News item: Golden Ears Bridge loses up to $45 million annually. Huh? How can a bridge lose money when it is part of B.C.’s infrastructure?
I would have thought that any toll bridge makes money. After all, the Golden Ears bridge collects $30 million in tolls annually. If that isn’t making money, I don’t know what is; especially compared to a bridge that collects nothing.
It turns out that the view from the bridge is quite different if you’re a public-private partnership (PPP). Built in 2009 across the Fraser River, the bridge links Maple Ridge with Surrey. The PPP consortium, Golden Crossing General Partnership, built the bridge and taxpayers, through TransLink, will pay back the consortium over
TransLink “loses money” only because it collects less in tolls than it has to pay the consortium.
If the bridge were publicly built, there would be no talk of it losing money. But the Liberals believe, ironically, that governments are too incompetent to build large projects. The justifications given for PPPs is that they transfer risk to the private sector and they provide better “value for money.” There is almost no evidence for either claim.
What risks? Not the risk of reduced tolls as we now know. Other building risks could have been reduced with bonds or similar means.
Value for money is insured for the consortium, not for the government. The consortium didn’t eat the added costs when the estimate went from $600 million to $800 million. Instead, TransLink borrowed money for the extra project costs and saved a bundle because it can borrow at a cheaper rate.
TransLink acknowledged the savings in borrowing costs in a news release of Sept. 21, 2005, in which it gives the savings in public borrowing as being from $35 million to $40 million in interest, as reported in a CUPE newsletter. The TransLink news release has since been removed from its website. TransLink could have saved even more by financing the project itself.
“Why don’t they finance the whole project and save even more money for B.C. taxpayers?” wonders CUPE.
A bit of ingenious accounting justifies PPPs. According the public corporation created by the Liberals to manage PPPs, Partnerships B.C., it’s cheaper to contract out than build publicly. They claim the savings for the Golden Ears bridge was from
$6 billion to $10 billion.
It takes a bit of economic manoeuvring to explain away advantages of public financing. First, the PPP costs have to be reduced by something called a “discount rate.” That’s the money saved by investing the money rather than spending it on a bridge. That part makes sense. If I can lease a car rather than buy it, and make interest on investing the purchase price, then I’m ahead.
However, like leasing a car, a lot depends on the details. Car dealers and PPP consortia have made their own calculations so that the terms of the agreement benefit themselves.
Risk aversion is built-in so that when things go sideways, it’s the government that pays.
The Golden Ears bridge is only losing money from the perspective of taxpayers. For the Golden Crossing General Partnership, it’s a money-maker.