After a presentation and a brief discussion, Erin council voted 3-2 in favour of moving forward with outsourcing its water department to the Ontario Clean Water Agency (OCWA).
The town announced in February its intention to obtain cost-effective proposals for “maintenance and management of the water systems” owned by the town. It had not been discussed by council.
In an April 24 special session of council, Tyler Sutton and Sarmad Mahbouba of Public Sectors Digest (PSD) presented a cost-benefit analysis of the current in-house water department compared to H2O and OCWA, the two respondents to the town’s request for proposals (RFP).
“The town of Erin’s distribution system has 33kms of watermain, 194 fire hydrants, 1,300 services and 296 valves. Erin has its own independent municipal supply system, located within its urban sector,” said Sutton. He added cost was a factor in the competition, but not the sole determining factor.
“The municipality is seeking the most advantageous overall approach to providing reliable operations, maintenance and management of the municipal water system,” he said.
Mahbouba said PSD ran two scenarios to compare the costs. The first scenario was a 5.5-year term, starting halfway through 2018 with a Canadian Price Index (CPI) increase of two per cent annually.
In this scenario, the total expenses are:
– in-house: $5,885,848;
– H2O: $5,508,414; and
– OCWA: $4,692,748.
The town’s reserves at the end of the term would be $1,976,083 with in-house work or $2,577,060 with OCWA.
The second scenario was a five-year term starting in January 2019 with an annual 3% CPI increase. In this scenario, the total expenses are:
– in-house: $5,525,710;
– H2O: $5,149,445; and
– OCWA: $4,319,742.
The town’s reserves in this scenario would be $2,345,226 with in-house work or $2,965,111 with OCWA.
Sutton said PSD also conducted a review of the services of both respondents based only on the executive summaries included in the proposals.
“Our conclusion and recommendation … (is) it’s certainly more significant cost savings with OCWA,” said Sutton. He added the town would benefit from economies of scale with OCWA.
OCWA is the largest water and wastewater operator in Canada. In Wellington County, OCWA operates water and wastewater services in Mapleton and the wastewater treatment plants in Arthur and Mount Forest.
Guelph-Eramosa dropped OCWA in 2008 and the township took over water services. Township officals expressed discontent with the service at the time.
However, Erin CAO Nathan Hyde stressed the town has confidence in OCWA.
“We have a lot of confidence, council and myself, in OCWA and their ability to provide good quality service, enhancing the level of service that’s being provided at a cheaper rate – that’s ultimately going to save taxpayers money,” he said.
In March, Hyde told the Advertiser the RFP route would “give us a true costing, that we didn’t have to pay for.” The question at the time was why the RFP process was not brought forward to council for debate and approval.
“Should I spent $25,000 of council’s money, of tax payer’s dollars, to do an analysis when I can go and just get this information and bring it directly to council?” Hyde said in a March 15 interview.
“We’re doing our due diligence; it’s been discussed by council, there’s a desire by council to bring forward the information about how is the water shop operating in terms of value for money, efficiencies, costs.”
Hyde said an analysis would be done, and it was timely to do it now. The cost of the analysis by PSD was not provided during or after the April 24 presentation to council.
“An FOI would need to be filed to release the financial information regarding the Public Sectors Digest analysis,” Erin communications officer Jessica Spina told the Advertiser on April 27.
The Advertiser disagreed and when contacted three days later for clarification, Spina said the PSD analysis would cost “under $10,000.” She would not provide an exact figure, stating the town had not yet received a final invoice.
Council discussion
Council’s discussion on the presentation was limited, said councillor John Brennan, because it was discussed in closed session prior to the open meeting.
“I would not want the public to walk away thinking that we’re sitting up here and that we don’t have any questions at all; we have heard this presentation and so we did ask questions,” he said.
“I don’t want anybody to go away with this wrong impression that this is not important, because it absolutely is.”
Brennan said it would be “derelict” if the town didn’t investigate the possibilities of outsourcing its water department.
“The devil’s in the details and I think there’s a lot of things that still need to be fleshed out,” he said. “(Staff) should go ahead and investigate further on this so that we can get a clearer definition of the benefits in the entirety.”
Councillor Rob Smith then read aloud a prepared resolution to “direct staff to enter into contract negotiations with the (OCWA) for the provision of water operations services and that council authorize the mayor and CAO to execute the final agreement.”
Brennan stated he wanted the matter to come back to council before the agreement was “executed.”
“I’m not sure I want to jump right to the conclusion without hearing back and more about the details,” said Brennan.
Councillor Jeff Duncan agreed.
“I think there’s some questions council would like to … or additional information that they would like to receive back.”
Hyde said it is better having authority going into negotiations.
“You don’t want to negotiate 98 per cent of an agreement and then bring it back to council when it’s almost completed and start re-writing it at that point,” he said.
Councillor Matt Sammut said, “I completely agree, but this is also impacting a number of lives.” He noted councillors may not have a lot of questions yet because “we don’t have the full detailed proposal.”
He added he has “confidence in our senior management team” to see any “holes” in the proposal.
Council voted 3-2 to enter negotiations and execute an agreement with OCWA, with Sammut, Smith and Alls in favour and Brennan and Duncan opposed.
After the motion was passed, Sammut appeared to have second thoughts.
“This is so important, I’m not sure we had enough discussion on that, but I guess we’ll move forward,” he said. “But clearly two councillors were not comfortable with it and that makes me a little uncomfortable on such an important issue that maybe we didn’t discuss it.”
Impact to the water department
Details of the proposal from OCWA are not being released to the public, so the impact to the current structure of the water department is unclear.
Hyde said it’s too early in the process to discuss if OCWA will also provide services for any future urban wastewater facility.
“That would be an entirely separate issue … down the road,” he said.
The current water department has five staff members, plus one summer student. Hyde said it is too early to tell what the department will look like under OCWA.
“In the bid documents, it talks about the possibility of having staff move over to OCWA, but I don’t know what the final numbers would be, because it’s part of the negotiation process,” he said. “My intention is to treat everybody as fairly and equitably as possible.”
After the meeting, water superintendent Joe Babin said he can’t comment on the item. Alls later said it was to Babin’s “advantage” not to speak publicly about the decision, though he noted Babin provided the town information for the cost-benefit analysis.
Asked about the advantages of outsourcing the water department, other than the cost, Alls said, “Well, you saw the dollar figures.”
He added, “The dollar numbers are huge. It’s nothing to do with our people. They’ve done good work, (it’s) nothing to do with that at all. It’s strictly a business decision.”
– With files from Chris Daponte
