A new report by Canadian Water Network (CWN) highlights the mounting financial pressures facing Canadian water utilities. Balancing the Books: Financial Sustainability for Canadian Water Systems acknowledges the widening gap between customer expectations and water system revenue to fully recover costs, and provides customizable approaches for municipalities to achieve sustainable water systems for the long term.
The report found that Canadians expect consistent, high quality water services, but due to rising challenges, existing financial practices may not be adequate to meet future needs. To achieve sustainability, the report suggests that water utilities must secure sufficient revenue to recover operational costs and required upkeep, buffer against unexpected circumstances, while also planning for future needs.
As the costs of managing drinking water, wastewater and stormwater systems increase, CWN cautions that affordability must also remain a priority in the search for sustainable solutions.
“Finding solutions to sustainable financing of Canada’s municipal water services is fundamentally about deciding and delivering on what we want and need from our systems, both now and in the future,” says Bernadette Conant, chief executive officer, Canadian Water Network. “This report provides strategies that municipalities can adopt to create sound financial plans — geared to recover costs associated with water system delivery, upkeep and infrastructure — and achieve their water system goals.”
The detailed report analyzed data collected from participating municipalities by the National Water and Wastewater Benchmarking Initiative (NWWBI) over a 17-year period (1999-2016). The data highlight a number of key challenges facing our nation’s municipalities, including changing water use, underinvestment in existing and new infrastructure, rising energy costs, the impact of climate change-related events and public resistance to rate increases. A key takeaway of the report is that a nation-wide culture shift is happening in water management, with municipalities moving from a reactive operational model towards a more proactive, customer-focused and fiscally sound management approach.
Across the nation, Canadians need and want the same level of service:
- Safe, up-to-date systems
- Consistency and reliability
- Fair and equitable cost distribution
- Fiscal and environmental accountability
The report stresses that while there are commonalities among municipalities, there are also unique challenges and realities being faced. It is this diversity, more so than the commonalities, that will drive the solutions each municipality decides to pursue. What will be key for the success of any strategy is clear and consistent communication with Canadian consumers.
“Canada is comprised of thousands of municipal water systems, each in various states of repair and experiencing its unique socioeconomic realities,” says Conant. “Awareness of the urgent need to adequately fund Canadian water systems is growing. Utilities, various levels of the government, industry and the public each play a role in responding. The opportunities for municipalities to select and implement the options best suited to their situation will shape and support a fiscally sound network of systems across the country.”
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Liana Kreamer, Communications Manager, Canadian Water Network
519-888-4567 x 39378
Balancing the Books: Financial Sustainability for Canadian Water Systems was prepared by Canadian Water Network on behalf of the Canadian Municipal Water Consortium to:
- Describe the current and changing context of water management
- Articulate the elements involved in full cost recovery
- Provide a snapshot of typical financial practices of Canadian utilities
- Highlight the challenges to achieving financially sustainable water systems
- Identify a menu of opportunities to advance financial sustainability
Canadians expect consistent, high quality water services, with operations that are fiscally, environmentally and socially responsible. However, substantial financial challenges have been inherited, and billions of dollars will be needed to repair or upgrade aging infrastructure across the country. The costs of running our systems, as well as the ability to generate revenue to pay for them, are impacted by fluctuations in system demand due to factors like population change, new developments and water conservation initiatives. Additionally, the potential impacts from climate change extremes — such as flooding, freezing, wildfire or drought — add uncertainty and can carry huge price tags for recovery, repair and rebuilding.
Means of Generating Revenue in Canadian Water Systems
- Water and Wastewater Rates: fees charged to household residents, industries and institutions for water services
- Development Charges: a one-time fee assessed for new developments so the costs of system expansion are paid for by the developer (or final occupants) instead of existing users or taxpayers
- Stormwater Charges: link the recovery of stormwater costs to use or benefit from the services
- Wastewater Surcharges: recover additional treatment costs or infrastructure degradation resulting from commercial, industrial and institutional over-strength discharges
- Federal or Provincial Grants: play an important role in enabling capital water and wastewater projects; however, the majority are one-time offers that have tended to favour shovel-ready or near-term projects rather than long-term strategies that lead to improved financial sustainability
Challenges to Achieving Financially Sustainable Water Systems
- Changing water use (including conservation efforts)
- Historic underinvestment in infrastructure
- High cost of unpredictable events (strong correlation to climate change)
- Rising energy costs
- Limited system information and asset management planning
- Gaps in provincial legislation
- Public resistance to rate changes
Opportunities to Move Toward Financial Sustainability
Although water utilities across Canada face similar core challenges, each has diverse systems, regional and regulatory settings and socio-economic realities unique to the communities they’re supporting. Achieving financial sustainability requires a customizable approach, leveraging the following suggestions:
- Design adaptive rate structures to achieve revenue stability
- Build climate change resiliency into financial planning
- Optimize energy use and recover resources
- Increase system knowledge
- Create a culture of communication
“For Canadian utilities on the front lines of water management, the opportunity exists to achieve financially sustainable systems and improve Canadians’ connection to shaping and supporting those systems.”
Canadian Water Network is Canada’s trusted broker of research insights for the water sector. When decision makers ask, ‘What does the science say about this?’ they frame what is known and unknown in a way that usefully informs the choices being made.
The Canadian Municipal Water Consortium is a national network of progressive water leaders who are working together to advance water, wastewater and stormwater management. In addition to sharing peer knowledge, members co-invest in projects and partnerships that generate new insights on critical challenges.