Thursday, February 5, 2009

"We did things that newspapers can do to bring about change, positive change."


That is a quote from Marty Beneteau, Editor of the Star.

In my opinion, this one newspaper town is being badly served so far by our newspaper. Or perhaps I am condemning them prematurely. Perhaps they are working on a massive series about the evils of public-private partnerships: P3s, AFPs as Ontario calls them or 3Ps as Michael Kergin did. Anything to confuse the public!

Bridge and road Megaprojects are running amuk in Canada and more are to come. The Danish Professor who writes on this subject should be offered a Chair at the University of Windsor so he can write about this. Or perhaps I will do my Doctorate on the subject about how taxpayers are being fleeced.

Here is what the Star's sister newspaper in Vancouver has been telling its readers about a massive bridge project that has gone hugely over-budget. Have you read about it locally? It is only a $3B+ project that doubled in price in a year. Does that scare you about DRIC's true cost? It ought to!

Is DRIC going to be our Big Dig too!

Moreover, the winning P3 partner, the Australian company Macquarie---are they MDOT's Australians---almost had to back out because they could not raise the money required with the economic melt-down. Instead the Province will have to put up one third of the huge amount required.

Did you see any of this in the Star? Nope we saw instead the Editorial today between the love-in between Eddie Francis and Dwight Duncan over Red Bull:
  • "When Finance Minister Dwight Duncan promised $3.2 million from the province to sponsor the event, organizers signed on the dotted line.

    "Without Dwight's involvement this event would not be coming back -- period," Francis was quick to say when the big news was announced on Tuesday.

    Duncan's commitment sets the stage for a series of unprecedented opportunities."

Oh my goodness. What was discussed in that car trip to Toronto airport between the two of them.

Oh Lord, please save us from the opportunities I am thinking about and with whom! No wonder we have not seen Dave Cooke's Report yet and we have just heard about the West End brownfields!

How much will all of this cost taxpayers at all levels just to stop the Ambassador Bridge Company!

Obviously, much more to come in subsequent BLOGs.

  • Four-step program for buying a bigger bridge blows the budget

    Vaughn Palmer
    Vancouver Sun


    Thursday, February 05, 2009


    Premier Gordon Campbell proudly took the wraps off the design for the new Port Mann Bridge project Wednesday, declaring, "A picture is worth a thousand words."

    A thousand words? Try more than three billion dollars.

    For $3.3 billion is the B.C. Liberal government's latest estimate for the "all-in cost" of its plan to double the carrying capacity of the Port Mann and widen the adjacent stretches of Highway 1.

    The new price tag is a shocker, to put it mildly.

    As recently as last June the government was still maintaining that the project could be completed for a capital cost of as little as $1.5 billion.

    As to how we got from what now looks to be a bargain-basement estimate to today's stratospheric rendering, the premier and Transportation Minister Kevin Falcon described a four-step escalation.

    Step 1: The raid on contingencies. At some point last year, the government realized that the project would be more expensive than initially estimated. So the Liberals took $230 million from the contingency funding for the Gateway project (which includes the Port Mann), boosting the budget to $1.73 billion from the initial allowance of $1.5 billion.

    Step 2: Inflation takes its toll. The preceding numbers were in 2005 dollars, a caveat that appears in some government documents though not invariably. In order to give a more complete picture, the Liberals switched to 2013 dollars, that being the year when construction is scheduled to be finished and the new bridge and road open to traffic. Eight years of inflation (by the government's reckoning) transforms the $1.73 billion construction cost to an estimated $2.1 billion.

    Step 3: Buying a bigger bridge. In the initial tender call, the Liberals asked for bids on construction of a new five-lane span downstream from the existing Port Mann plus all the related highway widening and improvements in intersections.

    They also wanted the builder to retrofit the existing span, bringing it up to modern-day standards for earthquake-proofing and safety. The winning bidder would then be contracted to maintain the entire project for 35 years of operations.

    But the bidders balked at tackling the old span on those terms, believing it wasn't worth it to try to extend the life of a bridge that was already 45 years old and costly to maintain. They "didn't want the risk," according to Transportation Minister Falcon.

    The winning bidder countered with a proposal to build a new 10-lane bridge on the downstream site, then demolish the old one. Cheaper to maintain and more reliable in the long run. But more expensive up front.

    The one-bridge solution boosted the price tag (remembering that we are in 2013 dollars now) to $2.46 billion, a jump of $360 million.

    Step 4: Everything including the kitchen sink. The province is also required by the auditor-general to tally up a number of ongoing costs, including maintenance, rehabilitation, operations and interest charges. The running tab is calculated to be $840 million, boosting the all-in cost to -- well, here's the relevant passage from the government press release:

    "The total cost will be released when the contract is finalized but is expected to be approximately $3.3 billion."

    Give or take? The Liberals didn't say. But the working estimate is onerous enough, particularly as the province has agreed to finance one-third of the total through its own borrowing power, meaning taxpayers will be ponying up $1.15 billion.

    Repayable at commercial rates, insist the Liberals. And the government can back out as early as 2010 if a bank or pension fund is willing to take its place as an investor in the project.

    Either way, the full cost of the project is supposed to be repaid through tolls, which will be collected throughout the 35-year life of the operating agreement. Starting toll is $3, which should yield an annual take in excess of $100 million.

    The projected long-term stream of revenues from the tolls must be lucrative, given that they are expected to repay the escalated cost as surely as they were going to cover the original low-ball estimate.

    Other details will be made public when the deal is finalized, which could happen as early as next month, according to Campbell and Falcon.

    The Liberal duo spent much of the press conference one-upping each other on the merits of the project, describing it as the biggest infrastructure project in provincial history, the greatest relief to traffic congestion, and so on.

    But one superlative that isn't likely to crop up in their boasting is the one suggested by what happened to the estimated cost of building the thing. From the $1.5 billion minimum last June, we're now at $3.3 billion and that still may not be the end of it.

    Sure, a lot of factors contributed to the increase: overruns, inflation, scope changes, carrying charges. There's nonetheless a jump of 120 per cent or $1.8 billion in a mere eight months, surely a record for a provincial project of any kind.

    And they've just started putting shovels into the ground.

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