The next step

Before you read this blog, it may be a good idea to reread “It’s a small world after all” and "Public engaged, EPCOR jilted" in which I provided some of the background on the proposed collaboration between the city and EPCOR to exchange control of some of our city’s services for some fast cash. That idea was put to rest when the community rebelled in no uncertain terms, emailing and phoning councillors, and turning up in droves in the council chambers. The mayor himself led the charge in backing off; he really hadn’t anticipated such strong negative reaction.

But that doesn’t mean that the issue has disappeared.

The basic concern is that our underground infrastructure—water and sewer—is aging and some of it has to be replaced. It’s expensive to do that, but it’s also essential to urban living. You can’t have a city unless you provide fresh, safe water and get rid of waste that residents produce. Without that you have a disease infested habitat.

But although our infrastructure is aging, we also have a lot of money invested in it. According to administration, about $1.6B in water infrastructure and $1.3B in wastewater. That’s a fair chunk of cash. It’s an investment that needs to be looked after and it takes money to do that.

That’s why some years ago, staff put forward a fifteen to twenty year plan for upgrading and replacement of the pipes. Some of the infrastructure is more than 120 years old. Digging up streets and replacing pipes doesn’t come cheap. So, for the past 10 years, ratepayers have been faced with increases well above the cost of living in their water and sewer rates.

To make the whole thing more palatable, these charges are separated out of the basic tax levy, added to the charges for water consumption, and billed through London Hydro. Annual increases of 7 and 8 per cent have become common to finance the renewal and upgrades. Recently, staff has proposed that more of the revenues come from a flat rate rather than usage. People have the idea that the only cost entailed is what they actually use rather than the cost of repairing and replacing the system itself, forgetting that age takes its toll on the pipes independently of how much water or sewage flows through them.

These increases have been a problem for the council, both past and present. It’s especially a problem when the council is fixated on a tax freeze. Taxpayers aren’t fooled by the fact that the bills for taxes and for water are sent separately; they’re still a tax as far as the public is concerned.

It’s also a problem when you have plans for fabulous projects—a new city hall, an urban beach, 401 interchanges, an arts district downtown—but no money to fund them. Where to get the cash that may leverage additional spending by other levels of government and the private sector?

That’s when you begin to look at your assets. What can you sell? What can you spin off? Who would like to take some expensive jobs off your hands? Who would be willing to invest in return for a piece of the action?

While I was on council, the interest in a new city hall was raised many times but for a majority of councillors, laying out another $100M on top of the more than $300M existing debt just wasn’t in the cards, although a number of options for raising money were explored.

Among these was the concept of spinning off some of our services to a separate utility. Why not have a separate garbage utility, for example, and let someone else run it and charge for it? That would take it off the tax base. You’d have more money for other things.

That was the thinking behind the Shared Services Utility Model council was considering last fall at the behest of London Hydro and then City Manager, Jeff Fielding. There might be some efficiencies in having Hydro run all three services (water, wastewater and hydro) and maybe garbage and parking as well. That would take it off the tax base freeing up money for other spending. Others could set the rates; it wouldn’t be council’s problem.

Then the Edmonton corporation, EPCOR, came calling on London, having hired Stratford mayor, Dan Mathieson, as its consultant. Mathieson, who serves with Mayor Joe Fontana on the Southwest Economic Alliance, was kind enough to introduce EPCOR to London Hydro. EPCOR was looking to get more business to make a profit for Edmonton. It suggested some private talks to make a deal.

Public reaction was swift and sure. No way was anyone get its hands on our utilities. The mayor had to back down. The best he could do was to get a further report.

That was what came before the Civic Works Committee on Monday evening, when council had been sitting for about five and a half hours and all the media had gone.

The report was a high level one, from “50,000 feet”, it was pointed out. KPMG had done the fiscal piece but the synergies of bringing them together had not been analyzed. AECOM’s report on this was due sometime in August. In the meantime, staff wanted to outline the interim steps to be taken before moving on to the next phase, establishing a framework for a shared services utility model.

Councillor Joni Baechler had a problem with the framework. For her, the big question was the governance and accountability piece. EPCOR was created to bring money into the municipality but instead Edmonton was experiencing average yearly tax increases of 5% in addition to very high water rate increases, 45% in one year alone. The infrastructure is paid for with taxpayers’ money. Giving power away to a private board means taking away from the democracy we represent. Water and wastewater are our core services, she pointed out. “What will be left for us to vote on?” she asked. “Planning applications? The plan is moving in a direction I’m not prepared for.”

Councillor Steve Orser found the information “challenging.” He wondered if there was a way this could save the taxpayer money.

Acting executive director and city engineer John Braam wasn’t prepared to hazard a guess on that score. “I can’t tell you whether there will be savings or not,” he confessed. “We’re at the infancy of this process.” He wanted council to clarify its position. “I don’t want to spend money on something that council isn’t interested in pursuing.”  

Orser was concerned about the problems that Edmonton had experienced. He suggested that maybe council should send a delegation to Edmonton to check things out. Maybe Baechler should go. And Dale Henderson, he suggested mischievously.to him

No need to go to Edmonton, committee chair Harold Usher responded. Just go to an FCM conference. 

He was confused about the report. It seemed that the original suggestion had come from London Hydro for four utilities. Now here was a report from staff with only two. As a result of the presentation by Hydro, the word EPCOR had come up; they came here and offered exactly what Hydro had offered us. Same proposal.

“If we do this, if we put it in hands of hydro, they’ll have responsibility to provide a dividend, they’ll still have to provide a service, and they’ll need additional profit to pay for big salaries,” he pointed out. “Who is going to pay for it?” 

He provided the answer. “My neighbour,” he said. Plus, they would have to pay for the analysis and reports, probably $1M.  

“What is going on?” he wanted to know. “We’re going down the wrong path; we need to stop it now.  It doesn’t make sense to me.”

Fontana reminded Usher that he (Usher) is an engineer. "Most engineers like to have all information," he chided. “Let’s wait to see until all the facts come forward; you don’t know what the benefits might be. Let’s see if there is a possibility or not.” The mayor felt that what EPCOR did was irrelevant to what happens in London. “You need the facts; I appeal to your greater sense of logic and pragmatism.”

Orser argued that it wouldn’t cost much to finish the first phase. “Let’s go forward to August; we can shoot it down then,” he suggested.

I remember those sorts of arguments well. Just take another step. Just one more. You can always say no later. But as you take one more step and then another, soon you find yourself on the path of no return.

The committee took the next step, over the objections of Baechler and Usher, with Orser, VanMeerbergen and the mayor voting to move forward. Councillor Sandy White had left the meeting long before.