Key concerns over cruise port project, Part 3

| 03/09/2019 | 51 Comments

(CPR Cayman): Proudly supporting participatory democracy in our country, the first people-initiated referendum will empower voters to have their say on the Cruise Berthing Facility. This letter forms Part 3 of a 3-part letter which seeks to highlight some, but not all, of the numerous significant and unquantified risks associated with this project.

1. Finance model transparency

What will Caymanians really pay for the project? Government has a duty to deliver value-for-money projects with public finances.

1.1. Capital investment will be CI$196 million for Option 2 from the preferred bidder, Verdant Isle Consortium, funded 40% from its own capital and 60% through a bank loan. However, required feasibility studies and public infrastructure costs remain either unassessed or publicly undisclosed including:

  • a geotechnical study of George Town Harbour;
  • George Town Revitalisation;
  • road upgrades;
  • increased demand for island resources, such as waste management, water and electricity;
  • Spotts Dock upgrades; (6) coral and shipwreck relocation.

1.2. What are the interest rates and payment terms to repay investors Verdant Isle and on the bank loan? Section 3.6 of the Outline Business Case (PWC report) indicates private cost of funds could be 10-15% per year. Who will ultimately pay for this?

1.3. Government concessions: The US$2.32 per head tax concession being given to the cruise lines, using 2018 numbers of 1.9 million passengers per year, is a direct loss to government revenue, i.e. Caymanians, of US$ 4.4 million per year. Where is the value-for-money assessment?

1.4. Project Management: Airport design flaws and overruns reported by the auditor general have been significant. What will be done differently for this project?

1.5. Competitive disadvantage of cruise lines unable to berth: With berthing, cruise lines reported they would likely stop calling on Cayman if they were unable to berth (PWC report p.19). What will happen on days with more than 4 ships? Will other lines be willing to pay their competitors, Royal Caribbean and Carnival, to use the pier?

2. Cruise ship reputation and long-term outlook

Cruise tourism is vitally important to our Islands and a positive cruiser experience is what we all want for Cayman. However, news and social media continue to highlight areas of concern over:

2.1. Illegal activity: Questionable practices by the industry such as fines and penalties for illegal activity, e.g. dumping of blackwater and garbage, sanitation and safety.

2.2. Learning from other popular cruise destinations: Why aren’t we learning from jurisdictions reacting to over-tourism problems? Venice recently banned mega-ships. Bruges, Dublin, Dubrovnik, Amsterdam and Santorini are introducing policies to limit or reduce cruise numbers. And cruise ships are crashing and damaging piers, for example in Honduras, Puerto Rico, Buenos Aires and Bermuda.

3. Outline Business Case (PWC report, addendum and supplement)

3.1. Uncertainty: The valuation by PWC is subject to inherent limitations based on varying assumptions and unreliable/unavailable data, which has significant implications for the results. These uncertainties are critical when considering whether this project will truly provide long term benefits for Caymanians.

3.2. Final conclusion raises red flags: The PWC conclusion reads, “The impact of the CBF is still driven by the number of visitors to the Cayman Islands who participate in ‘diving’ [watersports activities] and their behaviour in response to any damage to the reefs in GTH. These questions are fundamental to the economic rationale of the CBF.”

Evidence directly from the international dive community demonstrates the extreme likelihood of undervaluation:

Significantly, while approximately 80% of our annual tourism headcount comes from cruise and 20% from stay-over, Caymanians benefit more from stay-over guests, whose dollar spending contributes approximately 80% of annual tourism revenue — the “80/20 rule”.

Government should immediately release undisclosed information and set a referendum date which allows for completion of and public consultation on revised Environmental Impact Assessment and Final Business Case reports to allow our citizens to make a fully informed evidence-based decision on this matter of national importance.

Linda Clark, FCCA, MSc Marine Environmental Management

On behalf of CPR Cayman

*Information has been obtained by CPR from publicly available reports found on the websites for the Departments of Tourism (DoT) and Environment (DoE)

See relevant documents in the CNS Library

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Category: development, Local News, Viewpoint

Comments (51)

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  1. Anonymous says:

    Thou doth protest too much. This reads like a conspiracy theorist rant.

    How do we know Lee Harvey Oswald really short JFK? The government is hiding information. Proof? Well, we don’t have the info, so they must be hiding it.

    They say they have the evidence but where is it? Huh? Huh?

    Lots of people saw another shooter on the grassy knoll, why haven’t those people come forward? Why didn’t the government interview them? Huh, huh?!

    It’s all a conspiracy I tells ya!!

    You can cast doubt on absolutely anything by continually demanding more information and citing “concerns” and “risks”. The fact is that you’re never going to have perfect information. You’re saying there are risks, so we shouldn’t go ahead with it. There are always risks in life, doing nothing has risks too. I don’t see you ranting about those risks. People have concerns, so we shouldn’t go ahead with it. People always have concerns.

    Your three articles worth of naysaying doesn’t amount to evidence of anything. If you think the country will be worse off, present your own business case that shows that.

    This referendum is a total waste of money. If more than half the electorate was against it they would not have been struggling to reach the threshold. Signing the petition was a lot less effort than going to vote. It has zero chance of success.

    And before yo start talking about bots and bloggers I am neither. Believe it or not there are regular Caymanians who just think the government should go ahead with the port.,

  2. Anonymous says:

    My real wish is that CPR was truthful from the start. They should have been called “referendum to stop the dock” because that is all that they are. There would only be about 1000 signatures if everyone knew the real agenda instead of pretending they just want to give people a vote. Hogwash

    • Anonymous says:

      I find it very hard to believe that First Caribbean (CIBC) is giving the 60% bank loan with ZERO guarantees from anyone. Toronto headquarters will be firing someone in Cayman if all of this comes to financial fruition.

    • Anonymous says:

      CPR have been about demanding all the information from the government in order for the public to make an informed decision from day one.

  3. anon says:

    Just how many Caymanians are employed at the hotels? Probably less than 400. And there are over 4000 local people that work directly with the cruise tourism. This is a no brain decision. Build the dock and create decent jobs for locals.

    • Anonymous says:

      This is the sad truth, 7 Mile Beach, The Gem of the Caribbean, not just Cayman mostly does not benefit Caymanians. We can barely even have access to the beach to take a swim these days. No Caymanians can afford to buy there and all the hotels are not owned by REAL local Caymanians. Also I only ever saw expats working at the hotels, except maybe a few maids.

      • Anonymous says:

        That is because working in that industry; is below most Caymanian standards, they do not apply for those positions and if they do, are not consistent in work ethic.

        • Anonymous says:

          And why is the work below Caymanian standards? We are in Cayman.
          Good enough for Americans, Canadians, Philipinos and many others but not Caymanians. What gives? Caymanian entitlement?

    • Anonymous says:

      8:23, Why don’t Caymanians apply for jobs at the hotels? Its a no brain decision not to apply if one is unemployed and really wants to work.

      • Anonymous says:

        Ummm, because you can earn $50,000 a year sitting on your backside driving a cab during office hours instead of minimum wage on your feet day and night?

    • Anonymous says:

      Do you have a source for this? (of course you don’t).

      • Anonymous says:

        8:23 said that probably less than 400 Caymanians work in the hotels. All I was asking is why?

    • Jez cuz. (Caymanian gal) says:

      And destroy our standard of living while volume will never replace quality!!

    • Sunrise says:

      How many Caymanians are now employed because of the cruise line industry? A lot of these places that I have visited, do not have Caymanians employed there, it is a foreign national on a gainful occupational license (work permit). The taxi/tour and watersports operators that depend on tourism get a lot of business from the hotels, (stayover tourism). The detrimental spin offs that it will create for the locals far outweighs the benefits!!! Say no to the dock.

  4. Anonymous says:

    Just imagine if they had told us the truth at the outset and given us all the information?. Imagine if they had seriously read all the data stating why George Town is not the best place to put the enlarged dock and piers. Imagine if they had really focus on the most viable location and spent the last 3 years ensuring that all was above board. Chances are they would probably have their dock!, but no, instead they have spent so much of our money for the sole purpose of opposing the people of these Beloved Isles Cayman, ignoring the data just to have their way, to destroyed George Town Bay and perhaps a few dive sites, destroy the reefs and the seven mile beach. It seems like a case of idiocy then it is. Anyone knows if we can bring a class action against them?

    • Anonymous says:

      Yes we can. Judicial Review is an available option, including if the government (or any agency of it) fails to act in a lawful, rational, reasonable, or proportionate manner.

    • Anonymous says:

      4:11 which side of the Island you think should be destroy!

  5. Anonymous says:

    How many of these cruise lines are sending relief to the Bahamas after hurricane Dorian? The answer is zero! All they do is exploit the countries they visit and offer nothing in return. Disney even left 95 of their employees on Castaway Cay for this storm. Absolutely despicable the whole lot of them.

    Do not build the port to appease these awful cruise lines!

  6. Anonymous says:

    I see the financing of the CBF like this: imagine if I took out a mortgage, and told the bank to take the mortgage payments off my salary. I’m not paying directly, but I’m losing income. The bank is still charging me interest and so over the course of the loan, I will pay back more than I borrowed. That is now they naturally work.

    Government is taking out a mortgage (a capital loan for the construction of the CBF) and letting Verdant Isle take the payment off their salary (loss of revenue from the passenger fee). But government is pretending that this doesn’t cost anything, like getting a huge loan is free. It’s like pretending a mortgage doesn’t cost anything.

    If I buy a house with a loan of $250,000 and an interest rate of 6.25% over 25 years, I will actually pay back $494,654 over the course of the loan.

    When government gets a loan of $196 million, what is the interest rate? How much will we pay back over the life of the loan? What is the true cost?

    • Anonymous says:

      This is blatant misinformation. Government is not taking out a mortgage. Verdant Isle Group is private, not government, and they are putting down partial capital and borrowing the rest. Not us.

      • Forelock says:

        The people of the Cayman island currently pay nothing to land 1.9m cruise ship passengers a year. The cruise ships pay the tender company or use their own tenders.

        When the dock is built we will pay $4.4m per year in foregone revenue.

        If the number of passengers goes up, we will pay more.

        Why are we being asked to pay anything at all to build a dock that saves the cruise ship companies money?

        • Anonymous says:

          You can’t lose what you never gained. Your argument is invalid.

          Most business models have to spend / lose to gain. That 4.4 isn’t a loss when net profit is higher than before.

          • Anonymous says:

            Typical CIG logic as written by a pr blogger on contract

            • Anonymous says:

              Typical TenderBot logic as written by a tender worker fighting for their private stream of honey.

          • Forelock says:

            Anyone who understands Financial Statements would follow my argument.

            Revenue foregone has the same effect on the bottom line as an expense.

            • Anonymous says:

              I’m sorry, that’s complete BS. Check any set of financial statements. Is there any line item or note called “revenue foregone”? Of course not.

              The government is assuming that the total number of passengers will go up (because larger ships will stop). According to CIG the maximum number of passengers in a day will go down but the average per day will go up. In other words fewer days with no ships and fewer days with six ships. The ideal is more days with four.

              They also say that without the CBF the volume will dwindle because older smaller ships are being phased out in favor of larger ships which have better economies of scale. Makes sense to me Bobo.

            • Anonymous says:

              Why you so dense?

              You’re comparing two scenarios –
              0 loss and 5 million profit
              4.4 million loss and 10 million profit

              Which one results in a bigger benefit, CFO Forelock?

      • Anonymous says:

        Can someone explain what First Caribbean’s role is in the financing?

        Does anyone really know?

      • Stef says:

        So what you are saying is basically…this is FREE???

  7. Anonymous says:

    There might be more total money coming from stay over but most of that does not benefit caymanians. Actually the only Caymanian it benefits is the one man that owns most of the hotels now. With most hotels around $1000 per night or more in high season, it does t take a lot of accounting skills to realize the hotels which hardly employ caymanians are the main benefactors. Small Caymanian business get almost nil. Way higher cruise tourist dollars go to caymanians and small caymanian businesses

    • Anonymous says:

      What about the Taxis used to get around? What about ocean/land tours, water sport rentals, Car rentals, Restaurants, Supermarkets, the list goes on. Are you really that ignorant to think that Caymanians do not benefit? Before you jump back on here and answer that question, every single business on island must be 60% CAYMANIAN owned.

      • Anonymous says:

        Fronting is rife. In theory businesses are supposed to be 60% Caymanian owned and controlled, but we all know that is not always true in practice.

        • Anonymous says:

          The same would then hold true for businesses servicing the cruise ships.

          • Anonymous says:

            Exactly. The free access to work permits, the handing out of residency like candy, and the refusal by government to check into who really owns and controls companies means that the benefits to Caymanians are now nominal.

  8. Anonymous says:

    Government should worry. They are not fooling people with lies!

  9. Anonymous says:

    The yellow smiling face is out numbering the green frowning face by a ratio of +3:1 .
    Blue asleep face …Zzzzz.

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