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Public-private projects ease the load for cities Add to ...

Some of the homes lining Huron Church Road in Windsor, Ont., have been bulldozed and the rubble cleared away. Others are being lifted from their foundations, loaded onto flatbed trucks and moved to other parts of the city. In all, 900 properties are being levelled to make way for construction of one of the most expensive and ambitious highway project in Ontario’s history: the Windsor-Essex Parkway.

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The project is a public-private partnership, or P3, a type of development in which the government asks private firms to design, build, finance and manage public infrastructure for 30 years or more. The success of the Windsor-Essex Parkway will pave the way for more ambitious projects built this way.

Canada has become the land of opportunity for P3s as cash-strapped (mostly municipal) governments cope with fiscal pressure and an infrastructure deficit. International investors are flocking to Canadian projects, and experts warn that cities need to ensure they have the knowledge and resources to make P3s work, and that communities are on board.

With a price tag of $1.6-billion, the Windsor-Essex Parkway is expected to create 12,000 jobs. Eleven tunnels will span below-grade roads, and 20 kilometres of recreational trails and 300 acres of green space will be built. The road is crucial, since 31 per cent of trucking between Canada and the U.S. travels this route.

For P3s to be successful, communities must see a clear need for the project, be it a hospital, highway or cultural centre, says Mark Romoff, chief executive officer of the Canadian Council for Public-Private Partnerships. “The average person has to feel that this approach is best,” he says.

In Ottawa, a $246-million partnership project to refurbish an aging football stadium and civic centre has received considerable pushback from community groups, which took the city to court. The effort resulted in reduced building heights, reconfigured retail space and a one-year delay in construction. The city estimates the legal wrangling has cost $1.2-million.

Last month, the city of Montreal unveiled a $259-million P3 concert hall as the new home of the Orchestre symphonique de Montréal. There was grumbling in the community about the hall’s “shoebox” design, but the project fills a decades-long demand after several failed plans for a new space.

“In our latest poll, two-thirds of Canadians support P3s,” says Mr. Romoff. But to ensure success, projects must be put through a competitive and transparent bidding and consultation process, he says. The first step is to create a thorough value-for-money report and make it available to the public online. In the case of the Windsor-Essex Parkway, this report projects a cost savings of $325.4-million compared to traditional procurement.

Across Canada, cities are facing an infrastructure deficit. In the 1960s, the percentage of GDP invested in public works was about 3 per cent, but it slid to 1.5 per cent by 2003. To close the gap, the P3 model is growing in popularity among municipalities, who see it as a means to get projects under way. In 2008, P3C, a new Crown corporation, began funding up to 25 per cent of new projects from a $1.25-billion purse set aside by the federal government. “In three years we’ve seen applications grow from just a handful to 79 from municipalities,” says John McBride, CEO of P3C.

But not all of these applications will earn support from the fund. Only 15 per cent to 20 per cent of infrastructure projects are suitable to become P3s, says Mr. McBride.

“In general, the model works better for larger projects,” he says, since the private sector has to make a significant investment just to participate in the bidding process.

P3C also offers advice from experts and examples of documentation used throughout the P3 process.

With this support for the model, Canada has emerged as a P3 leader. “Spanish, French and U.K. investors are coming to Canada and investing in our P3s,” says Mr. McBride. “We’ve closed every project since the recession and have a deep bond market, so you can get your projects financed.”

Large and stable returns from Canadian P3s make them attractive investments for pension funds, says John Loxley, a professor of economics at the University of Manitoba and author of Public Service, Private Profits, which examines the financial workings of P3s.

But cities drawn to the model are misguided, he says. P3s are difficult, complicated projects and even sophisticated governments have a hard time policing them, he adds. “They just don’t have the knowledge or resources to keep up.”

“It’s undisputed that over time, P3s cost taxpayers more money,” Prof. Loxley says. “It’s like leasing to own a car.”

In 2009, forensic accountant Ron Parks published a study of four P3s in British Columbia that found the province substantially reduced the estimated project costs in value-for-money reports.

“There has to be ongoing monitoring of these projects,” Prof. Loxley says. With occasional changes in government and the civil service, the commitments of private partners can be forgotten.

“The role of the Auditor-General becomes very important in that process,” he says. “You have to maintain continuity of quality of service over 30 to 35 years.”

A few of the biggest P3 projects in Canada:

Centre Hospitalier de l’Université de Montréal (CHUM)

Replacing three other facilities, this new hospital and research centre will mix both old and new buildings.

Cost: $2.5-billion

Owner: CHUM

Autoroute 30

A tunnel under the Soulanges Canal and two major bridges, one spanning the St. Lawrence River and the other the St. Lawrence Seaway, are part of the plan to extend Quebec’s Highway A-30.

Cost: $1.5 billion

Service: Highway

Owner: Ministère des Transports de Québec

Edmonton Ring Road (Anthony Henday Drive N.W.)

Stretching 21 kilometres in four- and six-lane segments, this section of highway is scheduled to open at the end of October.

Cost: $1.42-billion

Owner: Province of Alberta

Evergreen rapid transit line

This 11-kilometre line will link Coquitlam City Centre and Vancouver’s Lougheed Town Centre.

Cost: $1.4-billion

Owner: TransLink

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