|
October 9, 2013
News item: Golden Ears Bridge loses up to $45 million annually. Huh? How can a
bridge lose money when it is part of B.C.'s infrastructure?
I would have thought that any toll bridge makes money. After all, the Golden
Ears bridge collects $30 million in tolls annually. If that isn't making money,
I don't know what is; especially compared to a bridge that collects nothing.
It turns out that the view from the bridge is quite different if you're a
public-private partnership (PPP). Built in 2009 across the Fraser River, the
bridge links Maple Ridge with Surrey. The PPP consortium, Golden Crossing
General Partnership, built the bridge and taxpayers, through TransLink, will pay
back the consortium over 35 years.
TransLink "loses money" only because they collect less in tolls than they have
to pay the consortium.
If the bridge were publicly built, there would be no talk of it losing money.
But the Liberals believe, ironically, that governments are too incompetent to
build large projects. The justifications given for PPPs is that they transfer
risk to the private sector and they provide better "value for money." There is
almost no evidence for either claim.
What risks? Not the risk of reduced tolls as we now know. Other building risks
could have been reduced with bonds or similar means.
Value for money is insured for the consortium, not for the government. The
consortium didn't eat the added costs when the estimate went from $600 to $800
million. Instead, TransLink borrowed money for the extra project costs and saved
a bundle because they can borrow at a cheaper rate.
|
TransLink acknowledged the savings in borrowing costs in a press release of
Sept. 21, 2005, in which they give the savings in public borrowing as being
from $35 to $40 million in interest, as reported in a CUPE newsletter. The
TransLink press release has since been removed from their website. They
could have saved even more by financing it themselves. "Why don’t they
finance the whole project and save even more money for B.C. taxpayers?"
wonders CUPE.
A bit of ingenious accounting justifies PPPs. According the public
corporation created by the Liberals to manage PPPs, Partnerships B.C., it's
cheaper to contract out than build publicly. They claim the savings for the
Golden Ears bridge was from $6 to $10 billion.
It takes a bit of economic manoeuvring to explain away advantages of public
financing. First, the PPP costs have to be reduced by something called a
"discount rate." That's the money saved by investing the money rather than
spending it on a bridge. That part makes sense. If I can lease a car rather
than buy it, and make interest on investing the purchase price, then I'm
ahead.
However, like leasing a car, a lot depends on the details. Car dealers and
PPP consortia have made their own calculations so that the terms of the
agreement benefit themselves. Risk aversion is built-in so that when things
go sideways it’s the government who pays.
The Golden Ears bridge is only losing money from the perspective of
taxpayers. For the Golden Crossing General Partnership, it's a money-maker.
David Charbonneau is the owner of Thompson Studio
He can be reached at
dcharbonneau13@shaw.ca
|
