Mapleton water, wastewater project draws fire from CUPE

"It's not privatization," says CAO of outside-the-box approach

MAPLETON – The township’s plan to outsource construction and operation of municipal water and wastewater infrastructure has drawn fire from a national public workers union, but the township’s chief administrative officer insists the plan has nothing to do with “privatization.”

A March 9 article on the Canadian Union of Public Employee’s online newsletter Counterpoint  by communications officer Karin Jordan asserts, “There’s growing evidence that the Canada Infrastructure Bank (CIB) is using a small community in Ontario to launch a bigger push to privatize public water and wastewater systems.”

In May of 2019 Mapleton Township issued RFPs inviting companies to invest in and propose solutions for the township’s water and wastewater facilities. The infrastructure  project, which includes a new water tower, upgrading an existing water pumping station, a wastewater treatment project, and a gravity sanitary collection system, is expected to cost between $15 million and $30 million.

On July 15, 2019 the municipality announced the CIB had committed to a $20-million debt financing package. The offered loan could help companies currently bidding on the project, as the township is extending the CIB financing option to all RFP applicants. If the successful RFP applicant makes use of the debt financing package, it would pay two per cent interest for the first five years and 3% afterwards over a 20-year period.

The CIB is a federal crown corporation with a mandate to invest $35 billion in new infrastructure projects.

“CIB is a new model of federal support for projects including green infrastructure. Our innovative financing approach will help Mapleton invest in new, expanded and sustainable public water and wastewater facilities,” said CIB president and CEO Pierre Lavallée at the time the funding offer was announced.

The CUPE article states the CIB is subsidizing the private sector borrowing costs of a 20-year private-public partnership (P3)  to design, build, finance, operate and maintain new and existing water and wastewater systems in the township. It’s  a model the union is critical of.

“There’s nothing new or innovative about P3s, which have been around for decades, and have drawn widespread criticism from auditor generals and other experts. P3s are expensive, rob communities of control of vital services, and are shrouded in secrecy. Despite major pressure, P3s have never taken hold in the water sector, which is why the CIB is zeroing in on municipal systems,” the article states.

Robert Ramsay, a CUPE researcher who provided much of the information for Jordan’s article, told the Advertiser the union has heard from local residents on the project.

“We have members who live in Mapleton who contacted us with their concerns about this and particularly about the negotiation of this deal in-camera, in closed sessions of council. There doesn’t seem to have been any public consultation, which seems to be a major concern as well,” said Ramsay. “Every session where this project was discussed has been in a closed session with no residents present.

“Primarily we’re concerned about the Canadian Infrastructure Bank using Mapleton as a test case for privatizing municipal water systems elsewhere in Ontario and across the country … and they have actually stated this is their plan,” said Ramsay.

“Virtually all the municipal water systems in Canada are currently publicly owned and operated and this is because water is a public good and a human right and needs to be clean and affordable and publicly controlled. A private corporation located somewhere else, even internationally as a lot of the big private water corporations are European, should not be making a profit off our water bills,” he added.

However, Mapleton CAO Manny Baron said CUPE’s concerns come from a union viewpoint and the approach does not amount to privatization.

“I think that’s from the perspective of a union and nothing else, with some misinformation there,” said Baron. “They’re saying privatization, but nothing will change. All ownership will be ours through the township, township-owned assets. And there’s nothing different than right now, having OCWA (Ontario Clean Water Agency) run our water and wastewater plants. Sure they are a provincial agency but there’s plenty of other companies that do that   … It’s an actual contract. It’s just like any other company, like a guy doing a road. Or it’s like a contractor removing snow in one of our parking lots. It’s not privatization. It’s still our parking lot.”

Ramsay said evidence shows the partnership approach is not effective

“We’ve done our own research … and there’s’ literally no convincing efforts that private-public partnerships  deliver better quality or value for users and, in fact, they have a lot of problems. They’re more expensive. They’re also negotiated behind closed doors as we’ve seen in Mapleton. They deliver substandard performance. They lock municipalities into long-term 20-year, 30-year contracts. They cut corners to make money since they are in it for profit and, while they claim to transfer risk to the private sector, in fact the public always bears this risk in the end. The residual risk is always held by the municipality. If a private operator backs out, the municipality still has to deliver that service. So we’re concerned that the Canadian Infrastructure Bank is rolling out a plan for water privatization that will have extremely negative consequences,” Ramsay continued.

While acknowledging Mapleton has been trying for years to get a water infrastructure project underway through more traditional sources, Ramsay suggested the township hasn’t fully explored more recently introduced programs.

“The township applied though various federal and provincial infrastructure funds in the past and were denied. But I don’t see any more recent applications and I know the Trudeau government has put a high priority on water and wastewater infrastructure. Those options could be explored for both funding,  direct granting, and low cost financing,” he explained. “It doesn’t seem like the township has explored Infrastructure Ontario’s  funding program, not their P3 program, but their funding program, which is specifically targeted toward small municipalities that do have limited debt capacity.”

“Another option is to partner with the private sector for the design and build portion of this project, which is done all the time … that would be a solution that would not then tie them into a long-term contract where the private company has a long-term stake in the revenue generated by the public water system,” Ramsay added.

Ramsay also suggested Mapleton has the capacity to finance the project without private sector support.

“We’ve looked at the Price Waterhouse Cooper business case analysis that was prepared for the township and even though a lot of the financial information was redacted – which sort of goes back to the transparency, the negotiations behind closed doors problem that I mentioned before – even in that report the report shows that Mapleton does have the room to take on that debt itself, even leaving some remaining room for additional projects or initiatives. And in fact in that … report if you take out the private company’s very questionable retained risk calculation, the public option is the cheapest option, it’s the least expensive way to get it done,” he insisted

Baron noted the process is still playing out, as the township evaluates RFPs, but stressed the decision to seek private sector bidders was made before the CIB became involved.

“I can’t really talk about the RFPs of course because it’s still kind of confidential,” Baron stated. However, he noted, any suggestion the process has been driven by the bank is “completely false.

“In fact, only once we went out and pre-qualified six of the vendors … they (CIB) came in and said they’d like to take advantage and offer them financing. They don’t have to take it,” the CAO pointed out.

“It’s not privatization. We’re just paying the contractor to run the plant,” said Baron, who said the Mapleton plan can’t be compared to privatization deals like the provincial government made with the 407 toll highway.

“Where the province messed up is they sold the 407 to a private company. So we’re not selling the asset, were keeping the asset and no ifs ands or buts. There’s no question we won’t embark on the journey if there’s a slight chance of us not owning an asset. It’s not an option for us,” he explained.

“We’re not at the end of the process yet and there is a chance that, once the questions come back and forth with all the bidders, that we may not even like what’s presented, but we’re not there yet,” Baron stated.

“But what I can assure you, and I hope this is in bold letters, is we are doing what’s best for the municipal ratepayers and the users of the systems. If the proposals aren’t what’s best for those municipal shareholders and the ratepayers then we’re not going to do it.”