Low profits force city out of sewer construction business

The city is preparing to pull out of the sewer construction business because years of work haven’t left it as flush with cash as expected.

Councillors decided in 2009 to use staff and equipment not needed for other projects to bid on outside for-profit jobs. But drainage design and construction has done only 15 tunnelling jobs worth $29.3 million since then, producing $3.6 million in profits on the completed work.

“Market projections made in 2009 do not appear to be as robust as anticipated and have not produced a significant return to the city,” says a report released Thursday.

“Further, challenges to delivering projects outside of Alberta proved difficult and ultimately uncompetitive.”

With strong competition and small profit margins, drainage services recommends changing focus so they only do external projects to improve their expertise or help a neighbouring community.

There’s more than enough city drainage construction to do, so the idea they could use “excess capacity” to turn a profit isn’t true, the report says.

Most of the upcoming city work involves flood prevention and replacing aging pipes.

Coun. Ed Gibbons, part of the executive committee that will discuss the report Tuesday, said despite the outcome he doesn’t think the city was wrong to try this business.

“Maybe there’s enough people coming into the industry. Let them do it. Let them lose money,” he said.

“(The city) has tried, they have learned something, and life goes on.”