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Opinion: Calgary has been taking $100 million a year out of its decrepit water system 

The city keeps raiding the utility for general revenue

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Sometimes the problem is something in the water. In Calgary, the problem is what’s not in the water.

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Going back a decade, Calgary has been taking out more than $100 million a year in user fees from its water utility and putting that money into general revenues, where it can be spent on whatever might set city hall’s heart aflutter. Given the trouble Calgary has been having with its water system lately, it’s a budgetary shell game with very serious consequences.

Opinion: Calgary has been taking $100 million a year out of its decrepit water system  Back to video

On June 5, 2024 the Bearspaw South Feeder Main water pipe that delivers 60 per cent of the city’s drinking water collapsed catastrophically, turning roads into rivers and parks into lakes. This led to an immediate city-wide state of emergency and months of severe water restrictions. The city then commissioned an expert panel to investigate and provide recommendations. But before that panel could release its final report, the Bearspaw line broke again just before last Christmas.

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When the document was finally tabled in early 2026, it was unstinting in its criticism of Calgary’s management and financial practices. Noting that city officials had been aware of problems with its underground concrete piping since at least 2004, the expert panel said “the City prioritized other critical needs and initiatives, repeatedly deferring Bearspaw South Feeder Main inspection, monitoring, and risk mitigation.”

The long-term health of the city’s water infrastructure had been habitually overlooked and underfunded. And as the report notes, the dividends paid to the city by the utility played a key role in siphoning off funds necessary for the system’s upkeep and repair.

Prior to 2021, the city-run water utility paid a flat 10 per cent of revenue — comprised of residential user fees and other levies — into civic coffers. As rates went up so did the total dividend, regardless of the system’s condition. That was subsequently changed to an 8.5 per cent “return on equity” that’s proven even more lucrative.

Because of opaque accounting standards, it is impossible for local taxpayers to figure out how much of their water fees are actually funding other things. The city budget combines the water dividend with earnings from the city’s electricity service and parking authority into a single line labelled “Return on Equity.” Figures that separate out the water dividend were only revealed by a C2C Journal investigation published on Tuesday. The numbers seem stunning.

Between 2016 and 2025, the water dividend ranged from $106 million to $114 million, or more than $1.1 billion cumulatively. It bears mention that all this occurred on the watch of aggressively progressive former mayors Naheed Nenshi (who recently said he knew nothing about the sad state of his city’s water system) and Jyoti Gondek (who recently had the RCMP execute a search warrant on her house for unspecified reasons). Now, two years after the first Bearspaw collapse, the utility is set to make its largest-ever dividend payment of $130 million. Extracting such sums from a water system clearly in need of immediate repair, the expert panel deadpanned, “is inconsistent with best practice.”

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Whether it’s the best or worst practice financially, having an extra $100 million or so to spend every year is certainly an attractive proposition politically. Municipalities have limited sources of revenue and politicians rarely get excited by the thought of spending tax dollars on below-ground pipes and valves voters never see. Above-ground projects such as roads, transit and recreational centres are always far more appealing. As the expert panel also noted, major infrastructure projects entail a 40-to-50-year planning horizon whereas local city councillors generally have trouble seeing beyond their own four-year election cycle.

The Bearspaw report can be considered a case study into the problems facing underground public infrastructure across Canada. As numerous engineering reports have shown, aging water systems — arguably the most essential of any municipality’s fundamental tasks — are routinely ignored as cities prefer other, politically sexier pursuits.

The practice of removing dividends from city-owned utilities is common in some provinces but unheard-of in others. In Winnipeg, for example, the water utility has been sending approximately $40 million per year into general revenues. Unlike Calgary, however, the issue has long been a political hot potato.

“The money we collect for water and sewer should actually be spent on water and sewer projects,” said Winnipeg city councillor Brian Mayes, who has made a crusade out of ending the payments. While he admits the practice has kept property taxes low, Mayes figures the city’s budgetary trickery hasn’t been worth the candle. In an interview, he notes his city faces two massive sewer projects worth several billion dollars combined that can no longer be deferred: “When we go to the province to ask for help funding these projects, they point to the $40 million a year we take out of the water system every year and say, ‘why should we help you?’”

In response to Mayes’ advocacy, the city recently passed a motion to investigate phasing out the dividends starting in 2027. In Saskatoon, the drinking and waste water systems contribute about $31 million a year to the city’s general revenues, although the payments are called “grants-in-lieu” and “return on investment.”

In Ontario, most cities’ water budgets are strictly ring-fenced to prevent a repeat of the 2000 Walkerton disaster, in which seven people died of E.coli poisoning when a local municipality failed to properly purify its drinking water. In response to Walkerton, the provincial Ministry of Environment issued a set of guidelines for municipal water systems. Principle no. 3: “Revenues collected for the provision of water and wastewater services should ultimately be used to meet the needs of those services.”

Harry Kitchen is professor emeritus of economics at Trent University and a widely recognized expert on municipal finances. “Using revenue from user fees on water to subsidize other municipal services is not the way to go,” he said in an interview. Beyond the issues of budgetary transparency and necessary maintenance, Kitchen pointed out that water is a necessity every resident relies upon. Artificially raising water fees to provide a dividend creates a significant disadvantage for low-income residents, since these folks are being forced to fund programs that should properly be covered by property taxes — which have a greater connection to income and ability to pay.

To fix the problems in Calgary, the Bearspaw expert panel recommended the city hand over control of its water utility to an arm’s length, city-owned corporation to be run by an independent board of directors. This is sometimes referred to as the “Edmonton model,” given that Edmonton’s EPCOR is considered a pioneer of the concept. EPCOR, which operates as stand-alone private corporation despite being wholly owned by Edmonton, has grown to provide water and other utility services throughout Canada and the U.S.; it is now the largest private water supplier in Arizona and has a large presence in Texas as well.

Corporatizing municipal water systems in this way solves several key problems plaguing many Canadian cities. It lengthens the time horizon to decades. It ensures technical experts are always in charge. And it eliminates the political temptation to skim money from the utility to fund pet projects elsewhere. While EPCOR also pays an annual dividend to its owner, it’s based on net profit, not gross revenues or equity. It thus reflects the prudence of a competently-run private sector organization.

The municipally-operated, public sector water utility model has failed Calgary and is likely to fail other cities in the future. It’s time to unleash the power of the corporation.

Peter Shawn Taylor is senior features editor at C2C Journal. Greg Wilson is the author of “Busted Flush: Why Your Next Mayor Should Be an Engineer” published at C2C Journal. 

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