AAA credit rating built on rising mountain of invisible debt

Editorial

Tuesday, May 5 2015

The Province of British Columbia has had its credit rating affirmed as AAA by Fitch Ratings, as well as by Moody’s and Standard and Poor, this coming, according to the Province, because of its strong financial planning and controls, with Fitch noting, “Contingencies, forecast allowances, and conservative economic-growth assumptions.”

The problem is not with Fitch - this is a company hired to base a credit rating on the official financial performance of the province. From that perspective, they are spot on. But it’s easy to achieve AAA rating if you’re hiding all your real debt in private or shell corporations owned by the province.

Example: BC Ferries with a debt load of $3 billion in capital debt and rising.

It’s also easy to balance the budget when you are requiring local governments and local school boards to tighten belts and in the words of Premier Christy Clark, “look for the low-hanging fruit.”

Premier Clark should note the low-hanging fruit of the education system was plucked back when she was education minister. School boards have been reaching higher and higher.

Consider some of the choices now being faced by our local school board.

They are facing the reality of needing to choose four schools to close within the district by June of 2016, just 13 months away.

This so they can balance their budget, as legally required by the province.

And within that same time period, the board will also be considering whether to charge fees for students to ride school buses. It hasn’t said which riders would be charged, but the fact the idea is being floated shows how hard up the board is for revenue - revenue which disappears down ever deepening holes and megaprojects like the Site C Dam. Last estimate on that needless project was hitting into the $8 billion range.

None of which will show up on the provincial books as BC Hydro takes that on and continues to hide more debt from Fitch and other companies.

The cost of the Site C megaproject won’t just be financial either - 3,800 hectares of farmland within the Agricultural Land Reserve, as well as an additional 10,000 hectares of other land, will be flooded and lost forever. At the same time that we’re hearing about how the drought in the southern U.S. is going putting a huge dent in the food production there.

The invisible debt of BC is growing, and should Fitch, or any other credit rating company, decide to start including private debt loads as well as cutbacks to the education system in their calculations, the current government would not be crowing quite so loudly about its financial performance.