Nov 02, 2015

How not to invest in public infrastructure

The following column from Mark Hancock ran in the Vancouver Sun on Monday, November 2.

When Prime Minister Justin Trudeau announces his cabinet this week Canadians will watch to see who will be appointed to deliver on his key election commitment to invest in public infrastructure. While the “who” will be important, so too will be “how,” and many examples of how not to proceed are right here in British Columbia. Specifically, the ongoing waste of tax dollars on so-called “Public Private Partnerships.”

Last year BC’s Auditor General said it cost the government twice as much to have private partners borrow money for P3 projects as it would have had the projects been publicly financed.

Now, information newly released under Freedom of Information (yes, that law does sometimes work in BC) shows the situation is getting worse. While public services are being starved and public employees get “zero” wage mandates, the corporate partners in P3s are getting guaranteed increases.

Essentially that means that taxpayers are on the hook for providing guaranteed profits to the big multinational firms, above and beyond the profits built into the contracts.

In some cases, increases for the P3 proponents have simply been linked to the Consumer Price Index. In other cases spending on labour has been linked to private sector labour contracts where increases have been much higher than in the government-funded public sector. Some of the contracts link increases to “calibration to the market” through indexing.

The Jim Pattison Outpatient Care and Surgery Centre had the lowest average increases, but increases for the private partner were still higher than increases for provincially funded employees. And there is no guarantee that employees of the private partner will see a nickel of the increase on their paycheques.

The largest single annual increase reported in the FOI releases was for the Northern Health Authority’s Fort Saint John Hospital saw an increase of 7.49% in 2014 based on “market indexing.”

Interior Health’s contract with Infusion Health for the Kelowna and Vernon hospitals linked labour costs to increases gained by three private sector unions resulting in average annual increases of 3.09%, almost triple the average increase provided for public employees. Interior Health reports that, “The Labour indexing impact on the base payment of the project from 2009 to June 2015 is $4,233,741.”

Payments for the William R. Bennett Bridge in Kelowna has seen labour indexing for payments to SNC-Lavalin rise by an average 2.43% annually since 2009, while Island Health’s contract with ISL Health for Royal Jubilee Hospital reports both CPI indexing and market benchmarking. Increases have averaged 1.2%.

Much of these increases will go straight to profits for the corporations.

This is bad for the economy: Instead of our tax-dollars returning to local businesses when spent by workers receiving a far wage, hikes in P3 costs take your money out of circulation - hoarded in corporate coffers.

This was how Stephen Harper did business. Corporations saw more than $60 billion in tax breaks since he was elected in 2006. The federal government’s PPP Canada said infrastructure investment had to go through costly public private partnerships. Canadians paid twice for this; once through cuts in public services and again in higher costs for P3 infrastructure projects.

For Mr. Trudeau to truly kick-start the economy, it means stopping the Harper giveaway of the public purse. It means investing in infrastructure in a way that ensures that money stays in our economy, to the benefit of local Canadian workers and businesses.

Prime Minister Trudeau was elected on a promise to invest in key public infrastructure. BC’s experience with P3s shows him how not to do it.

Mark Hancock is President of CUPE BC, representing 85,000 workers in communities across BC.

COPE 491