JRC hunting cash for rail asset valuation, divestment plan still in play
CASH-POOR JAMAICA Railway Corporation (JRC) remains wedded to plans to privatise the idle rail service, despite the failure of its last effort, but is faced with a dilemma.
To dispose of the assets, the JRC needs to have them valued, but it has no funds to finance the valuation.
General Manager Fitzroy Williams says he is now looking at new ways to grow revenue, based on a mandate from the JRC board of directors.
In its latest financial report for 2015-16, released last month, the JRC board said the failure to value the rail company ’s infrastructure and 10,000 parcels of land, totalling over 2,800 hectares, was itself a contravention of international accounting rules, but noted that JRC was unable to address the deficiency because it lacked resources to finance it.
The Jamaican Government has been pursuing privatisation of the 172-year-old rail operation for 25 years. Negotiations with its l atest targeted i nvestor, Herzog, finally fell apart last year, but the transport ministry said it has i dentified another prospective candidate — whom it did not name.
Williams told the Financial Gleaner that the cost of getting the valuation done was around $200 million, “given the size of the land portfolio and the track and infrastructure networks, including tunnels and bridges”. The funds would cover the identification, valuation and registration or titling of land, buildings and infrastructure, he said.
In fiscal 2016, funds disbursed by the transport ministry for the valuation was $2.87 million, amid a total allocation to the rail company of $16.3 million. JRC’s costs that year amounted to $185.68 million, according to the report tabled in Parliament last week.
For the year under review, the JRC’s main source of income was bauxite company Windalco, which pays for the right to utilise 90.1 kilometres of JRC’s rail track annually.
JRC earned rail revenue of $103 million, of which the Windalco fee contributed $87.75 million. Rentals and advertising billboards contributed another $35 million of income.
The rail company made a surplus of $9.7 million that year.
Williams said the valuation and divestment of assets would be done in phases, based on the schedule worked out for rehabilitation of the lines under the privatisation programme, the plans for which are ongoing.
The segments comprise: Phase 1 — Appleton, to Montego Bay; Phase 2 — Spanish Town to Appleton and Spanish Town to Ewarton; and Phase 3 — Kingston to Spanish Town.
He adds that the JRC board has instructed JRC management to implement measures to raise more revenues and maximise returns on real estate assets. The measures will be implemented over time.
“Aspects involve increased lease/rental charges for accounts for which this is applicable, for example, where no annual increases have been applied for a number of years,” said Williams.
“Other aspects involve intensifying our effort to collect arrears, especially for accounts with arrears over 90 days — efforts ranging from telephone calls, messaging, direct visits are to be employed — and where these strategies do not yield the desired result, the lessees will be taken to court to recover outstanding amounts and, if necessar y, possession of proper t y,” he told the Financial Gleaner.
Among the targets is the People’s Arcade in Montego Bay, which was established on appropriated JRC lands more than 20 years ago.
“Unfortunately, the process was never managed at the local level and over time, the location and process degenerated into an untenable situation. The current administration and the board and management have decided to re -establish its ownership rights over the property and streamline, and as applicable, regularise operations for commercial vendors i n the Arcade,” said Williams.
“The result of this activity will formalise vendors in a payment agreement with the JRC for the use of its assets”.
At March 2016, JRC’s balance sheet assets were estimated at $340 million, up from $270 million in FY 2015.