Kneehill Regional Water Service Commission blasted by Provincial Auditor


A Provincial government auditor was critical of the Kneehill Regional Water Service Commission when Tim Ell, C.A., with Endeavor, provided a summary of his financial findings at a public meeting held in the Acme Hall on Monday evening, August 30. It was made clear that he would give his report but not answer a single question. The figures were facts that the Commission Board did not dispute. The deficit was staggering. The blame was directed at the Commission Board, with its Manager and Treasurer. It could have been a massacre but the other side of the story came out. The history behind these financials was given wings and the room seemed full to capacity with citizens who had first hand knowledge of the questionable claims outlined in tonight's report and how the provincial government failed the Commission in the past and continues to do so. The 300 page report was made available to the Board less than one hour before the public meeting was set to begin, yet the provincial government-appointed auditor seemed well prepared.
This report was in regard to the Commission, which was originally formed to provide direction on the treated water pipeline that would come from the Red Deer River through the Drumheller treatment plant. When reference is made to the Kneehill Regional Water Service Commission it is for the construction and operation of the main trunk line that services member municipalities Linden, Carbon, Irricana, Beiseker and Acme. There are two Counties that are also members of the Commission with rights to tap into the trunk line with their own allocations, and their own licenses to withdraw water from the Red Deer River. Of the two Counties, it is only Kneehill at the moment that is actively engaged in building their own distribution system for their rural residents, financially and organizationally separate from the Commission. They do pay the Commission a water usage fee. The other member County is Rocky View. Both Counties have and continue to pay their share of the financial burden for the creation of the main trunk line, even before they were drawing water, as an investment in their own rural future of sustainability.
The accountant gave a very good recording of all the figures involved even if the figures were removed from the context of the history they evolved from. His report should be ready to view on the website at www.municipalaffairs.alberta,ca/1526.cfm. One of the main figures was the original cost over-run of two million dollars as well as paying back the Commission's 'Minister-approved' borrowing debenture. Not selling enough water makes it extremely difficult to recover financially (in the short term), without punishing consumers. This was a supposedly known fact since the very beginning, for the Commission and the Provincial and the Federal Governments. It was the government that is said to have initially urged the over-building of the pipeline for 100-year sustained growth. The summary report failed to cover any of the history in its report or mention that it was the provincial/federal governments delay of the construction project, holding off on approving the grants to the Commission for about two years. During this time the cost of steel rose dramatically, contributing to the cost over-run of the original project. The provincial/federal grants were paid on the original cost projection figures. This evening, original members of the Commission were in the audience and spoke out loud and clear on this issue.
There was much said on how recent water distribution lines for larger centers are receiving 90% government funding while the grants the Commission obtained were a hard fought campaign to garner the two thirds of costs (which in the end, wasn't based on the final costs). Members of the Board, past and present, expressed frustration and disillusionment with their attempts throughout the years to gain some extra financial help from the Province, with meeting after meeting in Edmonton and promises with Ministers that went unfulfilled as they vacated their offices, forcing the Commission to explain the issues again and again with the new guard. The auditor stipulated in his report that the Commission did nothing, had no plan, and continued to allow the deficit to grow, and were in violation of by-laws for not obtaining ministerial approval for their continued deficit.
Councillors, past and present, from every municipality that ever served on the Commission, told the same story. They said the government knew there would be a deficit. "They advised us to build the system to accommodate usage for numerous years and approved it, knowing there would have to be a deficit for a few years. They have always known this." It was the Provincial government that had to approve the Commission borrowing (in 2003), $11,000,000 for the Commission's 1/3 portion and then with the higher costs, versus the original budget, it was raised to $15,000,000 in 2004. Even the accountant stated in his report "that all went off according to plan with one exception; costs were higher."
The accountant stated that $600,000 was not, and has not been paid to the Town of Drumheller, which was still on the books as owing for the financial upgrades to that Town's system. As the new manager of the Commission, Kneehill County, specifically its administrator Kevin Miner, showed copy of a letter from Drumheller Corporate Services, dated August 20, 2010, confirming that "no further lump sum payments are expected in excess of the $1.8 million already received from the Commission." This discrepancy has continued to reappear on the books since 2007, and confused even tonight's auditor, as he once again raised it in his report. According to the Director's letter from Drumheller, "The current paid capital contribution is amortized over the life of the water supply agreement and the rate calculation model used came into effect with the start of the agreement. A review of the rate calculation report will show that the full cost of capital used is factored into the rate, with a corresponding reduction in the rate for the depreciated capital contribution for the year." With confirmation letter in hand, the Commission can now state that it does not still owe $600,000.
The municipalities involved are now paying about $3 a cubic meter. Other areas, including the Town of Drumheller, are reported to be paying $1 per cubic meter. The $3/cu meter is paid to the Commission with each municipality charging its own residents a bit over that to cover infrastructure. The Village of Linden, for example, charges its citizens about $3.65. It was stated by various Councillors that these rural communities are already paying three times more for their water than that of other centers, and yet the government continues to rescue these other centers from their debt overload.
The meeting took another turn, after the Commission was blasted for not having water volumes drawn by Kneehill County or Rocky View. "There is little revenue received from these municipalities." The Reeve of Rocky View County addressed the issue. "We wouldn't have to jack up these rates if we had been allowed to use our allocation. We spent $1.4 million, wasted dollars to design a pipeline to Balzac on government promises. We were on line for a provincial grant. It was a simple solution to all of this, but it became a political issue with the Liberals during elections and then everything went wrong." She explained that it was for the racetrack, that was issued a valid license. Continual supplies of hay for feeding the horses was also on the table for rural sustainability. It was a win-win situation for everyone, including the Province. "To stand up there and say the Board did nothing is not true. When the Provincial Government won't approve a license from the Bow or Red Deer River, what the heck are we supposed to do?" She gave her full support to the Commission Board, telling the accountant that if this planned project was as faulty as he claims, why did the government approve it? "But nothing like that happened. They gave approval and they didn't gloss over it. They really looked at it." Another voice concurred. "We could have expanded that (water distribution) map but we ran into a road block of problems."
Another person stood up and asked "who in the government, if not the Minister, was overseeing the audited reports that were sent in every single year?" Another said that the government had just come to the rescue of Vulcan and funded 82%. "What's wrong with us?" Another question asked was why the Commission was paying for water coming up hill rather than getting water from Calgary? The response was that maintenance for the pumps was worked into the debenture and that nobody can get water from Calgary, especially not for rural farm usage.
The Board, in its statement, said they had no dispute with the report figures, but to say they made no effort is wrong. "We feel let down." Others who had served on the board agreed. "We were told to wait, and given promises that the government was going to help and they never delivered. We sat with various Ministers." "There were efforts made year in and year out with more than two different Ministers." The Mayor of Linden also voiced the number of trips to Edmonton. "We heard promises and half promises. We worked our butts off to get these meetings and present our case but it seems to have fallen on deaf ears. Please don't be too disappointed in us because we tried to keep those rates down for you." It was the same from each Councillor. "We met with the Minister. We seemed to make progress but inevitably we would hear they were over-stretched right now, or over committed." The Carbon Mayor remembered how ecstatic she was with enthusiastic promises from Shirley McLellan and Minister Klein. "I was like Wow. Two days later Klein resigned." Tonight's board members said "Recent attempts to meet with the Minister to hash out a solution were stalled with the "Let's wait for the report." "That (report) was supposed to be ready for December 2009 and it is now August 2010."
Rob Anderson, MLA for Airdrie/Chestermere with Irricana, Beiseker, and Rocky View as part of his constituency, was present at this meeting and expressed support for the Commission. Rob was a representative of the Progressive Conservative party but he became disillusioned and is now an Independent. He backed up what the Commission was saying and advised that ratepayers in these communities had to become vocal with their provincial government and representatives, using a petition as a force to be reckoned with. "This government is totally reactive and they understand electoral pain. Make them understand your vote depends on their reaction to this issue." He stated he would take their letters and their petition to the government. "I would be happy to help you elevate this issue in the legislature."
Since the Commission does not have its own website, Kneehill County said it would provide, on its website a link, to give residents addresses and contacts for their letters. The Commission would formulate a petition for ratepayers to start signing. There was a hope that the communities and Councils of Drumheller and Three Hills would also support the petition. The Commission also stated, once it had time to digest the report, that they would be forthcoming with a formal statement that they would publish.