The bones of failed public private partnerships are buried across the province. From private jails to lease-back schools and corporate-led restructuring of services, P3s have not fared well under the provincial auditor’s microscope. A prime example is the Evergreen Park School.
The provincial auditor’s 1998 report exposed that the Moncton lease-back school cost nearly $900,000 more than a publicly financed and owned project. The auditor, noting that corporations cannot borrow as cheaply as government, found the difference in interest rates cost the province nearly $400,000. And the province is paying another $421,000 over the 25-year deal to lease back land it sold the Greenarm Corporation for $275,000.
The government estimated it would save $184,000 under the public private partnership — a far cry from the final $900,000 in added costs. The provincial auditor suggested the government had overestimated some costs to make the P3 seem more attractive than it actually was. Greenarm faces no risks for 25 years on either the lease or the maintenance side and all cost increases are provided for. The province can buy the school back after 25 years for $2.5 million, or can continue leasing at an undisclosed rate for a further 10 years.
The deal also obscures other financial details. Greenarm is not prepared to disclose its projected revenues from the P3 school. Its lease agreement stipulates that operating cost information will be made available to the province “from time to time”, but that this information will only be used for the purposes of the lease.
The P3 also diminishes community control of a once-public space. The Evergreen Park School principal only has authority over the building during designated hours — Monday to Friday from 7 a.m. to 6 p.m., plus one evening a week where events such as parent-teacher interviews and sports tournaments must be scheduled. A technology retraining company is another Evergreen partner, holding secondary rights to the school.
Another project that was supposed to blaze a P3 trail was a youth jail. The auditor found the added expense of private borrowing added $404,000 to the price for Wackenhut Corrections Corporation to finance and build the Miramichi youth detention facility — far from the province’s estimated $708,000 in savings.
Andersen Consulting worked at restructuring the province’s welfare system for more than a year without a signed contract. And it cost the public $10 million to cancel a failed overhaul of the province’s tax collection system. The payment went to an IBM-led consortium.
The province’s private highway has also come under the auditor’s scrutiny. In all of these schemes the public has shouldered much of the risk, while corporations reap the rewards.