Media releases | June 14, 2007

EDMONTON—“Albertans should not be fooled by the ideological shell game in today’s announcement to build 18 new schools in Edmonton and Calgary,” said Bill Moore-Kilgannon, Executive Director of Public Interest Alberta.

“The idea of having one company build 18 schools together will most likely result in some cost efficiencies, but today’s proposal will really end up costing Albertans a lot more in the long run. When you do the math you see that the real costs are going to be in the potential up front risk premiums that construction companies will be asking and in the cost of private sector financing over the next 25 years.”

The Minister of Education was not able to answer media’s questions today about the approximate cost of these schools, but the Edmonton Public School Board has estimated in their three capital priorities for 2008 – 2011 that each school will cost $15.1 million. If the government had decided to pay for these schools out of last year’s $7 billion surplus funds, then presumably we could have had a press conference today to announce a contract with a builder for a total of $271 million.

However, if the government enters into this proposed P3 deal, then Albertans will be paying the full private sector interest rates for the next 25 years. Assuming, for example, the private sector is able to finance this project at 5% over the next 25 years, this will mean Albertans are paying an additional $200 million in interest payments over the $271 million cost for the schools.

Even if the government wants to finance the schools over the next 25 years so that they can hide the costs from their current books, then they are in a position to get better financial terms than most private sector companies. For example, just a 1% difference in interest rates for these projects over 25 year is $35 million dollars.“Anyone who has gotten a car loan knows full well, that these “Buy Now and pay our interest rates for years to come deals”, always end up significantly costing more once all is said and done” says Moore-Kilgannon.

Albertans should tell the Education Minister that he needs to head back to math class.

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