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Westside Regional Wastewater Treatment Plant

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Background

Key Issues

Future Consideration

Consultant's Report

The District of West Kelowna (DWK) considers the Westside Regional Wastewater Treatment Plant (WRWTP), managed by the Regional District of Central Okanagan (RDCO), to be a critical piece of infrastructure for the community’s ongoing development.

West Kelowna Council wanted to understand the service and its structure more fully and raised a number of questions related to service funding, governance and the facility’s future. West Kelowna Council retained the services of Neilson-Welch Consulting Inc. to provide a report on the questions raised.

After receiving the final report and discussing its contents, Council agreed on August 17, 2010 to forward the report to the RDCO for consideration by its newly-created Sewer Plant Stakeholder Select Committee to follow up on areas of concern.

Council also agreed to provide information publicly on its website once confirmation of receipt of the report by RDCO; and to provide the report to the Minister of Community and Rural Development.

The Key Issues raised in the report are:

  1. Parcel Tax Payments for WRWTP
  2. Payments to Date 
  3. WRWT Phase 3 Expansion – Reliance on Development Cost Charges (DCCs) 
  4. Disposal of Sludge 
  5. RDCO Administration Overhead 
  6. Service Governance 
  7. Budget for the Service 
  8. Future Access to Capacity 
  9. Expansion of the Service Area

These issues are covered in more detail below under “Key Issues.”

BACKGROUND

CURRENT GOVERNANCE

Prior to DWK incorporating in December of 2007, West Kelowna formed part of the Westside Electoral Area of the RDCO. The RDCO provided a wide range of services, including local sewage collection systems and the WRWTP.

DWK became responsible for the sewage collection system at the time of incorporation. The WRWTP, as a sub-regional service, was retained by RDCO.

DWK and the District of Peachland are the sole participating jurisdictions in the WRWTP service. Westbank First Nation (WFN) is serviced by the WRWTP and a stakeholder in the service, but is not a participant in the service. WFN pays to access the service’s trunks and treatment plant.

THE RDCO Board of Directors is the corporate and governing body responsible for the WRWTP service. The full Board votes on a number of key matters related to the service.

FACILITY HISTORY

1988 - 1989: The WRWTP was constructed to serve the unincorporated areas of Shannon Lake and Westbank, with 3,640 parcels at the time.

1994 - 1996: Phase 1 expansion and included unincorporated Westside and Westbank First Nation and Peachland as a full participant – By 1998, 8,857 parcels in (now) DWK, 1,360 in WFN, 2,312 in Peachland.

2004 - 2007: Phase 2 expansion increased to current level – 12,552 parcels in DWK, 2,741 in Peachland and 3,353 in WFN.

COST OF SERVICE

The total cost for the service in 2009, at $3.73 million, was 4.2% higher than projected in the RDCO’s Financial Plan. User fees are collected from residents and businesses in West Kelowna, Peachland and Westbank First Nation: 

  • West Kelowna users paid $2.63 million, 72% of total user fee revenues; 
  • Peachland users paid $381,456, 10.4% of total user fee revenues;
  • Westbank First Nation users paid $645,189, 17.6% of total user fee revenues.

KEY ISSUES

The report provided the following information on these Key Issues:

  • Parcel tax Payments for WRWTP

RDCO charges all properties within the service area a parcel tax to help pay the debt associated with the WRWTP and its associated trunks. Parcels that are unable to connect to the utility are not exempt from the tax. DWK inherited this practice when it took responsibility for collecting the parcel tax from DWK taxpayers. This approach appears valid according to legislation (Local Government Act and the Community Charter) and reflect two points:

      1. All properties within in the service area will ultimately have the ability to use the plant and should pay a portion of the cost of expanding the facility. Failure to do so could risk creating inequities in the system once all connections are made.
      2. All properties in the service area share in the environmental benefits provided by the treatment plant service and should contribute to it.
  • Payments to Date

DWK expressed concerns in the level of equity among service beneficiaries as it relates to the past payments and terms of joining the system. The report provides the following information:

      1. Overall Debt and Debt Payments Low: Borrowing for the WRWTP has been minor, with only $850,000 borrowed in 1989 to assist in the construction of the original facility.
      2. No Charge to Join: RDCO charges no entry fee to join the service area, defendable by the following points:
        1. WRWTP constructed in phases in response to expansion of service area and growth-related increases in demand for service. Capital investment has been broken in to pieces and front-end investment by initial service entrants was quite limited;
        2. A review of capital investments shows majority of funds spent between 1987 and 2008 came from grants from senior governments and the Okanagan Basin Water Board (24%) and from DCC revenues (64%). Less than 9% of the funds spent came from current users and early users;
        3. RDCO appears to have been driven primarily by a goal to protect the health of Okanagan Lake and area groundwater resources and the expansion of WRWTP to cover all urban development in the broader Westside transcended any need to maximize equity through a buy-in charge.
      3. Pay as you Go: Borrowing has played a small role in the funding strategy to date (less than 3% of total investment to date). RDCO has signaled its preference for a Pay As You Go approach to capital funding which allows authorities to avoid debt charges and the stigma attached but expects current users of the system to pay for expansions that are required to serve future users. Concerns of inequity are mitigated by the relatively small numbers involved – current users have contributed 9% of all funds.

The report noted that with the WRWTP covering almost all of the broader Westside community now, there is a shift amongst RDCO staff in favour of introducing a buy-in charge for parcels to be added in future expansions.

  • WRTWP Phase 3 Expansion – Reliance on Development Cost Charges (DCCs)

DWK is concerned about RDCO’s strategy to fund the Phase 3 expansion currently underway and expected to cost $16.56 million (2009 dollars). Specifically, the reliance on DCCs to cover close to half of the total capital expenditure ($6.8 million) – other revenue is expected to come from infrastructure grants ($7.75 million) and new debt (1.16 million). If there is a shortfall in collection of DCCs, it would need to be covered through higher user fee payments or parcel taxes on new debt.

  • Disposal of Sludge

RDCO had expected to become an equity partner with the City of Vernon and the City of Kelowna in the Ogogrow facility to handle sludge produced by the WRWTP (1 large bin a day). Vernon vetoed RDCO’s participation. Currently sludge is transported to Kelowna’s Glenmore Landfill for disposal for a tipping fee. RDCO has $50,000 to study alternatives. West Kelowna would be faced with this same issue if it controlled the WRWTP.

  • RDCO Administration Overhead

    RDCO charges 13% of the service’s operating costs as overhead. In the case of WRWTP service, 13% equals $268,261. If West Kelowna controlled the WRWTP it would incur its own administration costs, charged as 16% and would be $330,173 - $62,000 higher than RDCO’s cost.
  • Service Governance

    Raised as one of DWK’s most significant concerns. Decision making is handled by the Board and the Board’s Governance & Services Committee. Many key decisions must be made by full board. Certain decision must be made by only directors from DWK and Peachland. The report indicates that no examples of improper voting were identified. DWK’s view is that only directors of participating jurisdictions and stakeholder jurisdictions have a legitimate place in discussions regarding the WRWTP.
  • Budget for the Service

    DWK asks if the existing funding levels for the WRWTP function are sufficient to ensure dependable service and to protect physical assets. The report did not provide a technical assessment of the service, but attempted to compare other local systems costs information and found in two cases where comparisons could be made, the RDCOs collection systems budget for West Kelowna were lower than the other jurisdictions. The plant itself can’t be assessed without an engineering analysis, but the report noted that RDCO has not been in violation of any regulations governing plants.
  • Future Access to Capacity

    DWK expressed concerned that growth on WFN land may impact the available capacity of the WRWTP. The report found that it was unlikely that the plant with its five-phase expansion strategy would run out of capacity soon and that growth in one jurisdiction will not take priority over growth in another.
  • Expansion of the Service Area

    A service area expansion can only occur through an amendment to the establishing bylaw and the decision is the board’s to make. West Kelowna does not have legal authority to veto any expansion as the largest participant in the service, but West Kelowna’s views, as the dominant participant, would carry considerable weight and it is unlikely that non-participating jurisdiction directors would oppose the views of West Kelowna’s representatives. Past practice of the RDCO board suggests that the views of the participating jurisdictions are important factor in votes.

FUTURE CONSIDERATION

The report indicates service governance as the most important issue for DWK to consider further action on. DWK views the WRWTP as a sub-regional function which only participating jurisdictions have legitimate interest in. As the largest participant, DWK should have the greatest degree of control over the service. The report provides two options available to DWK to pursue a change in its level of control:

  • Municipal Service Option – DWK would replace RDCO as the governing authority, with Council responsible for making all final decisions for the service. DWK staff would operate and maintain the plant and local systems for WFN and Peachland, and collect payments for service from Peachland and WFN.
  • Commission Option – DWK would work within the RDCO service framework and suggest the establishment of a service commission to oversee the WRWTP. The commission could have delegated authority from the RDCO for managing the service and making a range of decisions. On matters not decided by the commission – bylaws, budgets, changes to service area – the board could receive and act on commission recommendations. Planning and discussion on the service would be handled by the commission and membership limited to DWK, Peachland and WFN.

Preliminary discussions between Peachland and WFN on the Municipal Service option indicated no support for this approach. 

Last updated: 9/13/2011 2:59:21 PM