Total cost close to $39 million: St. Maarten Government now owns administration buildingPOSTED: 07/4/14 12:50 AM
St. Maarten – Prime Minister Sarah Wescot-Williams signed on Monday the buy-out agreement for the new government administration building on Pond Island with developer RGM. The buy-out price is $12,387,500. Together with the BOOT-fees the government started paying in the last quarter of 2007, the total cost for the building now stands at $25,374,500. According to the PM, the building’s completion will roughly require another $13.4 million (24 million guilders). Once completed, the building will have cost around $38.7 million.
On Monday, Wescot-Williams and RGM signed the deed for the property, the termination and settlement agreement, the final mutual release agreement and an agreement to cancel all pending litigation.
The government entered into a development contract with RGM in November 2003, whereby RGM St. Maarten would obtain a parcel of land on Pond Island in long lease and construct the shell of the building for $16,270,000.
The government remained responsible for outfitting the building and for the infrastructure around the property. RGM completed its part of the deal in 2008.
“For mainly financial reasons, the government was unable to complete and occupy the building,” Wescot-Williams said at yesterday’s Council of Ministers press briefing.
Under those conditions, the relationship with the developer soured and RGM took the government to court twice. The first court case was about a difference of opinion about additional lease land, additional costs and the responsibility for structural maintenance and insurance. The second case was about the government’s obligation to complete the building and move into it. The verdict in the first case was “largely in favor of the government,” Wescot-Williams said, the second verdict favored RGM.
Both court rulings were in appeal. The PM said that the government is unable to comply with the demand to complete and occupy the building within a year (by November of this year).
The buy-out gives the government full ownership of the building and the land. The long lease for the land was terminated, as were all other contractual obligations towards RGM and both parties agreed to withdraw all pending legislation.
According to Wescot-Williams, the buy-out price is “the amortized reduction of outstanding principal on the agreed investment amount on the assumption that the investment was done as a loan in accordance with the BOOT-payment agreement. The amount represents the principal investment minus payments made towards the principal. The building has been appraised at double the buy-out cost.”
Based on this statement, and taking the original investment of $16,270,000 into account, the government has paid off since 2007 $3,892,500 on the principal. Since the BOOT-fee payments since the last quarter of 2007 amount to $12,987,000, this means that over the past seven years the country has paid a heavy sum in interest charges, totaling $9,094,500.
From October 2010 on, getting additional money to complete the building was “a headache, to say the least,” according to Wescot-Williams. “This has been pending at previous Ministers of Finance for months before the first money could be allocated for the government to comply with its responsibility. I don’t want to lament too much about how this went with the finances.”
Wescot-Williams said she expects to be able to say more about a timeline for moving into the building in one of two weeks, adding that she wants to move in “as soon as possible.”