Ontario AG reveals Public-Private Partnerships aren't a savings bonanza after all
Governments love to 'partner' with the private sector on infrastructure — but AG says it's rarely worth it
Tonight's first order of business, the view that private business will always manage things more efficiently than government, gets a bit of a challenge from Ontario's auditor general.
It seems Ontario has spent $8 billion more than it needed on infrastructure projects by handing responsibility to the private sector. The Auditor General also complains about a lack of oversight into measuring how well the money is spent — and yet the suggestion that the answer to this problem is for governments to take on 100 per cent of their infrastructure build doesn't seem sensible either.
It could be that public-private partnerships are as Churchill once described democracy: "the worst of all options, except for all the others."
— Amanda Lang
Some of Canada's biggest public infrastructure projects were built with private hands: PEI's Confederation Bridge, Toronto's Highway 407. Public-private partnerships are politically tempting, since they allow governments to build now, and pay later. But Ontario's Auditor General Bonnie Lysyk has found that they come at an extra cost for taxpayers.
Her audit reviewed 74 projects in Ontario built through public-private partnerships. The government calls them Alternative Financing and Procurement. According to the Auditor General, those projects have cost taxpayers in the province $8 billion more over the last nine years than if they were managed just by the public sector.
So, instead of those hospitals, schools, and roads totalling $28 billion, the government ending up spending $36 billion. Part of the explanation for higher costs is that private companies pay much more for financing — about 14 times as much. In defence of the partnerships, Infrastructure Ontario says the $8 billion hole is worth it, since it ensures those projects are built on time and on budget, and saved the province from $18.6 billion in potential cost overruns.
The warnings come at a time when Ontario's debt load is ballooning. The AG says it's now growing faster than the province's economy."Ontario's net debt for 2017-2018 is expected to reach more than $325 billion, or $23,000 for every single man, woman and child in the province," the AG said. "That's a heavy load, and it could get heavier if interest rates start to rise above their current historical low levels."
Amanda Lang and Peter Armstrong discussed the topic of Public Private Partnerships on Wednesday's episode of The Exchange With Amanda Lang.