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“It’s not free debt,” Mario Angastiniotis, an analyst at S&P in Toronto, said by phone Thursday. “The P3 is just an alternative vehicle for financing, it’s not a different way that doesn’t cost you anything. You’re still adding to your debt.”

Debt Pile

While Ontario’s population is about one third of California’s, its debt load is more than double that of the biggest U.S. state.

S&P cut Ontario one step on July 6 to A+, the fifth-highest level. The company cited infrastructure spending that will lead to a “very high” 267 per cent debt-to-revenue level in the next two years.

The S&P move “has had no material impact” on borrowing plans, Kelsey Ingram, spokeswoman for provincial Finance Minister Charles Sousa, said via e-mail. Ontario intends to issue about $31.1 billion this fiscal year, which includes funds for roads, transit, water infrastructure, schools and hospitals, the province announced in its annual budget in April. That’s down from $44 billion in fiscal 2009-2010.

P3s are “an innovative way of financing and procuring large, complex public infrastructure projects,” said Andrew Forgione, a spokesman for Brad Duguid, minister of economic development, employment, and infrastructure. “It makes the best use of private-sector resources and expertise to provide on- time, on-budget project delivery.”

Underweight Investor

In the last nine years, Ontario has financed 75 major projects using the method, including the Union-Pearson Express train linking Toronto’s largest airport to the downtown financial corridor of Bay Street. Officials also worked with private developers on the Pan Am games venues and athletes’ village, where about 10,000 competitors are staying.