Libs, Cons and Dips put faith in preposterous financial claims #exln41

The people who push specific megaprojects usually over-estimate the benefits and under-estimate the costs.

That’s the result of a Scandinavian study of these sorts of things. The title is Megaprojects and risk.  They used examples taken from around the world:

Cost overruns and lower-than-predicted revenues frequently place project viability at risk and redefine projects that were initially promoted as effective vehicles to economic growth as possible obstacles to such growth. The Channel tunnel, opened in 1994 at a construction cost of £ 4.7 billion, is a case in point with several near-bankruptcies caused by construction cost overruns of 80 percent, financing costs that are 140 percent higher than those forecast and revenues less than half of those projected (see chapters 2-4). The cost overrun for Denver’s US$5 billion new international airport, opened in 1995, was close to 200 percent and passenger traffic in the opening year was only half of that projected. Operating problems with Hong Kong’s new US$20 billion Chek Lap Kok airport, which opened in 1998, initially caused havoc not only to costs and revenues at the airport; the problems spread to the Hong Kong economy as such with negative effects on growth in gross domestic product. After nine months of operations, The Economist dubbed the airport a “fiasco”, said to have cost the Hong Kong economy US$600 million. The fiasco may have been only a start-up problem, albeit an expensive one, but it is the type of expense that is rarely taken into account when planning megaprojects.

With that as background, consider that all three federal political parties are backing a megaproject in Labrador where the numbers just don’t add up.

labradore does a fine job of exposing the problem using comments from the provincial legislature last week.

Opposition leader Yvonne Jones asked Premier Kathy Dunderdale about current costs estimates for things like a transmission line from Labrador to St. John’s.  The current forecast price is the same as the price in 1998 despite the fact that  - for example – steel prices have climbed 200% in the years since.

Dunderdale’s response is really interesting.  She doesn’t explain anything but basically stands behind the contention that she and her geniuses have somehow magically eliminated the impact of inflation on this project.

Minor problem, notes labradore.

Nalcor’s geniuses told the environmental assessment panel reviewing the project that inflation still works, but only for things they have no interest in doing.  Like say a power line to the small communities in Labrador who will will only get to watch the power lines run by their communities on the way to the island and Nova Scotia:

In fact, in 2001 the Province estimated that the cost of constructing transmission lines to these communities would be in the range of $300 million. With inflation and increased costs for materials and labour, that number would be even higher today.

- srbp -

What will the meeting bring?

The meeting between Danny Williams and Stephen Harper later on Friday afternoon?

One of the possibilities is a rapprochement between the supposedly warring leaders.

The former, safely back in power with an overwhelming majority, may just signal peace is at hand. He's been known to do it before.

Tons of bluster and anger, followed by a sudden bout of kissing and hugging with the former "enemy".

That all might lead to some interesting developments in federal politics. Since the last cabinet appointments, the locals have been speculating wildly about the prospect that Tom Osborne and Jack Byrne - both turfed from the Williams cabinet - would actually be trying for a spot on the Stephen Harper team alongside their old friend Fabian Manning.

Osborne, you may recall, is the candidate whose political signage touts his - ummm - shall we say performance.

The story made the Globe this damp Friday, as Harper arrives in the province for a couple of days of politicking. You can find a link to the Globe article and some added comments over at nottawa.

One aspect of the story not covered by local media has been the prospect that some members of the provincial Tory caucus are getting somewhat frustrated with the ongoing feud and would like to see it settled. Human resources minister Shawn Skinner hinted as much, at least until he was reined in by his boss.

As Mark suggests at nottawa, though, perhaps someone ought to simply poke a microphone in the general direction of Osborne, Byrne and even Elizabeth Marshall to ask what they plan to do with themselves when the next federal election is called. The responses might well give some clues as to what will evolve out of the Danny and Steve meeting.

-srbp-

NL town suffers second major landslide

The first was last fall.

The second was this past weekend and it continues on Monday.

Odd that only last month, the provincial government stopped paying assistance to people thrown out of their homes by the last emergency. The province also refused any financial assistance to people who could not return to their homes because of safety concerns.

Lucky for them, their houses have now fallen into the ocean.

Jack Byrne, the provincial municipal affairs minister, is now talking about getting the feds to compensate the homeowners.