Should London’s city hall consider public-private partnerships (P3s) to deal with its infrastructure needs (estimated at three quarters of a billion dollars)?
“Mayor Joe Fontana says city hall must consider using private financing to build future water and sewer works, an option that’s becoming more common in money-starved Canadian cities.” (June 20, P. Maloney, London Free Press)
I say, no. I say the Mayor and members of city council should do a bit of book reading and a lot of discussing and thinking first, especially thinking about the long-term consequences of P3s.
John Loxley, a Winnipeg economist and author of Public Service, Private Profits sounds a loud note of warning.
He says that though “a city such as Moncton would argue it incurred no debt for (their) new water treatment plant, there is a hidden debt in charges citizens pay - and a lease effectively is a debt, so you’re not saving anything.” (Free Press)
One reviewer of Loxley’s book writes the following:
PPPs/P3s have become all the rage amongst every level of government in Canada in recent years.
Proponents claim P3s reduce the costs of building and operating public projects and services,that projects and services are delivered more efficiently through the P3 model, so that in the end taxpayers are better off economically and as consumers of public goods.
This book tests all of these claims, and more, finding them mostly empty, ideological assertions.
Through an exhaustive series of case studies of P3s in Canada — from schools, bridges and water treatment plants to social services and hospital food — this book finds that most P3s are more costly to build and finance, provide poorer quality services and are less accessible than if they were built and operated by public servants.
Moreover, many essential services are less accountable to citizens when private corporations are involved.
“One frightening consequence of the global financial crisis of 2008-09 is the renewed effort by private investors to force the privatization of public assets. And their tool of choice has become the public-private partnership.
In this devastating and incredibly timely critique, John Loxley exposes P3s for what they are: a phony fiscal shell game that enriches investors at our expense.
This book is an essential tool in the ongoing struggle to preserve the public good.”
- Jim Stanford, Economist, Canadian Auto Workers
In my opinion, the book is essential reading for city politicians, and it wouldn’t hurt to invite John Loxley to our fair city (after all the sinkholes have been filled in) for a lengthy debate about alternatives to P3s.
In the opening chapter of his book he writes:
“Governments have generally engaged in P3s in order to spin off some element of the financing, design, construction, operation and maintenance of public infrastructure and services.
With P3s, the large up-front capital costs associated with infrastructure projects can either be offset and spread over a number of years through a lease or passed directly to the consumers in the form of user fees.
Private firms can assume responsibility for things that may go wrong, such as project over-runs, problems resulting from poor construction, etc.
These features can be very attractive to public sector organizations, particularly smaller municipalities with minimal capacity and large financial constraints.
They might, however, threaten labour and, as we shall see, impose costs on taxpayers that may not always be evident.”
Did the mayor say anything about user fees or other imposed costs when telling city council it “must” consider P3s? Nope. Not a single word.
If London’s city hall isn’t careful, there’s a good chance our sinkhole problem will one day be replaced by a long-term stinkhole.
And I’ve heard it said that a stinkhole by any other name (unless it’s named after the mayor) is still a stinkhole.
[A PDF file pertaining to Chapter 1 of Loxley’s book can be downloaded by using the link under a short book review here.]
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Please click here to read PT 1 Our sinkhole may lead to a big stinkhole.
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