Some residents here say the
government shouldn’t sell the yet-completed Government Office Accommodation
Project because the country shouldn’t sell its assets.
We would like to point out
something that really should be obvious: Cayman doesn’t own that asset.
To use an example, let’s say you
want to buy a new car and a bank will lend you money to buy it if you can come
up with a 15 per cent down payment. It’s
true you would then have the privilege of driving that car, but you don’t
really own it. If you have any doubt
about that fact, just stop making your payments and you’ll learn who really
owns the car.
It’s a similar situation with the
GOAP. The government made a down payment
in the form of land worth about $13 million.
It then borrowed money to finance the construction. All totalled, the
government will probably have to borrow some $100 million to complete the construction
and fit-out of the building.
In the end, exclusive of the
fit-out costs, government will have a building worth about $103 million and
debt associated with the project of about $90 million. Just like the person who drives off a car lot
owing 85 per cent of the purchase price doesn’t own the car, the Cayman Islands
Government won’t own the GOAP.
While the repo man might not come
around and take the building back, a high amount of debt hangs around the neck
of the Cayman Islands like a noose. The
debt not only prevents the country from doing other important things – like
borrowing to finish the schools – the accruing interest is costing the country
more and more money. The high amount of
debt increases the chances of a downgrade of the country’s sovereign credit
rating, and increases the chance the UK will insist on the implementation of
direct taxation in order for the government to borrow more.
A group of Cayman’s leading
businessmen have analysed the situation and determined that the best course of
action is to sell the GOAP. Before
anyone starts complaining about selling assets though, they should realise that
what Cayman is really selling is some land and a huge, huge debt.