By NEIL HARTNELL
Tribune Business Editor
THE Water & Sewerage Corporation is owed $44 million by customers, its chairman has revealed, as he disclosed plans to “change the culture and embrace” private sector methods.
Adrian Gibson, the Long Island MP, likened the Corporation’s $151 million accumulated deficit (combined losses) and $100 million unfunded pension liability to “the deficit of a small country”.
He told Tribune Business that he wanted to eliminate the state-owned water supplier’s multi-million dollar annual taxpayer subsidy and take it to “less than nil” by the time the Minnis administration’s term in office ends, and acknowledged: “My hands are full.” Speaking after an Inter-American Development Bank (IDB) report warned that price increases were the only way to transform the Water & Sewerage Corporation into a sustainable, profitable entity, Mr Gibson said ever-increasing consumer debt was discussed by the latter’s Board last Thursday. He added that so-called ‘dormant accounts’, where customers no longer used its services but retained their ‘connection’ to the Corporation’s mains, were identified as a particular concern. These persons still have to pay a monthly ‘connection’ fee to the Corporation, but many have ceased doing so, resulting in significant bills accruing over multiple years.
“The bottom line right now is that the Corporation has $44 million outstanding from its accounts,” Mr Gibson told Tribune Business. “With respect to dormant accounts, I’m told a lot of this comes from accounts where persons have the Corporation’s line but are not using it.
“Every month a bill is issued, but they’re not using the service. They’re not paying, and it accrues and accrues. I want to beef up the collections department, and ensure persons reach their targets every week. We’re talking about a Corporation that has a $151 million accumulated deficit, and $100 million in unfunded pension liabilities. It’s stunning. We’re talking the deficit of a small country, a small state.”
Mr Gibson said he also wanted to reduce the average age of accounts receivables, representing monies owed to the Corporation by customers, which was currently “way up there”.
He added that he had initially targeted a 71-day deadline for cutting off delinquent customers, and moving to collect outstanding balances, but quickly realised more drastic improvement was necessary given the extent of the Water & Sewerage Corporation’s financial plight.
“I had a target of 71 days prior to shutting off and collecting,” the Water & Sewerage Corporation told Tribune Business. “I told the chief financial officer last night [Thursday’s Board meeting] that it had to be less than 71 days.
“She finally said: ‘68 days’. The quicker the outstanding payments are collected the better, and we lower the age of receivables. Operating cost recovery should be 100 per cent recovered from our revenues. I am trying to ensure we have specific targets in place that we must meet.”
Mr Gibson emphasised that the days of politically-influenced decision-making, at least as far as he is concerned, are over as he pointed to the “immediate suspension” of the ‘do not disconnect’ list for politicians and ‘high society’ figures with delinquent accounts.
“You can’t owe $20,000-$30,000 to the Corporation because you are a politician, and don’t have to pay,” he told Tribune Business. “These things all add to the ‘red ink’.”
The Water & Sewerage Corporation’s operating costs have far exceeded its revenues for decades, making it one of the biggest drains on Bahamian taxpayers - together with Bahamasair - among state-owned enterprises (SOEs) requiring annual subsidies from the Public Treasury.
These typically average between $20-$30 million annually, and K P Turnquest, deputy prime minister and minister of finance, has repeatedly said SOEs must reach a position where they wean themselves of the Bahamian taxpayer’s largesse through reaching a position where they cover annual operating costs themselves.
Indicating that the Water & Sewerage Corporation is already in the Ministry of Finance’s sights, Mr Gibson said: “I recently received a letter from the Deputy Prime Minister, which I’m preparing a response to and convening a meeting of the Corporation’s management team.
“I would like to see that subsidy go to less than nil in this five-year period. If we can have substantial reductions year-over-year, that would be great. I’m prepared to advance ideas that would see the subsidy reduced, but it will take a collective effort.
“It’s a worthy discussion the Ministry of Finance wishes to have on the subsidy. When we look at government corporations, and in my time as a Tribune columnist I looked at Bahamasair and others, some of them have been a financial drain and I’d want to turn that around,” he continued.
“Not only reduce the subsidy and improve the Corporation’s operating performance, but cut the $151 million accumulated deficit and look at ways and means to reduce the unfunded $100 million pension liability the Corporation has.”
The Water & Sewerage Corporation has been hit by a steady stream of negative news since the May 10 general election, featuring an Ernst & Young (EY) forensic audit; management executives being placed on administrative leave; and a continuing Royal Bahamas Police Force (RBPF) investigation that has sparked protests from the trade union representing its line staff.
Mr Gibson told Tribune Business that a key element of the Government’s transformation strategy for the Water & Sewerage Corporation is a “change of culture” that results in it being run like a private sector entity.
“My hands are full, but we’re going to put our shoulders to the wheel and change the culture, embracing a business/private sector culture at the Corporation,” he said. “We will adjust the model so that the Corporation runs more as a corporate entity according to standard business principles.
“We will be looking at the business plan, and tinkering with the business plan is something that’s high on the agenda. Sometimes you’ve got to take that bitter pill to get better. It’s going to take making the tough decisions, and taking that bitter pill for the greater good.”