Assessing B.C. Liberals’ asset sale plan comes down to credibility: observers
VANCOUVER – British Columbia’s provincial election campaign has focused heavily on the governing Liberals’ ability to balance the books — an achievement that won’t be possible without their plan to sell off more than half-a-billion dollars in assets during the next two years.
But the plan to sell those assets, which range from vacant lots to a junior high school, has become a major liability for the Liberals, with the Opposition New Democrats arguing the assets are being used to hide a deficit worth hundreds of millions of dollars.
And while observers say there is some truth to the New Democrats’ complaints, the controversy over a list of largely unused properties is really a debate over whether Liberal Premier Christy Clark can be trusted to turn the province’s finances around once those assets are gone.
Clark’s government tabled its 2013-14 budget in February, boasting it had balanced the books for the first time in four years. The budget predicted the fiscal year would end with a thin surplus of $197 million, a feat that would be achieved by reducing expenditure growth, raising taxes and selling off more than 100 assets determined to be surplus.
The asset sales, according to the budget, would be worth $475 million in the first year and $150 million in the second. Without that money, the projected surplus in the current year would evaporate, leaving a deficit of more than $200 million.
The New Democrats have repeatedly attacked what they deride as a “fire sale” of valuable assets, arguing it’s irresponsible to count revenue from such sales before they’ve happened and suggesting the estimates themselves are unrealistic. The New Democrats would honour any existing sales that have been signed, but would re-evaluate whether selling any of the assets on the Liberals’ list makes sense, the party has said.
James Brander, an economist with the University of British Columbia, said there is some merit to the NDP’s criticisms. He said it’s generally considered bad policy to sell assets to fund government operations.
“Should asset sales be used to finance the operation of government?” said Brander, who teaches at the university’s Sauder School of Business.
“Most economists, including me, would say that’s not a good idea. An asset can be only be sold once, and if we’re selling assets to fund operating expenditures, expenses that we’re going to have every year, that’s a big mistake.”
The Liberals have argued the asset sale plan is a one-time measure to keep the budget balanced until the economy improves. Brander said that’s a valid argument, but only if the Liberals can really balance the budget in two years once the asset sales stop.
“It’s not a crazy argument — if it’s true,” he said. “The question is: Do you believe it? It’s really an issue of credibility.”
As for the value of the assets, it’s difficult to assess the accuracy of the Liberals’ numbers, because they have not released a full list of the assets they might unload.
Tim O’Neill, the former Bank of Montreal chief economist hired by the B.C. government to review the revenue projections in the most recent budget, found no problems with the plan to include asset sales.
In fact, O’Neill determined the projections contained in the budget may even be on the low side.
“They used market prices that were quite reasonable and quite conservative, relative to what had been happening in the market,” O’Neill said in an interview.
“So my own conclusion was that what they were projecting to raise through the asset sales was likely going to be below what they could actually achieve.”
O’Neill agreed it’s acceptable to use asset sales to make up for short-term deficits, but only if the plan is to quickly return to balanced budgets without them.
“If it’s purely a delaying tactic to buy time to do the things that are going to be necessary — restraining spending growth, increasing revenue — that’s not really a problem,” said O’Neill.
“As to whether this particular group of politicians is going to really achieve that success is not something I can make a particular judgment about.”
The New Democrats have also announced at least one asset they would consider selling: BC Place stadium in Vancouver.
NDP Leader Adrian Dix has said he would examine whether the stadium should be sold, prompting the Liberals to label him a hypocrite for complaining about some asset sales while considering one of his own.
© 2013 Shaw Media