Imagine arriving home from a winter vacation to find a basement flooded with raw sewage, the reason for which was due to the long neglect by successive civic politicians who refused to properly fund public infrastructure. That’s an unpleasant thought, but a possible scenario when such infrastructure ages without new investment into water and sewer systems.
Which is why the success or failure of Winnipeg’s water and wastewater utility restructuring—will it deliver proper results— should be measured by such practical results rather than someone’s ideological bent.
On that score, the City of Winnipeg’s plan proposal to create a municipal corporation owned by the City to deliver water and waste services looks to be a model worth support. The model would include a private partner—but to be clear—to deliver waste services, not water, to Winnipeggers.
There is a strong practical case in favour of the model. First, it’s better than the old model as a stand-alone city corporation will bring more specialized knowledge to the table and reduce political interference. Also, secondly, an organization that specializes in waste management in charge of investment decisions (the City’s new partner) rather than ones specializing in electioneering (the city council and public sector unions), will be based more on engineering reality and less on political optics.
Some opposition to the new model stems from an anxiety that a new, non-elected body may end up with powers that citizens cannot control. According to this fear, this new body will then make private profits from the public purse and presumably gouge consumers. However, this narrative is over-the-top.
In the model proposed by the City, prices will be set by an external body, the Manitoba Public Utilities Board. This is no different than how automobile insurance and Manitoba Hydro rates are set. It is a well-accepted Manitoba solution to the problem of setting equitable rates for natural or government-enforced monopolies.
If anything, a clear separation of responsibilities will make pricing more responsive to actual, long-term infrastructure needs and not short-term political interference. Maintenance costs are politically under-the-radar whereas property taxes and are immediately visible. So degradation of infrastructure—which is literally underground–can be ignored for decades. It is in a large part because of this dynamic that the Federation of Canadian Municipalities now reports that Canada’s “infrastructure deficit” is $123 billion.
Winnipeg’s new model would mean that a private partner will be charged with delivering the service over 10 to 30 years (depending on the eventual agreement). That in turn means their incentive is to look at long-term costs to a much greater extent than occurred under the old management model
It will also mean that the management of such services will have better economies of scale. Anyone who has ever tried to build their own car will know specialized workers who have performed their particular job many times are much better at it than first-time dabblers. Similarly, having a specialist organization with expertise in managing waste is going to produce better results (all being equal) than a municipality that attempts to focus on many and varied activities.
Evidence from other jurisdictions such as France, Australia, and Kingston, Ontario better incentives, neutral price setting, and specialized knowledge will benefit the waste and water system and everyone who depends on it—that is to say, everyone.
Thus, Kingston uses a model similar (for water) to that which is proposed in Winnipeg (for waste). Kingston once managed its water utilities as a city department but in 1998, formed a wholly-owned municipal corporation, Utilities Kingston, to act as the water utility. Ever since, Utilities Kingston has provided that city with cost-effective utilities services, an upgrade in infrastructure, demonstrated compliance with relevant water standards, and on capital provision—has met growth requirements. The utility is free to contract with private organizations to delivery services, as necessary, much like Manitoba Public Insurance or Manitoba Hydro contracts with automobile companies to lease automobiles for their use.
Similarly, again to use an example from water services, In France, municipally-owned corporations have delivered water to cities since the 19th century and involved the private sector in delivery. Satisfaction with water management is high in that country. Ninety per cent of cities that enter a public-private partnership continue the partnership at contract renewal time.
This is line with international experience. According to the Public-Private Infrastructure Advisory Facility, at least 80 per cent of governments around the world that enter a public private partnership style model like Winnipeg is considering, choose to renew their arrangement when the contract expires. It’s overdue for Winnipeg to join that 80 per cent.