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Councillors' ForumHydro revenue sharing: The long and winding road

Hydro revenue sharing: The long and winding road

by Shaun McLaughlin


They say the journey is often more interesting than the destination.

In my post June 27, I reported on the 13-month process to achieve a hydro revenue sharing agreement, one that invested the shared money in the new septage plant to defray costs to rural taxpayers. That protracted process taught me much about politics: the importance of one-on-one conversations, how to build alliances, and to not be surprised when best laid plans go up in smoke.

This post chronicles the long road to hydro revenue sharing. (Warning: It is lengthy and best suits political junkies or wannabe politicians.)

13-Month Journey Begins

The journey began May 19, 2011 when I introduced a motion to begin discussions on hydro revenue sharing. My goals were:

  • fair and equal treatment of all wards

  • sharing of hydro revenues

  • some relief from the planned septage tax

  • try to bridge the urban/rural divide

On June 13, 2011, the Finance and Administration (F&A) committee held the first of many special meetings on this issue. (Special meetings are those not regularly scheduled and called to discuss major issues.)

Staff gave each of us a thick binder of financial data and previous policy documents as background material. In the following weeks, as I chewed on the reams of data, I decided to respectfully shelve it. I know from experience that excess information can sink a good idea. While the issue involved money, my goal was to achieve a mutually respectful policy on revenue sharing. The actual dollars and cents were secondary.

At the second special F&A meeting September 12, 2011, each member of Council presented a proposal on revenue sharing. Most, including mine, were too complicated. I began to understand that we had to simplify our plans to find common ground.

It was after that meeting that I decided the best course was to treat the septage portion of the waste water treatment plant (WWTP) the same as the sewage portion. The previous Council decided to subsidize the capital cost of the sewage portion with hydro revenues, which benefits urban dwellers, but that Council decided rural dwellers must pay all costs of the septage portion. That represented unequal treatment. That needed to change.

At the next special F&A meeting October 27, 2011, staff presented figures on the financial impact to Almonte water rates if we divided the hydro revenue in various urban-rural percentage splits: 60-40, 70-30, 75-25, and 80-20.

The tone of discussions changed at that meeting. Urban councillors began to admit that some form of sharing was inevitable and fair. Rural councillors began to sympathize openly with Almonte councillors, who insisted Almonte residents faced steep increases in water rates in the next few years. (Water bills are the main funding source for the WWTP and all water and sewer infrastructure. Only people who use town services—about 40% of our population—pay the millions required.)

Because of budget season and Christmas, four months passed before our next formal meeting on hydro revenue sharing. Through chats and phone calls with Almonte ward councillors, I learned they could accept an 80-20 split for the next few years. (Hydro revenues are low now and won't increase substantially until 2015 or 2016; so there is no bounty to share.) Because bridging the rural-urban divide was one of my goals, I decided to champion the 80-20 split. I also calculated that, if we applied the 20% rural share to the septage portion of the WWTP in the first year, it would about equal the expected hydro revenue subsidy of the urban sewage portion.

In mid-February 2012, staff added a new wrinkle. They informed Council that the septage plant would require up to $10,000 in operating costs in 2012, because no septage haulers intended to use it. I voted against the idea but the majority supported it. At that point, I decided to attempt to have hydro revenues applied to any shortfall in the septage plant's operating costs as well as the capital.

We waited until February 29, 2012, for our next special F&A meeting on hydro revenue sharing. At this meeting, I first expressed an idea to apply the initial rural share of hydro revenues to the septage plant. Funds from the first year would be applied to the capital cost to reduce the planned septage tax. And, using an idea borrowed from Councillor Garry Dalgity, I said funds from the second year should be used to create a reserve fund to cover operating costs in any year that the septage plant didn't take in enough revenue to pay its way. The last thing I wanted was rural residents dinged every year for a plant they don't use.

Naively, I expected the majority of rural councillors to support the idea because it put the rural 20% firmly in the pockets of rural residents and avoided nickel-and-dime operating cost levies in years to come. Wrong! While Councillors Paul Watters and Duncan Abbott voiced support, the other three rural reps opposed the idea. The harshest critics were Councillors John Edwards and Val Wilkinson. They suggested the funds be put into debt repayment, reserves or general revenues. (That meant Almonte residents would share the 20%, thus diluting the rural benefit.)

Aside: I will support allocating hydro revenue to debt or reserves later, but not yet.

I did not put my ideas forward as a motion that night because I was unsure of majority support. Our rules state that a defeated motion cannot be moved again in the life of the Council term unless two-thirds agree to reconsider. That is, you cannot play the same card twice. I had to be patient—not easy for me—and build support.

As that February 29th meeting advanced, a consensus developed to apply an 80-20 split for 2012 and 2013. After a short break, Denzil Ferguson moved a motion, seconded by John Edwards, for an 80-20 split in 2012 and a 70-30 split in 2013. The motion caught most of us off guard and flabbergasted the Almonte ward councillors. The motion passed. I reluctantly supported it because I did not want to miss the chance to finally have a revenue sharing agreement.

I disliked the motion intensely. It exacerbated the rural-urban split and it denied rural residents equal treatment with urban residents because it did not subsidize the rural portion of the WWTP.

By this point in my short political career, I knew the best discussions happen outside of the Council chamber. Following the February 29 meeting, I started working the phones. I cobbled together a coalition of rural and urban councillors who agreed to support an 80-20 split for two years, with the rural 20% going to defray septage costs. I just needed an opportunity to present the motion.

When a by-law that reflected the motion presented by Councillors Ferguson and Edwards on February 29 came to Council for final approval on March 19, 2012, many members had misgivings; so, Council referred it back to the F&A committee for further discussion.

Heading into the Home Stretch

More months passed. By consensus, we agreed that all members should be present when hydro revenue sharing came up for discussion. Between vacations and family obligations, the issue did not grace an agenda again until the regular F&A meeting on June 21, 2012.

Early in the meeting, when the draft by-law came up for review, with an 80-20 split in 2012 and a 70-30 split in 2013, I proposed the following amendment on how to divide the hydro revenue and where to apply the funds:

  • In 2012, 80% to water and sewer related expenditures and 20% to the capital cost of the septage treatment plant.

  • In 2013, 80% to water and sewer related expenditures and 20% to be put in a reserve fund, and that fund is to be used to cover operating costs of the septage treatment plant in years when tipping fees do not cover all operating costs

The meeting quickly became raucous, ugly, and ultimately bizarre.

Councillors Wilkinson and Edwards vociferously opposed the idea of applying the money to septage costs. Mayor John Levi and Councillor Ferguson opposed my motion but for other reasons. Almonte ward Councillors Garry Dalgity and Bernard Cameron strongly endorsed the idea. Councillors Paul Watters, Duncan Abbott and Alex Gillis also spoke in support. I clearly had enough support to win the vote.

After an hour of often rancorous debate, CAO Diane Smithson—making a rare mistake—informed us that our entire discussion on the issue was out of order and we could not make changes to the by-law. Based on her advice, the chair shut down the discussion. I lost my temper at the wasted time and effort, and stormed out of the meeting.

Shawna Stone, our town clerk, informed me the next day that we were not out of order, and we could have changed the by-law that previous night. I stewed for two days, calmed down, and began making phone calls.

The by-law was scheduled to come before Council June 26. I intended to present the motion again. (Since no vote took place on June 21, I was free to try again.) I contacted each member of the previous coalition to confirm their support.

On June 26, I moved my motion again and it passed 6-5. That vote ensures rural residents will be equally treated in terms of funding of the WWTP. The vote showed urban councillors that rural councillors are sympathetic to the water rate realities that Almonters face. And, the motion does not bind Council beyond two years.

I was pleased with the result. My only regret is that Councillors Wilkinson and Edwards were not part of the majority. It was their efforts in the last Council term to have hydro revenue shared that encouraged me to make the issue a key plank in my 2010 campaign

first published in Shaun on Council, Councillor McLaughlin's blog




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