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NORTH BAY The cost penalty paid by governments for financing hospitals and other public infrastructure projects through public private partnerships (P3s) has jumped substantially since the onset of the financial crisis, says a report released in North Bay today by the Ontario Council of Hospital Unions (OCHU/CUPE).
Economist Hugh Mackenzie’s report, Bad Before, Worse Now: The Financial Crisis and the Skyrocketing Costs of Public Private Partnerships (P3s), documents how the financial crisis has made P3s an even more expensive and risky way to build public goods like hospitals, roads and schools.
The financial crisis has been bad news for private investors looking to profit from so-called public private partnerships, says the report’s author, independent economist Hugh MacKenzie. The financial crisis has increased the spread between borrowing costs for the private and public sectors and made it harder to attract investors to highly leveraged projects. If P3 financing was bad before the financial crisis, it’s even worse now, and all governments should take notice.
The report finds that the financing cost disadvantage for P3s had reached as much as 60% in the early stages of the credit crunch and now has reached 83%, even assuming that P3 operators are prepared to accept lower rates of profit. That means that governments can afford to invest 83% more in infrastructure projects if they are publicly financed than if they are privately financed.
The McGuinty government remains fully committed to the P3 model for building vital institutions like hospitals, even though P3s increase costs by hundreds of millions of dollars for every large project. The Liberals have already admitted the financing and transaction costs for North Bay Regional Health Centre P3 would be $160 million more than if it had been built publicly.
Who benefits from P3s? Not the public, not patients, not our communities, said Michael Hurley, President of the Ontario Council of Hospital Unions (OCHU/CUPE). The Liberals are wasting hundreds of millions of taxpayer dollars with P3 hospitals, even while the government cuts health care services, programs, ER departments and even whole hospitals in smaller and rural communities. It’s time to abandon this flawed policy.
For more information:
Hugh Mackenzie Economist 416-884-5378 (C)
Michael Hurley President, OCHU 416-884-0770 (C)
David Robbins CUPE Communications 613-878-1431 (C)
The Ontario government’s deal for a privatized, for-profit P3 hospital in North Bay relies on secrecy and dubious accounting to conceal its exorbitant costs, according to the Ontario Health Coalition. The OHC reports that all financial numbers but one were blacked out in the project agreement. Even so, the government admitted the financing and transaction costs for the private hospital would be $160 million more than if they had built publicly. The government rationalizes its insistence on the P3 hospital by assigning a value of $230 million to a dubious ‘risk transfer,’ without disclosing details about this risk transfer.