A Model that Addresses Infrastructure Demand

Labourers’ International Union of North America (LiUNA)

The Labourers’ International Union of North America (LiUNA) is a National Union representing over 500 000 members – over 110 000 in Canada with an International Office in Hamilton, Ontario. It has Local Unions across the country and is the most common union of construction, healthcare, waste management, and show service workers in this country. In fact, LiUNA, established in 1903, is Canada’s largest Building Trades Union.
Infrastructure systems have a pivotal role to play in our country’s productivity, environmental sustainability, competitiveness and, perhaps more importantly, quality of life. The reality is that national development cannot be realized without infrastructure investment. This requires partnerships between the public and private sectors.

Introduce public-private partnerships (P3s) to the national arena, and opportunities abound. The Labourers’ International Union of North America (LiUNA) is committed to the power of P3s. Adopting the P3 model is an alternative investment resource that Canada needs to embrace now and in the immediate future.

LiUNA has the country’s fifth-fasting-growing pension plan which is recognized as the top fifty pension plans in Canada and the largest multi-employer pension plan (MEPP). The Labourers Pension Fund (LPF) benefits LiUNA’s members while aiding numerous communities with infrastructure and real estate development through desperately needed P3 projects.

“Pension plans are starved for good returns,” says Joseph Mancinelli, LiUNA’s international vice president and regional manager for Central and Eastern Canada. “So, in order to maximize our returns, we have to look at alternatives. One of the alternatives we look at is P3s. We have to make sure that the P3 project that we’re investing in is going to leverage the best returns possible for the pension plan.”

Public-private partnership projects also have the “potential to create work for our members. So this is a win-win situation.” Members who work on LiUNA’s selected P3 projects then generate funds back into the plan through their contributions. The government and citizens also win when social or infrastructure projects are completed.

There are some P3 projects in which LiUNA will not engage, particularly when assessing both risk and return, the two words essential in any investment venture. “If the risk is high and the return is low, we stay away from it,” says Joseph, noting that LPF returns on investments are always the determining factor for project interest.

Smaller projects, such as a $10 million road construction project, require substantial time and effort in the bidding process. “So we stay away from smaller projects. That’s why the government, to some degree, is talking about bundling some infrastructure projects, especially when it comes to transportation infrastructure.”

For a $100 million project, “we would join a consortium – a partnership – with some of our contractors that employ our members, and we would bid it that way.” Unlike most construction companies LiUNA is interested in maintaining long-term investment projects with decent returns. “The equity partner that stays in is us, because we have patient money, and we want to stay in the game for a long time … people want returns to be solid for a long period of time.”

“We manage their infrastructure funds and their real estate company,” says Lou Serafini, Jr., President and CEO of Fengate Real Asset Investments, of LiUNA’s LPF. “[LiUNA] has completed seven billion dollars’ worth of infrastructure development.”

The decision to invest pension money in infrastructure was made in 2004. “This is about pushing the risks to the private sector, and we have a proven track record with LiUNA that all of our projects have been delivered on time and on budget,” states Lou.

“LiUNA was one of the first Canadian pension plans to invest in the Canadian sector and one of the first Canadian pensions to take on construction risk or what we call greenfield development within the infrastructure space,” says Lou. ”They were one of the first to get their minds around the risk-return profile and made an informed decision to pursue investment deals that incurred construction risk.”

According to Lou, LiUNA also made a conscious decision to invest in green energy such as solar and wind farms, for example, so that its energy assets, “have a positive impact on the carbon footprint.”

The need for infrastructure investment is common across the country. “Every province in Canada, quite frankly, is suffering from this lack of infrastructure investment,” asserts Joseph. “The infrastructure deficit in Canada is enormous.” He maintains that transportation infrastructure, in particular, is something that needed attention at least twenty years ago. “That’s how late we are in the game.

“Governments have, in order to balance their budgets, avoided spending the money, necessary money, on transportation infrastructure.” This complacency has, “just postponed the inevitable, and now it costs three times more.”

He cites the Gardiner Expressway in Toronto as a prime example of this lack of investment. The Gardiner is the main artery connecting travellers to the largest city in the country, and the, “only highway that brings you to the centre of Toronto was built in 1963.”

It has reached its lifespan peak, particularly now that the amount of traffic using it daily has grown to such levels of congestion and increased commute times. But that is the least of the concerns according to Joseph.

“If you go underneath the Gardiner Expressway, you’re going to be shocked to see the amount of pieces of concrete that are falling off.” He questions whether we have to wait for a catastrophe before governments realize that, “infrastructure is, first of all, a public safety issue as well.”

The reality is that fixing this will run into the billions of dollars. The only means by which the government can address this pressing challenge is through, “alternative forms of financing or P3s,” Joseph stresses. “That is the way to do it because you can do ten-twenty projects almost at the same time … This is a partnership; this is not a privatization. It’s a partnership to get everybody involved in getting these projects to fruition.”

He feels that the private sector needs to incorporate pension plans similar to LiUNAs that will leverage several billions of dollars more into the economy as well. “There’s the other impact that a lot of folks haven’t really understood … If we can get a lot of this work going simultaneously, right across the country, that does wonders for the economy of Canada putting people to work.

“We’ve become very strong advocates of that infrastructure investing, especially through P3s, because it has a fairly immediate effect on the economy and an immediate effect on local economies as well.”

Joseph believes that the provincial governments are not engaged enough, although Ontario has readily embraced the P3 model because “there’s been such a dramatic need for this infrastructure because they’ve let it go for so long.” In fact, Infrastructure Ontario was created in 2006 to oversee such projects.

LiUNA is a member of the Canadian Council of Public-Private Partnerships which was established in 1993 and works closely with contracting partners who are consortium partners. “There’s not many unions that are,” says Joseph. “So we’ve been fairly active in promoting the structure that we’ve help create.”

LiUNA is participating in work on the Eglinton subway line in Toronto. “We’re talking about a multi-billion dollar project,” says Joseph. “So it’s a partnership with the government in order to get a subway line done.”

He indicates that Toronto’s subway pale in comparison with those of other cities, even Boston which has half Toronto’s population. “Toronto just has a couple of subway lines; they don’t have a subway system … They’re still like a hundred years behind. So that’s the problem.

“Clearly, the government could never get these projects off the ground in the speed that we can do it under a P3 and can’t do as many projects at the same time if it wasn’t for public-private partnerships,” adds Joseph.

Through this alternative form of financing, the province was able to get several hospitals built at the same time. Public funding would have been in the billions – figures that the government was not in a position to afford, especially not simultaneously.

LiUNA can finance a project for a twenty-year period, carrying the risk in terms of financing, construction and maintenance, before turning the project over to the government. In return, LiUNA is provided with a good return on investment, which is what is wanted for the LPF. “It’s a good way of doing things, and it’s a good way for the public to get these kinds of hospitals, court houses and structures in place without having to dip entirely into the public purse,” says Joseph.

“Ontario would definitely be the province that has embraced it,” he says of the P3 method. LiUNA participated in eight hospital projects over the course of four years. “These are not privatized facilities,” adds Joseph. There have been some misconceptions, chiefly among public sector unions who fear job loss, that P3s are “a privatization and a selloff of assets, and that’s not true,” Joseph says.

Privatizing the 407 toll highway just north of Toronto, “was one of the most foolish moves that the government made with regards to infrastructure,” says Joseph. The highway was sold in 1999 under the Tory government to a Spanish consortium for over three billion dollars. The sale is considered North America’s biggest privatization deal, and for the next ninety-nine years, the owners are at liberty to set the toll rate, according to the sale conditions.

He feels that, if left as a P3, the government could have, “the same returns we would have made as a pension plan … The beauty of it is, after twenty years, we would have walked away, and they would have owned it completely and taken one hundred percent of the money that would have come in through the tolls … That’s not a P3. That was a sale. That was a privatization … Unfortunately, a number of these public sector unions are confusing the two.”

Joseph refers to LiUNA’s participation in the two-billion-dollar Oakville-Trafalgar Memorial Hospital project. Hospital patients were previously forced to commute to other communities for treatment and hospital jobs did not exist. “So this is actually job creation, not job removal … this is definitely a misconception that requires a higher level of education to educate the public and also educate some of these public sector unions that P3s are not what you think they are.”

Canada’s north is not immune to the challenges that lack of infrastructure investment presents. Joseph relates that in some northern communities children are being poisoned by their drinking water. “In Canada, we have [things] like that happening?” he asks. “That’s pretty problematic in my opinion.”

To balance the budget, “what you’ve done is procrastinated, and you haven’t done what you should be doing because infrastructure is really important.” Some of these communities lack proper water treatment plants and other essential infrastructure that most of us take for granted.

This is something that LiUNA wants to change. Recently, LiUNA was in British Columbia to sign an accord with National Chief Perry Bellegarde of the Assembly of First Nations to, “work closely with the indigenous community on a number of these projects.”

Another accord was signed in 2007 with former national chief Phil Fontaine who, along with Joseph, sits as co-chair for the Indigenous Committee of LiUNA. “We’re trying to find innovative ways to train Indigenous youth, put them into the construction industry [and] raise their standards of living,” continues Joseph. “It’s the ripple effect that we’ll have.”

Trying to elevate, through P3 projects, our northern communities’ engagement in economic activity may solve some of their existing problems and contribute to socioeconomic prosperity and sustainable communities. “You have to elevate the standard of living in order for all of this to happen,” affirms Joseph.

LiUNA wants to instil an interest in youth in considering a career in the construction industry. “It’s definitely one of our highest priorities,” he says, noting that LiUNA has training centres in every major city in Canada.

He also feels that our school systems have not dedicated enough funds to expose young people to the construction industry and the trades. “[Young people] don’t have an interest because no one has never really exposed them to it … What we’re trying to do is convince the school systems, right across the provinces, and we’re dealing with ministers of education primarily, to introduce once again, like they did back in the sixties, some trade classes exposure.”

LiUNA is also trying to establish an effective outreach to immigrants and women, suggesting that social media may be the best means. “We’ve done a poor job as a construction industry, quite frankly, in reaching out to these groups. That’s really the bottom line.”

Better systems of transportation can be achieved, “by accelerating the number of projects that can be done. And the only way that you can accelerate is through public-private partnerships in order to get a lot of work done, all in one time,” affirms Joseph. “The economic ripple effects are enormous. I don’t think governments have really been able to quantify what that is and actually express what that is, and they should.”

Joseph says that LiUNA has been advocating for intelligent solutions for a long time. “P3s are part of the solution.” Some provinces have embraced the model; others are slowly engaging in its adoption essentially based on demand. “How do you get this done without going to the private sector to help out? Because governments just won’t be able to do it,” concludes Joseph.



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