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U of S professor says P3s are a ‘bad idea’

Apr 27, 2015 | 6:34 AM

David McGrane, a political studies professor at the University of Saskatchewan, has been invited by City administration in Prince Albert to speak at a public meeting Monday afternoon.

McGrane has done a lot of research on P3 partnerships and public financing of municipal projects. He believes strongly that P3s are generally a bad idea.

“The main reason why they are a bad idea is because the borrowing costs for a government are so much lower than [the] borrowing cost for the private sector,” he said.

McGrane points to a recent report by the auditor general in Ontario.  The report showed that it was 14 times more expensive to have an infrastructure project that is financed by the private sector as opposed to being financed by the public sector.

“These higher borrowing costs really create long-term financial risks for these types of projects, so that’s why I caution municipal government from jumping into these types of projects because they might as cheaper at the beginning, and maybe are, but in the long term, they are going to end up costing a lot more,” said McGrane.

McGrane suggests a better funding option is a more traditional method.  He said the municipal government, with some partners, should tender out the project. Private sector contractors would then bid on the project. The government would take the lowest bid and pay the private contractor to build the bridge. The government would own and maintain the bridge.

“And now why that is the best way of going about is that it maintains public ownership right, and when public ownership is maintained, your borrowing costs are a lot lower,” said McGrane.

McGrane compares P3s to a home buyer seeking a mortgage.  He said someone who is very rich, with a lot of assets, can get a fairly low mortgage on a house but someone who is a greater credit risk will have a higher interest rate.

He said he wants to make it clear that he is not coming to Prince Albert to speak for or against the idea for a second bridge, he is merely coming to help educate city council about the cons of a P3 partnership.

“I want to applaud city council for getting both sides of the debate and having a good community consultation discussion on this,” said McGrane.

McGrane is confident that once city council sees both sides of the debate, they will see that P3s are not the way to go.

The public meeting Monday afternoon at City Hall starts at 1:30 p.m.

-With files from Thia James.

nmaxwell@panow.com

On Twitter: @nigelmaxwell