Kincardine repeals controversial pipeline bylaw; uses reserve to cover debt

It took an extensive amount of debate and discussion, but Kincardine council has finally come up with a solution to paying off the decade-old debt for the lakeshore drinking water pipeline project.
 

In committee-of-the-whole last night (Jan. 14) in Underwood, in front of a restless crowd of about 40 people, treasurer Roxana Baumann explained the pipeline project and what led up to its construction which was completed in 2004, and the lack of mandatory payment and connection by area residents.

She said a premium structure (with annual increasing connection costs) was implemented to encourage residents to connect, but that did not materialize. By 2013, only 23 hook-ups had been achieved.
 

In June, 2013, council realized the stranded debt of $1.5-million was not going to be resolved through the premium-incentive program, said Baumann, so staff was directed to revisit the options to eradicate the pipeline debt.

In November, 2013, council decided to implement mandatory payment of the capital charge, of $7,200 per property along the pipeline route, but no mandatory connection. That was later ratified in April, 2014, and caused a stir among residents along the pipeline route who said council had broken the promise of voluntary payment and hook-up back in 2004.

In December, 2014, the new council directed staff to prepare the necessary documents to repeal the April bylaw (No. 2014-044), including a staff report outlining the alternate options for eliminating the pipeline debt, as well as the composition of the Fund 68 water reserve fund, and the financial implications of the refunded premiums.

Baumann pointed out that the premiums paid by the 22 property owners who hooked up between 2005 and 2013, have already been refunded, for a total refund paid of $64,360. “It would be difficult to re-invoice these property owners for the amounts refunded to them, therefore, council will have to decide whether this amount should be added on to the total unfunded debt balance.”
 

She said the Fund 68 water reserve fund is comprised of contributions made by existing water consumers (residential and commercial) through the water rates as established in the Rates and Fees Bylaw. “There are about 3,775 users of Kincardine's water system, which includes 84 consumers in Armow, Scott's Point and Underwood, as well as 92 users situated in the Township of Huron-Kinloss.”

Baumann said funding the stranded debt from this reserve fund would likely mean water rate increases in the future and at an accelerated rate.

In addition, she said if council repeals Bylaw 2014-044, a decision must be made on whether to re-instate the terms of the original Bylaw 2005-142 which means re-instating the premium schedule where the capital charges for 2015 and beyond would be $11,604 plus Consumer Price Index (CPI), for a total of about $14,000.

And finally, Baumann said the Inverhuron water and sewer project just received approval and the Guiding Principles for that project call for mandatory payment and mandatory connection to both services. “Repealing Bylaw 2014-44 will essentially only delay (not eliminate) the capital charge for water to 2016-17 when the Inverhuron Environmental Assessment (EA) billings will take place for those properties in the Inverhuron Study Area.”

There will also be confusion, she said, between what properties are mandatory pay and connect and which ones aren't throughout the Inverhuron area. “Of the 417 properties in the Inverhuron Study Area to be serviced by water and sewer, about 255 properties are also in the shoreline study area and, therefore, would be subjected to the Inverhuron Guiding Principles (mandatory pay and connect).

Baumann also noted that there could be liability issues if Inverhuron EA property owners are provided with full safety through water and sewer, but pipeline properties are provided with options (mandatory sewer, optional water).

She clarified that the total net interest payments on the pipeline debt from 2005-2013, amount to $208,545. The $86,000 figure in debt costs that was previously provided to council, represents the loan payments on external debt for 2013, net of loan payments received from property owners who financed their capital charges back in 2005.

Council was presented with the following five options:

• Uphold Bylaw 2014-044

• Repeal Bylaw 2014-044 and fund the stranded debt from reserve funds

• Repeal Bylaw 2014-044 and allocate a capital charge for all properties in the municipality to fund the stranded debt

• Repeal Bylaw 2014-044 and revert back to the provisions in Bylaw 2005-142

• Another option determined by council

A delegation by Susan Macleod was read by her mother, Sylvia Stepnow, because Macleod was unable to attend.

Macleod focused on water protection at the source, and decision-making about the pipeline debt, Bylaw 2014-044, and the bigger picture. She urged council to actively protect water at the source, and to make a wise decision and work together to fix this issue in the best way possible.

“Simply sticking the expense to the people along the waterline, as Bylaw 2014-044 does, is NOT the solution to your money problem for poor decisions of the past, and it certainly doesn't protect the water you are piping over the bedrock, loose pack rock and sand.

“Our future collective fiscal and personal health lies in your decision – please step back and determine what the right action is – do not act in haste, anger or humility.”
 

As council began discussing sourcewater protection and safe drinking water, councillor Randy Roppel reminded his colleagues that the item to be debated was the pipeline debt. He proposed simply repealing Bylaw 2014-044, and put forward that motion.

Councillor Laura Haight said if that bylaw were repealed, then everything about the pipeline project would revert back to the 2005 bylaw, including the premium payments (which have already been refunded), and council would be back to square one with the debt.

“If we do that, then the debt would be higher than ever,” said councillor Gordon Campbell. “That's the wrong way to go.”
 

Councillor Jacqueline Faubert said she felt bullied and backed into a corner when her only goal is fairness for the people who were told they would not have to pay or hook up to the pipeline 10 years ago.

Haight said the proper process would be to amend Bylaw 2014-044, rather than repeal it. Otherwise, there would be implications to the Inverhuron water and sewer project, she said.

Mayor Anne Eadie agreed, saying the Inverhuron project will soon be under way, and she doesn't want the same confusion and mess with that project.

Haight told Faubert not to get so hung up on the Guiding Principles because at the end of a project, there may be changes. For example, with the pipeline project, there were a couple of properties that could not be serviced, she said, because their frontage was at the back. “There is provision in the planning documents for an exception to be made.”

She emphasized that if council simply repeals Bylaw 2014-044, then everything reverts back to the original bylaw, and staff is left wondering what to charge future development.
 

As for funding the pipeline debt, councillor Maureen Couture objected to using the Kincardine water reserve fund which was established and paid for by water users in Ward 1 for maintenance and upgrades to the Kincardine water treatment plant.

In answer to a question about the pipeline debt, Baumann said that $1-million is external debt, and the rest is internal debt.

Council continued to talk in circles and spin its wheels, so Eadie called for a break.
 

When council reconvened, councillor Mike Leggett suggested Bylaw 2014-044 be repealed and the municipality borrow from its own water reserve to pay off the external debt, and then replenish that reserve from future development charges.

Eadie argued against touching any water reserve, but said there are other reserves available, such as the health care reserve and the tourism reserve.

Baumann said there are only a few reserves with a significant amount in them, to cover the pipeline debt. The health care reserve has $2.7-million in it, she said.

“I support using that,” said Couture. “That money came from grants and lump sum payments for the DGR (Deep Geologic Repository for low-level and intermediate-level nuclear waste at the Bruce site) project.”

“Then we could replace it with future DGR payments and money from the wind turbine companies,” said Roppel.

He put forward the motion to repeal Bylaw 2014-044, and borrow from the health care reserve to pay off the pipeline debt. No premiums would be charged or re-billed, and any capital charges already paid would be refunded. Staff would have until June 30, 2015, to sort out the financial details.
 

Committee-of-the-whole agreed with that path forward, by a recorded vote of 7-2. Voting in favour were councillor Gordon Campbell, Maureen Couture, Jacqueline Faubert, Mike Leggett, Linda McKee, Randy Roppel and Andrew White, while voting against were councillor Laura Haight and mayor Anne Eadie.

In council session, Haight clarified that the only capital charge payments to be refunded would be those paid in 2014.

Council approved the motion, by a 6-2 recorded vote, with only Haight and Eadie against, and the rest in favour. Leggett was absent for this final vote.