0 National Round Table on the Environment Economy, 1996

and the

All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form or by any means - graphic, electronic, or mechanical, including photocopying, recording, taping or information retrieval systems - without the prior written permission of the publisher. Canadian Cataloguing in Publication Data Main entry under title: State of the debate on the environment and the economy: water and wastewater services in Canada Issued also in French under title: L’etat du debat sur l’environnement et I’economie: les services des eaux et des eaux u&es au Canada Includes bibliographical references. ISBN l-895643-46-5 1.Water supply - Canada. 2. Water supply Economic aspects - Canada. 3. Sewage - Economic aspects - Canada. 4. Sewage Environmental aspects - Canada. 5. Water quality management Economic aspects - Canada. I. National Round Table on the Environment and the Economy (Canada) HD4465.C3S72 1996 C96-900785-X 363.67’1’0971

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National Round Table on the Environment and the Economy 1 Nicholas Street, Suite 1500 Ottawa, Ontario Canada KlN 7B7 Tel.: (613) 992-7189 Fax: (613) 992 7385 E-mail: adminenrtee-trneeca Web: http://www.nrtee-trnee.ca

State of the Debate on the Environment and the Economy: Water and Wastewater Services in Canada

National

Round

Table

Table

ronde

nation&

on the Environment and the Economy

sur I’environnement et 1’6conomie

At the heart of the NRTEE’s work is a commitment to improve environmental decision the quality of economic and policy development by providing they need

makers with the information

to make reasoned future for Canada. its mandate
l

choices on a sustainable The agency seeks to carry out

by: decision makers and opinion environinto considerations lead-

advising mental decision

ers on the best way to integrate and economic making;

l

actively seeking input from stakeholders with a vested interest and providing overcome ment; in any particular meeting ground developissue a neutral

where they can work to resolve issues and barriers to sustainable

l

analysing environmental ability in Canada; and

and economic

facts

to identify changes that will enhance sustain-

l

using the products national ronment consultation

of research, analysis, and to come to a conclu-

sion on the state of the debate on the enviand the economy. syntheon develop-

The NRTEE’s state of the debate reports size the results of stakeholder potential opportunities ment. They summarize consultations for sustainable

the extent of consensus review the conse-

and reasons for disagreement,

quences of action or inaction, and recommend steps specific stakeholders can take to promote sustainability.

ii

Table of Contents
Preface _. _. _. _. _. . _. _. .. ._ ..:. __ ... _. _. _. . __. _. _. .
1

Executive Summary I. II. Introduction ._..

.3 .5

. .._. ___.

Analysis of Canada’s Water and Wastewater System
Service and Capital Realities Infrastructure and Fiscal Trends _. . . . . _. . _. .7 .9

III. Toward a More Rational Water and Wastewater System
Full Cost, User Pay Principles Public-Private Partnerships _. . ... _. ._. . _. .. ... .. _. . _.. _. .. 11 .12

IV. Benefits of a More Rational Water and Wastewater System
Preserving Promoting Opening Canada’s Water Resources Economic Development ........................................................................ and Environmental Technology ......................... .15 .16 .17

Up a Major Export Market

.........................................................................

V.

Results of the NRTEE’s National Multistakeholder Consultation
Areas of Major National Issues of Divergence Regional Variations Consensus .......................................................................... .19 ..2 1 .22 ................................................................................................ ...................................................................................................

VI. Advice to Stakeholders
Government Provincial Municipal Labour of Canada Governments Governments ............................................................................................ ........................................................................................... ........................................................................................... .24 .24 .25 .25 .25 .25 .25 .26

..................................................................................................................... Groups ............................................................................................. and their Associations Technology Companies ........................................... ........................................

Environmental Infrastructure Financiers

Water Management

Professionals

and Environmental

.................................................................................................................

__. VII. Conclusion ._. __ Appendix
Participants Members in the Round of the National

.. ___.

.:._,

_.._..

_.__

.._. _. _. __

.27

Tables on Environmental Round

Infrastructures

_, _.

.30 .34

Table on the Environment

and the Economy

Endnotes .

._ _. .

_. _.

.. _.

. .. _. .

... _.

__. _. _.

.35
.37

Bibliography., . _. . .

With this state of the debate report, Water and
Wastewater Services in Canada, the National Round

Table on the Environment

and the Economy

(NRTEE) introduces a new series of flagship publications. Based on commissioned research and national consultation, the report aims to provide up-to-date and highly reliable information to optimize environmental on ways

and economic goals in

the delivery of water and wastewater services in Canada. As such, it represents a unique reference tool for policy and decision making for this sector.

The majority report stakeholder consultations continuing

of the recommendations in consensus

in this

are grounded

among key

NRTEE Task Force on Environmental Technologies
Chair Sam Hamad Associate Director Roche Ltd., Consulting NRTEE Member Angus Ross President SOREMA Management NRTEE Member Ray Brouzes Vice-President Scientific Affairs Enviro-Capital Laurie Macdonald Director of Professional Affairs Canadian Council of Professional Engineers Joe Luckacs President and CEO Canadian Environmental Advancement

groups. However, the national conducted disagreement by the NRTEE revealed over appropriate action the NRTEE

in some areas. In these instances, standing issues.

offers advice to help advance the debate on out-

Group

The NRTEE extends its appreciation who played a part in bringing fruition. In particular,

to all those

this project to

Inc.

it wishes to thank mem-

bers of the NRTEE Task Force on Environmental Technologies for guiding the project and staff at The Delphi Group for research and development of a first draft of this report. Credit is also due to the staff of the NRTEE secretariat in coordinating the multistakeholder tions and in producing for their efforts consulta-

the final report.

Since the Chair of the NRTEE, Dr. Stuart Smith, is engaged in the business interest tations, described of water and wastein the consulof the work Furthermore, the conclusions he or water services, he has declared a conflict of and has not participated planning, or reporting in this publication.

Technology

has had no part in forming recommendations.

Bob Slater Assistant Deputy Minister Environmental Conservation Environment Canada

Canada’s water and wastewater system is under pressure: the infrastructure - water and wastewater

treatment facilities, sewers, supply lines - is severely deteriorating, primarily due to shortages of public tundmg. it me decline continues, the health ot the country’s water resources will suffer. At the same time, due to subsidized and below-cost pricing for water and wastewater services, innovative environmental technologies that conserve water resources are failing to find a market.

The National program

Round

Table on the Environment a consultation on the sustainof issues

and wastewater stakeholder addresses

system. Targeted at specific (see parentheses), financing, regulatory, this advice employ-

and the Economy able development

(NRTEE) recently completed of the water and wastewater

groups pricing,

of national

ment, business

development,

and other issues.

system. While the type and seriousness revealed broad areas of consensus.
l

varied across the country, the consultation For example:

Recommendations
l

include:
of the costs services (federal,

increasing provincial,

public awareness municipal

the lack of user pay systems in many regions and municipalities across the country disl

of water and wastewater

governments); support

courages conservation
l

of water resources;

phasing

out capital and operational municipalities

given public fiscal realities, a major infusion of private capital is required to maintain existing systems and build new facilities;

for water and wastewater and mid-sized governments);
l

services to large (provincial

l

Canada’s water and wastewater principles

system will

setting up a uniform reporting agencies (municipal management

accounting governments,

and water

likely have to move toward full cost, user pay over the next decade simply to requirements; and
l

system for water and wastewater professionals); models of public-private part-

meet basic infrastructure
l

a full cost, user pay system would significantly increase demand environmental economic improve mental development for eco-efficient and promote infrastrucIt would also environthrough technologies

developing nerships mental

for delivery of water and wasteand environtechnology companies); role in regulatenvi-

water services (infrastructure

ture renewal and development. firms to compete

l

strengthening standards ronmental

the provinces’

the capacity of Canadian

ing water quality and setting environmental (provincial governments, organizations); Canadian environmental of a domestic technology market and

in export markets,

thus driving growth and job creation. Stakeholders public support also agreed that small, rural, and would need some ongoing the impact groups.
l l

helping

remote communities

firms expand into global markets by fostering the development for their services (federal government); placing nologies duction a priority on support

for their water services and that

measures would be needed to cushion of higher water prices on low income Consensus Contentious

for R&D and techa the pro-

could not be reached in some areas. issues included whether external

commercialization process to minimize to the Technology

for front-of-pipe used during or eliminate Partnership

(technologies of an emission

costs (costs not directly related to providing water and wastewater services) should be facthe private or pritored into water prices; whether capital and operating vate ownership wastewater ronmental

or waste) submitted Program

public sector would be most efficient at raising facilities; and whether and management of water and envi-

(federal government). The successful transition to a more sustainable to a and

facilities would compromise standards.

water and wastewater involvement.

system will depend

large degree on effective public education The NRTEE’s recommendations, consensus, possible. illustrate the of stakeholders consultation, sustainable water based on national interconnectedness win-win solutions

Using the results of the national the NRTEE has developed for achieving a more rational,

recommendations

and range of

4

I. Introduction

Water and wastewater services in Canada are in a state of radical transformation, as communities

across the country grapple with the challenges of preserving the environment while maintaining or expanding water infrastructure. At the root of the problem is the fact that Canada has the lowest consumer prices for water and wastewater services in the industrialized world, but next to the highest rate of per capita use - a situation that is clearly contrary to sustainable development of the sector.

While Canadians infrastructure shortages resources

have enjoyed

a high level of due to

labour, environmental structure companies, (see Appendix).

groups, hanciers, were informed

infiaby

water services, the current of public funding. - its ground pricing

water and wastewater If the decline conwater

and expert commentators by the NRTEE. the of the

is severely deteriorating,

Discussions

an issues paper commissioned

tinues, the health of the country’s

water, lakes, and rivers for water and wasteenvironmental techare failwater resources

This state of the debate report presents It shows how more rational water and wastewater both environmental Canada, helping and opening for Canadians. wastewater
l

will suffer. At the same time, due to subsidized and below-cost nologies water services, innovative that conserve ing to find a market. In 1995, the National Environment launched multistakeholder a program Round Table on the (NRTEE) on the future of The of analysis and nationwide, services in Canada.

results of the NRTEE’s analysis and consultation. management system could engender and economic to conserve gains for water resources of decision

up new jobs and export markets Aimed at an audience in the area of water and

and the Economy consultation

makers and stakeholders

services, the report: Canada’s water and wastewater

water and wastewater goal was to determine .

analyses system;

whether a more sustainable and economiconsenl l

water system was technologically

argues for the need to move toward a more rational outlines water and wastewater the benefits system;

cally feasible and, if so, whether national

sus existed on how to achieve such a system. To identify areas of national infrastructure four round consensus on water
l

of such a system; consensus and

and wastewater NRTEE convened between

issues, the tables, two in

details areas of national divergence

on the issues; and actions that stakeholders gains. can

Toronto and one each in Montreal and Vancouver, the fall of 1995 and the spring of 1996. included representatives from industry, the environmental Participants municipalities,

l

recommends environmental

take to build a system that provides and economic

both

I

II. Analysis of Canada’s Watt and Wastewater Svstem

Service and Capital Realities Canada’s water and wastewater infrastructure services are among the best in the world. While there is room for improvement, public health planning coupled with the growth of municipal services has resulted in a high quality water and wastewater infrastructure system in most parts of the country,

But such an infrastructure cheap: estimates Canada

does not come services in of the cost of land access and

Full Cost Pricing and Subsidies
If consumers Historically, are not picking up the full tab for water services through their water bills, who is? treatment plants and certain subsidies. vary sig-

for 1994 put the operational and capital expenditures relates to water distribution soil moving,

costs of water and wastewater at $5.9 billion at $4.7 billion.’

The major portion

capital costs (i.e., the costs of buildby tax revenue,

water infrastructure

ing water and wastewater both provincial jurisdictions The magnitude nificantly

systems and sewers. Costs include and rights of way, excavation, laying foundations pipes, pumping a kilometre urban

sewers) have been supported

and federal. In addition, and mix of subsidies

for supply lines and sewers. systems, and screens. Installing sewer in a dense of dollars.

receive some operational by province. between

Added to these are the actual costs of sewer of major collection

Based on the differential operational subsidies

user charges to $2.2 billion

area can cost tens of millions

and actual cost, it is estimated amounted

that in 1994

Market Distortions
In most Canadian by two significant consumer (i.e., all operational consumer regions market and municipalities, distortions: first, water and wastewater services are characterized

and capital subsidies to $3.1 billion.’ Simply put, Canada’s environmental infrastructure services receive a massive direct subsidy - and this is just for direct operational related to the environmental water pollution, ishment measures and capital charges costs - costs and social impact and replenin. or “out of pocket” costs. External

prices do not reflect the true cost and capital costs) of treateffluent. Artificially and discourage services are not low effiby taxes, encourage Second, water and

ing water and cleaning

of the resource use such as water table depletion, and conservation - are not factored

prices, subsidized

overuse of scarce resources cient use of those resources. wastewater provided infrastructure

User Pay Pricing
Operational costs are largely paid by consumers. through general tax revenue. households in Canada, areas, received However, in many cases users do not pay direct-

on a user pay basis. reduce demand technologies or waste). for (techor

These market distortions front-of-pipe nologies environmental used during

ly but indirectly For example, including unmetered

10 million

a process to minimize

some in urban

avoid producing Consumers tion oriented end-use

an emission

water services in 199 1.3 Further, that have user fees charge rate. resion consumption: compared

are not motivated to adopt conservalifestyles, invest in eco-efficient press for more compreplanning, or demand more

some communities

a flat rate for all users rather than a volume This has a major impact dential ages 450 litres/person/day litres/person/day amount

technologies,

hensive conservation efficient treatment

water use under flat rate systems averwith 270 under volume generated. rates.4 This difis reflected in the

of water and wastewater.

ference in water consumption of wastewater

Figure 1 highlights the impact of the lack of a full cost, user pay regime for water services in Canada. The relationship between price and consumption and, consequently, is quite evident. The higher the price, the lower the level of water consumption wastewater treatment. A country such as West Germany, which has a full cost, user pay system, consumes substantially less water per person.

8

FIGURE

1’

ture is declining. is consequently for economic Environmental Canada unmet

The long-term

viability

of

Wuter Prices and Qsidmtiul Water Use in SelectedCountries 1989

Canada’s water and wastewater development infrastructure

infrastructure

under threat, and opportunities are being missed. requirements existing in

are the sum of two accounts: needs and new demands to long term.

that will arise

in the medium

0.00 ’ , %s

I
Canada

I
United Kingdan &E&

I

France

I

Getmary

West”

I

I

Unmet Maintenance Needs for Water Infrastructure
The capital costs of sewers and water and wastewater structure treatment shortfall systems have largely been The current infracutdue to gradual governcovered by public subsidies. is mainly

Impact on Sustainability
The lack of full cost, user pay principles provision Canada of water and wastewater affects sustainability in the services in of water the stress

backs by the federal and provincial ments streams started

since the early I97Os, when revenue to show signs of stress. Between infrastructure tinanc-

1971 and 1990, all public cent of gross domestic downward

in the following

ing fell from 3.5 per cent to slightly over 2 per product (GDP). The through the trend has continued

way: Canadians due to subsidized country’s on aquatic

use excessive amounts prices. This diminishes putting

water resources, ecosystems.

undue

199Os, with the exception

of a small rise attribProgram.

It also means that as a

utable to the Federal Infrastructure

society Canadians (i.e., both consumer

spend more in total and public expenditures) they should.

on water than perhaps

Infrastructure and Fiscal Trends
Much of Canada’s water and wastewater structure upgrading - its water and wastewater or wholesale replacement. infratreatment Some sew-

facilities, sewers, and supply lines - needs major ers in older urban areas pre-date confederation. infrais As a

Existing funds are being used primarily to address critical water and wastewater structure a luxury needs. Anything for many Canadian beyond the urgent

municipalities. is deteriorating,

result, water infrastructure maintenance various

is being deferred, service delivery are stressed in

is less efficient, and ecosystems ways (see Box).

It also appears that the amount available

of public capital infrastruc-

for water and wastewater

9

As a result, in 1996 there is a large unmet to maintain wastewater and refurbish infrastructure, particularly

need

In total, Canadian environmental

capital requirements

for

existing water and sewage this need for the last have exacerbated water and waste-

infrastructure

will be $79-90

billion over the next 20 years. These projections assume a static market and do not reflect a move toward more conservation-oriented and to full cost, user pay pricing promote sustainability. practices systems that

capital stock. By ignoring I5 to 20 years, governments the situation over time. Estimates water infrastructure

since repair bills rise exponentially of unmet needs range from $38-49

billion”. This is the capital needed to ensure that existing capital stock and services are maintained.

Fiscal Trends
All levels of government transfer pressure payments are looking for ways to cuts many of This deficit infrareduce deficits. As the federal government to the provinces, which have stagnant

New Infrastructure Demands on the Horizon
The challenge wastewater new demands
l

tax bases, there is great today and will accelerate the 1990s. The impact of

to reduce grants to municipalities.

of maintaining stemming from:

existing water and by

trend is readily apparent reduction structure is felt through

infrastructure

is compounded

as the full impact of federal and provincial deficit reduction on water and wastewater

urban

growth in areas such as Halton and Surrey, British and the need to improve and rural areas; governing treatment; and

services will be dramatic.

Region, Ontario, Columbia, services to remote
l

Impact on Sustainability
Infrastructure structure billand and fiscal trends suggest a future infrainfrastructure crisis for Canada’s water and wastewater services. The predicted the reality of public

more stringent activities and tertiary

regulations

such as storm water separation level effluent

deficit reduction

may have a major impact
l

on sustainability. capital shortfall will degrade

separation hazardous

of waste streams containing and toxic wastes. projections estimate that, under will If a solution to the pressing for water and wastewater Canada’s water-based occur, the quality will be threatened. economic and wastewater services is not found,

Conservative current

infrastructure

pricing

regimes, new capital demands infrastructure by the year 2015.7

for water and wastewater exceed $41 billion

rapidly over the next two decades. Should this of Canada’s water resources Moreover, opportunities for water

activity to meet the country’s needs will be lost.

10

III. Toward a More Rational Water and Wastewater System

Full Cost, User Pay Principles The challenges outlined in the previous chapter could be addressed by moving toward full cost, user pay, direct consumer charges for water and wastewater services. Such a pricing system would help attract the capital needed to maintain and augment Canada’s water infrastructure. Moreover,

by paying directly for water services, consumers would create the revenue flow to retire the debt incurred in retrofitting existing infrastructure building new infrastructure. and economic opportunities and

New environmental would follow.
11

Environmental Opportunities
The evidence from other countries water treatment and industrial
l

Water infrastructure price increases
l

operators

also respond

to

and jurisdicinstitutional,

by: or building new infrastructure - this often that is only

tions is clear. When prices for water and wasterise, residential, consumers do three things:

upgrading requires

with more efficient

technologies

a level of investment

they start using less water (does the lawn really have to be watered twice a week, if at all?);
l

viable at higher prices; and making operations more efficient to cope

with lower subsidy support. to existing, or press for new, (such as of or take advantage

l

they respond

systems that reduce consumption re-use practices) municipal cy; and
l

Impact on Sustainability
The actions economic consumers and service providers in both terms. What is market that to attain and take as prices rise would be desirable and environmental the sustainable establishes needed is a water and wastewater

programs

for water use efficien-

they change operating introduce generation.

practices

and to

promotes

use of water through mechanisms standards; and practices and wastewater

new systems/technologies

conservation;

reduce water consumption

and wastewater

and enforce higher environmental and creates incentives for consumers providers to invest in technologies that reduce water consumption generation. The challenge opportunities signals needed to capitalize and economic

As well as changing water and wastewater revenue environmental prices provide mental end-of-pipe an emission

consumer

behaviour,

price the

increases associated with full cost systems give service providers stream to maintain standards. an incentive systems to meet Indeed, higher water to meet environrather than used to impact of (technologies

is to send the market on environmental for sustainability.

standards

with front-of-pipe

Public-Private Partnerships
Capital shortfalls consider delivering Increasingly, public-private alternative are leading municipalities modes of financing services. and to

technologies or waste).

clean up or reduce the environmental

water and wastewater they are looking partnerships infrastructure. partnerships

Economic Opportunities
Positive effects are also felt on the economic of the sustainability residential, consumers
l

at the use of to operate water

side

and wastewater Public-private as “any situation operating

ledger. When prices rise, and industrial generators water make:

institutional,

have been defined expanding or

and wastewater

in which the costs, risks and refurbishing, infrastructure are shared design,

rewards of creating, a municipal by government construction, structure

small investments aerators); and

in low-tech

water effr-

ciency (e.g., low-flow

shower heads, faucet

and the private sector.“8 A comprivate financing, some form (BOOT) and operation is through of large-scale infra-

mon way of combining in operating piping appliances. projects

l

major capital investments systems ranging

from improved

systems to more water-efficient

of a build, own, operate, transfer arrangement.
l

For example: frequently a consortium,

A franchisee, contracts

to build a facility and operate

it for a fixed period.

l

Typically, the franchisee of the equity financing guaranteed

provides

a portion loans

l

Investment/lending
water and wastewater the principal structure

risk: risk increases as
prices rise to pay back costs of infrathat

and obtains

for the rest. These are secured against a stream of income from the project or service.
l

and interest

capital. This means that investors

and lenders seek greater assurances are more actively involved and meetings

At the end of the contract period, ownership is transferred to the public authority. (either with the same successful bidder) replaceoperation. situations in

loans and equity capital can be repaid and in the investment from offifor very the who are (i.e., they may require regular reports with senior municipal especially recommend cials). In some instances, large projects, financiers introduction familiar to operate

l

A new contract franchisee is concluded ment, and/or

or a different continued

for refurbishment,

of private managers facilities.

The BOOT arrangement and/or operated

includes

with cash flow and debt repayment

which existing infrastructure authority. The trend toward public-private has generated or private owners/managers Some observers managers

is refurbished

on a lease from a public

Competing infrastructure demands:
faced with enormous infrastructure are looking of direct fiscal for water requirements some Canadian and operational and wastewater (e.g., for roads and bridges), municipalities accountability

partnerships public

much debate as to whether argue that public owners/

are more efficient. as private influence that or

for ways to divest themselves

would be just as efficient

services. This is especially to cover all

operators if they operated under similar conditions (i.e., they were free of political direct public accountability a return to shareholders). economies private ownership/management and is driven by profit-oriented that promote Regardless movement for providing throughout
l

the case when a user charge system already exists, or could be introduced, capital and operational costs.

but had to generate Others maintain involves incentives

Economies of scale: some municipalities,
especially small- to medium-sized In these instances, ones, a private have relatively modest water and wastewater infrastructure. operator with several existing facilities may

of scale, better access to capital, efficiency. there is a clear partnerships services

of the arguments,

be able to offer services for less and be better placed to raise capital.

toward public-private water and wastewater the country.

Reducing overhead: municipalities
seeking ways to reduce operating Entering into a public-private for water and wastewater gives them a mechanism planning, personnel administrative, to users. municipalities

are

Reasons include: withdraw of are

costs.

Raising capital: as governments
from indirect, becoming subsidy-type water infrastructure, partners

partnership all

financing

infrastructure for charging and technical

private financiers For

with water and wastemust fund a

water agencies and municipalities. example, when a municipality significant percentage

Several Canadian entered providing partnerships

have already for financand services. These

of water infrastructure acts as financial

into public-private

partnerships

from private sources, a financial intermediary (an underwriter adviser/partner or broker) to help raise capital,

water and wastewater

entail a range of ownership, retrofit, management,

ing, construction, control relationships

between the municipalities

and the private companies.

13

Principles for Public-Private Partnerships
When do public-private environment relationship nerships partnerships benefit the and the economy, and what type of does this entail? Public-private sustainability parttend to be

l

Capital and operational a rational customer

decisions

made on strong

market basis, including service practices.

l

Raising capital through ies (e.g., municipalities) nies depending costly for the project.

either public bodor private compa-

that promote

on which route is least

based on these principles:
l

Ownership

of water infrastructure

and

l

Transparent accounting.

fmancial

reporting

and

facilities by public bodies or agencies.
l

Strong public control provincial environmental

at the federal and and

level of water quality standards.

Impact on Sustainability
Public-private partnerships can benefit sustainproposed ability if they reflect the principles

l

Strong public consultation mechanisms.

and information

above. However, similar results can be achieved by structuring publicly run facilities on private publicly The key utility). sector principles accountable (e.g., an independent,

l

A competitive

test of whether

public or

private manager&anciers larger public interest.
l

provide the best

water/wastewater

mix of efficiency and service in the view of

point is to ensure that efficiency and the ability to raise capital are balanced with the public interest in service and environmental quality. This environment that or regulations. requires an open, competitive

Full cost, user pay pricing implemented

systems

on a gradual basis.

includes public interest guidelines

14

Il? Benefits of a More Ration1 Water and Wastewater Sys

Preserving Canada’s Water Resources More rational provision of water and wastewater services has several benefits for water resources and the environment:

l

Reduced stress on aquatic systems and water supplies: There is an assumption is wrong. While water throughout country is plentiful, short supply at specific locations urban areas during summer, that the at certain periCanada has water to spare. This assumption clean water may be in

Promoting Economic Development and Environmental Technology
The economic under benefits of attracting private infrastructure capital into water and wastewater They include: Technology development and application: A range of water-efficient, nologies markets in Canada because front-of-pipe techexists, many of which have limited they are not comthat use water and institutional water prices. The same is true in industrial

times of the year and day, for example, in drought ods, and peak demand. stress aquatic ecosystems plies. A more rational consumed, consequently These shortages and water supof water stress on system for water proreducing

full cost, user pay regimes are significant.

vision would reduce the amount the environment.
l

petitive at current more efficiently applications. Full cost pricing many technologies Examples
l

for some process technologies

Reduced improper discharges: Poorly maintained piping systems and sewers may lose more than 25 per cent of the water they carry. This means, for example, that effluent discharges into land mass and ground pricing water rather than being treated in wastewater plants. Adequate and wastewater needed to maintain systems for water adequately. would provide the capital infrastructure

changes this equation, commercially viable.

making

include: technologies, either generapiping (e.g., low-flow

water-efficient

tion or end-use-focused

shower heads, toilet dams, double

systems for homes and office buildings;
l

Maintained and enhanced environmental standards: When public subsidies and wastewater eliminated provincial (with the exception governments standards. for water or
l

solar, aquatic, or ecological forms of effluent treatment); process technologies efficient industry);
l

services are reduced

of support

that use less water and (e.g., more in and pumps

for small, rural, and remote communities), put more emphasis and enhancing This benefits technologistandards new and on maintaining, environmental cal innovation, enforcing,

generate less waste in production compressors and

water recovery and wastewater technologies membrane technologies

re-use

aquatic ecosystems and promotes since performance (which can be achieved through cheaper technologies) standards technology

(e.g., water barrels for homes; in industry).

rather than process

In the long term, home owners and builders respond to higher water prices by changing building designs to include, for example, xeriscaping and plumbing systems that re-use grey water. services

(which often restrict the type of used) become more common.

Higher prices for water and wastewater would help stimulate technology of new technology market, encouraging

Canada’s environmental development and services and attracting

risk capital to the sector.

16

Reduced infrastructure requirements: user pay pricing systems discourage tion of resources, less infrastructure

Since fair, consumpis needed.

Canadian construction

infrastructure technology

companies

(e.g., in and could

and project management) and wastewater treatment)

environmental purification compete

firms (e.g., in water in quality

Precise figures are difficult to calculate. However, if water prices rise by 100 per cent over time, water usage and a related percentage water generated financing between cent. Thus, the actual amount required overestimate, of waste30 per is an decline by approximately (i.e., $79-90 billion)

effectively in these markets

and price. However, they appear to be missing many opportunities. The main reason is that the French, British, and American development supply turnkey construction, management, firms that win the infrastructure and management solutions including environmental contracts can engineering, insurance and

of infrastructure

and could likely be reduced by

10 and 16 per cent.9 should not be demand experience. brought about by

This means that infrastructure built to accommodate projections should Rather, the amount based on historical

technology, project firms have

straight-line

project financing,

legal services, and goods. Canadian

of new infrastructure

not developed the networks needed to offer that package of services, largely because there is no domestic demand have managed governments financing. This situation is changing as local authorities contracts and - individual municipalities out services and subsidies to cover and contracted have provided

reflect lower demand infrastructure and attention such innovative

higher prices. Further, higher, full cost prices for environmental approaches, considering services open the should be given to options. Canadian door to more sustainable service delivery

Job creation: A more sustainable water and wastewater for job creation. tens of billions infrastructure struction, engineering, insurance,

such as Hamilton multimillion

and the York and Halton

system has vast potential attracted to address

regions tender management

Private capital (likely in the of dollars) needs would create jobs in conenvironmental of jobs

dollar projects (in excess of These initiatives are based on of a

$300 million for both Halton and York)” to private companies. partnerships. domestic wastewater communities of Canadian full cost, user pay systems and public-private By fostering infrastructure are helping companies the development turnkey solutions, these market requiring water and

project management, environmental

technology, finance,

and legal firms. The number

directly and indirectly precise figures.

created would be sub-

stantial, though further work is needed to provide

to build the capacity to compete in interna-

tional markets.”

Opening Up a Major Export Market
Global demand structure ronmental for water and wastewater infrais growing rapidly (in Southeast Asia, technologies as a whole is 16 per cent a of Latin America by infra-

for example, the projected growth rate for enviyear) .” The growth of cities, especially in the newly industrializing structure development. economies and Asia, is at last being accompanied that the water infrastructure industrializing economies

The World Bank projects market in newly will grow by $400 bil-

lion between now and the year 2005.

17

V. Results of the NRTEE’s National Multistakeholder Consultation

_,‘,./.,., i /& ;.,>;p,,>>.” .~ /.* “* ,~‘*: ,.<“yf&> =;<. _ jy;, .I$).i,, ,~ ,
Areas of Major National Consensus The multistakeholder round tables convened by

the NRTEE revealed broad agreement with the analysis presented in the previous chapters. The round tables also identified concerns over the impact of a more rational water and wastewater system and highlighted ways to ease the transition to such a system. The major areas of consensus were as follows:

19

Infrastructure Needs
1. Canada’s water and wastewater shortfalls infrastrucCapital ture is in major need of upgrading. to a rapid deterioration ahead. 2. There is a critical need for more capital to meet existing and new infrastructure demands. Given public fiscal realities, a of private capital for water infrastructure is required to major infusion and wastewater maintain facilities. 3. The time to act is now: any delay in dealing with Canada’s water and wastewater structure more daunting in the future. infrachallenges will only make problems

Achieving a More Rational System
6. Canada’s water and wastewater pay principles system will likely have to move toward full cost, user over the next decade simply capital requirein to meet basic infrastructure the price of water services. 7. The introduction private partnerships vate financing of various types of publichas much merit since priand

over the past two decades have led of infrastructure, in the years

and this process will accelerate

ments. This will mean major increases

will be required to maintain

build new water and wastewater infrastructure. 8. Both public and private means for delivering services are valid provided public interest companies compete (a) the overall is served, to in service quality

existing systems and build new

and (b) public and private agencies/ have an equal opportunity for water infrastructure contracts environment. in an open, In addition, an projects

and management competitive independent rate increases 9.

Current Market Distortions
4. Current pricing regimes do not encourage across conservation. the country resources. 5. The full capital and operational ly to the consumer. A substantial costs of treatproportion The lack of user pay systems encourages overuse of water

means of reviewing/approving should be establishkd.

The key issue in service delivery under either public or private models is the application of full cost, user pay systems and rational, sustainable decision making. developrole in

in many regions and municipalities

10. The transition

to more sustainable provincial

ing water and effluent are not charged directof costs are covered through tax or other ineffiof water

ment of water and wastewater likely involve a reduced the regulation coupled and monitoring environment. innovation nate regulations or provision

services will

of such services, role in regulation review to elimi-

public subsidies. This is creating a capital “gap” in water services and promotes cient production resources. and consumption

with an increased A regulatory is long overdue.

of water quality and the that inhibit efficiency and

Easing the Transition
11. Small, rural, and remote require transitional financing evolves. fiscal municipalities will and ongoing support as a

more open system with less public capital

12. There may be a need for short-term incentives municipal borrowing versus provincial/federal during the transition

to bridge the higher costs of period.

20

13. The impact lower income through

of water price increases

on

Some participants, environmental be factored

particularly should

groups should be moderated fiscal supports;

NGOs and some public offiinto the price of water services

direct or indirect

cials, believed the cost of externalities in the long term.

however, the specific means for doing this are not clear. 14. The role of labour through bargaining adherence should be respected to negotiated collective

Some private sector participants assets and that this would provide asset security for financiers. pants, however, believed public ownership protection of broader

felt the some

private sector should be allowed to own Most particibetter

agreements.

Consultation and Collaboration
15. Maintaining moving will require water quality and service while extensive collaboration between toward a full cost, user pay system labour, environprocess of

that continued

of assets provides

societal interests.

Public operators structure

and private sector infraparticipants had

all levels of government, mental organizations, A planned and incremental

company/finance

and the private sector.

differing views on the private sector’s capacity to raise capital and operate facilities more efficiently than the public sector. Many prithought the private of more they and ability to maninfrastructure believed vate sector participants sector had the incentive age the development water and wastewater efficiently

change is highly desirable. 16. All stakeholder the transition groups must play a role in toward a more sustainable system.

water and wastewater infrastructure 17. The transition significant nication individual process should include

and operation

than public agencies. Many pub-

public participation municipalities

and commu-

lic water service managers parts and had the advantage generate ticipants took the position

both at the macro level and within or jurisdictions.

were as efficient as private sector counterof not having to Other parthat the publicmana return to shareholders.

Spin-0fjCBenefits
18. A full cost, user pay system would significantly increase environmental economic demand for eco-efficient and promote infrastrucIt would in 5. through technologies,

private issue is moot as long as systems are operated in an open and competitive ner. Some environmental NGOs had concerns and manage-

development the capacity industry

ture renewal and development. also improve environmental export markets, job creation.

of the Canadian to compete growth and

over whether private ownership compromise the country. environmental

ment of water and wastewater facilities would standards - stanacross dards that are generally comparable

thus driving

Issues of Divergence
Opinions 1. were divided on the following from environmental organizations organizations are required services. 21 (NGOs) felt that issues: Most participants non-governmental and community comprehensive management sustainable and wastewater

land use and watershed to ensure a

future for Canada’s water

Regional Variations
Regional variations in the type and seriousness These variations development, and local of issues were also apparent. reflected the state of urban community legislation. 1. State ofurban capital problem Columbia in Ontario development: Ontario and problems, provincial

3.

Urgency of infrastructure problems: In Halifax-Dartmouth, problems the Greater Toronto infrastructure rapid progress In this respect, Canada are in Area (GTA) and Montreal, are promoting the search for solutions. some communities further is moving

size, urgency of infrastructure fiscal situation,

in Atlantic

ahead than the GTA, which in turn faster than communities in the or British Columbia.

Prairie provinces 4.

Quebec have a very different infrastructure from that of British and Alberta. In older urban areas and Quebec, capital has not been infrastruc-

Fiscd situation: The weaker fiscal situation of Ontario, Quebec, and some Atlantic provinces is prompting liberalizing ture regulations them to look closely at water and wastewater infrastrucin the near future. The probdebt.

adequately provided to maintain problem demands.

ture over the past several decades. Their is how best to recover from this and also meet new in British Columbia growth 5. In contrast, capital shortfall

lem appears less pressing in provinces that have begun to reduce their provincial Local Iegislation: Legislation water and wastewater significantly particular between province. some cases between direct regulatory than does Alberta. Saskatchewan that responds affecting and in in a

and Alberta, where major urban to capital& new infrastructure

services can vary provinces, municipalities

took place more recently, the issue is how requirements most effectively. 2. Commttnity communities providing Ontario, addition, in Quebec size: Small, rural, and remote are more concerned than major retreat from pronounced in In

Quebec has a more Manitoba and spread of

role in service delivery

centres about a government This concern is particularly Manitoba,

have a legislative environment to the geographic municipalities. and focus across in developing

capital for water infrastructure. and Saskatchewan. Canada

small- and medium-sized These differences the country transition in emphasis

there appears to be more concern and Atlantic about how and lower income

should be considered strategies system.

toward a more sustainable

smaller communities services.

water and wastewater

groups could pay higher prices for water

22

VI. Advice to Stakeholders

Members of the NRTEE recognize that the transition to a more sustainable water and wastewater system in Canada will not be easy. Various regulatory, local authority, infrastructure industry,

and financial hurdles must be overcome to build a system that benefits Canada’s environment and economy.

The following stakeholder suggesting

advice flows from the national organized by the groups,

l

Investigate

the merits of short-

or medium-

consultations

term incentives on investment-to financing
l

- such as capital gains relief attract private capital for

NRTEE. It targets specific stakeholder environmental and economic

actions that will help achieve both goals in the delivservices. As much are based on could

water infrastructure. a study into the impact of providsectors

ery of water and wastewater stakeholder

Conduct

as possible, the recommendations

ing more sustainable of the economy.
l

water and wastewater in various

consensus. Where stakeholders to help advance

services on employment

not agree on courses of action, the NRTEE makes recommendations contentious issues. proposed below will the debate on

Help Canadian environmental development

water infrastructure technology companies

and the

The success of the actions depend education engagement and participation is important

expand into global markets by fostering of the domestic market.

to a large degree on effective public in the transition delivery of services. Public for three reasons. First, long-term

process and ongoing few Canadians and wastewater

Provincial Governments
l

Reform regulations wastewater mental performance

governing

water and environ-

real&e that the true cost of water services (including costs) is up to double what water bills or taxes. are imposed without
l

services, emphasizing process.

rather than the tech-

capital and operating they pay now through public education

nological/technical Strengthen standards.
l

Second, if price increases resistance will be profound. implies public participation change.

the provincial

role in regulating

and consultation,

consumer

water quality and setting environmental

Third, sustainability in the process of

Support pricing

the principle in the medium

of full cost, user pay and long term, and support municends, a infrastructure/

Government of Canada
l

phase out capital and operational for water and wastewater ipalities province (the cut-off services to large- and medium-sized by province). Once funding

Provide

education

about water and wasteto increase knowand decision makers.

water services in Canada ledge among consumers
l

point would likely vary support that it is no longer for water infraThis would debt rating.

could announce

Provide information to Canadian water and wastewater of public-private

sessions/workshops about sustainable services and the role

the lender of last recourse um-sized improve
l

municipalities

structure debt incurred by large- and medimunicipalities. the provincial

partnerships.

l

Ensure that the goods and services tax (GST) will either not be applied to water and wastewater services or, at least, be revenue neutral (i.e., generate no net tax revenue for the federal government).

Develop funding

specific water and wastewater and support programs for small, These and interestof projects planning. costs when under welfare communities.

rural, and remote could include

direct funding

free loans. They could also include technical for R&D and techservices to promote “bundling” among munities
l

l

Place a priority commercialization nologies

on support

for front-of-pipe to the Technology

several small, rural, or remote comand watershed-based

submitted

Partnership

Program.

Factor in water and wastewater calculating transfer payments and other social assistance

programs.

24

l

Ensure that labour agreements in the event of a transfer management operators.

are respected

market-based

mechanisms

(these could be

of ownership/

similar to air emission permits, for example). 8 Advocate watershed-based particularly issues. municipal ernment planning and

from public agencies to private

service delivery. This advocacy may be timely in provinces amalgamations systems. considering govand conservation and regional

l

Be open to working with environmental groups on regulatory

Municipal Governments
l

Provide

easy-to-understand

information

to

consumers

on the costs of water and waste-

water services and how these are financed.
l

Water Management Professionals and their Associations
l

Establish a uniform facilities throughout

accounting

and reporting Organiza-

Work with municipalities form accounting throughout water and wastewater

to establish

a uni-

system for water and wastewater agencies/ the country. tions such as the Canadian Wastewater Association resource
l

and reporting

system for

agencies/facilities

Water and
l

the country. of more holistic planning).

are an excellent

Develop greater awareness ways of delivering

to this end. politicians and senior of water and
l

water and wastewater

Educate municipal wastewater

services (e.g., watershed-based Develop an understanding partnerships in preparation

staff about the sustainability private partnerships.

of public-private for service

services, and the role of public-

delivery based on market principles.

labour
l

Study the impact of full cost, user pay pricing regimes on collective bargaining agreements.

Infrastructure and Environmental Technology Companies
l

l

Study how unionized user pay pricing, services.

jobs could be created infrastruc-

Show municipalities government economic

and other levels of and into water

in various sectors of the economy as full cost, and additional ture capital flows into water and wastewater
l

how environmental goals can be integrated service delivery.

and wastewater Determine wastewater pay pricing
l

how a more rational will affect jobs. development

water and

l

Explore how job classification could be dealt with in collective to promote efficiency

and mobility agreements

system based on full cost, user

in the sector. Identify technology opportunities that are commercially higher price regimes. to
l

Environmental Groups
l

viable under

Work with provincial strengthen

governments

their role in setting and enforcing standards

Develop models for public-private ships that reflect principles

partner-

water quality and environmental and regulations.
l

of sustainability.

Urge various levels of government how the external and wastewater introduced

to explore water using

costs of delivering

services can be valued and

in practice, preferably

25

Financiers
l

Determine provincially

the true cost of federally/ supported borrowing infrastructure. bond ratings and lenderservices. risk to fund

water and wastewater
l

Assess the impact on provincial of provincial of-last-recourse funding support position

on municipal

debt for water and wastewater
l

Develop mechanisms borrowing

to manage

and reduce the overall cost of municipal for water infrastructure.

26

Achieving a sustainable water and wastewater infrastructure in Canada will be an enormous The NRTEE

challenge; but it is not insurmountable.

believes (1) that it is technologically and commercially feasible to provide Canadian water and wastewater services in a more sustainable fashion; and (2) that national consensus exists for action by governments (including local governments), labour, environmental groups, water management professionals and their associations, infrastructure and environmental technology companies, and financiers.

27

To launch development

Canada

on a path to more sustainable sysframethe following

l

Water and wastewater delivered public-private environment

services could be depending on

of its water and wastewater

either by public agencies or partnerships, for the

tem, the NRTEE proposes work for action:
l

which route offers the best benefits and the economy.

The price of water and wastewater services charged directly to residential, institutional and industrial services. consumers should reflect the of these full costs (capital and operational)
l

Research should be conducted introduced mechanisms.

to determine

how various external costs can be valued and in practice through market

l

Indirect public financing eliminated. provincial

(subsidies) for water especially to

l

Innovative

front-of-pipe

technologies

that

and wastewater services should be largely However, governments, governments, should continue

conserve resources should be developed. This first state of the debate report from the NRTEE fleshes out this framework targeted at specific stakeholder posed actions, based on national trate the interconnectedness with advice groups. The proconsensus, illusand possible with com-

provide financial and other support for these services in small, rural, and remote communities.
l

of stakeholders

The principal provincial

role of the federal and should be to

the range of win-win mitment, ingenuity,

solutions

governments standards.

and partnership.

preserve water quality and maintain environmental

Appendix

Participants in the Round Tables on Environmental Infrastructures
Attendees The following infrastructure individuals services. attended the Round Environment Canada Bob Slater Assistant Deputy Minister for Environmental Conservation Environment Canada Donald Tate Head, Environmental Economics Canadian Wildlife Service Equity Environmental Kevin Mercer Gore & Storrie John Anderson Vice-President Industry Canada Don Stewart Senior Advisor, Environmental KPMG Will Lipson Partner Land Use Research Associates Sally Leppard President Lyonnaise des Eaux Alain Rosier Director of Development Martineau Walker Pierre Meunier Attorney and Former Deputy Minister-e de 1’Environnement (LURA) Services Table sessions on the subject of environmental

Toronto, October 17-l&1995
Chair Sam Hamad, P.Eng., M.Sc. Partner and Director, Research-Development Roche Ltd., Consulting Group, and Chair, Environmental Technologies Task Force National Round Table on the Environment and the Economy Allen Associates Greg Allen President Borden & Elliot Morton Gross Partner Canada Trust Robert J. Cummings Senior Vice-President Canadian Environmental Carole Burnham Associate Industry Association

Section

Affairs

Canadian Union of Public Employees Peter Leiss President, Local 185 CN Watson and Associates Cameron Watson Principal Enviromega John Bell President Ltd.

Minister, (Quebec)

Ministry of the Environment and Energy Brian Nixon Director, Environmental Planning and Analysis Branch National Round Table on the Environment and the Economy Gene Nyberg Corporate Secretary/Acting Executive Director

Environment Canada Jef Harris Economist, Regulatory Assessment Branch

and Economic

30

Ontario

Clean Water Agency Specialist Affairs

Robert Falconer Corporate Project Finance Ontario Ministry

of Municipal Branch

SOREMA Management Inc. Angus Ross President Member, National Round Table on the Environment and the Economy The Delphi Group Diana Cartwright Project Manager The Delphi Group Chris Henderson CEO and Managing

Dale Taylor Municipal Finance ORTECH Dr. VI. Lakshamanan Program Director Philip Environmental Stan Spencer Vice-President

Inc. Partnerships

Director

Public-Private

Price Waterhouse Terry Stephen Partner, Corporate Finance, and President, Canadian Council for Public-Private Partnerships Public Committee for Safe Sewage Treatment in Metropolitan Toronto Deborah Kyles, Co-Chair Public Committee for Safe Sewage Treatment in Metropolitan Toronto Kerri Shinn, Co-Chair RBC Dominion Securities Ann Louise Vehovec Vice-President of Government

Treasury Board of Canada Hani Mokhtar Senior Advisor, Office of Infrastructure Water Matrix Ian Stewart Vice-President Wood Gundy David Leith Vice-President Inc. & Director

Montrkl,

March 19,1996

Finance

Region of York Peter Osmond Director, Capital Works & Approvals Regional Municipality of Halton Art Leitch Commissioner of Planning and Public Works Regional Municipality of Hamilton-Wentworth Leo Gohier Director of Infrastructure Operations Environmental Services Department Regional Municipality of Ottawa-Carleton Judy Wilson Director, Water Environment Protection Division

Chair Sam Hamad, P.Eng., M. SC. Partner and Director, Research-Development Roche Ltd., Consulting Group, and Chair, Environmental Technologies Task Force National Round Table on the Environment and the Economy Association des ingenieurs Marc Couture Engineer CANATOM Guy Choinibre Financial Consultant City of Montreal Gilles Vincent Environment Coordinator Delta Engineering Jefiey A. White Engineer Forum Communications Jean Simard Partner municipaux

JANIN Alain H. Boisset President McCarthy Tetrault Marc Dorion Lawyer Ministere des Affaires municipals Michel Guimont Directeur d’infrastructures National Round Table on the Environment and the Economy Elizabeth Atkinson Policy Advisor Ordre des ingenieurs du Quebec Rend Morency Vice-president, Finances and services aux membres Roche Ltd., Consulting Group Yves Lord Director, Water Management Department STOP Bruce Walker Research Director The Delphi Group Christopher Henderson Chairman and CEO Traitement industriel des rtsidus urbains (TIRU) Jean Paradis President Ville de Bern&es-de-Saint-Nicholas Richard Blondin Mayor Ville de Quebec Herve’ Brosseau Assistant Director Ville de Quebec Fraqoise Viger Municipal Counsel Ville de Saint- Jean-sur-Richelieu Myroslaw Smereka Mayor

Vancouver, April I,1996
Chair Sam Hamad, PEng., M. SC. Partner and Director, Research-Development Roche Ltd., Consulting Group, and Chair, Environmental Technologies Task Force National Round Table on the Environment and the Economy CETAC West Bill Dinsmore Vice-President

- British Columbia

City of Chiliwack Ted Tisdale District Administrator City of Edmonton Public Works Allan Davies Manager of Water Eco-Tek Wastewater Kim Rink President Treatments Inc.

Environment Canada, Hazardous Waste Management Branch Gerald W Andrews Chief, Strategic Planning Division Environment Canada Ed Noreena Director General, Technology Greater Vancouver Ben Mar-r Regional Manager Regional

Transfer District

Inland Pacific Water Works Ltd. Steve Davis President Inland Pacific Water Works Ltd. Gina Rowan Special Projects Coordinator JR Huggett Co. Jonathan Huggett Principal Lidstone, Young h Anderson Reece Harding Barrister and Solicitor

General

32

Municipal Finance British Columbia James R. Craven Executive Director

Authority

of

National Round Table on the Environment and the Economy Elizabeth Atkinson Policy Advisor National Round Table on the Environment and the Economy Gene Nyberg Corporate Secretary/Acting Executive RBC Dominion Securities Inc. Larry Blain Vice-President and Director Sierra Legal Defence Fund Gregory J. McDade, Q.C. Executive Director The Delphi Group Diana Cartwright Project Manager The Delphi Group Christopher Henderson CEO and Managing Director Western Economic Diversification Dan Genn Manager, Infrastructure and Special Projects

Director

Members of the National Round Table on the Environment and the Economy
Chair
Dr. Stuart Smith President Philip Utilities Management Jean Belanger Ottawa, Ontario Allan D. Bruce Administrator Operating Engineers’ Joint Apprenticeship Cindy Kenny-Gilday Yellowknife, NWT Corporation Dr. Douglas Knott Professor Emeritus University of Saskatchewan Lise Lachapelle President Canadian (local 115) and Training Plan and CEO Pulp and Paper Association

Anne Letellier de St-Just Lawyer Elizabeth May Executive Director Sierra Club of Canada Dr. Harvey L. Mead President Union quebecoise pour la conservation de la nature Karen A. Morgan President Woodnorth Holdings H. Joseph 0 Neill i Vice-President, Woodlands Repap New Brunswick Inc. Edythe A. (Dee) Parkinson President CS Resources Limited Carol Phillips Director, Education and International Canadian Automobile Workers Angus Ross President SOREMA Management Inc. and Chief Agent SOREMA Canadian Branch Lori Williams Lawyer

Patrick Carson Vice-President Environmental Affairs, Loblaw Companies Elizabeth Jane Cracker Co-Owner, P’lovers G. Martin Eakins Partner KPMG Peat Marwick Johanne Gelinas Commissioner Bureau d’audiences sur l’environnement

Ltd.

Thorne

publiques

Sam Hamad Associate Director Roche Ltd., Consulting

Group

Dr. Arthur J. Hanson President and CEO International Institute for Sustainable Development Michael Harcourt Senior Associate, Sustainable c/o Sustainable Development Dr. Leslie Harris President Emeritus Memorial University

Affairs

Development Research Institute

34

Endnotes
1. Delta Partners, Canadian Approaches to Environmental Infrastructure Projects, Report to Industry Canada and Public Technology Canada, p. 8. Federation of Canadian Municipalities and McGill University, Report on the State of Municipal Infrastructure in Canada, p. 23. Powell, George P. “Financing Municipal Water and Wastewater Services - What Needs to be Done,” Environmental and Engineering, pp. 28-29. Science 5. Note: Operational Cost Estimates: No exhaustive source data survey of water and wastewater operational expenditures has been conducted. Most sources cite operational revenue (i.e. user fees 1995) $3.5-$3.7 bn. This, however, does not represent the actual cost of operation since tax, grant and debt-based revenue for operations (particularly for wastewater treatment) are not netted in. The estimate of operational expenditures totaling $5.9 bn. is, therefore, based on: an estimate of $6 bn. from the Delta partners; and the fact that the Federation of Canadian Municipalities/McGill survey estimated that user fees cover only 63% of water distribution and supply costs. Capital Cost Estimates: Capital costs include replacement costs for existing systems and building of infrastructure for new development. The calculation used for replacement costs took 1992 expenditures (G. Powell, 1995) for Ontario, updated to I994 (@ 5% per year) and extrapolated for the country (using Ontario as 40% of national activity). The specific calculation was: $912 mn. X 1.10/.4 = $2.3 bn. New building activity was estimated by The Delphi Group to total $2.4 bn. reflecting infrastructure expenditures primarily in the Greater Toronto, North and South Shore Montreal and Greater Vancouver areas. Total capital costs were, therefore, estimated to be $4.7 bn. 3. Federation 23-24. of Canadian Municipalities, pp. 4. Note: The Federation of Canadian Municipalities/McGill survey estimated that user fees only covered 63 and 33% of water and wastewater operational and capital costs, respectively. This translates into subsidies from other sources of $2.2 bn. of operational expenditures, and $3.1 bn. of capital expenditures. D.M. Tate and D.M. Lacelle, “Municipal Water Rates in Canada: Current Practices and Prices,” pp. 3, 12. Canada. Environment Canada,“Urban Water: Environmental Indicator Bulletin,” SOE Bulletin No. 94-1, (Ottawa, February 1994), p. 4. Canada. Environment Canada, p. 4.

2.

6. 7.

“Introduction to Public-Private Partnerships,” Proceedings of the The 23rd Annual Technical Symposium and Exhibition of the Water Environment Association of Ontario, Peat Marwick, (April 1994), p. 465. Federation of Canadian Municipalities, p. 5.

8.

J.W. MacLaren, “Clean Water for Ontario: New Directions, New Challenges,” Insight Information Inc., Moderator’s comments. (April 1995), p. 2. Note: Unmet infrastructure requirements (defined as immediate capital expenditures that reflect the need for improved drinking water supply and treatment, toxic chemical removal from wastewater including pollution prevention at the source, and combined sewage and storm water management) are, at the high end, projected to be over $50 mn. New infrastructure requirements (defined as systems expansion to reflect new urban development and new wastewater treatment systems) are, at the high end, projected at $100 bn. The figures used in the report are conservative and less than the high end projections.

9.

Steve Bonk, “Municipal Water System Leakage Reduction” In Encouraging Municipal Water-Use Eficiency edited by Michael Hyduk, pp. 24-25. Note: Water losses due to poor infrastructure are high. Examples include: St-Hubert (losses of 40%), Sillery (losses of 35%), Calgary (losses of 30%), and Scarborough (losses of 353.3 gallons per minute). These cities are representative and support a conservative estimate of losses exceeding 25%.

11. John Wiebe, GLOBE Foundation of Canada, “Opportunities for Strategic Alliances.” 12. Terrence Corcoran, “Perils of Water Privatization,” Globe and Mail, 27 April 1996. Note: This State of the Debate Report of the National Round Table on the Environment and the Economy is a product of a process of national consultation which included distribution and discussion of an Issues Paper on the subject of Water and Wastewater. The national consultation verified the analysis of water and wastewater reflected in the Issues Paper, including many of the facts and figures that are cited in the State of the Debate Report.

10. R.M. Loudon, “The Influence of Water/Wastewater Rates on Water Use,” Every Drop Counts, Edited by Dan Shrubsole and Don Tate, pp. 2,51. Note: The elasticity of residential demand relative to price increases of water (and therefore also wastewater) is 20-30%. Industrial/commercial elasticity is 5-15%. This means that a doubling of water prices will lead to a decline in water consumed by 20-30% for residences and 5- 10% for industrial/commercial users. Since the amount of infrastructure capital demand is based upon existing water consumption levels, estimates of future infrastructure needs should reflect a projected decline in consumption that increased prices will cause. It is estimated, therefore, that as households consume 20-30% less water, and businesses 5- 10% less, this should reduce infrastructure requirements by 1217%. This factor is important, since municipalities should build infrastructure to meet projected future rather than current consumption patterns.

36

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to be ‘The Name of the Game’ in

the ‘90’s. Phoenix: City of Phoenix, Public Works, 1995.

KPMG. Region of Halton Formulating a Corporate Policy on Partnering. Halton, Ontario, 1995. Levine, Steve & Judy Augustino. Moody’s Public Finance Perspective on SRF/Pooled Financings - Wastewater Resolving Funds have been Successful. New York: Moody’s Investors Service Inc., 1993. Limbach, Edward W. Private Sector Goals and Objectives. Paper from the Canadian Institute Conference on Public-Private Partnerships in Infrastructure Finance and Development. November 22/23,1993. Toronto: Canadian Institute Conference on Public-Private Partnerships in Infrastructure Finance and Development, 1993.

Projects: Background Paper of the Public Technology Canada [PTC/TPC) Municipal Environmental Sector Workshops. Ottawa:

The Delta Partners, 1995.

Loudon, R.M. “The Influence of Water/ Wastewater Rates on Water Use.” In Every Drop Counts. Edited by Dan Shrubsole and Don Tate. Cambridge, Ontario: Canadian Water Resources Association, 1994. pp. 249268. MacClaren, J.W. 1995. “Clean Water for Ontario: New Directions, New Challenges.” Toronto: Insight Information Inc., April 1995. McCaIIum, Duncan. 1994. “Canada Issues First Real Return Bonds.” Public-Private Review. Vol.1, No. 1. (April 1994): p.9. McCarthy Tetrault. “Public-Private Partnerships - An Update.” McCarthy Tetrault Infrastructure News. (November, 1994): pp. 1-4. McManus, Katherine b Adam Whiteman.
on

Water Environment Association of Ontario, Windsor, Ontario, April 17-19,1994. North York, Ontario: Water Environment Association of Ontario, 1994. Pisecki, Marie S. 1994. Moody’s Public Finance
Perspective on Solid Waste - Analytic Questions for Solid Waste Bonds. New York:

Moody’s Investors Service, Inc., 1994. Powell, George G. “Financing Municipal Water and Wastewater Services - What Needs to be Done.” Environmental Science and Engineering. May 1995. pp. 28-29. Public-Private Partnership Group of McCarthy T&rat& “Public-Private Partnerships at the Municipal Level in Quebec: Framework Legislation or Numerous Private Bills?” McCarthy Te’trault Legal Update. (May 1994): pp. 1-4. Sanderson, Mark. Public-Private
Partnerships the

Moody’s Public Finance Perspective Airport Credit Analysis - Refinancing Alternatives

for Airport Revenue Bonds. New York: Moody’s Investors Service, Inc., 1992.

Global Experience: Lessons Learned for the Canadian Water and Wastewater Treatment Industry. Paper from the 23rd Annual

Morden, Peter. Halton Region Biosolids Recycling Program: Privatization of the Operational
Component, A Public/Private Partnership Case Study. Paper from the 23rd Annual

Technical Symposium and Exhibition of the Water Environment Association of Ontario, Windsor, Ontario April 17-19,1994. North York, Ontario: Water Environment Association of Ontario, 1994. pp. 491-505. Seldon, John D. Municipal Wastewater Treatment Operations: Public Sector or Private Sector Domain? Paper from the 23rd Annual Technical Symposium and Exhibition of the Water Environment Association of Ontario, Windsor, Ontario, April 17-19, 1994. North York, Ontario: Water Environment Association of Ontario, 1994. pp. 425-440. Sharratt, Ken, Bib WardIe & George Fiotakis. 1993. Ontario’s Water Eficiency Strategy. Paper from Canada’s First National Conference and Trade Show on Water Conservation, Winnipeg, February 5,1993. Toronto: Ontario Ministry of Natural Resources, 1993. pp. l-6. Shrubsole, D. & D. Tate. Every Drop Counts. Cambridge, Ontario: Canadian Water Resources Association, 1994.

Technical Symposium and Exhibition of the Water Environment Association of Ontario, Windsor, Ontario, April 17- 19, 1994. North York, Ontario: Water Environment Association of Ontario, 1994. Nantel, Martin. 1995. Sewage Treatment and Disposal in Quebec: Environmental Effects. Toronto: Environment Probe,1995. National Round Table on the Environment and the Economy. An Environmental and Economic MarketAnalysis of Environmental
Infrastructures in Canada: Moving Towards a Sustainable Future. Ottawa,1995.

Ontario. Standing Committee on Finance and Economic Affairs. Joint Committee Water Industry Associations, February 15, 1995. Toronto, 1995. Peat Marwick Introduction to Public-Private Partnerships. Paper from the 23rd Annual Technical Symposium and Exhibition of the

38

Simke, John. “Structuring Public-Private Partnerships.” Speaking notes from the 23rd Annual Technical Symposium and Exhibition of the Water Environment Association of Ontario, Windsor, Ontario, April 17- 19, 1994, North York, Ontario. Toronto, Water Environment Association of Ontario, 1994. pp. 451-464. .“Infrastructure - Newsletter.” Price Waterhouse, National Public-Partnership Group. August 1994, No. 5. Stanley, Tim. Review of Public-Private Partnerships. Thornhill, Ontario: Marshall Macklin Monaghan Limited, 1994. Tate, Donald M. h D.M. Lacelle. Municipal Water Rates in Canada: Current Practice and Prices, 1991, Social Science Series, No. 30. Ottawa: Environment Canada, Water and Habitat Conservation Branch, Canadian Wildlife Service, 1995. Vehovec, Ann Louise. “Presentation to the Canadian Council for Public-Private Partnerships - Financing Structures, Instruments and Costs.” Government Finance, Royal Bank of Canada Dominion Securities. November 21,1994. Toronto: Royal Bank of Canada Dominion Securities, 1994. Wiebe, John. “Opportunities for Strategic Alliances.” Speaking Notes from the Conference on Pacific Partners in Environmental Technologies, Brisbane, Australia, November, 1995. pp. 1-59. Brisbane: Conference on Pacific Partners in Environment Technologies, 1996.

Personal Interviews
Baker, Luanne, Public Affairs Director, Indianapolis. Personal interview. July 16, 1995. Gohier, Leo, Regional Municipality of Hamilton Wentworth. Personal interview. July 17, 1995. McCleary, Dave, Regional Municipality of Halton. Personal interview July 6,1995. Morrison, Ken, R.V.Anderson. Personal interview. July 13,1995. Osmonde, Peter, Region of York. Personal interview. July 27,1995. Sharratt, Ken, Ontario Clean Water Agency. Personal interview. June 30,1995. Tate, Donald M., Environmental Economics Section, Environment Canada. Personal interview. September 29, 1995.

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