An alternative to P3s
My understanding is that public-private partnerships, P3s, basically work in the following manner: The government wants to build something such as a school or highway. It then partners with a private sector company to finance and build that thing. Once the project is completed, the government repays the capital and construction cost to the private sector company over a number of years with a guaranteed rate of return. I estimate that the rate of return is quite a bit higher than what is available through GICs or Canada Savings Bonds.
Currently there are literally hundreds of thousands of Albertans, many of whom are seniors, who have fixed rate investments coming due. These individuals will consider themselves lucky if they are able to find a secure investment, such as a GIC or government bond, that pays marginally over two per cent for five years.
If the government is willing to guarantee private sector firms a reasonably high rate of return on their capital, why not guarantee the same rate to Albertans by selling them bonds? Albertans should have the first option to purchase with others, including companies, being able to buy in after a specified date. The money raised would be dedicated exclusively to specific projects.
I see at least two major benefits of implementing this type of financing. The first is it would offer a new investment option to Alberta seniors and other Albertans. Seniors, who need to renew their current investments, could have a secure investment and a reasonable rate of return. A second benefit would be to allow the government, now with cash in hand, to go to an open bidding process for major capital projects rather than negotiating these deals with their select partners. This competitive process might just lower overall construction costs.
Thousands of Albertans would be beneficiaries not just a few carefully selected companies.