Dude Where's my $110.3 Million...

Hey ! Where's our $110.3 m to build the new hospital in Nova Scotia? !!!

In the April Nova Scotia Budget the government said... well, something like the opening of the convention centre was so awesome it would give us $110.3m to put toward a new hospital and a BIG budget surplus of $127.4.

*PSAB = Public Sector Accounting Board is a public service organization. Invoking their name here and implying they're the boss and endorse this budget is incorrect

BUT... wait, there's more. In this month's fiscal update the $110.3m is gone... Where did it go? Heck, where did it come from in the first place? Who's got it? When will we get it? And most important... what is it?

I started to write it out. But I was even boring myself. So, I've made a video to try to explain...

In the Nova Scotia Fiscal Update* last week they said the delay of the convention centre opening will "push the Contribution to Fiscal Capacity"... and the budget is now $110.3 m less.

* A Fiscal Update means they changed the budget rather than show variance from the budget. This is about the same as trying to stick to your diet and lose weight by buying bigger pants. It's one of the things they do.

Anyway... What happened to that "money", er... Revenue... er... Contribution to Fiscal Capacity?

Economics is the story we tell ourselves about where our wealth comes from and where it goes.

I took a little time today to work out the whereabouts of the $110.3m Nova Scotians lost in the most recent provincial fiscal update due to delays in the Convention Centre opening.

The numbers move around with various changes since the deal was approved in 2012. This is just a sketch.

It's painful to watch people do math and accounting in real time... but for those who want to know, here's the basics of the story as I see it.

Bottom line... there was no $110.3m windfall. Like a good hiest story, the $110.3 that was lost was never really there.

For Accountants Only....

If you've read this far you almost certainly are, or want to be, an accountant. Good for you. So here I'll add the notion that this deal, described as a lease, and with a bargain purchase option, is almost certainly a capital lease under GAAP or any accounting standard. That means the transaction will record the asset (the Convention Centre) AND a liability, the payment on completion and a 25 year stream of payments.

If the deal has been set up as an operating lease to keep it off the books, that is wrong. And any payments from the Feds or the city simply reduce the liability... they are not money in the bank, revenue, or "Contribution to Fiscal Capacity" because provincial debt is not exactly like a credit card, it has no limit that would be impacted by this transaction. I will note though that this line of talk goes way back to the sale of NSP when the big benefit of the deal was quantified as reduction in loan gaurantees for the province.



JW 100 Million from John Wesley Chisholm on Vimeo.