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Water main break discussion

darwink said:
I think you're equating the two to too high of a degree. The city does not need an entire year of expenses/revenue in reverse to balance lumpy cashflows (which are way less lumpy than they were in the 50s).
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This is a fascinating conversation and I appreciate the insights from both of you. I have nothing to add to it, other than pointing out this is perhaps the first time I have seen in writing all three versions of "2" written out in a sentence concurrently, in the correct way ;)
 
lemongrab said:
And there were two full terms between then and when Nenshi took over where you'd expect the main work should happen to assess and bolster system resiliency
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Nenshi claims that council were never informed of the state of the main either. I believe him seeing the way the bureaucracy at teh city works. People love to hate on the mayor or council for the way the city runs, but it's the departments and their managers that really run the show.
 
darwink said:
Don't have to sell assets, or lease assets on long enough terms to be akin to selling it. In France ten year terms are common for infrastructure assets.


The city can borrow money. The feds and province are funding the greenline without the city portion being in reserve. The city runs the greenline via a ring fenced (money raised for a specific purpose, money spent for a specific purpose) sinking fund (revenue goes in, expenses come out) due to the aesthetic preference of tying a specific tax increase to a specific activity, but it makes no difference in the end if the account was intermingled with other city money or not. It is all money, its nature doesn't change if it touches money for other purposes.

But you don't need to have the 'cash call' tax if you just borrow the money. Borrow, pay off alongside amortizing the asset. Then do it again at renewal. No cash call. No delay for savings. Taxes or fees line up with the life cycle cost so investments are judged on real numbers instead of guesses.

I think you're equating the two to too high of a degree. The city does not need an entire year of expenses/revenue in reverse to balance lumpy cashflows (which are way less lumpy than they were in the 50s).

And yeah, I get that this is not 'conventional wisdom'. Part of learning about finance is learning that aesthetic preference on the look of a balance sheet does not equal superior financial performance. A lot of unlearning. Using sinking funds and reserves and ring fences can be justified from a 'values' preference, we just shouldn't equate those 'values' as rooted in or leading to superior financial outcomes.
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I'm not really sure the benefit of leasing. Let's say you lease for 10 years, the investment firm will expect a return for the risk. I just don't see Enmax being risky that we need to lose a portion of the cashflow.

I'm not a city finance expert, and what kind of loans are or aren't allowed, but is there any city in Canada or Alberta that does this? On a pure balance sheet perspective, it may not matter and it may simply be that we have councillors of varying financial knowledge and this is the only way we can preset budgets and funding choices in a clear way. Or cities prefer this funding method so we slowly build up reserves and we don't have to raise taxes for specific projects like BMO Centre or Scotia Place, etc.
 
trtcttc said:
Let's say you lease for 10 years, the investment firm will expect a return for the risk. I just don't see Enmax being risky that we need to lose a portion of the cashflow.
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Access to scale, a willingness to innovate (and not chase non-economic objectives imposed by the shareholder without knowledge of tradeoffs)) and difference governance incentives have been found to yield a return.

I agree, a firm operating the same will yield the same return.

trtcttc said:
s there any city in Canada or Alberta that does this?
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Every city that lets Epcor run their water system under contract? Kananaskis.

And that Canadian cities don't do it generally doesn't mean it is bad. We're hardly paragons of good governance and governance innovation.
trtcttc said:
this is the only way we can preset budgets and funding choices in a clear way
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It is less clear in the current way.
trtcttc said:
Or cities prefer this funding method so we slowly build up reserves and we don't have to raise taxes
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The thing is, they are raising taxes to build up reserves to then draw down. in the case of the event centre.

BMO Centre is different than Scotia, it is financed with loans that are then paid off by a general property tax increase and an education property tax increase (that is how Tax Increment Financing works).

IMO the BMO method is better, but not optimal, as it is often portrayed as inducing development to be self financing. As long as Council knows the long term result (higher taxes), it is a fine method.
 
Mountain Man said:
Nenshi claims that council were never informed of the state of the main either. I believe him seeing the way the bureaucracy at teh city works. People love to hate on the mayor or council for the way the city runs, but it's the departments and their managers that really run the show.
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It was pretty funny last week when everyone suddenly invoked the 2004 McKnight issue as a totally obvious thing that should have had feedermain resiliency at the top of the priority list for the last 15 years...yet I hadn't heard it mentioned a single time since the first break in June 2024. We needed a report to bring it to light and connect the dots.

If you watch any council meeting its obvious how easy it is for things to fall through the cracks. Councillors frequently ask for additional information beyond what is presented, and the answer is usually "we'll follow-up with you". And I'm sure that happens directly with those councillors, but that doesn't guarantee that information actually gets into the official record and is properly considered in future decision making
 
Saw a CBC news story today about privatized water supply even closer to home...
Rocky View County cited for failing to enforce fire hydrant bylaw, safety codes

She raised concerns about the state of fire protection in her community last year after two of the nine hydrants were tagged out-of-service, including the one in front of her house. Woynarski said the county, the fire chief and Westridge Utilities Inc., the private water company that owns the hydrants, wouldn't explain why they were put out of service or when they'd be fixed. [...]

Westridge Utilities Inc. appealed the county's enforcement order, but the decision was upheld last month.
The company has not responded to calls and emails requesting comment.
There are roughly 1,100 fire hydrants in Rocky View County, with 800 of them owned by private utility companies. Westridge owns 224 hydrants in 37 communities across the county. [...]

After all nine hydrants were tagged out of service last month, Woynarski said she was told by her insurance company that her premiums would nearly double.
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Installing fire hydrants and then just putting them out of service and fighting the county's attempt to get them working... that's willingness to innovate!
 
ByeByeBaby said:
Saw a CBC news story today about privatized water supply even closer to home...

Installing fire hydrants and then just putting them out of service and fighting the county's attempt to get them working... that's willingness to innovate!
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This case is far more complicated and isn't true that privatization = bad, the county shoulder at least equal blame.
These communities were built in the 1990s/2000s, where Rocky View would allow developers to build luxury homes but didn't want to pay for the pipes, so they franchise out those services to, in this case, Westridge. When those agreements were signed, the firefighting rules were different. These were not meant to function as hydrants, there was no flow/testing requirements, and they were built as water quality systems for flushing.

In 2013, the firefighting rules were updated, requiring much higher flow and testing. The County did not ask Westridge to make these meet those standards, and Westridge thought it was grandfathered and their original agreement didn't include upgrading the hydrants to new standards. No company would agree to this without cost recovery as it's essentially unlimited liability. So for 12 years, people went about their way, including Rocky View residents that paid an artificially lower water rate because neither the city nor Westridge upgraded the infrastructure and performed cost recovery.

Now the company is saying we agreed to provide a certain service, the rules changed, we thought we were grandfathered and nobody told us otherwise for 12 years. So we haven't charged residents for this upgrade. In reality, the County knew this, which is why they did not make news about this for 12 years. They don't want to pay for the upgrades, the residents don't want to pay for the upgrades. The provincial oversight, Safety Codes Council actually issued the order against Rocky View, for failing in its duty as a regulator. What should've happened with the 2013 bylaw change, is Rockyview should meet with all the providers and they need to raise rates on residents, raise taxes or find some way to finance the upgrades. It doesn't really make a difference if this was public or private, nobody paid for the upgrade, so there is no upgrade.
 
darwink said:
If the city is being a bad regulator, what makes you think they'd be a better service provider and self regulator?
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There's no perfect solution, but when you turn something over to a corporation who are only interested in maximizing profit, services suffer. The bureaucracy in the city (and any government) is the biggest draw back, but the city in theory should have more control and influence over it's own people than just taking a corporation at their word. For example, how much has the city or any jurisdiction left hydrants in the state the corporation in RVC has?
 
Mountain Man said:
There's no perfect solution, but when you turn something over to a corporation who are only interested in maximizing profit, services suffer. The bureaucracy in the city (and any government) is the biggest draw back, but the city in theory should have more control and influence over it's own people than just taking a corporation at their word. For example, how much has the city or any jurisdiction left hydrants in the state the corporation in RVC has?
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The corporation in RVC maintained the hydrants for their built purpose perfectly fine, they weren't built for today's fire hydrant standards. The city is asking for them to do something they were never contracted for. It's like if a company has a contract for maintaining Crowchild, and now the city decides we need a different type of asphalt for environmental reasons and added it into bylaws, and then demanded the maintenance company repave all the roads with the new asphalt with zero compensation all of a sudden, 12 years after the asphalt bylaw was passed.

Corporations are interested in generating the returns they contract for. It would not make sense for them to suck at providing a service such that they cannot collect revenue. You don't need to take them at their word, you have to write good contracts and perform good governance and oversight.
 
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