Debt could add $8 billion to Massey bridge cost, says NDP
The NDP says leaked documents show the cost to replace the Massey Tunnel with a new bridge could triple over the next 50 years to nearly $12 billion.
But experts are questioning whether anyone has yet to get the math right on the controversial megaproject.
According to documents released Friday morning by the NDP, interest payments on the financing would add an extra $8 billion in costs over the next 50 years.
That's because, to raise the money to build the $3.5 billion bridge, the government plans to use short term debt and a series of bonds released over the coming years, according to the confidential documents dated Aug 22, 2016.
"Because Christy Clark is pushing the bridge with no financial support from the federal or municipal governments, B.C. taxpayers will be left footing the whole bill," the NDP said in a statement released early Friday morning.
Financing defended
But B.C. Liberal candidate Todd Stone, who, as the transportation minister, was responsible for the bridge, is defended the financing costs.
"It's shocking that the B.C. NDP — a party that wants to be trusted with the province's finances — has such a fundamental lack of understanding of how financing works," said Stone in his own statement issued later in the morning.
"Yes, there will be a loan, and it will be spread out over the next 50 years — like a mortgage ... It's the exactly the same principle for the Massey Bridge — and the reason we're doing it is to keep toll rates low for commuters."
UBC economics professor Kevin Milligan agrees that simply adding future interest payments to the cost of the project distorts the cost for taxpayers because of inflation and other economic effects.
"That's not how we do financial analysis. You don't add up all the interest costs over a long time period," said Milligan.
"Instead, what you want to do is compare the costs and the benefits all put on the same page. That's the right comparison to make."
"You want to make the case that maybe the benefits are not as big as the government is suggesting, that congestion will not go down, that there may be some environmental costs that are not included."
No cost benefit analysis released
So what does a cost-benefit analysis say about the price of the bridge?
According to UVic public administration professor Kimberly Speers, it's impossible to say because the government has yet to release a proper cost-benefit analysis for the project.
And Speers says without that analysis, it's impossible to know if the financing plan represents the best deal for taxpayers.
"That is taxpayers' money. That is billions of dollars that could be spent somewhere else. All of that should be made available to the public. I think we have the right to know. "
She's not the first to raise that concern. Since the government announced the project in 2015, it's been mired in controversy, with Metro Vancouver's mayors rejecting it as unnecessary.
The last resort?
Speers also questions if bonds are the best way to finance the project, but once again without the proper analysis it is impossible to say.
"To me, it would a last resort.... With infrastructure projects, there are lots of different alternatives available to governments for debt financing. What I would like to see is a thorough analysis of what the costs and benefits are for each of those alternatives."
Neither Speers or Milligan is aware of previous examples where the government has used bonds to finance infrastructure projects in B.C.
But Speers said it is done extensively in Europe and Africa and is starting to catch on in North America. BC Ferries has also issued bonds to finance some of its large new vessels in recent years.
Nevertheless, Milligan says, in general, the principle of financing costly infrastructure projects by taking on debt is a reasonable approach.
"I think that this is a very standard approach to building infrastructure, where you take on some debt, and you pay off that debt over a long time frame, because you get a benefit over the long term."
