“Pradoville 2” and the removal of NCN transmission tower

Of recent, this columnist has been the subject of personal attacks reminiscent of those from during the “Dolphin Scam” that precipitated his premature departure from the Audit Office. One such attack relates to an assessment of the extent of leakages in our public procurement systems being in the order of 15-20%. The most recent attack, however, was in relation to his assessment of the value of the land on which “Pradoville 2” was built. That assessment includes the cost of the removal of the NCN transmission tower and relocating it on a 36-acre plot of land at La Parfaite Harmonie, West Bank Demerara.

 

Estimate value of Pradoville 2 land

The forensic audit report of NICIL is on the Ministry of Finance’s website and is therefore a public document. In that report, it was stated that the estimated market value of Pradoville 2 was $1.242 billion or $82.8 million per acre, prior to the allocation of house lots and the erection of buildings thereon.  The calculation was based on the following:

 

(a)          An independent and professional valuation of $985 million for the 15-acre land on which the Marriott Hotel was constructed. Both locations are waterfront lands having approximately the same acreage;

 

(b)          The cost of removal and relocation of NCN transmission tower and other associated costs totalling $185.553 million; and

 

(c)           The cost of developmental works totalling $71.496 million, including the construction of road and installation of water infrastructure.

 

Sequence of events

At NICIL’s 17 August 2007 board meeting, the Executive Director informed the Board that there was a 15-acre plot of land at Sparendaam that was good for sale. The Board agreed that NICIL would develop the area with high income house lots or town houses and condominiums. Approximately two years later, at the 14 July 2009 Board meeting, the Minister of Finance stated that he agreed to have all sums being expended at the Sparendaam Project to be treated as NICIL’s equity injection to NCN. At that meeting, the Executive Director indicated that “we intend to transfer the land at Sparendaam to NICIL, which will be subdivided for allocation and construction”.

According to NICIL’s audited financial statements for 2009, amounts totalling $166.241 million were shown as having been expended on the cost of removal and relocation of NCN’s transmission tower. This amount was treated as an increase in NICIL’s equity investment in NCN. However, there was no corresponding recording in the accounts of NCN.  In 2010, NICIL’s accounts recorded an additional capital injection of $29.465 million, increasing the equity investment in NCN to $231.889 million. However, it was not until 29 April 2011 that NICIL’s Board approved of the cost of removal and relocation of the tower being charged to equity in NCN’s accounts. In addition, NICIL’s investment in NCN decreased to $220.329 million in 2012 but it was not until 11 February 2015 that a share certificate was issued for this amount.

There was no evidence that NCN and its board were involved in the decision to remove and relocate the transmission tower. In any event, the approved procedure would have been for NCN to request the Ministry of Finance to include the associated costs in the Estimates of Expenditure under the capital expenditure programme of the then Office of the President. A perusal of the Estimates for the years in question indicate that no provision was made for this activity.

On 9 March 2010, Cabinet approved of the award of a contract to Atlantic Construction in the sum of $13.797 million for Phase I of the laying of road infrastructure work at Plantation Sparendaam. Cabinet also approved of the vesting of the new development project at Plantation Sparendaam in the Central Planning and Housing Authority (CH&PA).

At NICIL’s 12 March 2010 meeting, the Executive Director reported that amounts totalling $188 million were expended on the Sparendaam project of which VAT of $14 million was recoverable. He advised the Board that the former President had agreed verbally to the budget being increased from $135 million to $150 million but the overall cost was exceeded due to various factors. On 4 June 2010, Cabinet approved of a contract in the sum of $7.739 million for the installation of water infrastructure at Plantation Sparendaam and for NICIL to do all acts to ensure its completion.  The actual cost certified by a Chartered Accounting firm was $185.553 million.

In response to the above observations, the Executive Director contended that: (a) NICIL had no part in the allocation of lots at Sparendaam, with the land initially owned by the State and then transferred to CHPA per Cabinet’s decision; (b) NICIL’s role was to manage initial infrastructure on behalf of CH&PA in parallel with the relocation of the NCN transmission tower and to build the Dorcas Community Centre in exchange for a piece of land to create a Southern access way into Sparendaam (to be owned by CH&PA) based on tendered works and contracts; (c) the total amount expended was treated as a receivable in NICIL’s books; and (d) attempts have been continuous to have CH&PA repay the outstanding sum.

The forensic auditor indicated that he met with the Minister within the Ministry of Communities on 10 September 2015 who confirmed that CH&PA had no involvement in the project. This is notwithstanding Cabinet’s decision of 9 March 2010 to vest the Sparendaam Project in CH&PA. The auditor also reviewed the vesting orders covering the period 2007 to 2014 and found no evidence of the Sparendaam land being vested in NICIL and subsequently to CH&PA.

NICIL provided a detailed schedule of expenditure relating to road infrastructure works, the installation of water infrastructure, the building of the Dorcas Community Centre, and security costs, among others. The total amount expended was $71.496 million. This amount was shown as receivable from CH&PA. It therefore means that State funds amounting to $257.049 million were expended on the development of the Sparendaam housing project. The auditor expressed the view that NICIL should have accumulated the expenditure to be applied to the cost per plot and hence to be recovered from the ultimate beneficiaries.

Price per house lot

Using the figure of $82.8 million as the estimated market value per acre of the Pradoville 2 land, the cost of a house lot of the size of 0.3030 acre would work out to approximately $25.088 million, compared with $1.515 million paid by some of the recipients, a difference of $23.573 million.  NICIL, however, disputed the calculations, especially as regards the inclusion of the cost of removal and relocation of the NCN transmission tower. It contended that the management of the Ogle Airport had approached the then President about the concerns of the NCN transmission tower being in the flight path of aircraft utilizing the airport, and a request was made for the transmission tower to be lowered and/or relocated. However, no documentary evidence was produced to substantiate this claim nor was there any reference in any of NICIL’s board minutes or Cabinet’s decisions in relation to this matter.

Former Prime Minister, Sam Hinds, is reported to have stated that since the days of the late President Cheddi Jagan, representation was made for the lowering or removal of the transmission tower. Recently, the Opposition Leader made a similar statement and indicated that he is in possession of letters dating back to 2004 from the Ogle Airport authorities. However, despite these representations, the transmission tower was not lowered, or removed and relocated, with no apparent adverse effect on the operations of the Airport. It was only after the decision was taken to develop Pradoville 2 that this was done.  Considering the sequence of events, the forensic audit report concluded that:

It is evident that the removal and relocation of the tower was done to facilitate the housing development of the area.  In addition, instead of accumulating all the costs associated with the Sparendaam project in a special account to be applied in arriving at the price to be charged per house lot, NICIL and Cabinet were complicit in charging the related expenditure to NCN in the form of equity investment, and to CH&PA in the form of receivable. The fact that the majority of the Cabinet members are the beneficiaries of the house lots renders it highly inappropriate for the very Cabinet to approve of the charging of the expenditure of $257.049 million to the accounts of NCN and CH&PA.

Even if one were to exclude the cost of removal and relocation of the NCN transmission tower from the total cost of Pradoville 2 as computed above, the difference between the computed market value and the actual price paid for a house lot of the size of 0.3030 acre, would amount to $19.826 million.

Principle behind the allocation of Government house lots

Historically, Government’s housing drive has been to assist citizens in need to acquire their own homes. Interested persons would apply to the Ministry of Housing/CH&PA for house lots that were being developed in various parts of the country, and priority would be given to those with families and living in rented properties. To be eligible for consideration, an applicant must not be the owner of a property, and once a house lot is allocated, he/she must begin construction within 18 months, failing which the Government will repossess the land for redistribution to another applicant. In addition, the property cannot be disposed of within ten years of the allocation of the land.

The Government’s housing programme is not geared to benefit those who have already acquired their own homes, and, by extension, one cannot dispose of his/her property in the hope of benefitting from such a programme. However, an examination of the list of persons who are beneficiaries of house lots at Pradoville 2, indicates clearly that the above principles were set aside. The allocation was not based on need since several of the recipients are the current owners of properties.

Since Pradoville 2 is a Government-sponsored housing programme, there should have been a high degree of transparency in the allocation of house lots as well as strict adherence to the principles outlined above. However, it could not be determined what criteria were used in the allocation process, and from an examination of the list of recipients, it is evident that the beneficiaries were pre-selected handpicked persons. In the circumstances, one cannot help but to conclude that Pradoville 2 was not designed to assist those in need but to facilitate the personal enrichment of the few at the expense of the majority.

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