Report urges public asset sale
(CNS): Having rejected any form of taxation or sustainable income generation, James Miller III and his co-authors David Shaw and Kenneth Jefferson have recommended the government raise much-needed revenue from the sale of assets and privatization of some government services and companies. Their recent report reviewing the state of government finances states that the Port Authority, the airport, Water Authority, UCCI, the Development Bank and the Stock Exchange as well as the Cayman Turtle Farm could all be privatized. The authors claim that such sales would not only bring in revenue but would also remove government’s subsidy or liability for those losing money.
While the premier has not yet said which of those assets he will be selling immediately, McKeeva Bush stated on Monday that his government will be implementing many of the report’s recommendations. He has also confirmed that private accounting firms have been engaged to examine divesting government assets and services.
According to Miller, substantial privatization would not have an adverse effect on the Cayman economy but improve it and the CIG needs to sell off assets tobridge the financial transition from excessive spending to a more healthy revenue growth. In the report Miller and his co-authors discuss in detail the potential value of a number of assets, including the Port Authority, which it states is valued at around $40 million. Going beyond government’s current goal of entering into a public-private partnership in order to build the cruise berthing facilities, the report suggests the privatization of cargo operations as well.
“Government‘s current plans to invest in an upgrade of the port‘s infrastructure to better serve the cruise industry could be made a part of any privatization/concession arrangement, thereby freeing government from the obligation to issue, service, and guarantee the debt,” Miller et al wrote. “Marine terminals have been the target of successful privatization efforts over the past decade or more, and several of these privatizations and concessions have led to substantial facility upgrades. In the US, Ports America Outer Harbor LLC will upgrade and operate 5 container berths in the Port of Oakland through a 50-year concession, and total investment by the company is expected to be near $150 million.”
The report says many port privatizations have occurred through long-term concessions, where private entities take over operations for a defined period of time then agree to a series of investments to improve service and capacity. “In return, the private business receives all or some of the fees earned at the facility for which it is responsible,” the report stated. “Given government’s current fiscal situation, the advantages to the economy … and the expected costs of upgrading the port‘s cruise-ship capacity and convenience, we recommend that government move quickly in issuing a Request for Information to interested and eligible parties, stating the level of responsibility it is looking to divest, the potential scope of revenues, the infrastructure upgrades required, and the time frame expected.”
Miller also recommended selling the airport as he says there is an active global market for airport acquisition. He notes, however, that the Cayman Airport Authority is technically operating at a loss so it would be difficult to calculate its value, but estimating that Owen Roberts serves around 800,000 passengers per annum and by applying a low rate of $25 per passenger because of the losses would result in a valuation of CI$16.5 million. In addition to the proceeds, the report noted, by selling Owen Roberts government would save an additional CI$8.7 million per year that it now provides as an annual subsidy payment.
“In the end, the sale price would be based upon such factors as the age of the airport‘s many infrastructure components, conditions that may be included in the sale, regulation of fees, labour agreements, and future projections of the Island‘s business and tourism markets. The early release of a Request for Information may be the effective way of discovering investor interest and potential valuation,” the report said.
On Monday Bush expressed his interest in entering to a private finance initiative to enhance Owen Roberts and build the new runway but he fell short of stating that he would be willing to sell the airport. He noted that Terminal Five at Heathrow was one of the best airport facilities he had seen and it had been built using private cash. Bush also said that the UK had expressed concerns about the potential risks relating to PFIs, but was not necessarily against the use of this method of financing.
“They said that their main concern is that there is a proper feasibility and cost benefit analysis carried out and that the process is transparent for each project,” the premier added.
In the report Miller lists seven government companies and authorities that cold be sold, six where government subsidies should be phased out, including the Health Services Authority and Cayman Airways, and 16 where at the very least there should be increased competitive contracting of the services offered.
As many of the 25 government-owned enterprises are involved in commercial activity that is typically performed by for-profit private businesses and they all present the potential for some for of privatization, the report states. Cayman Airways should have its current subsidy reduced in equal increments over the next three years, along with the National Insurance Company, the National Museum, the Health Services, National Housing Development Trust, and the Public Service Pension Board, to eliminate the more than $180 million government currently spends subsidising these entities.
Category: Headline News
NOTE: TRANSPARENCY IS IMPORTANT!
MOREOVER, WITH GOVERNMENT EXPENDITURE CUTS AND SELLING OF PUBLIC SERVICES – QUESTION:
What will be done to strengthen the LABOR LAWS and ENVIRONMENTAL LAWS to protect Caymanian workers, the environment, and customers. For instance, if we privatize Cayman Airways, will its new owners employ Caymanians, rightfully protect workers, and give and manage reasonable airfares and costs.
WE SPEAK SO MUCH ABOUT PRIVITIZATION AND SELLING OF ASSETS, BUT WE HAVE TO LOOK OUT FOR OUR OWN. PRAY THAT OUR POLITICIANS LOOK OUT FOR THE PEOPLE AND ENVIRONMENT OF THE COUNTRY!
Now sell the port or airport and get into a dispute with the owner and they shut the country down until we meet their demands. I think history has shown that the Americans would not let foreign investors buy their ports why? It is a national security risk. Only Caymanians should be allowed to own these assets and their primary place of residence must be the Cayman Islands and even that is scary but at least we could arrest them for treason if they tried to shut down the country over a commercial dispute. These are scary times better sell some land the GOAP building or the schools. Miller is a fool and I will march against that!
Your absolutly right. You want someone else to buy and fund it but you want to tell them how to run their business or else. Good luck with that. Millar and any other successful business person would be viewed as a fool by the likes of you. Do not worry because your views are shared by your leaders.
Only Caymanians run Cayman and how is that working out so far? And how long before the country goes down the same road as the Schools. Closed due to lack of money, skill, foresite,ability, and common sense. In the current system even the most educated and motivated Caymanian is not valued.
Selling the Cayman Islands Development Bank????
Yes, I am sure there is a long line of investors waiting to pay for the right to give away CI$5 million at negligeable interest rates, of which 20 per cent will not be paid back.
The Miller/Shaw…Bush/Jefferson report is NOT surprising.
Miller/Shaw are pro rich people and against middle class and poor. They come from the American Republican mentality which is all about protecting the rich and their corporations…can anyone say "Wall Street Bailout".
Mac knows this… and rather than make the real cuts needed (like reducing the overall number of overpaid Govt. Managers) and his own (and other political) perks…he would rather the middle class and poor take the brunt of the cuts. Just like he allowed with the private sector middle and lesser class already.
I talk with many civil sevants…and they are generally not opposed to taking a cut "if all other avenues are looked at and cut also".
It seems to me that the middle class and poor (both Public and Private sector) need to stand for fairness for all…not just the rich. Otherwise we will once again allow the rich and powerful to "divide and conquer".
The rich have already made their many millions tax free..and are now making sure there is no way they are made to pay any of that back to the country that made this possible. They would rather the majority of us (and our children) make the sacrifices. Mac (and some others) say direct taxes are BAD! "it will ruin Cayman"…i ask why? can you please provide some sensible unbiased education to back up this claim?…after-all, the rest of the world pays taxes…and we are paying "indirect taxes"(more so by the middle and poorer class) so what’s the difference? Why not apply these taxes to ALL…especially the rich…after-all they can more afford it…why do they get protected while we don’t? The oe argument (scare tactic) put forward by Mac is that Govt. will come back for more and more..but that same thng will hapen with govt. coming back to a select few to suffer salay reductions.
It is much more fair to reduce the "numbers" in Govt. AND to require ALL (especially the rich) to pay towards the needs of operating Cayman!
Transparency is the key. . .
Selling and leasing back the government assets could be a way for government to get out of the current crisis. If we chose to go down this road we must have proper checks and balances in place.
The key is to make sure that the people get value for their money and that there are no kickbacks to those in power. The Auditor General must make sure that there is no funny acounting in the purchase. Kickbacks can often be disguised as legal or consulting fees and go unnoticed in such large transactions.
Not to say PFI’s are a bad idea but we must protect the taxpayer before we sign the deal.
Miller-Shaw Report?
Where is it?
Has it not been released already in the public domain?
CNS: It’s on the government website – Click here
Can the government sell/privatize/outsource its assets/services (with a condition to retain as much jobs as possible)?…This way it would generate the necessary revenue, cut the CS/Public Service numbers and also maintain jobs. CINICO should also be mandated to revamp/rebrand, go out into the market, and compete with the other insurance companies for business (thus changing their current health insurance plans)….this would also reduce their current government subsidy.
Without claiming I fully understand this PFI thing…it sounds like it makes alot of sense….BUT, who are these people interested in our assets and why? I hope that careful consideration is laid before we sell off these things…
Turtle Farm, wouldn’t it be great to make that into the WORLD’s leading turtle science center? We would attract a whole new class of interest–notjust gawkers who want to pick up a turtle, but we would be playing host to leading scientists, biologists, universities! This could trickle out to improvements in our ecosystem too as the research could fanout….oh the possibilities!
Airport, yeah, that needs some work, cause there are MANY ways to improve that place….
What about the schools? http://www.teachernet.gov.uk/management/resourcesfinanceandbuilding/FSP/schoolsprivatefinanceinitiative/
I bet that with PFI schools, we could reign in all these kids who graduate based on attendance & give them real quality learning standards. Get some great magnet/specialist programmes in here to focus on this burgeoning art scene, filmmakers could thrive, performing arts, engineering…. http://en.wikipedia.org/wiki/Specialist_school
Hopefully, the sale of these things brings more than just a balanced budget! The potential is out there for Cayman to refocus! Is this the way to do that, time will tell…..
Good Luck!
Sell, sell, sell!!!!!!
C’mon let get it!!! Stop all the skylarking and bickering, lets get Cayman back on TOP!!!!
I cannot see how privatization is compatible with the current immigration and employment policies.
Private companies need complete control over the people they hire and the salaries they are paid, because it is their employees who make the difference between profit and loss.
Believe it or not, many responsible businesses operate very effectively in compliance with current immigration and employment policies. They do not have absolute controlover who they hire. In fact, nor does any employer, anywhere on earth, when it comes to foreign labour.
Why are we paying to maintain an office in Dubai?? In these difficult economic times do we need that? After all Dubai is broke too? What about the London office? How does this help us?
How much is Mac spending on his private chef, chauffeur, the construction of his guard house and his endless first class globe trotting at the public expense? Surely he should cut that first!!
please get over this nonsense about chefs and chauffeurs…. even his travel expenses will be negligible compared to the daily wastage in the civil service…. lets tackle the real problems!
How about the Great Wall of West Bay we the people are building around his entire property in West Bay. At a cost rumored to be over CI100,000.00. Lets do a little math. Civil Servant earning 3,000.00 per month 5% decrease =150.00 per month x 12 months = 1,800 per year. Now lets say that the wall does cost only one hundred grand that is more than 55 civil servants annual pay cut.
I do not call that negligible. It is a significant amount of money misspent while asking for sacrifice from the CS.
And I would remind you he gets to keep the wall when he leaves office.
OK, would you rather and entire house was built for the premier? I would say that the majority of leaders in the world don’t live in their own houses, but one supplied by the country. I think a wall is much cheaper than the upkeep and cost of an entire house. How would you live if you had that job? No need for security when you are the head of state in your mind?
Actually, building a residence for the premier IS the best soloution (in better economic times), because rather than building an 8 foot wall every single time we get a new premier, we’d just move him/her into the designated residence. It would be a government owned asset. Not somebody’s personal asset that you and I are pay to "improve". Make sense to you??
These are difficult financial times for Cayman and the world. We all have to make sacrifices. It needs to be determine what is the least expensive way to protect the Premier. I am sure it is not walling the entire 2+ acres if land. Effectively the back acre+ does not need to be included at the peoples expense.
Our heads of government in the past have not needed this extreme expense. I also question if any consideration was given to the effect on the land value of the adjacent property owners I am sure it will be less than favorable.
It is clear that he is the one to gain not the public.
WOW You baffle me. Do you not realise this kind of crap is half of our problem?
We can’t see the forest for the trees. We need cut across the board all FRINGE benefits including HIS. I dare say ESPECIALLY HIS.
Look if I was a CS employee I would go bonkers if you wanted to take 10% from my salary but would be there flaunting your perks. An example goes far beyond just doing a paycut on yourself but setting the example of all other benefit cuttings. Then they need to look at all the perks for other senior officials and things that are not needed and remove them also.
Again Northward Hotel comes to mind about PERKS but in a different kind of way. The perks to prisoners. I would cut them down dramatically also.
what is the wall for, protection?
Mac’s chef, chauffeur and business trips cost is a drop in an ocean. It is wages and hand out to civil servants are the biggest cost for government to pay out least $25 million per month. Stop go on about Mac’s little team at his home!
Just sell everything and when the government sells all that is suggested, lets wait and see if anything of value will be left for future generations of the Cayman Islands.
Advocates for the sale will say sure why not sell everything to the highest bidder, the country is broke we need the money to offset the debt, but it seems as if we are only robbing Peter to pay Paul.
Instead of us increasing the necessary fees and even implementing income taxes we refuse to do that, rather we prefer to sell off of the assets of the country to pay its debts thus we will put the entire country into private hands good going this is a smart move.
How about examining all the money Government wastes on endless useless consultants and jetting around the world. CNS can you request an FOI on this? Could they at least tell us the amount that is spent on this before selling any assets or cutting CS pay?
CNS: Anyone can submit and FOI request. It is a sadly underused public tool.