Water Commission drowning under delinquency; pension plan threatened

With a $29 billion unfunded pension liability, the National Water Commission (NWC) says its ability to meet its monthly pension obligations continues to be strained by non-paying customers, who create a drag on the company’s cash flow.

Approximately three per cent of the company’s revenues, or $73 million, have to be set aside monthly to settle pensions payments, President and Chief Executive Officer of the NWC, Mark Barnett, told The Gleaner.

NWC operates its pension scheme under the Pensions (Parochial Officers) Act but is now pursuing pension reform towards having a contributory scheme.

“We were not considered under the arrangement to create the Government pension scheme two years ago, so we are on our own to manage our own pension liability,” Barnett explained.

The NWC, therefore, holds the obligation to pay out monthly to former employees “from way back then and some current employees who qualify for a pension under that scheme”.

“Ideally, you want to have a separate investment arrangement for pensioners because it is a long-term commitment. But [what the company has now] is really pay as you go. As I collect cash from my customers, it goes toward paying the pension that is due on a monthly basis,” he said.

However, the arrangement is unsustainable, Barnett explained, since many customers are not paying over what they owe to the NWC or are not paying consistently, impeding its cash flow.

Non-paying customers also impact the company’s ability to improve its infrastructure network and service to paying customers, the CEO said.

“This is why we are insisting that people pay their bills. It would allow me to possibly do a little set aside, but [right now] I don’t have that luxury where I can invest to satisfy pension obligations, and when you have to take it from your cash flow, it takes away from some of the activities that you could do as an entity in terms of system improvements,” Barnett said.

“It does affect our ability to do real water-supply work,” he said.

The majority of the NWC’s 2,148 staff are, however, now on a contributory scheme, which is managed by a separate arrangement, he said.

The NWC has long since lamented that it only manages to collect 87 per cent of what it actually needs to offset its operational and other costs and that its receivables account is also ballooning.

Gross consumer accounts receivables as at September 30 stood at $43.8 billion, Barnett said.

“Jamaicans have a choice of whether they want to have a utility [company] that is struggling to improve its services or a utility that they believe is responsive and able to deliver. The only way that is going to happen is where customers live up to their obligations to pay for the water they receive,” Barnett charged.

Improved cash flow would also make the company more attractive to investors to back its capital projects, he said.

The company’s quarterly loan commitments, which run between USD$3 million and USD$4 million, are also offset from revenues.

“In that same quarter, I still have to pay my Jamaica Public Service bill, salaries, and pension,” the NWC head said of the impact on non-payment by customers on the entity’s obligations.

“If people understood the details as to what has to be taken care of, then they would realise our limitations in satisfying the demands that come,” he said.

“An enterprise that is loss making is unlikely to secure attractive financing terms, and that is the reality for the company now,” he said.

“So we are insisting that to get us out of this quagmire of debt, each of our customers of the 527,000 connections the NWC has must pay for the service they receive to enable the NWC to deliver improved services,” he said.

The NWC has not reported a profit or broken even in years and is currently looking to sell between $15 billion and $20 billion of its debt to a collection agency.

“The draft audited statement for the most current year shows that we haven’t broken even, but we have seen significant improvement in the right direction,” he said of the entity’s viability.

Barnett was speaking with The Gleaner following an Editors’ Forum, where he noted that the company’s unfunded pension liability rivals its receivables portfolio.

tameka.gordon@gleanerjm.com