Summary of Findings
The Evergreen Park School PPP
WHAT IS IT ABOUT?
Evergreen park school is leased by the government from a private company, Greenarm corporation, of Fredericton.
WHAT KIND OF PPP?
This is an example of a build-lease-operate-transfer PPP, with Greenarm financing its construction through the Mutual Life Assurance Company of Canada and entering into a lease agreement with the province through the minister of education.
The province claims Evergreen Park School project would deliver:
- considerable capital and operating savings
- capital financing to Greenarm at close to province’s borrowing rate
- substantial risk transfer
- long term flexibility to government
- improved level of service
Government exaggerated both generic capital and operating costs, thereby exaggerating savings from PPP Auditor general estimates that province could have built the building at a lower cost than Greenarm. Province also transferred land at less than market value once lease costs allowed for.
Auditor general estimates that operating costs would have been about the same (Both assume use of non-unionized labour for maintenance). Cost of private sector borrowing, at 9.065% was well in excess of province’s cost of 8.787%, raising effective capital costs again. On balance, province estimated present value savings of $185,000. Auditor general estimates additional present value costs of $900,000.
Greenarm faces no risks for 25 years on either the lease or the maintenance side and all cost increases are provided for. Province can buy back after 25 years at $2.5 million or continue leasing at undisclosed rate for a further 10 years. Design risks borne by province, construction risks by Greenarm. No real risks after 25 years since most of capital cost already met and options for land and building.
In long term, organized labour bears a huge risk from this type of lease arrangement No evidence of improved service level. Loss of access to information by public. Greenarm takes 25% cut of payments for all after hours usages.