Finance Minister Curtis Dickinson tabled legislation on Friday that will allow the Government to pay lenders over the failing Caroline Bay development at the former Naval Annex in Southampton.
The The Government Loans Amendment Act increases Bermuda’s debt limit to $2.75 billion.
In the relatively brief parliamentary session held on the third floor of Veritas Place on Court Street,, due to renovations at Sessions House, the Minister criticized the former One Bermuda Alliance government for putting local taxpayers “on the hook” with a loan $165 million guarantee three years ago.
The credit facility of up to $200 million was negotiated with local banks for the $165 million to be paid next week, after work on the site ground to a halt earlier this year, leaving several contractors and sub-contractors unpaid for work already completed.
Speaking at a news conference held ahead of the parliamentary session on Friday, Mr Dickinson said the Ministry of Finance held discussions with rating agencies amid concerns that the island could suffer a downgrade.
“These extraordinary circumstances and the liabilities triggered by these defaults, have resulted in the Government having no choice but to raise the debt ceiling, in order to borrow monies to fund the payments, as set out in the guarantees,” he said.
“What the people of Bermuda did not know was that even before the marina had opened, the Caroline Bay project was experiencing difficulty.
“This had to have been known to the OBA Cabinet and the developers who persisted in providing public updates on the project which were inaccurate.
“Despite the financial viability of this project having been in question for many years, the OBA government guaranteed much of its lending even as this project continued to be beset with difficulties.
“Despite extensive efforts by myself and the Premier to support the developers, they have defaulted on the terms of the loan agreements with their lenders,” he added.
“While this government did not enter into the deal that placed the people of Bermuda ‘on the hook’ for the debt consequent upon the failure of this development, we are responsible for resolving the negative and unfortunate outcomes from the deal negotiated by the former government.”
Opposition Leader Craig Cannonier, and the former Minister of Finance, OBA MP Bob Richards both disputed the Minister’s claim that the former OBA administration had acted irresponsibly.
Mr Cannonier said OBA members had met “several weeks ago” with developers at the project, known as Caroline Bay, and discussed “a plan for new investment” from billionaires.
The developers also met with the PLP and Premier David Burt, he added when he further queried the reasoning behind the $250 million debt threshold, set at $85 million more than the guarantee.
Meanwhile, a Ministry spokeswoman said last night (Friday): “Neither the new borrowing nor the revised debt ceiling amounts have been determined for any purpose other than to fulfil the Government’s obligations and exercise of its rights under the respective guarantees for the Caroline Bay project.
“Ideally, the Government would not draw any additional funds other than the amount needed to purchase the interests of the tranche B and C lenders.”
The Ministry would seek professional advice on whether the Government would face other potential liabilities,
“Without this advice, borrowing or establishing a debt ceiling without room for contingency would be irresponsible,” she added.
Moving forward, Mr Dickinson said the Government will “acquire the valid claims of Bermudian companies”.
“Finally, we must bring this project to conclusion,” he said.
“What we have done today, is fulfil the sizeable obligation the former government placed on the people of Bermuda, and our stated intention is to use our best efforts to protect that investment. I wish him well.”