StarKist 5 week shutdown will cost the government millions
With an estimated 7% loss in local revenues for the government due to the upcoming five-week closure of StarKist Samoa cannery operations, Gov. Lolo Matalasi Moliga has advised directors of all ASG departments and agencies to “practice diligence in expending local funds”.
Pittsburgh-based StarKist Co., confirmed Tuesday that its cannery operations in American Samoa will shut down for five weeks, Oct. 21st to Nov. 26th, for upgrades and to install new equipment.
The StarKist Samoa plant is expected to re-open Nov. 27th.
The temporary shutdown comes at the start of the government's new fiscal year 2018, which begins Oct. 1, 2017.
In a memo Tuesday afternoon, Lolo informed directors about the notice received from StarKist regarding the 5-week closure of the cannery plant, saying that he brings this issue to their attention “because of the financial implications on the revenue posture of the government.”
Lolo provided data to show the financial impact on ASG.
He explained that at an average salary of $11,500 per annum, five weeks of no work translates to just over $1.43 million of direct loss of purchasing power, and $575,000 in individual tax revenues.
“Assuming a conservative multiplier effect of 2.5, the cumulative financial loss is $3,593,750 in purchasing power and $1,437,500 in individual income tax,” Lolo explained. “This represents about 7% of our total income tax revenues.”
“While this financial setback is unwelcomed,” said the governor, “it is fortunate that it is happening at the beginning of the fiscal year, thus giving us a broader window to minimize its adverse impact.”
In this regard, the governor requested directors to take prudent steps to ensure that spending is conducted proportionately to the identified loss in revenues. “Personnel costs consume an average of 85% of your budget, hence it behooves all of you to pay close attention to proper management of time to ensure that overtime it not incurred,” he told directors.
And since these are locally generated revenues, Lolo said existing cost containment measures will continue, and all directors are advised to practice diligence in expending local funds.
Although Senate President Gaoteote Tofau Palaie and House Speaker Savali Talavou Ale are copied in the governor’s letter, it's not immediately clear if copies have been sent to the leaders of the Fono, whose annual budget is 100% funded by local revenues.
StarKist is a major industrial customer for the American Samoa Power Authority.
Samoa News asked ASPA executive director Utu Abe Malae, if ASPA has conducted an assessment as to the possible loss - if any - of revenues for the authority as a result of the five-week shutdown. And if so, what type of impact - if any - will this have on ASPA.
“We will have to tighten our belts and continue to save up for hard times,” was Utu's reply yesterday afternoon. He added, “Our church and cultural material demands must adjust accordingly.”
The five-week shutdown has rattled the nerves of many in the community, not only StarKist employees and their family members, but also people who work for local vendors that serve the cannery.
According to the US Government Accountability Office report last December on minimum wage in American Samoa - where the minimum wage for cannery workers is currently $5.16 per hour - the canneries (which included the now closed Samoa Tuna Processors as well as previous cannery operators) have provided a number of indirect benefits to other industries and the territory's economy.
For example, many businesses exist to support the canneries, like the company that manufactures the cans. (Samoa News points out that Talofa Systems Inc., - which employs some 200 workers - is the can manufacturing plant for StarKist Samoa and both companies are owned by South Korean based Dongwon Industries. It's unclear if Talofa Systems will be affected by the StarKist Samoa shutdown).
Additionally, maintenance for the canneries and for the vessels that supply the canneries also has brought business and jobs to the island.
Cannery workers, like other local residents, spend money at local establishments, such as restaurants and retail stores. Additionally, exported cannery products and delivery of materials to the canneries, reduces the shipping cost of bringing other goods to American Samoa.