Let’s stop the government from saddling us with more debt

People living in Corner Brook and the surrounding region have needed new healthcare facilities, including more beds in long-term care, for many years. It came as welcome news to everyone, including CUPE members and their families, when the province announced two new facilities would begin construction later this year.

However, the secrecy and lack of transparency around these two projects are very troubling. In a meeting with then Finance minister Cathy Bennett and Transportation and Works Minister Al Hawkins in March this year, our representatives were told the details of these projects would be made public, but only after the contracts are signed. That’s a red flag!

What exactly are publicprivate partnerships? Instead of using its own borrowing power, a government looking to build public infrastructure uses private-sector money for the project. The private sector invests some (or all) of the required money in return for healthy financial returns and a measure of control.

As explained by economist Toby Sanger, financing a project at the seven to nine per cent return rate that private investors expect from infrastructure investments would dramatically increase the total cost of a project financed over 30 years. If the province directly borrowed the funds, they would get the current 30year bond rate of 3.7 per cent. There’s another red flag.

The Newfoundland and Labrador government has stated that the Corner Brook longterm care facility will cost $120 million to $140 million and the hospital will cost $700 million to $900 million. Assuming the province is borrowing money to finance these projects, P3 deals would cost almost twice as much to borrow as public procurement. Why on earth would we do that?

Borrowing costs

If the province uses a P3 to build the long-term care facility and borrows $120 million at seven per cent (the public model) amortized over 30 years, we’ll pay $167 million in interest. However, if we use public procurement and borrow the same amount at 3.7 per cent over 30 years, we’ll pay $79 million in interest.

If the province uses a P3 to build the hospital and borrows $700 million at seven per cent (the public model) amortized over 30 years, we’ll pay $977 million in interest. However, if we use public procurement and borrow the same amount at 3.7 per cent over 30 years, we’ll pay $460 million in interest.

There is plenty of evidence to show that P3s are the wrong way to finance public infrastructure.

The additional beds and services in Corner Brook will create new jobs, but that will happen regardless of how the facilities are built, and assuming the two projects don’t go over budget.

The additional costs could result in closing beds, laying off staff and reducing the quality of care. Look at the P3-built North Bay Regional Hospital in Ontario, which cost at least $160 million more than public procurement would have cost. Over 50 beds have been closed, and they’re on the third round of layoffs, with over 100 jobs cut.

The P3 deals that the Ball government wants to use are a Trojan horse that will allow the quality of our public health care to be influenced by private interests and profit margins.

CUPE Newfoundland Labrador urges the Ball government to take the following action:

• Make public the full details of the Corner Brook value-for-money report and business case — before final decisions are made and any contracts are signed.

In addition, the province should mandate:

• Public consultation.

• The involvement of a provincial auditor.

• Public-private partnership transparency and accountability legislation that demands a preliminary analysis — available to the public — outlining the risks, costs and benefits of using a P3.

We are going to pay for these projects one way or another. We might as well build our health-care facilities publicly. Let’s own and control them ourselves, for the public interest, and not for private profits.

Wayne Lucas, president CUPE NL