Tue | Aug 22, 2017

Wasting money - Shaw blasts PNP for bad handling of nation's funds

Published:Thursday | May 26, 2016 | 5:00 AMGary Spaulding
Audley Shaw, finance minister, closing the Budget Debate yesterday.
Audley Shaw, finance minister, closing the Budget Debate yesterday.
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Finance Minister Audley Shaw yesterday highlighted what he described as multimillion-dollar transactions undertaken by the former administration with which the new financially strapped Government is now saddled.

Shaw told the House of Representatives that the previous Government had agreed to provide J$400 million to renovate the ground floor of the Oceana Hotel, which the Urban Development Corporation (UDC) had previously sold for J$385 million.

He also took the former Government to task over its alleged issuance of a US$5-million letter of credit on behalf of Noranda to pay the Government of Jamaica the bauxite levy, which expired in December 2015 without the Government making good on its claim.

The ground floor of the Oceana is intended to accommodate the Office of the Accountant General.

"Why wasn't the facility sold to the Accountant General's Office for $1 to facilitate the expenditure of the $400 million on repairs to the facility?" queried Shaw.

Closing the 2016-2017 Budget Debate, Shaw also highlighted the effects of what he described as extreme cases of fiscal irresponsibility left behind by the previous administration.

He said that the Oceana Hotel was sold by the UDC Board to the Downing Street Group for J$385 million at its May 29, 2014, meeting at market value, determined three years before the transaction was finalised on August 2011.

He said that after the UDC, one arm of the Government sold the facility to a private-sector entity for J$385 million. Another arm of Government turned around and is spending J$400,089,841.20 for renovation and alteration of office space on the ground floor.

Shaw said that the rent agreement is for 10 years at a rate of J$1,774 per square foot, making it a total of J$90,922,822 annually for the 51,253 square feet of space on the ground floor. "The rent increases at 7.5 per cent per annum."

In addition to the monthly rental, Shaw said that the Accountant General's Department (AGD) must pay its proportionate share of common expense (maintenance). "The lessee must also pay its own monthly parking of $9,030 per stall, with an annual increase of 7.5 per cent."

Added Shaw: "We are not begrudging the AGD the space, obviously. They need it. We are looking at the economic value of the transaction."

Continued Shaw: "Is it good value for the Jamaican people, government mismanagement at its peak, or is it a sweetheart deal?"

The finance minister said that the rental payment and the maintenance did not appear to be below market for the downtown area, which would be a way to compensate the AGD for all the improvements being undertaken to the building.

According to Shaw, "the same slackness" involved in the handling of money and government affairs was applied to dealing with the troubled Noranda Bauxite relationship.

As Shaw spoke, Dr Peter Phillips, former finance minister, rose on a point of order, insisting that he had nothing to do with the exchanges with Noranda.

Shaw told the House that the new administration was left "completely incredulous" to find that the former minister of finance apparently allowed a US$5-million letter of credit, issued on behalf of Noranda, to pay Government of Jamaica, the company's levy to expire in December 2015, without making a claim on the irrevocable letter of intent.

"The Noranda people expressed great surprise to our negotiators that the then Government allowed the letter of credit to lapse, thereby avoiding being paid the US$5 million," said Shaw.

He added: "So because of that fiscal and managerial slackness, the Jamaican people were short-changed to the tune of J$625 million by the previous Government."

The finance minister also took Phillips to task for criticising the $13.5 million tax package he announced a week ago after the former finance minister imposed a total of $52.3 billion, which averages just over $13 billion annually.

"This ($52.3 billion) is in addition to $34.2 billion taken from the National Housing Trust for a total of $86.5 billion, with nothing given back," declared Shaw.

"In contrast, this new Government has put in a tax package of $13 .8 billion and is giving back $12.5 billion in the new unprecedented $1.5 million plan ... one is take and give, the other is take," he said to thunderous applause.

gary.spaulding@gleanerjm.com