B.C. Finance Minister Mike de Jong will be heading to Toronto in mid-December to assure bond-rating agencies that his government still has a firm rein on the growth of the province's debt. Around the same time, his cabinet colleagues are expected to decide whether to approve new borrowing for an $8-billion hydroelectric project.
The financing question for the proposed Site C dam will be "a key factor" in the decision by government over whether the project will go ahead, Mr. de Jong told reporters on Wednesday.
The provincial government has skirted the issue of BC Hydro's ballooning debt in the past because bond-rating agencies only looked at direct, taxpayer-supported debt when they set the province's credit rating. But, led by Standard and Poor's, the rating agencies are starting to consider the debt of Crown-owned agencies such as BC Hydro, as well.
"We will have to assess what the impact of a self-supporting agency like BC Hydro and the incurring of debt approaching $8-billion, we're told, what the impact of that will have and we'll have to factor it in," Mr. de Jong said during a news conference. "That's part of the decision-making process around that project – debt and debt management will be very much a part of the consideration."
Energy Minister Bill Bennett says he expects to bring a recommendation to cabinet by the end of the year on whether to approve the project.
BC Hydro hopes to start clearing for the third dam on the Peace River by January, but cannot begin site preparation without cabinet approval.
Mr. Bennett acknowledged the debt question is making Site C a tough sell at the cabinet table, and answering questions and concerns within government is taking longer than he expected.
"We have to have comfort that, whatever we do, whether it is Site C or some of these massive transportation projects that we have committed to are not going to move our debt-to-equity ratio to the point where our credit rating is endangered," he said.
"It's a huge decision, probably the biggest decision that the B.C. Liberal government has ever made, or maybe ever will make, so it's natural that everyone wants to be really, really sure about everything before the decision is made."
NDP critic Carole James said the government should have allowed the independent regulator, the B.C. Utilities Commission, to review the project before making such a significant decision that could endanger the province's triple-A credit rating.
"A major project like Site C should go to an independent body to look at the fiscal issues – and whether the energy is needed," she said.
The provincial debt now stands at $63.5-billion, according to Mr. de Jong's fiscal update on Wednesday. That is better than the $64.8-billion forecast last February, in part due to reductions in capital spending and changes in the way the government manages its cash reserves.
Mr. de Jong said he is confident B.C. will maintain its credit rating based on the government's record on debt management, but it is clear the government is sensitive to concerns raised by the bond-rating agencies.
The Finance Minister noted that the surplus this year has grown, and is now expected to be a relatively comfortable $444-million.
He said that may give the government room to increase spending on programs, but maintained his top priority is still repaying the debt.
"For four years, we borrowed, for four years, we ran deficits to sustain programming in British Columbia to the tune of roughly $5-billion, and we have to pay that money back. So the surpluses we are beginning to see, the first call on them is to address that situation and pay down the debt that was accumulated through some pretty tough years."