January 09, 2002, Backgrounder - The York Region Rapid Transit Public-Private Partnership

Question:

Why use a private/public partnership to develop a rapid transit system? Since the private sector is interested in profit, won't fares go through the roof? (Look at Highway 407)

Answer:
There are many reasons as to why the Region is attempting to form a Public-Private Partnership to develop a rapid transit system:

The Region needs an extensive rapid transit system, estimated at $2.4 billion to $4.1 billion, over the next two to three decades to meet its transportation needs and it cannot finance this development through traditional means (i.e., property taxes and development charges)

Public-Private Partnerships are being used increasingly the world over to deliver all forms of infrastructure and services faster and more affordably

PPPs have the potential to lead to more innovative solutions by combining the experience and knowledge of the public sector in addressing public needs and the expertise of the private sector in transportation technology, financing, project management and creative problem solving

Both the Federal Government and the Province are increasingly tying their funding programs to Public-Private Partnerships. Successful formation of a PPP will strengthen the Region's chances of obtaining such funding, which is critical for implementing rapid transit.

The fact that the private sector is interested in profit does not necessarily mean that the fares will be going through the roof. The right private sector partner will be able to implement a more innovative, efficient and effective rapid transit solution that will be a win-win for the riders and the company. Also, the issue of fares will be one of several items to be negotiated with the successful private sector partner. It is possible that the agreement with the private sector partner will stipulate specific rules on fare increases.

Question:

What role will the Regional Municipality play, if the entire system is planned, developed, managed and operated privately?

Answer:

We are at early stages in forming a PPP. We do not know at this time whether the private sector will be responsible for some or all of the functions raised in the question, as well as financing.

Typically, successful partnerships are formed by taking best advantage of all of its partners � the public sector and the private sector carry out responsibilities and assume risks that they are each best equipped to do. The roles and responsibilities of the partners will be determined as part of the negotiation process that would precede the formation of the PPP.

While we do not know the specific roles of the two sectors in planning, developing, financing, designing, constructing and operating the system, it is likely that both sectors will have responsibilities in each of the functions. Typically, the public sector retains the public policy function as a minimum to safe guard public interest.

Question:

Given that taxpayer's money will constitute a large piece of transit funding, how can taxpayers be assured that their interests would be preserved in a PPP?

Answer:

Protecting the interests of the taxpayers is one of the key responsibilities of the Region and its public sector partners as they enter into PPP negotiations. Detailed technical, financial and legal evaluations will be carried out of the private sector submissions throughout the PPP process to ensure that taxpayers receive a positive benefit from the process. All key decisions of the PPP process will be made by the Regional Council, acting on behalf of the taxpayers.

Question:

How will having a private partner speed up development?

Answer:

Just having a private sector partner will not speed up development. Having the right private sector partner with the right ideas, skills, expertise and financial strength is likely to. The aim of the PPP process is to attract such a partner to the table and to negotiate a deal that is win-win for both the Region and the partner.

Question:

What checks and balances would be in place to prevent cost overruns that might have to come out of the public purse?

Answer:

The PPP process has the following key steps, all of which are designed to lead to the best partner, best deal and best project implementation to minimize risks to the public sector. They are:

1. Request for Qualifications (RFQ): The goal of this phase of the process is to qualify several private sector teams for proposal stage, based on detailed technical, financial and other information supplied.

Request for Proposal (RFP): The goal of the RFP phase is to solicit detailed proposals from the pre-qualified teams and to select the best partner from the proponents. The RFP document will stipulate the information to be supplied in the proposal, including matters related to financial risks such as cost overruns.

Legal Agreement: This phase involves the development of a detailed Agreement between the public and private sector partners defining their respective roles and responsibilities, possible rewards and penalties etc. This will provide an opportunity to build-in necessary checks and balances to protect public interest.

4. Ongoing Project Management and Oversight: Once the partnership is in place, the Region will establish a project management team to liaise with the private sector partner, to review and monitor the project and to administer the terms of the agreement. This will ensure that the public sector interests are protected as per the agreement.