The Cayman Islands government is banking on the sale of some public assets to provide more than $70 million in its current budget proposal, but Financial Secretary Ken Jefferson revealed Wednesday that those plans are still somewhat vague.
Questions about the asset sales were raised earlier in the week by Opposition Leader Kurt Tibbetts, and have been viewed with some scepticism by United Kingdom officials who are keeping a close eye on Cayman’s budget developments after the country exceeded legal debt limits in its last spending plan.
Leader of Government Business McKeeva Bush defended the move Wednesday as one of the ways he was using to get the country ‘out of the mess from the previous administration.’
The majority of the funds from asset sales come from a proposed $50 million divestment of the government office accommodation project, now being built in central George Town.
Precise details of that agreement remain unclear, but it appears that government is looking for a buyer or buyers interested in purchasing some ownership or equity in the office building.
Government also listed a $20 million sale of the sewage treatment plant, and some $1.5 million in earnings from the sale of fire department vehicles in its budget plans.
The Caymanian Compass has learned one such plan would be for the public service pensions system – which secures and invests retirement funds for civil servants – to purchase an interest in the government office project that could then be counted as an asset against future pension liabilities.
Government would have the option of buying back the pension system’s interest in the project at monthly payments to profit the retirement fund.
‘If I have my way, government will retain some ownership,’ Mr. Bush said Wednesday during a speech before the Legislative Assembly. ‘But for now, we have to utilise these assets to help keep us afloat. If the civil service pension board, for instance, can have ownership in that building…who could be better?’
Opposition party members have noted that government is still budgeting some $40 million to spend on the construction of the office accommodation project this year.
Mr. Tibbetts asked why government would do that if it planned on selling the building.
Mr. Jefferson explained that this expenditure was acting as a sort of place-holder in the spending plan because government was not sure when the asset sale might take place.
‘We anticipate government will sell the building in this budget year, but the precise timing has not been worked out,’ Mr. Jefferson said.
Details of the asset sale regarding the sewage plant and the fire service vehicles were not discussed on Wednesday.
On Monday, Mr. Tibbetts questioned whether government would actually receive any value out of the proposed financing arrangement for the government office accommodation project.
‘Even at its stage now, land and everything else included, it has to be worth more than $50 million,’ Mr. Tibbetts said, asking whether any private entities were being asked to put equity into the project.
Mr. Jefferson declined to discuss who the interested investors might be in any of the proposed government asset sales.
The opposition leader echoed the comments of UK Foreign and Commonwealth Office Parliamentary Under Secretary of State Chris Bryant in a 1 October letter to Mr. Bush.
‘I would…have concerns if the (Cayman Islands government) put long-term sustainability at risk through a rapid depletion of government assets,’ Mr. Bryant wrote. ‘I would want to take a close interest in any such proposals.’
Mr. Jefferson said Wednesday that the Cayman Islands government was forced to boost fees and taxes to the levels that it has in the current budget proposal largely because of external pressures from the UK, which previously restricted the overseas territory’s ability to borrow money because of Cayman’s public debt.
Mr. Bush blamed the previous government, which was voted out of office on 20 May, for failing to understand the grave financial circumstances Cayman found itself in and for not taking the UK’s threats of cutting off borrowing seriously.
‘When Lehman Brothers folded, the (then) Leader of Government, now opposition leader said it would only cost us $245,000…he should have known,’ Mr. Bush said. ‘(The previous government) spent more, like it was going out of style…and now they talk about recklessness?’