Sewage problem leaves hole in budget

(CNS): Government's failure to sell off the Water Authority’s sewerage treatment system as planned for this financial year will increase the deficit it is likely to face at the end of the fiscal year. Government had already announced an expected deficit for 2011/12 at a recent Finance Committee meeting but continued problems with the tendering for the sewerage has delayed the sale and means that the $20 million government was expecting to come from the sale will cause a hole in the budget. The governor said on Friday evening that there was little chance of the divestment being made before the end of this financial year.

The civil service will now be under greater pressure to cut public spending to plug the growing deficit, given that government cannot borrow further cash and must comply with the parameters of the Financial Framework Agreement the premier signed with the UK. The agreement and the UK minister have also pointed to the need for good governance.

“There is a very clear process set out on the divestment of assets and the first stage would be a clear business plan,” Governor Duncan Taylor said about the sewage treatment sale, which has already been subject to a tendering process but which was stopped as a result of queries raised by ministry officials, the Water Authority Board and the Central Tenders Committee (CTC).

The governor implied at a press briefing on Friday evening that the divestment of that asset or the Water Authority in general would have to be re-tendered. He said that any divestment of public sector assets had to be conducted under a specific process. The UK does not object to the principle of the Cayman government selling assets to raise revenue when there is a business case but it had to be in line with the commitments made in the framework.

Taylor also stated that how government would fill the hole this created would be a matter for the premier. He said the deputy governor was looking very hard at ways to cut public sector spending.

The government has been planning to sell off the public sewerage system since it was elected but there have been a number of issues and allegations of problems and irregularities surrounding the bids.

According to minutes released under the FOI law, government was recently still putting pressure on the board to divest the sewerage before the end of this financial year.  In his role as minister of finance, Mckeeva Bush had planned to raise close to $60 million from the sale of public assets in this financial year and the money from the Water Authority was earmarked for completing the school projects.

See related article:

Sewerage bids in re-review