by Construct Connect™Daily Commercial News

25th Annual CCPPP National Conference on Public-Private Partnerships

NOVEMBER 13, 2017 WWW.P3-2017.CA ISSUE 3

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The new CIB will attract the expertise needed, says Fukakusa

DCN/JOC LIVE BLOG: Sidewalk Labs will bridge the divide between urbanists and technology

CCPPP

New Canada Infrastructure Bank (CIB) chair Janice Fukakusa told delegates attending the recent Canadian Council for Public-Private Partnerships conference in Toronto that the CIB will soon have a CEO and board of directors with broad private sector experience.

SEE VALUE, PAGE 2

The following is a live blog transcript from Dan Doctoroff’s keynote address on the second day of the CCPPP conference.

Dan Doctoroff, the CEO of Sidewalk Labs, was the keynote luncheon speak-er for the second day of the Canadian

Council of Public Private Partnerships P3 conference held recently in Toronto.

Doctoroff worked with Mayor Mike Bloomberg to assist with the financial recov-ery of New York City after 9/11, and then went on to act as CEO of Bloomberg LLP before joining Sidewalk Labs, a subsidiary of Google.

“Our work over the next two years tell us it is possible to accelerate innovation in urban systems,” Doctoroff said, and made a point of

telling Toronto that it is the ideal laboratory for testing out the ideas Sidewalk Labs hopes to implement.

Sidewalk Toronto will bridge the divide between urbanists and technology, Doc-toroff said, and by capturing the energy of the community and government “you have a chance to do something that’s never been done before.”

Toronto, Doctoroff said, faces problems from traffic to housing opportunity, to find-ing opportunity for all residents, and the municipal government has limited resources with which to deal with these problems.

“But these are challenges to every world-class city,” Doctoroff said.

Public administration can fall short and

privatization is not always the answer, but there is a third way through partnerships between government and the private sector.

In New York, Doctoroff said, they “unlocked value in the air,” citing the High Line walking park, which converted an abandoned freight line that was “one court decision from being torn down.”

Instead, the High Line became an ele-vated park and walkway, even though at the time the city was in financial freefall.

The city simply didn’t have the money to create the park, but but by rezoning and creating “air rights” so that if one wanted to build higher, they had to buy rights from whomever held the rights on that part of the line.

Today the High Line serves as a spine of social interaction and draws eight mil-lion visitors a year.

“We also created value from the future,” Doctoroff said by building on the Hudson Yards, Manhattan’s last underdeveloped train yard.

They believed a new subway station in the area would generate new interest and revenue in the area, and now the #7 train station will pay itself off int he next 20 to 30 years.

Hudson Yards is also set to become the largest private real estate development in North American history.

In New York, Doctoroff said, they “unlocked value in the air,” citing the High Line walking park, which was an abandoned train freight line converted into an elevated park and walkway.The High Line now draws eight million visitors a year.

INSIDE THIS ISSUE

Urban Infrastructure Super Session.....................4

Don WallStaff Writer

Infrastructure stakehold-ers got their first look at new Canada Infrastruc-

ture Bank (CIB) chair Jan-ice Fukakusa recently as she laid out the latest vision of the CIB’s mandate at the annual Canadian Council for Public-Private Partner-ships (CCPPP) conference held in Toronto.

Fukakusa, a former CAO and CFO of the Royal Bank

of Canada, was appointed to the position in July. The CCPPP keynote speech on Nov. 7 was her first public address as head of the newly created Crown corporation.

Immediately after Fukakusa’s speech, a panel of five legal and investment specialists with experience in P3 projects worldwide spent an hour commenting on the upcoming CIB rollout and offering recommendations for the new regime.

“I was very impressed by Janice’s view of the role that the CIB will play,” said Nick Hann, senior managing director at Macquarie Capi-tal Markets and a director of the CCPPP, in an interview.

“When she talked about it being an effective coun-terparty to private investors I think that was very well said.”

Jane Bird, a senior busi-ness advisor with Bennett Jones LLP, also indicated

approval of one of the key functions Fukakusa out-lined for the bank.

“There is a gap between the expertise that is in this room and the experience of the public sector with respect to more complex financial transactions and structuring,” said Bird. “The bank has a role to play in bridging that gap and in creating, as the chair said, a bridge between the expe-rience and capacity that lies here and will lie at the bank, and assisting levels of government as they look at some of the more complex financing structures.”

Fukakusa said the CIB was a new tool in the fed-eral government’s toolkit to meet infrastructure needs.

“We aim to attract private investment and expertise to priority revenue-generat-ing projects that might not otherwise be commercially viable,” she said.

“In other words, the CIB will complement existing models, such as P3s and traditional government funding for public infra-structure. It’s also impor-tant to note that we will not compete with private-sector investment where it already exists.”

That was a newly enunci-ated principle, said Hann.

“I think the key words were that she sees the CIB as being complementary to Canada’s successes in P3s,” he said.

“I think the membership of the CCPPP was quite con-cerned when the bank was announced that it was per-

haps an alternative model and maybe even a compet-ing model to what has been a successful model.”

Fukakusa’s statement indicated the CIB would take P3s to the next level and its projects would not become “an alternative uni-verse,” Hann said.

Fukakusa described how the CIB will operate at an arm’s length status.

“We at the bank have independence to operate as a sophisticated counter-party to private investors,” she said. “We have indepen-dence to conduct due dili-gence, to determine which projects meet bankable cri-teria and to structure, nego-tiate and execute projects.”

Counterparty, said Hann, is a “magic word.” The bank will step into situations that are otherwise economically viable but where there are gaps and pull together par-ties to launch new projects.

“I can think of lots of projects that would benefit from what we expect the products of the CIB to be,” said Hann.

He listed bundling proj-ects in smaller and indig-enous communities and water and wastewater, tele-communications, transit and mining projects as via-ble candidates.

Fukakusa enumerated three functions of the bank – to “make and manage investments in revenue-generating infrastructure in the public interest,” to develop a centre of expertise in those types of projects to serve the national inter-

est, and to collect Canadian infrastructure data to enable better-informed decisions.

The CIB will invest $35 billion in the next 11 years, Fukakusa said.

Addressing where risk will lie, Fukakusa said once investors are attracted to projects they would tradi-tionally find challenging, they “will take on additional risks relating to demand or revenue. This will provide extra incentive for private sector partners to ensure a project is well managed, with the benefits of private sector expertise and disci-pline.”

Hann said in failed projects around the world, one problem “is that often government agencies have been unsophisticated and allowed the private sec-tor to get the government to take the first risk on a project. I think we use the word de-risk the project for the private sector, and that I don’t think is the role of the CIB. The role of the bank is to encourage the private sector to take as much risk as possible, not to de-risk a project through intensive structuring.”

Panellist Jordan Eizenga, a partner in Infrastructure M&A at Deloitte, said the CIB would have the benefit of hindsight with P3 arrange-ments in the U.K., the U.S. and Australia identifying best and worst practices.

The CIB “needs to be eternally diligent with its traffic forecasts and the economics of that,” said Eiz-enga.

2 WWW.P3-2017.CA NOVEMBER 13, 2017

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Value extracted ‘from the streets’ did not work in New York

CCPPP

Dan Doctoroff, CEO of Sidewalk Labs, worked with then-New York mayor Mike Bloomberg to assist with the financial recovery of that city after the 9/11 terror attacks. He believes Toronto is the ideal laboratory for testing out some Sidewalk Lab ideas.

Continued from Page 1

Value in land was another approach they took, Doctoroff said. The city recognized it was too dependent on the financial industry, and made it easier for higher education institutions to build on Roosevelt Island. Cornell Tech, currently underway, will be an environmentally sustainable campus that will house 2,000 students and new industry.

“We’d like to do something similar involving urban innovation in Toronto,” he said.

Value on sidewalks, Doctoroff said, was done by adapting 7,500 public pay phones across the city into free wifi kiosks called LinkNYC, which provide high speed broadband wifi as well as free local calling. Advertising and additional revenue has made the venture profitable.

New York tried, but did not succeed to unlock value from the streets, Doctoroff said. Conges-tion pricing would have discouraged people from driving and reduced traffic, as well as become a source of revenue. But the state legislature ulti-mately killed the proposal, Doctoroff said.

However, they were successful in unlocking the value of government agencies, he said. After 9/11, officials were concerned not that people would have problems finding a place to live but if they would flee.

But by using the Housing Development Agen-cy, a housing bank, New York was able to lever-age and contribute its annual contribution to the annual housing plan, and the city was able to pre-serve 185,000 units of affordable housing.

Bloomberg and Doctoroff realized no private company could build the High Line or extend the No. 7 train, but government couldn’t do it alone and needed able partners in the private sector while protecting the common good.

Canada is fortunate to have a similar approach to the public and private sectors, and this was a big reason Sidewalk Labs went to Waterfront Toronto to implement their ideas.

Sidewalk Labs wants to provide transport options and innovation regarding energy

and waste, as well as adapt-able housing. Public parks should be usable day and

night and during all seasons, and digital technology should be helpful and also secure,

Doctoroff said. Visit ww.dcnonl.com for

more live blog entries.

NOVEMBER 13, 2017 WWW.P3-2017.CA 3

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4 WWW.P3-2017.CA NOVEMBER 13, 2017

Invest in Canada Toronto’s mayor urges pension fundsDon WallStaff Writer

Toronto Mayor John Tory has issued a plea to decision-makers at Canada’s major pension funds who have been investing billions in overseas projects to start looking in

their own backyards for infrastructure investment oppor-tunities.

Tory made the remarks on day two of the Canadian Council for Public-Private Partnerships (CCPPP) annual convention held in Toronto recently. He also urged private sector infrastructure stakeholders to come forward to him with ideas for a new wave of projects.

Tory and federal Infrastructure Minister Amarjeet Sohi were panellists at the CCPPP keynote session billed as The Urban Infrastructure Super Session held Nov. 7.

“The frustration for me, when I go to India and there’s an article in the Indian newspapers when I was there six or eight months ago extolling all the investments that have been made by our pension funds,” said Tory.

“Similarly, when I was in China, our pension funds with big pools of wealth are known.

“We haven’t yet been successful, and I don’t assess the blame but I share it, in making sure we have present-ed things on a scale that would attract that same sort of investment and partnership to attract those same pools of wealth where they are resident and where the money comes from.”

Tory targeted affordable housing and transit as two sec-tors where the city needs an influx of ideas and enterprise to ensure Toronto can continue to attract investments such as Google’s recently announced waterfront project. Quay-side from Google/Alphabet subsidiary Sidewalk Labs con-tinues the momentum on the waterfront established by projects from Corus, George Brown College, Tridel and Menkes, Tory noted.

An essential element of the Port Lands plan is water-front LRT, said Tory — the mixed-use communities in the area cannot wait 20 years for LRT to be in place, he said.

Sohi was asked after the panel session whether there would be federal funding for Toronto waterfront LRT.

“As far as the City of Toronto is concerned, we have

given them a considerable amount of money in phase one to repair existing infrastructure and also to design large projects. Also, we have given them money for the water-front including flood mitigation and we will work with them on the expansion of the public transit systems on the

watefront,” said Sohi. Referring to Quayside, he added, “It is a very exciting

project and it aligns with our priorities on sustainable communities and affordable housing choices for Canadi-ans and we are looking forward to working with them.”

In his address to the CCPPP delegates Sohi listed infra-structure spending rolled out since the first federal bud-get in the spring of 2016, including phase one funding for 4,000 projects with $35 billion spent, extensive spending on transit including 900 old buses replaced, and hundreds of water and wastewater projects funded.

His department has recently been consulting with prov-inces and municipalities as the government moves into the phase two, he said. The priorities in phase two will be transit, green infrastructure, social infrastructure, trade and transportation projects and rural and northern com-munities.

Sohi also talked about the creation of the Canada Infrastructure Bank (CIB) as an “optional” tool for the government that will leverage private sector investment in revenue-generating projects to make public funds go further.

Later, asked about the protection of the public interest in the choice of CIB projects given the recent folding of the PPP Canada agency, he explained, “As far as the Canada Infrastructure Bank is concerned, we will only undertake projects that will serve the public interest. Once that deter-mination is made we will leave it up to the expertise in the infrastructure bank and they will design these projects to make sure the public interest is protected.”

Sohi offered CCPPP delegates details of a new federal initiative announced in the 2017 budget, the Smart Cit-ies Challenge. The program is intended to encourage cit-ies to improve services and boost technical infrastructure. Examples he gave included integrating autonomous vehi-cles and encouraging innovations to reduce infant mortal-ity.

There will be allocations of $50 million to one large city with the best proposal, two $10-million grants to medium-sized cities, $5 million to a small city and the same amount to an indigeous community.

Sohi explained the initiative was a partial component of a broader technology agenda.

“We will be investing close to $300 million in the Smart Cities Challenge,” he said.

“The focus...is to mobilize resources, local expertise and technology and utilize data to improve efficiency and ser-vices within the system. We believe $300 million will act as a catalyst to unlock a large amount of private sector and institutional (expertise) to look at technology to improve services and to improve livability in communities.”

LINDSEY COLE

Toronto Mayor John Tory and Federal Minister of Infrastructure and Communities Amarjeet Sohi recently spoke at the 25th annual Canadian Council for Public-Private Partnerships National Conference in a keynote panel discussion entitled the Urban Infrastructure Super Session.

NOVEMBER 13, 2017 WWW.P3-2017.CA 5

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