P3 strategy will drive up cost of LRT, report says
Professor slams city for secrecy on plans
Plans to use a public-private partnership to build and operate the southeast LRT line are based on problematic assumptions and will likely end up costing the city far more in the long run, a new report from the Parkland Institute says.
The report, written by University of Manitoba economics professor John Loxley, blasted the city for failing to provide enough information on the potential deal for the public to decide whether it’s a good one. Loxley said his attempts to get more detailed data from the city, including the business case for a P3 approach, were stymied.
“The problem in evaluating this particular project is that the information that has been made public is almost non-existent,” he said Thursday. “And for the information we have been able to obtain under freedom of information, just about all the numbers have been blacked out.”
P3s generally involve hiring a private consortium to design, finance, build and maintain infrastructure for terms that can last several decades. Council voted last year to use such an approach for the $1.8-billion LRT line to Mill Woods, though the debate was held in private to avoid disclosing financial details that could hurt negotiations with potential bidders.
Loxley said that despite that lack of public information, estimates can be done indicating the P3 method could end up costing the city an extra $421 million to $510 million over the 30-year lifetime of the deal than if the city borrowed the money and handled the project itself.
He said those figures should be viewed cautiously since they are based on a number of unconfirmed assumptions about the project. However, he said the bottom line is that construction through a P3 will be more expensive, largely because private financing comes with higher interest rates that public borrowing.
Loxley’s report disagrees with a 2010 PricewaterhouseCoopers study, commissioned by the city, that determined a P3 could build the entire LRT, then run and maintain it for 30 years, for up to 10 per cent less than traditional methods.
The Parkland Institute, a leftleaning public policy organization based at the University of Alberta, released Loxley’s report during the civic election to get voters thinking about how municipalities should pay for needed projects.