The story goes something like this: We are asked to conserve water, but the net result of that, including the effect of business shut downs which, in turn, cause those businesses to cease consuming water, is that we are short 13-15 million dollars from our expected water and sewage revenues. (See full details in Spec today under Emma Reilly's Water Controls Dry Up Revenue.)
Water conservation is a good thing, but its place in the economic equation isn't. Less water used may mean a a 6-7% increase in water rates in 2011, due to lost revenues.
It's a trend, not a one off. The last several years have followed suit. It also appears that residential users are getting better at conserving water, decreasing usage by 9.9% over the summer.
There's a flip side. Less sewage is going through the treatment plant, theoretically lowering treatment costs. Less stress on the treatment plant, means longer life of the plant before significant capital investment needs to be made.
But given that immediate revenues have greater profile than longer term gains, conservation is hurting us (in a way). Need a drink to understand this twisted logic? Make it water...or not......
Comments?
Very well put, clever. We cannot have it both ways. Either we have people conserve and take the financial hit or we don't and get the revenues. That simple. Right now, were trying to have the cake and eat it too.
ReplyDeleteMartin
All processes have fixed and variable costs. Lower consumptions has to translate into savings in the water treatment process. I would question the numbers from city staff regarding this issue. Are we going to go forward with a new water treatment plant in view of the reduction in water usage. This is the same story we hear from Horizon regarding electricity usage that the revenues are down. However if you go to their website and read financial statements for the last 5 years you will see that Horizon have paid out an average of $7.4 million dollars to its main shareholder ( %79 ownership) to the city of Hamilton coffers. I believe that last year Horizon wanted to increase the kilowatt rate because Stelco had greatly reduced their usage, yet the financial statements do not reflect that and the power board turned down the increase on the usage rate. I for one do not accept these comments from city staff at face value.
ReplyDeleteI don't have the kind of financial expertise as evidenced by Yves.
ReplyDeleteThat said, it just seems to me to be highly questionable financial planning to prepare a budget which ends up with a loss of 13-15 million dollars worth of revenue when even a lay person such as myself could forsee significant reductions of water use by commercial establishments because of the economic downturn.
Also as water rates increase so precipitously as they have, even the ordinary watering of lawns and gardens by individual ratepayers is being cut back - a thing which should have been easy to predict.
So why budget for such a colossal amount of revenue, a target unlikely to be met? It seems like an ill-conceived gamble that speaks to poor advice being given by senior staff in finance department.
JBH and Yves - you both have good points. Maybe the city was expecting an outpouring of revenue ;-)
ReplyDeleteGee, sales are down this year. What to do? Depends if you are gummerment or private. Private enterprise,if unable to raise revenue, does whatever it can to reduce costs. Gummerment sticks it to the taxpayer yet again. Soooo easy.
ReplyDeleteThat may not be entirely fair, but I want to see our gummerment acting more like business. They haven't even tried, so my sympathy is limited.
Wait until we are all driving hybrids, smart cars and electric vehicles an the feds and province are losing all the gasoline revenues.
ReplyDeleteThe utilities such as water and electricity are very useful vehicles for municipalities to utilized in raising revenues for cities. In lieu of raising municipal taxes which is highly unpopular with taxpayers they stick it to us from the backdoor and it works. Obviously they do not call it a tax but these utilities are city owned and profits are poured back in city coffers without taxpayers knowing that they just had a tax increase. What has been bothering me is that most of the people have showed little or no interest in these matters. The utilities even though bureaucrats will tell you that they are privately held companies,they do not have public shareholders, in the case of Horizon the city of Hamilton owns %79 and the city of St. Catherines owns the remaining %21. Were else would you find a company that offsets any operational cost to its customers without sacrificing any revenues?
ReplyDeleteIt just keeps coming. Less than 1 month from the election we get all the bad news; water and sewage rates going up, HECFI needs millions of city money, Wild Waterworks ends up $200,000 short, and now for the good news Hamilton Conservation needs less than the predicted $450K bailout (exact number to follow...).
ReplyDeleteBut we are still going to find money for a new stadium, entertain (and spend money) on LRT work, and wait till you see the bill for the AEGD infrastructure.
Who voted for the incumbents again? It certainly wasn't me!