This just in from Business in Vancouver and Nelson Bennett, reporter. Documents leaked to and by the NDP Party show that while “replacing the George Massey Tunnel with a bridge would cost $3.5 billion to build, but another $8 billion in debt servicing”.

“The party says it filed freedom of information request several months ago to obtain information on the project’s financing. The documents released had financing details redacted, the NDP press release states. But the party then received leaked documents that detail the proposed bond issues for the project. It released those documents Friday May 5, along with a press release that states, “financing costs for the bridge will add another $8 billion in costs that British Columbians will be paying for the next 50 years – bringing the total bill to nearly $12 billion.
“The two-page document shows the province proposes to raise the capital for the bridge through the issuing of 18 bonds, at $200 million to $525 million each, with various maturity terms.”

“During the construction phase, the government would issue seven-year term bullet bonds with a 3.15% interest rate, as well as 30-year bonds at 3.57% to 3.9% interest rates.The total provincial interest costs on the bonds between 2017 and 2047 would be $5.2 billion, “prior to federal assistance.” In other words, that’s how much the interest from the province would be without federal money.”
“The total interest costs between 2017 and 2068 – when the debt would be retired – would be $8 billion.
The Premier was asked about the $8 billion dollars in interest repayments but responded “It’s going to come in on budget, it’s going to come in on time, and we’re going to get it done like we said we would.”
But the Transportation Minister of B.C. Todd Stone said the interest payments would be  spread over 50 years the same as a mortgage on a house.
As an example, if you bought a home for $750,000 today and pay it off over a 35- year period, you’ll pay nearly $1 million in interest. You wouldn’t say you paid $1.75 million for the home. It’s the exactly the same principle for the Massey Bridge – and the reason we’re doing it is to keep toll rates low for commuters.”


  1. The BC debt stood at $34B when the NDP left power, and a tad over $29B in ’97, an increase of $6B in 5 years. They were hammered for it in the press and by the BC Libs, but the NDP left office with a balanced annual budget, in part by transferring debt to crown corporations.
    Since the Libs assumed power they have added an additional $31B to the provincial debt, and another $75B in contractual obligations to the private sector with P3s on megaprojects, run of river schemes, and so forth. In essence, the Libs have increased the direct and indirect debt by $106B in 16 years. The total now stands shy of $200B
    Seen another way, the Libs have increased the per capita direct debt from $8,852 to almost $14,000 per person, not including the obligations. Oh, but they balanced the budget, just like the NDP.
    It’s a mystery why anyone would call this a fiscally responsible party when their debt creation ability is a phenomenon to behold.

  2. To be fair, all the other issues about the bridge aside, is this a legitimate measure of a project’s cost? eg would the Mayors’ Plan costs or the cost of the Canada Line balloon comparably if interest on borrowed money to build them(assuming there is some) were included in our discussions about its price tag?
    And, BTW, if tolls are now to be capped or scrapped, how much longer will the payback period be and how will that increase these stupid costs even further?

    1. Taking a solution agnostic point of view, the process should be one of value for money or social return on investment. And to define social value we need thorough consultation. Regardless of how much in tolls, fares or fees we pay for a public service, rarely are they fully paid out by the users. All tax payers across the region, province, and country will eventually support these mega projects. The idea is I help pay for your mega project and later you help pay for mine, which is the subsidy argument.
      But the key measure I believe is value for money as simply suggesting a project is “sustainable” or “green” does not mean we should pour money into it excessively. Whether it is a bridge, rapid transit line, or public bike system, we should ensure the ones with the best value for money go up the priority line (however it isn’t so simple because costs vary considerably and the investment return of a $100 million project is different from a $10 billion project, however the former is more easier to get off the ground and establish funding and financing for).

  3. Borrowing $4B at 2.5% is $100M/year. Times 50 is $5B. Not $8B !! If at 3% then $6B. Only if you assume 4% is it $8B.
    Province today would borrow at around 2.5%.
    See this years’ issues http://www.fin.gov.bc.ca/PT/DMB/di/issuingActivity.htm
    Last year’s here http://www.fin.gov.bc.ca/PT/DMB/di/issuingActivityPrev.htm
    One needs to see infrastructure investments as self-paying due to enhanced economic growth with associated higher income taxes, corporate taxes and PST, higher real estate value (thus higher annual property taxes – both commercial and residential, land transfer taxes and capital gains taxes collected by province) and toll rates. Where is this math ?
    One can’t lament the cost of this bridge, or any infrastructure for that matter, in a vacuum. One has to count fiscal benefits AND fiscal costs.
    deleted as per editorial policy

    1. Did you even read the article? It states they are assuming interests rates of up to 3.9%.
      Since the government can borrow at much lower cost, why is P3 even considered.? Simple, to hide the dept but keeping it off the governments books.
      And Thomas, you seem to have forgotten about compound interest!

      1. There is no compounding interest.
        We need to differentiate between operating debt and debt for capital projects. It makes good economic sense for the government to borrow at 2-3% ( but not at 3.9% in today’s bond market ) to build assets like subways, bridges, roads, tunnels or electricity producing dams as those spin off money, often well above the interest cost. Debt to GDP ratio matters, or debt to tax&atoll ratios !
        Would love to see a biz case here, just like KPMG did for UBC subway line.

        1. “We need to differentiate between operating debt and debt for capital projects”
          Fine. But this project has both. There are years of operating debts expected because the revenue stream starts off small, with the bridge not reaching capacity for decades. It comes from overbuilding.
          “Would love to see a business case here”
          You are not alone. It doesn’t appear to have been part of the decision support process. Which makes your unbridled enthusiasm for the project surprising, to say the least. Almost like ideology over facts.

        2. Sure there’s compound interest. If the toll revenue will not cover the annual interest – sure to happen in early years – the principal increases. Only way to avoid that is the government pays the shortfall from general taxes, in which case the government needs to come clean on the real annual operating cost for this piece of infrastructure.
          I’d love to see a proper business case published. Should have been done before this project was announced let alone shovels in the ground.
          I’m not opposed to spending (borrowed) money on infrastructure. But there needs to be rational and transparent discussion about the benefit-to-cost for various projects to ensure the right ones are identified as the priorities.

        3. A $500 toll cap would SPIN OFF about a 20 % cost recovery unless the toll cap is only for the Port Mann .

        4. There is no compound interest. Compound interest is interest on interest. If you borrow via a bond you pay the annual pay,nets as agreed. Nothing compounds.
          As to biz case, yes that would be nice. However we have massive congestion today, getting worse every year with a growing population and harbour traffic every year.
          So cling Port Mann by default makes sense as an 8 or ten lane bridge has minor price differences. What is missing is why another tunnel or two with 2-4 more lanes isn’t sufficient, especially given the engineering challenges of a heavy bridge in soft sand.
          deleted as per editorial policy
          Was a narrower deeper double decker tunnel with four lanes on top and bottom each ever considered ?

        5. Thomas still doesn’t get it….surprising given a real estate background where there are surely bank loans involved.
          If you don’t generate enough money to pay the interest each year, the difference gets added to the total outstanding. Bigger balance means more interest. i.e. Compounding.
          Sure the government can fully pay the interest each year, but this becomes an annual operating subsidy that has never been openly or transparently been acknowledged.

        6. As I said, the additional tax revenues from additional commerce, jobs, trade AND real estate development will be enormous – both north and south of he Fraser in Surrey, Delta, Richmond, Ladner, Tsawwassen and FN land ! See KPMG study for UBC subway .. also a total no-brainer. Ditto with this bridge (or tunnel) or whatever option will be chosen.
          What did the mayors chose ? Continued traffic jams ? That is better why ?
          ANY new project here is better than the status quo. A high bridge seems to make sense as Port Mann and Alex Fraser bridge show, so why not there either ? Alex Fraser too small already as is SFPR. Hence 8 lane minimum and for a few % more: 10 lanes. Makes total sense to me. More insight into biz case or alternatives would be useful, of course.

        7. Thomas, if you say that ANY new project at the location is better than status quo, I think that is correct and false at the same time. I agree a well designed project would improve the current situation (from a social benefit cost perspective), but not just ANY project. If you will entertain my silly example, a 50 lane bridge would not be better than status quo to society. It sounds similar to the argument that increased GDP indicates progress, which is not necessarily so.
          You are right though in that more insight into a business case or alternatives would not only be very useful, it should be a requirement and one that is as exhaustive as the project is significant.

        8. A precise biz case is very hard as immigration, company formation, job growth and real estate pacing is very tough to predict. All indication is though that in MetroVan subways, roads, tunnels, bridges, LRT systems are ALL undersized due to an annual almost 2% population growth over a three to four decade period, with no stopping in sight.
          Is there a picture somewhere showing the massive developments over the next 30-40 years that will likely occur throughout MetroVan? Likely not as it would scare of most folks. ( Just look at N Van, for examp,e, which tuned from a sleepy north shore community with hardly any condos into a massive condo site in only three to four decades. Most N Van folks would have rejected that if they had seen it in the 1970s !) That is probably the #1 reason the biz case is not shown. Port Mann and Golden Ears bridges are massive successes in terms of traffic flow. Massive. Our timid politicians just need to be more honest and educate folks that traffic flow costs money ie tolls, and that those tolls are likely far too low. Highway 1 incl all bridges need to be tolled to pay for it. I am still amazed that entering the airport by car is free, or crossing the Fraser river on any bridge ( except PM now ). No wonder people buy more cars. Charge more for each ride and people will change behaviour, i.e. carpool more, drive less, ride share, go earlier or later etc to ease traffic flow.
          deleted as per editorial policy

  4. Because of low demand for this project, the tolls won’t even come close to paying the entire interested let alone the principle for several years after it opens. Thus, the debt will rise for several years increasing the financing costs.
    This is happening with the Pt Mann too. It is really a poor idea to build these costly overbuilt bridges where even by the rosiest projections, the capacity will not be needed for years. The excess capacity is an expensive “asset” that really provides no benefit to anyone. A better idea would be to build smaller bridges. If more capacity is needed at someone, build another small bridge at the same or another location that does not force people to drive, cycle or walk way out of their way.

    1. Agreed. It is like buying a large van to drive around your family of 8 when you aren’t even married and have kids yet. Well at some point you may have a family to drive around, but maybe not. A risky investment. Investments are all about risks and i’m sure the risk analysis has been done on this bridge. The question is who will bear most of the risk.
      And on that, the actual bridge is an investment to mobility, but the physical bridge is not an asset that will appreciate in value. In fact, it will incur a negative cost at the end of it’s life as it will need to be dismantled (hopefully parts can be recycled).
      All this needs to be brought into the picture, including financing, and then its business case compared to similarly produced business cases of other options. Bring in discussions of what we can afford as a region for the next 50 years and then I think we are at a good starting place for proper dialogue, discussion, and debate.

      1. If an independent risk assessment was conducted on this project the results have not been released. The geotechnical report had to be obtained through the back door (via the insider’s tender call or non-public request for proposals from selected consortiums, I believe). The geotechnical conditions alone would bear heavily on the project risk.

  5. ” Investments are all about risks and i’m sure the risk analysis has been done on this bridge.”
    The problem is that any analysis is immediately suspect because of the wildly missed forecasts of the Port Mann and Golden Ears bridges. When you combine that with a sure bias by the Province to produce results that favour building the bridge it’s a recipe for disaster.

    1. The ‘business’ case I saw was the most pathetic spin job ever. I doubt whoever put it together can sleep at night. It is pretty telling by what was and was not analyzed. Something needs to be done but it does not take a genius to look at the business case and understand the business case was predetermined. It would be nice if a party pledged consistent and transparent business cases for all major projects. It would be nice if the auditor general had a look as well.

      1. Good points, Rico.
        Let’s not forget about the Ten Myths propaganda piece on this mega road project by the MoTI and Mr. Stone. They are in fact myths unto themselves which contradict extensive independent research from around the world on relieving congestion, land use ramifications, emissions and so forth.
        Car dependency to near total levels has been disastrous for the planet and for cities.

  6. Though polling is not entirely trustworthy, there seems to be a developing notion with polling evidence that the Greens could hold the balance of power in Tuesday’s election. Reading the three party platforms makes it clear that the Greens and NDP have a pretty fair amount of overlap on several issues. You would think that Andrew Weaver would naturally tend to support the NDP due to their similar policies on environmental issues, pipelines, the carbon tax, housing, transportation and other issues.
    However, in interviews over the last week or so Weaver seems to be softening on Christy Clark saying he doesn’t care if she’s re-elected, and that he can work with the Libs. His attitude toward John Horgan is now distinctly antagonistic, which could be seen in the clips from the TV debate. That could be a tactic to gain votes from NDP ridings which he clearly lusts for in interview comments using language like “taking out” Carole James. There are also unfounded rumours out there that Weaver holds certain socially conservative views, which may or may not bias where he places his support in a minority government situation.
    If Weaver backs the Libs, what will be his justification? What on Earth will his supporters do?

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