Public MSC Business Case Update

KPMG has created an updated report on water and wastewater services in Kingston. This report includes information from the previous business case with additions that aim to address some of the public concerns related to privatization.

It also includes supplementary information on the establishment of a public corporation under the Municipal Act, which prohibits any privatization vs. Bill 60 which is currently being contemplated by the province (page 9). A public MSC under the Municipal Act enables Kingston to implement strong local controls, protecting Kingston’s long-term financial stability and giving the City a stable, predictable governance model rather than leaving future decisions to provincial discretion.

The public MSC model established under the Municipal Act prohibits privatization and is a common model across municipalities, including the County of Frontenac which recently established its own water and wastewater public MSC through Frontenac Municipal Services. The intent is to ensure long-term public local control within a changing environment where new provincial legislation is being considered for the oversight of water and wastewater services. A Kingston Water & Wastewater MSC will be 100% municipally owned and controlled. No private person or firm will hold, directly or indirectly, any equity or equity-like interest in the MSC. Under the public MSC model, there would be limited changes from the current decision-making process under Utilities Kingston.

The document also provides additional financial information, specifically estimated investments required to replace older water and wastewater infrastructure, which can lead to major watermain breaks similar to recent incidents in Calgary. It is important for the City and Utilities Kingston to be able to continue to proactively replace older infrastructure, but this would be limited under the current financial structure as it would require about $100M per year in asset replacement costs. Under the current forecast, operational revenues alone are insufficient to fund these capital expenditures. The current City financial capacity cannot support this level of investment while supporting other municipal services such as roads, parks, transit, etc. The absence of additional financial tools available through an MSC (page 20) will force the City to limit its investments and reduce levels in all services.

Similar to past innovative decisions that enabled the City to retain long term control of Kingston Hydro and natural gas through Utilities Kingston, the City is exploring tools that would maintain local control while ensuring financial sustainability without reducing levels of service. A public MSC, established under the Municipal Act, can be a creative tool to support various municipal services, and the City continues to explore such tools within increasingly challenging fiscal environments.