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"These P3 schools will be the death of our communities in rural Nova Scotia. They’re closing perfectly good schools. And they want to rent the new ones to us. They’ve taken our post offices, our rail lines, our community elementary schools. Now they want our community high schools. Schools that produced people like Ashley MacIsaac, Nathalie McMaster and Linden McIntyre are now being closed. We’ll have nothing left."

Rose MacKenzie, Pictou County Councillor and member, Community Schools Coalition

Off-book but overpriced

While many argue that lease payments do in fact constitute debt, there is no question lease-back schools cost more than if the public sector financed and owned the schools in the first place. Taxpayers and students suffer as public money is drained from the school system to line the pockets of developers and consortia.

A now-notorious example is the Evergreen Park lease-back school, New Brunswick’s first public private partnership. As highlighted in last year’s Annual Report on Privatization, the Moncton school came under fire from the Auditor General in 1998, because it cost more than a publicly financed and owned project.

Further analysis of the government’s claims and the Auditor’s findings show the school cost $900,000 more than if the province had taken on the project. Because corporations cannot borrow as cheaply as government, private financing of the school cost nearly $400,000 more. And the province is paying another $421,000 over the 25-year lease to lease back land they sold the Greenarm corporation for $275,000.

The wild variations, between the government model which estimated it would save $184,000 using a public private partnership and the actual figures, led the Auditor General to suggest the government had overestimated some costs to make the P3 seem more attractive than it actually was.

Misrepresentation of costs has also plagued Nova Scotia P3 schools. In the case of calculations made to compare public and private costs of building Horton High School in Greenwich, King’s County, the government assumed a public sector bond rate higher than any long-term bond issued by the province. When the Horton High School costs are re-calculated using the rate of government bonds issued two days after the Horton lease was announced, the P3 school ends up costing $4.3 million more than it would have cost as a public venture. Similar calculations for the O’Connell Drive school in Porters Lake bring the cost of that public private partnership to $888,000 more than the traditional method.

The Liberal government at the time acknowledged that if they chose to buy out or renew the lease at the end of the initial 20-year term, they would pay "slightly more" for the school than if they had built it themselves. "Slightly more" ranges from $200,000 to $430,000. Multiplied by 56 schools, this amounts to a significant — and unnecessary — misuse of public funds. A government spokesperson justified the additional cost saying: "It’s like leasing a car. You pay a little more, but that’s because you have the option to continue, walk away or buy."

Yet as economist John Loxley notes, if the cost of the building is already paid off at the end of the term, walking away is the same as giving the building away. While this might be reasonable if the building is beyond repair, the Nova Scotia government is providing for full maintenance of what should be public assets. Yet there remain very real concerns that in some cases corporations will let buildings deteriorate as the 20-year lease approaches renewal, leaving the public sector on the hook.

For two years running, the province’s Auditor General has criticized the government for not conducting a cost-benefit comparison of P3 financing before stampeding ahead with new deals. There is no evidence that happened under the old Liberal government. And while the new Conservative government is fulfilling its election pledge to review 17 outstanding school deals before signing the leases, it hasn’t put the brakes on the process. Contracts for the 17 schools have been put out for tender, although they have not been awarded. These schools have been promised for specific communities and have specific delivery dates. As of yet, these dates have not been changed.

The new government has also begun accounting for some of the school leases up front, recording the entire cost of the P3 in one year. Since debt avoidance has underpinned the entire P3 process, it begs the question why any further schools are even being considered now that the debt is visible and accounted for all at once.