A case of putting lipstick on a pig
Last Friday, we witnessed some more masterful manipulation by the Progressive Labour Party government with the release of the long-awaited LF Wade International Airport Redevelopment Project Agreement Review Report. Of all the days that the report could have been released, it was done during the general Budget debate.
What a way to divert attention away from the Opposition's Reply to the Budget and the subsequent debate. The release of the report in this manner is another classic case of “look at my right hand while I do something else with my left”. It goes against parliamentary convention and, as the saying goes, “it's just not cricket”.
As we all know, the airport redevelopment project became one of the main issues that the PLP used successfully to divide Bermuda. In its eyes, the project will never amount to commercial good sense for Bermuda, notwithstanding that a blue-ribbon panel of eminent Bermudians found very little wrong with it; notwithstanding extensive public presentations by the Government and Aecon; notwithstanding specific permissions having been sought and obtained from the British Government for the project; and notwithstanding the PLP attending private presentations to explain the project, which included details of the contractual break clauses.
The “notwithstanding” aside, the PLP, of course, as always thinks it knows best. In fact, the PLP supposedly knows better than all the following bodies, as identified in the report;
1, LeighFisher, Industry Review of Airport Privatisation and PPP Models, August 2013 — Preliminary conclusions found Bermuda could afford a capital expenditure programme through 2020 under a public-private partnership model
2, Deloitte, Appraisal of Airport Development Business Case, May 2015 — Found an overall positive assessment of the strategic, economic, commercial, financial and management case for the project
3, Director, Overseas Territories, Foreign Office, Entrustment Letter, July 2015 — Confirmed that no additional sovereign debt would appear on the balance sheet of the Government of Bermuda as a result of the airport construction
4, HNTB, Faithful & Gould, Reconciled Cost Estimate, June 2016 — Independent review of airport cost estimate, which concluded that the project was within market standards
5, LeighFisher, High Level Review of Aecon Traffic Forecasts (Issue 16), November 2016 — Said that air traffic forecast represents a reasonable basis for financial assessments and determining the size of required facilities
6, KPMG gave logistical support throughout
7, Legal advice received from both local and international law firms throughout
Despite the assurances provided by the involvement of all these parties, the report was commissioned by the PLP at great expense, which ultimately will be footed by the people of Bermuda. The review was undertaken in September 2017 and completed in December 2017, although, curiously, the report itself is dated February 11, 2018. The report was finally released on February 23. One can only assume that between December and January, the PLP was deciding what kind of spin to place on the report.
Then I asked myself: why, given that the PLP was so sure that the airport deal was so bad, would it release the report under cover of an Opposition Reply to the Budget? Why, indeed.
Well, quite simply the Premier is trying to put lipstick on a pig. A pig in the shape of a report, which did not squeal out what the owner was hoping.
Unhappily for the PLP, the report noted the following:
a, Terms and conditions of the Project Agreement are broadly consistent with other similar contracts
b, The airport revenues are being used to fund the design, construction and financing of the new airport terminal building, as well as operating and maintaining the airport, including the existing terminal, and once complete, the new terminal
c, The interest rate for the long-term debt is within market range
d, The return on investment for the equity sponsor, Aecon, is within market range
e, The balance of risk/reward is consistent with other similar projects
The least favourable conclusion was that there was lack of a tender, but the aforementioned conclusions ultimately demonstrated that was fine. In fact, previous third-party due diligence found that “the likelihood of success from a negotiated deal is expected to be higher in this case than under a competitive tender, given the modest size of the airport traffic volume and recent experience in the region”. In other words, a tender would most probably have made no difference to the ultimate outcome.
The report made brief mention that there is an inability to change the contract. However, the report qualified this comment by confirming that there are opportunities for optimising the deal. This will be effected through co-operation between the Bermuda Airport Authority and Skyport. These parties have already demonstrated that they are very keen to maximise participation and training for Bermudians — as evidenced by the many announcements made in this regard over the past year or so.
The optimisations include jobs for Bermudians, workforce development and training, energy costs, passenger traffic growth and revenue sharing, social investment and physical accommodation at the BAA offices. All of these were already in progress under the One Bermuda Alliance as a result of the great working relationship established between all parties under the watchful eyes of the previous administration.
This is all to the ultimate benefit of Bermuda and its people in the long term. This is especially so when one considers the state of the airport, which is a well-documented disgrace.
If there were any further doubts that the project is not for the benefit of Bermudians, the report has attacked such doubts head-on. For example, other key findings of the report are that Bermuda benefited from:
i, No increase in sovereign debt
ii, No impact to debt/GDP ratio
iii, No effect on Bermuda's credit rating
iv, Leaves lending room available for other projects/priorities
v, Sharing in upside revenue above a set revenue sharing threshold
vi, Potential off-balance sheet transaction — accounting treatment being reviewed at present
So after years of demonising the project, the PLP failed entirely to find any fodder in the report to support its views. The report was overwhelming positive — so much so that the Premier released it against parliamentary convention with a view to burying the impact of its positivity and at a time to kill off debate in the House because of the concentration on the Budget by the Opposition.
If the PLP decides to continue to demonise what is a commercially sound and sensible project for Bermuda and its people, one cannot help but ask the following question: will the PLP want the airport to continue to be named after one of their most respected members?
If we are to go by what the PLP is spouting, the new airport — as impressive and modern as it will be — is hardly worthy of such an accolade.
• Michael Fahy is a former Minister of Home Affairs, Minister of Tourism, Transport and Municipalities, and Junior Minister of Finance under the One Bermuda Alliance government