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Demand for millions to fix pipes puts O’Brien’s tax freeze at risk
Mayor Larry O’Brien’s “zero means zero” pledge is an even tougher challenge now that the city’s financial managers say utility bills will need to go up over the next four years to pay for water and sewer improvements.
They say combined rates must increase for water and sewer service by nine per cent in each of the next four years to cover the financial shortfall for building and running the piped systems. An average household spends about $700 a year on the water and sewer bill and a nine-per-cent increase this year would mean about $63 more. Rural residents who aren’t on city services don’t pay.
Officials initially thought the nine-per-cent increase could just be in the first year, followed by smaller increases. But they say increased costs on some of the capital projects translated into a $431-million funding gap over the next 10 years, including $208 million over the next two years.
So they are proposing a nine-per-cent increase each year until 2011, when the increases would drop to five per cent, followed by five per cent in 2012 and another five per cent in 2013.
Officials hope that after 2013, the increases could drop to perhaps two per cent, but financial projections that far into the future are never very firm. The rates charged for water and sewer service must be approved by council each year.
The spending is estimated to be $822 million for the water system and slightly more than $1 billion for the sewer system. About $1.5 billion of that will come from the water and sewer rates paid by households and businesses. The city plans to issue additional debt, $69.6 million this year and $72.3 million next year, to help cover the costs.
Projects include replacing old sewer and water pipes and building a digester to handle waste from the Britannia water purification plant, sludge that is dumped into the Ottawa River, in violation of Ontario environmental rules.
Also covered is the separation of sewer and stormwater pipes in older neighbourhoods of the city so sewage isn’t dumped into the river from overloaded pipes during heavy rainstorms. In the fall, after questions were raised by Councillor Diane Holmes, city officials admitted that only 75 per cent of stormwater and sewage in a big section of downtown makes it to the wastewater treatment centre. The rest, mostly stormwater, flows untreated into the river.
The water problem is particularly important, since the city’s plan for growth involves building more housing and businesses in the central part of the city, where piped services are already stressed.
There were questions raised during the fall about whether the city’s water and sewer utilities are overpaying the city for administrative services, and perhaps charging too much on the utility bill. But building water and sewer systems is considered an essential capital task for the city.
“Capital spending for water and sewer is very difficult to reduce, primarily because it’s one of those safety issues,” said Marian Simulik, the city’s treasurer.
“People want to make certain you’ve got drinkable water and you want to make sure your sewage waste water is being treated properly,” she said. “I don’t think there’s too much you can defer.”
The city’s long-range financial plan says the higher costs being planned for are tied to rising prices in the construction business.
Mr. O’Brien won the fall municipal election in Ottawa on a platform of keeping city taxes and rates where they are, with a campaign theme of “zero means zero.”
The mayor’s communications director, Mike Patton, sat in on a budget briefing of journalists yesterday, where the utility increases were explained. He said the mayor’s zero-increase pledge is intended for city water and sewer services, as well as municipal taxes. But Mr. Patton stressed that it’s early in the budget process and council needs to explore, with frontline workers in the city’s operations, how operations and capital projects can be done in different ways that may cost less.
Council also faces a major problem in trying to constrain the budget funded by property taxes. The city has estimated increased costs of $95 million for this year, due to increased wage costs, higher energy costs and growth of the community. Ms. Simulik said that increase can be taken down to $39 million, or a four-per-cent property-tax increase, if the provincial government pays some of the money the city believes it is owed with shared-cost programs, and if city council agrees to measures such as not bringing in $20 million worth of enhanced city services.
Councillor Jacques Legendre said he is not interested in aiming at a “magic number” for the budget because there is a danger of neglecting maintenance of city assets and eroding services. He said there is no point in reaching a campaign promise of no tax increase if the cost for reconstructing a road jumps because it’s been delayed too long.
“To get below four per cent—that’s going to be tough, really tough,” said Mr. Legendre.
But Mr. Patton said there are all kinds of small ways that city departments can save money, while still delivering the services people count on. He noted that even a one-per-cent cut in departmental spending across the board would mean a savings of $9.5 million for the city.
City council is to meet to give budget directions on Jan. 11 and a draft budget is to be presented Feb. 8, followed by public meetings. The budget will be debated and adopted by city council in the last week of February.
© The Ottawa Citizen 2007