A small township outside of Guelph, Mapleton Ontario, had been promoted as the poster child for a federal effort by the Canada Infrastructure Bank (CIB) to privatize water and wastewater across Canada. However, this past summer Mapleton called off its plans to privatize its water infrastructure with the CIB on the grounds that it would have been too risky.
Communities across Canada must learn from the example in Mapleton and reject any attempt to privatize these critical infrastructure and services. Water is a human right and should remain in public hands.
Mapleton is a small township in Wellington County, Ontario. With a population of 11,000, the township consists of several towns, including Drayton, Moorefield and Rothsay The township had applied for, but failed to secure, funding from the province for a new water tower in the past and has struggled to upgrade the capacity of its sewage treatment plants to meet the needs of the growing population.
In 2019, the township announced it had secured a $20 million investment from the CIB for this project, and began soliciting proposals from six consortiums to design, finance and build several pieces of new water and wastewater infrastructure, as well as to take over the operation and maintenance of services. Under this proposal, the township would still own its infrastructure, but the water and wastewater services would be under a private consortium’s control for 20 years. Although promoted as an “innovative financing approach,” this proposal was for a public-private partnership (P3), an approach which has had poor track record across Canada.
The CIB is an arm’s length federal agency with a $35 billion budget and a mandate to “leverage” private sector investments in the planning, financing and delivery of infrastructure projects in Canada. In effect, the CIB is a tool for privatization that promotes P3s and privatization in infrastructure investments.
Established in 2017, the CIB has only announced funding for six projects and entered into memorandums of understanding with five others, all of which are P3s. The Mapleton investment was the smallest among them but was important to the CIB. The bank has indicated publicly that it plans to replicate the “innovative funding model” and plans to replicate it here in municipalities across the country. Read more about the CIB and its privatization agenda.
In late July 2020, after reviewing six proposals and considering its financial capacity, the township decided to end the Request for Proposals (RFP) process. After considering all the options, Mapleton decided that the best result would be to bring the project in-house and keep their infrastructure in public hands. With this decision, Mapleton is affirming that P3s are not the most viable option for financing critical infrastructure and services like water and wastewater. This latest attempt to privatize water, with the help of the federal government, offers us important lessons about the threats of water P3s and the Canada Infrastructure Bank.
Lack of transparency throughout the procurement process
Throughout the procurement process, Mapleton Township Council discussed the project proposals and subsequent decisions in closed sessions, with limited public reporting on the discussion afterwards there were no public consultations about the proposal and Freedom of Information requests only provided a heavily redacted Business Case.
The pattern of limited transparency is typical of P3 deals, where the public often doesn’t learn about critical information until it is too late or can’t access the contract at all. Even elected officials can be left in the dark, as happened with Ottawa city councillors and the light rail transit P3.
The lack of transparency and accountability puts public health at risk: in the aftermath of the Walkerton tragedy, the provincial inquiry called on municipalities to adopt open and transparent decision-making processes around water governance, and recommended municipalities make contracts with external operating agencies public, seeking community input. Water P3s run counter to this.
Questionable claims of cost saving
In a Business Case produced for Mapleton township, PricewaterhouseCoopers concludes that the P3 options are better than the public financing option due to a “risk-transfer” factor, despite public financing having lower capital and operating costs. The assumption is that the municipality transfers a certain amount of risk when private companies take on the service, although there is no clear rationale for the risk transfer values. In fact, we have learned from past water P3 examples that when it comes to essential services like water, the community and municipality still bear the consequences and cost when things go wrong. And with P3s, failure is a question of when, not if.
We can look to the recent past for an example of P3 failure. When a private contractor spilled 180 million litres of raw sewage into the Hamilton harbour and flooded 200 homes, the city had to bear the cost of cleanup. Who bore the risk in this instance?
The Ontario Auditor General, in 2014, reported that the “risk transfer” factor in P3 projects is regularly inflated without evidence. Often done with the help of private consultants, these “value for money” or “risk transfer” numbers are how investors make P3s a viable option. In fact, in the latest analysis done by the Mapleton township itself, the most attractive P3 option would have still cost the township $2-3 million more than using their own capital reserve fund to finance the upgrades.
The unaccounted risk of privatizing water and wastewater services
Because private companies must borrow at higher interest rates and guarantee a return on investment to their shareholders, P3 projects have higher project costs and deliver poorer quality compared to public financing. There is also an incentive to increase water rates over time. A Food and Water Watch report showed that in the U.S., private sector providers charge 59 per cent more for drinking water and 63 per cent more for sewage services than public water services.
Water and sanitation are UN-recognized human rights. They have never been more essential than now, during the COVID-19 crisis. These rights are jeopardized under private control. Private companies put profit before public interest when operating the services. They’re therefore less likely to make precautionary or proactive upgrades to improve water quality, guarantee reasonable rates and equitable access to water, protect source water, or apply pricing structures that encourage water conservation.
Disturbingly, U.S. markets recently began trading future water availability. This is part of an ongoing effort by corporations to commodify water and undermine it as a human right, which includes these water markets and water and wastewater infrastructure P3s.
P3s have been taking away communities’ control of water across Canada and the world for decades, putting public health at risk while costing the public billions. By rejecting the P3 option, Mapleton has joined a group of communities that saw through the corporate lies and flimsy numbers and chose to put community first. As the Canada Infrastructure Bank continues to promote water P3s across the country, it’s more important than ever that we stay vigilant about P3 threats in our communities, and loudly reject this false solution.