Perspectives on municipal water: Private or public…

In a time of great uncertainty over the use, consumption and trade of fresh water, municipalities are increasingly being plagued with tough water policy decisions. In Canada, there are numerous municipalities that have public water infrastructure systems meaning that water is managed, delivered and treated by a public body. Historically, municipalities relied on public water infrastructure because the private sector could not be relied upon to deliver a quality service at a price that all residents could afford. With 7% of the planet’s renewable fresh water, Canada could choose to position itself to profit through the privatization and commercialization of water resources municipally, provincially and federally. But should we really?

With municipal budgets only becoming more constrained, privatizing water infrastructure is only becoming more appealing. The U.S. Southwest has seen its fair share of egregious violations of water quality standards from corporations who have been negligent in water treatment. Moreover, many municipalities in the U.S. Southwest have privatized water infrastructure because water is scarce and can be profitable for private utility companies to charge for it at a higher rate. Further, privatization is presented to municipal governments in a pretty package, their proponents eager to capitalize on the difficult budget binds municipal councils often find themselves in.

Toronto finds itself in a precarious situation. It will have to pay ~$800 million to repair and upgrade its municipal water infrastructure. Let’s not forget that this cost can easily go up due to degrading infrastructure that is only exacerbated by population increases and unrestrained demand. The city of Toronto does not have $800 million right now to spend on upgrading and fixing its water infrastructure. However, a private company can do it for them with the condition that they have control over the delivery and allocation of water. This becomes tricky because the risks are not always known at this point of time. Privatization is appealing but what are the long-term effects? With water infrastructure or public infrastructure in general, the local governments pays about 50%. The province will chip in 40% and the federal government around 7%.

Personally I am an advocate for publicly owned and monitored systems. Provinces need to chip in however, municipalities cannot do it alone. Historically and contemporaneously, appropriate funding is not accompanying the downloading of provincial responsibilities to municipalities for a range of essential health and social services. Public capital investment has not kept pace with economic growth or population increases. Retaining public control allows governments to make appropriate investments for better water quality to protect people in their communities for the long term.

Finally, infrastructure construction and refurbishment could be funded through debt financing. Cities have an opportunity to arrange debt financing that maximizes benefits and services to the public while minimizing costs, thanks to having access to the lowest available borrowing rates.

Key message: Sometimes, when private operators move in, rates go up, quality deteriorates and accountability suffers. Should we then turn to public-private partnerships?