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No guarantee P3 community centre will save money
Built almost 40 years ago, the Cowichan Community Centre (now known as the Island Savings Centre) provides Cowichan residents with a swimming pool, hockey arena, gymnasium, library, art gallery, and a performing arts theatre.
Local officials anticipate the facility will require significant renovations or replacement within the next decade-and-a-half, and the Cowichan Valley Regional District has already begun setting aside cash.
Replacing the Island Savings Centre will not come cheap, and could cost upwards of $60 million. It should come as no surprise some of our municipal politicians are already discussing a private-public partnership, or P3, as a cost-effective way to ease the tax burden on property owners.
But is a public-private partnership the right approach? Do these models actually save us money in the long-term, or are they really geared toward enriching private interests on the public dime?
Public-private partnerships have been a popular model for big infrastructure projects since the 1990s, not just in Canada but right across the industrialized world.
P3s often involve contracting a private consortium to design, construct, operate, maintain and finance a major infrastructure project, such as a hospital or bridge. Contracts are often 20 or 30 years in length. Proponents of this model argue it transfers risk to the private sector, while providing lower-cost and higher-quality public infrastructure.
P3s may sound like a good idea, but there is growing evidence they may be far less effective than is often assumed.
A recent University of Toronto study analyzed 28 such projects in Ontario worth more than $7 billion, and found costs were on average 16% higher than conventional government contracts. Why?
Because private companies typically borrow at a higher interest rate than government, and often spend more on lawyers and consultants.
Other studies have similarly questioned the advantages of P3s.
Analysis done for the Federation of Canadian Municipalities found there is insufficient evidence to show P3s are more cost-effective or produce higher quality service than traditional contracting.
And research by two business professors from the University of British Columbia and Simon Fraser University on several P3s across Canada found governments often fail to transfer risk to the private sector, especially when construction costs are higher than anticipated and governments are forced to bail out the contractor.
Yet many political leaders at the local, provincial and federal level continue to trumpet P3s, perhaps because they keep big capital expenditures off the books and avoid the appearance of debt.
Either way, the public pays the full costs of building and operating these infrastructure projects. It’s just a matter of when.
If our elected officials are serious about pursuing a public-private partnership for the Island Savings Centre, let’s hope they take a close look at the evidence first. Because saving a few bucks now may end up costing us a lot more in the long run.
Rob Douglas is Constituency President of the Cowichan Valley NDP. He writes monthly for the Cowichan News Leader Pictorial and can be reached at email@example.com. The views expressed here do not necessarily represent those of the NDP.