The Assembly is slated to save $160 million worth of rent over a period of 20 years through the Build Own Lease Transfer (BOLT) process being used to build an administrative office complex for the Division of Agriculture, Marine Affairs, Marketing and the Environment at Shirvan.
The Tobago House of Assembly came under some fire for using the BOLT process commonly used by the Central Government to build multimillion dollar structures.
But Tobagonians are better off owning buildings rather than always renting said Secretary of the Division of Finance & Enterprise Development Dr. Anselm London.
“The people of Tobago must own their own buildings. We have no interest in renting, renting, renting.”
London was making reference to recent public criticism directed at the Assembly regarding BOLT. Critics have said the Assembly could have borrowed money instead of using the BOLT process to build the headquarters for the Division. The project is a joint arrangement between the Tobago House of Assembly (THA) and the special purpose company MILSHIV Limited. BOLT is a mechanism that allows the Assembly to lease a property without having to come up with all the money for the building upfront.
“It’s perfectly common in financial transactions worldwide,” Dr London indicated.
The building proposal was examined by the company Project Specialist Limited, experts in the area of project finance. The company determined that the best thing for the Assembly was to own the building and lease it back. Through this process the THA will save about $160 million dollars worth of rent over a period of 20 years.
“When you evaluate a project to see whether you should go ahead, there is a critical thing that you use. And that is called the net present value of the project.” The net present value is the determination of whether a project will be profitable. Dr London said the net present value of this project will be about $55 or $65 million.
The Assembly is not authorised to borrow on a capital basis without approval from the Minister of Finance. London said the Assembly has approached the Minister many times for projects and was told no.
“In no single year do we get the allocations necessary to put up buildings,” he said.
Bearing the cash requirements for the Scarborough Library and the Shaw Park Cultural Complex, the BOLT process gave the Assembly an opportunity to obtain the new building for the Division of Agriculture. London said several projects in Trinidad were built using BOLT, including the National Library and the UTC building. “Here in Tobago, the Dwight Yorke Stadium, it was financed by or through a BOLT operation,” he noted.
The new building project will be at the junction of the Claude Noel highway and Shirvan Road. The $143 million complex will comprise of 83,000 square feet of floor space.
“The land is three acres. The price paid for it was not determined by the Assembly. The valuation of the Ministry of Finance valued it at $12 million,” London said.
He explained in an interview on Monday (10th September 2012) at the new Victor E Bruce Financial Complex that though cash was used to build that facility, it took many years and the Assembly took many blows.
“Nobody finances capital investments cash,” London said. “You can’t sit back and save for 10 years to build. A BOLT operation by contrast allows you to have a building, lease it, and then at the end own it.”
Asked about the suggestion from Lionel Coker of the TOP that there is cause for concern over the project and its financing, London said, “I don’t think Coker is authorized to speak. I don’t know what training he has in this area.” He said what he objected to was the use of innuendo about the new project. “To date, Mr. Coker has not asked about the net present value.”
“What they want is for the Tobago House of Assembly to continue renting.”
Asked if the Assembly gave consideration to renting, London likened it to someone being told to not build a house but to rent from generation to generation. “A lease-to-own operation is always preferable because unlike at the end of the lease period, all you get with a rental is the memories.”
“Should Tobagonians be an island of owners or should Tobago be an island of renters? We choose the later,” he said.