Muskoka must take drastic steps to reduce its skyrocketing debt for water and sewer infrastructure, and extending costs to rural and waterfront homeowners appears to be one option now on the table.

After swallowing a combined 16 per cent hike in municipal water and sewer rates for urban service area residents this year, district councillors are vowing to get serious about addressing what many call a “frightening” financial forecast for Muskoka.

After three years of substantial increases in water and sewer rates, the district’s 2008 budget is predicting user fees and rates to jump by another 50 per cent over the next five years.

The forecasted hike, which follows a combined 48 per cent increase in rates since 2005, would leave the average homeowner in Muskoka using both municipal water and sewer with an estimated monthly bill of over $200.

This year’s price jump alone translates into an additional $21.80 per month, or an extra $261 a year for a home assessed at $200,000 using both water and sewer services.

The costs are reportedly being driven by the district’s rising debt load for capital water and sewer projects, such as the construction of treatment plants in places like MacTier. Over the past two years alone, Muskoka has issued approximately $83 million in debt for these and other capital infrastructure needs.

Stephen Cairns, district commissioner of finance and corporate services, told councillors Feb. 6 that Muskoka’s reserves for water and sewer projects are now empty.

“We are contributing to them and then depleting them in the same year,” said Cairns. “At any given time, they are 100 per cent (used up).”

This “scary” reality has some members of district council now floating the idea of charging fees to all residents, even rural homeowners not on municipal services, to help bring down the debt.

“Maybe we have to look at a general levy or line increase to all residents, as much as I’m loath to say that,” said Bracebridge district councillor Graydon Smith. Muskoka needs to look at “every possible way out of this predicament,” he added.

Huntsville Mayor Claude Doughty was also in favour of spreading costs out over a larger portion of the population. Doughty pointed out that everyone in Muskoka “enjoys the benefit of pristine water,” due in part to the district’s municipal servicing system.

“I strongly support . . . an initiative that in some small way we all pay for this mutual benefit,” said the mayor.

Also in support of the idea was district chair Gord Adams, who went so far as to suggest that local cottage associations were the driving factor behind many costly improvements to Muskoka’s water and sewer treatment plants.

“I think you want to ask yourselves, have (the cottage associations) really carried their fair share (of these costs)?” said Adams. “The answer to me, clearly, is no.”

Though controversial, the issue of who should pay for what is being explored, said Cairns. Staff is crunching numbers to determine what, if any, additional cost Muskoka incurred to upgrade its treatment plants to standards that were sought by some cottage associations, Cairns indicated.

“We need to quantify that,” said Cairns. “I think we have to look at the issue of ‘is there a greater community benefit (to having municipal services),’ and if there is, who should be paying for it?”

Cairns pointed out that, currently, the cost for managing Muskoka’s sewage lagoons is borne by all residents, though only those with septic systems actually use the service.

Nevertheless, several councillors said they could not support charging rural residents for a service they don’t use.

Muskoka Lakes councillor Mary Grady noted that currently, urban homeowners receiving a local improvement are only charged 20 to 40 per cent of the true cost of the construction.

“To go back to those (rural) individuals who pay 100 per cent of the cost of their own systems and say ‘we’re going to hit you again,’ I don’t agree with that,” she said.

Carolyn Horan, president of the Muskoka Lakes Association (MLA), said the association will wait to review any potential new charges before commenting on the issue. Horan, however, did note that the MLA has always has been in support of most measures that protect water quality.

While it is unclear when, or even if a recommendation to extend water and sewer costs to rural homeowners will be implemented, other options for reducing Muskoka’s capital infrastructure debt for municipal services are being explored.

In addition to soliciting more funding from senior levels of government, Cairns said council could use savings from the municipality’s normal allocation to the Ontario Disability Support Program (ODSP) to bring down the debt.

The province has recently pledged to “upload” the cost of ODSP, so fewer social services program costs are taken from the property tax base.

This option, if implemented, could see an additional $685,000 put into water and sewer reserves this year.

Another option, Cairns said, would be to significantly increase local improvement charges, so they cover at least half of the actual cost of extending water and sewer lines to homes.

Finally, Cairns said council could scale back its future capital plans, including review Muskoka’s need for such major projects as the planned sewage treatment plant expansions in Bracebridge, Huntsville and Port Severn.

Councillors, notably upset by the situation, initially defeated Muskoka’s 2008 water and sewer budget in a 6 to 5 vote.

Staff, however, said not adopting the budget would prohibit the district from increasing user rates this year, thus driving Muskoka further into debt.

After more discussion, councillors opted to accept the budget, with the caveat that staff investigates all options for reducing debt, including dramatically slashing future spending.

“We have to put ourselves on a very strict diet,” said Muskoka Lakes councillor Stewart Martin.

Bracebridge councillor Scott Young said he hopes council will finally act to address the financial situation. Young said the “shock and dismay” with the budget shown by councillors was like watching a “comedy,” given that many have known of Muskoka’s bleak fiscal situation for some time.

“The writing has been on the wall for years,” Young said. “I think, let’s just take our medicine and (deal) with it.”

Cairns is expected to report back to councillors before June 30 with options to address the situation.