The cost to terminate the controversial new airport deal, would have surpassed $100 million, with “unintended consequences” that include job losses, and further damage to Bermuda’s already stagnant economy.
Premier David Burt, who released the findings of the LeighFisher report, said the island’s economy would suffer even more damage, if the new Government pulled out of the public-private partnership deal.
The report on Bermuda’s airport redevelopment project with the Canadian Commercial Corporation and developers Aecon, also cited international reputational risk, credit rating downgrades and a negative impact on our tourism industry.
“Terminating the project agreement would be extremely costly and would have far-reaching negative consequences for Bermuda,” said Mr Burt.
Speaking at a news conference on Friday, ultimately, he said the cancelling deal would carry “a miniumum” $196 million price tag.
At that rate, he said it would be “fiscally irresponsible” to axe the plan.
The report also said termination of a public-private partnership was “always challenging and this case is no exception”.
“That said, the findings of this review suggest tangible gains for Bermudians are possible to achieve within the framework of the current project agreement.
“Notwithstanding the inability to change the contract, there are opportunities for optimising the project agreement but it will require co-operation from Skyport and Aecon.”
The consultant’s report also said the “downside consequence will have significant and long-lasting impacts on Bermuda while upside benefits, if any, will take longer to materialise”.
Further talks with the Bermuda Aiprort Authority (BAA) and Skyport, identified roughly $15 million in “enhancements for Bermuda and Bermudians” that could be negotiated.
Jobs for Bermudians, workforce development and training options, with the potential to negotiate a reduction in energy costs in three of six areas were also identified.
Other areas listed, included passenger traffic growth and revenue sharing, social investment and accommodation for the Bermuda Airport Authority (BAA).
“The revenue sharing threshold presents a modest hurdle that could be surpassed with the addition of a single new airline route to Bermuda,” the report said.
“It remains for the project agreement counterparties, the BAA and Skyport, to co-develop and entrench these elements going forward as declared benefits in their framework and to operationalise the fulfillment of the optimisation portfolio across the concession term to maximise their value to Bermuda and Bermudians.
“To formalise the optimisation, a commitment letter from Skyport to the BAA is suggested as the method to anchor the commitments achieved under the auspices of this review and provide a frame of reference for moving forward to deliver better outcomes for Bermuda.”
Terms and conditions of the contract were “broadly consistent” with similar public-private deals. And the interest rate for long-term debt and the return on equity for Aecon were “within market range”.
But, the report said: “The project was not competitively procured.
“Typically, these types of P3 projects are competitively procured by a public-sector procuring agency to retain control of the procurement process, to retain competitive tension, increasing Government’s negotiating leverage and ultimately garner best value for money.
“Unlike other similar P3 projects, this project agreement doesn’t allow changes. It doesn’t have variation provisions, which is unusual for a 30-year concession agreement.
“The only way to make substantive changes to its terms and conditions is to terminate the agreement.”
A new minimum target of a 90 percent Bermudian workforce at Skyport replaced the original unspecified target.
An increase in the Bermudian workforce negotiated from 60 to 65 percent, was also reached on the construction side of the deal.
The former government negotiated a 5 percent increase in Bermudian construction jobs to 60 percent in March last year.
And a $6 million budget for workforce and development training for Bermudians was also agreed to, which was not included in the original deal.
Skyport also agreed to fund an initial $1.3 million air service development and tourism promotion scheme, designed to “benefit Government’s participation in the project agreement’s revenue sharing agreement”.
The company also earmarked $4 million over the 30-year agreement period, to fund social investment programmes, including education, youth work and the environment.
The original social investment agreement did not carry firm commitments in this area.
The BAA will also get offices at a peppercorn rent, which translates into between $3.8 to $4 million during the life of the contract.
Premier Burt, stated up front, that “true democracy demands transparency and transparency grows trust”.
But he said: “The previous government was not transparent, and at every turn, an agenda, other than one for the people of this country, was being pursued.”
The multi-million dollar plan, piloted by former Minister of Finance and Deputy Premier Bob Richards, “stands as a stain on the relationship between a government and the people it is meant to serve”, he added.
“From start to finish this agreement has been caught up in justifiable concern expressed in homes, clubs and churches across the Island.
“The People’s Campaign gave voice to the core issues presented by this bad deal and promoted a public awareness of its significance to a generation of our people.
“Central to our election promises to the people of Bermuda was to look carefully and deliberately at the Agreement and to determine how we could reverse what had been done in their name but on their behalf.”
He also encouraged “everyone to read it and digest what has been found”.
The review was carried out to determine whether the Government could “terminate the contract”, and if not, whether or not anything could be changed “so Bermuda has more control of its own Airport”.
And the new administration wanted to know whether they “could make the contract more beneficial for Bermudians”.
“In short, we wanted ‘a better deal’,” said the Premier.
The full report is available online at www.gov.bm, “in the interest of complete transparency”.