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de Bever: It’s not money that’s in short supply for cities

Instead, he says, it’s acceptance of private capital

Tim Querengesser is senior editor with Alberta Venture. Email Tim

Jun 24, 2014

by Tim Querengesser

Leo de Bever invited mayors, city planners and other municipally minded folk in the room in Edmonton to throw tomatoes at him. “I’d like that,” he said.

The reason for de Bever’s joking challenge was that the current but soon-to-retire CEO of AIMCo, Alberta’s investment management corporation, was addressing City Age, an urban conference held over the past two days in Alberta’s capital that has heard more than a few city policy-makers talk of their frustrations with finding money to build badly needed infrastructure. While many at the conference have rightly linked these frustrations to a lack tax revenues – and the related short shrift on taxation powers that cities get from the provinces and the federal government – de Bever argued that there are sources of capital that many cities ignore or are ill equipped to take advantage of.

“There is no shortage of capital to finance infrastructure,” de Bever said, pointing to private capital. What’s actually in shortage, he said, is Canadian cities that have their infrastructure projects adequately prepared to accept private capital injections. He said there is also reluctance amongst politicians and citizens to fully embrace private investments in these public needs. Indeed, as became clear over the two-day conference, the balance between public and private investment in municipal infrastructure will be the discussion shaping our cities over the next generation.

The majority of private capital investment in Alberta is currently going to projects on brownfield sites, de Bever said. The comparative lack of private investment in larger, more critical pieces of infrastructure like bridges, roads or light-rail transit, is due to a dearth of preparation on the part of these bigger projects to embrace private capital and create win-win situations for all involved, he argued. While the needs are big at home, de Bever said developing countries such as Brazil have better embraced private capital. This, he said, allows capital investors to reap reasonable profits for taking on the risk of investment. Of course, what de Bever did not point out is that many of the corrupt or dysfunctional federal and state governments in these countries have made a dependence on public investment for infrastructure next to impossible, meaning private capital is the only infrastructure capital. So, while de Bever is right that Brazil is more welcoming of private capital to build water infrastructure, it’s a little like saying someone with a wound in a country without public healthcare is more willing to pay for a doctor.

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Still, as de Bever and other private-capital minds at City Age argued repeatedly, there is no free lunch when it comes to finding money for projects. And, they said, used in the right way, private capital can reap real benefits for cities. Consider the example of EPCOR, a private company wholly owned by the City of Edmonton that provides water and electrical transmission services in Alberta. As Edmonton Mayor Don Iveson noted at the conference, without EPCOR’s yearly revenues from its private operations, Edmonton would have to increase its taxes by 12-13 per cent to maintain services.

What can private capital also do well for cities? De Bever says cities have “accumulated more infrastructure than they can maintain,” suggesting that private ownership of some of this legacy infrastructure could alleviate that burden. And, he says, if projects are structured properly to allow the private investor a modest seven per cent return on their risk, Canadian cities could be able to build the bits they need to grow rather than waiting for ages for senior governments to chip in cash.

Whether politicians and citizens agree with de Bever is the real question. But whether that will change, as public transit projects with huge price tags in Edmonton, Vancouver, Toronto and other cities wait to go ahead, is the debate of our times.

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