Want Safe Drinking Water? You May Have to Drink the Privatization Kool-Aid

Ecojustice released it's third report card on drinking water quality today titled Waterproof 3. It is well worth the effort to read the full report,in doing so myself I came across a section in the report dealing with federal funds available to municipalities for water systems upgrades. Essentially the feds only make these funds availabe if the municipality first agrees to enter into P3 agreements with the private sector. with the only out requiring the municipality to spent vast amounts of money and other resources.

Here from the report is the relevant section

 In 2007, the Federation of Canadian Municipalities (FCM) raised an alarm for policymakers and Canadians. The report, Danger Ahead: The Coming Collapse of Canada’s Municipal Infrastructure, pointed to a water infrastructure deficit tied to water supply and waste water and storm water systems. The report estimated it would take $31 billion to repair aging infrastructure largely put in place in the
1930s and 1940s and maintained through under-funded budgets for decades. The FCM estimated another $56.6 billion was needed to build new infrastructure to meet the demands of a growing population and new provincial and federal regulatory requirements.55 These looming infrastructure needs further strain already strapped local government budgets.

Now, the federal government is taking advantage of local governments’ desperate need for funding to impose ideologically slanted polices. The manipulation of public funding to drive a political agenda is sparking fierce community battles, such as one occurring in 2011 in Abbotsford and Mission, B.C. There, the two communities initially proposed a project to develop a new water source as a “public-private partnership” (PPP). The decision to build the project as a PPP was taken to gain access to the federal Public Private Partnership Fund for 25 per cent of the project’s cost.

According to a local councillor, the PPP Fund was the only federal fundingavailable for the project.The proposal generated so much local opposition that Mission was forced to pull out of the plan and Abbotsford was forced to put the matter to referendum (still to be held at the time of writing). Federal government efforts to increase privatization of public water services include making new funding available only through the PPP Fund, as well through the rules for the Building Canada Fund (BCF). Under the BCF, cities applying for funding were forced to undergo a mandatory PPP screening process for large projects over $50 million. Municipalities had to go through a complicated process
involving expensive legal fees before they were allowed to opt out of PPP arrangements. In 2006, Whistler had to spend more than $1 million dollars in legal fees to maintain the public water system local residents demanded.

The federal government’s policy choices might be defensible if there were a demonstrated benefit to PPParrangements, but that is not the case. For decades, policy makers have experimented with PPPs in an effort to save costs. Cost savings were promised under privatization due to the effects of “competition.” However, research on the privatization experience at the local government level challenges this understanding. Expectations of costs savings are not well supported by a careful reading of economic theory, and empirically the evidence for cost savings is weak. Theoretically, expectations of cost savings derive primarily from competition, but competition is rarely present in public service markets. Private owners will have incentives to reduce quality, and transaction costs of contracting may be higher than the costs of internal delivery.

In our view, the proper role of federal governmentshould be to assist in meeting Canada’s drinking waterminfrastructure needs, not drive a political agenda. The federal government should make funding equally available to all water systems based on need