How your taxes disappear - Pt 2
A.C. Count, Guest Columnist
Appreciation to the Ministry of Finance and Planning for its excellent publication - Estimates on Revenue and Expenditure to March 2015 for Jamaican Public Bodies.
Most of the content of this column, and last week's, comes from that publication. Taxpayers seem to have infinite patience to stomach large sustained losses in the public sector. As a result, little corrective action is taken.
JUTC unsustainable formula
Jamaican Urban Transit Company Limited (JUTC) was incorporated in 1998 to provide cost-effective transport services to the Kingston Metropolitan Transport region. It operates depots at Twickenham Park, Portmore and Rockfort, and a central maintenance workshop, Ashenheim Road, Kingston.
It plans a cashless fare system with a sustained bus run-out of up to 445 buses, daily, and a 37 per cent increase this year in bus fares. It employs almost 2,000 people and plans to lose $3 billion in operating losses, before taking credit for a grant of $1 billion from an unspecified source. Who is that grantor?
Its fuel costs are budgeted to be 52 per cent of its gross revenue, with staff costs closely behind, at 45 per cent. Combined, this means only three per cent of the gross revenue of the company can be used to service debt, maintenance and all other costs of running a company.
Even after the fare increase, perhaps this company cannot really function on its existing formula.
JUTC fares will have to increase, by about 85 per cent, to allow the company to break even next year, based on inflation of 10 per cent.
NROCC is haemorrhaging
National Road Operating and Constructing Company Limited (NROCC ) was incorporated in 1995, but commenced operations in 2002. Its core function is to design, construct and maintain highways.
NROCC is haemorrhaging and is budgeted to lose $8 billion, in 2014-15, after losing just a little less in each of the years 2012/13 and 2013-14.
NROCC has been negotiating with China Harbour Engineering Company Limited (CHEC) to undertake construction activities for the completion of the Mount Rosser bypass and remainder of the Kingston/Ocho Rios toll road. NROCC hopes the Mount Rosser bypass will be completed by August 2014 and the rest of the toll road by 2016.
CHEC is investing US$601 million
NROCC is responsible for the acquisition of all land required for the road as well as the relocation of the utilities along the corridor. It is not clear from the Ministry of Finance booklet what the total anticipated cost is for these expenses of the NROCC and how they will be funded.
NROCC currently has long-term loans of some $71 billion, a share capital of $1 - one Jamaican dollar - and accumulated losses of just under $50 billion.
There are no financial projections at hand for NROCC that would indicate how this company is going to service its debts - and pay for the land to be purchased for the toll road - and become economically viable. Much of its borrowed funds are in hard currency, thus creating annual foreign exchange losses.
Caymanas Track piles up losses
The budget for Caymanas Track Limited (CTL) projects it losing just under $20 million in 2014-15 - continuing the losses of $112 million in the previous two years.
Its total revenue has grown eight per cent over the last two years, the value of purses it pays out by just under four per cent, and its staff costs by 16 per cent. It was incorporated in 1990 and is wholly owned by the Government of Jamaica.
CTL hopes to export local races to the Jamaican diaspora. It employs 360 persons. The chairman of Caymanas Track and the chief executive officer need to get it divested as soon as possible. Its financial results are abysmal.
Strange finances of the USF
The Universal Service Fund (USF) plans to lose more than $900 million during this financial year, largely due to spending of $1 billion on tablets for students in 37 schools. Other project costs include almost $450 million for wi-Fi in schools and for the improvement in the broadband network. The tablet project will be managed by E-learning Jamaica Limited
The Universal Service Fund has receivables (from whom?) of $8.6 billion, a figure that has been static from 2012-13. No information is made available as to details of this receivable. It seems a very large number, considering the total income of the USF is projected as under $1 billion.
The finances of this entity can best be described as strange.
The USF is part of Mr Paulwell's ministry and has as its CEO Hugh Cross. It is perhaps surprising that its attractive website does not appear to contain any financial data.
This column intends to review the audited and in-house accounts and reports of companies and entities owned or influenced by Government. Readers are invited to add their Comments after this article on Gleaner Online.