Category Archives: Municipal

Federal, Municipal, Provincial

Financial Reality Check

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The report on the state of the hospital on Haida Gwaii contained two important reality checks.

The NDP continue to need a major reality check on financial reality. There the NDP were, once again, demanding the BC government spend millions ($60 million) on health care (new Haida Gwaii hospital) while the NDP continue to advocate the repeal of the HST.

The 2011/12 budget is already facing a revenue shortage of $475 million, the amount that was due July 1, 2011 for implementing the HST. Given that BC’s referendum on repealing the HST violates the agreement with the federal government, the feds are not going to be paying that $475 million. Unless of course reality and sanity prevail and the Voters vote to keep the HST.

So, the NDP are working to cut $475 million out of BC’s 2011/12 budget and calling for added spending of $60 million for a new hospital on Haida Gwaii.

As a public service to the citizens of BC I am willing to make the sacrifice and accept $1 million from the NDP in order to provide a salient lesson on the effect of a significant revenue reduction . I am willing to accept any additional millions from the NDP that may be necessary in order for the NDP to learn about the effects a significant reduction in revenue has on a budget and what that reduction means for spending.

Further I will accept $130,000 from the NDP to model the effect of adding a large expenditure to a budget dealing with a large revenue reduction. (13% was arrived at by dividing $60 million demanded expenditure by the $475 million revenue reduction demanded by the NDP).

I also extend this offer to Mr Vander Zalm (adjusted to remove the additional $130,000 representing the NDP’s demanded expenditure as Mr Vander Zalm has only advocated reducing revenue by the $475 million this year, hundreds of millions per year in subsequent years and by the $1.2 billion that will need to be repaid to Ottawa).

Neither the NDP or Mr Vander Zalm should have any objection to accepting this offer as this is exactly what they are advocating the citizens of BC do with their money. There is no reason to object to acting on a personal financial level in the same manner they are advocating the province of BC act, is there?

The second reality check (and of far more concern) was the statement that, while the government was committed to getting the people on Haida Gwaii a new hospital, they did not have the $60 million needed and did not know where they could find it.

Hardly surprising in light of the Finance Minister’s statement that the government did not have any extra millions to increase spending on the missing woman’s inquiry. Or in light of the report on the same newscast that the most vulnerable of our citizens, those facing mental and physical challenges are facing cutbacks because the government simply does not have the money to meet all its obligations and demands for services. This situation is not the only cannibalizing of services here to provide services there. The government has been, over time, more and more often robbing Peter to pay Paul.

 

And that is the reality before revenue is reduced by $475 million or by the hundreds of millions (year after year) that will result from a repeal of the HST.

Why do I say this is of far more concern?

Consider this scenario: the province finds the $60 million but the people of Surrey say “Wait a minute, we need more hospital beds, the money should be spent building more hospital beds in Surrey (or Vancouver). There are only 2,500 people in Haida Gwaii and hundreds of thousands in Surrey.”

We are in that scenario. If the government manages to scrape up the $60 million by (robbing it from) further reductions in support to the challenged and other programs and if the money is spent on a new hospital on Haida Gwaii there will be no money for new hospital beds in the rest of BC.

We are just beginning resource and service wars pitting Haida Gwaii against Surrey, premies against the old; those in need of heart surgery or transplants against those in need of elective surgery……

We cannot have everything, have it now and not need to pay for it.

Reality is about to give British Columbians and our government, indeed Canada as a whole, a rude awakening with a reality hip-check.

As it says in the Tao of James: ‘Realty doesn’t much care what you believe or what you want to be true, it just IS.”

Municipal

P3 – the Public Speaks

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I wrote that I thought it only fiscally responsible for Abbotsford and Mission to cost out a P3 – as long as they were also costing out a public project and that there was full disclosure on the terms of the P3 as well as addressing ownership and control issues.

I see nothing wrong with a city council that explores all its options when a financial commitment the size of the water project is in the process of being made – as long as council does due diligence on ALL the options .

However it is clear that the public, the people who pay the bills, are opposed to the P3 option.

Since the public’s concerns are understandable and not unreasonable, the public being opposed to the P3 should be the end of considering the use a P3 for the water project.

I salute the District of Mission for their quick recognition and acceptance of the public’s position on the matter and their listening to their citizens and voting not to waste time, resources and taxpayer’s money pursuing the P3 any further.

What can one say about Abbotsford council except – business as usual.

A recent example of council’s business as usual: the residents of Clayburn Village and area are at council – new housing development isn’t approved. Two weeks latter without the residents present and one of the councillors opposed to the housing development not present – the decision is reversed and the development is approved.

Deferring a decision until the public isn’t there, or out and out reversing a decision when the public is no longer there in numbers, is the established modus operandi for Abbotsford council in ignoring the public, the people who pay the bills, and doing as council wants.

Hopefully the District of Mission’s ‘No’ decision will prevent Abbotsford council from ignoring the public’s wishes on the matter. A sad state of affairs when Abbotsford’s citizens must depend on the District of Mission council sticking to its guns (there is little doubt Abbotsford will be pressuring Mission to ignore the public and do what Abbotsford council wants) to deny their own Abbotsford council the ability to once again ignore citizens and do as they please.

Abbotsford council’s actions make it clear that their intention was P3 or nothing to try to force voters to vote yes to the P3 in November – no matter how bad a choice it may have been for taxpayers. Again behaviour we have seen before and that has saddled taxpayers with the money devouring black hole that is the AESC and has Abbotsford taxpayers buying a profession hockey team for a few wealthy and well connected Abbotsford residents.

So it is imperative the public turn out in force at the next council meeting to prevent council, in business as usual mode, voting to proceed with the P3.

In a way the public weighing in and speaking so strongly against the P3 is a relief. While I do think it is due diligence for a city council to explore a P3 option, we are not dealing with just any council but Abbotsford city council. Typical Abbotsford council behaviour is to proceed with the P3 as the only choice and sell it to the public – branding as naysayers those who dare to suggest that the P3 was a bad choice.

For council a P3 represents a ‘get out of jail free card’ since they avoid the need to deal with the consequences of their financial mismanagement of the City’s resources with the added bonus that it is easy – the P3 private partners do all the work.

A public project will force council to deal with the consequences of the financial decisions it has made and it requires a lot more work on the part of council and staff.

Let me amend that – in a well managed municipality a public project requires a great deal of work and attention to detail in order to maximize taxpayers bang for their buck.

Which means that if the public keeps the pressure on council and prevents Abbotsford council from sneaking back to the P3, the real hard and long work for the public begins – to keep Abbotsford staff and council’s noses to the grindstone on the matter of the public project.

If taxpayers are lucky November elections will present voters an opportunity to elect financially responsible councillors to ensure the cost of the water project does not become another albatross around the necks of taxpayers.

Municipal

P3 or NOT P3?

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“…it’s been proposed we’re going to privatize the water system. It’s deceitful and it’s absolutely untrue,” said Peary”

Deceitful and untrue? Not really……

As a P3 is this a traditional public project? No. As a P3 is there private involvement? Yes. Does the private sector take the lead in construction and operation of the project? Yes. Is a P3 privatization?

That very much is a matter of definition. A public project has no private sector participation beyond being the constructor. A P3 has private sector participation well beyond simple construction into operations.

The mayor is using the meaning of ‘privatization’ that existed prior to the rise of P3 projects. Those who call P3s ‘privatization’ are referring to the dominant role private sector organizations play in P3s: adding the private sector into what were public sector projects is by definition privatizing.

The important point is not what you call it but what differences there are in the terms of the agreement and ownership between a strictly public project and a P3.

‘…the cost efficiencies of a P3 operation…” Studies of P3 projects have shown that P3s cost both more to build and to operate than a well managed public project. All other things being equal a P3 water project will cost taxpayers significantly more than building a well managed public water project.

I use ‘all other things being equal’ because of the existence of the conservative governments P3 Canada funding that provides funding of up to 25% for P3 projects.The fund exists to provide funding to make P3 projects competitive with well managed public projects, promoting P3 projects in keeping with the federal Conservative government’s ideology.

Without the 25% federal (P3 Canada) funding Abbotsford and Mission should not consider, much less go with, using a P3 to build the water project because without the 25% funding a public project will provide appreciable savings to taxpayers.

Even a full 25% subsidy, given the congruence of current economic conditions with the state of affairs in the construction business, may not make a P3 the best choice.

Despite the previous council’s insistence that construction costs would continue to skyrocket and that those who called for Plan A construction be delayed until the post Olympic construction boom lowered prices and saved taxpayer $$$$ were idiots……now is a time when significant savings can be realized on construction costs.

The downward pressure on construction starts created by the economy together with the end of federal stimulus construction projects translates into significant reductions in construction costs for public projects.

Should Abbotsford/Mission explore the costs of a P3 water project – yes.

Is that all Abbotsford/Mission councils should do? Of course not – it would be irresponsible not to do due diligence to ascertain the cost of a well managed public project. A thorough and accurate determination of the water project, its timelines, its management and its costs if it is built as a public project must be made.

As to the referendum question in November – we don’t even know what the question should be at this point and won’t until we know whether the P3 will get the 25% funding, the costs of proceeding as a P3 project and the costs for a public project.

The water project is a financial decision that represents an extensive and long term commitment of City/taxpayer resources/dollars.

The effect the project will have on City/taxpayer resources/dollars necessitates an accurate and full understanding of the costs of both the P3 and public build options, the specifics and details of both options as well as the ownership implications of going with a P3.

Only when they are in possession of all the facts can voters make an informed decision in November on how to proceed with the construction of the water project.