Opinion: MP David Burt On Airport Development
[Opinion column written by Shadow Finance Minister David Burt]
“You have a piece of land? Let me build you a brand new airport terminal for free.”
These are the words that were said by no person ever. So the words from the OBA extolling the great deal for a new L. F. Wade International Airport without Bermuda borrowing any money may sound nice, but they don’t match with reality.
There are simple principles of economics; one of them is that there is no such thing as a free lunch. Someone will have to pay for a new airport, and in the end, that someone will be the Bermuda taxpayer.
Whether the Bermudian people borrow the money to build an airport, or the Canadian Commercial Corporation [CCC] borrows the money to build an airport and we pay them back, the money for new airport will have to be borrowed and must be repaid with interest.
Whether or not the debt appears on Bermuda’s balance sheet is largely irrelevant, we will have to repay the lender with our future revenues, so the airport deal will add additional stress to Bermuda’s finances.
If the OBA’s airport deal is going to put additional strain on our finances, shouldn’t the OBA ensure that Bermuda gets the best deal possible? The OBA keeps telling us that this is the best deal for Bermuda, but how do they know it’s the best deal if they haven’t asked anyone else if they can beat it?
Wouldn’t it be the right thing to have an open, transparent, and competitive bidding process so that the amount of additional stress put on our finances is a little as possible? That may sound like common sense good governance to the average man, but to the OBA good governance “takes too long and is too expensive”.
To try to justify their wholesale rejection of the principles of good governance, which require a competitive bidding process for large infrastructure projects, the OBA have come up with a convenient boogeyman – consultants! Again, I must remind the OBA, there is no such thing as a free lunch.
The ‘value for money’ work will need to be done by someone, and that means that the Bermudian taxpayer will be on the hook – whether explicitly or buried within CCC’s massive contract. Money will be spent on consultants, but the taxpayer won’t know if they could have paid less and they will never know if a better deal was out there because the OBA refuses to ask anyone to see if they can beat CCC’s offer.
The OBA’s plan would see the L. F. Wade International Airport privatised for a period of 30 years. One of our most important assets would be completely under foreign control along with the $25.2 million in revenue that our airport earns per year. That revenue stream, taken over 30 years and assuming a 2% inflation, rate exceeds $1 billion.
But the OBA have admitted that the current revenue stream isn’t enough to build a new airport, so also under consideration is income from the creation of a solar farm on airport land and revenues from Bermuda controlling our own airspace. We are talking about a revenue stream that will easily exceed $1 billion over the next 30 years.
With such a large amount of money, it is laughable that we are even talking about whether or not we should have a competitive bidding process.
On Friday [Nov 28], we learned that the OBA’s $1 billion privatisation of our airport for 30 years without a tender has hit another snag. The UK government [Bermuda is still a colony] stated in its letter of entrustment that “The project for the redevelopment of the airport must meet value for money tests in accordance with best practice set out in Her Majesty’s Treasury’s Green Book”.
The value for money tests in HMT’s Green Book [PDF] specify 4 different procedures that the OBA must follow to ensure value for money: open, restricted, competitive dialogue, or negotiated procedure. The most restricted of these 4 options, the negotiated procedure, requires the OBA to receive proposals from a minimum of three entities!
However, such is the OBA’s determination to hand over more than $1 billion in revenue without a bid that they are now fighting the UK government to get their way.
So let’s recap: $1 billion of revenue to CCC; 30 year privatisation of our gateway to the world; construction firm already selected without a competitive bidding process; and the OBA is fighting the UK to get their sole sourced way.
Something doesn’t smell right about this airport deal, and it beggars belief that the OBA think that $1 billion of future revenue shouldn’t be subject to a competitive bidding process. The Bermudian people must demand the OBA hold fast to the most basic principles of good governance and engage in a competitive bidding process so that the Bermudian taxpayer gets the best deal for their tax dollar.
- David Burt
“There are simple principles of economics; one of them is that there is no such thing as a free lunch.” – David Burt
This is laughable! Where were you when we gave out free Bermuda College tuition? Free daycare? Free licensing for seniors? Free bus rides for children? This all being handed out for free by borrowing money from foreign lenders!!!
The PLP have no credibility when it comes to managing the financial health of this island, so you have no leg to stand on to criticize this government on financial matters.
Using Burt’s own argument one has to wonder where the $350,000,000 generated by the airport during the PLP’s tenure disapperaed to because it’s plain to see very little was spent on the public facing side of the buildings and virtually nothing on the inside if you listen to comments made by airport staff.
Yet again reality and logic have an anti-PLP bias.
Still throwing out the same revenue projections you were in the House, David? Might as well have said a GAZILLION dollars if you are looking for the fear monger effect!
Agreed. Look at how many times he used the $1 billion in that opinion piece. The fact that he keeps aggregating a cash flow stream 30 years into the future and quoting this undiscounted amount as he cost is:
1) an insult to my intelligence but he’s probably not talking to me
2) obviously designed to stir up an emotional reaction from the populace – straight from the playbook
That’d be like me saying i’m worth about 2million dollars because 30years old and make 65k per year and if I work for the next 30 years that’s what i’ll make. Oh actually make that 2.5million if you assume 2% inflationary salary increase.
Mr. Burt – you are the shadow FINANCE minister!!!! In a community filled with financial services professional. Please start speaking as if you have taken a basic finance 101 course. Otherwise, I and many others like me, who are only OBA supporters because there’s no other viable alternatives, will continue to see through your thinly veiled attempts to get a certain reaction from a certain demographic by using emotive sound bites with no basis in reality.
You should not be anywhere near the position of Finance Minister.
How much future revenue did the PLP govt GIVE away for 250 years on the waterfront lease?
Was cruise ship passenger tax income part of the lease?
But revenue is different to profit……
Please say it again!!!
Spin that record PLP. Wake up people. Revenue doesn’t matter. What’s the profit collected annually??!!
Sit back, and let the job be done…There’s absolutely nothing the P.L.P. can do to “alter the destination”. You around there at Alaska Hall want to stop people from working? Well if not, prove it by stepping aside.
Good grief! Is this the same PLP politician that, under his management, spent millions of dollars on the dock, TCD building and the court/police complex with no bids? We know there was no control over spending in that regime, so one must as from whence came this change of heart? Does anyone really think a PLP government would act any different?
MP Burt was not the Finance Minister during that period – - he can’t have a change of heart IF he wasn’t even elected at that time. Get your facts straight before you speak, please.
He was Junior Finance Minister for the latter part of it. As Bob Richards said in the House, He (Bob) has been in the Finance business for longer than David Burt has been alive. Not something that went over too well with that side but true. Experience really counts right now. I heard David Burt on the radio last week desperately trying to make listeners believe that because he was now 35, he was now not considered young. Funny!
So OBA supporters and OBA members believe that “thirtysomethings” don’t have the ability to come up with sound fiscal policy and make financial decisions, and only those of Bob Richards’ age should be doing it?
Experience means something in our current financial state. The stark comparison of the two individuals is plain for all to see. With age comes wisdom.
He was the Junior Minister and his record of public speech during the PLP’s administration is deplorable and makes him look like a real hypocrite now.
To say nothing of the intellectual dishonestly…
“Simple principle of economics”….it would need to be.
I agree with Mr Burt – but for a different reason: I think the money would be best spent on capital projects elsewhere such as the redevelopment of the Hamilton waterfront.
However, I also have to laugh when I hear a PLP person talk about tendering – the recent report into the Port Royal Golf Course tells us that the PLP was not adept at such processes.
I also wonder about the new hospital wing. The successful bid went to a UK-owned firm; in order to pay the debt BHB either has to cut costs (and services) or raise extra revenue – which will filter down to the taxpayer (you and me) through increased health premiums. (By the way, the contract to actually run the new wing was won by an overseas firm.)
I am not sure of the need for a new airport and it does seem as if the OBA has still got some explaining to do, but neither do I support ignoring history.
If we had 800 million ACCOUNTED for funds we couldve probably built it ourselves!
Maybe you should get the same contractor that done the Port Royal golf course do it.
I’m being a bit lazy not looking it up myself but i thought the hospital was being built the same way, was there an open bidding process for that?
Similar…the hospital will cost over a Billion with payments of $30,000,000 per year for 30 years adjusted for inflation….recall that the first payment of $40,000,000 this year came from fund drives all over begging IB and selling bricks…this will go on every year because the PLP broke the bank… Mr Burt is well rehearsed with his canned spiel the only thing missing is the lack of wiffs and dems and dee’s classic empty suit
No it was setup the same and will take 30 years to pay them back too.
I’ll bet it doesn’t smell as bad as Berkley, TCD, the Cruise Terminal, Port Royal, the Acute Care Wing at the hospital or Grand Atlantic.
Funny how all the comments are going back to PLP projects, but firstly, David Burt was not an MP during the PLP years, and was only a Senator during the last 2.
Secondly, can anyone discount anything said in his opinion column as incorrect? I doubt it.
There is that PLP selective memory kicking in again.
Do you want us to believe that Burt joined up with the PLP the day he was elected?
For many the PLP will forever be tarnished by projects that went vastly over cost. it does not matter that he was not around then …. it’s going to take a long time before anyone can trust the PLP with a major capital project.
Only a senator, eh?… Nice way to try and distance Burt from the PLP’s dismal record of governance. I guess you wanted to gloss over the part where he was National Party Chairman from 2006-2009 and the part where he was Chief of Staff to then Premier and Minister of Finance Cox.
So inside advisor to Finance Minister, then Junior Minister of Finance… sounds like Burt was intricately involved in the financial train wreck the PLP inflicted on the next 3 generations of Bermudians.
He was the Party Chairman and a Deputy Minister.
1 – David Burt should start by discounting the 30 year revenue stream that will be used to pay for the project.
2 – Then he should compare that number to the economic impact that the project will have on Bermuda.
3 – Then we maybe we would have an opposition that is doing its job of challenging the government on the issues that matter rather than using sound bites to score political points.
So he was only a Senator, a Deputy Minister, and the PLP Party Chairman. Other than that, he had nothing to do with the PLP. Is that the point you’re making?
Since you know all about him, can you give us a list of busnesses he has run? Successfully?
Doesn`t smell right David Burt? What doesn`t smell right is coming from your commentary of blah,blah,blah nothing to say worth listening to! Not to mention how you were so silent when the PLP RAN THE Country into the ground. Didn`t hear you then ! Still don`t !!
Get um How it Works….
Regardless of whether you like PLP or OBA or whether you like Burt or not, the points he makes are valid and sensible.
The strange thing is that the same points raised by Burt would have been made by OBA had the PLP administration done this.
Bottom line is that – PLP and OBA know what the right thing is, but OBA has chosen not to do the right thing in the largest capital project in recent times.
There are some valid points in the piece. Clearly there as no official tendering but we don’t know if other providers had been vetted informally. We don’t know why CCC was chosen but Bob Richards stating that CCC is known and they ‘tick all the boxes’ is an absoluely abysmal justification, especially given the size of the project. So hopefully a better justification is forthcoming…
I wish the PLP were a stronger opposition. I wish they could challenge the OBA on intellect rather than with emotive sound bites. I wish they didn’t undermine their own credibility the bay Burt does everytime he references $1B pricetag for the project, as if he has never taken even the most basic of finance classes and doesn’t understand time value of money.
They have undermined their own credibility through a series of cost overruns on major capital projects that have never been fully explained – even by the auditor general….
Not true Agatha. The consensus is the reason Bermuda is in this position is because of the recession. Remember; that is the answer to ALL their Financial short comings. They really take us for fools. After all, they have a voting base to make them believe we are, but that’s another story.
Funny how with the lack of acceptance for their bad government, and the millions in unaccounted money (which is also denied, see above recession comment)we regularly hear about over runs on projects and now the Port Royal fiasco?
Every little bit here and there adds up to the big number; but move on, nothing to see here. And people complain about comparing the two Parties? I too want a new and better government who can not use the last governments short coming as excuses; but intentionally trying to ignore and deny past mistakes, only results in the chance of it being repeated. Unfortunately some hate the constant reminder. What would go a long way is for the PLP to get off their perch and accept their faults. Move forward and work with the current Government to save Bermuda. As long as they constantly bring up BS, people will constantly remind them of all their faults.
Simple.
And please people; stop with the “WE DON”T NEED A NEW AIRPORT”. Most saying this have never had to work in the environment.
“IT IS NEEDED”.
With our financial position, is NOW the time to address it? Hard to prove it is not with the way the project is being carried out. It will not take money that can be used else-where, and we need jobs. So the Government has taken advantage of the opportunity to address both issues.
DON’T HATE…..
How many other project can we kick off? Any-one know who will finance a bridge? Oh, wait we don’t charge Tolls so there is no revenue return.
Maybe a few hotels? Keep looking OBA, Bermuda needs investors and jobs.
If BOTH Parties work at making Bermuda an attractive environment to invest, opportunities will continue coming.
Why is everyone responding by bashing PLP projects and past actions???
CAN ANYONE actually counter what his said? You idiots are justifying bad decisions for the future with bad actions from the past. Pay attention!! Bermuda is being sold out TODAY and everyone’s still stuck on what happened two years ago!
Because the PLP jump up and down over every single issue and have no credibility. Once they publically accept what they did to our country and that they sold us to foreign lenders in 2010, then we can have a conversation and people will stop bringing up the past. To stand there and be high and mighty now about airport bids is a slap in the face to voters. Get it?
One of the reasons PPP/PFI schemes suck from the get go, is that the cost of money is higher in the private sector. You’re already working from a weakened position. Look at the hospital or any other PPP in Britain you care to pick – schools, hospitals etc.
If you take the view that austerity won’t work to dig ourselves out of the PLP induced mess, and that we need to spend, but because of the PLP, we have no money, you have a problem.
At least with CCC, you, we, get to borrow against The Canadian government’s rating and inject some much needed liquidity into the local economy.
You are correct in saying the cost of borrowing is higher in the private sector. That is a major drawback of PPP schemes as in the long run they cost more and that cost is invariably passed down to the consumer, whether it is through increased parking charges or increased health costs …
@ Aggie -Inherently, it will cost more. Take a simple example of a 100% mortgage financing. Over time it costs more to repay the mortgage than if you had a down payment, without a doubt. However when you show up to the bank for a mortgage with no money and want to borrow for that once-in-a-lifetime opportunity, what options do you have? Unless somebody says, “I’ll build it for you, you pay me x amount based on your earnings/income streams for the next x years.” You would hope that nothing derails your earning potential for the next x years, or that your funds improve significantly so that you can shop around for a different type/or better financing arrangements.
BDA is being sold out because of what happened two years ago, mate! No other reason. As another commenter pointed out above, IF we had that 800m in the bank, we could pay for our own damn airport! But guess who spent all that money?
Some people will agree with anthing the OBA says or does right or wrong.
Correct, as with many other articles, this is the same camp of OBA supporters / PLP haters making the same comments about what the PLP did in the past , to divert us, from the actual the content. It really does nothing for our progress. The PLP is not government anymore. Your vote, or absence of one, pronounced this like a loud trumpet. If PLP get it, then they will change to be a viable choice, if not they will receive the same response again in a few years. But I digress . . .
His query about tendering is something that should be addressed. Was this done? My expectation would be that all projects are put out for bids and we should be aware of the status of each project. Encyclopedia commented correctly. This process is not being followed or aleast doesn’t appear to be) . It may be that the process is so time consuming that it needs to be updated in order for it to be practical to implement.
Also, Burt mentions that the ‘value for money’ work needs to be done. He suggests that the revenue to be obtained from the airport and solar farm or other revenue streams would exceed $1 billion. This call to reveal the value of future revenue, must have been done on some level and should be provided.
Really, I want to know the same answers.
I’m an OBA supporter but also agree that we deserve an explanation as to a) why this didn’t go to tender and b) how are we sure that this is the best deal for Bermuda in light of that fact?
I heard the question of airport revenue being addressed on the news the other day (questions in either the house or the senate). The net income less expenses is somewhere in the region of $3M according to that report, if I recall correctly.
I agree that there are some valid points in the above article with regards to the how/why of CCC. The OBA would do well to clarify things. They should know by now that perception is reality !
However, MP Burt undermines his valid arguments when he persists with the deliberate misuse of the $1Billion figure.
The PLP would be better served to speak honestly about numbers. Every time they do not, they appear to either be ignorant of the true figures or deliberately massaging facts. Neither alternative is good.
It is good for the opposition to question things especially of this magnitude but keep to the facts!
Well said. Hopefully bloggers on both sides of the political divide in this country listen to your comments. It would be great if the blogs contained intelligent debate, based on fact and minus the rhetoric, about the issues. It would hopefully encourage our politicians to do the same.
I’m an OBA supporter and I agree.
Most of this harping on the past and waiting for an apology from the PLP is a waste of time. What is needed most is healthy debate on the real issues not this constant politicking and blindly picking sides.
It’d be great if the OBA and its supporters would simply draw a line in the sand and say we are where we are and we’re not going to get all the answers to the questions about how we got here (notwithstanding that any criminal wrongdoing should be pursued). Unfortunately, I don’t think we’re mature enough as a society to do that.
“We are talking about a revenue stream that will easily exceed $1 billion over the next 30 years”.
This is utter hogwash! The airport operations does not presently break even so I have no idea where he gets this $1 billion from?
um,revenues…wouldnt there be associated expenses? do they not factor in the discussions of income streams and the time value of money?
so again the ppl here think anything done by the oba/UBP is ok. No worries
lol
Now take apart his points, don’t give us this well they did it crap.
you ppl are beyond the worst
Typical PLP. Short memories.
Mr Burt should have a few words with the BTUC in reference to the FREE LUNCHES.
This is about Privatization as we cannot keep “BORROWING” $300Million per year to keep the Government going.
Otherwise we will end up like “JAMAICA” where there dollar is $110 to $1.
Or do you think we can continue to “BORROW” other peoples money.
The RUSSIAN visitor could pick up all our DEBT,own the country and then “KICK EVERYONE OUT” and only have who he wants here.
just think about it.
Having read his opinion piece most of his criticisms are word for word applicable to the Hospital PPP.
Hmmm….
I wish Burt that you and the plp would get on the first plane that takes off from the new airport and never return.
Maybe he has some points but, there will be no one who will do this project for free up front money and I think that’s what the OBA are getting at. Do you really think that BCM McAlpine for instance will take on this project and not get paid for it as the job goes on? I doubt it. Do you really think that there is any company here that will wait until the project is finished to start collecting money for it? I doubt it. So what sense does tendering make? It’s just a waste of time. People need jobs now. The OBA has promised to get them jobs within the five years they are in Government, but the PLP, being so desperate to re-gain the Government, want to slow down everything. Don’t fall for it OBA.
It worries me greatly that the only way of creating jobs is through construction. Hardly sustainable. Hardly visionary. Counter-intuitive as well, if you think about it. Cover the island in concrete and expect visitors to use a spanking new airport …
Does anyone think that the PLP complaining will prevent this project from happening? All dealings will be accessible through PATI. As of April 2015 there will be no hiding from anyones eyes.
Disappointed in our Shadow Min. of Finance.
Why does he continually go on about potential revenue while completely omitting the expenses tied to the revenue. We are not all financially illiterate and understand the differences in revenues, expenses and net income.
And his statement, “Whether or not the debt appears on Bermuda’s balance sheet is largely irrelevant,” belies belief and wraps the economic incompetence of the PLP in a nutshell.
As someone noted above we are a financial industry island so you can’t fool the majority (hopefully) with your continued reference to revenues and not net income (i.e. revenues after expenses). So since you guys already have confirmed the ‘potential’ revenues lost over 30 years, why don’t you also include the expenses that will also be forfeited?
The reason being, IMO, why the PLP omits such crucial details is because they know full well that the net income derived from the airport operations are negligible at best and in no way will sustain the redevelopment that is noted as being necessary by the OBA and the PLP.
This is no different than Burt taking Gibraltar’s gaming income and dividing it by 4 and stating Bermuda can procure that level for the local economy via online gaming. Absolutely amateurish at best and totally incompetent at worst.
This is all politics in the end as the PLP, as they did with the hospital, knows full well that we are in no position to fund such a project.
Also, is the hospital not a key Bermudian asset? So why was there no outage at gifting this Bermudian asset for a long period of time to foreigners?
Unfortunately for Bermuda we have a compromised political situation whereby the Opposition has no credibility in regards to any financial matters for Bermuda.
To regain any shred of credibility, David Burt must first publicly acknowledge the mismanagement of Bermuda’s finances by the former PLP Government and then recognize the compromised fiscal position that the OBA inherited. He also needs to apologize to the people of Bermuda, on behalf of the PLP, for this.
Only then, should the Bermuda public have any faith in his, or the PLP’s, understanding of economics or should we be even willing to listen to any of his ideas and what the PLP believes is good for Bermuda’s economic future.
As I said above, this is an unfortunate reality and puts David in a tough position. But he must do this sooner than later. Bermuda needs a credible Opposition.
This is what you call an “unqualified opinion”.
Is he an economist? NO
Does he have a significant background in financial services? NO
Does he have a background in large project capital management? NO
Does he have any experience in contract law? NO
So as someone said above, he does not have a leg to stand on.
America’s CUP! We need a new airport and we need it now! We need Casino’s and we need the now! No time top dilly dally paying lip service to the unqualified opinions of the PLP and their plans to distract and drag the island through the economic mud.
as always we have oba supporters bashing the plp and plp supoorters bashing the oba. as a 20 year old bermudian i’m tired of hearing the same songs sung everytime the oba n plp go at it. its clear both the OBA and the PLP are both….. no part should be trusted because no party as done anything to earn your trust. if we stopped pointing fingers at the opposite party every time something went wrong maybe we can get ahead in life
So true… I think it is a function of the older generations in Bermuda. Conflict is the only way they know. I’m hopeful that when your generation takes over the political divide in this country will be less harmful to Bermuda’s progress.
As a society we’re becoming the masters of our own demise…
OBA needs to stop going on and on about the past the “now that we’ve looked under the hood” comment has past its sell by date.
PLP stop trying to win back power by pulling on the heartstrings of the demographic with the scars that evidence their previous oppression.
We know our history now let’s build our future together.
Boy, that could have been cut & pasted from any one of a number of letters to the editor from the 1960s.
As the years go by so much stays the same.
“There’s no such thing as a free lunch”…
Unless you’re in Comstituency 33, apparently.
CDC guarantees on budget and on time, something no PLP awarded project ever achieved. Ever!