WRONG TURN : Is a P3 the best way to expand Edmonton’s LRT?

WRONG TURN:
Is a P3 the best way to expand
Edmonton’s LRT?
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Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Wrong Turn: Is a P3 the best way
to expand Edmonton’s LRT?
John Loxley
This report was published by the Parkland Institute
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Contents
To obtain additional copies of this report or
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About the author
About Parkland Institute
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Introduction
Public-private partnerships (P3s)
Assessment of the proposed P3 approach to the Southeast Line
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with other P3s
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Conclusions and Recommendations
Appendix 1.&LW\RI(GPRQWRQSROLF\RQSXEOLFSULYDWHSDUWQHUVKLSV
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Figures
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Acknowledgements
The author gratefully acknowledges the useful suggestions of two
anonymous reviewers, and the suggestions and editorial input of Shannon
Stunden Bower, Research Director, Parkland Institute.
Parkland Institute would like to thank Nicole Smith and Flavio Rojas for
their contributions to this project.
About the author
John Loxley is Professor of Economics at the University of Manitoba and
a Fellow of the Royal Society of Canada. He has studied and published
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author, with his son Salim, of 8]JTQK;MZ^QKM8ZQ^I\M8ZWÅ\["<PM8WTQ\QKIT-KWVWUa
WN 8]JTQK8ZQ^I\M;MK\WZ8IZ\VMZ[PQX[?QVVQXMO".MZV_WWL8]JTQ[PQVO
About the Parkland Institute
Parkland Institute is an Alberta research network that examines public
policy issues. Based in the Faculty of Arts at the University of Alberta, it
includes members from most of Alberta’s academic institutions as well as
other organizations involved in public policy research. Parkland Institute was
founded in 1996 and its mandate is to:
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Albertans and Canadians.
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to the media and the public.
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All Parkland Institute reports are academically peer reviewed to ensure the
integrity and accuracy of the research.
For more information, visit www.parklandinstitute.ca
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Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Abbreviations
,*"LM[QOVJ]QTL
,**"LM[QOVJQLJ]QTL
,*."LM[QOVJ]QTLÅVIVKM
,*.757"LM[QOVJ]QTLÅVIVKMWXMZI\MUIQV\IQVW_V
,*.75"LM[QOVJ]QTLÅVIVKMWXMZI\MUIQV\IQV
,*>.75"LM[QOVJ]QTL^MPQKTMÅVIVKMWXMZI\MUIQV\IQV
LRT: Light Rail Transit
NAIT: Northern Alberta Institute of Technology
PSC: public sector comparator
8WZ888"X]JTQKXZQ^I\MXIZ\VMZ[PQX
PwC: PricewaterhouseCoopers
SPV: special purpose vehicle
VfM: value for money
iii
3 D U N O D Q G , Q V W L W X W H š2FWREHU
iv
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Executive summary
Edmonton’s transportation master plan lays out some ambitious goals for
the city. It signals the need to encourage downtown development, better
integrate the city’s suburbs, reduce car use and congestion, and raise the
MKWVWUQKMNÅKQMVKaWN \PM+Q\a¼[\ZIV[XWZ\I\QWV)SMa_Ia\PM+Q\aWN Edmonton plans to meet these goals is by expanding its Light Rail Transit
(LRT) system from one line to six in order to encompass more of the city.
Four of the proposed lines are considered extensions of the existing system,
_PQKPPI[JMMV\ISMV\WUMIV\PI\\PM+Q\aQ\[MTN [PW]TLUIVIOMÅVIVKQVO
operations, and maintenance. The expansion also consists of two new lines,
and some have argued that these are suitable for a public-private partnership
(P3) approach.
<PM+Q\aWN -LUWV\WVZM\IQVML\PMKWV[]T\QVOÅZU
8ZQKM_I\MZPW][M+WWXMZ[8_+\WQV^M[\QOI\M\PM[]Q\IJQTQ\aWN \PM8
approach to the LRT extension. This report examines, insofar as possible,
\PMLI\IIVLIVITa[Q[]VLMZTaQVO\PZMMSMaZMXWZ\[XZMXIZMLJa8_+;WUM
WN \PM[MZMXWZ\[NWK][[XMKQÅKITTaWV\PM;W]\PMI[\TMOWN \PMXZWXW[ML>ITTMa
4QVMM`\MV[QWVWN\MVZMNMZZML\WI[\PM;W]\PMI[\4QVM_PQKPQ[[TI\ML\W
soon move ahead. Notably, none of the reports have been made public in
their entirety. The most important document, the business case, was accessed
QV[M^MZMTaZMLIK\MLNWZU\PZW]OP)TJMZ\I¼[.ZMMLWUWN 1VNWZUI\QWVIVL
Protection of Privacy legislation. Indeed, the business case was so severely
KMV[WZMLI[\WUISMQ\QUXW[[QJTM\WR]LOMLMÅVQ\Q^MTa_PM\PMZ\PMKI[M
for the P3 approach is valid. The secrecy surrounding the P3 proposal is
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=VNWZ\]VI\MTa[QOVQÅKIV\KWVKMZV[IZMZIQ[MLM^MVJa_PI\TQ\\TMLI\IQ[
publicly available. Problems include the following:
Π+WV\ZIZa\WPW_[WUM8IL^WKI\M[PI^M[W]OP\\WXWZ\ZIa\PMUI\\MZ
][MWN VM_\MKPVWTWOQM[VMQ\PMZVMKM[[Q\I\M[VWZR][\QÅM[I81VLMML
a P3 approach has the potential to introduce problems of system
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capacity that will be needed in-house for further LRT expansions.
Π8_+LMUWV[\ZI\M[\PM[]XMZQWZQ\aWN \PM8IXXZWIKPQVXIZ\\PZW]OP
KWUXIZQ[WV[\W\PM^IT]MNWZUWVMaIKPQM^MLQVW\PMZ+IVILQIV8[
Because of differences in how value for money is calculated, these
comparisons cannot be accepted at face value.
1
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examples of what might be achieved here in Edmonton. However, a
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infrastructure, and that their purported advantages may be nothing
more than imaginary.
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sector is open to criticism. Particularly, the assumption of large amounts
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million in today’s money) more than if it borrowed the money directly.
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[a[\MUQV\MOZI\QWVIVLTW[[WN X]JTQKIKKW]V\IJQTQ\aIVL[MZ^QKMY]ITQ\a
)N\MZI\PWZW]OPI[[M[[UMV\WN \PMI^IQTIJTMQVNWZUI\QWVQ\Q[KTMIZ\PI\
\PMZMQ[IUXTMZMI[WV\WY]M[\QWV_PM\PMZXZWKMMLQVO\W]VLMZ\ISM\PM
;W]\PMI[\4QVM]VLMZI8IZZIVOMUMV\_QTT[MZ^M\PMX]JTQKQV\MZM[\<PM
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2
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
RECOMMENDATIONS
1. *I[MLWVI^IQTIJTMQVNWZUI\QWV\PM+Q\a[PW]TLVW\XZWKMML_Q\P\PM8
WX\QWVJ]\[PW]TLQV[\MILJ]QTL\PM;W]\PMI[\4QVMWV\PM\ZILQ\QWVIT
Design-Bid-Build or a Design-Build basis.
2. 1N \PM+Q\aQV[Q[\[WVKWV[QLMZQVO\PM8WX\QWVQ\[PW]TLWXMV]XITT
documents and calculations employed so far in the evaluation of this
option, so that they can be publicly scrutinized.
3. <PM+Q\aIVL8_+[PW]TLKTMIZTaR][\QNaIVLM`XTIQV\PMI[[]UX\QWV[
that have gone into the assessments that have found in favour of a
P3 approach, and be prepared to discuss these assumptions in public
meetings.
4. /ZMI\MZKI]\QWV[PW]TLJMM`MZKQ[MLQVUISQVOKWUXIZQ[WV[JM\_MMV
\PM^IT]MNWZUWVMaX]ZXWZ\MLTaIKPQM^ML\PZW]OPW\PMZ8XZWRMK\[
IVL\PI\M`XMK\MLNZWU\PM;W]\PMI[\4QVM+WUXIZQ[WV[[PW]TLJM
made only when the public sector comparators employed in the various
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5. -LUWV\WV+Q\a+W]VKQT[PW]TL\ISM[MZQW][Ta\PMM`XZM[[MLKWVKMZV[
WN \PMX]JTQKIJW]\XZWKMMLQVO_Q\P\PM;W]\PMI[\4QVM\PZW]OPI8
approach.
3
3 D U N O D Q G , Q V W L W X W H š2FWREHU
Introduction
Edmonton’s transportation master plan provided for the expansion of the
+Q\a¼[4QOP\:IQT<ZIV[Q\4:<VM\_WZSNZWUWVMTQVM\W[Q`1.QO]ZM
[PW_[\PMM`Q[\QVOTQVM\PI\WXMZI\M[NZWU+TIZM^QM_[\I\QWVQV\PMVWZ\PMI[\
passing through downtown to the University and then continuing to the
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[MK\WZ[WN \PMKQ\aILLQVOTQVM[\W\PM6WZ\P_M[\6WZ\PMZV)TJMZ\I1V[\Q\]\M
WN <MKPVWTWOa\W;\)TJMZ\6WZ\PMI[\+TIZM^QM_\W1VL][\ZQIT0MIZ\TIVL
-I[\,W_V\W_V\W;PMZ_WWL8IZS;W]\PMI[\,W_V\W_V\W5QTT?WWL[
;W]\P+MV\]Za8IZS\W0MZQ\IOM>ITTMa?M[\,W_V\W_V\W4M_Q[-[\I\M[
IVL\PM+MV\ZIT)ZMI+QZK]TI\QWV;a[\MU<PMQV\MV\WN \PMXTIVQ[\W
encourage downtown development, better integrate the city’s suburbs,
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+Q\a¼[\ZIV[XWZ\I\QWV<PM\W\ITKW[\WN \PM[M4:<VM\_WZSM`XIV[QWV[_I[
M[\QUI\ML\WJMQVM`KM[[WN JQTTQWV2
4
1
City of Edmonton, The Way We Move:
Transportation Master Plan (Edmonton:
September, 2009).
2
City of Edmonton, Fast Tracking LRT
Construction (NAIT, Southeast and West)
(Transportation Department: April 15, 2010), 2.
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Figure 1. Edmonton’s LRT system and proposed extensions
Figure 1: City of Edmonton, The Way We Move: Transportation Master Plan (Edmonton: September 2009), p. 45.
5
3 D U N O D Q G , Q V W L W X W H š2FWREHU
1VIXZMTQUQVIZa[KZMMVQVOWN \PMM`XIV[QWVXZWRMK\[QV7K\WJMZ!\PM
+Q\a)LUQVQ[\ZI\QWVLM\MZUQVML\PI\XZWRMK\[QV^WT^QVO\PMM`\MV[QWVWN existing LRT lines should be proceeded with in the conventional manner,
QMJaX]JTQKÅVIVKQVOIVLX]JTQKWXMZI\QWV[IVLUIQV\MVIVKM\WI^WQL
XZWJTMU[WN QV\MOZI\QWV_Q\PM`Q[\QVO[a[\MU[<P][\PM6WZ\PMZVXZWRMK\[
\PM;W]\PXZWRMK\IVL\PM+MV\ZIT)ZMI+QZK]TI\QWV;a[\MU_MZMLMMUML
to be suitable only for conventional procurement and organization. This
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_PQKP\PMLM[QOVÅVIVKQVOW_VMZ[PQXWXMZI\QWV[IVLUIQV\MVIVKMWN \PM
XZWRMK\ZMUIQV_Q\P\PMX]JTQK[MK\WZ_PQTM\PMXZQ^I\M[MK\WZJQL[\WJ]QTL
\PMXZWRMK\0W_M^MZ\PM;W]\PMI[\\W?M[\4QVMKITTML\PM>ITTMa4QVMQ[
completely new and was thus deemed appropriate for ‘alternate delivery
methods’, usually a euphemism for public-private partnerships.
1V,MKMUJMZ!\PM+Q\a+W]VKQTIXXZW^ML\PMKWZZQLWZ[NWZ\PM
;W]\PMI[\\W?M[\4QVMITWVO_Q\PILW_V\W_VTQVSI\W\ITWN SQTWUM\MZ[
WN ZIQT1V.MJZ]IZa+Q\a+W]VKQTLM\MZUQVML\PI\\PM;W]\PMI[\\W
?M[\4QVMJMOQ^MVKWV[\Z]K\QWVXZQWZQ\a_Q\P\PM6)1<KWVK]ZZMV\\WWZ
following.31V5Ia\PMKQ\aTIQL\PMOZW]VL_WZSNWZLMXIZ\]ZM[NZWU
KWV^MV\QWVITXZWK]ZMUMV\IVLUIVIOMUMV\WN +Q\aXZWRMK\[_Q\P\PM
LM^MTWXUMV\WN IXWTQKaWV8[1V2]Ta8ZQKM_I\MZPW][M+WWXMZ[
8_+_I[IXXWQV\MLJa\PM+Q\aI[.QVIVKQIT)L^Q[WZ[\W\PM;W]\PMI[\
\W?M[\4QVMXZWRMK\;QVKM\PI\\QUM\PMaPI^MKWUXTM\MLIV]UJMZWN I[[M[[UMV\[WN PW_JM[\\WXZWKMML_Q\P\PMXZWRMK\ITTWN _PQKPKWVKT]LML
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assessing the validity of these challenges falls outside the scope of this
document. This review is intended to determine if, based on the available
data, the decision to proceed with the LRT expansion as a P3 is sound.
6
3
Ibid.
4
City of Edmonton, Alternative Delivery
Methods for Future LRT Extensions (Capital
Construction Department: October 27, 2009),
Attachment, 5, 15.
5
Ibid., Attachment, 3.
6
City of Edmonton, “Fast Track LRT”
(PowerPoint presentation, Transportation
and Public Works Committee: May 4, 2010), 4.
7
Gordon Kent, “Edmonton Council Votes
to Keep Seeking Southeast LRT Grants,”
Edmonton Journal, June 19, 2013.
1\Q[VW_NW]ZaMIZ[[QVKM\PMQLMIWN ]VLMZ\ISQVOIV4:<[a[\MUM`XIV[QWV
\PZW]OPI8IZZIVOMUMV\_I[ÅZ[\UWW\MLX]JTQKTaQV7K\WJMZ!)[
of yet, no concrete progress has been made in implementing the idea. In
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further.7
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
,I\II^IQTIJQTQ\a_I[IUIRWZQUXMLQUMV\\W\PQ[[\]La6WVMWN \PMZMXWZ\[
XZMXIZMLJa8_+PI^MJMMVUILMX]JTQKQV\PMQZMV\QZM\a<PMUW[\
important document, the business case, was accessed in severely redacted
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TMOQ[TI\QWV1VLMML\PMJ][QVM[[KI[M_I[[W[M^MZMTaKMV[WZMLI[\WUISM
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^ITQL,M\IQTMLIVITa[M[WN \PM+Q\aWN -LUWV\WV¼[XWTQKaWV8[IVLWN \PM
LWK]UMV\[XZMXIZMLJa8_+IJW]\\PM;W]\PMI[\4QVMIZMI^IQTIJTMQV\PM
appendices to this report.
Public-private
partnerships (P3s)
P3s are multi-year, often multi-decade, contracts in which a corporation or
consortium of corporations assumes responsibility for activities previously
]VLMZ\ISMVJa\PMX]JTQK[MK\WZ1V\PMKWV^MV\QWVITIXXZWIKP\WJ]QTLQVO
infrastructure, the public sector commissions an architect to design the
structure, and one or more private contractors to build it, while retaining the
N]VK\QWV[WN ÅVIVKMWXMZI\QWV[UIQV\MVIVKMIVLW_VMZ[PQX<PQ[Q[KITTML
a design-bid-build approach, or DBB. In a P3, the private sector may design
IVLJ]QTL\PMXZWRMK\_PQTMIT[W\ISQVOWV[]KPZM[XWV[QJQTQ\QM[I[LQZMK\
ÅVIVKQVOWN QVNZI[\Z]K\]ZMI[_MTTI[UIVIOMUMV\WXMZI\QWVUIQV\MVIVKM
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M`\ZMUM\PM8UIa\ISM\PMNWZUWN \PMXZQ^I\M[MK\WZ[QUXTaWXMZI\QVO
or servicing a facility, such as a water or waste water facility (e.g. as in the
KI[MWN \PM0IUQT\WV?MV\_WZ\P_I[\M_I\MZNIKQTQ\a_PQKPIT[WKW^MZML
maintenance).8)\\PMW\PMZM`\ZMUM\PM8UIa\ISM\PMNWZUWN ILM[QOV
J]QTLÅVIVKMWXMZI\MUIQV\IQVIVLW_V,*.757NWZIXMZQWLWN aMIZ[
I[QV\PMKI[MWN \PM+PIZTM[_WWL*ZQLOMQV?QVVQXMO9
8
John Loxley with Salim Loxley, Public Service
Private Profits: The Political Economy
of Public-Private Sector Partnerships
(Winnipeg: Fernwood Publishing, 2010), 161170.
9
Ibid., 112-119.
10
Rich Saskal, “Trends In The Region: It’s
Quality, Not Quantity: Eying the Big Picture of
California’s Big Debt,” Bond Buyer, October 5,
2007, 1.
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payments to cover the private sector’s cost of capital. These are a substitute
for the public sector repaying its own direct borrowing and are, in effect, a
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X]\Q\[W[]KKQVK\Ta¹+TMIZTaITT\PMUWVMaQ[KWUQVONZWU\PMOW^MZVUMV\
It’s debt of the province, whether you borrow it as bonds, or contract over
IaMIZXMZQWLº10 The public sector also covers the private partner’s
operating costs, which may sometimes be folded into the lease payments, and
maintenance costs.
7
3 D U N O D Q G , Q V W L W X W H š2FWREHU
The attraction of P3s for the private sector is straightforward. They provide
ZMTI\Q^MTaVM_WXXWZ\]VQ\QM[NWZTWVOZ]VIVLO]IZIV\MMLXZWÅ\;QVKM
XZQ^I\MÅVIVKQVOQ[OMVMZITTaUWZMM`XMV[Q^M\PIVX]JTQKÅVIVKQVOIVL
since the legal and other ‘transactions costs’ of P3s are much higher than
under the traditional approach, the P3 approach must offer other forms of
savings to the public sector. The claim is that in a P3, various potentially
KW[\TaZQ[S[\PI\\PMX]JTQK[MK\WZ_W]TLW\PMZ_Q[MNIKMIZM[PQN\MLW^MZ\W
\PMXZQ^I\M[MK\WZ,MXMVLQVOWV\PMVI\]ZMWN \PMXZWRMK\\PM[MZQ[S[IZM
WN\MVOZMI\M[\QV\PMKWV[\Z]K\QWVXPI[M_PMZMKW[\W^MZZ]V[IVLXZWRMK\
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include those related to demand or customer use, which can be important in
\ZIV[XWZ\I\QWVXZWRMK\[<PMZMUIaIT[WJMZQ[S[MVKW]V\MZMLQVWXMZI\QWV[
and maintenance. Proponents of P3s also argue that by involving the private
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QVKMV\Q^M\WMV[]ZM\PMTMI[\KW[\LMTQ^MZaWN XZWRMK\[W^MZ\PMQZTQNMKaKTM
IN\MZ\ISQVOZQ[SQV\WIKKW]V\
For these reasons, proponents maintain that P3 delivery may be superior
QV\MZU[WN TQNMKaKTMVM\KW[\[IVLJMVMÅ\[-NNWZ\[\WM[\IJTQ[P_PM\PMZ8
LMTQ^MZaQ[IXXZWXZQI\M\aXQKITTa\ISM\PMNWZUWN I^IT]MNWZUWVMa>N5
analysis in which the proposed P3 (represented by a so-called shadow
JQL_PQKPZMÆMK\[JQL[\PI\IZMTQSMTa\WJM[]JUQ\\ML_PMV\PMXZWRMK\Q[
put to tender) is compared with traditional delivery through the use of a
8]JTQK;MK\WZ+WUXIZI\WZ8;+<PM8;+[PW_[\PMKW[\[IVLJMVMÅ\[WN XZWKMMLQVO_Q\P\PMXZWRMK\QVIKWV^MV\QWVITUIVVMZ-[\QUI\M[IZMUILM
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JMVMÅ\[IZM\PMV\ZIV[TI\MLQV\W\WLIa¼[UWVMaXZM[MV\^IT]MJaLQ[KW]V\QVO
them for each approach by an interest rate, based on the argument that
future sums are worth less than sums today because time is money. The
PQOPMZ\PMZI\MIVL\PMTWVOMZQV\W\PMN]\]ZMQ[\PMKW[\WZJMVMÅ\ZMKMQ^ML
\PMTW_MZ_QTTJM\PMKW[\WZJMVMÅ\QVXZM[MV\^IT]M\MZU[<PM[IUMQV\MZM[\
or discount rate is applied to both approaches. The approach with the lower
^IT]MWN VM\KW[\[I\\PMOQ^MVLQ[KW]V\ZI\MQ[[IQL\WWNNMZ>N5ZMTI\Q^M\W
\PMW\PMZIXXZWIKP?PMVI8IXXZWIKPQ[LMMUML\WJM[]XMZQWZ>N5Q[
usually expressed in dollar terms or as a percent of the discounted net costs
WN \PM8;+<PMPQOPMZ\PMLWTTIZ^IT]MWN \PM>N5IVL\PMPQOPMZQ\Q[I[
IXMZKMV\WN \PMVM\XZM[MV\^IT]MWN KW[\[WN \PM8;+\PMUWZM>N5\PM8
approach is said to offer.
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\PMIXXZWIKPUW[\TQSMTa\WLMTQ^MZ\PMZMY]QZMLQVNZI[\Z]K\]ZMI\\PMTW_M[\
KW[\)[\PMXZWRMK\UW^M[NZWUXTIVVQVO\WQUXTMUMV\I\QWV\PMIV\QKQXI\ML
>N5UIaWZUIaVW\JMZMITQbMLLMXMVLQVO]XWV\PMZMI[WVIJTMVM[[IVL
accuracy of the assumptions on which the analysis rests.
8
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
?PQTMI[[M[[QVO>N5UIaIXXMIZ[\ZIQOP\NWZ_IZLQVZMITQ\aQ\Q[VW\[W11
The details of calculations, and the reasonableness and consistency of
I[[]UX\QWV[XZWL]KM_QLMUIZOQV[WN MZZWZTMI^QVO[QOVQÅKIV\ZWWUNWZ
LMJI\M;WUMM`XMZ\[M^MVY]M[\QWV_PM\PMZWZVW\\PMUIRWZJMVMÅ\[WN P3 could be obtained by the public sector offering a single design-build (DB)
KWV\ZIK\I\IÅ`MLXZQKM_PQTMZM\IQVQVOITTW\PMZN]VK\QWV[QVPW][M12 DB
X]\[KWV\ZIK\WZ[QVKWV\ZWTWN XZWRMK\[OQ^QVO\PMU\PMTI\Q\]LM\WLM[QOV
XZWRMK\[I[\PMaJ]QTLQVWZLMZ\WÅVL_Ia[WN _WZSQVO_Q\PQVJ]LOM\
KWV[\ZIQV\[?PQTMXWX]TIZ_Q\PKWV\ZIK\WZ[IVLOW^MZVUMV\[IZKPQ\MK\[IVL
MVOQVMMZ[NMMT\PI\,*LMJI[M[\PMQZ[SQTT[[]JWZLQVI\M[\PMU\WXZWÅ\LZQ^MV
KWV\ZIK\WZ[IVLXW\MV\QITTa[IKZQÅKM[\PMY]ITQ\aWN \PMÅVQ[PMLXZWL]K\
;WUMI]\PWZ[TQSM4W`TMaIVL4W`TMa\ZMI\,*IZZIVOMUMV\[
as a form of P3.137\PMZ[LWVW\)[_M[PITT[MM[WUMZMKMV\8>N5
appraisals seem to have implicitly accepted DB arrangements as alternatives
\W8[JaI[[]UQVO,*ZI\PMZ\PIV,**QV\PM8;+
<PMZMPI^MJMMVIV]UJMZWN IKILMUQK[\]LQM[WV8XMZNWZUIVKM;WUM
[]KPI[1IKWJIKKQPI^M]VLMZ_ZQ\\MV\PMIZO]UMV\[QVNI^W]ZWN \PMQZ
use, while others have been more critical.14<PMUIRWZKZQ\QKQ[U[WN 8[IZM
\PI\WN\MV>N5IVITa[M[QN XMZNWZUMLI\ITTIZMQVILMY]I\M<PMXZWJTMU[
with these analyses are numerous, and include situations where:
Π\PM8;+ZMXZM[MV\QVOIKWV^MV\QWVITIXXZWIKPIVL\PM[PILW_JQL
(representing a P3 approach) that are compared are often not driven by
\PM[IUM[XMKQÅKI\QWV[#
11
Columbia Institute, Public-Private
Partnerships: Understanding the Challenges:
A Resource Guide (Vancouver, BC, 2007).
12
John Loxley, “Public-Private Partnerships
after the Global Financial Crisis: Ideology
Trumping Economic Reality,” Studies in
Political Economy 89 (2012).
13
Loxley with Loxley, Public Service Private
Profits.
14
Authors in favour of P3s include: Mario
Iacobacci, Dispelling the Myths: A PanCanadian Assessment of Public-Private
Partnerships for Infrastructural Investments
(Conference Board of Canada, 2010), http://
www.conferenceboard.ca/documents.
aspx?did=3431. Authors who are more
sceptical include: Aidan R. Vining and
Anthony E. Boardman, “Public-Private
Partnerships in Canada: Theory and
Evidence,” Canadian Public Administration
51, 1 (2008): 9-44; John Loxley with Salim
Loxley, Public Service Private Profits:
The Political Economy of Public-Private
Sector Partnerships (Winnipeg: Fernwood
Publishing, 2010).
15
Π\PMKPWQKMWN LQ[KW]V\ZI\MQ[WN\MVIZJQ\ZIZaIVL[WUM\QUM[Y]Q\MPQOP
I[QV*+_PQKPNI^W]Z[8[[QVKM\PMTMI[MKW[\[IZMTWVO\MZU#
Π\PMI[[]UX\QWV[IJW]\ZQ[S\ZIV[NMZIZMWN\MVM`KM[[Q^MI[PQOPI[
!NWZ[QUXTMZ,*.UWLMT[IVLI[\WVQ[PQVOTaQVM`KM[[WN NWZ
,*.75XZWRMK\[15IVLTIKSR][\QÅKI\QWV#
Π\PM>N5IVITa[Q[Q[XMZNWZUMLWVTaIN\MZ\PM8PI[JMMVQVQ\QI\ML_PQKP
_W]TL[]OOM[\[]KPIVITa[M[IZMQV\MVLML\WR][\QNaLMKQ[QWV[ITZMILa
UILMZI\PMZ\PIV\WO]QLMLMKQ[QWVUISQVO
)[IZM[]T\WN []KPÆI_[\PM>N5XZWKM[[Q[WN\MVPMI^QTa_MQOP\MLQVNI^W]Z
of P3s.
Matti Siemiatycki and Naeem Farooqi,
“Value for Money and Risk in Public Private
Partnerships,” Journal of the American
Planning Association, 78, 3 (2012): 286-299.
9
3 D U N O D Q G , Q V W L W X W H š2FWREHU
7\PMZKZQ\QKQ[U[WN \PM8IXXZWIKPQVKT]LMKWVKMZV[\PI\"
Π\PMV]UJMZWN JQL[ZMKMQ^MLQ[WN\MVY]Q\MTW_UISQVOQ\]VTQSMTa\PI\
KWUXM\Q\QWV_QTTMV[]ZMTW_KW[\[#
Π\PMTIZOM[KITMWN 8[LQ[KZQUQVI\MIOIQV[\TWKITKWV\ZIK\WZ[#
Œ IVaX]ZXWZ\MLMNÅKQMVKQM[WN\MVKWUMI\\PMM`XMV[MWN TIJW]ZQVTW_MZ
_IOM[NM_MZJMVMÅ\[IVLTM[[[MK]ZQ\a#
Œ KWV\ZIK\XMZQWL[IZM\WWTIZOMNWZMNÅKQMV\UWVQ\WZQVOIVLKWV\ZWTWN XZQ^I\MXIZ\VMZ[M[XMKQITTaJa[KPWWTJWIZL[IVLU]VQKQXITQ\QM[#
Œ 8[J]QTLTWVO\MZUÅVIVKQITQVÆM`QJQTQ\aQV\WX]JTQK[MZ^QKM[IVL
IZMOMVMZITTaUWZMKW[\TaW^MZ\PMXZWRMK\TQNM\QUM\PIV\ZILQ\QWVITTa
LMTQ^MZMLXZWRMK\[
1\[PW]TLIT[WJMVW\ML\PI\LQNÅK]T\QM[QVIKKM[[QVOSMaLI\IZMTI\ML\W\PM8
IZZIVOMUMV\IZMNIZNZWU]VQY]M\W\PM-LUWV\WV4:<KI[M1VLMML8[
are associated with reduced accountability and transparency in the public
sector, because they are often shrouded in the secrecy purportedly necessary
\WMV[]ZMKWUUMZKQITKWVÅLMV\QITQ\a16
<PMZMQ[I^MZa[\ZWVO8TWJJaQV+IVILI[]XXWZ\MLJa\PM+IVILQIV
+W]VKQTWV8[1\Q[[]XXWZ\MLJaITTUIRWZKWV[\Z]K\QWVÅVIVKMIVL
KWV[]T\QVOÅZU[QVKT]LQVO8_+I[_MTTI[IV]UJMZWN XZW^QVKQITIVL
municipal governments. This lobby serves as a strident and persistent
advocate for P3s. The federal government also has a strong bias in favour of
8[1V!Q\M[\IJTQ[PMLIJQTTQWVN]VLLM^W\MLMV\QZMTa\WN]VLQVO
8[IVLZMÅVIVKMLQ\QV5WZMQUXWZ\IV\Ta\PMNMLMZITOW^MZVUMV\
ZMY]QZM[ITTTIZOMQVNZI[\Z]K\]ZMXZWRMK\[\WJMM^IT]I\ML\WLM\MZUQVMQN \PMa
IZM[]Q\IJTMNWZ8IXXZWIKPM[JMNWZM\PMaIZMMTQOQJTMNWZÅVIVKQVO\PZW]OP
ZMO]TIZQVNZI[\Z]K\]ZMN]VLQVOW]\TM\[[]KPI[\PM*]QTLQVO+IVILI.]VL17
1VKZMI[QVOTa\PMZMNWZMQN U]VQKQXITQ\QM[IVLW\PMZ[_Q[P\W\ISMIL^IV\IOMWN NMLMZITQVNZI[\Z]K\]ZMUWVMa\PMaIZMXZM[[]ZML\W\ISM\PM8IXXZWIKP
8[PI^MJMKWUMY]Q\MKWUUWV[QVKM\PM!![)KK]ZI\MLI\IIZM^MZa
PIZL\WKWUMJaJ]\JM\_MMV! IVL8[_MZMXTIVVMLWZ
QUXTMUMV\MLQV+IVILIQVKT]LQVO\PI\_MZMÅVITQbMLI\IKW[\WN =;JQTTQWV)N\MZI[M\JIKSZMTI\ML\W\PM !ÅVIVKQITKZQ[Q[\PM
pace at which P3s are coming on-stream seems once again to be increasing.18
10
16
John Loxley, Asking the Right Questions: A
Guide for Municipalities Considering P3s,
Report Prepared for Canadian Union of Public
Employees, June 2012, cupe.ca/p3guide.
17
Loxley, “Public-Private Partnerships after the
Global Financial Crisis.”
18
Loxley, Asking the Right Questions.
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Assessment of the proposed P3
approach to the Southeast Line
/Q^MV\PM[MKZMKa[]ZZW]VLQVO\PMLMKQ[QWV\W]VLMZ\ISM\PM;W]\PMI[\TMO
WN \PM>ITTMa4QVM4:<M`\MV[QWVI[I8Q\Q[PIZL\WWNNMZI\PWZW]OP
M^IT]I\QWV?PI\NWTTW_[LZI_[WV_PI\TQ\\TMQVNWZUI\QWVPI[JMMVUILM
I^IQTIJTMI[_MTTI[\PM_QLMZIKILMUQKIVLM`XMZ\TQ\MZI\]ZMWV8[)\
\PM^MZaTMI[\\PQ[IVITa[Q[ZIQ[M[Y]M[\QWV[\PI\U][\JMN]TTaILLZM[[MLQN \PMX]JTQKQ[\WPI^MKWVÅLMVKMQV-LUWV\WV+Q\a+W]VKQT¼[XZWXW[IT\WOW
forward with the P3.
1. TRANSPARENCY, ACCOUNTABILITY, AND
ACCESS TO INFORMATION
<PM+Q\a¼[IXXZWIKP\W\ZIV[XIZMVKaIKKW]V\IJQTQ\aIVLIKKM[[\W
QVNWZUI\QWV_I[UILMY]Q\MM^QLMV\QVI,MKMUJMZQVNWZUI\QWV
[M[[QWVNWZ+Q\a+W]VKQTWV\PMLMTQ^MZaUM\PWLNWZ\PMKWUJQVML;W]\PMI[\
\W?M[\4:<4QVM19 ,MTQ^MZMLJa\PMV5IVIOMZWN 8ZWRMK\5IVIOMUMV\
5IQV\MVIVKM;MZ^QKM[2WM3IJIZKP]S\PMO]QLMTQVM[NWZ\PM[M[[QWV
KWV\IQVML[WUMZMUIZSIJTMZM[\ZQK\QWV[WV+W]VKQTUMUJMZ[¼I]\WVWUaIVL
democratic rights:
Π6WZMKWZLWZUQV]\M[WN \PMQVNWZUI\QWV[M[[QWV_QTTJMSMX\
Œ <PMÆW_WN QVNWZUI\QWVU][\JMMV\QZMTaWVM_IaNZWU)LUQVQ[\ZI\QWV
\W+W]VKQTTWZ[
Œ +W]VKQTTWZ[KIVWVTaI[SKTIZQÅKI\QWVY]M[\QWV[
Œ +W]VKQTTWZ[U][\VW\I[SY]M[\QWV[ZMOIZLQVOR][\QÅKI\QWVNWZQVNWZUI\QWV
XZW^QLMLWZIK\QWV[\ISMVJa\PMILUQVQ[\ZI\QWV
Π+W]VKQTTWZ[U][\VW\XZW^QLMKWUUMV\[LQZMK\QWVWZQV[\Z]K\QWV[\W
)LUQVQ[\ZI\QWV
Π+W]VKQTTWZ[U][\VW\LQ[K][[WZLMJI\M\PMQVNWZUI\QWVXZW^QLMLJa
)LUQVQ[\ZI\QWVIUWVOMIKPW\PMZ
Π+W]VKQTTWZ[U][\VW\I\\MUX\\WZMIKPIVaLMKQ[QWVWV\PMJI[Q[WN QVNWZUI\QWVXZW^QLMLJa)LUQVQ[\ZI\QWV
19
City of Edmonton, SE and W LRT Delivery
Method: Business Case Results, December 9,
2010.
<PW]OP\PMQV\MV\_I[\PI\\PMUMM\QVOVW\JMKWV[\Z]MLI[I+W]VKQT
meeting, most of these restrictions constitute a serious breach of the
LMUWKZI\QKNZMMLWUIVLZM[XWV[QJQTQ\aWN +W]VKQTUMUJMZ[<PM
alternative of not agreeing to them, of course, was denial of all access
to the information available. This management edict stood in complete
KWV\ZILQK\QWV\W\PM+Q\a¼[8XWTQKa_PQKPZMY]QZM[\PI\\PM¹8]JTQKQV\MZM[\
11
3 D U N O D Q G , Q V W L W X W H š2FWREHU
must be thoroughly examined and discussed,” that policy reviews and
oversight should be carried out “to ensure transparency, due diligence and
the protection of the public interest,” and that “P3 processes and outcomes
will be transparent.”20
Since that time, it is apparent that information on the project has been
severely restricted, well beyond even the information restrictions that
characterize P3s elsewhere in Canada. Clearly, the City has chosen to put
Q\[XWTQKaWN XZW\MK\QVOKWUUMZKQITKWVÅLMV\QITQ\aIJW^MIVaKWVKMZVNWZ
openness and transparency. Crucial decisions, such as that to proceed with
the P3 and, subsequently on August 29, 2012, to reverse Council’s decision
to keep operations and maintenance in-house, were taken at short notice
and in-camera.21
20
City of Edmonton, Public Private Partnership
(P3) Policy, Policy C555 (Finance and Treasury
Department: May 26, 2010).
21
“Council Challenged on Secret Decision to Run
SE LRT Privately,” OurLRT News, October 16,
2012, http://ourlrt.ca/council-challenged-onsecret-decision-to-run-se-lrt-privately/.
22
City of Edmonton, Public Private Partnership
(P3) Policy, Policy C555.
23
Deloitte, City of Winnipeg: Analysis of
Private Sector Involvement for the Disraeli
Bridge, Executive Summary, February 18,
2008, http://winnipeg.ca/publicworks/
MajorProjects/DisraeliBridges/DisraeliF
reewayProjectReportCouncil-May1408.
pdf; Winnipeg Council Minutes, May 14,
2008, http://winnipeg.ca/publicworks/
MajorProjects/DisraeliBridges/DisraeliFreewa
yProjectReportCouncil-May1408.pdf.
24
John Loxley, “Public-Private Partnerships
after the Global Financial Crisis,” 23.
25
Ernst and Young, Capital Regional District
Core Area Wastewater Treatment Program:
Business Case in Support of Funding from
the Province of British Columbia, Addendum,
September 2, 2010, 23, downloaded
August 22, 2013 from http://www.
wastewatermadeclear.ca/documents/2010sept-business-case-addendum.pdf.
26
12
Siemiatycki and Farooqi, “Value for Money,”
297.
The almost complete redaction of numbers in the Business Case and related
papers also contradicts yet another component of the City’s P3 policy, which
states that “The community will be well informed about the obligations of
the City and the private sector.”22 It should be noted that outline business
cases and the argument for proceeding with the corresponding projects
as P3s have been made available for projects undertaken in cities such as
Winnipeg and Victoria well before the call for proposals. These have given
numerical estimates of the net costs of the PSC as well as of the shadow
bid of the P3. They have also put numbers on different types of risk, and
the estimated allocation between the City and the private partner. See the
example of the 2008 report by Deloitte to Winnipeg City Council, which
lays out the P3 options for the Disraeli Bridge with an estimate of possible
VfM relative to the PSC.23 The 2008 document authored by Deloitte
suffers from severe shortcomings. Most worryingly, the data in the risk
^IT]I\QWVIVLITTWKI\QWVIXXMIZ\WJMKZ]KQIT\W\PMÅVIT^IT]MNWZUWVMa
ÅO]ZM[IVL\PMZMKWUUMVLI\QWV\WXZWKMML_Q\P\PM8J]\\PMQZ[W]ZKM
Q[VW\OQ^MVIVL\PMQZTM^MT[IZMVW\R][\QÅML24 Nonetheless, these reports
are fuller than anything Edmonton has released on its LRT P3 proposals.
Their availability would indicate that release of such documents does not
XZMR]LQKMKWUUMZKQITKWVÅLMV\QITQ\a1VLMMLQV\PMKI[MWN \PMXZWXW[ML
wastewater treatment plant for Victoria and region, the whole business case
was released, together with sensitivity analysis around use of alternative
discount rates.25
As Siemiatycki and Farooqi have argued,
...it is critical that the key project information that underpins the complete VfM
report is publicly released during the project planning process prior to approval,
enabling meaningful assessment and debate of the merits of a PPP compared to other
XZWK]ZMUMV\IT\MZVI\Q^M[<PQ[QVKT]LM[LI\IWVXZQ^I\MZI\M[WN XZWRMK\ÅVIVKQVO
expected returns on private investment, and the data used to develop the risk premiums
that are applied to both the PSC and the PPP concessions in the VfM assessment.26
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
=VNWZ\]VI\MTa-LUWV\WV+Q\a+W]VKQTPI[VW\PMMLML\PQ[KITTNWZX]JTQK
ZMTMI[MWN SMaQVNWZUI\QWV)[IZM[]T\-LUWV\WVQIV[PI^MJMMVTMN\
wondering about the wisdom of proceeding with the construction of the
;W]\PMI[\TMOWN \PM>ITTMa4QVM4:<M`\MV[QWVI[I8
2. NEW TECHNOLOGIES AND SYSTEM
COORDINATION DO NOT REQUIRE P3s
8ZWXWVMV\[PI^MIZO]ML\PI\\PM;W]\PMI[\\W?M[\4:<4QVMQ[[]Q\IJTMNWZ
P3 processes because it is a new line employing new technologies. However,
the use of new technologies does not necessarily demand a P3 approach.
1VLMMLIVaM`XIV[QWVWN \PM4:<VM\_WZS_QTTQVM^Q\IJTaQVKWZXWZI\M
VM_\MKPVWTWOQM[ZMTI\Q^M\W\PMM`Q[\QVOTQVM1N \PM+Q\aKIVPIVLTMVM_
technologies in the expansion of old lines, then surely it can handle it in the
creation of new lines.
Furthermore, a P3 approach is certainly not a guarantee of a wellcoordinated system. The decision to proceed with the construction of the
;W]\PMI[\TMO_PQTM\PM?M[\TMOZMUIQV[WVPWTL\PZMI\MV[\WQV\ZWL]KM
XW\MV\QITKWUXTQKI\QWV[<PM_QVVQVOJQLLMZWV\PM;W]\PMI[\XZWRMK\Q[
ZMY]QZML\WXZW^QLMWXMZI\QVOIVLUIQV\MVIVKMKW[\[NWZ\PM?M[\TMOI
line they may not get the opportunity to build.27)[M^MV+W]VKQTTWZ[ILUQ\
this allows the possibility of two different companies building different
parts of the LRT system, with a single company dealing with operations
IVLUIQV\MVIVKMWXMVQVO]X\PMXW[[QJQTQ\aWN ITTSQVL[WN LQ[X]\M[IVL
TQ\QOI\QWV_Q\P\PM+Q\aKI]OP\QV\PMUQLLTM28 Rather than ensuring a
well-coordinated system then, a P3 arrangement in fact sets the stage for
problems with system coordination. Indeed, the beginnings of some of these
problems may already be apparent in Edmonton.
<PMXZWRMK\ML4:<M`XIV[QWV[\PI\_QTTJMPIVLTMLQV\PM\ZILQ\QWVIT
UIVVMZIVLWXMZI\MLQVPW][M_QTTZMY]QZM\PM+Q\a\WJ]QTL]XQ\[XZWRMK\
planning and management capacity. Using the private sector to build and
WXMZI\M\PM;W]\PMI[\\W?M[\4QVM[QUXTaLMTIa[\PMJ]QTLQVOWN \PI\
KIXIKQ\a<PMM`Q[\QVO4:<[a[\MU[MMU[\W_WZSMNÅKQMV\TaIVL\PMZMIZMVW
obvious reasons why it could not be expanded without use of P3s and their
M`XMV[Q^MÅVIVKQVO
27
Ryan Tumilty, “Edmonton Still Missing Funds
for LRT Project,” Metro, March 14, 2013, http://
metronews.ca/news/edmonton/596281/
edmonton-still-missing-funds-for-lrtproject/.
28
Ibid.
13
3 D U N O D Q G , Q V W L W X W H š2FWREHU
3. THE PUBLIC SECTOR COMPARATOR AND
VALUE FOR MONEY COMPARISONS WITH
OTHER P3s
8ZWXWVMV\[WN ]VLMZ\ISQVO\PM;W]\PMI[\4QVM\PZW]OPI8IZZIVOMUMV\
have sought to demonstrate the superiority of the P3 approach by citing the
>N5W]\KWUM[IKPQM^ML_Q\PW\PMZ8[QV+IVILI.WZM`IUXTM\PM>N5
WN \PM)TJMZ\I;KPWWT[8ZWRMK\8PI[MQ[OQ^MVI[ WZ29)TJMZ\I¼[
W_VI[[M[[UMV\WN \PI\XZWRMK\X]\[\PM>N5I\!UQTTQWVWZ30
<PM)TJMZ\I;KPWWT[8ZWRMK\8PI[M11Q[[IQL\WaQMTL!W^MZ\PM8;+31
<PM>N5Y]W\MLNWZ\PM;W]\P-I[\;\WVMa<ZIQT:QVO:WIL+ITOIZaQ[
[IQL\WJMIZMUIZSIJTaPQOP32
<PMKWUXIZQ[WV[JM\_MMV\PM>N5X]ZXWZ\MLTaIKPQM^MLQVW\PMZ8[IVL
\PM>N5\PI\UIaMV[]MNZWU\PM;W]\PMI[\4QVMKIVVW\JMIKKMX\MLI\
face value. The problem is this: most public sector comparators employ the
\ZILQ\QWVIT,*,WZWVTaXIZ\QIT,*<PMJ][QVM[[KI[MXZMXIZMLJa8_+
QVZMTI\QWV\W\PM;W]\PMI[\4:<XZWRMK\PW_M^MZMUXTWa[,*=[QVO,*
\aXQKITTaZM[]T\[QVITW_MZ>N5I[U]KPWN \PMKWV[\Z]K\QWVZQ[S_W]TLJM
transferred to the private sector in exactly the same way as it would under
\PM8+MZ\IQVTaIXXTaQVO,*\W\PM8;+WN \PM[MW\PMZXZWRMK\[KW]TLJM
M`XMK\ML\WZML]KM\PM>N5WN \PM8[QOVQÅKIV\Ta
)[IZM[]T\Q\Q[QVKWZZMK\\WUISMIVa[WZ\WN LQZMK\KWVVMK\QWVJM\_MMV
\PM>N5KITK]TI\MLQVZMTI\QWV\WW\PMZ8[IVL\PI\M`XMK\MLNZWU\PM
;W]\PMI[\4:<M`\MV[QWV;]KPKWVVMK\QWV[PI^M\PMXW\MV\QIT\WUQ[TMIL
\PMX]JTQKIJW]\\PM>N5WN XZWKMMLQVO_Q\P\PM;W]\PMI[\4QVMI[I8
14
29
PricewaterhouseCoopers, Business Case:
Southeast and West LRT Project, February
2011, 81.
30
Government of Alberta, P3 Value for Money
Assessment and Project Report: Alberta
Schools Alternative Procurement (ASAP)
Project Phase 1, June 2010, 21, http://
education.alberta.ca/media/1320820asapip3
valueformoneyassessmentandprojectreport.
pdf.
31
PricewaterhouseCoopers, Business Case, 81.
32
Government of Alberta, P3 Value for Money
Assessment and Project Report: Southeast
Stoney Trail (SEST) Ring Road Project,
Calgary, Alberta, September 2010, 4, http://
www.transportation.alberta.ca/Content/
docType490/Production/SESTVFM.PDF.
33
Stuart Murray, Value for Money? Cautionary
Lessons about P3s from British Columbia
(Canadian Centre for Policy Alternatives,
June 2006), 39.
34
Ibid., 40.
4. THE VALUE FOR MONEY COMPARISONS WITH
OTHER LRT PROJECTS
8ZWXWVMV\[WN XZWKMMLQVO\WJ]QTL\PM;W]\PMI[\4QVMI[I8UISMU]KPWN \PM[]XMZQWZXMZNWZUIVKMWN *+¼[+IVILI4QVM_PQKP[MMU[\WPI^MJMMV
][MLI[I\MUXTI\MNWZ\PM;W]\PMI[\4:<0W_M^MZ\PMZMIZMIV]UJMZWN reasons that Edmontonians might do well to be cautious about emulating
\PM*+M`IUXTM
Firstly, there are concerns about the process through which the decision was
UILM\W]VLMZ\ISM\PM+IVILI4QVMI[I8;\]IZ\5]ZZIaPI[IZO]ML
\PI\\PMLMKQ[QWV\WUISM\PMXZWRMK\I8_I[\ISMV_MTTJMNWZM\PM>N5
estimate was made.33<PM>N5I[[M[[UMV\Ja8_+_I[UILMX]JTQKWVTa
QV_MTTIN\MZKWV[\Z]K\QWVPILJMO]V34)VL\PMI[[M[[UMV\KWV\IQVML
IV]UJMZWN JI[QKÆI_[[]KPI[LQNNMZMVKM[QV\PMI[[]UX\QWV[]VLMZTaQVO
\PM8UWLMTIVL\PM8;+ZIVOQVONZWU\ZIQVNZMY]MVKQM[\PZW]OP
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
KWV[\Z]K\QWV\MKPVQY]M[\WZQLMZ[PQXNWZMKI[\[=T\QUI\MTa\PM>N5NIQTML\W
KWUXIZMIXXTM[_Q\PIXXTM[¹_PQKPUISM[\PMIVITa[Q[UMIVQVOTM[[º35
-NNWZ\[\WKTIZQNaI[[]UX\QWV[QV\PM>N5ZMXWZ\Ja:WVITL8IZS[!IV
QV^M[\QOI\Q^MIVLNWZMV[QKIKKW]V\IV\I\*TIQZ5IK3Ia5aVM\\>IT]I\QWV[
1VK>IVKW]^MZKWVKT]LML\PI\8IZ\VMZ[PQX[*+][MLIVIXXZWIKP\W>N5
that systematically discriminated in favour of P3s by using unsubstantiated
J]\TQSMTaM`IOOMZI\MLM[\QUI\M[WN \PMZQ[S\ZIV[NMZZMLIVLPQOPMZ\PIV
_IZZIV\MLLQ[KW]V\ZI\M[8IZS[M`IUQVMLNW]Z*+XZWRMK\[7V\PM+IVILI
4QVMZQ[S\ZIV[NMZ_I[M[\QUI\MLI\UQTTQWVNWZ\PM8;+IVLUQTTQWV
NWZ\PM8J]\VWLM\IQT[WZY]IV\Q\I\Q^MR][\QÅKI\QWV_MZMOQ^MVNWZ\PQ[36
;QVKMOMVMZITTa_PMZMQVNWZUI\QWV_I[I^IQTIJTM\PMVWUQVIT]VLQ[KW]V\ML
^IT]MWN KW[\[_MZMPQOPMZNWZ8[\PIVNWZ\PM8;+[\PMI[[]UX\QWVIJW]\
the discount rate to bring these costs into present value was crucial. For the
+IVILI4QVM\PM>N5IVITa[Q[][MLILQ[KW]V\ZI\M\WIZZQ^MI\\PM
ÅVIT>N5WN !UQTTQWV<PQ[ZI\MM`KMMLML\PM\ZIV[Q\I]\PWZQ\a¼[KW[\WN borrowing, and favoured the P3 by heavily discounting long-term public
[MK\WZTMI[MXIaUMV\[\W\PMXZQ^I\M[MK\WZ0ILIZI\MWN M^MVJMMV
][ML\PM>N5_W]TLPI^MNITTMV\WWVTa WN \PM8;+¼[VM\XZM[MV\
^IT]MWN KW[\[)ZI\MWN _W]TLPI^MJZW]OP\\PM>N5WN \PM8\W
zero, and anything less, such as the Province’s long-term cost of borrowing
WN QV !WZ\PM][MLQV8[QV\PM=3_W]TLPI^MTML\W
\PM8;+LMTQ^MZQVOVM\[I^QVO[ZMTI\Q^M\W\PM837
35
Ibid., 41.
36
Ronald Parks, Evaluation of Public-Private
Partnerships: Costing and Evaluation
Methodology (Vancouver: Blair Mackay
Mynett Valuations, 2009), 26. Report
prepared for Canadian Union of Public
Employees.
37
Ibid., 26.
38
Ibid., 39.
39
Taras Grescoe, Straphanger: Saving Our Cities
and Ourselves from the Automobile (Harper
Collins Canada, 2012) as quoted in Mack
D. Male, “P3 or not P3? That’s the Question
as We Try to Fund Edmonton’s Future LRT,”
MasterMaq, March 14, 2013, http://blog.
mastermaq.ca/2013/03/14/p3-or-not-p3thats-the-question-as-we-try-to-fundedmontons-future-lrt/.
40
Murray, Value for Money?, 39.
41
Partnerships BC, Project Report: The
Evergreen Line Rapid Transit Project
(Vancouver, March 2013). The discount rate
used was the private partner’s internal rate
of return on this very short-lived project of
3.94%.
;MKWVLTaXMZPIX[M^MVUWZMLQ[KWVKMZ\QVONWZ-LUWV\WVQIV[UIaJM\PM
K]\[QVXZWRMK\[KWXM\PI\MV[]MLQV*+I[\PMKW[\[WN \PM+IVILI4QVM
XZWRMK\M[KITI\ML<PM[MQV^WT^MLZML]K\QWV[QV\PMV]UJMZWN [\I\QWV[IVL
¹KPIVOM[QV\PMXPa[QKITVI\]ZMWN \PMTQVMIVL\PM_IaQ\_I[J]QT\º38;WUM
changes, such as shorter station lengths, may present problems of system
expansion in the future.39 There were also several million dollars’ worth of
‘scope transfers’, moving costs from the P3 to the public sector.40 In sum,
\PM+IVILI4QVMXZWRMK\PIZLTa[MMU[TQSMIVM`IUXTM\WMU]TI\M_PM\PMZ
_Q\PZM[XMK\\WOW^MZVUMV\IKKW]V\IJQTQ\aWZ\PMZML]KMLY]ITQ\aWN \PM
infrastructure that was built.
8ZWXWVMV\[WN ]VLMZ\ISQVO\PM;W]\PMI[\4:<M`\MV[QWVI[I8IT[W
ZMNMZMVKMIVW\PMZ*+XZWRMK\\PMSU-^MZOZMMV4:<<PQ[8\ISM[
\PMNWZUWN ILM[QOVJ]QTLÅVIVKM,*.IZZIVOMUMV\OQ^MV\PI\Q\Q[
a connection to an existing line, with responsibility for operations and
UIQV\MVIVKM\WZMUIQV_Q\PX]JTQKXZW^QLMZ<ZIV[TQVS<PMXZWRMK\
report on the Evergreen LRT compared the DBF arrangement with a
8;+QVKWZXWZI\QVO,*IVLKWVKT]LML\PI\\PM8_W]TLWNNMZI>N5WN UQTTQWVWZ41<PQ[ZMTI\Q^MTaTIZOM>N5_I[\PMZM[]T\WN \PM
successful bidder building a single line tunnel rather than a double one,
\PMZMJa[XMMLQVO]XKWV[\Z]K\QWVIVLZML]KQVO[Q\MZQ[S0W_M^MZ\PMZMQ[
no evidence that a DB approach would not also have incorporated these
15
3 D U N O D Q G , Q V W L W X W H š2FWREHU
ILR][\UMV\[)[IZM[]T\\PM[]XXW[ML>N5UIaJMVW\PQVOUWZM\PIV
imaginary. This example highlights a logical inconsistency in using DB in the
8;+"\PM,*IXXZWIKPQV^Q\M[KZMI\Q^Q\aIVLÆM`QJQTQ\a_Q\P\PMZM[]T\\PI\
Q\[XZMKQ[MVI\]ZMKIVVW\JMSVW_V]V\QTXZWXW[IT[IZMZMKMQ^ML)[IZM[]T\
>N5KITK]TI\QWV[\PI\QVKWZXWZI\M,*TQSM\PW[M]VLMZTaQVO-LUWV\WV¼[
;W]\PMI[\4:<8XZWRMK\WNNMZTQ\\TMJa_IaWN KWVKZM\MQVNWZUI\QWV\W
O]QLMZM[XWV[QJTMLMKQ[QWVUISQVO
5. PRIVATE OPERATION OF THE SOUTHEAST
LINE PROVIDES MUCH OF THE SUPPOSED
VALUE FOR MONEY. HOW?
<PMLWK]UMV\[I^IQTIJTMWV\PM;W]\PMI[\4QVMUISMKTMIZ\PI\\ISQVO
WXMZI\QWVW]\WN \PM8IXXZWIKPZML]KM[XZQ^I\M[MK\WZZM\]ZV[[QOVQÅKIV\Ta
and reduces the relative attractiveness of the P3 approach relative to the
8;+<P][\PM>N5KITK]TI\QWVNITT[NZWUJM\_MMVIVL\WJM\_MMV
IVL_Q\PITQSMTa<PQ[JZQVO[\PM>N5KITK]TI\QWVXMZQTW][Ta
KTW[M\WbMZWUMIVQVO\PI\\PM8;PILW_*QLQ[VW\KTMIZTa[]XMZQWZ\W\PI\
WN \PM8;+_Q\PX]JTQKWXMZI\QWVWN \PMTQVM:M\IQVQVOWXMZI\QWV[_Q\PQV
\PM8Q[_PI\ZIQ[M[\PM>N5JZQVOQVOQ\[]XXW[MLTaKTW[M\W\PI\WN W\PMZ
8[QV+IVILI<PQ[ZIQ[M[\PMY]M[\QWVWN _PI\\PMXZQ^I\M[MK\WZ_W]TLJM
LWQVO\WZML]KMWXMZI\QVOKW[\[QV\PM8+W]TLQ\JM\PI\\PMTQVM_W]TL
][MNM_MZ_WZSMZ[ZML]KM_IOM[IVLJMVMÅ\[WZ][M]VKMZ\QÅMLTIJW]Z'
?PI\Q[Q\IJW]\XZQ^I\MWXMZI\QWV\PI\TW_MZ[KW[\[ZMTI\Q^M\W\PM8;+'1V
the absence of further information, there is reason to be concerned that
[]XXW[ML>N5UQOP\KWUMI\\PMM`XMV[MWN \PW[MMUXTWaML\W_WZSWV\PM
XZWRMK\
6. ASPECTS OF THE RISK TRANSFER IN THE
VALUE FOR MONEY CALCULATION ARE
DIFFICULT TO BELIEVE
:Q[S\ZIV[NMZQ[_PI\Q[\aXQKITTa][MLJa8XZWXWVMV\[\WR][\QNa>N5
0W_M^MZ\PMZMQ[ZMI[WV\W\PQVS\PI\IVaZQ[S\ZIV[NMZ_Q\PQV\PM;W]\PMI[\
LRT P3 arrangement is minimal at best.
<PM8;+][ML\WM^IT]I\M>N5QVZMTI\QWV\W\PM;W]\PMI[\4:<XZWRMK\Q[
based on a design-build arrangement, which commits the contractor to a
Å`ML[]UIVLIÅZULMTQ^MZaLI\M=[QVO,*I[WXXW[ML\W,**I[I8;+
[PW]TLZML]KMIVaZQ[SI[[]UML\WJM\ZIV[NMZZML\W\PMXZQ^I\M[MK\WZL]ZQVO
\PMQUXWZ\IV\KWV[\Z]K\QWVXPI[M1VLMMLWN \PMZQ[S[QLMV\QÅMLQV8_+¼[
16
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
;W]\PMI[\4:<*][QVM[[+I[M[WUM[MMU\WZMTI\M\W\PMKWV[\Z]K\QWV
XPI[M1\Q[PIZL\W[MM_PaUW[\WN \PMU_W]TLVW\IXXTaMY]ITTa\W\PM
8;+IVL8MO\]VVMTTQVOKW[\[]\QTQ\QM[ZMTWKI\QWVLM[QOVZQ[SM\K42 The
XIaUMV\WN XZWOZM[[WZUQTM[\WVMXIaUMV\[IT[WZML]KM[^IZQW][ZQ[S[
M[XMKQITTaÅVIVKQITWN \PMXZQ^I\M[MK\WZQVKWV[\Z]K\QWVXPI[M)OIQV\PQ[
[PW]TLJMKWUUWV\WJW\P\PM8;+IVL\PM8
-^MV_PMV,**Q[][MLQV\PM8;+\PMI[[]UX\QWV[WN TIZOMIUW]V\[WN ZQ[S\ZIV[NMZU][\JM\ZMI\ML_Q\PIPQOPLMOZMMWN [SMX\QKQ[U:Q[S\ZIV[NMZ
assumptions are rarely spelled out fully, and if experience elsewhere is to be
\ISMV[MZQW][TaIZMWN\MVOZMI\TaM`IOOMZI\ML43 In a situation such as the
;W]\PMI[\4:<_PMZM\PM8;+MUXTWa[I,*ZI\PMZ\PIVI,**\PMZMQ[
[]J[\IV\QITZMI[WV\WLW]J\\PI\ZQ[S\ZIV[NMZQ[[QOVQÅKIV\
.]Z\PMZUWZM[QVKM]VLMZ\PMXZWXW[MLIZZIVOMUMV\NWZ\PM;W]\PMI[\4:<
8\PMZMQ[VWLMUIVLWZZM^MV]MZQ[SLM^WT^ML\W\PMXZQ^I\M[MK\WZZM^MV]M
I[[]UX\QWV[[PW]TLJMNIQZTa[QUQTIZNWZJW\P\PM8;+IVL\PM8;PILW_
*QL<PQ[TMI^M[WVTa\PMUIQV\MVIVKMZQ[SI[IXW\MV\QITIZMIQV_PQKP\PM
8Q[XZWRMK\ML\WWNNMZ[QOVQÅKIV\IL^IV\IOM[W^MZ\PM8;+5IQV\MVIVKM
ZQ[S_W]TL[MMU\WZMNMZ\WI[Q\]I\QWVQV_PQKPJ]LOM\KWV[\ZIQV\[_W]TL
LMTIaWZUISMQUXW[[QJTMVMKM[[IZaUIQV\MVIVKM_WZS?PQTMUIQV\MVIVKM
XZW^Q[QWV[]VLMZI8_W]TLJMO]IZIV\MMLQ\Q[PIZL\WJMTQM^M\PI\+Q\a
budget constraints would be so severe that public sector maintenance
would be impaired on infrastructure such as an LRT where safety must be
paramount.
=V\QT\PMZQ[SKITK]TI\QWV[M[\QUI\MLJa8_+IZMUILMX]JTQK[SMX\QKQ[U
IJW]\\PMTQSMTaLMOZMMWN ZQ[S\ZIV[NMZQV\PMKI[MWN \PM;W]\PMI[\4QVMQ[
warranted.
7. THE ADDITIONAL FINANCING COSTS OF THE
P3 ARE HUGE
42
PricewaterhouseCoopers, Business Case, C3.
43
For the UK example, see: Dexter Whitfield,
The Global Auction of Public Assets: Public
Sector Alternatives to the Infrastructure
Market and Public Private Partnerships
(Spokesman: Nottingham, UK, 2010). For
Canadian perspectives, see: Hugh Mackenzie,
Doing the Math: Why P3s For Alberta Schools
Don’t Add Up, prepared for CUPE Alberta,
2007; Matti Siemiatycki and Naeem Farooqi,
“Value for Money and Risk in Public Private
Partnerships,” Journal of the American
Planning Association, 78, 3 (2012): 286-299.
+W[\M[KITI\QWVIVL\PMIJ[MVKMWN KTMIZÅVIVKQVOIZZIVOMUMV\[UISMQ\
^MZaLQNÅK]T\\WI[[M[[\PMILLQ\QWVITKW[\[WN ][QVOXZQ^I\MI[WXXW[ML\W
X]JTQKÅVIVKQVO=[QVOXTI][QJTMI[[]UX\QWV[PW_M^MZ_MKIVM[\QUI\M
these additional costs.
/Q^MV\PMÅVIVKQVOXZWÅTM[]OOM[\MLJa8_+Q\_W]TLIXXMIZ\PI\
XZQ^I\MN]VLQVO_W]TLVW_JMM`XMK\ML\WZMIKPWVM\PQZLWN JQTTQWV
WZ!UQTTQWVWN _PQKP!UQTTQWVUQOP\JMMY]Q\aIVLLMJ\
WZJWVLÅVIVKML<PM8_+ZMXWZ\[]OOM[\[\PI\JI[MLWV\PMQZ
UIZSM\[W]VLQVO[_Q\PXZQ^I\MJ][QVM[[M[IVaXIaUMV\[WVXZQ^I\MLMJ\
_QTTJMIZW]VLUWZMKW[\Ta\PIVLQZMK\JWZZW_QVO?MLWVW\PI^M
aMIZJWZZW_QVOKW[\[NWZ-LUWV\WVJ]\NWZ?QVVQXMO\PM[MIZM 17
3 D U N O D Q G , Q V W L W X W H š2FWREHU
;QVKM-LUWV\WVIXXMIZ[\WJMIJTM\WJWZZW_I\[TQOP\TaTW_MZZI\M[\PIV
?QVVQXMO_MM[\QUI\M-LUWV\WV¼[TQSMTaJWZZW_QVOKW[\[I\XI<PQ[
_W]TLUMIV\PM8JWZZW_QVOZI\MUQOP\JMXI<PMILLQ\QWVIT
KW[\[WN JWZZW_QVOI\\PQ[ZI\MW^MZaMIZ[ZMTI\Q^M\W\PMM[\QUI\MLKW[\
WN -LUWV\WVJWZZW_QVOLQZMK\TaQ[TQSMTa\WJMUQTTQWVW^MZaMIZ[
WZUQTTQWVQVXZM[MV\^IT]M\MZU[LQ[KW]V\MLI\-LUWV\WV¼[M[\QUI\ML
KW[\WN JWZZW_QVOWN -Y]Q\aZM\]ZV[IZMM[\QUI\MLJa8_+\WJM
JM\_MMVIVL<PQ[[]OOM[\[XIaUMV\[\WMY]Q\aWN JM\_MMV
UQTTQWVIVLUQTTQWVW^MZaMIZ[QVVWUQVIT]VLQ[KW]V\ML\MZU[WZ
JM\_MMV!UQTTQWVIVLUQTTQWVQVXZM[MV\^IT]M\MZU[
1V[PWZ\XZQ^I\MJWZZW_QVOIVLMY]Q\a_QTTKW[\-LUWV\WVJM\_MMV
UQTTQWVIVLUQTTQWVUWZMQVVWUQVIT\MZU[W^MZ\PMTQNM\QUMWN \PM
XZWRMK\WZJM\_MMVUQTTQWVIVLUQTTQWVUWZMQVXZM[MV\^IT]M
NZWU\PMLI\MWN WXMZI\QWV[WN \PMTQVM\PIVQN \PM+Q\aPILÅVIVKML\PM
XZWRMK\Q\[MTN44
8. PROVISIONS TO ENABLE THE PUBLIC TO
SHARE IN GAINS RELATED TO REFINANCING
OR EQUITY FLIPPING ARE LACKING
7VKM\PMKWV[\Z]K\QWVXPI[MQ[KWUXTM\MIVL\PMZQ[SI[[WKQI\ML_Q\P
Q\VWTWVOMZZMTM^IV\Q\Q[KWUUWVNWZ8XZWRMK\[\WJMZMÅVIVKML1\
is increasingly common for the public sector to share in the gains from
ZMÅVIVKQVO1N \PM;W]\PMI[\4QVMQ[\WXZWKMMLI[I8XZW^Q[QWV[PW]TLJM
UILMNWZ\PM+Q\a\W[PIZMQVIVaZMÅVIVKQVOOIQV[
18
44
It should be noted that the profile of the debt
(whether bonds or loans, number of years the
debt will be outstanding, borrowing costs,
etc.) is not known at this time. If, for instance,
the debt were to be repaid earlier, the
additional borrowing costs would be lower
than estimated.
45
Keith Reynolds, “How Flipping Equity in P3s
Boosts Profits and Ends Up With the Projects
Being Run From Channel Islands Tax Havens,”
Policy Note (CUPE-BC: March 9, 2011), http://
www.policynote.ca/how-flipping-equity-inp3s-boosts-profits-and-ends-up-with-theprojects-being-run-from-channel-islandstax-havens/
46
Dexter Whitfield, The £10 billion Sale of
Shares in PPP Companies: New Sources of
Profit for Builders and Banks (European
Services Strategy Unit: County Kerry, Republic
of Ireland, Tralee, January 2011), http://
www.european-services-strategy.org.uk/
news/the-ps10bn-sale-of-shares-in-pppcompanies-new/.
)XIZ\NZWUZMÅVIVKQVOQVKZMI[QVOTa\PMMY]Q\aWN 8[QV+IVILIQ[
JMQVOÆQXXMLIVL\PMX]JTQK[MK\WZLWM[VW\[PIZMQVIVaOIQV[45 In the
=3ZM\]ZV[WN W^MZ_MZMMIZVMLWVW^MZ8MY]Q\aÆQX[46
1V\PMIJ[MVKMWN IVaXZW^Q[QWVNWZ[PIZQVOXZWÅ\[ZMTI\ML\W[]KPÆQX[
Edmontonians stand to lose out as the private sector wins big.
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
9. THE WISDOM OF 30 YEAR CONTRACTS
4WKSQVO\PM+Q\aWN -LUWV\WVQV\WIaMIZÅVIVKQVOLMITJZQVO[_Q\PQ\I
PW[\WN XW\MV\QITXZWJTMU[.QZ[\WN ITTQ\JQVL[\PM+Q\aQV\WXIaUMV\[\PI\
IZM\PMMY]Q^ITMV\WN LMJ\,MJ\JaIVW\PMZVIUMQ[[\QTTLMJ\1N \PMQV\MV\
WN \PMXZWXW[ML8Q[\WZML]KM-LUWV\WV¼[ÅVIVKQVOXZWJTMU[\PMIV[_MZ
is not to be found in P3s.
<PMTWVO\QUMNZIUMIT[WTWKS[-LUWV\WVQV\WZQOQLWXMZI\QWV[
UIQV\MVIVKMIVLTQNMKaKTMÅVIVKQITKWUUQ\UMV\[\PI\UQOP\XZM^MV\\PM
+Q\aJMVMÅ\\QVONZWUXW\MV\QITVM__Ia[WN LWQVO\PQVO[W^MZ\PMXZWRMK\
lifetime. It also builds rigidities into the LRT system as a whole over that
long time period.
10. PUBLIC OPINION AND THE LRT P3
=[]ITTaQV+IVILI8[XZWKMML_Q\PW]\IVaNWZUITKPMKSQVOWV_PM\PMZ
or not the public supports this method of service delivery. In Regina,
PW_M^MZINWZUITZMNMZMVL]UQV;MX\MUJMZ\M[\MLX]JTQK[]XXWZ\
for a waste water treatment plant proposed as a P3.47?PQTMVW[]KPXTIV[
M`Q[\QVZMTI\QWV\W\PM8XZWXW[MLNWZ\PM;W]\PMI[\4QVM8]JTQK1V\MZM[\
)TJMZ\ILQLKWUUQ[[QWV\PM-V^QZWVQK[:M[MIZKPOZW]X\WKWVL]K\IZIVLWU
sample survey of households, to ascertain the level of public support for
the P3, and for handing over the operations to a private company. The
ÅVLQVO[ZM^MITLQ[[I\Q[NIK\QWVJW\P_Q\P\PMNMLMZITOW^MZVUMV\NWZNWZKQVO
\PM8IZZIVOMUMV\WV\W+W]VKQTI[IKWVLQ\QWVNWZN]VLQVOMQ\PMZ
LQ[IOZMMLWZ[\ZWVOTaLQ[IOZMMLIVL_Q\P\PM+W]VKQTNWZ\ISQVO\PM
decision to privatize operations behind closed doors without a public debate
WXXW[ML)KTMIZUIRWZQ\aWN XMWXTM[]Z^MaMLWXXW[MLXZQ^I\QbQVO
\PMWXMZI\QWV[IVLM`XZM[[MLKWVKMZV[IJW]\\PMQV\MOZI\QWVWN \PM
8QV\W\PM4:<[a[\MUI[I_PWTM IJW]\TW[[WN IKKW]V\IJQTQ\aQN \PQVO[_MZM\WOW_ZWVOIJW]\KW[\[ZQ[QVO\WO]IZIV\MMXZWÅ\[NWZ
\PMXZQ^I\MXIZ\VMZ!IVLIJW]\ZML]KMLY]ITQ\aWN [MZ^QKM!48
<PM[MZM[]T\[IZM[QOVQÅKIV\[\I\Q[\QKITTaIVL[PW]TLOQ^M\PM-LUWV\WV+Q\a
+W]VKQTKI][MNWZZMÆMK\QWVWVQ\[LMKQ[QWV[
47
Paul Dechene, “Hey, Regina, Looks Like You’ll
Get That Waste Water Referendum After
All,” Prairie Dog, July 22, 2013, http://www.
prairiedogmag.com/congratulations-reginalooks-like-youll-get-that-waste-waterreferendum-after-all/.
48
Environics Research Group, Public Interest
Alberta; Edmonton LRT Expansion Banner
Tables, 2013.
19
3 D U N O D Q G , Q V W L W X W H š2FWREHU
Conclusions and
recommendations
<PQ[ZM^QM_PI[M`IUQVML\PMKI[MX]\NWZ_IZLNWZLMTQ^MZQVO\PM;W]\PMI[\
TMOWN \PM>ITTMa4QVM4:<M`\MV[QWVI[I8WZUWZMXZMKQ[MTaI[I
,*.758?PQTM\PMZMPI^MJMMVKPITTMVOM[\W\PMXTIVVMLM`XIV[QWV
WN \PM4:<[a[\MUJW\PKWVKMX\]ITTaIVLQVZMNMZMVKM\W[XMKQÅKZW]\M[
chosen, assessing these falls outside the scope of this document. The main
ÅVLQVOWN \PQ[ZM^QM_Q[\PI\\PMIZO]UMV\[NWZJ]QTLQVO\PM;W]\PMI[\4QVM
using a P3 approach are far from convincing.
<WR]LOMJa_PI\PI[JMMVUILMI^IQTIJTMWN \PMI[[M[[UMV\[]VLMZ\ISMV
\WLI\M\PMZMQ[ZMI[WV\WLW]J\\PI\IVaXW\MV\QITZQ[S\ZIV[NMZQ[[]NÅKQMV\
to establish the superiority of a P3 over a traditional DBB or narrow
,*IXXZWIKP_PMV\PMM[\QUI\MLILLQ\QWVITÅVIVKQVOKW[\[WN I8IZM
considered.
?WZZaQVOTa\PMZMZMUIQVUIVa]VIV[_MZMLY]M[\QWV[IJW]\\PM+Q\a
of Edmonton’s plans, in large measure because of the layers of secrecy
that surround the P3 proposal. The obsession with so-called commercial
KWVÅLMV\QITQ\aI\\PM^MZaMIZTQM[\[\IOM[WN M^IT]I\QWVJMNWZM\PMXZQ^I\M
sector has even submitted a bid, is unwarranted and unnecessary, and
KWV\ZILQK\[QUXWZ\IV\\MVM\[WN \PM+Q\a¼[W_V8XWTQKa
?PI\Q[XMZPIX[M^MVUWZM\ZW]JTQVOQ[\PI\-LUWV\WV+Q\a+W]VKQTQ[
[QOVITTQVOQ\[QV\MV\QWV\WXZWKMML_Q\P\PMXZWRMK\I[I8LM[XQ\MKTMIZ
X]JTQKUQ[OQ^QVO[IJW]\\PMILWX\QWVWN I8IXXZWIKPIJW]\\PM+Q\aJMQVO
forced into a P3 to obtain federal funding, about fears of problems with
system coordination, and about the wisdom of the private sector running the
operations and maintenance.
.ZWU_PI\TQ\\TMQ[SVW_VIJW]\\PMXZWRMK\\PMKI[MNWZ\PM8IXXZWIKP
[MMU[_MIS)[\PMZQ[S\ZIV[NMZKTIQU[[MMUY]M[\QWVIJTM\PMOMVMZIT
IZO]UMV\NWZ\PM8XZW^QLQVO>N5Q[L]JQW][;MZQW][Y]M[\QWV[KIVJM
ZIQ[MLIJW]\\PMNI^W]ZIJTM>N5V]UJMZ[QVW\PMZ8XZWRMK\[JW\PQV
4:<IVLQVW\PMZ[MK\WZ[][MLJa\PMKWV[]T\IV\[\WR][\QNaIVLXZWUW\M
\PM8UWLMT1N \PM8LWM[OWIPMILI[XZWXW[ML\PM+Q\a_QTTJMXIaQVO
_MTTIJW^MQ\[W_VJWZZW_QVOKW[\\WXIaXZQ^I\M[MK\WZLMJ\IVLXZWÅ\[
<PMaMIZKWV\ZIK\XMZQWLNWZWXMZI\QWV[XW[M[XW\MV\QIT[a[\MUIVL
ÅVIVKQITQVÆM`QJQTQ\aQ[[]M[NWZ\PM+Q\a5]KPWN \PMXTIVVMLM`XIV[QWV
to Edmonton’s LRT system will be built using the traditional approach,
UMIVQVO\PI\\PM+Q\a_QTTJMWJTQOML\WLM^MTWXQ\[\MKPVQKITKIXIKQ\a
to manage new lines and ensure system coordination. In using a P3
IZZIVOMUMV\WV\PM;W]\PMI[\TMOWN \PM>ITTMa4QVM\PM+Q\a_W]TLUQ[[IV
opportunity to begin to build this capacity.
20
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
<PM;W]\PMI[\TMOWN \PM4:<M`\MV[QWVXZWRMK\PI[ITZMILaMVKW]V\MZML
XZWJTMU[_Q\PKW[\M[KITI\QWVIVLÅVIVKQVO[]NÅKQMV\Ta[M^MZM\WKITTQV\W
Y]M[\QWVXZWRMK\\QUMTQVM[?PQTMZM[]T\QVOLMTIa[KZMI\MPIZL[PQXNWZ\PM
people of Edmonton who are awaiting much-needed improvements to
\ZIV[XWZ\I\QWVQVNZI[\Z]K\]ZM\PMZMUIaJMI[QOVQÅKIV\[QT^MZTQVQVOQN I
LMTIaXZW^QLM[IVWXXWZ\]VQ\a\WZM^Q[Q\\PMY]M[\QWVWN PW_\WUIVIOM\PM
LRT expansion so as to best serve the public interest.
RECOMMENDATIONS
1. *I[MLWVI^IQTIJTMQVNWZUI\QWV\PM+Q\a[PW]TLVW\XZWKMML_Q\P\PM8
WX\QWVJ]\J]QTL\PM;W]\PMI[\4QVMWV\PM\ZILQ\QWVIT,M[QOV*QL*]QTL
or a Design-Build basis.
2. 1N \PM+Q\aQV[Q[\[WVKWV[QLMZQVO\PM8WX\QWVQ\[PW]TLWXMV]XITT
documents and calculations employed so far in the evaluation of this
option, so that they can be publicly scrutinized.
3. <PM+Q\aIVL8_+[PW]TLKTMIZTaR][\QNaIVLM`XTIQV\PMI[[]UX\QWV[
that have gone into the assessments that have found in favour of a
P3 approach, and be prepared to discuss these assumptions in public
meetings.
4. /ZMI\MZKI]\QWV[PW]TLJMM`MZKQ[MLQVUISQVOKWUXIZQ[WV[JM\_MMV\PM
^IT]MNWZUWVMaX]ZXWZ\MLTaIKPQM^ML\PZW]OPW\PMZ8XZWRMK\[IVL\PI\
M`XMK\MLNZWU\PM;W]\PMI[\4QVM+WUXIZQ[WV[[PW]TLJMUILMWVTa
_PMV\PMX]JTQK[MK\WZKWUXIZI\WZ[MUXTWaMLQV\PM^IZQW][XZWRMK\[IZM
truly comparable.
5. -LUWV\WV+Q\a+W]VKQT[PW]TL\ISM[MZQW][Ta\PMM`XZM[[MLKWVKMZV[
WN \PMX]JTQKIJW]\XZWKMMLQVO_Q\P\PM;W]\PMI[\4QVM\PZW]OPI8
approach.
21
3 D U N O D Q G , Q V W L W X W H š2FWREHU
Appendix 1:
CITY OF EDMONTON POLICY ON
PUBLIC-PRIVATE PARTNERSHIPS
Edmonton’s policy on P3s is broadly consistent with that of the provincial
government.49+Q\aXWTQKaXZW^QLM[NWZ\PM8IXXZWIKP\WJMKWV[QLMZMLNWZ
KWUXTM`XZWRMK\[KW[\QVOW^MZUQTTQWV\PI\XZWUQ[M\W"
a. deliver improved services and better value for money through
IXXZWXZQI\MITTWKI\QWVWN ZM[W]ZKM[ZQ[S[ZM_IZL[IVL
ZM[XWV[QJQTQ\QM[JM\_MMV\PM+Q\aIVLXZQ^I\M[MK\WZXIZ\VMZ[#
b. MVPIVKMX]JTQKJMVMÅ\[\PZW]OPKTMIZTaIZ\QK]TI\MLIVLUIVIOML
W]\KWUM[#
c. leverage private sector expertise and innovation opportunities
\PZW]OPIKWUXM\Q\Q^MIVL\ZIV[XIZMV\XZWKM[[#
d. KZMI\MKMZ\IQV\aIZW]VLKW[\[[KPML]TMY]ITQ\aIVL[MZ^QKMLMTQ^MZa#
and
e. optimize use of the asset and included services over the life of the
P3.50
>IT]MNWZUWVMa>N5Q[LMÅVMLQVY]IV\Q\I\Q^M\MZU[I[\PMLQNNMZMVKM
JM\_MMV\PMZQ[SILR][\MLVM\KW[\[\W\PM+Q\aWN LMTQ^MZQVO\PMXZWRMK\][QVO
traditional methods, and those incurred in delivering it as a P3. Net costs are
to be calculated in present value terms, meaning that all future costs, minus
ZM^MV]M[IZMLQ[KW]V\MLJaIVQV\MZM[\ZI\MJIKS\WXZM[MV\LIa^IT]M[)
X]JTQK[MK\WZKWUXIZI\WZ8;+Q[\WJMLZI_V]XNWZVM\KW[\[TQSMTa\WJM
QVK]ZZMLQN \PMXZWRMK\XZWKMML[ITWVO\ZILQ\QWVITTQVM[IVL\PQ[Q[\WJM
compared with a shadow bid for the P3 approach. The term shadow bid
is used because the P3 costing is an estimate only, since it precedes actual
private sector bids. If the present value of net costs of the shadow bid is
estimated to be lower than that of the conventional approach as represented
Ja\PM8;+\PMV\PM8IXXZWIKPQ[\WJMKWV[QLMZML[]XMZQWZIVL_QTTJM
pursued.
22
49
Government of Alberta, P3Public Private
Partnerships: Alberta Infrastructure and
Transportation’s Management Framework:
Assessment (Edmonton, September 2006),
http://www.infrastructure.alberta.ca/
Content/doctype309/production/ait-p3assessmentframework.pdf; Government of
Alberta, Alberta’s Public-Private Partnership
Framework and Guideline (Treasury Board:
Edmonton, March 2011).
50
City of Edmonton, “Fast Track LRT”.
51
John Loxley, “Public-Private Partnerships
after the Global Financial Crisis.”
52
Ibid., 2.
?PQTM\PMXWTQKaLWM[VW\[\I\M_PQKPLQ[KW]V\ZI\MQ[\WJM][ML\PMXZIK\QKM
IKZW[[)TJMZ\IQ[\W][M\PMX]JTQK[MK\WZJWZZW_QVOZI\M?PQTM\PQ[XZIK\Q[M
results in less of a bias in favour of P3s than the high discount rates used in
*+\PI\IZMJI[MLI\TMI[\XIZ\QITTaWVXZQ^I\M[MK\WZZM\]ZV[\WKIXQ\IT\PMa
are still higher than experts suggest they should be.51
<PMXWTQKaIT[WITTW_[NWZY]ITQ\I\Q^M^IT]MNWZUWVMaKITK]TI\QWV[\WJM][ML
ITWVO[QLM\PMY]IV\Q\I\Q^MWVM[J]\PW_\PM[MIZM\WJM]VLMZ\ISMVQ[VW\
elaborated upon.52
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
<PM[PIZQVOWN ZQ[SJM\_MMV\PM+Q\aIVLXZQ^I\MXIZ\VMZ[Q[KWV[QLMZML
QUXWZ\IV\)TTZQ[S[[PW]TLJMKTMIZTaQLMV\QÅMLI[[M[[MLY]IV\Q\I\Q^MTaIVL
allocated to the party best able to handle them.
The policy lays out an organizational structure for implementing P3s,
XZW^QLQVONWZIV1VLMXMVLMV\.IQZVM[[)L^Q[WZ\WW^MZ[MM\PMXZWK]ZMUMV\
XZWKM[[IVLNWZI;\MMZQVO+WUUQ\\MMI5]T\Q,Q[KQXTQVIZa8ZWRMK\<MIU
IVLIVQVLMXMVLMV\+WZXWZI\M8.]VK\QWV_Q\P\PM+Q\a)LUQVQ[\ZI\QWV
+W]VKQTQ[IKMV\ZITKWUXWVMV\WN \PQ[[\Z]K\]ZMJMQVOZM[XWV[QJTMNWZ
appraising and approving P3 assessments, and monitoring P3 progress.
The intent of following the P3 approach is to provide incentives to the
XZQ^I\MXIZ\VMZ\WUMM\KW[\IVL\QUQVO\IZOM\[IVLUIQV\IQVMNÅKQMVKaIVL
KZMI\Q^Q\a\PZW]OPW]\\PMXZWRMK\¼[TQNM\QUM
)[WN )]O][\\PM;W]\PMI[\4QVM_W]TLIXXMIZ\WJMI\\PM8ZWRMK\
,M^MTWXUMV\;\IOM_Q\P:MY]M[\[NWZ9]ITQÅKI\QWV[M`XMK\ML\WJMKITTML
QV7K\WJMZ53
.QO]ZMW]\TQVM[\PMXZWKM[[\PZW]OP_PQKP8[U][\XI[[
53
Kent, “Edmonton Council Votes to Keep
Seeking Southeast LRT Grants.”
23
3 D U N O D Q G , Q V W L W X W H š2FWREHU
Figure 2. P3 project process lifecycle and approval
Figure 2: City of Edmonton, Public Private Partnership (P3) Policy, Policy C555 (Finance and Treasury Department: May 26, 2010).
24
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Appendix 2:
REVIEWING THE DOCUMENTS: secondary
screening, business case, outline business
cases, and addendums
>MZaTQ\\TMX]JTQ[PMLQVNWZUI\QWVQ[I^IQTIJTMWV\PMXZWXW[ML4:<M`XIV[QWV
][QVOI8IZZIVOMUMV\?PI\NWTTW_[ZM^QM_[ITT\PMLWK]UMV\I\QWV\PI\
PI[JMMVUILMI^IQTIJTMJW\PWNÅKQITTaIVL]VWNÅKQITTa\W[PW_PW_\PM
XZWRMK\PI[M^WT^ML?MIZMVW\I_IZMWN IVaW\PMZLWK]UMV\[\PI\LMIT_Q\P
\PMJ][QVM[[KI[MNWZ\PM8IXXZWIKPZMTI\Q^M\WJ]QTLQVO\PMXZWRMK\ITWVO
conventional lines.
1VQ\QITTa8ZQKM_I\MZPW][M+WWXMZ[8_+_I[ZMY]M[\ML\W]VLMZ\ISM_PI\
Q[KITTMLI[MKWVLIZa[KZMMVQVOWN \PMXZWRMK\[_PQKPUMIV[IPQOPTM^MT
assessment of the wisdom of different alternate delivery methods. This
_I[KWUXTM\MLQV)]O][\IVLXZM[MV\ML\WIVQVNWZUI\QWV[M[[QWV
NWZ-LUWV\WV+Q\a+W]VKQTTWZ[QV,MKMUJMZ54;]J[MY]MV\Ta8_+
_I[ZMY]M[\ML\WXZMXIZMI*][QVM[[+I[MWZILM\IQTMLÅVIVKQITI[[M[[UMV\
WN IT\MZVI\Q^MIXXZWIKPM[IVL\PQ[_I[KWUXTM\MLQV.MJZ]IZaI\IV
M[\QUI\MLKW[\WN !551V2IV]IZa+W]VKQTLMKQLML\WXZWKMML
QVQ\QITTaWVTa_Q\P\PM;W]\PMI[\M`\MV[QWV)OIQV8_+_I[KWUUQ[[QWVML
\W]VLMZ\ISMIPQOPTM^MT7]\TQVM*][QVM[[+I[MILLMVL]U_PQKP_I[
XZMXIZMLQV)XZQT
1V5Ia+W]VKQTZMY]M[\ML8_+\WZM^QM_\PM)XZQTM`MZKQ[MNWZ
\PM;W]\PMI[\M`\MV[QWVJ]\\PQ[\QUM_Q\P\PMWXMZI\QVOWN \PM[a[\MU
ZMUIQVQVO_Q\PQV+Q\aPIVL[<PQ[_I[KWUXTM\MLQV2]VM-IKPWN \PM
8_+J][QVM[[KI[MI[[M[[UMV\[KWVKT]LMLQVNI^W]ZWN \PM+Q\aX]Z[]QVOI
8NWZUI\NWZ\PMXZWRMK\
PwC’s secondary screening of the Southeast
and West Lines projects, 2010
54
City of Edmonton, SE and W LRT Delivery
Method.
55
City of Edmonton, Fast Tracking LRT
Construction.
56
City of Edmonton, SE and W LRT Delivery
Method.
<PMÅZ[\LWK]UMV\ZMTI\QVO\W\PMJ][QVM[[KI[MNWZIXXTaQVOI8UWLMT
\W\PM4:<M`\MV[QWVQV-LUWV\WVQ[I[]UUIZaWN 8_+¼[[MKWVLIZa
[KZMMVQVOWN \PM;W]\PMI[\IVL?M[\4QVM[XZWRMK\[<PQ[ZMXWZ\PI[VW\
been made available, but it has been possible to access a summary of a
8W_MZ8WQV\XZM[MV\I\QWVOQ^MV\WQV\MZM[\ML+W]VKQTTWZ[I\IVQVNWZUI\QWV
[M[[QWVPMTLWV,MKMUJMZ!56 The summary indicates that the
presentation consisted of an overview of P3 policy, commercial criteria to
be followed, proposed performance measures, the meaning of and factors
KWV[QLMZMLQV^IT]MNWZUWVMaIVW]\TQVMWN \PMY]IV\QÅKI\QWVWN ZQ[SIVL
25
3 D U N O D Q G , Q V W L W X W H š2FWREHU
IPQOPTM^MT[]UUIZaWN \PM*][QVM[[+I[MZM[]T\[<PMKWVKT][QWV_I[\PI\
\PM8IXXZWIKPQ[^ITQLXZWXW[QVOIaMIZ\MZU,M[QOV*]QTL>MPQKTM
.QVIVKM7XMZI\M5IQV\IQVUWLMT,*>.75
The presentation summary indicates a P3 would have a positive value
NWZUWVMaWN JM\_MMVIVLZMTI\Q^M\W\PM8;+1V\PQ[KI[M\PM
8;+_I[VW\JI[MLWVKWV^MV\QWVITUM\PWL[WN LMTQ^MZaJ]\ZI\PMZWV
a design-build alternative that is said to offer more reliability in terms of
construction timing and costs. The presentation summary stresses that this
value for money would only be valid if the two lines were built at the same
\QUM\PMXTIVJMQVO\WKWUXTM\M\PMUJa?PI\\PMXZM[MV\I\QWV
summary did not do, however, is show how these conclusions were arrived
I\QVY]IV\Q\I\Q^M\MZU[6WLI\IIZMOQ^MVWV\PM^IT]MWN \PM8;+WZ\PM
;PILW_*QLVWZQ[\PMZMIVaQVNWZUI\QWVOQ^MVWVPW_ZQ[S[_MZMY]IV\QÅML
or allocated between the two potential partners. The presentation summary
is also silent on the discount rate used.
<PMXZM[MV\I\QWV[]UUIZa[\I\M[\PI\ÅVIVKQVO_W]TLJMNZWU\PM
X]JTQKIVLXZQ^I\MJ]\\PMZMQ[VWJZMISLW_VWN _PMZM\PMX]JTQK
UWVMa_W]TLJMNW]VLIVLVWLQ[\QVK\QWVJM\_MMVXZQ^I\MMY]Q\aIVL
XZQ^I\MJWZZW_QVO7VKM\PMTQVM[JMKWUMWXMZI\QWVIT\PMXZQ^I\M[MK\WZ
_W]TLZMKMQ^MUWV\PTaXIaUMV\[\WKW^MZQ\[ÅVIVKQVOKW[\[\WOM\PMZ_Q\P
_PI\Q[KITTMLI»XMZNWZUIVKMI^IQTIJQTQ\a¼XIaUMV\\WKW^MZXZWÅ\[<PM[M
XIaUMV\[_W]TLJMILR][\MLI[ZQLMZ[PQXKPIVOMLW^MZ\QUM
The business case: Southeast and West LRT
project, 2011
<PM8_+*][QVM[[+I[MLWK]UMV\_I[VW\UILMX]JTQKIVL_PMV
ZMY]M[\MLVMQ\PMZ\PM+Q\aVWZ8_+^WT]V\MMZML\WZMTMI[MQ\)[IZM[]T\
\PM8IZSTIVL1V[\Q\]\M[W]OP\IKKM[[]VLMZ\PM.ZMMLWUWN 1VNWZUI\QWV
IVL8ZW\MK\QWVWN 8ZQ^IKa)K\QV5IaIVL_I[OQ^MVI[M^MZMTa
redacted version two months later. The redactions are so severe that barely
IV]UJMZQ[TMN\QV\PMLWK]UMV\)[IZM[]T\Q\Q[QUXW[[QJTM\WKPITTMVOM
8_+¼[KITK]TI\QWV[JaKPIVOQVOI[[]UX\QWV[WZJa][QVOIT\MZVI\Q^MÅVIVKQIT
parameters. Nonetheless, the report does throw light on the process
\PI\8_+_MV\\PZW]OP\WR][\QNa\PM8IXXZWIKPIVLQ\IT[W[]OOM[\[I
KWUUMZKQIT[\Z]K\]ZMÅVIVKQIT[\Z]K\]ZMIVL\PMJZWIL\MZU[]VLMZ_PQKP
I8Q[TQSMTa\WJMX]Z[]ML
1VI[[M[[QVO^IT]MNWZUWVMa\PM8_+LWK]UMV\ÅZ[\TQ[\[ITTTQSMTaJI[M
KW[\[IVLZM^MV]M[JMNWZMZQ[SQ[\ISMVQV\WIKKW]V\+W[\[QVKT]LMITTKIXQ\IT
KW[\[IVLITTWXMZI\QVOKW[\[I[_MTTI[XZWRMK\LM^MTWXUMV\KW[\[\PI\\PM
+Q\aQ[M`XMK\ML\WQVK]ZQVKT]LQVO\PW[MNWZXZWXMZ\aIKY]Q[Q\QWV[WKQIT
26
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
and environmental assessment, legal services, administration, and publicity.
:MO]TIZUIQV\MVIVKMIVLTQNMKaKTMWZUIRWZI[[M\ZMXTIKMUMV\KW[\[IZMIT[W
listed. No data is available for any of these amounts, though the maintenance
[MK\QWVLWM[KWVÅZU\PI\\PMXZWRMK\Q[I\PQZ\aaMIZWVM*I[MZM^MV]M[IZM
mainly fares. The average fare per rider is redacted, as are non-fare sources
of revenue. Ridership numbers are given for both the opening date of
2IV]IZaIVLNWZ#\PM+Q\aM[\QUI\M[ILIQTaZQLMZ[PQXWN NWZ\PM;W]\PMI[\4QVMZQ[QVO\W _PQTM\PMMY]Q^ITMV\V]UJMZ[NWZ
\PM?M[\4QVMIZMZQ[QVO\W<PMOZW_\PZI\MQ[QV\MZXWTI\MLI\
XINWZ\PM;W]\PMI[\4QVMIVLXINWZ\PM?M[\
<PQ[JI[MLI\IQ[\PMV][MLQVLM^MTWXQVO\PM8]JTQK;MK\WZ+WUXIZI\WZ
8;+]VLMZ_PQKPQ\Q[I[[]UML\PI\\PM+Q\aPQZM[IKWV\ZIK\WZ\WLM[QOV
IVLJ]QTL\PMXZWRMK\MV\MZ[QV\WI[MXIZI\MKWV\ZIK\NWZ^MPQKTM[]XXTa
IVLWXMZI\M[IVLUIQV\IQV[\PMXZWRMK\Q\[MTN<PMZMXWZ\ZMXTQKI\M[\PM
IXXZWIKP\ISMVQV\PM[MKWVLIZa[KZMMVQVOJaKWUXIZQVOI[PILW_8JQL
_Q\PI,M[QOV*]QTL,*IXXZWIKP5IRWZI[[]UX\QWV[WV_PQKPJW\P
\PM8;+IVL8IZMLM^MTWXMLQVKT]LMKWUXTM\QWVWN KWV[\Z]K\QWVJa
,MKMUJMZWXMZI\QWV[KWUUMVKQVOWV2IV]IZaI\PQZ\aaMIZ
WXMZI\QWV[IVLUIQV\MVIVKMXMZQWLIVLXZWRMK\MVLQVO,MKMUJMZ
2IV]IZaJMQVO\PMLI\MNWZLQ[KW]V\QVOKW[\[\WXZM[MV\^IT]MIVL
\PMLQ[KW]V\ZI\MJI[MLWV\PM+Q\a¼[M`XMK\MLKW[\WN JWZZW_QVOXZMKQ[M
V]UJMZQ[ZMLIK\ML<PM][MWN \PM+Q\a¼[JWZZW_QVOKW[\[NWZLQ[KW]V\QVOQ[
TM[[NI^W]ZIJTM\W\PM8IXXZWIKP\PIV\PM][MWN PQOPMZZI\M[I[QV*+J]\
more favourable to it than using social discounting rates.57
<PMJI[MKW[\[IVLZM^MV]M[WN \PM8;+IZMÅZ[\[\ZQXXMLWN IVaXZW^Q[QWV
NWZKWV\QVOMVKQM[IVL\PMVILR][\MLNWZZQ[S<PMXZWKM[[WN Y]IV\QNaQVO
ZQ[SQ[TIQLW]\QV[WUMLM\IQTQVIXXMVLQKM[1\QV^WT^MLÅZ[\LM^MTWXQVOI
UI\ZQ`WN ZQ[S[\PI\UQOP\INNMK\LM[QOVIVLKWV[\Z]K\QWVWXMZI\QWV[IVL
UIQV\MVIVKMIVLÅVIVKQITIVLKWUUMZKQITI[XMK\[WN \PMXZWRMK\;WQV
\PMKWV[\Z]K\QWVXPI[MNWZQV[\IVKM\PMZMUQOP\JMZQ[S[I[[WKQI\ML_Q\P
MV^QZWVUMV\ITWZW\PMZIXXZW^ITLMTIa[XZWXMZ\aIKY]Q[Q\QWVKWV[\Z]K\QWV
LMTIa[[\ZQSM[M\K_PQTMWV\PMÅVIVKQITIVLKWUUMZKQIT[QLM\PMZMUQOP\
JMKPIVOM[\WQV\MZM[\ZI\M[JWZZW_QVOKW[\[LMJ\I^IQTIJQTQ\aÅVIVKQIT
XW[Q\QWV[WN [XWV[WZ[KW[\[WN QV[]ZIVKMM\K<PM[MXW\MV\QITZQ[S[_MZM
LM\IQTMLIVLXZM[MV\ML\WI\_WLIa_WZS[PWXI\\MVLMLJaZMXZM[MV\I\Q^M[
WN \PM+Q\a8_++050QTT;XMVKMZ-V^QZWVUMV\ITIVL<P]ZJMZ
-VOQVMMZQVO<PQ[IXXIZMV\TaOI^MZQ[M\WIY]IV\QÅKI\QWVWN ZQ[SQV\PM
UI\ZQ`IVLIVI[[M[[UMV\WN Q\[XZWJIJQTQ\aIVLQ\[TQSMTaLQ[\ZQJ]\QWV
JM\_MMV\PM8;+IVL\PM8;PILW_*QL1VW\PMZ_WZL[\PM+Q\a¼[
M`XW[]ZM\WZQ[S_QTTJMLQNNMZMV\LMXMVLQVOWV_PQKPIXXZWIKPQ[\ISMV
57
Loxley, “Public-Private Partnerships after the
Global Financial Crisis.”
<PQ[LI\I_I[\PMVZ]V\PZW]OPI[WN\_IZMXZWOZIU_PQKPKWVL]K\ML5WV\M
+IZTW[QU]TI\QWVWZZIVLWU[IUXTQVOIVITa[Q[QVWZLMZ\WLMZQ^MXZWJIJQTQ\a
27
3 D U N O D Q G , Q V W L W X W H š2FWREHU
WN ZQ[SLQ[\ZQJ]\QWVQV\MZU[WN TW_UW[\TQSMTaIVLPQOPQUXIK\!
outcomes.58<PM[MZQ[SM[\QUI\M[_MZM\PMVIXXTQML\WKW[\[IVLJMVMÅ\[WN JW\P\PM8;+IVL\PM8;PILW_*QLQV\PM^IT]MNWZUWVMaKITK]TI\QWV
-^MZaI[XMK\WN \PMZQ[SLI\I_I[PW_M^MZZMLIK\MLQV\PQ[ZMXWZ\[W\PMZMQ[
VW_IaWN SVW_QVOPW_ZMI[WVIJTM\PMI[[]UX\QWV[IZM
<PM>N5M`MZKQ[MKWVKT]LM[\PI\\PM8[PILW_JQLWNNMZ[IKPMIXMZ
alternative, but by how much is redacted. This conclusion is said to hold
even after a sensitivity analysis is applied to the data by varying assumptions
IJW]\LQ[KW]V\ZI\M[XZQ^I\MJWZZW_QVOKW[\[8MNÅKQMVKaLQNNMZMV\LMOZMM[
WN X]JTQKÅVIVKQVOIVLIZML]K\QWVQV\PMKWV\ZIK\\MZUNZWU\W
aMIZ[<PQ[IVITa[Q[OQ^M[IZIVOMWN >N5ZM[]T\[[WUMPQOPMZIVL[WUM
TW_MZ\PIV\PMJI[M>N5)OIQV\PW]OP\PQ[LI\IQ[VW\UILMI^IQTIJTMNWZ
scrutiny.59<PMZM[]T\[IZM[IQL\WKWUXIZMNI^W]ZIJTa_Q\P>N5I[[M[[UMV\[
WN W\PMZ+IVILQIV8[QVKT]LQVO\PI\WN \PM+IVILI4QVMQV*+]XWV
_PQKP\PM-LUWV\WV8IXXZWIKPLZI_[PMI^QTa<PI\XZWRMK\Q[[IQL\WaQMTL
I>N5WN 60
<PMWZOIVQbI\QWVIT[\Z]K\]ZMXZWXW[MLJa8_+Q[\PMKZMI\QWVWN I;XMKQIT
8]ZXW[M>MPQKTM;8>\WJMW_VMLJa\PMXZQ^I\M[MK\WZ_PQKP_W]TLPI^M
ZM[XWV[QJQTQ\aNWZKZMI\QVOIVLZ]VVQVOI,*>.758UMIVQVOQ\_W]TL
be responsible for designing, building the infrastructure, purchasing the rail
KIZ[ÅVIVKQVOWXMZI\QVOIVLUIQV\IQVQVO\PM[a[\MUNWZIXMZQWLWN years after construction is complete.61<PM;8>WZKWVKM[[QWVIQZM_W]TLJM
\PM[WTMXWQV\WN KWV\IK\_Q\P\PM+Q\a1\_W]TLIZZIVOM[]JKWV\ZIK\WZ[QN VMKM[[IZa\W]VLMZ\ISM\PM^IZQW][\I[S[I[[QOVML\WQ\1\_W]TLIT[WIZZIVOM
NWZMY]Q\a[XWV[WZ[PQXIVLNWZXZQ^I\MLMJ\ÅVIVKM1\_W]TL\PMVXZW^QLM
4:<[MZ^QKM[\W\PM+Q\aIVLKWUUQ\\WUIQV\IQVIKMZ\IQV[\IVLIZLWN [MZ^QKM8_+LQLKWV[QLMZ\_WW\PMZWX\QWV[WVMQV^WT^QVO\PM+Q\aZM\IQVQVO
WXMZI\QWV[IVL\PMW\PMZQV^WT^QVO\PM+Q\aZM\IQVQVOUIQV\MVIVKMJ]\
[\ZIVOMTaVW\JW\P8_+KWVKT]LML\PI\_PWTMTQNMKW[\[WN \PM[a[\MU
would be lower if these functions were transferred to the P3.
28
58
For a discussion of risk assessment
techniques, see: John Loxley with Salim
Loxley, Public Service Private Profits:
The Political Economy of Public-Private
Sector Partnerships (Winnipeg: Fernwood
Publishing, 2010).
59
PricewaterhouseCoopers, Business Case:
Southeast and West LRT Project, 80.
60
Ibid., 81.
61
Ibid., 21-22.
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Figure 3. Proposed organization of the Edmonton LRT P3
City as owner
and fare setter/
collector
Availability &
Construction
Payments
Lenders
(Debt)
Services
Capital
Investment
SPV
Private
Finance
Return on
Investment
Subcontractors
DB
V
DB – Design Build
O
V – Vehicle
Sponsors
(Equity)
M
O – Operations
M– Maintenance
Figure 3: PricewaterhouseCoopers, Business Case: Southeast and West LRT Project, February 2011.
.WZQ\[XIZ\\PM+Q\a_W]TLZM\IQV¹UW[\QN VW\ITTºW_VMZ[PQXWN \PM
infrastructure.62 1\_W]TLIT[WJMZM[XWV[QJTMNWZIKY]QZQVOZMITXZWXMZ\a
[M\\QVO\ZIV[XWZ\XWTQKaUIZSM\QVO[MZ^QKM[XZWK]ZQVO\PMXZWRMK\LM^MTWXQVO
J][QV\MZNIKM[IVL[KPML]TQVOOW^MZVQVO\PMXZWRMK\QVKT]LQVOKWWZLQVI\QVO
with other levels of government, and obtaining necessary environmental
approvals.63
62
Ibid., 26.
63
Ibid., 26.
64
Ibid., 33.
,M\IQT[WN \PMXZWXW[MLÅVIVKQIT[\Z]K\]ZMIZMZMLIK\MLJ]\\PMOMVMZIT
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incentives for the private sector to exercise due diligence and are consistent
with available private capital.64)OIQVVW[W]ZKM[IZMW]\TQVMLNWZ\PMX]JTQK
UWVMaIVLVWJZMISLW_VWN MY]Q\a^MZ[][TWIV[Q[OQ^MVNWZ\PMXZQ^I\M
money.
29
3 D U N O D Q G , Q V W L W X W H š2FWREHU
)[MZQM[WN KWUUMZKQITKWV[QLMZI\QWV[IZMTIQLW]\J]\IOIQV\PMLM\IQTML
KWVKT][QWV[IZMZMLIK\ML1\[MMU[\PI\8_+NI^W]Z[XZWOZM[[WZUQTM[\WVM
XIaUMV\[I[XZWOZM[[Q[UILMIVL^MZQÅMLQVKWV[\Z]K\QWVI[WXXW[ML
to substantial completion payments when construction is ended. Progress
XIaUMV\[ZML]KM\PMVMMLNWZXZQ^I\M[MK\WZÅVIVKQVO\WTM[[\PIV\W\IT
construction costs, and also save on capitalized interest and fee payments.
<PQ[IXXZWIKPQ[NI^W]ZMLQV)TJMZ\I65
<PMUMKPIVQ[UNWZXIaQVO\PMXZQ^I\M[MK\WZ\WKW^MZQ\[KW[\[IVLZQ[S[QV
the operating phase will be designed supposedly on the ‘no service, no fee’
XZQVKQXTM_Q\PXIaUMV\JMQVOUILMWVTaQN IVIOZMML]XWVTM^MTIVLY]ITQ\a
of service is actually delivered.66 There will be a series of components to
\PMNMMXIQL"IVI^IQTIJQTQ\aXIaUMV\_QTTKW^MZXZQ^I\M[MK\WZÅVIVKQVOKW[\[
WXMZI\QWV[IVLUIQV\MVIVKM#IXIaUMV\TQVSML\WY]ITQ\aWN [MZ^QKMMO
KTMIVTQVM[[#IVLI[MZ^QKMTM^MTILR][\UMV\<PQ[TI[\_QTTILR][\XIaUMV\[
as costs increase due to increased ridership. Notably, this payment “is not
QV\MVLML\W\ZIV[NMZIVaLMOZMMWN ZM^MV]MZQ[S\W\PM;8>º671VNIK\8_+
IZO]M\PI\\PM;8>[PW]TLKIZZaVWZM^MV]MWZLMUIVLZQ[SWV\PMOZW]VL[
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IUIZSM\[W]VLQVO[M[[QWV_Q\PMQOP\XZWUQVMV\KWUXIVQM[MVOIOMLQV
\PM8J][QVM[[I[KWVKM[[QWVIQZM[WZMY]Q\aXZW^QLMZ[)KKWVQI*ITNW]Z
*MI\\a8IZ[WV[*ZQVKSMZPWNN*WUJIZLQMZ2WPV4IQVO5IKY]IZQM8TMVIZa
;QMUMV[IVL;6+4I^ITQV8_+_MZM\WTL\PI\\PMZMKMV\ÅVIVKQITKZQ[Q[
has reduced the private sector’s appetite “to accept a high degree of demand
ZQ[Sº68*M[QLM[¹M`KT]LQVOZM^MV]MZQ[SNZWU\PMIZZIVOMUMV\_QTT\PMZMNWZM
JM[QUXTMZ_PQKPQV\]ZVUISM[\PMIZZIVOMUMV\MI[QMZ\WILUQVQ[\MZNWZ\PM
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8_+TQ[\[XW\MV\QITSMaQVLQKI\WZ[]XWV_PQKPXIaUMV\[\W\PM;8>KW]TL
be based, including system reliability and punctuality, a satisfaction survey,
UIVIOQVOK][\WUMZKWUUMV\[UISQVOQVNWZUI\QWVI^IQTIJTMQV»ZMIT\QUM¼
for travellers, maintaining trains and stations in good condition, system
accessibility, safety, and ride comfort. Failure to meet these indicators
XMZ[Q[\MV\TaKW]TLPI^MÅVIVKQITQUXTQKI\QWV[NWZ\PM;8>QV\PMM`\ZMUM
the termination of the contract. Provision would be made, however, for a
ZMK\QÅKI\QWVXMZQWL
30
65
Ibid., 32.
66
Ibid., 33.
67
Ibid., 35.
68
Ibid., 36.
69
Ibid., 37.
7\PMZKWUUMZKQITXZQVKQXTM[_MZMXZWXW[MLJa8_+<PMÅZ[\Q[\PI\
KPIVOM[QVQV\MZM[\ZI\M[JM\_MMV\PM\QUMWN JQL[]JUQ[[QWV\WÅVIVKQIT
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\ISQVOXTIKMIN\MZÅVIVKQITKTW[]ZM;MKWVLTa\PMa[MMU\WZMKWUUMVL
IOIQV[\\PM+Q\a[PIZQVOQVIVaN]\]ZMZMÅVIVKQVOOIQV[I[\PQ[[MMU[
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-T[M_PMZMQ\Q[KWUUWVNWZ\PMX]JTQK[MK\WZ\W[PIZMI\TMI[\
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
QVIVaZMÅVIVKQVOOIQV[70<PM\PQZLQ[\PI\8_+IOIQVZMKWUUMVL[
NWTTW_QVO)TJMZ\IXZIK\QKMQVZMY]QZQVOI[]J[\IV\QITUQTTQWVWZUWZM
TM\\MZWN KZMLQ\\WO]IZIV\MM\PI\\PM;8>X]\[ÅVIVKQVOQVXTIKMIVL
successfully designs and builds the structure. The fourth is that three
situations are outlined in which termination may occur: default related
\WVWVXMZNWZUIVKMWN KZQ\QKITWJTQOI\QWV[NWZKMUIRM]ZWZX]JTQK[MK\WZ
\MZUQVI\QWV)OIQV\PM[MIZMLZI_VNZWU\PM)TJMZ\IUWLMT.QVITTa8_+
[]OOM[\[\PMIXXWQV\UMV\WN IVQVLMXMVLMV\KMZ\QÅMZ\WJMÅVIVKMLRWQV\Ta
Ja\PM+Q\aIVL\PM;8>\WIK\I[IVWJRMK\Q^M\PQZLXIZ\aWVXZWOZM[[
assessment, bill payment, disputes etc.
<PMUIZSM\[W]VLQVOM`MZKQ[MZMNMZZML\WMIZTQMZ[]OOM[\[\PI\UIRWZXZQ^I\M
sector players in P3s support the idea of an Edmonton LRT P3, and support
the proposed organizational structure, as well as the proposed payment
UMKPIVQ[U[<PMZM_I[ZMT]K\IVKM\WIKKMX\IVaZQLMZ[PQXZQ[SWZVWV
ZQLMZ[PQXZM^MV]MZQ[S?PQTMOMVMZITTa[]XXWZ\QVO\PM)TJMZ\IUWLMT\PMa
QVLQKI\MLVWWJRMK\QWV\W[PIZQVOIVaZMÅVIVKQVOOIQV[<PMa[]XXWZ\ML
X]JTQKN]VLQVOQV\PM\WZIVOM<PMaIV\QKQXI\ML\PI\XZQ^I\M[MK\WZ
OMIZQVOZI\QW[_W]TLJM!LMJ\\WMY]Q\a\PI\ZM\]ZV[\WMY]Q\a
QV\MZVITZI\M[WN ZM\]ZV_W]TLJMQV\PMZIVOMWN \WIVL\PI\LMJ\
UIZOQV[\PMM`\MV\\W_PQKPXZQ^I\MJWZZW_QVOM`KMML[\PMKW[\WN +Q\a
JWZZW_QVOQV\PQ[KI[M_W]TLLMKTQVMNZWUJI[Q[XWQV\[\W
JI[Q[XWQV\[NWZ\PM[\IZ\WN \PMXZWRMK\
Outline business case addendum: Southeast
LRT project, April 2012
73
PricewaterhouseCoopers, Outline Business
Case Addendum: Southeast LRT Project, April
2012, 4.
,]ZQVO\PM+Q\a)LUQVQ[\ZI\QWV_I[QV[\Z]K\ML\WM`IUQVMXPI[QVO
QV\PMXZWRMK\[\IZ\QVO_Q\P\PM;W]\PMI[\M`XIV[QWVIVLQV2IV]IZa
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\_WUIRWZLMXIZ\]ZM[NZWU\PM*][QVM[[+I[M"Q\_I[\WKWV[QLMZ\PM^QIJQTQ\a
WN 8NWZLMTQ^MZQVO\PM;W]\PMI[\M`XIV[QWVWVTa#IVL[MKWVLTa\PM
LMILTQVM\WUMM\-`XW_I[VWTWVOMZZMTM^IV\<PMMI[QVOWN \PM
deadline was the result of Edmonton withdrawing its bid for Expo when
\PMNMLMZITOW^MZVUMV\ZMN][ML\WKWV\ZQJ]\MÅVIVKQITTa\W_IZL[Q\<PM
IVITa[Q[W\PMZ_Q[MUISM[ITT\PM[IUMI[[]UX\QWV[I[\PM*][QVM[[
+I[MJ]\ILL[KWV[QLMZI\QWVWN XW[[QJTMXZWJTMU[\PI\UQOP\IZQ[MQVN]\]ZM
if the LRT system is expanded in the face of proceeding with the P3. It
KWVKT]LML\PI\¹\PM,*>.75_I[[\QTT\PMUW[\IXXZWXZQI\MWX\QWVNWZ\PM
P3 delivery considering that if expansion occurs, contractual mechanisms
M`Q[\IVLKIVJMQVKWZXWZI\MLQV\PM;W]\PMI[\4QVMKWV\ZIK\\WXZW\MK\\PM
+Q\a¼[QV\MZM[\[º73
31
3 D U N O D Q G , Q V W L W X W H š2FWREHU
<PM)LLMVL]UKWVKT]LM[\PI\\PMXZWRMK\_W]TL[\QTTPI^MITQNM\QUMWN aMIZ[\PMÅZ[\JMQVOKWV[\Z]K\QWVIVL\PI\\PM8ZW]\M_I[[\QTTWX\QUIT
ZM\]ZVQVOI>N5WN JM\_MMVIVLKWUXIZML_Q\P\PMVM`\JM[\
VWV8IT\MZVI\Q^M\PM,M[QOV*]QTL1\Q[\WJMVW\ML\PI\\PQ[>N5QUXTQM[
[WUM[TQXXIOMI\\PMTW_MZMVLZMTI\Q^M\W\PI\QV\PMKWUJQVML;W]\PMI[\
?M[\XZWRMK\I[LM[KZQJMLQV\PM[MKWVL[KZMMVQVO
)TTZMTM^IV\LI\IM`KMX\\PMJW\\WUTQVMWN \PM>N5KITK]TI\QWVQ[M`KT]LML
purportedly for reasons of commercial sensitivity and the possible harming
WN \PM+Q\a¼[VMOW\QI\QVOXW[Q\QWV
Outline business case addendum: Southeast
LRT project, June 2012
1V5Ia8_+_MZMIOIQVI[SML\WXZW^QLMI*][QVM[[+I[M)LLMVL]U
NWZ\PM;W]\PMI[\M`XIV[QWVJ]\\PQ[\QUMWV\PMI[[]UX\QWV\PI\WXMZI\QWV[
_W]TLJMZM\IQVMLJa\PM+Q\a7VKMWXMZI\QWV[IZM\ISMVW]\WN \PM8Q\[
I\\ZIK\Q^MVM[[NITT[ZMTI\Q^M\WJ]QTLQVO\PMXZWRMK\QV\PMKWV^MV\QWVITWZQV
\PQ[KI[M\PM,*UIVVMZ<PM>N5_I[[\QTTXW[Q\Q^MNWZ\PM8;PILW_*QL
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IVITa[Q[[PW_QVOIZIVOMWN JM\_MMVIVLWN \PW[MKW[\[<PM
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J]\\PI\XZWRMK\LQLQVKT]LMWXMZI\QWV[1\IT[W[\ZM[[ML\PI\IK\]IT>N5QV
W\PMZ)TJMZ\I8[PILW]\XMZNWZUML\PMQVQ\QIT>N5M[\QUI\M[74
8_+KITTMLIVW\PMZ5IZSM\;W]VLQVO\PQ[\QUM_Q\PVQVM]VVIUML
organizations of vehicle suppliers, design and build contractors, and P3
concessionaires. Though participating organizations expressed a preference
for operations being included, they would be happy to proceed with or
without them being in the P3. They also generally felt that any expansions
should be negotiated or re-tendered rather than pre-priced, given the
uncertainty of the timing.
)TTZMTM^IV\LI\IM`KMX\\PMJW\\WUTQVMWN \PM>N5KITK]TI\QWVQ[M`KT]LML
purportedly for reasons of commercial sensitivity and the possible harming
WN \PM+Q\a¼[VMOW\QI\QVOXW[Q\QWV
)[QV\PMKI[MWN ITT\PM8_+ZMXWZ\[M`IUQVML\PMZMQ[I[\ZWVO[\I\MUMV\
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IXXZWXZQI\MOW^MZVIVKM[\Z]K\]ZM\WMV[]ZM\PM8ZWRMK\Q[_MTTLMÅVMLIVL
IXXZWXZQI\MTa[\Z]K\]ZMLº75
32
74
PricewaterhouseCoopers, Outline Business
Case Addendum: Southeast LRT Project, June
2012, 5.
75
Ibid., 5.
Wrong Turn: Is a P3 the best way to expand Edmonton’s LRT?
Application to the P3 Canada Fund
-LUWV\WVIXXTQMLNWZÅVIVKQITI[[Q[\IVKMNWZ\PMXZWRMK\\W\PM8+IVILI
.]VL1V)]O][\\PM+Q\a+W]VKQTUM\QVKIUMZIIVLZM^MZ[MLQ\[
decision to perform operations in-house. The assumption is that pressure
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JMQVOZMRMK\MLQVXIZ\I\TMI[\JMKI][M\PMKMV\ZM_I[VW\XTIVVQVO\WPQZM
private management of the facility.77<PM+Q\a_I[PW_M^MZMVKW]ZIOML
\WZMIXXTa[]OOM[\QVO\PI\8+IVILI[MMS[\WXZM[[]ZM\PMX]JTQK[MK\WZ
QV\WZMLM[QOVQVOXZWXW[IT[\WN]Z\PMZXZQ^I\MOIQVNZWUX]JTQKI[[M\[?Q\P
operations once more in private hands, Edmonton’s application to the P3
.]VL_I[[]KKM[[N]TIVLIOZIV\WN UQTTQWV_I[IVVW]VKML5IZKP
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federal government.78
76
“Federal Threat Forced Approval of P3 for LRT,
Group Claims,” Edmonton Journal, October
16, 2012, http://www.cbc.ca/news/canada/
edmonton/story/2012/10/16/edmontonsoutheast-lrt-p3.html.
77
Bartley Kives, “No Help from Ottawa to
Expand Convention Centre,” Winnipeg
Free Press, January 5, 2011, http://www.
winnipegfreepress.com/local/no-helpfrom-ottawa-to-expand-conventioncentre-112924489.html.
78
PPP Canada, Edmonton Light Rail Transit
System (Edmonton, Alberta: 2013), http://
www.p3canada.ca/project.php?id=17.
33
3 D U N O D Q G , Q V W L W X W H š2FWREHU
34
No Free Lunch: Financing the Priorities of Calgarians
7
0 ARKL AND ) NSTI TUTE s *UNE 11045 Saskatchewan Drive,
Edmonton, Alberta
T6G 2E1
Phone: 780.492.8558
Email: [email protected]
Website: www.parklandinstitute.ca
ISBN 978-1-894949-42-2
8