Call me a geek but the big transportation projects of BC have always been of keen interest to me and I’ve written about many. The Kicking Horse bridge, the South Fraser Perimeter road,Port Mann Bridge and of course, the infamous Sea to Sky highway.
With the discussion of road pricing and regional tolling sure to be back on the radar come fall, many have often wondered why there isn’t a toll for visitors on the Sea to Sky, which would surely be a cash cow the province could milk for a century.
I revealed the reason why it can’t be tolled here back in 2010 with confidential documents from Macquarie, one of the consortium members – the sea to sky P3 agreement already had a ‘shadow toll’ included as part of the governments payments to the concessionaire: https://lailayuile.com/2010/10/25/breaking-news-bc-liberals-inked-hidden-toll-into-sea-to-sky-highway-deal-and-we-all-pay-for-the-next-25-years
Even in the face of confidential documents and proof from companies promoting their involvement in the landmark project, the ministry of transportation denied it. Several times,including when the Globe and Mail’s Mark Hume picked it up.
The Sea to Sky highway deal has been the subject of much speculation and discussion since I revealed those confidential documents from the concessionaire Macquarie, which indicated shadow toll payments were part of the deal. Called Vehicle Usage Payments, also known as Traffic Volume or Traffic usage payments, are in addition to the normal maintenance and availability payments made to the operator, and are based on the number of vehicles that travel the highway, the size of those vehicles and the distance they travel.
Payments are made monthly from the BC government to the sea to sky operator and although they are capped at some point, the addition of these shadow toll payments beyond the regular maintenance and operation payments ensures a good return on the initial investment of the concessionaire and is an incentive to companies who wish to bid on projects like this one, or to consortiums like the one who now own that stake in the sea to sky.
In this case, the deal goes to 2030.
However, in 2010 the Macquarie consortium behind the financing of that project, sold 100% of their stake to Fieria, the Nova Scotia Pension Plan and the third member, Regimes de Rentes du Mouvement Desjardins( 9th largest private pension plan in Canada)
All stood to benefit from a stable and growing income for their funds over the next 20 years – on the backs of your hard-earned dollars. In changing economic times, a government making regular payments is a safe and secure investment opportunity. But over the past few years there have been a few issues including one failed attempt by the new stakeholders to refinance the project.
This press release, details the newly completed refinancing effort.
It’s interesting to me, and should be to you, because of the secrecy and government denials. It’s a public highway,one of which the ministry of transportation has succinctly said over and over again,to myself and several press outlets( see links above) did not have a shadow toll.
And yet darn it, someone forgot to tell Moodys Investor Services they weren’t supposed to talk about the shadow toll the BC government has both denied and tried to keep hidden from the taxpayers in BC when they recently assigned a rating to the project:
” The Issuer, however, is exposed to some operating risks over the remaining term of the concession, including traffic volume risk related to the shadow toll structure included in the payment mechanism of the Concession Agreement, full debt repayment contingent on the receipt of the End of Term Payment based on the final asset conditions and relatively weak projected financial metrics (minimum 1.15x and 1.19x average annual debt service coverage ratios as calculated by Moody’s which includes all movements to and from the reserve accounts). These risks are well mitigated by a lengthy traffic history with demonstrated consistent growth and a base case traffic forecast prepared by a reputable firm, look forward mechanisms in the O&M Contract and a solid cash break-even ratio at over 34.6% to manage any deductions and/or unexpected increased costs over the remaining term. The Issuer’s financial profile also demonstrated good resiliency to changes in the traffic forecast as indicated by Project Co’s ability to generate minimum/average DSCRs of 1.13x/1.17x should traffic projections decline by 5% and minimum/average DSCRs of 1.11x/1.15x should traffic projections decline by 10%”
Well would you look at that? But how can this be? Just last spring Transportation Minister Todd Stone was again denying there were shadow tolls on the Sea to Sky, according to this Hansard transcript: https://www.leg.bc.ca/content/Hansard/40th4th/20150421pm-Hansard-v23n9.htm Click on the image to see a bigger version.
Come on Todd, you’re better than that, trying to spin Claire Trevena. The gig’s up.
Will this newer transportation minister now say Moody’s is mistaken too? Or continue to play a rather insulting game with taxpayers by continuing to pretend this isn’t a lovely way to keep people from avoiding the road with a real toll?
Like they told this reporter from the Squamish Chief? : http://www.squamishchief.com/news/local-news/document-reveals-sea-to-sky-highway-being-shadow-tolled-1.1104530
This isn’t the only time the government has been caught in a fib. Remember the sea to sky retaining walls story I broke here? The ones government said were fine and inspected regularly? With some minor cosmetic issues?
That is, until the ministry confessed the builder has used materials that did not meet ministry specifications…and major work was done to two walls. https://lailayuile.com/2015/04/25/the-contractor-who-built-the-wall-peter-kiewit-and-sons-used-parts-in-the-retaining-wall-that-do-not-meet-ministry-standards/
And you wonder why I have such an issue with this government. Six years later, busted once again by a major ratings agency…
Heading out to the Sea to Sky this weekend? Better enjoy it. You’re paying for it every single time you go.. the only way you’ll make money off of this one, is if you invested in this deal.
((( And how much is the province paying every year to the private partner,including the shadow toll vehicle count payments? Approx. $ 51 million dollars this year alone… Norm took a look at this in a previous post, HERE: http://northerninsights.blogspot.ca/2014/07/sea-to-sky-highway-subsidy-12-15-each.html )))