Mississauga, Ontario Mayor Hazel McCallion said property taxes alone cannot address the infrastructure shortfall for municipalities, and the private sector should build and manage infrastructure assets. Carl Zehr, mayor of Kitchener, Ontario said his city's own infrastructure fund helped create an education and knowledge cluster and triggered private sector investment, including downtown construction, and the increased developed pursed plan for Waterloo Region's light rail transit plans.
While public-private partnerships (P3s) will continue to play a prominent role in the creation of municipal infrastructure, more of the seed money to launch these partnerships needs to come from provincial and federal governments, says Mississauga Mayor Hazel McCallion.
“Property tax was never intended to look after humans; property tax was created to look after property,” she said during a mayors’ panel that addressed municipal infrastructure challenges at the conference of The Canadian Council for Public-Private Partnerships in Toronto.
“But user fees and property tax are currently our only sources of revenue. We need the provincial and federal governments to come into the picture in a major way, not on an ad hoc basis like the stimulus program, to provide a sustainable source of revenue to deal with the infrastructure needs of municipalities. It has grown far beyond the capability of property tax revenue to address this, so P3s are the answer.”
McCallion pointed to a widening municipal infrastructure gap, one she says the private sector is best suited to fill through building and managing infrastructure assets.
“I was in the construction business for 20 years and I know the private sector can do a better job, no question about it,” she said. “The private sector makes money and the public sector loses it.”
However, what form P3s take in addressing infrastructure needs depends on the circumstances of individual municipalities.
Carl Zehr, mayor of Kitchener, noted that some P3s begin with diverse projects, some of them within the public and institutional sector, that lead to infrastructure development.
The creation of the city’s education and knowledge cluster was endorsed by Kitchener city council in 2004 and assisted by “Kitchener’s own infrastructure stimulus funding plan,” said Zehr. The fund, derived from property tax revenue over a 10-year-period, was established following extensive public and private consultation. It totalled $110 million with $75 million in seed money set aside for partnerships.
The fund helped to encourage the downtown migration of Wilfrid Laurier University’s faculty of social work, the University of Waterloo’s School of Pharmacy and other public-sector entities.
“These public-sector developments at the core of the city triggered significant private sector investment” said Zehr. “We’ve seen $660 million of construction occurring downtown from the time we announced that plan until today, so our investment has been leveraged nine times, while increasing property tax revenue.”
The increased development in turn spurred plans for the Region of Waterloo’s $800-million light rail transit system, due to begin construction in 2014, he said.
While U.S. mayors tend to have more political power than their Canadian counterparts, some lessons from south of the border are applicable here, said Richard M. Daley, former mayor of the city of Chicago.
“The people who are against P3 projects are very, very focused,” he said. “The people who are for them need to be motivated by a champion, a mayor for example. The goal is to elevate those who are in favour of the plans by making their benefits tangible and addressing those who are potentially against it.”
Daley noted that private-sector players who stand to benefit from P3s often wait on the sidelines, allowing government proponents to do the heavy lifting and failing to garner public support while plans are in their formative stages.
“They have a role to educate their own employees (about P3s), to educate their clients, and educate people about their operation and what they’re doing for the good of the community, such as hiring people and contracting,” he said.
“From my perspective, they wait until the elected official comes forward and then they want to become part of the system. But they haven’t been out there dealing with some of the negative impressions people have about privatization.”
Zehr noted that Canada is seen internationally as a model for public-private co-operation.
Stephen Goldsmith, senior strategic adviser, McKenna, Long & Aldridge LLP and former mayor for the city of Indianapolis, said he agrees.
“What Canada has done with P3 best practices, the U.S needs to do,” he said.