Class of March 23

1. Class of March 23 • Anticipating the Ontario budget • Anticipating the final exam • Student presentation on Ontario Internship Program and opportunities for youth and new professionals • Alternative Service Delivery • Highway 407 privatization case • Reading: Blakeney and Borins, chapter 11

2. Anticipating the Ontario Budget • Globe and Mail article today based on “sources close to the government” • Balanced budget by 2018 • No new taxes or big spending cuts before the 2011 election • “an aspirational document rather than a detailed document” • Spending freeze for most programs • New money for priorities (all-day kindergarten plus 20,000 new post-secondary education spaces) • Process to identify savings

3. TVO Civics 101Budget Simulation • TVO is also doing a budget simulation that they just told me about. Try it at: http://www.tvo.org/TVOsites/WebObjects/TvoMicrosite.woa?civics101

4. Alternative Service Delivery • Public sector restructuring by sharing governance functions with individuals, community groups, private sector • Spectrum of Organizational Forms • Department • Service Agency (Canada Revenue Agency, Parks Canada, Food Inspection Agency, Canada Border Services Agency, Service Canada?)

5. Alternative Service Delivery • Crown Corporation (LCBO, OLG, Hydro One) • Government as Investor (loan guarantees, e.g. example US Gov’t. to JP Morgan Chase to buy Bear Stearns, BoA to buy Merrill-Lynch, preferred shares in Citigroup, BoA) • Public-Private Partnership (hospitals, gov’t buildings, infrastructure) • Privatization, usually accompanied by regulation and time limits (Highway 407)

6. Service Agencies • Clear mandate and charter • Full costing of activities • Business plan, access to capital on business criteria • Flexible staffing • Entrepreneurial culture • Federal-provincial cooperation

7. Crown Corporations • Traditional vehicle for economic/policy intervention • Government sole shareholder • Minister ultimate decision-maker, board advisory and sometimes patronage • Some evidence of recent choices of president and board members based on experience and expertise • Capital from government borrowing • Sask. Crown Investments Corporation • LCBO, OLG, Hydro One

8. Other Examples of ASD • ServiceOntario kiosks: IBM builds and maintains for a $1 transaction fee • Nav Canada: non-profit corporation involving major stakeholders in air navigation system • Airport authorities: non-profit corporations involving major stakeholders in airport • Canada Post retail outlets: franchising to improve service and break through bad climate of labour relations

9. Government as Investor • Bailouts (recessions, one-industry towns) • Investment funds (Canada Pension Plan Investment Fund, Norwegian state oil fund, sovereign funds of other nations now investing in US banks) • US rules for bank investments -- limit dividends on common shares -- control executive compensation -- banks try to pay off gov’t loans as soon as possible • Blakeney rules • Be suspicious of bailouts • Entrepreneur must have a stake • Loan guarantee = cash • Monitor performance closely • Use progress payments

10. Highway 407 Case Based on Mylvaganam and Borins, “If you Build It…. Business, Government, and Ontario’s Electronic Toll Highway” (see www.407etrbook.com)

11. Reasons for Development • Reduce traffic congestion in 905 suburbs • Support construction industry during early 90s recession • Rae NDP government running deficits, finance through road tolls • Use large contracts for quick delivery, supervised by small Crown corporation • Develop leading edge tolling technology (transponder plus video-imaging) in an urban setting

12. Outcome • Highway completed and opened in 1997, 6 months behind schedule, $80M over budget of $1 billion => not bad! • Traffic growth faster than anticipated and tolling technology works • Harris Government wants to privatize something big before 1999 election; ideology and money (but not the LCBO)

13. Highway 407 Privatization • Government received $ 3.1 billion for a 99 year lease just before June 1999 election • Successful concessionaire an Australian-Spanish consortium • Rapid toll increases starting in fall 1999 • McGuinty promises to roll back tolls in 2003 campaign • McGuinty Government challenges toll increases in court; concessionaire goes to court to restore license plate denial for unpaid tolls

14. Outcome • Courts uphold right of concessionaire to set tolls and require government to restore plate denial • Out-of-court settlement announced 5 pm Friday March 31, 2006, Ontario drops appeals and concessionaire agrees to frequent user benefits program, establish ombudsman

15. Completing 407 East • From Brock Rd to join Hwy 35/115 • Who will supply the capital? (government has an advantage over private sector) • Who will supply the technology? (407 already has the technology, inefficient to introduce different technology, 407east will increase usage of 407 central and west)

16. Lessons Learned • There were alternatives to privatization (public ownership or phased privatization) • Canada lost an opportunity to have a firm developing leading-edge transportation tolling technology • Transparency needed for major contracts • Road tolling works and is a huge potential revenue source (London, Stockholm)

17. Class of March 30 • Presentation on Ontario budget of March 25 • Careers in the public service (continued) • Public service human resource management issues • Concluding comments