The Regional District of North Okanagan (RDNO) will proceed with an Alternate Approval Process (AAP) to borrow up to $18 million to install filtration at the Mission Hill Water Treatment Plant.
Construction of the filtration plant has increased in priority due to the increasing presence of cyanobacteria, with two (2) blooms occurring in the past four (4) years, presenting a health risk to water customers. Algae, including cyanobacteria, can only be mitigated with filtration. An Alternate Approval Process will be undertaken for the Greater Vernon Water (GVW) service area, which includes the City of Vernon, the District of Coldstream, and parts of Electoral Areas B and C. If the AAP is successful, the debt incurred from borrowing will be paid through Greater Vernon Water user rates and will not impact property taxes. The estimated $85 million to construct the filtration plant will be paid through grants, GVW reserves, and debt.
The Board adopted a new four-year water rates bylaw in December 2024. The new borrowing is expected to have no impact on water user fees and charges because there is $17 million of existing GVW debt that matures in 2025. The current principal and interest payments will be allocated to the new principal and interest payments with a nominal impact on the future GVW capital program.
At the end of 2024, GVW had approximately $74 million in cash reserves for future capital projects and would have only $0.5 million in outstanding debt by 2029 before consideration of this project. GVW could proceed with the project without borrowing any funds; however, it is financially prudent for local government utilities to hold some reserves for items like future capital expenditures and matching funds when there are grant opportunities.
Because of the current economic climate and significant construction cost escalation in recent years, the approved financial strategy incorporates a project cost of $85 to $100 million to ensure the project will be completed. If the project cost is at the lower end, the RDNO may not borrow the full amount of funds under the loan authorization bylaw and may utilize more of its reserves on hand. The borrowing under the loan authorization is contingent and meant to provide additional funding only if required. It is more financially prudent to borrow at the time. The actual borrowing will not occur before 2027.
The following graph shows the level of outstanding debt for the past ten (10) years and the level projected for the next five (5) years.
GVW’s outstanding long-term debt has been declining by approximately $2 million annually. Its outstanding debt peaked in 2010 at $32.4 million when $18 million was borrowed for the Duteau Creek Water Treatment Plant. With the potential addition of $18 million in new debt in 2027 for the Mission Hill Water Treatment Plant Filtration project, the total debt outstanding will be like the level outstanding in 2018, and approximately $1.9 million per year will be paid off in the years immediately following the new debt issuance.
Project Background
Filtration at the Mission Hill Water Treatment Plant was identified as the highest priority to meet provincial legislation and the single largest project within the 2017 Greater Vernon Water Master Plan. Due to the increasing presence of cyanobacteria in Kalamalka Lake, a health threat that can only be mitigated with filtration, the urgency to install filtration has been heightened.
In support of an August 2018 application for Federal and provincial grant funding, an updated cost estimate indicated a project cost of $45 million; however, the application was unsuccessful. The RDNO applied again in February 2020 under the Investing in Canada Infrastructure Program and received approval for a $30 million grant in November 2021. Preliminary studies and design were started and carried out through the COVID-19 pandemic, where inflationary pressures escalated construction costs dramatically, resulting in the 30% design construction estimate increasing again to $84 million in 2023 (including cost escalation to 2024).
In response to these cost increases, the RDNO approached senior governments for additional grant funding but was unsuccessful. Due to water quality degradation observed in Kalamalka Lake and ongoing cost escalation, the Board of Directors has decided that this project needs to move forward, and in November 2024, requested a financial strategy be developed to fund the filtration project without additional funding from senior governments. This strategy was presented to the Board of Directors at the February 19, 2025, meeting, and included funding the project through the grant received, reserves, and borrowing with approval through an AAP.
What is an Alternate Approval Process (AAP)?
The Local Government Act and Community Charter gives the Board of Directors an alternative to seeking electors' approval other than by referendum: the alternative approval process (AAP). It is a less costly and less time-consuming way of asking the electorate permission to proceed with the adoption of something like a borrowing bylaw.
Those electors in the service area who do not want the project to move forward will be able to register their opposition once the AAP process is initiated. If the total opposition received is at least 10% of the estimated number of electors in the service area, the Board will not be permitted to proceed with the borrowing bylaw.
Details for the Alternate Approval Process for the Mission Hill Water Treatment Plant Filtration project are anticipated to be announced after approvals are received by the province this spring.
For more information on the project, please contact utilities@rdno.ca. For more information on the Alternate Approval Process, please contact corp@rdno.ca.
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For media inquiries:
Stacey Raftus, Communications Officer
communications@rdno.ca