June 4, 2007
  

Public-Private Partnerships Boost Infrastructure In B.C., Canada

Matt Rosenberg

For a nation thought to embody the concept of "Big Government," Canada has some lessons for advocates of private investment in the West Coast's lagging transportation infrastructure. The Los Angeles Times reports that while efforts have stalled in the state legislature to broaden private sector involvement in the enhancement of California's transportation system, Governor Arnold Schwarzenegger found inspiration for that cause during last week's visit to Vancouver, British Columbia.

At a Vancouver construction site that he dropped by, workers were busily boring a tunnel for the type of public works project that the governor has been unable to get off the ground at home: one owned and operated entirely by a private company. A 12-mile rail line that will connect Vancouver's waterfront to its airport is one of dozens of ventures like it in Canada. Provinces are turning to private companies to build and operate trains, roads, public hospitals, university facilities -- even local schools. "The way they do it is, I think, the right way to go," Schwarzenegger said in an interview....He said that Wall Street is clamoring to invest in private infrastructure projects and that California must examine ways to "benefit from all the private money that is out there."

However, Schwarzenegger's incremental, politically cautious approach to promoting privatization at home has drawn criticism.

....Adrian Moore, vice president of research at the Reason Foundation, a Los Angeles think tank....worked with the Schwarzenegger administration to craft privatization plans soon after the governor was elected. But he has since become critical of what he sees as Schwarzenegger's reluctance to antagonize public employee unions. "Canada is doing it, for crying out loud. I just spent 10 days in China, a communist country, and they are creating these partnerships right and left," Moore said. "They don't see this as some kind of mystical thing. They see it as a way to get things done."

But the Democrats who control California's Legislature have sided with public-employee unions that see privatization as a threat to tens of thousands of government jobs."Democrats -- we're not in the business of contracting out state services," said Assembly Speaker Fabian Nuñez (D-Los Angeles). "It doesn't fit well with our political diet."

OK. Give Nunez points for honesty. But not vision.

Taxpayer protections are par for the course, The Times reports.

....many governments have found ways to structure their contracts so that if a project is not completed on time or fails to provide the promised level of service, it is investors rather than taxpayers who get stuck with the bill. Most projects in Canada include such provisions. "It is very rare that they come in late or over budget. If they do, the private company eats the costs," said Jane Peatch, executive director of the Canadian Council for Public Private Partnerships.

Among the successes is a $1-billion bridge, built by a private company, linking Prince Edward Island to New Brunswick. A hospital in Vancouver was built and is maintained by a private company; government and university doctors provide care. A privately built water treatment facility was completed $10 million under budget, and several sections of roadway throughout the country have been built and are maintained by private firms. At a makeshift conference table under a canopy at the Vancouver construction site Thursday, British Columbia Premier Gordon Campbell told the governor that within a decade every major infrastructure project in his province will be built and managed by private interests.

The Governator's snazzy blog includes this video on the topic from special economic advisor David Crane, who says California must draw on the lessons of BC and Canada to finance needed infrastructure with private capital - resulting in projects that are built more quickly, at lower taxpayer cost, and are better maintained.

This press release from Schwarzenegger's office provides a good quick overview of BC's approach.

British Columbia's government owns Partnerships BC (PBC), an independent organization that evaluates and implements financing and construction of major infrastructure projects. PBC is staffed by professional project finance experts who determine the best approach for each project, conduct a standardized and competitive bidding process, and then oversee construction. PBC uses a number of financing models for projects, including traditional bond financing, vendor financing and public-private partnership financing. Public-private partnerships are increasingly being used by governments around the world. The province of Ontario, Britain, Ireland, Australia and others already use professional-financing models similar to British Columbia's.

"Public-private partnerships have been a tremendous success in British Columbia, resulting in millions of dollars in additional benefits to over 20 projects, including critical transportation and health care infrastructure," said British Columbia Premier Gordon Campbell. "P3s take advantage of innovation and expertise of the private sector, while reducing risks and delays. P3's will be fundamental to B.C. meeting our infrastructure requirements."

The issue resonates in Washington state. Even if one chooses not to factor in debt and inflation, Central Puget Sound is looking at tens of billions in needed transportation network improvements - the big-ticket item now is the roads and transit package facing voters this fall. Well worth review is this video of King-5 TV's "Upfront" public affairs program aired yesterday (Windows Media Viewer required). Always-incisive host Robert Mak and guests discuss the November transportation funding measure - which relies on hikes in sales tax, motor vehicle excise taxes, and long-term debt.

Clearing the decks for robust private sector investment in Washington state's public infrastructure only makes sense. Taxpayers are willing to pay for what they perceive to be pieces of the solution to road congestion and maintenance problems. But the project list is long, and the standard menu of tax increases and public debt will not suffice, over the long haul.

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Comments

Just an update from North of the border. TransLink's P-3s are coming to grief. In fact the RAV Line P-3 has been equated to a sophisticated ponzie scheme.

Malcom, please, what does the acronym RAV stand for? And in what manner exactly is that project and other specific BC transpo P3s "coming to grief," as you say? Do you have any reports or articles to which you can pass along links? Thanks.

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