Berbice River tolls can be substantially reduced

Introduction
The Demerara Harbour Bridge is vested in and operated by a public corporation, while the Berbice Bridge was built and is operated by the Berbice Bridge Company Inc, a private company under a Build, Operate and Transfer Agreement. The Demerara Bridge was constructed under the Burnham administration in 1978 and vested in a public corporation in 2003. The toll for a motor car to cross the Berbice River is $2,200. The toll to cross the Demerara River is $100. There does seems something quite inequitable in such an arrangement and one wonders why a government that draws so much of its support from Regions 5 and 6 would subject its residents to the kind of high fares that the private company charges.

By now, everyone is aware that the country has long come out of an IMF arrangement and even if the bridge was constructed when Guyana was under such an arrangement, the Jagdeo administration was still willing to defy the IMF and World Bank to build the ill-fated Skeldon Sugar Factory, and the stadium. And we have been willing to invest in a $3 billion fibre-optic cable, a specialty tourism hospital and a hotel.

Ghost town
Since the bridge opening in late 2008, business in New Amsterdam has fallen off dramatically. Understandably, if not entirely justifiably then, the local business community is attributing many of the problems facing them first to the location of the bridge and second, to the high tolls charged by the Bridge Company. When I met last Thursday with members of the Berbice business community they complained about the refusal of Chairperson of the Bridge Company Ms Geeta Singh-Knight and her directors to give them an audience and to discuss the effect of the company’s high tolls on their businesses. Indeed, they pointed out the irony that businesspersons from Georgetown are now doing better and brisk business in Berbice, to the detriment of the Berbice businesses. According to the persons I met, the effect of siting the bridge at D’Edward has made New Amsterdam into a ghost town at night.

But notwithstanding their arrogance and insensitivity to Berbicians, the directors – all of whom are Georgetown-based – can do nothing about the location of the bridge. That, according to both government critics and observers, was loaded with political considerations. If the bridge was placed further upriver, traffic would have had to pass through unfriendly villages and the town of New Amsterdam which has never had a warm relationship with the PPP/C. And this was before President Jagdeo described its Mayor in language most inappropriate for Business Page.

The government on the other hand argues that politics had nothing to do with it. That it was about cost. That if the bridge was built further upriver, the capital cost on new roads and the likely logjam in New Amsterdam would have been intolerable. In any case those arguments are moot now: the bridge is where it is and there is nothing the directors or anyone else can do about it.

Addressing the high tolls
Ever since October 16, when in the Business Page column I reviewed the Bridge Company’s annual return and the 2010 financial statements, I have been studying how the second issue – the high tolls – can be addressed. I am more than ever convinced that the legal structure, nature of ownership and the financing model are the cause of the high tolls. The 2010 audited financial statements show that the company had assets of $8.9 billion of which only $400 million was put up by equity shareholders with the remaining $8.5 billion coming from high cost, interest bearing debts, namely, 950 million Preference Shares with a return rate of 11% and redeemable at increasing percentages after year fifteen; Subordinated Loan Stock – $1,250,000,000, repayable 2026; Bonds Tranche 1 – $3,050 million at 9% maturing 2013; Bonds Tranche 2 – $2,525 million at 10% maturing 2017 and Loans – $450 million.

 

The result is that the company has to pay over $800 million annually in interest alone. Because of the business model and financial structure of the Demerara Harbour Bridge Corporation, that corporation has no debt financing and therefore no interest cost. A similar model for the Berbice Bridge would therefore save upward of $800 million which can then be applied to lowering the tolls.

Savings
My recommendation is for the government to buy over the debts paying by way of Treasury Bills at lower rates of interest to reflect the lower risk of government paper compared with private sector loans to a company whose projections had shown it would be a high risk investment. To the question of why the government should assume the debt, the answer is why should Berbicians be subjected to a model that is different and more costly than that in Demerara?

 

Some even argue that road users pay no toll and it is unfair for those who live in an important region of the country to have to bear costs which others do not have. The government pays for the roads often with borrowed funds so there is nothing unusual or burdensome about the government carrying the cost via the public accounts.

Readers of this column would also be aware that the investors in the company enjoy the widest range of tax concessions paying no corporation tax, income tax and withholding tax while the company enjoys additional exemptions from customs duty, VAT, etc. In public finance, tax concessions are treated as a cost so the government has a saving, albeit a non-cash one.

 

Legal structure
The other problem lies in the legal structure and the nature of ownership of the Berbice Bridge Company. It is a private limited company incorporated under the Companies Act 1991 and operating under a Concession Agreement for twenty-one years. This means that all the company’s investment in the bridge has to be recovered within that period, for which the clock is already running. In other words, since the right to operate the bridge ends in twenty-one years, the investment must be written off over that period. That gives an amortization charge of roughly $500 million. Again, if we look for a comparison with the Demerara Harbour Bridge we note that in the 2003 Act creating the corporation, the bridge was vested at a nil value. Apparently the Demerara Harbour Bridge Corporation does not file its annual report and accounts in the National Assembly and I am therefore unable to say whether, subsequent to vesting, it revalued the bridge and has been taking depreciation on it.

 

My recommendation is that after paying the investors, the government should vest the bridge in a new entity, at nil or at a value lower than the cost. This would allow for a substantially reduced depreciation or indeed none at all, with the savings going to the users of the bridge. An alternative suggested by my partner is vesting at full cost but for the government to make an annual grant to the entity equivalent of the depreciation charge. That seems eminently sensible, since commercial entities like the Chronicle and NCN are given annual subventions with much less justification.

Putting aside money
The other point of considerable significance arises out of what I referred to earlier: the duration of the Concession Agreement which incidentally has not been tabled in the National Assembly or ever released to the public. It means that apart from the annual interest, the Berbice Bridge Company would have to repay all borrowings and preference shareholders at agreed times but no later than at the end of the concession period.

 

What the Bridge Company requires is to set up a sinking fund account into which it places sufficient cash to ensure that it can meet its obligations as the repayment of the borrowings becomes due. For example, in another two years, the company has to find $3,050 billion to pay the investors in the Tranche 1 Bonds, on pain of penalty. The company clearly will not be able to do so (it had practically no cash balance at December 31, 2010), and will have to roll over the debts. Four years later, Tranche 2 of $2,525 million becomes due and it will also not be able to meet those obligations.

As the end of the concession period approaches, the company will find increasing difficulty in persuading anyone to lend it any money, let alone billions of dollars. From the October 16 Business Page, readers would have noted that the government was forced to waive hundreds of millions of dollars on its preference shares, just so that the company could pretend that it was meeting its other obligations. In fact it was only able to do so by the very dubious and possibly illegal waiver by the government.

Would the government have to waive that more than one hundred million due to it every year and would it also waive the redemption of the preference shares which become due in three years after the second tranche bonds? The Berbice Bridge Company seems to be a walking insolvent company and shielding it from that embarrassment is not only financially sensible but will allow any successor operator to charge considerably lower tolls and yet be solvent.

 

Looming clouds
In its present form the company requires about $1550 million annually to meet its annual operating costs, the interest and dividends payable to investors, and future loan obligations. In 2010, its total income was $1,115 million, a shortfall of $435 million. The company’s only hope for survival is that traffic would increase by an improbable 50%, or that it can increase tolls by that amount. That would surely be unacceptable, even for Berbicians.

 

Ramon Gaskin had predicted this situation more than five years ago when Winston Brassington was trying to twist the arm of the New Building Society directors to invest $2 billion in the bridge. The directors agreed with his assessment and it was only when Dr Nanda Gopaul became Chairman that the NBS bought over some $1.5 billion dollars in bonds held by the sinking Clico. I do not believe that we have heard the last of that investment.

Conclusion
Despite substantial subsidies, the bridge is uneconomic for the body of investors as a whole, and most especially the government in the form of exempted taxes running into further hundreds of millions of dollars and in waivers of Preference Shares Dividends. The high cost necessitates an unbearable burden on the users of the bridge in the form of tolls.

Even at, or because of the high tolls, the company will continue to have significant shortfalls to cover annual expenditure and current and future debt obligations. In the medium to long term the company would only be able to repay loans by further borrowings and would be insolvent, ie unable to pay its debts at the time of its contractual handover. The cost of the bridge to users and especially Berbicians is both economic and social.

My recommendation for reducing the high debt cost of the Bridge Company is stated above. Additionally, instead of paying NICIL (or one of its satellites) for the $950 million in redeemable shares it holds, these can be converted to ordinary shares which will attract dividends.

Organisationally, I also recommend the establishment of a national Bridges Authority out of the separate entities. This single entity will own and operate all publicly owned bridges in Guyana enjoying the benefits of shared expertise and management.

 

Finally, I recommended in my presentation to the Berbice businesspersons the following toll charges:

My numbers indicate that the new entity will make in one year a surplus of $79 million at the proposed tolls, if the government, having bought out the investors, vests the bridge in the new entity at 50% of its cost. If it is vested at an even lower value the tolls can be reduced even further.

Original Post
Originally Posted by skeldon_man:
Originally Posted by TK:

The plan makes a lot of sense to me. The AFC should adopt it. 

The AFC should disappear.

It will not disappear...it will continue to be a 7 to 10 seat party. That is a great accomplishment in itself. The PPP is never seeing 50% again. However the PPP has the bastardized Burnham Constitution that will allow them to continue to expropriate the monies of the working class even with 45%, which is what they will get in the snappy election. 

Ramjattan and Nagamootoo were key participants in the Bbice bridge project. Now they take their shyte and try to daub it in Ramotar's and the pPP rear. ahahahahah

 

The bridge was built on the condition that private participants along with govt provide the funding with an agreed upon rate of return to recoup from their investment. This is how capitalism should work. Now you people really believe this contract can be broken because C Ram says so?

Originally Posted by TK:
Originally Posted by skeldon_man:
Originally Posted by TK:

The plan makes a lot of sense to me. The AFC should adopt it. 

The AFC should disappear.

It will not disappear...it will continue to be a 7 to 10 seat party. That is a great accomplishment in itself. The PPP is never seeing 50% again. However the PPP has the bastardized Burnham Constitution that will allow them to continue to expropriate the monies of the working class even with 45%, which is what they will get in the snappy election. 

How can you settle for anything less than a majority? You speak as if you are already defeated.

Originally Posted by BGurd_See:

Ramjattan and Nagamootoo were key participants in the Bbice bridge project. Now they take their shyte and try to daub it in Ramotar's and the pPP rear. ahahahahah

 

The bridge was built on the condition that private participants along with govt provide the funding with an agreed upon rate of return to recoup from their investment. This is how capitalism should work. Now you people really believe this contract can be broken because C Ram says so?

This bridge is the best thing the PPP built for the Berbicians. God bless the PPP and hope they will rule for another 99 years.

Originally Posted by skeldon_man:
Originally Posted by TK:
Originally Posted by skeldon_man:
Originally Posted by TK:

The plan makes a lot of sense to me. The AFC should adopt it. 

The AFC should disappear.

It will not disappear...it will continue to be a 7 to 10 seat party. That is a great accomplishment in itself. The PPP is never seeing 50% again. However the PPP has the bastardized Burnham Constitution that will allow them to continue to expropriate the monies of the working class even with 45%, which is what they will get in the snappy election. 

How can you settle for anything less than a majority? You speak as if you are already defeated.

===

 

That's because I already make a good living for myself...I don't have sleepless nights for minista wuk. I just want to see the best for Guyana. In the absence of getting rid of the bastardized Burnham Constitution, which Ramotar said he loves, the AFC is the best game in town. 

Why I cannot support David Granger

Dear Editor,

 

That I supported David Granger and the APNU+AFC coalition in the 2015 elections is a matter of public knowledge. Neither conscience nor logic nor reason allows me to do so again.

As a leader with a nought point one three per cent, and a one-seat majority in a hugely bifurcated society, instead of fostering national healing and reconciliation, Granger has been more divisive than disappointing. Instead of policies and strategies to bring the communities closer, he, his government and several of his high level appointees have shown, at best, an insensitivity to ethnic concerns and at worst, a tendency towards narrow ethno-centric policies. For a still poor country, the pattern of public spending during the period and accentuated in this campaign season, is nothing short of reckless. Where competence is required, he has preferred loyalty. While laying claim to integrity and decency, he has shown that he is as willing to engage in cheap posturing and politics as the most opportunistic politician around. Most of all, Granger has shown contempt for and continues to display arrogance and superiority for the country’s Constitution and the rule of law.

His grand vision has been breakfast, bicycles, boats and buses, the sort of things you leave to local authorities, or a reasonably funded charity. He has no problem with his picture on flags financed by unaccounted and possibly tainted money, taking up public space, abuse of state resources to campaign for re-election on a platform of integrity, taking the bully’s position when the courts rule against him, and breaking written promises and pledges.

 

His administration has retained all the Afro-Guyanese permanent secretaries inherited from its predecessor while removing almost all the rest. The result is that Indo-Guyanese are barely represented among PS’s and in the public service as a whole. Of the scores of senior positions in the State sector, less than ten per cent represent the other community. Granger personally relieved two prominent active persons – Cecil Kennard and Prem Persaud – because of age while unconstitutionally/ unlawfully appointing two individuals – James Patterson and Professor Clive Thomas – with even more pronounced characteristics. The professional and business class of Guyana can fend for themselves but the treatment of sugar workers has been nothing short of cruel and inhumane.

Taking advantage of the media’s softness and silence, Granger’s government has shown a stubborn refusal to disclose the full details of a number of projects including the Durban Park project, the Sussex Street drug storage facility, the Mazaruni Prison reconstruction, contracts without proper approval and money for politicians, their family, friends and supporters.

For all the taxes his administration has raised and tons of money spent, Granger’s five years in power has revealed a man of poor judgment, weak leadership and low achievement. He did show cunning on his belittling of the AFC whose greed for power guaranteed that nothing could cause them raising off their knees. And in his appeasing of the WPA, which for years grumbled about bad faith and breach of trust. Having broken the promise of free collective bargaining in the public service, stood aloof of the struggle between an oppressive foreign employer and its employees, and ignored the labour movement as a whole, he has managed to have the president of the TUC on his party list – unprecedented in Guyana.

Mr Granger now singlehandedly appeals to the same electorate to ignore his grave violations of the law and several broken promises because this time his promises represent a sacred contract. Having failed them in the past, he seeks to entice them in the present. Granger now talks up the agriculture and gold mining sectors as shining stars while not too long ago, he listed them among curses. Having thrown thousands of sugar workers to the ranks of the unemployed and the desperate, his administration scurries to distribute sugar lands for peanuts. He and his party now fly to visit the hinterland appealing for votes from the Indigenous People who were described by his party functionaries as “greedy.”

 

Mr Granger shares a special relationship with Raphael Trotman, the man directly responsible for the biggest give-away this country has ever seen and who is now Co-Chairman of Granger’s Re-election Campaign. He appointed the largest government in the history of this country which just happens to be the most incompetent. Think of former attorneys general such as Burnham himself, Ramsahoye, Ramphal, Shahabudeen, Fred Wills and Keith Massiah and the contrast with the incumbent is clear. As ministers of finance, think of Peter D’Aguiar, Ptolemy Reid, Frank Hope, Desmond Hoyte, Bharrat Jagdeo and Ashni Singh: again the contrast is striking. Prime Minister Moses Nagamootoo has been largely a sinecure and warrants no comparison while Khemraj Ramjattan, whose portfolio has been halved, has performed several times as badly as even his more ordinary counterparts, let alone Fenton Ramsahoye, Ptolemy Reid, Desmond Hoyte and Stanley Moore.

Granger cannot be blamed for the incompetence of others. But he cannot escape responsibility for appointing and retaining what is at best mediocrity. A measure of the low rating which Granger places on the national interest is his appointment of a single unsuitably qualified person to head the petroleum sector instead of pursuing the Petroleum Commission, which his government tabled and then allowed to die with the dissolution of Parliament.

But Granger’s greatest danger is his contempt for the Constitution and our laws, with threats of more to come. There has been no Judicial Services Commission or fully constituted Procurement Commission for some time, while many other constitutional bodies were appointed inordinately late. He unconstitutionally appointed James Patterson to head GECOM and never relented until the CCJ forced him to; he defied the National Assembly’s No Confidence Motion – not because he believed that the majority of 65 is 34 but because, as he told his supporters, “they elected him for five years and he would be president for five years.” And now he threatens to remove the National Assembly’s power to have a Motion of No Confidence, and warns people of his constitutional power to strip them of their citizenship.

The recitation of all the above, which is only part of the story, leaves one to wonder whether he as president will ensure free and fair elections, elections that are free from fear and intimidation, and whether he will obey the will of the electorate. There is no evidence for me to have those same fears about the other parties contesting these elections. I am as fearful in 2020 as I was hopeful in 2015.

 

Yours faithfully,

Christopher Ram 

 
Dave posted:

Why I cannot support David Granger

Dear Editor,

 

That I supported David Granger and the APNU+AFC coalition in the 2015 elections is a matter of public knowledge. Neither conscience nor logic nor reason allows me to do so again.

As a leader with a nought point one three per cent, and a one-seat majority in a hugely bifurcated society, instead of fostering national healing and reconciliation, Granger has been more divisive than disappointing. Instead of policies and strategies to bring the communities closer, he, his government and several of his high level appointees have shown, at best, an insensitivity to ethnic concerns and at worst, a tendency towards narrow ethno-centric policies. For a still poor country, the pattern of public spending during the period and accentuated in this campaign season, is nothing short of reckless. Where competence is required, he has preferred loyalty. While laying claim to integrity and decency, he has shown that he is as willing to engage in cheap posturing and politics as the most opportunistic politician around. Most of all, Granger has shown contempt for and continues to display arrogance and superiority for the country’s Constitution and the rule of law.

His grand vision has been breakfast, bicycles, boats and buses, the sort of things you leave to local authorities, or a reasonably funded charity. He has no problem with his picture on flags financed by unaccounted and possibly tainted money, taking up public space, abuse of state resources to campaign for re-election on a platform of integrity, taking the bully’s position when the courts rule against him, and breaking written promises and pledges.

 

His administration has retained all the Afro-Guyanese permanent secretaries inherited from its predecessor while removing almost all the rest. The result is that Indo-Guyanese are barely represented among PS’s and in the public service as a whole. Of the scores of senior positions in the State sector, less than ten per cent represent the other community. Granger personally relieved two prominent active persons – Cecil Kennard and Prem Persaud – because of age while unconstitutionally/ unlawfully appointing two individuals – James Patterson and Professor Clive Thomas – with even more pronounced characteristics. The professional and business class of Guyana can fend for themselves but the treatment of sugar workers has been nothing short of cruel and inhumane.

Taking advantage of the media’s softness and silence, Granger’s government has shown a stubborn refusal to disclose the full details of a number of projects including the Durban Park project, the Sussex Street drug storage facility, the Mazaruni Prison reconstruction, contracts without proper approval and money for politicians, their family, friends and supporters.

For all the taxes his administration has raised and tons of money spent, Granger’s five years in power has revealed a man of poor judgment, weak leadership and low achievement. He did show cunning on his belittling of the AFC whose greed for power guaranteed that nothing could cause them raising off their knees. And in his appeasing of the WPA, which for years grumbled about bad faith and breach of trust. Having broken the promise of free collective bargaining in the public service, stood aloof of the struggle between an oppressive foreign employer and its employees, and ignored the labour movement as a whole, he has managed to have the president of the TUC on his party list – unprecedented in Guyana.

Mr Granger now singlehandedly appeals to the same electorate to ignore his grave violations of the law and several broken promises because this time his promises represent a sacred contract. Having failed them in the past, he seeks to entice them in the present. Granger now talks up the agriculture and gold mining sectors as shining stars while not too long ago, he listed them among curses. Having thrown thousands of sugar workers to the ranks of the unemployed and the desperate, his administration scurries to distribute sugar lands for peanuts. He and his party now fly to visit the hinterland appealing for votes from the Indigenous People who were described by his party functionaries as “greedy.”

 

Mr Granger shares a special relationship with Raphael Trotman, the man directly responsible for the biggest give-away this country has ever seen and who is now Co-Chairman of Granger’s Re-election Campaign. He appointed the largest government in the history of this country which just happens to be the most incompetent. Think of former attorneys general such as Burnham himself, Ramsahoye, Ramphal, Shahabudeen, Fred Wills and Keith Massiah and the contrast with the incumbent is clear. As ministers of finance, think of Peter D’Aguiar, Ptolemy Reid, Frank Hope, Desmond Hoyte, Bharrat Jagdeo and Ashni Singh: again the contrast is striking. Prime Minister Moses Nagamootoo has been largely a sinecure and warrants no comparison while Khemraj Ramjattan, whose portfolio has been halved, has performed several times as badly as even his more ordinary counterparts, let alone Fenton Ramsahoye, Ptolemy Reid, Desmond Hoyte and Stanley Moore.

Granger cannot be blamed for the incompetence of others. But he cannot escape responsibility for appointing and retaining what is at best mediocrity. A measure of the low rating which Granger places on the national interest is his appointment of a single unsuitably qualified person to head the petroleum sector instead of pursuing the Petroleum Commission, which his government tabled and then allowed to die with the dissolution of Parliament.

But Granger’s greatest danger is his contempt for the Constitution and our laws, with threats of more to come. There has been no Judicial Services Commission or fully constituted Procurement Commission for some time, while many other constitutional bodies were appointed inordinately late. He unconstitutionally appointed James Patterson to head GECOM and never relented until the CCJ forced him to; he defied the National Assembly’s No Confidence Motion – not because he believed that the majority of 65 is 34 but because, as he told his supporters, “they elected him for five years and he would be president for five years.” And now he threatens to remove the National Assembly’s power to have a Motion of No Confidence, and warns people of his constitutional power to strip them of their citizenship.

The recitation of all the above, which is only part of the story, leaves one to wonder whether he as president will ensure free and fair elections, elections that are free from fear and intimidation, and whether he will obey the will of the electorate. There is no evidence for me to have those same fears about the other parties contesting these elections. I am as fearful in 2020 as I was hopeful in 2015.

 

Yours faithfully,

Christopher Ram 

 

One has to be completely devoid of reasoning to reject any of Ram's arguments above.

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