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Ways to raise cash to fuel recovery

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This is part two of an article on suggestions to raise revenue during Bermuda's covid recovery.

Our government has utilised significant, precious financial resources to assist thousands of local residents: the unemployed, and those temporarily or made redundant individuals due to the Covid-19 pandemic.

Curtis Dickinson, the Minister of Finance, sounded the clarion call again last week, asking the Bermuda public for suggestions on raising capital, implementing cost efficiencies to reduce the deficit and returning to surplus serenity.

This is our country's great challenge. We must restart the economy, rebuild confidence in our destiny, and access every source of cash (revenue) possible, particularly foreign currency — for without foreign exchange, Bermuda cannot buy anything.

The 2019 audit of Bermuda Government Consolidated Fund, released last December, which lists debt responsibilities then of $2.5 billion and a further $1.2 billion in contingent liabilities, only emphasises this challenge — as the debt continues to rise.

Here are additional suggestions from RG readers and Moneywise.

1, The Bermuda Unite Together bond offering

Suggested last week (https://tinyurl.com/y6vcrdng)

, it received mixed reviews from the very positive to absolute negative. We will explore this suggestion fully in a future article, both positive and negative comments.

2, Education / public support lottery

Why not float an education/public assistance lottery?

• To fund increased demands above local charities' resources

• To assist children with supplies, meals, and tutoring to do well in school

• To sponsor young adults with university opportunities, tie sponsorship in with returning to Bermuda for a career

• To assist parents with unaffordable daycare as they head back to work, and

• To assist adults with continuing education leading to a degree, and

other supportive functions.

Bermuda needs every single working individual to be their very best, to acquire and enhance leading technology skills in order for Bermuda to continue to compete in the global finance environment.

Negative: a lottery may not be popular with the faith-based community, but quite frankly we need to raise money to benefit our whole community.

3, Spruce up

Solicit everyone in receipt of stimulus payments (who is able, furloughed and/or unemployed) to volunteer in spring cleaning our island: neatening, painting, landscaping; bus stops, hedges, beaches, railway trails, docks, government buildings, et cetera. Bermuda needs to look her very best as we welcome back visitors and business travellers. Everyone who wants to work, rather stay at home, please consider providing a valuable service to our community.

4, Sell assets, collateralise assets, privatise or seriously streamline services

Government has a huge reservoir of physical assets, estimated at around $1 billion.

• Sell idle buildings and equipment: while there are probably not many takers at this point in time, using spruce-ups (as described above with help from furloughed individuals) could bring these assets to a better marketability standard down the road

• Collateralise assets for the Bermuda Unite Together bond structure.

One of the bond offerings suggested is called Payment-in-Kind explained below. See Link above to original article above.

The bond issuer, the Government, could offer to pay interest and principal to the bondholder tied to ownership deed(s) of certain financial asset(s) of government (such as an idle building), instead of cash. The Government avoids depleting cash during a liquidity crunch. Idle, unused government buildings would be revamped, revitalised, reused as a going concern by a company, a partnership, or other combined resources group.

• Privatisation of government services has been discussed at various times under the assumption that the larger the organisation, the greater the inefficient management. According to BusinessNewsDaily, small owner-operated businesses are the backbone of a country, operating with ingenuity, innovation, agile management, customer service, workplace culture and diversity. They have a positive effect on local communities.

Or, is the best outcome to rigorously and efficiently streamline existing government operations for best cost savings?

5, Caroline Bay revisited

Every successful business deal requires negotiation and compromise to the point where there is a meeting of the minds: a willing seller and a willing buyer.

Let's get this albatross off the government books before it degenerates further. Why not get a deal done — in US dollars?

Do we really want this sad site to be cruise ship visitors' first impression of Bermuda as they sail into the Great Sound?

6, An unrequited transfer

Move say, $200 million out of the Bermuda Government public pension funds and invest the same in United Kingdom treasuries, triple A-rated sovereign bonds.

Our Government then requests HM Treasury to give us $200 million. This is called “an unrequited transfer”. It is not a loan, there is no interest, and no maturity. Our government can define an informal future commitment for repayment to HM Treasury that becomes quite acceptable since the UK has our $200 million cash invested in UK Treasuries. No additional debt is racked up, the pension fund is not depleted.

We have to keep in mind that Bermuda does not have access to the International Monetary Fund, the World Bank, European Union aid agencies or UK aid agencies.

Further, Bermuda should not have to assess more taxes from every resident, involuntarily, if better outcomes can be managed by the Government — and this is key — managed carefully to inspire confidence and practical investment.

So, let's total up the estimated cash that might be collected in our suggested revenue list.

Before picking apart the estimated amounts, readers, please note that these are suggestions — no actual guarantee implied and none of these ideas may reach fruition.

$200 million raised in a Bermuda disaster recovery bond offering

$200 million in an UK unrequited transfer

$10 million in lottery

$100 million +/- for Caroline Bay

$80-100 million various other cost savings measures

Total: $600 million plus/minus — enough to cover two years of deficits.

After which, it is absolutely imperative that this government and economy gets back on track to conservative, cost-effective, successful management — because the Bermuda community can't do this again.

So there you have it.

Thank you all, readers, your input is appreciated, as always!

Comments anyone?

Sources

Business News Daily: “The power that small businesses wield” by Skye Schooley, January 3, 2020, https://www.businessnewsdaily.com/15359-importance-of-small-business.html

Bermuda Government Consolidated Fund Financial Statements 2019 and prior years, https://www.gov.bm/articles/consolidated-fund-financial-statements-2019,

https://www.gov.bm/consolidated-fund-financial-statements

Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Contact: martha.myron@gmail.com

Caroline Bay: time to get this albatross off the government books and raise some money (File photograph)

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Published May 23, 2020 at 2:00 pm (Updated May 23, 2020 at 2:24 pm)

Ways to raise cash to fuel recovery

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