Finance Minister Curtis Dickinson has tabled legislation which will raise Bermuda’s debt ceiling by US$250-million and allow the Progressive Labour Party (PLP) government to pay lenders over a stalled hotel and condominium project whose future remains unclear.
The Government Loans Amendment Act increases Bermuda’s debt limit to US$2.75 billion.
On Friday, during a legislative meeting, Dickinson attacked the former One Bermuda Alliance (OBA) government, which ran the country between 2012 and 2017, for putting the island “on the hook” for a guarantee of US$165 million backing the Caroline Bay project at Morgan’s Point three years ago.
Construction ground to a halt at the former United States military base late last year owing to financial problems.
In July, construction firms said they remained unpaid for their work on the project and that they were considering legal action.
Dickinson said a credit facility of up to US$200 million had been negotiated with local banks, with the US$165 million to be paid next week.
He disclosed that the Ministry of Finance had been in discussion with international rating agencies over concerns that the island could suffer a downgrade.
“These extraordinary circumstances and the liabilities triggered by these defaults, have resulted in the government having no choice but to raise the debt ceiling, in order to borrow monies to fund the payments, as set out in the guarantees,” he said while speaking at a press conference later that day.
Meanwhile, former Finance Minister Bob Richards had provided credit facilities on behalf of Morgan’s Point Limited for use in the construction of the hotel and condominium project in March 2016.
He said at the time: “The (OBA) government believes that as this project scales, it will be a key part of a significant stimulus to the Bermuda economy.”
The following April a superyacht marina was launched at the site a few weeks before Bermuda hosted the America’s Cup, a blue-riband sailing event, that was televised around the world and won by a team from New Zealand.
However, the Finance Minister on Friday said that even before the marina had opened, the Caroline Bay project was experiencing difficulty.
“This had to have been known to the OBA cabinet and the developers who persisted in providing public updates on the project which were inaccurate.”
But Richards said he stood by his administration’s US$165 million guarantee on the development.
“If I had to do it all over again, I would do it,” Richards said of the decision.
Richards countered Dickinson’s charge that the OBA committed the public purse to a development already mired in financial difficulty.
His comments were echoed by Opposition Leader Craig Cannonier, who called Dickinson “disingenuous”.
The former Finance Minister who lost his parliamentary seat in the July 2017 general election, in which the PLP trounced the OBA, described a bleak economic scenario for the OBA administration when it took power in December 2012 searching for projects to stimulate the ailing economy.
He insisted that “context is everything”, adding: “The traditional way to get a country out of recession involves the government borrowing money and creating projects.