The residents at Silver Star have watched, with interest, the proceedings over the last 2 years on the proposed purchase of Silverhawk Utilities (SH) by the RDNO. There was a Town Hall meeting at the resort on November 16, 2023, where RDNO officials indicated to the audience that they anticipated closing the sale with Silverhawk based on reasonable financing assumptions being applied to the then current 2022 Silverhawk rates. The community was encouraged by this suggestion and looked forward to witnessing the change of ownership.
The written information provided to the community by the RDNO for the Alternative Approval Process (AAP) stated in part:

“It is expected the annual debt payment will be funded from within the existing rate structure. At this time, RDNO does not expect an increase in fees to finance the loan.”

The AAP process was used to gain electorate approval to borrow $4.5 million and to establish a sewer service area at Silver Star. That process closed on November 21, 2023, with only one person registering an objection.A month after the AAP process closed, the Silver Star Property Owners Association’s research into the RDNO purchase proforma indicated that the RDNO overstated the revenues based on Silverhawk’s historical rates The SSPOA estimates that the RDNO revenue projection adds up to a revenue shortfall of $343,000 per year if the 2022 Silverhawk rates are used.

From the AAP Public Notice:

“The agreement, under which a liability will be incurred, is for the purchase of the assets associated with the Silver Star Sewer Utility from Silverhawk, for a base purchase price of $6,000,000 payable over four (4) years, plus a contingent liability to pay Silverhawk additional consideration in the amount of $800 per new additional “pillow unit” for a period of ten (10) years. The “pillow units” will be calculated based on the impact to the sewer system from new connections and development.

 The $6 million purchase price is made up of $4 million at closing (from the AAP approved borrowing) and a payment of $500,000 over the first 4 years after the RDNO assumes ownership.

Our understanding is that the RDNO is proposing a Harmonized Fixed Fee Rate of $983/year for everyone. (There are currently 987 Silverhawk ratepayers). In comparison, the Silverhawk rates in 2022 were as follows:

• Residential Homes and Suites - $896/year
• Strata Condominiums - an average of $450/year

As a result, condominium owners will experience a dramatic rate increase, and residential owners will see a modest increase.

At the SSPOA Special General Meeting in the fall of 2024, we learned that the RDNO has a policy to “harmonize the fixed fees” for the utilities it operates and intends to do so with the Silverhawk sewer rates. (For example, the RDNO’s Silver Star water utility billings were harmonized at $347 per unit last year, be it a condo or a residential house or vacant lot.) 

The RDNO overstated revenues by assuming that the existing “Silverhawk Rates” were already harmonized at $983 a year per rate payer, when in fact there were 2 distinct rates charged by Silverhawk (as noted above). For that reason, “harmonization” was never mentioned or documented during the AAP process.

Again, from the AAP FAQ: 

“There are no plans at this time to change the rate structure and how the fees are calculated.” 

The SSPOA has determined that the correct harmonization of the 2022 Silverhawk sewer rates is approximately $700 per year if the Silverhawk fixed fee revenues were to be harmonized across all ratepayers.

Neither the SSPOA (representing the ratepayers) nor the Silver Star Mountain Resort owners have been involved in the purchase negotiations, nor has our input ever been sought by the RDNO. There is a “Non-Disclosure Agreement” in place between the RDNO and Silverhawk which precludes any knowledge or participation in the purchase negotiations. Our questions and rate impact analysis are based on publicly disclosed data and some assumptions as nonparticipants.

 What can be done?

• Change the terms of the sales agreement to reflect the reduction in revenue to finance the purchase.
• Recalculate the amortization so that the ratepayers will pay the 2022 harmonized fixed fee of $700/year.

The SSPOA held a Special General Meeting (SGM) at the NATC to disclose to the community what our analysis discovered. Mr. Sewell, RDNO CAO and our elected representative Ms. Amanda Shatzko attended via ZOOM. Following that meeting a letter was sent to the RDNO Chair, Ms. Fowler, quoting the resolution that came from the SGM. The SSPOA received a response from Ms. Fowler and quoting, in part, from that letter of November 12, 2024:

“The RDNO recognizes your interest in being active with this file and to have a full understanding prior to the RDNO committing to the purchase. However, as discussed at the Special Meeting, the RDNO will not be in a position to release full details of a transaction prior to entering into a binding agreement and further, based upon continued negotiations and differences in the categorization of properties between Silverhawk and the RDNO, it is fully expected that there will be changes to the rate structure.”

And…….

“The RDNO Board and its elected representatives are tasked with looking after the public interest within the bounds set by legislation but continues to welcome stakeholders input as we proceed through this process.” 

The ratepayers have received no information on any changes to the proforma. It has been over 2 years, and the letter noted is the only response.

View the full letter (Dated: Nov 12, 2024)                                                                    

As we noted, there is a “Non-Disclosure Agreement” in place between the RDNO and Silverhawk which precludes any knowledge or participation in the purchase negotiations. Our understanding is that there are a number of outstanding due diligence issues pertaining to a transfer of the assets that remain unresolved.

The rates that have been referred to as the 2022 rates are the discounted rates that Silverhawk charged for the calendar year of 2022. That invoice was issued at the end of March 2023.

The residential rates for 2023 saw a 10% on-time payment discount offered but they had raised the rate by 11% so the fixed fee increased by $45 to $941.53.

The rates for 2024 saw another increase in the discount offered to 15% but the rate was increased by 16.6% so the fee was again increased by $95.83 to $1037.36.

Ms. Amanda Shatzko, Area C Representative                                                           
Regional District of North Okanagan 
9848 Aberdeen Road  Coldstream, B.C. 
V1B 2K9 
Email: amanda.shatzko@rdno.ca