Pensions fund didn’t want gov’t building

The pension system that secures
retirement savings for Cayman’s civil servants and public officials turned down
a chance to buy the new government office accommodation building earlier this
year when Cayman was trying to sell it.

According to Public Service Pension
Board meeting minutes from 25 February, the board decided it was “not in a
position at this time to express an interest in the purchase”.

The meeting was called for the
purpose of deciding whether the board would express interest in such a deal –
the deadline for doing so was the next day, according to board records.

The issue has once again become
timely following statements made to the Caymanian Compass by Premier McKeeva
Bush that government would need to sell some of its assets to help stave off
looming budget problems.

Mr. Bush told the Compass Tuesday
that the need to sell certain government assets was “no longer in question”,
and that the proceeds from those sales would go toward paying off debt as well
as building up government’s cash reserves. He did not specifically mention the
government office building as one of those assets during the interview.

The initial sale plan was for the
pensions board 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 told the Legislative Assembly last year. “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
previously noted that government budgeted some $40 million to spend on the
construction of the office accommodation project this year and never managed to
find a buyer for the building.

The Compass contacted the actuary
of the Public Service Pensions Board regarding the asset sale proposal but did
not receive a response by press time.

According to those familiar with
the negotiations, there was some concern about the pensions board investing too
heavily in real estate if the market should take a down turn. It was not clear
whether the proposed purchase would have pushed legally-mandated investment
guidelines for the pensions plan out of line with government regulations.

Property deals have been used in
other jurisdictions to help shore up public pension systems with varying
success.

In 2004, the city of Houston
approved a plan that shifted ownership of the Hilton Americas convention centre
hotel to the municipal employee’s pension system. The hotel, valued at US$300
million, was used as a credit to help ease an unfunded pension liability of
some US$2 billion. The city has since tried to buy back the hotel from the
pension fund and sell it off, but it has not been able to do so.

The US state of Alabama actually
launched a development project on its own, called the Robert Jones Golf Trail,
which included 18 public courses and numerous hotels. Since 2006, state
officials indicated that the investment had yielded “healthy returns” and also
boosted annual tourism revenues.

The fund also invested US$4 billion
in broadcasting stations and newspapers, getting advertising for tourism
efforts and the retirement fund as part of the deal.