The question of how to fund a new sewage treatment plant in Regina will soon be put to citizens in a referendum.

Council members decided to hold a city-wide vote on the plant's funding model even though they have already approved a plan that would involve a private sector partner in the construction and operation of the facility.

The referendum is expected sometime within the next eight weeks.

The city prefers the funding arrangement, known as a P3, that would also qualify for federal dollars.

A group called Regina Water Watch, however, insists the P3 model is not the best way to spend public money and advocates for a funding model that has the city managing the project at all stages, including borrowing.

Construction of the facility is estimated at $224 million. The total budget for all the work associated with the project, including construction, is $232 million.

Here is the city's rationale for a P3 model:

  • If the city partners with a private company, that company would raise about half of the money needed for construction, so the city would not have to borrow the entire amount.
  • Using a private sector partner would qualify the project for a grant of $58 million, from the federal government, under a program that encourages P3s.

The city says this approach saves money. Officials acknowledge that Regina will — over 30 years — pay the private company for its initial half of the construction cost, plus interest.

Interest rates key

Regina Water Watch is concerned with the interest portion of that funding model.

The city refuses to release the interest rate Regina expects to pay the contractor, but Regina Water Watch believes the rate will end up costing taxpayers.

The group argues that if the city paid the entire cost of the project itself, Regina would a get a lower interest rate than the private contractor.

The long term effect of paying the contractor a higher interest rate, the group says, adds up to tens of millions of dollars of added cost to citizens.

Sorting through the costs, however, is tricky because a key variable — the interest rate — is not known.

Politics at play?

One public policy analyst says that means the debate is more about politics than money.

"There's various assumption and various perspectives on the whole issue," Ken Rasmussen, a professor at the University of Regina, told CBC News. "This is a political debate, it's not a debate strictly about the cost of a wastewater plant."

Rasmussen says the referendum may ask citizens a question about financing a sewage treatment plant, but the underlying question is about the role of the private sector in public works.

"The issue is really about what kind of a city we want," Rasmussen said. "What role are various groups going to play: private sector, public sector? Those are going to emerge as bigger issues than what this thing will have costed thirty years from now."

 

With files from CBC's Julia Dima