March 9, 2007
FREDERICTON (CNB) - The governments of New Brunswick and Canada must negotiate a new deal for New Brunswick, one that places a strong emphasis on developing strategic infrastructure, reducing barriers to work, and improving access to capital for the province's entrepreneurs.
The Self-Sufficiency Task Force's third report, entitled The New Brunswick Reality Report Part III: Policy Directions, highlights a number of policy and program changes that co-chairs Francis McGuire and Gilles Lepage recommend should occur if the province is to put itself on the path to self-sufficiency.
"Our provincial government has a key role to play in setting the tone and direction of reforms," McGuire said. "That is why we are recommending that it take a direct role in things such as the re-branding of the province and the development of New Brunswick-based companies."
At the centre of the provincial government's new role is the task force's recommendation to create two funds, both financed through the issuing of government bonds.
As the task force has stated in its previous two reports, the Government of New Brunswick must move quickly to invest a significant amount of money in strategic infrastructure to support transportation, tourism, energy transmission and wireless communications, and to fund improvements to public health-care delivery.
To accomplish these, the task force recommends the creation of a not-for-profit corporation to finance and oversee expansion of the province's e-health system, and a $1-billion self-sufficiency fund to finance strategic infrastructure projects.
The proposed e-health corporation would finance the expansion of this system, which the task force estimates will cost from $300 - $400 million, by issuing bonds.
A partnership between the governments of New Brunswick and Canada will be required for full funding of the $1-billion self-sufficiency fund. The task force recommends that the Government of New Brunswick provide up to $500 million, which it can do through a long-term bond issue financed by NB Liquor Corp. revenues.
"It is an innovative approach to financing this vitally important project," Lepage said. "It is an investment in our future because it will help lay the groundwork for the development of the province."
Policy Directions contains over 20 recommendations, including:
The task force's final report, which will combine the information the task force has gathered through meetings, formal submissions and online discussions with the ideas the co-chairs have raised in the previous three reports, will be released in April.
EDITOR'S NOTE: A backgrounder on government bonds follows. MEDIA CONTACT: Brendan Langille, Communications New Brunswick, 506-444-5070.
A provincial government issues bonds when it needs to raise money. These bonds may be issued in various denominations. Most provincial bonds have face values of at least $1,000, and can reach maturity anywhere between one and 30 years. A long-term bond reaches maturity after a minimum of 20 years.
When an investor buys a bond, he or she is lending the provincial government money that will be repaid in full upon the maturity of bonds. This is the bond's face value.
In the interim, the investor receives a set amount of interest that is paid on a regular schedule. Normally these payments are made either annually or semi-annually. These payments are called coupons.
Bonds have fixed interest rates. The Government of Canada sets the benchmark interest rate with its long-term bond. Provincial governments usually set interest rates for provincial bonds higher than the federal benchmark, based on the level of risk and the attractiveness of the bond to potential investors.
Bond-rating services rank the risk of bonds based on the issuer's ability to make interest payments and to pay back the bond upon maturity. The Government of New Brunswick's bonds generally enjoy high ratings.
Provincial bonds are considered low-risk investments because the Government of New Brunswick guarantees both the principal and the interest of its bonds.