Winnipeg saves $9.7 million by canceling a private construction partnership

Winnipeg, Manitoba

In 2012, the City of Winnipeg announced plans to build a new South District Police Station to replace two aging district stations. Initially, the City believed it could save money by financing construction of the new facility with a public-private partnership (P3). After a private company built the station, the building would be leased by the City at an annual cost of $1.17 million for the first five years.

P3 terms prohibitive

But the deal soon proved to be a money-losing proposition: The private company’s lease terms were more expensive than interest payments on bank loans. When the City realized it could save money by terminating the contract, it borrowed $16 million to purchase the building outright, projecting savings of $9.7 million over 30 years. “Because we’re still in a low interest rate environment, it’s in the city’s advantage to exercise its right to purchase the station,” Brad Erickson, property management superintendent for the planning, property, and development department told the Winnipeg Free Press.