2019 SUPREME COURT RULING ON NORTHERN ELECTORAL AREA D WATER RATES
The bulleted points are directly taken out of the Honorable Madame Justice Young’s ruling, which can be seen in full – HERE.
Fees are legal
- The City is authorized to enact bylaws to set fees for bulk water pursuant to s. 194(1)(b). The City can exercise this fee-setting power outside its boundaries and can establish different rates in relation to different factors, make provisions for different areas, and establish different classes of places and properties (via Campbell River Bylaw 3271).
- There is nothing untoward about the City, who is a seller, setting a purchase price for its commodity.
- The alternative of having the purchaser set the price does not make commercial sense.
City of Campbell River have been paying for system upgrades, but Area D residents have not
- City taxpayers had been paying for water system upgrades over the years by way of development cost charges and parcel taxes in addition to other delivery expenses.
- The City had been subsidizing the system for Area D because Area D was not subject to development cost charges or parcel tax charges.
- The City continued to face a deficit in its water budget and was trying to recover from that shortfall by adding premiums to the water rates and charges to Area D over 20 years.
The City of Campbell River’s bulk cost charges are based on historical and current cost of delivering water to the City and Area D
- The City estimated premiums by looking at what the City could have charged Area D in development cost charges and parcel tax charges if Area D had been within City limits.
- This approach makes it appear that the premiums are not based on actual water expenses but are based on the City’s estimates of its lost revenue.
- It is apparent that the premiums are linked to the historical and current cost of delivering water to the City and to Area D.
Fees are directly related to the delivery system
- The City’s Utility Manager, provided evidence in support of Campbell River Bylaw 3271. The City operates its water utility in financial isolation from all other City services.
- During the City’s 2009-2011 financial plan deliberations, the City found that the existing water fee was inadequate to sustain water service into the future.
- A detailed engineering analysis was undertaken to assess the City’s operational expenses of the water system. It evaluated the infrastructure renewal cost to replace aging and failing infrastructure.
- In addition, it evaluated contributions to capital improvements required to improve system performance.
- As a result of this review, and upon being made aware of the financial shortfall, the City determined that it was necessary to implement fee increases, phased in over five years starting in 2013.
Conclusion: Fees reflect true cost of delivery, make up for deficiency in Area D rates, are solely for funding the water service and do not form part of general revenue
- These fee increases reflected the true cost of water delivery within the City boundary but did not recover the full cost of water delivered beyond the City boundary.
- The premiums reflected in the bulk water fee increase are linked to the historical and current cost of delivering water to the City and to Area D.
- Revenue generated from the bulk water fee is used solely to fund the water service. It does not form part of general revenue and is not expended in respect of other works or services.
- I am satisfied on the evidence that the water rate set out in the SRD bylaw reflects the cost to the SRD of providing the water service to residents of Area D.