Wastewater plants and P3s: A cautionary tale?
Published Friday, February 22, 2013 12:42PM CST
On Monday, Regina city councillors will consider a proposed public-private partnership to fund upgrades to the city’s aging wastewater treatment plant. Some governments argue that taxpayers get more value for their dollar by transferring risk to the private sector. They also say P3s ensure that projects are delivered on time and on budget. However, opponents argue that P3s seldom deliver projects on time, and that the public sector can borrow money at a much lower interest rate than private firms. The following is a look at P3s involving other wastewater treatment plants across North America, and the successes and failures that resulted.
In 1994, the City of Hamilton awarded an untendered contract for its water and sewage treatment plants to Philips Utilities Management Corporation. In turn, the company promised economic prosperity, new jobs and cost savings. However, within 18 months of the deal being signed, the workforce at the plant was cut in half, and some 180 million litres of raw sewage had spilled into the city’s harbor. In the decade that followed, the contract changed hands four times. Two of the contractors are now bankrupt, and it was eventually revealed that one of them was a subsidiary of the scandal-plagued Enron Corporation. When the contract came up for renewal in 2004, municipal politicians voted to put water and sewage treatment back in the hands of the public sector. The about-face reportedly saved the city $1.2 million in the first year alone.
Dawson City, Yukon
This community of 1,300 people, located in Canada’s Great Frozen North, opted for a deep-shaft system to deal with its sewage. As the Yukon government noted, Dawson City faced severe space limitations due to permafrost and the state of the ground in the historic mining town. But then Corix Water Systems seemingly came to the rescue, even though the company had never dabbled in deep-shaft systems prior to being awarded the contract. Corix beat out another firm, called Ketza, in the tendering process, despite the fact that the Corix bid came in at $8 million more than that of its competitor. In the months that followed, Corix changed the project design at least three times. Instead of using wood to build the structure, as originally planned, Corix opted for a steel structure. Local builder Han Construction Ltd. blamed Corix’s “significant fast-track changes” to the design of the facility for the project being over budget and behind schedule.
Perhaps P3 agreements and wastewater plants can mix, at least on the surface. Faced with fines and even a sewer connection ban by the Washington Department of Ecology, the City of Vancouver, Wash. opted in 1978 to fix up its struggling wastewater treatment plant. The facility had been plagued by heavy industrial loads, buildup of internal solids and frequent equipment breakdowns after it started up in 1975. But it appears the city has cleaned up its act since it entered into a P3 agreement with Paris-based Veolia, the world’s largest private water services and treatment provider. Within six months of the deal being signed, the plant was 100 per cent compliant with state and federal regulations. Surrounded by wetlands and located near a high-end residential community, the plant uses air scrubbers and a negative vacuum system to keep odours inside the building, where they are virtually undetected by residents. The plant also boasts peaked roofs and arched windows, drawn from the city’s heritage buildings. But, as one official notes, what makes the plant most attractive to residents is its reputation as a “good neighbour.”
St. Louis, Mo.
Amid mounting pressure from the activist coalition “Dump Veolia,” St. Louis Mayor Francis Slay this week declared that a proposed contract between the city and Veolia was indefinitely on hold. The proposal seemed destined for approval, until a petition with about 2,800 signatures called on city aldermen to reject the contract. Opponents argued that Veolia, which has operations spanning 69 countries and revenues totaling $16 billion in 2011, has a questionable record, both socially and environmentally. The Missouri Coalition for the Environment claims the company has had to settle with other American cities for overcharging and misleading investors. In addition, there were some disputes over Veolia’s performance after a contract has been signed.
Written and researched by CTV Regina’s Ken Gousseau