News from Grand Cayman

Government officials confirmed today they are considering a temporary pay cut for civil servants to help balance the budget.

Under the proposal there would be a 2 percent reduction in salaries for civil servants earning more than $3,000 per month. In return civil servants would receive four days of unpaid leave each month.

Chief Secretary Donovan Ebanks said the measure could come into effect in October 2009 and run until June 2010.

Civil servants earning less than $3,000 per month and teachers employed on a daily basis by the Education Department.

The 2009 Miss Cayman Pageant has been cancelled as a direct result of the economic crisis facing the Cayman Islands.

Government has decided is unable to afford the $100,000 cost of staging the competition.

As a result there will be no entry from the Cayman Islands in the 2009 Miss World pageant and the 2010 Miss Universe pageant.

The Cayman Islands Government has stated that it will stick to promises made by the previous administration to the developer of the proposed Dragon Bay project.

Developer Michael Ryan was promised numerous concessions to secure the project including

• A dedicated space for resort guests and owners at Owen Roberts International Airport
• A 99 year lease on the land
• 50 work permits for staff
• Waiving/reduction of import duties

Dragon Bay was announced in March 2009. The proposed project incorporates the Ritz Carlton hotel and the land formerly occupied by the SafeHaven golf course.

Leader of Government Business McKeeva Bush stated in a press conference yesterday that income tax and property tax are not options to resolve Cayman’s financial crisis.

He stated ‘Property tax and income tax. To go this route would change the uniqueness of these islands’ economic base.’

To cover the deficit government are seeking private partners to upgrade Owen Roberts International Airport, develop a new sewage system, build a cruise ship facility, and improve roads.

On September 1 government’s operating bank account was overdrawn by CI$4.3 million, with a limit of CI$15 million. Cash outflows during September are likely to be around CI$79 million with revenues of only CI$30 million.

To meet its obligations government needs to borrow around CI$ 40 million. In order to do this it needs the approval of the United Kingdom Foreign & Commonwealth Office.

On Monday 7 September government is due to present plans to the UK outlining proposals to cut spending and increase revenues. They hope to then receive approval to borrow the money they need to pay government salaries and other expenditure.

Last month government was unable to pay employee healthcare and pension costs.

Leader of Government Business McKeeva Bush held an emergency meeting at the Ritz Carlton hotel yesterday to outline the financial difficulties government is currently facing. Over 400 people attended.

He revealed that:

• For the year-ended June 30 2009 the public sector had an operating deficit of CI$81.1 million.
• On August 25 2009 government held net cash reserves CI$65.6 million, of which CI$76.1 was in restricted cash reserves.
• In order to pay the wages of civil servants on payday on August 25 2009 government postponed payments to contractors, and postponed the payment of employee healthcare and pension costs.
• Government is forecasting a cash shortage at the end of September of CI$44.1 million.
• Since government incurred an operating deficit for the 2008/09 financial year, it needs the permission of the UK Foreign & Commonwealth Office (UK FCO) to borrow additional funds.
• Government has agreed with local banks to borrow CI$372 million to finance its commitments until June 30 2010. To proceed, permission must be granted by the UK FCO.
• On August 28 2009 government wrote to the UK FCO requesting permission to borrow CI$272 million.
• On August 30 2009 the FCO advised government they were unlikely to allow the additional borrowing.
• On August 25 2009 he spoke with the FCO seeking urgent permission to borrow CI$30 million to meet current obligations.
• He had received a letter that day from Chris Bryant of the FCO stating that government needed to present a realistic plan to turn around public finances before they could consider a request for additional borrowing. In the letter Bryant stated ‘To give me the confidence that you will be able to service any new borrowing you will have to widen the tax base. I fear you will have no choice but to consider new taxes – perhaps payroll and property taxes such as those in BVI.’

Bush then went on to suggest a number of measures that could increase revenues. These included:

• Widening the channel in the North Sound to attract mega yachts and their rich owners.
• Building cruise ship berthing facilities.
• Building a sewage system.
• Making additional efforts to attract five star resorts to the Cayman Islands.

He also stated aggressive cost cutting measures were required.

The OECD has placed the Cayman Islands on their ‘white list’ of countries that have substantially implemented international standards on tax disclosure.

On Thursday Leader of Government Business McKeeva Bush was in Washington DC to sign Cayman’s 12th Tax Information Exchange Agreement (TIEA) with New Zealand.

In April, following a meeting of the G20 in London, the Cayman Islands was placed on an OECD ‘grey list’ of countries that had not met the required standards on tax disclosure. The ‘grey list’ comprised countries that had not signed TIEAs with at least 12 other countries.

Cayman is in discussions to sign further agreements with a number of other countries such as Australia, Germany, France, and Germany.

Grand Cayman’s Ritz-Carlton hotel has been named as the 17th best resort in the Caribbean, Bermuda and Bahamas region by readers of Travel + Leisure magazine.

Travel + Leisure’s annual World’s Best Awards poll is determined by reader input on hotels, cruises, airlines, travel companies and top cities to visit.

Her Majesty’s Most Honourable Privy Council has approved the new Cayman Islands Constitution.

Governor Stuart Jack issued the following statement:

Following the successful outcome of the constitutional referendum on 20 May, the 2009 draft constitution was considered and approved by Her Majesty in Privy Council yesterday (Wednesday, 10 June 2009). This means that the draft constitution is now the Cayman Islands Constitution Order 2009. Although Her Majesty has approved the new Constitution, this does not mean that it comes into force immediately.

I am convinced that the focus and energy demanded by this entire exercise will pay off in a smooth transition that will allow us to enjoy the benefits of the new Constitution without the administrative and legal gaps that would otherwise undermine its effective working. Regular reports on the progress towards implementation will be provided to Cabinet, and the public will be kept abreast of ongoing developments.

The United Democratic Party (UDP) has won the Cayman Islands General Election, 4 years after losing to the People’s Progressive Movement (PPM). The UDP captured the 9 of 15 elected seats in the Legislative Assembly.

Islanders also voted to accept a new constitution. Over 11,000 voters cast referendum ballots, with just under 63 percent voting for change.

The new constitution will introduce a bill of rights, three new elected positions in government, and give Cayman more control over its affairs.

Voting got underway this morning for 2009 General Election.

Polling stations across the Cayman Islands opened at 7 am and will close at 6 pm.

The country’s 15,361 registered voters are also voting in a referendum on constitutional reform, the first referendum ever held in the Cayman Islands.

The first returns will be announced at 9 pm, with updates every 2 hours after.