Feb 1, 2009

Time to Pee on P3’s


Maybe it’s the Baja sun; perhaps it’s the tequila I’ve been forced to drink down here. But I just cannot understand the Vancouver Sun’s angst about the province financing one-third ($750 million) of the Port Mann project.

The simple fact of the matter is that provincial government financing will reduce the tolls and/or taxes required to pay for the project. The issue isn’t whether the government should finance one third of the project; the issue is why it isn’t financing all of it.

I can understand why my good friend Larry Blain (CEO of Partnerships BC) likes the Port Mann P3. As he told me numerous times, he views government tax-supported debt financing as tantamount to communism. But for the less ideologically inclined, it should be obvious that any private financing of the Port Mann and other highway infrastructure projects (that government must buy back with a long term lease) makes no economic sense.

The private financing doesn’t reduce government long term debt (it just changes the nature of it). It doesn’t reduce long term costs (it increases it). And while it may enable some transfer of project risks, depending on the contract terms, it doesn’t transfer the fundamental market risk or affect whether the project itself is good for BC.

Thank goodness it is getting late here. A shot of Jose Cuervo Tradicional beckons, and not a moment too soon.

~ Marvin Shaffer, on “assignment” in Mexico

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