ALF V1

For Immediate Release
Friday, July 18, 2014

P3 Model Bad for Alberta Taxpayers

Lukaszuk’s Appointed P3 Board Idea a ‘Recipe for Corruption’

Edmonton - PC leadership candidate Thomas Lukaszuk’s proposal to create a “secretariat” that would oversee negotiations of Private-Public Partnerships (P3s) ignores the reality that P3s cost more, deliver less, and could open the door to corruption. 

In comments made to the Edmonton Journal, the former deputy premier admitted that P3 deals concerned him, and that he saw the potential for Albertans to be “taken for a ride.” His proposed solution is to create a special cabinet-appointed board to oversee Private-Public Partnerships, and to negotiate on behalf of the province. 

Read the Full Fact Sheet here!

Government makes the right call in building 19 new schools without for-profit partners

Edmonton — Nineteen new schools in Alberta will be built through traditional financing models.

Although the schools had been previously been announced last year as Private-Public-Partnership (P3) ventures, the government did not receive any competitive bids. 

"Rather than funneling taxpayer money into corporate pockets, the Hancock Government had the courage to abandon the P3 model," Alberta Federation of Labour president Gil McGowan said. "This is encouraging.  It's a good decision for Albertans, and I hope they continue to move away from the P3 model."

Alberta Infrastructure Minister Wayne Drysdale left the door open for the use of the P3 scheme in the future, suggesting that while it hadn't made sense in this instance, they would return to it. The Alberta Federation of Labour encourages the government to abandon the P3 model permanently. 

"Schools need to be built in the way that is best for students," McGowan said. "When a private corporation is involved, their motivation is to make profit, and decisions about how the school is built will reflect that. P3s are not just more expensive, they're worse for Alberta's kids." 

MEDIA CONTACT:

Olav Rokne, Communications Director, Alberta Federation of Labour, 780.218.4351 (cell)

or via email - [email protected]

Scathing internal report shows government scrambling to find way to build schools

Edmonton – “The Redford Government’s P3 schools experiment has been all but abandoned by the construction industry,” Alberta Federation of Labour president Gil McGowan said. “The Redford government needs to be honest with Albertans about how and when new schools will be built. Families in new neighborhoods can’t send their children to a school made of government press releases held up by hot air.”

The document, obtained by the Alberta Federation of Labour through Alberta’s Freedom of Information system, summarizes a debrief session of companies in the business of designing, building, financing and managing P3 facilities, including schools. The government commissioned Deloitte to get feedback from these companies after only one bidder stepped forward for the last round of P3 schools.

According to the document, dated October 21, 2013, the P3 process for new schools has been halted. It continues by saying the government is “now considering a range of different procurement options” for these and other schools.

“Now we know why government announcements heralding new schools have been noticeably absent on the costs, expected completion dates, and method of procurement,” McGowan said. “Redford’s new-schools announcements are a figment of a spin doctor’s imagination. They aren’t a real commitment to building the province.”

“P3s are high-flying ideological experiments, and this document proves they haven’t worked for Albertans. It’s time for Premier Redford to get her feet on the ground and put forward a conventional plan to build new schools,” McGowan said. “I’m calling on the province to publicly do as industry has already done – abandon this failed P3 experiment and get busy with a real plan to build Alberta schools.”

Internal government debrief document on P3 schools

MEDIA CONTACT:

Olav Rokne, Communications Director, Alberta Federation of Labour at 780.289.6528 (cell)
or via e-mail [email protected]

Internal government debrief document on P3 schools

Part of AFL News Release Thursday, February 20, 2014 titled "Documents show school promises may never be fulfilled"

The Redford government's promise to keep building Alberta despite budget woes and bitumen bubbles could lead the province to embrace alternative financing to pay for high-priority construction projects.

Premier Alison Redford and high-ranking cabinet ministers have said repeatedly since last fall they will borrow to bankroll critical infrastructure projects such as the twinning of Highway 63 to Fort McMurray.

Some of that debt could come in the form of public-private partnerships — an alternative method of building, maintaining and paying for major public works projects often referred to by the acronym P3.

"I think we've been pretty clear, we're not only going to be using P3s, but we're going to be using the capital markets for infrastructure and only when it makes financial sense to do so," Finance Minister and Treasury Board president Doug Horner said in an interview last week.

The 2013-14 budget to be delivered March 7 should add clarity. But if the province decides to use P3s to spread out construction costs, it will build on a decade of experience with the format.

Since 2003, the government has used the financing method to build large sections of Edmonton and Calgary's ring roads, as well as 41 schools and a water and sewer treatment plan in Kananaskis.

Under a P3, a government signs a contract with a private partner who agrees to design, build, maintain, and sometimes operate, the project over a period of time. That private company finances some or all of the project, and the government repays the company, with interest, over a set term of several years.

As an example, the northeast leg of Anthony Henday Drive, scheduled to open in 2016, is a $1.81-billion P3 project that will be repaid over 34 years.

Redford has made no secret of her interest in P3s. When she became honorary chairwoman of the Canadian Council for Public-Private Partnerships in November, she said in a statement she was pleased to work with the council to champion P3s across Canada.

After last week's Alberta Economic Summit, Redford described discussions related to P3s as "fundamental."

"There was much comment about the fact this isn't about incurring debt, this is about assuming risk," she said. "That these are still assets that continue to be publicly owned, but they allow us to build them in a more effective way."

Still, the subject of borrowing to pay for schools, roads or housing projects — always contentious in a province that wore its debt-free status like a badge of honour — becomes even more complicated when discussing P3s.

Advocates praise them as an efficient way of building and transferring risk from the public to the private sector. The P3 for the northeast leg of the Henday means the 27-kilometre stretch of road will be finished three years faster than through traditional channels and for $340 million less, according to the province.

Critics, however, pan P3s for their lack of flexibility and contractual secrecy.

NDP MLA David Eggen pointed to the complaints that surfaced in the first round of P3 schools that opened in Edmonton and Calgary in September 2010. Those schools, built on a standard design, faced many restrictions on how they could be used.

Alberta Education said last March they adjusted the contracts for the next round of P3 schools to allow outside groups to lease space for things like child care programs or community events.

Alberta Federation of Labour president Gil McGowan said he was disappointed to hear Redford focusing on P3s after the summit. He believes they do not provide better value for taxpayers.

"We now have more than three decades of (international) experience with P3s and what that experience shows us is that P3s are a shell game that almost never works for citizens and taxpayers," McGowan said.

"P3s are helpful to politicians in the short run because it allows them to move upfront costs for large infrastructure projects off the books in the short term, but over the long term we end up paying at least as much, if not more."

Wildrose leader Danielle Smith said P3s are simply another form of borrowing, which her party opposes in all forms. "We simply do not believe that once you start down the track of borrowing money that a government will ever stop," Smith said.

Anthony Boardman, Van Dusen professor of business administration at the University of British Columbia's Sauder School of Business, studies P3s. He said experience indicates that if a project is complicated, it may be better to keep it within government.

"Over time, what's happened is some governments are better at managing them, although there's still a fair amount of evidence we pay too much for them," Boardman said.

There are ways the government can make sure a P3 is a good fit, he said. One important step is to have an independent evaluation process looking not just at the financial impact of a P3, but also the social costs.

Governments often fail to take the social consequences of P3s into account, such as limits the arrangement might impose on community groups' use of a school building.

"That's a problem," Boardman said. "The reason why they don't is because it's not easy. But instead of doing the wrong thing because it's easy, on all projects we should devote the resources to getting it right."

The government also needs to be as transparent as possible, Boardman said.

In Alberta, the provincial government publishes more information today about new P3s than it did for the first P3s a decade earlier. Alberta Transportation's information about the northeast leg of the Henday includes a value for money report and contract information. (http://www.transportation.alberta.ca/3787.htm).

It also consults with the Advisory Committee on Alternative Financing, a panel of private-sector experts that examines the business cases for P3s and gives its opinions to Treasury Board.

Committee chairman Tim Melton, executive chairman of Melcor Development's board of directors, said P3s can be an excellent way for government to build but are not the best fit for every project.

Whether the government uses P3s, traditional bonds or cash to pay for construction, Alberta's finance minister said the province will take the advice Albertans have been giving to act more like a business when it comes to deciding how to pay for infrastructure.

"Money-in-the-mattress mentalities don't work," Horner said. "It certainly doesn't create value for future generations of Albertans.

"We have growth in this province and that makes us different than almost every jurisdiction in the country and we have to manage for that."

The Edmonton Journal, Monday, February 18, 2013
Byline: Sarah O'Donnell

The Redford government's promise to keep building Alberta despite budget woes and bitumen bubbles could lead the province to embrace alternative financing to pay for high-priority construction projects.

Premier Alison Redford and high-ranking cabinet ministers have said repeatedly since last fall they will borrow to bankroll critical infrastructure projects such as the twinning of Highway 63 to Fort McMurray.

Some of that debt could come in the form of public-private partnerships — an alternative method of building, maintaining and paying for major public works projects often referred to by the acronym P3.

"I think we've been pretty clear, we're not only going to be using P3s, but we're going to be using the capital markets for infrastructure and only when it makes financial sense to do so," Finance Minister and Treasury Board president Doug Horner said in an interview last week.

The 2013-14 budget to be delivered March 7 should add clarity. But if the province decides to use P3s to spread out construction costs, it will build on a decade of experience with the format.

Since 2003, the government has used the financing method to build large sections of Edmonton and Calgary's ring roads, as well as 41 schools and a water and sewer treatment plan in Kananaskis.

Under a P3, a government signs a contract with a private partner who agrees to design, build, maintain, and sometimes operate, the project over a period of time. That private company finances some or all of the project, and the government repays the company, with interest, over a set term of several years.

As an example, the northeast leg of Anthony Henday Drive, scheduled to open in 2016, is a $1.81-billion P3 project that will be repaid over 34 years.

Redford has made no secret of her interest in P3s. When she became honorary chairwoman of the Canadian Council for Public-Private Partnerships in November, she said in a statement she was pleased to work with the council to champion P3s across Canada.

After last week's Alberta Economic Summit, Redford described discussions related to P3s as "fundamental."

"There was much comment about the fact this isn't about incurring debt, this is about assuming risk," she said. "That these are still assets that continue to be publicly owned, but they allow us to build them in a more effective way."

Still, the subject of borrowing to pay for schools, roads or housing projects — always contentious in a province that wore its debt-free status like a badge of honour — becomes even more complicated when discussing P3s.

Advocates praise them as an efficient way of building and transferring risk from the public to the private sector. The P3 for the northeast leg of the Henday means the 27-kilometre stretch of road will be finished three years faster than through traditional channels and for $340 million less, according to the province.

Critics, however, pan P3s for their lack of flexibility and contractual secrecy.

NDP MLA David Eggen pointed to the complaints that surfaced in the first round of P3 schools that opened in Edmonton and Calgary in September 2010. Those schools, built on a standard design, faced many restrictions on how they could be used.

Alberta Education said last March they adjusted the contracts for the next round of P3 schools to allow outside groups to lease space for things like child care programs or community events.

Alberta Federation of Labour president Gil McGowan said he was disappointed to hear Redford focusing on P3s after the summit. He believes they do not provide better value for taxpayers.

"We now have more than three decades of (international) experience with P3s and what that experience shows us is that P3s are a shell game that almost never works for citizens and taxpayers," McGowan said.

"P3s are helpful to politicians in the short run because it allows them to move upfront costs for large infrastructure projects off the books in the short term, but over the long term we end up paying at least as much, if not more."

Wildrose leader Danielle Smith said P3s are simply another form of borrowing, which her party opposes in all forms. "We simply do not believe that once you start down the track of borrowing money that a government will ever stop," Smith said.

Anthony Boardman, Van Dusen professor of business administration at the University of British Columbia's Sauder School of Business, studies P3s. He said experience indicates that if a project is complicated, it may be better to keep it within government.

"Over time, what's happened is some governments are better at managing them, although there's still a fair amount of evidence we pay too much for them," Boardman said.

There are ways the government can make sure a P3 is a good fit, he said. One important step is to have an independent evaluation process looking not just at the financial impact of a P3, but also the social costs.

Governments often fail to take the social consequences of P3s into account, such as limits the arrangement might impose on community groups' use of a school building.

"That's a problem," Boardman said. "The reason why they don't is because it's not easy. But instead of doing the wrong thing because it's easy, on all projects we should devote the resources to getting it right."

The government also needs to be as transparent as possible, Boardman said.

In Alberta, the provincial government publishes more information today about new P3s than it did for the first P3s a decade earlier. Alberta Transportation's information about the northeast leg of the Henday includes a value for money report and contract information. (http://www.transportation.alberta.ca/3787.htm).

It also consults with the Advisory Committee on Alternative Financing, a panel of private-sector experts that examines the business cases for P3s and gives its opinions to Treasury Board.

Committee chairman Tim Melton, executive chairman of Melcor Development's board of directors, said P3s can be an excellent way for government to build but are not the best fit for every project.

Whether the government uses P3s, traditional bonds or cash to pay for construction, Alberta's finance minister said the province will take the advice Albertans have been giving to act more like a business when it comes to deciding how to pay for infrastructure.

"Money-in-the-mattress mentalities don't work," Horner said. "It certainly doesn't create value for future generations of Albertans.

"We have growth in this province and that makes us different than almost every jurisdiction in the country and we have to manage for that."

The Edmonton Journal, Monday, Feb. 18, 2013
Byline: Sarah O'Donnell

CALGARY — Premier Alison Redford was ready to declare the inaugural Alberta economic summit a success Saturday even without a consensus from the prominent Albertans who spent the day hashing out the province's spending and revenue issues.

But the call of many participants to introduce a provincial sales tax left lingering questions from the opposition parties about the Tory government's intentions around a consumption tax.

The focus of the summit — called by Redford because the province is dealing with a major revenue shortfall due to lower-than-expected energy prices and a deep discount for Alberta bitumen — was the long-term future of the province's economy, not the March 7 budget.

Speaking to reporters following the seven-hour conference at Mount Royal University, Redford said she was intrigued by suggestions around increased delivery of services by the non-profit sector and greater use of public-private partnerships (P3s), as well as the emphasis on gaining new market access for Alberta energy.

She said the repeated emphasis on a sales tax by many panellists did not necessarily point the direction the province will ultimately take.

"I also heard a lot today about spending cuts, I heard about reducing provincial income tax or eliminating provincial income tax, reducing corporate tax," said Redford.

"Do we need to have a conversation about revenue? I don't know the answer to that yet. But I think there's a lot of smart people engaged in that room who want to keep having that conversation. We're going to keep talking to Albertans."

The summit saw over 350 Albertans from academia, the business community and the non-profit sector — as well as MLAs from all parties in the legislature — in attendance. The event was also streamed online and Redford touted the social media success of the summit, noting in her closing address that 72,000 individual Twitter accounts used the hashtag #absummit.

The event saw four five-person panels discussing the state of the provincial economy, the public's expectation of services, Alberta's revenue mix and the government's spending habits.

Many of the panellists argued for a consumption tax even if they differed over whether the province's $40-billion budget is out of line.

George Gosbee, president and CEO of AltaCorp Capital, said the province could no longer rely on natural resource revenues to pay for programs and government should introduce a five per cent sales tax, as well as consider bringing back the health-care premiums scrapped by former premier Ed Stelmach.

"We had a free ride and we had a great ride. Now's the time to get off of it," Gosbee said.

Other panellists who advocated a consumption tax included the former dean of the University of Alberta business school Mike Percy, interim dean Joseph Doucet and AIMCo CEO Leo de Bever.

Jack Mintz, director of the University of Calgary's School of Public Policy, said Alberta has a spending problem but does need a fundamental reform of the tax system.

He said a sales tax harmonized with the federal GST would be more efficient and should be introduced with the aim of gradually eliminating the provincial income tax entirely.

But Derek Fildebrandt of the Canadian Taxpayers Federation doubted the possibility of a revenue-neutral sales tax being implemented in the province and suggested the Tory government would face an electoral revolt if it introduced a PST.

"The government has no mandate to bring in a sales tax," he said.

"The premier, I imagine, likes her job in government."

Redford has said the government faces a $6-billion shortfall in revenue in 2013-14 because a glut of oil in the United States has depressed the benchmark West Texas Intermediate price of oil and widened the differential in price between WTI and Western Canadian Select, which includes Alberta bitumen.

The government has made gaining access to new markets, particularly in Asia, its priority. That means the provincial go-ahead for pipeline proposals such as the Keystone XL line to the U.S. Gulf Coast, Northern Gateway and an expanded Trans-Mountain pipeline in British Columbia, and a reversed line to Eastern Canada.

However, all those projects face fierce opposition because of the environmental impact of the oilsands.

Jim Prentice, a former federal Conservative cabinet minister who is a close ally of Redford, said in his keynote address that "energy leadership and environmental leadership are now two sides of the same coin."

"We will either be an environmental leader or we will have other jurisdictions dictate our environmental policies, dictate our energy policies and dictate the markets we are able to access," he said.

The tone of the debate was always civil but the most striking differences were seen on the last panel of the day, which dealt with government spending.

Tom Flanagan, the University of Calgary political scientist who managed the Wildrose campaign in the spring election, said the solution to the government's financial woes could be found 20 years ago.

The cross-the-board cuts of Premier Ralph Klein and Finance Minister Jim Dinning in the early '90s balanced the province's books and set the stage for the province's economic boom, he said.

But Gil McGowan, president of the Alberta Federation of Labour, said the Klein-era cuts devastated the province's infrastructure and services.

"Albertans are willing to make tough sacrifices when necessary. We're prepared to take it on the chin when we've been convinced it's the right thing to do, he said.

"But allowing yourself to get punched in the face when it's not necessary is not brave and it's not noble. It's stupid."

Wildrose Leader Danielle Smith said she was pleased overall with the summit and noted that most Albertans would have found at least one or two panellists they agreed with.

"I was disappointed to see how often the conversation turned to this being a revenue problem and the solution being either taking out debt or raising taxes," she said.

"I don't support a sales tax because it is regressive. It actually does hit the lowest income people the hardest."

NDP Leader Brian Mason was more blunt, suggesting the summit had been "stacked" to deliver a message favouring a sales tax and pipelines.

"But we didn't learn what it was that created the dependence on royalty revenue in the first place, which was of course cuts to income tax for the wealthy and for corporations. That didn't even come up," said Mason, who noted there was also little discussion about increasing refining in the province to deal with the differential issue.

"My sense is that they're trying to set the stage for a sales tax, which is not something we support."

The Calgary Herald, Monday, Feb. 11, 2013
Byline: James Wood

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