Federal Government Forces Transit P-3’s
In Europe, a P3 is a tool where by a private consortium is involved in the planning, design, building, and operation of a transit project, then ‘hires‘ money, in a form of a loan,Ai??from a bank or institution and assumes risk in the building and operation of a transit project.Ai??The P-3 consortium thenAi??pays back theAi??loan with the profit of the successful operation of the transit project. In Europe, a P-3 reduces the public’s cost for a transit projects.
In Canada, P’s are a sort of money laundering scheme, designed to spread and hide the real cost of a transit project over time,Ai??from the taxpayer. P-3’sAi??are also used as aAi??tool to protect corporate revenue streams, to the detriment of the local taxpayer. In Canada, for little investment the return on a P-3 can be many times higher than other investments and to top it all off, in Canada, those investing in a p-3 assumes little or no risk!
The Canada Line is a perfect example of a Canadian P-3, where the winning consortium, as a bit player,‘hired’ investment money both from banks and provincial retirement funds for the Canada Line P-3Ai??for aAi??fraction of theAi??total advertisedAi??cost of building the light-metro, assumed no risk, yet receives anywhere from $90 million to $100 million annually from TransLink and/or the provincial government or both. As the project is a P-3, exempt from Freedom of Information requests, the taxpayer does not know the true cost of the Canada line, which ranges anywhere between $1.8 billion to $2.8 billion, nor does the taxpayerAi??know the actual cost to operate the Canada Line.
It seems the Harper Government is forcing a P-3 on Edmonton’s newAi??LRT project, in a sort of Ponzi scheme investment,Ai??to insure healthy revenue streams for its corporate friends.
Public Right Yes! Monopoly Right No!
NoAi??to Secret Edmonton Transit Privatization Deal
– Jim Nugent –
OnAi??October 15 it was revealed that a secret deal has been made between EdmontonAi??City Council and the Harper government that seriously violates publicAi??interests in Edmonton’s transit system. Under this deal, the operation andAi??maintenance of the 13.8 km south-east light rail transit (LRT) line will beAi??handed over to a private for-profit operator under the most onerousAi??conditions. The deal was approved during anin camera meeting of City CouncilAi??held on August 29 and kept secret until now. It only became known when theAi??advocacy group Public Interest Alberta obtained information about the secret Council decision and released this information to the public.
AtAi??that August 29 meeting, Council went in camera to review terms dictated byAi??the Harper government as conditions for a federal funding contribution toAi??the $1.8 billion cost of the LRT
project. In return for funding, the HarperAi??government demanded that the LRT must also be operated and maintained by aAi??Ai??private operator. All but two councillors voted to accept Harper’sAi?? terms.
Prior to the August 29 meeting, Council had decided to use aAi??private-public-partnership (P3) arrangement to design and build the LRT,Ai??while operational control of this important public service would be kept inAi??Ai??Ai??Ai?? City hands. Under the rules and criteria of the federal infrastructure funding body P3 Canada, this would make the Edmonton LRT project eligible for federal funding. The Harper government though had changed its own rules.
InternationalAi??infrastructure monopolies prefer P3 arrangements that include the operationAi??and maintenance of infrastructure because this arrangement yields multi-year guaranteed revenue streams. Harper changed the rules to accommodate these monopoly interests.
When the city made an application to P3 Canada for $300-400 million in federal funding, even though the LRT project as it was set up was eligible under P3 Canada’s rules, the City’s plan was arbitrarily rejected. The Harper government told Edmonton that the project would have to be P3 all the way toAi??get any federal funding. The City would have to abandon its plan to keepAi??operation and maintenance under City control. It would have to hand theAi??whole project over to private for-profit operators.
AllAi??across the country, the Harper government has been using funding through P3Ai??Canada to impose similar private-public-partnership arrangements onAi??municipalities. For every type of infrastructure project requiring a federalAi??contribution, from water-treatment plants to LRTs, the Harper government is using funding blackmail to shove P3s down the throats of cities and towns.Ai??Elected municipal officials are often opposed to these arrangements,Ai??especially when they involve giving operational control of important urbanAi??services to for-profit operators and indebting municipalities in multi-yearAi??contracts. These arrangements are also opposed by workers building theAi??projects and providing services and by service users.
This interference in municipal affairs and dictate by the Harper government isAi??unacceptable, in Edmonton and elsewhere. The secret conniving of CityAi??Council with the Harper dictatorship to violate the public interest inAi?? transit services is also unacceptable.
It seems major transit projects in Canada are merely make work projects for major corporations and Canadian P-3 projects are the evolution of “money in plain brown envelopes.”
Edmonton Transit System or ETS is not TransLink staffed with Mickey Mouse accountants and economists shuffling paper to pay their big salaries, and ETS does not require assistance in the operation and construction of LRT. Edmonton Transit System is part of the City of Edmonton which employs high calibre engineers who are capable of designing, bridges, roads and whatever else required for LRT in Edmonton, and the City of Edmonton has been operating LRT since 1978.
The last thing that Edmonton needs is a P3 deal where the federal government forces ETS to select the federal government’s preferred engineering firm (shady SNC Lavalin being investigated around the world for its unethical conduct, for instance) to build and operate the LRT line in Edmonton when you can’t find more qualified engineers than the ones in Edmonton to do it.
As an engineering student, I took an “advanced” third year finance course as one of the six electives allowed from other faculties and was the top student (9 out of 9) in a class full of third year “business students”. Compared with the third year reactor kinetics course in engineering where you had to understand and apply the calculus and thermodynamics lectures (last week) to follow the reactor kinetics lecture in engineering, playing around with the present value formula requiring high school math in the “advanced” finance course was a piece of cake.
Really the course work in the Faculty of Business was trivial and fostered a sense of contempt for accountants and economists in general. It left you wondering whether business deserved to be taught at the university level.
After taking finance, I did learn one useful thing which is relevant to the P3 deal being proposed for the LRT line in Edmonton – if the net present value (NPV) of the P3 deal for ETS is more than the City of Edmonton would be paying (NPV) for the entire LRT line up front without the $400 million grant (bribe) from the federal government, the P3 deal for ETS is a bad deal. Without even knowing the details of the secret P3 deal for transit in Edmonton, I’m almost 100% sure that the P3 deal for ETS is a lousy deal for taxpayers in Edmonton.
Taxpayers are in it for the long haul in Edmonton and want the LRT line to be operated well and safely without money going to some inept private operator who is in bed with federal politicians who graduated with a degree in business. You don’t want a private operator to cut corners and to have its partners (taxpayers) to pay for it in the end. This is what happened in Vancouver, and you can flush P3 and TransLink down the crapper, in Vancouver, as well.
The Canada Line thanks to the P3 deal is costing TransLink (taxpayers, ultimately) about $100 million extra annually in “performance payments or whatever other euphemism TransLink with its creative accounting methods wants to call it” over about 30 years ($3 billion for selecting SNC Lavalin to build and operate it). SNC Lavalin even lied to get the job and had to open cut Cambie Street rather than bore it as was the original plan (resulting in many businesses going bankrupt along Cambie Street and paying the cost for SNC Lavalin to make money).
At the end of it, TransLink couldn’t even afford to reinstall the trolley lines as was the original plan and is now operated cheap diesel buses which would not be necessary on Cambie Street if TransLink went with LRT rather than SkyTrain, another blunder. Moreover, the $2 billion purported capital cost of the Canada Line is closer to $4.5 billion (NPV) due to the P3 deal. Edmonton would be smart to stay well clear of any P3 deal. Edmonton doesn’t need the bribe from the feds and can finance LRT all on its own if there are strings attached.