P3s just put the bill in another pocket

They're called contractual obligations, but they're still piling up debt for our children and grandchildren to pay

Craig McInnes
Vancouver Sun
July 19, 2007

New Democrats poring over the annual release of the Public Accounts last week seized on the $51,000 spent at Starbucks as evidence of lax government control over spending.

I don't spend that much every year myself on coffee, but I do shell out considerably more than the roughly $1.25 that works out to for each civil servant. That won't buy much.

So I turned my attention to a much more startling number I found deep in the explanatory notes at the back of the annual report on government finances.

Under the heading 25.(d) -- Contractual Obligations -- the report noted the total this year for internal government and Crown corporations and agencies this year was $55,232, not that different from the Starbucks bill except for the bit of small type at the top of the table that noted that the figures were in millions of dollars.

Looking back at last year's Public Accounts, I found the comparable figure to be $27,586, again with the note that it was in millions.

What does that mean? It means that in the past fiscal year alone the provincial government and its various affiliates added more than $27 billion in bills that will come due for taxpayers in coming years, bringing the total future obligation to more than $55 billion.

Surely that's a mistake, I thought. That is more than the entire provincial budget for a year. It's more than the total provincial debt has ever been.

Well, after conferring with provincial officials, I discovered there had been a mistake, not in this year's report but in the report last year.

The true figure for the previous year was $34 billion, so the increase was just over $21 billion, still an astonishing number.

This is only the second year the finance ministry has included contractual obligations in it annual assessment of the state of the province's finances.

What they show is the effect of the Liberal government's determination to turn to the private sector to provide services and facilities that in the past were provided by government.

They show that while using private sector capital to build hospitals, roads and electrical generating facilities means that government can reduce its debt, taxpayers still get stuck with the bill. It just gets put into another pocket.

When the Liberals made it policy that all future electrical generating capacity would be purchased from independent power producers, for example, it was so that BC Hydro would no longer continue to pile up debt.

In this year's Public Accounts we see the fallout from that decision. Hydro added another $15 billion to its contractual obligations to purchase electricity from private producers through multi-year contracts.

The total future obligation is now $28 billion for energy purchases.

That money will have to be paid by the consumers of electricity, just as they would have to pay debt charges if the government had chosen instead to built publicly owned generating facilities.

What I cannot tell from looking at these numbers is whether the price I pay for electricity will be more or less than it would have been if the Liberals had continued to follow the old model of public sector ownership.

What I suspect from the fact that the old model delivered some of the lowest power rates in the world is that this was a case of "If it ain't broke, don't fix it," but that is a column for another day.

Looking at the future obligations associated with the Abbotsford Regional Hospital, which is being built as a so-called P3, a public-private partnership, we see that the $355 million cost associated with the facility is only the cost of construction. The multi-year operational contract pushes the price to around $1.1 billion.

Again, I can't tell whether the cost of building and operating the hospital under the old public model would have been any less, only that when comparing the impact of debt, we should also be aware that P3s also create obligations that we will be handing down to our children and grandchildren.

For at least the past two decades we have been focused on debt as a measure of the health of our public finances. The Public Accounts released last week show that the total provincial debt is now less than it has been since before the NDP took office in 2001.

But what benefit is there in reducing debt if we are simply replacing it with other financial obligations?

Is the Liberal government going to continue to pile on new obligations at the rate of $20 billion a year? How much is too much?

Maybe once the New Democrats finish digging through the credit card bills of public employees, they can start taking a look at some of these questions.

They might find a lot more to squawk about.