Category Archives: The Issues
Concerned for Council’s P3 not for Citizens Pocketbooks or Wellbeing
Note: An Addendum has been added to the end of this piece.
On November 19th the voters of Abbotsford will be voting Yes/No on using a P3 to finance, design and build an upgrade to Abbotsford’s water supply/infrastructure.
The use of a P3 has proven highly controversial and generated a great deal of opposition to private control of Abbotsford’s water supply and the higher cost to taxpayers of using a P3 to finance/design/construct the upgrade.
The large sign pictured is one of two that are erected at the corner of George Ferguson Way and Tretheway Street in Abbotsford, diagonally across the civic plaza and employee parking lots behind Abbotsford City Hall and was up as incumbent councillors were in the all candidates meeting (November 8th) denying the city was using intimidation and threats, or deceptive information to mislead voters to believe the vote on November 19th was about whether the water supply would be upgraded or not, in order to get voters to vote Yes to the P3.
The smaller sign sprouted on the corner of Clearbrook Road and Maclure Road on November 10th.
Given: that the November 19th in Abbotsford vote is only about whether or not to use a P3 to finance, design and build an upgrade to Abbotsford’s water supply/infrastructure and that the November 19th vote has NOTHING to do with whether Abbotsford needs to, or should, upgrade its water supply.
Then: the clear intent of this sign – “On November 19 Say YES to Water” – is to deceive voters into voting yes for Abbotsford’s Mayor and Council’s P3 proposal by misleading voters into believing the vote on November 19th is about whether or not to upgrade Abbotsford’s water supply/infrastructure.
And that: the appearance of the second, smaller sign makes clear that there is an organized attempt being made to deceive the voters of Abbotsford into believing that the P3 vote on November 19th is about whether Abbotsford’s water supply is upgraded/expanded and thus deceive voters into voting Yes to the P3 based on the false belief created about the purpose of the November 19th by this organized effort to deceive.
1. Who are the ‘concerned citizens ‘ who paid for these signs which are clearly designed to trick/deceive voters in Abbotsford into voting yes to the P3 by causing them to falsely believe that the November 19th vote is about whether or not to upgrade the water supply, when in truth the vote is only about whether to use a P3 to finance, design and build the upgrade?
2. How many more of these signs are posted around Abbotsford to deceive voters into voting yes to the P3 proposal put to referendum by Abbotsford’s Mayor and Council?
3. Can any group of ‘concerned citizens’ put up signs designed to trick and deceive voters into voting the way the ‘concerned citizens’ want them to vote during a municipal election and/or on referendum issues?
4. Or are the signs of these ‘concerned citizens’ being treated in a special manner because the signs refer people to the City’s site promoting the P3 and the signs are intended to deceive voters into voting Yes to the P3 proposal of Abbotsford’s Mayor and Council?
5. Does not the existence of these misleading signs bring the validity of a Yes vote and approval of the P3 into question as the signs will cause people to vote Yes based on false information?
6. If anyone can post misleading and/or deceptive signs or the ‘concerned citizens’ posting the signs are not required to identify themselves – do we not require the laws governing municipal elections to be changed to prevent the use of clear deception to bring about a desired result on a referendum or who is elected to civic office?
Addendum:
The signs referred to in the story have suddenly been joined by numerous other signs that have appeared across Abbotsford. Given the cost the signs represent it is clear that someone (or several someone’s) is spending a great deal of money in an attempt to deceive voters into voting Yes to the P3 by creating the false belief that a yes vote is a vote to increase the water supply while a no vote is a vote against expanding Abbotsford’s water supply.
It appears someone (or several someone’s) is prepared to spend a great deal of money and go to extraordinary lengths to ensure that the mayor and council’s P3 plan is approved.
Which raises several new questions:
Who are these wealthy ‘concerned citizens’?
Why are they spending so much money to ensure mayor and council’s P3 passes?
What, if any, effect did these ‘concerned citizens’ and their deep pockets have on the decision to go with a P3 despite the overwhelming evidence it was the poorest choice to u for the upgrade?
P3 Comments
P3 versus a Partnership with Mission – The $$$ Numbers
P3 versus a Partnership with Mission
The $$$ Numbers
Summary:
Going with a Partnership with Mission would save the taxpayers just over $96 million dollars ($96,366,367).
The best plan the mayor, council and staff have stated they could devise will cost the taxpayers $96 million more than abandoning the P3 approach to continue in Partnership with Mission would have.
Given that Mission was to pay 33% and that the federal grant represents a recovery of only 22.5% one would think that one of: two retired school principals, a current school principal, a retired banker, a real estate agent would have recognized that 33% is higher than 22.5%.
There are no engineering plans drawn, no company (or companies) chosen to design and build the P3 project that mayor, council and staff are obsessed with using to the point they are using fear, intimidation, threats, statements that are so inaccurate that they fall apart with the most basic examination with logic, irrational statements and claims – not to forget $200,000 taxpayer dollars – to scare Abbotsford voters into approving using a P3 as they want – even though the P3 will be significantly more costly to use while delivering an inferior product compared to other methods available to accomplish the water system upgrade.
The one area in which the P3 clearly stands above other choices is that it requires no real effort or work of mayor, council and staff other than paying whatever it costs (with no regard to what it should cost) and raising the tax and water rates to whatever stratospheric levels will be required to cover the bloated final cost.
If voters elect new councillors who are competent and looking to the best interests of voters, the water system infrastructure can be upgraded at least as quickly, if not quicker, using a more cost effective and efficient approach. Numerous studies have shown that a well managed public project achieves significant cost savings over a P3.
P3:
- Project type: P3 – design build
- The cost: $291 million
- Contribution: Government Grant1 $65.7 million 23% (65.7/291)
Partnership with Mission:
- Project Type: Public managed – Project designed, then tendered to construct.2
- The cost: $291 million3
- Contribution: Missions share of the cost 33% (1/3)
Cost to Taxpayers
Partnership with Mission:
Total cost – Mission share = Abbotsford’s Taxpayers share
$291,000,000 – $97,000,000 (291,000,000/3) = $194,000,000
P3:
Total Cost – Federal Grant + (-) I = interest costs (interest savings) + (-) A additional costs (savings) = Cost to Abbotsford Taxpayers
$291,000,000 – $65,700,000 + $35,066,367 + $30,000,000 = $290.366,367
Cost (Savings) to Abbotsford Taxpayers of using P3 instead of Mission Partnership = Cost of P3 – Cost of Mission Partnership
$290,366,367 – 194,000,000 = $96,366,367
I – Interest cost:
Payment: Monthly; Amortization Period: 25 years; Interest Rate 7%
Principal borrowed: $31,300,000.00 Regular Payment amount: $221,221.89
Total Repaid: $66,366,567.00 Total Interest Paid: $35,066,367.00
Total interest paid as a percentage of Principal: 112.034%
A – Additional Costs:
P X C = 30 X $1,000,000 = 30,000,000
P : The project period of operation is 30 years
C: The consultant’s report commissioned by the City noted that it would cost an additional $1,000,000 per year to operate the project as a P3 than it would if the project were a public project.
It is Important to Note: Michael Maschek, PhD, from the University of the Fraser Valley’s department of economics stated in the local newspaper interview asking him about using a P3 for the water upgrade:
“Maschek believes the contract is the key to any successful P3 plan. “If you could write the perfect contract, there would be no problem.”But it is unlikely that every possible situation can be accounted for in the agreement and because of the lengthy term, the contract is usually reworked.“Renegotiation is highly likely for two highly related reasons: One, the long duration of the contract period, and two, the fact that PPPs are prone to contractual incompleteness. The contract itself is very difficult to negotiate; economists refer to this as a high transaction cost,” he explained.”
Translated from economic speak Dr Maschek stated that it is highly likely any P3 contract will need to be renegotiated. This renegotiation results from the nature of P3s where the original contract is based upon words which results in renegotiation when the drawings/design/drafting plans emerge and what it is that will actually be built becomes tangible plans rather than imprecise words.
Which means the price is highly probable to rise when the ambiguity of words as the defining element are replaced with the precision of engineering plans.
If the cost rises above $291 million under a P3 there will be no additional federal funds forthcoming. Under a Partnership with Mission, if the costs rise Mission will cover 33% of the cost increases.
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1 On October 25, 2011 Ed Fast was quoted in the local papers as saying the Abbotsford would qualify for up to $65.7 million dollars in federal P3 funding.
2 From ‘Abbotsford’s Water Infrastructure Upgrade’ : an examination of the type of project to use to upgrading the water infrastructure.
‘That we do not use current councils preferred method of design/build. Under this system the builder maximizes their profit by delivering the least project they can at the lowest cost they can at the highest price they can.
Water is far too important a resource to go with a design build. We need to be able to ensure the upgraded infrastructure meets not just current but future needs, is robust enough for the years of service it will need to deliver and delivers the highest quality water.
To do that council and the public need to have an opportunity and sufficient time to study the plans to discover and correct any errors and omissions.
It has been my experience that the skills, knowledge and insights a group of people such as the citizens of Abbotsford and Mission possess, can be surprising and serve to ensure nothing gets missed in the plans for the water infrastructure upgrade. Letting people share their thoughts and ideas can lead to valuable insights. At least for a council willing to actually listen with an open mind, accept and act on good ideas.
Going with this approach requires far more of council than simply saying build me one of these. But if the mayor and council are not willing to put in the time and effort required to ensure the needs and best interests of taxpayers are met – exactly why are they in or running for office?”
3 Reality does not care what you want to be fact, reality does not care what you believe to be fact, Reality simply is what IS fact. Tao of James
In their attempts to scare, intimidate, mislead voters into approving a P3 plan, mayor, council and staff have all inaccurately, falsely, claimed that using another approach than a P3 would be more expensive.
The use of P3s is part of the ideology the federal Conservatives operate on in spite of the considerable differences between that ideology and the real world. In order to serve their ideology and bring about the use of P3s the federal Conservatives had to make infrastructure grants available exclusively through the use of P3s.
Without a financial incentive large enough to offset the additional costs that arise from the very nature of P3s no competent municipal management would choose to use a P3. At a grant level covering 25% of the cost of the P3 the project will save a small amount, break even or cost a small amount more. As the percentage the federal grant contributes to the project falls below 25%, the extra costs the P3 inflicts on those who are mathematically and financially challenged to the point they do not comprehend that the P3 is, rather than reducing the cost, increasing the cost to those who must pay the bill.
Your Abbotsford Tax Dollars at Work
It would appear that the $200,000 taxpayer dollars City Hall is spending to hire PR and sell the P3 to the public is working.
Friday’s Global News Hour Final’s unbalanced reporting on the water system upgrade issue in Abbotsford was not only a one sided promotion of the current mayor and council’s position on the P3 issue, but did a great disservice to the taxpayers of Abbotsford by implying that the Mayor and Council are correct in their assertion that the P3 is the most cost effective way to upgrade Abbotsford’s water system.
Several people have performed and written about calculations that document that only under the most optimistic assumptions (everything goes perfectly and not a single tiny thing fails to go according to assumptions) does the cost of the P3 – possibly – come in under the cost of proceeding with the upgrade as a public project.
Failing to inform the citizens of Abbotsford that there are analysis that show a P3 is not the most cost effective way to accomplish the water upgrade (even with a $65 million grant from the federal government) gave Abbotsford’s citizens the impression that City Hall’s financial claims are correct is a great disservice to the citizens of Abbotsford.
The knowledge that there is serious doubt as to whether the City’s proposed P3 is the most cost effective (lowest cost) way of proceeding with the water upgrade is vital to citizens making an informed choice on November 19th.
The report also failed to note that the federal Conservative government is ideologically wedded to the idea of P3s and that the purpose of the grants is to make the cost of proceeding with P3’s competitive with the cost of a public project. And to tempt financially challenged politicians into fixating upon the idea of all those $millions$ of federal dollars and ignoring any evidence that demonstrates the cost of the P3 exceeds the cost of a public project – even after you subtract the federal grant dollars.
It is also important to know that as the cost of the water upgrade increases the savings to be found in using public financing increase. Given the nature of P3’s and Abbotsford’s mayor and council’s record of pie in the sky financial forecasting and cost overruns…..the probability of the cost soaring past the current number of $291 approaches certainty.
However, all those arguments are based on Abbotsford’s mayor and council’s insistence on going it alone on the water upgrade.
As I point out as part of my platform in seeking election to Abbotsford’s council if we return to the original partnership with Mission and the announced 2/3 and 1/3 split of the cost of the water upgrade Abbotsford Mayor and council plan to spend an additional $127 million in order to get a $65 million dollar federal grant. (see http://www.jameswbreckenridge.ca/?p=2176 for the calculations).
Would anyone – other than Abbotsford’s mayor and council – give someone $127 in order to get $65 back?