Reliable water, sewer and storm water systems are essential to public health, a clean environment and a strong economy. But British Columbia’s systems may be at risk – aging infrastructure, growth, strengthened regulations, seismic risk, and climate change are driving the need for significant upgrades and re-investment in the pipes, pumps and equipment that are used to treat, deliver and safely remove water for homes and businesses.
At the same time, fiscal restraint and public complacency impede the ability of local governments and water utilities to secure the financial resources required to sustain water infrastructure assets.
In 2015, the BC Water & Waste Association (BCWWA), together with Urban Systems, produced the research report, Are our Water Systems at Risk? to assess the financial capacity of B.C.’s local governments to maintain, renew and replace the existing water and wastewater infrastructure. The report points to four main concerns about the financial sustainability of the water and wastewater systems.
1.Water and sewer fees are not covering the full cost of services in many communities. To be financially sustainable, the revenues earned by a water or sewer system should cover the full cost of operating and maintaining the system, as well as the eventual replacement of the system as it comes to the end of its useful life.
While some communities are financially well positioned to meet current and future service needs, water and sewer rates in the majority of B.C. municipalities do not generate sufficient revenues from fees to pay for the full cost of providing services. In order to reach full cost pricing in the worst cases, rates would need to nearly double to reach financial sustainability.
2.Communities are vulnerable. The majority of B.C. municipalities have not set aside sufficient reserve savings to provide a buffer against unexpected changes in water or sewer system operating costs or revenues. This means that some communities are vulnerable to unanticipated events, like sudden equipment failure or the impact of severe storm or seismic events that damage water or wastewater systems, which could cause unbudgeted expenses, loss of revenues, or sudden rate increases.
While emergency borrowing mechanisms exist for municipalities, they take time to implement, which means there could be reduced service levels or delays in re-instating services following an unexpected change.
Smaller systems have greater financial gaps. Smaller communities (with a population less than 10,000) have greater financial sustainability gaps in their water and wastewater systems than larger communities. Water and wastewater systems are capital-intensive; smaller communities do not have the benefit of “economies of scale”, and so the costs of their systems are shared across a smaller base of users, which impacts their financial capacity.
3.Investment is required. As water and wastewater systems approach the end of their useful life, investment will be required to renew and replace the current infrastructure. Approximately $13 billion would be required in B.C. in order to address the shortfall in current reserve savings.
To ensure an appropriate level of funding will be available when required, B.C. communities need to have pro-active long-range plans that address their infrastructure renewal and replacement needs. The estimated $13 billion investment does not include new infrastructure that may be needed to accommodate growing communities, or upgrades that communities may need to undertake to meet regulatory change, or upgrades to address resiliency for climate change or seismic events.
4.The Role for the Construction Industry. The scale and scope of the investment needed in the next decade(s) create significant opportunities for the construction industry. The renewal of water and sewer infrastructure within an urban environment is an area of construction that is ripe for innovation and new approaches. Replacing pipes that lay beneath busy roads, and provide vital services that can only be interrupted for brief periods, creates significant challenges. Those construction firms that are able to pioneer new approaches and technologies that reduce the disruption to municipal services and reduce overall costs will prosper.
Compounding the technical challenges, there are also financial issues to overcome. Municipal budgets are stretched and staff capacity is limited. As a result, there will be opportunities for construction firms that are adaptable to project delivery approaches that involve partnerships and longer term business arrangements. Municipalities will increasingly be seeking expanded service offerings and more “turn-key” solutions that leverage the management and business expertise of their business partners.
In addition to the financial constraints of local governments, there are also staff capacity constraints. Local government managers and professionals are burdened with a widely diverse set of issues to manage. To have deep expertise in infrastructure renewal and the latest construction techniques will be challenging. Therefore, construction firms with expanded service offerings such as inspection, planning and program design will be well positioned. Developing relationships and partnerships with other firms that can help expand the service offering will also prove to be advantageous.
It is possible to meet water infrastructure needs for this generation and the generations that follow. Municipalities can make sound choices today about priorities for existing tax dollars and setting user rates that cover the full cost of operating, maintaining and replacing systems. B.C. is fortunate to be home to a thriving construction industry comprised of skilled and talented construction professionals and tradespeople. Collaboration and forward thinking on behalf of the construction industry will be needed to ensure water and wastewater systems continue to protect public health and the environment and contribute to economic development in the province.
John Weninger is a principal at Urban Systems and former chair of the BC Water & Waste Association (BCWWA) Infrastructure Management Technical Advisory Committee. As a consultant for municipalities, he regularly applies his deep experience in asset management and financial policy to help support thriving communities. The full report can be found at bcwwa.org