Water utility muddle

Hey there, time traveller!
This article was published 07/07/2009 (6022 days ago), so information in it may no longer be current.

CITY council is supposed to vote in 15 days on the creation of a new quasi-independent water and waste utility, but it’s getting hard to believe that all 15 councillors and the mayor are fully prepared for the important decision they are about to make. There is still too much confusion and uncertainty, too many unanswered questions, about the future of one of the city’s most important services.

The basic concept sounds harmless enough: Establish an arm’s-length 100 per cent city-owned corporation that the city can never sell; rely on the Public Utilities Board to set rates based on a standard business model; and find a private partner to share some of the risks. The devil, however, is in the details, which are still eluding some key stakeholders in this discussion.

In an editorial board meeting Monday with Paul Moist, national president for CUPE, and other local union officials, for example, concerns were raised that the utility would be a public-private partnership, with the private sector holding a 49 per cent stake. The union officials thought such an arrangement was inappropriate for a water utility, and they questioned whether private-public partnerships actually saved any money.

It turns out they are at least partly wrong, but you wouldn’t know it from reading the business plan for the project, which itself was only released at the end of June. The plan calls for a strategic partnership with the private sector, but notes that a private-public partnership is just an option for the delivery of some infrastructure.

City officials added to the confusion Monday by explaining that a private partner would not own anything, but merely be responsible for the design and construction of waste-water upgrades.

Since this process started last year, Mayor Sam Katz has said the new utility model would only proceed if a private partner was found. The reason, we were told, was to help reduce the cost overruns generated by engineering firms. If such a company joins the city in a strategic partnership, or so the thinking goes, then it would have a vested interest in keeping costs down.

This needs a better explanation, but the business plan is extremely tentative and it is not even clear if a business partner could be found, particularly if the only criterion is to keep professional costs down. The business plan is silent on how forming a partnership with an engineering firm will reduce costs.

Despite the confusion and frustration felt by union officials, councillors and community activists, there is much in the city’s concept that is worthy of consideration. The new utility model would reduce excessive political interference in the setting of water rates and the way in which the funds are used.

The city, for example, only recently stopped, or was supposed to have stopped, transferring some water revenues to general revenue to be used for other purposes, which was an abuse of the public purse.

As well, the Public Utilities Board would preclude that kind of budget wizardry and provide a higher degree of transparency and accountability. The city’s budget numbers have tended to be fuzzy and hard to follow, but a PUB hearing would lay out all the data and ensure that rates were set in ways that met broad public policy goals, rather than meeting short-term political considerations.

The city, however, is running out of time to clarify its proposal. Unless there is a need for a decision on July 22, council should consider postponing the vote until September so it can ensure that all councillors, and the public, have a clearer understanding of the plan.