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Finance Minister rebuffs airport accusations

David Burt, left, and Marc Bean, make their case for Bob Richards to resign over the airport redevelopment controversy (Photo by Nicola Muirhead)

A showdown at Parliament is in store, with the Opposition calling for the resignation of Finance Minister Bob Richards and the People’s Campaign urging the public to gather tomorrow outside the House of Assembly.

The Progressive Labour Party has called for the agreement for a new terminal at LF Wade International Airport to be halted immediately, but Mr Richards emphatically rebuffed accusations of tainted dealings.

The minister told The Royal Gazette that he hoped for a new announcement on the proposal with the Canadian Commercial Corporation, or CCC, by the end of this month. “We’ve had challenges — the main one has been the UK Government, but we’re working through that,” Mr Richards said.

While the deal with CCC and the contractor Aecon Concessions is “strictly a commercial transaction”, he said some in the British Government viewed the airport deal as “something that falls under the aegis of external affairs, which is their purview”.

It has been more than a year since Mr Richards declared that Bermuda’s ageing airport needed to be replaced, possibly through a public-private partnership (PPP) like the one awaiting approval with CCC.

While the PLP maintains that documents released by the People’s Campaign prove that Aecon was chosen from the start in a back room deal, Mr Richards insisted otherwise.

He said that after his Budget statement last year, Aecon presumably “picked up on that and saw an opportunity in Bermuda”.

“The important, critical thing is that the Government of Bermuda, particularly myself as the leader of this, made no contact with Aecon before the meeting of June 4, 2014,” the minister said of the initial sit-down with CCC, held at the Toronto offices of the Canadian Imperial Bank of Commerce, or CIBC.

Describing the project as highly complex, particularly in its financing and projections of future airport revenues, Mr Richards said he had learnt of the PPP model offered by CCC in April 2014 when informed by CIBC, which was giving the Government financial advice. “The economics around these things are always tailor-made to the project itself. In very broad terms it’s not that different from the PPP that the Government did for the new hospital wing,” he said.

“There are important features that are different — most importantly, the airport project will not include a guarantee by the Ministry of Finance and the Government.”

Mr Richards acknowledged that the lack of open tendering would be unpalatable to some, but said resorting to a sole sourcing for the project was legitimate under the Government’s financial instructions.

“What we have done is hire an international construction company to verify value for money before any deal is signed or ground broken. Let’s face it, the traditional tendering process has not worked well for Bermuda.

The Berkeley Institute, the Dame Lois Browne-Evans building, the Sylvia Richardson building, the old departure terminal at the present airport, Heritage Wharf — they all resulted in hundreds of millions of dollars of overruns. I’m giving up the tendering so that I can have a guarantee of performance, and I think that’s a good trade-off.”

Much has been made of references in the e-mails, published online, to the need for “CCC cover” cited by Aecon’s president, Steve Nackan, before a visit to Bermuda.

“I’m not sure what they’re talking about — other than the fact that the cover they’re talking about may have related to the fact that this is referred to as a CCC project,” Mr Richards said.

“If you look at the structure of the model, Aecon is called the CCC developer.

“A lot of this model uses the CCC name, reputation, et cetera to go forward.

“You don’t want to confuse the word ‘cover’, to think that it’s a front in a typical use of that word, because CCC are more than just providing cover; they’re more like providing cover in the insurance sense, because they are providing a guarantee to the Bermuda Government against overruns and against delays.”

Mr Richards also came under heavy fire for his remark, in an e-mail just before the agreement with CCC was signed in November, that he had “fuzzied up the no new debt part in view of the funding gap”.

According to the minister, the phrase signified his intention to be deliberately vague about the airport’s revenue stream at the start of the project.

“What we’re talking about is numbers that I didn’t know. I didn’t want to tell anybody that we had a funding gap of X dollars, because a lot of things were in motion and I didn’t know what the number was.”

The “funding gap” referred to a discrepancy between future airport revenues, which will finance the PPP, and the actual cost of the project, he said.

“The key metric is your projection for the people walking through that airport every year, and the reason that is particularly challenging for us here in Bermuda is that for the last 30 years the traffic history has been a downward track.”

Early e-mails between the Canadian businesses refer to “privatisation”.

“That’s something that one of the parties said to each other, but it didn’t come from the Bermuda Government,” Mr Richards said.

Mr Richards said it would take about 3½ years to build the new airport terminal, with other plans in the works to add a solar power facility on the vacant runway by Castle Harbour known as the finger.

Enhanced airport retail and departure tax earnings would pay off the roughly $250 million project over 30 to 35 years, which the PLP have characterised as handing over $1 billion to Aecon. The Opposition yesterday decried Mr Richards’s handling of the deal as shoddy, self-interested and harmful to the Island’s reputation.

While the PLP agree that the airport is in need of replacement, Shadow Finance Minister David Burt has said that replacing it now was premature, and that the Government ought to confine its attention to boosting air arrivals.

Asked if he planned to attend the People’s Campaign gathering set for 9am tomorrow, Mr Richards signalled that he would not.

“I like to have reasoned discourse; if folks want to march and have speeches, that’s their constitutional right.

“But we’ve got an agenda to do for the benefit of the people, to provide jobs, and we’re going to do that.”

• For the PLP’s full press statement and for the full transcript of Bob Richards’s rebuttal, click on the PDF files under “Related Media”.