News Release Archive
TRANSPORTATION/PUBLIC WORKS--COBEQUID PASS--HIGHWAY TOLLS
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Recent media coverage about the potential for a "$60 million
penalty" being paid in the Cobequid Pass highway deal is a
complete misunderstanding of the project's financing.
An article in the Halifax Chronicle-Herald correctly stated that
$61 million of private investment used to construct the highway
would have to be repaid to private investors. Subsequent coverage
has interpreted the $61 million as being a penalty owed to
private investors should the financial terms of this
public-private partnership be altered.
The "$60 million question" as it has been called is nothing more
than repaying the money that was borrowed. This is not a
"penalty." There's no reason to believe investors who have put up
$61 million in bonds issued through Newcourt Capital will accept
anything less as repayment. The private investors are also
entitled to interest on the $61 million that has been invested.
Another claim being made is that there is a "penalty for tolls"
that amounts to $255 million that will go to the private sector
because of the public private partnership. This is false.
The Department of Transportation and Public Works acknowledges
that the interest rate for private sector financing of Cobequid
Pass was two per cent higher than normal government borrowing
rates for a project such as this. By involving private
investment, the full risk for toll revenue has been placed with
the private sector, not government. That two per cent interest
rate premium amounts to $20 to $25 million more over the next 30
years, not $255 million. This is duly noted in the 1996 report
of The Auditor General.
Another popular misconception being reported is that Atlantic
Highways Corporation will reap plentiful profits from the tolls.
This is simply not true.
Cobequid Pass is being built by Atlantic Highways Corporation, a
private contractor, for its bid price of $112.9 million. All
major highway construction in Nova Scotia is done by private
companies. The Department of Transportation and Public Works can
only reasonably assume that profit is built into the bids any
supplier would submit for provincial work.
Atlantic Highways Management Corporation has been contracted to
run the tolling operation for a flat annual fee that is not
related to the amount of toll revenue collected.
Any excess toll revenue collected from higher than projected
traffic volumes is to be used to offset future toll increases or
be returned to the government. Any shortfall in toll revenue
would have to be managed by the private sector.
Over 30 years toll revenue will pay back investors, cover a
$650,000 annual maintenance contract with the Department of
Transportation and Public Works, pay for the toll operations, and
go towards the cost of long-term maintenance, such as repaving.
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Contact: Chris Welner
Department of Transportation and Public Works
902-424-8687
jlw Aug. 6, 1997 4:55 p.m.
