After finding that concessionaire Smart City Solutions (SCS) vastly inflated estimates of its capital investment in the Georgetown metered parking project, the Mayor and City Council’s Negotiating Committee has warned against proceeding with the venture without a renegotiation of the contract.
The 25-page final report of the committee, which was seen by Sunday Stabroek, recommends five options for the council, including continuing with the project with SCS, albeit with a renegotiated contract, or alternatively discontinuing the project by rescinding the contract and leaving the city without metered parking.
The other recommendations are that the council continue with the project in accordance with the law by rescinding the contract and proceeding with a system in line with the process outlined in the Municipal and District Councils Act; or continue with the project independently by rescinding the contract and setting up its own parking system; or await the outcome of the pending court challenges to the legality of the contract. “Council has the option of requesting a further suspension of the implementation of the metered parking system, pending the outcome of the court proceedings,” it says, while adding that using the court ruling as a legal guide, the council will then have the option of using one of the other recommendations.
The report is to be presented to the council at an Extraordinary Statutory Meeting on Thursday for discussions.
Following the suspension of the metered parking by laws in March, the seven-member committee, led by Team Legacy Councillor Malcolm Ferreira, was in April mandated to review the contract, consult with all stakeholders and recommend possible solutions to any impasse that may arise from the implementation of the metered parking project.
The team was specifically tasked with addressing five areas of concern identified by Central Government. These included the unequal terms of the contract, which disproportionately favours the concessionaire; the fees, which are too burdensome; the too high penalties for non-compliance; and the exclusion of gazetted public roads and certain areas around schools and hospitals.
After two months of stakeholder engagements, the committee submitted its report to Mayor Patricia Chase-Green and Town Clerk Royston King on August 2.
Though it was expected that the committee would have engaged in negotiations and other discussions with SCS, the report notes that these discussions never occurred because SCS refused to provide several financial documents.
Red flags
The report specifically says that though SCS was asked to provide proof of its stated millions in investments, it refused to do so. The company also refused to share with the committee its feasibility study and business proposal unless its members agreed to sign a confidentiality agreement.
During a meeting with SCS, a query into the actual investments made saw Director of Business Development Amir Oren noting that “costs are his and that this is not something he is doing for the first time.”
However, the report says “given the public nature of the parking meter fiasco the committee found it necessary to reject the idea of signing a non-disclosure agreement or to be bound by secrecy.”
While SCS refused to provide documentation, the report says consultations with an independent accountant raised several red flags about the veracity of several of SCS’ claims and meetings with representative of the Ministry of Finance suggested that the city failed to preform due diligence.
It notes that the accountant found that there is a more than 25% variance in SCS’s estimation of its original operations total and the accountant’s total. The variance is in excess of $600 million
The report says the accountant, Lancelot Atherly, found that the total was adjusted for apparent excessive estimates. He further explained that 25% is a conservative estimate and that the actual variance could be as much as 50% since quite a lot is overstated and some aspects seem vastly overstated, bloated and inflated.
The accountant also found that the Government of Guyana stands to collect more revenue than the city of Georgetown by way of Corporation Tax and Value-Added Tax (VAT) but SCS gets the most overall.
Given the importance of ascertaining the true initial capital expenditure, Atherly advised the committee that it was prudent that all verifying documents be presented to the committee.
The committee said this recommendation was also made by Minister of Legal Affairs Basil Williams and Finance Secretary Hector Butts, who agreed that SCS should willingly release such documents as requested, as is the norm for due diligence.
The documents, however, were never presented to the committee and so no further discussions took place.
Best deal
In light of these and other findings, the committee has recommended that if the council proceeds with the implementation of the project with SCS, it must set up a committee to renegotiate on its behalf. As part of a renegotiation, it says SCS must provide all documents requested, “including those of a financial nature (this is the only way to know the true Initial Capital Expenditure, that is necessary to protect and ensure that the citizens and the Mayor and City Council of Georgetown are getting the best deal) as a means of fostering transparency and accountability.”
A true reflection of SCS’ expenditure would also be helpful if council were to consider revoking the contract since it would then be liable to reimburse the company for its investment. Under Article 14 of the contract, 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.”
Additionally, the report also says when the members of the committee met with Oren, they found themselves unable to secure direct answers to several questions.
Minutes of a May 4 meeting show Councillor Heston Boswick attempting to ascertain just how many parking meters would be installed in the city. SCS had previously claimed that the project would be conducted in two phases. The first phase was expected to see the installation of 157 meters to cover 3,237 spaces, while in the second phase an estimated additional 163 meters was to have been installed to cover an additional 4,000 spaces.
However when Boswick asked how many meters are needed to manage a population of less than a million, with approximately 400,000 in the city, Oren said the question was too technical for him to answer. Asked how many vehicles are likely to operate under a meter located on the block between Avenue of the Republic and King Street, Oren once again responded that he was not an engineer and therefore could not answer technical questions. The businessman further noted that he and his team were not prepared to provide the committee with direct answers, only to answer as “best he can.”
