A new study from the Canadian Centre for Policy Alternatives is calling P3 funding models into question.
Author Christopher Majka wrote the report titled “Highway Robbery – Public Private Partnerships and Nova Scotia Highways” which indicated Nova Scotians overpaid for the Cobequid Pass by $242 million dollars.
The original estimate for the project was $124.6 million.
Majka says an additional $102 million in financing charges and $121 million in operations costs are responsible for the inflated price tag.
He says the P3 funding model is fundamentally flawed.
“The bonds that finance this, all of them had interest rates in excess of ten percent. This was in 1996. This was at a time when government bonds were being issued for 5.7 percent.”
Majka compares that difference in interest rates to a mortgage in that, over thirty years, the province ends up paying a great deal more on interest than paying down the principal.
Majka says the motivation to enter into a public private partnership can be political.
“Back in 1996, these costs didn’t appear on the books of the government. So governments that are politically interested in saying, hey, we balanced our budgets, can say that because, they’re essentially kicking the costs down the road.”
Majka says whether or not government decides to fund a complete project or in stages, is irrelevant as they can always borrow money at a lower rate than private businesses.
However, Transportation and Infrastructure Renewal’s Chief Engineer Peter Hackett says the decision to use the P3 model with tolls was two-fold.
“There was very little money in the provincial capitol program, around $75 million for all highway work at that time… and the previous [Highway] 104 that went through the Wentworth Valley had a number of fatalities on it.”
Hackett says above all, government was worried about the human cost.
He says twinning the Cobequid Pass has reduced the number of motor vehicle fatalities from three to one per year since the highway was completed.
Hackett says prolonging the time it takes to complete a project makes it more expensive.
“The price of each kilometer that you do year after year continues to go up. And that’s not taken into account in that study as well. So that if I do 5km today and 5km five more years down the road, well, the price of today isn’t the price of tomorrow.”
Hackett says at the end of the day the province now has a very good highway.
And he feels the cost wouldn’t have been much different if government had fully funded the project.
Reported by: Ed Halverson
Twitter: @edwardhalverson
E-mail: halverson.ed@radioabl.ca
