Last week Edmonton’s city council voted seven to six, with the mayor casting the deciding vote, to hire an external consultant to assess the merits of the latest bid by Epcor to take over the city’s drainage assets. Despite the fact that Epcor’s proposal appeared to have caught most councillors entirely by surprise, it is not the first time the city-owned corporation has made a play for drainage. In fact, it’s the third time. And the bottom line is that the risk factors and downsides of transferring the asset over to it has not changed since the last time the company tried, in 2005. If anything, there are probably even more reasons to turn this deal down outright today than there were 11 years ago.
For starters, the numbers just don’t make sense for the city. Drainage is a $2.6 billion asset and is expected to generate, according to the 2015 budget, $39 million in earnings over the course of the year. Epcor’s proposal is that the entire drainage asset be handed over to it in exchange for a commitment to pay off the city’s $447 million drainage-related debt and increase the dividend Epcor pays the city by $20 million a year. That’s a pretty sweet deal for Epcor. The company would come out about $2.2 billion ahead on the asset transfer and about $19 million a year on the earnings generated by the asset. Why would anybody sign that kind of deal?
Some would argue that because the City of Edmonton owns Epcor outright, a deal like this would simply be a matter of transferring an asset from one pocket to another, and that we would still technically own the asset. Unfortunately, it’s not that simple.
Epcor is neither a public utility nor a traditional crown corporation. As such, it does not offer the increased accountability and transparency those models offer. Rather, Epcor exists and operates entirely as a private sector corporation. Yes, its primary accountability is to its shareholder, which happens to be Edmonton’s city council, but that accountability happens behind closed doors with no public oversight. Likewise, it is governed by a board of directors that is ostensibly appointed by city council, but that board also meets behind closed doors with no public oversight.
Why does this matter? As a public utility, Edmonton’s drainage department is fully and publicly accountable to city council and to all Edmontonians. It reports monthly and in public to the city’s drainage committee, falls under provincial freedom of information legislation, and its operations are regularly reviewed by the city auditor, who also reports out publicly.
None of that is true for Epcor. There are no public meetings. No freedom of information requirements. And no access by the city auditor. It is this secrecy and lack of transparency that allowed Epcor to hive off and privatize its power generation assets (our power generation assets) in a closed-door shareholder meeting with no public consultation or input in 2009. What guarantee is there that our drainage assets will not meet the same fate?
This complete lack of direct public accountability and transparency alone should be a deal breaker for the city. At a time when climate change is resulting in more severe storms and weather events than ever before, drainage becomes a critical piece of our public infrastructure. Flood preparedness and mitigation, proper storm sewer functioning and environmental planning are too important in this day and age to remove them from the realm of public oversight and accountability. Epcor president Stuart Lee has suggested that taking drainage off the city’s hands would allow the city to “focus on core services.” The fact that he doesn’t recognize drainage as one of the core services the city provides does not bode well for how Epcor would run and manage the asset.
This deal is not about advancing the public interest in Edmonton. Rather, it’s about advancing Epcor’s own bottom line. The City of Edmonton’s drainage services are recognized leaders in environmental policy, planning and flash flood preparedness. Having control over drainage would allow Epcor to leverage that physical asset and expertise—both of which have been paid for by Edmontonians over the years—in order to grow the corporation and begin marketing drainage services in markets across North America. While that may be good for Epcor’s bottom line, and maybe even the city’s revenues in the long-term, the value of drainage goes far beyond dollars and cents. Although the external consultant is not likely to identify and measure that value, our city councillors should, and it will be up to Edmontonians to make sure that they do. V
Ricardo Acuña is the executive director of the Parkland Institute, a non-partisan, public policy research institute housed at the University of Alberta. The views and opinions expressed are his own and do not necessarily reflect those of the Institute.