The provincial governing party — the Saskatchewan Party — made a lot of noise about the millions supposedly saved by the policy of public/private partnerships to construct and maintain public facilities.
Three main areas were involved — the $800 million Regina bypass project that ballooned to $1.8 billion; the $410 million Saskatchewan Hospital in North Battleford; and $110 million for schools.
The government prided itself on pushing the capital costs to the companies constructing the projects and saving taxpayers that huge amount. The Saskatchewan Party makes no mention of these projects and the million supposedly saved.
The embarrassing need for remediation might have pushed taking credit onto the back burner. The bypass project was no sooner complete before truckers and farmers found they couldn’t turn equipment without driving on the French-built curb.
The French-built bypass system had another issue when the light standards had to be replaced. Heavy Saskatchewan winds were blowing them out of the ground.
The Saskatchewan Hospital had issues from a leaky roof needing repairs right after completion to hot water bubbling up the toilet system. Parents were upset they had little say in the cookie-cutter one-size fits-all school designs.
The public/private partnerships save taxpayers from raising the money to build facilities. That is only an initial saving. The private partner in the partnership needs proper payment for taking on all the risks.
The only way to get adequate compensation for risk taking is by tacking on a higher margin. The competitive bidding process is supposed to keep margins low. But if few bidders are attracted, that is no guarantee of a fair margin.
Public authorities can borrow money at much more favourable interest rates than private contractors. The federal government deficit borrowing ranges from 1.5 to two per cent. Most certainly private partners will pay double that and be repaid by the taxpayers.
Public/private partnerships are a method for government to deceive taxpayers because these partnerships remove debt from the public books and onto private balance sheets. Yet the taxpayers make the payments to project owners that repay the debt.
The 20-year contracts to maintain the project should stop the private partner from cutting corners in buildings as the partner faces maintenance costs for the next 20 years.
The condition of the project when handed over to the government in 20 years will be the chief measurement of how well the partnership served taxpayers by saving money, if at all.
The fact is public/private partnerships can’t be properly evaluated until the contract is complete. Taxpayers have to hope a lot along the way — hope the project maintenance doesn’t cut corners, hope the building construction didn’t cut corners, hope the private partner makes a go of it for 20 years, or the government faces taking over the project, and/or finding a new partner.
This perhaps explains why the Saskatchewan Party isn’t taking credit for saving taxpayers money. It doesn’t take a rocket scientist to figure out that taxpayers are still paying for the project plus giving the private partner a nice profit.