It may make political sense to hide public expenditures, but it doesn’t make financial sense.
Dennis Fentie’s Yukon Party government has offloaded at least $67 million in capital spending to the Yukon Hospital Corporation, which will now build a new residence and two hospitals, one in Watson Lake and another in Dawson City.
This allows Fentie to create the illusion the territory’s economy is stronger than it is.
He can, for a short time, bolster construction in the territory, fueling the labour market. And he does so without sapping the territory’s capital budget – essentially, he’s keeping his cash reserves for other projects.
If you’re looking at short-term political benefits, that’s clever. If you’re looking at the long-term interests of the territory, it’s irresponsible.
Eventually, bills must be paid. In this case, he’s offloading the bill on future generations, which will have less because of Fentie’s off-book accounting.
The Yukon Hospital Corp. hasn’t got cash reserves. It can only build the hospitals and residences by borrowing money from commercial lenders. So it’s going to have to pay interest on the money.
And that interest will be slightly higher than the rates the government itself can secure.
So, for the next 15 years, the hospital corporation will pay interest on money it borrowed. Those interest payments are going to add up to millions.
It’s a senseless waste – the hospital corporation is funded by the Yukon government.
Essentially, fast-tracking the hospital contracts will prevent the territory from building other multimillion-dollar capital projects in the future.
The Yukon government is, needlessly, going to be paying interest to a bank through the hospital corporation. Worse, had it borrowed the money directly for the projects, it probably would have paid less interest than the hospital corporation.
We say probably because it’s not clear what interest the hospital corporation is paying. It won’t say – the details are not finalized yet. And the hospital corporation is suggesting it might not be willing to reveal the details once they are nailed down, citing possible confidentiality clauses.
If it won’t volunteer the information, the public is out of luck. The hospital corporation is exempt from access-to-information legislation.
Which brings up another political benefit to having the hospital corporation handle the projects.
The Watson Lake and Dawson hospital schemes have been controversial. The need for a hospital in Watson Lake, a town of fewer than 1,000 residents, has been questionable, at best. And its initial construction, which resulted in a mouldy, half-finished shell, has been a political liability for the Fentie government.
Now, the whole thing has been offloaded to a Crown corporation immune from access requests by the public and the media.
It is now well shielded from public view.
And thanks to the government’s use of off-book accounting, the territory will now be paying for these projects, through the hospital corporation, for 15 years.
As noted, that will suck millions from the territory’s coffers, which could have been used for future capital projects.
Rather than mortgage the future, we’d all be better off if territorial government pays as it goes.