Nanoose Bay Reservoir Improvement Project - Alternative Approval Process

Qu. Thank-you for your prompt response to my recent questions. I do however have some followup questions. Answer 1: In the absence of "...a firm schedule for the various phases....' from the Lakes District developer, what assumptions were used on the timing of the 1,600 new residences coming on stream for purposes of quantifying the need for the new reservoir construction in 2025? 

A. The assumption used for the timing of the new reservoir build is that the Lakes District developer started the subdivision process for several areas in late 2023.  

Qu. What assurances are contained in the Phased Development Agreement with the Lakes District developer that "...the development will proceed." Are these financial assurances or simply undertakings? 

A. These are undertakings as laid out in the Phased Development Agreement. There are no fixed financial assurances other than the observation that a significant amount of effort (money) is currently being spent by the developer on the applications recently underway. 

Qu. The project material indicates that the DCC's will be funding 49% of the new Notch Hill reservoir capital costs. This is accurate only if the $862,923 were collected from the developer in 2025. As DCC's are not due from the developer until the subdivision or building permit approvals are granted by the RDN, this amount is being borrowed from the Nanoose Bay Bulk Water Supply Service Reserve to fund this portion of construction costs. As noted in my earlier question, the longer it takes to collect these DCC's from the developer, the greater the interest that will have to be paid to the NBBWSSR fund and accordingly, the lesser the DCC's contribute to the capital costs. For example, it has been indicated that "While there isn't a firm schedule...the developer has indicated full build out would be reached in 2040." So the loan from the NBBWSSR fund could extend for 15 years. Clearly the DCC's could come due earlier or later during this 15 year period; however, for illustrative purposes if one assumed the DCC's were collected uniformly during the 15 years, a mid period balance [$862,923 / 2] $431,461 @ 4.6% [current rate of interest under the Municipal Finance Authority] would result in averaged interest of $19,847 per year or $297,708 in interest over the 15 year period. If $297,708 of the projected DCC's of $862,923 is due to the NBBWSSR fund for this bridge financing, only [$862.923-$297,708] or $565,215 of the DCC's "actually" contribute to the capital costs of the new Notch Hill reservoir, which represents [$565,215 / $1,761,068] or 32%. So in summary, the DCC's contribution to the new Notch Hill reservoir capital costs is: a) 49% if the developer paid the DCC's in 2025; b) 32% if the developer paid the DCC's uniformly over the 15 year period (2025 to 2040) c) 0% if the developer does not proceed with the development, as it will have been permanently funded by the Nanoose Bay Bulk Water Supply Service Reserve fund, in which case the capital costs will have been paid entirely by existing taxpayers. 

A. The DCC’s will eventually pay the full amount of the developer's share. The DCC collected per lot will increase with time once we complete the major DCC bylaw amendment later in 2024, which will increase the total amount collected. 

Qu. Which other projects are the NBBWSSR funds earmarked for, who does the earmarking and is there public consultation involved in this process? 

A. Nanoose Bulk Water Service is primarily responsible for the Nanoose system’s involvement in the Englishman River Water Service and the Arrowsmith Water Service joint ventures. It also owns and operated the pump station by Craig Bay in Parksville and the transmission main to the Notch Hill reservoirs. Funds in the reserve fund are used to fund future renewal requirements for these assets.   RDN staff develop annual and 5-year financial plans each year that are public and approved by the RDN Board.   

Qu. What is the basis for and extent of discretion exercised by the RDN board regarding the distribution of federal CWFP funds? Surely each Electoral Area receives their per capita share of these grant monies and the RDN board's discretion does not extend to distributing them on some other basis. How much of these funds have been allocated/committed to RDN services in EA E and to which services? What is the process for these allocations? 

A. Community Works Funds (CWF) received by the RDN on behalf of electoral areas are allocated by the RDN Board, generally at the request of Electoral Area Directors. The amount received is set proportionally according to Electoral Area population. RDN Finance prepares an annual report on where the funds are allocated.  In general, Water Services has received a generous allocation of these funds, some recent examples are given in the table below. 

Question 1 - To better understand the need and urgency for the new Notch Hill reservoir, please advise how many households the existing reservoirs can service, how many more households the new Notch Hill reservoir will accommodate and when these new households are projected to require this service?

Answer 1 - The existing reservoirs at Notch Hill have the capacity to serve about 100 additional residences. The number is not exact as it depends on a number of assumptions. There are about 1600 new residences to be added, the addition of the proposed reservoir will provide adequate operational storage to accommodate this growth. Most of the development will occur in the Lakes District under the terms of a Phased Development Agreement. While there isn’t a firm schedule for the various phases that has been shared with the RDN, the developer has indicated full build out would be reached in 2040.

Question 2 - To be clear, while it is projected to have the DCC’s fund 49% (or $862,923) of the new Notch Hill reservoir capital costs, the $862,923 portion is currently unfunded (ie. not received from the developers yet) and will be bridge financed with funds from the Nanoose Bay Bulk Water Supply Service Reserve (“NBBWSSR”), which currently has a balance of $2.5 million. As the DCC per lot is fixed by Bylaw No. 1715, the $862,923 is also a finite amount. The NBBWSSR will receive interest on the $862,923 amount ‘loaned’, while the DCC’s are collected. The longer it takes to collect the DCC’s from the developer(s), the greater the interest due to the NBBWSS reserve and the lower the contribution to capital costs; accordingly, the 49% is in reality the upper limit of the DCC’s contribution to the capital costs of the new Notch Hill reservoir. If the NBBWSSR fund "...is used for any new capital, renewal, or maintenance projects related to the existing infrastructure...", why is it not being used in place of the long term debt financing from the Municipal Finance Authority ("MFA").

Answer 2 - As the funds in the NBBWSSR are earmarked for other projects, only the ~$800,000 is available to the reservoir project.

Question 3 - Electoral Area E (“EA E”), on an estimated per capita basis, is entitled to 15.5% of future Community Works Fund Program (“CWFP”) allocations under the Canada Community Building Fund, federal grant program. The RDN’s allocation for the first 5 years of this 10 year program is in the order of $2.1 million per year, which would suggest that EA E’s portion over these five years would average $323K per year. Has there been any consideration given to using these grant funds instead of the proposed long term debt financing?

Answer 3 - The Nanoose Water System and the Nanoose Bulk Water System have received generous funding from the CWFP over the years. Those funds are distributed at the RDN Board’s discretion, and obviously all RDN services in EA E would like to receive them.

Question 4 - I assume the interest earned (if any) on EA E’s portion of the CWFP’s is less than the interest payable to the MFA on the planned long term debt. Would it not make more sense to use existing reserve funds already collected from taxpayers or federal grants allocated to taxpayers, rather than to borrow funds from the MFA, incur interest and repay the debt through additional taxation.

Answer 4 - Reserve funds are built through taxation, so decisions are made as to what to save for and what to borrow for to try and keep increases in annual taxation reasonable. If we had access to grants we would certainly be pursuing them.

Question 5 - It has been suggested that should "..construction costs start to approach the $2.4M limit promised to the property owners, the RDN has the option to reduce the scope of the project, halt the project, or temporarily suspend the project...." If these are practical courses of action, does this not place the scale or urgency of the project into question.

Answer 5 - This is intended to reassure taxpayers that the amount of borrowing that they approve with this AAP will not and can not be exceeded. We have a good budget in place for this work and it is not a complex project, so the risk of budget exceedance is relatively low.

Yes, the taxes and levies paid by Nanoose Bay Water Service Area residents are only spent in the Nanoose Bay Water Service Area. 

Yes, a new reservoir on Notch Hill will benefit all of the Nanoose Bay water system users, including the Beachcomber area. 

No. There are 2600 properties that currently benefit from the six water storage reservoirs in the Nanoose Bay water service area. One reservoir needs repairs immediately, and one additional reservoir will need to be constructed in the future (at a high topographical location) for water system resiliency during periods of extreme demand such as watermain breaks and house/brush fires. 

The Phased Development Agreement with the Lakes District developer has just been added to the Document Library on the right-hand navigation bar of this webpage. The DCC report (Bylaw 1715) is already in the Document Library on this webpage. There are no tender package(s) for this project as it hasn't been approved yet.  

Click on the button in the right-hand navigation bar that says Follow Project.  

Nanoose Bay water service area taxpayers will only be paying the interest on the DCC loan (shortfall).  The principal amount of the loan, $862,963, is paid by the developers as they create lots through subdivision and pay DCCs

The Nanoose Bulk Water Reserve fund is the savings account for the Nanoose Bulk Water Service Area.  As such, it is money used for any new capital, renewal, or maintenance projects related to the existing infrastructure. It is not exclusively for funding infrastructure related to new development. We can, however, access this money for a loan to the Nanoose Peninsula Water Service Area to fund the reservoir improvement project. Doing this allows the interest paid on the borrowed money to stay in the Nanoose Bulk water account rather than going to the bank or the province. The Nanoose Bulk Water Service is essentially the RDN partner in the Englishman River Water Service joint venture. Through this connection we own and operate a dam, intake, and water treatment plant located in Parksville as well as a portion of a storage reservoir also located in Parksville, two pump stations in Nanoose Bay, and a transmission water main that moves water from the river to the reservoirs at Notch Hill. It is common to borrow funds from a related water service account temporarily to bridge the service area's obligations. In doing so, the interest that is paid back remains in the Nanoose Bay Bulk Water account rather than being paid to the bank.

The reservoir improvement project is not about increasing the water pressure. Please email the RDN Water Services staff at rcu@rdn.bc.ca to find out more about water pressure. This project will benefit all the Nanoose Bay water system users, who already benefit from the existing two water storage reservoirs on Notch Hill.  The additional reservoir is included in the RDN's 20-year capital plan, and only 49% of this reservoir cost can be attributed to developers.