Procuring New Infrastructure for Canada s Municipalities

Transcription

1 1 V E R K I M I C H A E L T U N T E N G - H E E N A N B L A I K I E L L P C A R D I F F 2 2 O C T O B E R, Procuring New Infrastructure for Canada s Municipalities Public-Private-Partnerships and a Commonwealth-Wide Exchange

2 Agenda New Infrastructure for Canada s Municipalities 2 Challenges facing Canadian Municipalities Alternate Forms of Infrastructure Procurement Case Studies

3 Agenda New Infrastructure for Canada s Municipalities 3 Challenges facing Canadian Municipalities A Municipal Infrastructure Deficit Canada s Federal Dynamic Funding new Infrastructure Alternate Forms of Infrastructure Procurement Case Studies

4 Challenges Facing Canadian Municipalities 4 Canada s municipalities are experiencing sustained population growth Almost 70 percent of Canadians live in urban areas Toronto, Montreal and Vancouver account for 35 percent of Canada s population

5 Canada s Urban Reality

6 Challenges Facing Canadian Municipalities (cont d) 6 Canada s municipalities are dealing with a generation of delayed repairs to existing infrastructure (estimated at CA$150 billion) New infrastructure is needed to meet the needs of a growing population Municipalities own over half of Canada s infrastructure, but collect less than 10 percent of taxes

7 Agenda New Infrastructure for Canada s Municipalities 7 Challenges facing Canadian Municipalities Alternate Forms of Infrastructure Procurement The Traditional Approach to Procurement Risk Transfer to the Private Sector Municipal PPPs: When? Case Studies

8 Alternate Forms of Infrastructure Procurement 8 Traditional Model Municipality defines the specifications of the deliverable, entering into multiple contracts with various specialists Capital cost of the project, and cost overruns, are borne by the municipality Maintenance costs, which may or may not be included in the initial budget, are municipality s responsibility

9 Alternate Forms of Infrastructure Procurement (cont d) 9 Public-Private Partnership (PPP) Municipality specifies requirements in terms of performance and availability Private sector partner designs, builds, finances and operates/maintains an asset to meet those requirements Municipality does not make any payment until the asset is delivered in accordance with requirements; private-sector partner is responsible for cost-overruns

10 Alternate Forms of Infrastructure Procurement (cont d) 10 Are PPPs Appropriate for Municipalities? Can performance requirements be quantified? Is there sufficient private sector capacity and interest? Is the private sector suited to take on the risk? What is the term of the project? Is there scope for operations/maintenance/innovation? Greenfield vs. brownfield projects Transaction costs relative to overall project size? Can municipality afford the annual costs upon delivery?

11 Agenda New Infrastructure for Canada s Municipalities 11 Challenges facing Canadian Municipalities Alternate Forms of Infrastructure Procurement Case Studies Goderich Water and Wastewater System Toronto Light Rail Transit Projects

12 Case Study Goderich Water and Wastewater System 12 Goderich is a city of approximately 7,500 inhabitants, located 230 km northwest of Toronto on Lake Huron.

13 Case Study Goderich Water and Wastewater System (cont d) 13 Project Requirements Deliver water and wastewater services consistent with current service levels and compliant with applicable legislation Project proponent (Veolia Water Canada) was expected to make capital improvements to the facility during the life of the agreement (scope for innovation)

14 Case Study Goderich Water and Wastewater System (cont d) 14 Project Timeline and Features Financial Close: December 2000 Initial agreement called for a contract term of five years with possibility of renewal (it has since been renewed twice) Agreement calls for operation and maintenance of water and wastewater treatment facilities, water distribution system Goderich retains responsibility for billing, equipment risk; Veolia assumed servicing risk

15 Case Study Toronto Light Rail Transit Projects 15

16 Case Study Toronto Light Rail Transit Projects (cont d) Project Features Design-Build-Finance-Maintain of 19-km light rail line running through mid-town Toronto The Toronto Transit Commission will operate the lines Project consists of 33 stations, connects to 54 bus routes Aims to reduce traffic congestion and greenhouse gas emissions, stimulate economic development Request for Qualifications issued January 2013, project completion expected

17 Sources 17 Federation of Canadian Municipalities ( The Canadian Council for Public-Private Partnerships ( Institut National de la Recherche Scientifique

18 New Infrastructure for Canada s Municipalities 18 Thank you! Verki Michael Tunteng Heenan Blaikie LLP Tel 1 (416) vtunteng@heenan.ca