Winnipeg Free Press - PRINT EDITION

Secret water deal irks

Stakes too high for politicians not to see fine print, critics say

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It's a deal so secret not even the mayor has seen the financial fine print.

It locks city hall into a 30-year contract with a multinational mega-firm and marks a big shift in policy.

Now critics from the left and the right are calling on councillors to step back from the brink of a $1.2-billion deal with Veolia Canada to privatize the renovation and parts of the operation of two city sewage treatment plants.

Council votes on the deal Wednesday.

"The partnership proposes to reduce rates and improve results for taxpayers so that's a good thing," said Colin Craig of the Canadian Taxpayers Federation. "However, councillors should ask to see the final contract before it's approved. Like they say, the devil is in the details."

Craig said as much of the deal should also be made public as possible without violating Veolia's business interests.

Several left-leaning groups -- the Council of Canadians, the Canadian Centre for Policy Alternatives and the union representing city workers -- agree, saying Veolia's reputation is "less than stellar" and serious questions about the contract remain unanswered.

But Coun. Justin Swandel said the city has been working for months with hundreds of lawyers, accountants and engineers to vet the costs of overhauling and managing the north and south sewage treatment plants and has hammered out the best deal for the city based on a highly competitive bid process.

And he said Veolia will only make money if it succeeds in saving the city money while also sharing the risk of any cost overruns.

"If you can't see the value, then you haven't done your homework," said Swandel. "This is one of the better deals the city will ever do."

Council votes Wednesday to authorize the city's chief administrative officer to draw up a contract with Veolia to design and build $661 million in upgrades to two plants so they meet strict new provincial waste-water standards meant to clean up Lake Winnipeg.

Veolia would also manage and run the plants for 30 years, saving the city between 10 and 20 per cent of the expected total $1.2 billion operating and capital costs.

Those are about the only financial figures contained in a nine-page report released a week ago and approved by the mayor's cabinet.

Still secret is how much Veolia will make in profits, the penalty the city must pay to terminate the deal, exactly who covers cost overruns, and from where exactly the 10 to 20 per cent savings will come.

Most of that information is considered proprietary and not even councillors nor Mayor Sam Katz have access to it.

It's another confusing twist in an already murky move by the city to create a new, arm's-length water, sewage and garbage utility. That plan is now in the province's hands and was originally criticized by some as a bid by the city to create a partly privatized utility.

Now there is debate over whether the Veolia deal counts as a public-private partnership, or P3.

Bryan Gray, the city's manager of utility development, said it doesn't. Unionized city staff will continue to do the hands-on work and the city would still own the plants. The city would also be financing the project and would be responsible for meeting provincial environmental rules. Those are all normally elements that are outsourced in most P3s.

Gray also said a key benefit of the deal is Veolia will be on the job and on the hook for years after the improvements are made, in case anything goes wrong. Instead of designing and building the new treatment components at the two plants then handing the city the keys, Veolia will stick around to help run the plants for decades. It's in their financial interest to make the upgrades work.

Reg Alcock, the executive-in-residence at the Asper School of Business, agreed, saying the deal is not unusual for utilities like Manitoba Hydro. He said it's a creative solution to a highly technical public project and one that's been through many layers of due diligence by experts inside and outside city hall.

"Why is this thing so politically contentious when we do this with our other utility?" wondered Alcock.

Veolia questions

How much will Veolia make in profits? The city says that's commercially sensitive information that is never disclosed in any contract, even mundane ones for street paving or garbage pickup.

What portion of any cost overruns must Veolia pay, and what portion of any savings does it keep? The city says Veolia will share roughly half of any cost overruns and those will come out of its management fees.

How does the contract mesh with a plan to set up an arm's-length city utility to manage water, sewer and garbage collection? Who will manage the contract?

Where are the 10 to 20 per cent savings expected to come from? Some might come from bulk purchasing or technical improvements in the cost of chemicals and power.

Exactly how much operational control will Veolia have when the overhaul is complete?

Republished from the Winnipeg Free Press print edition May 18, 2010 A4

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