Metro Vancouver wrestles with the challenge of how to finance the $1.4B cost for two sewage treatment plants
How to Pay for Two Treatment Plants
The Vancouver and North Shore sewerage areas of Metro Vancouver are presently served by the Iona Island and Lions Gate primary sewage treatment plants, respectively. Both have been in operation for ~50 years. The total capital cost to replace them with advanced treatment facilties is $1.4 billion.
At its November 2009 meeting, the Metro Vancouver Board referred the matter to the Finance Committee for input on the financing implications. When the Finance Committee met in January 2010, its deliberations were informed by reports prepared by the advisory Reference Panel and the Chief Financial Officer.
An action item flowing from the discussion was a staff report that addressed key items flowing from the Reference Panel submission. This report was the focus when the Finance Committee met in March 2010.
To read the complete story about the January 2010 meeting, click on Metro Vancouver Reference Panel informs Finance Committee deliberations on HOW to pay for two replacement sewage treatment plants.
Timeline for Replacement
A critical issue before the Metro Vancouver Board is the timeline for replacement .The Board is considering two scenarios:
- replace Lions Gate by 2020 and Iona Island by 2030
- replace both by 2020
At the March meeting, the spotlight was on the Report to Metro Vancouver Finance Committee by Chief Financial Officer – February 2010. Chair Malcolm Brodie opened the meeting by stating, “I'd like to remind everyone that as much as we like to sink our teeth into the environmental stuff, we are a Finance Committee…”
Summary of Findings
“The environmental analysis strongly suggests that a solid, scientific, risk based set of guidelines has been developed by competent authorities, and that those guidelines, once translated in to regulatory imperative will require that Lion’s Gate be upgraded within ten years and Iona within twenty years,” stated Jim Rusnak in his report.
“The legal analysis confirms the risks and possible adverse consequences of committing to an accelerated timeline for the Iona upgrade.”
“The financial analysis indicates that it is preferential to utility payers to defer the Iona upgrade in the absence of senior government cost sharing. This is the more prudent approach – achieving regulatory compliance by committing to Lions Gate by 2020, while maintaining the flexibility to accelerate the completion of Iona if circumstances permit.”
An approximately 90-minute long debate flowed from the report by the Chief Financial Officer. The spotlight was on Attachment 1: Roles, Responsibilities and Senior Government Cost Sharing.
“After Jim Rusnak gave his overview, the committee debate was about semantics and tactics,” reports Susan Rutherford, speaking on behalf of the Reference Panel.
“In the end, the Finance Committee deferred making a decision and referred the file back to staff to re-work the language in Attachment 1 so that Committee members will be able to vote on some wording that better reflects their views.”
According to Susan Rutherford, the principles that the Finance Committee wants incorporated into “Attachment 1” are:
- express Metro Vancouver's strong desire to construct both treatment plants by 2020 if it is possible to have senior government financing;
- stick to a 15-year amortization period as all members of the Finance Committee support that choice and believe it confuses the matter to refer to other amortization periods; and
- set out an option of starting to “pre-collect” to pay for Iona so that the whole Board can then consider and vote on this option.
“Senior government financing is seen as critical to accelerating the project. For this reason, the committee does not wish to risk the Minister striking out 'conditional upon' language; and leaving Metro Vancouver with a commitment to do both plants by 2020 without senior government financing,” explains Susan Rutherford.
What They Said
“The Chair,….Mayor Malcolm Brodie of the City of Richmond, basically advocated that unless Metro Vancouver publicly commits strongly to need to do both plants by 2020, it has no chance of getting the cash from other governments or the public,” continues Susan Rutherford.
“Mayor Brodie stated that Metro Vancouver needs to say more than “we 'want' this”, as that is too weak. He added that Metro Vancouver has to put forward its strongest foot and put the onus on province to refuse. He also spoke about the need to make the Finance Committee decision conditional somehow, and let the province take the political heat for backing off from replacing the Iona Island plant by 2020.”
“Director Marvin Hunt, City of Surrey, asked rhetorically 'Is this exhaustive or exhausting?'. He basically aligned himself with the staff report, that is: commit language-wise only to what is required (Lions Gate by 2020, Iona Island by 2030); and try to woo the senior governments to participate with a carrot/let them take credit approach, rather than whining or threats. He believes it is important for Metro Vancouver to state that senior government should be paying. Marvin Hunt also noted that Metro Vancouver has to give senior governments time for the economy to recover.”
“Johnny Carline, Metro Vancouver Chief Administrative Officer, noted the advice they have received is that it is better for Metro Vancouver to get its act together and everyone aligned in support of a lofty positive goal, to get public support for it so there is press in favour of it, then go to Ottawa to ask for cash – not whine that 'the feds are making us do it so they should pay'… which is a negative message. Carline said that the federal government wants to look good; so you have to give them that opportunity.”
“An additional contextual item that was repeatedly mentioned around the table (by Johnny Carline, Marvin Hunt, Jim Rusnak and others) was that whining about property and other rates in Ottawa won't get Metro Vancouver very far because property taxes and sewer rates are about twice as high back East. So people don't comprehend our problem with the rates or increases proposed; they just shrug.”
Posted March 2010