Unlocking Value in Infrastructure
Published June 2021
IMAGE CREDIT: Let Go Media / Shutterstock.com
Across Canada billions of dollars have been committed to infrastructure projects by different levels of government. In addition to ambitious plans to build new transit lines, hospitals, and arenas, there is also a sizeable backlog of repairs and maintenance that needs to be addressed.
With governments facing extreme fiscal challenges there is an opportunity for the public and private sector to reinvent how they work together to deliver more value for infrastructure investment.
Value can come from paying for new highway lanes through smart lanes that can favour transit and provide a faster option home for commuters. New windows and heating systems for schools can be paid for through energy savings. Affordable housing and community amenities can be built within transit stations.
Value can also come from being less prescriptive in how hospitals should be built and evaluating what is most important to patients’ recoveries. Smaller projects like bridges can be bundled together to bring savings in design, project management, and offsite construction. Using technology can help identify and rectify problems in the design phase.
There are broadly five buckets where the private sector can add greater value:
- Revenue opportunity: where there is an opportunity for long-term revenue through utility bills, user fees, tolls, or rent, there are opportunities for the private sector to finance new infrastructure.
- Leveraging land value: rising land values and scarcity especially in an urban setting provide partnership opportunities, especially when there is a strong need for additional housing or public amenities.
- Reducing capital costs: reducing the cost of building infrastructure frees up government funding that can be spent on additional projects.
- Operating cost reductions: operating costs can represent 80% of the overall cost of an asset, by reducing those costs in the long term it can be used to finance capital investments
- Unlocking economic potential: future tax revenue from new resources or property developments and engaging local communities to invest in their economic future can enable investments in critical job-enabling infrastructure.