The Tribune

• No response to ‘reimbursement’ billings

• PM spokesman declines to reveal sums

• No plan laid out for ‘fundamental change’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday accused the Grand Bahama Port Authority (GBPA) of failing to repay costs the Government has incurred in providing public services in Freeport despite being billed for these expenses.

Philip Davis KC, seeking to maintain the pressure on Freeport’s quasi-governmental authority and its owners, told the House of Assembly as he wrapped up the 2023-2024 Budget debate that the Government has “begun to invoice” the GBPA for “reimbursement” of these unspecified costs.

He argued that the Government was justified in seeking repayment under section one, sub-clause five, of the Hawksbill Creek Agreement, Freeport’s founding treaty, which stipulates that it can seek payment from the GBPA for providing “certain activities and services” if the costs involved exceed certain tax revenue streams generated in the city.

“It’s important to note there’s a provision in the Hawksbill Creek Agreement that specifies that the cost borne by the Government for certain activities and services provided are to be reimbursed by the Grand Bahama Port Authority for amounts in excess of Customs duties and emergency taxes collected,” Mr Davis said.

“My government has begun to invoice the Port Authority for these reimbursable expenses, as calculated by an independent accounting firm. To date, the Port Authority has not provided reimbursement in connection with any of these invoices.”

A government spokesman subsequently declined to disclose how much the GBPA has been invoiced for to-date, and the total bill that the Davis administration believes has been incurred. “We prefer not to disclose that amount at the moment,” they said.

Tribune Business previously reported that these alleged costs, and the Government’s demands that they be repaid, are one tactic at the Davis administration’s disposal should it seek to financially squeeze the GBPA’s owners, the Hayward and St George families, in a bid to pressure them to sell their ownership interests.

However, the Hawksbill Creek Agreement clause referred to by the Prime Minister may not be all it seems. It was last amended in 1960, when Freeport was five years-old, the city’s development very much in its infancy, and the only revenues earned by the Public Treasury at the time from the Port area were Customs duties.

While it indeed stipulates that the Government should not spend any more in the Port area than it earns in revenues, and that any excess costs over and above the latter should be reimbursed by the GBPA, that clause has not been amended to account for either the Freeport of today or multiple taxes that have been added since then.

Thus VAT, departure taxes and a host of other revenue streams are not factored into the calculation of whether the Government is spending more than it is earning in Freeport. And the accounting firm hired by the Government, thought to be PriceewaterhouseCoopers (PwC), has been given a remit to include all the Government’s costs in its billings, even though the clause in question only refers to covering expenses associated with police, Customs and Immigration.

Thus, while all the Government’s tax and revenue streams are not covered by the Hawksbill Creek Agreement clause, the invoices are also seeking to recover expenses for public services it fails to mention such as education, social services and health. Millions of dollars are involved, but it is likely that the GBPA will contest the Government’s figures given the lack of a detailed accounting or breakdown of the numbers.

Mr Davis, meanwhile, renewed his cry that there is “a fundamental need for change” in Freeport, and that both the GBPA, its governance and the Hawksbill Creek Agreement are failing to deliver on their longstanding obligations. Again branding the city’s “status quo” as untenable, the Prime Minister added: “For many years, the people have called for changes to the way the city of Freeport, as the economic engine of Grand Bahama, is managed.

“As the Government, we have done what we can to make important investments in Grand Bahama. We are investing in a new airport, a new hospital and a multi-million-dollar jobs programme. While these initiatives are much-needed, under the Hawksbill Creek Agreement this is the Port’s responsibility......

“They do not address the more fundamental need for change. Grand Bahama lost 9 percent of its GDP last year, and continues to lose more. Our position is clear: The Port Authority under its present structure is not realising Freeport’s enormous potential. The status quo is not working, and the people of Grand Bahama deserve better.”

However, Mr Davis’ address - apart from revealing the reimbursement invoices - did not go much beyond where he left off in his Budget communication. He even sounded a conciliatory note, pledging that the Government will consult with Freeport residents and the GBPA’s 3,500 licensees on the way forward for the city’s governance.

“We need to have a serious conversation in this country about the best way forward,” the Prime Minister added. “I am of the belief that the GBPA needs a governance and management change in order to realise real growth and opportunities in Grand Bahama.

“Over the years it is the Government that has been doing the work of the Port Authority. We’ve been attracting the investments, we’ve been investing in Grand Bahama. We have to have a conversation on the relevance of the Port. It may still be relevant. We are open to a range of different possibilities. And we are committed to consulting with the people of Grand Bahama and the licensees of Freeport to determine their outlook and views.”

Mr Davis, though, did not lay out a road map, or comprehensive strategy, for how the Government will tackle Freeport’s governance, management and development issues should the St George and Hayward families remain reluctant to exit or bend to his administration’s demands for far-reaching reforms and changes.

One source, speaking on condition of anonymity, said the GBPA was likely to dispute the amounts it was being billed by the Government. Analysing the Prime Minister’s remarks, they said: “They [the Government] don’t have a way forward. They don’t have clear path. They’re always posturing, but they don’t have a settled plan and way forward yet. It just suggests they don’t have what they need to move.

“There must be something else; some piece left to fall into place. There’s something missing here that they can’t get to work.” One strategy would be for the Government to take over the GBPA, and its quasi-governmental and regulatory powers, with private sector entities such as Mediterranean Shipping Company (MSC) acquiring the St George and Hayward families’ combined 50 percent stakes in assets such as Freeport Harbour Company.

Besides the reimbursement invoices, other pressure tactics that remain open to the Government include enforcement of the 2016 Memorandum of Understanding (MoU) which committed the families to seek a buyer for their GBPA ownership interests and master plan their landholdings.

Another option would be to impose real property taxes on all foreign-owned land in Freeport, which would hit the GBPA’s owners hard financially as a result of their interest in Grand Bahama Development Company (DevCO) and other real estate companies.

Mr Davis, meanwhile, used the GBPA impasse to attack the Opposition and former Minnis administration for not moving forward with the Freeport plans left behind by the government, in which he served, when it was voted out of office in 2017.

In particular, he pointed to the Grand Bahama (Port Area) Investment Incentives Act 2016, which Mr Davis said required the GBPA to make “certain investments” in return for the extension of expiring concessions otherwise the latter would be “rolled back”.

Accusing the Minnis administration of failing to act on what it met in place, the Prime Minister blasted: “Just look at the Bill. You did nothing. You all did nothing. Listen. You’re campaign said you would repeal it. One of the first Bills you laid in this House was a Bill” to repeal that legislation.

Referring to the MoU, and asserting that “everything was in force”, Mr Davis told the Opposition: “Stay tuned and watch if this has no teeth.” He also taunted his predecessor, Dr Hubert Minnis, saying: “Killarney, don’t go”, as he argued that the former administration’s efforts to “erode” the Grand Bahama (Port Area) Investment Incentives Act would have “taken us back to 1967” and pre-independence.

Mr Davis said it was only when himself and former prime minister Hubert Ingraham spoke on this topic that the former administration “got cold feet” and elected not to proceed with the repeal. “It will be fixed and we will get it done,” he said of Freeport.