Preparing to negotiate a service agreement with your neighbouring community can seem like an intimidating task for any First Nation. You may have read in a previous blog post, ‘Knowing Your Municipal Service Needs…And What’s Possible’, that the best place to start is by identifying exactly what it is your community needs.
Once you’ve determined your needs, the next step is understanding what it might cost to provide the service you need before sitting down with your neighbouring municipality. Preparing yourself with this information will create a more open and informed negotiation process. The Pathways to Service Delivery website contains various resource tools to assist First Nations and municipalities through the negotiating process, including a cost calculator.
The cost calculator is an interactive Excel based tool developed to highlight information about the costs of services, such as water and sewer. While the cost calculator will not provide you with the exact rate, it acts more like a tool for discussion purposes with your neighbouring municipality, to better understand what goes into determining the rate.
The cost calculator is not only a great tool for First Nations preparing to negotiate a service agreement for the first time but also those First Nations with existing service agreement that are nearing their expiration date.
How exactly does it work?
The cost calculator supports the user in thinking about what a fair rate might be for providing a service to their location. It assists in estimating how much the First Nation might pay annually for services and based on the annual estimated cost, how much of that cost is eligible to receive funding from INAC and how much would need to be funded through other sources of revenue. To determine these costs, the cost calculator relies on information about rates in the neighboring community and helps the user compare rates and levels of service.
The cost calculator includes three services, all which are eligible for funding through INAC. These include water, sewer, and fire protection. Because fire protection varies so much from community to community, the calculator provides a range of average rates per household. This can be used to give people an idea of how their rate compares with rates in other communities. Also, from time to time, service agreements might cover a full bundle of services. Some of these services may already be provided by the First Nation, in which case it may be fair to apply a credit of up to 100% for that service. The cost calculator helps the user review different services that are often included in a service bundle and consider which ones might receive a credit and why.
For the cost calculator to work, you’ll first need to identify and provide some basic information including, the municipal rate for the service, the number of member homes, and the number or non-member homes who will receive service. For water and sewer, you can identify municipal water rates by looking at the Water and Sewer Bylaw of your neighbouring municipality. This bylaw is publically available information and should be accessible through the municipality’s website.
By inputting these values, the pre-formatted Excel sheet will display estimated rate for how much your First Nation might pay annually for services, how much of that cost is eligible to receive funding from INAC and how much would need to be funded by your community through other sources of revenue.
Now – let’s go through an example, looking at what BC First Nation, a fictional community, might pay for water through their neighbouring municipality, BC Town.
The Administrator from BC First Nation has already gone onto BC Town’s website to find their municipal water rate.
Looking at BC Town’s water user fees, the Administrator can see the Town charges a fixed rate only and has no volume rate. This varies from community to community with some municipalities only charging a fixed rate, while others use a combination of a fixed rate and volume rate.
The Administrator has taken the municipal water rate and the number of member and non-member homes and entered it into the cost calculator. Because a service agreement is not yet in place, simply enter the same rate you entered for the municipal water rate and the calculator will provide an initial estimate based on the rates in BC Town.
From there, the Administrator is able to better understand what it might cost to provide water to their members through a service agreement with BC Town annually ($81,316.44) if rates were the same as in BC Town, as well as how much of that annual cost would be covered through INAC funding ($60,211.01) and how much the First Nation would need to pay for themselves through other sources of revenues ($21,105.43).
The Administrator of BC First Nation knows that the service agreement with BC Town will not include operations and maintenance of infrastructure on reserve, so the rate that is paid for on-reserve service through the service agreement may be less than what is paid by customers of BC Town off-reserve.
The Administrator can now go into discussions with BC Town with a baseline of costs that can be discussed with BC Town, to get a better understanding of what will be included in the rate and how it will compare to the rate being paid in the Town.