Water Partners' Positions

The positions of some water partners could have been entitled Postulating and Puffery as the new Millenium got into full swing.
Or the Mire of Bureaucracies.

With a view to a better understanding--even now in 2015--of water opinions held within various jurisdictions in Greater Vernon, this 2009 document is printed with permission from its author, Maria Besso, former Coldstream councillor.  Links were provided. 

At the text's conclusion, Maria has added two current comments to update the situation to where we are now.

In 2000 there were three separate Water Utilities supplying the Greater Vernon Area;

1)    The City of Vernon supplying residential Vernon,

2)     District of Coldstream supplying residential Coldstream and

3)    The North Okanagan Water Utility (NOWA) that supplied residential and agricultural customers in the Electoral Areas as well as areas of Vernon and Coldstream.

In 2003 the three Water Utilities came together to form the Greater Vernon Water Utility (GVWU).

The history of why the GVWU was formed is long and complicated, but essentially Vernon needed water licenses in order to service new developments, it had a 1.36 million dollar debt and a large domestic customer base, Coldstream and NOWA had abundant water licenses that had been secured for agriculture and a surplus of $.853 million.  The motivation for coming together was Vernon’s immediate need for water. The utility came together under a set of principles (essentially a contract) of a single Water Utility with the same water quality and same water pricing for all..  Residential and agricultural rates were set so that agricultural rates would be competitive with other Okanagan Valley areas.  

The legal framework for this Utility came under the Local Government Act whereby the Utility was part of a “Function” of the North Okanagan Regional District. The participants in the “Function” were Vernon, Coldstream, and Electoral Areas B & C. The “Function” was the Greater Vernon Services Commission, formed by the NORD Board to deal with matters pertaining to Parks & Recreation, the Greater Vernon Water Utility, Wesbild Centre & Performing Arts Centre, and the Vernon and District Queens Committee that were specific to the City of Vernon, District of Coldstream and Electoral Area's "B" & "C". This Commission had maximum delegated authority and a voting structure of three representatives from Vernon, two from Coldstream, one from Electoral Area B, one from Electoral Area C, plus an Agricultural representative with a vote on water issues.  

In 2006 the Greater Vernon Services Commission was downgraded to a committee and became the Greater Vernon Advisory Committee. The voting structure has stayed the same (minus voting rights for the Agricultural Rep.) but the decisions of the GVAC now had to go through the NORD Board. 

What is DEVOLUTION?

  It is the opposite of Evolution.

 Devolution is going backwards.

 Maria Besso                        

Also in 2006, Vernon requested a service review of the Greater Vernon Water Utility “function” of NORD, stating dissatisfaction with operational issues and a lack of control of water issue decisions within their boundaries. Vernon stated that they only wanted to withdraw from the water distribution portion of the function. 

This would essentially mean Vernon would get to keep the water licenses as they are part of the supply side of the GVWU, but would take away their large domestic customer base. Their large domestic water base was what they contributed in the first place to make the combined water utility attractive to the other partners. 

In late 2008 a consultant came out with a report analyzing the financial implications of the withdrawal of Vernon from the distribution part of the ‘Utility’ – this report: Devolution of the Water Function from Greater Vernon Water Services to City of Vernon - Technical and Financial Report, dated December 2008, by Quadra Development Solutions Inc.,which included a financial analysis done by Catherine Lord,at that time the Chief Financial officer of the Municipality of Coldstream. This full report and it’s implications became public at the June 8th, 2009 Vernon Council meeting.  The full report was then shared with Coldstream in July 2009, and it at this point that the question of a hypothesis of a financial subsidy for agriculture  came to light. 

This is the basis for the recent ad that Vernon ran in the Vernon Morning Star, but the report is purely a financial analysis and does not take into account any of the history and contractual obligations on the part of the’ Utility’ partners. 

In another process, occurring simultaneously with Arbitration, a few other proposals have been put forward. One of the latest proposals put forward by Vernon, was to set aside the Arbitration process IF Coldstream and Area B&C allow the voting structure to be changed to population representation with weighted votes on the NORD Board. Another proposal was to set up an independent water utility (see clippings from Morning Star).

The NORD Board represents a much larger area than just Greater Vernon – including Armstrong, Enderby, Spallumcheen, Lumby, Area D, E, and F, but the voting would remain with the original partners. Under this Governance Vernon would get weighted votes representing 35,000 population, while the weight for Coldstream would represent 10,000 population, and  another 10,000 population for Area B&C. combined.  i.e.  a ratio of 7 to 4  Vernon vs Coldstrem,B&C.

Vernon’s position is that water rates should be based on the amount of water consumed, i.e.: volume.  Because Vernon has a larger residential (domestic) customer base, and residential customers use less volume of water than agricultural customers, then, in a nut shell, according to Vernon their customers should pay less than they are paying now.  Under the present system, it would appear that the Vernon residential customers are subsidizing Agricultural rates to a greater extent than anyone else, and that seems unfair to them.  However it can be argued that no such subsidy exists, since most of the costs incurred are for water treatment, and Agricultural users do not require treated water, all of these upgrades were for the benefit of the Domestic users. 

Coldstream and Electoral Areas B&C’s position is that, yes, the domestic tax base in ALL jurisdictions is “subsidizing” , for lack of a better term, agricultural water rates, but that was one of the reasons the amalgamated water utility was formed in the first place. A large portion of the water licenses belonged to the agricultural users before the formation of the amalgamated water utility, this was a well understood part of the deal when the ‘Utility’ was formed. Assurance that agricultural rates would remain competitive with those charged in other communities, was part of the founding principles upon which the new water utility was formed.

As explained above, in the historical summary, the agricultural users had the water licenses Vernon needed in order to allow it to develop new areas, and consequently increase its tax revenue. The real estate value of all the new properties that were able to be developed by virtue of Vernon’s access to new water licenses as a result of the amalgamated utility, are directly related to the value of the water. A beautiful view lot at ‘The Rise’ is worthless without water…try selling one.  Once Vernon was able to secure water supply the new lots had great value, and were taxed accordingly.  This created a financial benefit for the city of Vernon for many years, ironically now a lot of these lots have remained undeveloped and therefore do not consume any water, thereby limiting their actual contribution to the water utility revenue.

The position that Vernon is taking on devolution is:

1)That the rate structure is unfair to domestic users. 

2)Based on volume of consumption, the Vernon customers would be better served by taking control of their own distribution of water. 

The position that Coldstream and Electoral areas B&C are taking is:

1)That the original set of principles upon which the Greater Vernon Water Utility (GVWU) were formed, were based on a trade off of mutual benefits for the parties.

2)The priceless water licenses that were held by Agricultural users ( in order to insure the viability of agriculture in the future) are more than enough compensation for Vernon’s participation in the combined utility.

Furthermore, when the combined water utility was formed, one of the conditions that the provincial government insisted on , was the formation of a Master Water Plan (MWP)to address how the goals of the new regional water utility would be carried out. The MWP called for the separation of domestic and agricultural water.  The MWP was never followed, and right from the start the GVWU selected its projects to favor improved services (and consequently improved property values and taxation revenue) for the City of Vernon.  That is not surprising given that these improvements stood to benefit the greatest number of people, and given that engineers argued that this was the most cost effective way to go.  The reality was that this was the most cost effective in the short term for the water utility but most of the benefit was accruing geographically to Vernon and effectively to the Vernon tax base. In the long term there would be a price to pay if the interests of the agricultural users and less populated fringes of Coldstream and electoral areas B&C were continuously superseded by the interests of the more numerous domestic users. 

Now the time has come we are going to have to pay the price for not separating the agricultural and domestic water supply when we could have.  Now with the construction of the Duteaux Creek water treatment plant (DCWTP), areas of Coldstream that have been suffering with inferior quality water, are finally going to see some benefits. 

Now is the time Vernon is choosing to withdraw from the distribution side of the water utility.

Vernon is not getting a raw deal, as it seems to be implying, Vernon got a very sweet deal.

Despite Vernon’s blatant self interest in the first few years of operation of the GVWU, its partners Coldstream and Area B&C are still willing to abide by the founding principles of the water utility.  Coldstream and Areas B&C want to see the status quo in the water utility - we do not want to see the water utility devolve.  The strength of the utility is in it’s ability to spread out the cost of supplying and distributing a high volume of water for agricultural use at a competitive rate by having a large domestic base.

If Vernon is allowed to withdraw from the distribution side of the water utility then it must properly compensate all the other partners for all the benefits it received, and continues to receive. Coldstream and Areas B&C have been very accommodating and patient since 2003. Initially Vernon cited operational and control issues with scheduling of public works, as the reason for seeking a service review and withdrawal from  the service. Coldstream and Areas B&C were very willing to discuss and deal with all of Vernon’s issues in this regard, but every time an issue was dealt with another one emerged.  Coldstream even went as far as signing a set of devolution principles, a signature they have now rescinded.  Now the true reason for Vernon’s desire to withdraw has come to light, as stated at the beginning of this letter, it is their dissatisfaction with the pricing structure of a water utility that is designed to stabilize agricultural rates at the expense ( as Vernon sees it) of domestic customers. 

In their “Statement of Response” position paper, Vernon refers to “the assumption of bona fide agricultural use” stating that “this may not reflect the actual use”

Coldstream and Areas B&C believe this statement is at the heart of the true problem. Vernon, with 80% domestic users and 20% agricultural users, is eyeing the rural areas of Coldstream and the Electoral Areas, and judging that there is a lot of water waste, hobby farms, and Country Estates, that may be unjustly benefiting from reduced water rates. Water rates that they view are in large part subsidized by Vernon domestic users. 

If this is the problem then Vernon should discuss its concerns up front with all the partners, water conservation and bona fide agricultural use are concerns of all the partners.  Instead of meeting with a mediator and communicating with all the partners in the water utility, Vernon is insisting on forcing Arbitration. Arbitration will be very expensive with legal fees mounting easily into the hundreds of thousands of dollars. 

Who knows what the solution will be …. we can only hope that the arbitrator will be more intelligent than the politicians. At this point the only thing that is certain, is that the solution will be expensive to all the taxpayers in the end. "

Maria Besso  

( written Nov.1st, 2009) 

2015 comment from Maria Besso:

“keep in mind (the above) was written in 2009 :-) so some of my thoughts may have changed. In particular, with the new knowledge that came to light after the 2011 and 2012 water consumption data came out. That data revealed that 96 % (by volume) of the  water treated at Duteau the first few years, was being used for irrigation and only 4% of the volume was used for Domestic consumption. That for me was the turning point, that led me to further question the Master Water Plan, and come to the conclusion that we had chosen the wrong water source, for many reasons.... ( including unreliable 1)source quality, and 2)source quantity, 3)remote location that required many miles of pipe twinning 4) extreme cost to bring up to IHA standards 5) detrimental impact to Agriculture - essentially the agricultural allocation was being converted to domestic. 

I am sure that others will remember or know the history better than me ... but "Vernon's immediate need for water." referred to below, came in the days of Sean Harvey (Vernon mayor) and the desire to develop "The Rise" and "Predator Ridge",  at the time, the Province refused to give Vernon any new water license on Okanagan Lake, and thus started the coveting of the Agricultural Water licenses at Duteau ... and the rest is history. “

February 2010 Update:

On Feb. 8th,  2010 the Arbitrator ruled in Coldstream and Electoral Area B&C’s favor. He ruled that he, (the Arbitrator), does not have jurisdiction to rule on a partial devolution of the (Greater Vernon Water) GVW function . ie: Vernon cannot pull out of only the “distribution “ side of the utility. The Arbitrator said he could rule on full withdrawal or no withdrawal not partial withdrawal. 

As of May 2010 the City of Vernon has appealed the Arbitrators Ruling.

The Municipality of Coldstream has opposed the appeal. 

Electoral Area B & C were not able to oppose the appeal because the NORD Board voted not to do so.

 May 24th, 2015 Update by Maria Besso:

Between May 2010 and November 2011( the next Election) there was not much movement on the Devolution front.

The efforts of the Greater Vernon Water Utility turned to defending themselves legally, after the contamination of a drinking water well at Antwerp Springs ( January 13th, 2010).  A potential catastrophe was narrowly avoided,  and the Province sued the Water Utility ( RDNO), The District of Coldstream, as well as the farmer that caused the contamination.  For all concerned Devolution seemed to be unofficially 'on HOLD'.

Meanwhile in October 2010 the Duteau Creek Water Treatment Plant was officially completed and started operation. For a short time people were happy with their clarified water.  Then, predictably  they saw their water bills start to rise. 

On March 11th, 2011 the Interior Health Authority ( IHA) issued an Order to the GVWU and RDNO to prepare a Master Water Plan that would achieve all the Drinking Water Protection objectives mandated by the Federal Drinking Water Protection Act by the year 2020. 

Then in November 2011 there was another Election, and Wayne Lippert was replaced by Rob Sawatzky as the Mayor of Vernon.

An atmosphere of greater cooperation started to take hold at  GVWU, however there were still problems.

Things that may have contributed to a change in attitude regarding Devolution were mainly a change in the people involved.

The City of Vernon lost its Chief Administrative Officer (CAO)Leon Gous, who had been a driving force behind the devolution litigation.

The Regional District had a  new Administrative officer Trafford Hall at the helm - who was able to successfully negotiate operations agreements with all the participants in the water utility. 

Mike Stamhuis, former RDNO employee involved with NOWA had become the CAO of the District of Coldstream in early 2009 and was now in a position to influence the direction of a new Master Water Plan that was being ordered by IHA, and he had been able to successfully defend against Vernon's initial attempts at 'Partial Devolution'.  

Will Pearce, a former administrator in Cranbrook, was hired to replace Leon Gous as the CAO in Vernon, and he needed time to understand the nature of the conflict at Greater Vernon Water and RDNO. 

It seemed that 'Principles' upon which the Water Utility came together, back in 2004 would be honoured by all the participants. 

Then the true cost of those 'Principles' started to get clearer, if one was taking over an irrigation utility where a large volume of water is used for irrigation and a small volume is used for domestic drinking water, and if one guarantees the irrigation customers that their rates will stay competitive with other jurisdictions, then the obvious result is that the domestic customer will end up having rates that are not competitive with other jurisdictions because they will have to bear the cost of unnecessarily treating large volumes of water for irrigation purposes. 

"...the new 2012 Master Water Plan that would compound the magnitude of the error that was made initially by choosing the Duteau Source as a major source of potable drinking water."

Regardless of the opposition - Greater Vernon continued with setting a direction for the new 2012 Master Water Plan that would compound the magnitude of the error that was made initially by choosing the Duteau Source as a major source of potable drinking water. 

On June 13, 2013 GVAC voted to Recommend that Option 2 of the 2012 MWP be adopted. That option would require a filtration plant be built at Duteau by 2017, at a cost of $26.5 million dollars plus at least $42.6 million dollars of pipe separation to be done between 2013 and 2017 in order to bring the size of the filtration plant down to  80 ML/day capacity. 

On December 18th, 2013  the Drinking Water Protection Order was lifted by IHA, they accepted the 2012 MWP as meeting the objectives of the Drinking Water Protection Act - they did not comment on the financial implication or the merit of the plan, as they said this was not in their mandate. 

In order to go ahead with this plan the public had to be asked for permission to borrow the money. A borrowing referendum was held in conjunction with the November 2014 Election to borrow up $70 million dollars to implement phase 1 of the $111 million dollar Master Water Plan. 

Despite the expensive public information campaign put on by RDNO, the message of opposition to the Master Water Plan was successful in defeating the borrowing referendum.  

Now (in 2015) RDNO seems to be continuing with the capital projects of the Master Water Plan despite the failure of the borrowing referendum in November 2014. 

In early 2015 a new group called Citizens for Change to the Master Water Plan formed, to urge the elected officials to  stop with the projects of the MWP and get an independent consultant to take a fresh new look at the Master Water Plan. 

That's were we are now. 

"Despite the failure of Vernon's 'devolution' attempt, some still want to take their bat and leave the game," says Kia.

But they don't own the ball.

Sincere thanks to Maria Besso for allowing her material to be printed here.