Capital Projects: What's Good, What's Bad?
A cursory glance at government budgets across Canada and the size and scope of "capital spending" is quite alarming. Taken together, provincial, territorial and federal capital spending is in the range of $17 billion for the year 2005 alone! What is included as capital spending? Any hard asset, building, road, pipeline, plant and housing, etc. is considered a capital expense. And after years of mismanagement, poor upkeep and neglect, Canada's capital infrastructure is in need of serious repair.
According to one report by the Toronto Dominion Bank the Canadian national infrastructure gap is estimated to be in the range
of $50-125 billion. But what exactly is meant by infrastructure? It's the latest buzzword from politicians and bureaucrats but
how can
we define
it? Perhaps the best definition is to distinguish between core infrastructure and discretionary infrastructure. Core infrastructure
would include projects like highways, bridges, water systems, sewage treatment plants, airports, schools and hospitals. Discretionary
infrastructure spending would include arenas, community centres, football or soccer fields, film theatres and tennis courts.
Clearly, governments should stick to maintaining or improving core infrastructure and leave the market to satisfy the demands for discretionary infrastructure projects. In other words, even though a project may have a P3 designation it is not a good use of tax dollars if it is for discretionary purposes.
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Design-Build-Finance-Operate
