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B.C. government bails out Port Mann P3
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by mike_yvr | January 28, 2009 at 06:27 pm
438 views | 12 Recommendations | 2 comments
There's a lot of questions being raised about the future of using so-called public-private partnerships to provide major infrastructure projects like the Port Mann Bridge and Highway 1 expansion.
Just yesterday, the treasurer of California argued that the P3 model Governor Arnold Schwarzenegger had borrowed from Premier Gordon Campbell was not fit for purpose and that raising capital by issuing municipal bonds was more cost effective than subsidizing the profit margins of private sector middlemen.
But today the provincial government moved to guarantee that the middlemen involved with the Port Mann P3 -- Macquarie Group, banks and the lawyers putting the deal together -- could still dine out on the taxpayers' dime.
British Columbia will put up one third of the money needed for the twinning of the Port Mann Bridge and expansion of Highway 1, Transportation Minister Kevin Falcon announced Wednesday.
He said the province has reached an agreement in principle with Macquarie Group, which he said should be finalized by March. Under the original plan, Macquarie was to raise the entire financing for the project.
Falcon said the province had not planned to finance any portion of the Port Mann project, but this intervention "made sense" given the state of the financial markets.
Falcon said this new arrangement was reached during a "tough negotiation process" while the capital markets are in "turmoil."
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Most RecentMost Recommended Comments (2)
at 13:37 on January 30th, 2009
I think taxpayers pay more for these projects over the long-term because they are paying for the private sector's higher borrowing costs and for the private sector's profit margin. The current financial meltdown has brought this reality into sharper focus.
at 18:11 on January 30th, 2009
I'm not so sure that these so-called public-private partnerships featuring private financing make a difference to the government's balance sheet and its credit rating. Evolving accounting practices have ensured that debt borne by "private partners" is also reflected on government's books as debt.
For example, transportation minister Kevin Falcon acknowledged in the B.C. legislature a couple of years ago that government was required to transfer an additional $185 million to the provincial debt in 2005 to reflect private debt associated with the Sea-to-Sky Highway P3.
That makes sense because taxpayers still have a long-term liability regardless of whether government pays through regular service or lease payments (in the case of a P3) or by servicing debt (as in the case of traditional procurement).