Water utility muddle (2)

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(DALE CUMMINGS / WINNIPEG FREE PRESS)

IF there was any doubt about whether the city is ready to vote in two weeks on a proposed new water utility, it was removed Tuesday during a Free Press editorial board meeting with the two top administrators in charge of the project. Glen Laubenstein, the city's chief administrative officer, and project leader Brian Gray, had difficulty answering basic questions and even appeared to disagree with one another during a 60-minute discussion that focused on the role of the private sector in the project.

Faced with a $650 million tab in mandatory improvements to the water and waste system, the city is proposing to take on a private partner in some form to reduce its risks and costs, and to acquire control over expertise in project management that the city does not have. What's unclear is the precise nature of that business relationship, and the implications of private ownership on the city's plan to scrutinize all water and waste rate hikes (or reductions) at the Public Utilities Board.

The city's 91-page business plan talks about creating a subsidiary through a strategic partnership with the private sector, although Mr. Laubenstein balked at the term subsidiary and told Mr. Gray he didn't want that term used any more, even though it's in the business plan. The officials suggested the private partner would not have an equity share in the utility's assets, which would be 100 per cent city-owned, but they went on to say that the partner could conceivably own a 49 per cent stake in all new infrastructure, which the city would lease back. Such an arrangement would normally be known as a P3, or public-private partnership, a term that Mr. Laubenstein said wouldn't necessarily describe the business relationship.

The apparent confusion might be dismissed as semantics and academic quarrelling, but the precise nature of the business relationship is important, since it could impact on the PUB's ability to conduct full and open hearings. A private partner, for example, might balk at the idea of sharing information with its competitors, citing privacy rights and proprietary privilege.

Messrs Laubenstein and Gray thought it was probably a non-issue, but the response was hardly reassuring. Ordinary prudence requires that the legal obligations to PUB of a private partner be properly investigated and understood.

It may well turn out to be a non-issue, depending on the precise nature of the business relationship, but the city really should have a better idea of where it is going and how it intends to get there.

City councillors are supposed to vote on the proposal on July 22, but it's likely that many of them have already made up their minds based on broad principles. Some will like the greater transparency provided by PUB hearings and the involvement of the private sector, while others are suspicious and worried that the city will give up complete control of its water resource. In the absence of better information, both positions come down to an act of faith, or lack of it.

The city claims it can't postpone council's vote until the fall because it is facing a 2012 deadline to complete $650 million in upgrades to the sewer and water system under an order from the Clean Environment Commission. Mayor Sam Katz should ask the commission for an extension to develop a more coherent plan and to reassure the critics and cynics that the city's water supply won't evaporate under a properly developed and explained corporate model.

Republished from the Winnipeg Free Press print edition July 8, 2009 A10