Lawmakers question shipyard’s self sufficiency
Appearing before the Fono joint budget hearings for FY 2012, Shipyard Service Authority officials, yesterday, focused on the newest semi autonomous agency’s ability to support itself — predicting a surplus of more than $100,000 in the new fiscal year 2012 based on their forecast of revenues collected and money to be expended.
However, lawmakers expressed concern over it not being able to operate without eventually asking for a subsidy from the government — money that just isn’t there, given ASG’s precarious financial situation.
The authority’s Board Chairman Carlos Sanchez, Vice chair David Robinson, along with board member Toetasi Tuiteleleapaga appeared during yesterday’s joint budget hearing and provided for lawmakers the executive order that established the shipyard authority.
Robinson gave lawmakers a brief “snap shot” of the background pertaining to the shipyard authority, which was established in June this year to manage and operate the government owned Ronald Reagan Marine Railways shipyard after the government was able to wrest the facility from MYD Samoa Inc.
He also told lawmakers that the shipyard was able to secure $1.08 million in American Recovery and Reinvestment Act (ARRA) funds, which were used for major purchases and capital improvements with the help of the Territorial Office of Fiscal Reform.
Robinson further briefed lawmakers on plans to secure more purse seiners to use the local facility instead of these vessels going elsewhere, stating “we have forward bookings to February” for vessel repairs.
Without any available background information from a previous shipyard budget, Robinson said, the board had to work from scratch to compile the FY 2012 budget, where revenues are forecast at $1.53 million and expenditures at $1.42 million.
Therefore, he said, the shipyard is looking at a surplus of $115,000 in FY 2012, which will be re-invested back into the shipyard. He also said that the board is “very confident with the success” of the shipyard and the benefits it will bring to the territory with more boats coming here for repairs.
One of the major concerns heard from lawmakers prior to the hearing was the idea of having the government provide funds for yet another entity, when there is already a serious financial constraint for ASG in FY 2011 and probably into the new fiscal year.
This concern was raised by Rep. Larry Sanitoa, who was first to ask questions, saying that local funds are not in good condition and yet there is new authority included in the government.
He wondered how secure this new entity will be in continuing to fund its own operations without a government subsidy. Sanitoa said it was revealed in budget hearings that besides local revenues and federal grants, there is no other new source of revenue for the government in FY 2012.
“We’re not asking for an allocation, we are able to stand on our own with a possible surplus” in FY 2012, replied Robinson.
Sanitoa said that there are still concerns that later down the line, the government will be asked to fund this authority and based on what’s presented to the Fono there is “no confidence” that the the authority will continue to generate their own revenues without asking the government for a subsidy.
He also wanted information from the board, on any contract it may already have in place with boat owners, to prove that the authority can stand on their own.
Robinson explained that boat owners asked for quotations and they make comparisons with other off-island facilities, but there are no advance contracts. “We based our modest budget figures” on the revenues to be collected from the types of boats to be repaired at the shipyard, he said.
The proposed budget is enough to pay operations but not enough for major capital improvement in FY 2012, said Robinson, who also pointed out that the board is “very confident” the shipyard will have a strong cash flow in moving forward into the new fiscal year.
Robinson and Sanchez both emphasized at least three times that the shipyard has only been in operation for three months and a lot has been done since then to bring the facility into a situation where it is now attracting vessels to come here.
A business plan for the shipyard was requested by Rep. Talia Fa’afetai Iaulualo to ensure that the new authority is “self sufficient” because this issue remains unclear. He said he has a lot of reservations about the risk the government takes when there is not enough revenue generated by the authority for their own operation.
Both Robinson and Sanchez said the shipyard is in the process of preparing a business plan, but at this time, the board is working quickly to improve the facility and attract new customers.
Sen. Lualemaga Faoa said the executive order creating the shipyard authority states that the shipyard board has the authority to approve their budget. He asked Tuiteleleapaga for a position on this provision, saying that this issue is being raised because it’s the same issue the Fono and the American Samoa Power Authority are now in conflict over.
Tuiteleleapaga said that it’s the position of the Shipyard Service board that this approval provision of the executive order is prior to submission of the budget to the Fono for final approval, and nothing in the executive order takes away the authority of the Fono to approve the budget that “we all comply with”.
At the beginning of the hearing, Vice chair Robinson stressed to the committee the poor condition of the shipyard when the board took over responsibility— and after getting the shipyard into “a better condition” than it is in now, more improvements can be made.
He noted the shipyard now has 27 employees, with the majority, former workers of MYD; and “...we used our own connection with vendors” to obtain credit and move operations forward despite many setbacks, especially in securing the proper tools and equipment, in order for the shipyard to provide quality service.”
Robinson also said that the board was “disappointed” with some criticism directed toward Sanchez, who has worked tirelessly to bring this facility “to be a better operation” and the government is grateful to Sanchez and his wife (who was in the Senate gallery).
Sanchez, who also addressed the hearing, said the board wants “to make the shipyard cost friendly” so that boats will come here and not elsewhere, as in the past.
It was also revealed during the hearing that Sanchez has been working long hours without pay and he is currently taking on the duties and responsibilities of a general manager until the shipyard is in a better financial position to hire a general manager.