P3: The Hamilton experience
Other Canadian cities have experimented with the P3 format for water supply, with varying results.
In Moncton, New Brunswick, a P3 agreement has reportedly worked well. In 1999, Moncton solved its ongoing water quality problems by signing a 20-year P3 deal with Veolia Water Canada to build and operate a water plant.
City administrators say the deal has worked for both sides.
The story was different in Hamilton, Ontario in 1994.
At that time, city officials entered into a 10-year water contract with Phillips Utilities Management Corporation.
“The deal was also for waste water management. That’s a big difference (from the Abbotsford proposal) – it makes it that much more complex,” said Dan McKinnon, director of water operations in Hamilton.
“A lot more things can go wrong on the waste management side.”
Just over a year after signing the deal, a sewage spill poured millions of gallons of waste into Hamilton’s harbour, and flooded more than 100 homes.
Sewage spills were not new to the city, which McKinnon said has the second oldest water and sewer system in Canada, but the large size of the spill had anti-P3 groups pointing to the failure of the private sector to fulfill its agreement.
Before the incident, the private company had laid off nearly half the original workforce and critics blamed a lack of personnel for the accident. What followed was a long battle between the city, the company and those affected by the spill, over responsibility for the damage. The company denied fault for more than three years before finally settling.
Other, smaller spills occurred in the following years, and the 10-year deal changed hands on several occasions.
According to McKinnon, P3 deals were not as common in 1994, and the “contract was looser than it should have been.
“Was it a disaster? No. Were there a number of problems? Yes. But there weren’t any deal-breakers.”
He said the city and the private sector both made mistakes. In 2004, with the contract complete, Hamilton began looking for a new P3 partner to run the water/sewer facility.
“The fact that we were going back to give it another try says a lot.”
But the history of problems seemed to put the private sector on edge. Every bid the city received was higher than the cost of running it in-house.
“The price we got back was above our budget.”
Hamilton eventually decided to take over the treatment plant itself.