Report suggests City re-evaluate P3 approach to funding southeast LRT

EDMONTON- A new report is questioning the City’s approach to funding Edmonton’s southeast LRT line.

The $1.8 billion project is to be funded through a public-private partnership (P3). But according to a report released Thursday by the Parkland Institute, the P3 approach is shrouded in secrecy and will end up costing taxpayers more.

“Based on the information we’ve been able to access, virtually every aspect of the City’s case for proceeding with the P3 arrangement is far from convincing,” said John Loxley, a University of Manitoba economics professor who authored the report. “City Council should either reverse its decision to build the Southeast LRT as a P3, or open up to public scrutiny all of the underlying documents and calculations in order to make clear the basis for its decision.”

The P3 would see the City raise much of the money, with a private firm operating and maintaining the southeast line. The City says this method would save taxpayers three to 10 per cent of the cost over the life of the project.

However, Loxley says the City’s assumptions are misleading, because it has compared the funding model for the southeast expansion to other models that are vastly different.

“PwC (PricewaterhouseCoopers, the consulting firm the City retained to investigate the suitability of the P3 approach) demonstrates the superiority of the P3 approach in part through comparisons to the value for money achieved in other Canadian P3s. Because of differences in how value for money is calculated, these comparisons cannot be accepted at face value,” the report reads.

“So you’re comparing apples with oranges when you do that. And that’s very important, it sounds like an innocent point, but it’s very important,” Loxley added. “It looks like over the lifetime of the project, the extra costs of borrowing are going to be about $240 million because the private sector is borrowing at two per cent higher than the public sector.”

Loxley says none of PwC’s reports on the P3 project have been made public in their entirety, adding that the “business case was so severely censored as to make it impossible to judge definitively whether the case for the P3 approach is valid.

“And the information that we have been able to obtain, has been obtained under Freedom of Information mainly, by the Parkland Institute. And when you get that information, just about all the numbers have been blacked out.”

The report recommends that the City should not proceed with a P3 approach, and should opt instead for either a design-bid-build or a design-build-arrangement.

City administration maintains a P3 partnership is worthwhile and will protect taxpayers from some of the financial risks involved. No one from the City was available to comment on the report Thursday.

Parkland Institute’s report can be read below:

Parkland Institute’s LRT Report