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Alberta P3 schools “make no economic sense”

Jan 16, 2008 12:54 PM
 

Alberta’s plan to build new schools as P3s comes with a hefty price tag, according to an economic analysis of the scheme. The report found that for every two schools financed as P3s, three could be built as public projects.

Last June, the provincial government announced plans to privatize financing and “major” long-term maintenance of 18 new schools in Calgary and Edmonton. Edmonton and Calgary will each get six new public schools and three new Catholic schools. In early January, the government announced it had narrowed the field to three consortia.

CUPE Alberta criticized the scheme when it was first announced, and commissioned respected economist Hugh Mackenzie to do an in-depth analysis. His report, Doing the math: Why P3s for Alberta schools don’t add up, details the true costs, lack of transparency, loss of community control and increased financial risk that come with a P3. It was released in Edmonton and Calgary this week.

While Alberta is touting the P3 as a “made in Alberta” version of privatization, Mackenzie argues that a better home-grown solution would have been to fund the schools directly, rather than relying on private financing.

“Given the province’s fiscal wealth, the fact that the province is even considering indirect financing through P3s is odd, to say the least,” writes Mackenzie. “But even if the province were not in a position to make the investments needed without borrowing, the evidence is clear that relying on P3s to finance public infrastructure makes no economic sense,” he says.

Mackenzie also cuts through private sector arguments about risk transfer to show that the public ultimately bears the risk when a project or corporation fails. “For the government, there is no walk-away option…leaving open the question of why the government would pay someone to absorb a risk that, in the event of default, it will have to absorb in any case,” he writes.

“The Stelmach government is wilfully ignoring the very real danger of cost overruns, which led to the cancellation of a proposed P3 courthouse,” says CUPE Alberta President D’Arcy Lanovaz. “While it is inarguable that Albertan children need new schools, a P3 model is far from the best option for Albertan taxpayers.”

While the schools are being promoted as innovative, reports have emerged that under the proposed P3 contracts, the province has outlawed other public uses in the school buildings including child care, after-school care, and shared space with libraries or public-health units. In other words, back to what one columnist calls “back to the old model of single-use buildings.”

As Edmonton school board trustee Gerry Gibeault told the media, "The board was hoping we'd have more mixed community uses in schools, because that's what taxpayers expect from their facilities…The P3 is going to take us backwards."