Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

B.C.’s P3 projects not immune to world financial meltdown

with 4 comments

I have been poking around this evening looking for the announcement that Kevin “done deal” Falcon was supposed to have made this afternoon. It got no coverage on the CBC Vancouver at 6 News – there was nothing in my inboxes or on Twitter. So it was something of a surprise to find the answer at the Vancouver Sun

But on Friday, Transportation Minister Kevin Falcon was poised to make a sudden, late-day announcement about the Port Mann. Then, 18 minutes before the press conference, it was cancelled with little explanation.

Even more surprising it comes in the middle of a substantial story posted at 6pm this evening examining how BC’s P3 model is faring. And the Sun looks like, at long last, it has rediscovered how to be a newspaper. The shakiness of the P3 deals was becoming more and more apparent as more and more banks were showing that they were not at all interested in taking on risk. It has taken the Asper’s organ a while to catch up but give them credit for a thorough piece of work – with another nice quote from my friend Eric.

Note too that on the Golden Ears Bridge risk was not transferred in terms of usage. The operator gets paid the same no matter how many cars go over it. So, just like the Canada Line if the traffic forecasts are wrong then we the taxpayers are once again on the hook. And after spending far too many years around transportation forecasts I think it is not an exaggeration to say that the ones that are right are the exceptions. Most forecasts are wildly optimistic – because they are produced very early on in the process, are used to get approval – and then are not usually revisited even though their assumptions may be proved to be questionable long before the project is delivered.

Friday afternoon is also the time that is typically used to bury items that have to be announced but that it is hoped no-one will notice. So to plan to have one then – and then cancel it is most unusual.

Written by Stephen Rees

January 23, 2009 at 7:23 pm

4 Responses

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  1. This non-news conference was given much play on BCTV news, but Baldry seemed almost apologetic about the cancellation. “Oh money hard to find, yada yada….”

    I’m glad the sun is rediscovering itself and one hopes there is crossover with Global TV.

    Malcolm J.

    January 23, 2009 at 7:29 pm

  2. Thanks for this, Stephen

    I’m trying really hard to be optimistic about this moment in time, but I’ve seen too much P3 pushing to be convinced they’re ready to pack up the old carpet bag and go home.

    Call me a jaded old bird or just a plain old cynic, but I just can’t believe the Asper’s organ (or the Sun) has come to any sort of epiphany about P3s.

    I was on the GVRD Transportation and Environment Committee in 2000-2001 when the RAV Line proposal to jump the transit infrastructure queue ahead of the approved and much-needed Northeast Sector line landed on our table. The Ken Dobell-led Translink recommendation to proceed with a high-cost, Skytrain-only model, with a ridership guarantee of 100,000 boardings per day (when the 3 major N-S bus lines on either side of Cambie, combined, were boarding less than a third of that) was written by the MacQuarrie Group. I tried to challenge the report based on the critical analysis provided to us by then-director of planning, Ken Cameron. George Puil was the Chair of the GVRD in those days and he must have known there was trouble in River City because he uncharacteristically showed up for this particular meeting and immediately moved that the report{s} be tabled (indefinitely, it would seem). and Ken’s critique of MacQuarrie’s methodology and assumptions never saw the light of day. GIven what we now know, it’s really a shame.

    Why would we keep making same egregious mistakes and expect different outcomes?

    And why would we keep ploughing our once decent credit ratings into the dirt with these bad P3 deals when we have a perfectly lovely Municipal Finance Authority to finance our public infrastructure on superb terms? Do we have some perverse need to serve the profit margins of Australian or German banking houses? Every time we provide a guarantee in a P3 arrangement, the bond rating agencies knock us down a point. Enough already.

    Some good resources are found at Eric Doherty’s latest blog entry:
    http://www.livableregion.ca/blog/blogs/index.php/2009/01/22/p3_freeway_projects_seven_things_you_sho

    and an old Murray Dobbin commentary in the Straight:
    http://www.straight.com/article/who-wins-at-the-p3-game

    Lisa Barrett

    January 23, 2009 at 8:38 pm

  3. Macquarie Infrastructure Group (the listed investment company for the Macquarie Group Limited, operator of private toll roads) released their worldwide Traffic Statistics for the December Quarter 2008 and Financial Year 2009 to date (a requirement of the ASX disclosure rules).

    The report is available from here: http://www.asx.com.au/asxpdf/20090113/pdf/31fjzrt2bd1827.pdf (or browse the “Announcements” section of http://www.asx.com.au and enter the MIG security code).

    Contained in the report is traffic statistics for the “407 ERT” in Toronto. The December quarter of “Vehicle Kilometres Travelled (VKT) have fallen 3.4% due in part to “the reduction of trips, driven by the continuing impact of slowing economic activity across North America”.

    The Share Price for MIG on March 16 2007 was $3.94. The January 23 close was $1.54 (See http://tinyurl.com/affd3x Google Finance).

    In other words, the share prices of the investment companies involved in P3 deals are bleeding and actual traffic volumes can decrease.

    Robert Finlayson

    January 24, 2009 at 8:46 am

  4. In closing, Stephen said:

    “Friday afternoon is also the time that is typically used to bury items that have to be announced but that it is hoped no-one will notice. So to plan to have one then – and then cancel it is most unusual.”

    Hmmmmmm…..

    Would that make it a constipatory ‘Document Dump Interruptus’?

    .

    RossK

    January 24, 2009 at 6:19 pm


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