Municipalities struggling to pay for water services increasingly look to private solutions

There’s a widespread belief that water is such an important resource that it should be kept in the public realm. After all, access to clean water is the sustenance of all life.

Canada’s municipalities, however, are now saddled with a water infrastructure deficit of approximately $88 billion.

That’s about $2,500 needed from every man, woman and child to repair, maintain, replace and expand our water and wastewater pipes and treatment plants to meet the needs of Canadians.

Andy Radia is a politics contributor for Yahoo Canada News.

There are several reasons for the daunting deficit: population growth, increased urbanization, artificially low public utility rates that don’t support long-range capital investment and a lack of political will (cutting a ribbon at subway station opening is sexier for politicians than a photo-op at a sewage treatment plant).

Regardless of the root causes, governments in Canada are now being forced to act. To the angst of many, their policy solutions include privatization in the form of public-private partnerships.

Public-private partnerships, also known as P3s, are essentially contracts for private financing and management of public infrastructure projects. Governments find these sorts of schemes desirable because of the front-end cost benefits: they don’t have to pay for the asset until it is built, a substantial portion of the cost is paid over the life of the asset and the private partner assumes all the risk of potential cost overruns, delays or performance issues.

According to the Journal of Commerce, more than $58 billion has been invested in more than 180 P3 projects across Canada over the past 20 years. Many of the projects have been transportation and health related and, for the most part, has been successful. A 2010 Conference Board of Canada study found that P3s have delivered efficiency gains over traditional procurement projects and have provided a “high degree of cost and time certainty.”

The Stephen Harper government is also a strong proponent of bringing in for-profit partners. Through their New Building Canada Fund, they are pushing municipalities to involve private partners by making P3 a requirement to provide federal funding for large scale projects.

But when it comes to P3s for water and water services, there’s a lot of public resistance.

Daniel Cayley-Daoust of the Polaris Water Institute argues that water and wastewater management are essential public services that should remain under the explicit management and ownership of municipal governments.

He suggests that P3s – in the water space – have a checkered history.

“Looking at the track record of P3s for water, both in Canada and abroad, there’s a big move to going back to the public because of numerous amount of problems related to the effort of privatization, whether it’s an increase in cost, whether it’s the lower quality of services or badly delivered infrastructure,” Cayley-Doust says.

He specifically points to the City of Hamilton’s experience.

In 1994, that city signed a 10-year waste water management contract with a private firm. Less than year after the deal was consummated, the company had fired almost half of the original labour force. Many blamed the layoffs for a series of sewage spills, including one that flooded the harbour and more than 100 homes. Subsequently, three other companies were brought it in to fix the mess before the city regained control.

The Hamilton experience is often used as a rallying cry for opponents of P3s. Its memory was certainly evoked during a 2011 Abbotsford, B.C. referendum about a P3 for a massive water works project. And last year it was used in Regina as an example of a deal gone bad during a referendum campaign asking voters if they wanted a P3 to fund and manage that city's new wastewater plant. The Abbotsford P3 was rejected, while the Regina plant is now progressing.

Opponents of water privatization also decry the lack of transparency for P3 projects.

Economist Hugh MacKenzie, who penned a report titled “Why the privatization of the [Regina] wastewater treatment plan is a bad idea” says that one thing governments find appealing about the P3 model is that there’s no accountability.

“The details of these of financing arrangements are shielded by points of commercial confidentiality,” MacKenzie says.

“We only really learn anything about the finances, the economics of these projects when they end up in court. We learned a lot about how bad the [Ontario] Highway 407 deal really was about 10 years ago when there was a law suit filed about late payment charges … and the details of the contract between the Harris government and the Highway 407 were exposed in court.”

Ultimately, there will always be some who will never be comfortable with for-profit involvement in water services regardless of how poor or how great the deal is for taxpayers.

“Allocating funding for water services under P3s entrenches water governance within a market framework that favours profit over human rights, environmental protection, social justice and public health,” Emma Lui, water campaigner for the Council of Canadians recently wrote in a report.

“The allocation of water must be based on principles of water as a commons, human right and public trust."

(Photos courtesy AP Canada, Reuters)