Privatization through public-private partnerships (P3s) was the silent elephant in the room during the emergency meeting held earlier this month between municipal counselors, MHAs and MPs. The September 6th meeting was called because Newfoundland and Labrador municipalities have to find $600 million in order to meet the looming deadline for upgrading our waste-water infrastructure to federal standards. Another $400 million will eventually be needed to upgrade water infrastructure.
With a federal election coming up next month, it’s not surprising MPs didn’t want to talk about P3s at the meeting. But make no mistake: both the federal Liberals and Conservatives are strongly in favour of them.
Under P3s, a corporation or consortium of corporations provides the initial financing of an infrastructure project. It then runs the project for two to three decades, charging governments for management and services rendered during that period.
There are compelling reasons why municipalities should try to resist the P3 route for waste-water improvements.
First: P3s invariably cost a lot more than straightforward public funding for public infrastructure. Here in Canada, British Columbia’s auditor general found the cost of borrowing through P3s was double that of public borrowing. Likewise, Ontario’s auditor general said the province’s reliance on P3s had cost $8 billion more than traditional public financing,
It’s a similar story internationally. The British government has now admitted that their P3 equivalents, (called PFIs) have built up a massive liability of almost $500 billion. That’s more than $20,000 per UK household.
Second: P3s do not benefit the local economy or local entrepreneurs. Generally, any corporation bidding on a P3 has to have a lot of financial backing since the corporation will be funding the project at a loss in the first few years of its installation. That favours large, multinational corporations. And under the CETA trade agreement with the European Union, the bidding process on local P3s also has to be opened up to European water management corporations like Veolia and Suez. You can be sure that any profits made by these corporations will not stay in the province.
Third, P3s can lead to the loss of municipal control. P3 contracts are tightly drawn up by corporate lawyers with no flexibility for change. In the past this has meant that if any alterations were needed government had to pay way above the real cost price to get them implemented.
It can also be extremely difficult to cancel P3 contracts even if there is massive mismanagement. Under the CETA agreement, the investing corporation can sue in offshore Investor State Dispute Settlement Courts where the decisions have a tendency to favour corporations.
But perhaps worst of all, once we go the P3 route for waste-water management we are locked into some form of private sector management as long as the CETA trade agreement is in effect. That’s because there’s a ratchet clause in CETA that prevents us from re-municipalizing the project even when the contract is up.
A Brief History of Canadian P3s
Although P3s had been around for a long time, it was under the Conservative government of Stephen Harper that P3s were heavily pushed. Municipalities wanting to upgrade infrastructure projects found it very difficult to access funding unless they agreed to a P3 relationship with private partners. The Harper government was also the architect of the CETA treaty with all its sneaky constraints on municipal control of public services.
When the Trudeau Liberal government came into office, to their credit, they removed the P3 screen put in place by the Conservatives. They continued underfunding infrastructure projects, however. They also rushed the CETA treaty through Parliament, in spite of the fact that 50 Canadian municipalities, including the largest in the country objected to its undermining of municipal power.
And then the Liberals created the Canada Infrastructure Bank. This was the fulfilment of a 2015 campaign promise to create a national bank that would use the federal government’s ability to borrow money in a more affordable way than municipalities could. The money would be used to support infrastructure projects.
To many of us this sounded like something akin to President Roosevelt’s New Deal in 1930s America. Government would spend money, create jobs and strengthen public infrastructure. It had to be good.
But that is not what we got. This is a bank largely designed by the private sector and managed by a Board that does not include a single government representative. The bank’s primary goal is to provide or find the money for public private partnership initiatives linked to government infrastructure projects. There is little transparency and public accountability required of the bank, its projects and its use of public funds.
The Canada Infrastructure Bank has turned out to be a Machiavellian distortion of Trudeau’s 2015 campaign promise.
The Dubious Rationale for P3s
At the federal level our two major parties appear to have bought into the neoliberal assertion that the private sector knows how to manage things better than government. What’s illogical and alarming about that assumption is that both parties have done so despite reams of contrary evidence. In the last 15 years, municipalities in more than 35 countries have cancelled or not renewed over 180 water-related privatization contracts. The P3 model for water management is fading across the world.
But maybe not in Newfoundland and Labrador. Our Liberal government has already embraced the P3 model for long term care facilities, the new mental health hospital, and the new penitentiary. Will our political leaders be willing to bring the arrangement into water management? After all, P3s will allow the province to postpone payments on waste-water upgrades for years. In other words, supporting a fiscally irresponsible “solution” will actually allow immediate budgets to look more fiscally responsible and make it easier to get re-elected. Is that a temptation?
If all of this disturbs you and you’d like to learn more, there’s an opportunity coming up. On Monday, Sept. 23 (6:30 p.m.) Maude Barlow, Canada’s foremost authority on water issues, will be holding a public forum at the Lantern (35 Barnes Rd). Consider attending.
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