Brad MacKay and Jennifer Prittie
Eye Weekly
June 6, 2002

Local environmentalists are sparring over an upcoming city council debate on the future management of Toronto’s water system. The conflict features increasingly polarized arguments about proposals for the system’s ownership and operation, with some claiming the city is on its way to selling off its water supply.

What did Walkerton teach us?

In a chapter headed "The Role of Municipal Governments" in his Part Two Report of the Walkerton Inquiry – A Strategy for Safe Drinking Water, Mr. Justice Dennis O’Connor examines a range of ownership and structure questions as they relate to Ontario’s water systems.

Private Ownership

O’Connor does not recommend selling off municipal water systems to the private sector. But he also notes that "rarely does the discussion of privatization in the water industry in Ontario include the contention that ownership of water facilities and infrastructure should be placed in private hands."

Options for a Municipal Operating Agency

O’Connor examines options including: keeping water management as a city department, which is Toronto’s current system; creating a public utilities commission, an option the province’s new Municipal Act will turn into a municipal services board with directors appointed by city council; creating a municipally owned corporation, with directors appointed by city council. O’Connor did not favour any of those options.

City staff have just recommended that a municipal services board should run Toronto’s water system, and have left the door open for a muncipally owned corporation – a controversial alternative – to be considered in the future.

Of the possibility of a municipally owned corporation, O’Connor writes that the "corporate model offers the potential benefit of greater expertise in the oversight of the water system through the appointment of a qualified board of directors." But, he says, "as with the other models, municipalities will want to balance the benefits against the costs, in this case a reduction in direct accountability to local residents. (The level of accountability will vary depending on the arrangement between the corporation and the municipality)."

Role of Private Operators

O’Connor does not have a problem with private water operators working within a public system. "Both public and private operating agencies may perform well or badly [in terms of water safety]," he writes. "I am not convinced that either is uniquely able to operate a water system so as to achieve consistently high-quality drinking water."

He says there "is rarely one big question for which there is one big answer, but rather a whole series of issues and decisions where sensible judgment will need to take into account a wide range of options and considerations . . . it is not a matter of choosing between a ‘public system’ and a ‘private system’ pure and simple, but of deciding on the best mix of concrete arrangements in the circumstances at hand."

City staff have just completed a six-month study looking at the best long-term governance structure for the municipal water and wastewater system. Last week, they recommended it be governed by a type of agency known as a municipal services board, keeping the system as a city asset but having it run by directors appointed by city council.

Those are fighting words to critics who insist the city is heading towards private ownership. "It’s an easy way to get rid of the responsibility," says Bryan Timm of Toronto Water Watch, a coalition of environmental and labour groups. "Everyone on council knows that we need to build infrastructure, but we’ve been procrastinating."

There will be special committee meetings on June 11 and 12 at City Hall to discuss the staff recommendation. It will then be debated the following week by city council in its June 18-20 session.

Marilyn Churley, the NDP MPP who proposed the provincial Safe Drinking Water Act two years ago, is also worried about the report. "The case for moving in this direction is very feeble," she says. "I’m concerned that once you set up this kind of hybrid organization, it can lead to privatization." Critics of the proposal say the city now has excellent water standards, and argue it makes no sense to move to a governance model they say provides for less accountability, since a municipal services board includes unelected directors. They also feel the city rushed its study, and they were unhappy with opportunities for input.

But Elizabeth Brubaker, executive director of Environment Probe, thinks the city would be remiss to ignore the benefits of private-public partnerships for its water system. She doesn’t think the staff recommendations go far enough. "It looks to me as if the proposal won’t solve any of the problems that are now plaguing the water system," she says, "because even a services board will remain highly politicized." She argues it’s a "big conflict of interest" to have "councillors who have political interests making the decisions about our water utility."

Brubaker thinks Toronto Water Watch’s approach is wrong-headed. "I’m shocked that they’ve said ‘If it ain’t broke, don’t fix it.’ Our system is certainly broke. Some of our infrastructure is 100 years old, we have billions [of dollars worth of needed] repairs, our beaches are regularly closed because of sewage pollution and [the system] is overstaffed."

Governance options considered included keeping the service as part of a municipal department, as it currently is; creating a municipal services board with directors appointed by council; or creating a publicly-owned water and wastewater corporation.

Staff call a municipal services board a "hybrid" organization, where the city would still own water assets, employees would still be municipal employees, and council would appoint a board consisting of four councillors and five expert citizens. Council would approve water rates, annual operating budgets and multi-year capital projects. Staff also left the door open, however, for the city to consider a municipally owned not-for-profit corporation for water and wastewater services in the future.

The city is plagued by aging water and sewer-main infrastructure, like other municipalities around North America, and it must make a huge investment to replace it. In 2001, staff said replacement would cost Toronto $195 million per year for 10 years.

The system is paid for by water rates. The city hasn’t charged enough for water in the past, and the report said a municipal board could be more aggressive in recommending higher rates. The report also said new provincial legislation means the city will have to provide full accounting for its water system, and under the current structure, inter-departmental fees make that difficult.

A board could also provide the strategic focus the water system now needs. The works committee has a lot of other important city service issues on its plate, the report said, and council, which now has responsibility for the water system, has 39 other businesses requiring attention and decision-making. "Only the most contentious water and wastewater issues receive full public debate when having to compete with other service areas . . . because water and wastewater services is one of the most important services the city provides, a decision-making body with attention focused on water and wastewater issues would be appropriate."

Public discussion over the matter has become particularly heated in light of the Walkerton tainted-water scandal in 2000, when seven people in the south-western Ontario community died and around 2,300 fell ill after E. coli contaminated the water supply. The Toronto debate often invokes the name of Mr. Justice Dennis O’Connor, Commissioner of the Walkerton Inquiry. In Part Two Report of the Walkerton Inquiry – A Strategy for Safe Drinking Water, made public last month, O’Connor did not recommend private ownership of municipal water systems, but he did not preclude private operators.

He also noted that high-quality drinking water is rarely mentioned as a goal on either side of the issue.

The "private-public debate is frequently carried out at a level of abstraction far removed from the kinds of issues decision makers, confronted with the practical challenges of running a water system, normally have to face," O’Connor wrote.