The idea put forward by Gwyn Morgan (“P3s bridge infrastructure funding gap,” March 26) that P3s are filling a funding gap doesn’t add up. Private-sector providers of services and infrastructure are not in the charity business. Their motive is profit, plain and simple.
When a P3 provider sells a city a bridge, a toll road, an arena or a rec centre, some will be seduced by the prospect of reduced initial capital costs. What they get in return is a costly and painful contractual obligation that will have the public paying the cost for years, if not decades.
P3s do not transfer risk — it’s built into the price of the product. Risk-transfer is a marketing slogan, not a financing formula. Ultimately, risk still falls on the public, who will be left holding the bag if a builder or an operator goes bankrupt.
P3s cost more. Financing for government projects is available at lower costs than those available for private-sector providers. The financial industry understands risk, and they price their products accordingly. P3 providers are a bigger risk.
Many public projects are already built by private-sector providers. Governments and public agencies call for proposals to build major infrastructure to meet their needs, the private sector responds, and projects get built. Infrastructure is designed to meet public needs and asset control remains in public hands, where it belongs.
In the case of tolls or other user charges, that is a legitimate subject for discussion with publics served, essential to meet public objectives, not revenue guarantees for private-sector operators. For P3 providers, it’s the double dip — you pay for the infrastructure through long-term contracts, and you pay again for access through tolls and user charges.
Of course, infrastructure budgets may expand where scope changes are ordered or changing circumstances drive up costs. P3s will price those risks into their contingencies and cut corners to meet more inflexible budget constraints. The Canada Line project put up as an example of success is an essential addition to Vancouver’s transit services, but sifting through the details will uncover some questionable practices and a system that might now be unable to absorb growing demand for transit. Too few cars and too small stations met then-current budget needs, but failed to forecast changing travel choices being made by Greater Vancouver transit users.
Victoria, like other municipalities, has many capital assets in need of renewal or replacement. We need to remind ourselves that these investments are the core business of cities, not liabilities, as the P3 promoters would have us believe. We’ll be better served if we stick to traditional procurement methods that rely on available and reliable sources of financing. In the long run, we’ll get a better product, at a better price.
Managers and operators of public assets should be responsible to the public — they shouldn’t report to private shareholders or distant corporate head offices.
John Luton served as a Victoria city councillor from 2008 to 2011.
