By NEIL HARTNELL
Tribune Business Editor
THE Bridge Authority's $9.4 million "deficiency" will "not be put on the taxpayer", a Cabinet Minister pledged yesterday, saying any financing needs would have to be met by increased toll fees.
Desmond Bannister, the minister of works, told Tribune Business the Government is awaiting recommendations from the Authority's Board to determine whether the Paradise Island bridge overseer needs extra funding.
"I could tell you that nothing is going to be put back on the taxpayer," Mr Bannister said, when asked by this newspaper how the Government planned to tackle the deficiency in the Authority's bond repayment fund.
"I can't tell you that there's going to be any raising of tolls. But if there's any funds required, and that's a big 'if', it's going to have to be dealt with by user fees."
This means that the burden of plugging the "deficiency" in the Bridge Authority's 'sinking fund' will fall largely on Paradise Island's hotel and business workers, plus wealthy residents through increased toll fees to enter the island. Taxi drivers and tour operators would also feel the impact.
Mr Bannister was responding after Tribune Business revealed that the Bridge Authority requires $3.5 million in 'emergency' annual funding over a five-year period to cover a $9.4 million "deficiency" in its bond repayment fund.
The Authority's 2016 financial statements, tabled recently in the House of Assembly, reveal that the 'sinking fund' created to finance repayment of its $29 million bond debt contained just 45 per cent of what management felt it should have accumulated. "The sinking fund was established voluntarily by the Authority to reserve funds periodically to assist in retiring the bonds as they mature," the financial statements said. "On December 31, 2016, the Authority had $29 million in bonds payable and $7.65 million in the sinking fund.
"However, according to management's calculations, the estimated amount that should have accumulated in the sinking fund at the balance sheet date was $17.026 million. As a result, management recognises that there is a deficiency of $9.376 million ($17.026 million versus $7.65 million)."
There is nothing to suggest that the Bridge Authority is in danger of defaulting on its first $7 million long-term bond repayment, which is due in March next year, but the financial statements laid out a plan to immediately correct the deficiency.
This involved injecting $3.495 million in 'emergency' funding into the 'sinking fund', in addition to the Authority's regular $3.009 million annual contribution, every year for a five-year period through to 2021.
Mr Bannister yesterday said the Minnis administration did not know if additional capital injections, as set out in the Bridge Authority's 2016 financials, would be necessary until it received the Board's advice.
"I know the Board is looking at all these financial issues," he said. They've not gotten back to me on their recommendations. The Board is going to have to make some decisions with respect to that [deficiency], and they'll consult us and give their best advice.
"We'll review it and see what's best. We don't know if any of that [emergency funding] is going to be necessary. I believe we have some time, and we're going to look at the options and see which is the best to take. Until such time as the Board makes their recommendations I cannot tell, but there will be no raising of taxes.
"Should it, and I'm not sure it will, any funding that may be required at some stage, if ever, will come from user fees. But I don't know if any of it will be required."
Describing himself as a "non-interventionist minister", Mr Bannister said Bridge Authority Board was "very competent" and would provide "the best advice" in due course.
The staggered nature of the bond repayment schedule, with investor principal set to be returned in four payments spread over a 15-year period between 2019 and 2034, gives the Government and Bridge Authority Board time to craft their financial strategy.
The projections contained in the 2016 financials called for a total $32.5 million contribution over the five years to 2021, with the net injection amounting to $25.5 million as a result of 2019's $7 million principal payout.
The financials define the 'emergency funding' as "the amount calculated to be funded annually for the next five years to prepare for the bond maturity when due".
The Authority's financial projections placed the present value of combined principal and interest payments on its bonds at $70.759 million. It derived the $17.026 million that should have accumulated in the 'sinking fund' by subtracting 'paid interest' of $25.198 million from a "theoretical" sinking fund balance of $42.223 million.
Given that the Authority's total income for the 2016 calendar year was $2.75 million, and total revenue some $7.733 million, it appears unlikely that it can fund the 'emergency' financing alone without a substantial toll increase or government support.