EDMONTON — A decade before Calgary's Bearspaw South Feeder Main failures, a consultant warned city administrators about structural weaknesses in its water utility governance and recommended major changes — but over half of its priority recommendations were deliberately excluded from material presented to city council.The independent Government of Alberta inspection report, submitted on October 8 and released Thursday, was conducted by former Alberta Energy Regulator (AER) chair David Goldie and follows an investigation into Calgary's water utility. Its release comes as Calgary faces another water restriction while crews continue the years-long process of addressing issues with the Bearspaw feeder main.Goldie's investigation cost Albertans $1.2 million, and it examined Calgary's management, administration and operations relating to the feeder main from the 2004 McKnight Boulevard water main failure through June 2026. Goldie reviewed 58,260 documents and conducted 50 interviews..Among the most significant findings was the city's handling of a 2015 review by Raftelis Financial Consultants, which Goldie described as "irregular, improper and improvident."Raftelis had been hired by Calgary in 2015 to examine the finances and governance of its water, wastewater, drainage and reclaimed-water utilities.The 2015 recommendations included creating a dedicated utility financial-management structure, establishing independent expert governance, producing standalone audited financial statements and reforming the city's return-on-equity transfers.Goldie's findings state that senior administration, led by then-city manager Jeffrey Fielding, debated the report's nine recommendations. The draft-final report was emailed to Fielding, chief financial officer Eric Sawyer, then-mayor Naheed Nenshi and his chief of staff, Chima Nkemdirim, in late November 2015.However, five of the nine priority recommendations were consciously excluded from the material presented to Calgary city council for consideration.“A decade later, the Independent Review Panel and this Inspection independently identified many of the same institutional safeguards, underscoring the continuing significance of the governance and financial-accountability issues Raftelis had identified,” the report reads..City administrators, led by Fielding, were responsible for not presenting the full recommendations, but Goldie could not rule out Nenshi's involvement based on the available information.“The interviews did not establish that Mayor Nenshi gave guidance to Fielding or others about what should be reported,” the report reads. “Nenshi did not recall the report, the meetings, or any substantive discussion with Fielding or Sawyer." "(Rob) Pritchard testified that he took no direction from the mayor on the content of Council reporting and did not remember a strong mayoral opinion. Fielding likewise recalled no guidance. Nkemdirim said the Mayor's Office did not pre-vet or approve Administration's reports and recalled no administrative recommendation to change the utility's governance.”Goldie said the situation presented two issues: an imbalance between what Nenshi knew and what other city councillors knew, and a lack of transparency.“(Municipal Government Act) provisions do not require Administration to transmit every consultant recommendation without analysis. Administration must exercise judgment about what information Council needs.""In this case, however, the omitted material went to the heart of Council's oversight role. The recommendations should have been disclosed and debated, with Administration free to explain why it agreed or disagreed.”.Goldie also found Calgary's water utility spent an average of 35% less on capital projects than city council-approved budgets between 2006 and 2024.The report estimates cumulative capital underspending of approximately $2.06 billion through 2024.Capital expenditures fell from approximately 46% of utility revenue in 2006 to 23% in 2024. Between 2021 and 2023, capital spending was less than 20% of revenue.Goldie said the sustained gap between planned and delivered capital work increased long-term infrastructure and service risks and likely contributed to deterioration.“Such under-investment may have been a contributing factor to high water leakage rates and successive critical failures,” the report reads. “Under-investment in capital infrastructure can result in reduced service levels and low reliability.""Under-investment can also result in significant rate escalation when the Utility needs to address urgent repairs and catch up on its capital maintenance program. This can negatively impact the affordability of utility services.”However, the inspector cautioned that the evidence does not establish that spending the full approved budgets would necessarily have prevented either Bearspaw feeder main failure.The report also found no evidence that investment was significantly constrained by available funding, instead identifying problems with the city's ability to deliver planned capital projects..Goldie's investigation identified broader deficiencies in how Calgary assessed infrastructure conditions, prioritized maintenance, communicated risks and assigned responsibility for completing projects.The city's 2022 administrative reorganization, which distributed water utility responsibilities across several departments, further complicated coordination between engineering, operations, asset management, finance and capital delivery.The report also scrutinized Calgary's financial arrangements with its water utility, including return-on-equity payments collected from ratepayers.Between 2004 and 2024, payments to the city, including return-on-equity and franchise or transfer payments, totalled approximately $1.87 billion.Goldie found significant departures from generally accepted utility rate-setting practices, including concerns that ratepayers were effectively being charged for the use of their own equity under the city's cash-needs approach.The inspector recommended Calgary adopt a utility-based rate-setting model and evaluate whether its capital maintenance spending is sufficient to maintain reliable services and reduce the likelihood of critical infrastructure failures..Goldie's report makes 20 recommendations intended to improve Calgary's governance, asset management and financial accountability.These include creating a comprehensive inventory of critical infrastructure, establishing a formal risk register, improving water-loss reporting, linking infrastructure risks to budget decisions and publishing an annual utility performance report.Goldie also recommended establishing a formal process requiring independent reviews and technical reports with significant public safety, financial or governance implications to be presented to council, along with documented responses to their recommendations.The most significant proposed change involves restructuring Calgary's water utility into an arm's-length municipally controlled corporation.The inspector recommends an independent, skills-based board, a single accountable chief executive, standalone audited financial statements and public performance reporting. Two possible models would be examined: establishing a standalone water utility corporation or integrating the utility into ENMAX.Goldie identified ENMAX integration as his conditional preferred option, provided an independent assessment determines it can deliver reliable water services, appropriate water-specific governance and value for ratepayers..The inspector recommends an independent consultant compare the two options and report to council by the fourth quarter of 2027. Council would then identify its preferred corporate structure by June 2028, with a final decision targeted for the end of that year.The report says Calgary should begin implementing its other 19 recommendations over 24 months rather than wait for a decision on the utility's corporate structure.Goldie also identified potential implications for the Alberta government, suggesting the province examine whether its legislative framework provides sufficient oversight of critical municipal infrastructure and large municipal utilities.The report identifies a lack of clearly defined reliability expectations for critical municipal infrastructure, limited requirements for transparent and participatory utility rate-setting and insufficient guidance about the financial and regulatory information municipalities should provide to ratepayers.Goldie said the province may wish to consider legislative changes to address those gaps, potentially extending the implications of the Calgary investigation beyond the city's municipal government.The report does not direct the Alberta government to impose a particular regulatory framework but identifies areas where greater oversight could be considered.
