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Monday, 7 November 2011

Municipal Refit. Part 2

Fresh off the heals of the Municipalities Newfoundland and Labrador (MNL) Annual Convention in Corner Brook we continue the discussion on the municipal sector and why it is misunderstood and in need of serious attention. In Municipal Refit. Part 1 we covered the basic ideas surrounding the level of  ignorance of the average resident when it comes to what municipal councils are responsible for, the lack of appropriate training for councillors, the issue of administrative capacity (average of 1 staff person per town), and the shortfall in the area of all aspects of municipal planning. In Part 2 we will look to the situation in municipal infrastructure and the potential implications for things like drinking water and sewage treatment.

What the Heck is Infrastructure Anyway?
In basic terms infrastructure includes the physical assets that support the community. Things like roads, water and sewer systems, buildings and recreation facilities. Most people appreciate that infrastructure is very expensive to build and maintain but they don't understand where the money comes from of how it gets invested into a local water system or road. Because the cost of major projects regularly run into the millions of dollars and the average municipality has an annual budget of around five to eight hundred thousand dollars the money has to come from another source. In NL the vast majority of money comes through a cost sharing program developed by the Provincial Government of NL. The Province combines Federal and Provincial dollars to create a pot of infrastructure money that then gets allocated to municipal projects on a case by case basis. There is a ratio that determines how much of a project is funded by the municipality and how much is funded by the infrastructure program based on the population of the municipality. From the Municipal Affairs Website:
Eligible funding is allocated based on the following ratios:
  • 90/10 for populations less than 3,000 (258 municipalities, 31 per cent of provincial population)
  • 80/20 for populations between 3,000 and 7,000 (16 municipalities, 14 per cent of provincial population)
  • 70/30 for populations greater than 7,000 (9 municipalities, 43 per cent of provincial population)
  • Local Service Districts in the province would also qualify for funding supports on approved projects
While only having to pay 10% of a project is a great deal, if that project costs $10 million then your portion is still one million dollars. So where do you get that kind of money when you have a population of 500 people, few businesses and an annual budget already stretched to the limit at $500,000 per year? The answer is that you borrow it. Adding debt payments to your budget is never fun but is often the last resort available.

In one end...
The cost of collecting, treating and then delivering safe drinking water to residents is no cheap or easy task. It requires a chlorination and treatment building, a collection area (possibly a dam), and miles and miles of various sizes of pipe to every single building in the town. The costs of these systems are incredibly high, usually in the tens of millions of dollars. So if you run a town and you determine you need a drinking water system you calculate your portion of the project and you redesign your budget to include the payments on the loan for your 10%. The project is complete, likely over budget, and your residents have safe drinking water. Maybe. Now begins the lifetime struggle of ensuring the system remains safe. Because many of our municipal water supplies begin in a pond we have many systems with very high levels of silt and even mud in the drinking water. Then there's the organic matter that has to be treated with hundreds of liters of chlorine. Assuming you do get a good quality drinking water you will soon find that no matter how good a system is designed, it will eventually break. Very few municipalities in NL have any kind of preventative maintenance program in place. The general approach is to fix it when it breaks. Unfortunately that leads to systems in very poor condition and incredibly costly repairs that are often out of reach and never budgeted for.

If you're wondering what all of that means for the average household then you should have a look at this, and these two here and here. At the end of the day drinking water is one of the most important services a municipality provides. And if you have travelled around NL you will know all too well the number of boil orders in place, and the number of systems that produce "safe" drinking water that I wouldn't give to a dog. So who is at fault here? It's all about the purse strings.    

The situation is bad enough that I have heard it surmised that we have already had sickness and possibly even deaths that were attributable to unsafe drinking water. Old aunt Jenny may very well have had her condition made worse by the quality of her drinking water but because she was 83 and had high blood pressure, diabetes, and a sting of other issues it was never considered that her health was damaged by her drinking water. Not that far fetched is it?

...and out the other.
So now that you have some understanding of the drinking water infrastructure you need to know a little  about the wastewater situation. Don't get confused by the term "wastewater" it simply means sewage and all other liquid waste that leaves your home and all businesses. In NL our traditional approach is to have no treatment. All we do is pump it into the ocean, untreated. In the entire province there is a very small percentage of municipalities who have any level of wastewater treatment. Why? Because it costs so much. Remember the St. John's sewage treatment plant? Original budget of $93 million jumped to about $150 million. It's not cheap. The problem is that there are new regulations coming from Environment Canada that will require a high level of sewage treatment for all liquid that enters the ocean. Depending on the timeline and the investment provided by the federal government this could be a huge issue for NL. We don't have the money for proper and safe drinking water, so how can we come up with the investment for wastewater treatment? And how much will it cost? The estimates are currently in the range of 2 to 3 billion to upgrade the systems in NL over a 30 year time period. We just don't have the cash.

Up next in Municipal Refit. Part 3 we'll look at the fiscal framework and the structural issues in the sector...

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