By Andrew Mitchell
Transportation Minister Kevin Falcon chalked up the recent
controversy over the total cost of the Sea to Sky Highway Improvement Project
to a difference of accounting practices, and vowed to deliver the project for
the promised $600 million.
“Nothing has changed from the point of view of our government,”
said Falcon. “This is a $600 million project that will be delivered for $600
million.”
In September, Acting Auditor General Arn van Iersel released a
review of costs related to hosting the 2010 Olympic and Paralympic Games. He
included the cost of upgrading the highway, even though the B.C. government has
maintained from the beginning that the project would have gone ahead regardless
of whether the province won the right to host the Games.
According to the report, “We have included this project as a
Games cost since it was included in the capital budget presented to the IOC in
the Bid Book and in our opinion is a necessary part of staging the Games.”
In addition to including the cost of the highway, van Iersel
said that the $600 million price tag did not take into account interest or
inflation, or the additional cost of items like new bridges not covered in the
initial agreement. Taking that into account, the van Iersel report pegged the
total price tag for the P3 (public-private partnership) at $775 million.
According to Falcon that number is misleading to the public.
“The only thing that has changed is the accounting treatment,
which is a fascination of accountants but not to members of the public,” said
Falcon.
“What the auditor general is saying is that even though the
money being borrowed to construct the highway is being borrowed by the private
sector… you still have a notional allocation for interest during construction
which is something like $80 million.”
As to the report’s assertion that the $600 million only
accounted for baseline costs, not the addition of new bridges or safety
features, Falcon says that is also misleading. The P3 contract, made with a
group of contractors under the title of the S2S Transportation Group, takes
those extras into account by also giving the contractor the maintenance
contract for the highway for 25 years after completion.
“The benefit of the P3 contract is that the contract is doing
things up front — for example using thicker pavement on the Sea to Sky
(highway) because they will save money down the road in terms of potholes,
rehabilitation and maintenance costs,” said Falcon, adding that it was
important to dispel the myths around this project.
“One example is the decision to replace the Britannia bridge up
front, instead of waiting 10 years when we don’t know what the costs will be.
To the auditor general that qualifies as an accelerated allocation and puts
capital costs higher up front… when not one single additional taxpayer dollar
is going into the project beyond what we said when we announced it,” he said.
“It remains ahead of schedule, on budget, and we’re
extraordinarily proud of this project. The payment schedule has not deviated by
one nickel, nor will it.”
Falcon also recently took issue with a recent study released by
the Canadian Centre for Policy Alternatives that suggested the end cost of the
P3 agreement would be $220 million higher than if the government had done the
project itself.
“Partnerships B.C.’s report exaggerated the cost to taxpayers
under the public option and double-counted the benefits of the risks that the
P3 will assume,” said Marvin Shaffer, who wrote the CCPI analysis. Among other
things Shaffer alleged that the initial Partnerships B.C. Report acknowledged
that the costs of the P3 would be $46 million higher for the lifetime of the
contract, while government inflated the cost of borrowing for the project by
2.5 percentage points, and underestimated service and maintenance costs of the
highway.
“Is this P3 worth a $220 million premium to taxpayers?
Absolutely not,” said Shaffer. “There may be some benefits to the P3, but there
is no evidence that they total anywhere near that amount. It was an
ideological, not economic decision to go with the P3.”
Falcon says he read the CCPI report, and that the findings were
contradicted by the auditor general himself.
“It’s totally false. The CCPI, as far as I’m concerned, is just
a mouthpiece for the NDP… it’s a labour organization that has never supported
P3s and is false in saying (the P3 would be more expensive),” he said.
According to Falcon, the auditor general said there would be
$130 million in additional safety benefits above and beyond what the province
would have been able to offer if it built the highway.
“We have 33 per cent more passing lanes, an additional 20
kilometres that the P3 partner is putting into this project beyond what we
could deliver. We have 80 per cent more median barriers, 68 per cent more
shoulder and centre line rumble strips. They’re doing it because it makes the
road safer, there will be less accidents, and that affects the performance payments
made to them.”
If anything, Falcon says the Sea to Sky project and Kicking
Horse Highway project support the P3 model, noting that government has had
trouble managing large capital projects in the past such as the Coquihalla
Highway and fast ferries.
“I can’t tell you the number of people that have approached me and the Premier (Gordon Campbell) and said what a great job is being done on the Sea to Sky,” said Falcon.
