More public-private partnerships coming
Business leaders look forward to new opportunities building and leasing back government building projects.
IQALUIT Northern business leaders are pleased with the GNWT’s plan to invite private businesses to invest in public building projects.
The move toward public-private partnerships, dubbed as “P-3s,” was evident in the 1998-99 budget handed down last week in Yellowknife.
By its own estimate, the GNWT predicts that public-private partnerships will create investments of up to $100 million for each of the next two years.
That’s in addition to the government’s own $140-million annual capital spending program.
“There can be a lot of intellectual arguments about whether it’s appropriate, socially, to have the private sector financing some of this infrastructure,” says David Connelly, the president of the NWT Chamber of Commerce.
“But there’s not enough cash for the government to do it all on its own, so the practical question is to have it or not to have it.”
A creative alternative?
The NWT Chamber of Commerce described the move toward so-called public-private partnerships as a “creative alternative” to dependence on the mining sector, especially given the current slump in gold prices.
One form of private-public partnerships would use private money to develop large-scale transportation projects, such as deep-sea ports, airports and roads.
The government would then lease the facilities back from its private partners.
In the Baffin, the Inuit-owned Qikiqtaaluk Corporation is already negotiating such a contract to build a new regional hospital.
Financing spread out over time
The advantage of this arrangement, says Connelly, is that instead of paying 100 per cent of the cost of new infrastructure, which residents will enjoy for decades to come, financing is distributed evenly to future generations.
“It matches the expense of the infrastructure to the periods in which it’s being used,” Connelly said.
Greater corporate interest in large infrastructure projects can also come in the form of managment and service contracts.
This, in turn, can accelerate the transfer of technology, skills and training to the North, Connelly said.
Praise for investment tax credits
The GNWT’s proposed tax-credit scheme for northern investors also earned praise from the private sector.
So did the government’s commitment to encourage more private homeownership through its Accelerated Home Ownership Program, which the GNWT expects will result in the construction of 1,000 new housing units over the next two years.
“Not only are 1,000 homes good for the social side, to the extent that the components can somehow be manufactured in the Northwest Territories, and assembled in the communities, there’s an opportunity there for industry, ” Connelly said.
The chamber was disappointed, on the other hand, to see the GNWT still has no plans to remove the goverment’s one per cent payroll tax.
According to the chamber’s analysis, the tax is a expensive administrative burden, costing almost as much to collect as it generates in revenue.
“Approximately $13 million is collected, and it costs approximately $12 million to collect,” Connelly said. “The economic argument is, then, wouldn’t it be better to leave the $13 million out in the communities? You don’t create wealth by the administration of collection.”