Winnipeg faces C$7.4bn infrastructure deficit(3)

The Canadian city of Winnipeg faces an infrastructure funding deficit of C$7.4 billion (€4.8 billion; $6.8 billion) over the next ten years and will increasingly look to the private sector to help it fill that gap, Russ Wyatt, the city’s Secretary of Strategic Infrastructure Renewal, told InfrastructureInvestor.

Winnipeg: embracing PPPs for infrastructure

At a contentious city council meeting last week that lasted well into the night, Wyatt presented two reports which revealed that Manitoba’s provincial capital has a C$3.8 billion funding deficit for meeting existing infrastructure needs, a C$3.6 billion deficit for new infrastructure.

The total, C$7.4 billion, is nearly ten times the C$800 million deficit Winnipeg estimated in 1998. It also illustrates the problems faced by many of Canada’s less populous municipalities struggling with similar shortfalls.

Like the US, the Canadian government uses gas tax revenues to finance infrastructure spending. The municipal gas tax is only guaranteed through 2012, though. Since it is apportioned to provinces on a per capita basis, less populous regions are facing reductions in federal resources for their infrastructure needs.

To address these issues, in the fall of 2008, Winnpeg Mayor Sam Katz appointed Wyatt to provide policy recommendations to the problem. Wyatt said his fellow city council members reacted with either “surprise or shock” to his findings, which were received as information and will be used to shape public policy solutions of the problem.

Russ Wyatt

“The hope is that the mayor of the city will provide direction on the next step or a gameplan or a vision as to how we can go about [meeting] this challenge of lack of infrastructure funding,” Wyatt said.

The solution, he said, will involve greater private sector participation in financing the city’s new infrastructure.

“Because of the challenge that we’ve been faced with . . . we have started a PPP project in the city,” Wyatt said. “We haven’t done [PPPs] for quite a number of years. We just started doing them again”, he added.

While many populous Canadian provinces, such as British Columbia and Ontario, have quasi-governmental organizations which help them implement public-private partnerships (PPPs) for infrastructure, Manitoba and several other provinces have no similar organisations, leaving the burden of implementing PPPs to their individual cities.

One sector of opportunity for the private sector will be Winnipeg’s water infrastructure. At the city council meeting last week, Winnipeg councilors voted 10-6 in favor of spending C$800 million to $1.8 billion to create a new water utility and authorise it to contract with a “strategic partner” from the private sector. It is unclear, though, what the strategic partnership would entail, Wyatt said.

Other priorities will include a rapid bus transit system, existing roadway widening, underpass construction and social infrastructure such as libraries and police stations.

Wyatt envisions many of these projects will be carried out using PPP-type arrangements. Winnipeg is pursuing PPPs for a C$200 million rehabilitation of its Disraeli bridge and an extension of the Chief Peguis Trail, a road in the north of the city.

Other PPPs in the immediate future will include the building of two police stations, a new downtown public safety building and a centralised public works facility.

He warns, though, that there is currently a limit to how much the city can use PPPs.

“PPP is more a means to an end. Even if we expand our PPP portfolio, we still have to finance the lease payments of that portfolio,” he said. “We have to find some new sources of revenue.”

An additional complicating factor is the city’s climate. Winnipeg’s average annual temperature is about 2 degrees Celsius, according to WorldClimate.com, making the city of 650,000 “one of the most severe climates to build infrastructure”, according to Wyatt.

Still, Wyatt is hopeful new developers and investors will enter the Winnipeg market since the city has experienced 68 percent inflation on its construction costs between 2000 and 2008 – a development which he blames largely on the lack of competition in the construction market.

“It would be a positive thing if we could get more competition,” he said.