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Throwing stones in glass houses

Dumping at Pond Hill after the Tynes Bay Incinerator broke down and ran out of storage space

The sight of garbage being dumped on Pembroke Marsh for the first time in decades is a ready symbol of Bermuda’s shift from economic miracle to economic mediocrity. There are others. The dreadful state of the Botanical Gardens, poor roads and government buildings falling down spring to mind.

These problems and the lack of ready funds for infrastructure projects such as the Tynes Bay Incinerator can in part be blamed on the Covid-19 induced recession and the need to divert funds to help those in desperate need. The Government has also argued that much of this is due to economic mismanagement by the previous One Bermuda Alliance Government.

There is some validity to the first two causes, and less to the third.

This is not to defend the One Bermuda Alliance; it made its share of mistakes. But it is too easy to blame past administrations rather than accept responsibility and this Government should be held to account as closely as its predecessors were.

The other risk for the Progressive Labour Party Government is that it can result in the impression that it would rather blame the OBA than solve the actual problems.

To that extent, it is striking that the Government has spent a good deal of time weaving together the airport contract, the triggering of the guarantee for Caroline Bay and the “vanity project” of the America’s Cup into a narrative in which it blames the former One Bermuda Alliance Government for the Tynes Bay debacle and presumably other future failures to invest in capital projects as well.

There has never been a government in the world that has not found a way to blame its predecessor, of course. Certainly the OBA found time to blame the previous PLP administration for the financial mess it inherited.

The Premier, and more recently backbenchers Neville Tyrrell and Anthony Richardson in columns in this newspaper, identified four errors.

The triggering of the Caroline Bay guarantee is perhaps the most credible. When the development failed, the Government had to pay some $165 million in debt associated with the project. This newspaper has stated that any government should exercise extreme care in offering guarantees for private business ventures. If they are risky enough to need a taxpayer guarantee to get credit, perhaps they are too risky altogether.

So Mr Burt is right to criticise this decision which has added to Bermuda’s debt. Certainly, if and when a new developer is found for the project, at least some of the money may be recovered. Perhaps the Government is tirelessly working to find such a developer, but if so, it is exercising unusual discretion.

The second accusation concerns the America’s Cup, which Mr Burt loves to describe as a boat race for millionaires. It is claimed that this diverted needed funds from other projects such as the refurbishment of the incinerator.

That is not accurate. The America’s Cup project was designed to put Bermuda back on the world tourism map and it did just that. It is one thing to spend money on infrastructure but without a healthy economy and growing revenues this will never be afforded.

Recently released gross domestic product figures show that 2017, the year of the America’s Cup, produced growth of 3.6 per cent — the only year in the last 13 to have produced real growth of more than 1 per cent. GDP in constant prices — after taking out inflation — when the government changed in 2017 was $6.458 billion. By 2019 — after two years of PLP government but before the pandemic struck — it was $6.45 billion and still smaller than it was 24 months earlier. That is a description of stagnation, not growth.

Mr Burt and his colleagues can claim the America’s Cup was a vanity project. But it was also virtually the only stimulus project that generated significant jobs and economic activity for Bermuda in a decade. The mistake was not the event but that the incoming PLP Government refused to use it as the economic springboard it was designed to be.

The airport project is more complex. It has never been entirely clear whether the PLP was opposed to a new airport — an idea first mooted by PLP Premier Ewart Brown — or simply the deal that was struck to build it. Most of the debate has been over the deal. Further, there is little dispute that the previous terminal was deteriorating, and the costs to maintain it were rising fast, much of this neglect having occurred under the PLP Government of the previous 14 years.

So assuming the PLP agreed that a new airport was needed, the question was whether the public-private deal with Aecon was a good one. The PLP has argued that handing over ownership of the airport for 30 years in return for not paying for its construction meant that Bermuda gave up the revenue which came with it. Without going into great detail, it is fair to say that once operating expenses are taken from revenue, profits would be pretty marginal, even before Covid-19. Once the borrowing costs to build a new airport are taken into account, Bermuda would have been paying out tens of millions of dollars.

The second criticism of the airport deal concerns the minimum revenue guarantee. The claim here, made again this week by Neville Tyrrell, the former transport minister, is that Bermuda should never have agreed to a revenue guarantee without a clause eliminating the payment in the event of an act of god like a hurricane or a pandemic. One has to assume that Aecon would never have taken on the risk in those circumstances, especially since insurance apparently could not be obtained for a pandemic.

What would have happened had Bermuda built the airport directly, using debt? When the pandemic struck and flights were grounded, the Government would have had to decide whether to lay off staff or continue to employ them while also maintaining the airport buildings. Presumably the Government would have followed the same practice it did with its other public servants and continued to pay them.

According to the Government’s budget figures, the cost of running air operations before these deals were made was about $20 million. In 2020 the Government paid out $32 million in revenue guarantees, meaning it paid out approximately $12 million more than it would have had it never built a new terminal but if it had kept all staff employed. Again, if it had borrowed money and built a new terminal it is almost certain that the debt payments would have been more than $12 million a year.

In other words, only if Bermuda had not built a new airport — and that is a separate argument — would the Government be in a better position than it actually is with regard to the airport.

The last leg of the criticism concerns the incinerator itself. It was inoperable for the past several weeks. As a result of the repairs needed to boilers and the unavailability of a part for a baling machine, garbage has been piling up and eventually was put at the old landfill at Pembroke Marsh for the first time in 30 years.

Wayne Furbert, the acting Minister of Public Works, explained this quite succinctly and said that Bermuda has a choice of spending tens of millions of dollars now to keep the incinerator running or spending $150 million on a brand new plant, which is the recommendation of the experts.

But Mr Furbert and later Mr Burt went on to claim that all this could have been avoided if the OBA had commenced work on a new plant in 2012 when it came to government. Instead it spent the money on the America’s Cup and other vanity projects.

It is no secret that the incinerator is ageing. Work was done on the plant over the years.

So doing something sooner could be justified. But what Mr Furbert and Mr Burt neglected to mention is that none of this is a surprise in 2021.

David Burch, the Public Works Minister, told MPs in October 2017 that a decision would have to be made on whether to go ahead “with the construction of a third stream or a further refurbishment, either of which will need to take place within the next three years in order for the plant to remain reliable“.

So Mr Burt certainly has known since 2017 that a decision would have to be made by mid-2020. It is 2021, no decision has been made, and as predicted, the plant is clearly not reliable and Bermuda has had to resort to burying its trash.,

The OBA was far from perfect, as the voters made clear in 2017. But it is dangerous to throw stones when living in a glass house. Mr Burt and Mr Furbert should get their brooms and dustpans out.

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Published December 06, 2021 at 8:00 am (Updated December 05, 2021 at 5:37 pm)

Throwing stones in glass houses

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