Municipality of French River

There are two generally accepted methods for determining the revenue requirements and rates for water and sewer systems. These methods are:

1. The Utility (Full-Cost) Approach. Revenue requirements are comprised of net operations costs, depreciation, return on assets, and principal shortfalls (if any).
2. The Cash Needs Approach. Revenue requirements are comprised of net operations costs, debt costs, and capital costs

Under the Cash Needs Approach, the costs required can fluctuate dramatically due to any large capital expenditures required by the utility. Using this method makes it difficult to adjust rates from year-to-year to account for capital projects and expenses and then results in shortfalls, debt or other costs being supported, knowingly or unknowingly, by municipal taxes.

The Utility (Full-Cost) Approach looks at what is needed to pay for the utility now and sustain the service in the future. This method means that the people using the system today are paying for the use of the system and building up reserves that will be used for required capital expenses or emergencies. The Utility Approach generally results in greater rate stability and an assurance that rates are not supported by the municipal tax levy.

In early 2020, the Town commissioned CORVUS Business Advisors to conduct a utility rate review.

The review uses the Utility (Full-Cost) Approach to determine water and sewer rates that will ultimately result in a self-sustaining utility. When rates achieve full cost requirements, it means the utility has the funds to pay for the costs that exist today, future expenses and repair or replacement of infrastructure once it reaches the end of its life.

If rates are left as is, or reduced, the water utility will require a municipal tax injection of approximately $1.74 million from 2020 to 2029. This is money that can be spent on other municipal services such as recreation, infrastructure maintenance and increasing municipal services. By subsidizing the utility with municipal taxes, the utility would not be collecting reserves for future capital expenses, this would be similar to someone not putting away savings for emergencies or retirement on a regular basis.

In 2020 the Town renegotiated the water contract with SaskWater. Under the terms of the proposed new agreement with SaskWater, the Town will see a savings of approximately $6.23 million in water costs over the next 20-years, this provides stability to the municipal rates and helps support the full-cost approach.

• Reserves, or savings, aren’t established for future expenses or emergency repairs.
• It reduces the funds available for providing other municipal services like recreation, planning, programming, projects, snow removal, maintenance and more.
• It may result in more significant increases to tax rates.
• The community as a whole ends up subsidizing water usage of some residents instead of those residents paying for the water they use.

The Town’s water is well water (or groundwater) provided from the Zehner Aquifer located North of White City. Aquifers are typically made up of gravel, sand, sandstone, or fractured rock, like limestone. Water can move through these materials because they have large, connected spaces that make them permeable. The speed at which groundwater flows depends on the size of the spaces in the soil or rock and how well the spaces are connected. 

Well water is traditionally much 'harder' than surface water as it flows between different materials and minerals which are then diluted into the water. The Town currently has three wells in the Zehner Aquifer that provide the town with untreated water. The mineral deposits in the aquifer impact the 'hardness' in the water, the two wells to the Southwest of Pilot Butte provide slightly 'softer' water than the well to the West of Pilot Butte. To preserve the aquifer the Town will draw water from the western wells for one month and then the northern well for one month, this is why the water 'hardness' in the Town can fluctuate.

Although the Town’s water is 'hard', it is healthy and safe to drink – it can be hard on fixtures and appliances, the use of a water softener adjusted on a regular basis can help mitigate the hardness of the treated water.

While installation of a reverse osmosis system would help reduce the 'hardness' of the Town’s water it would also require a significant capital investment. Currently the equipment used in the water treatment plant is specific to treat well water, or groundwater. Introducing a Reverse Osmosis process into the treatment plant would result in removing and reinstalling equipment and would result in a higher increase to rates to fund the additional costs to install the required equipment. Reverse Osmosis also requires a more significant operating cost once the equipment has been installed which will also impact future rates. Currently with Reverse Osmosis water, an additional re-mineralizing step needs to be added as purely demineralized water will damage water distribution systems, fixtures and appliances.  Recent studies from the World Health Organization have shown there is also a negative health impact to drinking demineralized water.

Another significant deterrence to move to a Reverse Osmosis system is the amount of wastewater that comes from the process. Of the untreated water coming into the plant approximately 30% becomes unusable, this will require the town to increase the volume of raw water being drawn from the Zehner Aquifer and a large increase to the wastewater being sent to the Town’s sewage system. To accommodate the additional wastewater the Town would need to look at expanding lagoon capacity, and additional capital cost that would be reflected in utility rates.

This was the result of a decision by council in 2003 to transfer the Town’s risk and liability of providing safe drinking water to SaskWater. SaskWater is a provincial agency that has the expertise and knowledge to assure that the Town’s water is safe to drink. The decision of council came after the Walkerton Water Crisis in 2000 where 7 people died and 2,300 became ill and the 2001 North Battleford Water Crisis where 700 people became sick from drinking contaminated municipal water. Walkerton’s compensation to victims totalled $72 million, while North Battleford’s compensation totaled $3.3 million. Using SaskWater’s expertise and recognized water treatment procedures and best practices, White City residents can be assured that their drinking water is monitored 24 hours a day and is safe to drink.

As growth occurs with new development in the Town, the fixed costs of running the utility and the expected capital costs get spread out over a larger amount of households meaning that as growth occurs, water rates will be decreased.

Although growth brings the need for more raw water and treatment capacity those upfront costs are collected through development levies for new developments, this means that the growth of new areas in the town also pay for the costs to provide the services to those areas.

The Town isn’t aware of the rate setting methods that other municipalities use to determine their rates. Each municipality has different assets and financial approach to managing the services provided to residents or customers. Each approach to setting utility rates has to fit the respective municipality.

The method used by the Town ensures that there are no municipal taxes subsidizing the utility and appropriate reserve balances are in place for future expenses and emergencies.

The chart below shows how White City's rates compare to other municipalities in the province based on 10, 20 and 50 cubic metres of usage. Compared to other municipalities in the province, White City is close to average. The dashed lines show the average bill cost for each level of usage.

Assumptions: Residential, 5/8" Water Meter. No Environmental Fees. Includes infrastructure & drainage fees. Adjusted to monthly billing, some municipalities use a quarterly billing system. Information gathered from municipal websites based on most recent data available and compared to 2022 White City Utility Rates.

The chart below compares White City's Waterworks Ratio to other municipalities in the province.  The Waterworks Ratio is determined by the waterworks revenues divided by the waterworks expenses plus annual principal debt payments due.  A ratio of less than 1.00 indicates that the waterworks or utility is not collecting a sufficient level of revenue to cover the expenses of the waterworks and may be supported through an injection of municipal taxes:

Assumptions: 2020 data gathered from municipal websites and/or the Municipal Infrastructure and Finance branch of Government Relations. 

Data on water hardness comes from Aquatell.ca