Former Cayman Islands Governor Duncan Taylor and representatives with the U.K. Foreign and Commonwealth Office last year opposed a plan to pay for the extension of the East-West Arterial road through duty concessions to a development company, according to former Health Minister Mark Scotland.
Mr. Scotland said members of the interim People’s National Alliance government engaged in what he called “informal discussions” with Mr. Taylor and FCO economic adviser Richard Holmwood about how the country might pay for the 10-mile extension of the highway from Newlands to Frank Sound. The road extension is considered essential for the development of a proposed US$360 million golf resort known as the “Ironwood” development in the center of Grand Cayman.
The former minister, who lost a bid for reelection as a Bodden Town MLA in May 2013, said the government’s plan had been to require the developer to pay up front for the road and, in return, government would exempt the developer from payment of all duties that would normally be charged on imported construction materials.
“A question was raised one day [with the then-governor], would this be something that could be supported?” Mr. Scotland said. “And the answer was ‘no.’”
Mr. Scotland said similar comments were made by Mr. Holmwood in a subsequent discussion.
The reason the deal was declined, the former minister said, was two-fold. First, it was brought by an interim government with only a few months in office. Second, the structure of the funding agreement did not meet the requirements of the Framework for Fiscal Responsibility contained within the Cayman Islands Public Management and Finance Law.
“The governor saw the [duty] concession as a loan and so did the FCO,” Mr. Scotland said, noting that he disagreed with the decision. “I don’t see how concessions are a loan.”
Since those discussions occurred, the Cayman Islands has a new governor from the U.K., and the current Progressives-led government has partially restructured the road funding agreement with the Ironwood developer. The pact is still being worked out under a nonbinding “heads of terms” agreement signed by government late last month.
“[Governor Helen Kilpatrick] is optimistic that a financing structure can be put in place that the FCO recognizes as meeting the requirements of the [Framework for Fiscal Responsibility],” a statement from the governor’s office noted this week. “The FCO is supportive, in principle, of the Ironwood project and road extension.”
According to the “heads of terms” agreement, the Ironwood project backers propose to fund the initial construction of the 10-mile stretch of road. The initial cash outlay will then be refunded to the developer through concessions based on import duty fees.
The entire 10-mile road extension is expected to cost $40 million, although that amount could change as the project moves forward.
The amount that might be derived from import concessions on the project were estimated at “a minimum of somewhere between $20 million and $25 million” by Works Minister Kurt Tibbetts.
According to the agreement: “[The Cayman Islands government] anticipates that additional revenue to the islands will be generated from the development in the form of, for example, stamp duty [arising from the development itself as well as from adjacent properties along the length of the road] and which will go toward the cost of the government’s annual road user fee.”
The annual road user fee, as defined by the agreement, is to be paid by government to the developer in a stipulated payment schedule over the useful life of the road extension – estimated at 20 years.
Mr. Scotland said the current financial arrangement, which he has heard references to as a “duty reallocation,” sound a lot more like a loan than the previous arrangement.
The terms of the Framework for Fiscal Responsibility prevent the Cayman Islands from issuing long-term debt to pay for public projects until at least mid-2016. Public projects must now be funded through either cash reserves or via public private partnership arrangements, with which the U.K. must first agree.
Minister Tibbetts noted Tuesday that government still does not know whether the U.K. would approve the current financing arrangement for the road.
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I do think the road is needed, I do think IronWood putting the upfront money up to build it is a good idea especially since the road will benefit them greatly. However I completely disagree with them getting a complete break on all import duties during construction to recoup the money, nor do I agree with the idea of the annual road user fee. The CIG needs terms that do not include direct payments to the developer and doesn’t leave the CIG without any revenue income. The 50 percent concession that Dart got will mean that the CIG will still get some income while he recoups his money and there’s no direct payments to him. This deal with the Ironwood development sucks to high heaven and will leave the CIG with not only zero revenues from duty during the construction but will also leave them having to make yearly payments directly to the developer for the road, to me that sounds like a loan with bad terms, I don’t see how this will get approved by the UK. There are also more pressing issues in Cayman than this road such as cleaning up Mount Trashmore which has been again put on the back burner.
Ok… so does Ezzard and Arden have to fight this one alone or are all the hardheads on board with the ExMinister-Former LOGB?
Get together on this for it is only those who voted will feel the crunch from this injustice.
Florence, can you tell me where you got information about Ezzard or Arden fighting the Road construction or even the IronWood development. I haven’t seen either one of them speak out against either project. I even saw Arden on the news saying the road was needed as well as development in the East end.