Kyle,

You responded to Dr. Hogan with: “Dear Dr. Colman Hogan,

What is this subsidy you speak of? The tunnel, built by a private company, paid for by airport user fees?

I fear you are woefully misinformed on this matter.”

It is not Dr. Hogan who is “woefully misinformed”.

Here are the facts (I am sorry if it’s a bit long-winded, but this will provide the full picture):

The tunnel that was originally projected to cost as little as $20 million (Star June 3, 2009) went up to $38 million in August 2009,  $45 million in November 2010, and is now at $50 million. That's most unlikely to be the final number.

Where's that money to come from?

Here's what the TPA said in its January 29, 2010 release - this is all they've said to date on financing:

The private sector proponent would arrange Bank financing representing approximately 50 per cent of the project's estimated $45 million cost. In addition, the TPA will consider providing up to  20 per cent of the project's cost in the form of a subordinate loan or other instrument.

 Surely any private sector financier will insist on securing any loan on public assets held by the TPA.

And while ultimately passenger user fees might pay back the public money spent, there are two risks at play:

*  Porter's the sole carrier committed to the Island Airport, and its financial condition is far from assured - based upon the latest available data from Porter (first quarter 2010 - revealed in the prospectus for its failed IPO) Porter has lost huge sums of money since it was founded: $11,486,000 in 2007, $3,317,000 in 2008, $4,609,000 in 2009 and $5,972,000 in the first three months of 2010. There is no evidence that points to a turnaround in Porter's fortunes - in fact the recent chronic 20% discounts (mounting to 30% in recent days) and a substantial decline in its business since last August suggests sales continue to be problematic.

*  Then there's the matter of the TPA's unpaid property taxes - about $43 million. Most lenders will be skittish about relying on a borrower facing a liability big enough to bankrupt it, if forced, finally, to pay them by the City. That, given a recent Supreme Court of Canada decision, is increasingly likely.

Both of these risks will surely give any private sector financier considerable pause.

So the TPA will be using its own funds (taxpayers', ultimately), and borrowing more, likely using public assets as collateral for their borrowing, on the assumption that the airport will continue to be viable enough to repay the loans.

That also assumes that peak oil will not hit, and it will not  reduce flying. That's an increasingly weak assumption. Here's a recent piece on peak oil that’s worth a read::

From John Michael Greer's blog, The Archdruid Report, http://thearchdruidreport.blogspot.com/2010/12/in-wake-of-victory.html

All in all, it looks like another hit on the taxpayer is all too likely.

Brian Iler