In Canada, an innovative way to rebuild roads, hospitals
British Columbia's 'private-public partnerships' have been touted as a model for the US to revamp its infrastructure.
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Since 2002, British Columbia has pumped nearly $10 billion (Canadian; US$8.1 billion) into infrastructure financing – 50 percent of it supplied by the private sector. The province has been at the forefront of the Canadian scramble to team the public and private sectors – making the country a world leader in its pursuit of P3s – with projects from Alberta to Ontario, Quebec, and Newfoundland.Skip to next paragraph
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Larry Blain, head of the provincial arm that assesses the viability of each project in B.C., says one of the overriding benefits of these ventures is transferring taxpayer risk to the private sector.
"These projects are at the low end of risk, and they're very attractive investments for pension funds and life insurance companies," says Mr. Blain, chief executive officer of Partnerships BC. Private companies not only assume risks associated with design but with project construction, he adds.
Do P3s cost more?
But not everyone is enamored with P3s. Recently, serious questions have been raised in British Columbia about the true costs of public-private partnerships.
In a report commissioned by one of B.C.'s public-sector unions, a prominent forensic accountant concluded that the costs of P3s were higher than if the government had constructed the projects alone. For example, accountant Ron Parks pegged the cost of one project at $434 million (US$352 million)more than if the province had paid for it. Similarly, by his calculations, a hospital project will cost taxpayers double the estimate for a public procurement contract.
"There's a lot of hocus-pocus and management jargon about the projects,'' says B.C. New Democratic Party finance critic Bruce Ralston. "The government hides behind the rhetoric. A lot of the bidding and contract documents are not revealed publicly. And their response is: 'You just don't understand this.' And that makes me very suspicious that they are putting public assets at risk."
California already has a number of P3s underway – including solar power projects in San Jose and the Port of Oakland, as well as the Foothill bus transit system operating in the San Gabriel and Pomona Valleys. Few P3s have been in large transportation projects because public unions have opposed them, Mr. Crane says. But recent legislative changes in the state have set the stage for building new, large transportation projects involving both private and public sectors.