By Peter Hendra, Kingston Whig-Standard
KINGSTON - The new hospital slated to be built in the city’s west end should eschew the current private funding model and instead be paid for by the Ontario government, an economist says.
As it stands now, the new hospital — which is to offer 270 beds, cost $350 million to build, and replace Providence Continuing Care’s St. Mary’s of the Lake Hospital — is to be financed through what is known as a public-private partnership, or P3.
The Ontario Health Coalition — and, by extension, the Kingston Health Coalition — has launched a campaign to have the provincial government disclose the full costs of building a P3-funded hospital. It charges that the P3 funding model is flawed and that up to $100 million could be wasted in Kingston alone.
“It’s one of the cheapest times to fund infrastructure like hospitals. At (an interest rate of) 3.4%, we won’t see these yields again,” Canadian Centre for Policy Alternatives senior economist David MacDonald said yesterday at a news conference held at City Hall.
In the past, hospitals were funded by provincial government selling 30-year bonds to investors at 2.4%, MacDonald said.
“The P3 deal won’t work that way,” he said.
“The P3 deal will have the international consortium listing their own bonds, which will be private bonds. And, because they’re private bonds, they cost 2% more, and 2% doesn’t seem like a lot until it’s stretched over 30 years and then all of a sudden it increases the present value of the project by 30% or something along those lines.”
Up to three consortiums could bid for the contract to build the new facility, MacDonald explained, but there should be another one, too.
“I think what needs to happen in this process, in order for it to actually be fair, in order to make sure that the people of Kingston are getting the hospital that they deserve, is that their should be a fourth bidder, and that fourth bidder should be the provincial government,” MacDonald said.
He feels that, if the competition is equal, the government would win that bid.
MacDonald echoes the fear of the health coalition that the new facility, to be built across King Street from St. Lawrence College, will not live up to what had been planned.
“I think what will end up happening as you continue to go down this road is Kingston will end up with a smaller hospital, with fewer services, for the same price that the province could have built a much bigger hospital with better services over this time period,” he offered.
“That’s certainly what the historical evidence suggests.”
Financing the hospital is analogous to financing the purchase of a home, MacDonald suggested, and the private financing would be like paying too high a mortgage rate.
“What’s happening for P3s, though, it’s a much more complicated, much greater project, but at the end of the day, it’s the interest rate that determines how much you’re going to pay over the long period — 25 years, 30 years,” he said.
Ontario Health Coalition director Natalie Mehra, who also spoke Friday, said that a P3-funded, 497-bed hospital built in Brampton cost $650 million, whereas a government-funded, 494-bed hospital built in Peterborough cost $197 million.
“It’s unfortunate that the government isn’t willing to use its own ability to borrow instead of going through P3s to get the exact same money through the exact same people,” MacDonald said, “and just paying 2 to 4% more for it.”
The provincial government, meanwhile, has stated that the public-private partnership is the only way it can afford to build new hospitals because of the huge deficit it faces.
http://www.thewhig.com/2012/10/26/province-urged-to-bid-on-p3-hospital-contract
