Financial Sustainability for Canadian Water Systems

Canadian Water Network (2016-2018)

Challenge

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.

Achieving financial sustainability requires that water utilities balance the books for the long term, securing sufficient revenue to recover the system costs, buffer against unexpected circumstances, service debts and save for future capital needs. Moreover, as the expectations and costs of managing water systems rise, the socioeconomic consequences of decisions are becoming more central in the search for sustainable options. Decision makers need to know what options are available and how they can be tailored to work within a local context.

Project

In 2016, Canadian Water Network launched a multi-phase initiative to:

• Understand more clearly the challenges that Canadian municipalities were facing
• Identify knowledge gaps and barriers that were limiting progress
• Develop insights to help decision-makers accelerate, advance and improve long-term financial sustainability

Outputs

Phase 1: Insights report

Balancing the Books: Financial Sustainability for Canadian Water Systems was prepared by CWN on behalf of the Canadian Municipal Water Consortium to:

• 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

Data on the financial practices of a subset of Canadian utilities were analysed in the report, collected from participating municipalities by the National Water and Wastewater Benchmarking Initiative between 1999 and 2016.

Phase 2: National survey

Analysis in phase 1 revealed that achieving financial sustainability may require customers to pay more for water services, and that equity and affordability — particularly for low-income customers — is an important and growing issue. Increasing our understanding of these impacts and identifying strategies to address them will be central to moving this issue forward. To support this, and other work focused on improving financial sustainability, CWN launched a national survey in September 2018 to understand what knowledge gaps and barriers for implementing financial best practices persist. The results of this survey will help guide the development of phase 2 initiatives in early 2019.