Big projects: hold it!
Our city administration is not immune from the urge to build “legacy projects”. These become monuments to the mayors and councils which created them -- Montreal’s Olympic stadium and Toronto’s sky dome and CN Tower. Gatineau Council’s “multifunctional centre” for downtown Hull is another, although the big sports centre in Gatineau sector already gives the city one dramatic monument.
These are controversial because they are so expensive to build and to maintain. The fancier the architecture – curved glass walls, translucent towers, interior waterfalls, etc. – the more expensive the maintenance bills for future taxpayers. Cost is usually the most controversial part of these projects. Location, second. Use, last!
Citizens often want basic infrastructure rather than monuments – wouldn’t we benefit more from another interprovincial bridge than another arena or art gallery? Wouldn’t more people use neighbourhood libraries than one big convention centre? And do these “glamour projects” really make a city stand out? How many people in Montreal could identify the CT Centre as in Ottawa?
Last week this column looked at the question of serving city citizens rather than national teams or corporate events – local skating or curling rinks, neighbourhood libraries, bridges and thoroughfares. How much use do regular citizens and local teams get from the new sports palace in Gatineau? What should be our city’s priorities? Cost is central. And, in our era of austerity, how can we build any big projects? That’s a rhetorical question, because the planners have their answer ready: Public-Private Partnerships (P3 or PPP).
In P3 projects, corporate investors and governments together fund new projects, and the projects themselves pay off the corporate investors via fees, tolls, or other revenue sources. Toll highways or bridges are the usual examples. The public funds support the loans and bonds so that the private investors do not assume much risk.
This thinking is magical, not necessarily good, finance since governments can issue bonds which cost much less than the interest and revenues the investors want. But that’s in theory, and theory can be argued both ways. How about the actual history of success with PPP projects? Canadian data is thin, but the USA keeps better statistics. Two thirds of new transportation construction in the US is done via P3.
Last year, the magazine, Thinking Highways, published a study on P3 projects by one of its editors, Randy Salzman; he “could not find a single P3 where the toll-collecting firm had not gone bankrupt or walked away within the first 15 years.”
So why would corporations invest in P3? “The private firms took construction profits, accelerated depreciation tax credits, and enough revenues to cover their investment, (while) taxpayers were left with the bill for the unpaid loans and private bonds (for decades to come).”
Remember that, when planners assure us that a P3 deal will give us our next big monument. The real monument may be public debt for years; your debt.