Hamilton's Crown Jewel
The first municipality in Canada to privatize water
Christopher Grosskurth, CBC Radio | Feb. 5, 2003

Hamilton, Ontario

In South America and the southern U.S., the arrival of a for-profit water company was met with strong opposition.

Hamilton was supposed to be a successful alternative to a public utility, but it hasn't quite worked out that way.

Listen to Christopher Grosskurth's report

Send your thoughts about this report

Charlton Avenue is normally a quiet residential street but this morning it looks like a battle zone. A torrent of water is gushing into the street. Firemen, police, emergency vehicles are everywhere.

Marilyn Hunt is standing on the doorstep of her house when a repair crew arrives. One of Marilyn's friends leads us through the house. Our footsteps sink into soggy carpet. We reach the top of her basement stairs. Water is lapping near the top step.

The men from the gas company move on to the next house. Marilyn and I are left standing at the top of her stairs, staring at her submerged basement. Marilyn's furnace is completely under water.

CBC's Christopher Grosskurth: "Tell me how your day began. What happened?"

Marilyn Hunt: "Well my day began by getting up, because I was due to get up at about five o'clock to get ready for work, and I heard this mushing sound and I though, my God, the furnace is really putting out a blast of air. And I went to check the heat vent and there wasn't any air circulation, so I thought I'd go down and check the furnace and I opened the door to be met by a suitcase floating towards me."

CBC: "A suitcase?"

Marilyn Hunt: "A suitcase floating towards me. And so I plunged into the water and realized that the windows had been knocked out and it was just coming in like Niagara Falls, and in no time it was at the top of the stairs."

CBC: "How many feet of water?"

Marilyn Hunt: "I don't know. The ceiling's what, nine feet? So it was up to there and up to the top of the stairs."

A massive break in one of the city's main water lines is the culprit. A raging torrent has flooded homes, closed schools, disrupted lives. The flooding is another mishap in a series of mishaps that go back to the mid-1990s, when the city hired a private company to run its water treatment and sewage plants.

There's no evidence the company is to blame for the mess on Charlton Avenue. As for some previous spills, well that's another matter.

Bill Baldwin: "My sister... went on vacation in Pennsylvania and I looked after the house so every morning I come down to check to make sure everything is okay. I went in and I opened the basement door and there was staring at me two or three feet of sludge, sewage."

CBC: "How did you know it was sewage?"

Bill Baldwin: "Well, particles, waste floating in the water. You could see different particles. I knew it wasn't from the basement itself."

Bill Baldwin was right. It was sewage and a lot of it. In fact, the January 1996 spill was one of the biggest sewage spills ever in Ontario. Millions of litres of stinking raw sewage spewed into people's homes, Hamilton harbour and Lake Ontario.

The city blamed Philips for the mess. Philips Utilities was the original private operator of Hamilton's water works.

"Woodward Avenue," says Greg Hoath, who used to work at the Woodward Avenue plant, "this is the famous Woodward Avenue that quite often the plant itself is referred to as Woodward Avenue as opposed to using the phrase sewage treatment plant or the water treatment plant. It's certainly well known in the city of Hamilton. When you refer to Woodward Avenue, you're referring to water and sewage."

In the early days of the private-public partnership, people like Hoath supported the deal. So did the union he now represents. Hoath thought the deal would be a catalyst for economic development and put Hamilton on the map.

Greg Hoath: "It was going to be the crown jewel for the water and waste water industry."

CBC: "Ten years later, how would you describe it?"

Greg Hoath: "It's definitely not the crown jewel and I'm not so sure that still today you'd want to bring too many delegations through and show them it's a shining example of what works."

Hoath says Woodward Avenue is now a shining example of what doesn't work.

The sewage spill Bill Baldwin talked about was the first of many. On one occasion the basement of a hospital was flooded. In 1997, 1998 and 1999, there were more spills.

Both the city and private company threatened to take Greg Hoath to court if he talked publicly about the spills. They contended the problem was malfunctioning pumps. To this day, Hoath disagrees.

"The city and the company would say that bypassing happens during high precipitation, heavy rains, and the reality is because the plant hasn't operated properly we've had high discharges of raw sewage and partially treated sewage in dry conditions just because of the inadequacies of the plant operation," he contends. "But it's always been a contentious issue that the city and the company would say there's a valid explanation and we would say there's not."

Hamilton city councilors like to kick off meetings by singing along to a piped-in version of the national anthem. They then get down to business. But, this evening, councillors are distracted by a protest in the public gallery.

Two men hold a large sign. It reads "Hamilton and American Water are squandering tax dollars." American Water is the current operator of the water treatment and sewage plants.

Raw sewage isn't the only thing council has to contend with. A game of corporate musical chairs began in 1999.

Councillor Andrea Horvath remembers when Hamilton's water woes took a new twist – when Philips' parent company became embroiled in scandal and debt.

Andrea Horvath: "We've gone through a process now where the original contract was more or less sold off. It was sold off to none other than Enron."

CBC: "Enron?"

Andrea Horvath: "Yes, Enron. Believe that or don't, that is exactly what our city was faced with."

Yes, Hamilton was connected to the biggest bankruptcy in U.S. history. Why was Enron making a cameo appearance in the Hamilton water saga? Well, for a while Enron owned Azurix, the new operators of Hamilton's waterworks.

CBC: "Who actually owns the company now?"

Andrea Horvath: "My understanding is that it's the company called American Waterworks. That's the last thing I heard."

CBC: "Who are they owned by?"

Andrea Horvath: "I don't even know who they are owned by to be honest with you and at this point in time I think from what I understand our legal position is, we don't have a say in that. For me as a councillor, I just shouldn't worry my head about that because you know what, there's nothing we can do to affect that outcome regardless, and that's problematic."

CBC: "As a councilor, shouldn't you know who owns this company?"

Andrea Horvath: "Well, there's no doubt about it – not only who owns it, but who's interested in owning it next."

The Woodward Avenue plant is in City Councillor Sam Merulla's ward. He wasn't around when the original deal was signed – a contract, by the way, that was never tendered even though it was a 10-year deal worth $180 million.

Sam Merulla: "I think at that time because it was so new, it was a chique I guess because of how private/public partnerships work. The council was in many way seduced by the pressures of the electorate in trying to save money and reduce taxes and the pressure to bureaucracy to provide them with an option that would do just that, and I think that's what occurred."

CBC: "Do you know who owns American Water?"

Sam Merulla: "That's a very good question… It's changed so dramatically. In the last two years it's only transferred once. Prior to that, it transferred from Azurix to American Water."

CBC: "Who owned Azurix?"

Sam Merulla: "Azurix was owned by, I believe it was a European conglomerate if I'm not mistaken."

Merulla is partly right. A European conglomerate did enter the picture, another player in the confusing game of "Who owns the company that operates Hamilton's water plants?"

What Merulla doesn't know is that this European company is still around. In fact, RWE AG of Germany now owns American Water. What do we know about this energy giant? It's one of the biggest multi-utility companies in the world. Its core businesses are electricity, gas, and, of course, water.

Peter Spillett

Thames Water, RWE's water division, is based in Britain. Its operations are global: 70 million people in 46 countries depend on Thames for their water.

Peter Spillet, head of environment, quality and sustainability for Thames Water, says when it comes to water, size matters.

"The single most important thing to me is the provision of capital funding, which I think the private sector can do better than the public," he says. "There's nothing wrong with the public sector, I just think the private sector can do it faster, quicker and probably more innovatively."

Here's a figure that illustrates just how deep RWE's pockets are. The German multinational paid more than $7 billion US to acquire American Water. Compare this to another figure. In Canada, only 7 per cent of tax dollars go to municipal governments.

Local governments are strapped for cash, but water is an emotional issue for a lot of voters. The Canadian Union of Public Employees hopes to capitalize on this emotion. The union is leading the charge against privatization.

Judy Darcy

Judy Darcy, CUPE's national president, says Hamilton is the exception. A private company has a contract for both drinking water and sewage. The most common scenario is a little different. Darcy calls it "privatization by stealth."

"In our experience in Canada, they're going after waste water treatment first because frankly Canadians care less about the water that leaves their home through their toilets than the water that comes into their house through their taps," says Darcy. "So they seem to be moving in there first.

"Also there's a sense that, do we want profit made from the water that we drink? No. But the stuff in toilets, well, maybe that's another story. It's dirty stuff, right? That's where we've seen the biggest move so far. That's what we saw in Hamilton. That's what we've seen in Moncton. That's what we've seen in Halifax. It's about a harbour clean up, it's not about the water treatment for drinking water. But there's no question that the strategy is to move into both ownership of water delivery systems as well as water treatment, and that's certainly where they've moved in other countries."

On Charlton Avenue in Hamilton, the residents aren't worrying about the big picture, they're worried about their submerged basements.

Rich Minert, one of the Marilyn Hunt's neighbours, is fuming.

"Like I said to my alderman, having a water main break is something that does happen. You can't avoid that at times during the cold weather. But you can avoid water running through the whole area for seven and a half hours," he says.

Minert is a businessman. He says when the city handed over the water contract to a private company, they thought their problems were over.

"When they privatize anything that the government privatizes, whether even it's even in corrections and the Ontario government, you privatize it, it's now for profit," he says.

"It's a simple theory again of if it's not broken, don't fix it. Why is a company going to want to come in and do some upgrading when they figure, hey, what the hell, it's already been here for 100 years, what's the difference? They'll take their time replacing it. I think it's a bad idea to privatize it because it's all for profit. They're making money off of us and now what's going to happen is we're going to end up paying more.

Send your thoughts about this report

TOP | MAIN PAGE