A second opinion on health projects?

It was in 1997 when the government of the Northwest Territories first announced that the Qikiqtaaluk Corporation would build and then lease-back a replacement Baffin hospital in Iqaluit.

The chair of the Baffin Regional Health Board, Ann Hanson, reacted by declaring that she was opposed to the idea, and that she couldn’t support the use of private money to build a public health-care facility.

Suddenly, the project was in trouble. So the government, backed by the Iqaluit Chamber of Commerce, whose members were salivating over the prospect of landing various juicy sub-contracts on the $30-million job, acted swiftly.

Hanson and an executive director who shared Hanson’s point of view were pushed out. To replace them, the GNWT appointed former premier Dennis Patterson to chair the board, and veteran bureaucrat Ken MacRury ended up as executive director.

The project got back on track — or so we were led to believe.

The GNWT went on to sign “service agreements” with all three birthright development corporations in Nunavut, with the tacit understanding that each of these corporations would eventually build and lease new health-care facilities in their respective regions.

At the time, it looked like a brilliant solution. Ottawa had slashed base funding for territorial governments and withdrawn billions from its annual health-care contributions to provinces and territories. In turn, the territorial government slashed its own spending, including its once-generous capital budgets for Nunavut. It seemed obvious that the GNWT didn’t have the cash to pay for expensive new health-care structures, and equally obvious that Nunavut wouldn’t have that kind of money either.

So the idea of getting private developers to build these structures, and then have the territorial government use public money to lease them back through payments scheduled over 15- or 20-year periods, looked like the only way.

Build now, pay a little bit every year — the only solution. The nearly forgotten incident involving Ann Hanson shows how strongly the territorial government was wedded to this concept, and to no other option.

But now, thanks to the auditor general of Canada’s analysis of the Nunavut government’s leasing practices, Hanson’s warning about the use of private developers now look like valid concerns that the territorial government should have paid attention to.

For example, the auditor general’s report points out that, until now, the territorial government never bothered to figure out whether leasing made sense, and never bothered to compare leasing with other options.

“Management informs us that the government has not established any formal objectives for deciding to lease or buy, depending on which is cheaper,” the auditor general wrote.

That means that for all these years, neither the GNWT nor the GN ever compared the lease-back option with other ways of supplying new health-care facilities. Leasing may sound attractive, but if it’s not done right, governments can end up spending two or three times more than if they had constructed the buildings with their own cash.

For example, would it be cheaper for the government to borrow the money and build the projects itself? Would it be cheaper for the government to pay cash for some parts of these projects, borrow money for others, and lease the rest?

No one ever knew, or bothered to find out.

The GNWT did hire an independent consultant called Med-Emerg to study the territorial health-care system in 1996 and 1997, through a sole-sourced contract that cost $700,000. One MLA dismissed the study as a “$700,000 doorstop.” The Med-Emerg report recommended using birthright development corporations to build and lease back the three structures, but offered little analysis in support of this conclusion.

But now, the government of Nunavut has been more or less shamed into doing what territorial governments should have been doing from Day 1. Nunavut deputy ministers now say they’re taking a close look at all three hospital projects, and promise they’ll compare the cost of leasing with other options, such as borrowing or paying cash.

The deputy minister of finance even told a legislative committee last week that they’ll look “very, very closely” at the purchase option, and at various combinations of borrowing, paying cash and leasing. We hope that this time, MLAs get a chance to see this information before voting to approve spending on the three health projects — if the facilities are ever built, that is.

Until now, members of the Nunavut legislative assembly, and the Northwest Territories legislative assembly before them, have been approving sometimes dubious long-term leases without even knowing what they were voting for. Lease payments have not been included in the government’s capital estimates, and instead, have been buried in the main estimates as O&M spending.

“Lease payments could raise the total cost of capital projects to an unaffordable level, without anyone noticing the problem,” the auditor general wrote.

Because these leases usually cover 20-year periods, this means that the legislative assembly has, in effect, been authorizing spending on behalf of governments that haven’t been elected yet. For example, in 1999-2000, they committed the current government — and future governments — to about $467 million in lease payments. In 2000-1, they committed future governments to another $145 million worth of long-term leases.

Privatization doesn’t look like such a brilliant option anymore — especially when it’s revealed that on at least one lease, the government will spend 50 per cent more than it would have cost to build the structure with its own cash. At least one developer will be laughing all the way to the bank for the next 20 years.

We now know that the three hospital projects would add at least another $80.1 million to the Nunavut government’s total lease commitments, and probably more.

Given all this, the government cannot afford to write blank cheques to the Qikiqtaaluk, Sakku and Kitikmeot corporations and trust them, on blind faith, to build affordable health care structures that we will all end up paying for over the next 20 years.

There are other ways of doing the work, and other ways of ensuring that Inuit workers obtain benefits from that work. The government must look at all options, then choose the one that’s in the best interests of Nunavummiut, whether or not it’s politically convenient.

Finally, none of the three health projects should go forward until MLAs have enough financial information before them to make informed decisions on our behalf. Anything less would be a gross violation of the public interest.

JB