A recent report issued by the Federation of Canadian Municipalities estimates that to replace Canada’s water, stormwater and wastewater infrastructure will cost approximately $80 billion or more.
In Canada, municipalities and the public at large have taken water for granted, and as a result over the years the management of water may have been left to be desired. Either there was no long term planning or it was lucrative to charge users for water and wastewater treatment and pocket the surpluses instead of re-investing in infrastructure as may have been the case for some cities.
It is reported that all around the country infrastructure is crumbling. That as a result of growth and climate change the burden of water management will increase. There is no doubt that this may be true, but to call it a deficit for some cities without exploring all the facts is disingenuous.
Denise Deveau of the Natonal Post , reported that Paul Fesko, manager, strategic services for water resources with the city of Calgary commented :“The only way we could grow as a city was to be more efficient in the way we use water,”... “Those rivers aren’t getting any bigger and no extra money is coming in. We just have to keep getting better at reducing per capita demand.”
In the case of Calgary, there is no doubt that we need better water management, but to have an informed debate, the public must be given the true facts. First and foremost for years Calgary refused to have water meters, because a former Alderman Sue Higgins always opposed it. Over the years the policy has changed and we now have meters in new homes and increasingly older houses. The question is whether it is a deficit or poor management?
Case in point; the City of Calgary recently had to postponed the opening of a multi residence apartment because it was found that the existing sewer system would not be able to accommodate the increase usage in that area. Furthermore, policies in Calgary have pushed for increased development in the downtown area, which has old infrastructure which needs upgrading. Although there has been an aggressive infrastructure replacement program over the years, one must remember that in the eighties the water utility operations had an estimated deficit of $2 million per year.
The perennial mantra for more money does cut mustard in Calgary. In a report done for then Ald. Ric McIver –The Case for Controlling Utility Rates, It was found that over the years, through a unique utility model and policies, the City had been siphoning out millions of dollars from the utilities by charging a 10% franchise fee and a 10% dividend payable by both water and wastewater utilities. These charges were in the range of $50 million per year. All the money was diverted to general revenues which were then spent on other services. I termed this policy ‘vicarious taxation’ because unlike some other cities, the price of utility services is not included in property taxes; hence the claim that Calgary has one of the lowest property taxes in Canada.
The policy was changed to cap the yearly payment to $25 million. Had the revenues been placed into a replacement reserve, millions could have been spent on both new infrastructure and maintenance costs, and rates would not have to be increased to build new facilities.
For years the Institute for Public Sector Accountability has called for a different governance structure for Calgary’s utilities, one more in line with the structure used by Edmonton for Epcor, who serves 50 other communities. The model is not privatization, but an arm’s length operation which forces them to have better long term planning, and as a result produces a more efficient use of resources.
In Calgary, the diversion of revenues generated by the utilities to the general fund is one of the reasons why we may have an infrastructure deficit or a lack of money for maintenance. And a policy to increase density in old areas will definitely acerbate the problem.
Any Canadian City using the same utility model and policies as Calgary could find themselves in the same wanting situation. But is it lack of funds, or is it lack of management foresight? Should we look at privatization as a long term solution?