Elizabeth Brubaker
Financial Post
April 7, 2004

CBC’s Fifth Estate last week pronounced the privatization of water and wastewater utilities "Dead in the Water." In fact, such privatizations are alive and well.

By the CBC’s own admission, private water companies now serve hundreds of millions of people around the globe. They operate in more than 100 countries. In the United States alone, private firms own almost 30,000 water and sewage systems and operate more than 2,000 publicly owned facilities. Canadian governments – in large part, Liberal – are increasingly interested in joining this global movement.

The federal government has appointed MP John McKay as parliamentary secretary for public-private partnerships – or P3s, as they are known. Apparently unaware of the CBC’s pending death sentence on the process, Mr. McKay blithely insisted in a February interview with CanWest News Service: "The sewer, water, all of that stuff can all be P3-ed. Why does the government have to run a sewage system?"

Although Mr. McKay lacks authority over water and wastewater utilities, which are a provincial responsibility, the federal government does help fund municipal infrastructure. And Mr. McKay vowed that before his government funds an infrastructure project, it will do a "P3 analysis" to determine if and how the private sector can help reduce costs.

Interest in water utility privatization is likewise growing in several federal departments. Industry Canada is advocating domestic privatization to improve the international competitiveness of Canadian industry. Native Affairs hopes the private sector can redress the terrible problems with substandard public systems on native reserves. And next week, Environment Canada will be sponsoring a workshop on urban water issues, in part to "enhance understanding" of public-private partnerships.

Provinces are also oblivious to privatization’s purported demise. In November, Quebec’s municipal affairs minister told a conference that his province needs private-sector know-how and private-sector funds to fix its water infrastructure. His interest in new sources of capital is hardly surprising, given that the province faces as much as $24-billion in water and sewer infrastructure costs.

The British Columbia government has made public-private partnerships "a key part" of its infrastructure strategy. It has set up Partnerships B.C., with a mandate to "promote, enable and help implement public-private partnerships." Although the company’s current list of projects doesn’t include any water or wastewater plants, it hasn’t shied away from talking about the opportunities in these sectors. And little wonder. B.C. – where hundreds of communities endure boil water advisories, and where more than half of the sewage treatment systems perform poorly – needs all the help it can get.

In February, the Ontario Ministry of Public Infrastructure Renewal released a discussion paper on infrastructure financing and procurement. It noted that too many public water systems have been neglected and must be repaired and expanded. And it asked, "What risks and responsibilities can government appropriately shift to the private sector?"

Just two weeks ago, at a ministry workshop on water and sewer infrastructure, three objectives were highlighted. Two invited privatization: optimizing efficiencies, by ensuring risk is transferred to the party most expert at managing it; and optimizing return on investment to taxpayers and users, by tapping into all available sources of public and private capital. The workshop then reviewed various ownership and operation models, including the private operation of publicly owned facilities and the sale of facilities to regulated private companies.

Even municipalities themselves haven’t figured out that privatization is – if the CBC is to be believed – dead. In January, the city of Hamilton, Ont., decided to continue private operation of its water and sewage plants for another decade. The city’s contract with a private operator will expire at the end of the year, and the unions have been demanding that the city take back operations. But Hamilton was adamant: It would not abandon the benefits that come of the private sector’s flexibility, innovation and efficiency.

Hamilton, oddly, is the same city that CBC Radio featured last year in a so-called documentary on privatization. At the time, the CBC concluded that Hamilton’s private operations had not proved to be a successful alternative to a public utility. Certainly Hamilton’s approach to privatization – initially, it sole-sourced the contract to an inexperienced local company – made for a rocky start. But the CBC’s ideological filter led it astray, preventing it from providing its listeners with the whole story.

When it comes to water, in fact, there’s a whole lot that misleads CBC listeners and viewers. Take the Fifth Estate’s treatment of privatization in Moncton. Reporter and host Linden MacIntyre acknowledged that the city’s water utility, when in public hands, provided discoloured water that was frequently unsafe to drink. The background information posted on the program’s website reports that a private firm financed and built a new water filtration plant for $9-million less than the city had expected to spend. It admits that, under private operations, there has been "a huge leap in the quality of water."

Why, then, did the broadcast do its best to undermine Moncton’s success? What journalistic standard did the CBC employ when it bizarrely cut from an interview with Moncton Mayor Brian Murphy to an entirely unrelated clip of Margaret Thatcher speaking about the Conservative’s capitalist "crusade"? Mr. MacIntyre doubtless succeeded in convincing many viewers that Mr. Murphy was driven not by pragmatism but by a right-wing agenda. This is the triumph of a propagandist.

Moncton’s success with a privately financed, built and operated water filtration plant inspired the city to consider hiring the same firm to upgrade its water distribution system. The Fifth Estate made much of the city’s ultimate decision to reject expanding the private sector’s role, legitimately criticizing flaws in the city’s non-competitive, behind-the-scenes process. But Mr. MacIntyre’s conclusion – that "the once glamorous notion that public works are better done by private enterprise is losing its lustre" – was unwarranted. The private provision of water in Moncton remains a great achievement. Why not celebrate it as such?

Why celebrate instead the destruction of another desperately needed water system? The Fifth Estate’s coverage of a Soweto, South Africa protest against pre-paid water meters was disturbing. As protesters dug up and smashed newly laid water pipes, and onlookers danced and clapped, Mr. MacIntyre hailed "a fleeting moment of power in the face of vast global forces." Surely there are ways for governments to ensure that the poor can afford clean water, be it publicly or privately provided. Only ideology could persuade one that South Africa is better off with its infrastructure smashed, and that it is "a small victory" for poor villagers to go without water rather than to pay a private firm to treat and distribute it.

But even ideology can’t excuse playing fast and loose with the facts. The Fifth Estate had no business leaving unchallenged the false claim that all out-sourcing leads to "a huge increase in prices." Nor was it honest to hide certain truths so that all but the most vigilant viewers would miss them.

To take one example, the program distorted the truth about a cholera outbreak in South Africa. When a local water board required payment for treated water, many villagers drew free water from contaminated rivers and became ill. Almost 300 people died. In an effort to pin this tragedy on privatization, Mr. MacIntyre mentioned that although the area had both public and private services, the policy of cost recovery meant that even municipalities behaved like private companies. Most viewers would likely have missed this passing remark, and most would have been left with the impression that privatization was to blame. Why else would the incident have been included in a screed against privatization?

The tactic is a familiar one at the CBC. Last year’s radio program on the privatization of Hamilton’s water system began and ended with reports of flooding that resulted from a broken water main – even though the failure occurred in a system of pipes that was both owned and operated by the city. The episode certainly mislead listeners into believing that privatization was at fault.

The CBC condemns privatization as an expression of ideology and corporatism, refusing to accept that it is often a pragmatic response to problems that municipalities simply cannot solve on their own. The Fifth Estate introduced its program with accusations of ideology, and quickly moved on to a clip of Ronald Reagan touting the merits of deregulation – a clip that, had the producers done their homework, they would have rejected as irrelevant, since water utility privatization generally brings stricter regulation.

But Mr. MacIntyre seemed wilfully blind to this or the myriad other benefits that private water companies can bring to municipalities. He described one water company as "a global empire with resources that can overwhelm most of the municipalities they do business with." Such a presentation suggests that resources are somehow a threat. But those resources include 150 years of experience, thousands of employees with specialized skills, hundreds of millions invested in research and development, and access to vast amounts of capital. Who would Mr. MacIntyre rather see operating his water system? A company with overwhelming resources or Walkerton’s own Stan and Frank Koebel?

Viewers got their answer: Mr. MacIntyre and the CBC concluded that "For some, the intrusion of private enterprise is a mere inconvenience. For others, it is a life or death struggle."

"Human problems still defy glib ideological solutions," Mr. MacIntyre piously – and more than a little hypocritically – intoned. He’s right. And rejecting the capital investment, expertise, efficiencies, and improved regulation that privatization can bring – no matter how desperately they are needed – marks a pyrrhic victory of ideology over pragmatism.