Having read the agenda for Monday’s City Council Meeting and seen the term Public Private Partnership used to describe the Waterfront Development project, had got me wondering just what that term actually means. I went to the Canadian Council for Public Private Partnerships to try and get some answers. This is what I have found.
Models Of Public-Private Partnerships
The following terms are commonly used to describe partnership agreements in Canada, although this should not be considered a
definitive or complete listing:
Design-Build (DB): The private sector designs and builds infrastructure to meet public sector performance specifications, often
for a fixed price, so the risk of cost overruns is transferred to the private sector. (Many do not consider DB’s to be within the
spectrum of PPP’s).
Finance Only: A private entity, usually a financial services company, funds a project directly or uses various mechanisms such as
a long-term lease or bond issue.
Operation & Maintenance Contract (O & M): A private operator, under contract, operates a publicly-owned asset for a
specified term. Ownership of the asset remains with the public entity.
Build-Finance: The private sector constructs an asset and finances the capital cost only during the construction period.
Design-Build-Finance-Operate (DBFM): The private sector designs, builds and finances an asset and provides hard facility
management (hard fm) or maintenance services under a long-term agreement.
Design-Build-Finance-Maintain-Operate (DBFMO): The private sector designs, builds and finances an asset, provides hard
and/or soft facility management services as well as operations under a long-term agreement.
Build-Own-Operate (BOO): The private sector finances, builds, owns and operates a facility or service in perpetuity. The public
constraints are stated in the original agreement and through on-going regulatory authority.
Concession: A private sector concessionaire undertakes investments and operates the facility for a fixed period of time after
which the ownership reverts back to the public sector.
These are the models used to describe Public Private Partnerships. It may not be a complete listing but I think you get the idea of what makes a project a PPP. The private sector builds something for the public sector and then either leases it back to the public sector or owns and runs it for the public sector. Highway 407 ETR is an example of that.
Prince Arthur’s Landing is not a Public Private Partnership. The role of the private sector in this development is minimal. The private sector component was initially part of the project to allow the City Of Thunder Bay to qualify for matching funds from programs offered by the two other levels of government. With the creation of the Canada Ontario Infrastructure Stimulus Fund, the private sector investment requirement in the project was gone. As it sits now, the public sector, the City of Thunder Bay receives very little benefit from this “partnership”. It will get some taxes if the condos and hotel are built. Maybe a handful of service industry jobs if the hotel goes through. What has it cost Thunder Bay? It cost $50M that could have been used to build on the park that was there. The opportunity to expand that park with the stimulus money is now gone. After this project is complete, the size of the park will be exactly the same as it was before this exercise started back in 2007. What has the developer invested in this project so far? Nothing. In fact, Man-Shield Construction, the company owned by several of the developers, is making money of this project. That company is providing the Project Management services as well as, being successful bidders on a Tenders No. 4 and 6. Tender No. 6 was not awarded as the bid came in neighbourhood of 100% over the estimated value.
This is not a PPP project. It is simply the City of Thunder Bay selling very valuable land to a developer at below bargain prices. That is all it is. You can dress it up all you want. You can parade J. Bova and G. McDonald around City Hall till the cows come home. All it is is a very poorly negotiated one sided real estate transaction. Nothing to brag about. Move along people. There’s nothing to see here.
