Tuesday, June 01, 2010

RailGate Tax Credits....It's The Indemnity, Stupid.


After Will McMartin's latest in The Tyee, which demonstrated that BC Rail was not a financial albatross around our necks, a lot of folks started asking just how much we, the people of British Columbia, actually got for BC Rail.

The answer, as best I can figure it, is.....

Nobody, Gordon Campbell, Martyn Brown, and/or former BC Rail 'strategic advisor' Patrick Kinsella included, knows for sure.


Well, according to Vaughn Palmer, writing this time last year, in addition to offering $750 million for the assets, CN Rail originally bid 'aggressively' on the tax credits they would receive for 'buying' BC Rail's so-called 'debts'.

Which meant that CN/Mr. McLean et al. offered up $250 million for the debt part of the deal when nobody else would.


Unfortunately, in the final days before the deal went down for good Premier Gordon Campbell, in an effort to shut-up an increasingly squeaky wheel (ie. the public of British Columbia), suddenly started making noises about how it wasn't a 'sale', but instead was just an innocuous 'lease'.

Which could have, potentially, nullified the tax credit given that if CN wasn't 'buying' the railway's assets it also wasn't buying its 'debts'.

Thus, at the very last minute we made CN Rail an indemnification offer they couldn't refuse.

Which, in Wall Street parlance might, be called a:

"Tax Credit Default Swap"

Because, essentially we agreed to insure the tax credits, year-over-year.....At nine percent interest.

Yes, you read that right.

Nine freaking percent.

Compounded annually.

Thus, by 2009 the thing had ballooned so enourmously that we 'potentially' owed CN, according to our own provincial government record of public accounts...Hold onto your hat......

$550 million dollars!
(large pdf file here; small google cache listing here)

And I am not making this stuff up (just click on the google cache link above and you will get both the 2008 and the 2009 numbers straight-up; alternatively, go to pg 71 of the massive pdf file).
(but, see update, below)

Now, to the best of my knowledge this issue has not yet been resolved in 2010 (please someone, correct me if I'm wrong, but I have heard/read/seen nothing, and I pay pretty good attention).

Thus, we are currently, by my calculations, on the hook for almost $600 million.

I'll leave it the accountants amongst us to figure out when, if this is not resolved, we will actually start paying CN Rail for the making money off our Railbeds.


And who, we can only wonder, might have helped get that indemnity deal rolling on down the tracks at the last minute?......Hmmmmmm......Let's see....Can somebody remind me again who, precisely, was advising BC Rail in the Spring of 2004 when things got a little sticky on the sale/not sale station?.....
Update, Tuesday Morning (June 01/10): Interesting, but ......After visiting here earlier this morning, a PAB-Bot flew off using a slightly different search string that did NOT include the numbers cited above....Notice the slightly different 'result' you get using the Botian's string compared to the one you get if you use my 'many numbered' string.....Anybody else smell a plot to plant a google stinkbomb-assisted scent thrower-offer here?......Regardless, looks like I'll have to get a screenshot of the actual document up instead....Will try and do that at lunchtime... Oh, and just specially for the Bots....It goes without saying that I also have screen-shots of the landing and the take-off, as well as the shortened string....Furthermore, the resulting jpg's have already been sent to multiple locations in to that great cloud-in-the-tubesky so that they can never be accidentally deleted on purpose...



Gary E said...


Not being a bean crusher using any fancy accounting, early last year I figured that we PAID CN $235 Million to take our railway from us.I also mentioned that this was done by a government that was "best qualified to manage our economy" I even tried to generate some comment on it and provoked the government to prove me wrong.

Your math is probably better than mine. But either way this gang of crooks in Victoria not only paid someone to take our railway they effectively dried up monies that were to go to health and education. Until my dying day I will never figure out how the people of BC allowed this to happen and then were lulled into re-electing these thieves TWICE MORE.
Oh, and if the people are wondering why these thieves want the HST I think they are looking for money to replace what they have already given away. Simple math. Fork out 1.6 billion to take our railway. Get 1.6 billion from the feds to further screw the electorate.

Leah said...

Our next big expenditure should be a gallows in Gastown, with lying politicians as it's only clients.

Anonymous said...

i would like to see the required approvals

from: Financial Administration Act

Approval for indemnities on behalf of government corporations
1.1 An indemnity may only be given by or on behalf of a government corporation if

(a) prior written approval has been given by the Minister of Finance,
(b) the director of the Risk Management Branch of the Ministry of Finance, or a person specified by the director for the purposes of this section, has given prior written assurance that the proposal for the indemnity has been reviewed and accepted by the Risk Management Branch, or
(c) the indemnity is given by the government corporation after the corporation has approved the giving of the indemnity following an approval process for which the Minister of Finance has given prior approval.
[en. B.C. Reg. 365/92]

2) A guarantee may only be given by or on behalf of a government corporation
(a) if prior written approval has been given by the Minister of Finance,
(b) where the liability of the government corporation under the guarantee is limited
(i) to $100 000 or less, if prior written approval of the corporation has been obtained,
(ii) to an amount that exceeds $100 000 but does not exceed $1 million, if prior written approval of Treasury Board has been obtained, and
(iii) to an amount that exceeds $1 million, or is unlimited, if prior written approval of the Lieutenant Governor in Council, after consultation with Treasury Board, is obtained, or
(c) if the guarantee is given by the government corporation after the corporation has approved the giving of the guarantee following an approval process for which the Minister of Finance has given prior approval.

RossK said...


Where, if one were to go looking for said approvals, would one look?

(and/or make the FOI Request).

If you would rather, please feel free to send me an Email at....

pacificgazette at yahoo dot ca.



BC Mary said...


I gotta admire the swift, deft way you dealt with that outbreak of Botulism.

Holy smoke, you are good!

RossK said...



Just had time on my hands sitting in the darned dentists' office most of the morning.


North Van's Grumps said...

Interesting phrase to search on Google:

"BC Government contingencies and contractual obligations"

First one up is "Public Accounts 2008/2009"



RossK said...

Thanks NVG.


North Van's Grumps said...

Financial Administration Act
Guarantees and Indemnities Regulation

[includes amendments up to B.C. Reg. 18/2000]

What's this, and indemnity cannot exceed $50 million, how did they manage to get $250 million past the bookkeepers?

(c) the total liability of the government for all guarantees made, in any fiscal year, by virtue of the authority of this subsection will not exceed $50 million, and

(d) all guidelines issued by Treasury Board with respect to guarantees given under the authority of this subsection have been complied with.