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Report On Business Liberals drop public-private requirement for infrastructure funding

Construction at the Highway 407 subway station in Toronto.

Fred Lum/The Globe and Mail

The federal government will no longer require that cities and provinces look first at creating public-private partnerships before getting funding for major infrastructure projects.

The new Liberal government, which is preparing to roll out $5-billion a year in additional infrastructure spending, will work much more co-operatively with other governments to get the money out the door, Infrastructure and Communities Minister Amarjeet Sohi told The Globe and Mail.

Among the first changes will be to get rid of a requirement, put in place by the Conservatives in 2011, that all federally funded infrastructure projects worth $100-million or more go through so-called "P3 screening."

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The move suggests the new government may be less enthusiastic than the Conservatives about P3s, in which in which governments and private contractors share the costs and the risks of projects, everything from roads and transit systems to courts and schools.

"We feel that is an onerous requirement for municipalities," said Mr. Sohi, a former Edmonton city councillor. "Municipalities know better how to build the infrastructure that their communities need. So why impose certain conditions?"

That kind of screening can needlessly delay a project by a year or more, he said.

"If municipalities lack [financial] capacity, then let's build the capacity … instead of us imposing that," he said. "If they want to that, then fine, do it, but we should not be imposing that."

The change is aimed at making it simple, easy and transparent for municipalities to qualify for federal infrastructure money, according to Mr. Sohi.

The move comes amid growing skepticism about P3 projects. Critics argue that P3s can cost governments more over the life of a project because private partners face higher borrowing costs than governments. Supporters, however, say these projects have a much better record of being on time and on budget.

Alberta's NDP government recently announced it is reviewing the costs and benefits of all P3 projects.

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A 2014 report by Ontario Auditor-General Bonnie Lysyk found the province spent nearly $8-billion extra over the past nine years to farm out infrastructure-building to private companies rather than handling the projects on its own. Ms. Lysyk found the private companies paid significantly more for financing and received a hefty premium from tax payers for assuming risk.

But Ontario – like many provinces – remains committed to the public-private model. Ontario Premier Kathleen Wynn has defended P3s, saying the province does not have the "capacity" to deliver all the infrastructure the province needs.

There are roughly 220 P3 projects worth more than $70-billion operating or planned in Canada. One of the largest is the replacement of Montreal's federally owned Champlain Bridge, a project that could cost as much as $5-billion.

Mr. Sohi vowed that the government would start providing the new infrastructure money early in the 2016 fiscal year. "Some of the communities will see the money start flowing very shortly," he said.

The Liberals promised in the election campaign to put a extra $5-billion a year into three kinds of projects – transit, social and green infrastructure.

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