McGuinty signed hospital deal despite poor value

'P3 projects are thoroughly discredited and in decline.' - Warren (Smokey) Thomas

Toronto (11 May 2007) - Premier Dalton McGuinty apparently knew he was getting a poor deal for taxpayers in 2004 when he signed the contract to establish Ontario’s first public-private-partnership hospital, says the Ontario Public Service Employees Union (OPSEU/NUPGE).

Documents released as a result of a four-year court case show that the public sector comparator used to justify the deal was over-inflated by $300 to $400 million, falsely making the P3 project look like a viable alternative to public financing.

The deal could cost taxpayers as much as $300 million more than if the Brampton facility had been built under the traditional public model, the union says.

Detailed criticism of the methodology used by Deloitte and Touche was in the Premier’s hands prior to finalizing deals for two P3 hospitals – the Royal Ottawa Hospital (ROH) and William Olser Health Centre (WHOC) in Brampton.

During the 2003 election campaign McGuinty had initially opposed the then Mike Harris Tory plan to establish the two privatized hospitals, claiming he would make them public if elected.

Despite minor penalties associated with canceling the deals, the McGuinty government reneged on his promise and signed contracts that differed little from the original Tory plan.

OPSEU, together with the Ontario Health Coalition (OHC) and other unions, initiated the court challenge in 2003 to force the disclosure of contract details.

“So far, the WOHC P3 has had cost increases, space decreases, flexibility decreases – and all of this with little transparency in the various early stages of the project,” says Lewis Auerbach, a former director with Audit Operations, Auditor General of Canada.

Steven Shrybman, who fought the case on behalf of the unions and the health coalition, said the Osler P3 represents a serious betrayal of the government’s obligation to manage the public purse, and to ensure hospital services are provided in an efficient and transparent manner.

The documents reveal that the total estimated cost of the Osler hospital will be $2.7 billion over 25 years.

The higher cost of borrowing undertaken by the private consortium adds $94 million in additional interest charges over the life of the contract. Moreover, $299 million is forecast to be paid out in dividends to equity partners, while only $7 million is expected to be paid by the consortia in taxes, thanks to an extraordinary deal with the province.

Despite claims that P3 hospitals are more likely to come in on time and on budget, the Osler hospital has failed to accomplish either goal.

The hospital is now significantly behind deadlines. It is also smaller than originally projected and costs have almost doubled.

The unions and the OHC are asking for a moratorium on all new P3 projects until the provincial auditor has had an opportunity to review the deals. They are also demanding the government make public other secret deals to establish P3 hospitals, including the ROH and the North Bay Hospital.

“P3 projects are thoroughly discredited and in decline in almost every jurisdiction, so we wonder why the Ontario government is continuing with these risky and expensive hospital projects,” says OPSEU president Warren (Smokey) Thomas. “Hospitals built in Ontario should be fully owned, financed and operated by the public sector.”