How a wealthy country can be so broke

Q: Why can’t our emergency responders have nice things?
A: Because our public officials keep spending the money on other stuff.

A recent report from a special committee set up by Cayman Islands lawmakers confirms what many of our readers may have already deduced — that, instead of saving up funds in order to replace government vehicles (including ambulances and police cars, as well as garbage trucks) on a regular schedule, officials have been diverting those funds for other purposes.

As committee leader George Town MLA Roy McTaggart observed, “This results in the lack of adequate cash balances when the asset has reached the end of its useful life and needs to be replaced.”

Mr. McTaggart was, of course, a prominent accountant in the private sector before entering elected office. But the situation Mr. McTaggart describes isn’t strictly a problem with “dishonesty in accounting” by government; it oftentimes leads to a waste of financial resources provided by taxpayers.

Instead of purchasing new vehicles when the old ones reach the end of their useful lives, officials are paying for pricey repairs to keep older vehicles on the road for a long time after that strategy has ceased to be cost-effective. While it is necessary and prudent to keep vehicles maintained and in good working condition, as most car owners know, at a certain point it simply becomes more expensive, in the longer run, to keep repairing and re-repairing a vehicle than it is to buy a new one.

In the case of emergency services, the pure problem of cost is compounded by the issue of vehicular availability. The difference between an ambulance being at the ready, and being stuck in the garage, could have very grave consequences.

That’s why you see altruistic-minded citizens, such as the nonprofit Cayman Heart Fund, stepping up to raise money to buy a new ambulance for the Health Services Authority.

We, however, have counseled against relying on private efforts to supplement public shortcomings. We wrote in mid-October: “The proceeds of such goodwill result in the masking of government’s deficiencies, and so fundamental imbalances are never addressed.”

Our government’s problem with misallocation of resources (with nearly $1 billion in annual revenue, “scarcity” is no excuse) goes far beyond service vehicles.

For example, take a look at one of government’s most-treasured “assets,” the millions of discarded tires at the George Town landfill, which we cannot seem to get rid of, despite government levying fees of $2 per tire — logically for the very purpose of disposal … but in reality for “general operations” at the dump. Or, broaden your vision, and consider the greater Mount Trashmore as a whole. The government has no money in the bank to fix the hazardous landfill or to start a new facility somewhere else, although officials identified the looming problem more than 25 years ago.

In a recent editorial on the subject of Cayman’s inadequate infrastructure, we posed this question about building to prepare for an economic expansion: “Do we have the money and, if not, how are we going to finance our future?”

The answer is straightforward, but not easy. Except in rare instances, such as deep-pocketed investors like the Dart Group paying for specific projects that ordinarily would be financed by governments, money for public infrastructure and assets doesn’t just fall from the sky. Rather, cash reserves are grown over years and decades, through careful stewardship by conscientious leaders with foresight.

When it comes to financial resources, Cayman is a wealthy country. When it comes to fiscal discipline, prudence and long-term planning, Cayman is coming up short.

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  1. Two questions that need to be answered are exactly who approved the payment of these outrageous vehicle repair bills and who they paid the money to. I imagine that a list of the names involved could prove extremely interesting.

    Whilst I would like to be kind and that suggest that this kind of fiscal abuse is simply typical of the civil service attitude to public money my suspicion is that it goes a fair bit beyond that.

  2. Running out of money is not a problem unique to the Cayman Islands. Just about every government in the world has similar problems.

    Nor is it totally fair to point to places where money has unfortunately been wasted.

    Every government and every big business makes bad spending decisions sometimes.

    As does every person. How about that boat you rarely use or that gym you joined but don’t go to.

    But when dealing with a big budget the size of the mistakes appear to be worse.

  3. It’s absolutely fair to hold government accountable for poor spending decisions, just like business executives are held accountable for poor spending decisions and as people should hold themselves accountable.

    The problem comparing Cayman to other countries around the world is the scale and complexity of the economy here aren’t nearly as vast as most other countries and Cayman doesn’t have the ability to finance its way out of overspending or print money the way other countries can. It’s more akin to compare the government here to a small town has two giant tax producing industries and still managed to squander their wealth. Or if you prefer the personal equivalent, like a famous athlete, celebrity or someone who won the jackpot lottery and then went broke due to poor money management.

  4. I’ve made similar comments before regarding the CIG purse. A budget of 1 billion USD for 60,000 persons comes to around 17,000 in "taxes" per person living here. In the US: 330 million persons with a 3.3 trillion dollar budget (10,000 per person). The bottom line is Cayman gets significantly more $ per person than the US. The majority of the US budget goes to defense spending: army, navy, etc. Then look at the almost 100 billion dollars they give to foreign countries and the billions they spend on the CIA and NSA. Cayman doesn’t do any of those things, yet they still cannot find the funds for new ambulances and police cars! I ask again–Where is all the money going???

  5. Perhaps the priorities of the powers that be are somewhat misguided as one can see from this editorial. It appears to be a matter of being "penny wise and pound foolish" or "throwing good money after bad money." Fire trucks, ambulances, police vehicles, and garbage trucks are heavily depended on as these vehicles clock many miles in a given year. Hence, to me, it would be more cost effective to purchase new vehicles rather than repairing and then repairing again. The used tires situation is a massive problem, not only for Cayman but throughout the USA as well. The unanswered question is "what is the best solution to effectively do away with this tires?" One effective way is to burn the tires but this will create an environmental disaster of untold proportions.

  6. There are so many practical uses for old tires that it baffles me why the CIG can’t figure out how to deal with them. They already collected $2 per tire for their disposal so why the urgent need to sell them, I guess the CIG is hurting for money more then we actually know.

    Here’s a few good ideas, Grind them up and use them as fill for all the new roads or sell them as fill for new developments which will all need parking lots. Make roofing shingles out of them, Grind them up and sell them as rubber mulch.

    Just sticking them where the sun don’t shine or begging people for money for them doesn’t seem to be working. I find it hard having confidence in anyone that figure this one out..