Over the course of three decades, nearly every aspect of Ray Gibbon Drive has been debated to death, from the alignment and environmental impact to the cost of borrowing, financial risk and the phasing and timing of construction. Now it seems there’s a new stone to overturn with Coun. Roger Lemieux advocating exploring the potential of a public-private partnership, or P3, to construct the third stage to Villeneuve Road. As with all facets of the road’s history and debate, considering a P3 model warrants caution, but most importantly demands an assurance of public transparency.
The city has been at a crossroads with stage three for several years, the project stalled while waiting for the provincial government to come through with the necessary funding to pay for the $47-million third and final leg. Alberta’s freefall into deficit budgets has resulted in just $17.4 million being released, most recently a $4-million installment for stage two costs. The city has agreed to spend about $17 million to buy land for stage three, but at this point has no means to take on the $30-million cost of construction. Past councils have been reluctant to borrow, especially with so much uncertainty surrounding the timing of provincial payouts.
Lemieux’s motion, if approved when officially put on the floor May 2, would ask city administration to prepare a report analyzing the financial risk of a P3 funding model and/or borrowing. The second-term councillor suggests a P3 would be a cost-effective way for the city to build stage three while transferring any financial risk to the public sector partner. Though Lemieux concedes he isn’t clear on all the details, he has been in touch with firms interested in building the road under such an arrangement, ready to provide the city with sweetheart financing of 3.9 per cent over the long-term.
Therein lies the first note of caution — that the private sector is lobbying behind the scenes to take on the project, and obviously not just out of the goodness of their hearts. One of the main criticisms of P3 projects, especially in Alberta, is the lack of transparency in the numbers. Albertans have heard all sorts of stories about the hundreds of millions saved on projects like the $1.2-billion northwest leg of Anthony Henday Drive or the 32 schools across the province built with private-sector partners. Detailed information about those projects and what they’ll cost in interest and fine-print charges over decades-long contracts is harder to come by. The province’s math has been attacked by opposition parties, labour groups protecting public sector jobs and even the office of Alberta’s auditor general, which has advocated for clearer numbers to explain how P3s provide good value for taxpayers. Those are lessons council needs to heed; telling the public P3s save money without a true explanation is not transparent.
That report also needs to weigh the value of a P3 versus the city borrowing the money itself — utilizing financing rates that are more favourable than the private sector. While a P3 transfers risk to the private sector, there are no guarantees, especially if the partner firm goes bust. The province’s commitment to one day take over the road as a highway throws another wrinkle in the term of a P3 contract. Then of course there’s the ideological debate about whether to take on more debt, something council has refused to do even when interest rates were at record lows. Even though a P3 might not appear as debt on the books, it’s not a free lunch. Just like borrowing, there are still annual payments to make that have to come from somewhere, presumably capital grants or property taxes. So before councillors ask for a P3 vs. debt report, they should do us all a favour and first consider whether they’re prepared to invest in St. Albert’s future up front, or if debt-averse ideology again rules the day.
