| Pension Funds Hail Investment Plan
May 12, 2005 Private sector would build, finance infrastructure Dana Flavelle and Tony Wong, Toronto Star Pension funds and developers say they're ready and willing to help the Ontario government finance and build $30 billion worth of roads, hospitals, schools and other infrastructure projects over the next five years. "Infrastructure projects tend to be ideal for pension plans because they are very long term and very stable and they keep up with inflation," said Lee Fullerton, spokesperson for the Ontario Teachers' Pension Plan, with $85 billion in assets. The plan has been frustrated by the lack of opportunities within Canada, she added. "It's great for Ontario and it's great for us," said Paul Haggis, president and chief executive officer of the Ontario Municipal Employment Retirement System, with $41 billion in assets. Private developers also welcomed the move. The company that's already building a $20 million emergency medical service for the City of Ottawa called such partnerships the wave of the future. "From the government's perspective, you get private sector expertise and a project that will likely come in on time and on budget. From our perspective, you get stable returns and great tenants," said Richard Abboud, president and chief executive officer of Toronto-based Forum Leasehold Partners Inc. The program, one of the biggest spending initiatives in yesterday's provincial budget, is designed to speed up investment in Ontario's aging infrastructure while bringing private sector discipline to capital projects, the government said. "What we're doing is inviting the private sector, if it has the expertise and access to finances not available to us, to participate," Finance Minister Greg Sorbara told reporters at a budget briefing. The projects will go ahead with or without the private sector, government officials said. However, the government was short on details about how the program would work, how much the private sector would contribute and who would own and operate the facilities at the end of the day. Haggis, who met with Sorbara on Tuesday to discuss the program, agreed: "It's a little vague at this point." Other business groups praised the infrastructure program, along with the government's plans to invest $6.2 billion in post-secondary education and skills training, saying they were the highlights in a budget that otherwise ignored corporate Ontario's needs. Small business lobbies wanted the government to cut property taxes, a measure touted as costing the province nothing since municipalities set and collect the taxes. "We got almost nothing," said Judith Andrew, vice-president of the Canadian Federation of Independent Business. Small business pays four to six times what residential consumers pay on property of the same value, she said. "Unless this is addressed, you'll see a hollowing out of the city's core." Manufacturers wanted the province to accelerate the capital tax cuts on investment and help boost the image of manufacturing to entice more young people to work in the sector. "We were quite disappointed," said Ian Howcroft, vice-president, Ontario division, of Canadian Manufacturers and Exporters. The one bright spot for him was increased training in skilled trades because many of his members are facing labour shortages. "The minister heard the door of opportunity knock but failed to answer it," said Len Crispino, president and chief executive officer of the Ontario Chamber of Commerce, who was critical of the increased health care spending. Just how much the private sector might contribute to the $30 billion infrastructure program was unclear yesterday. New Democratic Party leader Howard Hampton, who denounced it as "privatization by stealth," pegged the amount at $12 billion and said it would add $5.5 billion in borrowing costs over the 30-year life of the loans. The private sector has higher borrowing costs than government. Mary Webb, a vice-president at the Bank of Nova Scotia, said there are models for the program in British Columbia, the United Kingdom and Australia. Under those schemes, the private sector raises the money, oversees the construction and in some cases either owns or operates the facility. Some of the funding may come from an existing program that gives municipalities access to lower-cost loans, she said. The government has said it will not hand ownership of any hospitals, schools or municipal sewer or water projects to the private sector. But it hasn't ruled out private ownership of roads, bridges or other transportation projects. The projects will help business by unclogging roads, particularly in southern Ontario, which bears 70 per cent of the province's truck traffic, the province said, estimating that congestion costs business $5 billion a year. The plan will face stiff opposition from public sector unions and teachers, whose cash-rich pension plans are the likeliest participants in the scheme. Union leaders vowed to fight it. "They're not going to use the pension plan money of my members and gamble it on risky ventures like public-private partnerships," said Syd Ryan, head of the Canadian Union of Public Employees. "Not only that, it puts us out of work." Ryan said his union is forming a coalition with the teachers. |
