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A water main rupture causes a flood at Queens Quay and Spadina Avenue in Toronto on July 10, 2013.Gloria Nieto/The Globe and Mail

An environmentally friendly effort by many Torontonians has come with a hidden cost – a shrinking pool of money to guard against extreme weather.

The growing use of products such as low-flush toilets, tankless heaters and efficient washing machines, combined with rising bottled water sales, has reduced local water consumption by 10 per cent since 2005, leaving Toronto with a projected $350-million loss in revenue from water utility bills over the coming decade.

The result is that the city's water division is facing a significant funding drop for critical infrastructure upgrades, at a time when extreme weather events are already severely taxing the region's aging sewer system. The phenomenon was thrown into sharp relief this week as a record deluge created flash floods and dumped enormous volumes of polluted water into Lake Ontario.

That cash shortfall, coupled with a decision by council last year to cut $1.1-billion from projects such as storm-water management ponds and basement-flooding remediation, is raising urgent questions about how the city will find new funding for the city's waste-water infrastructure, especially given the increased frequency of vicious storms once considered to be rare. As the city grapples with growing debt levels and calls for billions in new spending on transit expansion, council may have seen long-term water infrastructure spending as a place to trim costs. But though they may seem rare, such devastating storms inflict tens or hundreds of millions of dollars in damages – the bill for this week's flood has already been estimated at more than $600-million, with thousands of homeowners reporting flooded basements due to backed-up sewers. A potent August, 2005, storm wiped out almost $500-million in city assets and caused $400-million in private property damage.

Politicians such as Janet Davis (Beaches-East York) and Paul Ainslie (Scarborough East) say council needs to take a hard look at a range of new revenues to finance the city's huge water infrastructure deficit. "We need to look at all avenues, including water rates," Ms. Davis said. Added Mr. Ainslie: "We've had huge issues with climate change. It's hard for municipalities to bear the full financial burden of all of that."

Still, such calls for increased taxes and fees to pay for water infrastructure repairs come at a time when the city and Metrolinx are asking Torontonians to agree to additional levies for regional transit expansion.

The city has been down this road before. After the 2005 storm, the city's water infrastructure division spent hundreds of millions fortifying creek banks against flood-related erosion, rebuilding a washed-out segment of Finch Avenue, and digging huge storm-water holding tanks in areas that saw heavy basement flooding due to backed up sewers. Among other things, the rains tore open a sewer main buried under Highland Creek and the resulting sewage spill destroyed $3-million worth of city equipment in a nearby works yard. Another heavy storm last summer destroyed three bridges along the Don River tributaries.

The 2005 downpour, like Hurricane Hazel in 1954, was considered a "100-year" storm, meaning the likelihood of a repeat next year is 1 per cent. But Monday's deluge marked the third such extreme weather event in just over 60 years.

With more of them on the horizon, Councillor Shelley Carroll (Don Valley East) says the city should also look at a proposed surcharge on heavily paved commercial and residential properties that place additional stress on the storm sewer network in heavy rainstorms. "We may begin to bill people based on how much they're taxing the system," she said. "Lots of people when they built these faux chateaus left no land on the lot."

But Ms. Carroll acknowledged that the revenues from such a levy won't fill the funding gap. Ms. Davis pointed out some upgrades are required by federal regulations governing water quality in the Great Lakes, yet Ottawa doesn't contribute funding for the city's water infrastructure.

City staff last September presented a report to council suggesting that Toronto Water could make up the shortfall through debt financing or increasing the water rate beyond the 3 per cent that has been approved for 2015 and beyond.

Between 2004 and 2013, council approved annual 9-per-cent increases in the water rate to finance both long-delayed repairs and new infrastructure to the city's water and waste-water systems. But those yearly increases will be cut to 3 per cent as of 2015. Toronto Water's operations and capital projects are entirely self-financed, meaning there's no draw on property taxes or other sources of income.

After amalgamation, the new city faced huge hurdles relating to aging water mains and combined sewer outflows that contained both storm water runoff and raw sewage. City beaches were all but unusable because in heavy rains, the sewage treatment plants couldn't handle the volumes, with the result that millions of litres of untreated waste water ended up in Lake Ontario. Just before the end of mayor Mel Lastman's term, council approved the so-called "wet weather flow management master plan," which laid out a 25-year, $1-billion program of projects such as downspout disconnect programs, new emergency holding tanks and naturalized storm water ponds, all of which are designed to make the city somewhat more absorbent during heavy rain. Ms. Davis said much of the planned wet-weather project spending has been delayed indefinitely.