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Taxpayers of Prince Edward County, and your Councillors, need to know that you will pay for the wastewater treatment plant whether it is undertaken as a public-private partnership (P3) or in the traditional method in which the County pays someone to design and build it and then operates it with County staff.
P3s aren’t magic money or free services. A private company won’t come to town and build and operate a wastewater plant for free. If a private company builds and operates the plant it has only one objective to make money. It will make that money by charging the County for financing, designing, building and operating the plant.
What CUPE has been demonstrating to the PEC council is that taxpayers will pay more for a P3 wastewater plant than for a plant built in the regular way. We have brought evidence to your Council that P3s are more expensive, less transparent, less accountable and riskier for the people of PEC than the usual method.
Why are P3s more expensive? Here are some of the reasons.
.The County can borrow money more cheaply than a private firm. If it can borrow money at 1% less, over 25 years that saves 20% to 25% on the costs of the project.
Consideration of a P3 has already cost the county time and money, driving up the cost of the project. There have been extra bids and tenders, extra consultants, extra trips to Alberta and thousands of dollars to private firms to offset the costs of their bids. If the County goes forward with a P3 model, there will be lots of lawyers and accountants and consultants to pay to negotiate and write the contracts. These transaction costs are often equal an additional 8% to 10% of the costs of the actual project.
Private firms and their investors expect to make a 15% or higher rate of return on their investment. Either this profit comes on top of the regular cost of the project, or someone has to cut corners somewhere to make a profit.
The claimed advantage for P3s of risk transfer is entirely notional contractor failure must ultimately be bailed out by the County and the taxpayer. Picton will need sewage treatment whether it’s profitable or not.
In addition to costing more, P3s take control and accountability away from the taxpayers who pay for the plant. That can have consequences for services and the impact on the local environment and economy. Hamilton’s City Council and its residents have finally been able to control sewage outflow into the harbour since they brought their operations back in house.
CUPE has delivered hundreds of pages of evidence to the Prince Edward County Councillors that P3s are poor public finance and poor public policy. If you need more information yourself, please follow some of the links on the CUPE web site.
Thanks for your interest. We urge you to ask you Councillor if they have considered all of this information.
