Hiding $5 Billion
A reporter from back East called me yesterday to ask about the B.C. Auditor General’s May report into a Vancouver Coastal Health Authority P3. As Keith Reynolds pointed out, the AG found that the actual costs of the P3 were much higher than what the Coastal Authority and Partnerships BC had said they would be. The ‘value for money’ wasn’t there.
A large part of the higher cost was because of the way in which the present value cost — the long term liability — of the future P3 contract obligations was calculated. The AG calculated that liability based on the government’s borrowing cost — in other words, he calculated the actual amount the Health Authority would have to set aside now to pay its future contract obligations. In justifying the P3, however, the Health Authority, as directed by Partnerships BC, used a different rate, one that seriously understated how much they would actually have to set aside to make the future payments.
In all fairness, this does sound a bit academic. But its significance wasn’t lost on that eastern reporter. He, like Keith and other followers of the P3 debate, was surprised (well, disappointed more than surprised) that there has been no media coverage about this very important Auditor General finding.
The Health Authority project was relatively small — approximately $100 million. So the higher cost– some $17 million — wouldn’t appear to be enough to get excited about. But this is a systemic problem. The Auditor General’s finding applies to all of the government’s P3’s — the $53 billion of future contract obligations last reported in the Government’s financial statements.
Partnerships BC would have us believe that the present value cost — the long term liability — of those future contract obligation is some $26 billion. The Auditor General’s finding implies that it would in fact be over $5 billion more than that. Even C.D. Howe would have had to agree, $5 billion matters. The liability of the P3 obligations the government has already entered into is far greater than anything Partnerships BC, in its so-called value for money assessments, has acknowledged.