Kingston P3: John Gerretsen should know better

Carleton University’s Hugh Armstrong speaks about P3s in Kingston March 4.

KINGSTON – As a Minister of the Crown, Kingston MPP John Gerretsen should know better.

At yesterday’s anti-privatization rally in front of his Kingston constituency office, Gerretsen was steadfast in his assertion that the deficit rendered the government unable to build new hospitals without private involvement in the finance, design, construction and long-term maintenance of the building.

The protesters are upset by the government’s plans to use a public-private partnership (P3) deal to build a new hospital in Kingston. The new facility will replace the aging psychiatric and rehab hospitals.

At the same time, Gerretsen surprised the protesters by telling them he knew the P3 option was more expensive.

The suggestion is that somehow using the private sector takes the costs of doing these projects off the government accounts. This is completely untrue.

It’s a little like taking out your high interest VISA card as a solution to your debts.

You don’t have to take our word for it.

The Conference Board of Canada issued a report in 2010 funded largely by pro-P3 groups such as the Canadian Council for Public-Private Partnerships, PPP Canada and Partnerships BC. To say the report subsequently contains a pro-P3 bias is a massive understatement.

Despite this, the report acknowledges that the idea of taking these financial obligations off-book has no value.

“The off-balance sheet treatment of public sector liabilities was a widespread practice in the first-wave P3 projects,” the Dispelling The Myths report states. “However, this practice reduces the transparency of public sector accounts and provides no economic value. Further, the extra effort required to structure an off-balance-sheet transaction arguably leads to higher transaction costs and thereby destroys value. Fortunately, this practice has been abandoned in the second wave of P3 transactions (emphasis added).”

That means all the debt obligations around these P3 deals remain on the government books. Paying more, it means greater deficit financing, not less.

So what is Gerretsen talking about? Is he really this misinformed, or is his strategy to spread misinformation about how these deals are structured?

Private consortiums are not out to help government with free capital. They have one objective – to make money. To do that, somebody has to pay.

Last night the Kingston Health Coalition held a panel discussion on P3s at the downtown Johnson Street library.

Carleton University professor Hugh Armstrong questioned why the government would pursue the P3 option when the evidence was so clearly lined up against this option of building new public infrastructure.

He noted that the high costs of building new P3 hospitals has led to layoffs and cuts to services when the new facilities eventually open.

It also leads to a considerable loss of control.

“Private operators have a seat at the policy table. They are not just stakeholders, but privileged stakeholders,” he said.

The complexity of these rigid contract arrangements makes it difficult to respond to changes in health care delivery brought on by new technology or shifting relationships among caregivers. When a hospital inevitably needs to make changes to the physical structure, public administrators have to weigh the high costs of dealing exclusively with the P3 operator against the health and operational benefits. They cannot simply tender the project.

Amy Van Vlack, President of the Kingston Coalition Against Poverty, said planned cuts to psychiatric beds at the new hospital will lead to greater homelessness in the city. She fears new charges dictated by the P3 operator will make it difficult for those on fixed incomes to afford parking and other user fees when the new hospital opens.

OPSEU’s Rick Janson said initially the TD Bank had recommended the best candidates for P3s were ones in which the public paid directly, such as the Confederation Bridge or the toll highway in Nova Scotia. The problem with single-payer P3s is the private operator essentially has only one source to base its economic model on.

“It ends up becoming a parasitical relationship as the P3 operators continually look at ways to generate revenue from the hospital’s operating budget,” says Janson.

Speakers reminded the audience that P3 operators are often foreign companies who will mine their profits in Kingston and send them overseas, damaging the local economy.

Natalie Mehra, Director of the Ontario Health Coalition, noted that in Britain such projects are justified by “pseudo-scientific mumbo jumbo” and such deals represent a massive transfer from public to private control over key infrastructure.

Over the next six weeks the Kingston Health Coalition is planning on working with its partners to stage a citizen-based plebiscite campaign on the issue. They have rented a campaign headquarters and have already begun to send letters to all local doctors notifying them of the flaws in the P3 plan. Vote day is April 13. The question on the ballot will ask Kingston residents if they want their hospital to be fully public?

“We need to force them (P3 proponents) out in the open and have the debate with them,” said Mehra.

Armstrong likely had the best suggestion of the evening — noting the fraud investigation around the P3 hospital in Montreal — he suggested that any bidder for such projects should automatically be disqualified if they or their senior officers have had a previous fraud conviction in this or any other jurisdiction.

The meeting began with a video clip from earlier in the day when protesters sang an adapted version of the Barenaked Ladies’ “If I Had Million Dollars.” The song was altered to “If I Had $100 Million Dollars,” a reference to the coalition’s estimate of how much more Ontarians will pay to develop the new hospital as a P3.

Earlier this year City Council was told by Infrastructure Ontario that the rate of return on this project is expected to be about 12 per cent annually to the private contractor.

—

On Wednesday, March 6 at 6:30 pm the Kingston Health Coalition is holding a meeting for volunteers wishing to work on the plebiscite campaign. The meeting will take place at the campaign offices at 303 Bagot Street. An “official” opening will take place March 18th.