Southeast LRT will be P3 project

Council to seek provincial, federal help with $1.8B plan

City council has voted to build the $1.8-billion southeast LRT line as what could be one of Edmonton's largest publicprivate partnerships.

The decision, made this month following a closeddoor meeting, will see Mayor Stephen Mandel write to Premier Alison Redford asking for special provincial funding to support the so-called P3 project.

The city will also apply to the federal P3 fund, a move Coun. Don Iveson hopes will raise as much as $300 million to $400 million of the $1 billion Edmonton needs to wrangle for the LRT from the other two levels of government.

"Frankly, doing this seems to be the only way we can get federal funding," he says.

"This is one strategy, but the program isn't big enough to fund the entire LRT system."

A P3 contract generally involves hiring companies to design, finance, build and maintain infrastructure, such as schools or roads, for terms that can last several decades.

While the provincial government has used P3s to construct a dozen schools in Edmonton, along with three sections of Anthony Henday Drive worth $3.7 billion, the city hasn't built anything with a P3.

The issue was debated in private because confidential financial details were involved that could affect negotiations with potential bidders.

"There's a big range with P3s as to how much you hand over to the private operator and how much you retain control over as the city," Iveson says.

"Where we fall on that range will be released at the appropriate time, but we're just not ready to do that at this time."

A 2010 PricewaterhouseCoopers study determined a P3 could build the entire lowfloor LRT from Lewis Estates to Mill Woods, then run and maintain it for 30 years, for up to 10 per cent less than traditional methods.

Wayne Mandryk, manager of LRT design and construction, says there are expected to be similar savings just for the section from downtown to Mill Woods, which was the basis of the council decision.

He hopes to hear how much money is available from the federal and provincial governments by the end of the year, and if all goes well construction could start in 2014.

However, Alberta Federation of Labour president Gil McGowan says he's "profoundly disappointed" with the city's move.

"P3s almost never work out in the public interest. Governments around the world have had experience with P3s, and in almost all cases they end up costing taxpayers more and creating enormous headaches down the line."

Governments can borrow for less than private firms, and future issues often boost expenses, McGowan says.

"It may look cheaper up front, but the experience with P3s is clear. The private developers are never satisfied with the amount of money the governments put on the table in the beginning, and come back asking for more."

Coun. Karen Leibovici, who voted against the motion along with Coun. Linda Sloan, says her objection was the treatment of the west LRT line rather than using a P3.

She's concerned this portion of the project is being put on the back burner rather than being viewed as the next phase of a complete system.

"In documents it became clear to me the administration was saying, 'We will build a piece of it, eventually we will build the west line,' but it was an if, not a when," Leibovici says.

"The west part of the line has to be an integral part of the LRT - (construction) has to be continual."

Edmonton Journal, Sat May 26 2012
Byline: Gordon Kent

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