(This op-ed by Paige MacPherson, Alberta Director of the Canadian Taxpayers Federation, was originally published in the June issue of "Business in Calgary" magazine.)
It’s not entirely clear why Alberta Infrastructure Minister Brian Mason is shelving all public-private partnerships in favour of “traditional methods of funding” for the next five years of the government’s capital plan.
What should be clear, however, is that in any policy area, refusing to at least take a look at all available options just doesn’t make sense. Ignoring potential political motivations (cough, cough: giving more taxpayer-funded work to government unions) and thinking only of building quality infrastructure at the best price, it’s hard to understand why the government would universally reject a model that’s enjoyed so much success.
Public-private partnerships – better known as P3s – involve engaging the efficiency, experience and expertise of the private sector on public infrastructure projects. In many cases, P3s allow businesses to not only design and build infrastructure, but also to help finance, maintain and operate it. Often, governments pay for projects once they’re completed, and cost overruns are avoided and ideally, contractually forbidden – unlike in ‘traditional’ government projects.
Let’s be clear: not all P3s are a good deal for taxpayers. Like any financing model, they make sense in some cases and not others. But the P3 financing model has worked well for many Canadian infrastructure projects.
In 2013, Regina put out a competitive tender for a P3 wastewater facility. The Canadian Union of Public Employees argued against the model, and opponents gathered enough signatures on a petition to force a vote on the matter. The P3 project passed with 57 per cent. Ultimately, a report by Deloitte estimated that the project ended up saving a total of $138 million, or 29 per cent less than what it would have cost had it been traditionally procured and financed. That’s almost double what the city thought it would save.
In British Columbia, the P3 model has been used often – and in particular has helped three major health care projects come to fruition on time and on budget. The Abbotsford Regional Hospital and Cancer Centre was built in 2008, followed by an outpatient and surgery centre in 2011 and a critical care centre in 2014.
Here in Alberta, the government used a P3 model to design, build, finance and operate the Northwest, Northeast and Southeast legs of Anthony Henday Drive in Edmonton, saving taxpayers a cumulative $614 million over the course of the three projects.
P3s have worked outside of Canada as well. In 2000, a group called Environment Probe drew attention to a P3 success story out of Indianapolis.
In 1994, Indianapolis privatized the operations and maintenance of two of its wastewater treatment plants, saving $72.8 million U.S. over the first five years of the contract. Environment Probe said the P3 model resulted in improved environmental results and strengthened relations with staff at the plants.
As should be the case with any project, P3 contract agreements must be entered into with healthy skepticism. The government must act diligently on behalf of the taxpayer, ensuring all bases are covered and accountability mechanisms are in place.
The province has committed $39.1 billion to infrastructure over the next five years, with a chunk of that cash coming to Calgary. There is no reason to automatically reject a funding model that has in the past delivered important infrastructure projects on time, on budget and often saving taxpayers money.