News Release Archive
TRANSPORTATION/PUBLIC WORKS--HIGHWAY 104 ALIGNMENT FACT SHEET
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Some misconceptions have appeared in various new media reports
concerning the Highway 104 western alignment project.
Specifically, the misconceptions concern the relation of tolls to
profit and financing.
The Department of Transportation and Public Works provides the
following fact sheet to help clarify the issues. This document is
also available at https://novascotia.ca/tran/links/104
FACTS ON FINANCING
(Misconception: "Atlantic Highways Corp. will use $57 million of
its own money to build the highway in return for the right to
charge tolls over the next 30 to 35 years.")
- Atlantic Highways Corp. (AHC) is not contributing any money to
the project. It was the successful (i.e. lowest) bidder in the
competition to become the private-sector contractor in this
public-private partnership. It placed a bid of $112.9 million
for construction costs.
- Taxpayers are contributing $55 million to this cost -- $27.5
million provincial money and $27.5 million federal money
through the Strategic Highways Initiative Program.
- The remaining $58 million in construction costs and $2.5
million in contract-closing costs (such as the cost of
borrowing, bond registration fees, hiring the independent
engineer, etc.) is financed through bonds issued to private
investors by Newcourt Credit Group, a non-bank lender in
Toronto. There is also a $5.5-million government pension fund
investment which will be used to seed reserve funds.
- The investors will be repaid from toll revenue collected for 30
years, according to a detailed schedule drawn up during the
negotiations.
FACTS ON TOLLS AND PROFITS
(Misconception: "The (speed zone) changes are part of a contract
with the company building and operating the new high-speed, four-lane, 45-km highway, to ensure it has enough traffic to turn a
profit.")
- The tolls do not go to AHC. The tolls cover a number of costs:
the return on investment to the bondholders who placed the $66
million to cover the cost of the project beyond the government
contribution, toll operations, the annual maintenance costs of
$650,000 that go to the Department of Transportation and Public
Works, and long-term maintenance such as repaving.
- No one but AHC knows what its profit margin is. Its bid of
$112.9 million contains the profit margin. As a private
company, it is entitled to keep that information confidential.
Negotiations with AHC did not concern profits because that was
part of its bid, already accepted as the lowest.
- The government bears no financial liability for low toll
revenue. The private investors have taken the full risk for
traffic volume and for revenue flow from the tolls on the road.
OTHER FACTS
The Highway 104 western alignment is:
- 45 kms between Masstown and Thomson Station
- twinned, four-lane, with a wide (22.6-metre) median
- nine kilometres shorter than old route
- 16 minutes faster than driving the current route
- a public-private partnership
- opening December 1997
- replacing a 54-km section of two-lane highway
Tolls:
Per car $3
Per truck $2 per axle
Per recreational vehicle $4
Per kilometre 6.6 cents
Funding:
Construction cost $112.9 million
Government contribution $55 million, split 50/50
provincial-federal
Private contribution
The remaining money is provided by sale of bonds to private
investors underwritten by Newcourt Credit Group of Toronto. Toll
revenues over 30 years will provide the investors a return, pay
for toll operations, cover the $650,000 annual maintenance
provided by the Department of Transportation and Public Works,
and pay for long-term maintenance such as repaving.
The government is not responsible for any financial shortfalls
due to low traffic volumes. The money borrowed from the private
sector by the Highway 104 Western Alignment Corp. was borrowed on
the security of tolls and not the financial guarantees of the
province.
Public-Private Partnership:
Without the involvement of the private sector, this urgently
needed highway could not have been built in a reasonable time
frame, and fatalities on the existing road would have continued.
In a partnership arrangement, the funding is in place at startup,
meaning the highway can be built faster with such efficiencies as
purchasing with economies of scale.
The Players:
- Atlantic Highways Corp., a subsidiary of Canadian Highways
International Corp. (CHIC) of Mississauga, Ont., is the major
contractor.
- AHC has involved three major Nova Scotia sub-contractors: Nova
Construction, Tidewater Construction, and The Foundation Co. of
Canada.
- CHIC has four equity partners: Monenco-Agra Inc., Dufferin
Construction, Armbro Holdings Inc., The Foundation Co. of
Canada.
- Atlantic Highways Management Corp. (AHMC) is a subsidiary of
AHC and will be subcontracted by the Highway 104 Western
Alignment Corp. to manage the toll operations.
- Newcourt Credit Group is a non-bank lending institution in
Toronto and is underwriting the toll revenue bonds for the
private financing.
- The Highway 104 Western Alignment Corp. is a private company
owned by the provincial government. It was created by the
Highway 104 Western Alignment Act (incorporated in July 1995)
to manage the financing, design, construction, operation and
maintenance of the project. In this way, the financial
obligations of the highway are separate from the province's
debt. This is termed non-recourse funding because the private
investors have no recourse to government assets or money should
toll revenue fail to provide them a return on their investment.
The financial transactions of the corporation are handled
through the construction trustee, Montreal Trust, and Newcourt
Credit Group has the right to review these transactions.
- The Department of Transportation and Public Works owns the
highway. The operation of the highway is turned over to the
province when the bondholders are repaid in 30 years. (The
contracts stipulate that the highway must be in excellent
condition.) Until that time the Highway 104 Western Alignment
Corp. manages the highway and subcontracts the toll operations
to AHMC. The Department of Transportation and Public Works
provides annual maintenance for the highway in return for
$650,000 per year, paid from toll revenues.
-30-
Contact: Susan MacLeod
Highway 104 Western Alignment Corp.
902-424-2248
Chris Welner
Transportation and Public Works
902-424-8687
trp Apr. 22, 1997 - 4:25 p.m.
