Two major government asset sales
must happen by mid-April in order for the Cayman Islands
government to meet its current budget targets, Premier McKeeva Bush said Tuesday.
In this year’s budget, government
is anticipating a $70 million cash influx from the sale of the government
office accommodation project, now under construction on Elgin Avenue in George
Town, as well as the Islands’ sewerage
According to budget documents, the Cayman Islands anticipated receiving $50 million from the
office building sale and an additional $20 million from the sewerage system.
Buyers have not been announced for
either asset, although Premier Bush indicated Tuesday that there had been at
least two expressions of interest in the government office accommodation
At least one local interest is
attempting to drum up investor participation in the sewerage system purchase.
The asset sales were proposed last
year as the government faced projections of a $132 million operating deficit in
the current 2009/10 budget. Mr. Bush said those sales are still very much
needed at this time to balance the spending plan.
“From the best information given to
us the budget forecast is on track,” Mr. Bush said. “However, it is imperative
that the revenues from the sale of the…government office accommodation project…and
the new sewerage system are realised prior to the start of the next financial
Cayman’s financial year runs from 1
July to 30 June. Mr. Bush said he expected to propose a budget for the upcoming
2010/11 fiscal year on 30 April.
Mr. Bush said that the sales would,
in fact, have to be realised by mid-April to ensure government is in compliance
with the principles of responsible financial management in the current budget.
“Our main objective is to put the
country in the best direction possible, and not have to layoff droves of civil
servants,” he said.
Since Cayman remains a British Overseas
Territory, the UK – to a
certain extent – is allowed to police the country’s finances. For instance,
Cayman ended the last budget year in violation of the principles of responsible
financial management in three areas – total public sector debt, total cash
reserves, and maintaining a balanced budget.
The failure to meet the principles
led the UK
to threaten not to allow Cayman to borrow any more money unless the territory
proposed a reasonable plan for balancing the budget and bringing the country
back into compliance.
Premier Bush said his government
did propose a balanced budget, while also agreeing to perform an independent
revenue study that would consider – among other matters – the potential for
direct taxation in the Cayman Islands.
Government revenues in Cayman are
primarily derived from indirect sources such as customs tariffs, fees and
charges for various services, and stamp duty on property purchases. There is no
income tax or direct property tax in the Cayman Islands.
The premier said Cayman does not
have the luxury of balancing its budget over a period of several years as the
opposition People’s Progressive Movement has suggested.
“That cannot be implemented, as
this would have serious ramifications,” Mr. Bush said. “It would mean that
right now, we would have to either layoff droves of civil servants or implement
the income or property tax which the UK was advocating.”
“It would probably even lead to
letting the UK take away financial management from the government…which would
lead to all of the above happening. We are not prepared to do that today.”
Mr. Bush said precise plans for how
the asset sales would proceed had not been firmed up at this point. However, he
indicated that his government would like the Cayman
Islands to retain some ownership in these divestitures.
For example, one proposal that has
been floated is to sell the government office accommodation project to the
public service pensions system so the various funds could list it as an asset.
Government would then purchase the building back over a period of years, adding
to the pension plan’s assets.
Another option might be to sell the
building to a private interest who would then allow government to purchase it
back over a fixed period.
“If we find an investor for the
(government office accommodation project)…the Cayman Islands government can
have some ownership,” the premier said. “Of course, we would have to put some
money into it.”