CCPA study calls for independent public sector comparison of RAV P3 by Auditor General

Author recommends against P3 arrangement, citing higher costs, poor risk transfer and failure of similar projects elsewhere
May 21, 2003

(Vancouver) The author of a CCPA report released today on the proposed P3 (public-private partnership) for the RAV (Richmond-Airport/Vancouver rapid transit line) is calling for the development of an independent 'public sector comparator' by BC's Auditor General. Blair Redlin says such a comparison of public and private sector costs and risks is needed before TransLink and the GVRD make a decision about the RAV, and before a Request for Proposals (RPF) is issued.

Blair Redlin is the author of High Risk: An analysis of the proposed public-private partnership for the Richmond/Airport-Vancouver Rapid Transit Project. Redlin is a CCPA research associate, former Deputy Minister of Transportation, and former President of the Transportation Association of Canada. The study analyzes the proposed P3 arrangement for the RAV, in which a private partner would design, build, operate, maintain and partially finance the new line for a 30- to 35-year period--an arrangement the provincial government reputedly insists on in exchange for its financial contribution.

"Municipal authorities and the public are being asked to make a big leap of faith with this P3," says Redlin. "It is impossible to make an informed decision without being able to compare the P3 to a conventional project, one that is entirely publicly owned and operated." Ironically, the commitment to a P3 in the absence of a 'public sector comparator' violates the provincial government's own Capital Asset Management Framework, which requires that a comparator be developed and refined at every stage of planning for major capital projects.

"TransLink and project staff have also refused to release the PricewaterhouseCoopers financial feasibility study to TransLink and GVRD Directors, even though the Directors are accountable to the public for what happens with the RAV." Redlin says his report raises significant concerns that should be addressed before a Request for Proposals is issued. These include:

  • The P3 could cost transit users and taxpayers considerably more than a conventional infrastructure project because of higher private financing and operations costs, and because the private investor must earn a profit;
  • The extra costs of private financing are not justified, given the minimal risk that will be transferred to the private investor.
  • Taxpayers will be on the hook if fare revenues are lower than projected, if tunneling costs increase as a result of unexpected soil and geotechnical conditions, if savings from cuts to bus routs along the corridor do not materialize, or if the contractor defaults.
  • The RAV project office's estimate for operating costs has already doubled over the course of one year, which Redlin says doesn't bode well for future cost overruns.

The report reviews recent P3 rapid transit and airport rail projects in Australia, the US and the UK. "The record for similar P3 projects is cause for serious concern. The Sydney Airport Rail Link is in receivership, the Brisbane Airport Rail Link has been given a significant credit rating downgrade, and a proposed airport rail link for Melbourne has been deferred indefinitely. In New Jersey, a P3 light rail contract very similar to the RAV proposal is far short of ridership expectations, and a new P3 light rail system for south London is coping with a major financial crisis."

"Lower Mainland mayors and councillors on the boards of TransLink and the GVRD need to consider whether this is really a model to emulate--taxpayers and transit users will live with the implications of their decision for decades to come."

"Work on a public sector comparator should have been started in 2001," says Redlin. "Let's put the brakes on this P3 until an independent comparator is developed, and until TransLink and the GVRD have access to the financial feasibility study. Once this proceeds to the Request for Proposals stage, it will be very difficult to turn back."