After Council’s failed bid to find a peer reviewer for its planned waterworks infrastructure in Wellington, the Audit Committee moved expeditiously last month to determine which questions must be answered, by whom, when, and how.

The CAO attributed the failed bid to the difficulty of the task. The available peer reviewers, firms like KPMG and Ernst and Young, would have known of Watson and Associates’ excellent reputation, said Marcia Wallace, and that the chance of finding flaws in methods or materials would be slim.

 “It is a lot of work to review a firm like Watson’s work; they are one of the top dogs in the industry, as everyone knows. There’s little likelihood of finding easy mistakes.”

To move forward, Committee Chair Councillor John Hirsch identified four main concerns: 1. How to cost out the new regional infrastructure proposals. 2. How costs are charged to developers in existing and future upfront financing agreements. 3. The assumptions informing Watson’s growth projections. 4. How the municipality goes about financing debt and how tax and ratepayers can be protected from escalating debt servicing costs.

Explaining the County’s deficit and debt financing plans, the CAO noted the County is hardly unique. “It’s not new or unusual; infrastructure deficits exist in every municipality and have for decades.

“What is new is that we must, under new legislation in Ontario, quantify how much of a deficit we have.

“I realize that staff keeps coming to Council with these alarming reports about how much our buildings cost and how much our roads cost,” continued Ms. Wallace. “It is not our assumption that we are going to enter into debt for every single thing we show Council. Rather, we want to help Council to understand the breadth and depth of the priorities.

“In rural municipalities in general, the deficits are getting bigger, not smaller, because there is so little upper-tier investment in rural infrastructure, and it is clear how ineffective tax dollars are at paying for this growth.

“Ultimately, Council will need to decide on priorities: maybe we don’t spend on parks, maybe we sell a few old buildings, turn some roads to gravel and give up on some projects.”

Those decisions will have to be made by the end of the year. The 2025 budget will prioritize water and wastewater infrastructure.

“Our strategy is to leverage growth as much as possible, so we maximize what growth can be used to pay for and we don’t leave any money on the table.”

As for the Regional Water Supply Servicing Master Plan recommendation of a single WTP to serve Wellington, Picton and Bloomfield, Ms. Wallace noted, “If we move to a regional model, maybe 80-90% of that trunk transmission line between Wellington and Picton will be eligible for development charges.”

“We must do it now,” she cautioned, “so the DCs can pay for the infrastructure we need.”

“Growth offers a window of opportunity — but if you don’t take advantage of it, that changes the options dramatically.”

A number of studies are underway — the Regional Master is not yet complete, nor is the Picton Master Servicing Plan, which assesses water and wastewater needs there in conjunction with planned development.

After these two studies, an area specific Development Charge background study will see how much of the required infrastructure can be charged to development across Wellington and Picton.

Public representative Jane Lesslie summarized the prevailing concern. “We are moving on this to take advantage of the growth, I understand, but the worry is, what happens if the growth does not materialize?”

Ms. Wallace suggested clear and practical action, breaking large questions into discrete pieces, could address concerns about assumptions and costs and inspire more confidence in the public. The committee came up with an action plan to address the four main concerns.

Growth requires two things: people wanting to live in the County, and developers wanting to develop. The developers are here, but the people might not come in the projected numbers. To test those projections, the Audit Committee will ask Watson and Associates to review its numbers. It further broke that ask into two parts: a review of the Regional Growth Study, and of the 2021 Area Specific Development Charge background study for Wellington. 

This is the Watson study that estimates one million square feet of commercial space will be required in Wellington. Commercial development charges have been factored based on that amount. 

Councillor Hirsch also noted concerns about the County’s upfront finance agreement with Kaitlin. “I have reviewed the agreement and I think we are on solid ground,” he said. “But the question remains, how to communicate that to the public.”

Ms. Wallace noted that Council has directed staff to find an external, third-party lawyer to review its upfront financing agreement.

“We are to get a legal opinion independent of the municipality to review the upfront financing agreement. The agreement was developed by lawyers for the County and now we are going to send it to an independent third party who can review it in a comparative way by holding it up against other, similar agreements.” said Ms. Wallace. “It is not a unique agreement.”

That work will come back to the Audit Committee for review before it goes to Council.

In short, the Audit Committee passed three motions: to recommend Council direct staff to invite Watson and Associates to review their Regional Growth projections and to review the 2021 Area-Specific Development Charge background study for Wellington, in particular assessing the projected residential-commercial split; and, finally, to direct the legal review of the upfront financing agreement with Kaitlin Corp to come to the Audit Committee.