Airport deal can only spell a future of debt
Mr Speaker, there is no doubt that the biggest threat to the future prospects of the way of life we enjoy in Bermuda today is the problem of the Government deficit and public debt.” — Bob Richards (2016 Budget Statement)
Bob Richards is on record as stating that the biggest issue we have to confront as a country is the country's deficit. We in the Progressive Labour Party agree that we must get our budget deficit under control.
With that stated, it boggles the mind that the Minister of Finance, who claims to be committed to deficit reduction, and the One Bermuda Alliance, which was elected with promises of balancing the budget, continue to press ahead with the untendered privatisation of our airport. The OBA's 30-year privatisation of our airport to Canadian company Aecon, which will earn a taxpayer-guaranteed return of 16 per cent, will add at least $33 million to our annual budget deficit. Over 30 years, this means an additional $990 million of debt will be added to our already $2.4 billion national debt. If inflation were considered, this number would easily exceed $1 billion of additional debt.
I will break down the numbers, as it is important that the taxpayers of Bermuda understand exactly what Mr Richards will ask Parliament to approve in November.
The L.F. Wade International Airport, according to the 2016-17 budget, earns $37.2 million a year in revenue at present, while expenses are only $20 million a year. This results in a $17.2 million surplus annually. That's right — our airport, as old as it is, turns a healthy profit every year.
However, under the existing agreement that the OBA has signed, Aecon will get all of the $37.2 million in revenue, but will assume only $11 million of expenses. Taxpayers will still be responsible for $9 million of present airport expenses annually. This means that instead of making $17.2 million of profit a year on the airport, we will be spending/losing $9.8 million a year, meaning that the negative net impact on the Government's consolidated fund will be $26.3 million a year.
This $26.3 million annual hole in our budget does not take into account the estimated $107 million of taxpayer-funded electricity over 30 years. It also does not take into account the exemption that Aecon has been granted from payroll taxes and work-permit fees. Further, taxpayers will incur $3.6 million in additional annual expenses for the proposed new airport quango. This means that the Minister of Finance, who has done his best to convince voters that he is a sound steward of the public purse, will ask MPs to approve a contract that will increase our budget deficit by at least $32.6 million a year.
These facts paint a different picture than what the minister said last year about the airport:
“The net effect on the consolidated fund is minimal.” – March 31, 2015
I am sure that the taxpayers of Bermuda will agree that $33 million a year is not minimal. Thirty-three million dollars is more than the Government spends annually on tourism. It is larger than the budget of five of the 12 cabinet departments listed in this year's Budget Statement. The Minister of Finance has repeatedly said that Aecon will also assume the expenses of the airport; however, as the figures in the chart show, they will assume only half of the expenses. The rest of the expenses will be the responsibility of Mr and Mrs Taxpayer. That $33 million will have to be found somewhere, and the only way it will be found is from increased taxes, cuts to government services or additional borrowing — all of which can have a negative economic impact on Bermuda.
As taxpayers read this — and scratch their heads in disbelief — we must ask ourselves why Mr Richards is so committed to this project. Why would he press ahead with a project that will increase our deficit, requiring us to borrow more money and thus increase our national debt? What possible motivation could the Minister of Finance have to push through a deal that makes our financial position as a country worse?
One answer could be that the OBA is looking for a short-term boost in employment in advance of an election; however, we must ask at what cost? Is $33 million of extra money borrowed each year for the next 30 years, which will increase our debt by at least $990 million, worth three years of jobs? Is it right to pass on this $990 million of debt to future generations?
Should we be handing over our airport to a Canadian company that will earn a guaranteed return of 16 per cent, while we struggle to maintain our schools and bridges?
We need to do something about our airport. The PLP has put forward a less expensive and fiscally responsible plan that extends the useful life of our existing structure, creating immediate jobs that can be filled by Bermudians, while keeping airport profits here in Bermuda, which will assist us in getting our fiscal house in order.
Mr Richards's airport privatisation is a bad deal for Bermuda and will compound our financial problems. We implore all taxpayers to contact their OBA MP and tell them to vote no on this deal that will grant a taxpayer guaranteed return of 16% to a Canadian company while saddling our children with at least $990 million of extra debt.
• David Burt is the Deputy Leader of the Opposition, Shadow Minister of Finance and MP for Pembroke West Central (Constituency 18)