Empowering Ontario’s Municipalities
Insight A new approach to infrastructure projects — public-private partnerships — is transferring the risk from taxpayers to the private sector, while drastically improving every facet of Ontarians' lives.
Strong communities are built around quality public infrastructure. The roads we travel, the water we drink and the facilities we use determine our quality of life. Infrastructure spending represents a significant portion of overall government expenditures, and as public officials it is our responsibility to ensure taxpayers receive the best value possible.
Over the past decade we have begun to think differently about infrastructure, by considering an asset’s entire lifespan rather than just the construction period. Public-Private Partnerships (P3’s) engage the private sector for a longer period of time, typically 20 to 30 years, by bringing together the design, construction and operations and maintenance phases for large infrastructure projects.
"Having ‘skin in the game’ creates strong incentives for good performance and adds the discipline of the oversight of lenders."
When done properly, this motivates the construction of government-owned assets that last and are properly maintained. P3’s transfer risk from taxpayers to the private sector – the risk of cost overruns, time delays and quality product. To ensure this risk is truly transferred, the public sector pays only on a performance basis over the life of the infrastructure. This requires the private sector to raise and invest significant amounts of capital. Having ‘skin in the game’ creates strong incentives for good performance and adds the discipline of the oversight of lenders.
The P3 approach
The Canadian approach to P3s has made Canada a global leader with a strong market that is attractive to investors. This, in part, can be credited to the pioneering approach of provinces like Alberta, British Columbia and of course Ontario. The models success in Ontario is demonstrated by the hospitals, highways and courthouses that have been built across the province.
"The Canadian approach to P3s has made Canada a global leader with a strong market that is attractive to investors."
And now, as the market evolves and grows, we are beginning to see a greater interest from municipalities. According to a report from the Federation of Canadian Municipalities, the Canadian Society for Civil Engineers, the Canadian Public Works Association and the Canadian Construction Association, 30 percent of current municipal infrastructure was rated ‘fair’ to ‘very poor’ with estimated replacement costs at $171.8 billion across the country.
In 2013, PPP Canada launched Round Five of the $1.2 billion P3 Canada Fund. Municipalities accounted for almost two-thirds of the applications received with half of them in the province of Ontario. The need for improved water, wastewater and solid waste treatment facilities and modernized transportation strategies is evident.
"When done right, P3s have proven themselves a successful tool in the toolbox for governments across Canada, something Canadians can appreciate when they use and enjoy well-built, low-stress infrastructure."
Improving our province
Already we have seen cities like Barrie adopt the P3 model for their new transit facility that will provide enhanced operation and maintenance services to sustain the current bus fleet while improving operational efficiency and quality of service.
The City of Sudbury is using the P3 model to construct a centralized wastewater sludge treatment and bio-solids end-product storage facility to deliver a long-term, modernized approach to their wastewater management.
And in Ottawa and Waterloo, the City Councils are moving forward with their new Light Rail Transit projects using the P3 model.
When done right, P3s have proven themselves a successful tool in the toolbox for governments across Canada, something Canadians can appreciate when they use and enjoy well-built, low-stress infrastructure.