Our Port in a Storm

By G.A. Dwyer Astaphan

For those of us who hadn’t known before, this was revealed in a Report by SCASPA’s Chief Financial Officer in January of this year (the month of the general elections) which seemed to have been kept under tight wraps until its recent appearance on the St. Kitts-Nevis Internet Chat List.

The Report, entitled “The Way Forward, Financial Solutions ‘ says that as at December 31st,2009 the overall debt of  SCASPA was $160.1 million, while other sources reveal that as at September 17th, 2010 the debt stood at about $180 million.

The Report also states, at page 16 that “…the Authority finds itself in a situation where its current debt service requirements exceed the level of its operating cash flows.”
 
From 2004 to the present, SCASPA has lost money every year, with the total for that period alone being over $70 million, and counting. And, according to the Report, SCASPA would have to try to borrow at least an additional $33 million over the next three years, and urgently have its debt refinanced.

SCASPA seems to be under threat of defaulting on its debt obligations. And if SCASPA, which is a Government corporation, defaults, would that also be considered as a default, even a technical default, by the Government?

One way or the other, it poses extremely serious problems for SCASPA, for the Governmen and for the country. This is a desperate situation. A Category 5 storm.

Now apart from all of the other difficulties, finding someone decent to lend money to, and refinance the debt of, an enterprise with such a poor track record, and which is in such deep trouble, will be a major task. Perhaps even unrealistic.

And would a lender look to the Government for a guarantee to cover SCASPA’s debt? If so, what value would such a guarantee have, given the weak fiscal and financial condition of the Government itself? Indeed, is the Government even able to give such a guarantee? The IMF is watching!

Further, if a lender were to be found, he (or she, or it) would probably pounce on the vulnerability and desperation of SCASPA and the Government, and end up with a sweetheart deal that would only further compromise and humiliate the people of this country.

And that is not what people elect Governments to do.

Can we ever reach the point where we’re such an attractive and respected society, jurisdiction and economy that investors would feel that they’re missing a glorious opportunity if we aren’t, in some good way, involved in helping them grow their wealth and their happiness, and they ours? Can we ever reach the point where we don’t have to give away the shop in order to attract major capital investment?

The answer to both questions is yes, but only if the people of this country become more responsible and independent-minded, and insist on higher standards from ourselves and from our leaders.

We would be more than naïve to simply expect, or even hope for, efficient, transparent and responsible leadership. We have to demand it. And whatever we expect, hope for or demand from others, we must first possess it and demonstrate it.

Meanwhile, I’m sure that we would all be keen to learn how much revenue is lost to SCASPA each year as a result of concessions, deals and ‘freeness’ that have been granted by the Government.

Perhaps the Report failed SCASPA, the Government and the country by not providing an estimate of the revenue losses.

Perhaps the Report could also have included the list of persons who owe SCASPA and the amount that they owe. And although it did indicate that SCASPA would be pursuing debt collections vigorously, we have little reason to believe, based on the modus operandi to date.

The country must have and must demand the details. Pressure must be applied, and relentlessly, here and everywhere else, if we truly want Government of, by and for the people.

Now in addition to the further borrowing and debt refinancing story, and the debt collection story, some of the other measures proposed in the Report to deliver SCASPA out of this Category 5 storm appear to be also very wishful, and maybe even unrealistic.

I’ll look at some of them.

Firstly, Cruise tourism arrivals are up. That’s a good thing. But how does that translate into dollars for SCASPA? The Report should have shown what revenues SCASPA has been getting from the Cruise sector, as well as the projected returns to SCASPA from the macroeconomic impact of the growth of the sector.
 
This would have helped us to see where the money, or at least some of the money, would come from to pay for the construction of a second cruise pier (a project that could cost at least US$12 million), for the servicing of debt generally, and for other measures to become operationally buoyant.

But if no significant revenue can be shown to make that pier a reality, then SCASPA will have to try to borrow the money. Again, I ask: From whom, and how?

I know that a few years ago, RCCL, the world’s second largest Cruise Line, was interested in partnering the Government in building a second pier at Port Zante, but a number of issues were unresolved and RCCL walked away in frustration and disgust. Perhaps they are, or can be brought, back on board.

Secondly, the Report shows that there has been a steady decline in passenger and cargo movements at the Robert L. Bradshaw Airport since 2005.This is troubling because over that same period the Government has increased airlift and seat capacity into St. Kitts.

And something must be wrong if seat capacity has increased yet actual passenger movements have decreased.

This means that money is being wasted, or lost, or both. Further, over that same period, Government’s financial obligations and its indebtedness to the airlines have increased.

The people have the right to know the details of this too. It’s we who are in debt.

Now what has helped to buttress the RLB Airport revenue since late 2008 has been the Passenger Facility Charge. But this charge has been applied to a reduced pool of passengers. And putting more and more charges on less and less passengers and cargo will serve only to exacerbate the problem.

SCASPA and the Government will, therefore, have to be mindful of the two most important revenue sources, namely, passengers and cargo. It is their numbers that must go up.
 
Thirdly, the economy is down, and there are no signs of a recovery in the short term. Accordingly, with less cargo through-put at SCASPA and less revenue for it, pressure will mount on SCASPA to service its debts.

One of its cost savings steps is the offering of a severance package to all of its employees (except those on contract). I’m told that it has borrowed $10 million from the Sugar Industry Diversification Foundation (SIDF) to pay off these workers and to take care of some other matters.

Would you believe that SCASPA has 420 employees and a payroll bill of $500,000.00 a month?

In 1996, there were 86 employees. Then the Labour Government decided to add dock workers and operators to the staff complement. And after 9/11, the security numbers were increased to about 110.

I’m told that 223 employees have accepted SCASPA’s severance package offer. This is expected to realize savings for the Corporation. But before we come to any conclusions on this, we need to see an analysis, and the Report was of little help in this regard.

Meanwhile, SCASPA  is concerned, even surprised, that so many employees have opted for the separation package, and it now finds itself confronted with some transition and other issues which it hadn’t anticipated.

Regarding security, I understand that a present Board member and a former SCASPA security manager have set up a business which will get the security contract, and while I don’t begrudge anyone getting work, I think that this should be done fairly and transparently.

In this regard, it might be helpful if consideration were to be given to an arrangement under which off-duty personnel from Government’s security agencies would provide that security to SCASPA.

They need additional the income, and SCASPA, a Government entity, needs the security. Indeed, this arrangement can be extended to security services for other Government facilities (such as hospitals, schools, and so on).

Let me end on the major reason for SCASPA’s staff reaching 420. It has to do with the way in which the Prime Minister does things.

First, it must be noted that he was the Minister responsible for SCASPA for the most part between 1995 and the present. He steered SCASPA into the middle of this Category 5 storm. And even if he hadn’t been the Minister, he would have dealt with it as if he was, because that’s how he operates. Fact of life!

Now with regard to his constituency, he set up separate entities, under his direct command and control, to develop and market White Gate and La Vallee. And they failed. And while Beaumont Park has been trying its best, Kittitian Hill remains flat thus far.

So the wave of jobs that he (and the rest of us) had hoped for from these projects never materialized, and he had to look elsewhere to place his constituents.

SCASPA was one of those places. So many were sent there that I wouldn’t be surprised if 275 to 300 (about 65-70%) of its 420 workers are from his constituency.

And while I am happy to know that these good folks from Constituency 6 were able to get jobs (Lord knows, they have suffered), the fact is that many of them ended up working the Port and elsewhere in town (which meant longer hours away from home and greater expense for commuting) only because of the costly failures of White Gate and La Vallee particularly.

And, inter alia, it is through his failure to deliver on those projects that he forced SCASPA into virtual bankruptcy. One Category 5 financial and fiscal storm after another, each catastrophically impacting the other, and, in the process, the entire economy and nation.

And now, with some separation dollars in their hands (which will disappear in time if there is no income, because there are bills to be paid), with jobs more difficult to get in this bad economy, and with many of them now having to struggle harder to maintain themselves, their families and their homes, what is to come of them?

Of course, the same questions will apply to the severed workers who live in other constituencies, because they and their families will all face the same plight.
 
Will they now begin to ask questions about White Gate and La Vallee, and the other projects which had been promised as saviours? And about the national debt, transparency and good governance? Will they still think that it’s working?

And will Manchester, Sebastian, Solomon, Nathan, Halbert, Challenger, France, Bradshaw, Southwell and others now have to come out of their graves to tell us that this is not Labour’s way, that we have been led astray, and that it’s up to us, and only us, to take ourselves out of the path of this one-man storm that now threatens to decimate us?