posted: Jun 3, 2024
The $6 million debt incurred by the waste water treatment plant (WWTP) upgrade has a significant impact on the size of the Cobden water bills. This post analyzes how the debt was reflected in our 2023 water bills. Turns out that the debt contributed $92.87 to each bimonthly water bill and represents 20% of the bill. The major information source used in this post is the very informative (but long) Water & Waste Water System -- Council Report Oct 2023 (ver 2) [ref]. Note that the analysis applies to the 2023 water bills only, and that the portion of each bill resulting from the debt changes each year as the rates change.
Future posts will dig further into what constitutes the other 80% of the bills, and ways that the bills might be reduced.
Based on an initial cost estimate of $9.2M to upgrade the waste treatment plant, grant funding of $9.4M was obtained [ref]. The grant consists of $3.1M from the Federal government, $3.1M from the Provincial government, and $3.1M from Whitewater Region. So even before any upgrade work had started, half of the $6M debt was incurred as part of the agreement for funding the upgrades.
The final cost of the completed upgrades was $13M [ref], and the resulting upgrade debt was $6M. The debt is in the form of a $6M loan at 2.98% over 30 years (2021 - 2051) [ref].
Analyzing the water bills gets a bit squirrelly, and isolating the upgrade debt portion gets downright gnarly (the technical terms that seem to apply here).
Each bill has 2 components: the clean water portion and the waste water portion. Sort of makes sense when you consider the physical pipes connected to buildings: one set of pipes comes from the water plant and brings in clean water, while a different set of pipes takes out waste water that goes to the waste water treatment plant. Each system of pipes has its own plant and its own costs. For simplicity, the township combines both the clean water and waste water costs into a single bill issued every 2 months (bimonthly).
To further simplify (?) billing, bills are based on a generic "user". Don't think of a user as a person, think of a user as the physical connection of a building to the pipe systems. 1 user = one single family residential house connected to both the clean water and waste water pipe systems. The bill for 1 user is the baseline value for calculating water bills. Different categories/scenarios of use (e.g. single residence homes, businesses, apartments, etc.) are assigned a weighting factor [ref] that gets multiplied by the baseline value to arrive at the bill for that category. For example, the Medium Commercial category has a weighting factor of 1.5, so the bill for a Medium Commercial business is 1.5 times the bill for a single residential "user". Basing bills on weighting factors is simple, but contentious.
Many will recall that the baseline bimonthly water bill for 1 user in 2023 was $461.85, of which the waste water portion was $281.61 (as stated on the bills). But how is the $6M upgrade debt reflected in this? On an annual basis, the 2023 bill for 1 user consisted of $1081.41 for the clean water connection [ref] and $1,689.68 for the waste water connection [ref], for an annual total of $2,771.09. (The word connection is used here because usage is not metered.) Six bimonthly bills are issued to manage cash flow, and $2771.09 ÷ 6 = $461.85 bimonthly.
The payment of Cobden's waste water debts are passed on to the users. In 2023, 34% [ref] of each $281.61 bimonthly waste water bill paid for waste water debts, and 34% of $281.61 = $94.75 bimonthly. In fairness, two unrelated sewer projects account for 3% of the total waste water debt [ref], so the upgrade debt portion represents 97% of this, or $92.87 bimonthly. In layman's terms: the upgrade debt cost a user less than 50 bucks a month in 2023. In practical terms, the debt accounts for 20% (one fifth) of the total bimonthly water bill.
The analysis shows that the $6M debt for the waste water treatment upgrades represented 20% of your 2023 water bills. That is a significant chunk of the bill, and it suggests a few follow-on questions for future posts: What does the other 80% of the water bills pay for, and what might be done to get this portion of the bills down? Can anything be done to get the waste water debt portion of the bills down? What are the current plans to change the water bill rates and how will the portion associated with the upgrade debt change?
TWP