Some mention in here of the City Yards/bus barns removal and relocation being done as one project. There are certainly many concerns/doubts over these "P3s", but at least we know City administration has the city yards and bus barns on their minds?
City eyes public-private partnership
City yards, bus barns relocation considered as potential project
By David Hutton, The StarPhoenix July 9, 2010
Saskatoon may see the province's first true public-private partnership, as the city is on the lookout for a project to test the politically controversial method of building or upgrading municipal infrastructure.
Being considered as a potential "P3" are the new $100-million-plus relocation of transit headquarters and city yards, which have long been slated to move to the industrial outskirts, and, eventually, the perimeter highway, a billion-dollar project that will divert traffic around Saskatoon.
"A (public-private partnership) on the right project is absolutely the right thing to do," said city manager Murray Totland. "But we have to find a project where some of the risk can be transferred to the private entity."
During the last decade, public-private partnerships have become a staple for cash-strapped municipalities, but Saskatchewan cities have remained largely untouched by the trend. Under a P3, a private consortium is involved in more than one aspect of designing, building, financing, owning or operating a public project.
The city yards, the 24 acres of north downtown land reserved for snowplows, graders and offices, are in the way of infill redevelopment along the 25th Street extension. The nearby bus barns, the transit department headquarters, need to be moved to make way for the redevelopment of south Caswell Hill.
Long considered separate projects, city administration is determining if they can save money by building both on the same site and seeing if a P3 is a viable way to structure the project.
The city would consider a design-build-finance model, where the municipality would still operate the infrastructure but the cost of the project would be paid out over a longer term to reduce the debt load and shift some of the risk, Totland said.
The city explored using a P3 approach for the new $91-million police station, but discovered such projects don't quality for federal funding, which pays 25 per cent of the cost of P3s, Totland said.
Mayor Don Atchison said he's not for or against P3s, but they need to at least be explored regardless of one's ideological position.
"I think we need to look at all different options," Atchison said.
"To close the door without even looking at it, especially if that's the direction the federal government is going . . . would be wrong.
"You shouldn't rule something out just because you don't think it's right (ideologically)," he said.
Prof. Joe Garcea, head of political studies at the University of Saskatchewan, said municipalities must "exercise maximum caution" when getting involved with such partnerships. Case studies have shown them to be problematic if all provisions aren't clearly worked out up front in contracts to determine risks and potential rewards and liabilities.
Whereas municipal government will always exist, a lot can happen to a private consortium in 30 years -- a company could decide to pull out of the deal, go bankrupt or change ownership, Garcea said.
"P3s should not be judged, first, from an ideological standpoint in terms of private sector becoming involved in the public sector," Garcea said. "Secondly you can't judge them superficially. You can't look at one criterion and say it's not a good thing. You have to look at all the possible ramifications of doing a P3 versus doing something (more conventional).
"They can be good or they can be bad depending on how they're structured."
John Loxley, professor of economics at the University of Manitoba, said Saskatoon is likely too small to have the expertise to deal with a complicated P3 arrangement. His recent book, Public Service, Private Profit, studies a dozen recent P3s from around Canada and argues they've cost more than they're worth.
The main argument is that P3s shift risk, but the cost to the taxpayer is typically higher, he said in an interview. Payments through lease agreements may be spread out over a number of years, but private companies typically pay higher interests rates, eliminating any benefit, he said.
"Their track record leaves a lot to be desired," Loxley said.
In Saskatoon, the massive north bridge project, though still in preliminary phases, would also fit the city's P3 strategy because it would reduce debt and guarantee the project's cost and timeline, Totland said.
Public-private partnerships have been used to help finance the massive extension of the Anthony Henday ring road in Edmonton and the Stoney Trail in Calgary. A similar formula, where the city and province make annual payments to a private consortium to finance and potentially maintain and refurbish the road for a 25- or 30-year term, could work for Saskatoon's north bridge, Totland said.
The city is testing the water with the most basic form of public-private partnership during the $300-million Circle Drive South project by using a design-build approach. The competitive process is credited with saving the city $50-million, leaving financial wiggle room to build the new interchange at Preston Avenue and Circle Drive. A conventional approach would have likely forced the city to reduce the scope of the project, Totland said.
It's been an adjustment for city staff to step back from a project once it's underway, he said. The city is able to learn from mistakes made during the past decade, where case studies have shown a number of P3s to be questionable from a value-for-money perspective using public sector comparisons.
"We're looking at those and we're learning from those," Totland said.
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WHAT ARE P3S?
There are many variations on P3 arrangements. Some involve the private sector putting up the money to build facilities and the city guaranteeing leases, rents or fees per use for a number of years.
Others have the city putting up costs to build and the private sector managing or maintaining the facilities under long-term deals.
They have become increasingly popular since the early 1990s.
The P3 approach contrasts with the traditional approach where the city manages and designs projects and tenders out the work to the private sector but always owns and maintains it.
In other Canadian cities, everything from arenas, schools, hospitals, major road projects, water treatment plants and retirement homes have been built using P3s.
Unions and left-leaning politicians often deride P3s and say they end up costing more than purely public projects, are non-transparent and work as a very expensive method of mortgaging public debt. Businesses and right-wingers love them, arguing they save tax dollars and are completed more efficiently.
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