Area F Blog: Water Systems: Sage Mesa: Update on operations and maintenance

(date on this post is missing)

[List of Sage Mesa water system blog entries]

Al Lister, who has been the Chief Water System Operator for the Sage Mesa system retired recently, as did his crew currently consisting of Jim Grasswick and Frank Lamberty.  As a result, the Water Stewardship Division of the provincial Ministry of Environment (the entity that runs, but not owns, the Sage Mesa water system) had to find a water operator with the necessary level of training and certification.

Initially, the Province went to the City of Penticton to negotiate a maintenance contract similar to the one between Penticton and the West Bench Irrigation District.  This made some sense to me, at least as a short term measure, since the Penticton is close by and is already dispatching trucks up the hill for the WBID contract. However, for whatever reason, Penticton chose not to take on this contract.  That left the RDOS little choice but to step in and offer its services to the province.

The RDOS already runs four water systems, including the relatively large UV treatment in Naramata, so we certainly have the organizational capacity (certified personnel, expertise, etc.) to operate and maintain the Sage Mesa system.  Moreover, many of the costs of operating these water systems, such as engineers, operators, geographical information systems, trucks, and so on, are fixed costs.  Thus, the RDOS will likely realize some efficiencies in running the Sage Mesa system.

The letter describing the transfer will be sent to all ratepayers on the Sage Mesa system (a copy is here).  Please note that this arrangement is operations only and has nothing to do with ownership or capital improvement (e.g., water mains, hydrants, etc.).  That all will come later.

Area F Blog: Water Systems: West Bench: The commutation option

The commutation option

[List of Sage Mesa water system blog entries]

• Posted on: 16 November 2014
• By: Michael Brydon

I have received some questions recently about the two letters that went out to ratepayers on the new West Bench water system last week.  The first letter contained information about the option to commute payments for the capital costs of the West Bench water system upgrade.  The second letter was a mock water bill, giving people some preliminary information about their water usage relative to other West Bench properties.

Commutation letter (template)

Mock water bill (template)

I can address some of the comments about these letters below:

Q: Why were the letters sent out just before the election?

This strikes me as an odd question. Public Works at the RDOS does not and should not alter its activities to advantage or disadvantage one candidate or another in an election.  Indeed, one of the benefits of going with a professionally-managed RDOS water system is to get politics out of water.  Public Works staff sent out the letter as soon as they could following the passage of the borrowing bylaw by the RDOS board at the November 6 meeting.  It is as simple as that.  I certainly appreciate people's concern that these letters would hurt my chances as the incumbent in the election.  But withholding these letters in order to achieve some political objective would have been a serious ethical breach.  

Q: Why weren’t we told the capital bill was coming?

Ratepayers of the West Bench system voted overwhelmingly in 2012 to authorize the RDOS to borrow money to complete the West Bench water system upgrade.  The recent letter simply provided information to each household about its share of the capital cost.  There should be no surprises here.  Indeed, the number is quite a bit smaller than what was promised prior to the referendum.

Specifically, the wording of the 2012 referendum was the following:

Are you in favour of the Regional District of Okanagan Similkameen adopting West Bench Water Supply and Distribution System Loan Authorization Bylaw No. 2590, 2012 to upgrade the water system in the West Bench Water Service area by entering into an agreement with the City of Penticton to purchase bulk water, construct a pump station, construct a transmission line from the pump station to the West Bench distribution system, install water meters and up-grade the distribution system at a total cost of $9,750,000; consisting of $5,730,000 Federal & Provincial grants and $4,050,000 borrowing.

The borrowing bylaw passed a few weeks ago authorizes the RDOS to borrow $2,290,000.  This is clearly much less than the amount authorized in 2012.  This is good news.

Update 17 Nov 2014: There are 349 connections to the West Bench water system.  Capital costs are assessed as a parcel tax (flat rate per property) so the $2.29M is divided by 349 to get the $6,562.

Q:  Is the water system project over budget or under budget?

Roughly two-thirds of eligible expenses for the West Bench water system upgrade are covered by grants.  But we do not get the grants unless we also incur our one-third share of the cost.  We therefore have strong incentives to be exactly on budget.  If we are over budget West Bench ratepayers are on the hook for 100% of the overruns.  If we are under budget we leave grant money on the table.  The West Bench water system, even after the significant upgrade, is far from perfect. There are many desirable and grant-eligible upgrades that were put onto a “complete if money is available” list.  Some of these small improvements are now being undertaken in order to ensure we maximize our grant funding.  In this sense, the project is a financial success because we are getting to some of the non-core (but important) upgrades.

So if the project is on budget, why are we borrowing less than authorized?  First, when crafting the referendum, RDOS staff was careful to set the borrowing amount at the upper end of their expectations.  This is common practice and is where the $4.05M number came from in the referendum question above.  Our best guess for borrowing at the time (the number I used in my presentations to West Bench residents) was only $3.2M.  Now that the project is almost 100% complete, we are only borrowing $2.29M even though (as noted above) the project is on budget.  The reason for the difference is reserves.  We have been accumulating reserves for contingencies over the last few years and these reserves, being unused, are being applied against the debt.  So it is not that the system is costing you less than we promised.  It is costing what we promised but you have already paid about 28% of your share.  That might count as a pleasant surprise.

Q: The letter says I can pay $6,562 now or $548 for 20 years.  But $548 over 20 years is $10,960!

Careful here: you have to do the math the same way the bank does the math.  $548 dollars today is not the same as $548 in 20 years.  There is interest.  Put it this way: If you went to your bank tomorrow and asked them to lend you some money now in exchange for $548 per year for the next 20 years, they certainly would not give you $10,960.  In fact, they would not even give you $6,562.  Why?  The interest rate the RDOS will get through the Municipal Financing Authority of BC is lower than the interest rate you can get as an individual.  Bottom line: the net present value of a series of 20 annual payments of $548 is approximately $6,562.  These two patterns of cash flow are financially equivalent.

The next question is whether you should exercise the option to commute your share of the West Bench water system debt?  That is, should you pay upfront as a lump sum or pay over 20 years?  This is up to you and you should contact a competent financial advisor if you are having difficulty making the choice.  For me, this is a complete no brainer. Do not commute.

To illustrate, consider the case of my parents who live on the West Bench.

1. If they pay annually they are certainly paying some interest.  But it is a low rate of interest.  MFA is currently showing 3.03% fixed for 10 years.  If you factor in inflation, the real interest rate is about 1.5-2%.  That is like free money.  And if one can find an investment that pays more than 3.03% interest, it makes sense to invest the $6,562 there instead.
2. My parents are not going to live on the West Bench forever.  If they pay the $6,562 now there is no guarantee they will get that money back when they sell.  Yes, the new buyer will not have to pay $548 per year for the remainder of the loan term.  However, ask any realtor: buyers tend not to think this way.  Good luck getting the buyer to up his or her bid in response to this logic.
3. My parents are at an age at which it makes sense to defer their property taxes. The $548 per year will appear on their RDOS taxes as a parcel tax.  It therefore can be deferred until the house is sold.

 

Update 17 Nov 2014: The present value of the $548 payment:

Here is a nerdy aside for those who really care: If you use the on-line calculator linked to above and enter the current MFA rate of 3.03%, you will see that the present value of $548 annually for 20 years is closer to $8,130.  That implies that paying the lump sum of $6,562 is a bargain. The problem is (a) we have not yet gone to MFA for the money and therefore do not know our interest rate and (b) the rate is only for 10 years.  We have to refinance in Year 11, possibly at a higher rate.  It looks like RDOS staff have used an interest rate of approximately 5.5% to come up with the $6,562 lump sum payment.  Appreciate that this is a tricky balance.  If we use a rate that turns out to be too low, people who commute their payments (pay up front) are overcharged; if we use a rate that is too high, we won't collect enough money from commuters to pay our creditors.  I would say 5.5% represents a good balance.  Close to the historical average cost of capital.

 

Q: What will my water bill look like in 2015? Is this $548 a new cost?

We have always talked about the cost of water on the West Bench in terms of total cost: capital, debt servicing, operations, payments to Penticton for water, reserves, and so on.  Here is an early estimate provided to me by RDOS staff for 2014 (already billed) and 2015. Our estimates at this point are that an average property on the West Bench will see a slight decline in its water bill.

The full budget for the West Bench water system can be found on the RDOS site (page 230). I am working with RDOS Finance to simplify this budget somewhat.  "Renewal fund" and other such terminology were inherited from the WBID.

So these are some responses to the questions I have received so far.  Please let me know if you have others.

 

Issues: 

water

taxes

election

Neighborhoods: 

West Bench

‹ Spring 2017 West Bench water meter implementation up More on the economics of commutation: Three models ›

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Area F Blog: Water Systems: Sage Mesa: October 2018 update on Sage Mesa water

October 2018 update on Sage Mesa water

[List of Sage Mesa water system blog entries]

• Posted on: 11 October 2018
• By: Michael Brydon

As you hopefully know, the Sage Mesa water system, which services Sage Mesa, Westwood Properties, and Husula Highlands, is privately owned.  There has been talk for years about transferring ownership to a local government (e.g., the RDOS).  The primary reason for this discussion is that only local governments are eligible for infrastructure grants from the federal/provincial governments.  In addition, local governments can borrow on favorable terms through the Municipal Finance Authority.  Access to grants and long term debt funding are clearly important for aging water systems in need of major upgrades.

Two things need to happen for this transfer of ownership to the RDOS to occur:

1. The RDOS has to initiate a service establishment bylaw. This bylaw will  create a "service area" for Sage Mesa water.  A service area is a polygon on a map that shows who is in the service area and who is out.  The RDOS cannot simply own a water utility.  The water utility must be associated with a legally-established service, with its own budget, taxation base, and provincial blessing.
2. The property owners within the proposed service area must give their assent.  Before a new service can be established, a majority of property owners within the polygon must agree to the terms.  In this case: take on the assets and liabilities of the Sage Mesa system and pay the costs of running the service in compliance with health regulations on an ongoing basis.  Assent often takes the form of a referendum (as it did for the West Bench) but there are other cheaper possibilities.

 

So why hasn't the RDOS initiated this process? Well, regional districts in British Columbia have no obligation to provide water services in rural areas.   Indeed, in many parts of the RDOS, water is provided by private operators or irrigation/improvement districts (which are their own level of local government independent of the regional district).  The RDOS only becomes involved in water services if it is invited to do so.  In this case, the inviter has to be the owner of the Sage Mesa water system and—as noted in (2) above—the invitation needs to be supported by a majority of ratepayers.

What does an invitation look like?  It is basically a formal offer by the owner to transfer the water system to the RDOS if and only if the RDOS can successfully establish a service.  If the RDOS fails to establish a service (for example, ratepayers fail to provide assent), the RDOS cannot accept the system.  Various Area F directors have been in discussions with the Sage Mesa Water and Utility Co. about such a formal offer for a very long time.  One problem has been the RDOS's inability to commit to much once the system is transferred. This is especially true of grants. 

On September 11th of this year, a delegation from the RDOS and MLA Ashton met with senior staff from the Ministry of Municipal Affairs and Housing to discuss Sage Mesa water and the potential for grants to "move the process along".   You may recall that the referenda to authorize the transfer of the West Bench water system from the West Bench Irrigation District to the RDOS came loaded with all sorts of grant promises.  That made the decision for ratepayers a bit simpler: do you want free money or no?

Unfortunately, the province has decided to move away from unconditional promises of grant money for such transfers. You can see their point: they do not want to earmark scarce grant funds to projects that may or may not move forward because voters may or may not give their assent.  Indeed, in our meeting they used the West Bench project as Exhibit A for what they are trying to avoid.  The West Bench project turned out well, but we encountered many false-starts, dead-ends, and delays along the way.

Given this, the process for transferring the Sage Mesa system to the RDOS and upgrading the system would have to look something like this:

1. Owner of the utility formally promises to transfer the system on creation of a service area.
2. The RDOS creates, and receives ratepayer assent for, a service area to takeover Sage Mesa water.  No grants or other goodies are offered as part of the assent process.
3. If the service area is created successfully, the system is transferred to the RDOS.  There, it is managed like other RDOS water systems (Naramata, West Bench, etc.) by the Public Works department in accordance with both Interior Health regulations and best-practices concerning capital budgeting, and so on.
4. The RDOS completes an assessment of the system and identifies upgrade priorities.  This study, like all costs of running the system, is charged to the service area.
5. The RDOS applies for grants to address known water quality and quantity deficiencies.  Of course, this depends on the timing of Canada/BC funding programs (if any) and the level of competition for these grants.
6. The RDOS requests ratepayer assent to borrow the balance of the funds required to upgrade the system.  Such an upgrade would likely (though not necessarily) involve connection to the City of Penticton's filtered water supply through the West Bench system.

 

That is it.  Not quite as exciting as the West Bench project (with all its moving parts and conditions and diverse players).  But simple is good, too.

As my term as Area F director winds down, the RDOS is waiting for a formal invitation from the system owner.  If this comes, the RDOS will then wait for formal assent from Sage Mesa water ratepayers (of whom I am one).  If ratepayers vote down the transfer, then we stick with the status quo.

Issues: 

water

Neighborhoods: 

Sage Mesa

Westwood Properties

Husula Highlands

‹ Sage Mesa Water missed another round of grants up West Bench ›

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Area F Blog: Water Systems: Sage Mesa: Sage Mesa Water missed another round of grants

Sage Mesa Water missed another round of grants

[List of Sage Mesa water system blog entries]

• Posted on: 3 November 2016
• By: Michael Brydon

The RDOS finalized it list of projects for the Clean Water and Wastewater Fund grants program and the Sage Mesa water system is not on the list.  I see this as a significant missed opportunity for Area F.

Board report

The RDOS cannot apply for a grant for the Sage Mesa water system because the RDOS does not own or control the system.  The system is privately owned by the Chapman family but has been managed and controlled by the provincial government out of Victoria since the system was seized in the 1990s.  The province contracts with the RDOS to maintain the system (swing the wrenches) but the RDOS has no decision making authority concerning the system.

This situation is not sustainable in my view.  The system currently does not meet Interior Health's 4-3-2-1-0 water quality guideline and is facing the possibility of a health order to mandate upgrades.  Since a privately-owned system is not eligible for senior government grants, all system costs must be borne by its ratepayers.  Thus, if the system is ordered by IHA to meet the 4-3-2-1-0 guideline, or if there is a major failure of the aging infrastructure, the 265 ratepayers in Sage Mesa, Husula, and Westwood are on the hook for 100% of the costs.

According to a 2012 engineering study commissioned by the RDOS, the per-property cost of meeting IHA's guildeline is between $9,500 and $12,000 per property.  This is only capital upgrades and does not include the ongoing costs of running a water utility.

2012 Sage Mesa water system evaluation

The outcome I would have preferred is the following:

1. Transfer of the system to RDOS ownership (at no cost, of course; the system is a pure liability, not an asset).
2. Apply for senior government grants to upgrade the supply and distribution system.  Grants are never certain, but I can absolutely guarantee the system will not get a grant in its current configuration.
3. Upgrade the system to:
   1. meet water quality standards
   2. replace at-risk infrastructure (water lines)
   3. address capacity issues

 

To this end, we (me and RDOS staff) have met with a member of the Chapman family, representatives of Interior Health, the system manager from Victoria. various provincial staff and ministers many times over the years in order to move forward.  No resolution.

My objective in scribbling this update to make sure that ratepayers on the Sage Mesa system understand the situation and the downside risks they face.

As usual, comments and questions are welcome.

 

Issues: 

water

grants

Neighborhoods: 

Sage Mesa

Husula Highlands

Westwood Properties

‹ May 2017 Sage Mesa system boil water notice up October 2018 update on Sage Mesa water ›

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Area F Blog: Water Systems: Sage Mesa: May 2017 Sage Mesa system boil water notice

May 2017 Sage Mesa system boil water notice

[List of Sage Mesa water system blog entries]

• Posted on: 8 May 2017
• By: Michael Brydon

The Sage Mesa water system is on a boil water notice.  See here:

Why?  The Sage Mesa does not filter or otherwise treat its water beyond dosing it with chlorine.  Chlorine is less effective when the water is turbid.  Below is a photo of Okanagan Lake near the Sage Mesa water system intake:

Issues: 

water

safety

Neighborhoods: 

Sage Mesa

Husula Highlands

Westwood Properties

‹ Update on operations and maintenance up Sage Mesa Water missed another round of grants ›

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Area F Blog: Water Systems: Sage Mesa (topic homepage)

Sage Mesa

[List of Sage Mesa water system blog entries]

• Posted on: 27 November 2009
• By: Michael Brydon

Update March, 2018: The Sage Mesa system remains privately held.  However, the RDOS is in talks with the Chapman family to initiate a transfer to the RDOS.  Stay tuned for more news on this.

The Sage Mesa water system is privately owned but operated by the Province on behalf of the system’s users (which include residents of Sage Mesa, Husula Highlands, and Westwood Properties).  Given this ownership structure, it is not possible for me to say too much about the future of the system, other than the following:

1. Interior Health Authority’s new 4-3-2-1-0 water treatment guideline will eventually apply to all water systems.  So it is just a matter of time before the Sage Mesa system will have to be upgraded with a second stage treatment system (filtration or UV).
2. Private water systems, like irrigation districts, are not eligible for government grants.  Thus, users of the Sage Mesa system will have two options:
   1. Pay for the upgrades themselves, or
   2. Somehow have ownership of the water system transferred to a municipal or regional government. Since the standard senior government granting for these kinds of projects is 2/3 of capital costs, transfer is almost certain.
3. All options under currently under consideration for the West Bench water system are sized with sufficient capacity to accommodate users of the Sage Mesa system.  Thus a phased approach is possible.
4. A combined system is in everyone’s best interests.  Consider options 2-UV and 3-UV in Table 1 of the 2007 Associated Engineering report.  The cost per connection per year of UV treatment for West Bench only (Option 2-UV) is $841.  The cost of the same system for West Bench and Sage Mesa (Option 3-UV) is $526.  That is, the cost to West Benchers is about 60% higher if they go it alone.  The same kind of result obtains when one compares the prices from the City of Penticton (but keep in mind that the prices for the Penticton options are being revised—hopefully heavily revised): Option 1 (City of Penticton supplies West Bench: $1690) and Option 7 (City of Penticton supplies West Bench and Sage Mesa: $1,375).
5. Any expansion/upgrade of the Sage Mesa system would involve a separate grant process.  That is, West Bench grants will not be used to upgrade the Sage Mesa system.

 

So how might a combined system work?  It depends on ownership of the upland infrastructure:

• Extraterritorial service (the City of Penticton own and operates the infrastructure for both systems): I am not sure.  A big issue is that the existing West Bench and Sage Mesa water systems are very different: they have had different levels of upgrades, they carry different amounts of debt, they have different pressure zones, and so on.  Good luck with this...
• Bulk water sales from Penticton or UV treatment: This makes more sense to me because the RDOS has the ability to create distinct “service areas” that correspond to the existing West Bench Irrigation District and Sage Mesa system boundaries.  This would eliminate the issues created by the difference between the systems. They would, in effect, remain separate systems that happen to get treated water from the same source.

It is for this reason that I am recommending that West Bench residents make a clear distinction in their upcoming referendum between water treatment and infrastructure ownership.  It is possible to buy filtered water from Penticton (subject to better pricing, as noted above) without also handing them ownership of West Bench pipes.

 

• Update on operations and maintenance
• May 2017 Sage Mesa system boil water notice
• Sage Mesa Water missed another round of grants
• October 2018 update on Sage Mesa water

‹ Red Wing up Update on operations and maintenance ›

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Area F Blog entries on the Sage Mesa water system

It always bothered when I first moved back to the West Bench (actually, Westwood Properties) that I did not know much about what was going on.  I did not even know what the RDOS was until I had to get a building permit.

So when I was first elected the Director for Area F, I tried to maintain an informal website that people like me could use to fill in some of their knowledge gaps.  I structured it as a hierarchical blog:  it was hierarchical in the sense that it had separate sections on water systems, parks, and topical issues like "roaming horses".  It even had a section called "Area F owner's manual" which talked about garbage, roads, taxes, and so on.  And it was a blog in the sense that I just kept adding to it as things happened and new information rolled in.  I thought it would be good to have a historical record of how the issues evolved.

I did my best at the time to make sure people in Area F knew about the areaf.rdos.bc.ca website.  I put the address on everything we sent in the mail and sent a monthly summary of new content to everyone whose email I happened to have.  When big news broke, I posted a link in Facebook to the Area F site.  So although I am sure there are people who never heard of the Area F site in 2008-2018, it was hardly a secret.

My mistake was assuming that the RDOS would treat the website like it treats paper and other records.  I stupidly expected the RDOS IT department to keep the site running indefinitely, or at least send me a backup before they pulled the plug.  Alas, they pulled the plug and, as far as I know, there is no backup or archive.  I do have my own unformatted database backup from 2016, but I was adding stuff up to late 2018 when I left politics.

Fortunately, there is a thing called The Wayback Machine (https://web.archive.org/).   The non-profit project stores content from websites over time.  I decided to go back to some of my blog posts to see what I wrote about the Sage Mesa water system.  Keep in mind that the Sage Mesa water system was (and still is) a privately-held company regulated by government agencies other than the RDOS.  So most of my posts on the topic were mere speculation and thinking out loud.  The secondary objective, of course, was to incite Sage Mesa residents to exert some neighborly pressure on the Chapmans.

Below are a number of links to Sage Mesa water posts much as they appeared on the Area F site starting in about 2009.  Note, however, the the Wayback Machine can be slow and flaky (due to heavy usage).  I have cut and pasted copies of the posts (including follow-on comments) into this blog to save some frustration.  Note as well that the Wayback Machine does not do a good job of capturing formatting or supporting content (e.g., images, links) when the source is a content management system (in the case of the Area F site: Drupal).  So the pages below are a mess.  The content is mostly intact, but don't even bother trying to click on the links.

[This historical background is in addition to my more recent summary of the Sage Mesa water issue.]

1. Sage Mesa water system top-level blog page:
   This was the entry point into the hierarchy.  All postings on the topic of Sage Mesa water were posted as child nodes.  As can be seen below, there were relatively few posts on the Sage Mesa system (especially when compared to the Faulder and West Bench systems) because, as noted many times, the RDOS had/still has no jurisdiction over the Sage Mesa system.
1. Local copy: https://michaelbrydon.blogspot.com/2026/01/area-f-blog-water-systems-sage-mesa.html
2. Wayback Machine: https://web.archive.org/web/20130322071700/http://areaf.rdos.bc.ca/cms/node/7

The child pages within the Sage Mesa water topic are listed in chronological order at the bottom of the page above.  These have been copied to the extent possible to this site.  Note that some of these have comments from residents.  In many cases, I responded to the comments:

1. Update on operations and maintenance:
1. Local copy (unformatted, from database backup): https://michaelbrydon.blogspot.com/2026/01/area-f-blog-water-systems-sage-mesa_80.html
2. Wayback Machine: missing/not archived
2. Sage Mesa Water missed another round of grants:
1. Local copy: https://michaelbrydon.blogspot.com/2026/01/area-f-blog-water-systems-sage-mesa_26.html
2. Wayback Machine: https://web.archive.org/web/20221203022709/http://areaf.rdos.bc.ca/cms/node/412
3. May 2017 Sage Mesa system boil water notice:
1. Local copy: https://michaelbrydon.blogspot.com/2026/01/area-f-blog-water-systems-sage-mesa-may.html
2. Wayback Machine: https://web.archive.org/web/20221203031911/http://areaf.rdos.bc.ca/cms/node/435
4. October 2018 update on Sage Mesa water:
1. Local copy: https://michaelbrydon.blogspot.com/2026/01/area-f-blog-water-systems-sage-mesa_28.html
2. Wayback Machine: https://web.archive.org/web/20220929234612/http://areaf.rdos.bc.ca/cms/node/480

There is a link in one of the comments to a relevant post under the West Bench water system topic (a different branch of the Area F website):

1. The commutation option:
1. Local copy: https://michaelbrydon.blogspot.com/2026/01/area-f-blog-water-systems-west-bench.html
2. Wayback Machine: https://web.archive.org/web/20220929234612/http://areaf.rdos.bc.ca/cms/node/208