Monday 14 April 1997
Water and Sewage Services Improvement Act, 1997, Bill 107, Mr Sterling /
Loi de 1997 sur l'amélioration des services d'eau et d'égout, projet de loi 107, M. Sterling
Ontario Public Interest Research Group
Mr Robert Barron
London and District Labour Council
Mr Gil Warren
City of London
Mr Ted Wernham
Canadian Institute of Public Health Inspectors, Ontario branch
Mr James Reffle
Ms Judith de Grosbois
Citizens Environment Alliance of Southwestern Ontario
Mr Rick Coronado
Ms Susan Smith
Ontario Water Works Association
Mr Tom Eyre
Mr Wallace MacKinnon
Water Technology International Corp
Mr John Neate
Mrs Sheila Davenport; Mr Keith Oliver
Ontario Municipal Water Association
Mr Jim Morris
Canadian Auto Workers, Local 1520, environment committee
Mr Jim Mahon
Ms Anne Hutchinson
Ms Eleanor Hart
Mr Bob Sexsmith
Mr Gerry Rupke
Statement by the minister and responses
Hon Norm Sterling, Minister of Environment and Energy
Mr Dominic Agostino
Mr Floyd Laughren
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Président: Mrs Brenda Elliott (Guelph PC)
Vice-Chair / Vice-Président: Mrs Barbara Fisher (Bruce PC)
Mr DominicAgostino (Hamilton East / -Est L)
Mr John R. Baird (Nepean PC)
Mr DavidChristopherson (Hamilton Centre / -Centre ND)
Mr TedChudleigh (Halton North / -Nord PC)
Ms MarilynChurley (Riverdale ND)
Mr Sean G. Conway (Renfrew N / -Nord L)
Mrs BrendaElliott (Guelph PC)
Mrs BarbaraFisher (Bruce PC)
Mr DougGalt (Northumberland PC)
Mr PatHoy (Essex-Kent L)
Mr BartMaves (Niagara Falls PC)
Mr John R. O'Toole (Durham East / -Est PC)
Mr Jerry J. Ouellette (Oshawa PC)
Mr Joseph N. Tascona (Simcoe Centre PC)
Substitutions present /Membres remplaçants présents:
Mr FloydLaughren (Nickel Belt ND)
Clerk Pro Tem /
Greffière par intérim: Ms Donna Bryce
Staff / Personnel: Mr Lewis Yeager, research officer,
Legislative Research Service
The committee met at 0928 at the London Convention Centre, London, Ontario.
WATER AND SEWAGE SERVICES IMPROVEMENT ACT, 1997 / LOI DE 1997 SUR L'AMÉLIORATION DES SERVICES D'EAU ET D'ÉGOUT
Consideration of Bill 107, An Act to enact the Municipal Water and Sewage Transfer Act, 1997 and to amend other Acts with respect to water and sewage / Projet de loi 107, Loi visant à édicter la Loi de 1997 sur le transfert des installations d'eau et d'égout aux municipalités et modifiant d'autres lois en ce qui a trait à l'eau et aux eaux d'égout.
The Chair (Mrs Brenda Elliott): Good morning, everyone. We'll start right on time. We have a busy day planned and the sooner we get started, the sooner we can listen to the delegates who come forward.
Mr Doug Galt (Northumberland): I wonder if we could have that door shut because of the noise coming in from the hall.
The Chair: That's probably a good idea, Doug.
I'd like first to welcome everyone. We're very pleased to be here in London to hear delegates come forward on Bill 107, the Municipal Water and Sewage Transfer Act. Certainly from the members' point of view, we're all well rested, bright-eyed and bushy-tailed and anxious to get going.
The first order of business this morning will be dealing with the subcommittee report, and I would draw your attention to the fact that we have two changes from our original plan: The hearings in Ottawa and in Thunder Bay have been cancelled essentially because there weren't enough presenters able to attend.
Could I have a motion, please, on the subcommittee report? Thank you, Mr Agostino. All in favour?
Mr Galt: Chair, that's subject to those changes?
The Chair: Subject to those changes. Opposed? Carried. Thank you very much.
ONTARIO PUBLIC INTEREST RESEARCH GROUP
The Chair: We'll move on then and welcome our very first presenter today. It's Mr Robert Barron, who is here as a representative from the Ontario Public Interest Research Group. Good morning, Mr Barron, and welcome. Your presentation consists of 15 minutes -- we're very strict about this, otherwise we get behind -- and that will include your own presentation and questions from the three caucuses. The remaining time will be divided evenly.
Mr Robert Barron: Thank you, Brenda. Good morning, ladies and gentlemen of the committee. As my member of Parliament said, my name is Robert Barron and I'm delegating for the Ontario Public Interest Research Group at the University of Guelph. My particular working group is called the Clean Water Coalition, and our mandate is the study of water issues and how they are affected by environmental protection, naturalization and rehabilitation, locally and globally.
We've been very active in several different watershed studies recently, starting with the Hanlon Creek watershed study. We've just finished the Mill Creek watershed study and we're about to begin with Torrance Creek in the city of Guelph. We've also been active on the landfill search locally in Guelph, we've made presentations to the advisory committee on environmental standards on water quality in the Great Lakes, and we also made presentations regarding the aggregate extraction bill.
I'd like to begin this morning by reading out a consensus position for the Clean Water Coalition, my working group, and then I'll go on to discuss a specific example of my concerns with sewage privatization and then some comments about water privatization. I've submitted a copy of a videotape to illustrate what I'm talking about, about the sewage privatization in Guelph.
"Dear members of the standing committee on resources development:
"I am writing to express my great opposition to actions by the Ontario government that weaken environmental protection.
"The government has weakened or revoked 13 laws and plans to weaken over 80 regulations. Such changes will have serious, negative impacts on Ontario's environment far into the future. Every aspect of environmental protection is at risk, including controls on air pollution, water pollution, pesticides, waste disposal and recycling, urban sprawl, energy use and climate change, natural heritage and biodiversity protection, mining and forestry.
"Major rollbacks in environmental rules and citizens' rights have occurred alongside huge staff and program cuts in the Ministry of Environment and Energy and the Ministry of Natural Resources. The government has drastically reduced or eliminated its role in monitoring pollution and resource use, issuing permits for pollution activities and resource extraction activities, and enforcement of environmental protection laws. Many legal changes have also significantly reduced citizens' rights of access to both environmental information and to environmental decision-making that affects their lives.
"This massive environmental deregulation is occurring when public opinion polls have repeatedly shown that an overwhelming majority of citizens want strong environmental laws, strictly enforced, even during times of recession or government deficit cutting.
"To add to this shocking record, the government is moving just as fast to sell Ontario's natural heritage. The privatization of forests is nearly complete. Cash-strapped municipalities have new powers to dissolve conservation authorities and sell the land. Provincial parks are on the chopping block, and fish and wildlife management has been downgraded from protection of biodiversity to the production of game species. With little input, the government is paving the way for the privatization by municipalities of our water resources. The private management of water will occur with weaker laws, fewer citizens' rights, huge cuts to programs to control water pollution, no provincial water conservation policy and no regulatory body to control these private utilities.
"This anti-environmental record will have enormous negative impacts on the environment and citizens' rights, and it has no support. I call upon you, on behalf of the Clean Water Coalition, to oppose any further environmental protection rollbacks and to insist that Ontario's green laws be restored and maintained.
"Yours very sincerely, Robert J. Barron."
Now, the first thing that I'd like to specifically discuss is the sewage privatization issue and an example which I experienced personally in the city of Guelph.
Several years ago, in 1995, there was a private project by an American corporation and it was located on property adjacent to the sewage treatment plant in Guelph. They had a project to try and develop composted sewage sludge as commercial fertilizer, and they were going to sell it.
What they found, however, was that it was so heavily loaded with heavy metals such as cadmium, lead, mercury, copper and other metals that it was not usable, and because of all the expenses they had incurred in developing this project, they went bankrupt. They walked away from the project, leaving a multimillion-dollar building that they had set up there, plus an enormous pile of sewage sludge sitting out in the open under the snow and rain, about a 10-foot-deep pile covering an acre of land there.
On February 19, 1995, I happened to notice it and I went in with my camcorder and I recorded the footage that I have submitted on the videotape. It shows that there was an enormous amount of sewage sludge which was, like I said, about 10 feet deep in places and it was running down the road like diarrhoea. It was going off road and down a gully into the Speed River.
I submitted this tape to the Ministry of Environment and a cleanup was ordered. Subsequent to that, the people of Guelph had to pay for this cleanup and had all the sewage sludge shipped over to the Eastview landfill site.
What concerns me is how long this had been going on and all of these heavy metals going into that water. The people down in Brantford and Dunnville get their drinking water out of that. Even more than that, less than a kilometre below this outlet there was a wildlife refuge and a waterfowl park. I'm wondering just what is going to be happening to those animals that are there, plus anything that's located along the river, just below the city.
It seems to me that what we have to do is to ensure that there is adequate monitoring of incidents like this, investigations and protection for the people of the communities. I don't think that under the proposed Bill 107 we're going to have that sort of thing happening.
One of the other things we're concerned about, because of different incidents that I've experienced around the city of Guelph, is that there's contamination of the Speed River from almost up to its source, near the proposed N4 dump site. Around the headwaters of the Speed River, a farmer has a manure holding tank which periodically overflows. In September 1991, I was walking by Guelph Lake and observed a very strong stench of cattle manure coming from the lake. As I walked along the south shore between the dam and Highway 24, I counted approximately 70 dying seagulls that were paralysed with the poison from the lake. They were dying.
I reported this to the Guelph Lake nature centre there that's run by the Grand River Conservation Authority. I never heard back from it. Apparently, it was just a volunteer person manning the desk there. I left a report of what I had found and no report was ever given back to me about what had happened there.
This was not the only occasion that this has happened there. Again, in I think it was August 1995, just following the Hillside Festival which is held at Guelph Lake, it was observed that there was some sort of purple dye in the water and there was also, again, the smell of manure coming from the lake. I again went around with the camcorder and I took some water samples, using some bottles from the Wellington-Dufferin health clinic to obtain the samples. What concerned me was that I got strong opposition from the health unit to even take samples and report all of this.
I sent the samples across to the MOEE and heard back from them explanations which I really didn't think were very plausible. They seemed to think there was an anaerobic condition created on the bottom of the lake which was causing an algae which was causing this smell. My personal belief is that the manure had overflowed again, and it was causing a great big algae bloom and it was causing this smell.
Those are two personal examples that I've seen at Guelph Lake and at the sewage treatment plant in Guelph that concern me very much and illustrate the sorts of concerns.
One other point is that the city of Guelph is getting the summer games for next year and they're proposing using Guelph Lake as one of the places for some of the activities. I think we should look into the safety of that place, for one thing, if they're going to do that.
That's basically what I had to say about the sewage privatization.
The next thing is water privatization issues. I and everybody else in the Clean Water Coalition believe water facilities should be maintained as an essential public service for the sake of public health and safety, to provide equal access and affordable access to essentials of life, basically. You can't go more than two weeks, I think, in a temperate climate without water or you'll die, so this is really an important issue, to keep access open to people on that.
What I've learned from the example over in the United Kingdom is that their problems were that once privatization had taken place, there were large increases in the rates -- people were getting off because they couldn't, basically, afford the rates -- and they had some health problems occur, such as dysentery, hepatitis A and a couple of other diseases. I think it was either typhoid or something like that which occurred. There's also the potential of cholera infections being spread if they don't have access to water for sanitary conditions.
I think those sorts of things are in the making here because of some problems that I've observed, again, in our locality at Guelph. Some of the water supplies may be contaminated by septic systems around. If they are contaminated, most of our ability to clean that up will be severely affected as far as the ability to monitor it, to inspect it and to do an investigation afterwards is concerned. So I'm really concerned about the water privatization as an essential service that we must maintain for the people of this country.
That's basically all I had to say about this. If you have any questions, I'd be prepared to answer them now.
Mr Pat Hoy (Essex-Kent): Thank you for your presentation this morning. Your main concern appears to be one of monitoring and inspection. You touched a bit on the conservation authorities. In my area, the conservation authorities play a great role in some of the aspects that you've talked about, and they have experienced cuts to their operations of 70%. Do you feel that they will be able to provide the proper monitoring that you're talking about in the future?
Mr Barron: No, I don't. One of the things that I've talked about with a member of the Eastview landfill public liaison committee touches on testing water. She mentioned to me that they've found out that since this is going forward and the public facilities for testing water are being shut back, the private facilities they're going to have to go to -- the cost of all of the tests they formerly did is the same as only two that the private facilities are going to be doing. We're concerned then that there would have to be probably an increase in tax rates in the cities to try to keep up with it.
I think for the sake of their efficiency they're going to try and do less testing. I think as well as the conservation authorities being cut back so that they're not doing so much, we're also seeing that cities themselves are not going to be able to do so much unless they have a drastic increase in taxes. I don't think the city of Guelph particularly wants to try to do that.
Mr Floyd Laughren (Nickel Belt): I just want to make a comment. In view of the cutbacks in the Ministry of Environment, I think they should put you and your camcorder on the payroll.
Mr Barron: I second the motion.
Mr Laughren: I think you seem to be uncovering what they should be doing. I'm also worried about Guelph Lake. That could be very heavy rowing for those athletes, so I share your concern.
Mr Galt: Just a quick comment about Bill 107. You're concerned about privatization. We too are concerned about privatization and that's part of the reason for Bill 107. It's all about who does what and to get the responsibility in the right place. Municipalities today could sell and privatize with no problem. Seventy-five percent of those who own water and sewer plants have not privatized to this point.
With this bill, those 230 plants that will be transferred to the municipalities, or any of the plants that municipalities own, including the 230 that will be transferred, will have to pay all the subsidies or grants given to them by the province since 1978. That is certainly going to discourage them from going to sell them off to some private industry in the future. To put your mind at rest, this is not about privatization; this is all about who does what and who should have what responsibilities.
The Chair: Thank you very much, Mr Barron, for taking the time to come before us this morning. Unfortunately, the time has expired, but we're very pleased to hear your point of view.
I would just point out for the members of the committee that the video Mr Barron referred to is here with the clerk and it will be available for anyone who has an opportunity to view it.
LONDON AND DISTRICT LABOUR COUNCIL
The Chair: Our next deputant this morning is Mr Gil Warren, representing the London and District Labour Council. Welcome.
Mr Gil Warren: I welcome you all to London. Since the filibuster is over, I hope you all stay awake during my presentation. I hear people have been working overtime for free lately. I have a controversial presentation, though, so I think it'll keep you awake.
Good morning from the citizens of London. My name is Gil Warren and I am here today to speak on behalf of the London and District Labour Council. I am a member of the environment committee of council and a long-time environmental activist in London. Our labour council represents over 25,000 members, including auto workers, teachers, brewery workers, grain millers and your own Ontario government employees.
The London labour council is opposed to Bill 107. This bill must be withdrawn. Bill 107 is part of a cynical attempt to dump provincial water assets on to the cities. Provincial funding has been slashed. The sale of all water and sewer assets to large private corporations that will create unregulated monopolies is just around the corner.
One hundred years ago London was the home of Sir Adam Beck. Beck was a prominent Conservative politician who founded Ontario Hydro. The corporation started out as a cooperative owned by the cities of southwestern Ontario. Hydro eventually became a crown corporation of Ontario because it was realized that public power was a vital province-wide concern. Hydro was set up to prevent the US robber barons of the day from gaining monopoly control of a very important community resource.
My question to the committee is this: Why is it that Sir Adam Beck realized the dangers of unregulated private monopolies and you do not? Why is this government's thinking a throwback to the Victorian ideas of the 1850s?
The committee says we don't have to worry because the price will be too high to pay for these if they have to reimburse the province for the money put in since 1978. I would argue that you've just raised the price so that only large multinational corporations can buy private water systems. You say you are moving us forward into the future. The reality is that advisers to the Premier like Tom Long and David Frum are sending us back into the nasty past that was rejected in 1900 by Sir Adam Beck.
Bill 107 is not an act to improve water and sewers. Once again we see the Orwellian spin doctors of Bay Street trying to tell us you are improving things when in fact you are destroying things. Power and water are symbols of our sovereignty as a nation. It makes us very angry to see Bill 107 setting the stage for our water to be piped over the border by corporations of the United States.
The privatization of water is opposed by a majority of the people of Ontario as well as the labour and environmental movements. The privatization of water failed miserably in Thatcher's Britain, as it would in Ontario. This government says it can carry out privatization but prevent a repeat of the British failure. This is either a naïve attempt to tinker at a process you really do not understand or a cynical attempt to con people.
If the British example is not bad enough, look at what happened when public utilities were privatized in Mexico under Salinas. Greed, corruption, insider trading, political payoffs and finally murder were the legacy of the Salinas selloff. Let us not let Ontario be the Mexico of the north.
Your government says the municipalities want all this new responsibility of running water and all the other services that you are dumping on them. Most city politicians have figured out your game and do not want to play. There is no way the cities can handle all these downloaded responsibilities. The only solution is to either raise local taxes or sell off assets. If the water system is sold, it will be local government that takes the political heat from an outraged public. You are really just doing this to finance your tax cut to the wealthy while you dump the political cost on to the cities.
The London labour council is also opposed to the union-busting implications of this bill. Workers are entitled to decent-paying, secure jobs. You say we have to prepare for globalization. We say we are sick and tired of hearing this hackneyed cliché.
It is very curious to note that in the European political debate the term used is the "neo-liberal agenda." That is much more accurate, because "neo-liberal" means 1850s Europe, and that is where this government is taking us.
What we really have going on here is the integration of the Canadian economy into the US trading bloc. This is the Americanization of our economy and you are willing accomplices.
Let us look at your proposal to bust unions among water and sewer workers from the perspective of the auto workers in our labour council. There are 5,000-plus members within our labour council, and then there's the auto parts industry. The biggest cost of water and sewer services are the energy costs to do the pumping. Labour costs are a very small component of total costs. Therefore, the small alleged savings, which haven't even been proved, would be counteracted by the need for a large profit, big executive salaries and paying off borrowed money. Our citizens will lose in this scenario as well as the workers.
The other big concern in this pay race to the bottom is that a poorly paid water worker will no longer have the income to buy the new car that is made by our auto workers here in London. This is the big flaw in your economic assumptions. We need more demand for our products from ordinary, well-paid government workers.
Many economists, including another well-known local person, John Kenneth Galbraith, are now arguing that giving the wealthy even more money is a very stupid way to help the poor. If the wealthy have more money, they are not going to buy a new Ford or GM car; they already have a BMW. The money is much more likely to be invested in some harebrained overseas speculative mining venture like Bre-X, and then we get another stock crash and a currency and interest rate crisis just like Mexico.
We now turn to our concerns about some of the local implications of Bill 107. Our drinking water in London is piped in by two large pipelines from lakes Huron and Erie. This provincially owned system serves not only London but St Thomas and many other smaller towns and villages. Who will dominate if this system is downloaded? The answer is London, and this should be of great concern to the smaller communities.
What if the Lakes Huron and Erie pipelines are sold to one of the darling companies of this government, Laidlaw or Wackenhut? There is an immediate loss of public ownership, control and accountability that formerly existed when it was owned by the province. This is yet another attack on democracy by this government.
The final insult is that this bill fails to provide a public, regulatory body to control the private sector monopoly that has been created. You have also laid off thousands of Ministry of Environment workers, which also greatly reduces our protection.
A final word about another one of your favourite ideas: user fees. Our labour council opposes user fees. These fees punish the poor and reward the wealthy. Let us give you a water-related London example. Thanks to you allowing user fees, London now has sanitary sewer and storm water user fees; there are two fees there. That's on my water bill every month when it comes.
Two powerful London institutions -- the University of Western Ontario, our biggest water user; and the London Health Sciences Centre, Victoria and University hospitals, which recently merged -- were exempted from the fees. Why? Because big corporations can always use their insider connections to lobby local government.
The bigger you are, the more powerful you are. With power, you have the money to hire an expert to argue that you should be exempted from a user fee. This infuriates the average citizen, myself included, who not only has to pay our sewer-using fees but also those of the freeloaders.
My neighbours and I, if we have money in our pockets, can spend it on "job creation" in the same way as a major institution. Is it not ironic that UWO also claimed that it should be exempted from the user fees because of the funding cuts caused by your government and the federal Liberal government?
The privatization of the management of publicly owned water systems is already happening in southwestern Ontario. Last year, the Middlesex township of Ekfrid contracted out its management. We see this as a first step towards privatization of ownership. The management firm gains firsthand knowledge of the waterworks and is then in a much better position to buy it.
A further concern is public waterworks that have built up a prudent reserve fund to cover the costs of repairs and infrastructure replacement. Does this reserve fund then become an asset that is coveted by a hostile corporate takeover?
Is a desperate, cash-strapped township, due to your downloading, going to have to sell its waterworks at a fire sale price with a big cash reserve? This sounds like the Ontario government snowplows you sold for $1 each. This sounds like former Saskatchewan Premier Grant Devine's sale of earthmovers for $1. Please, no more fire sales at our expense.
The London and District Labour Council has many other objections to this bill, but we would like to use the rest of our time for questions. Thank you for taking the time to come to London and for hearing our concerns. We hope you will act on our concerns, if you hope to get re-elected. By the way, your support in southwestern Ontario has fallen to 37% in the last poll. That's the end of my presentation.
The Chair: Thank you very much for your presentation. We have about five minutes remaining, and we'll begin with the third party.
Mr Laughren: I appreciate your presentation. I think your points about the downloading need to be re-emphasized. While municipalities may not, by nature, want to privatize, when the downloading hits them they will have no choice. In my own community the net cost of downloading in the regional municipality of Sudbury is $105 million -- net; that's after education taxes have been removed. That would in effect double property taxes in the regional municipality of Sudbury. It's not that municipalities necessarily want to privative; they won't have any choice by the time this government gets finished downloading.
I wanted to ask you about the whole question of privatizing part of a water system. That really intrigued me. You've got a water system that's linked up to different communities, and I don't understand how you cut that in two. If the London water system is privatized, how does that affect the rest of it, St Thomas, for example? Do you have any idea how that would work?
Mr Warren: It's confusing to me how that would work in any kind of equitable situation. London is the dominant municipality around here, with over 300,000 people, and it would seem to me that if a joint system is downloaded to the municipality or privatized, it will end up in the control of the dominant community. That's a great concern we have.
There are small municipalities of 1,000 people drawing water off the pipelines, and how they're going to have any political weight in a scenario where London is so dominant -- I don't think they will. How would they divvy up the ownership? Does the little village of 1,000 have a per cent ownership or does it have no ownership of it? It seems to me that it's much better to leave it in provincial hands and to exercise a role by the provincial government of managing a regional resource.
Mr John O'Toole (Durham East): Thank you for your presentation and for your welcome to London. I want to make three points, really. On the bottom of page 2 you suggest that most politicians or most cities don't want any part of this. The information I have is quite the contrary: 75% of the municipalities own them today, and of the rest, there's quite a lineup, a list of municipalities over the years that have been requesting this change. I bring that to your attention.
Second, on page 4 your economic argument is not completely balanced in the first paragraph, and I'd like to talk to you about that. In the second-last paragraph on page 4 you talk about a "private sector monopoly." I'd like your comments on a public sector monopoly which perhaps exists today. I'd ask if you think that the current fees paid for water usage are not user fees. How else would you describe them? There's a base fee and then there's a user fee based on some kind of consumption rate or discharge rate.
Finally, I wonder if you think we should be charging the hospitals these fees. With public service institutions like universities and hospitals, which are publicly funded, should we be also churning the fees through to charge the hospitals so we divert the health care dollars to sewage and water treatment as opposed to patient care?
Those are three or four things for you to think about that I find exception to in your presentation.
Mr Warren: To make a point on the last one, the hospitals, as part of their operating budgets, should have the money to cover whatever taxes or user fees they have to pay. The argument that you guys make about user fees is that they're designed to encourage conservation. If the largest single water user in London gets off, they're not going to have any incentive for water conservation.
I think linking the argument of water conservation and user fees together is inaccurate in the first place. You don't say that hospitals should get free gas from the private gas company because it's a public institution. You say they should pay the market rate like everybody else.
No, I think the hospitals or universities should be paying a user fee. I'm opposed to user fees, but if user fees are in place, then everybody should be paying. The system is different here in London from what it used to be. You used to pay for water on the basis of how much water you consumed. Now we're paying sewer charges, a sanitary sewer charge and a storm sewer charge, and that has dramatically increased the price of water, to me, in the community. In fact, if you figured that into the tax increases here in London, municipal tax increases are about a 7% increase, not a 1% or 2% increase, because of those user fees that have gone into place around water.
I'm not sure what you're disagreeing with me on about the economy and that sort of thing, and we're probably running out of time on that. But in terms of the municipalities, a lot of municipalities were asking for a more flexible approach to the way the provincial government bureaucracy works. I don't think any of us has a particular problem with that, but when you came along with mega-week, you dumped all these responsibilities suddenly on to the municipalities. I don't think they asked for all these responsibilities.
Many municipal councillors in London have been speaking up against the downloading, including prominent Tory Conservative members of our city council and our school board, and they're saying that you guys have not thought this out, that there are going to be all kinds of problems. People who should have been your allies politically in this mega-week bill are not supporting you and we're seeing that in this region.
Mr Dominic Agostino (Hamilton East): Thank you for the presentation. I think you had many points that are quite pertinent to what has happened and the purpose of this bill. I think you can't do it in isolation of just this bill. You've talked about the downloading, of course, which forces municipalities now to find ways, and the biggest resource they can privatize is water and sewers. There's not a lot of money to be made in privatizing a transit system or privatizing social services department, but there's a hell of a lot of money to be made in privatizing a water service.
Bill 26 also took away the one tool that citizens had to deal with this issue. Prior to Bill 26, municipalities had to hold a referendum before they could privatize water and sewer services. Bill 26 took that away from them, so basically it has opened the door to privatization, and clearly this move here, the slightest move now, will simply allow it to go ahead, as I think it will, simply as a result of the cash-strapped problem municipalities will face.
In your view, if municipalities go ahead and privatize not only the operation but actually selling the assets, the water, what will that do first of all to workers' wages who currently work under some pretty decent contracting conditions in many of those plants? Second, what do you believe it will do to the rights that taxpayers will have to pay once you have a private corporation whose interest will be the bottom line and not the public service of water and sewers?
Mr Warren: If the assets are sold, I think there will be a campaign to strip the contracts of the workers. There may be legislation that says there are no successor rights and that sort of thing. I think the workers are in serious problems here if they are privatized.
The other thing is, once you've created a private monopoly of something like water, which isn't like telecommunications where you can set up a separate system, it is a physical monopoly and it's going to be unregulated. That's the thing that really bugs us. At least with the pipeline system we've got now, it is owned by the province of Ontario, it's accountable to elected officials and there's some regulatory system there. With this proposal we've got here, there is no regulatory system at all. Any monopoly has to be regulated by the government.
The Chair: I'm going to have to interrupt, Mr Warren. Time has expired. Thank you very much, on behalf of the members of the committee, for taking the time to come before us this morning. We appreciate hearing your advice.
Mr Warren: Thank you.
The Chair: Is Mr Charsley here, please? No.
CITY OF LONDON
The Chair: We'll move then next to Mr Wernham. Mr Wernham represents the city of London.
Mr Ted Wernham: Good morning. I have with me this morning the city engineer, John Jardine, and also Bob Cooper, manager of water and sewer services.
The Chair: Thank you very much for introducing your colleagues. You may begin.
Mr Wernham: My name is Ted Wernham. I'm the chair of the environment and transportation committee of the city of London. I've been on council for 12 years and will be making our submission to you on behalf of the corporation of the city of London. I take it that you have the text of our brief in front of you.
The city of London very much appreciates the opportunity to appear before the standing committee today to offer its comments on Bill 107, the proposed water and sewage transfer act, 1997. As major users of facilities to be transferred from provincial to municipal ownership and responsibility, we have some suggestions for improvements to Bill 107 as it applies to area systems.
By way of background, the city of London receives water from two separate systems: the Lake Huron supply system and the Elgin-Middlesex water system. The Lake Huron water supply system was conceived in the early 1960s and was originally to be built by the city of London. An agreement was reached in 1964, however, whereby the Ontario Water Resources Commission, which was the predecessor to the Ontario Ministry of Environment and the Ontario Clean Water Agency, took over the project and sold water to any municipality along the pipeline desiring water at a price based on the actual capital and operating costs. Since that time all costs have been recovered based on the volume of water sold and rates have been established accordingly.
Currently London pays for 95% of the water supplied by the Lake Huron water supply system. In 1992 the city of London entered into an agreement with Ontario to take approximately 50% of the water from the Elgin area water system, which is the primary system, and pay for the costs of the expansion based on the volume of water purchased.
The Elgin-Middlesex water system, which is the secondary system, consisting of the pipeline from St Thomas to London, and the addition to the existing pumping station and reservoir, were constructed in 1994 to provide water to London, and 100% of those costs are recovered from London through rates based on volume of water purchased.
Under the proposed Municipal Water and Sewage Transfer Act, the Minister of Environment and Energy would have the power to transfer ownership of waterworks owned by the Ontario Clean Water Agency to two or more municipalities. The city of London submits that the proposed act should include as part of the criteria relating to the minister's power that ownership, and all payments to which OCWA is entitled, should be transferred to the municipality or municipalities that in the past have paid for, or in the future will pay for, the cost of the system. If a municipality does not wish to assume ownership or if by agreement of the users it is more cost-effective, a single municipality should be able to assume ownership.
From a financial perspective, a larger municipality may have the ability to refinance the outstanding debt at a more favourable rate to the benefit of all system users. The city of London also submits that the act should be amended to have the minister take into consideration, when making a transfer, the financial capacity of the various users of the system and award ownership accordingly.
Under the proposed act the minister would have the power, on a transfer of ownership to two or more municipalities, to establish a joint board to manage the works. The city of London submits that in an area system such as Lake Huron, where there is one very large user and a number of very small users, the management of the system should be the responsibility of the major user of the system even though other municipalities may have a share of the ownership. This would offer the following advantages:
(1) Planning: Administration and staff resources from the large user municipality would be available to provide planning for expansion of the system to meet the anticipated growth with the entire service area.
As an example of such a benefit, in 1994 the city of London staff actively participated on the technical review committee for the OCWA environmental study report for water supply to the city of London and area. All users of the system benefited from the water supply study, which led to the expansion of the Elgin area system to London, Aylmer and Port Stanley.
City staff were also significantly involved in a 1995 OCWA environmental study report for the partial twinning of the Lake Huron pipeline, requested by the city of London, which provided security to all users of that system.
(2) Operation: Operational expertise and maintenance staff are present in a larger municipality to support an efficient operation of the treatment plant and pipelines. Currently, city of London staff are the only municipal participants on the study team for operation and maintenance assessment of the Lake Huron water supply system. The city of London also provides the emergency repair personnel and equipment for both the Lake Huron and Elgin area and the Elgin-Middlesex water supply pipelines.
(3) Economy: An area water supply system will be more efficient and economical if a larger municipality with existing trained and technically qualified staff is responsible for the management of the system. Management of the Elgin area water supply system should be the city of London's responsibility as the major long-term consumer on the system. Management of a multi-user system by consensus, as suggested in the bill, is an impossible situation. A joint board would not make effective and/or timely decisions.
In the event of a dispute with respect to the management of the systems, subsection 6(4) of the act provides that a municipality may apply to the Ontario Municipal Board for a resolution. The city of London submits that the proposed act should allow owner municipalities in the first instance to identify or prescribe the dispute resolution process preferred by them as part of any ownership agreement they may reach. In the absence of this being done, the proposed recourse to the OMB could be used.
Under subsection 5(1) of the proposed act, the minister's transfer order would not be effective for at least nine months before the order takes effect. During that period, after notice to the affected municipalities, they have an opportunity to make written submissions concerning the proposed transfer.
The proposed act is silent with respect to the opportunity for municipalities to undertake any type of "due diligence" customarily present in a willing seller and willing purchaser situation.
While the city of London supports the transfer of ownership, the proposed act should expressly entitle a municipality or municipalities proposed for taking ownership of the facilities to investigate the condition and liabilities of the system or systems. Financial assistance should be available from the province for major rehabilitation of the facilities, if necessary, through such due diligence. The municipal assistance grant program has, in the past, provided grants for capital improvements. This will now be the financial responsibility of the municipalities.
Section 9 of the proposed act would permit the minister to require an owner municipality to continue to provide services to a person previously receiving service from OCWA under an agreement. The minister's transfer order may contain provisions governing payment for these services. The city of London submits that the proposed act should be amended to expressly allow an owner municipality to establish water rates applicable to such persons with the right of such persons to appeal to the Ontario Municipal Board where the rates exceed those that may be set out in the minister's transfer order.
Subsection 9(2) of the proposed act makes reference to the collection provisions of the Municipal Act and the Public Utilities Act regarding water and sewage services. The provisions of the two acts are not consistent. The city of London submits that the provisions of the Public Utilities Act should be amended to mirror the collection provisions of the Municipal Act.
Section 56.2 of the proposed amendments to the Capital Investment Plan Act, 1993, would provide, among other things, that if an owner municipality transfers ownership of any portion of the waterworks system or sewage system to a third party other than a municipality, the owner municipality is obliged to repay all provincial subsidy on the entire water system or sewage system, not just the portion being transferred. The city of London submits that the proposed amendments should be changed to limit the repayment by the owner municipality to the provincial subsidy on the portion of the system being transferred. The city of London further submits that, recognizing that systems age over time, a depreciation allowance should be calculated with respect to the provincial subsidy susceptible to repayment. The depreciation allowance should be based on an annual rate generally accepted for facilities of this type or on a volume rate.
In closing, may we express again our appreciation for the opportunity of presenting the comments of the city of London on Bill 107, and I suggest there should be a depreciation allowance on all politicians.
Mr Galt: Yourself included. Thank you very much. I just wanted to make a couple of comments, first on your opening remark that a municipal user fee is totally cost recoverable and that's how it's working here. That's the way we believe it should be working, so it's right on.
The other one I wanted to respond to is that, as it relates to multiple ownership, certainly that is open for negotiation. It's not a closed book as to how it's going to occur. There will be a nine-month announcement to the municipalities involved, with a six-month period to put in your thoughts and ideas on how you would like to see it happen and then a three-month period for the minister to make a decision. I would suggest that during those periods there will be ample time to discuss and negotiate and come up with a workable agreement on ownership that's practical to all concerned.
It's very unique here, where there's such a sort of elephant-sized usage along with some very small usages. That's going to have to be looked at very carefully so the communities with 1,000 people have some say and don't get misused, and at the same time the large municipality that's paying the elephant's share has a lot of rights as well. It's one that may be a little difficult to work out, but certainly the opportunity is going to be there to negotiate and work that kind of thing out.
Mr Wernham: We don't want to appear heavy-handed in our submission, but there are economies of scale that need to be considered here.
Mr Agostino: I want to follow up on the earlier privatization issue. As a municipal councillor, in view of what has happened with the downloading, with the extra costs municipalities will face and also this massive shift and dumping that's occurring, do you believe this legislation should have a clause or a prohibition form to make it very clear that municipalities cannot sell the water and sewer assets, or do you believe municipalities should have the power to choose and possibly sell and privatize the assets of water and sewer services?
Mr Wernham: On the issue of privatization, my personal opinion, and this is my own opinion, simply is this: that it is an area that should be considered. Whether there's action taken in that area is entirely up to the individuals involved. With respect, we at city council had this discussion just last week with another issue involved with the firefighters. Because we here at the city of London enjoy certain rights and benefits of our location and our size, we feel the legislation should be permissive in that regard so that the opportunity exists for individual municipalities to adjudicate as to what they think is best, given that certain municipalities don't enjoy those benefits we do.
We are not indicating to you that it is our position that there should be that opportunity for us at this time, but we would like not to be restricted from that opportunity in the future.
Mr Laughren: Mr Wernham, it's good to have a submission from a fellow politician.
I wondered about the last part of your presentation when you talk about the repayment of any provincial subsidies. I see your point about repaying only the part that's being transferred, but what's left out of this is the whole issue of interest over that period of time, and of course there's a link between inflation and interest rates. I'm concerned that the person or the company buying this from the municipality, for an example, would, under your scheme or your plan, have to buy it at an appreciated price but without any consideration for interest over that period of time, and I wonder how you come to grips with what for me is a contradiction.
Mr Wernham: The issue you refer to is in the last part with respect to depreciation. We are simply, on the basis of considering the actual asset, applying a formula to it that should take into account any kind of assessment on the basis of what we've maintained should be a willing seller and a willing buyer. We're open to that consideration as well. It's our interest, of course, to make sure that as we acquire this from the province we pay a fair price, and in the interests of any future opportunity, it should also, if it's necessary to transfer ownership, take into account those things you've mentioned, which are entirely valid.
The Chair: Thank you very much, Mr Wernham. Our time has expired, but on behalf of the committee members, I thank you for taking the time to come this morning and give us your best advice.
Mr Wernham: Perhaps, Madam Chair, it would be more appropriate to say that our time's evaporated.
The Chair: Rightly so. Thank you very much.
Is Mr Charsley here now? No. Mr Coronado? Do we have Mrs de Grosbois, Mr Reffle and Mr Hatton from the Canadian Institute of Public Health Inspectors? Excellent. For committee members, we're missing two delegations and we're moving down to the 10:45 slot.
CANADIAN INSTITUTE OF PUBLIC HEALTH INSPECTORS, ONTARIO BRANCH
The Chair: Thank you very much for coming this morning. We're not only appreciative that you're here to give us your advice, but we're also glad you came early, so you've helped us move right along this morning. We're very happy to see you. Welcome.
Mr James Reffle: Thank you very much, Madam Chair, members of the standing committee, for giving us the opportunity to present this submission.
My name is James Reffle, and I am attending as president of the Ontario branch of the Canadian Institute of Public Health Inspectors. Also in attendance are Judith de Grosbois, who chairs our healthy environments division, and Mr Brian Hatton, who is divisional director in Waterloo region.
We will be restricting our comments to the impact of Bill 107 on the inspection and approval process for private sewage systems, also referred to as onsite sewage disposal systems. We will also address the effects of the proposed amendments to the associated regulation for sewage systems. As you may know, public health inspectors, as employees of public health units, have been the traditional service delivery personnel for this service for decades.
The administration and delivery of the septic system program has profound effects upon both human health and the environment. The Environmental Protection Act, or the EPA, was brought into existence to address the need for environmental protection in a province that was undergoing rapid growth. Prior to the EPA, protection of our recreational waters and supplies of safe drinking water, both private and communal, was sporadic in many areas of the province. Ponding of raw sewage and pollution of our natural environment created numerous hazardous conditions detrimental to human health. Public health units spent considerable time investigating and correcting conditions which spread disease potentially, such as typhoid, dysentery and salmonellosis.
The EPA was brought into existence upon formation of the Ministry of Environment and Energy to correct the inconsistencies and deficiencies of private sewage system inspection in Ontario. Because the MOEE did not have the personnel required to carry out the program, agreements were signed with local agencies, which were health units for the most part. The MOEE has retained the responsibility for approval and inspection of unconventional systems, and the approvals branch in that ministry is well respected and consulted on a regular basis for their expertise.
The Ontario branch of the Canadian Institute of Public Health Inspectors fully supports the direction in which the regulations are moving; performance-based regulations, standardized approvals and training and certification of installers and haulers will serve the province well, as will the removal of provincial subsidies so as to run the program on a cost-recovery basis.
We would like to point out, however, that before certification, students in the environmental health program at Ryerson Polytechnic University have had a minimum of 78 hours of classroom instruction in waste water technology and water technology. This does not include time spent in instruction in the field. The British Columbia Institute of Technology offers a similar program. In order to become certified as public health inspectors in Canada, the students must have three months of supervised experience in the field. If the regulations are not revised from their current form, Ontario will be in the unique position of being the only province or territory in Canada that does not recognize certified public health inspectors as qualified sewage system inspectors.
We fully support the recommendation for scheduled recertification for inspectors. Our branch has had a long history of providing annual in-service courses in this for public health inspectors through the University of Guelph in association with the Ministry of Environment and Energy. Advances in sewage technology occur slowly, so recertification could occur as infrequently as every five years.
There are also reservations concerning the proposed time line for bringing the new act and regulations into effect. Completion of training and certification of inspectors, installers and pumpers before October 1, 1997, is very optimistic, considering that the training and certification process and logistics have yet to be established. Weather conditions restrict program delivery to the months proposed for training and certification, and program directors will not be able to deliver the program if staff are not available. Essentially, if you're looking at an October 1 establishment date for training of inspectors and installers, the training would likely have to occur during the summer and early fall, which is really the busy building time of the season.
The Ontario branch believes it would be advisable to revise the timetable, and a target date of March 31, 1998, would be feasible. This may coincide with both the end of the fiscal year for many of the businesses delivering these programs and some of the agencies as well.
Any legislation concerned with private sewage systems must balance health and environmental concerns on one hand with convenience for the public on the other. Because of the strong connection between untreated human sewage and infectious disease, the Ontario branch believes health protection and environmental protection must outweigh the other considerations.
Bill 107 transfers the responsibility of program delivery for low-volume, onsite sewage systems, those with flows of under 4,500 litres per day, to the lower-tier municipalities and to the Ministry of Municipal Affairs and Housing in unorganized territories. Upper-tier municipalities will be responsible for large volume systems, or those that are over 4,500 litres per day.
There is provision in the legislation for municipalities to enter into an agreement with the upper tier to deliver the program, or for several municipalities to jointly administer the program. The proposed amendments would enable local municipalities to name the designated authority for administering this program. The Ontario branch interprets this as a clear opportunity for public health units to be open for consideration.
We understand that the reasoning behind dividing the responsibility for approval and inspection of larger and smaller systems was to allow "one-stop shopping" for consumers seeking a building permit. However, more than 50% of certificates of approval are issued for replacement systems, which do not require a building permit. Septic systems have a natural lifetime of 15 to 20 years, so those installed in the 1970s and early 1980s are currently requiring replacement.
It is in the interest of lower-tier municipalities to encourage development, as that is where the greater part of their revenues are generated. In the past, concern for health and environment has been the limiting factor for development. Public health agencies and conservation authorities, who have been delivering the program in all but a few areas of the province for several decades, have frequently found themselves at odds with the local municipality over development proposals. If lower-tier municipalities take the responsibility for program delivery, it will appear that this system of checks and balances will all but disappear.
Given the cost-recovery nature of the program, unless all lower-tier and upper-tier municipalities within a designated area agree on one program delivery agency, the cost of providing the service may be prohibitive, without raising the price of a certificate of approval application substantially.
Whoever takes on this program also assumes responsibility for all current and future systems. The costs of liability, along with complaint investigations, is easily underestimated. A complaint investigation may take hours and days, and may conclude with charges being laid. This is not done on a cost-recovery basis, and the agency responsible for program delivery will need to build these expenses into the charge for a certificate of approval.
Concurrent with the proposed changes in the present legislation is the suggestion that the bill and regulations be transferred to the Ontario building code. Our organization has strong objections to this course of action. The disposal of human sewage has no relation to the structure of a building and has serious public health and environmental implications. The primary mandate is the protection of groundwater and surface water, which is the drinking water source for a large percentage of Ontarians. Groundwater protection cannot be addressed as a local issue only. The entire watershed must be taken into account.
If the act and regulations fall under the building code, the perception will be that building inspection departments would have the ability and training to deliver the program adequately, which is not necessarily the case. Delivery agents must be trained in soil morphology, groundwater movement and epidemiology at a minimum.
In conclusion, leaving the responsibility for program delivery for low-volume systems with the lower-tier municipalities will lead to a patchwork of inconsistent enforcement and inefficient and costly administration, especially in areas with low population. Assigning the responsibility for inspection and approval of all onsite sewage systems to upper-tier municipalities will remove any confusion about which level of government is responsible for a particular system and will ensure cost-effective coverage for all areas of the province.
Program delivery is optimized by retaining it at the provincial level. If it is the government's decision that the program must be divested to the municipal level, we urge that the entire program be allocated to upper-tier municipalities. The municipal department or agency providing the service will be able to support a larger staff, lower program administration costs and ensure experienced personnel will be available.
That's the conclusion of our presentation at this time. We thank the committee for allowing us this opportunity to voice our perspective.
Mr Hoy: Thank you very much for your presentation this morning. You actually answered most of my questions in the second-last paragraph before you were thanking us for hearing you today.
The riding I represent is very rural. There isn't a town or village over 4,500 people, and that's round numbers. They had in some areas the notion that they should have more building sites, more homes built to offset downloading so they can have revenues, and here we have in the county of Kent municipal restructuring going on where there is no decision as of yet as to whether there will be a one-tier municipality or a two-tier municipality.
I was going to ask you the question if there would be a hodgepodge, and you say a "patchwork" of inconsistency. You've answered those questions and given some recommendations here that I appreciate very much.
Mr Laughren: Just very briefly, when it comes to inspecting septic systems -- I live rurally and have my own water supply and my own septic system, and they're trying hard to figure out how to put a user charge on me but they haven't figured it out yet -- do inspections always occur only at the time of building of the septic system? Are there any follow-up inspections after 15 years, 20 years, 30 years?
Ms Judith de Grosbois: There may be a follow-up inspection if there's been a complaint made.
Mr Laughren: Only then, though.
Ms de Grosbois: That's the only time, yes.
Mr Laughren: Okay. Thank you.
Mr Galt: Just a couple of comments at the top of page 2, and thanks very much for your words of support and also for your very thoughtful presentation. As you get down a little further in that paragraph you talk about not recognizing some of the training programs. I bring to your attention that there are many organizations which require entry exams following graduation from any particular institution, so that could be consistent in a spot such as there.
The October 1 deadline, yes, we're concerned about that as well and are certainly looking at that date. I don't think there's any question you're going to see that date adjusted. Just to what point I'm not sure at this time, but certainly that date is pushing things pretty hard.
On page 3 a comment as it relates to replacement septic systems: A certificate of approval is still going to be required for a replacement system. And lower-tier versus upper-tier, who should provide which service: I'd appreciate any further information and thoughts you have on that one. That one is a struggle. I struggle with it.
I can see your concern about patchwork pieces with the lower municipality. Certainly I see a lot of -- if it stays with the lower municipalities, they will probably be using health units to provide the service. I think that's a very natural evolution. The struggle with that versus a one-window approach to a building permit whereby the building inspector can be certified and trained to be able to do the job of septic systems, particularly in sparsely populated rural municipalities, is that an awful lot of complaints that we receive as government are: "We don't want the 13 or 14 inspectors coming out. Couldn't you have two or three or four? Do you need the 15?" I might be exaggerating, but I hear all kinds of horror stories out there. That was one of the things we were looking at to get to the one-window balance.
One window versus should it be upper-tier, lower-tier, large subterranean sewage systems versus small -- yes, any more information, any more thoughts you have on that I'd appreciate receiving.
Ms de Grosbois: By written submission?
Mr Galt: Yes.
The Chair: Our time has expired. Thank you very much for coming this morning. We appreciate your advice and your expertise.
CITIZENS ENVIRONMENT ALLIANCE OF SOUTHWESTERN ONTARIO
The Chair: Our next presenter is Mr Rick Coronado, who represents the Citizens Environment Alliance of Southwestern Ontario. Welcome, Mr Coronado. We're pleased to see you here this morning.
Mr Rick Coronado: Good day. My name is Rick Coronado. I'm the coordinator for the Citizens Environment Alliance of Southwestern Ontario. We are based out of Windsor and we are a Great Lakes alliance of community, labour and environmental activists working for an educated population on protecting and enhancing our natural and community environments in the southwest region of the province. I am here today to comment on Bill 107 and to express our concern about the transfer/dumping of Ontario's water and sewage systems on municipalities of this province.
I guess from an environmental standpoint we asked for public hearings and we got them, although most environmental non-government organizations such as ours have little time and resources in such a short time frame to put together an effective presentation. We suggest that environmental non-government organizations have better things to do than to continually participate in hearings to fight the neo-conservative agenda promoting the propaganda that we can effectively gut the public services of this province in the name of efficiency and cost and wind up in a positive frame of mind.
Polls from April 1996 indicate that 76% of Ontarians want water services to remain in public hands, and for a government that prides itself in majority polls in order to mandate its governance, we think you'd better listen.
This government has been very crafty. Bill 26 -- and I think this is the key issue; we call it the ominous bill, not the omnibus bill -- changed the Public Utilities Act so that municipalities no longer have to hold a public referendum on the sale of public utilities.
Currently the Ontario Clean Water Agency, an agency of the Ontario government, owns and operates 77 water and 153 waste water treatment plants, and this is about one quarter of Ontario's water and sewage works. Municipalities and public utilities own the rest, although the Ontario Clean Water Agency operates 116 of these.
The agenda of this government is to download costs of public service expenditures to municipal government. An example: The Ministry of Environment and Energy has endured budget cuts of $285 million over the next two years. Much of these cuts will be felt at the local level, with less monitoring, regulation and enforcement. As you may know, in Windsor the local Ministry of Environment and Energy office has been reduced to half its size. Where is the slack going to be taken up there?
The mayors and town councils are saying they must work for the best interests of taxpayers. Many are prepared to give private operators consideration, as they have in the case of garbage collection. Companies such as BFI and Laidlaw have certainly benefited. The result has been that the Ontario blue box system is in financial difficulty. A Report on Business article points out Laidlaw's bid for the ambulance service in the Hamilton-Mississauga area and the fear of the union, the Ontario Public Service Employees Union, for higher charges for profit service.
The privatization of our public water services means private companies will be accountable to their shareholders first, and the bottom line is profits. The first priority will not be water efficiency and conservation.
We are convinced, as in the case of the privatization of garbage services, that if municipalities are lured into the sale of public water services to the private sector, we will experience the cost of water rising and becoming unaffordable for the poor. Water systems could also deteriorate, as they have in Britain.
Let me talk about the England and Wales experience. Under Margaret Thatcher, one of the Harris government's mentors, no doubt, water and sewage services were privatized in 1989. They have since then experienced severe water shortages and soaring water rates, up 450% in several areas. Health has suffered since 1989. There has been a 600% rise in dysentery, a 200% rise in hepatitis A and there have been increases in other gastrointestinal diseases.
There has been a rise in the cryptosporidium parasite in England and Wales. In Milwaukee in 1993, 400,000 people became ill and 100 people actually died from drinking water contaminated with the cryptospordium parasite. It is one of the largest water-borne epidemics in North America.
In England and Wales, profits from these private water companies funnelled into huge executive salaries, as has been the case with the Ontario privatization of garbage services. Water disconnections peaked in 1991 and 1992 at over 21,000 households. In 1995-96 there were 5,800 household disconnections. The British Medical Association issued a press release in August 1996 calling for a ban on water disconnections due to serious public health consequences. The water system itself has become poorly maintained. This will be the case in Ontario with the move to deregulate while cutting local environmental monitoring. We are concerned that the privatization in Ontario will lead to similar tragedies as in Britain. We've also included in our package several news articles from England and papers in the UK.
York region in Ontario may be the start of privatization in Ontario. A consortium is putting together a bid. The consortium includes Consumers Gas and North West Water, a British company whose top official has an annual salary of $720,000. British, French and American companies are opening offices in Toronto with an eye on Ontario's water. They will make big money operating plants in the long term. Their biggest profits will come when they can start piping our fresh water to US markets. We can remember the debate over free trade. As a commodity water is under the rules of NAFTA. Ontario's water, once diverted, would have to be perpetually supplied even during times of shortage in Canada.
Are there alternatives? A coalition of health, environmental and labour called Save Ontario Water is opposing the potential loss of public control over Ontario's water resources. We are urging municipalities to keep their water and sewage treatment plants public. We advocate that the province pass laws implementing mandatory water conservation for all sectors of users: industrial, commercial, municipal and agricultural. The objective should be to bring Ontario's per capita consumption of water down to the volumes used by European countries. Savings from conservation programmes should be measured before privatization is even considered. We will be asking municipal councillors to defend public control of water. A fight-back has begun.
We are asking for full environmental assessments for this precedent-setting, pre-emptory attack on our public water system, not class EAs. A full EA would allow the issue of need alternatives to be evaluated.
Minister Norm Sterling suggested, in announcing the introduction of Bill 107 to the Legislature called Water and Sewage Services Improvement Act, "that restructuring the services will improve the way they are delivered so that the taxpayer receives value." He says that restructuring will provide the best possible service with optimum efficiency and least cost. But the British experience suggests caution. It would also suggest that this government is ideologically driven, ignoring the warnings and wanting to follow and ram through its Thatcher, neo-conservative agenda that has proven so disastrous for the UK.
We would suggest that if this government is allowed to ram through its ideological agenda in Ontario, we, the public, will pay for a long time to come with our health and loss of public control of our vital services. With hospital and health care cuts we can't afford any outbreaks of water-borne epidemics.
A report prepared for the Ontario Municipal Water Association discusses why public utilities, not privatization, is the answer. They claim customers of public utilities have, in political terms, a voice. That voice is exercised in regular elections under the Municipal Act and through open meetings of the public utility commissions.
They say that franchised utilities have undesirable consequences for both the customer and the municipality. Not only are the customers captives of the company because they have no exit to other suppliers, but also the municipality is on the hook for customer complaints. What a municipality may gain by divesting itself of responsibility for a utility it more than loses through increased political costs that stem from the loss of public accountability. Privatization has political costs because there is no voice for customers.
If this government is not stopped, we will continue to witness the dismantling of the best public service programs in the entire world.
In summarizing, I just want to go over some of the things we've already mentioned.
Private companies will be accountable first to their shareholders, and net profits are likely to be their first priority, not water efficiency and conservation.
Without controls, under privatization, water costs could rise and become unaffordable for the poor, while systems and service could deteriorate as they have in Britain.
Recent deregulation has weakened and delayed important water discharge laws. Without a strong regulatory framework to guide their activities, private companies are likely to increase pollution of our waterways, as they have in Britain.
Maintenance costing billions of dollars is needed now to repair these systems, which are leaking, aging and polluting, but these needs are likely to be ignored in the pursuit of profits.
Droughts, overdevelopment and climate change could lead to diminished supplies and water crisis and conflicts between water users in the province.
Unionized jobs and workers' health and safety, and consequently plant performance, could be placed at risk.
Water allocation will be dictated by development, engineering and profits and not by the environmental considerations of the carrying capacity of our watersheds.
Groundwater resources aquifers could be depleted since watershed protection is not included in Ontario's Planning Act.
Ontario's waters will not be protected by private interests from diversion to areas in the US and Mexico which are or will shortly be suffering severe water shortages.
Trade agreements will make waters diverted into a commodity which, once diverted, will have to be perpetually supplied.
Fragmentation of the management of and jurisdiction over our water and waste water systems has caused the problems which have bankrupted Ontario's water budget.
Adding many new private users to the mix without strong regulation in place will compound our water woes.
Mr Laughren: How do you really feel about this bill? I did appreciate the directness with which you presented your views.
On page 1, the second-last paragraph, you say, "Much of these cuts will be felt at the local level with less monitoring, regulation and enforcement." I wanted to ask you -- it's a bit of a long question; I hope you won't mind it -- if you were aware of what happened in Sudbury, where Inco had a gas leak and dozens of people actually keeled over on the street and had to be taken to hospital. It was in late 1995.
The Ministry of Environment laid charges against Inco, and then when it came time for the appearance in court, on two different occasions the Ministry of Environment people failed to show up and the judge threw it out. There's real outrage at what's happened with the cutbacks in the Ministry of Environment and their failure to follow up on what was obviously a serious public health issue.
I'm wondering whether you're basing your comments in this presentation on that incident or other incidents or whether you're just concerned because of the cutbacks.
Mr Coronado: It's overall concern. Coming from Windsor, we know the value of enforcement. Our organization came together in 1985 over the incident of the blob in the St Clair River. We have fought very hard and for many years to protect our water systems there. They were closed two or three times during that crisis. So the concern over the health of drinking water is a very big focus for us in the Windsor area.
As far as privatization is concerned, right now, tonight at city council, there's a debate over the privatization of the parking system. There is obviously a move afoot now to move the entire Ontario programs into the municipal sector. Perhaps the municipal sector can be effective in some areas, but I would suggest to the Ontario government that if they're going to continue to downsize, devolve and deregulate, then they ought to pass the resources on to the municipalities as well, because we're not going to be able to do it the way we are.
As I said earlier, with the downsizing now of the Windsor Ministry of Environment and Energy office, as far as our interface with the US side and the very hot binational issues in that area are concerned, we're not going to be as effective as we were.
Mr Bart Maves (Niagara Falls): Thank you very much for your presentation. I have a quick question. Some 75% of systems are owned already by municipalities and have been for quite some time. They could have been privatized already. Many times municipalities have faced difficult situations, yet have never taken that step. What makes you think that all of a sudden they'll all rush to take that step?
Mr Coronado: Bill 26. You guys rammed that through and now it's just going to be a red flag. The companies are coming out of nowhere. They're making offers to municipal governments. We've got three or four of them down in our area right now. They're all looking at it, saying, "We have to worry about the taxpayer." Obviously they want to sit down when they're being offered by a private company, "We can do this job $400,000 to $500,000 cheaper than you're doing it right now." They're going to want to look at it. That's what we're concerned about.
Mr Maves: You think what they'll contract out is the administration of the service.
Mr Coronado: Why not?
Mr Maves: The bill puts the onus of environmental protection now on the municipality if they contract it out, so why would all the maintenance of the system falter? Even if they contract out the administration of it, the municipality is still in charge of the Environmental Protection Act as it pertains to the water and sewer services.
Mr Coronado: Yes, but municipalities don't have the resources to enforce. The Ontario Clean Water Agency was put together by this province. What was it put together for?
Mr Maves: Public health officials, who are 100% at the municipal level, have been looking after inspecting this stuff for quite a long time, so they have the facilities to do that.
Mr Coronado: What we're saying is if you pass it on to municipalities, as has been the case in England and Wales, their experience has been very detrimental. What we're suggesting to you is if you do this, after passing Bill 26 and giving them the opportunity now to do this without public referendum, you're putting us in a very precarious position at the municipal level. We would suggest that if you want to downsize and pass the resources off to municipalities, you pass along the resources to go with it.
Mr Hoy: Thank you for your presentation this morning. I spoke with someone who visited England recently and they concur with some of the things you've said. They told me other points of interest, such as connecting fees to water lines going up to astronomical amounts. He was suggesting $3,000 per home in one location, where prior to that it was only $300. It's quite an increase for the citizens there.
I appreciate your comments throughout the whole of your brief. I just want to mention that I too have noticed the reduction in staff at MOEE in Windsor. The response time to investigations and the resolution of complaints is taking much longer. That reduction in staff is not helpful to the citizens who have complaints throughout many areas, not just the topic of today, which is water and sewage, but other things as well. I've noted a marked difference in the response. It will perhaps jeopardize pollution control in the future.
Mr Coronado: Absolutely.
The Chair: Our time has expired. We appreciate your appearance here this morning and your advice.
The Chair: The next presenter is Susan Smith. Thank you for coming this morning.
Ms Susan Smith: Thank you very much. I'm hopelessly nervous, so I hope you'll be able to hear me. Actually, I won't be doing my job if I don't sound like I'm absolutely, ideologically driven in terms of not only what I opposed about what was in Bill 26, but here in this bill, the enactment of the unfolding master plan.
I don't actually look at this out of the context of both the Development Charges Act and, I believe it's Bill 102, about municipal financing, the piece of legislation about that. Keep in mind that I feel I'm asking the resources development committee to have your analysis, particularly at the regulation stage, and appreciate that when people are watching what you do, the chronology of how you pass these bills and how you implement them is incredibly significant, no matter how quickly the government may choose to call an election after this particular set of bills has been passed.
I oppose it ideologically because it's a set piece. It all works together.
I believe we should stop public-private partnership for natural resource entities that are absolutely essential to communities, public health and how people thrive in our communities. I don't want to repeat what people have said in terms of the cautionary tales about what's happened in Britain.
I appreciate that there is no express prohibition to transfer to the private sector in this bill. I think that's a big mistake. That's something I would look for. Lots of people who read the Canadian Constitution as it unfolded noticed the express absence of a prohibition that a corporation can't be viewed as a citizen, and we certainly know that one of the first pieces of constitutional law to be challenged and ultimately decided did have to do with corporations having the rights and privileges of citizens and communities and groups of people.
That was a terrible mistake. That's certainly why capital is fleeing into Canada, and probably most particularly into Ontario, because we have assets that have been built up with social capital, community capital, generational capital over decades, and you people want to do a lot more than sell the farm. I am requesting this committee to recommend that express prohibition of transfer to the private sector be enumerated in the bill.
Also, there are provincial grants mentioned, I believe going back to 1978, but again as a set piece with the municipal restructuring that is taking place. Even though that might appear to be an accounting impediment to municipalities that would choose to do this, I actually think that with all the municipal restructuring, it will make it quite a bit more difficult to get actual numbers pinned to the wall, instead of Jell-O.
That of course raises the issue of social capital that citizens have in their reserve funds. I would hate to see that cannibalized and taken over in a hostile way from municipalities. There certainly are multinational water companies. I'll talk about the one in my community in a minute. There are really powerful corporate interests to be represented here, transnational corporations that may never care if water comes out of an aquifer again. I'm here to tell you that doesn't represent my cultural belief or value, and for generations of Canadians who have attempted to protect their karst topography, their groundwater supply, when you think about the generations of people who farmed and did all kinds of things throughout Ontario for decades, I don't think this is the right route to go.
Two cautionary tales: You've cut $295 million. There are no more capital grants envisioned. You've certainly cut back MOEE positions, trained, skilled people who have provided service to the community. Public health is an issue because as the municipality takes over 100% of those dollars, this becomes really significant.
I'm going to refer to the cautionary tales very briefly. One is Naramata. That's not in Ontario. That's in British Columbia. We have a municipal council I can speak about here in London that will be very keen to appoint boards and not have council-elected representatives on the boards. The cautionary tale about what is unfolding in Naramata in the context of -- you work in the context of what was federal Liberal and Conservative agenda for a long time in terms of corporate hierarchy, and that is how municipalities and provinces in your are constrained legislation today.
Some 76% of Ontarians who were polled suggested they want public control of water. They don't want it sold off, not only the economic issues of the costs increasing, but there are a lot of longer-term costs that inform this.
The other cautionary tale is about London Hydro. Trigen is owned by Trans-National Corp out of Lyon, France, and of course they have an interest.
If you had the opportunity to have professor Bill Fyfe, who's a professor emeritus at the University of Western Ontario, he could tell you about the geomorphological history here in London, about how London used to be a 2,000-foot-deep lake. When two glaciers melted, it drained interbasin out into Lakes Erie, St Clair and Huron. The underground water flow in this city is tremendous but there is therefore also the potential for great error in terms of contamination.
Actually, in 1962 a good percentage of the people in this municipality got their drinking water from wells. Of course, that's no longer the case. However, the potential of the liability for failing septics -- even though the municipality has in the past had the process for gradually funding the separation of storm and sanitary sewers dealing with the environmental hazards of the outlet overflows. You seem to be throwing every roadblock in the way, and as a set piece, environmental remediation in London appears about to be seriously constrained. This may not be the appropriate time to do that.
With privatization and the spectre of corporate remuneration, we might end up seeing listings, public first, then privatized, of engineering staff or account executives who will now be well in excess of $100,000 remuneration. I'll simply remind the government that you've frozen the minimum wage for the last two and a half years, so I think that's quite inappropriate.
With respect to Trigen and the cautionary tale, what I've given to the clerk is some background material about the absolute contortionism of the local municipal council, its appointed hydro commission and the interest of, of course, every Trans-National Corp going into the privatization of that utility.
They are paying people generous executive salaries for the privilege of introducing lots of technology for customer accounts. Actually, there was so much cash flow and so little scrutiny and so little real public trust expressed that now they're trying to recover millions, hundreds of thousands of dollars, simply because of their bad past practices in accounting.
I'm sure you've enjoyed this morning's London Free Press, so I'll just remind you that a minimum of three articles today address the impact of this bill.
Development charges: When you're constraining them, that's limiting the potential of the municipality to get funding for subwatershed studies up front. There are members of a municipal council here in London, given what I've told you about the tremendous underground configuration of water flow, who have gone out of their way to find interests to disclose at the level when the municipality is voting about subwatersheds and about putting forward the engineering dollars to do the studies. In that instance, where does it come in for the municipality to ultimately be able to make a good decision about monitoring septic systems, about the water supply system?
I guess people have a pretty emotional response to water. When I was 19, I travelled in West Africa, and one of the most interesting experiences I had, in addition to appreciating that the mortality age for most people in the country I was in was 36 years of age, which was younger than both my parents -- potable drinking water is an absolute necessity of life. There are aesthetes in this world who fast for days; I'm certainly not one of them. But drinking water is an absolute essential.
You're not putting in, as a corollary to this, safe drinking water standards; you're not acting on that or working on the tritium levels, working on all the standards out there. There's no dearth of input this government and governments before have received about implementing something as elemental as a safe drinking water standard to be guaranteed. As a set piece, this is so myopic, so shortsighted. To the government members, I will say that you were aware of this politically because of the chronology, if nothing else. That's about all I want to say.
Mr O'Toole: Thank you very much for your presentation, Susan. On Bill 98, the development charges, I would like you to be informed that all hard services are covered under the current proposals in Bill 98. So I would qualify that in that there's no impact on providing hard services.
Ms Smith: There's an impact right now. Bill 20 froze development charges. Any municipality that had been in the process of rejigging their municipality to reflect the real cost of growth and the real hard services costs requires Al Leach's signature to enable them to raise the development charges. Your messaging to business might have been really important, but it was dumb.
Mr O'Toole: The new formula in Bill 98 -- Bill 20, the planning bill, did freeze them because there was so much variation in the province, from as low as $500 to as high as $25,000. That was the intent under Bill 98, if you've taken part in any of that. Bill 106, the fair assessment system, is also in hearings. It's intended to make sure that every person across Ontario pays their fair share. Would you agree that that is what we should do, or do you think some people should not be paying their fair share?
Ms Smith: Well --
Mr O'Toole: That's really what this is about. Specific to this bill --
Ms Smith: Sure. Fair share is interesting to me. When I read Bill 32 and Bill 42, the alacrity with which Bill 42 was passed left me reeling. To appreciate, again I will say that minimum wage -- there are people in my community who make minimum wage.
Mr O'Toole: That's Bill 49.
Ms Smith: Yes, that's Bill 49. So what was passed before that, and with tremendous speed, was Bill 32 first, which was in place for all of three days, freezing the remuneration of MPPs. But what Bill 42 did was raise the pay once the social contract came off, raise the remuneration you received dramatically.
Mr O'Toole: Minimum wage should be -- I remember one of your comments earlier.
Ms Smith: Go back to the record.
Mr O'Toole: Yes, that $22 should be the minimum wage. That's your own record.
Ms Smith: No, that wasn't the figure, but it was quite high.
Mr O'Toole: It was $19.50.
Interjection: It was $19.85.
Mr O'Toole: On this bill, I think you should understand that 75% of municipalities own their water and sewer today. It's just completing that cycle. I have a list here; almost all the municipalities have requested this. It's certainly working in cooperation. The province will still maintain a very important role of setting and enforcing standards for drinking water and sewage discharge. That is the responsibility --
The Chair: I'm going to have to interrupt. Our time has expired. Apologies to the Liberal and the NDP caucus; we'll go to your caucuses on the next questioning.
Thank you very much for taking the time to come before us this morning, Susan.
ONTARIO WATER WORKS ASSOCIATION
The Chair: We move now to Mr Tom Eyre, who is a representative from the Ontario Water Works Association. Welcome, Mr Eyre. We're glad to have you join us this morning.
Mr Tom Eyre: We thank you for the opportunity to address the committee. I am Tom Eyre, and as chair I am representing the Ontario Water Works Association, an essentially volunteer organization of water industry professionals, manufacturers and utility suppliers. We have over 1,000 members in Ontario, and are a section of the American Water Works Association, with over 55,000 members worldwide. We set standards for the industry and provide funds for major research work in North America. We're here today to address Bill 107.
We recognize that in large measure the changes specified are a continuation of the separation of the original operating arm of the old Ministry of the Environment from its regulating arm. The formation of the Ontario Clean Water Agency was the first stage. We realize that as the provincial government divests itself of municipal assets, this is by way of transfer to the local municipality.
We also recognize that the option must remain with the municipality to operate the plant competitively. However, our association has also recognized that the ratepayer deserves the best quality at the lowest possible price.
There is a current restraint on pricing of water in the public sector, and that is by having an elected board, council or commission. In this way, the customer can ensure accountability without there being a need for regulation. However, if privatization does occur, there must be some form of control. In this context, the United States has both public and private water utilities. In most states, a state public utility commission reviews prices etc. In Ontario, the electrical utilities are regulated, even when publicly owned.
Perhaps our major concern with the act is the way in which the door is opened slightly for privatization, without setting any rules. Generally speaking, the customers of a public utility believe they own the assets, not the council of the municipality.
There is no question that for the disposal of such assets, the customer should be involved, as councillors are only trustees. A mandate, whether by election or referendum, should be established to determine the disposal of waterworks or waste water assets. The data supplied by Insight Canada Research for the Freeman report, Models for the 21st Century, indicated that more than three quarters of Ontarians believe that water should be provided at cost and be municipally owned, not privately owned.
In conclusion, the OWWA commends the government for passing down the ownership of plants, but would be concerned if subsequent sale of plants took place without adequate safeguards.
We appreciate this opportunity to make this presentation. Thank you.
Mr Agostino: Just a couple of points. You suggested that the door has been slightly opened. I believe the door has been jarred wide open and the windows and the roof and every other part of the house have been opened up to allow privatization to occur as a result of this bill.
Mr Maves made a comment. I think we've got to separate clearly the difference between privatizing the operation if certain provisions are in place. That has occurred, and in some cases it has occurred successfully, if you have successor rights, if you have the contracts, if you ensure that the protection is there. Under certain circumstances, that could work.
But there's a significant difference between the operation being run by a private company and the assets. The municipality is not going to make a lot of money by having the operation of a plant. They may save $500,000 or $1 million a year in larger municipalities by having a private company operating. The money that is to be made, from the point of view of offsetting the downloading, is from the sale of the assets and the utilities that come with that, and then of course the ability to set the rates. This is what I want to talk to you about.
Clearly, this legislation, tied in with Bill 26, allows any municipality across Ontario to sell the whole thing, the assets, the whole operation of water and sewer, and with that you give up the right to set the rates. Do you believe the rates for water and sewer services should be set by a private corporation, or do you believe that local councils and elected officials should have the responsibility to set the water and sewer rates?
Mr Eyre: Currently, we have for many years established a water rate across the province municipality by municipality. This doesn't seem to have caused a problem. Canada, in general, has the second-lowest water rates in the world.
However, where we see the concerns is that if it does move this way -- and I do not wish to get into the debate as to whether the door is open wide or just slightly ajar -- if that does occur, we're recommending that there be some overall regulating body to at least look at it. Concerns, obviously, in our case have always been to look after the customer first. In answer to your other statement, obviously the best proponent or operator of a unit, whether it be public or private, is still in the best interests of the customer if those regulations are in place.
I refer to the States more so than any other jurisdiction, where you do within a province or a state have private and public companies working side by side, and there is an overall control there.
Mr Agostino: Just to follow up, a quick question: Do you believe municipalities should have the right, if they choose, to privatize and sell their water and sewer services and assets?
Mr Eyre: I believe if they're given approval by the customers, ratepayers or whatever, then that could well take place if indeed that is what is given to them as a mandate.
Mr Agostino: You're aware of the fact that that was there previously, and after Bill 26 the referendum in regard to the sale of the assets has been taken away, and municipalities do not have to go through a public referendum in order to sell their water and sewer services or assets.
Mr Eyre: My only knowledge of Bill 26 was in fact the need to remove public utilities commissions by not going to a referendum. I wasn't aware that it went that one step further.
Mr Agostino: Yes, it did.
Mr Laughren: Thank you, Mr Eyre, for coming before the committee. I appreciated what Mr Agostino said about the difference between ownership of assets versus simply contracting out management. I think that's a good point.
On the question of privatization, basically your organization largely are private sector folks, are they not?
Mr Eyre: No.
Mr Laughren: They're not? I thought they were.
Mr Eyre: No. In fact, our sector covers private companies, public utilities, municipalities. Even OCWA is a member of our association.
Mr Laughren: It's a mix.
Mr Eyre: We are mixed, yes, correct.
Mr Laughren: Since privatization now is going to be the order of the day, with encouragement by the provincial government to the municipalities -- it's not ordering them to, but if you squeeze them enough, then they'll look for opportunities to make money, in my view -- I'm wondering about what rules should be applied to privatization in order to, as you put it, protect the real owners of those systems. I'm worried about that because right now we don't have a framework for privatization in the province, whether it's water, Hydro or LCBO. There's absolutely no framework out there, and it's a mug's game at this point. So that's one question I had, and perhaps I'll have time for a second one on rates, but I really wanted to know if you could give us some advice on the whole issue of what rules should apply when and who should apply them when it comes to privatization.
Mr Eyre: If I could use the UK example, there are regulators appointed by the government there to control, within certain limits, the pricing structure. It's as good as the regulator handles it. For example, in the province, if we take the electrical industry, the supply industry, Ontario Hydro has been the regulator of the municipal utilities there and has set rules there. Although the Ontario Energy Board is partially a control, it is not a regulator of Ontario Hydro on its own. So that aspect of it has not been regulated.
Where a regulator would be is to make sure -- again, I can't state what the limits would be, but it would at least apply some overseeing situation. You have it with the CRTC. Anywhere there's a monopoly situation, there should really be somebody who has the final say to ensure, whether it's a public or private monopoly, that there is some control.
Mr Laughren: We do have a privatization minister who has hired somebody at a quarter of a million dollars a year to help draft this framework. That's what he's doing.
My other question, if there's time --
The Chair: Yes, there is time.
Mr Laughren: Thank you -- has to do with rates. Who should set the rates, particularly if it's privatized? If it's not privatized, then you've got lots of pressure on the elected municipal folks on rates. If it's privatized to whoever, who should ride herd on their right to set rates?
Mr Eyre: Currently, it has been left with the utility or the municipality or whomever to set those rates. There is some competition, obviously, between municipalities for supplying things, but it really is a monopoly situation. Supply is usually restricted within the municipality, so it isn't the question that you're buying from the equivalent of Ontario Hydro, as, for example, electricity is. Therefore, the local costs very much dictate the rates in the first place.
The question of money being made as profit of course is the other side of this, which has to be addressed and would have to be looked at if it went that far. I haven't, nor has my association, really looked that far down. What we're really saying is, we appreciate that the municipalities are taking over their plants; that, we understand. But we're really saying perhaps there should be some caution as to how any further steps go, and if there is going to be a bill specifically on that, then we probably will come back and address that at that time.
Mr Jerry J. Ouellette (Oshawa): I have just a quick question. We had a presentation from the health inspectors -- and I realize they may be different fields, but you may have an opinion on it -- regarding the 78 hours of training for the course that's available now to graduate school for inspections. Do you have any concerns in any of those areas?
Mr Eyre: In the inspections, I'm more interested in the training and certification aspect for waterworks operators.
Mr Ouellette: Do you see any problem with the current system the way it is now?
Mr Eyre: I personally -- and again this is not an association view; I'm sort of getting into a personal thing, because our association does not have a view on that.
Mr Ouellette: That's fine.
Mr Eyre: I think training is important and updating is very important. For example, I think we should be improving the standards we set. I wasn't aware exactly of the 72 hours, nor do I really know the health inspection side.
Mr Ouellette: It's 78 hours.
Mr Eyre: The usual control of course is the fact that there's a medical officer of health to whom those people respond and his training is significantly greater than most medical practitioners. So one must assume that his control of those people is significant.
Mr Galt: Thank you for your presentation. I'm kind of curious about your comment about the door being opened slightly for privatization, and yes, there's nothing there that absolutely blocks it through asking for all grants to be returned and the minister approves how they're returned; there's a lot of control there, but over and above that, down the road, yes, there's that possibility. I'm curious as to how you see that might be plugged, your recommendation, making a comment to it.
The other thing I'd like to bring to your attention is the concern we have as we look at OCWA that it could go the other way in all this Who Does What and getting it streamlined. It could come to a monstrous monopoly, and the previous government developed it, which is one step towards privatization, by the way. We want to see it stopped by taking it to the municipalities. We see OCWA as the operator, the owner, the funder and the regulator. We believe there must be a conflict of interest in there someplace. I'm coming back to my question, after a few comments: How do you see overcoming this problem of a possible door being opened slightly, as you put it?
Mr Laughren: How was that privatization?
The Chair: Mr Laughren, please, order.
Mr Laughren: I don't understand what you're talking about; talking silly.
Mr Eyre: OCWA, as I stated in the brief, was the first step for the ministry.
Mr Laughren: The province owns it.
Mr Eyre: I'm starting to feel like I'm in Parliament.
Interjection: It's a challenging place to speak, I can tell you.
Mr Eyre: It would have to be a long workweek, so I don't think I want to be.
OCWA was the first step. When the ministry originally ran its plans and set standards for quality, the splitting away of OCWA was the first step, as we saw it. It's really very difficult and I've perhaps been asked a lot of questions which -- one can see through a crack or a door, whether it's ajar or wide, but really until you get there, you have a lot of problems really understanding whether it's a picture over there or real things. I have a problem moving that a stage further and talking about privatization.
What I'm suggesting is that if privatization does occur, by whatever means, there should be some relatively strong regulation available so that the customer, and that's who we serve, has the chance to have some recourse.
The Chair: Thank you very much, Mr Eyre. We appreciate your taking the time to come before the committee this morning to give us your best advice.
The Chair: We would now like to hear from Mr Wallace MacKinnon, please.
The Chair: They're getting it out of their system before you begin. Welcome, Mr MacKinnon. We are pleased to have you join us this morning.
Mr Wallace MacKinnon: Thank you, Madam Chair. I appreciate having the opportunity to come here this morning and speak to you and the committee. Just for your own reference, I can speak from a varied experience on this issue, because I have worked for municipal, provincial, regional and federal governments as well as the private sector in the water business, so I can see it from all sides.
The purpose of my submission is twofold: to speak in support of the legislation and to offer the following suggestions to further improve it and make it even more attractive and effective for the province of Ontario and the municipalities.
I want to speak first about the repayment of grants. The proposed legislation requires that any municipality that undertook to sell all or part of its water or sewage works to the private sector would have to repay the face value, without interest, of any provincial capital grants it has received since 1978.
I suggest that requiring municipalities to fully repay any grants they have received for their water or waste water infrastructure serves as a major disincentive towards seriously considering privatization of these facilities as a viable alternative, especially when there is no time limit placed on the obligation to repay. Infrastructure built with a grant given 15 to 20 years ago should not be placed in the same category as infrastructure built with a grant made five years ago.
A reasonable compromise would be to establish a formula that enabled the province and the municipality in question to write off the value of the grant over a reasonable period of time. The length of the write-off period could be linked to the circumstances of the original grant; for example, how long ago the grant was made, the value of the grant in relation to the total value of the infrastructure, the number and value of other grants received by the municipality etc. This approach would leave municipalities free to choose what they feel is best for them and, at the same time, return some of the funding to the province if the accumulated equity in the infrastructure was converted into capital.
I'd like to speak about a smooth transition from provincial operations and ownership to municipal operations and ownership. The proposed legislation contains provisions to ensure a smooth transition period. OCWA will continue to provide services to municipalities in accordance with existing agreements. In cases where agreements do not provide for a full-service termination date, municipalities can choose to retain an alternative service provider after a reasonable notice period is given.
OCWA and its predecessors were given a mandate to provide operations and maintenance services to municipalities which either lacked the resources or had no interest in running these facilities themselves. At the same time that most of this infrastructure was built, there essentially was no private sector presence in Ontario that possessed the ability to fill the gap that OCWA and its predecessors were called upon to fill.
This is not the case in 1997. Today, there is more than sufficient interest, capability and capital in the private sector to respond to all municipal needs for water and waste water services. Therefore, there is no real need for OCWA to continue on indefinitely as an operating entity.
Bearing this in mind, I suggest the legislation include a clause which sets a reasonable time limit as to how long OCWA can continue providing service to a municipality or group of municipalities. At the end of that period, OCWA would no longer have a mandate or an obligation to provide service to the municipality in question. The municipality would have the choice of taking over operations with its own workforce, absorbing the existing OCWA workforce into the municipal organization or contracting out the services to a private sector company.
It is very difficult, if not impossible, for the private sector to compete against a subsidized government entity such as OCWA. This government has taken the position that it has no interest in being in the service delivery business in areas where the private sector has the capability to meet the demand. Supporting or prolonging OCWA's existence any longer than absolutely necessary will only serve to stifle the private sector's interest in the Ontario market and discourage vigorous and healthy competition.
Bearing this in mind, the government should place OCWA in a no-contract-renewal, no-new-project-operations mode and instruct OCWA's management to focus on facilitating smooth transitions for all of the infrastructure the agency is involved with. Municipalities and the private sector will quickly and effectively fill the void created by OCWA's departure.
I'd like to speak next about the capital improvements, upgrades to existing infrastructure and the same to new infrastructure projects. The proposed legislation amends the Capital Investment Plan Act, 1993, thereby relieving OCWA and the crown of the obligation to construct, expand or finance the construction or expansion of water or sewage works.
It must be noted that the legislation does not prevent OCWA from entering into new agreements to finance, construct and operate infrastructure expansions, nor does it prevent OCWA from financing, constructing and operating new infrastructure. This in effect gives OCWA an unofficial mandate to maintain and expand its existence. Private sector companies are ready, willing and able to meet the infrastructure needs of municipalities that lack the resources or do not wish to undertake those projects on their own. The continued existence of OCWA will only serve to drive the private sector out of Ontario and, over the long term, entrench municipal dependence on the province for infrastructure support.
The environmental approvals process now in place will allow the Ministry of Environment and Energy to assist municipalities in ensuring that plans for new infrastructure, whether delivered by the municipality or a private sector company, are capable of meeting the service demands on a operational, financial and environmentally sustainable basis. The MOEE could also reassume the mandate to serve as a facilitator to support municipalities which do not have the resources to initiate and administer an infrastructure project on their own.
The need for revitalization and upgrading Ontario's water and waste water infrastructure is substantial. Returning control and responsibility for this infrastructure back to local government will motivate municipalities to move forward on this issue. Creating a fair and competitive business environment will motivate the private sector to dedicate the resources and funds required to help municipalities get the job done right. The end result will be a win-win-win situation for the environment, the government and the citizens of Ontario and our economy.
Mr Laughren: It's an interesting presentation, the idea of a shotgun to make sure that OCWA gets out of the business and gives it to the municipalities; they wouldn't have any choice. I worry about two things. I worry about the motivation of the private sector. I know they would be doing this for the good of the municipalities, not for themselves, but I'm wondering why it was such a debacle in Great Britain.
Secondly -- and I know you make a proviso at the end that MOEE would get back into the business for municipalities that do not have the resources -- I have several communities in my riding that have 500 people where the water table was a disaster and there was no choice; it had to be replaced. But that cost millions, and it's not even remotely possible for that to be financed by the local residents, not even remotely. I don't know who decides whether or not a municipality can afford it. That's the other thing, because I can't imagine many municipalities saying, "Oh, we can afford it; don't worry about us," and others saying, "Hey, not us; we can't do it." So those are the two things that intrigued me about your presentation.
Mr MacKinnon: Well, if I could speak first about the British experience, and I have very limited knowledge of it, but I could assure you that for every bad-news story you have heard about privatization in the UK, I've heard a good-news story, because I've talked to several of the companies across England that have been involved in this.
England's infrastructure was crumbling. There were many municipalities where, if you lived there, you didn't know from one time to the other when you turned on the tap whether anything was going to come out, and that was before privatization. Privatization injected huge investments into that infrastructure, investment the British government did not have. They felt this was their only choice.
The people who have typically come to Ontario to talk about Britain's experience have come here with a message to defeat change in Ontario, so they'll only speak about what they want you to hear. I would suggest that if you're going to base a decision on what you hear, then you'd better go and get both sides of the story.
As far as private sector companies doing things for the good of the municipality, there's no doubt in my mind that they're in this business for a profit, but private sector companies are also driven by success in delivering service to their customers. If you don't perform, you get tossed out on your ear. If you have a contract with a municipality to deliver a specific quantity, a specific quality and a specific level of reliability, if you don't, the penalties associated with that are huge. Try that with OCWA and you'll just get: "Sorry, we screwed up. We'll try it over again." What I'm saying is, you'll actually end up better off being served by either the municipality or by a private sector company.
If you investigate the performance results of OCWA measured up against municipal operations or private sector companies, you will find that municipalities and private sector companies consistently outperform OCWA in delivering value, environmental compliance and stabilized rates. The reason that happens is because they are closer to the point of control. If the city engineer here in London is running the waste water operations and he doesn't do a good job, he's going to get whacked by council. He's either going to turn it around or get pushed out the door and somebody else is going to take his place. If OCWA is sitting there, you're fighting a very large bureaucracy which the council in any municipality has a really tough time defeating.
It's even easier for a municipality to take a private company -- and I draw this analogy: You try to take a municipal civil servant out on the steps of city hall and reprimand them for poor performance, and they would get lots of people coming to their defence. You take a contractor to the steps of city hall and reprimand them for poor performance, and the citizens will line up to do the same thing. It's just the nature, survival and performance.
Mrs Barbara Fisher (Bruce): I have enjoyed very much your presentation this morning. It's rather enlightening, given that you've had experience on almost every front in dealing with the situation. Without having stated in what order your professional interests were, at least you have the experience of all levels, and I think it's very enlightening.
I would just add a comment that although you said you knew nothing about the British system -- hardly; you did know that it was in a deteriorated state when they did have to go to the privatization of it to provide that quality and quantity and service that people do want.
I take a bit of exception to something that was just stated here with regard to a shotgun approach to OCWA. It was put in place for a reason; it served its role for the time being. Just to cite you an example of something in my community, we have a situation where a single municipality a year ago -- it's a community of about 2,000 people; just less than that, actually -- was paying about $135,000 to OCWA to service their system for the year. They decided to be a little more creative in their bidding in terms of servicing and, lo and behold, one year later it's $90,000 for the same servicing.
So I think your point is well made when you talk about sharpening the pencil. There's nothing to say it has to go away, but it's going to be competitive and it's not going to be on the backs of taxpayers, taxpayers' dollars subsidizing against competition.
My one question to you is this: On your repayment of grants, your suggestion there of repaying at the face value without interest, did you consider in there any suggestion with regard to depreciation?
Mr MacKinnon: That was not mine. When I spoke about repaying without interest, that was what the proposed legislation had in it.
Mrs Fisher: My question to you, though, is, where would you bring depreciation into the discussion if it was being negotiated?
Mr MacKinnon: You should look at the value of an asset based on its book value. If a grant is going to be given for $10 million, it should be written off over the life of the infrastructure it's supporting.
Mr Hoy: Thank you for your presentation. You've given us and the government something to think about here in your presentation most clearly. There is a view that municipalities will not be able to maintain some of the water and sewage systems that are going to be downloaded on to them and over time some may choose to sell and privatize. In the middle of your first page you talk about a formula for the municipality to write off the value of the grant over a reasonable period of time.
If indeed these municipalities are not able to sustain this on their own -- and I'm hearing a fair bit of discussion that we are going to have "have-not" and "have" municipalities, so clearly there could be people who fall into this category -- and you talk about values and so on and what you see as being part of the equation to design this formula, would you feel that the government should, however, if they decide to go this route and take up your suggestion, have further consultations, perhaps with AMO or ROMA, in order to make sure that it's not a government-driven solution but a solution that is designed with everyone concerned?
Mr MacKinnon: Yes, that would be a fair approach to take. I think AMO could shed a lot of light for the government on where their priorities lie in this whole process. I don't think it's fair that a municipality should make a substantial gain on the backs of other Ontario municipalities, so if they get a whole pile of grants and then they just want to turn around and flip that infrastructure over, then obviously they should give that money, that support back that they've received from the province. By the same token, as I said, a grant you got five years ago doesn't compare at all to one you got 15 or 20 years ago.
Mr Hoy: I would agree with you on that. As well, I suppose, they should talk to these utilities across Ontario as well, as with these municipal representatives from the groups I mentioned.
The Chair: Mr Hoy, I'm sorry to interpret but, as one gentlemen said this morning, time has evaporated. Mr MacKinnon, thank you very much for coming today to bring your thoughtful presentation to us.
Mr MacKinnon: Thank you. I appreciate the opportunity. Good luck.
WATER TECHNOLOGY INTERNATIONAL CORP
The Chair: We'd now like to invite Mr John Neate to come forward, representing Water Technology International. Hello and welcome, Mr Neate.
Mr John Neate: Thank you very much, Madam Chair. I have a text that was prepared, and I believe it has been handed out.
Water Technology International Corp is pleased to have the opportunity of making this presentation to the members of the legislative committee reviewing Bill 107. As a progressive environmental technology and services company, WTI is supportive of initiatives to improve the efficient delivery of services in the province in a manner that will protect the environment.
First of all some background on WTI: Water Technology International Corp is an employee-owned company that was established in 1992. The company provides specialized consulting services and operations knowhow to industrial and government clients. It develops and demonstrates environmental technologies and it participates in commercial ventures.
WTI's principal areas of domain expertise are prevention of pollution through the application of recovery and reuse technology, control of pollution through the selection and optimization of cost-effective pollution control technologies and practices, and remediation of contaminated soils, sediments and groundwater.
WTI has equity-based joint ventures in British Columbia, Mexico and Poland, and our headquarters is in Burlington, Ontario.
In 1996, WTI took over as the private sector operator of the Wastewater Technology Centre in Burlington. The Wastewater Technology Centre is a federal government water and waste water technology development and demonstration facility that provides technical support in the areas of regulatory development, technology assessment and evaluation, technical program delivery, and demonstration of Canadian environmental technology products and services. The contract to manage the Wastewater Technology Centre currently represents about 50% of WTI's overall revenues, and I should add that our employee group of just over 100 employees includes about 25% of those employees formerly with the federal government.
The novel management approach that was implemented at the Wastewater Technology Centre in 1991 is an example of an effective public-private partnership. Under this arrangement, the federal government continues to own the facility and equipment but contracts with a private sector company, WTI, for technical support, defined annually on the basis of specific deliverables required by the federal government. A version of this privatization model has been successfully applied for more than 50 years in the United States for the management of strategic mission-oriented work at national laboratories in the areas of defence and energy. So we certainly know a fair bit about privatization and public-private partnerships.
With that background, I'd like to make these overall comments and recommendations to the committee:
(1) We are supportive of efforts to streamline and improve the efficiency of government program delivery.
(2) We believe the private sector can play a lead role in the efficient delivery of programs, including the management of water and waste water infrastructure.
(3) The decision to transfer responsibility for the management of water and waste water treatment facilities to municipalities makes sense provided that these municipalities have the capacity either to operate these systems or to evaluate the quality of operations services that can be provided by private sector companies.
(4) Ontario municipalities should establish full-cost, user-pay accounting practices for the development and operation of water and waste water infrastructure.
(5) In redefining the way in which government and the private sector do business in Ontario, attention must be given to ensure that regulatory responsibilities are clearly defined and effectively administered. This includes ensuring that appropriate regulatory standards are enforced and, in some cases, improving on these standards. It also requires the implementation of appropriate quality assurance and quality control systems for those laboratories responsible for regulatory programs, as well as for those which support the operation of water and waste water facilities.
(6) Our strategy for moving forward should build on Ontario's strengths and encourage the development of a domestic market for Canadian environmental technology and services companies. This will allow these companies to expand into international markets, creating new jobs and opportunities for Ontario products abroad.
What about WTI? First of all, I think it's understood that managers and operators of water and waste water treatment plants will continue to face increasing pressure to do better with less due to more stringent regulations, public expectations, community growth and fiscal restraints. With over 25 years' experience in the optimization of water and waste water infrastructure, WTI will continue to provide managers and operators with practical approaches to get the most out of their facilities and personnel.
Thank you for this opportunity to participate in shaping Ontario's future, and I guess we can handle some questions if that's appropriate.
Mr O'Toole: Thank you very much, Mr Neate. You bring an interesting perspective this morning. First, theoretically, would you consider yourself a private sector company?
Mr Neate: Yes, we are a private sector company. We've been a private sector company since 1992, and in 1996 we took over the operation of the Wastewater Technology Centre.
Mr O'Toole: I'm quite interested in point 4 in your recommendations, "full-cost, user-pay accounting practices." Do you believe realistically that any system should be not necessarily profit-motivated -- that's part two of this question -- but certainly cost-recovering, meaning full depreciation cost, cost of capital, all the things that are full accounting? Do you think the system in place today with the water and sewer plants practises these business principles?
Mr Neate: Not at the present time. I think the trend should be towards establishing such a system and capturing those costs.
Mr O'Toole: Do you think the move to move responsibility and authority into one area, ie, the municipality, with this incumbent business practice is the right strategy? Because there's really only one taxpayer.
Mr Neate: We believe that is indeed a sound strategy, although we recognize that there are certain portions of the province that may be faced with certain difficulties, given the kinds of infrastructure they may either have in place or may require. Our understanding is that part of the legislation does accommodate for some of those circumstances.
Mr O'Toole: The province would step in.
Mr Neate: Yes.
Mr O'Toole: On number 4, the criticism we've heard this morning is the fact that you may have an ulterior motive, ie, profit. Could you explain that? Is profit a result of efficiency or focusing on standards? How do you get profit?
Mr Neate: Certainly in our company there are really a couple of ways where we can provide sufficient incentive to our staff to go the extra yard and make our business competitive and ensure that it survives. Various ways of doing that, of course, you've touched on: improving the efficiency through which you undertake your business; other areas are focusing on areas where there are longer-term markets, and again, infrastructure is one of those. So, again, having something you can plan on through multi-year contracts makes it much easier to then ensure that the efficiencies of performance and profitability are achieved.
Mr O'Toole: Do you think there should be competition, both public and private sector, within any market to ensure that the customer is well served?
Mr Neate: Yes, I do.
Mr Galt: The previous speaker found a shotgun to eliminate OCWA. Would you support a plant that had been transferred to the municipalities; that maybe OCWA for operational purposes should be privatized? Would you be thinking along those lines, to compete with other private companies?
Mr Neate: Well, yes. Unfortunately I came in during the middle of the presentation and I am not quite sure where the shotgun thing came from.
Mr Galt: Elimination.
Mr Neate: We're looking for shortcuts here, aren't we? I think in general terms the concept of competition makes sense, but I do agree -- I think at the end of the discussion there were some concerns about consultation and ensuring that we don't shoot ourselves in the foot with the shotgun, so to speak. I think there are elements of caution required in certain parts of the province.
The Chair: To the Liberal caucus.
Mr Hoy: Thank you for your presentation. I had a question but I think it's been answered. You actually will not only advise and give technical expertise to clients but you actually will operate plants?
Mr Neate: Yes, we have indeed, and I attached some background information. We do operate some small systems, but these are typically either industrial systems or almost one-off-type systems that have particularly unusual characteristics in terms of the types of contaminants. We operate one system in Gloucester, Ontario, and we're now putting together the treatment facility for the Columbia Icefields in Alberta.
Mr Hoy: Do you envision your WTI expanding beyond just giving technical expertise but actually the delivery of your knowledge hands on?
Mr Neate: Again, in this world, to survive one has to be flexible and adaptable. Our business actually has three components to it. One is the advisory role. That has been traditionally our roots and that's probably what we do best. In fact, frankly, we consult more with government than we do with private sector clients in terms of providing technical advice.
The second aspect is that we do have a business strategy that is looking to take Canadian technology and commercialize it, so there's an actual marketing and sales strategy within our company.
The third and perhaps least defined area for us, because of the constant change that's going on here in the province -- and I think this legislation is trying to bring clarity to the way business will be done -- is the operations area. We've tended to focus more on clients who, after they see what great advice we can provide them, say, "Hey, how about running this thing for me?" So we get in it more at the back end as opposed to a front-end, clearly stated strategy.
The Chair: We'll go to the NDP caucus.
Mr Laughren: I enjoyed your presentation. You've had an interesting number of years. I was puzzled by the ownership in the business you do. You took over as the private sector operator of the Wastewater Technology Centre, right, back in 1996?
Mr Neate: Yes.
Mr Laughren: Then you say that represents 50% of your revenues. So who actually owns Wastewater Technology Centre?
Mr Neate: The building is owned by the federal government and we pay rent for the use of the facility. We also have a contract with the federal government to deliver something in the order of $7 million to $8 million worth of technical services on an annual basis. In fact, we're the third contract holders. The gentleman who invented the concept of privatizing these government facilities is Dr Stuart Smith, and subsequent to Dr Smith's contract, Philip Utilities Management Corp had the contract for two years, and now WTI has the contract. We have two years remaining on our contract. It will terminate March 31, 1999, and of course we're hoping to do such a great job that they'll want to extend with us.
Mr Laughren: Sorry to be a little slow on this, but help me out, if you will. Wastewater Technology -- you say the building is owned by the federal government.
Mr Neate: Yes.
Mr Laughren: Who owns the actual operation? You do now, or they still do?
Mr Neate: Our company has the ownership of all the intellectual property that we develop in operating that facility.
Mr Laughren: And the assets?
Mr Neate: The assets, being the physical plant itself, the facility, are owned by the federal government and we pay rent. It's a very common management model referred to as a GO/CO, very well established in the United States since the 1940s, a government-owned contract or operated concept, a very interesting way for your next deliberations when you look at the incredible capacity that you've built up in Ontario for doing research and technology development. It's a fascinating model for bringing the private sector on board as a partner to indeed get the biggest bang for the buck out of these facilities.
Mr Laughren: So 50% of your business then comes from the federal government.
Mr Neate: At this point, yes, although, as I referred to earlier, the product commercialization business that we have just launched, which we believe will grow exponentially, will eventually take over and well surpass those revenues.
Mr Laughren: What percentage of the remaining 50% is also with the public sector?
Mr Neate: We probably do something in the order of the remaining amount, one third of that business, I would say, with various levels of government: municipal governments, provincial governments.
Mr Laughren: Two thirds of your business is with the public sector, roughly, and a third is private sector.
Mr Neate: Yes, that would be a reasonable mix.
The Chair: Mr Neate, we appreciate your taking the time to come to the committee this morning. Thank you for your advice.
The Chair: Now I'd like to call Mr Keith Oliver, representing a group of city councillors from London. Please introduce yourselves. Welcome. The presentation time this morning is 15 minutes and that includes your presentation as well as questions from the caucuses.
Mrs Sheila Davenport: Thank you very much. I am the group of city councillors. There are two who aren't here, and one I'll keep looking over my shoulder for.
The Chair: And your name is?
Mrs Davenport: Sheila Davenport. This is Keith Oliver, who is beside me. Keith is an active member of the Urban League of London, the newly formed London town meeting and a member of the London social planning council. I am a city councillor and presently chair of the board of health, but we are here speaking as individuals today, because I know you have had presentations from boards of health and the city of London as well. Joe Swan, who I am sure is going to tear in in just a minute, is a city councillor and presently chair of the community and protective services committee of council. Megan Walker is the fourth member of this delegation. She is also a city councillor, but Megan has just assumed another job and is with us only in spirit today.
We appreciate the opportunity to make this presentation on a matter that encompasses so many issues of vital importance. We see those issues as ranging from the reliable delivery of two essential services to our long-held belief as a society that such services should be available to all.
While all of us in this delegation, the two of us, are intimately involved with our community, none of us is an expert on the subject of the delivery of water and sewage services. What we do have to offer in this debate is the argument in support of the principles of fairness and equality that must be maintained in the delivery of all basic services. In that capacity, and with these references, we offer the following basic recommendations:
With regard to the delivery of drinking water, the provincial government must ensure the following: Clean, safe drinking water must be available to all Ontarians at all times; such water must be available in sufficient quantities and without interruption; the ability to pay must not be a factor in achieving the above and must only be used to discourage any inappropriate use of the resource or the system. To achieve these objectives drinking water must always be considered a public asset, controlled by the public through their elected representatives.
With regard to the provision of sewage services, the provincial government must ensure the following: All Ontarians at all times must have access to a system of adequate sewage disposal; such a system must adequately address issues related to public health; such a system must do no harm to the natural environment; the ability to pay must not be a factor in achieving these and must only be used to discourage misuse of the system. To achieve these objectives sewage systems must always be considered a public asset, controlled by the public through their elected representatives.
Mr Keith Oliver: By the way, you'll all have copies of this. We don't have them at hand, but you'll have them later this afternoon. In support of the basic recommendations, we make these specific recommendations:
First, the provincial government should rescind the provision in Bill 26 that permits a municipality to sell off a public asset without holding a public referendum.
Second, the provincial government should conduct a full public inquiry into the delivery of drinking water in Ontario and the ability of the present system to achieve our basic recommendations.
Third, until such time as the above have been accomplished by the government, it should remove the Ontario Clean Water Agency from the group of agencies it is considering for privatization.
In support of our basic and specific recommendations, we offer the following testimony: Through our public institutions we maintain and foster the concept of the common good. It's well recognized that as individuals we are not all equal in our abilities, in our education and in our upbringing. Some of us chose the right genes, the right parents, the right social and economic background, while others did not. The law and the notion of basic rights are an attempt to address these inequities and create equal opportunities and basic services available to all. Our personal income tax system and the responsibility of the provincial government to establish and enforce minimum standards has been our way of ensuring that all individuals and communities have equal access to opportunities and services, as well as the financial ability to meet them. This principle is fundamental to our shared values of respect for the individual and must never be compromised.
The legislation contained in Bill 107 raises the possibility of uneven standards for the provision of water and sewage services across this province, and turning this wonderful province of ours into a discordant group of have and have-not communities.
There's also the issue of public versus private ownership. Public control and ownership of public services is a long-standing practice in Ontario and in Canada. It has evolved and found its many forms and expressions for very specific reasons. Public services such as the supply of electricity, water, sewage services, roads etc are not conducive to free market competition. They rely on a fixed infrastructure serving a fixed clientele.
By the fact that flexibility in supply and the ability of the consumer to exercise choice is absent, the privatization of such public services can only complicate their delivery. The specific result of the privatization of water and sewage services would be the creation of for-profit monopolies. This in turn would result in an increase in the level of government interference and regulation. We do not believe the present government has this objective in mind.
The importance of unimpeded access to drinking water as a public health issue: Historically, some of the greatest advances in public health have occurred when the state has acted to guarantee the delivery of safe and adequate supplies of water and has ensured that waste was properly disposed of. Cholera and dysentery have been eliminated by such means but can recur at any time. The recent appearance of cryptosporidium should cause us to be concerned as to whether or not existing standards for the delivery of drinking water are in fact high enough.
Drinking water is an increasingly limited resource. We're under the illusion that we have unending supplies of water. In fact, 0.007% of the world's fresh water is available for human consumption, and this according to a recent study of the Worldwatch Institute. While we here in Canada and Ontario appear to have access to an abundance of fresh water, we have a moral obligation to manage, protect and conserve it.
One of this country's greatest resources is its fresh water. Along with the American share of the Great Lakes, Canada possesses two thirds of the world supply of available fresh water. We should be a model for the rest of the world as to how to shepherd and manage a natural resource of this kind of importance and magnitude. How can we tell the Brazilians to conserve their rain forest if we abuse and squander our fresh water? Public control over fresh water is essential.
Finally, the experience of the United Kingdom: The experience of the United Kingdom in privatizing its public water supply system should be a cautionary tale for all of us. Starting in 1988 under the Conservative government of then-Prime Minister Margaret Thatcher, 100% of Britain's public water delivery system was privatized and is now in private hands. The problems associated with the private enterprise takeover are well chronicled and we believe result in a misfit over the privatization of a public service. The failure of the water system, the problems that have occurred in the UK, are well chronicled in the report commissioned by the Ontario Municipal Water Association, entitled Ontario Water Industry: Models for the 21st Century, and edited by Dr Neil Freeman. The facts are there for all to see.
The results of that experience should never be forgotten in this debate: reduced investments in maintenance and delivery systems, increased leakage rates, escalating cost to the public, the fact that customers have been cut off from water services due to an inability to pay, the fact that water shortages have been experienced and the fact that water is now being thought of in the UK as a tradeable commodity and has already been exported from Scotland to Spain. Ironically, that happened in 1995, during a water shortage in the rest of the country.
This constitutes our presentation and summarizes our concerns and recommendations. We have no argument when the implications and benefits of privatization are well studied and are justified. We do not believe this is the case with Bill 107.
Thank you for your time. We will be forwarding copies of this to our four local MPPs and asking them for their response and asking them how they will vote on this bill.
Mr Hoy: I assume you're going to provide copies to everyone here.
Mr Oliver: Yes.
Mr Hoy: Thank you very much. You mention in the opening the ability to pay, and in your summation you talk about for-profit. I assume, through those two statements that each one of you made, that you believe the delivery of water should be cost recovered but not for-profit. Is that right?
Mrs Davenport: That is correct.
Mr Hoy: That cost recovery -- you stated that you thought it should also apply to abuse in some way. Did you say that the ability to pay may be used in some forms of abuse?
Mr Oliver: In some cases water is metered. Fine. But when it comes to fees, we believe, and this applies to all areas of user fees, that fees should be used not to discourage the behaviour you want to encourage but to discourage behaviour which abuses the system, abuses the resource. Paper bag garbage is an example of that and has worked quite successfully: a couple of bags free and the extra ones you have to pay for. You're discouraging people from adding more waste into the system, encouraging them to recycle. It's a wonderful example of a good, well-considered use of fees. That's the principle we're addressing here.
Mr Hoy: Did you have a comment?
Mrs Davenport: Yes. I think we've argued this around fees for libraries. We feel to charge for the use of libraries is something that is discouraging use and we're looking at the other side of the coin. We need to encourage good practices.
Mr Laughren: I was taken to task this morning by somebody from the private sector for not listening to the good stories coming out of Great Britain about the privatization of water there. Perhaps I am guilty; I don't know. I have read the literature and I haven't seen any good stories, but perhaps you could help me out here. Have you seen any good stories extolling the virtues of privatization in the UK?
Mr Oliver: You never hear the good news, right? That's not an uncommon occurrence. On the other hand, the information that I'm seeing -- again, we're addressing principles here and those groups of principles that we put out here in our basic recommendations have to be adhered to, as far as we're concerned. The details are up to you and the other experts in the water industry.
As far as the bad news is concerned, from the information that I've seen -- a lot of it comes out from the report that I referred to, the Ontario Municipal Water Association -- the fees have gone up in a general level 150% or 160% from what they were when the system was in public hands. The leakage rates have increased, not a monumental increase, to be fair, but still have increased, on the average, I believe, 10% to 20%. But the evidence is that the system is not being maintained.
It's understandable, because out of the revenues generated by the system, you have to extract some financial reason for a shareholder to get involved. The salaries of executives are competitive with the public market for such services, so I don't think there's any question but costs will got up. If costs will not go up or costs are going to go down, I'd like to see the studies, and as far as I'm concerned, the studies don't exist.
Mr Maves: My question is a brief one. The last time I did some research on the fresh water supply was in my university days, and my recollection is that there are billions and billions of gallons of fresh water that flows north into the Arctic that's not used for human consumption because it's simply not tapped. The infrastructure is not there to use it and we haven't needed to tap that yet. You said that only .007% of the world's fresh water is available for public consumption.
Mr Oliver: Excuse me, of the world's water.
Mr Maves: Oh, the world's water. So there's a great deal of fresh water available for consumption, it's just that we haven't got the infrastructure to get that yet?
Mr Oliver: No. Let me go back over that quickly: .007% of the world's water is fresh water and is available for human consumption. We seem to think it's an endless supply. It's not. If you're talking about diverting water from the Arctic, learn the lesson of Russia and Lake Baikal. That's why Lake Baikal disappeared, one of the most important fresh water fisheries in the world.
Mr Maves: I wasn't talking about diverting anything. I was confused as to that statement and wanted clarification.
Mr Oliver: I can get you more information if you want.
The Chair: On behalf of the committee members, I thank you for taking the time to come before us this morning. We'll look forward to reading the entire presentation this afternoon.
ONTARIO MUNICIPAL WATER ASSOCIATION
The Chair: I'd now like to call our final presenter of the morning, Mr Jim Morris from the Stratford Public Utility Commission. Welcome.
Mr Jim Morris: Ladies and gentlemen, it's a good day, and thank you for having me here today. My name is Jim Morris. I'm past president of the board of directors of the Ontario Municipal Water Association, and that's who I'm representing today. I am at present chairman of the Stratford Public Utility Commission.
We are pleased to be here today to comment on Bill 107. Our organization speaks for more than 200 public water authorities across the province, which supply drinking water to more than eight million Ontario customers. We represent people who are directly involved in the supply, treatment and distribution of water in this province, and our association takes a great deal of interest in all matters relating to the provision of drinking water. Our members come from every region of the province and bring a wide cross-section of expertise and specialized skills to provide direction and leadership on policy issues for the association.
Within our mandate, we promote the public utility concept as a system that offers safe, reliable drinking water on an at-cost, fee-for-service basis. Through this system, waterworks are financed entirely by dedicated revenues, with no subsidy from the local tax base, and are directly accountable to the public. This approach is consistent with the current emphasis on full financial transparency, removal of service cross-subsidization and the levy of user fees for public services.
We think the public utility concept is an approach that has broader relevance and applicability as a model for all utilities and water systems across the province. We believe public utilities serve the best interests of the customer in terms of cost, efficiency and reliability.
This brings me to our comments on Bill 107. In many respects this bill raises more questions than it answers. It highlights the government's lack of guiding policy on the provision of water in Ontario and does not provide a strong enough deterrent to privatization of all local water systems across the province.
The combined effect of the government's recent barrage of legislation, such as changes to the Municipal Act and the Municipal Elections Act, is surely going to have an impact on the ability of Ontarians to have a say in the supply and distribution of drinking water.
We are also concerned that in its haste to exit water business completely and to restructure the way our municipalities are run, the government is abdicating its responsibilities to ensure the long-term viability of our public water systems. By offloading all provincial costs on to the municipalities, it becomes difficult for local governments to maintain dedicated revenues for water services and opens the door to decline in infrastructure and a patchwork of operational standards. Municipalities will be forced to cross-subsidize other services with water revenues, which creates an incentive to make up for lost revenues through hidden taxes in water rates to the customer.
In our view, the government has a clear role to provide a focal point for standards and to ensure enforcement and quality control. We also believe that the province has a strong responsibility to oversee public health, the natural environment, and to ensure the availability of basic, vital infrastructure regardless of a municipality's ability to pay.
I'd like to add that recent media reports on the steep decline in enforcement, caused by layoffs and cutbacks, erodes our confidence in the province to ensure the safety and long-term health of our water systems.
We are not advocating that the province micromanage our water systems. Instead, we are calling for a framework policy and government commitment to ensure the high quality of drinking water to our customers, a level of quality that is often taken for granted. If it is not the role of the provincial government to provide this coordinating function, what will occupy the vacuum? What will be the consequences?
Public water supplies are an essential service and should not be compromised by unstructured restructuring. There must be a viable long-range plan for the continued supply of clean, safe drinking water. Our association would be happy to work with the government to develop such a plan.
Our concerns also centre on potential privatization of municipal water systems. Bill 107 contains section 56.2, which imposes an obligation on municipalities to repay provincial grants if they propose to sell all or part of their water or sewage works. This clearly constitutes only a backhanded and token obstacle to privatization and ensures no such result. The measure merely guarantees that the province will pocket at least some of the windfall collected by the municipalities. When no longer willing or able to afford the cost of maintaining and operating the plant, the municipality sells it to the highest bidder.
More importantly, the government makes no commitment to the notion of a public system, either through stronger legislative measures or through moral authority. Notwithstanding the number of municipalities that have never received any provincial grants and therefore would have nothing to repay, the Ontario Municipal Water Association believes that privatization of our water systems will cause the irreversible deterioration of what we take for granted as a high-quality, low-cost vital service; nor is it a course of action desired by Ontario voters.
I want to share with the committee some information from a poll we commissioned and carried out in February of this year by Pollara. This is a survey of 1,263 Ontarians 18 years of age and older. I think the results speak for themselves:
Eighty-six per cent of Ontarians believe that drinking water is not a commodity and should be provided to customers at cost. Only 8% believe it should be sold for a profit.
In our survey, 80% of Ontarians feel that the money they pay in water rates should be used solely for improving the water system and not other municipal services.
Finally, 81% believe that the public should be consulted when the government is contemplating key changes in how our drinking water systems are run.
These are unequivocal numbers. A year ago we conducted a similar poll and since then it is clear that there is growing awareness and concern about this issue among Ontario residents.
Our association has a five-point plan that addresses these concerns and offers a time-tested, workable structure and process for the operation of municipal services. Our drinking water is far too precious a resource to leave to chance or experimentation.
Our solution is to implement the Ontario Municipal Water Association's five-point plan. It is as follows:
First, we advocate full financial transparency to ensure that water utility rates continue to be based on fee-for-service and full-cost recovery and that revenues must be dedicated only to public utility purposes. Water rates should not be used to cross-subsidize general municipal services.
Second, the Ontario Municipal Water Association calls for direct public accountability. We believe it is important to secure the autonomy of water utilities from municipal councils in order to ensure accountability to customers and financial separation from the municipality. Municipalities should administer tax-supported services, while public utilities provide rate-based services. Where municipalities control water service, the system should be run in a businesslike manner with dedicated revenues.
Our third point is to capture natural efficiencies through integration of utilities. This involves seeking statutory amendments that would encourage the integration of a municipality's public utility functions, including water, waste water and electricity, into a single autonomous public utilities commission to capture the natural efficiencies that go with it.
Fourth, we need full cost-benefit studies before privatization. Our policy would require that privatization of water services should not occur without a full and open cost-benefit comparison with the public utility concept, including a full accounting of all consequences of all contract commitments.
Finally, we believe in the value of meaningful public input. Our plan would require that there be public consent and input through referendums and other consultation before public water utilities are dissolved or transferred to a council function or franchised to the private sector.
It was our pleasure to be here today to express our ideas on the operation and distribution of water in the province and our views on Bill 107. We want to work with the Ontario government to develop a credible plan, a blueprint for the future, for Ontario's water industry and for the water customers in this province. Thank you, and I would be happy to answer any questions.
Mr Laughren: Mr Morris, I don't want to discourage you, but what you want ain't what they want.
I'm confused about the repayment thing, though. Perhaps you could help me. You don't really like the idea -- I think that's what you said -- that the repayment of loans must be given back to the government if you privatize the system.
Mr Morris: That's the way we understand it.
Mr Laughren: What I didn't understand is whether you were in favour or opposed to it. It sounded like you were opposed to it.
Mr Morris: We are and we aren't. We understand they're going to do that. Some smaller municipalities that seem to feel they can't afford to operate their facilities will look and say: "Maybe we can get $2 million or $3 million for this. We only owe the government $600,000 and we're going to be ahead $1 million-plus. We'll take it." But they forget that down the road the guy who's putting in the $3 million or $4 million has got to get that back, plus interest and profit, for his company. The water or sewage rates he'll charge are going to incorporate that, and you're going to pay. We feel that the idea of the government getting some money back is really negligible.
Mr Galt: Thank you for your presentation. I should bring to your mind that this bill is about the clarification of who has what responsibility and ensuring that the 25% of the municipalities that don't presently own will own in the future, as do 75% of the others.
You make reference to standards and a patchwork across the province in the different authorities. The standards ensuring that clean drinking water will be available will still continue to be a role for the Ministry of Environment, and I can assure you that those tough standards will remain in place. We have something like 230 of these facilities presently owned by OCWA. I believe, if I remember correctly, Stratford is one of those.
Mr Morris: We own it; they manage it. It's the first one in Ontario.
Mr Galt: Are you one of those asking to have it transferred to the community?
Mr Morris: No. My understanding from the mayor is that OCWA is going to run it on a fee-for-service.
Mr Galt: To operate it. But to own it?
Mr Morris: My understanding is that the city owns it and always did own it.
Mr Hoy: Thank you for your presentation. Of your five-point plan, number 4 the government would probably agree with and say, "You go ahead and pay for that study and you'll have what you're looking for." But I would expect that you're wanting the government to lend some moneys towards these requirements.
You have a lot of experience municipally and with the Ontario Municipal Water Association. Do you think maybe this bill is coming a little too fast? Throughout Ontario, we don't have the restructuring of municipalities finished yet. Many municipalities don't know whether they're going to be single-tier, two-tier, unicounty, unicity. Do you not think to put this forth today is a little in advance of some of the other things this government wants to do, that this is just a little too hurried?
Mr Morris: To be quite honest with you, I didn't think I'd be sitting here today representing the Ontario municipal waterworks. I would assume that Perth county had taken over Stratford and there was no more utility, but apparently that isn't the way it is right at the moment. I think we're about a year ahead of what we should be doing. What they should do is get those boundary lines straightened away on what they're going to do and then decide how they're going to treat the utilities and the water infrastructure. Then I think they'd be going in the right direction. They've just got the cart before the horse in trying to do too much at the same time.
The Chair: Thank you very much, Mr Morris. We appreciate you coming before us with your advice today.
Colleagues, that concludes our morning presentations. We'll recess until 2 o'clock this afternoon.
The committee recessed from 1230 to 1400.
CANADIAN AUTO WORKERS LOCAL 1520, ENVIRONMENT COMMITTEE
The Chair: We'll resume our afternoon session of the resources development committee hearing on Bill 107, the Water and Sewage Services Improvement Act. Our first presenter this afternoon is Jim Mahon from the Canadian Auto Workers environmental group. Good afternoon.
Mr Jim Mahon: Good afternoon. My name is Jim Mahon and I am here today to speak on behalf of the Canadian Auto Workers, Local 1520, environment committee. I am chairperson of the committee, our union's environmental representative at the St Thomas Ford assembly plant and a long-time environmental activist in the London area.
Ontario first passed public health and municipal waterworks legislation in the 1880s. This was supported by more extensive public utilities legislation in the early 1990s. During the 1950s, the province greatly expanded its role in safeguarding water resources by enacting the Ontario Water Resources Commission Act. This act created the Ontario Water Resources Commission, an independent body that enjoyed general supervisory and regulatory authority over water quality and water use within the province.
In 1993, the Ontario Clean Water Agency was created by the province as a crown corporation modeled on the Ontario Water Resources Commission Act. The justification for the Ontario Clean Water Agency was that it protected human health, promoted water conservation, ensured public accountability and supported provincial policies regarding land use and development. The current provincial government, with the introduction of Bill 26, made it easier to dissolve water or public utilities without electoral assent, paving the way for Bill 107. At the same time, the provincial government has virtually eliminated the municipal assistance program which provided capital grants for municipal water and sewage projects.
It is our belief that water is essential to life and that the protection of our water is part of our government's responsibility to its taxpayers. After all, is that not why we need our government, to oversee and to provide things that are considered part of the public good?
We are blessed with a good supply of water in this country, but history has shown that water and natural resources can be contaminated or squandered if not managed very carefully. That was one of the reasons that our water and sewage infrastructure was created in the first place: to provide clean water and protect the health of our citizens and our environment by providing a proper sewage system.
London has experienced at first hand the commitment of private enterprise to the preservation of our environment, water and sewage system. In 1980, the Ministry of the Environment found elevated concentrations of polychlorinated biphenyls, PCBs, in shiners collected from the Thames River at the mouth of Pottersburg Creek. Subsequent investigations by the Ministry of the Environment found the source to be a number of industries, the main source being Westinghouse Canada Inc, a plant on Huron Street in London. This plant reconditioned transformers and was found to be the main culprit responsible for the contamination, although several smaller contributors were pinpointed as well.
Our capitalist system is one dedicated to the worship of the dollar. Private enterprise in Ontario fulfils this goal. That goal is not always compatible with that of public need or good.
During the Pottersburg Creek cleanup I worked on the public liaison committee and on the technical review committee. As a member of these committees I became very aware that the condition of the sewer lines in our city vary greatly in age and condition. There was then, as I am sure there are now, some eight-inch sewer lines made of wood in the east end of London.
I was also made very aware of the millions of dollars spent. Moneys were collected from the public -- the taxpayer -- and then spent to resolve a problem created by private enterprise. Money was of course also collected from the corporations involved, but it did not begin to cover the full cost of the cleanup of the environment, and there was no assessment of costs to human heath ever undertaken. My point is that the private good and public good are sometimes totally different, finances being the driving force in the case of a private corporation, whereas a government or public institution first considers the public good or such factors as public health, environmental integrity and moral responsibility.
As far as we're concerned, Bill 107, on that basis alone, should be scrapped or at least withdrawn and written with the direction given that it is to be a priority to protect public health and environmental integrity and to maintain moral responsibility within our public water and sewer works.
Bill 107 proposes to transfer Ontario Water Resources Commission resources to the municipalities, which, in turn, are free to sell off waste treatment plants or sewage treatment plants to the private sector. Our current Minister of Environment and Energy has indicated that if a selloff were to occur, the province would still maintain and enforce rigid water quality standards.
In previous years, this claim might have had some credence; however, given the substantial staff reductions and budget cutbacks experienced by the Ministry of Environment and Energy, including abatement, investigation and enforcement departments, we question the ability of the Ministry of Environment and Energy to adequately enforce the existing standards, let alone improved water standards.
It is important to note that in other environmentally significant industries the centrepiece of the legislation is an independent regulatory body. For instance at the federal level, the National Energy Board generally regulates intraprovincial and international energy exports and related activities. Here in Ontario, the Ontario Energy Board regulates the natural gas industry and reviews Ontario Hydro's bulk power rates. If Bill 107 proceeds without the creation of an independent regulator, the residents of Ontario will be virtually powerless against private water and sewer monopolies that are likely to result under Bill 107. Consumers of water and sewer services generally do not enjoy the option of switching to a competitor or just not using the product. Water is basic to life. It is needed for the safety and health of every individual and thus can be distinguished from other natural resources and commodities.
Bill 107 makes absolutely no provision for an independent public regulator to safeguard the public interest as water and sewage services are transferred, amalgamated and ultimately privatized. In our opinion, this is one of the most objectionable aspects of Bill 107. Therefore, if Bill 107 proceeds in a form that does not prohibit privatization, then it must be amended to include provisions establishing an effective, efficient and independent public regulator.
Bill 107 fails to enact or entrench the essential elements of the long-overdue safe drinking water act. Such legislation has long been advocated by public interest groups in Ontario and would include the following components: Entrench a clear public right to clean drinking water; establish standards limiting the amounts of contaminants in drinking water that may adversely affect human health; establish standards that address contaminants that may cause odour, appearance or useability problems with drinking water; impose a positive statutory duty on the Ministry of Environment and Energy to set and enforce drinking water standards; require public and private water suppliers to periodically sample, monitor and report on the quality of drinking water; promote research into alternative water treatment technologies that eliminate organic chemicals in the water treatment process; establish appropriate prohibitions, penalties and investigation and enforcement provisions; require public and private drinking water suppliers to provide timely public notice of operational problems, failure to carry out prescribed testing or violations of prescribed standards; and create a statutory cause of action permitting individuals to sue violators of the act or standards.
In the opinion of the CAW Local 1520 environment committee, the need for safe drinking water legislation does not depend on the outcome of the current privatization debate. Regardless of whether water services are under public or private control, Ontario residents deserve tough drinking water laws and regulations, as opposed to unenforceable objectives, guidelines or self-regulation, to ensure safe and adequate supplies of clean drinking water. Privatized water and sewage services in Ontario would make it an even greater priority for the province to pass safe drinking water legislation to enhance the accountability of private operators if and when problems arise. In short, the province must act now to ensure that drinking water is protected at the point of consumption.
In the opinion of the CAW Local 1520 environment committee, Bill 107 is seriously flawed and the whole concept or intention of the bill must be re-examined on the basis of public good, environmental protection and preservation of public health.
Thank you for taking the time to come to London and giving us this opportunity to express our concerns regarding this seriously flawed piece of legislation.
The Chair: I would just remind the members of the audience that this is a standing committee of the Legislature. We must abide by the same rules as in the Legislature, which means no clapping or displays from the audience.
Mr Galt: Thank you for your presentation. I have just a few comments on it, particularly as it relates to the intent to sell. This bill is about clarification of who owns and who has responsibility. In this case, we want all municipalities to own the waste water treatment plants and the water treatment plants; right now, 75% do and 25% don't. That's really what this bill is about. There are limitations in there as far as selling in that they have to return any of the subsidies or any of the grants given out by the province to limit that. We do not want to see the kind of things often brought up about the British system. That is not our intent. Our intent is to ensure that it does stay with the municipalities.
As it relates to the tough standards and the things you have listed, the tough standards will remain there; they will be the responsibility of the Ministry of Environment and Energy. We will see that there is safe, clean drinking water coming out of those taps and also that the waste water treatment plants will be properly operated according to the standards.
Mr Mahon: Will there be safe drinking water standards put in place?
Mr Galt: The standards are there and will be kept there.
Mr Hoy: Thank you very much for your presentation this afternoon from Local 1520. I took particular note that you stayed within the environmental aspects of your committee and did not wade into what might happen to workers. Your presentation is strictly on environment, and I appreciate that very much and noted that in your presentation.
In what Dr Galt has spoken about, we have to be reminded of the fact, however, that the budget of the MOEE has been cut by a third and their staffing is down a third. There are many presenters, like yourself, who are concerned about the future as it pertains to inspection of pollutants and other aspects of water and sewage.
On page 5, in your second-last paragraph you talk about tough drinking water laws and regulations, whether it is privatized or not. I take note of those comments from you.
Mr Laughren: Welcome to the committee. I noted your concern about the ability of MOEE to adequately enforce the existing standards, let alone any improvements. I wondered what you base that on. Do you have any experience of MOEE not enforcing existing standards?
Mr Mahon: In a way, I guess it's a tough question, in that a friend of mine from the Ministry of Environment is in the audience, but yes, I do. I've had the same experience with the Ministry of Labour. I guess everyone realizes the budgetary constraints and so on, but you can put all the directions on the ministry you want, if you don't have the staff in the enforcement branch and the inspection branch to follow through on that direction, it just isn't going to happen.
Mr Laughren: The reason I asked if you had any experiences is because, and others who were here this morning will bear with me, just recently I had a situation in Sudbury, where I live, in that area, where the Ministry of Environment didn't or couldn't -- don't ask me why -- send anybody to court to press charges against Inco, and the judge threw out the charges, which were very serious charges, threw them out of court. You ask yourself, "Why was MOEE not there, representing the interests of the community?"
Mr Mahon: I'm chairperson of a group that is currently involved in discussions surrounding the Victoria Hospital energy and waste plant here in London, which is trying to expand the amount of waste that goes into the incinerator. We're currently involved in discussions based on reports that have come out of constant problems over the last few years. I must admit that the Ministry of Environment has not been voicing concern.
The Chair: Thank you very much, Mr Mahon. We appreciate your taking the time to come before the committee today.
The Chair: Our next presenter is Anne Hutchinson, please. Welcome, Anne. We have your presentation in front of us here.
Ms Anne Hutchinson: Thank you for giving me this opportunity to talk to you. My name is Anne Hutchinson, and I live in Woodstock. I do not represent a group, but I am here as a private citizen. My presentation will focus on the ways Ontario municipalities are being pushed to privatize their water and sewage systems on the false assumption that it will save money. My points will be illustrated by quotes from people I have talked to in Oxford county.
But first I would like to comment on the Fraser Institute language adopted by the Harris government to try to put a positive spin on some devastating legislation. Bill 26, which removed the requirement that municipalities hold a public referendum on the sale of public utilities, nearly eliminated financial assistance for infrastructure and reduced monitoring and enforcement staff by 40%, is called the Savings and Restructuring Act. Bill 107, which transfers to municipal ownership all water and sewer plants currently under provincial control, is called the Water and Sewage Services Improvement Act. Ernie Hardeman, member of provincial Parliament for Oxford, justifies this dumping of responsibility, saying, "Requiring a referendum wasn't in keeping with local autonomy."
Another example on a different matter is Bill 84, which would allow municipalities to reduce staffing levels of professional firefighters and increase the time it takes to respond to an emergency. Solicitor General Robert Runciman argues that the bill will "enhance public safety by focusing on fire prevention." These attempts to hide the underlying purposes of the legislation are an insult to the intelligence of the people of Ontario.
What is the underlying purpose? First, the need to save money, which most people agree is an urgent need; second, save the money by privatizing government services, and here there is no agreement. How can private business operate for less than public business when it has to make a profit? Ed Down, the warden of Oxford county, says private business can compete because "labour costs are less." Doug Steele of CAW Local 636 says, "Private operators make a profit through lower maintenance standards and concessions from workers."
Examples of privatization bear this out. An article by Sarah Sexton and Nicholas Hildyard in the Public Service Privatization Research Unit in London, England, January 1996, says: "The economic benefits of private companies taking over public services lie in the assumption that private operators are more efficient managers.... In practice, cutting labour costs makes the main savings." They say that when water and sewage systems were privatized in Britain, 25% of the workers were fired while huge dividends were being paid. I won't go into the private monopolies in Britain, which I'm sure you have already heard about today.
We should not be so quick to dismiss public systems as inefficient and embrace private systems as superior. An example of a public system that works well is the Woodstock Public Utilities Commission. Garry Roth, the general manager, says the PUC is an autonomous system owned by the county and operated by Woodstock. The money collected pays all the costs, and the profits go back into the system instead of paying stockholders. Woodstock has one of the lowest water rates in Ontario. Roth is opposed to privatization and says, "Water systems are, by necessity, a monopoly, but I think what's worse than a public monopoly is a private monopoly, especially when it monopolizes something as essential for life as water."
Al Scott is the general manager of OCWA, Elgin hub, which includes Oxford. Scott says that municipalities will not privatize by selling assets because Bill 26 sets out penalties if they do. If a municipality borrowed money from the province to build the system, it must pay it back if it sells the system. This is another example of trying to fool people with reassuring words. In fact, it is not a penalty but an incentive. It sets the price that the water company will have to pay and leaves the municipality debt-free. The price is cheap because the water company is not required to pay the interest the taxpayers paid on the loan. Looking at it from that point of view, Scott acknowledges the penalty is slight and maybe not enough. He says, "It appears to me that the provincial government is setting it up so it's not the province that will get the blame for it."
Asked how private business can operate for less than public business when it has to make a profit, Scott says: "That's what private contractors are complaining about. They don't like to bid against a government agency. Government doesn't have the same overhead costs or profit margins to meet, so they feel they are being hard done by. They are lobbying the government very hard."
If they are successful in their lobbying, and business certainly has the ear of the Harris government, then OCWA and all the good services it provided for municipalities will be gone. Bill 107 virtually eliminates the role of OCWA.
The local governments in Oxford county have no plans to sell their water and sewage systems, though some do look favourably on privatizing the operation. Down says Oxford county is debt-free and so will have no difficulty handling the downloading, but the costs of the new social service responsibilities being dumped on municipalities could jeopardize this. If budgets get tight, that is when municipalities will look for ways to cut expenses. Some municipalities will be vulnerable. They don't have the money, the resources or the expertise to run the systems they are inheriting from the province, and they can no longer get financial help and expert advice from the province. An offer from a private company will look like an easy solution.
Municipalities are being backed into comers where they have nowhere to turn except to private business, and there are 30 international water companies from Britain, France and the States in Ontario poised to take over. There are also many Canadian companies. True, the new legislation doesn't actually specify that municipalities should privatize, it just enables. Why has the government passed laws enabling privatization if it doesn't intend them to be used? The message is certainly clear to the water companies.
The Ontario Ministry of Environment and Energy has indicated that the province will maintain and enforce rigid water quality standards. However, reducing inspectors by 40% will make that enforcement difficult. Hardeman says: "I'll be the first to admit that government inspection will not be as regular as now. It will be more random." He says that stronger penalties and fines if they get caught will keep operators from breaking the regulations.
So enforcement is now mainly a municipal responsibility. Water and sewage treatment testing and inspection of the infrastructure require expensive equipment and expertise. Municipalities will need to factor these costs into any decision to privatize. Here again the Fraser Institute intrudes with the mantra that government cannot monitor the systems it operates. Therefore, it follows that if municipalities must enforce, they must privatize.
In conclusion, I would like to ask, if this government is concerned about jobs, why is it promoting policies that reduce jobs and lower wages? If this government is concerned about public safety, why is it jeopardizing safety by reducing inspection? And where is all the money that has been saved? At the end of the day, water rates still have to be paid, either to a local government or to a private company. As a ratepayer, I don't want my money going to stockholders.
Mr Hoy: Thank you for your presentation. We don't have time to discuss your presentation in detail, but towards the end of it you talked about inspection maybe being reduced and put in a more random form, and that higher fines will protect the public. I'm paraphrasing, but that's what is here. How do you feel about that? Do you think that would be adequate to safeguard the system of water supply?
Ms Hutchinson: No, I don't. They'd have to be very high fines, and there's always the chance they won't get caught. I understand there is only a full provincial inspection of the water systems once a year now. They send in reports every couple of months, but to actually come in and monitor is only once a year. If it's less than that, is it every three or four years that they're going to come in and inspect? It's pretty easy to gamble that you won't get caught if it's going to be at random like that.
Mr Hoy: The combination of random inspections and higher fines doesn't necessarily add up to good protection for the public.
Ms Hutchinson: No, I don't think so.
Mr O'Toole: Thank you for your presentation. On page 1 you lead into the whole argument of sort of a conspiracy theory. Do you advocate that there's some kind of conspiracy theory? Is this something serious or are you just kidding?
Ms Hutchinson: I am concerned about it. The choice of words seems to occur over and over.
Mr O'Toole: You mention about six pieces of legislation here, as if there's some kind of agenda that I'm not aware of.
Ms Hutchinson: It's the words "improvement" and "enhancement" and all these things that lull people into thinking: "Oh, I guess they're doing a good job. They're improving things and making it safe."
Mr O'Toole: My question wasn't on that, though. I want to get your reaction to that way of phrasing things.
I'm going to ask a question. You make the point, and it may be a very good point, that "Roth is opposed to privatization and says...`what's worse than a public monopoly is a private monopoly.'" Which one is worse in your opinion?
Ms Hutchinson: A private monopoly.
Mr O'Toole: Why?
Ms Hutchinson: I think it's more difficult to monitor.
Mr O'Toole: Should the government provide the standards so that there's some kind of measurement activity? I agree with you that we have to have clean, healthy water. No one here would ever disagree with that. Is that the role of the government, to make sure that the standards are complied with?
Ms Hutchinson: I'll speak personally. You're asking me personally. I have more trust in our government systems and our municipal systems than I have in a private company.
Mr O'Toole: Which level of government? Federal? Provincial?
Ms Hutchinson: We're talking about the municipal level.
Mr O'Toole: So you think it's a good idea to move it down to the municipality where it's really close to the people.
Ms Hutchinson: It always has happened that way anyway, hasn't it? As soon as the debt's been paid, it does go to the municipality. That's always happened. This is no different here.
Mr O'Toole: Yes, 75% of them now own this.
Ms Hutchinson: Yes, and it's only another 25%, but they're coming now before the debt has been paid off, so it could be difficult for some communities to handle.
Mr Galt: I just wanted to re-emphasize that this bill is about clarifying who owns these plants. You made reference to the Woodstock plant and how well it operates. That's exactly the kind of thing we want with all the plants: to be in municipal ownership. We're putting discouragements in there for privatization. You're expressing some concern about privatization, and certainly we are.
You also express some concern about inspections. The inspections are continuing at the same rate as they did previously. There's been no reduction in the inspections of the water or water treatment or waste water treatment plants in the province. It will continue that way and the province will continue with the tough standards it's had. There will no change in that role.
It will only change in who owns them. It will give the municipalities the opportunity to choose who they will have run them: themselves, OCWA or a private company. But the ownership is quite clear cut, and that's what the bill is about: to give ownership to the municipality.
Ms Hutchinson: I agree, and this is what I've said in here, that the ownership traditionally always has gone back to the municipality. But I believe now, with all the other burdens of money they're going to have for social services and so on, they will be looking at ways to unload and that's going to be one thing they're going to look at. The water company is going to be there making them wonderful offers. While in the past they haven't had to privatize or sell off their utilities, why has the government enabled them to sell these if they don't intend to do it?
It's the same with the parks and so on. They own the parks but there's nothing now that says they can't sell all these assets that the public has built up over the years. I believe, as a public citizen, I own these things and I don't want them sold to a private company.
Mr Galt: But they have to repay the grant and the subsidy --
Ms Hutchinson: I explained in here that that's not a penalty; it's an incentive. The water company simply comes in and says: "Great, here's the money you paid the province. I'll pay you back." They don't have to pay the interest that, as a taxpayer, I've paid for those systems over the years. They just pay the price and it's theirs, and then they're going to put up the water rates to get that money back.
That's what I mean by the language, to say, "It's a penalty and we're discouraging it," when in fact, if anything, it's an incentive.
The Chair: Thank you very much for your time. We appreciate hearing your advice today.
The Chair: Our next presenter is Eleanor Hart, from Grassroots Woodstock. Welcome.
Ms Eleanor Hart: Madam Chair, thank you very much. I would like to express my appreciation to the Chair and the committee for allowing this opportunity to speak. The group I am representing is Grassroots Woodstock, a local organization made up of a diverse group of people, all interested in preserving and enhancing a healthy environment for everyone.
This response to Bill 107 came about because we believe, and are concerned, that this bill does nothing to prevent privatization of water and sewage management. In fact, we feel that planned legislation and legislation already passed encourages it.
Our presentation includes five parts.
(1) Privatization: Why? We understand that there are 30 or so corporations, including international conglomerates, poised to take control and manage water and sewage facilities. They are not doing this out of the bigness of their hearts, but because of further profit, which is not always put back into the system but goes to excessive executive salaries, investors and, often, foreign investment.
One merely needs to be reminded of the privatization experience in England and Wales to be sobered by the effects: on the environment, on health, in maintenance problems and in huge rate increases.
We are told by the government that Bill 107 has nothing to do with privatization. Why did Bill 26 first change the Municipal Act so that municipalities no longer have to hold a public referendum on the sale of public utilities?
Bill 107 does not require public ownership of water and sewage works, but merely provides that a municipality repay the grant received from the government. This is a nice little subsidy for corporations in that it is a small price to pay. With municipalities staggering under funding cuts, the lure of no longer financing water and sewage facilities would be difficult to refuse.
Bill 107 does not provide for an independent public regulator and the government has seen fit to cut the budget and staff at MOEE. Please don't expect private industries to regulate themselves.
If multinationals succeed in gaining control of water and sewage works, it is likely the rates for these services will be determined abroad and not by local elected officials.
The government should look closely at why they are allowing so much privatization. Is it to get rid of unions and allow lower wages and allow more of the rich-getting-richer trend? Again, look at England to see the negative effects.
We see this as a choice between private profits and public service. Some 76% of Ontarians favour public ownership.
(2) Environmental impacts: (a) Impacts on conservation: Running pipelines from the Great Lakes system impacts on water levels. An example is York region's proposal. This, added to the threat of water export, means loss of habitat and biodiversity and effects on all shoreline commercial, residential and recreational uses, as well as aboriginal rights. It is imperative to ensure that water diversion of any kind be done in a modest, strictly controlled fashion. Our research has shown that only 1% of the water in the Great Lakes is naturally renewed.
Wetlands provide many absolutely necessary functions: protecting biodiversity, controlling water levels, temperature moderation, groundwater recharge, buffer zones, purifying water, supplying spawning areas, as well as slowly releasing water into the lakes. They also slowly release moisture into the air, which regulates wet and dry spells. This helps provide relief from flooding and costly crop loss due to lack of rain. The 20% of what remains of the original wetlands is disappearing at an alarming rate of 8,000 hectares, or 20,000 acres, each year.
These facts argue that wetland draining by deliberately increasing land available, or by the adverse effects of lowering water levels by too much diversion, must be stopped.
(b) Sewage plant impacts: Waste waters from sewage treatment plants are of additional concern. These facilities are the largest polluters of the Great Lakes. Already there are some inadequate discharge treatment facilities. Privatization would discourage updating costly treatment because it would mean that profits are diverted from shareholders.
(c) Inland water impacts: Inland water bodies are also of serious concern. Many Ontarians have been making efforts to restore rivers and streams and protect headwater areas. Unfortunately, the present weakening of land use planning controls has undermined these and future efforts to restore and protect water and adjacent riparian ecosystems.
Increasing land development and allowing a privatized management system will lead to indiscriminate diversion of water and less safe sewage treatment systems. Private companies will not encourage water conservation because of the profit motive.
"The frog does not drink up the pond in which it lives."
(3) Free trade and water exports: Water is Canada's most valuable element and must remain under our sovereign control. Under NAFTA, water is classified as "goods" to allow this resource to flow across North American borders. Free trade also breaks down boundaries of where profits can be made. Once the tap is turned on, it must be maintained, even through times of drought.
Here, with the Grand Canal system from James Bay to probably the Great Lakes, these plans lack public support and demand enormous financial resources. Thus, the pressure will be on to use the Great Lakes. The ability of governments to act through the Great Lakes Charter to protect their jurisdiction from the negative impacts of lowering water levels can be challenged under NAFTA. Governments within the charter may now not favour their residents to the disadvantage of people outside their jurisdiction.
Multinational companies are anxious to buy assets in OCWA and are clearly interested in cornering a North American water market. The government must understand the implications of this. Ontario water users and taxpayers would be helping pay, through fees and taxes, by giving away what should be under sovereign control to profit-driven, foreign-controlled multinationals. Under Bill 107, this activity is entirely unregulated.
If there is a conflict for any reason, whether it is because of too much diversion or impact on fishing and tourism etc, the complaint would be heard by a trade panel and not by an agreement made between elected governments. Thus, Canadians lose their voice if made to suffer the consequences of diversion.
To lose control of our most valuable element is to give away our country and become a resource-supplying colony of the USA. We are already too far down that road, and it makes one weep.
Further conservation of water is not encouraged if it is plentiful, nor are technologies to purify sewage water by biological cleansing processes such as Living Technologies in Vermont.
The implications of water export, other than bottled, are so devastating that privatization of water and sewage works must at all costs be prevented.
(4) Request: The Ontario government should immediately withdraw Bill 107 unless the legislation is substantially amended. The amendments are supplied in the submission to the MOEE regarding Bill 107 by the Canadian Environmental Law Association and Great Lakes United. Grassroots Woodstock supports their recommendations.
Conclusion: Grassroots held a meeting to hear a representative of CELA explain Bill 107 and the implications of privatizing. It was gratifying to see seven members of the city of Woodstock and county councils in attendance. This included four mayors and the county warden, Ed Down. All were sobered, and one mayor said emphatically, "We don't want privatization of water." He also mentioned concerns about free trade. This sums up the feeling of most present.
Let it be understood that we would encourage municipalities to charge fees for water to induce conservation; this would be better than through taxes. But we are absolutely against private companies doing it for profit.
This society must adjust its understanding of the water ecosystems to recognize that water is not a renewable resource. We must change our use and management of water with sustainment in mind, rather than as goods. To do this, we must encourage the government to find routes other than opening doors to privatization. I say kill Bill 107.
The Chair: Thank you very much, Ms Hart. There are just two minutes remaining, so my suggestion would be that we have questions from the NDP caucus. We'll move to the government caucus on the next round.
Mr Laughren: I feel privileged. Thank you, Madam Chair.
Ms Hart, thank you for your presentation. You made a very strong plea for either withdrawing the bill or making substantial amendments to it if the government does proceed. I suspect the government will proceed with the bill. The real test is whether these hearings are a sham or are meaningful. We've heard lots of people tell us what the amendments should be if the government proceeds. If you were to have your choice of what amendments should be brought into the bill, are they close enough to the front of your mind to tell us what they would be?
Ms Hart: I've got a copy at home of the amendments, but I knew I would not have time to list them all. The first amendment would be to amend it to disallow, entirely prohibit, the privatization of water and sewage works.
Mr Laughren: Would you allow it if there was a referendum held in the municipality?
Ms Hart: I don't think it should be up to each municipality to set the standards. I think the provincial government should set the standards in that area.
Mr Laughren: I'll conclude, because I know we're out of time, by urging you to keep an eye on this committee and just see, when the bill is finished, through your local MPP, whether any amendments have been made or accepted by the government. I would encourage you to do that.
The Chair: Thank you very much. We appreciate your taking the time and coming today with your advice.
Our next presenter has not yet arrived, unless I've missed him. Mr Robinson? No.
The Chair: Is it possible that Mr Sexsmith is here? There we go. We can move forward. Mr Sexsmith, thank you for coming. We are grateful that you are here early. Welcome.
Mr Bob Sexsmith: My name is Bob Sexsmith. I thank you for the time to appear before the committee. I hope my leaving is as welcoming as my presenting and arriving here.
It is my view that Bill 107 is substituting legislation for privately negotiated contracts known as compliance plans. It allows them to obtain the privilege of not being bound by the law that applies to previous policies related to water and sewer services. With careful study, one can't help but think it is a page from the development industry's continuous opportunity strategy, that this bill is one which dangerously attempts to divide municipalities into competing factions.
When invisible borders have different environmental regulations along with different measures of enforcing those laws, one side will inevitably be subjected to the other's effluent. Each municipality will feverishly compete to lure industry and development into their location. Under the bill, each municipality has the right to further weaken existing legislation by striking their own agreements, even at the risk of public health and the welfare of neighbouring communities. It puts a system in place in which government authorities have an uncomfortable and unreviewable discretion to set aside regulations and laws, allowing them to substitute legislation with private agreements by having repealed the law requiring a municipal referendum before local services can be fully or partially privatized, which would lead to less accountability for the environment and other public services.
This bill contradicts provincial policy statements to reduce the potential for long-term public cost or risk to Ontario residents. It denies municipalities control of development and does not impede the expansion of an urban area or a rural settlement area, nor will we be able to avoid situations which may require future remediation to address environmental or health and safety concerns.
While public communal services are the preferred means of servicing and partial services to a new lot of the minimum size are needed to accommodate the residents with an appropriate sewer and water service, Bill 107 has no formal community participation plan.
In consideration of certification criteria for sewage treatment plants, we need to include measures to build local human or institutional capacities. Projects must not create dependence on high levels of resource inputs from outside the community. There must be a post-certification participation plan aimed at maintaining public awareness and accepting the facility during its life cycle.
The bill presents the municipal government the total liability for past, present and future septic approvals as of October 1997. We have already lost the curb program that conservation authorities provided regarding water quality and septic approvals. This raises questions about how inspectors are qualified, by reviewing what is required to investigate complaints about a septic tank. Conservation authorities were required to have a minimum of three years' experience on the job. A three- to five-day workshop, as proposed by new regulation, would not be sufficient training.
It should be noted that the present list of certified haulers and installers is outdated in our area. We have people still on the list who died years ago. Also, there is a significant difference in the qualifications of the persons listed.
We now have 49 approval authorities for septic systems, including all that is entailed. In October 1997 we will have 1,200 to 1,300 cities with approval authorities. In addition to the city's authority, we need to meet the provincial requirements as well. The provincial requirements are included in the policy area and the act, with all the differences in requirements and compliance with regulations. At the present time there is no staff allotted to this in our municipality, and all of this will be done without additional qualified staff at the municipal level and reduced staff at the provincial level.
I have not addressed the manufacturing area of research and development of septic systems. The right to charge user fees after September 1997 will mean a 50% increase. At present, the costs range from $56 to $250. It is expected that fees will be in the $400 to $600 range. This potential liability for regulatory nuisances will now become a cost to the municipalities. With the transfer of part VIII of the authority, considerable legal liability will be added to these costs. Given that the environmental appeal hearing cannot award costs, this will increase administration costs. With the average hearing taken three to five days, how will municipalities afford these costs? Even fines do not cover the costs of administration, as the Provincial Offences Act is not adequate, with a maximum fine of $3,000.
The city of London has seven sewage treatment plants, with few inspectors to control and investigate discharge, ie, the treatment of waste or the tests for dioxins or PAHs, polycyclic aromatic hydrocarbons, and VOCs, volatile organic compounds. Bill 107 presents more questions for the city of London than it addresses. I do not think the municipal tax base can afford Bill 107. The return of the provincial grants back to 1978, before the sale of or from the transferring ownership of sewage works and water supply systems, may not do anything but establish the dollar amount needed to buy what residents of London have paid for already with their taxes.
The province enjoys extremely broad immunity against certain civil actions, while municipal elected officials can now be sued for financial loss by other legislation that makes them accountable for business losses resulting from their decisions. There is a need for a continued provincial role in inspection and approvals, as opposed to the devolving of responsibility to every municipality in London.
I would like to present some questions about the environmental rationale that appears to be motivated by economic terms, not ecological terms.
This issue is contained in the safe drinking water act for Ontario, or rather what is not enacted or entrenched in this essential element called water. Water quality and water use within the province is of particular public interest. The protection of this vital, life-sustaining resource is self-evident. The justification for the protection of human health, water conservation and ensuring public accountability seems to be threatened by the potential privatization under Bill 107.
The government's intention to facilitate privatization of water by reducing water to a simple commodity that should be bought and sold on markets like any other commodity is a denial of reality. The London community has already had to approach utility companies to have regard for economically disadvantaged citizens. Do we now have to negotiate for these citizens to ensure water to their homes for their children, given that the private companies are motivated by the ability to collect their payments?
I would question the province's goal to comply with the North American free trade agreement. It should be recognized by the public that once water is accepted as a commodity, this agreement requires the continued supply south of the border, even if water shortages occur in Canada. In fact, public tenders for privatization must include corporations in the United States when water is deregulated.
In conclusion, what we have with Bill 107 is a sort of "live and let live" arrangement among public officials and companies to accept and approve. An additional problem is that we have a framework for any agreement, a collusion with the affected companies, the ability to block proposed changes promoted by environmental groups, to modify legislation or agreements not aimed at protecting ecological concerns. A case in point is that business and authorities have a clear intention of promoting investment within Bill 107. The result is the weakening of already limited but necessary instruments for the prevention of negative environmental impacts.
Environmental authorities are frequently criticized for a growing tendency to negotiate the application of the law and interpret it in a discretionary manner, ignoring scientific studies that demonstrate the unsuitability of a site or legitimate opposition of the community. The artificial shortage of financial resources for environmental investment continues to shift those costs on to the environment, the health and welfare of the population and the viability of our province.
Thank you for the time. I did include in the written submission five minor recommendations. I don't know whether I have enough time left to read them, Madam Chair.
The Chair: Yes, you do.
Mr Sexsmith: The recommendations are:
1(a) That there be developed a 90-day notice to local residents when sewage treatment plant tenders for privatization are called and that residents are allowed to respond to any concerns; and
(b) That all privatizations of sewage treatment plants have a municipal and public monitoring board for a minimum of five years to ensure public safety and to ensure that proper maintenance is performed.
2(a) That qualifications for inspectors include proper educational background and experience to investigate a complaint and ensure proper environmental installation; and
(b) That haulers and installers be licensed and have the proper qualifications.
3. That the environmental hearings and Provincial Offences Act be amended to reflect the administration costs to the public or the municipality.
4. That the province extend immunity to municipal councillors to the extent that the provincial government and employees of the government have.
5. That in the event of privatization of the water distribution system, no person can be denied this life-sustaining resource.
I thank you for your attention. I apologize for not having sufficient copies for everybody, but my own typewriter doesn't print well.
The Chair: Don't worry about that, Mr Sexsmith. The clerk has indicated that she'll make sure we all have copies of those tomorrow. We'll begin with questioning from the government caucus, please.
Mr Maves: I just have a quick one. Have you ever had occasion to go to your municipal council on any issues and ask for support for certain things?
Mr Sexsmith: Oh, yes.
Mr Maves: Have you been successful? Do you find them responsive?
Mr Sexsmith: Responsive, yes, but not always in agreement.
Mr Maves: Do you think that municipal councils are more accessible, say, than the federal government or the provincial government, for the average person?
Mr Sexsmith: I can deal with the municipal level, but the staff of all three levels I find are much more responsible than the elected officials, because I find that the --
The Chair: Don't take offence.
Mr Sexsmith: Some of them have the experience and the qualifications to advise you of a particular problem that elected officials are not privileged to have. I think when you get into the details of a request or a concern, in particular involving the environment, sometimes there isn't time in a presentation to elected officials to get into the scientific justification for your concerns.
Mr Maves: This bill doesn't privatize anything. It gives title to the municipalities. If you presented those five recommendations to the municipalities, once they had title, do you think they'd be receptive to them?
Mr Sexsmith: If they follow London's Vision '96 process and the official plan that was put in and is now being appealed, I would say yes, because in our official plan we had an environmental plan component within that and it was appealed all over the place after we finally presented it as a municipality. We're still waiting for the results on that, because when a developer approaches an area for development, the city has been very careful to include in our official plan an opportunity for citizens to have input into that plan before it gets approved.
Mr Maves: That's got to be comforting for you then.
Mr Sexsmith: It's comforting in the fact that I have the opportunity to make a presentation, and it's too often that I have found that I have been proven right, after the fact, with what I said. We have two separate examples where subdivisions have been approved with a septic system rather than being tied into the municipal services. They have now been forced to turn both of those subdivisions, and they're only small, into municipal sewage systems. That's in south London.
The other incident, where we have groundwater -- they were about to put in some sewers under a street extension and I told them before they went there that there was a high groundwater level there. They ended up putting in two eight-inch pumps 24 hours a day for about two weeks so they could put in a sewer system.
Mr Maves: I thought you said the staff was good.
Mr Sexsmith: The staff is good and they said that, but the developer and the private contractor who was putting it in wouldn't listen. The staff had advised them, "Yes, the water table is high and you should be aware of that." Then the developer came back and said: "Hey, wait a minute. I've got to have special permission so I can pump this water out of here so I can put in the sewer line."
With private companies, they have a tendency to have schedules, deadlines and a profit to make. With the municipal staff, they tend to take more time and they will consider your requests and they will try to satisfy them as much as possible. Now, at times it's not physically possible. Hindsight is always wonderful; foresight is a little bit more difficult to prove.
Yes, I like the staff of most levels of government. I find that they are being cut back. They're probably all working 40 to somewhere in the area of 85 hours a week and they're being told that they ain't doing enough. I'm saying it's about time we stopped doing that and started giving them the supports that are necessary.
The Chair: Thank you, Mr Sexsmith, for coming before us this afternoon. We appreciate your advice.
The Chair: Our next presenter is Mr Rupke. Welcome and good afternoon.
Mr Gerry Rupke: Thank you very much for this opportunity. My name is Gerry Rupke. You don't have a handout in front of you because I've just recently, as of this weekend, come back from Africa and I'm suffering the consequences of poor water and sewage infrastructure, so you'll have to bear with me.
Mr Maves: Is that private or public?
Mr Rupke: They were very public.
I was sent because I have very little hair. That's so you can see I don't have any horns. I'm one of these privatizers. People have said a lot of things about privatizers, and I'd like to give you a little of my background to let you know where I'm coming from and what perspective I'm speaking from.
I'm a professional engineer with a master's degree in environmental health engineering. I graduated back in the mid-1960s. I've dedicated my life and my career to the water environment in Ontario. I started with the Ontario Water Resources Commission, worked for the Ministry of the Environment, worked for York region as an operations engineer and was responsible for all the water and sewage facilities in that area for a number of years, and then went into private enterprise providing contract operation services to the private sector, primarily to industry, doing some municipal work. Quite recently, within the last three years, I sold my company to one of those big multinational conglomerates. I hear there are 30 of them. I don't know where they are. I see about five or six real contenders in the field of supplying contract operations and privatization of water and sewage facilities to municipalities in Ontario.
I come with that background, with that baggage, so I have a unique perspective and I want to confess that to you when I start talking to you.
I have had an opportunity to review Bill 107 and, from my perspective, I come with two comments. One relates to, what is the purpose or the intent of government in the whole area of water and sewage infrastructure?
It was my understanding that the government was interested in promoting the utilization of private capital to provide public infrastructure. I think in light of the financial restraints that are being placed on municipalities, the sourcing of funds, the grants being cut off, that the money's going to have to come from somewhere to provide water and sewage infrastructure expansion over the next number of decades. If it is in fact the government's intention to promote private money to be utilized in that manner, Bill 107, specifically as it relates to section 56.2, makes that somewhat difficult. It's obvious that if the private sector is going to put money into infrastructure, it's going to want some recourse to recoup that money should the municipality fail to repay the moneys that are owing against it. Private enterprise does not put money in and not expect a return on capital or a return of capital.
The requirement to repay any grants that have been provided to the municipality over the years is a disincentive to bringing private capital into the infrastructure of the municipality. You can obviously see that if you're comparing not having to pay back the grants with having to pay back, say, $10 million or $15 million, there's a big hill to overcome before it becomes cost-effective for private people to bring in private capital. That's the first point I want to make.
You'll find that I'm not completely following my outline. There is a bit of an outline coming out.
The second issue is the presence of OCWA in a competitive marketplace. We've heard a number of people talk about the Ontario Clean Water Agency and the excellent job it has done. I was part of that excellent job for quite a number of years. I was here when there were no other alternatives in the marketplace, other than government becoming involved in a very meaningful way in the operation of water and sewage facilities. I was at the front of developing new technologies. That was my job with the government.
So I am well aware that yes, there was a role for the Ontario Water Resources Commission and ultimately for OCWA at one time or the role that OCWA now plays. However, I'm also very aware that in today's marketplace there are other ways for that service to be provided. I've seen both sides. I know the private sector can in fact provide better service at a lower dollar.
When I was with York region, I was convinced that we could run the most cost-effective and best-run water and sewage facilities there would be in the province. I found myself so overburdened with paperwork and minutia that I didn't even have time to see how well the facilities were running.
Some earlier speakers spoke of how the municipal people are overloaded these days, and it's going to stay that way. Private enterprise has an ongoing profit motivation, yes, but that motivation is for efficiency and excellence, because it's through efficiency and excellence that you arrive at the minimum cost of operation.
Why is OCWA still in the marketplace? It's no longer needed. It's a white elephant. It's time that government in a meaningful and systematic way rolled out some plan to eliminate OCWA over time and allow the competitive forces in the marketplace to provide excellent service to the municipalities. I'd be happy to answer any of your questions.
Mr Agostino: I have a couple questions. Do you believe the private sector, upon assuming ownership of the facilities, should have the right and the power to set rates?
Mr Rupke: No, I do not. That should be the purview of the municipality.
Mr Agostino: How would you balance, then, the fact that as a corporation responsible to shareholders there must be a profit made or some heads will roll, obviously, in any operation they take over? If you have a municipality that feels its taxpayers cannot afford any type of increase in water rates or sewer rates based on that particular municipality, how would you offset that, from your point of view, from the operation to ensure that you do what you have to do as a private corporation -- that is, make a profit -- without affecting water rates? Where would that difference come from?
Mr Rupke: The competitive process of bidding out the job would ensure that the municipality gets the lowest possible price for the service it requires. How the municipality raises that money -- I mean, if a municipality takes out a contract or proposes a contract to the private sector and they find they don't like the prices, they can do it themselves if they can do it cheaper. But if they find that the private enterprise can do it cheaper, then they should go with private enterprise. You're asking where they're going to get the money. The same place they'd get it if they did it themselves.
Mr Agostino: I'm trying to distinguish the difference between a private company coming in and operating a facility -- and there's plenty of evidence that companies have done that and that it went well and better than municipal government. However, the control is still there. I am talking about what I see down the line on this, and that is a private company coming in and buying the whole infrastructure, as could happen, because you can dangle a great deal of money in front of municipal governments in cash-strapped times, saying, "Here's a couple hundred million," or whatever the worth of that facility is, "and we will take it over."
I presume that a private company that comes in and spends that kind of money on the infrastructure of a water and sewer works would want the ability to set rates in order to be able to meet its profit line. Are you suggesting that private companies would be willing to give up that right to set the rates but at the same time pay the type of money necessary to municipalities to own the infrastructure?
Mr Rupke: From our view, the municipalities have an equity in the asset. We would be willing to provide capital money, and we would want ownership of the asset until the money was returned. Now, ownership can be a 20-year term, and at that time the asset goes back to the municipality. Basically, you're amortizing a mortgage. They're taking the asset they have and they're mortgaging it, and they pay back the mortgage. We have never seen a privatization that has been different than that, quite candidly, in North America.
Mr Agostino: In your comments, you said you wanted section 56.2 removed, which would be the one protection that the government members are arguing would be there for municipal taxpayers, and that is the fact that any money since 1978 would have to be paid back. You were arguing to remove that. So what you are suggesting is that you want to take over the assets but not pay back the investment the taxpayers have put in.
Mr Rupke: We'll be the banker that provides the mortgage for the asset so that they can realize some dollars out of the equity they have in the asset today, if they choose to do so. I'm not proposing that we do that. I am saying that if it is the government's position that they want to attract private money to provide municipal infrastructure, that clause is going to be a detriment to doing that, and you should be aware of that. We'll contract to operate facilities or we'll remortgage them.
Mr Laughren: I am puzzled by your comments on OCWA. I am obviously confused here, and maybe you can help me out. I thought OCWA actually made a profit. Hasn't OCWA made a profit the last two years?
Mr Rupke: OCWA lost $8.5 million on operations last year. They made some 20-million-odd dollars on the financial portfolio the government gave them, and they get an interest rate spread. Overall, yes, they made a profit, but on the component that we primarily look at, which is the operating cost, they lost around $8.5 million.
Mr Laughren: They're your competitor, right?
Mr Rupke: Yes.
Mr Laughren: You don't like them.
Mr John R. Baird (Nepean): That's unfair to say you don't like your competition.
Mr Laughren: You don't show it any more than he shows --
Mr Rupke: Many of them are friends of mine. How can I say I don't like them? They've been in the industry as long as I have, and we're a small industry.
Mr Laughren: Okay, help me out on the repayment of loans. The government has provided grants to municipalities for their sewer and water systems over the years. That's hard-earned taxpayers' money that's gone to those municipalities. Now, why should the private sector be able to come in and scoop up those assets that have been subsidized by the long-suffering taxpayer?
Mr Rupke: I think we're talking about remortgaging; I don't think we're talking about taking ownership.
Mr Laughren: No, I am. If a municipality privatizes a sewer and water system, the bill says they must repay grants going back to 1978 that had been given to them by the taxpayers, right?
Mr Rupke: Yes.
Mr Laughren: Now the municipalities, if they repay those grants, surely to goodness they're not stupid. They're going to build that into the price they would demand from the private sector, or else why would they sell to the private sector?
Mr Rupke: But that's going to artificially increase their cost of service, is it not?
Mr Laughren: But you're leaving the poor taxpayer out of this. Why should the taxpayer not get back the money?
Mr Rupke: When will the taxpayer get the money back if they don't privatize the facility?
Mr Laughren: They don't need to, at that point. They don't need to. They already own it. We're talking about selling it to the private sector.
Mr Rupke: And 20 years down the road they'll own it again.
Mr Laughren: Here you've got a situation -- boy, you've got a beautiful plan here, this is wonderful; I want to join your organization -- where you say: "The taxpayers have put money into this. Now give it to me." Now, that is outrageous. How in the world would I as a taxpayer ever go along with that?
Mr Rupke: I'm saying that if you want me to put capital into it, I need some protection of my capital.
Mr Laughren: So does the taxpayer. The taxpayer has put that money in there. Why in the world should you not have to compensate the taxpayer for what they've already paid for?
Mr Rupke: There's only one condition under which the provincial government asks for that money back.
Mr Laughren: If they privatize it.
Mr Rupke: If they privatize it.
Mr Laughren: Right, if they sell it to a profit-making organization. But the municipality is not a profit-making organization, right?
Mr Rupke: Yes.
Mr Laughren: That's the big difference. If they're going to privatize, for heaven's sake, they've got to get what they can out of it.
Mr Rupke: Mr Laughren, I am not proposing that you in fact sell the facility. I'm saying, if the provincial government wants to attract private capital to provide public utilities, then this clause is making it difficult to do that, because you treat that situation differently than any other situation that they have to compare the costs to. You are then saying, on one hand, "Yes, we'd like to attract the capital," but you're passing a bill that makes it difficult. If that is in fact the government's position, that they want to attract the capital, they should best know that this clause causes a problem.
The Chair: Excuse me, I must interrupt. I'm sorry.
Mr Galt: Thank you for your presentation, and thank you ever so kindly for explaining to the previous Treasurer of Ontario that OCWA and its operation lost $8.5 million. I very much appreciated that explanation to him.
Mr Laughren: He didn't say that.
Mr Galt: Oh, yes, he explained that, very much so.
What I wanted to run over very quickly is that the intent of the government is that the plants should be municipally owned and give the municipalities a choice in how they're operated, so there's some competition brought in, whether it be the municipality that runs them, whether it be OCWA that runs them or whether it be a private company that runs them. That's the direction we're headed.
You mentioned having to give back those grants as a disincentive. We've been hearing from several groups that it would be an incentive. I'm awfully glad you explained that also, because it has been adding to confusion.
Mr Laughren: I have a point of privilege.
The Chair: Okay. May I just thank the presenter? Thank you, Mr Rupke, for taking the time to come this afternoon. The committee members appreciate it.
Mr Laughren: I'm getting a little tired of the parliamentary assistant's distortions here.
The Chair: Hang on. That's not a point of order.
Mr Laughren: Let me finish. In 1996 OCWA --
The Chair: No, that's not a point of order. Sorry, it's not a point of order.
Mr Laughren: -- it's not a loss. That is a point of privilege.
The Chair: Excuse me. Order, please. We're moving on. We're going to take a short recess. Our presenter Mr Robinson is not present at the moment, unless he has just come in the door -- no -- in which case we're going to take a recess. I believe it's going to be a 30-minute recess.
For those who are interested, we have passes available for anyone who wants to go to the trade show upstairs. You can come and pick these up. We'll meet back here at five to 4, please.
The committee recessed from 1522 to 1556.
STATEMENT BY THE MINISTER AND RESPONSES
The Chair: We welcome this afternoon Minister Sterling, the Minister of Environment and Energy, who will make a presentation to us on the Municipal Water and Sewage Transfer Act, Bill 107. Welcome, Minister.
Hon Norman W. Sterling (Minister of Environment and Energy): I'm glad to see so many of my colleagues, after last week, bright and cheery here.
Mr Ouellette: Thanks, Norm. You too.
Hon Mr Sterling: I can actually see their eyes.
It's a pleasure for me to be here because I believe Bill 107 is a tremendous improvement in the quality of water and sewer services for the people of Ontario. You may have noticed on my lapel I have a pin with a trillium and a shovel on it. I was this afternoon made a member of the select society of sanitary sludge shovellers upstairs with regard to the Water Environment Association of Ontario, which is meeting upstairs, and had an opportunity to speak to them earlier this afternoon.
I know members of this committee and everyone else who has taken the time to join us today share in my commitment to ensuring that Ontarians continue to enjoy first-rate water and sewage services. There will of course be differences of opinion about how to meet this shared goal, but I believe we can work together to improve the delivery of water and sewage services while giving better value for the tax dollar. This is the intention of Bill 107.
The bill, as you will recall, followed the recommendations made in December 1996 by David Crombie's Who Does What panel to clarify provincial and municipal responsibilities. Bill 107 will improve water and sewage services in this province by clarifying the role of government and increasing its accountability. The bill proposes to (1) give Ontario municipalities full title to provincially owned water and sewage treatment plants serving their communities, and (2) transfer to municipalities responsibility for the septic system program, including inspections and approvals.
Municipalities already have shown they can deliver high-quality water and sewage treatment services to their communities. After all, they now own 75% of all Ontario's treatment facilities. With the passage of Bill 107, they would be the sole level of government holding title to water and sewage plants in Ontario. In other words, the other 25% will be added to the 75%.
In addition to being able to deliver the services, municipalities have also shown the desire to do so. Many local governments have told us they want us to move in this direction. In fact, almost 60 municipalities made this request even before we introduced Bill 107. They wanted title to their own plants. We are responding to the wishes of municipalities like St Mary's and Waterloo region, to give you just two examples.
Right now the province is in an ambiguous position, being the regulator, the owner, the operator and sometimes the funder of water and sewage services. Bill 107 would end this complex situation. Municipalities need the kind of flexibility provided by Bill 107. Our proposed legislation would allow municipalities to deliver water and sewage services, as most do now, and to choose the operator that best suits their needs. There will be advantages for the taxpayer as well. Fewer levels of government administration means increased efficiency and decreased cost. It would make our water and sewage systems operate more efficiently so that safe, drinkable water can continue to be provided well into the future.
Bill 107 will help the provincial government focus on its real job, my real job, and that is setting and enforcing tough performance standards for water and sewage treatment plants and ensuring that those standards are met.
Bill 107 would also encourage continued public control of water and sewage works, thereby protecting the taxpayer's best interests and investment. Municipalities would be prevented from selling all or part of their waterworks to the private sector until they have repaid any and all provincial capital grants received since 1978.
I might add, that not only applies to the 25% which titles are being transferred, it applies to all sewage and water treatment plants in the province of Ontario -- 100%.
There is no such provision existing in Ontario today. Therefore, municipalities have greater ability today to sell water and sewage infrastructure than they would once Bill 107 is passed. Some water and sewage works provide service to more than one municipality; many are jointly responsible for the debts and the operations of these particular area plants.
These works will be transferred to the serviced municipalities through a joint management structure which is referred to in the bill.
Soon after the bill is promulgated, area planning municipalities would be given proposed terms for management of their joint water and sewage facilities. They can work within these model frameworks. Of course, we would welcome alternative proposals from them.
Bill 107 also calls for the transfer of responsibility to municipalities for the septic system program, including inspections and approvals. The Ministry of Municipal Affairs and Housing would administer the program in unorganized areas of the province. We originally proposed to make this change effective on October 1, 1997. However, we have since heard municipalities express concerns about this date. We listened to those concerns and will be proposing that these provisions take effect on a date no earlier than January 1, 1998. The transfer date will be proclaimed at a later date.
We do not intend to rush our changes through. We want to act quickly, but we also will do what makes more sense and of course ensure that the safety of our drinking water and our sewage facilities work before we in fact embark on this system.
When the septic system provisions of 107 are in place, municipalities could include new or expanded septic systems within a one-stop approval service for the building industry. We intend to ensure that public health and environment are protected by tough rules for septic system installation and operation. Those working in this area will have to be competent enough to meet the standards that we set.
People must have confidence in the abilities of inspectors, confidence that their advice can be relied upon. We are using the transition period leading up to the transfer of responsibility for training to ensure that inspectors meet the highest standards of professionalism.
I might add that there is no uniform standard for inspectors across this province now for people who are involved in inspecting these particular installations.
We are also going to be requiring the training and certification of installers. There is presently no training or no certification required for anybody installing a septic system. Homeowners will benefit from greater protection by the enhanced training and certification requirements. Greater professionalism will mean better value for the dollar.
I'd like to read a quote from Aubrey LeBlanc, the CEO responsible for the Ontario New Home Warranty Program. I might add he's the former Minister of Consumer and Commercial Relations under which the home warranty program fell. Of the payouts with regard to defaults or faults under the home warranty program, the payout of that particular insurance scheme, about 10% to 15% were for septic systems. So it is a very big part of their overall program, the failures, with regard to the overall program.
Mr LeBlanc said, in terms of the new program, "The new requirement for training and certification of installers and inspectors will provide greater protection for both the environment and the homeowner." This is a person who has hands-on knowledge with regard to a huge number of failures which have occurred under the old system with regard to septic system installation and inspection in the province of Ontario. "This will mean that residents of all municipalities across the province will receive a seamless level of service delivery. This has not been the case in the past."
Just as we will continue to set and enforce high standards for water and sewage treatment plants, we will also continue to set tough rules for the septic system installation and operation. Restructuring these services would improve their delivery, thereby giving good value to the taxpayer; the best possible service with the optimum efficiency and least cost. Higher-quality work would also of course mean better protection for the environment. This remains the most important goal of all of Bill 107.
Confused ownership and fragmented administration are hindering the delivery of water and sewage services in Ontario. Our intention with Bill 107 is to clarify and untangle the roles of municipal and provincial governments in this area. Bill 107 will better protect the environment by clarifying the roles and accountability. It will also help save tax dollars by eliminating administrative overlap. It will not compromise the quality of services themselves.
Municipalities have clearly shown that they are able and responsible in delivering quality water and sewage services. The government is committed to ensuring that Ontario's high standards of environmental protection are maintained and, wherever possible, improved upon, which is, I believe, what Bill 107 is all about. Thank you.
The Chair: It has been agreed that each of the opposition and the third party will have 10 minutes to either respond or to question. We begin with the official opposition.
Mr Agostino: I'm pleased to respond to the statement made by the minister today. I think we have to look at this legislation in the context of everything that has happened in the past year and a half or two years. If you look at the bill in isolation, most of it seems like an innocent piece of legislation that simply transfers 25% of water services to the municipalities and allows them control, as they do the other 75%. So in isolation, as this government would like to spin this bill, to a great degree it has some impact, but not that significant.
What has to be looked at, though, is the history that has led to this bill being put in place. It started with Bill 26. I find it ironic that the great believers in referendums -- the Common Sense Revolution kept talking about going to the public with everything: referendums on tax increases, referendums on everything except Metro Toronto amalgamation -- go out of their way, under Bill 26, to remove the one protection that the public had in regard to the selling of assets.
Very clearly with Bill 26, which was not something the NDP or the Liberals eliminated, your government clearly removed that provision. You took away that one tool that local taxpayers had directly. The reason that provision was there was because previous governments, including Tory governments before this group, had realized that water services were essential. It was not simply another asset for governments to play with and fit into the fiscal agenda of the day. You took that away. So first of all, you took that provision.
You then followed with the most massive dumping in the history of this province to local taxpayers. You then put municipalities in a position that most municipalities across Ontario have never ever been in the history of this province. You took the right of municipal electors to vote directly on the issue of selling of services, you then dumped upon the municipalities hundreds of millions, if not billions, of additional costs as a result of your dumping legislation, and then you bring in this bill.
This bill would have been a great opportunity if this government -- and I've heard the parliamentary assistant say it. The minister himself says: "I don't think any municipality would be foolish enough to privatize because I don't think that's where the general public are in terms of those kinds of assets." I agree with the minister in that comment.
There's a very simple solution to this problem. Most of the people who spoke today, and I presume tomorrow and the next day in Toronto, are deeply concerned about the possibility, due to the things that I've outlined, of municipalities in desperate situations turning to selling the biggest asset and probably the most profitable asset to the private sector, and that would be water and sewer services.
The government can very clearly and simply assure the public and assure the opposition parties that this will not happen. You can do that by simply bringing in an amendment or amending this legislation that would prohibit municipalities from selling the assets. It's not rocket science.
I want to distinguish clearly, as I did earlier, between the operation of a facility and the selling of a facility. I believe there is a role for the private sector, with certain conditions being met, to operate a facility. If those conditions include ensuring that contracts are protected, that successor rights are there for the workers and that the agreements that have been in place continue to be maintained, I think under those circumstances, the running of a facility can work.
That is substantially different than selling the whole package to the private sector. Frankly, any company that's going to invest that kind of money is also going to expect to have the main power to make a profit, that is, the ability to set the rates. So you have a situation where if the profits don't quite meet the expectations of the boys on Bay Street or the boys on Wall Street, as the corporate shareholders who will run these major corporations, then there's only one tool: raising water and sewer rates. We've seen that experience very clearly in Britain. We have seen the total disaster there has been in Britain as a result of that.
You have one provision in here that you believe will discourage this, and that is the fact that the municipality will have to repay the provincial government the money in infrastructure since 1978 in relation to this. That provision sounds great on the surface. The reality is that the type of money that can be made in this is a drop in the bucket to the private corporations that would want to come in and would be more than willing to pay back to the government that amount of money on behalf of the municipality. It is simply a token smokescreen effort to try to make it look like there's some protection.
You really do have the power, and I urge this committee, I urge this minister, to take that power that you have and simply bring in this one change to the legislation that would in many ways deal with the concerns I would say of 90% of the presenters today, and that is to make that one legislative change. If your interest is the protection of public service, and that is the service of providing water, if your interest is not a corporate interest, I would urge you to do that.
In the few minutes left, I'd like to ask the minister a couple of questions if I can. The first question is: I agree with the concerns that you outlined with regard to the selling of the assets. If you have those very legitimate concerns and members of your government do as well, why would you not bring in legislation to ensure that it cannot happen and that the municipalities cannot sell the assets to the private sector?
Hon Mr Sterling: Let me just clarify one point you made, Mr Agostino, and that was that prior to Bill 26, a referendum was required to sell any assets. That only applied to PUCs. Most assets in this province, the majority of the water plants, are not owned by PUCs but are owned directly by the municipality, and all sewage plants are owned by municipalities. So municipalities at the present time are free to do with those as they choose. Bill 26 only affected a minor part of a piece of the pie with regard to referenda.
I guess I believe that the people who paid for it, collected taxes for it, have the ultimate control over the asset. I believe in the autonomy of municipal governments. I don't understand how the province could say to municipalities, "You are responsible for raising the money for building the Green's Creek sewage plant in Ottawa-Carleton," yet the province is coming in and telling you what you can or cannot do with that asset. With regard to even 25% of the assets which we are devolving, what we have is really nominal ownership of these particular plants. The people in those areas have already paid for those plants in terms of the charges they have had levied upon them from time to time. In their charges they not only pay for the operating but they also pay a portion for the capital which was expended on those plants.
My belief is that those who pay should have the ultimate control of the asset. None, or very few to my knowledge, have taken that choice. They are responsible to an electorate which paid taxes to them so I think the decision is best left in their hands. I have no fears that there is going to be any wholesale move to privatize sewage and water plants or pipes in this province. I just don't think the public will support municipal politicians who make that proposition.
Mr Agostino: Just to follow up, I think there are many circumstances and thousands and thousands of pieces of legislation where the provincial government tells municipalities certain conditions they must meet -- for welfare rates, programs that are mandatory. That's across the board. In every ministry there are tons of programs and regulatory requirements for municipalities to meet. That is part of the responsibility of the provincial government, which funds a great deal of these programs. That's a role we play at Queen's Park. It's ludicrous to suggest that we don't think we should be telling municipalities, particularly in such a sensitive area. I think government has a responsibility to protect the public and to protect public interest, and this is clearly one area of public interest.
We seem to have unanimous consent around this room that it would be a bad idea for municipalities to sell the assets to a private company. If we deeply believe that, and are not beholden to the interests of the private sector, then frankly we would move to do that.
While we're on this scenario, just briefly, this government's legislation has done absolutely nothing to avoid that. You have a situation where, if a municipality chooses to, they could tender out the assets of water and sewer services. They then would pick a company that, as part of the process, could pay the province back the infrastructure cost since 1978, and that company would then have full control.
There's nothing in here that would give municipalities the power to retain control of the rates, and that company, when they walk in, take over the operation, would have full control of setting the rates for water and sewer services in a municipality. Those rates would be based upon the bottom line and not public service. I think it's a very dangerous scenario that we're exposing them to.
We must learn from the experiences of other communities. I would again urge this government and this minister to make that one change that would eliminate this fear and simply prohibit municipalities from doing that. Anything short of that would be irresponsible and leave one of the most essential services that government provides in the hands of profit rather than the best interests of the citizens. That would be wrong.
Mr Laughren: I must say I'm very impressed with Mr Agostino's presentation and his questions. I won't repeat them because I think it was very well done. I have a couple of questions for the minister and, depending on the answers, I may not have any comments to make.
Mr Sterling, do you care if the water and sewer systems are privatized by the municipalities?
Hon Mr Sterling: Do I care? If they are privatized by the municipalities then the government would have to take another step, and that would be introduce a method of regulating charges, as we do with natural gas at the present time. Once you're into a monopoly kind of situation then you have to move to a regulatory regime. There hasn't been any privatization in the province to speak of -- there may be some minor services provided and some private systems in relatively small communities -- but if that happened, then you would have to move to the next step and have a regulatory regime that would be there.
I just don't think it's going to happen in this province. The sewage and water systems in this province are in very good shape. Most of the need to do that kind of thing, as was the case in Britain, as you point out, was that their systems were terribly deficient and there was a huge need for an injection of capital into their systems. That government went to a direct privatization by region and it has turned out to be somewhat unsuccessful in terms of what they've done. I don't think any municipal politician would choose to do that if they wanted to get elected again. It doesn't make sense in Ontario.
I also believe, Floyd, in terms of the basic soundness of most municipal governments that are involved in this kind of decision: You're principally talking about larger centres where they have a fair degree of sophistication in terms of the decisions they're making, so I don't think the worry's that great. I think it's autonomy which can be handled and I don't think they're going to make the wrong decision, from my point of view.
Mr Laughren: I didn't put the question in terms of you being disinterested. It was more, do you have a concern? Does it bother you one way or the other if a municipality does take advantage of this and sell off a system?
Hon Mr Sterling: Any kind of privatization which I have seen within Canada of any kind of municipal government asset or provincial asset -- your government sold our GO trains.
Mr Laughren: We didn't sell them; it's called a lease-back. It's using private capital.
Hon Mr Sterling: That's using private capital and using the tax system in order to make a gain because of the fast write-off of these particular assets. That's what happens. That is what you would call privatization, as it has existed in Ontario and Canada at the present time.
It depends on the control of the asset ultimately, in my view. I would not like to see any municipality give up ultimate control of, particularly, the pipes in the ground and the easements going to and from those particular plants. I have -- maybe I'm from the old school -- concerns over those things in the long run, because I believe those easements, those rights, those pipes, should be there for the future of all our people.
I may have less concern about a competitive situation. I'm not so much concerned about a situation which is a competitive situation as a private situation. In other words, if a municipality said, "We'll buy water from you," from such-and-such, but retain the right to build their own plant, then I have less concern about a competitive situation than I do a monopoly situation.
Mr Laughren: Perhaps your answer explains why you're requiring municipalities to pay back grants if they do privatize.
Hon Mr Sterling: I think that's only a degree of fairness for those who have paid the full shot for their system as well. We have, through your government and the previous governments over the last 20 years, been very generous with some municipalities, paying 85%, perhaps more, of the capital cost. It seemed to me that there might be a temptation for those people to cash in on not only the 15% that they put into the mix but the 85% which we, the provincial government, bellied up. That was a request by myself to include that in the legislation to prevent that kind of transaction from going on.
Mr Laughren: I appreciate that. I might have added some interest on to that number, but nevertheless that's -- we could debate that.
The province -- correct me if I'm wrong here -- does not give OCWA any operating subsidy, right?
Hon Mr Sterling: They didn't do it this year, but when your government was in place they effectively subsidized it to the tune of I believe about $7 million to $8 million a year by giving them the loan portfolio on which they earned interest. Therefore, they used that interest to say, "We balanced the books." We said to them when we came to government: "Uh-uh, you no longer have the interest off that loan portfolio. You must now operate on a break-even basis."
Mr Laughren: Do you know if in 1996 OCWA earned a profit, with or without the subsidy?
Hon Mr Sterling: I believe they're operating at a break-even basis now. They have contracted their operation and therefore are much more business-oriented in terms of what they're doing. I'm very proud of what they've done in the last year.
Mr Laughren: Because there have been some comments by competitors of OCWA that they're competing with a subsidized operation. In 1996 OCWA, without the subsidy, earned a $2.9-million operating profit. I know you know that, but I want you to pass that on to your parliamentary assistant, who doesn't seem to.
I would ask another question as well. It has to do with changing the date on which the facilities will be transferred to municipalities. I appreciate your comments on changing that date to not before January 1, 1998, I believe you said, which I think makes eminent good sense if there's going to be some municipal restructuring going on by that time. I think that is indeed the earliest date you would want to do that. I don't know; I think this is up to the municipalities really when they can handle that kind of transfer, not for me to take a position on it.
It may be, if the municipal restructuring in some cases takes place by that point, that they'll want a little bit of breathing room as well before they just absorb that. You might want to think, not for any other reasons, but just simply for the interest of municipalities to handle that kind of absorption, before you lock in January 1, 1998.
Hon Mr Sterling: I don't think there's going to be any lock-in date. The legislation points out that I have a notification date and I give them a standard kind of arrangement they could make between themselves. I'm talking principally about the area schemes. They have a six-month period to come back and say to me, "We have an alternative scheme, and there's agreement or substantial agreement with regard to the alternative one." I have to wait three months and then I can say, "It's this or that."
I think it's going to be different for different areas because there are going to be differing degrees of ability to come up with -- I want to get a solution that comes primarily from them and I don't want to impose one upon them, so I think it will differ from area to area. There is also a huge amount of work in terms of turning these assets over to the municipalities, because there's a great deal of legal documentation required, because they include easements and description of easements and all the rest of it. Fortunately, there's going to be a lot of legal work.
Mr Laughren: Just to sum up -- and I appreciate those responses -- I remain opposed to Bill 107 because it does allow for the privatization of the systems and I really do fear that the downloading that's going on -- this is not political rhetoric when people talk of the downloading. It's all there. I can give you dollar for dollar what's happening in my own municipality. Whether you like it or not, whether you'd feel comfortable with it or not, they're going to feel the squeeze to such an extent that they'll be desperately looking for every dollar they can find, and if that includes the sale of their sewer and water services, so be it. They'll feel that they will have basically no choice, so I am opposed to Bill 107 largely for that particular reason.
The Chair: Minister, on behalf of all the members of the committee, did you have a couple of things you wanted to sum up with?
Hon Mr Sterling: I know you're anxious to get in the bus and on the way home. I may just add that I believe some of the other principles I'm concerned about with regard to the usage of water will, by the untangling of the responsibility with regard to water and sewer services, encourage some of the things that we've been trying to bring forward for a long period of time. There's conservation of water. I believe that is done through a full-pay system; in other words, it's not highly subsidized through one hand or the other.
Therefore, I think that will become more of a reality under this system when we have clearly defined the role of municipalities to take care of their own water. I hope it becomes a more precious commodity in Ontario, as we are terrible abusers of the use of water in our province. Perhaps that's because we're graced with such an abundant supply. I believe these moves will lead to much more stewardship with regard to our fresh water in Ontario.
The Chair: Thank you very much for taking the time to come this afternoon. We appreciate it.
We shall reconvene tomorrow at 9 o'clock at Queen's Park, in room 228.
The committee adjourned at 1630.