Don’t be surprised if the territory ends up paying $50 million over the next 15 years to the bankers at CIBC who are financing three expensive public works projects.
This figure is, admittedly, a rough projection.
It’s based on an estimate offered on Monday by Craig Tuton, chair of the Yukon Hospital Corporation, who said he expected the interest rate for a $67-million loan would likely be “somewhere below five per cent.”
That’s supposing that when the corporation locks in the repayment rate of the loan, the prime business rate remains at 2.25 per cent.
Using a rate of 4.5 per cent, interest would rack up to just above $51 million.
Add half a percentage point and you end up just shy of $53 million. Take away half a percentage point and you get $49.5 million.
The money is being borrowed to build the new medical residence underway in Whitehorse and new hospitals in Watson Lake and Dawson City.
This is the hospital corporation’s first foray into the construction business. It was thrust into this role over the past year by the territorial government.
The reasons are fairly simple. The government is running out of money. Borrowing now means the territory can throw up buildings it couldn’t otherwise afford.
Of course, this borrowing comes at a cost. About $50 million, give or take.
And there’s more borrowing to come. The Yukon Energy Corporation hopes to raise $100 million in a 30-year bond offering to pay for the expansion of the Mayo-B hydro electric dam and other projects.
“This is debt on a scale that no previous Yukon premier or minister of finance has considered. And, on top of it, they’ve been extremely secretive and evasive on coming clean on this,” said Liberal Leader Arthur Mitchell.
Health Minister Glenn Hart did not respond to requests for an interview this week. Neither did Premier Dennis Fentie, who is also the finance minister.
To date, the two have had very little to say in public about the hospital corporation’s borrowing scheme.
Mitchell characterizes the answers provided by Hart in the legislature on the matter over the past year as “at least disingenuous, if not downright misleading.”
When Mitchell asked Hart in April for details on the $17-million loan that is financing the new medical residence in Whitehorse, Hart claimed he didn’t have that information “in front of him,” but offered to provide it to Mitchell later. He never did.
An access-to-information request since filed by the Liberals shows that Hart did possess details of the loan in question. A letter dated January 27 from Tuton to Hart describes draft interest rates and amortization periods proposed by the bank.
This information is admittedly dated. The letter proposes that the loan be repaid over either five, 10 or 10.5 years. The period has since lengthened to 15 years.
Mitchell raised more questions about the hospital corporation’s loans in December. Again, Hart chose to not answer them.
“He had some very specific figures he was looking at,” said Mitchell. “That was not reflected in the answers he provided last spring or this fall in the House.
“There’s been a real shell game of hide the pea on this thing, and it’s been anything but open and accountable government.”
All this borrowing may be poorly timed. It comes at a time when Prime Minister Stephen Harper is musing aloud about cutting transfer payments to the provinces and territories, and when one-off agreements with Ottawa to build affordable housing and pay for health services look unlikely to be renewed.
“If this funding isn’t there, we’re going to face some difficult choices,” said Mitchell.
“If there’s any shortfall in the future, it’s going to mean greater taxes for Yukoners. Because no one is going to repossess the hospitals, the dam or the power line.”
On top of the new medical facilities and dam upgrade, the government is planning to build a new high school in Whitehorse, worth $50 million, and a new jail, worth $67 million.
“It just makes no economic sense to start this many major projects in a jurisdiction this size, virtually simultaneously,” said Mitchell. “It tends to drive the cost up on projects, because we have a limited number of skilled contractors. We’re going to go from famine to feast.
“We saw it in the housing market five years ago when it heated up, how difficult it was to find people to build houses. That’s what happens when you create too much demand.”
The new, three-storey medical residence in Whitehorse will offer 34 apartments to visiting nurses and doctors on its two upper floors and office space on the lower floors. It’s to replace an aging complex that’s affectionately referred to by health staff as “the gulag,” and is expected to be complete by December.
A new hospital in Watson Lake will replace an aging facility there. The territory initially planned to build a new extended-care unit for the elderly, attached to the existing facility, but changed plans mid-construction when it became clear that upgrading the old hospital would cost more than building a new one.
Dawson City, like Watson Lake, has been long promised a new medical facility by the Yukon Party. But the territorial government has provided little in the way of hard data to justify the need for these new hospitals, other than past assertions by Tuton, who says the territory must prepare for an impending mining boom in the areas surrounding both communities.
Contact John Thompson at
johnt@yukon-news.com.