Did territorial governments squander Ottawa’s money?
Here’s a story with a moral.
Territorial politicians and bureaucrats wrangled for years over how to spend a multi-million-dollar gift from Ottawa.
Now they’ve lost it and will end up spending much more.
Back in 1988, within the agreement that devolved health care from the federal government to the government of the Northwest Territories, Ottawa promised to pay for replacement hospitals in Iqaluit and Inuvik.
Since then, politicians batted around the need — and even the budget — for a hospital in Iqaluit, but they’ve never managed to move ahead on building it.
Under the government of the Northwest Territories, plans were sidetracked in 1997 when a $700,000 consultants’ report recommended three new facilities — one in each of Nunavut’s three regions — could be built instead of a single new hospital in Iqaluit.
It also suggested the money set aside for the Iqaluit hospital — about $47 million at that time — could be put into “P3,” or “public-private partnership,” arrangements with developers.
Under the proposed P3 arrangements, the territorial government would have signed long-term build-lease agreements with private developers to construct new buildings and other projects.
Because of federal cut-backs and rising year-to-year costs, territorial government capital budgets have shrunk dramatically. The Nunavut government just doesn’t have enough money within its annual budgets to pay for expensive new projects.
Arviat’s new health centre was, orginally, to have been built as a P3.
But the rules for this kind of financing changed, and the Arviat health centre never qualified as a P3 project.
These public-private partnerships were highly touted by John Todd, then the finance minister for the Northwest Territories, as a way of spreading around the economic benefits of new building projects.
But they were delayed by disagreements over how much money to spend.
In May of 1998, the Baffin Regional Health Board called for a $48 million investment in a replacement Iqaluit hospital, including $25 million for a new building, $8.8 million in renovations to the old building, and $1.4 million for site development.
But the territorial government rejected this plan in favour of a more modest $31 million proposal, but this lower amount is also a 1998 figure.
This figure could increase because of the decrepit state of the current Baffin Regional Hospital.
The new facilities in Cambridge Bay and Rankin Inlet were estimated at $9 million each in 1998, but their construction will likely cost more now too.
The Nunavut government won’t be reaching into its capital budget to pay for them, however, because the birthright development corporations will build them instead.
But no one is saying how much the Nunavut government will end up spending on lease payments by the time the buildings are paid for.