Water Budget Tops $20 Million - KISS FM and Kiss' comments

Written by Peter McIntyre  

Thursday, 29 January 2015 18:00 

This year's Greater Vernon Water budget calls for 15 million dollars in operating spending, and 5.5 million dollars for capital projects.

Regional District of North Okanagan Finance manager, Stephen Banmen, says one area of good news is water treatment costs are going down $410,000.

"Within the functional area of water treatment, the largest savings are related to water treatment chemicals ($134,000), utilities ($129,000) and operations and maintenance ($72,000)," says Banmen.

Among the 26 capital projects planned for this year is $660,000 to replace a cast iron water main at 9555 Highway 6 in Coldstream, $600,000 to upgrade a water main on Venebles Way between Aberdeen and Middleton in Coldstream, and $490,000 for Pleasant Valley Road, 41st Ave to 20th Street in Vernon.

Greater Vernon Advisory Committee director Gyula Kiss questioned staff why a $400 a year base fee is charged for water, calling it "a tax that doesn't seem to have any bearing on anything."

Finance manager, Stephen Banmen, says that fee helps cover the fixed costs of running the utility.

In a presentation to the board, Utility Manager Zee Marcolin said 53-thousand residents use the system, and 200 samples of the water are taking each month to ensure the quality.

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The "fixed costs" argument is frequently used by finance managers and other staff members. However, they cannot identify which part of the budget is dispensable.

In fact, a budget, by definition, is 100% fixed. Any part of the expenditure ledger not covered by the revenue ledger would create a shortfall and an imbalanced budget. I believe all budgeted items are fixed. If staff can identify any unnecessary expenditures I would be quite happy to eliminate it from the revenue stream.

Based on the above, if we were to cover all fixed items with base fees we would arrive at a point where all customers would pay the same flat fee regardless of their consumption. We used to have that not so long ago. Then we introduced water meters and started to implement small base fees (access fees) and collected the rest of the revenue through user fees. In 2005 the base fee was $25 per quarter or about 26% of total fees yet revenue targets were met. In 2014 base fees increased to $99.80 (which is basically a punitive tax not related to either property values nor water consumption) per quarter shifted to about 53% base fees and 47% consumption. I wonder how a business would survive with a similar philosophy?

Staff is considering spending up to $8.3 M for upgrading the water metering system. Considering how the ratio of fixed fees versus consumption fees is shifting what benefit would this huge expenditure have for the water customers? 

We must remember that we are trying to control consumption and the more revenue is collected from flat fees the less clout we have on the consumption control. Also, the less water one uses the more one pays for a unit of water.

Those are some of my concern with the budget. Other concern relate to the huge capital expenditures (over $5.5 million) at a time when we are still searching for a Master Water Plan that will be acceptable to the water customers.

      

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