Minister of Transportation.
Thank you. I will just speak to a couple of issues that the Member has raised. First of all, he’s requested some information that I believe will be in the concession agreement in terms of who signed it, when it was signed. All the information is on the government website. There’s a lot of information there. There are probably 70 to 80 schedules that he can certainly look at and review.
He’s also mentioned the loan. The terms of the loan, it’s a really return bond and the interest rate is at 3.17 and it’s a loan that includes the outstanding principal on a yearly basis. Why did we sign such a deal on those terms? At the time that we signed it, it was an attractive deal. It was for certainty. We wanted to lock it into the long term. Unfortunately, since then, the interest rates have dropped and it doesn’t look as attractive.
He’s also raised the question on whether it’s possible to get out, whether it’s feasible. Of course, if the interest rates go up, that would be something that could be considered but we’d still have to find a way to pay out the cost of this loan. The terms of the loan requires $8 million to be indexed on an annual basis and maybe that’s why the numbers aren’t adding up for the Member. It’s increasing all the time on an annual basis.
Whether it’s locking us in for the long term, Mr. Chairman, this was the intent, was to have this piece of public infrastructure paid for by traffic volumes that will be travelling through in that part of the Territory in the future. So that was the intent of how this project was going to be financed and it’s still the intent to have the project financed that way.
As to some of the other questions, I will refer to the Premier.
Premier Roland.
Thank you, Mr. Chairman. Mr. Chairman, the other question that was asked if we approached the federal government to look at this as self-liquidating debt and treat this as a permanent bump up to our borrowing limit, again I talk about the relationship with Minister Flaherty and when he states on it, he’s honoured his word both when he said we are unable to do something or when he can do something. He made it clear that this was going to be short-term relief, that we would not see a permanent adjustment to our debt limit, so I know at that point that’s off the table.
As for self-liquidating debt, it is treated partially by that, but the formula, I guess as a way of putting it, the previous government approved the $2.28 million going into it as an additional top-up on top of our ferry service and ice road crossing service and the rest in a toll. So that process remains the same and is in place.
As well, as I stated earlier, in my discussions with Minister Flaherty it was made clear that this would not be a permanent adjustment. Thank you.
Mr. Beaulieu.
Thank you, Mr. Chairman. Mr. Chairman, if 3.17 percent is buying some certainty for the GNWT for the long term, I’m okay with that. I think that’s actually not a bad interest rate even in today’s standards. So I guess my only question is that my fears now are not so much. I mean, I have fears about the cost. That’s something I have already talked about. My fears are the impacts; the impact of removing the short-term dispensation from the federal government for five years. When that gets removed and if this government is not in a position at that point to be able to assume the roughly -- I believe the number of that was given to another colleague -- $155 million, if this government cannot assume that within the $500 million debt wall in addition to the two self-liquidating debts that are in place for the Housing Corporation and the Power Corporation, it would then become an issue. So would it be possible then for the Premier to try to get a bit of a longer term on this debt to a point where the debt would be reduced by a greater amount and then down to $155 million looking for maybe a 10-year term on this dispen... -- I’m sorry, I can’t say the word, whatever -- the special borrowing limit that’s going to be approved by the federal government and see if that would be something that’s possible as opposed to a five-year window looking at maybe 10 years down the road that would give us more opportunities, a longer term to recover. We don’t have to recover so sharply. What is the Premier’s position on maybe going for a longer term? Thank you.
When we initially looked at this to see what package we feel would best suit our needs, we felt the five-year would give us the flexibility in future years that would allow future governments borrowing room, still have room for borrowing. That is why we requested of them the five-year extension or adjustment. Now, we’ve yet to hear back if they will do the full five year and to what limit. Thank you.
Next I have Mr. Abernethy.
Thank you, Mr. Chair. I have a number of questions as outlined in my general comments, but to begin with, thanks to Ms. Bisaro for asking a bunch of the questions I wanted to ask and Mr. Beaulieu as well. I was going to start with the question Mr. Beaulieu just asked, which is why five years. Is there any chance we can look at getting a six or a seven? Even an extra year or two would help us an awful lot. I’m looking at the forecasts of what our debt is going to be, and in 2015-2016 we are still quite in debt and if we had a couple of extra years it might give us a little more comfort moving forward considering that we would still be significantly in debt on the bridge. Are there any chances that those discussions with the feds can include the possible negotiation for an extra year or two taking us to six or seven? Thank you, Mr. Chair.
Mr. Premier.
Thank you, Mr. Chairman. Mr. Chairman, our initial proposal to federal Finance staff has been a five-year window. We are unable to confirm at this time if that is what they presented to their Minister to bring forward. I could have additional conversations with them, but I know at this point trying to get it through again, his comment was short-term relief, project-specific and we are waiting to see what that actually means in the final documentation. Thank you.
Seven years isn’t that long. I would encourage you to try, if you can, to get some additional time in there.
One of the other questions I wanted to ask was with respect to qualifications of the new project management team. As indicated, I don’t have confidence that the project management team put in place by the Deh Cho Bridge Corporation has the knowledge, skills and abilities to deal with a project of this magnitude. This is a huge infrastructure project and I think if we had some individuals in the Deh Cho Bridge Corporation who had the background to deal with such a large infrastructure project, we might not be where we are today. So I’m happy that we have a new project management team, but I would like to hear from the Premier and the Minister about this new project management team, the Associated Engineering and what their qualifications are and why we should have confidence that they are going to be able to manage a project of this magnitude without putting us in further discomfort. Thank you, Mr. Chair.
Minister of Transportation.
Thank you, Mr. Chairman. I’m not sure if that’s something we want to start reading off. Do we have that with us? We have the background information. We have looked at their experience, their references and the different individuals that are involved in the project, including the ones, the engineering and the staff that will be working directly for this project, and are quite comfortable that they have the qualifications. We have a package for almost all the companies that are working for us or are signed on as part of this project. We can provide that to the Members.
Thank you for that. I’m looking more for the primary project managers on this project. Have they got bridge experience? Have they got experience building bridges of this capacity and this size? Can we have some confidence that the team we put in place to replace the team that wasn’t able to build us a bridge can build us a bridge within the timeline provided? You’ve told us over and over again, and I hope you’re right, that 2011 will be the time that you build the bridge by. Does this project management team have the knowledge, skills and ability to make that happen? Thank you, Mr. Chair.
Mr. Chairman, that’s quite specific information. I will ask the deputy of Transportation, Mr. Neudorf, to respond with information that he has.
Deputy Minister Neudorf.
Thank you, Mr. Chair. About a year or so ago when we were being challenged to deliver a large number of capital projects, including a large number of bridge projects, we did go out with an RFP to procure the services of a team to help us with some of the bridge design, bridge management, construction supervision services. We put into that RFP the projects up to the magnitude of the Deh Cho Bridge. Associated Engineering was a firm that we selected as part of that process. So it was a public process. We feel as part of that, that we did get the best firm, the best team that was available to us. Associated Engineering themselves is a very large national firm with offices across Canada with much bridge experience. Individuals that are on this team and the three individuals in particular that are going to be on site to help supervise the construction, manage the project, are all familiar with the North having done other work for us. The one individual just came off of the Kakisa River Bridge where he did a great job in supervising the contractor ensuring that bridge was completed on time, on budget.
Other individuals, one of the other engineers is just coming off the Golden Ears Bridge in British Columbia. I don’t know the magnitude exactly, but a very significant structure, lots of considerable experience in supervising the bridge.
We have every confidence in their abilities to be able to carry us forward and ensure that the bridge is successfully completed. Thank you.
Mr. Abernethy.
Thank you, Mr. Chair. I’d like to thank the Minister and the deputy minister for that. That didn’t seem so hard. I think that’s important information and I think the people of the Northwest Territories want to know that the people we’ve put in charge have the skills. I’m happy that you’re confident and I’m happy you went through the process that you went through to get individuals that you’re confident in.
With respect to the timeline, how much involvement of these people, these experts that you’ve brought on as your project management, how much involvement have they had and how much disclosure have they had from the Deh Cho Bridge Corporation to develop this timeline for November 2011 as an opportunity for me and you and the residents of the Northwest Territories to drive across this darn thing?
The timeline developed and the commitment to November 2011 completion is actually a Ruskin Construction commitment. They have brought onto their team Buckland & Taylor, who will be the erection engineers, so they will be the firm on site that is responsible for supervising all the construction and ensuring that it meets the schedule and all the quality assurance and quality control commitments.
Buckland & Taylor is another large bridge construction/bridge engineering company. They have been involved in this project in the past so they are familiar with the project and the site. They are a very reputable firm, as well, and we have every confidence that they’ll be able to work with Ruskin Construction to be able to meet the time frame required.
I’d like to thank the deputy minister for that. I sure hope he’s right.
The last little bit that I’d like to talk about and get some comfort around is the cost control on this project. When we look at what’s coming in and what needs to go out it’s a pretty fine line of us being able to bring in enough money to be able to cover what our annual cost is without having to find money elsewhere. What assurance do you have that we can control the costs on this project so that they don’t inflate out of control? Some Members have suggested numbers but I’m not sure where those numbers come from so I’m not going to re-quote them, but there have been some pretty high quotes. How are we going to assure and how are the project management team going to ensure that our costs don’t get out of control and that we stick within the $181 million that we’ve already projected?
The process has been a very extensive one. As we have looked at the contract and the work required and been in negotiation with Ruskin to finalize the price, certainly much work in terms of getting very detailed information from suppliers so we are firm in those commitments. Lots of work, lots of inspections of the schedule so that all the parties agree that we do have a reasonable schedule going forward and one that’s achievable.
The other big factor, of course, is that we now do have a final and approved design for the superstructure that has been very recently completed. It was an integral part of those discussions and we’ve got a commitment from a reputable contractor and all the other engineering firms that are involved in the project that they can meet the schedule within the price that’s available.
Three seconds to spare. Is it a fixed-price contract?
The contract that was entered into was a standard contract that the GNWT would enter into for any number of different projects. So it is a firm commitment on behalf of the contractor to deliver the bridge as laid out in the bridge design for the price that he quoted.
Next I have Mr. Bromley.
Thank you, Mr. Chairman. I just want to carry on a little bit on the fiscal environment that I was mentioning earlier. I want to make sure I have some things right here. Our annual payments will be about $8 million per year, including a net of about $2 million new dollars each year. After a five-year period we have federal support for extra debt. We will have paid about $40 million for a reduction in the principal of about $10 million, leaving about $150 million in principal debt on the books. Over this same period we’ll reduce our current debt, which is estimated at $215 million at the end of this fiscal year to about $145 million; a difference of minus $70 million over that five-year period. This while servicing almost a billion dollars in new infrastructure as well as the considerable aging infrastructure we have in place.
The projections show that we will do this by unrealistically, in my mind, low annual expenditures and some favourable revenues. Just for perspective, I don’t think that after all the angst and discord that we were able to anywhere near achieve the reductions we wanted between the 2007-2008 and 2008-2009 fiscal years. I’d be interested in what the increase was in our O and M between those two years. Yet we’re asking the next Legislative Assembly to not only do better than we did there, but we’re asking them to do better every year. That’s a pretty amazing ask.
My points here are that just because we’re allowed to do this by our federal patron does not mean that there will not be severe implications to the services and infrastructure we provide to our public. That’s the first point. The second one is, because these are unrealistic projections, if we bank on them we will be in even more troubled water than we currently find ourselves.
I don’t see much contingency planning on a large-scale basis by the Department of Finance, but perhaps there is for eventualities that during the life of our term certainly seem to come to pass on a fairly regular basis. I’m wondering what contingency planning we do have on a government-wide basis by the Department of Finance that will inform our remaining term and that of the next Assembly. Recognizing that there are these severe implications.
Mr. Roland.
Thank you, Mr. Chairman. Every Government of the Northwest Territories when taking office is faced with severe implications. I’ve been a Member of the Legislative Assembly for four terms and I think right at the start of my term we talked of debt walls. We’ve always avoided them by taking the right fiscal strategy and managed to keep the government in a place that keeps ourselves moving along.
The Member has talked about unrealistic expectations. The expectations that are presented are presented on a fiscal strategy that Mr. Miltenberger presented in his budget that the Members of the Assembly had a chance to review and passed in this Assembly. So to now call them unrealistic, I did not hear that being mentioned to Mr. Miltenberger in that way.
Yes, there are real implications here. If things are to go totally off the rails, if we had another catastrophe, right now all our capital projects are on our books, accounted for, moving ahead as they typically would. This is the one project that was outside of our system. We don’t have another one that’s outside the system in that area. We feel we have a fix in place going forward specifically to this project that’s before us. As to the other fiscal strategies, the Minister will have to come back in his business planning process, as he does annually, to deal with that.
The other one is the fiscal strategy is set with the support of Members. So if things need to change he would have to gain that support. At times, for example as Mr. Miltenberger went out with possible tax initiatives to see if there was new revenue that could be sought. After seeking public input and input from the business community and the downturn of the economy it was felt this was not the appropriate time. We would have to continue to weigh those options as we go forward. So with future governments of the Northwest Territories either you increase your revenues or you decrease your expenditures. We took the road of trying to reduce our expenditures to allow us some more flexibility and we have gained that flexibility. Now, with this Deh Cho Bridge Project coming onto the books, if approved by Members we’ll be able to manage this through and as presented by the Department of Finance with the borrowing capacity extended to us by the federal government project specific. We’ll be able to manage our way through this one as well.
Some used to say, every government would say we’ve always talked about this proverbial debt wall that we never seem to get impacted on. That’s because the fiscal strategies at the time presented helped us stay off that debt wall and we continue to present those scenarios to Members as we go forward. We fully recognize that there are severe potential future impacts if things were to not go this way. If the federal government was not to work with us, if the Members of the Assembly said no to this bill, there would be immediate fiscal impacts. There would be immediate impact to capital projects and there would be immediate impact to O and M. We believe we have found a way to manage through this so that’s not the case.
I’m hoping that Members will see that we manage to always stay off the debt wall by the fiscal strategy. We have put an action plan in place that would see this and we’ve had to adopt one for this we feel will keep us whole in the 16th Legislative Assembly. It will provide the 17th Legislative Assembly as they start out with the flexibility they will need. That aside, the next Assembly will have to adopt their fiscal strategy going forward.
It’s interesting that the Minister mentions the budget this year. It was up over 7 percent. I think it was 7.5 percent, something like that. The projections the Cabinet has come up with here were 1 percent. I’m wondering how that fits with what the Premier has just said. The projections for next year are 2 percent. That’s exactly what I mean by unrealistic. If we’re going to go into this with those kind of ridiculous figures, we’re looking for real serious trouble. This $165 million on top of a 7 percent increase this year would equate to something like a 20 percent increase. This is not business as usual. I’m sure the Premier would regret having said or implied such a thing. I would welcome any more perspectives the Premier might have to offer that would actually be based on reality. Given that we have never achieved this, and the Premier I’m sure through all that we’ve been through remembers the discord and angst of trying to get some reductions in our first year. Or second year. Between the first and second years. It’s not easily done and that’s what we’re saddling. Subsequent to people with....
We might get some relief -- I hope we do -- from the federal patron, as I mentioned. But how long will it be for and given that the payments don’t really do a great deal to that principal it takes a long, long time before it really helps us out here. Like I say, $40 million over the first five years will get us $10 million reduction to the $155 million. As the projections, again, at the same time, requiring that we reduce our existing debt, not bridge debt, by $70 million. How realistic is this? If we’re going to go forward, we’re going to need serious reference figures on which to base our decisions. Thank you.
Mr. Chairman, again, I go to the fact that the Minister of Finance tabled his budget, brought his business plans to community members. The fiscal strategy is not different than when he presented that to Members. It’s not my plan. It’s not the Cabinet’s plan. It’s been through our committee system, it’s been to the floor, it’s been accepted by Members. So, as previously, it seems easy to separate one’s self from some of the tough choices that need to be made when we accept the fiscal strategy, but that’s been presented. That’s not a new scenario because of this process. And, again, I go by the fact that the Minister of Finance tabled his budget, put a fiscal strategy in place, and that’s been put in place.
The other number the Member used was $70 million. I’m not sure which fiscal strategy that he’s working off, what sheet he’s working off. I know the Minister of Finance went to committee with a number of scenarios of that and I’d have to look at or have him respond when he’s able to or have Ms. Melhorn provide some details on the scenarios that we’re working on that we’ve presented the proposal forward on that basis. Thank you.
Mr. Premier, did you want Ms. Melhorn to add? Ms. Melhorn.
Thank you, Mr. Chair. As the Premier noted, there were a number of scenarios that were discussed in committee and I’m not sure right now which one the Member is referring to with respect to the $70 million debt reduction. But as the Premier noted, the fiscal strategy that was adopted as presented with the budget in January did assume that we would be reducing our debt, the debt that we have incurred as a result of the aggressive infrastructure investment plan that we’ve undertaken as a government over 2009-10 and 2010-11, that we would be required to address in any event. Thank you.
Next I have Mr. Ramsay.
Thank you, Mr. Chairman. I just wanted to continue on with some questions that I had earlier. First of all, I had a question about when we were here during the last sitting of the House and it kind of touched a nerve with the Minister of Transportation and that was the fact that ATCON had gotten the contract for $165 million and weren’t bonded to perform that work. I know they have a line of credit. The government had access to a line of credit for ATCON’s work and performance on that job, but I’m just wondering what assurance, and I think I’ve heard the Minister say this, but I want to get some more clarification on whether, in fact, Ruskin, in the completion of the second phase of this project is going to be fully bonded in their performance of that work. Thank you, Mr. Chairman.
Minister of Transportation.
Thank you, Mr. Chair. Mr. Chair, the previous contractor had security in the project and the security has been deemed still good. Going forward with the new contractor we have performance bonds for this company also.
Is the work going to be fully bonded to the maximum extent or are they just going to have a $1 million bond on a $72 million job? I mean, what are we talking about? They could have a $500,000 bond, for all we know. What’s it going to be? Thank you.
Mr. Chairman, this company is bonded as we would bond any other company with our projects. They have a 50 percent performance bond that they provided.
I thank the Minister for that and I’m glad to hear that’s the case. It’s interesting, I guess, when you start talking about the deficiencies, and again I want to be as clear as I can be, the Minister I believe I heard him talk about another one of the deficiencies as being compaction and to me that would address the approaches, both north and south, that that work was previously done and that was one of the deficiencies. I understand we’re paying again an additional $4 million under the new contract to address the deficiencies on both of those approaches. Is this work that we’ve already paid for and are we paying for it again? Thank you.
Mr. Chairman, the $4 million is a carry-over from last year’s projects that were held back as a result of recognized deficiencies, and that’s what we’re going to be using to bring it forward into this new contract to address the deficiencies.
Mr. Chairman, I’m just wondering if the Minister, and again my whole reason for asking these questions, Mr. Chairman, is to make sure that we are proceeding on this project knowing everything’s that’s out there, knowing where the deficiencies are and, you know, up until today it was the first time I heard the Minister talk about compaction, first time I heard the Minister talk about scour rock, and I’m glad to see that now we’re getting somewhere. I think that’s the level of detail that people… I’d like to know what we’re getting ourselves into here. In that, I mean can the Minister provide the Members of this House with a detailed list of the deficiencies on that Deh Cho Bridge Project and what it’s going to cost us to get these deficiencies fixed? Thank you.
Mr. Chairman, I don’t believe with any projects that we discuss in this House that I’ve ever brought forward a list of deficiencies, whether it’s the Inuvik school or any other project. I don’t think the request for that type of detailed information as to bolt holes and bolt sizes and scour rock and things of that nature ever had been debated at this level. If the Member wants, we are compiling, and we do have, a list of deficiencies. I would prefer to provide it to them with some comments as to where they are in terms of resolution and plans to deal with the issues that were brought forward. We are right now waiting for that to be developed and it’s being developed and we certainly will share it with the Member. He’s raised concern and we can bring that, and we can make it standard practice as we talk about projects, we start talking about deficiencies. It’s a level of detail that is not normal to have on the floor of the House of a government. Thank you.
And this project has never been normal from the word go and I’m raising these issues out of the… You know, it potentially could be a public safety issue and it could potentially cost this government more money to fix deficiencies if they’re not corrected now. It will cost us more money down the road to correct these things.
On the scour rock, I’m just wondering, is the plan to go down under the water and see what’s left of that scour rock, and if we are going to get under the water, are we going to inspect the pier footings and the workmanship of those piers under the water? Thank you.
We have to be clear that we are not looking at the issues in terms of deficiencies as a public safety issue. I know the Member has been trying to make it an issue that would jeopardize the whole project in terms of safety. That’s not the case and I think we should be clear that’s not the case. We’ve done analysis on a number of the things that are being raised. We have a list of deficiencies that we are going to be dealing with. That’s standard. We certainly can reassure the Member that we have looked at the scour rock this past year and we know what has been put down there. We can share that information with him if that’s the kind of detail he wants. We can sit down with him in the next little while, once we complete the analysis. Because I’m sure he’s going to want more information as to where we are in terms of resolving some of these issues. We can provide that private briefing for him, so he can look at the design, look at all the issues that he keeps raising in terms of specific detail. If that information was being provided to him by somebody else, then it’s obvious that it’s by somebody who has been on the project and I think there is an obligation for that person to come forward. If he’s very concerned that there are safety issues, I think it’s from a professional standpoint and an ethical standpoint, that person should come forward and should not hide behind a politician and keep feeding information that should be brought directly to our attention. If that’s something of concern, then provide it to us.
Let’s not throw pieces out there and say this is a safety issue. Scour rock right now is not a safety issue. Bolt holes, bolt sizes, length of bolts, some things that need to be cleaned, I recognize as deficiencies. Is that public safety? No. It’s obvious that we are getting down to some very specific details of this project and we just about have to start bringing in engineers if we are going to start getting into more detail.
I, again, from what I know, have concerns over some of these deficiencies that were brought to the department’s attention on a number of occasions. That’s what I know. I can’t say it any other way, they were brought to the department’s attention and the department chose not to act on it or the Deh Cho Bridge Corporation chose not to act on these things. That’s what I have been told. Again, I will take the Minister up if he wants to offer me a private briefing sometime and I look forward to that.
One other thing while I have a few seconds here on the clock, I’ve always said this project would cost much more than the $181 million. With the $3 million contingency on the remaining work and the deficiencies that we talked about thus far, I don’t understand how we’re going to get by with a $3.2 million contingency on $90 million. That’s like 3 percent. It doesn’t give you much allowance either way and I’m just wondering is that just not a recipe for some more cost overruns as well that we don’t have a bigger contingency than $3.2 million.
There have been issues brought to our attention and that’s why they are recognized and recorded as deficiencies. We have inspectors that look at the work that was done. If the quality is not there, if the wrong material is used, if it’s not what the specifications call for, then it’s registered as deficiencies. We do have a little more than $4.5 million to deal with the deficiencies and that’s in the form of a holdback. There is some carry-over from work that was supposed to be done last year that hasn’t been completed. That’s around another $4 million and there is a $3 million contingency. Right now, there are no issues that have been identified that would require drawdown on this $3 million. Thank you.
I know the Minister has offered information he has which might be helpful to the Members with regard to the questions here, so if you have that information, it might be able to help assist in some of these questions. If you have it and it’s available, we could circulate it to the Members. Next I have Mr. Yakeleya.
Thank you, Mr. Chair. I wanted to ask the Minister about other legal things that could be associated with the Deh Cho Bridge Project, some of the unresolved matters. For example, ATCON is in receivership and there may be claims outstanding that may be unresolved issues with the bridge. Is the GNWT likely to become involved in any legal actions related to the project? What matters might be unresolved that might cost the GNWT money? Thank you.
Minister of Transportation.
