Sewer partnerships: A troubled history

Published by the Times Colonist (Victoria)
May 12, 2006
Written by Richard Bocking
Richard Bocking has written extensively on water resource issues, including two books, "Canada's Water: For Sale? and Mighty River: A Portrait of the Fraser". He has produced several films on water resource issues for the CBC.

In "Sewer partnership makes sense for Colwood" (May 10) Brett Hodson, speaking for Texas giant Terasen, makes the case for privatizing utilities using the model called a "public-private partnership." His company stands ready to finance and manage municipal functions that, he implies, are beyond the competence of local governments.

Taking over sewer systems is often the first step toward privatizing water, since the two are so closely linked. Around the world both are targets for privatization by a handful of transnational corporations, including Terasen.

One reason often put forward for privatization of sewer and water systems is a lack of public funding for the purpose. And it is tempting for politicians to put available funds into projects more politically profitable than water and sewage systems. But a private system will cost citizens more in the long run; financing is more costly for private operators and a guaranteed profit will be skimmed off every litre delivered or drained.

So what are the advantages of a privatized system, whether or not it operates under the "public-private partnership" (PPP) label?

Let's look at the record, because Colwood is not the first Canadian municipality to be wooed by water corporations. Halifax almost signed a huge sewage contract and the Greater Vancouver Regional District came close to having the U.S. giant Bechtel build and operate a $100-million water filtration plant. Hamilton actually did enter an agreement for privatized sewage services.

What happened? In Halifax the corporation with which the city was dealing constructed the contract in a way that ensured all risks would be borne by the citizens, while a healthy rate of return on its investment would be guaranteed to the company. That's a common sort of arrangement in the water and sewer business; fortunately Halifax city council realized what was going on just in time and backed out of the deal.

Ownership of Hamilton's privatized sewage system changed hands so often it was sometimes unclear who owned it. A huge sewage spill into the harbour helped convince the city to reclaim the system into public ownership.

In the Lower Mainland, a public furor forced the GVRD to back out of the deal with Bechtel when it became apparent that, under the rules of NAFTA, if the privatization turned out badly there would be no way out of it without enormous payments to the corporation to compensate it for loss of profits it expected to make.

In Moncton, public protest against a proposed privatization of the water system was so strong that eventually the mayor supporting the public-private partnership had to admit defeat. The system still belongs to the people of Moncton.

Outside Canada experience with water and sewer privatization has been even more graphic. The Suez corporation took over the water system of Atlanta, Ga., with the promise that it would create an "international showcase" for public-private partnerships. But in 2002 the system had five boil-water alerts, many fire hydrants were useless for months at a time and leaking water mains went unrepaired for weeks.

The company laid off 25 per cent of waterworks staff while demanding that the city pay it millions of additional dollars. Atlanta gave Suez 90 days to fix all these problems. It didn't, so Atlanta cancelled the contract and the system once again belongs to the people of the city.

When water services were privatized in the United Kingdom in 1989 consumer water bills soared as much as 141 per cent in the following decade. Billions of dollars of government subsidies went to water companies even while they were laying off thousands of public-sector workers. The conservative newspaper Daily Mail wrote "Britain's top 10 water companies have been able to use their position as monopoly suppliers to pull off the greatest act of licensed robbery in our history."

Politicians may imagine that life will be simpler if they turn their water or sewage systems over to a corporation rather than getting on with resolving the issues themselves. But this can be a costly illusion.

In addition to paying more in the long run citizens lose control of basic elements of their infrastructure and even of their most precious resource if water services are privatized.

A corporation operating a water or sewer system will maximize profits for distant shareholders, who are unlikely to be motivated by concern for the long-term sustainability of our water and sewer systems or for the ecology of this region.

Richard Bocking has written extensively on water resource issues, including two books, Canada's Water: For Sale? and Mighty River: A Portrait of the Fraser. He has produced several films on water resource issues for the CBC.