The Government Loans Amendment Act 2005 was passed in the Senate last night, under much protest from the United Bermuda Party Senators who thought that under the Act, the Government would be handing over too much control through private/public partnerships.

Under the Act, as of April 1 this year, public debt increases from $250 million to $375 million.

PLP Senator Raymond Tannock said the Government would continue to maintain the debt policy limit of ten percent of the Gross Domestic Product (GDP).

But, he said, given that the GDP had increased from $3.96 billion in 2003 to $4 billion in 2004, the Act would raise the statutory debt ceiling to $375 million.

"This proposed statutory debt limit of $375 million will allow for more flexible capital financing arrangements including public-private partnerships and private financing initiatives," he said.

Sen. Tannock said the Government had been approached by financial institutions that had a keen interest in assisting Government with its high priority capital projects.

Some of these projects include the replacement of the Causeway at a cost of $60 million, the new Police Station/ Magistrates Court and adjacent office block projects at $40 million, the replacement of King Edward VII Memorial Hospital structure at $100 million, the completion of the National Sports Centre at a cost of $70 million and the replacement of the International Airport Terminal building at a cost of $40 million and finally, a new office building designed to house most, if not all, Government staff who currently occupy rented accommodation at a cost of $45 million.

"This is an indication of what may be possible with the use of Private Financing Initiatives," Sen. Tannock said.

With many of these types of financing arrangements, while Government itself would not be required to borrow funds, it is possible for accounting reasons part of the underlying financing elements of some projects could be recorded as contingent liabilities on Government's account.

Sen. Tannock said such contingent liabilities would therefore be charged against the statutory debt ceiling in the same way as a Government guarantee.

But Sen. Tannocks' reading of the bill was met with anything but applause.

UPB Senator Bob Richards said the bill was another example of Government putting the cart before the horse.

"There is no entitlement to extra borrowing power just because the GDP goes up," he said.

Sen. Richards said he did not want to find himself sitting in Senate again next year discussing increasing the rate yet again, because the GDP had increased yet again.

"We need to use extreme caution when dealing with projects that we're not 100 percent in control of," he warned.

"If some public/private relationship takes place, the question of ownership of the project is always a concern. We have no experience in this type of business and while they might sound sexy, especially since it's not our money, we have to use extreme caution."

Sen. Richards said it was important to take "baby steps", especially when taking into account the current Government's experience in such matters, using the Marginal Wharf project as an example.

"These matters can be quite complex and things that are out of Government's control tend to get out of control," he said.

Senator Walter Roban replied that Government was not proposing any "phantom projects" and that the Minister of Finance had outlined the purpose of the initiative, which was good in the long-term and dealt with major infrastructure.