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AQUATERA

Aquatera is an important organisation in our region. It is also sometimes contentious.

It provides us with water, waste water, and solid waste removal- services we absolutely rely on. At the same time, these services cost us all a lot of money every month.

Aquatera is our biggest example of regional collaboration. It is also sometimes a heated political subject.

Because it is so important to our community and involved in so many conversations, it is important to have a good understanding of what it is and how it works.


ON THIS PAGE

Following is basic information about the aspects of Aquatera which I hear the most questions or confusion about. I also share my take on some important topics. Any mistakes or opinions expressed here belong to me and me alone.

If you don’t want to read this whole page, you can click on section links below:

History and Ownership

Setting Rates

Shareholder Dividends

My Thoughts on Aquatera

Let Me Know What You Think


HISTORY AND OWNERSHIP

In 1989, the City of Grande Prairie began providing water and wastewater into the County. This partnership was the basis of Aquatera, which was formed in 2003.

Aquatera is setup as a for-profit company. However, it is exclusively owned by municipalities. The biggest shareholder is the City of Grande Prairie. The County of Grande Prairie and the Town of Sexsmith are also original shareholders, while the Town of Wembley will be receiving shares in 2020.

100% of Aquatera dividends are disbursed to these municipal shareholders in order to lessen property taxes or fees for other municipal services. There are no private owners or founders who profit from Aquatera.

Aquatera owns and operates water and wastewater infrastructure to service all shareholders as well as solid waster infrastructure for the City. In order to generate profit, it also offers operation services to other municipalities and owns two companies: Advanced Trenchless Inc. and Sustainable Water Solutions.

As its majority shareholder, the City currently receives ~75% of Aquatera’s dividends. However, the agreements and bylaws that form Aquatera do not give the City more control than others. Instead, all original shareholders (City, County, and Sexsmith) need to give unanimous consent for major decisions including Board of Director appointments, acquisitions, and issuing Discretionary Dividends.


SETTING RATES

Every two years, Aquatera presents suggested rates to Council. These rates are effected by many factors, including:

  • The full cost of providing services including overhead, indirect costs, and future maintenance

  • Appropriate shareholder return (see dividend section below)

  • Aquatera’s founding agreement requiring uniform treated water rates in the City and other connected municipalities

  • Future capital project requirements

Council does not need to adopt the rates suggested by Aquatera. However, if Council chooses to set lower rates Aquatera will not recover the costs needed to deliver services the the City. This shortfall would have to be paid directly to Aquatera by the City of Grande Prairie, necessitating a tax decrease, the raising of other fees, or service cuts.

One of Aquatera’s primary goals is to keep its rates at or below the median rate of comparable municipalities. The information I’ve received suggests it has been accomplishing this:

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SHAREHOLDER DIVIDENDS

Aquatera gives dividends to shareholders. The City of Grande Prairie receives ~75% of its dividends with the rest going to the County of Grande Prairie or Town of Sexsmith. The Town of Wembley will also be eligible for dividends in 2020.

No individuals or private corporations receive dividends from Aquatera.

There are two types of dividends which shareholders receive: Mandatory and Discretionary.

MANDATORY DIVIDENDS

Mandatory Dividend amounts are determined by the founding agreement of Aquatera. They are based on previous investments and have to be disbursed to shareholders every year. These cannot be removed or changed without the City, County, and Sexsmith giving unanimous consent.

If a municipality contributes infrastructure or cash to build infrastructure to Aquatera, it can receive a return of investment in the form of Mandatory Dividends. These are given in recognition that one municipality contributing to Aquatera benefits all shareholding municipalities. The taxpayers of the contributing municipality deserve compensation for what they put in.

A shareholder only attracts Mandatory Dividends if it contributes its own cash. Investments made from grant money or development levies are not eligible.

These dividends start two years after the contribution is made and are equal to 5% of the cash investments made into Aquatera.

For example: say the City invests $1,000,000 into a new lift station. It pays cash for it and does not receive any contributions from developers or other levels of government. This would be eligible for Mandatory Dividends. Starting two years after the investment is made, the City would receive $50,000/year in Mandatory Dividends.


DISCRETIONARY DIVIDENDS

Discretionary Dividends are determined every year by the Aquatera Board. They are based on Aquatera’s profits and are optional. The City, County, and Sexsmith need to give unanimous consent for Discretionary Dividends to be approved.

Aquatera has several big goals, one of which is to maximize Discretionary Dividends. However, this is balanced out by its goal to keep its utility fees at or below the median of other Alberta municipalities.

Every year Aquatera determines the total amount of Discretionary Dividends to be given out while also seeking to keep rates reasonable and enough money for its operational and capital needs. This total is then divided between the shareholding municipalities based on how much capital and infrastructure they have previously contributed to Aquatera.


MY THOUGHTS ON AQUATERA

AQUATERA'S PRIORITIES

I hear a lot of concerns and disagreements about Aquatera. It strikes me that a lot of these are caused by various parties having different views about the priorities of Aquatera.

Aquatera has many different goals. While they are all complimentary, putting resources into pursuing one goal will mean less resources are put into the other goals. If we want to be satisfied with how Aquatera sets and pursues goals, we need to be clear on our priorities for it.

I’d suggest that Aquatera’s number one priority is to reliably provide its core services (treated water, waste water, and solid waster removal) to shareholding municipalities. Aquatera’s primary goal should be to safely provide these services while building and maintaining the infrastructure needed to meet the demand of properties currently connected to it.

However, there are other important secondary goals Aquatera can pursue. These include:

  • Deliver its core services at as low fees as possible. This makes it easier for its customers to meet their obligations.

  • Increase dividends for shareholders. Dividends are a revenue source which allows shareholding municipalities to decrease their property taxes.

  • Expand water services to new areas. Having water hookups available can encourage the development of land. This is good for our local economy. Additionally, developed land increases the tax base which means that tax rates can be lowered.

There are pros and cons to all of these secondary goals. I don’t think there is an objectively right answer about which one is correct- they just reflect differing priorities.

That being said, I do think that we as a regional community should decide which priorities are important to us. A lot of people question Aquatera decisions because they reflect a goal that person does not necessarily share or understand. I’d love to see the Councils of Aquatera shareholders do more to publicly discuss and set the priorities they have.

SHOULD WE TAKE DIVIDENDS OR LOWER RATES?

Whenever Aquatera gets discussed, dividends and rates come up. Some feel that Aquatera should take the money which goes towards dividends and put it towards lower rates.

It is important to remember 100% of dividends go to shareholding municipalities with the City receiving ~75% of them. In 2018, the City received $3,330,863. This was used to subsidize tax revenues. To deliver the same level of services without these dividends, the City would’ve needed to raise taxes by ~3%.

It is also important to note that there are many buildings within the City which do not pay property taxes. This includes all government buildings and property owned by non-profits. Some of the biggest properties in the City do not pay taxes, including the hospitals, schools, and GPRC. They are all provincially funded and serve people from across our region.

Despite not paying taxes to the City, these properties do consume City services including RCMP, fire, and City roads. These services that government and non-profit properties receive are heavily subsidized by those who do pay taxes to the City. There is only one way that they contribute to City revenue: utility fees. When these properties pay their Aquatera bills, part of their payment makes it back to the City in the form of dividends. This allows the City to recover a very small portion of the money it spends servicing these buildings.

If the City cut Aquatera fees by collecting less dividends, its taxes would need to go up. If taxpayers added subtracted this tax increase from what they saved on their Aquatera bills, they would actually see a net increase to their costs. Decreasing Aquatera fees increases the subsidy taxpayers give to government and non-profit buildings.

I feel it is important that our water and waster removal fees are in line with what other Albertans pay. However, as long as we are at or below the Alberta median costs I do not support further reductions at the expense of lowered dividends (and increased taxes). Provincial buildings (hospitals, schools, offices, court house, etc…) consume a lot of water. I don’t want to give the province a better deal on it than it receives in other communities- this leads to more money leaving our local economy. Additionally, the City subsidizes many regional services that are accessed by residents of other communities. I do not support policies which increase these subsidies.

DEVELOPMENT STANDARDS, PROCESSES, FEES AND LEVIES

I’ve heard some concerns or ideas relating to how Aquatera works with builders and land developers. These touch on many topics including development levies, water line sizes, and the timeliness of services. Due to how technical many of these conversations are, I’m not going to expand on them here. However, I will say: I do think there are changes which would allow Aquatera to better support development. Council has been having this conversation with the Aquatera board and management, and it needs to keep on happening. If you have any questions, concerns, or great ideas I would love to chat so that I can help bring them forward. My contact info is at the bottom of this page.

CORPORATE STRUCTURE

Aquatera is a municipally controlled corporation. The original shareholders (City, County, and Sexsmith) appoint its board and need to give unanimous consent to major decisions. While 100% of its profits go to the municipalities which own it, it is arms length from them and outside of their direct control.

This has at times created concern in the community. Some object in principal to a corporation controlling our water system. Others feel that elected officials should be more directly responsible and accountable for Aquatera than its current structure allows.

I understand these concerns. The nature of its corporate structure creates more risk that Aquatera will lose sight of the public good than it would have if it was a non-profit or municipal department. And there have been times where I have been frustrated at how indirect elected officials’ abilities to influence Aquatera are.

However, there are two big reasons that I could not currently support efforts to fundamentally change the structure of Aquatera. They are:

  1. It is a regional service which needs to answer to the Councils of four different shareholding municipalities. And many of its decisions (especially relating to growth) have very political ramifications. Given this context, I don’t picture any structure other than an arms length organisation with and independent board working. Although as a governance geek, I’d love to hear about any other ideas for a corporate structure you might have….

  2. A change needs the unanimous consent of the City, County, and Sexsmith. This would take a lot of negotiation, time, and energy. If our municipalities are going to pursue regional change together, there are much more pressing needs than this

Whatever our take on whether or not Aquatera should be an arms length private corporation, it is what we have right now. There are definitely some changes I would love to see. But we are better off using our energy to bring them about within the current structure than putting energy into looking for another structure that may not be possible at this time.

Since it is what we have, it is worth acknowledging two big advantages of Aquatera’s corporate structure:

  • The laws and regulations surrounding corporations are less burdensome than those surrounding non-profits and municipalities. This gives Aquatera more flexibility and ability to pursue shareholder goals than it would under other structures.

  • It keeps politicians arms length from decisions about investments in existing water infrastructure. Since these decisions are very long-term and technical, they can become problematic when politicized. Two notable examples of this: the Walkerton E Coli. outbreak and Victoria’s challenges building a sewage treatment plant. I’ve talked to both staff and politicians from across the country who are concerned that their water systems have not been receiving proper investment due to politics.


LET ME KNOW WHAT YOU THINK

I’d love to hear yours thoughts.

Do you agree with my thinking? Do you have push back on it? Would my ideas improve programs in Grande Prairie? Do you have any other ideas Council should be considering?

You can email me at dbressey@cityofgp.com or call me at 780-402-4166. I participate in a lot of discussions in the GP Round Table Facebook group. I’m also always happy to meet for coffee.

Thanks for taking the time to read!

-Dylan