OBA: ‘Premier Owes Explanation Of PHC Lease’

Shadow Education Minister Dr. Grant Gibbons has called on Premier Paula Cox to provide the taxpayers with an explanation that justifies the PHC Lease Agreement and her ” lack of disclosure surrounding this major commitment of taxpayers’ money.”

Dr Gibbons said, “It is apparent from reviewing the structure of Government’s $10-million lease with PHC that the primary purpose of the lease is to guarantee an annual minimum payment of $391,000 to PHC over a 20-year period, while the needs of the participating schools and their students are secondary.

“If student needs had been the primary reason, then a three-year lease, with an option to renew, would have been more than adequate to test the arrangement and ensure it was meeting student “health and wellness” needs.

“A review of the details indicates that the agreement was structured as a 20-year government commitment to service the debt on an anticipated PHC bank loan to finance their development project.

“Although the lease states that “this Agreement may be reviewed at the end of each five (5) year period,” there is no provision to allow the Government to terminate the lease early and interrupt the payments, should Government’s needs or the needs of the affected schools change.

“In fact, unless PHC breaches the agreement or goes bankrupt, the annual payments must be made regardless of whether 850 students or no students use the facility.

“While it’s a good deal for PHC and their members, it doesn’t adequately protect the interests of taxpayers or students should circumstances and needs change during the 20-year lease period.

“As the Executive Officer of the BUT suggested earlier this week, given the current economic circumstances, it is likely that the money allocated to the PHC lease could be spent on more pressing educational needs. For example, the OBA believes that more resources should be dedicated to professional development for teachers.

“As it stands, given the agreed $442 cost per student, some 884 students must use the facility annually to justify the $391,000 rent. The Lease’s built in inflation factor also means that the annual $391,000 payment could easily double over the 20-year period if inflation increases by more than 3% annually,” continued Dr Gibbons.

“The fundamental inflexibility of the lease begs a number of questions which need to be answered.

• “Was a needs assessment done at the time to indicate that the existing playing field and gym facilities were inadequate?
• What happens during the 20-year period if the schools find better ways to address health and wellness issues through their own facilities or, indeed other facilities?
• What happens if some of the schools decide they don’t want to participate because it no longer addresses their students’ needs?
• How will transportation issues and the need for extensive bussing of students to and from the facility be handled?
• Have transportation costs, the extra time required, and the potential disruption of school days been factored into the planning?
• How will the potentially overlapping needs of the seven schools be handled?

“Finally, because this $8-million Lease Agreement (closer to $10 million with inflation) was formally signed “on behalf of the Government of Bermuda’ in September 2008, it should have been reviewed by Cabinet at the time.

“We understand that the current Minister of Education was not in Cabinet in 2008 and may not have been aware of the Lease Agreement until more recently, but no such excuse applies to the then Minister of Finance, Paula Cox.

“When did Minister Cox find out about the Lease? And why did Minister Cox not disclose the agreement earlier given her obligation to do so and her recent pronouncements about the importance of transparency?

“We call on Premier Cox to provide the taxpayers with an explanation that justifies this Lease Agreement and her lack of disclosure surrounding this major commitment of taxpayers’ money,” concluded Dr Gibbons.

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