New Funding Mechanisms and Better Management
Sewer and water transmission mains for Canada's 5,000 water utilities need upgrading and replacement. Unfortunately, the absence of adequate accounting and asset management practices has magnified the problem. Because of their smaller tax bases, this issue is even more acute in rural and small communities (of less than 10,000 people) that operate almost 80 per cent of our water systems. This leaves many municipalities incapable of taking full advantage of federal funding.
More P3s are essential if maximum value is to be delivered for taxpayers. After all, P3s are shared-risk partnerships between government and the private sector that tend to place a greater emphasis on performance. McGill University's Professor Saeed Mirza argues that governments alone cannot afford to meet our infrastructure requirements without accessing innovative funding sources, and underlines that P3s are the best among these. He also says that municipalities must consider the full cost and depreciation of infrastructure, as well as the operation and maintenance of assets over their service lives, which are rarely if ever considered. Deploring the present philosophy of "design, build and forget," he emphasizes that municipal infrastructure management must undergo a paradigm shift.
Interestingly, Professor Mirza made none of these key points in his recent study for the Federation of Canadian Municipalities, Danger Ahead: The Coming Collapse of Canada's Municipal Infrastructure. A discussion of these contributing factors and possible solutions to the infrastructure deficit should have been included in his analysis.
Not only have P3s been successful in large communities, their track record is also excellent in small municipalities, particularly for water and wastewater projects. According to engineer Jonathan Huggett, a specialist in the non-traditional delivery of public infrastructure, opportunities in this area abound, as demonstrated by successful P3 initiatives in British Columbia, Alberta and Ontario. Savings achieved there have been between 20-50%, based on a complete life-cycle evaluation.
The federal government has been active on this front with initiatives like PPP Canada Inc. and the Public Private Partnership Fund. As well, its requirement that P3s be an option for all projects seeking $50 million or more in federal contributions is welcome news. If funding thresholds were significantly lowered, however, more private expertise could be accessed, more local companies could get involved and more projects undertaken.
1. Public Private Partnerships