There are a couple of people who I really admire and follow with regards to their work on P3’s in the province, among other items of concern. One is Erik Andersen , who in the embedded link talks about the potential for BC reaching our own fiscal cliff, and Keith Reynolds, who has written more about P3 projects than anyone else.
For newer readers, Public-private partnerships are a method of financing and building a project whereby a private corporation – usually a team of them – is selected to build a government project, and also finances it all up front.
The government then pays that private partner back over a long period of time, along with very lucrative payments and interest, and that make P3’s a very popular investment vehicle for many investment funds – the Sea to Sky highway project has been sold once already to a new investor : http://lailayuile.com/2010/12/22/sea-to-sky-highway-changes-hands-as-macquaries-essential-asset-partnerships-sells-100-of-their-stake-in-the-project/
While the Liberal government has greatly endorsed the use of this manner of financing and building many projects, in particular highways and bridges, critics including myself have great concern over the amount of debt that it obligates the province to re-pay. The province doesnt actually consider it debt though, and it is not reported as debt, but rather ” contractual obligations” . I’ve compared it to your mortgage, which is also a contractual obligation… but if you tried to tell a credit card company it wasnt debt, they would laugh at you.
It is debt, under another name, and those P3 payments over time, over multiple projects, have nearly bankrupted other countries and many countries have now stopped using this method because of the burden it places on the government over time, in paying back those debts.
Now Keith Reynolds has brought forth another strong concern – the new owners of two P3 projects in BC are companies that are located in countries that are tax havens… and this may have a strong impact on the amount of taxes they should be paying to our province.
Here is an excerpt:
“If P3 infrastructure is operated by the government or its agencies, then the operator does not pay taxes to the federal or provincial governments. But a private sector operator does pay taxes and these taxes are factored into the equation that decides whether or not to use a P3.
But what happens if the tax revenue predicted from the P3 project doesn’t materialize? That means the province does not get the expected revenue, which is a big deal in cash strapped British Columbia. It also means that the comparison used to decide whether to use a P3 to do the project publicly was biased against public operation because of overly optimistic revenue expectations from the P3.
One of the ways companies cut their taxes is by moving their headquarters to tax havens. Instead of claiming their profits in the country where they actually deliver services profits are claimed in the tax haven and taxes are paid at much lower rates.
Here in British Columbia there is complete silence on the issue from both the government and the media. The Ministry of Finance in response to a Freedom of Information request asking about the impact of tax havens and P3s said “although a thorough search was conducted, no responsive records were located. Your file is now closed.”
In a nutshell, the public private partnerships are already creating a sizable debt load in this province and when projects are flipped, losing valuable tax revenue to offset that debt is a huge liability.
But I’m pretty sure the government doesn’t want you to know, or understand any of it …. and that’s why you have to read the full post here http://www.policynote.ca/are-tax-havens-robbing-the-government-of-revenue-from-p3s-nobody-seems-to-care/
I’m more than willing to answer any questions you have, as I am sure Keith is, to help you understand why this is such an important issue for the financial future of our province.
Then, go and read the top post of 2012 on this site: http://lailayuile.com/2013/01/02/the-top-post-of-2012-on-lailayuile-com-how-money-and-corruption-are-ruining-the-land-originally-posted-june-19th-2012/