Minister & PLP On Airport Redevelopment Project

August 15, 2016

The airport deal “awards a sole source contract valued at over $1 billion to a Canadian company that will get free electricity courtesy of the people of Bermuda and earn a taxpayer guaranteed return of 16%,” Shadow Minister David Burt said, while Minister of Finance Bob Richards responded saying “the Bermudian public should not be deceived by innuendo, false allegations and political rhetoric over the airport development project.”

MP David Burt’s Statement

Speaking at a press conference recently, Mr Burt said, “Today we will be discussing the airport redevelopment project and the misleading statements, fabrications and half-truths that have been told over the past 20 months by the Minister of Finance.

“I will take the opportunity to clarify some of these items for the people of Bermuda and also speak about how the Progressive Labor Party will handle the issue of the airport redevelopment project going forward.

“There has never been a question that Bermuda needs to do something about our existing airport. Whether we renovate the existing structure or build a new one, the paramount question should be – what can we, as a country, afford?

“Last week Monday the People’s Campaign released a report entitled, “A Bad Deal for Bermuda”. This report contained new revelations which to date have not been discussed or examined in detail by the local media. I encourage all members of the public to read this report to become more informed about the background of this deal.

“Some of the most damning revelations that have come from the documents show that from the very beginning the Minister of Finance has been misleading the people of Bermuda. They make it clear without a shadow of a doubt that the Minister of Finance withheld critical information from Parliament and the Accountant General, who is responsible for ensuring that financial instructions are followed.

“The documents show that the Minister’s own partners, the Canadian Commercial Corporation, did not agree that the statements Minister Richards has made to the people of Bermuda were accurate. In fact, they requested he change his statements, and the Minister largely ignored the requests.

“The same items that CCC stated are not accurate, the Minster continues to repeat to this day, especially the statement that the new airport will pay for itself. From the very beginning it has been known that Bermuda will have to put up a significant amount of funding for this deal, but the Minister and the OBA continue to ignore that reality.

“The Minister of Finance seems to be obsessed with plans that were produced in 2006 which were part of the Airport Master Plan which the Minister is using to this very day.

“Focusing on these old drawings is a convenient way for the Minister to ignore the real value for money questions about his billion dollar sole source deal with Aecon, which were reiterated by the Chamber of Commerce.

“Referring to drawings produced 10 years ago does nothing to answer the critical questions raised by the current deal. The lack of tendering, the lack of transparency, and the fact that Aecon has not had to compete with anybody means we cannot be assured that this deal is the best deal Bermuda can get.

“Let me read a quote from the Chamber of Commerce’s release in which they said: ‘In addition to providing transparency, a proper request for proposal process creates competitive pressures on a bidder’s proposed price. A competitive RFP would drive value for money and ensure that Bermuda gets the best deal.’

“We couldn’t agree more, as this is something that we have been saying since 2014, when this project was first announced.

“Additionally, the Minister of Finance continues to compare the airport project to the new Acute Care Wing, seemingly forgetting the fact that the Acute Care Wing was put out to tender. There is one other key difference, the Bermuda Government runs our hospital not a private company as will be the case with Aecon and our existing and new airport terminal if this deal goes through.

“The latest PR move by the Minister to try to make this deal sound better than it is, speaks to a profit sharing arrangement. The OBA has even gone so far to create a website that states that profit sharing from this deal will free up money for seniors and schools. It seems the OBA has no issue lying to the people of Bermuda.

“The Minister of Finance is on record stating that any profit sharing from the airport is at least 15 years away and will likely not happen until 20 – 25 years into the project. What will happen to our schools and seniors in the 25 years between now and then?

“This shameful PR exercise is the reason why there is a vast trust deficit between the OBA Government and the people of Bermuda. What we should ask ourselves is, if the OBA would use our children as pawns for their lies, why should we trust them with our children’s future.

“I would like to speak to how the PLP will handle the airport project going forward:

  • “1. Minister Richards wants to create the impression this is a done deal, it is not and there are many steps that need to be completed before this project can get approval to proceed.
  • “2. The letter of entrustment required the government to produce a “written and evidenced based assessment” which amongst other items will contain a “public sector comparator” which is required by the United Kingdom in order to progress this project. This comparator will show side by side the cost to the people of Bermuda of this project if the Bermuda Government were to fund it itself or if we were to privatise our airport to CCC.
  • “3. After this document is produced, we call on the international business community, who privately have expressed their dismay at the direction the OBA have taken with this project, to examine the numbers to make sure that the Minister hasn’t “fuzzied them up”. This is important as the financial hole that this airport privatization will create in our budget will likely have to be filled by increased taxes on the private sector.

“The PLP awaits this document and until the time it is released we will continue to educate the people of Bermuda on this deal which awards a sole source contract valued at over 1 billion dollars to a Canadian company that will get free electricity courtesy of the people of Bermuda and earn a taxpayer guaranteed return of 16%.”

Minister Bob Richards’ Statement

In response, Minister of Finance, Bob Richards said, “As I have said previously, we have been much more transparent on the airport redevelopment project than any other development in Bermuda’s history.

“This is evident in both the Deloitte Report and the Letter of Entrustment which are public documents and speak to accountability, transparency and openness. The Deloitte Report is a helpful guide for ensuring value for money. The Government is committed to communicating regularly about the progress of the project and providing opportunities to answer questions about our progress.”

“The Bermudian public should not be deceived by innuendo, false allegations and political rhetoric over the airport development project.”

“In their statement, the Opposition claimed that the Bermuda Government will have to put up a significant amount of funding for this transaction. That is not true.

“This Government has indeed spent money on financial, technical and legal advisors. World class advice on a project such as this is necessary.  The former government spent $3.5 million on airport consultants and kept it secret.

“There was $13 million budgeted. However that money, put there while details were being negotiated, is now not necessary.

“Only money raised by the Airport Improvement Fee – some $6mn which Parliament has already passed – will be spent, and by financial close it will have already been accumulated.

Minister Richards said: “I was happy to see that the Chamber of Commerce has agreed that the Bermuda Government decision to contract with a reputable third party to build a new terminal and maintain it into the future for Bermuda is reasonable.

“As the Chamber acknowledged, this arrangement transfers the risk of cost overruns and other unforeseen events from the taxpayer to a third party. It is similar to the model that was used when the new acute care wing of the hospital was constructed.”

“The Chamber President stated that with a proven track record, Aecon was a “well-considered” choice and that through CCC – and the financial backing of the Canadian Government – they have built large infrastructure projects, including airports.

“They questioned the sole source route taken and encouraged the Government to show value for money through benchmarking, something the Government has already publicly agreed to do.

“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,” said Minister Richards.

“We would have never been able to control cost over-runs 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.”

Minister Richards continued: “It should be very apparent to everyone that Bermuda cannot afford any initial expenditure for the airport redevelopment.”

“The options available to Bermuda are as follows:

  • 1. Do nothing [renovate and maintain - the expensive band aid approach]
  • 2. Borrow the money and put it out to tender to design & build
  • 3. Put it out to tender to design, build, finance, operate and maintain.
  • 4. A bilateral government to government [G2G] approach.

“The first three options would require the Government of Bermuda to either guarantee the finance costs and/or increase the national debt–both of which would impair Bermuda’s credit worthiness and increase the cost of debt.

“The bilateral Government to Government strategy not only avoids the impairment of government’s creditworthiness but it shifts construction risks to the other partner. The Government has selected this, the best option, a win win and one that we can afford.

“The current dilapidated terminal is deteriorating. There will be millions of dollars of expenditure in the near, intermediate and long term future that will be Required to be paid by the Government of Bermuda. Remember it would cost over $400 million to completely refurbish that terminal.

“If Bermuda does not build a new terminal, skyrocketing maintenance and various remedial capital costs will be inevitable and must be accounted for in our calculations.

“There really is no “do nothing option”, we will have to do something! We can’t just let the terminal fall down,” said Minister Richards.

“Renovating the existing airport building will increase the deficit with very little to show for it, all of which will increase the national debt.”

“The Airport Redevelopment Project, under the chosen G2G model, will be financially self-sustaining as the new airport development will pay for itself.

“The taxes will go to paying for Our, New, State-Of-The-Art Airport terminal. The proposed new building will belong to the Government and people of Bermuda. Taxes and fees form the bulk of the cash flow that will repay the debt raised to build the structure and to operate and maintain the facility for the next 30 years.

“Aecon/Projectco will make a profit from operating the airport, but their profit margin is precisely prescribed in the Project Agreement [IRR=15 -16%] – market standard for transaction with this risk profile.

“The Project Agreement also specifies that any profit greater than that will be split 50/50 with the Government of Bermuda. So the Government of Bermuda and Aecon are effectively partners in this project which will create hundreds of jobs for Bermudians.

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Comments (30)

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  1. somuchless says:

    Plp. Good night.

    • Let Trump build it, U.B.P are his overseas supporters.

      • Jus' Wonderin' says:

        The PLP/UBP aligns more with Trump than they do Hillary/Obama, sorry to say that lmfao!

        • mayonnaise says:

          what do you mean, Trump is anti immigration and talks about real Americans getting jobs and how although the US economy is better than it was when Obama got in it is still Obamas fault that he didnt fix the mess he found it in….
          HOW IS THIS ANYTHING LIKE THE PLP????
          Please tell me because you are not making any sense, just another UBPoba supporter, or is it ubpOBA im confused, its such an intelligent combination of acronyms

  2. LiarLiar says:

    “What will happen to our schools and seniors in the 25 years between now and then?”

    Airport operations have generally generated an annual loss or a miniscule profit which has had to be utilized to enact repairs on the crumbling airport.

    So not understanding how airport revenues affects other infrastructures like schools or how it will negatively impact seniors.

    “There is one other key difference, the Bermuda Government runs our hospital not a private company as will be the case with Aecon and our existing and new airport terminal if this deal goes through.”

    So is Mr. Burt claiming that the private entity, Paget Health Services, isn’t being reimbursed for the hospital wing development? From what I understand PHS stands to rake in almost $900mn as per the life of the contract.

    It should also be noted that the financing sections of the hospital contract is redacted (i.e. blacked out), so no one actually knows the particular details of this agreement. Sorry Mr. Burt, despite your hospital tendering claims that is not a transparent arrangement in the slightest.

    On top of that the expenses associated with the construction of the hospital wing are the primary drivers behind the ever increasing ‘hospital levy’ that is deducted from every taxpayers pay cheque.

    Lastly, I can’t be the only one who finds it ironic that Mr. Burt is clamoring for tendering when he, in his role as PAC Chairman, vehemently defended the non-tendered, sole sourced Port Royal contract to a fellow PLP MP who also happened to sit on the PR Board at the time the contract was awarded. He and his colleagues even stated that they know they got value for money for the project.

    Oh, politicians and their politricks.

  3. well…there is the build….how many jobs may we hae sirs?

    • almost says:

      As many as you want, assuming you’ve even been bothered to get yourself a trade

      • Its me again says:

        Why does he need to have a trade?

        • mayonnaise says:

          ya, my boi kwatwanytwan should be able to become an air traffic controller chaboy is wicked with his watsapp and snapchat, obviously gots to be similar

  4. Navin Johnson says:

    What we cannot afford Mr Burt is to listen to you or any other PLP person…….come back in 2025 with your new plan…..

    • sage says:

      What was Richards response about the electricity claim, or the claim that the 16% profit is guaranteed? Does the airport currently make 16% profit? Just asking.

      • Onion says:

        The 16% is an IRR to the management company, not the return of the whole project.

        The electricity will be paid for one way or another either with a markup through the management company or directly at lower cost as is the case now.

        As usual Burt knows this but is trying to manufacture dissent.

        • sage says:

          Please expand on the Internal Rate of Return, Bob says it is the “profit margin”, I ask again does the airport currently earn profits of 16%? If not we will be on the hook, correct? Also 16% of what exactly, the $250 mil investment or, of all taxes, fees etc? Is the govt. going to be paying for electricity, yes or no?

  5. Jus' Askin' says:

    The Road to Election 2017 ;-)

  6. Toleratate says:

    wow…. now that’s a long read… lost me at “Last week Monday the People’s Campaign released a report entitled, “A Bad Deal for Bermuda”….is he really trying to pass off the PC as a creditable no-political entity….
    Basically “last week I had the PC release a report”…….smh……

  7. Ringmaster says:

    Leave the airport as it is, leave the Causeway as it is, leave the swing bridge as it is, all as a memorial to the PLP’s 14 years of ignoring the need to maintain infrastructure. Spend the money on Beyonce, a Court Building owned by a Trust but paid by the taxpayer, hiring thousands of Civil Servants unnecessarily. Then open up previously closed jobs to non Bermudians and in 2016 complain. Shout down hotel developments then complain there are no jobs. Reap what thou sow.

  8. High road says:

    Please go away plp and let progress happen

  9. Psant says:

    Your getting tiresome BURT and PLP co horts. You FAILED in your 14 years and are looking even more silly and childish now.

  10. hISTORY says:

    to psant

    Your getting tiresome DUNKY and UBP/OBA co horts. You FAILED in your 400 years (versus 14 years) and are looking even more silly and childish now.

    • mayonnaise says:

      soooo… you classify creating one of the worlds strongest economies for GDP per capita in a place with no natural resources besides its beauty a failure…. stop using ur subjugation in the past as an excuse to be a blind bigot towards the future please, thanks bb

  11. shutthemdown says:

    All the silly talk wont change the fact that the oba/UBP is selling away Bermuda.

    oba/UBP is a year and a bit from the exit.

    fool me once………..

    • mayonnaise says:

      can’t wait till they win again…. oh it will be sooo sweet to watch you all cry and wine for another x amount of years…

  12. Pondering says:

    There’s truth on both sides. I think it’s time we all put on our big boy pants and sat down with each other to work a way forward together. Seems Bermuda gets forgotten in the fight to who’s going to win.

  13. Build a Better Bermuda says:

    It completely destroys the credibility of his claim that the the OBA is the more dishonest party, when Mr. Burt is still trying to claim that government is going to lose access to a $1b. Valuation of anything also MUST include expenditures before the truthful valuation can be shown. So in effect, Mr. Burt’s half truth claim as presented constitutes a complete lie on his part because of the way he represents it.

    No matter how and who builds this, they have to be paid back, so like the hospital, in a PPP (Public/Private Partnership) the Private party is owed so much at whatever the final negotiated rates are. As is also the typical case of a PPP, the Public and Private entities will form a combined company (the Partnership part of the PPP formula) to oversee the operations over the duration of the contract, with both parties then sharing in the profits, at a negotiated scaling, of the venture above and beyond what is contractually owed for the initial construction cost. Any other way would still see a party, most likely creditor, being paid back as well; and if done on our own, we would also be responsible for the cost overruns guaranteed when any government tries to undertake a capital venture of this magnitude and complexity. As a PPP, the Private take on the risks and liabilities associated with the construction, thus they prefer to stick around to have a say in operations to protect their risk investment.

    As for the PC ‘special report’, they have neither the expertise nor the impartiality to be able to actually develop such a report, leaving it as nothing more than a waste of paper produced for political ends, only to be consumed by those who have no desire to actually read whole truths on matters as they would challenge their carefully guarded preconceptions of other parties to which they are more willing to hold as the sanctimonious truths, even in the face of the obvious deceptions by their ‘unquestionably moral’ leaders… And to the grammar nazis, I know it’s a run on sentence, that was deliberate.

  14. mixitup says:

    Just the flood of negative comments towards Burt here add to my suspicion…Bermudians, I am glad to see you slowly waking up to what is happening in your Bermuda…..I’ll leave that right there….

  15. UNREAL says:

    Simple resolution: If the airport bothers you guys that much, just don’t use it..

  16. Flo says:

    No matter what politicians are in power, they all have their own agenda. At least in this case we may get a new airport that all of us can use. In PLP’s case they wasted hundreds of millions and we have nothing to show for it.

  17. Bermudalove says:

    What really saddens me is the fact that when reasonable Bermudians who this will affect long after the thirty years are over are asking for all avenues to be at least explored…with good reason..are being told that we don’t know what we are talking about..that we are ALL playing politics …are the ppl making these comments Bermudians …I cant see how anybody who plans on carrying on the lineage of there family here would let either party sell us out blindly in the name of political support….which is what most of you on here who have commented have done…No MATTER WHAT PARTY YOU SUPPORT THIS DEAL IS FLAWED…N I VOTED OBA

  18. DE Budgetwa says:

    Lets look at it this way! The PLP were going to do it for 500 odd million. And none of there projects came in close to budget! So we would be way out if pocket further then we are now. So at least we are not going further into debt. And maf wernt even my stronger pint. Anglish is doe.

  19. Grizz says:

    Political parties set aside, does it not bother anyone that this Company doesn’t even have to pay an electricity bill?! So who ends up footing the bill because last time I checked electricity bills were already sky high; tax payers problem again. Also, if we get no revenue for 30 years what exactly are we getting; just a new airport to look pretty? So you do realise after 30 years we will probably have to do major renovations again; so when does Bermuda benefit financially from this airport….looks like never. I don’t need letters behind my name to figure this out; financially it does absolutely nothing for us!