Looking at the agreement numbers
I have reviewed in detail the new proposed contract between EPCOR and the District of Sooke. I also attended the Council meeting Monday the 9 of May were it was discussed. This contract is complex and it appeared that most of the councillors had just recently received their copy. I expected they would have a lot of questions around past cost and growth estimates as well as the amount EPCOR would be paid to operate the system. Only two councillors, Haldane and Berger asked questions around monetary issues, the rest seemed more concerned with questions about spelling.
In 2006 EPCOR and the District put out a 10 year plan for operating costs, revenue and what the surplus or deficit would be for each year 2006 – 2015. In addition, the District has just prepared a five year budget plan which includes operating costs.
Sewer Operating Costs
EPCOR 10-Year Plan - $488,326
Sooke District 5 year budget -
New EPCOR Contract - $924,752
New proposed contract of $924,752 is 89 per cent over EPCOR 10-year plan projections for 2011. The $924,752 contract is 35 per cent over Sooke`s own current five -year budget which they have just passed.
In the sewer fund system, total costs are made up of debt servicing (original loan for system) of $685,359 per year, operating costs and other miscellaneous costs. The district’s five-year budget shows the total of these costs for 2011 to be $1,534,135. This is using the operating costs set out in the district`s five-year budget plan, see above at $683,180. If we use the new operating costs as set out in the new $924,752 contract, the total price for operating the sewer system in 2011 will be $1,775,707 The district projects 2011 revenue based on the number of sewer users paying $515 each at $1,314,280, plus a sewer generation charge of $271,920, plus a rehabilitation fee from EPCOR of $30,000 for total revenue of $1,616200. This equates to a loss of $159,507. Sooke`s financial plan shows that at the start of 2011 there is a $178,225 shortfall in the sewer operating fund. If the district goes ahead with this contract the sewer operating fund with be in the hole, ($337,732) at the end of 2011. This is all because of the outrageous increase in operating expenses proposed in this contract.
If Sooke goes ahead with this agreement the sewer operating deficit will continue unless they get more sewer users on line or they charge each user more, or they could go to the market and ask for bids in which case they may be able to rduce operating costs through a competitive process. Assuming they proceed with the contract, the user fee stays the same and the number of users increases marginally the deficit will be approximately ($159,507) a year for the foreseeable future.
The District of Sooke web site suggests that we can opt out anytime after five years with 12 months notice. It fails to mention, as set out in the agreement at 12.6 (ii), that the district would have to pay a termination fee equal to 12 months of Operations Fee which will be well in excess of $1,000,000 in five years.
The contract sets out a process to renegotiate the operating costs every three years during the life of the agreement. So we start at $924,752 in 2011 with inflation for two years then the district has to renegotiate the operating cost again. In addition, during the term of this contract EPCOR will be paid a management fee out of operating costs, with a starting base of $115,594 in 2011 increasing. This management fee is simply a fee paid with no service provided.
Sooke Council is proposing a 21- year deal that will cost in excess of $1,000,000 to get out of after five years
No competitive process.
The size of the negotiated operating costs will drive our sewer operating fund into a significant deficit position ($337,732) at the end of 2011.
Renegotiated operating costs every three years... what will they be? Who knows?
EPCOR will have the opportunity to make more money as the contractor in capital projects.
Another ``in camera`` deal... ever wonder what really happened?
The Alternative Approval Process (petition) will stop this process.
If you are interested please watch for further information.