Comments after a review of the Georgetown metered parking system concession agreement
Ministry of Finance
July 2, 2016
Following a decision by Cabinet, officials of the Ministry of Finance undertook a review of the Georgetown Metered Parking System Concession Agreement (GMPSCA) between the Mayor and City Council of the City of Georgetown (MCCCG) and a private investor, Smart City Solutions., (SCSI).
In general there is no argument that parking metres are a useful tool in reducing traffic congestion in cities. They also bring in much needed revenues for many local councils. Such a system does not exist within Guyana. As the country continues to develop, these systems will have to be put in place. However, while there is need for a parking system within Guyana, especially in Georgetown, both care and caution are needed when implementing such a system.
The objective of this review is to point out the financial implications of the GMPSCA. The team assumed the content of the contract (agreement) would permit an assessment of the need for parking as well as the plan, implementation and sustainability of any metered parking system and general parking fee system to be put in place in Georgetown. In addition, the review aimed to point out anomalies to support the need for greater transparency in the monitoring and evaluation fees and penalties for metered parking, towing and recovery of vehicles in Georgetown and other municipalities.
The following comments and observations are provided
- since we are dealing with a contract, we make the assumption that the MCCCG has done its due diligence and determine that SCSI has the competences, resource and capability to undertake the project in keeping with the objectives of the MCCCG.
- we also presume that MCCCG undertook the required financial analysis (within a related feasibility study) to determine that the projections for revenue and costs from the industry (over 49 years) are fair to itself; and the benefits to be derived therefrom are likely to boost the facilitatory business environment for growth and development, not only of the City of Georgetown and its environs, but Guyana (for example add to the coffers of government via employment, value added, and widened tax base.)
notwithstanding the above, a review of the content and context of the contract suggests that this agreement is wholly in favour of the SCSI for three main reasons:
- New industry to Guyana: as a new industry there are no comparatives (cost leadership or differentiation) and domestic guidelines to follow. Thus, as a pioneering venture the interest of SCSI is prominent as teh dominant party in the contract.
- Competitive position: SCSI is a monopolist (only player). In this context the content statements are clear that SCSI intends to keep it that way for 49 years (if allowed). Importatnly, it seeks “absolute right” to determine the space, number of meters, locations, boundaries, etc, while building value added ( differentiation).
The value added (services not related to parking) will increase its capability, to bar new entrants (other potential players) to the metered parking industry. This is a detriment to the Public because they pay prices which are not set on competitive basis.
- Creation of synergies from value-added: SCSI has the opportunity to create and exploit synergies across a range of value-added businesses to the dismay of MCCCG. The contract gives SCSI the right to establish, without consent of constraint, value added activities not related to the meter parking business. This suggests intent of a foreign company (an assumption) to enter into the economic activities of the country via a backdoor.
This has negative financial implications if SCSI circumvents the “revenue dragnet” by receiving unwarranted concessions ( income redistribution). The apparent context in which MCCCG has signed suggests that it does not have a clear understanding of the role of taxes in nation building.
If MCCCG understood, it had difficulty to approach the authorities for some insights on this intended investment, but on the contrary it sees no difficulty to have the relevant authorities –Go Invest, GRA and MoF be requested to “grandfather” the concessions, after the fact.
However, there is no guarantee that the authorities will grandfather the intended activities. This presents one of two risks that SCSI faces. The other risk is the national Government may find after closer study of the feasibility study and legal review that the arrangement disadvantages the people of Guyana relative to potential quality of service and rights of the public.
it get’s better 🙂