ECC approves Roosevelt Hotel transaction

ISLAMABAD:

Pakistan on Wednesday approved giving the Roosevelt Hotel at a nominal rent to the New York City government and also endorsed a $56 million settlement with its sacked employees –- in a deal that will help re-open the facility after two-and-half years.

The Economic Coordination Committee (ECC) of the cabinet approved the deal to give the 1025-room hotel, located at the prime tourist resort, to the New York City government for immigrant business under a three-year deal.

Headed by Finance Minister Ishaq Dar, the ECC also endorsed the withdrawal of lawsuits and reach a $56 million settlement deal with the sacked employees of the Roosevelt Hotel, New York.

A finance ministry handout stated that the aviation ministry briefed the ECC on the outcome of negotiations held by the committee with the New York City government and the hotel union on reaching a suitable agreement for utilisation of the Roosevelt Hotel (1,025 rooms) over a period of three years for Immigrant Housing Business by the New York City Government.

“The ECC after detailed discussion approved the execution of settlement agreement with the Hotel Union and the New York City government,” according to the decision.

Roosevelt Hotel Corporation (RHC), New York, is owned by PIA- Investment Limited (PIA-IL), a subsidiary of PIA – the national flag carrier.

On April 28, the aviation ministry had presented the draft agreement for the approval of the ECC, which showed the per night room rent at $200. However, the ECC had termed the agreed rates too low and dispatched a team to New York to renegotiate the contract.

Ironically, the team that flew from Pakistan got only $2 per night increase in rent and the hotel will now be rented out at $202 per night price.

The ECC further gave nod for withdrawal of pending lawsuits by the Roosevelt Hotel with the entity’s union and City of New York pursuant to the terms of settlement agreement with the union, according to the finance ministry.

The aviation ministry maintained that the committee has concluded its negotiations with the union and the City. It has also informed that the results of the negotiations were placed before the PIA-IL Board of Directors on May 8 who after concurring with the position brought out by the committee resolved that the matter may be placed before the ECC for seeking their approval and execution of the proposed settlement agreement with the union and contract with the City as well as withdrawal of pending lawsuits between the hotel, union and the City after making a full disclosure.

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Roosevelt Hotel had been shut down in December 2020 with the approval of the then federal cabinet. After closure, the entity was required to reach a settlement with the union on payment of severance and pension to 469 employees as per local laws.

However, since this settlement could not be reached, several lawsuits and arbitration claims were filed against the hotel by the union as well as the Pension Fund in various courts and the Impartial Chairperson for Arbitration respectively.

After renegotiation, the total value of the contract the local authorities have offered is $228 million in rent for three years, with a minimum guaranteed period of 18 months.

According to the proposed contract, the city government would pay $202 per room per day for the first year, $205 per room for the second year and $210 per room for the third year – a price that is far below the prevailing market rates at the fifth avenue, which is the prime location for the tourists visiting New York.

The ECC approved settlement deal with the 469 union employees who were sacked when the last PTI government closed the hotel in 2020.

The settlement cost of the 392 employees is estimated at $56 million, as 77 employees are expected to rejoin once the facility is opened for business.

The ECC directed the PIAL to engage and share its business plan with the NBP regarding rollover of the $142 million loan for a period of two years.

Other decisions

The ECC approved Rs153 million supplementary grant for payment of court cases fee for the settlement of dispute with India under the Indus Waters Treaty. Against the budgeted amount of Rs821 million, the total fee cost is estimated at Rs974 million.

The Indus Waters Treaty, 1960 provides a mechanism for sharing of waters of the Indus system of rivers between India and Pakistan. But there exists an ongoing dispute pertaining to two Kishenganga hydropower project of 330MW and Ratle hydropower project of 850MW.

Both plants violate various design parameters provided in the treaty, including those relating to pondage, intake, sediment outlets, spillway and freeboard.

The cabinet body also approved Rs4 billion, or $20 million, as rupee cover in favour of Ministry of Federal Education and Professional Training for the World Bank Programme Actions to strengthen performance for inclusive and responsive education.