Planning and funding

Asset management is the process of looking at the life cycle of all the assets in a municipality to develop information about future maintenance, new development and the capacity to resource. Though asset management applies to a broader set of infrastructure considerations than just maintenance, it is still important to highlight the critical role it plays in the viability of municipal water systems.

Visit Alberta Municipalities’ Asset Management Hub for more information.

Over the past several decades in Alberta, there has been a trend toward the consolidation and regionalization of small water and wastewater treatment facilities into larger regional networks and commissions. Regionalization can help municipalities deal with concerns about the financial viability of small water and wastewater systems and the safety of the water supply by sharing regional pipelines, central treatment and supply facilities, or financial and operational resources. These approaches can help increase water safety, decrease liability, and reduce the costs for municipalities.

Regional systems can take many different forms ranging from hard infrastructure to operational consortiums that share water and wastewater operation staff between different systems. Regionalization is not “one size fits all”; every community has unique needs, and each approach has varying merit depending on different situations. For instance, if potential regional systems stretch over a large distance, the cost of infrastructure may be prohibitive. However, cooperation by sharing water and wastewater staff may still be very effective.

Challenges

As mentioned above, regional systems are not a “one size fits all” approach. Municipalities often encounter challenges in the process than can block progress towards improving water safety and security. In spring 2015, Alberta Municipalities members responded to a survey that helped identify the following major challenges with regionalization:

• Small communities have difficulty funding/obtaining reserves for infrastructure given the large distances infrastructure must cover, and low population densities.
• Many municipalities, particularly small communities, are concerned about a large increase in costs should they join a regional system or consortium.
• Some communities are concerned about a loss of autonomy or control over water and wastewater systems.
• Some communities are concerned that regional systems would not be any more efficient than standalone systems in their case.

Given these challenges, survey respondents identified the following actions to address concerns and meet challenges:

• A need for infrastructure funding.
• A need for the provision of best practices, models, templates, and examples.
• A need to educate the public on water and wastewater issues to assist municipalities in instituting sustainable solutions that may require unpopular changes in water cost.

Resources and list of regional systems

• Download Alberta Municipalities’ list of regional water and wastewater systems in Alberta
• Governance options for municipal regional services in Alberta

Alberta Municipal Affairs – Alberta Community Partnership

The Alberta Community Partnership provides funding to improve the viability and long-term sustainability of municipalities by providing support for regional collaboration and capacity building activities. Funding is available for projects that utilize intermunicipal collaboration, such as regional water systems.

Alberta Transportation – Alberta Municipal Water/Wastewater Partnership (AMWWP)

Funding is provided to cities (under 45,000 population), towns, villages, summer villages, regional commissions and eligible hamlets within rural municipalities for the construction of high-priority water supply and treatment and wastewater treatment and disposal facilities. Water distribution and/or sewage collection systems are not eligible for assistance. For municipalities under 1,000 population, projects are cost-shared on a 75 per cent government/25 per cent municipality basis. For communities over 1,000 population (to a maximum 45,000 population), grant percentage ratios are calculated by a formula. The percentage ratio declines as the population increases.

Alberta Transportation – Water for Life Funding

Funding under Water for Life is available for new regional water or wastewater systems or new regional commissions to regional commissions or groups of two or more municipalities that are eligible for funding under the AMWWP.

Alberta Water and Wastewater Operators Association (AWWOA) – Operator Training Subsidy for Classroom Courses for Small Municipalities

The AWWOA offers a 25 per cent registration fee reduction for operators who are AWWOA members and are from small municipalities within Alberta, serving fewer than 5,000 people.

Federation of Canadian Municipalities – Green Municipal Fund

Green Municipal Fund funding is available to all municipal governments and their partners for environmental plans, feasibility studies and pilot projects, and capital projects. Grants covering up to 50 per cent of eligible costs for plans, feasibility studies and pilot projects to a maximum of $175,000 for plans and feasibility studies, and a maximum of $350,000 for pilot projects are available. Low-interest loans are also available up to $5 million to cover up to 80 per cent of eligible costs for capital projects.

Government of Canada/Alberta Municipal Affairs – Canada Community-Building Fund

Federal Gas Tax Fund funding can be used by municipalities for various water and wastewater infrastructure projects, including water and wastewater systems, solid waste management, and disaster mitigation infrastructure. While this funding is available, it is also available to be used for other purposes such as public transit systems, solid waste management, and community capacity building. Given the large infrastructure deficits experienced by municipalities, this often makes the funding insufficient to cover all water and wastewater needs.

As municipalities across the province are aware, water and wastewater systems are an expensive service to provide. The cost of infrastructure, maintenance, and staff is rapidly increasing along with Alberta’s booming population, and many municipalities are already struggling to fund their systems. This means that it is essential to know exactly how much water systems cost to operate. Full-cost accounting provides municipalities with a clear approach to understanding the exact costs of water services. Once full cost accounting has been performed, municipalities can shift toward full cost pricing, which recovers the true cost of operation from ratepayers.

Full cost accounting

One of the most important factors in ensuring the viability of water and wastewater systems is creating a sound financial plan that addresses the system’s assets and operations. This requires the costs of providing services to be fully understood to inform decisions on pricing, operations, and infrastructure choices. Full cost accounting does not necessarily mean that full cost pricing must be adopted, but it is a vital first step to informing decision-makers in your water system.

Water metering

An essential part of full cost pricing and accounting for water and wastewater services is ensuring that all water users are metered. According to a 2004 national study of Canadian municipalities, unmetered communities consume 75 per cent more water than full metered ones. Metering allows consumption-based billing, which helps municipalities recover costs and provides a strong incentive for water efficiency. Metering is also vital to determining how well your distribution system is functioning and where there are leaks in the system.

Full cost pricing

Once your community has a firm understanding of the costs associated with operating your systems, you may choose to employ full cost pricing to recover expenditures. Full cost pricing involves setting the prices customers pay to utilize your system at a rate that meets the full costs you assume to provide the service. Full cost pricing is not always an easy transition, especially if your municipality is transitioning off of a non-metered flat rate.

Increases in pricing or changes in the method of pricing may come with significant ratepayer pushback. Some municipalities may choose to approach full cost pricing incrementally, increasing pricing year by year to soften the transition. In addition, education and outreach about the importance of pricing changes are very important to achieve ratepayer buy-in. To learn more about education and outreach measures on water issues, see Education and Outreach.

Conservation pricing

In addition to pricing adjustments to ensure financial viability, many municipalities are creating “conservation pricing systems” that both cover the costs of expenditures and encourage consumers to use less water. These systems involve either increasing rates above full cost levels for high water users or reducing rates for those who use very little. Caution must be taken when using this approach to avoid a negative cycle where customers reduce water use to the point that rates must be increased, which leads to further water use reductions.