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P3 Hospital Project Cost Overruns Are the Premier's Fault: Opposition

Posted on: Monday, 9 April 2007, 09:00 CDT

By TOBI COHEN

TORONTO (CP) - Ontario Premier Dalton McGuinty is ultimately responsible for millions of dollars in cost overruns for large-scale, private-public hospital projects across the province, the leader of the opposition said Sunday.

Conservative leader John Tory said the mounting costs are the result of McGuinty's decision to delay the projects when he first took office. He said the premier was initially opposed to the controversial P3 financing plan initiated by the previous Conservative government which allows private-sector investors to finance public health-care centres.

Critics have called the plan a bold step towards privatized health care and McGuinty has since said it's the "right way to go."

"All of this was caused by Mr. McGuinty playing politics instead of just getting on with what was best and building the hospital," Tory said.

Recent media reports suggest interest costs on a $551 million hospital project in North Bay will ultimately double at the end of the province's 30-year contract.

Tory said the project cost was set at $221 million when it was launched in 2002. The media recently obtained a letter, sent in February from Health Minister George Smitherman to a hospital board official, that pegged the new cost of the project at more than $1 billion.

Tory suggested rising inflation and construction costs as a result of project delays were behind some of the increase, but that the $1 billion figure will only be fully explained if the Liberals make the contract public.

"The (North Bay) hospital could have and should have been under construction four years ago using the private-public partnership. If that were the case, first of all you'd have a new hospital open and operating there today and receiving patients and secondly you would have a cost that was far less. . . than you have today," he said.

"The main thing we should be doing right now is making sure all the documents to do with the hospital. . . are made public."

Privacy laws surrounding commercially sensitive information about private businesses can restrict what documents can be released.

But the province says they were not hiding any costs about the total price tag of the North Bay Regional Health Centre, at least no more than any government would do for any other infrastructure project.

Interest is always a part of financing projects but that does not change the value of a new hospital, said Mary Lowe, a spokesperson for Infrastructure Ontario, a government agency responsible for monitoring the construction and operation.

"We were absolutely giving the true cost of the contract with Plenary Health expressed in net present value terms," Lowe told the North Bay Nugget.

"The financing costs weren't omitted from the announcement...You would never express it in nominal numbers. When you look at the financing, you never include that in there...those costs do exist and the province has always paid for them."

Lowe likens the situation to buying a home, wherein the value of the home might be $100,000, but the cost to the home buyer could be over $200,000 after paying mortgage payments over an extended period of time.

The value of the house, she said, is still $100,000 at the time of purchase.

A spokeswoman for Smitherman said taxpayers will only be responsible for the initial $551 million contract to build the North Bay Regional Health Centre .

Erika Mozes said all mortgages carry interest over their full term and that the contractor is responsible for cost overruns related construction costs.

The North Bay hospital project is among more than 30 similar innitiatives in Ontario and Tory said it's not the first to experience a cost overrun as a result of project delays.

Hospital projects in Ottawa and Brampton also experienced cost increases.

Ontario Health Coalition director Natalie Mehra said skyrocketing interest costs are what's wrong with the P3 system which the Conservatives, and now the Liberals, have touted as a cost-saving way to build hospitals.

She said interest charges on loans are higher for the private sector and that it would ultimately be cheaper for the province to build its own facilities.

"The rationalization doesn't hold water. We've investigated it and while we absolutely want new hospitals for communities where new hospitals are needed, this is a very destructive way to do it," she said.

"All those extra costs will come out of the health system for the next 30 years. . . siphoning money away from clinical care for bricks and mortar and for unnecessary borrowing expenses."

Source: Canadian Press

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