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The GBPA has to go
  
Wednesday, 29 February 2012 16:16
There is a widespread belief that a privately owned Grand Bahama Port Authority (GBPA Ltd) is an anchor around the neck of Grand Bahama. The popular sentiment is that the entity has to go. Some actually suggest that the Hawksbill Creek Agreement (HCA) has to go, linking the GBPA Ltd’s performance to that of the Agreement itself. While the GBPA Ltd is the entity unto which the HCA rests the quasi-local government responsibilities and authority for the Port Area, the HCA is actually a tripartite agreement between The Government of The Bahamas, The Grand Bahama Port Authority Limited, and Licensees of The Grand Bahama Port Authority Limited. Further, the HCA provides within itself for the GBPA Ltd to be succeeded by a “Local Authority” with the consent of 67% of the Licensees.

It is this author’s considered opinion that the HCA is essential to the future development of the economy of Grand Bahama and that its administration has to be transparent and has to be seen to be transparent. Some persons envisage this happening by transitioning the administration of the HCA to an elected municipal government. While this is a laudable consideration the vagaries of politics would surly relegate the city to the plight of the rest of the country. Another option to accomplish this transparency is to simply convert the GBPA Ltd into a non-profit organization with a Board which is representative of its stakeholders. This paper aims to discuss the latter approach. No need to throw the baby out with the bath water.
What Is The GBPA Ltd.?

There is a lot of confusion about who or what the GBPA is. The acronym GBPA is commonly used to refer to all of the entities in the group of companies founded by the late Wallace Groves. While this may have been technically true in 1955 when the HCA was signed, it has not been true since the formation of the Grand Bahama Development Company (GB Devco) in 1962. GB Devco, a sister company to GBPA Ltd, became the holding company for Groves’ investment entities and GBPA Ltd was reduced to the role of regulator (administrator of the HCA).

GB Devco’s subsidiaries included Freeport Harbour Company, Freeport Airport Company, Freeport Power Company, G. B. Utility Company, Freeport Commercial Industrial Company (the land owner/developer on the Freeport side of the Port Area), Bourbon Street (Port Lucaya Market), Sanitation Services and others. GB Devco was also the land owner/developer of the Lucaya side of the Port Area.

While GBPA Ltd and GB Devco had common shareholders they were and are different entities with different missions and responsibilities. GB Devco and its subsidiaries were all licensees of GBPA Ltd but were not owned by GBPA Ltd.

While not the subject of this discussion, it is worth noting that the umbrella role of GB Devco has since been succeeded by a new entity Port Group Limited (PGL) with GB Devco only retaining the role of land owner/developer for Lucaya. Additionally, much to the dismay of some residents, GB Power was sold out right and PGL took on joint venture partners in GB Devco,  Freeport Harbour, GB Airport and Sanitation Services.

Having made the distinction between GBPA Ltd and Port Group Ltd we can now focus on GBPA Ltd. GBPA Ltd currently comprises the following regulatory functions:

• Business Licensing
• Physical Planning Compliance
• Lands and Survey Compliance
• Environmental Compliance
• Building Code Compliance,
and performs various administrative functions such as:
• Public Relations (promotions)
• Community Relations
• Project Management services
• Subdivision maintenance (Freeport side)
• HR, Accounting, etc.

GBPA Ltd essentially performs the regulatory functions mandated in the HCA. While the Project Management and subdivision maintenance roles will be discussed further later, it is fair to say that the regulatory function has performed significantly better than that of the central government. Yes, there have been abuses by individuals from time to time (not unlike that of any government) but as a whole, Freeport/Lucaya is an effectively and efficiently regulated twin city with a physical environment and quality of life second to none in the region. The city which is almost twice the size of New Providence Island is regulated by a competent staff complement which is a small percentage of the size of the ministries responsible for the same functions in New Providence.

For clarity sake, let me repeat that the GBPA Ltd does not, and has not for half a century, owned the investment companies that are normally associated with it. It is not the investment company most individuals incorrectly look to for the development of Freeport/Lucaya as envisaged by the HCA. As the successors of the original GB Devco, PGL and its partner, Hutchison, are responsible for that role. Under the HCA, GBPA Ltd. is “merely” the regulator of the physical city and franchisor of the economy of Freeport/Lucaya, a very important quasi-local government role.

Can The GBPA Ltd Stand Alone?

The short answer is “yes” but there are many challenges that require resolution before GBPA Ltd can be a successful, non-profit, stakeholder driven keeper of the HCA. The major challenges are:

1. Willingness of the current shareholder (Inter-Continental Diversified, a Cayman Island based company) to consent to a restructuring of the company.
2. Restructuring of its finances
3. Additional regulations (Bye-Laws) to regulate functions which would no longer be under shared management control with PGL.
4. HCA exemptions which near expiration.

Let us address them one at a time.

1) Restructuring of GBPA Ltd

The financial gain to Inter-Continental Diversified from GBPA Ltd is small to none. As such, financial gain/loss should not be a major consideration to the divesting of the entity by GBPA’s shareholder. However, the loss of control of the regulatory entity and the perceived power that goes with it would be a huge disincentive. This has to be addressed in any restructuring of the Board. It is thus proposed that GBPA’s Memorandum and Articles be amended to convert GBPA to a non-profit entity with a Board comprising five (5) Directors representing all stakeholders as follows:
  • One (1) member appointed by The Government of The Bahamas
  • One (1) member - Chief Councilor (City Freeport Council)
  • One (1) member – President of Licensee Association (or President of GB Chamber)
  • Two (2) members appointed by Port Group Ltd.
This would provide for 2 Board members to be representatives of the people, 1 to be representative of the Licensees and 2 to represent the former owner. Any combination of 3 votes would carry a motion. This negates the Board becoming a rubber stamp of the politicians or a rubber stamp of PGL. The Board would select its Chairman.

The Officers, Managers and staff of the “new” GBPA Ltd. would be full time professionals completely independent of the Officers, Managers and staff of PGL, its subsidiaries and joint venture companies.

2) Restructuring of GBPA’s Finances

It is often said that GBPA is subsidized by PGL and its subsidiaries and joint venture companies. While this is true, there are mitigating circumstances. GBPA Ltd. earns the majority of its income from fees imposed on its licensees and fees it collects from the Building Permitting processes and from service charges it collects for the maintenance of the Freeport side of the city. Any shortfall is currently subsidized by PGL, et al. However, it is also fair to say that PGL, et al only pay a “nominal” license fee and the collection of service charge and corresponding expenditure on subdivision maintenance ought not be a GBPA function. The subdivisions GBPA Ltd. maintains are “owned” by PGL’s subsidiary, Freeport Commercial Industrial. All other subdivisions in the Port Area are maintained by their owner/developer (eg. Bahamia, Lucaya, Tamarind, etc.).

Subdivision maintenance is the major financial short fall for GBPA Ltd. If this burden, along with the project management burden, were reassigned to their proper places, and if PGL, et al paid license fees comparable to other licensees, GBPA Ltd. would not require subsidy. This, however, could be a philosophical stumbling block for PGL and its partners and would require significant mediation.

Fortunately, transparency will remove the stigma of a “company town” thus allowing GBPA to be more successful in promoting Freeport/Lucaya. It would gain more license and building permit fees and would be in a position to not only pay its way but also to invest its excess funds in community based initiatives.

3) Additional Regulations

When GBPA Ltd. and PGL and its subsidiaries and joint venture companies were all under the same management there was no need for regulations to ensure that the subsidiaries met GBPA’s requirements of them. However, as entities have been spun off, and as it is proposed that GBPA would be managed totally independently of PGL et al, there is a need for additional Bye-Laws to regulate the municipal functions required for the safe, efficient and effective development of the city. These Bye-Laws would be drafted by GBPA but require Government approval in accordance with the HCA and the Freeport Bye-Laws Act. These Bye-Laws would cover functions like electricity, potable water, harbor, airport, telecom, cable and land development.

4) Hawksbill Creek Extensions

Whether the HCA is administer by a private, for-profit company as is currently the case or a non-profit organization as proposed, the potential for the double taxation of the residents and licensees of Freeport/Lucaya that would come about because of the need to pay the Government and the private developers property taxes/services charges etc. must be addressed. While Government counts its “potential” revenue from the existing 3,000 licensees and 40,000 property owners it must remember that the reason it is able to collect large amounts of taxes from the approximately 60,000 residents on Grand Bahama Island is because of the exemptions that caused the city to exist in the first place. These are the same exemptions required to cause the economy to grow and not regress. As part of a restructuring of GBPA, the extension of these exemptions must be forth coming.

Conclusion

The Hawksbill Creek Agreement is essential to the future development of Grand Bahama and by extension The Bahamas. Resolution of the concerns of the Government and the people about the management/ownership of the GBPA Ltd is a priority. There is a viable option to restructure the GBPA Ltd. to make it financially independent and accountable to ALL its stakeholders.

Serious consideration must be given to this cause.

Dillon F. Knowles, B. Eng. (Chem.), PE
Management & Engineering Consultant
Dillon F Knowles Consulting

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