On Monday night, the issue of water takes centre stage at council meetings in both Abbotsford and Mission.
A new water system – estimated to cost $300 million – is needed by 2015, to augment the current Norrish Creek water supply. Up for debate is how to fund the project.
Both councils will discuss and vote whether to move forward with a private public partnership (P3) to create a Stave Lake treatment plant and water source. The P3 approach features a possible federal funding grant worth close to $72 million (25 per cent of the cost) added to $110 million of privately financed money.
A lively, long council debate is expected. Public input is welcome.
If both councils agree to move forward on the P3 option, a referendum would be held in November for public approval to borrow the money needed, and to enter into a 25-year P3 agreement.
It’s a contentious issue. Some citizens worry that a natural resource is being privatized, while city representatives are concerned the facts are being muddied.
“Stave Lake will be an additional, fourth source of water that will give us the redundancy we need,” explained Jim Gordon, Abbotsford’s general manager of engineering. “We still own the water licence … we determine how much water we need.”
The city would retain the operations of Norrish Creek, Cannell Lake and the 19 wells that make up the existing water system, as well as set the water rates and issue all the billing notices.
Norrish Creek will remain the primary source of water for both communities, but as the population increases and the current system reaches its capacity, more water will be needed from Stave Lake.
According to the business case put together by consulting firm Deloitte, the water plant will cost $2.09 million a year (based on 2011 dollars) to run privately, as compared to $1.3 million if the plant was run publicly.
That’s a difference of about $19 million over the 25-year contract.
Gordon said the increased cost is due to the number of employees needed to run the plant as well as other issues like insurance and management costs. The private company would have 20 employees at maximum capacity while the city would need 16.
When all costs are added, Gordon said it is still a 10 per cent saving to go the P3 model, even before the federal funding.
Among the critics of a P3 water supply option is the Canadian Union of Public Employees (CUPE).
Murray Jones, head of the Abbotsford CUPE local 774, said, “We have no interest in supporting the privatization of the water system.”
He said CUPE is preparing a campaign against the P3 option, pushing for a public design-and-build formula.
“If you do it publicly, it costs more initially. But over the 25 years, the cost is less when publicly operated,” claimed Jones.
He is also concerned that when the new system is on line, the private investor will want to increase its profits by increasing the amount of water provided. “Won’t there be pressure from the private company to bring the treatment centre on-line at full capacity?”
The city says no.
The contract will dictate supply, along with some provisions to deal with the rising costs of doing business, such as hydro rates.
“If we get into a war with a major union, the first casualty will be the truth,” said Abbotsford Mayor George Peary.
He believes the P3 system can work and points to the Abbotsford Regional Hospital as a local success story.
Gordon said another immediate advantage to a P3 is the risk transfer it offers.
When projects are put to tender, costs often become higher and delays may occur. But under the P3, the private company has put much of the financing up front and is obligated to finish the job.
“The risk is if they don’t meet their requirements, we can withhold payment,” said Gordon.
It’s the same approach for maintenance. The building has to be kept in prime working order, or payment is withheld.
Both the city and the company will do weekly water testing to ensure provincial standards are met.
Pat Soanes, general manager of finance for Abbotsford, said there are some downsides to P3. “We do lose our flexibility … we have to make the payments.”
She said with publicly run facilities, if city money is needed elsewhere, the option is available to defer payments – for maintenance, as an example. With a P3, the city has to follow the contract.
Monday’s votes do not ensure a P3 will be undertaken – only allowing the cities to apply for funding. Both councils meet April 4 – Mission at 6:30 p.m., Abbotsford at 7 p.m. at their respective city halls.
VOTERS MUST GIVE PERMISSION
A referendum will be needed in November in order for Abbotsford and Mission to create a new Stave Lake water supply and treatment centre.
Voters will be asked for permission to borrow money to pay for a new system. Public consent is mandatory under the municipal borrowing bylaw. The price tag will depend on what plan the two councils decide to follow.
On Monday, both cities will debate a P3 proposal that could see the federal government supply $72 million in funding. If a P3 (private public partnership) is approved, public support on a second question will be required to allow the cities to enter into a long-term contract. The wording of the referendum questions has yet to be established, as officials wait to see if a P3 will be approved by councils and the overseeing federal agency, PPP Canada. If funding is not made available, the P3 concept may be reconsidered.
If a P3 funding application is made, a decision is expected by June, well before the November referendum.
Both Abbotsford and Mission would have to approve the referendum for it to pass. Voters could approve the borrowing of money, but not the long-term contract, which would also force a change in plans.
“I can’t see people saying no to borrowing money for water. We all know we need it,” said Peary, who was less certain regarding the P3 question.