Spend surplus to cut CUC bill, opposition leader says

During the upcoming session of the Legislative Assembly, Cayman’s opposition leader will propose using some of an expected $100 million-plus government surplus to help reduce electricity bills for residential customers.

The assembly is expected to convene next week to review the budget for the 2014/15 fiscal year, but it is unlikely Opposition Leader McKeeva Bush’s motion will be heard before the government spending plan is approved.

According to the private members motion, to be seconded by West Bay MLA Bernie Bush, government is being asked to reduce import duty “to where it brings down the cost to the consumer in a meaningful manner.” It is also being asked to restart a temporary employment program for local workers.

Mr. Bush said this week that he specifically seeks to have government reduce import duty on fuel. The former United Democratic Party administration increased the duty by 25 cents per gallon in 2010.

“We had to put on the duty because we never had any money,” Mr. Bush said of the former government that he led as premier. “We promised, as soon as we had a sustainable flow of revenue and we had a sustainable surplus, we would reduce the duty.”

The largest payer of fuel import duty in the Cayman Islands is Caribbean Utilities Company, which uses diesel fuel to power its electricity generation plants. Mr. Bush surmises that reducing the costs of importing fuel for CUC would translate to a rate reduction for the consumer.

However, the opposition leader noted that the reduction must be significant enough to encourage a real reduction for utility customers.

“Reducing $6 million or $7 million [on CUC’s import bill] would only [save] about $20 per household,” Mr. Bush said. “This is negligible.”

The exact amount of government’s operating surplus – revenues exceeding expenditures in the current budget year – was not known at press time. Finance Minister Marco Archer has said he expects a $100.3 million surplus by June 30. However, Premier Alden McLaughlin hinted Friday that the surplus would be higher than expected, and Mr. Bush said he’d heard a figure of $104 million mentioned, but that was not confirmed by the government.

In any case, the operating surplus – while significant – will be reduced by the costs of paying off the principal on government debts and by spending on public projects. A Cayman Compass analysis of the 2013/14 budget showed that the $100.3 million surplus would be reduced to $22 million by the time debt payments and capital project costs were taken out.

Mr. Bush’s motion also seeks the revitalization of a seasonal work program implemented during the former UDP administration. This program, which involved hiring people on a temporary basis to clean up roadsides and beaches, cost the government about $1 million annually.

The opposition leader suggested that the program could be expanded to include painting and repairing buildings, basically improving the island’s look while giving out-of-work individuals some temporary assistance.

“It’s always good that we have a surplus, but you can’t save up a surplus and leave your people without electricity and without work,” Mr. Bush said.

While Cayman is likely to find itself in a good position with regard to operating revenues, the government’s overall debt remains a worry for both the ruling Progressives government and U.K. budget overseers.

Core government debt was expected to fall just below $549 million by June 30, including a $26.3 million principal payment made over the course of the current budget. Total public sector debt, including money owed by government-owned companies and statutory authorities, will total around $678 million at the end of the current budget year.

It is partly because the Cayman Islands government is spending so much money during the 2013/14 budget year to pay off its debts that Cayman finds itself, once again, not in keeping with the principles of financial management under its Public Management and Finance Law. Combining both interest and principal on various government debts, government will pay 12.2 percent of its projected core revenues for the year – or more than $78 million in a single year.

The debt service to core government revenue ratio required under the law is supposed to be no more than 10 percent each year.

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5 COMMENTS

  1. Before starting a social program which will have negligible consequence, why not pay down some of the debt this country has. This will amount to a huge amount of savings over a period of time.

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  2. We most certainly can and should save any surplus income we have and work to cut government costs further to create more surplus funds. Past and successive governments’ eagerness to spend every cent they have and not save is a big component of the problems we face as a nation. Hurricane season is nearly here. We’ll need that money, another Ivan caliber hurricane hits. A temporary CUC relief action is meaningless. Concrete agreements and or legislation need to be reached to permanently mitigate the cost of electricity over the long term. We don’t want a voting induced bone to gnaw on. Besides which fact, just because we reduce CUC costs doesn’t mean it will reach the consumer. Why? Because CUC has been bleating about declining profits, they may well keep cost reductions in their pockets for their shareholders.

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  3. It is truly unfortunate how the Government continues to promote the operating surplus notion greatly sugar coating Cayman’s financial picture.

    This operating surplus is a mid level line item or simply there is still more items to pay before you get to the net bottom line as the Compass has pointed out. It would be much more helpful to the Cayman people to report where we are exactly and AFTER everything is accounted for and paid.

    Still to fund after the 100m are debt payments, and some basic capital improvements that are needed on an ongoing basis and transfer payments to statutory authorities that run deficits.

    Would these items not be considered operating if they occur year after year after year??? Perhaps not technically from an accounting perspective but certainly would be from a Cayman household’s point of view.

    Let’s keep in mind that built into these amounts there is an extra 83m (47%) tax increase over the past few years from financial services and an extra 10.5m (52%) tax increase from tourism. Essentially the 100m surplus has merely been a tax grab from our two primary industries.

    Add into the mix that the Govt and statutory authorities owes its own pension plan shy of 200m, has done so for over a decade and apparently will still take another 20 years to pay off, that the 2004 actuarial estimate for the civil service health care plan was pegged at 665m (which is an estimate done prior to the expansion of the civil service beginning in 2005). Using a modest health care inflation rate that is less than what the US is experiencing, and leaving out 8 years of civil service expansion, 665m grows to 1.1b in today’s terms. Not all due at once of course but 1.1b to cover how many people and over what the next 25-40 years???

    Ouch that is a combined whopping 1.3b plus plus plus bill that is looming over our heads. Who and how is that going to be paid for??? It does not take a mathematician to see how that is going to unfold and what that means for anyone who is not in the civil service.

    So while we are busy patting each other on the back for a job well done and where to spend our surplus let’s just keep in mind that we have priced our two flagship industries (financial and tourism) very high in the marketplace (equals less competitive and less local employment), that there are other basic essential payments still required during a regular operating year, and that we have made very little progress on past pension obligations and have reserved NOTHING for the massive future health care costs of the civil service.

    Time to stop sugar coating and fooling ourselves with this operating surplus notion and be (more) forthwith with where we stand exactly. Once we know what that true bottom line is, then let’s set about figuring out how it is ALL going to be paid for.

    We owe this much to the future generation of Caymanians.

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  4. Take that 7 to 8 millions to start installing solar power infrastructures in government buildings. At least, we will be able to see where that money went, and, this will also help reducing the oil consumption. Wait, wait, I am getting too ahead of myself. Oil consumption means taxes and revenue for the government. Just forget everything I said. I was just expressing some crazy taughts.

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  5. If Baffles me ho people continuously believe what these politicians say year after year election after election. And you wonder why the guys think the Caymanian people are fools. It’s look how long and how easily they been fooling them with lies and deceit and they get away with it every time.

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