Local property owners can expect their water and sewer bills to jump a full 2 1/2 per cent more than the city originally proposed - to 15 per cent over what they paid in 2008.

When council gave first reading to the operating budget, it was proposing to hike water and sewer rates by 12.5 per cent.

The city has since pushed that figure upward, arguing an earlier spread sheet error is to blame for the mistake.

The city's water and sewer fund, where the money collected from the bills goes, is designed to fund the operation of the system.

"There's no real flexibility," Rob Fendrick, the city's director of administrative services, said in an interview following Monday night's city council meeting where the 15 per cent hike was proposed.

He pointed out that unlike other departments where projects may be able to be put on hold, operating the city's water and sewer system has direct costs the city can't get away from.

"It's just the costs of running the system," he said.

When officials calculate the rates each year, they look at how much it will cost to operate the entire system.

Last year though, the city saw a deficit in the fund that it's required under policy to recover this year.

"Through a spread sheet error, we thought we had incorporated it into our rates, the 12.5 per cent, it was a fairly large increase, but then, between first reading ... in January and then the end of January, we realized we made a spread sheet error and failed to pick up the extra $113,000, so that's the 2.5 per cent," Fendrick said.

Valerie Anderson, the city's manager of financial services, presented to council the full report on the public input into the operating budget.

She pointed out that under council policy, the city has to recover the deficit.

"According to council policy - I don't write it, but council does - we need to recover all of that," Fendrick said. "And we need to do that in such a way that the $4 million in the water and sewer reserve remains."

The water and sewer reserve is in place to pay for capital work on the system like replacing the older infrastructure.

Along with funding the cost of operating the system, another 20 per cent of what property owners on the system pay goes into the reserve, with the city maintaining a balance of about $4 million.

There's no formal policy on maintaining the $4 million in the reserve, but it's been the practice for years, Fendrick said.

Following Anderson's report, council and staff spent nearly a half-hour discussing it, with Coun. Dave Stockdale taking issue with a number of points in the report.

The 12-page document notes one of the factors in the hike is that under new accounting regulations by the Public Sector Accounting Board (the board legislated to oversee accounting regulations for government bodies), the city must include in its cost a severance calculation that would account for all employees quitting on one day.

A visibly frustrated Stockdale questioned exactly who makes up the board and whether the city is bound by their rules.

Fendrick told him the board was established in 1997 to oversee accounting principles for government, and indeed the city is required to follow those by law.

"That's ludicrous," the councillor said. He then learned the city won't be taking money out of the reserve to pay for the additional costs on the water and sewer system.

Whether council likes the accounting rules or not, its only other option is to be in contravention of those regulations, Mayor Bev Buckway commented. The water and sewer fund must be self-balancing as per city policy, she noted.

Arguing the reserve is a "rainy day" fund, and this would qualify as such, Stockdale told officials: "I'm very dissatisfied with that approach."

While it couldn't be done in time for this year, Coun. Jeanine Myhre suggested officials may want to look at the possibility of setting up some sort of stabilization fund for the future.

Though the 2009 increase in water and sewer bills is significant, Fendrick suggested the rates for 2010 aren't likely to see such a dramatic hike.

"We've had some accounting rule changes, we had some unexpected cost increases and all those contributed to this change," Fendrick said. "So very much so, I don't really see a big increase for 2010."

Should council pass the budget as it's now proposed, this year would see those owning single-family properties (with no suites) pay $173.10 quarterly for water and sewer services, with prices going up from there, depending on the number of suites a home might have.

Duplex property owners would be charged $346.20 on a quarterly basis.

The increase will undoubtedly hurt many property owners, Utility Consumers' Group president Roger Rondeau told the Star this morning.

"We're not happy with 12.5 (per cent); how can we be happy with 15?" he asked.

In a presentation to council last week, he argued the city could indeed use the reserve to pay for last year's deficit after surpluses in the water and sewer fund in years past were moved to the reserve.

While Rondeau said his group is not happy about the increase, beyond letting the city know its stance on it and letting the public know what's happening, there's not much that can be done beyond hoping council listens.

Councillors Doug Graham and Dave Austin were absent from last night's meeting, while Coun. Jan Stick attended by conference call.