No treatment plant, no growth
We don't have $1.8b to build a new one, says city manager
December 06, 2008
The Hamilton Spectator
Hamilton will be forced to freeze future growth if it doesn't receive millions in government funding to help build a new wastewater treatment plant.
Joe Rinaldo, acting city manager, warned council yesterday that the city simply can't afford the $1.8- billion, 10-year capital project, given the economic downturn.
"It's virtually impossible for us to proceed at this time without assistance."
The city is exploring staging the project, a move that may mean Hamilton won't meet the goal of delisting the harbour as a Great Lakes pollution hot spot by 2015.
The existing plant on Woodward Avenue is already operating at or above capacity depending on the weather, said Jim Harnum, senior director of water and wastewater.
"If we don't do something with the plant, we run the risk of shutting down development."
The plan, including a $700-million treatment plant which is supposed to start construction in late 2009, is the largest project in the city's history. For years, the city has been ramping up water rates to help cover the expected costs.
This year's increase will be 4.5 per cent or $26 to bring the average bill to $595.
But user fees will only pay for a portion of the project. The rest of the funding is supposed to come from development charges, loans, reserves and government grants.
Staff now fear the financing model is on shaky ground and could leave taxpayers paying a larger part of the bill.
To start, the rate of water consumption is continuing to decline, which means less money for the city to fund the project.
In addition, upper levels of government have not committed any money to the project. The city plans to apply this winter for infrastructure funding and hopes to receive at least $200 million.
When it comes to borrowing, Rinaldo said he's concerned the city can't afford to have $600 million in planned debt during a downturn.
"That level of debt, quite frankly in my view, is not sustainable."
The city's credit rating was just lowered due to its projected debt.
The other threat is a shortfall in growth. The plan was established to support the units the province expects the city to add by 2031.
The government's projections call for 3,000 to 5,000 new units a year, but the reality has been closer to 1,000 to 1,600.
If the full growth doesn't come, the city won't generate the development charges it is counting on to pay for 35 per cent of the plan.
Staff laid out the "perfect storm" scenario yesterday where taxpayers pay more. Yearly water hikes would soar as high as 8.8 per cent.
The city is looking at a new stormwater fee to generate funds. It would apply to properties, like parking lots, that don't pay water rates but do have run off.
The city is also proposing to dramatically increase its water-related development charges from $5,500 to $12,500 per unit.
Steve Spicer, president of the Hamilton-Halton Home Builders, said if the city can show its proposed charges are based on real growth costs, the builders will support the fees, he said.
"That's not to say we won't challenge their numbers," he said.