Thank you, Mr. Chairman. I would like to thank the Members of the House for this opportunity to appear before the committee of the whole, and to have a full discussion of the water and sewage service policy amendments and subsidy reductions that I announced in my statement to the House on March 30, 1994.
Historically, the water and sewage service subsidies provided by the government have not been consistent across all the communities. As a result, the changes to the subsidy provisions in the water and sewage services subsidy policy appear rather complex.
Mr. Chairman, I will not repeat the text of my previous statement to the House, however I would like to elaborate on some of the background and context surrounding the changes that were announced.
The water and sewage subsidy program is targeted at three groups of users; residential, non-profit and commercial users. There is no subsidy for government or industrial users.
The policy has been designed around four principles. Firstly, that NWT residents should be entitled to basic water and sewage services to safeguard their health. Secondly, that these services should be provided to residents on an equitable and affordable basis. Thirdly, that municipal governments should exercise authority and responsibility for delivery of water and sewage services. Lastly, that these services should be provided as efficiently as possible.
Mr. Chairman, I must stress, however, that the ability of the government to fulfil these principles is limited by the financial resources that are available.
The most difficult element of this policy to deal with is the determination of what is affordable to consumers and what is not. In the absence of a better standard to rely on, this policy refers to the rate charged to residential customers in the city of Yellowknife for piped water and sewage service to be the guide in the determination of what is an affordable rate to all NWT residential consumers. This approach is consistent with other similar utility subsidy programs of this government.
When the water and sewage services subsidy policy was first introduced in April of 1987, the base rate -- the rate based on cost of service in Yellowknife -- was approximately .20 of a cent per litre. This rate was subsequently revised upward to .22 of a cent per litre in April of 1990. Today, Mr. Chairman, the rate has reached approximately .33 of a cent per litre. Accordingly, the recent announcement of the adjustment in the subsidized rate was necessary to keep up with the increase in the rate.
In addition to the change in the base rate there has been a need to modify the policy to make it more consistent throughout all communities.
When the water and sewage services subsidy policy was first introduced, it only applied to the hamlets, charter communities and settlements. The remaining tax-based municipalities continue to receive only the benefit of a trucked water delivery subsidy.
Local circumstances in each of the tax-based municipalities were such that over time the trucked water delivery subsidy provisions had to be applied differently from one community to the next. Ad hoc arrangements prevailed. What was consistent was that trucked sewage pump out and piped water and sewage service received no subsidy at all in the tax-based municipalities.
In some instances, the lack of subsidy for these services meant that some residents were unable to have their sewage pump out tanks regularly emptied. This contributed to local sanitation problems. In other instances, high user rates were imposed upon government and industrial users in order for the municipality to indirectly subsidize the provision of services to local residents and businesses.
Over the period of 1989 to 1991, the water and sewage services subsidy policy was extended to include the towns of Norman Wells and Iqaluit as part of the turnover of the local water/sewer infrastructure to the municipalities. There was one exception in that only 50 per cent of the commercial consumption would be subsidized, whereas in hamlets, charter communities and settlements, commercial users were subsidized at a rate of .44 of a cent per litre for 100 per cent of consumption.
Mr. Chairman, the amendments to the policy which I announced on March 30, 1994, will now finally extend the subsidy provisions to those remaining municipalities with the exception of the city of Yellowknife which is funded through a separate block funding agreement.
As my colleague, the Honourable John Pollard, indicated in the House one year ago, the subsidized rate to commercial users in hamlets, charter communities and settlements was to be reduced to 50 per cent of consumption from the present level of 100 per cent. This would make the subsidy arrangements for commercial users in hamlets, charter communities and settlements consistent with the subsidy rules applied in the towns of Norman Wells and Iqaluit. It would also make a contribution to the government's effort to address the overall operating deficit that has been projected.
There has been recognition however, that the pursuit of consistency in the design of this subsidy policy may be at odds with the principle of affordability. As a result, the reduction of the commercial subsidy in hamlets, charter communities and settlements is being implemented very carefully. The subsidy is being reduced only to 90 per cent of consumption at this time, not to the 50 per cent level originally indicated.
Mr. Chairman, this will allow the government time to monitor and assess the impact of this 10 per cent subsidy reduction to commercial users before any further reduction is considered. The 10 per cent subsidy reduction also strengthens the local accountability of councils and their administrations for the efficient provision of water and sewage services.
Should the local economic rate for water and sewage service increase, it will now have a direct impact on the non-subsidized 10 per cent of service to commercial users. If commercial users believe that the service is not provided as efficiently as possible, they are likely to raise their concerns with the local municipal government.
Mr. Chairman, this kind of feedback is essential for local councils to be truly responsible and accountable to their residents for the efficient delivery of municipal services.
At this time, Mr. Chairman, I would like to thank Members for their patience in allowing me the time to elaborate more fully on this matter. I and my officials are prepared to respond to any detailed questions Members may have. Thank you, Mr. Chairman.