The contentious parking system contract between City Hall and Smart City Solutions Inc. (SCS) is of such “unequal bargaining strength” that it includes a clause intended to scare the Mayor and City Council (M&CC) at the prospect of terminating the agreement, according to a review done by the Attorney General’s Chambers.
This is according to a two-page memorandum submitted to Cabinet by the Attorney General’s office, which has recommended that the M&CC of Georgetown employ an accountant to “advise” as it revisits “the terms and conditions” of the controversial agreement.
The memorandum was compiled along with a Ministry of Finance (MoF) review of the contract, which also advised that the city “reassess the financing arrangement of the contract,” at the behest of Central Government.
These two documents were made public at yesterday’s statutory council meeting, with a copy being provided to each councillor and officer of the city. The contract, which the AG’s report notes was signed on May 13, 2016—although the municipality said the agreement was signed by the previous council last year—has still not been made public.
The documents were made public on the same date that the local corruption watchdog Transparency Institute of Guyana Inc (TIGI) voiced its concern over “the handling” of the project by the municipality and its response to relevant queries, which it said “exhibit a dearth of democratic principles and disdain for citizens that would lead to a feeling of exclusion, and alienation from the decision making process.” (See other story on page 11)
Terror
Under the heading, “Characteristics of the Agreement,” the AG noted in the memorandum that the “concession agreement is one of unequal bargaining strength.”
“Most of the terms are overwhelmingly in favour of Smart City Solutions Inc with Article 14 on Termination being in terrorem of the City,” it stated.
Under that article, if the city unilaterally terminates the agreement, it would be bound to “pay the concessionaire a lump sum payment equivalent to (i) the total direct and indirect, hard and soft cost cumulative gross investment of the concessionaire in the project; plus (ii) an amount equal to 25% of the direct and indirect hard and soft cost cumulative gross investment of the concessionaire in the project; multiplied by the number of years (or fraction) remaining under the term…(iii) the reasonable out of pocket and documented costs and expenses incurred by the concessionaire as a direct result of such termination.”
As a result, the AG’s Chambers concluded, “This is not a genuine pre-estimate of the true loss to be suffered by the concessionaire, but rather a provision to put the city in terror of terminating the agreement.”
However, the report also noted that financial regime of fees and fines to the account of the concessionaire “seem to be so onerous on the city and thus the citizens, that a caveat is provided that these figures could be reduced by agreement between the parties.”
In light of this fact, the AG noted that the parties can revisit the terms and conditions of the agreement, with the city employing an accountant to advise it on the numbers with a view to reaching a reasonable financial fees and fines regime along with the appropriate consideration that ought to be paid to the city.
This advice aligns with some of the findings of the Ministry of Finance review of the contract, in which it described the deal in some areas as exploitive and labelled the city’s outlook on aspects of the deal as “ignorant.”
The report also revealed for the first time that the secret contract grants fiscal concessions to the company which are not within the powers of the city and would now have to be addressed by Go-Invest, the Ministry of Finance and the Guyana Revenue Authority after the fact.
The city administration came in for sharp criticism in the Finance Ministry report for first failing to undertake a financial analysis and feasibility study to determine, in part, whether the projection for revenue and cost from the industry are fair to itself.
The absence of these reports prevented the Ministry of Finance from commenting “on the financial considerations and hence cost or revenue projections” of the project.
Additionally, it was found that the unwarranted concessions granted to the contractor suggest that the M&CC “does not have a clear understanding of the role of taxes in nation building.”
On this point, the Ministry of Finance noted that while the city “had difficulty approaching authorities for some insights on the intended investment,” it sees “no difficulty in having the relevant authorities –Go-Invest, GRA, and MoF be requested to grandfather the concessions after the fact.”
As a consequence of these conditions which are “wholly in favour of the contractor,” the Ministry of Finance advised that that the council either undertake a study of putting metered parking, parking facilities and towing and recovery system within the city on its own accord or re-tender for bidding for the six zones within Georgetown separately, so as to allow for greater competition.
Barring these two possibilities, the city has been advised to “re-assess the financing arrangement of the contract.”
A number of general observations were made in the report, including that that SCS faced no risks except that its applications for concessions may not be granted and that prices appeared “outlandish” since no feasibility study was done.
Initially, it had been suggested that parking per hour would cost $500 but this figure has now come down to $200.
Other observations were that the contract has given complete monopoly power to SCS over parking within Georgetown raising the risk of exploitation of customers and that the inscribed fines are well above those charged internationally for parking violations.
Stabroek News has been informed that the Attorney-General’s Chambers met with company officials a few weeks ago and told them that there was nothing illegal with the contract and they could go ahead with their plans.
Mayor Patricia Chase-Green has said that her administration intends to work towards fulfilling the recommendations of the Central Government.
