The Cayman Turtle Farm is budgeted to receive a little more than $30 million by the end of government’s current fiscal year in “equity injections” – largely subsidies or money paid to retire debt – according to financial statements completed for the 2011/12 budget year.
An audit completed by accounting firm KPMG and reviewed by the Cayman Islands Auditor General’s Office put the government’s equity injection during the 2010/11 year at $9.85 million and $9.7 million for the 2011/12 year.
The projected equity injection for the current 2012/13 budget year is set at $10.5 million, although it’s not certain yet whether the farm will spend all of that cash through the end of the year on 30 June, 2013.
The massive amount of government funding required to sustain operations at the Turtle Farm was a subject of “going concern”, according to auditors.
“Cost overruns of the development of the park, lower than projected visitor numbers and operating costs in excess of initial budgets have given rise to significant business risks that cast uncertainty over the company’s ability to continue …” according to the auditor’s review.
The issues referenced by auditors resulted in the farm being unable to discharge its obligations without access to lending facilities or government equity injections.
“Furthermore, operational results subsequent to 30 June, 2012, indicate that the company continues to generate significant losses from operations and experience cash flow difficulties,” auditors noted.
It’s a problem Turtle Farm Managing Director Tim Adam knows well and has spoken about on previous occasions.
Over the past four government budgets, including the current 2012/13 spending plan, the Cayman Islands government has spent or plans to spend an average of $9.775 million each year in “equity investments” for the continued operation of the Turtle Farm.
That works out to about $175 dollars per year for each resident of the Cayman Islands, using a population figure of 56,000.
The payments, according to Turtle Farm Chief Financial Officer Phillip Fourie, are mostly to pay off debt accumulated by the farm during a redevelopment and expansion effort that was undertaken between 2001 and 2004 and other loans that were taken since.
For instance, this year Mr. Fourie said about $6 million of the $10.5 million will be paid from the government subsidy to retire the principle and pay off interest on that debt. The other $4.5 million will go to making up operational costs of the farm that its revenues cannot support.
The majority of the remaining facility debt, about $31 million as of the end of October, will be paid off by 2019 or earlier, according to farm officials.
However, it is doubtful, and Mr. Adam would not give a date for when, the tourism facility might come close to breaking even – much less make any money – within the next several years.
“I’m not going to make any promises I can’t keep,” he said.
To just “break even”, Mr. Adam estimates the facility would have to draw twice the number of visitors it draws now per year – 460,000 people – or about one-quarter of Cayman’s yearly total visitors, counting both cruise ship and stay-over tourists.
That number is not likely to be reached unless Grand Cayman can install a new cruise ship berthing facility in George Town and/or a berthing facility at the West Bay Public Beach, Mr. Adam said. When the Turtle Farm was expanded in the early part of last decade, the business model called for the construction of a cruise dock at the public beach.
“In the current scenario, where we don’t have a cruise dock … we have to bear in mind that about 70 per cent of our revenues come from the cruise business,” Mr. Adam said.
He also said an aggressive tourism marketing campaign targeted at stay-over visitors is under way, but that alone won’t create the numbers the farm needs to be solvent.