No warning, consultation sounds like a city move

It was tough to keep a straight face when Mayor Sam Katz complained this week about how the province had unleashed new rules for municipal public-private partnerships (P3s) without warning or consultation.

"There was no dialogue," Katz told reporters about the introduction of Bill 34. "This just came out of nowhere."

Following hot on the heels of the recent water park/hotel debacle on city-owned land near The Forks, only the latest in a series of shock-and-awe policy ambushes on council by the mayor's office and executive policy committee, it was funny hearing Katz complain about being taken by surprise.

That having been said, it was never entirely clear why the province introduced new rules for P3s, and why now.

Finance Minister Stan Struthers, who introduced the law, only indicated he wanted increased accountability and transparency when municipalities elected to use a P3 involving a private entity to build large infrastructure. The city has done this many times, paying nothing up front and a relatively small annual sum to a private partner over a long amortization period to get costly bridges and freeways built. But Struthers would not say Bill 34 was in response to any specific concern or project.

The city's response was hyperbolic, to say the least. Without indicating specifically why, both Katz and finance committee chairman Coun. Scott Fielding claimed the new rules would kill future P3s. However, there was no compelling example of how that would happen.

The new rules would impose three demands on P3s: first, that there be a mandatory comparative analysis to ensure the financing of infrastructure is better in the long run than paying for it up front; second, that a summary of this analysis be made public early in the tendering of the project as part of a broader consultation; and third that a third-party "fairness monitor" be assigned to oversee the tendering and management of the project.

In an interview, Fielding acknowledged the city is already doing most of what the province is asking for in Bill 34. However, there are a couple of items that have knickers in a knot at city hall. First and foremost, that fairness monitors be mandatory on all projects of $20 million or more. Currently, the city only uses fairness monitors on projects greater than $50 million. Fielding said the added cost of the monitor -- which he estimated at $500,000 -- would essentially ruin the cost-benefit of a P3. Exactly how an additional cost that is only about 2.5 per cent of a $20-million project (much less for projects up to $49.99 million) could completely upset the economics of a P3, is not entirely clear. The city's belief that it does is, however, quite clear.

The city is also upset about a requirement that all reports from the fairness monitor be reviewed by Manitoba's auditor general. Fielding said this amounts to yet another level of red tape that could delay P3s, putting them in jeopardy. That review, however, will only be done well after the tendering of a P3. In fact, given the monitor has until two years after the completion of the project to file a report, the auditor general's review has no impact on the approval of P3s.

The city believes, and rightly so, that it is a leader in P3 execution and management. However, it has not always approached these deals with adequate transparency and accountability.

The best example of this was last year's deal with Veolia, a multi-national water and sewage contractor, to oversee construction and operation of Winnipeg's new sewage treatment facilities. Although only part of the Veolia deal could be considered a P3, the tendering and negotiations were rife with procedural misdemeanours. Few believe there was any transparency or accountability.

No one from the province will say it on the record, but quietly it's pretty clear Veolia was a central event in the origin of Bill 34. Public-sector unions were infuriated by the Veolia process, and are generally fearful of P3s because it means less work for public-sector workers. These are unions that have the ear of the NDP.

Is this just pandering to labour? The requirements imposed by Bill 34 are fairly reasonable and can easily be defined as best practices. Even P3 Canada, the federal program that contributes to municipal partnership projects, generally likes to see fairness monitors on any project it funds, and it now considers bids of $20 million or more. As for the oversight from Manitoba's auditor general, that's done well after the awarding of a P3 contract. Only municipalities that construct poor P3s have anything to fear from that accountability measure.

Winnipeg may not like being told it has to change the way it does something it believes it already does pretty well.

On the other hand, it's pretty difficult for Katz and Fielding, among others, to argue against greater transparency and accountability, especially when it has not necessarily been their strong suit.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 26, 2012 A8