After three years of negotiations with Epcor on a contract for the company to run all of Banff’s utilities, council decided this week to keep the work in-house, citing added costs associated with the private sector option.
The utility services being considered include the wastewater treatment plant, water treatment plant and sewer and storm water systems and a cost analysis showed it would cost $350,000 more annually for Epcor to do the work than for Town of Banff staff.
But there were also unknown costs associated with the proposed contract, including the fact that an office or administrative facility would have to be provided for Epcor to operate, which was of particular concern for Mayor Karen Sorensen.
“This is a significant price difference … $350,000 is a lot of money to a municipality of our size,” Sorensen said. “Of equal concern to me is this operations and administration space, which is in addition to that $350,000 and I understand it would be our infrastructure and we would build it.
“I mean literally, where are we going to find the square footage?”
Councillor Chip Olver made the motion to keep all utilities within the Town of Banff’s operations, noting taking over the wastewater treatment plant will provide efficiencies.
“I feel from everything we have seen that the Town is ready to take on management of the wastewater treatment plant that will realize the efficiencies of putting all the services together and I have total confidence in our staff and our team to do that,” Olver said.
Another unaccounted for expense was heated storage for two pieces of equipment that are part of the utility. Operations manager Paul Godfrey said the ideal place for office space and storage is at the wastewater treatment plant, however, given seasonal travel restrictions on the roadway to the plant by Parks Canada, it is uncertain if that is possible.
Godfrey said a new building for Epcor to operate could be anywhere from $2 million to $4 million and that is if space can be found.
“We don’t have those costs nailed down yet, because we don’t have a location,” he said.
Chief administrative officer Robert Earl added that more heated storage options would be coming back to council in the budget.
Godfrey detailed the two options to council, noting that the wastewater treatment plant has always been contracted out and Epcor has handled that operation since 2009.
Before that, operators included Aquatrol, JMM, United Water and Earth-Tech. Godfrey said the Town of Banff is capable of running the treatment plant as well.
The current agreement with the utility company expires at the end of this year and Godfrey said the municipality would offer those currently employed at the facility jobs if Banff takes over running it.
The contract negotiations began in 2011 when administration put out a request for qualifications for the operation and maintenance of the wastewater treatment plant. A third party was brought in to review the submissions and Epcor chosen as the leading proponent.
When administration began the process of negotiating a 10-year contract for the facility, it was felt the potential for operational efficiencies for Epcor to take over all utilities was worth exploring and after direction from council was received, negotiations continued.
“A public and private partnership, or P3, was not considered or contemplated for this because no infrastructure or ownership is changing hands,” Godfrey said. “The negotiations were based on operation and maintenance services.”
In addition to operations, Epcor proposed to provide the capital program for utilities. Both operationally and for capital delivery, the price was more than what the municipality estimated it would cost to do it itself.
“The capital program was included in this because we believe there are greater efficiencies that can be gained by the operator managing the capital program,” Godfrey said, adding it did not include linear infrastructure like water and sewer pipes.
The total cost for Banff to operate all utilities came to $3.8 million and Epcor’s proposed contract was $4.1 million – 9.11 per cent more.
Part of the negotiations involved Epcor performing a comprehensive lifecycle analysis of Banff’s utility assets to move toward a Sustaining Capital plan, which is described in the staff report as “the periodic addition of capital which is required to maintain operations, including infrastructure at existing levels.”
“Some of the things that came out of that was a bit of an eye opener for us,” Godfrey said.
The results indicated the wastewater treatment plant had not had a high level of preventative maintenance done. A 20-year model was developed and then a 100-year model attempted, but Godfrey said it didn’t perform at that time length.
“We were trying to explain the link between preventative maintenance and extended life,” he said. “Both parties agreed the infrastructure operated and maintained by the Town of Banff was in much better condition than infrastructure maintained by outside operators.”
The proposal in front of council broke the original idea of a 10-year initial contract down into three- and seven-year periods. Godfrey said the first three years would be to develop that Sustaining Capital Plan after Epcor is “able to look under the hood of everything at least once.”
One of the issues addressed by contracting out the service is risk management. Godfrey said Epcor has lower risk tolerance than the Town and they would be responsible for health and safety and labour, but share the environmental risk with the Town as its name is on the approvals with Alberta Environment.
That risk is built into the fee for service that was proposed. But Godfrey said if that premium is not required, Epcor keeps it as part of the contract, whereas if the Town of Banff does not use all funds set aside they go back to reserves.
He said labour was a primary driver of the integrated utility option, as Epcor has greater efficiencies, while Banff has had historic staffing challenges.
Councillor Stavros Karlos noted Epcor is an organization that is more capable of carrying the risks associated with the utilities, but, along with other councillors, expressed support for the municipality taking over the wastewater treatment plant.
“While I have definitely been convinced in the value of continuing with an organization like Epcor, the costs associated with that are greater than the value and that for me is simple math,” Karlos said.
