A controversial proposal for St. Albert to set up its own utility corporation has been put on ice.

On Monday, city council voted 4-3 against a motion that would approve a budget of $60,000 and direct administration to bring back a Unanimous Shareholder Agreement (USA) to set up a municipal utility corporation by March 2020.

The agreement is a legal document that sets out rules for the corporation's directors, the level of financial reporting as requested by council, and how council instructs directors on public submissions at hearings.

The for-profit utility corporation would aim to generate revenue for the city with potential services like a waste-to-energy plant or commercial garbage collection.

Monday's vote prompted applause from the gallery from a few dozen residents who fought to cancel the proposed utility.

At Monday's meeting, Mayor Cathy Heron spoke against a number of concerns before voting in favour of the motion.

She argued the plan had off ramps along the way that meant the city did not have to take millions of dollars of risk. She said the project would allow for a high level of service, meet environmental goals and reduce taxes.

It is clear this proposal is a financial trainwreck. - Coun. Sheena Hughes

Heron said the city had contacted an experienced third party and asked the firm to see if the plan was viable.

Councillors Sheena Hughes, Ken MacKay, Jacquie Hansen and Ray Watkins voted down the motion.

Speaking passionately by phone, Hughes picked apart the business case. She said revenue never exceeded expenditure and predicted it would cost the city millions.

"It is clear this proposal is a financial trainwreck," said Hughes.

MacKay said he has always had reservations about government competing with private business and after doing a lot of research, he decided he couldn't support the motion.

"When the horse underneath you dies, the best strategy is to get off," MacKay said, setting off laughter in the gallery.

Hansen said she was enthusiastic about finding new revenue streams and wished the proposal were better received but from everything she had heard "people do not want this."

'Power of the people'

Outside the chambers, residents welcomed the decision.

"All of the business things that were being proposed could be done just as standard business by council," said Mike Killick, a longtime resident of St. Albert who recently retired from Telus, where he put together long term business cases.

"We didn't need to set up a separate municipal utilities corporation to do that. We certainly didn't need to incur the overhead to do that of nearly $1.2 million to set up a board and a special governance model."

Killick credited public pressure with turning the tide. He said the comments he reviewed of an online city survey were 100 per cent negative.

'So I don't know how they got it so wrong but we ended up at the right decision tonight," Killick said. "It's the power of the people."

In August, the City of Chestermere retook control of its utilities from a municipal corporation created in 2012, after racking up a $35-million debt.

Coun. Wes Brodhead and Coun. Natalie Joly voted in favour of the motion.