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Winnipeg Sun | 01Oct2012 | Tom Brodbeck

Taxpayers bail out Human Rights museum once again

And you can bet final cost will exceed latest estimate

Gail Asper says the Friends of the Canadian Museum for Human Rights may have to raise more money from private donors than the remaining $14 million it needs to reach its fundraising goal, because the Friends will have to pay interest on a provincially-backed loan they’re taking out.

Actually, they’ll  pay a lot more than interest on the $35-million loan they’re securing from Scotia Bank and two credit unions.

Last time I checked, when you take out a loan, you have to pay back the principal too. And even under the most generous of interest rates offers, the Friends will have to raise as much as $50 million over the next 20 years to pay back the provincially-backed loan, if they use the full $35 million.

And if they can’t, taxpayers will be on the hook for the balance.

But why let those little financial realities get in the way of the big celebration this past week over how the CMHR now has funding “certainty” to open in 2014?

There’s funding certainty because taxpayers just bailed out the museum -- again.

The only reason museum officials and the Friends have the liquid cash they need to finish the inside of the building and open in two years is because they secured two loans on the backs of taxpayers.

That’s on top of the $160 million taxpayers have already provided for capital costs.

The first loan is an interest-free, $35-million loan from the federal government. The Harper government had vowed earlier this year that it wouldn’t sink another dime into the museum, insisting its $100-million capital contribution and $21.7-million annual operating contribution was as high as it would go.

Well, they gave in and have provided the museum with an interest-free loan. Depending on how quickly the museum pays back that loan, the advance will cost taxpayers millions in interest costs.

The second loan has been secured by the Friends -- the fundraising arm of the museum. They vow to repay the bank loan with interest from donor contributions.

Trouble is, even though taxpayers are guaranteeing the loan, the details of it -- including interest charges and the amortization period -- have yet to be determined.

“The agreements between the Friends and the financial institutions are being finalized and Friends will be able to provide more information as appropriate, once they are concluded,” wrote CMHR communications director Kathi Neil in an email response.

Naturally, the less favourable the terms of the loans -- including what interest rate the banks charge -- the more risk there is to taxpayers.

Asper did speculate on a 20-year payback period this past week.

“If it takes 20 years to raise this money, there will be more interest costs incurred and there’s more operating cost,” said Asper, the Friends national chairwoman.

So let’s assume that because this is a government-backed loan, the financial institutions will lend the money at prime, currently 3%.

At 3% fixed over 20 years, the Friends would have to raise an additional $47 million between now and 2032 to pay back a $35 million loan.

That’s principal and interest. Of course, prime is unlikely to stay at 3% over the next 20 years. So the repayment amount will probably be even higher. At 5% over 20 years, for example, the Friends would have to raise $56.2 million to pay back the loan.

Can anyone see the Friends out in the community 10 or 15 years from now trying to raise tens of millions of dollars to help pay off the principal and interest of a museum that’s been open for more than a decade?

Naturally, the Friends debt could be lower if they don’t use the full $35 million.

But if history has taught us anything about this project, the final bill for the CMHR will almost certainly exceed the latest estimate of $357.5 million.

You can take that to the bank.