Contractors still owed hundreds of millions | Local Business

The Housing Development Corporation (HDC) still owes contractors $588 million for outstanding work prior to 2015, HDC chairman Noel Garcia confirmed yesterday.

Of that sum, only $7 million is owed to small contractors, he said.

He told the Sunday Express the HDC hopes to pay off the small contractors by February 2021, from a fund it set up specially to meet arrears to them.

Garcia said the remaining sum is owed to bigger contractors and the HDC will honour its legal commitments to its contractors and service providers.

In July 2019, the HDC had quantified the debt owed to contractors at $698,516,843 after making 271 payments to contractors for the sum of $139,853,660 in June 2019.

Garcia explained that before the onset of the Covid-19 pandemic in March, the HDC had projected it would sell houses valued at $1.2 billion this year.

However, the State housing company has only managed to sell $300 million in houses so far in 2020.

“The problem is that HDC has $3.4 billion worth of homes that need to be sold,” he said,

Further, the HDC’s ability to earn revenue in 2020 was stymied by the moratorium on mortgages, which was one of the measures instituted by the Government to manage the fallout of the pandemic on the country’s most vulnerable people.

For now, the company is focused on converting and preparing its existing house stock, with many in various stages of completion.

Conversely, Garcia observed that the other State company he chairs, the Urban Development Company of Trinidad and Tobago (Udecott) owes “nobody” except for variations and funds in contention.

According to the Central Bank’s July 2020 Economic Bulletin, the construction sector slowed in the first quarter of 2020, bought on by the Covid-19 pandemic.

“The construction sector slowed, based on evidence of a drop in local sales of cement, as work on several public infrastructural projects including the Curepe Interchange, the Valsayn Pedestrian Walkover and Bridge B1/4 at Mamoral Road, neared completion,” it said.

In its bid to reset the economy, the Government’s policy for the construction sector is to get smaller companies working again.

In presenting the 2021 budget last Monday, Finance Minister Colm Imbert said 20 per cent of all State housing construction projects would be reserved for small and medium-sized contractors.

“Over the next two years, we will incentivise the construction sector through a number of fiscal incentives, including tax relief, which will be granted for approved development projects, such as approved housing and commercial and industrial building development, along similar lines to the fiscal incentives already available under the law for approved tourism and hotel projects,” he said.

 Timely payments

Contractor Emile Elias said the State needs to ensure timely payments for work.

He acknowledged that construction can stimulate the economy by creating employment but that governments “have no intention of paying for work done.”

He said legitimate invoices should be met with timely payments.

Elias had represented the Joint Consultative Council for the construction industry (JCC) on a committee appointed by Prime Minister Dr Keith Rowley to tabulate the outstanding debt to the construction industry in 2018.

Then Rowley, in an address to the JCC had noted that there were outstanding payments to contractors.

“This Government acknowledges that significant monies are owed to contractors and payments are continuously being made on these accounts, albeit late, sometimes, even as new work is awarded to some of the same contractors thereby incurring additional debt.

“In 2015/ 2016, at the height of the Government revenue collapse, $589.9m was paid to contractors for outstanding amounts owed to them at the Ministry of Works alone. Other payments were also made elsewhere. The point I am making is that it is a continuous process of payments and awards and the Government undertakes to pay as much as we can without stopping the development programmes, which in themselves continue to provide ongoing opportunities for service providers, even as they are owed money,” he had said.

Rowley had said the Government was committed to paying contractors who have legitimate claims.

Elias, at the time, said that while some outstanding claims submitted to the Government amounted to about $676 million, that figure will probably be revised downward to about $500 million compared to the sum of $4 billion which was floated at the time.

“The total figure that we received from members of the JCC who wish to participate in this process was appropriately $676 million. This is now subject to some refinements. I am expecting the figure to be between some $400-$500 million. This is only to emphasise; these sums are owed to the members of the JCC who want to participate in this process and that the JCC is engineering this reconciliation. We hope that within the very short while the fully reconciled figures would be agreed and the process of payment would begin,” Elias had said.

Yesterday, he explained that those figures were sent to the various permanent secretaries in 2019 and they were all certified claims.

“The amounts are all overdue. The State has the habit of paying late or not at all. These State agencies are not honouring their own contracts,” he said.

Elias said the onus is on the Minister of Finance, when the consent is given for certain projects, to release money to pay the contractors in a timely fashion.

He said even at the Education Facilities Company Limited (EFCL) there remained certified claims to be repaid.

Contractors, at that time, said Elias, who agreed to have their claims reviewed by the Committee, had all agreed to accept bonds as payments from the Government.

 Budget 2021

In fiscal 2017 and 2018 the Government attempted to encourage public private partnerships (PPPs) by offering a 50 per cent tax relief to investors willing to contribute capital for public infrastructure etc and a $100,000 premium to be paid to contractors who successfully constructed and sold HDC units to applicants.

Those incentives did not attract mass investment.

In the 2019 budget, Imbert indicated that 437 homes were constructed through PPPs and soon, the Government would issue a $1 billion housing bond to finance the construction of thousands of units.

Imbert had said the housing bond initiative (which will offer financing support for the development, construction, and sale of houses) was a tremendous game changer for the construction sector and home-ownership in T&T.

The housing bonds, he had said, can be used as part payment for State housing constructed by the HDC and it would have provided the HDC with critical and urgent cash.

The housing bond did not materialise.

But in the 2021 budget presentation, Imbert said the Ministry of Finance would facilitate a Government-guaranteed loan facility of $1 billion for the HDC in 2021, to finance HDC’s construction of houses for low and middle-income families. The Minister of Finance added that after HDC receives the $1 billion, the Government expects it “to accelerate the finalisation of mortgages for already completed houses, to assist in financing new construction”.

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