A new courthouse is slated to be built at the Civic Plaza, just to the east of Clearbrook Road. Government of BC image

A new courthouse is slated to be built at the Civic Plaza, just to the east of Clearbrook Road. Government of BC image

Interest costs for new Abbotsford courthouse to run into tens of millions

Province to contract private company to finance 60 per cent of project

The provincial government wants Abbotsford’s new courthouse to accommodate demand through 2035, but taxpayers will be paying for the building’s construction for much longer than that.

The province will ask a private partner to finance up to 60 per cent of the $140 million cost of Abbotsford’s new courthouse through a private partner, a plan that will reduce the upfront bill but cost millions in interest payments over three decades.

Those details for the new 14-courtroom facility, which was announced by the province in February, are included in a request for qualifications (RFQ) posted online. The RFQ is the first stage as the province looks to pick a private partner to build, operate and partially finance the cost of the courthouse. The new courthouse will replace Abbotsford’s current “functionally obsolete” facility, which has five provincial courtrooms and two initial appearance/conference rooms.

The RFQ says that the province will make interest payments on its courthouse debt over 30 years, although payments could be lower “if performance requirements are not met.”

Further details – including an “affordability ceiling” that will put a cap on total interest payments – are expected to be revealed in a request for proposals that will be issued to three short-listed companies in the summer. Whatever the interest costs, they will likely run into the tens of millions of dollars.

The BC Liberal government previously compared such financing to taking a mortgage out on a house.

Borrowing up to $84 million – which represents 60 per cent of the $140 million capital cost – over 30 years would result in tens of millions of dollars in interest payments over the life of the deal. For 2018, interest is likely to run at least $3 million.

But Lynda Gagné, a professor of public policy at the University of Victoria, said adding up the actual interest payments “is nonsensical” from an accounting perspective because the actual value of a dollar decreases over time due to inflation and the ability to invest money held in the present day.

An interest cost of $3 million in 2020 will have a bigger impact on a province’s budget than in 2040.

However, Gagné said it is relevant to ask whether a government would be able to obtain cheaper funding than the private sector and, if so, why the private sector would be asked to finance the project.

Because the future of the next British Columbia government has not yet been decided, the Ministry of Justice was unable to provide comment or further information.

The use of financing to pay for infrastructure projects is not uncommon for provinces and federal governments. And with interest rates at historic lows, some have argued that governments should take advantage of the reduced rates to stimulate their economies and build for the future.

The RFQ also reveals the courthouse will be built with the flexibility to add two more courtrooms. A separate 336-stall parkade will also be built on the site, which will be located on civic plaza lands in what is now a parking lot to the immediate east of the Clearbrook Library.

The province anticipates the facility “will accommodate anticipated demand through 2035, provide a high level of quality, increase the safety and security of courthouse users and staff, and provide the needed flexibility to keep up with demand and technological advances into the future,” according to the RFQ.

The document says construction should start next June, with opening targeted for the fall of 2020.