Innovation Deficit

Great cities don’t hire P3s to do all their thinking for them

by Paul Dechene

city-hallMALTA — I’m sitting in the Three Villages Bar in Malta reading online reports of big savings on Regina’s wastewater treatment plant public-private partnership. By all accounts, the deal is really good.

“It’s a win all round,” your online media tells me. “It’s a triumph for Regina.”

Yeah, it’s a triumph, all right. But not for Regina.

It’s a triumph for Edmonton.

Here in Regina, the much ballyhooed WWTP P3, rather than a cause for popping champagne corks and holding a ticker tape parade for council, is a reminder of how we’re losing the municipal innovation war. You didn’t know we’re engaged in a municipal innovation war? That’s okay. Neither does council. They’re too busy patting themselves on the back for implementing policy tools 20-plus years out of date. We’re Accessing Federal Grant Funds and Partnering With The Private Sector to address our infrastructure needs! How very 1990s of us!

We’re Trimming Budgets and Finding Efficiencies! Brian Mulroney will be so proud!

Edmonton on the other hand is raking in out-of-province cash through a water and power utility that’s also an exportable commodity. An arms’-length municipal facility that shops out its expertise so as to generate buckets of sweet cash for its lone shareholder, the city? That sounds suspiciously like one of those alternative revenue tools our council says it’s been meaning to find so that it doesn’t have to crank up our property taxes every year.

And yet somehow city hall thinks it’s a good idea to brag about partnering with a profit-generating water corporation that’s wholly owned by another municipality. The optics seem a little off on that.

Of course, EPCOR isn’t synonymous with Edmonton. EPCOR isn’t exactly a public sector utility in the traditional sense. It’s an independent corporation. But a corporation’s sole job is to please its shareholders — that’s what they taught me in business school. And seeing as EPCOR’s lone shareholder is the City of Edmonton, it isn’t a private corporation in the ordinary sense either.

Shouldn’t all those staunch No side supporters be a tad taken aback by that?

I remember a council meeting before the referendum where Councillor Hawkins orated at the gallery about how the WWTP P3 was a good idea because Regina will benefit from the expertise of whatever private partner runs our wastewater plant. At the time, most everyone I talked to assumed it’d be one of those European water titano-consortiums with an inoffensive Swedish-designed name and a reputation for Teutonic perfection. We’d be accessing that free-money flywheel that only unfettered capitalism can set to spinning.

Screw Big Government. We were on the hunt for our own John Galt. But here we are a year later and the John Galt we got is completely beholden to Alberta’s third-biggest Big Government.

Ayn Rand was a severe mistress. I doubt she’d consider this arrangement ideologically pure.

And secretly, deep inside their withered hearts, that’s got to make Regina’s free-market fundamentalists a little nervous that maybe J-Galt won’t be fully free to deploy all his Objectivist mojo on the problem of making our poop flow faster and better.

But, hey, if it was never really all that necessary to go schlepping around Galt Gulch to find us an untainted wizard of capitalism, maybe it’s time to do a serious rethink of the “Private” P in the P3 acronym.

The funny thing is, pre-referendum I remember speaking to academics and think-tank thinkers who seem to agree that the real experts on processing city wastewater are all those city employees you’ve hired to do that job every day. Wastewater treatment isn’t rocket science, they told me, and typically it isn’t the plant workers and engineers you have working for you who are throwing up barriers to innovation (hint, hint).

And that kind of suggests that every city has its own miniature water titano-consortium right there in its backyard. It just needs to find a way to unleash all that pent-up public sector expertise.

The genius of the EPCOR/Edmonton model is that it recognizes this.

The City of Edmonton’s water utility isn’t just about its built-capital. And it isn’t tethered to its city of origin. EPCOR is also a team of highly skilled, highly trained employees. And instead of sitting back and wondering, “Who can we fire so as to achieve ‘efficiencies’?” EPCOR instead asks, “How can we sell this?

Enter willing buyers: in this case, Regina, eager to fob off its wastewater processing. We said a hearty 57-per-cent Yes to Harper’s offer of $58.5 million and, by doing so, turned our city sewage into an indirect revenue stream for another municipality.

Now, everywhere I look, I see people saying, “What a great deal we’ve signed on to,” and not, “Why aren’t we doing what Edmonton’s doing?”

I suspect at the root of this is a long-held belief that we’re a small prairie city with nothing worth exporting. How can we compete with giants like Edmonton who’ve had a decades-long head start? What could we possibly have to offer? We should just accept our lot in life as a buyer of services and not a seller of them.

If cities had gruff grandfathers hassling them over every adolescent misstep, Regina’s would be saying right now, “You’re never going to get anywhere with an attitude like that.”

Regina’s grandfather might also point out that boasting about your growing tax base and all your greenfield housing starts won’t do anything to win you that municipal innovation war.

You win the municipal innovation war with good people, he’d say.

But when you’ve committed your organization to outsourcing, contracting, downloading, downsizing and utilizing outside consultants, then maintaining your own payroll starts to look like a major inconvenience.

That’s why you’ve seen public institutions mercilessly slashing their workforces since the days of Thatcher and Reagan. And Regina is carrying on that tired practice.

For instance, the kick-in-the-teeth clause of that WWTP P3 deal is that we’re letting EPCOR hire away all those City of Regina people who’ve built careers at our wastewater treatment plant. We can no longer tap their genius to turn our city into a 21st Century powerhouse because Edmonton, via EPCOR, bought that genius.

It’s all just so sad and disappointing because I think we’re headed into an age where cash-starved municipalities should really start looking into ways to mobilize their people to turn their organizations into revenue-generating operations.

And even though we’ve given away the wastewater treatment plant and the people associated with it, there are still things Regina has that we can remake into revenue engines.

What things? How will we do that? Don’t know, exactly. People who were elected or put on salary to think about this stuff all day can hammer out the details. (Though I have listed a few ideas in the footnotes to the web version of this article.)

I’ll end by saying that I’m very worried for Regina. Worried that when the next big, marquee project comes along and we’re figuring out how to finance it, the local business columnists and talk radio hosts and most everyone at city hall will point to the bullish talk about the success of the WWTP P3 and use that as justification for us to embark upon more and more P3s.

If they do, they will have gotten the lesson of this EPCOR deal exactly backwards.

What we should be doing is investing here at home, making the stuff we have awesome — in house — cultivating our own virtuoso team of hungry, mercenary professionals, so that when other towns and cities are contemplating a P3 procurement, they’ll bring their projects to Regina.

And Regina, like Edmonton, can happily take their money.

(A much longer version of this article appears on Dog Blog, prairiedogmag.com)

2014-10-30

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