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Jean Castellini : Clear messages

21 September 2018 - 10h00

Jean Castellini was the guest of the Monaco Press Club at the Métropole Monte-Carlo on 14th September. The Minister of Finance and Economy expressed his pleasure at the good state of health of the Monegasque economy, but did not hide the fact that a number of construction sites are causing problems, and underlined the efforts made in the area of social housing.

 

The summer season? It was a good one, according to Jean Castellini, with employment stable at around 80%. The average per-room price increased from €377 to €400 over the course of a year for the period between June and August, a rise of 7.3%, and the REVPAR, the average revenue per available  room, rose by 6%. In August, the average revenue was 465 euros, and the REVPAR was 384 euros. With almost 3,000 participants, the Rendez-Vous de Septembre (insurance and reinsurance) virtually saturated the Principality’s hotel capacity. The number of overnight stays for business tourism showed a sharp increase as early as June. Tourism began in wintertime 150 years ago, recalled the Minister, and today the winter experience is working well, and business clients are present. With 700 events a year and extremely high-level conventions, tourist activity is thus “smooth” throughout the year, which was the objective.

 

Le Larvotto

On the subject of Le Larvotto, he admitted that the activities might have been penalized by the work on the offshore extension, although all the actors involved have attempted to reduce its impact. We should not forget that the weather played a part, with a late start to the season and a number of weekends of poor weather, he stressed.

 

The 2019 season will be impacted by these works far less. And as for the future? A Larvotto that is “all beautiful, all new”, which will integrate well with the extension, taking up Renzo Piano’s project, because the esplanade has aged, like the car parks, and architectural consistency is needed. The project will be presented to the elected representatives by the end of the year, but there will be no “bling”. The cost of the project has not yet been determined: it was originally 50 million – this was the State departments’ project – and the cost including the Piano plan should still fall within a similar budget. It will be an evolution, not a revolution, and we must not “break the spirit”. While the consortium of companies is taking responsibility for the studies and the design, the additional costs will be borne by the State, which will provide supervision and launch a call for tenders, says Jean Castellini. The works should begin at the end of 2019 or the beginning of 2020.

 

The idea is to draw inspiration from the Hôtel de Paris, which in the end is continuing to operate during the works, with scaled closings and re-openings of its iconic locations, said Jean Castellini.

The human and social elements are at least as important as economics and finance“, explained the Minister of Economy and Finance, “but if they are to have their place, the finances need to be in good shape“.

 

The CHPG and the Ilot Pasteur

 

Having started by discussing with the offshore extension, the work on which is progressing according to schedule, and Le Larvotto, where work is scheduled to begin at the end of next year, it was just a short step to citing other more problematic issues that are in the spotlight. With regard to the CHPG, Jean Castellini is of the opinion that “what is happening will not fundamentally call the final cost into question”. “There will be inevitable financial consequences, but they can be mitigated or shared”. On the other hand, the Minister did not hide the fact that after 15 years, the cost might “technically” increase from 750 million to 1 billion euros taking account of revaluation, which, he insisted, was normal with a revaluation over such a period, especially as the problems with the construction site cannot but have an impact on the schedules. There will be years in which the costs will be very significant, but they are not the first, and will amount to hundreds of millions, he explained. In any case, Jean Castellini expressed his pleasure at the fact that his predecessor had decided to make an annual provision in the State budget, even though the Board of Auditors had expressed some reservations in principal at the time.

 

It is an extremely complex site, and we were perhaps over-optimistic with regard to certain estimates. The contract provides for penalties in the case of overruns, and the costs will be shared, and will not be borne entirely by the public authorities“, he continued. “These slippages mostly involve the schedules. We will recover a part, but not all, of the delay. But let’s not chastise ourselves”, insisted Jean Castellini: “You often see significant delays with ambitious projects in other large countries. This should not be used as an excuse, but we need to put things into perspective“.

 

The CHPG construction site is not the only one to raise questions, however. The Ilot Pasteur site is currently at a standstill, confirmed the Minister. An initial call for tenders had estimated certain costs wrongly, explained. “We asked whether we should continue”. In the end, it was preferred to halt the project, and another call for tenders will be launched, in the knowledge that the least expensive offer will not necessarily be selected. There is also a problem with the car park at the Darse Nord at Port Hercule. The paving has been completed, but there is the question of the sea, and what happens below it is complicated, Jean Castellini confirmed, recalling the problems encountered when the works at the Yacht Club began. Even though the techniques have been mastered, there are always unforeseen events…

 

What conclusions should we draw? We need to have more efficient supervision of construction sites and to decide who is liable, and what is the responsibility of the State, the architects, developers and the inspection bodies. We must ensure that the developers have the internal resources for such ambitious worksites, and we must take an interest in sub-contracting, he stated. The new Director of Public Works will be carrying out a thorough review of procedures. “I want a fair price to be paid for the quality we have a right to expect in Monaco”, emphasized Jean Castellini, citing the Hélios issue, which has been in the news after the Jardins d’Apolline matter. These are two different questions, not only because of their size (237 homes at Apolline and 68 at Hélios), but also because of the problems that have been encountered. At Apolline, where appraisals are currently under way, the major concern seemed to be encased pipes with screed that was soaked with water so that the wood fibre partitions developed mildew, as well as bathtubs and showers trays whose installation did not guarantee waterproofing, explained the Minister.

 

Hélios, after Apolline

 

There are also concerns at Hélios, at least with some of the shower trays and bathtubs, and there is also a waterproofing problem with the vents. We therefore decided to carry out renovations, and to rehouse the residents temporarily under the same conditions as with Apolline but for a shorter period, five or six months”, he explained. “Another difference is that the developers admitted their mistakes more quickly, and we have devised a protocol for these renovations with them“. The renovations will be paid for by the developer, but we could, for example, replace the wood fibre with glass wool at the State’s expense, said Jean Castellini. In reality, anyone can experience a water leak for various reasons, he continued, and so this untreated wood fibre (although it can sometimes be treated these days) develops mildew on contact with the water. What is the cost of all this? At Apolline, around 50 million for the works, to which must be added intangible costs of around ten million a year, which means that the shorter the delays are, the more the cost is reduced. (It should be noted that at Apolline, the works are running somewhat ahead of the proposed schedule).

 

These expenses will very clearly have an impact on the adjusted 2018 budget (between five and ten million), as well as on the initial 2019 budget. In the end, Jean Castellini confessed, part of the costs will in all likelihood still be borne by the State at the end of the legal proceedings, in particular the intangible aspects. These are cost overruns that the Minister responsible for the budget “never wants to have to be liable for again”.

 

Today, his leitmotif is investment for the future: “Providing the Principality with what people have the right to expect”. Clearly, the new shopping centre is at the heart of his considerations. The State will fund the works, and he hopes there will be additional significant revenues. The specifications provide for new brands and an appropriate range of product for people who live and work in Monaco. When asked about the social housing that might be built in the context of these renovations, Jean Castellini replied: “this is a possibility that has been mentioned, but there are technical constraints. I am thinking in particular of the cable car that will have to take the people who use the 1,800 parking places at the western entrance, at the Jardin Exotique, to Fontivieille or the Rocher”.  This hypothesis was not part of the specifications.

 

Social housing: 315 million for purchases

 

These homes are one of the developments requested by the new majority in the National Council. More generally, the majority has let it be known that if its demands are not satisfied, it will not vote for the 2019 budget. “We have heard the message, and it doesn’t surprise us”, declared the Minister, who explained: “it seems that there is a desire to oppose budget surpluses and the housing policy. It is because we have surpluses and healthy public finances that we can envisage development”. And he recalls: “Between 2009 and 2012, we had a 200 million deficit, but over six years, we have recorded an accumulated surplus of 140 million. L’Engelin is a 120 million investment”. These are figures with which Jean Castellini draws a parallel, explaining that between 2013 and 2018 17 buildings were also acquired, to which must be added 72 apartments, both to accommodate compatriots and to proceed with future reparcelling procedures. The total amount for all of this is 315 million.

 

As for a budget that may not be passed, the Minister explained the theoretical effects. Expenses would be replicated month by month, based on the previous year, without its being possible to of incur new expenses. The country would not come to a halt. Jean Castellini added, however, that like the National Council, the government works for the good of Monegasques in the country, and that everything will be done to reach an agreement.

 

The digital transition

 

Among the priorities for both sides is the Smart City. Jean Castellini believes that the Principality has suffered a delay, and that tens of millions of euros will need to be committed. He also expressed his delight at the return to the country of people like Frédéric Genta to ensure the digital transition and Fabrice Marquet to drive MonacoTech, for which he predicts a promising future. For now, the Delegate for Digital Transition could also be accommodated in the premises that were formerly occupied by the DTC, in Boulevard des Moulins. It does not seem possible to envisage work in this location to increase the size of the building quickly, just after the works carried out in Place du Casino. This is a government position that needs to be properly understood.

 

On his return after the holidays, the Minister of Economy and Finance has taken up numerous topical issues, while he waits for the National Council’s public sessions to be the occasion for discussing them in the context of the debate on the adjusted budget in October, followed by a debate on the initial budget at the end of the year.

 

Noël Mettey

Photo ©Manuel Vitali - Direction de la Communication

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