AUDITOR GENERAL DISSECTS B.C.’S OBLIGATIONS AND DEBT
Annual report puts public accounts, arm’s-length agency under spotlight
Premier Christy Clark and the B.C. Liberals have sold off more than $1 billion worth of government land and other assets in recent years, with another $1 billion in sales already in the works, auditor general Carol Bellringer says.
The independent watchdog on government finances reported on the burgeoning asset sales in her annual report on the public accounts, released Tuesday.
Bellringer and her staff looked at the release of assets for an economic generation program launched in Clark’s first year as part of a drive to eliminate the operating deficit and balance the budget.
The sell-off of surplus public land to private developers brought in almost $800 million in the first three years, with Vancouver’s Dogwood-Pearson and Little Mountain lands accounting for threequarters of the proceeds.
The Liberals unloaded a further $300 million worth of assets outside the program for a $1.1-billion tally up to the March 31, 2016 end of the last financial year.
With the budget now certified by Bellringer as balanced on the operating side, the Liberals have moved on to a second program of asset sales, this time ticketing land suitable for development by non-profit housing societies.
The target is a further $500 million over the next few years. Bellringer also noted the province is in line for almost half a billion dollars as its share of the sale of the Jericho lands in Vancouver to three local First Nations.
“The public has viewed some asset sales with great interest,” the auditor general wrote. She put the government on notice that her office is proceeding with an in-depth performance audit of the initial round of asset sales as well as the followup program tailored to nonprofit housing societies.
The auditor general’s report also addressed the controversy over the growing number of long-term contractual obligations undertaken by the B.C. Liberals, some $101 billion worth in all.
Those include $9 billion to B.C. Ferries, $9 billion in the health-care sector, $5 billion for the policing contract with the RCMP and so on. The biggest tally is $58 billion worth of obligations undertaken by B.C. Hydro to purchase electricity from independent providers.
Thereby hangs the controversy — but Bellringer rejected calls to begin counting the contractual obligations as part of the already hefty ($66-billion-and-counting) provincial debt.
“One of the common misconceptions we hear is that contractual obligations are the same as debt,” she wrote. “This is simply not true.”
The difference: “Debt is money that government has already borrowed and must repay in the future. … Contractual obligations are agreements to obtain goods or services in the future. There is no liability for payment until the goods or services are received, and therefore no debt.”
But that’s not to suggest there is no cause for concern.
“Even knowing that contractual obligations are not debt, having over $100 billion in contracts outstanding sounds like a lot of money tied up. It is: about twice the amount that the government spends every year on its programs and services,” Bellringer said.
“However, when analyzing contractual obligations, both the magnitude and time frame they relate to are important. Some contracts entered into will be paid out over about 50 years.” Over that same five-decade-long stretch, taxes and other government revenues will bring in several trillion dollars.
Still, the B.C. practice is out of step with other Canadian jurisdictions. Only the national government (at $151 billion) has undertaken more contractual obligations than B.C. Among provinces, only Quebec (at $90 billion) is even close. Quebec’s tally includes $38 billion in agreements with power producers.
Bellringer also looked at a couple of instances where the Liberals hived off a share of revenues into separate entities for special purposes. One was the Forest Enhancement Society of B.C., created last year as an arm’s-length agency to fund forest rehabilitation, restoration of wildlife habitat, wildfire risk reduction and other kinds of stewardship.
The Liberals provided it with an initial $85 million last spring and added a further $150 million earlier this year, making $235 million in all.
Though the Liberals maintain that the society and its spending decisions will be independent of cabinet control, Bellringer, after a preliminary review, was unable to say one way or another. She pledged a further investigation in the year ahead.
“If it is determined that government controls the society, then the society should be consolidated into the summary financial statements” — along with that $235 million worth of seed money from central government.
She also gave the onceover to the prosperity fund, established a year ago as a long-term legacy to invest resource revenues into health, education and other services and to help retire the provincial debt.
The fund is real enough, Bellringer concluded. “However, the arrangement is similar to moving cash from your chequing account to your savings account. You aren’t creating any more money — you’re just putting it aside to save for something specific.”
The Liberals launched the fund with a $100-million deposit last year and are readying a further $400 million deposit this year. Withdrawals are governed by provincial legislation, but those, like the government itself, are subject to change.
Indeed, a new provincial government could liquidate the fund altogether or use it for some purpose other than the one envisioned by the Liberals — as it should be in an election year.
The (prosperity fund) is similar to moving cash from your chequing account to your savings account. CAROL BELL RINGER, B.C. auditor general