Regional and municipal politicians should think twice about using public private partnerships for infrastructure projects. That’s an important lesson from February’s downgrading of the British Columbia Municipal Finance Authority’s credit rating by Standard & Poor’s.
On Feb. 21, Standard & Poor’s lowered the authority’s credit rating (down to ‘AA+’ from ‘AAA’) because of the Greater Vancouver Regional District (GVRD)’s increasing debt: a projected $5.5 billion by 2009.
The downgrading is directly linked to expensive P3s such as the rapid transit line from the airport to downtown Vancouver (RAV) line) and the Golden Ears bridge. P3 projects result in much higher costs and less accountability for taxpayers.
“Early in the planning process, regional politicians were told P3s would hide debt, but accounting rules don’t allow this,” CUPE BC president Barry O’Neill said. “Now that debt is on the books for projects that are as much as 25 per cent over budget projections.”
The lower credit rating means increased interest rates on regional projects. This could mean higher taxes or a reduction of services.
“This is really typical of what we see with P3s and privatization of services - big promises, a lot of disappointment, and taxpayers left on the hook,” O’Neill added.