Cooper said there is no clear plan to save the Grand Bahamian economy with the purchase of Grand Lucayan Resort


Contribution To Resolution On Grand Lucayan Chester Cooper, Exumas And Ragged Island MP September 20, 2018:

Exuma and Ragged Island MP Chester Cooper arrives at the House of Assembly to destroy the FNM Government. – FILE PHOTO (Photo by Torrell Glinton)

Mr. Speaker, before I embark on the meat of my contribution of behalf of the people of Exuma & Ragged Island who I am grateful to represent, I begin with two statements of concern:

Firstly, I am greatly concerned about the state of Grand Bahama and her people. Grand Bahama is hurting. Plagued with high unemployment, the island needs new investment, new opportunities, new jobs and new growth. Each time I visit my heart aches at the many signs of economic decay on the island and the adverse impact on families that I observe. I am, therefore, deeply sympathetic.

Secondly, notwithstanding the drips of information and misinformation by actors in this ordeal in the press, it took a formal request of the Leader of the Opposition to provide the document at the heart of this matter, the sales purchase agreement for the property. It’s a voluminous document that we just got yesterday, the day the debate started. Also, the government never saw fit to brief the opposition on the finer points of this deal. They simply threw a bunch of paperwork at us and suggested “happy hunting”. I wonder if this goes beyond simple political immaturity and unpreparedness and an affront to our parliamentary process. I wonder if it goes deeper, into the region of perhaps there is something to hide.

I remind the side opposite that they marched for freedom of information.

In any event, we are here today to debate a resolution to issue a government guarantee for a $35 million mortgage to purchase the Grand Lucayan in Grand Bahama.

Since this is clearly a fate accompli, as the government has already paid out $30 million of the Bahamian taxpayer’s hard-earned money to start this purchase, which seems rushed and ill-advised and a slap in the face, quite frankly, since we can’t exactly walk away from the $30 million already paid, I will offer my observations in the hopes that others will perhaps be able to analyze, learn and listen when this stubborn administration will not.

Let me say from the outset that the government appears to be most disingenuous in how it has frame this deal in trying to explain it to the Bahamian people. I believe this deal will ultimately cost taxpayers at least $100 million. I’ll go through the math in my contribution, but it immediately strikes me as counter to the government’s own cries for fiscal responsibility. If what we can see on the surface of this deal doesn’t cry fiscal irresponsibility, I don’t know what does.

The government says they want to do the right thing for Grand Bahama.

This purchase, in my opinion, Mr. Speaker, is not about saving the Grand Bahamian economy, as there is no clear plan presented to do that. I’ve heard nothing that addresses the fundamental challenges of the Tourism product in Grand Bahama.

This purchase is not about helping the people of Grand Bahama, in my opinion.

This purchase, it appears to me, is all about the prime minister’s ego.

I believe it is about an FNM desperate to deliver on something, anything, for Grand Bahama, given its lofty campaign promises, no matter what the cost.

I note a comment made by the prime minister, the member for Killarney, on the sidelines of an event at the National Training Agency on Monday, that the opposition’s job is merely to oppose, and the opposition is only focused on the negative.

A most arrogant statement from a member, who only a few short months ago, stood in this chamber and admitted, as massive public outcry and derision took hold, that mistakes were made with the Oban deal.

The same Oban deal a Cabinet subcommittee is reportedly restructuring after the member for Killarney tabled it with much fanfare and confidence in this House.

I have no confidence in this administration, Mr. Speaker.

It has proven brash and quick to mislead without first gathering the full facts.

It seems clear to me, that the people of Grand Bahama have no confidence either.

The people of The Bahamas have also lost confidence, in my view, and this is in part evidenced by the lack of enthusiasm in this deal.

I wonder now, if we are being presented with the full facts in this scenario.

Yes, Grand Bahama needs help.

Yes, Grand Bahamians need help.

But so does Exuma and her people.

So does Eleuthera and her people.

So does Abaco and her people.

So does Ragged Island and her people.

Ragged Island, decimated by a storm more than a year ago, and still characterized by this administration as unlivable while the residents still live there, has been crying out for help, but it was told that there was no money in this budget to help.

Now, more money, no problem.

That there is no talk of any grand intervention on those islands I mentioned to help vendors or any of the other workers or ailing businesses in those communities should be telling.

Many Bahamians right here in New Providence need help as well, but they wait for relief.

Many Bahamians need uniform assistance for their children to attend school, but they were told the government can’t do it all when a $90,000 subvention was being discussed.

Our youth studying at UWI are gravely concerned that they ain’t get their money yet for their tuition and many small vendors and contractors complain that back to school was rough for them as they can’t get paid from the Government.

But there seems no urgency from this administration to help them.

When it comes to the Grand Lucayan and its owners, however, there is fire in the belly of the Cabinet, the People’s checkbook is open and money seems to be no object.

And, clearly, no demand by the owners of this property appears to be too outlandish.

It occurs to me that with five seats up for grabs in Grand Bahama, the government’s concerns may not be as altruistic as the prime minister indicates.

With five MPs from Grand Bahama, two senators, three Cabinet ministers, and one parliamentary secretary from that island, I suppose it not too surprising that they feel pressured to do something.

There is no denying, Mr. Speaker, that the people of Grand Bahama are in need of help.

The question is: Is the government buying this hotel the answer?

I submit that it’s not.

There are many more creative and much, much less expensive ways for the government to help the employees of Grand Lucayan, and the vendors around the resort and the people of Grand Bahama.

Perhaps the government could have subsidized the losses of the hotel until a buyer could be found. It’s paying nearly $2 million to Hutchison to subsidize Lighthouse Pointe now anyway.

Perhaps the government could have instituted a social welfare program tailored to the employees after it forced Hutchison to honor the union’s agreement and pay out severance according to our laws.

Perhaps the government could have insisted that in order for Hutchison to continue to receive the level of concessions it does, then it would have to actively facilitate the sale of this property.

But why bother explaining any of that at this time, to this administration, whose intransigence knows no bounds?

Why bother giving good advice to an administration that won’t listen?

Why expect consideration from an administration that can’t even honor its most basic promise of transparency as it refuses to share details of the sales purchase agreement, the property’s valuation and the investor prospectus with all members of this House, and by extension, the people of The Bahamas?

I offered to help the government find a buyer a few weeks ago, Mr. Speaker.

All I needed was a one-page teaser and requested the same from a member of the Cabinet. It has not been forthcoming, to date.

Mr. Speaker, I previously spoke about the folly of this deal in a press statement to the media.

In that statement, I spoke about the mixed messages from ministers and others involved.

I spoke about the failure of this administration to demonstrate a duty of care by explaining this purchase to the public before this administration spent the people’s money.

I explained that in the face of the fiscal constraints of the government so painstakingly articulated by members of this administration, there is the compelling question of why the government sees the need to insert itself in the middle of a private transaction when they claim there are interested buyers.

Why this course rather than encouraging and facilitating a transaction directly with the seller?

Without details of the deal and clarity on the structure it raises suspicions as to whether the government is removing risk at public expense to line up a deal for its special interests.

Perhaps another deal that will ultimately land in the hands of Friends, Family and FNMs.

Whatever the case, this administration’s bungling has clearly resulted in a sweetheart deal for Hutchison.

And it is starkly clear, and somewhat embarrassing to see, that the government has been outgunned in these negotiations; if you an even call them that.

Why the government has acquiesced to what appears to be onerous terms to which I can see no clear benefit for anyone not named Hutchison, is still beyond me.

This resolution before us, Mr. Speaker, raises more questions than answers.

Here are a few.

Exactly what does this deal do for Grand Bahama?

We have heard such broad concepts, such as “save the economy of Grand Bahama”.

What does that mean in terms of the Grand Lucayan?

Surely the government doesn’t think that this hotel with under 200 rooms, was saving the economy from collapse.

Half the employees now want to leave and are looking for severance from the government. That leaves 200 employees, the majority of whom do not now have full employment there.

How does keeping it open better help the economy of Grand Bahama than many of the other tools at the government’s disposal?

Is there going to be a new injection of capital into the resort and the island or does the administration think it will not lose money in the interim through sheer force of positive thinking when the state is agreeing to pay Hutchison $1 million for its losses on this property?

Why didn’t the government just agree to cover the losses on the property rather than spending $30 million cash, without telling the public, and incurring an additional $35 million debt that it could least afford?

If this property is to quickly change owners, to do a flip, then why is the government inserting itself in the middle of what should be a private sector transaction?

If there is a buyer to flip the property to then why doesn’t the government just bring the parties together and facilitate that transaction?

The Financial Administration & Audit Act 2010 call for any loan entered into by government to receive “prior” approval.

Parts (a) and (b) of the resolution indicate that the government has “paid” $10 million plus another $20 million “paid upon completion date”.

This, in effect, binds the government to take the loan or pay otherwise the additional $35 million.

Can the government lawfully commit to this without the approval of this Parliament? Has the government properly followed the law in this respect?

What they gat to hide, Mr. Speaker?

Revisiting paragraph one. The government clearly understands it cannot guarantee a financial liability without parliamentary approval, but we cannot see the sales purchase agreement to see what was agreed to. Most disgraceful, Mr. speaker.

Again, I ask, has the government followed the law?

The government should have reconvened Parliament over the summer, or, at a minimum, briefed the opposition before committing the country to this course of action.

Paragraph 4 speaks to the purchase price of the property being $65 million.

Was there an appraisal done on this property by a reputable firm before the government entered into an agreement to buy it?

All indications in the press are that there was not.

In fact, press reports indicate that the property was appraised at somewhere in the neighborhood of $57 million before it was hit by the hurricane.

So did the owners collect on their hurricane claim and still get $65 million from the government?

I understand that at least $80 million was paid to Hutchison in insurance claims, not a dime of which, it appears, was spent on any renovations since the hurricanes.

At least $8 million more than the property was appraised at before the hurricane?

Were there any engineering studies done on this property to determine the soundness of the buildings?

My information is that the Memories property needs to be demolished. What would be the cost of this, and how would this impact the value of the property?

What would be the current value of the property in actual market terms today? Again, we do not know. But we can be sure it is not what Hutchison demanded for it.

The sales purchase agreement appears, in clause 1. (c), to allow Hutchison to keep the insurance proceeds from the hurricane and not discount any of this from the sale price.

This means that Hutchison will keep money from the insurance that exceeds the what the government is paying for it.

And it will keep that.

This is unconscionable. The governing side should hang their heads in shame.

Why would the government agree to such an unfair condition? How is this in the best interest of the Bahamian people?

Either you have been taken advantage of, or you are complicit in this nonsense.

It is disgraceful.

Paragraph 7, part c of the resolution speaks to the loan price of $35 million.
This money being borrowed is to be issued in U.S. currency, meaning we will have to pay the exchange rate. It just gets worse the deeper you get.

Where does this put us in terms of the ongoing discussion on foreign debt, and debt overall per the recent budget debate and discussions by rating agencies and local experts?

Where does this additional borrowing and the fact that the government will also have to factor in the $30 million already spent on this transaction put us in terms of the minister of finance’s grand plan to have no deficit within three years?

Speaking of this $30 million, how is it that a government that pledges transparency can make such a major spend without coming to this Parliament in advance?

Again, without even the courtesy of briefing the opposition.

Is this what the Bahamian people can expect for another three years? Will transparency only be the order of the day when it is convenient for this administration?

Mr. Speaker, this resolution is also flawed in that it asks the government to approve funding of $35 million.

Where is the resolution to approve the $30 million already spent?

And the more than one million already given to Hutchison. Are we going to pretend that is not expenditure?

Will the government not come clean with the Bahamian people and seek approval for that spending now? Or will it neglect its own commitments to transparency and try to bring a supplementary appropriation bill for that money at some future date hoping the Bahamian people do not notice?

Where is the resolution for the stamp tax on the mortgage the government has agreed to pay in this lopsided deal?

That’s another $3.5 million? Will they not ask this Parliament to approve that as well? Or are they so careless with the People’s money during this The People’s Time?

My time is limited, Mr. Speaker, so let’s go through some numbers.

The government has already paid $10 million, then $20 million, now it will pay another $35 million on mortgage, with interest.

That’s $65 million. Let’s start there.

Is there stamp tax on this sale, Mr. Speaker?

If so, we can assume from the negotiations so far that the government has graciously relieved Hutchison from paying its fair share of that.

So, that’s another $6.5 million.

Then there’s the interest on the bond, that’s another $2.8 million, if we’re being conservative.

Then there’s the stamp tax on the mortgage we know the government has agreed to pay – that’s another $3.5 million.

Employee obligations that the government has magnanimously agreed to shoulder the responsibility of, are at least another $8 million for back pay and union obligations and severance. Again, I’m being conservative.

The government will pay another $2 million, being extremely conservative, to subsidize Hutchison’s losses until the sale closes.

Let’s not forget this resort is losing millions of dollars every month.

I will tell you that I think the closing will take longer than anticipated and it’ll end up being over $3 million. But I’m being conservative with the People’s money here.

Since we’ve established that the hotel loses $1.5 million per month, let’s multiply that by the six months the government actually believes it will take to find a buyer for the property, plus another two months to close the deal.

That’s another $12 million.

That’s assuming that the government doesn’t feel gracious with the new buyer and cover all the taxes and costs again.

Then there’s legal fees. I think we can safely say that Higgs and Johnson is not working on this pro bono.

That’s 2.5 percent of the transaction. That’s another $1.6 million.

To exchange the money given to Hutchison to U.S. currency with the VAT and stamp tax for that – another half a million.

Now, Mr. Speaker, Hutchison also told the government they can’t have the napkins, or the plates or the cleaning supplies or the toilet paper in the resort that they’re purchasing for $65 million dollars. So they’ll need to replenish that. Let’s be conservative again and say that’s another half a million dollars.

Mr. Speaker, we’re well above $100 million at this point.

So that we’re clear. This FNM administration, that has terminated thousands of employees in its first 12 months, that can’t afford to put basic amenities on Ragged Island, that can’t afford to help school kids with uniforms, is making a $100 million commitment of the public treasury to, quote, save, unquote, the jobs of fewer than 450 people on Grand Bahama.

I believe the physicians on that side might accuse the this government of exhibiting bi-polar traits.

Other observations:

I must also ask, Mr. Speaker, what happened to the deal that the government indicated would have closed in November?

Did the government drop the ball? Or was the deal simply so unattractive and unworkable that the investor fled?

And if that is the case, then why would the government involve itself in a transaction even an investor with experience in these matters, flush with cash, eager to invest and used to taking risks would walk away from?

It would also be nice to know what the government’s intentions are with regard to running this resort.

I have no faith in this administration’s ability to run a convenience store, let alone a multi-million dollar hotel property.

I fear that the Bahamian people will be left to hold the bag.

I pray a private corporate concern with some experience would be selected.

And if so, if you got one, then may we know the name of such a firm and the details of its terms?

This FNM administration said Baha Mar was a fake deal and you would find a real buyer.

Maybe you can now draw on that list of “real buyers” you claimed you had lined up and sell this property to one of them to avoid the pain that, if left unchecked, will inflict on the Bahamian people.

I note that there has been no business plan, and no plan in general, presented for this property. No new investment intended.

I think there is a real fear that this property will become an albatross around the neck of the Bahamian people.

Is there a buyer lined up for this property, and be they friend, family of FNM?

Is this government shepherding this property to special interests by removing the risk of acquisition?

Mr. Speaker, in my opinion, the government has failed to demonstrate good faith with the Bahamian people.

It has entered us into a deal that it is reluctant to disclose the terms of, with an investor in our country that it is supposed to regulate.

It has borrowed from this foreign investor at shameful terms and without being frank about what it has undertaken.

It has presented no plan, no prospectus, no growth strategy, no exit strategy, and no ideas for the way forward. It has done this, after coming to this Parliament to raise taxes on the Bahamian people and to tell them that they must tighten their belts lest the country fall off some imaginary fiscal cliff.

I have no confidence that this administration knows what it is doing with this hotel.

And to this point, it has demonstrated nothing that warrants any confidence in it.

And, in my view, the people of Grand Bahama and people of The Bahamas have no confidence in this government or this deal.

I don’t support this deal, but I do hope that people of The Bahamas and in particular, the people of Grand Bahama are not made to suffer for the folly of the members opposite.

This makes no sense to me, Mr. Speaker.

And nothing I have heard from those opposite has changed that opinion in the least.

I strongly recommend that this government engage someone who knows what they are doing to offload this property in the shortest possible time. Perhaps contact an investment banking firm with expertise and reach in the hospitality space.

I sympathize with my friends in Grand Bahama.

This government has failed to deliver for Grand Bahama.

Now in a desperate stupor they bring this.

First, they inflicted Oban on the people of East Grand Bahama – a bad deal.

Now this, another bad deal. An egregiously bad deal.

Another one that lacks transparency and accountability.

One in which confidence is sorely lacking.

May God bless Grand Bahama and may God bless the Commonwealth of The Bahamas.

Thank you, Mr. Speaker.