Significant investments have been made in Canada over the past 20 years in mass transit rail projects with many more projects in the planning stage.
Typically, the federal and provincial governments each provide one third of the project capital costs in the form of grant payments during the construction period. These payments do not directly cost the project interest, but the federal and provincial governments bear the borrowing costs of this funding.
The municipality typically contributes the remaining third of capital costs (including responsibility for any cost overruns) and provides an operating subsidy (sometimes with provincial support) which covers the approximately 60% of operating costs which are not covered by farebox revenues.
Under traditional government delivery, consultants employed by government design the project and then put it out for tender for construction by private sector builders (“design – bid – build”). Government retains responsibility for design changes, delays and cost overruns.
Under a P3 model, government consultants still undertake preliminary planning and design but the private sector contractors take on more risk by undertaking to complete the design and construction for a fixed price and provide some financing to guarantee this. Government still bears significant risks of project planning and definition.
Under the enhanced P3 model proposed for CABR, the private sector partner undertakes the planning and development of the project to ensure that it’s able to deliver the ridership revenues and operational performance necessary to make it viable; the government’s risks are very limited.