spending due to costly emergency repairs,” states the OSWCA submission to the Ontario Minister of Finance.

While it is lobbying for full-cost recovery, the OSWCA says it understands that not all municipalities are on the same page when it comes to what full-cost recovery means. The term suggests that all funds invested into the water systems are recovered through securing funding or charging user fees; however, the OSWCA says the province should create a standardized definition.

The pre-budget submission points to the Sustainable Water and Sewage System Act, 2002, which was never proclaimed following the 2003 Ontario election. The legislation noted that “the full cost of providing the water services includes the source protection costs, operating costs, financing costs, renewal and replacement costs and improvement costs associated with extracting, treating or distributing water to the public and such other costs as may be specified by regulation.”

For wastewater, the legislation noted that full-cost recovery includes “source protection costs, operating costs, financing costs, renewal and replacement costs and improvement costs associated with collecting, treating or discharging wastewater and such other costs as may be specified by regulation.”

Using the 2002 legislation as a guiding point, the OSWCA says full-cost recovery through user fees should be mandated for municipal water systems that serve at least 10,000 people. It suggests that specific exemptions could be allowed for low-income households.

The submission notes that more than 80% of the 677 drinking water systems in the province serve populations of less than 10,000 people, while 47% serve less than 1,000 people.

“A great many of these small systems are facing increasing financial pressures due to deteriorating infrastructure, shrinking user bases, and escalating costs to maintain and operate their system,” states the OSWCA submission. “Notwithstanding these pressures, there remains an obligation for local system operators to meet provincial regulations for water.”

Full OSWCA Pre-Budget Recommendations:

• Reinstitute the legislated definitions for “full-cost recovery” and “wastewater services” as defined in the Sustainable Water and Sewage System Act, 2002. Maintaining these definitions will ensure that those municipalities which voluntarily adopted full-cost recovery when it was previously legislated will not be unduly penalized due to a language change.

• Require municipal water systems that serve at least 10,000 people to recover all costs through user fees.

• Temporarily, make funding available to municipalities seeking to retrofit or rehabilitate water and wastewater infrastructure in order to accommodate a move towards system regionalization.

• Require municipalities applying for provincial funding for a water or wastewater infrastructure project to demonstrate that amalgamation of their water and wastewater systems with a nearby municipal system would not resolve their funding issues and create greater economies of scale.

• Maintain a long-term goal of eliminating provincial funding for municipal water and wastewater infrastructure projects for all municipalities with a population over 10,000.

• Establish a regionalization fund that incentivizes larger system operators to assist smaller system operators with material purchasing and problem issues in cases of emergencies.

• Allow small system operators the opportunity to remain independent, even when a regional option is available, on the condition that the users of the system are willing to pay for its operation and upkeep moving forward.