City needs to explain

In his June 17 letter to the editor, city manager Glen B. Davies claims that a P3 model for the construction of the new wastewater treatment plant will cost $79.6 million less than building it the traditional way.

Building the traditional way avoids three things that result from involving a private partner: higher borrowing costs, the partner’s profit and the higher deal structuring costs.

As your paper reported on May 7, a study by economist Hugh Mackenzie found: “Proceeding with a public private partnership (P3) to upgrade the city’s wastewater treatment plant is going to cost Regina taxpayers $60 million more than if the city paid for the project itself.”

Mackenzie’s study conservatively assumed the private partner’s borrowing costs were two per cent higher than the city’s, that it would be looking for a 7.5 per cent aftertax profit on its equity investment and that the deal-structuring costs would be four per cent for each party. So far, the city has tried to hide behind a veil of commercial confidentiality, refusing to make public similar details behind its business case for a P3.

Davies and city council need to show more respect to Regina residents and explain how the extra costs incurred from involving a private partner translate into a saving of $79.6 million on a $224 million project.

David Weir, Regina