Editor’s note: This is the third in what’s expected to be at least a four-part series in which we try to unravel the complex financial underpinnings of public-private partnerships such as the ones in place for the Okanagan Correctional Centre and Penticton Regional Hospital, and determine if they are actually a good deal for taxpayers. You can read Part 1 here and Part 2 here.
VANCOUVER – Ordering the full release to The Herald of the financial model underlying the Okanagan Correctional Centre was “absurd,” a lawyer for the company that created it argued Tuesday in B.C. Supreme Court.
Plenary Justice, which won the 30-year contract to design, build, finance and maintain the 378-cell jail near Oliver as a public-private partnership has asked for a judicial review of a December 2016 order by the Office of the Information and Privacy Commissioner that granted The Herald access to the financial model.
The two-day review hearing began Tuesday.
At the heart of the review is debate about whether the OIPC adjudicator properly interpreted a section of the Freedom of Information and Protection of Privacy Act that allows public bodies to withhold information held by public bodies.
The information in question is the construction schedule for the OCC, which opened a year ago, and the financial model, a 587-page spreadsheet.
Those items were sought by The Herald through an August 2014 freedom of information request to the Ministry of Citizen Services. That request was denied, prompting The Herald to appeal the decision to the OIPC.
In December 2016, the OIPC overturned the ministry’s decision and ordered release of the documents to The Herald.
The release was stalled, however, when Plenary Justice applied in January 2017 for the judicial review, which took 13 months to get before a judge.
In refusing to release the documents, the ministry relied on Section 21 of FOIPPA, which requires public bodies to withhold information that could harm third-party business interests, such as those of Plenary Justice.
Information afforded such protection is that which is “supplied, implicitly or explicitly, in confidence and the disclosure of which could reasonably be expected to harm the third-party business interests,” according to that section of the act.
Supplied, not negotiated
OIPC adjudicator Celia Francis focused mainly on the definition of “supplied” in her decision, noting supplied information must also be “immutable,” or incapable of being change.
Such was not the case with the OCC financial model, Francis ruled.
“B.C. orders have consistently found that information in an agreement or contract does not normally qualify as ‘supplied’ for the purposes of Section 21 because the information is the product of negotiations between the parties. This is so, even when the information was subject to little or no back and forth negotiation,” Francis concluded.
The result is absurd
In her submissions Tuesday, Plenary Justice lawyer Tamara Hunter argued Francis’s decision was unfair and unreasonable. She asked for Francis’s decision to be quashed.
Hunter argued the financial model was initially submitted in response to the B.C. government’s 2013 request for proposals from bidders interested in the OCC project, and later incorporated almost unchanged into the final project agreement, except for clarifications and “mechanical” adjustments to interest rates.
“To illustrate the unreasonableness of the adjudicator’s approach, consider that the financial model contains terms of agreements between Plenary Group’s financing partners and Plenary Group that pre-exist the (OCC) bidding process,” Hunter argued.
“These pre-existing contractual terms are unquestionably not capable of being renegotiated by the ministry, yet the adjudicator nonetheless found that these contractual terms were susceptible to change based only on the language of the RFP and the project agreement.”
Other information in the financial model is “in the nature of economic forecasting or cost budgeting” that was meant “to provide the ministry with background information explaining the overall price of its bid. Plenary Group’s predictions about the future could not be the subject of negotiation,” Hunter added.
In summary, she continued, “The result is absurd and contrary to the legislature’s intent to permit limited exceptions to the general right of access under FOIPPA.”
Public scrutiny expected
With the exception of The Herald, all parties at the hearing – the judge, ministry, Plenary and the OIPC – have seen the financial model in camera. As such, The Herald was unable to speak directly to whether or not its release was properly ordered.
“But for (Plenary) to declare the entire financial model as secret is unreasonable,” The Herald argued.
“Surely when a business enters into a contract with a public body worth hundreds of millions of dollars over three decades it expects close public scrutiny. And, as noted in Section 2 of FOIPPA, the purpose of the legislation is, in part, to ‘make public bodies more accountable to the public.’”
Competing public interests
Ministry lawyer Diane Roberts adopted Plenary Groups arguments in whole, but also delved into another aspect of the public interest served by withholding information to protect third-party business interests.
Roberts argued the public would be harmed if companies interested in doing business with the B.C. government decided not to supply their services for fear their trade secrets could be divulged through FOI requests.
She further suggested the OIPC adjudicator improperly drew conclusions from the P3 contract without letting the ministry or Plenary Justice comment on it.
What we know already
So far, partial release of information from the original FOI request revealed the 30-year deal with Plenary Justice is worth $419.2 million in 2015 dollars indexed for inflation,
According to schedules of payments, the B.C. government anted up $72.3 million during construction and will hand over another $255.6 million in capital payments over the 30-year life of the deal. That would seem to put the true capital cost of the jail at $327.9 million – nearly double the stated $192.9-million sticker price.
In addition, Plenary Justice will receive monthly lifecycle payments totalling $28.3 million, and maintenance fees totalling $63 million.
It’s unclear exactly what’s covered by those fees or the effective interest rate to taxpayers resulting from Plenary Justice financing the jail through the private bond market.
Plenary Justice’s parent company is privately held and headquartered in Australia. It boasts of operating 44 projects around the world worth a combined $32 billion.
The hearing continues Wednesday with submissions from the OIPC. Look for that coverage in Part 4 of this series on Thursday.
The judge can either uphold the OIPC decision or send the case back to the OIPC for a focused review of specified parts of the decision.
Full disclosure: The Herald is being represented by city editor Joe Fries, who filed the original FOI request and is making submissions on the newspaper’s behalf.