[N Say]

<strong>Written By:</strong> N Say
<strong>Date:</strong> 2007-11-11 11:17:51
<a href="/article/95328353-infrastructure-in-financial-post">Article Link</a>

As the tech boom becomes a distant memory and the global residential real estate boom fades to black, the infrastructure boom will provide a new source of economic growth, new opportunities for investors and pose new challenges for both governments and voters over how far they are willing to open up public assets to private involvement.

Even Ontario-- still traumatized by its late-1990s Highway 407 private-sector experiment -- is spending $10-billion on some 35 hospitals under its "Alternative Financing and Procurement" program in the next few years.

The trend is firmly underway. "Few things could be growing as fast as this," says David Livingston, president and chief executive officer of Infrastructure Ontario, the crown corporation charged with making the projects a reality. "It's just sucking up people and money. It's quite unprecedented."

And overdue. Estimates of Canada's infrastructure gap (the difference between what is needed to bring services up to scratch and support growth and what is being spent) range from about $60-billion to $125-billion.

It was not always thus. Infrastructure spending actually outpaced GDP from about 1955 to 1985, but began to fall behind as the focus switched to social spending. It was among the first to get axed during Canada's big-deficit days. More recently, new money poured into health care.

Canada is not alone. The infrastructure demand is global as the need to renew the West's creaking public services collides with an insatiable appetite for new investment in emerging markets such as Brazil, India, China and Russia.

The United States, which wowed the world with the speedy development of its Interstate Highway System in the 1950s, this summer faced the tragedy of a bridge collapse in Minneapolis, Minn. It killed 13 and injured more than 100.

The American Society of Civil Engineers estimates it would take US$1.6-trillion over a five-year period to bring U.S. infrastructure into "good" condition.

In Canada, which has been blessed with an oil windfall in recent years, the money is beginning to flow. The federal government committed in June to invest $33-billion over the next seven years to renew public infrastructure under its Building Canada Plan. Ontario plans to spend $30-billion on its 2005-2010 ReNew Ontario program, while Quebec also has a five-year $30-billion plan. Other provinces are spending too.

With some of these federal and provincial amounts overlapping, the cash will only make a dent in a $60-billion gap, let alone $125-billion.

"That size of gap can't be bridged by any jurisdiction", said Saad Rafi, national infrastructure leader for Deloitte & Touche Canada, said at the Toronto infrastructure conference. That is why observers say private sector involvement is inevitable.

...

Ontario, however has been reluctant to dip its toes back into the P3 waters after the Highway 407 controversy. Depending on who you ask, the toll road that bypasses Toronto either provides excellent value for money and is a pleasure to drive or a rip-off sold by the province for a song.

The Ontario Liberal government has expunged all traces of the word "private" from its P3 strategy, preferring to use the "Alternative Financing and Procurement" handle. Most of the focus so far under the DBFM model has been on hospitals. The private sector takes little equity and the province maintains ownership.

That is why big Canadian players like CPP and the Ontario Teachers' Pension Plan, which have become leaders in infrastructure around the world have so far invested little in their own country. They can't get enough equity.Ontario has also made it clear any form of privatization is off the table.

"If, in the end, these are assets that are designed to be for the public good then they should be controlled by the public and you don't need to have the thing transferred to have the private sector be involved so why confuse the issue?" Mr. Livingston said.

It will be interesting to see how Ontario handles its next major infrastructure push -- transport.

...

<a href="http://www.canada.com/nationalpost/financialpost/printedition/story.html?id=ccad5c6e-2b94-477e-bbcd-d65c5fe4658a">http://www.canada.com/nationalpost/financialpost/printedition/story.html?id=ccad5c6e-2b94-477e-bbcd-d65c5fe4658a</a>

[Ed Deak]

PPP means Plundering the Public Purse. It is nothing more than an accounting gimmick to cover up the realities and give people a false sense of euphoria.

All payments for PPPs must come out of the same public's pockets, with profits added, therefore they're not "cheaper", or "more efficient", because evidence shows that they cost far more on the long run, with lower qualities of service to the public.

We can see this all over BC, with the privatization crimes of this present gang in office. The privatized old people's homes are the best examples of this criminal madness.

Ed Deak. Big Lake, BC.

[N Say]

The Park Bridge over the Kicking Horse Canyon was a P3 project. The contractor got their $60 million up front, and they were told to do the job & that they weren't going to get any more money from the government. So any additional costs would have to be covered by the contractor. I think that's what the article meant when it said the risk is transferred from the government to the contractor. That phase of the highway project was completed 19 months ahead of schedule and on budget, and the highway remains public property, and has no toll.

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