$503M Deh Cho Bridge debt on track to be paid off by 2046 despite increasing due to inflation

The Deh Cho Bridge, pictured here in the summer of 2014, spans the Mackenzie River near Fort Providence. (Elizabeth McMillan/CBC - image credit)
The Deh Cho Bridge, pictured here in the summer of 2014, spans the Mackenzie River near Fort Providence. (Elizabeth McMillan/CBC - image credit)

Editor's Note: This story has been updated since it was published to reflect that the cost of the Deh Cho bridge over the life of the loan brokered to pay for it was underreported.

It's been almost ten years since the Deh Cho bridge opened. The territory has been paying for it ever since, but recent spikes in inflation mean the debt the Northwest Territories Government took on to help pay for the bridge is going to cost slightly more than was originally expected.

The bridge provides a year-round link between many N.W.T. communities, such as Yellowknife, and Alberta.

Back when the territory first issued the bonds that let it finance the bridge, it projected the final cost would be about $334.6 million — a number that does not include the principal loan amount — after decades of interest payments.

But Canada's year-over-year inflation rate was 6.9 per cent as of September, instead of the two per cent the territory had estimated. The bond was tied to inflation, meaning the cost has gone up to an estimated $338 million.

The loan is still projected to be paid off in 2046. By then the territory will have paid approximately $503 million for the bridge, according to an official with the N.W.T. Department of Finance.

A breakdown of the loan shows that the bonds themselves were worth $165.4 million. Thirty-eight years of interest make up the rest of that debt, meaning that by the time the territory is finished paying it off, it's expected to have paid more than triple the amount of the bonds themselves.

Over the last decade, the territorial government has made about $70 million in payments — between $7 million and $9 million a year.

The reason those payments fluctuate is because the cost of the debt is tied to inflation and the Consumer Price Index. With every loan payment, the principal goes down — it's now around $137 million — but the interest cost, which is calculated every six months, has risen because of the steep rise of inflation.

Earlier this week, N.W.T. Finance Minister Caroline Wawzonek refused CBC's request for an interview on the loan repayment and instead deferred to the Department of Finance. The department declined a request for an interview.

But Tom Holloway, an assistant finance professor at the University of Calgary, says the territory's decision to issue inflation-indexed bonds was "surprising."

Holloway, who also works as a portfolio manager with Pacifica Partners Capital Management, says provincial and territorial governments don't often finance projects this way. Though Holloway did say he could think of a couple examples, including the financing for the Confederation Bridge that connects New Brunswick and Prince Edward Island and the 407 toll highway in Toronto.