Just weeks after hard-hatted politicians kicked off construction of a new, 10-lane Port Mann bridge, the province of British Columbia announced Friday that it will be on the hook for the entire cost of the $3.3-billion project after failing to reach a deal with private-sector partners.
The new financing arrangement reflects tough conditions on global capital markets, but will not change the planned schedule or design of the project, provincial Transportation Minister Kevin Falcon said.
"If we can't get the value we need to have in a deal like this through the private financing arm, we have the option of moving forward ourselves, and that's exactly what we have done," Mr. Falcon told reporters at a news conference in Vancouver.
The province now intends to borrow capital to build the project on its own. Previously, costs were to be shared by the province and Connect BC Development Group, a private-sector consortium that includes engineering firm Peter Kiewit Sons Co. and the Macquarie Group, an Australian investment bank.
The collapse of the Port Mann partnership raises questions about the viability of the project and about the province's support for public-private partnerships, or P3s, said New Democratic Party finance critic Bruce Ralston.
"If you can't get financing for this kind of a project, where there is a guaranteed source of revenue over a lengthy period of time, what project can you get financing for?" Mr. Ralston said to reporters after the news conference.
The new Port Mann bridge is to be financed through commuter tolls of $3 each way for cars. The planned completion date is 2013.
The existing span, a 45-year-old structure that links Surrey and Coquitlam, has been the scourge of commuters and truckers for years because of congestion and bottlenecks.
Plans to update the bridge date back to at least 2006, when Liberal Premier Gordon Campbell announced a twinned Port Mann bridge as part of a $3-billion Gateway Transportation Program.
Earlier this month, that plan gave way to the current concept: a new, 10-lane bridge that, including operating and maintenance costs, would ring in at $3.3-billion, more than double original estimates.
Mr. Falcon and Mr. Campbell launched construction earlier this month, wearing hard hats and trumpeting a "first-class, state-of-the-art connector."
Under a fixed-price deal, the contractor will be responsible for any cost overruns in the project, Mr. Falcon said, adding that the province can take on the financial burden without putting other projects or its own credit rating at risk.
However, taxpayers will be exposed to potential shortfalls in toll revenues - a risk previously shouldered by the private-sector partners.
"Where we have now taken on risk is on the revenue side through traffic forecasts," Mr. Falcon said, saying he was "very comfortable" with traffic forecasts.
The province remains committed to P3s as a way to build major projects such as bridges, roads and hospitals for financial and operating reasons, Mr. Falcon said.
Mr. Ralston, however, said the collapse of the Port Mann P3 suggests the P3 model is "virtually dead" in current economic conditions.
Wendy Stueck