How a GNWT funding policy change might affect residents’ water bills

While upcoming changes in territorial funding might strain some communities’ budgets, a subtle policy shift could have important implications for residents’ water bills.

The NWT government is changing the way it allocates funding to community governments, as we set out earlier this week, with many communities expecting adjustments to the amount of funds they receive starting next year.

When the new policy comes into effect, residents might have to pay substantially more for water, according to five people working in community governments who spoke to Cabin Radio for this article.

Most of them requested anonymity to discuss sensitive details without jeopardizing their employment.

Some sources said they expect residents will have to pay three or four times current water rates in their communities if the proposed changes go through in their present state.

“People can’t afford that. They’re going to have to start making decisions of ‘Do I buy food or do I pay for my water bill?’” one person said.

Why would a funding policy change cause water rates to skyrocket?

The explanation requires a bit of background on the inner workings of community government and (sorry) some math. Stick with me.

‘Rates must be consistent’

The GNWT’s Department of Municipal and Community Affairs –Maca – provides funding to community governments in three pots: one for community public infrastructure, one for operations and maintenance, and one for water and waste services.

Each funding pot has its own policy. Last year, updates to all three policies were approved by Maca’s minister at the time.

Under the new water and waste funding policy, “rates must be consistent – houses or similar buildings in the same area must be charged the same rate,” according to slides prepared by Maca that were presented to community governments in recent months. A copy of the slides has been seen by Cabin Radio.

The wording in the water and waste services funding policy approved last year differs slightly from the wording in the presentation. The policy states that fee rates and charges must “be applied consistently to similar customers,” and that rates can be based on residential, commercial, industrial and institutional user classes.

The people Cabin Radio spoke to understood the new rule to be that all users in the same zone – for instance, all houses in a residential zone – or all buildings of the same type would have to be charged the same rate.

Sounds reasonable, right?

The issue is that the NWT government has a water and sewage services subsidy program, which means that private homeowners typically get charged a lower, subsidized rate than government users, who pay the full rate.

Government pays less, residents pay more?

One person said the subsidized rate for residents in their community was roughly a fifth of the rate charged to government users. In other communities, private homeowners pay roughly half or a quarter of the government rate for water and sewage.

In many communities, the government owns a large proportion of homes. Public housing units operated by Housing NWT make up roughly 37 percent of total housing stock in the territory’s smaller communities on average, according to a 2022 report. In addition, some units in communities might be owned by the federal government to house staff, for instance RCMP officers.

A large portion of a community government’s revenues to run water and sewage services therefore comes from government users.

“Public housing is a big income for the hamlets,” one person said.

Another person said the community made roughly seven times more from Housing NWT than private customers on water and sewage services in one month.

Under the new policy, however, the people who spoke to Cabin Radio understand that government-owned houses and private residences would be treated equally. Community governments would therefore suddenly lose a large share of the revenues they need to cover their costs.

To break even, they will need to re-adjust rates.

“If everybody’s going to have to pay the same rate, Housing will pay less and private customers will have to pay more,” another person said.

That individual had crunched the numbers for their community, finding rates for residents would quadruple. Elders, who are currently charged a lower rate than residents, would face an even bigger increase, they said. Meanwhile, Housing NWT would be saving thousands of dollars per month on its water bills.

Another person told Cabin Radio: “My finance manager and my finance clerk ran the numbers and they told me that the average water bill will triple under this new scheme.”

If people aren’t able to pay their water bills, they said, the community will have to cut them off.

When the water and sewage subsidy program began, the person said, the program was not to be used to subsidize government departments or agencies.

“But under the proposal where all houses are treated the same, then the federal and territorial government departments and agencies will reap the benefit,” they said.

Maca to meet with SAOs

Not all communities would be affected equally. Smaller communities with high proportions of public housing would likely face the largest increases in water rates, according to one person.

“The problem has come from highly educated, smart people who work for Maca in Yellowknife writing these policies with no idea whatsoever what it means to people on the ground,” another person said of the funding policy changes.

Another person described the new rule as a “dumb move.”

Asked about the policy update, Maca deputy minister Gary Brennan said the intention was to make services equitable.

“Similar services should be charged the same to different people,” he said, drawing a comparison to property taxes, which are based on the assessed value of a house rather than who owns it.

That was the plan anyway, according to Brennan.

He said the department has heard from communities who have pointed out that the new rule is problematic, adding that it is one of the items Maca will be looking into more closely.

“We actually are hoping to schedule a meeting with SAOs” – senior administrative officers – “sometime in December to discuss a couple of the changes that were made and have another look at them,” he said.