(Mainichi Japan) February 24, 2012
Town's 'lies' show stronger checks needed in gov't use of precious tax money
A report in The Mainichi Shimbun revealed that the Oi Municipal Government in Fukui Prefecture, the location of Kansai Electric Power Co.'s Oi Nuclear Power Plant, received 2.5 billion yen in "nuclear power plant grants" after submitting a fake business proposal to the central government. Naturally, one can point the finger at the town assembly whose members all kept quiet despite knowing, in the words of one town official, that the town "lied to the government." Yet at the same time, the fact that the government's screening system could not see through this "lie" is problematic.
In the wake of the disaster at the Fukushima No. 1 Nuclear Power Plant, reviews of the government's energy policies have been mulled, and the status of such grants, which are funded by taxes, has come under scrutiny. Unless an effective checking system is in place the public will not agree to having the grant system continue.
The public finances of Oi, a town of about 8,800 people cannot be separated from nuclear power facilities. In the 1960s, the town was so short of funds that it was unable to pay the wages of its town workers, but the when the Oi Nuclear Power Plant started operating in 1979, the situation changed completely. The town received a huge amount of nuclear power plant-related grants and fixed property tax and used the money to build hot spring facilities, a sports park and a stream of other lavish structures. Prefectural government officials said that as of fiscal 2009, the town had received 32.2 billion yen.
As the cash flowed in, the town in 1991 established a plan to turn its image from a nuclear plant town into a resort town, and a marina and other facilities were prepared. However, when the town sought an operator for a hotel that was to be a centerpiece of the resort, it struggled to find anyone due to poor economic conditions. With no sightseeing spots in the area it was hardly a favorable location, and eventually only one party applied.
Here the town told its first "lie" to the government as it eyed more nuclear plant-related grants.
The hotel operator formulated a business plan stating that it expected about 60,000 visitors a year, with the total cost of the project reaching 5.9 billion yen (Plan A). The town meanwhile prepared a 6 billion yen plan (Plan B) that envisaged 105,000 visitors a year. The town made preparations to formally adopt Plan A, but when applying for a grant it presented Plan B to the central government, showing a higher number of visitors. At the time, business at facilities funded by grants was slow, leading to criticism. It is believed the town's submission of a fictitious business plan was based on the conclusion that projects which forecasted low profitability would be less likely to be eligible for grants.
The town then told a second "lie."
When the government screened Plan B -- that is, the fake plan -- to decide whether or not to provide a grant, it judged that about 1 billion yen in operating expenses could be cut. The government urged the town to make these reductions, but the operator, which was already proceeding with Plan A responded, "It's impossible to make any cuts under our plan." Eventually the town decided to secretly cover about 700 million yen of the requested cuts to help make the amounts add up. Of course, it did not inform the government about this "covert operation."
As a result, the project passed government screening, and 2.5 billion yen was paid out. Construction of the hotel was completed in 2009, but the occupancy rate last fiscal year stood at just 30 percent.
There are two problem points in this case: Firstly, obviously, is the town's response. The background to the case was reported at a meeting of all members of the town assembly in 2007, and a town official confessed, "We lied to the government." But this was not brought forward as a problem, and at a plenary session of the town assembly two days later the project was approved. Town assembly members at the time pointed out that the project was already proceeding, and it could not be halted at such a late stage. But as a result, some 700 million yen of the town's tax funds were eaten up. There is no doubt that the town assembly checking system failed to function as a result of the town's reliance on grants for many years and its desensitization to the fact that it was using public funds.
Secondly is the central government's response. Being a case in which a local government was deceiving the central government, the central government was primarily a victim, but I think it has room for improvement. For example, it could open meetings of the external screening committee of the Ministry of Economy, Trade and Industry's Agency for Natural Resources and Energy to the public. The agency says that meetings are not made public "to allow members to freely state their opinions," but in the Oi Municipal Government's case, it is likely that the town's false application would have been detected.
I also want to mention the examination system after grants are paid out. The agency says that inspections are the responsibility of the Board of Audit of Japan, but it's possible Board of Audit inspections could come too late. There is rather a need to review the screening system of external screening committees. If such a screening were applied to the Oi Municipal Assembly and the hotel operator, the false claim could easily have been detected. And if the screening system is strengthened, this will help prevent false applications in the first place. If problems are found only after the building is constructed, then it will be extremely difficult to recover the grant money.
In promoting nuclear power plants, the central government has enticed local bodies to host plants with a huge amount of grants. But the grants are originally collected as taxes on top of electricity charges. Officials need to be more aware that each grant they dish out is hard-earned tax money.
(By Toshiki Koseki, Osaka City News Department)
毎日新聞 2012年2月23日 0時22分