Airport deal costs defended as minimal
The Bermuda Government's sole-source deal for a new airport terminal has been defended as the only way to avoid extra debt, according to Bob Richards, the Minister of Finance.
Mr Richards was responding to the latest critique of the proposal by the Progressive Labour Party — which came in a hard-hitting joint statement by Acting Leader of the Opposition David Burt with shadow transport minister Lawrence Scott.
The Opposition on Thursday maintained that the island could not afford the proposal with the Canadian contractor, Aecon, and again charged Mr Richards with misleading the public and dismissing concerns.
In a statement earlier today, Mr Richards took on the PLP's contention that a significant amount of funding would be required of the Government.
“That is not true,” the minister responded, saying the public “should not be deceived by innuendo, false allegations and political rhetoric”.
Mr Richards maintained that the Government had shown greater transparency on the project than it had for “any other development in Bermuda's history”, and defended the deal, backed financially by the Canadian Government through the Canadian Commercial Corporation, as the best way of avoiding financial risk.
According to Mr Richards, the only expenditure would be about $6 million raised by the Airport Improvement Fee, approved by legislators in August 2015.
He noted that the Bermuda Chamber of Commerce had approved of the selection of Aecon and CCC, although the statement earlier this week by chamber president John Wight also questioned the Government's rationale in not putting the project out to tender.
“The reasons we didn't put this out to tender — as we have discussed in the past — is because we would have then had to add to the national debt to pay for it, which we are in no position to do,” Mr Richards said.
“We would have never been able to control cost overruns for the project and the tax payer would again be on the hook for it all. Our plan transfers such risks away from the taxpayer.”
Although he said some $13 million had been budgeted for the project while it was under negotiation, that spending was “now not necessary”.
Mr Richards insisted that renovating the existing terminal, borrowing to rebuild, or putting the project out to tender for building, operating and maintenance, would ultimately impair the island's credit and increase the cost of its debt.
He said the agreement with the Canadian Government shifted construction risks onto the other partner, and had been chosen as the affordable strategy.
With the present structure deteriorating, Mr Richards said it would burden the Government with millions of spending in the near to long-term future, and cost about $400 million to refurbish in its entirety.
In Thursday's statement, Mr Burt decried the terms of the project as “a sole-source contract valued at over $1 billion to a Canadian company that will get free electricity” as well as “a taxpayer guaranteed return of 16 per cent”.
While Mr Richards conceded that a profit would be made by Aecon and the Projectco entity created for the new terminal, he defended the 16 per cent margin as “market standard”
“The Project Agreement also specifies that any profit greater than that will be split 50-50 with the Government of Bermuda,” he added, saying the Government would effectively stand as a partner with Aecon.
The two parties have sparred over the project's necessity since the initial proposal was signed in November 2014, with the Opposition repeatedly attacking its lack of tender and financing terms.