Okanagan Correctional Centre Bond Rating by Joe Fries
Soon almost anyone with cash to spare may be able to buy into the new Okanagan Correctional Centre.
Plenary Justice Okanagan, the consortium of companies expected to finance, design and build the jail, last week unveiled a proposed $114.5-million bond issue to fund construction of the facility.
The 30-year bonds were given an A rating by DBRS, a Toronto-based credit rating firm, which assigns grades ranging from BBB to AAA to such public-private partnerships.
No one from DBRS was available for an interview, but a project summary prepared by the firm said the bond issue received a favourable rating because the $200-million project is backed by the B.C. government and Plenary Justice itself is composed of industry heavyweights like PCL Constructors and Honeywell. The rating was dragged down by complex contractual agreements between the partners and heavy reliance on borrowing.
Mike Marasco, the Vancouver-based CEO of Plenary Concessions, said information about the bond price, interest rate and underwriter are protected by confidentiality agreements.
Partnerships BC spokeswoman Katie White said in a statement the offering is “a private bond placement, not for public sale.
“This type of lending is suited to institutions like banks, life insurance companies and pension funds due to the size and risk of the project," she said.
According to the DBRS summary, the 29,500-square-metre jail will consist of three pods with 12 living units and a total of 465 pre-cast concrete cells that will be manufactured off-site and house up to 867 inmates. A separate building will host administrative services.
The summary also notes PCL Constructors is expected to sub-contract 85 per cent of the construction work and already has firm price commitments for half of it. Construction was expected to begin in March and take 31 months, with the jail slated to open its doors on Sept. 30, 2016.
It’s unclear what’s behind the delay.
The B.C. government announced Plenary Justice as its preferred proponent in January and said at the time a finalized, 30-year deal with the consortium was expected in “early spring,” after which work would begin.
Justice Ministry spokesman Stuart Bertrand said in a fresh statement “a public announcement is planned for later in April,” and, “at that time, details regarding the final agreement and the design, construction and schedule will be available.”
Besides contributing $72.3 million to construction costs, the DBRS summary said, the B.C. government will also provide Plenary Justice a monthly payment, 65 per cent of which will cover debt servicing, overhead and return on equity, while the balance will go to Honeywell, the company responsible for day-to-day operation of the jail.
Local businesses are also still hoping for a piece of the action. Nearly 475 companies have signed up with the South Okanagan Chamber of Commerce for inclusion in a project registry, which Plenary Justice will use to identify local service providers.
Chamber president Myers Bennett said the Oliver business community, particularly the portion with an interest in real estate, seems to be holding its breath while waiting for the project to break ground.
“I would say about six months ago there was quite a bit of activity on some of the small business buildings downtown, more so than (residential) real estate,” said Bennett. “I think until people start to see the jail get built and people moving here that it’s going to be kind of a false economy.”
Work at the prison site has been limited so far to realignment of roads and utilities within the Senkulmen Business Park, plus construction of a secondary access off Tucelnuit Drive.