CR: In many cases yes, because the payments are amortised over many years, just like a home mortgage.
LAST YEAR, WHEN WINN IPEG UN VEILED A $7.4BN INFRAS TRUCTURE DEFICIT, ONE OF THE CITY COUNCILORS SAID 'EVEN IF WE EXPAN DOUR PPP PORTFOLIO, WE STILL HAVE TO FINANCE THE LEASE PAYMENTS ON THAT PORTFOLIO'. SO ISN 'T THERE A LIMIT TO HOW MANY VAILABILITY PAYMENT-BAS ED PPPS CAN BE DONE WITHOUT NEW REVENUES?
CR: Absolutely, and that's true of "traditionally financed" infrastructure as well. I'm not saying that PPP is new money. That's a misconception that some have, that the PPP model somehow creates a payment stream out of nowhere. If you need the infrastructure, if you don't have the capital, you don't have the borrowing power to go out and borrow to build it yourself, it's either pay me now or pay me later, right? A city has to be able to deliver services, period. So whether you borrow it to build it yourself or whether you engage a private partner and pay for it out of a stream of availability payments, you still have to pay for it. But value for money and lifecycle maintenance are key factors that should be considered in the affordability equation. If the project can be delivered on time, on budget and significantly reduce the long-term maintenance costs, then the government will definitely save money in the long term. Looking at the interest costs alone isn't enough, you have to evaluate the significant benefits of transferring risks to the private sector.