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Water P3s

The federal government’s scheme to promote water P3s in Canada

Written by Vi Bui and Dylan Penner

This past summer, the township of Mapleton, Ontario dealt a direct blow to the Canada Infrastructure Bank’s (CIB) attempt to privatize water in Canada by ending their Request for Proposals (RFP) process and choosing to finance their water and wastewater upgrades internally. For the last year, the CIB had been touting Mapleton as the pilot case of water public-private partnerships (P3s) to be replicated across the country.

The $20 million investment in a water and wastewater project in Mapleton would have been the smallest investment by the bank. The CIB’s recent annual report covering the period up to March 31, 2020 still highlights Mapleton as a promising project “to showcase the involvement of private-sector capital” in water and wastewater infrastructure, despite the township having since rejected the CIB.

After decades of infrastructure underfunding, communities across Canada welcomed the federal Liberal government’s commitment to invest in infrastructure. However, the CIB, established in 2017 as an arm’s length government agency with a budget of $35 billion, has been acting as a privatization bank, focused on incentivizing private investments and promoting P3s. Instead of expanding public infrastructure, the Liberal government set up the CIB to leverage private sector investments in the planning, finance and delivery of infrastructure projects in Canada.

Local governments have borne the brunt of this long-term underfunding. Under the Harper government, securing federal funding for major infrastructure projects required a P3 screen, while provinces’ austerity budgets downloaded more costs onto municipalities.

The Federation of Canadian Municipalities estimates it will cost over $50 billion to repair and replace water and wastewater infrastructure in poor or very poor condition. The investigative reporting in 2019 of dangerously high levels of lead in drinking water revealed the direct consequence to public health of our aging infrastructure and chronic underfunding. Meanwhile, the worsening climate crisis urgently requires more investments in infrastructure to adapt to a changing climate.

For the last year, the CIB has signaled its intention to promote water and wastewater P3s across the country. Mapleton was seeking a consortium to finance, design and build new water and wastewater infrastructure, as well as to operate and maintain the new and existing infrastructure for 20 years. Find out more about the P3 proposal in Mapleton in this analysis piece.

According to the Wellington Advertiser, the winning proponent of the Mapleton contract would have been able to take advantage of the debt financing package from the CIB at two per cent interest for the first five years, and three per cent in the following years. These rates are 2-3 times lower than what private investors are subject to, and equivalent to public financing rates. Similarly, the CIB’s investment in the Réseau express métropolitain (REM) in Montreal was also through a low-cost loan at 1-3 per cent interest rate. Under this scheme, private companies are offered a generous subsidy to take over community control of infrastructure.

Instead of offering subsidies to municipalities directly, the CIB is using public funds to prop up an inefficient, costly and flawed model. P3s are associated with higher project costs, increased user fees, poorer quality, a weakened public sector and a complete loss of accountability and community control, as demonstrated by multiple provincial auditor generals over the years. When used to finance and operate water and wastewater services, P3s pose serious threats to public health and the human right to water.

Across Canada, privatized water systems are extremely rare. Municipalities in Canada such as Owen Sound, ON; White Rock, BC; and Taber, AB have managed to take back control of their water or wastewater system from private hands. In fact, from 2000 to 2015, the global movement to remunicipalize water services has brought back over 240 municipalities’ water services under public control. In that context, the federal push for water privatization and subsidizing private investors revealed our government’s prioritization of corporate interests.

Before the pandemic, the CIB promoted the model in Mapleton as a pilot to be replicated across Canada and began making presentations to municipalities about their “innovative” financing model. Since then, Catherine McKenna, the Minister of Infrastructure and Communities, has indicated that as the federal government looks to infrastructure investments as part of the COVID-19 recovery plan, it wants the CIB to play a key role.

Mapleton’s decision to keep the financing and services in-house reaffirms that P3s are a flawed model that do not hold up to scrutiny and should play no role in water operations. More importantly, it significantly sets back the CIB’s water privatization agenda, and puts into question the many potential investments the bank has made in other critical infrastructure projects.

As we recover from the impacts of the pandemic, develop rebuilding plans and prepare ourselves for future crises, our communities urgently need investments to bridge the infrastructure gap and keep essential services like water and sanitation in public hands. The federal government, however, is putting corporate interests before communities by promoting privatization through the Canada Infrastructure Bank.

Now more than ever, communities must be vigilant about the threats of privatization, adamant in our rejection of water P3s and persistent in our demand that the federal government invest directly in communities.

Take action now to oppose CIB privatization and demand a just recovery.