The Yukon Hospital Corporation will disclose the interest rate of its $67-million bank loan after all.
Joe MacGillivray, CEO of the hospital corporation, deemed the rate to be secret last month.
But he and Craig Tuton, the hospital corporation’s chair, came around this week as they faced growing criticismÂ and learned that this information would eventually have to be disclosed in the hospital corporation’s annual financial statements.
“Frankly, this is the first time we’ve dealt with this,” said Tuton. “So we wanted to be sure, before we made any comments, we would be saying the right thing.
“We have every intent to disclose what we disclose as we move forward.”
The financing arrangement struck with CIBC will allow the hospital corporation to build the new medical residence underway in Whitehorse and new hospitals in Watson Lake and Dawson City.
The deal will consist of three loans, which will later be rolled into one repayment package.
The first, a $17-million loan to build the hospital residence, was signed off in December. The two remaining loans will be finalized later this month.
The corporation is paying the prime interest rate – 2.25 per cent – on the loan to build the new, four-storey medical residence.
When the building is complete in December, the outstanding debt will be parceled into a mortgage and repaid at another rate, that has yet to be negotiated, said Tuton.
This is the hospital corporation’s first foray into the construction business. The bank loan will help the territory to pay for this work without risking a traditional deficit, which is prohibited by the Taxpayer Protection Act.
But the trade-off to privately financing these construction project is that the Yukon government will pay millions of dollars in interest until 2025. Exactly how much those payments will be remains to be seen.
And the CIBC deal itself remains confidential, said Tuton.
“That’s not good enough,” said Arthur Mitchell, leader of the Liberal Opposition.
He doubts the corporation would have agreed to the disclosures without a public outcry. And he objects to having to wait until the end of the fiscal year to learn the interest rate.
He notes that when he wrote to Tuton asking for information about these loans, he was brushed off with a response that told him to read the corporation’s newsletter.
“If the chairs of these corporations don’t wish to be forthcoming, there isn’t much that we as MLAs can do, and the public is left lacking the openness and transparency that they expect from government,” said Mitchell.
“This premier, and this government, is running up the debt in ways that have never been done before.
“I think it’s misleading. And I also think it’s risky. We’ve never had this kind of debt on these corporations before.”
It’s not uncommon for Crown corporations in the provinces to use bank loans to leverage infrastructure work. But provinces generate a far larger proportion of revenue themselves compared to the Yukon, which is heavily dependent on federal transfers.
“We don’t have the ability to raise new taxes and do things like an HST,” said Mitchell. “That would be outrageous in the Yukon.”
At least some of this borrowing would not be needed, if the territory had not invested $36.5 million in asset-backed commercial paper, said Mitchell. That money’s now tied up in long-term investments.
“This is an unintended consequence of that bad decision-making, because there’d be another $36.5 million available short-term. This first facility could have been built without much impact.”
Mitchell fears the territory is “spending beyond its means” and that this will present challenges in the future, especially if Ottawa decides to curb transfer payments.
But Premier Dennis Fentie will be gone by then. “He’ll be 75 years old when the loans are repaid,” said Mitchell.
Elizabeth Hanson, leader of the NDP, worries the territory didn’t have a proper plan when it decided to build new hospitals in Watson Lake and Dawson City.
Both communities need improved health centres, Hanson said, but little information has been provided to the public to justify the higher operating costs of the new hospitals.
It’s just part of the dearth of information surrounding the Health Department’s plans, she said.
She notes that a department report called Taking the Pulse, released in May of 2009, compiled the results of a survey that asked Yukoners their thoughts on a variety of public health issues. But it remains unclear what, if anything, the territory has done in response to the report, said Hanson.
“Is this government listening to anybody? We don’t know.”
Contact John Thompson at email@example.com.