Wednesday, November 23, 2022

City's water infrastructure planning makes for discussion Monday at Council session

City resident Tom Kertes brought a list of concerns and questions
related to how the City of Prince Rupert may be looking
at the future of the city's water infrastructure system

"No decision has been made at this point in time, we're very early in this process" -- Prince Rupert  Mayor Herb Pond offering some reassurance that any plans towards the future of the city's water infrastructure are still in the early days of discussion. 

Whatever plans that City council may have towards the future of how they operate the civic water infrastructure, Monday night provided some notice that as they chart the path forward, keeping the public informed should be the number one priority.

What became a presentation topic at City Hall for a local community advocacy group, came in response to a recent call for expressions of interest by the City on the BC Bid website, which was looking to explore the prospects for partnership on the city's water treatment plans.

A topic we explored back in mid October and a note that propelled the local group People for Public Infrastructure to seek out an opportunity to discuss the topic with council.

That came as part of Monday's Committee of the Whole presentation, when Tom Kertes appeared in the Council chambers to share his concerns and that of the community group towards the dangers they believe a private model could lead to.

With the City's Operations Director Richard Pucci to deliver his own report on the topic later in the session, Mr. Kertes chose to focus on some of the reading of that report to frame his presentation, for the most part relaying ten questions that the document raised for him.

Those themes included:

When did city council direct senior staff to move forward on using a municipality-controlled corporation to run the city’s public water and, possibly, public sewer system – in partnership with a private company? 

Who was involved in developing plans to set up a municipality-controlled corporation, working with a private company, to run (including finance and operate) our water and, possibly, sewer system?

Is there a business plan and can we see it? 

How much debt does the city plan to finance through a municipality-controlled corporation? The initial rumour was $230 million dollars. Is this true? 

What assurances do residents and businesses have the once a municipality-controlled corporation is formed that it will not be sold in whole (or part) at a future date? 

What are the alternatives and have these been considered by city council already? 

What can a municipality-controlled corporation do that a public (within the municipality) utility cannot do? 

If the municipality-controlled corporation forms a partnership with a private company, then how will its profits be calculated and paid for? 

Will the municipality-controlled corporation be able to make a profit? If so, why? 

Finally, is the decision already made? Or is there still a process for the public to share its concerns and to have input into how our public utility system is structured, run, and financed?

In reply to his opening remarks, Councillor Adey observed how there was a a lot to absorb and how the questions were worthy of answers and that as things unfold he hoped he would get those answers.

The Mayor noted that no decision has been made to this point and that it was very early in the process.

Following his list of questions, Councillor Teri Forster suggested that Council also allow for his scheduled presentation, a slide show review of some of concerns the group has related to any thoughts of taking the civic infrastructure into the private sector.

Much of their work on the topic is also available online, which you can review from their website here.

In comments following up on his presentation, Councillor Cunningham thanked Mr. Kertes for it and noted that some of his questions could apply to anything that the Council does. 

The Councillor also observed that on the issue of the water initiative, there is no intent to privatize the whole system just to determine if there is an alternative to it and it is not something that Council takes lightly.

"I don't think we're going to privatize the whole water system, I don't think that was the intent of council. We were just reaching out to see if there was an alternative to it. 

So far, like the mayor says there has been no decision made and before we make a decision, trust me we'll be looking around, it's not something that we're going to  take lightly.

As much as I'd like to see the sewer privatized because we would save 120 million dollars that we don't have I don't think that will ever happen, it's not exactly a buskins most people want to get into -- Councillor Barry Cunningham

That set the stage for the presentation to Council from the City's Director of Operations, who observed that many of the Questions asked by Mr. Kertes would require a bit more time to answer.

Mr. Pucci's presentation provided some background to the city's water infrastructure and to highlight why they had sought out interest from the private sector.

"At this point right now, we've just requested to see if there's any interested parties for this design, build, operate, maintain and finance model. 

We had no idea if there was interest, we heard there might be so we thought we would go out and take a look ... and council was aware of that.

At this point right now, we have not completed our review process, but there has been some interest. Council will be aware after we've done a full compliant look at the bids then we can bring that forward for council Review"-- Operations Director Richard Pucci

Towards why the City may explore taking on some private interests in operation of the civic infrastructure program, the Operations Director noted of the financial issues related to the work required, the challenges of attracting staff members towards operations.

"The city is proposing this because a lot of it has to do with Operation Capacity and  some of it has to do with Financial concerns" -- Operations Director Richard Pucci

The proposal would be for a municipally owned company, controlled by the City Council, with the City to have a larger share of whatever Board was required to operate it.

From report to Council November 21 2022

When it comes to a new water treatment facility, Mr. Pucci observed as to how it would be state of the art and how there is a need to introduce a more sophisticated system to that currently in place, which he noted was verging on non-compliant.

He also observed that they don't anticipate any conflict with the union as they have been specific on any ties to union agreement provisions, noting  however of the ongoing challenges towards attracting and retaining qualified individuals for the infrastructure.

To that theme he suggested that the proposal may be one way to solve some of those staffing concerns.

From report to Council November 21 2022

Like the Mayor, Mr. Pucci reinforced that no decision has been made to this point.

"I just want to stress that there is no decisions made, Council does ultimately have the final decision here and that the first step was always to go out and see if there was actual interest in the market, to see if there was interest there to support us" -- Operations Director Richard Pucci

City Manager Rob Buchan picked up on the theme of the staffing issues, recounting some of the many challenges the city is finding as it tries to fill vacant positions with little success and how it is a significant and difficult issue for Council to consider.

With the prospect of the proposal for  the partnership to be able to have some confidence of a pool of technically qualified people available to run the water facility.

"Director Pucci has identified the staffing as the major issue and it is. I can tell Council and share with the community that we've actually engaged recruiting firms over the last year to try to fill vacant positions in public works,  unsuccessfully except for one position.

You know this is not a small issue, it is not a small challenge ... if we were to have a plant designed and a plant built which would be by private interests because we don't do that. 

We would have to be then faced with the challenge of operating  and if you don't have staff to operate and you don't have a pool of staff to draw from or the ability to attract, you end up with basically a disaster on your hands because you can't run the system, not viable.

So we're facing this reality, this new reality that is perhaps, more continental or even global of competing for resources, competing for staff resources and technically skilled people, this is very difficult. -- City manager Rob Buchan

Doctor Buchan suggested that the approach is not so much that of privatization but that of a service model.

"So What's driving this interest in exploring this not privatization model, but this service model I would say is a better description. Is to be able to have some confidence that we have a pool within a broader service provider of technically qualified people to actually run the water treatment facility. 

So that is perhaps one of the biggest challenges that were facing and that is why we're exploring this at this point" -- City manager Rob Buchan

As the others had, the City Manager also stressed how the process was still in the very early days.

In response to a question from Councillor Adey towards a timeline for the issue and where the public would have a change to offer input,

In reply the Director observed that there would be a review of the expressions of interest received and bring that to Council, at which point Mayor Pond noted that Council could then decide on how to define the public inputs and process that they wish to pursue.

The full thirty five minute discussion can be reviewed as part of the Council Video from Monday, the topic opens up the evening's council work.

The City has posted some additional information of the topic through the civic website 

More notes on Monday's Council session can be reviewed through our Council Timeline Feature.

A look at the city's ongoing work on infrastructure themes is available here, while past Council Discussion themes can be reviewed here.


  1. The staffing issues Mr. Buchan doesn't make sense aside from the city not wanting to accept responsibilities for hiring training and maintaining staff.

    If another company was to build and operate the facility, there would be a cost to hire train that employee.
    There is also a cost for redundancy built into the program (coverage for holidays. illness, terminations and employees giving notice.) would in all likelihood not be local hire so you might be looking at turn-around and travel to and from Prince Rupert along with room and board. No company is going to do this at cost. The labor costs will be marked up and profit paid to the operator. All of this is added cost to the taxpayer.
    City utilities should not be in the hands of the private sector. We have managers at city hall let them manage not pass the buck.

  2. How can you compare an offer from an operator if you don’t know what it would cost the city to build it. The city is looking for some entity to finance construction. Do you really think the cost is going to be less then the municipal borrowing rate.

    Talk about passing costs on to your children and grandchildren.

    1. Public infrastructure is usually financed with long term public debt because it is future users who will benefit from it. We all benefit from public utilities. The fairest way to pay for it is over the course of the infrastructure's usefulness. We get way more value than cost for utilities like water and sewer. If a private company owned this monopoly it could charge a lot more than the city does, because of the value that utilities provide (we need them, we will pay a lot for them). Because of this monopoly power, we elect people to represent our interests in low fees and good services. That system works really well and allows us to save a lot money by living in cities (not needing to build our own wells, and our own septic systems - which are not even possibly in a densely populated town or city).

  3. All the language is there to make this exercise non binding.
    This resident is pleased to see that city hall realizes its limitations and is doing its due diligence on behalf of taxpayers to explore alternative service models.
    For those who are rushing to the conclusion of privatization, you are tilting at windmills.

    1. No, they're not tilting at windmills. As councillor Adey commented, there are questions worthy of answers.

      There are two issues here that should be separated.
      1) Having a large enough pool of skilled people to draw from, which a private company could provide. That could be addressed by contracting out the operation of the facilities. As you say, alternative service models should be explored.

      2) Having a private company finance the facilities on a for-profit basis because the cost involves, as councillor Cunningham puts it, "money we don't have". That's a very different question.

      Successive councils have had a penchant for investing in commercial activities with the aim of making profits to keep taxes low, but that comes with opportunity costs, the city's ability to finance water/septic facilities is a case in point. The council should be looking at privatization, but that should include looking at some of the city's investments that do not deliver municipal services. The private sector is quite capable of delivering telecom services, operating a logistics park etc.

    2. Profits from a city owned monopoly are essentially taxes. We have no choice for utilities and if the city owns the monopoly and charges higher than needed fees, those profits are essentially just hidden taxes. And if part if those fees make profits for private corporation, then we’re essentially being required to pay taxes to a private corporation.

  4. Read the Memorandum to Council (Nov 17, 2022). City staff proposed a plan to transfer city utilities to an MCC (a corporation outside of the city but with at a majority of board members representing the city) and to have the MCC partner with a private company. That is a proposal to privatize - as utilities would no longer be directly within the city itself. City staff at the council meeting confirmed this plan. They are proposing to privatize utilities by transferring them out of the municipality and by also partnering with a private company. That is privatization. City council pushed back on this, which is good news for keeping the system public. No windmills here. City staff confirmed their plan and tried to justify it. If they have it their way, the utilities would be transferred to an entity outside of the the municipality, one owned by the city but no longer part of the city and one in partnership with a private and for-profit corporation. This is full on privatization. That is a major restructuring with huge implications for ratepayers and local democracy.

    1. There are no bad questions, and most readers will understand the concerns that have been raised to date.

      But words like proposing, non binding, exploring appear to be ignored. While privatization is being glommed onto.

      This problem is being defined, measured, and assessed in a linear manner by the city.
      Non-linear speculation by residents just adds to the rumour pile at this point.

    2. I voted for council to represent me at council meetings. There was not a vote for board of directors of a private company.
      Thirdly, in addition to having good leadership skills and being a good team player, good directors will of course require some operational experience or sector expertise. This may be in some or all of the following:

      Financial matters - not just for the CFO or FD of the company, all directors require some level of financial acumen.
      Industry knowledge
      Sector knowledge
      Operational experience
      Strategic thinking

      Too my knowledge current council doesn’t meet the criteria.

  5. Of course the current council does not meet the criteria that you list. Nor is any future council likely to. Council members are not elected to be business managers with those various skill sets. Their role is bring the values and concerns of the community to bear on decision-making, particularly about civic policies and priorities.

    It is city staff, whatever their particular areas of responsibility, who are collectively expected to have the requisite financial skills, experience and operational knowledge, no different from their managerial and management support counterparts in the private sector.

    As for company directors, there is no general rule that requires that they have the skills of business managers. Some do, lots don't. Some directors serve on the boards of companies in different industries. Their role is to bring to bear on decision-making the values and priorities of the shareholders, particularly in terms of risk tolerance, expected returns on investment, and corporate ethics. Directors have a different role from managers, same as council members.

    1. If council is on the board of directors on a private partnership, I stress private, their duty lies with the partnership and not the City of Prince Rupert

      Under the fiduciary duty of loyalty, directors and officers are to act impartially and place the interests of the corporation first, not allowing their decisions to be tainted by self-interest or self-dealing

    2. Yes, a director has a duties of loyalty, honesty and good faith to the corporation, but there is no prohibition against a director of a corporation holding positions on the board of another corporate entity, whether another corporation, a society or a municipality as an incorporated entity. Many directors sit on more than one board, and many corporations have interlocking boards of directors., as in a group of related companies. The possibility of self-interest or self-dealing only comes into play if there is a "material interest" that conflicts with the interests of the corporation, in which case the director must disclose the nature of the conflict. They are not required to resign if there is a conflict. Nor are they prohibited from serving as a director because the possibility might exist that there could be a conflict of interest in future. But they must disclose material conflicts if and when they arise.

  6. City staff's privatization plan is detailed in the memo to council, the staff presentation for city council, and the BC Bid expression of interest. Here are some quotes from these sources worth noting.

    1. The memo says that "Council approved the directive for Senior Staff to move forward with a Design-Build-Finance-Operate-Maintain (DBFOM) approach using a Municipality Controlled Corporation for designing, building, financing, operating, and maintaining the service". This transfers governance of the service to a city-owned company and has that new company working with a private-company (P3).

    2. The memo also says that "The City's WTP [water treatment plant] is proposed to operate as a Municipality Controlled Corporation (MCC) and will be the treated water provider for Prince Rupert residents, with the possibility of expanding into wastewater treatment". This shows that city is already considering to expand the new governance structure and and private-company (P3).

    3. The expression of interest request says "The City of Prince Rupert (City) is requesting Expressions of Interest (OEI) from potential partners willing to enter into a legal relationship with the implementation of the City's required Water Treatment Plant (WTP)". This confirms that the city is looking for a private company to partner with.

    4. At the city council meeting, staff said that at least a majority of the board members of the new Municipality Controlled Corporation would be city board members. This leaves open having some board members not representing the city.

    We need more details. But the above information suggests that the city is planning to start a new company, transfer the service provision part of the water utility (and possibly sewer) to it, and then to have a private company partner with the new company. The new company would be owned by the city but operated outside of it. This would mean that the entire service delivery and water treatment part of the utility would be run outside of the city itself.

    1. Another potential business venture for the Hermit Kingdom, how exciting!

      I hope we receive big novelty cheques from this new company only to have them turn around and charge tax payers six figures for services.

      Example - Prince Rupert's telecom monopoly handed over a cheque for $800 000 in 2021, but invoiced $156 795 to City Hall in 2021.

      Meanwhile in Terrace, their SOFI has no mention of Citywest, but states a payment of $26 722.93 to Telus for 2021 services.

    2. You seem to be very well versed on this. I have a question. How many other municipalities have this structure for their utilities, 1%, 5% 10%? If less then 10% why is this good Prince Rupert taxpayers?

    3. The MCC is required to distance the city and taxpayers from liability. Like the following example.