Part­ner­ships cost tax­pay­ers $3 bil­lion

Re­port claims pub­lic-pri­vate part­ner­ships took $226 mil­lion out of Okana­gan wal­lets

The Daily Courier - - OKANAGAN - By JOE FRIES

Tax­pay­ers are over­spend­ing by $226 mil­lion on three ma­jor in­fra­struc­ture projects in the Okana­gan, ac­cord­ing to a new anal­y­sis of pub­lic-pri­vate part­ner­ships in B.C.

Keith Reynolds, a re­searcher at the Vancouver-based Columbia In­sti­tute, spent years col­lect­ing data through free­dom of in­for­ma­tion re­quests to the B.C. gov­ern­ment and this week pub­lished a re­port with his find­ings.

In­cluded in the 17 projects he an­a­lyzed are three in this re­gion: the Kelowna and Ver­non hos­pi­tals pro­ject; the Pen­tic­ton hos­pi­tal up­grade; and the Okana­gan Cor­rec­tional Cen­tre in Oliver.

In each case, Reynolds found it would have been cheaper for the gov­ern­ment to bor­row the money and man­age the projects it­self through a tra­di­tional pro­cure­ment process, rather than find pri­vate-sec­tor part­ners to fund and build the projects in ex­change for 30-year re­pay­ment and op­er­at­ing agree­ments.

Go­ing the P3 route does, how­ever, al­low govern­ments to un­der­take ex­pen­sive in­fra­struc­ture projects with­out adding debt, while at the same time pass­ing on the risk of things like con­struc­tion de­lays to the pri­vate-sec­tor part­ners.

It’s those ad­van­tages to which Part­ner­ships BC — a Crown cor­po­ra­tion found in 2014 to be in a con­flict of in­ter­est as both an ad­viser to gov­ern­ment and pro­moter of P3s — as­signs com­plex dis­count rates that seem to tilt the scales in favour of P3s.

But as the re­port notes, au­di­tors in other parts of the world have found the as­sumed risks and as­so­ci­ated dis­counts have lit­tle ba­sis in real­ity. Reynolds’ anal­y­sis re­moves those dis­count rates from value-for-money cal­cu­la­tions and com­pares dol­lars to dol­lars.

“If you just look at the num­ber of dol­lars that are spent, be­fore you get into the ar­cane method­ol­ogy of dis­count­ing, then there are sig­nif­i­cant sav­ings for do­ing tra­di­tion­ally pro­cured projects.”

In straight dol­lar terms, the Kelowna and Ver­non hos­pi­tal pro­ject would have cost $1 bil­lion via pub­lic pro­cure­ment, rather than $1.15 bil­lion as a P3.

The Okana­gan Cor­rec­tional Cen­tre would have cost $393 mil­lion, but will in­stead set back tax­pay­ers $466 mil­lion.

And the new Pen­tic­ton Re­gional Hos­pi­tal tower and parkade, with ad­di­tional ren­o­va­tions in the old build­ing to fol­low, could have been done through tra­di­tional pro­cure­ment for $581 mil­lion, while the P3 method will lift the price to $583 mil­lion.

In to­tal, Reynolds found the 17 projects will cost B.C. an ex­tra $3.7 bil­lion by go­ing the P3 route — and the anal­y­sis only cov­ers about half of the projects in ex­is­tence.

The re­port fur­ther de­tails how P3s were seem­ingly forced on the pub­lic sec­tor by the B.C. Lib­er­als be­gin­ning in 2003, and con­cludes with a call for the NDP gov­ern­ment to put a mora­to­rium on new P3s, plus re­view ex­ist­ing con­tracts and con­sider buy­ing them out.

Reynolds is also hop­ing B.C.’s au­di­tor gen­eral looks into the mat­ter, as col­leagues in Que­bec and On­tario have done.

Part­ner­ships BC falls un­der the Fi­nance

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