New Onion

The proposed new Bermuda International Airport terminal has already elicited summary commentary from Vexed and politics.bm.

IMHO this rendering reflects everything that’s wrong with both architect’s understanding of Bermuda and the Bermuda Government’s lavish proposals.

The key things wrong with it:
- Incredibly expensive.

We’re looking at a cost of 300-400 MILLION dollars… which given the Bermuda government’s record in contracting really means 600 million dollars. Assuming they don’t manage to go over budget then it’s between a 22 million and 30 million annual payment amortised over 30 years – and I think it’s correct to look it as an amortised expense not capitalised because we’re almost certainly going to pay for it with more debt on top of the billion or so dollars already racked up.

- Terrible use of land.

In most of the island it’s worthwhile to build multi-story car parks to maximise the amount of available space. The same is true of government land, even if we pretend it’s worthless the reality is that virtually the entire buildable land of Bermuda faces economics more like the downtown of a major city – see: London City Airport. It shouldn’t be an architect’s wet dream of a sea of palm trees and grand indoor spaces. We have a land use crisis in Bermuda that stems in large part from government inappropriately using land (Morgan’s Point, Club Med, etc.)

The problem with “iconic” buildings is that they have a nasty habit of looking the same everywhere in the world and of becoming dated with time. Being iconic builidng is a bit like being a respected politician – if you have to tell people you’re one then you’re probably not.

This is what an iconic Bermuda building really looks like:

For today make it cheap, make it work, and make it efficient – ie. maintain and renovate the existing building as necessary.

We will need to build a new airport in the next 100 years as sea level rises somewhere between a few inches and a few feet… that’s where we should be pointing this incredibly large chunk of our resources.

I’m disappoint with the behavior of almost everyone on the gambling debate with the exception of the UBP and the PLP back bench. On Facebook the BDA likened the harm of gambling to the harm of alcohol and said that:

The truth is however that addiction problems will develop in a small proportion of people….whatever the “substance”. We recognize that alcohol is the most common substance of abuse/dependence, yet there is no debate over making this illegal in Bermuda.

This is true, but nor do we consider legalising and taxing cocaine production for the financial and tourism benefits, despite similar levels of long-term addiction as a percentage of the population who has partaken. Indeed, legalising drug use would do WONDERs for our tourist business.

Anyway, enough hyperbole and back to the reality of gambling:

Based on the government’s own numbers of an average of over $22 million dollars will come out of local pockets and into the pockets of the casino operators.

Depending on the assumptions we make about the number of locals who gamble the per-person annual losses range from $32,745 at 1% of locals gambling to $3,275 per person for 10% of locals gambling

22,266,666/680= 1% – $32,745 per person
10% = -$3,275 per person.

Needless to say, a small fraction of all gamblers are responsible for the majority of the financial losses. In any case, let’s pretend that we’re dealing with average gamblers.

During a 20 year gambling career that’s an average transfer of wealth from each gambling local to the casinos of between $64,901 in our 10% of locals case, and $654,901 in the 1% case.

In addition, gambling problems overwhelmingly affect young men of low income… you know, the same ones who are currently hurting the most and most at risk for drug problems, arrest, jail time, etc. Normal gambling debts incurred by problem gamblers is between $50,000 and $90,000 dollars – to say nothing of the lost income, retail consumption, and family support lost… and one of the big reason that people get beaten or chopped on this island is (you guessed it) – unpaid debts.

One thing about this whole Southlands/Morgan’s Point debacle doesn’t add up. Dr. Ewart Brown’s normal clown show of self-interest, meddling, and hidden motives is by this point being revealed.

What I don’t understand is this:

Why were the owners of Southlands Ltd. so excited when they bought Southlands? At the time of the purchase it was zoned such that it could really only be used as a cottage colony. I wouldn’t make that kind of buy, have architects do a huge amount of work, then bank on an SDO to make construction possible… it would be wildly speculative and hugely risky, especially in a world that was at the time full of far easier and lower-risk development options.

Did they have behind the scenes assurances from the politicians that they’d allow the land to be effectively rezoned?

If so, I have absolutely zero sympathy for them and they deserve to get the Southlands property zoned as it was.

For the record – the real slowdown is just beginning.

From the New York Times:

Some suggest that the banks, spooked by enormous losses, have replaced a disastrously indiscriminate willingness to hand out money with an equally arbitrary aversion to lend — even on industries that continue to grow.

Some have suggested that Ewart Brown is a remarkable alchemist for his ability to make a Platinum era in tourism (he picked occupancy numbers from the week of the Newport Bermuda Race) from tourism numbers that most would consider to be more Talc than anything. I expect that if Brown continues to work his magic in tourism and if the US slowdown becomes a truly widespread credit bust then we could soon be in the “Peat” period of tourism. The only thing that will prevent that is if the government decides to use the taxpayers to subsidize large capital investments in tourism for the benefit of private developers… like the Southlands/Morgan’s Point giveaway and the Club Med giveaway. Either way, the people of Bermuda get screwed.

Other bloggers have already sounded off with their thoughts on the Music Festival.

I think the music festival spending is pretty minor in the context of the things to actually complain about, especially if it breaks even. In my view there are a few fundamental issues:

1. How do they not know if it will make a profit or not? They know what revenues will be, and should have a good handle on expenses, so why can they not make a financial projection?

2. The festival is only the latest in a long string of public works whose returns accrue primarily to the party insiders in the form of an image boost and direct payment of taxpayer money, and is borderline vote buying.

3. How many of those “overseas” tickets are actually Bermudians with foreign friends/families fronting for them?

For the record: I have a history of assuming mere poor decision making when the actual issue is abject corruption.

From The online Royal Gazette.

“We talked about Bermuda. He was interested in how we were doing in tourism and understood our rationale for rebuilding tourism and not having a one-legged economy.

Essentially shows one thing: The Premier, the President, or both do not understand international business.

As I have said before, we do not have a one-pillar economy, not even close. We have insurance/reinsurance, investment management, trusts & fiduciary services, and a number of others. Each of them is a completely different industry and each of them is highly efficient at bringing in revenue from overseas into Bermuda and depositing it into our economy in the form of salaries, rental payments, services, taxes, tourists, etc.

Each of these international industries can offer Bermudians completely hilariously high salaries in comparison to competing jurisdictions and other industries. If we do things right then these salaries funnel through to the service sectors and keep our blue collar workforce enjoying a good standard of living and unlimited opportunity for their children. Why? Because Bermuda has a sustainable competitive advantage of being a historically stable, well-run country with a legislative framework far more nimble than large countries (although a number of countries are gunning to take us down).

All of our pillars are suffering from the bad behaviour of Dr. Ewart Brown and his cronies and the utter mismanagement and corruption that is their standard operating procedure.

Unknown to most voters, and despite the politician’s best efforts to derail international business, in the background the machinery of the Bermuda regulatory system continues to do an acceptable job of keeping legislation up to date without the clown show of some of our competing jurisdictions.

They may be able to employ the growing number who leave the public school system without the ability to survive in any of Bermuda’s other industries.

Of course, in a perfect world with a competent government capable of managing effective services then we would see high social mobility as students came out of public schools, into Bermuda college, and then onward and upward taking advantage of the many scholarships available… so that the proverbial son of a bricklayer could move up in the world to become a wealthy executive. Of course, since that’s not happening the way it should – and in many respects we have made substantial backward progress in the area of social mobility over the past 10 years, perhaps because the government believes in the talented tenth (and therefore the useless 90%), or is just plain corrupt and incompetent. The reasons are irrelevant. What matters is that the only answer to having failed an entire generation in public education is to create more low-paying, low-skill jobs, and hotels are the answer because we can’t put all the non-graduates to work in construction, drug distribution, and odd jobs forever as the industries are cyclical and risky – and next time there is a recession or competent management of Bermuda’s long-term growth then Bermuda will face massive structural unemployment… well, more than we already do anyway.

Remember that with on the order of 70% of males (by Larry Burchall’s reckoning) not graduating from public high school that means that there is essentially a generation of a segment of society who do not and will never have the skills necessary to make a living in any industry that requires the ability to read and do math. Even the most entry level of international business or service jobs require the ability to read, write reasonably well, and do basic maths, and most more senior positions require the ability to deal well with fractions, percentages, and use “there/their” correctly, never mind a fancy degree. Without these skills a person’s options are seriously limited and these hotels will provide jobs for those products of the failed public education system.

If we take government incompetence as a given then those of us in the reality based community have no choice but to support the building of new hotels.

We need to take note that many of the hotel developments include a large portion of fractional units.

So here’s the question – if we need to discriminate against Bermudians married to non-Bermudians and Bermudians who own properties in the international purchasers end of the market in order to preserve Bermuda for Bermudians then why is it perfectly acceptable to sell Bermuda to foreigners as fractional units?

Recently there have been a number of people in letters to the editor and on blogs saying that the current government can “run on their record”… their web page of their accomplishments is here.

I asked the posters on the Bermudasucks.com forum (yes, I deeply dislike the name and always will) for some help in creating a government scandal list for the past few years… Here’s what they came up with:

BHC – The big kahuna.
Premier sues the media to keep them quiet.
Limo Importation – Law changed to allow government insider to start a Limo business.
Hummer H3 commercial vehicle
Cedarbrige Mould
Education Statistics
Firing of Hotel Chef
Work Permit of Curtis Mcleod (construction boss v. George Scott)
Southlands Tunnel
Southlands planning approval
Hospital location
Discrimination against non-Bermudian spouses
Equality act
Col. Burch “House ****” comment
Long-line fishing
Berkley over-budget
“we had to deceive you”
Robert Jensen
RC’s profane e-mail
Mount Saint Monica (dump fire)
Calling squatters “criminals”
Faith Based Tourism
Tracking Chips for Vehicles
Emission Testing.. Buildings
Emission Testing… Contract
“settlement” with Pro-Active Construction
Club Med 1
Club Med 2
Club Med 3
Rebecca Middleton handling
Indigent Clinic and firing of Doctor for writing a letter to the press.
Kurron
Stem Cell Clinic
Cedar Beams
SDO’s
Removal of Stuart Hayward and Bermuda’s #1 Eco Farmer from the round table.
Voting from the bathroom (applies to both parties’ MPs). (Gay Rights Issue)
Independence (most notably the BIC report)
After closing the Clinic, the Brown one, signed up as an “approved Dr” then refused to take any patients.
Forcing GPS upon the taxis
Brown’s Relationship with Tina Poitevien , Mark Lay and MDL Investments.
Free Bus & Ferry Transportation (that never was!)
The $11 million spent on cricket
The amount spent on football
The police contracts never being settled
No cruise ships for Hamilton
Building a pier over an historic wreck
The “deal” they cut with the US government re the cost of cleaning up the Baselands [$11 mill towards the bridge when the estimated cleanup costs were $65 mill]
The apparent about face re moving the Southlands project to Morgans Point (and the bill that will stick the taxpayer with)
Pay to Pray
Pay to Play
US Passport
$ 1 million per month spent on PLP travel junkets abroad.
$25,000 to $30,000 to fly entertainers to Bermuda on a private jet for Brown’s love fest
$1 million to set up Govt TV channel
Abdallah Ahad
Racist dog attack on Gibbons
non-Charity (THE)
Alex Scott’s email to Tony Brannon
$82,000 spent on security for Brown’s private residence.
$1,500,000+ for renovations at Clifton, and then overcharging for rent so it remains unoccupied.
“Political eunuch”
China tourist office
Plantation questions
Refusing to answer cost questions
Donation to a US congressman even though EB shouldn’t be an American anymore.
Gay cruise saga
Reducing funding for the Salvation Army.
Firing developers who were ready to go on Club Med.
Health Minister’s notes on need to obfuscate “embarrassing” report.
Bermuda Cement
BHC 2.0

Readers – please help me remove the inaccurate ones and add any others – I have done some of this on my own.

If I had more time I’d like to go through and add up the cost of these various mistakes to the taxpayer – it would probably run into the thousands of dollars per person in Bermuda.

A good editorial by Alan Gamble raises the right questions about tourism….

I am still not convinced that the latest tourism numbers are really what they are made out to be. If one subtracts the regular business traveler and the visitors who come to visit guest workers, the repeat visitors to establishments like The Reefs and Cambridge Beaches plus the visitors generated by the Fairmont Group’s own marketing department from the overall total, it would appear to me that we are probably spending a lot of money per new visitor.

I would like to see categories of visitors which include ‘new visitors to the island’ instead of lumping all passengers into ‘air arrivals’. Only then will we really know if our huge tourism budget is money well spent.

So if the government were honest, transparent, and interested primarily in doing what is best for Bermudians then they would ensure a high return on taxpayer dollars.

How would a government do it?

Good visitor attribution.

Total air arrivals
- Locals
- People visiting friends/family
- Business travellers
- Long-term repeat visitors
- Visitors attracted by non-government marketing
- Other visitors not attracted by government
= Visitors attracted by government

Then you would take that number by the economic value added by those visitors (which is a function of both the revenue from visitors, tax breaks given, taxes spent, and the opportunity cost of resources) and divide the total value added of government attracted visitors by the real economic cost of attracting them. On a more simplistic level, it’s possible to simply divide the number by the tax spent directly – but this will likely underestimate the true cost as it ignores opportunity cost. A quick run of the numbers on Faith Based Tourism (hundreds of thousands of dollars spent, potentially as many as a few hundred tourists attracted) shows almost immediately that this was a bad investment by government.

The corporate finance guy in me wonders if there is some way to assign return on investment (ROI) to government discretionary programs as an independent office.