Job cuts or government funding could be required to deal with mounting financial difficulties on the docks, according to the auditor general.
Declining cruise ship arrivals have contributed to the economic troubles of the Port Authority of the Cayman Islands, which is suffering from a $4 million cash flow shortfall.
The figures, revealed in the authority’s 2012 financial statements presented to the Legislative Assembly last month, prompted Auditor General Alastair Swarbrick to express “significant concern” about the authority’s future.
In his notes to the financial statements the auditor warns: “Given that the port authority has already increased fees in 2010, there is limited room for further manoeuvre on the revenue generation side, if the expected downward trajectory of cargo and cruise passenger volumes continues.
“The likely options include staff rationalisation and direct government support to sustain the port operations.”
Tourism Minister Cline Glidden acknowledged that the auditor general’s concerns were valid and that measures to bolster revenue or decrease expenditure would have to be considered. He added: “The finances of the port authority are affected by declining volumes of imports and decreased numbers of cruise passengers, high debt repayment, inherently high operational costs and costly capital maintenance requirements.”
Minister Glidden said it was not currently believed that direct government funding would be required, though the situation is being closely monitored.
It is hoped that the repayment of some long term loans within the next five years will help free-up cash to deal with the problem in the long term.
The situation on the docks is only likely to get worse in 2013, with Carnival’s decision to divert some of its ships to Roatan likely to result in a further loss of revenue.
The number of cruise passengers arriving on Grand Cayman’s shores peaked at just more than 1.9 million in 2006 but had dropped to 1.4 million by 2011. A minor boost saw that figure increase to 1.5 million last year.
But the decision of Cayman’s most frequent cruise visitor Carnival, which was responsible for 60 per cent of cruise arrivals in Grand Cayman last year, to drop some trips is predicted to result in a loss of at least 250,000 more passengers.
The port authority predicts the loss will be offset by increased visits from other cruise lines and has estimated a total of 1.4 million visitors for this year, though some observers believe that prediction is optimistic.
Cruise arrivals are a major revenue-generator for the port authority, which collects a small fee for every passenger.
The auditor points out that the port authority’s current liabilities exceed its assets by nearly $4 million.
In his comments to the financial statements, he adds: “The concern over the continued viability of the port authority is mitigated by the fact that the port authority is a 100 per cent government owned entity whose operations are critical to the survival of the Cayman Islands.
“In light of this it is perceived that the government will intervene if circumstances warrant, ensuring the PACI’s continued viability.”
The report also points out that a planned increase in tender fees that would have netted the authority just more than $500,000 annually had not gone ahead within the financial year.
“The authority amended its tender fees in March 2010 along with other fees but before the implementation of those fees it was realised that the charges to the tender company will only be passed on to the cruise lines.
“The fees conflicted with the [Florida-Caribbean Cruise Association] agreement and were never charged. The authority reverted to the old fees and the new gazette fees remain dormant.”