So… I’m voting “Yes” in the wastewater referendum. I know. “Prairie Dog guy is voting against a P3, big effing surprise.” It’s a no-brainer so I wasn’t even planning to write this. But hey, the Leader Post thinks you care how their financial editor, Bruce Johnstone, is voting (spoilers: he’s voting No… who saw that coming?!?), so indulge me.
There is one element in my decision that might surprise my fellows out here in Saskatchewan’s lonely, wasteland of the left, it’s that the public-private partnership isn’t really the issue for me. I have a business degree¹ and was indoctrinated young into that free-market-does-it-best thinking. I can see the case for a P3. In fact, if this referendum was for a 30-year, Design-Build-Finance-Operate-Maintain public-private partnership for the stadium, I’d be voting whichever way would hand that albatross off to the private sector fastest and for longest. I mean what’s the worst that could happen? The private sector totally screws things up and the Riders have to keep playing football in the perfectly good stadium they already have?
Sure, maybe all the academics I’ve spoken to are right and P3s over the long run wind up being more expensive than public projects… so what? The city signs us up to pay way more than we should for a sports complex? Amazing. That’s what governments do. Waste our money on dumbass ideological bullshit, amirite?
So, yeah. Football stadium DBFOM P3: sign me up. And you know what? Deloitte agrees with me.
It was city hall that decided, no, no, we’ll use a P3 to design and build it, but we’ll forego all the efficiencies and innovation that comes with a private sector manager because we have synchronicities with Regina Exhibition Association Ltd. and, with them in our corner, we can run this thing on our own.
They went rogue, basically, and ignored their consultant’s advice. Deloitte even said they felt our calculations were exceedingly optimistic and washed their hands of the whole mad scheme. (I still don’t get why this all went down.)
And in the end, we’re going to have total control over our football stadium. For all time!
But if the No side wins tomorrow, we aren’t going to have total control over our wastewater treatment plant for the next 30 years. And that’s what this referendum is all about for me. Control.
I think council has been successful in making the debate about money by plastering that $58.5 million figure over every flat surface in the city. And congratulations to them for that. They diverted everyone’s attention away from what I pointed out in that infographic yesterday: $58.5 million looks way less important when you put it in the context of the whole project. And while that money covers a quarter of the construction cost, the construction represents only the first three years.
Our wastewater plant will be run by a private Sewage Consortium for ten times that long.
But what could possibly go wrong over 30 years?
Well, that’s the thing. We don’t know.
With a stadium, you can pretty much guess what will happen with ticket sales based on historical data. And as long as the CFL stays in business, I think we can safely say we’ll fill the stands often enough that it won’t seem like a completely wasted facility. So, like I said, hand the thing off for 30 years. I don’t care.
But wastewater… I’m not sure we should be so confident that things will carry on, business-as-usual for the next generation and a half. And that could end up costing us a lot of money.
How’s that, you ask?
Well, according to a water/wastewater study prepared by PPP Canada — that’s the group who’re pimping P3s across the country — most P3 deals that concern wastewater will have guidelines about the quantity and quality of water — ahem, sorry, sewage that flows into the plant.
…the design of a wastewater treatment process requires the nature of the influent to be understood, and limits to be placed on the range of influent quality that the process is expected to be able to handle. This range is often referred to as an influent quality “window”. The window should reflect all reasonably anticipated conditions, including seasonal variations and historically observed influent quality.
As long as the quality and quantity of the “sewage” remains within the window, it’s all on the Sewage Consortium’s head to make sure that it’s treated and disposed of properly. But what if something about the sewage changes to be outside of the window?
If the influent water quality moves outside of the window (either temporarily or permanently), any incremental cost associated with treating the water is the sponsors’ responsibility.
And by “sponsor,” they mean “city.”
Now, I’m one of these crazy people who believes in this thing called human-caused global warming. And as such, I’m looking at our water sources and thinking, yeesh, historical data may not be the thing on which we should be basing our expectations. Not over 30 years, anyway. For the next 10 or 15 years, sure, maybe we’ll be fine. But beyond that? Anything could happen to our water.
And if the worst — or even next-to-the-worst — anything happens to our water, we could wind up on the hook for it and the private sector gets to back away, no harm, no foul.
So there’s that. Which isn’t to say, this is how the P3 is going to break us, climate change will be our undoing. I mean, climate change will be. But as for the P3, my point is we don’t know what’s coming up over the next 30 years except that the environment is changing — everything is changing — and I’d feel much more comfortable if democratically elected institutions were in direct control of our environmental facilities so that we can have the most say about how they’re managed.
Related to this, there was this sidebar I wrote for last issue’s “P3 or Not P3? These Are The Questions” piece but it didn’t make it into the paper. It’s about another possible future cost that we might be baking into this P3 project. Here’s that…
All the experts on P3s warn that one of the ways that the costs to the city can snowball out of control is if we start changing the specifications of the project after the deal is in place. The cost associated with changing the plan is one of the risks that the city will retain.
Deputy city manager Brent Sjoberg concurs, “Once the performance specifications are set out the city retains the risk of changing it. So it doesn’t say you can’t change it but it says if you do, the risk is you’re going to have to pay for that. The private sector won’t simply absorb those costs of changing expectations.”
Good to know. Except that it looks like we’re baking the need for a change right into the project from the outset.
Among the specifications the city has presently laid out for the wastewater plant upgrade are that it “will be able to meet the needs of a population of 258,000.” That’s straight out of the staff report passed in February.
But a September 9 report to council about annexing land from the Rural Municipality of Sherwood states, “To support Design Regina, Hemson Consulting Ltd. provided population, housing and employment forecasts and an associated land needs analysis to 2041. Hemson forecasts the city population to reach 300,000 by approximately the year 2038 or roughly 25 years from today.”
You may have noticed that 300,000 is larger than 258,000. And that means, if Hemson Consulting’s projection is correct, we’ll surpass our wastewater treatment plant’s capacity five or more years before our contract with the Sewage Consortium expires. And that means we’ll be changing the specifications of the project and have to eat whatever costs that entails.
Now, there’s still plenty of time to update that specification before the deal goes through. But one of the things raised at council is that Hemson’s projection is considered by many too be very conservative and that means we could see our population rise much more quickly. Knowing that, we can at least set up a P3 that takes that into consideration. But it just goes to show how such a long term contract can be very fragile. And when it breaks down, the City of Regina has to pay to set things right.
You see what I mean? It isn’t the deal that’s on the table that we have to watch out for. It’s how the context can change in hard-to-foresee ways over the next three decades that worries me. And I’m sure there are plenty more possible problems that I haven’t written about above.
But I can’t write about unanticipated problems. They wouldn’t be unanticipated if I could anticipate them.
So anyway, that’s it in a nutshell. I’m voting Yes because I’m too much of a control freak where our sewage is concerned and by going with a Design-Build-Finance-Operate-Maintain P3² we’re locking ourselves into a 30-year relationship with a Sewage Consortium. And that will limit our control over our wastewater. We’ll control the water rates, sure. We’ll oversee the quality of effluent that comes out of the plant. We’ll probably even get to decide on the font used on the sign outside the building. But the technology, the staffing, the chemicals — all the important stuff that happens in a wastewater plant, that’ll all be under the control of the Sewage Consortium.
And that makes me nervous.
Maybe that’s my problem but considering that our effluent winds up as drinking water for everybody downstream from Regina, I think the polite thing to do is to make sure that I’m 100 per cent confident that my poop remains in my hands.
Wait… that came out wrong…
¹ “You have a business degree?” It’s true. From the University of Alberta, no less. But I’m not pulling some kind of academic rank by mentioning it. My take-away from that degree was that Academy Pizza in HUB Mall starts serving beer at 10 o’clock in the morning.
² For the record, personally, if this was about a P3 that would just build this wastewater plant, I’d be totally okay with that. In fact, I think the stadium and wastewater plant procurement deals are totally backwards. It would be fine with me if we went with a 30-year DBFOM P3 for the stadium and had a Design-Build P3 for the wastewater plant. Actually, my preferred option was the CMAR-DB option that Deloitte considered — that’s a Construction Manager At Risk twinned with a Design-Build P3. It would have gotten us all the spiffy risk transfer on the plant construction that we’re after while giving us total control over maintenance and operations. We’d have had to give up the $58.5 million in federal funding but I think that’s a small price to pay to avoid giving away control of the plant for 30 years.