Terms of Reference – Okanagan Basin Water Board

Preamble

The Okanagan Basin Study completed in 1974 identified increasing nutrient pollution as the cause of algal blooms and other signs of deteriorating water quality in Okanagan and Skaha Lakes. The major contributors to nutrient input into the lakes were the municipal sewer outfalls.
The three valley regional districts opted to levy a tax through the Okanagan Basin Water Board (OBWB) on all properties within the Okanagan watershed. The purpose of the tax was to establish a Sewage Facilities Grant program to provide subsidies for construction of tertiary sewage treatment plants and collection systems by valley communities.
There were two reasons for instituting this property tax: (1) local government considered the lakes a regional resource so that all citizens should pay toward restoring and maintaining the quality of the water regardless of whether they received sewers or not; and (2) the grants would assist smaller communities with a limited tax base in funding advanced treatment systems.
The expenditures made on nutrient removal technology resulted in a decrease in phosphorus input into the lakes from municipal effluent of about 92.5%, from 59,000 kgs in 1970 to less than 5000 kgs in 1997.
A significant proportion of the funds allocated through this program have gone toward community sewering projects intended to decrease water pollution coming from developments with small lots and failing or over-capacity septic systems. To avoid repeating these costly fixes in the future, the OBWB now requires applicants to have in place zoning policies or bylaws prohibiting new development of lots less than 1.0 hectare that are not serviced by community sewers. This requirement is not intended to deter responsible development.

Operating Principles from SLPs
The following principles were established in the OBWB Supplementary Letters Patent held by each regional district.

The Water Board can levy up to 21¢ per $1000 assessed value (for Sewage Facilities Grants) on all properties within the Okanagan drainage area.
The OBWB will pay 18% of the total project cost of sewage improvement projects. The community must first pay the equivalent of 2.5 mills.
Both treatment plants and collectors are eligible.
Communities must submit applications for Sewage Facilities Grants prior to the commencement of project works. Grants will not be paid retroactively.

OBWB Policies

The following policies were made through OBWB resolutions to further define the operating principles of the grant program.

Qualifying

Only communities employing tertiary treatment of sewage effluent are eligible for grants. (1977)
Projects which qualify for Provincial government funding do not automatically qualify for OBWB funding. Qualifying for provincial funds is a necessary but not sufficient qualification for an OBWB Sewage Facilities Grant. (policy revised: 2007)
The grant program is intended to address point source pollution from treatment plants utilizing old technology and to fund qualifying projects extending sewer service to subdivisions created prior to 1977 that are still on septic. New sewage treatment plants, expansions, or refits made necessary by growth or replacements due to age or outmoded technology are not eligible for OBWB grants. These works should be funded by DCCs and other mechanisms put in place by local government so that new infrastructure is paid for by the component causing the infrastructure needs. (1994)
Lots on septic at the time of the original grant program (1977) will be eligible for funding when sanitary sewers are installed – providing infilling does not exceed the average annual growth rate for the community.
At its discretion, the OBWB may decline approval of sewage infrastructure applications in communities that create lots smaller than 1.0 hectare which are not serviced by community sewers, and that do not have zoning policies or bylaws in place by January 1, 2008 prohibiting future creation of such lots. (Policy adopted January, 2000 to follow Provincial policy for infrastructure funding and revised in 2007)
Each local government with subdivision approval authority is responsible for adopting the ‘1.0-hectare’ policy. For example regional district grant status is not affected if a member municipality does not comply. Electoral area bylaws which contravene the 1.0 hectare lot size policy of the OBWB are considered to be in non-compliance with the requirement for the Regional District.
Homesite severance lots are exempted from the ‘1.0-hectare’ policy (2004).
The ‘1-hectare’ requirement is limited in geographic scope to the portions of the regional districts within the Okanagan watershed. Areas outside the watershed are not taxed for OBWB programs and are not eligible for grants. Districts should be aware that subdivision of 1.0-hectare lots on septic outside the watershed may still jeopardize funding from provincial sources (2007).
The 1.0 hectare requirement may be waived through preparation of an approved (by Ministry of Environment) Liquid Waste Management Plan (LWMP) for decentralized wastewater. The LWMP must address on-site sewage in a sustainable fashion with the understanding that the system will be considered as permanent infrastructure and will be ineligible for sewering assistance funds in the future. The LWMP must be supported by appropriate bylaws (e.g., OCPs, zoning, subdivision standards). In addition, local government bylaws must be in place for the enforcement of operation and maintenance of these systems. All Type II and III package treatment systems serving multiple homes must be registered under the Municipal Sewage Regulations, which among other requirements specifies that developers must post a bond equivalent to the value of the plants.

Financing

Annual assessments are made on the projected draw on the fund in that fiscal year – it is not always necessary to levy the full 21¢ per $1000.
Water Board grants are made on a debt repayment basis. There is not enough money to fund project costs up-front.
Communities that do not incur debt are still eligible for 18% funding with that portion being on a debt repayment basis. This policy is not retroactive prior to April 1985.
Grants are tied to a Municipal Finance Authority (MFA) issue and repaid over a twenty year period.
If the amounts to be paid recipients are greater than the funds available for distribution, the 18% will be reduced proportionately such that all recipients are reduced by the same percentage. An exception is made for communities which have not previously qualified for assistance from the Board. In such cases the reduction will not apply for the first three years and any shortfall will be born proportionately by the other qualifying communities.
The OBWB will not approve any Sewage Facilities Grants or retroactive payments if the application is made more one year after confirmation of eligibility for provincial funding. (2001)

Future of the Program

There will be an end point to the Sewer Grant Program when project debt is retired from all tertiary treatment plant construction and extension of sewers to developed areas that were present at the time of the grant program commencement (1977).
Recommendation for review: that OBWB investigate further infrastructure improvements, plans and research needed to protect the quality of valley lakes. This program was specifically designed to avoid funding upgrades and expansion required by new development, stipulating that these should be paid by DCCs or other local government funding mechanisms. However, blanket policies prohibiting support of sewage plant upgrades due to age or outmoded technology reduce the ability of communities to maintain the highest possible levels of effluent treatment. In addition, new treatment technology may enable communities to expand wastewater re-use, reducing burdens on the supply system. Substantial pollution also arises from non-point sources – including stormwater run-off from roads, urban and agricultural areas. The OBWB should investigate the need and appropriateness of extending the Sewage Facilities Grants program to address other infrastructure upgrades that protect the quality of valley lakes (2007).

Application Policies

Requirements

Communities should inform the OBWB of their intention to claim a grant for a new project at an early stage of their planning process so that adequate funds can be requisitioned.
A general description of the project and a schedule of costs should be included in the application. Engineering detail is not necessary.
Proof of eligibility for Provincial Infrastructure assistance should be attached. The project need not receive infrastructure funding as long as it meets appropriate standards and the lack of Provincial approval is due only to insufficient grant funds.
The community must first pay the equivalent of 2.5 mills. Assessment is capped at 105% of the 1988 converted value for purposes of calculating the 2.5 mills to be paid by the community. {Revenue Sharing Act, Sections 6(4) and 35.1(1)(b)} The Provincial Infrastructure Grant Program of 1977 required communities to pay the 2.5 mills however later iterations of the Provincial program paid on the total project cost. The Okanagan Basin Water Board retained the original financial formula so that the basis for grant amounts would remain consistent.
Applicants will provide a copy of a bylaw or a letter stating that a policy has been put in place prohibiting creation of lots less than 1.0 hectare in size not serviced by community sewers. Lots less that 1.0 hectares created by homesite severance on lands within the ALR are permissible.

Payments

Communities meeting the criteria of the OBWB Sewage Facilities Grants receive 18% of the cost of treatment and collection systems upon completion of the project. Payments are made on a debt repayment schedule over a twenty year amortization through an MFA issue.
Should a community refinance the debt from a project, the Okanagan Basin Water Board debt payments will be altered according to the new MFA rates. Changes in finance rates should be incorporated into the community’s grant invoice.