From a reader:
I just returned from attending the public hearing at the Convention Center on the new common use fee. It was explained at the hearing that the fee was needed largely because SBMA's principal source of revenue---lease payments---had dried up. Exisiting leases have been paid in full in advance, and SBMA has run out of land to lease, 60% of the Freeport being forest protected from development. However, SBMA could cash in on the 60% of the Freeport not open for development.
A number of companies have sprung up to sell "carbon offsets". Go to: http://planetgreen.discovery.com/travel-outdoors/top-carbon-offset-companies.html. These companies engage in reforestation projects, planting trees for the purpose of capturing carbon which would otherwise contribute to global warming. Individuals, companies, and governments purchase "carbon offsets" from these tree planting companies to compensate for the carbon generated by their activities. For example, an individual might buy a carbon offset to compensate for the carbon generated by an airplane flight.
Over the years, SBMA, its locators, and others have engaged in reforestation projects in the Freeport, but SBMA has not sought to market it's tree planting opportunities. With it's competitive labor rates, and fecund soil, and hothouse climate, SBMA could sell rights to reforest cut over areas in the Freeport to these carbon offset companies. By selling carbon offsets, these companies generate cash "up front"--before the trees are planted and grow to maturity--and thus could be a source of up front payment to SBMA for reforestation rights.
This would provide a new source of revenue for the Freeport and obviate the need for common use fees.
Thursday, May 31, 2012
Tuesday, May 29, 2012
Is SBMA in the Red or Just Crying Poor?
From a reader:
SBMA is publicly claiming, as justification for imposing a Tax called CUSA that it’s projected P1.2 Billion to P1.5 Billion annual revenues are insufficient to meet its expenses, and haven't been since 2005. However, at the meeting of the Kalayaan residents and locators on May 27th, SBMA representatives disclosed, under questioning, that P800 Million of their claimed expenses are "depreciation expenses". When asked what property was being depreciated, they answered that it was the property acquired from the U.S. Navy in 1992, although adding that depreciation on some property acquired since then was also included in the depreciation figure. The SBMA representative admitted that the property acquired from the U.S. Navy in 1992 was "fully depreciated", meaning that it had reached the end of its useful life, for depreciation purposes, when acquired. Yet twenty years later hundreds of millions of depreciation "expense" on this property is still being recorded on the books of SBMA, every year.
At the May 27 meeting, and at the CUSA meeting for Locators at the Convention Center on May 22, SBMA representatives indicated that SBMA's expenses had been exceeding revenues since 2005, but SBMA had been able to "get by" in ways unspecified.
Since the representatives claimed SBMA is entirely self-sufficient, I was wondering
how SBMA was able to "get by" for so long without borrowing money to
cover operational expenses.
Now that SBMA has disclosed its P 800 Million annual "depreciation expense", I believe I have my answer. It appears that, when the claimed depreciation is NOT taken into account, SBMA has not been in the red since 2005 at all. This means that SBMA's out of pocket expenses have not exceeded revenue since 2005 as presented, and SBMA is NOT in as bad financial state as portrayed.
True, the obligations to pay on the port loans only commenced in the last year or so. I don't know if this additional expense finally pushed SBMA into the red. However, it does appear that up to P 800 Million of SBMA's justification for the CUSA is bogus.
SBMA is publicly claiming, as justification for imposing a Tax called CUSA that it’s projected P1.2 Billion to P1.5 Billion annual revenues are insufficient to meet its expenses, and haven't been since 2005. However, at the meeting of the Kalayaan residents and locators on May 27th, SBMA representatives disclosed, under questioning, that P800 Million of their claimed expenses are "depreciation expenses". When asked what property was being depreciated, they answered that it was the property acquired from the U.S. Navy in 1992, although adding that depreciation on some property acquired since then was also included in the depreciation figure. The SBMA representative admitted that the property acquired from the U.S. Navy in 1992 was "fully depreciated", meaning that it had reached the end of its useful life, for depreciation purposes, when acquired. Yet twenty years later hundreds of millions of depreciation "expense" on this property is still being recorded on the books of SBMA, every year.
At the May 27 meeting, and at the CUSA meeting for Locators at the Convention Center on May 22, SBMA representatives indicated that SBMA's expenses had been exceeding revenues since 2005, but SBMA had been able to "get by" in ways unspecified.
Now that SBMA has disclosed its P 800 Million annual "depreciation expense", I believe I have my answer. It appears that, when the claimed depreciation is NOT taken into account, SBMA has not been in the red since 2005 at all. This means that SBMA's out of pocket expenses have not exceeded revenue since 2005 as presented, and SBMA is NOT in as bad financial state as portrayed.
True, the obligations to pay on the port loans only commenced in the last year or so. I don't know if this additional expense finally pushed SBMA into the red. However, it does appear that up to P 800 Million of SBMA's justification for the CUSA is bogus.
Saturday, May 26, 2012
How Can SBMA Survive?
Last week SBMA called a meeting with Locators in Subic Freeport to tell them
that SMBA was broke and could not meet their obligations.
SBMA's answer to their problem, TAXES disguised as services fees!
Yes it now seems a regular event to struggle through the COLR or CUSA or whatever other name SBMA officials can find to create a new tax and each time SBMA is given categorical thumbs down by the locators and residents, why?
What is it that makes Locators and Residents unwilling to help SBMA in their time of need?
SBMA is after all is in the blood of everyone in Subic so why Locators and Investors should so strongly rejects SBMA's cries for help?
For us here at the Subic Bulletin the answer comes from an old saying:
"God helps those who helps themselves"
During the presentation the SBMA representative put up slides that showed SBMA's greatest expense was MANPOWER. SBMA has around 3600 employees to administer Subic Bay Freeport and has only been able to reduce this number by 1% per year.
In another slide the SBMA representative showed that SBMA was spending P6M per month in Street Cleaning! By our calculations SBMA could potentially have 1 employee per street?
For benchmarking purposes let’s look at Clark Development Corporation that administers the Clark Freeport, which has no seaport but a thriving Airport.
CDC administers the Clark Freeport including Luzon's budget airline airport with 700 employees.
So why does SBMA have 4 employees to 1 in Clark, if you ask people inside SBMA they will say Politics. SBMA was foundered by thousands of volunteers who were then given jobs; Dick Gordon ruled the Freeport with a strong hand and showed great potential for the development of Subic. Unfortunately, a personal argument between Dick Gordon and Joseph Estrada saw EA-1 under the Estrada government removing Dick Gordon from the Freeport which then opened up the Freeport to a string of political forces that wanted their own people employed and something in it for them coupled with low accountability and very poor business decisions. This has proven to be SBMA's recipe for disaster.
The new administrator and the new board of SBMA seems to be the best administration since the Gordon times and give us the most hope for SBMA to recover, but is it too little too late?
The current administration is faced with a daunting task of fixing something that’s been broken for a long time; obviously all those who are employed by SBMA don't want to lose their jobs so they again want to push the problem onto Residents and Locators.
One thing is for sure, if eventually one of these politically disguised taxes is ever implemented it will just put a band aid over the real problem and without a doubt the problem will fester and rise up again and again. We know the SBMA response to the festering problem will be INCREASE THE TAXES, after all they will find a way to be exempt so let’s just keep hitting up the investors and residents for problems we choose to ignore. As the taxes go up the benefit of the Freeport reduces and the investors go away, so what then, raise the taxes again and again will be their only solution, that’s why it’s a solution doomed to failure from the beginning.
So, as civic minded people how do we assist the new SBMA administration to resolve this problem?
We believe the SBMA board should make a resolution to outsource the placement services for people currently employed by SBMA into the Private and local Government Sectors. By doing this they will not unduly effect local unemployment, reduce costs, provided much needed employees to the private sector and most of all SAVE SBMA.
Hanjin alone wants 10,000 employees right now, although there won’t be a match on all of those position there is a golden opportunity to kick off the staff cost reduction program, then as SBMA gives 2% of taxes to surrounding local governments the local government units should be strongly encouraged to take SBMA employees to fill any vacant positions.
Once SBMA has reduced its staff by 60% spend a little of the saved money on training and higher salaries for the employees chosen to carry SBMA back to glory.
So back to my comments about helping those who help themselves, we believe that attitude of locators and residents to paying a little more in to SBMA would change dramatically once they saw SBMA doing something to solve their own problems long term.
It has been said that if SBMA can't get the locators and residents to pick up the bill then SBMA will be bankrupt and disbanded, so then all the SBMA employees will be out of a job, our option has to be better. Can the SBMA board have the strength both morally and politically to fix SBMA and give it a secure future?
SBMA's answer to their problem, TAXES disguised as services fees!
Yes it now seems a regular event to struggle through the COLR or CUSA or whatever other name SBMA officials can find to create a new tax and each time SBMA is given categorical thumbs down by the locators and residents, why?
What is it that makes Locators and Residents unwilling to help SBMA in their time of need?
SBMA is after all is in the blood of everyone in Subic so why Locators and Investors should so strongly rejects SBMA's cries for help?
For us here at the Subic Bulletin the answer comes from an old saying:
"God helps those who helps themselves"
During the presentation the SBMA representative put up slides that showed SBMA's greatest expense was MANPOWER. SBMA has around 3600 employees to administer Subic Bay Freeport and has only been able to reduce this number by 1% per year.
In another slide the SBMA representative showed that SBMA was spending P6M per month in Street Cleaning! By our calculations SBMA could potentially have 1 employee per street?
For benchmarking purposes let’s look at Clark Development Corporation that administers the Clark Freeport, which has no seaport but a thriving Airport.
CDC administers the Clark Freeport including Luzon's budget airline airport with 700 employees.
So why does SBMA have 4 employees to 1 in Clark, if you ask people inside SBMA they will say Politics. SBMA was foundered by thousands of volunteers who were then given jobs; Dick Gordon ruled the Freeport with a strong hand and showed great potential for the development of Subic. Unfortunately, a personal argument between Dick Gordon and Joseph Estrada saw EA-1 under the Estrada government removing Dick Gordon from the Freeport which then opened up the Freeport to a string of political forces that wanted their own people employed and something in it for them coupled with low accountability and very poor business decisions. This has proven to be SBMA's recipe for disaster.
The new administrator and the new board of SBMA seems to be the best administration since the Gordon times and give us the most hope for SBMA to recover, but is it too little too late?
The current administration is faced with a daunting task of fixing something that’s been broken for a long time; obviously all those who are employed by SBMA don't want to lose their jobs so they again want to push the problem onto Residents and Locators.
One thing is for sure, if eventually one of these politically disguised taxes is ever implemented it will just put a band aid over the real problem and without a doubt the problem will fester and rise up again and again. We know the SBMA response to the festering problem will be INCREASE THE TAXES, after all they will find a way to be exempt so let’s just keep hitting up the investors and residents for problems we choose to ignore. As the taxes go up the benefit of the Freeport reduces and the investors go away, so what then, raise the taxes again and again will be their only solution, that’s why it’s a solution doomed to failure from the beginning.
So, as civic minded people how do we assist the new SBMA administration to resolve this problem?
We believe the SBMA board should make a resolution to outsource the placement services for people currently employed by SBMA into the Private and local Government Sectors. By doing this they will not unduly effect local unemployment, reduce costs, provided much needed employees to the private sector and most of all SAVE SBMA.
Hanjin alone wants 10,000 employees right now, although there won’t be a match on all of those position there is a golden opportunity to kick off the staff cost reduction program, then as SBMA gives 2% of taxes to surrounding local governments the local government units should be strongly encouraged to take SBMA employees to fill any vacant positions.
Once SBMA has reduced its staff by 60% spend a little of the saved money on training and higher salaries for the employees chosen to carry SBMA back to glory.
So back to my comments about helping those who help themselves, we believe that attitude of locators and residents to paying a little more in to SBMA would change dramatically once they saw SBMA doing something to solve their own problems long term.
It has been said that if SBMA can't get the locators and residents to pick up the bill then SBMA will be bankrupt and disbanded, so then all the SBMA employees will be out of a job, our option has to be better. Can the SBMA board have the strength both morally and politically to fix SBMA and give it a secure future?
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