Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

Why the rush on public-private partnerships?

with 5 comments

Globe and Mail

Nice to see that a journalist at the Globe can question conservative dogma. Usually the Report on Business does not show this kind of objectivity. Being Toronto’s national newspaper, it is all about the federal government’s determination to go for P3s. I would have thought that it would have been easy to find a lot more examples – especially in the UK but also Australia and the US.  From what I read, the bad and the ugly outweigh the good when it comes to P3s. Not only that but the critics of P3s are certainly more than just civil servants worried about their jobs. People in Toronto impacted by the toll structure of Highway 407 for a start! Not to mention hospital patients in the UK, prisoners in the US and the victims of Blackwater in Iraq. I may be wrong but I also have the distinct impression that there are some investors who are not too happy either.

Written by Stephen Rees

November 30, 2007 at 3:58 pm

Posted in privatisation

5 Responses

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  1. The 407 isn’t a P3 so much as it was a fire sale when the Mike Harris/Ernie Eves conservatives realized a budget scandal was imminent. However, it remains one of the many possible horror stories of what can happen when private interests control infrastructure which should be in public hands.

    Andrae Griffith

    November 30, 2007 at 4:41 pm

  2. Sadly “fire sale” is exactly what a lot of P3s have turned out to be. For example, for several years no new rolling stock was built by the private companies after British Railways was broken up. The biggest profits were made by former BR managers who saw an opportunity, paid very little for rolling stock, set up leasing companies to rent them out to operators and then promptly resold them to banks and other institutions. Even worse was the sale of the UK’s Regional Water Authorities – natural monopolies – which were almost a license to print money. And they subsequently failed nearly every European health standard too.

    Stephen Rees

    November 30, 2007 at 4:48 pm

  3. Funny you should mention water in a discussion about Harris & Eves, but that’s a whole other topic in itself…

    Andrae Griffith

    November 30, 2007 at 5:42 pm

  4. Can we avoid comparing a local government financial crisis in London to Blackwater?

    I mean its one thing to go towards P3’s in an attempt to save money on transport infrastructure, and then lose it all because civil servants aren’t properly trained to negotiate private contracts…

    … Its another the to use a private firm to write-off the war dead (since Blackwater causalities aren’t counted as part of the US\UK death toll)… its another thing to use Blackwater as an agent violate civil liberties in Iraq and Afghanistan.. this is a whole other monster… comparing Blackwater to Public Infrastructure?

    I know your against privatization, but P3’s are not privatization by any means if negotiated properly. Surely you realize that most like-minded pro-P3 advocates of municipal infrastructure are absolutely against the likes of Blackwater and company.

    When it comes to Transit, since you are using your Canadian examples,I will counter with a Canadian example. In the Toronto suburb of York Region, the York Region Rapid Transit Corporation is a P3 conglomorate of public and private stockholders.

    Since the establishment of the P3 VIVA Rapid Transit network in York Region, ridership has skyrocketed, and the buses on the Bus Rapid Transit routes are on average twice as reliable as the previous Publicly financed network. They’ve seen their share of innovation, from GPS linked bus platforms, which displays the exact time the next bus will arrive (similar to the London Underground)… interactive buses, with Wi-Fi onboard… display\announced stops, even a telly!

    All while significantly reducing the cost of transit to tax payers. Rates have gone up slightly, however, the rise in fares in York Region has been parallel to the rise in fares in the Toronto transit and subway, which is publicly financed.

    If negotiated properly, P3’s can work. The problem is hiring staff that can affectively negotiate these deals. Its different from contracting our or privatization because the public sector continues to play a role as a major regulator. Incomplete contracts have been the failure in many P3’s around the world.

    It will take time before local governments realize they need hte experience and expertiese before they can enter into these types of negotiations. That means, Public Administrators and Universities need to act, to train future Policy analysts the art of negotiations

    Ken

    April 1, 2008 at 10:39 am

  5. Hello Ken – you are a bit late on this one. Once upon a time I would have agreed with you. There is indeed the potential for writing contracts that benefit the tax payers and users. Sadly, I have seen very few that have fullfilled that promise, and far too many that have cost a lot. Sometimes it is incompetence in the people who negotiate, sometimes it is something much worse. And the effect of the current credit crunch has been to make P3 financing and insurance much harder.

    There is always the cost of capital. Governments can borrow money at lower rates of interest than companies. There is also the potential, not used much in English speaking countries but popular elsewhere, of not borrowing at all. So one year you take a big tax hit, build the whatever and then you do not have to pay interest on capital to anyone. This usually goes hand in hand with a system of referenda on large projects. Also something I would like to see.

    I am quite prepared to specify Blackwater as a special case. But not British Rail or Metronet, or Highway #407 north of TO.

    Stephen Rees

    April 1, 2008 at 1:18 pm


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