Why P3’s Don’t Work

P3’s, the glorious neoliberal solution to the systemic under funding of Canadian municipalities, have once again shown why they do not work. Today, as reported in the Ottawa Citizen, the developer of the $36 million Orleans art center is asking for a public contribution beyond the initial agreement. Forum Equity Partner’s Inc. is building the facility and leasing it back for the city for 30 years. Indeed P3’s are useful leveraged government assistance to attract private capital. While such agreements are meant to reduce the public risk, in most cases in fact, they only obscure the true cost to the public. In most cases such as the Daily Building in Ottawa, LeBreton Flats, or more famously the Baltimore Inner Harbour development, private sector partners have come back to the public treasury and demanded additional funds. In other cases, the developer has been bolder and request a complete rewriting of the contract if the profits to not meet their expectations. The Orleans redevelopment follows this trend. Forum Equity Partner’s has requested the City waive $223,000 in fees, threatening to cancel a proposed senior’s park as part of their bid to have the terms revisited and to extract additional public funds.


Mr. Abboud, the firm's president, is correct in arguing that additional risks were added to his development, though, once again this shows how P3’s have a perverse organization or risk. The request for new public funds during the final development stages are in fact the general rule rather than the exception in this deals. As many scholars have noted, P3’s are organized for the public to take all the risks, and for private firms to reap the rewards. Thus, when cost overruns are faced, rather than assume these costs themselves, private developers turn back to the public for additional funds (in the most extreme cases these take the form of bailouts of the developer). If the public is on the hook for more investment once a deal has been struck, we have to wonder why bother with P3’s at all? In fact over the long-term these projects tend to cost more to cities since they must not only pay the complete cost of the project over time, and the additional cost of providing land, services, and other favours to the developer, but also a respectable rate of return to the developer. Defenders of the public good have long argued that such conditions are perverse abuse of public funds – the recent blackmail by Mr. Abboud is just once more example of why P3’s do not work.