Port development won't come anytime soon

The proposed agreement with a Chinese government-owned construction company to build cruise berthing facilities in George Town harbour could have been salvaged, according to the project’s manager. Alastair Paterson, who was appointed by government in July 2012, said he was dismayed at the amount of work that had been done and money spent only for the cruise berthing project to be back at square one. 

Mr. Paterson believes construction could be already under way had a deal with the China Harbour Engineering Company, or any of the other interested developers, gone ahead. Now he warns it could be 12 months before the cruise berthing project breaks ground.  

A request for proposals from financial consultancy firms to produce a new business case for the facility is expected to go out Friday – the first step in the process of following the UK’s framework for fiscal responsibility on the port deal. Mr. Paterson said the consultants would be essentially repeating work that had already been done.  

“Time should be of the essence as the Cayman Islands cannot 
afford to miss out on future cruise ship development,” Mr. Paterson said.  

“There is major competition in the region. Roatan, Jamaica and who knows possibly even Cuba could dilute arrivals here and hurt this economy. 

‘If it has to be done it has to be done but I have to say I am personally disappointed after all the efforts that have gone into this project so far and there is now nothing to 
show for it.” 

The former project manager dismissed speculation, based on a leaked “framework agreement” with the Chinese, that government was giving too much away to the developer. He said that document was simply a starting point for negotiations and was substantially revised after he came on board.  

Mr. Paterson said one of his first actions as project manager was to redraft the “framework agreement” – the document leaked to the media last month – which he said had never been anything more than a discussion document. 

Zhongdong Tang, a spokesman for the China Harbour group, said the company still considered itself to be involved in the project and could not comment on the details. 

He said: “China Harbour didn’t receive any official letter from the government of Cayman Islands up to now regarding the terminated discussions, so we both are now still in the process of proper negotiations for the agreement of build-finance-operate a cruise terminal in George Town.” 

The statement appears to contradict earlier expressions of disappointment from the firm after former Premier McKeeva Bush publicly announced the negotiations had been abandoned because of the UK’s insistence that specific procurement regulations were followed. 

The original framework document, published on the Internet last month, allowed China Harbour to collect all passenger taxes and tendering fees and contained a lease agreement that would have given the Chinese control of the port, including a planned hotel and shopping development, for 50 years with an option for a further 30. 

Mr. Paterson insisted that this was not the deal on the table when it was scuttled in November. He said it had been substantially renegotiated to maintain government revenue and protect Caymanian jobs and businesses.  

The revised draft ‘concession agreement’, provided to the Compass, would have given the Cayman Islands government a 20 per cent share of the passenger taxes (currently charged at $7.50 to $9.50 per passenger) over the $1.5 million mark, though this was still under discussion, Mr. Paterson said.  

Only the tendering fees for the four ships docked would have gone to the developer. The private sector company, currently operating the tender service for ships at anchor, would have retained their fees for the service still necessary when more than four ships visited. 

The other aspect of the deal offering a lease extending to 80 years to the Chinese for portside development was scrapped, Mr. Paterson said. He said an agreement was struck to form a limited liability company as a partnership between the government, local traders and the Chinese for any future development depending on the need. Negotiations with China Harbour also included current Port Authority debt being assumed by the developer as well as a reorganisation of cargo handling to improve operations. Current revenue by the Port Authority of $3 per cruise passenger was to be retained by them and was not part of the financial arrangements with the developer, Mr. Paterson said. 

He said the deal being discussed included substantial improvements at the Spotts landing. The improvements included the construction of onshore facilities, parking and traffic circulation as well as an upgraded landing dock.  

“That contract was nearing a process of competitive tendering with local contractors when the project was terminated,” he said. “The anticipated contract was estimated at approximately $6 million and would have been carried out entirely by local businesses and not the Chinese.” 

There was some payback for whichever developer built the port, he conceded.  

“No one is going to build us a port out of charity,” Mr. Paterson said. “A developer will want to be repaid and receive a return for their investment. This is a major marine development. The government can’t invest, it can’t put up any equity or guarantees and it can’t provide any expertise. Any partner appointed to be the developer will be assuming most if not all of the risk associated with their investment. 

“Whichever developer is chosen –whether it is Dart, GLF, the Chinese or the cruise ships – they will all be in the same position. They will all have to invest a substantial amount, with little or no security. Even the cruise ships will want to get their money back in one way or another. 

“The current preference seems to be for the cruise lines to develop the facility. While this partnership has a number of advantages, there could be a negative effect on the local traders. Go to any port developed by the cruise ships in the Caribbean and the amount of spending with local businesses can be debated. Substantial on shore spending money is earned by the cruise business. There is nothing wrong with that as they are in business to make money but it does not necessarily help the local economy.” 

There may be few companies worldwide capable of such an undertaking, Mr. Paterson said.  

“Only a select few firms globally have the ability to carry out this type of work, particularly as they will have to provide not only the design and construction but also the funding, estimated at around $200 million. Few will be prepared to risk that investment or have the ability to provide that level of funding as well as the expertise in design and build.” 

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40 COMMENTS

  1. Well now it looks like it will be up to the next government to deal with this. Let’s see what they do or how they manage to blame it all on the last administration

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  2. Hopefully the West Bay Dock has been dropped. Any passanger or their friends unloading there would avoid ever coming back.

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  3. Yesterdays paper reported a giant decrease in cruise passengers of 18.9% from this time last year. That is tremendous. Whatever the reason, if Cayman cannot provide the proper port facilities, then the island will have to depend on only overnight stay passengers. Can the Caymans afford to lose all that revenue. I think not. Cruise ships will pass us by.

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  4. just build 2 long concrete slabs and be done with it. That simple. But i guess in politics nothing is simple and people want recognition for everything. We already have a town with enough jewelry stores.

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  5. The development of the port MUST HELP our local businesses and our economy solo. Any other deal that includes the chinese, the cruise lines, or a single developer like dart instead of an array of local developers, is not in Cayman’s best interest. Any politicians that excludes the locals for this endeavor, I am sorry, they don’t have this island at heart. It is either they are sold out to the few on this island who has the almighty dollar; or, some foreign special interest.

    We don’t have to rush this cruise berthing facility and make wrong choices… it has to be well-thought out and include the entire unemployed local community and ailing businesses to jumpstart competition once again in the Cayman Islands.

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  6. 2 concrete slabs sound easy to do but it not as easy as just pouring concrete. Not to mention the CIG most likely cannot afford that either and anyone that invests into a pier is going to want something that will give them a return on their investment.

    Another thing the people have to realize is that with a new docking facility more ships will come which means more tourists and strain on an already stretched infrastructure in GT. Whether people like it or not there will be a need for an infrastructure upgrade along with this which will mean more business opportunities for smart people. There will most likely be commercial spaces for new stores and restaurants which of course will affect the business currently down on GT, but you know what, dealing with competition is a part of running a business they will have to do what it takes to compete. No business in guaranteed a monopoly on consumers..

    Again I say the reason Cayman finds itself in this situations is simply because of years of spending on things that cost money instead of things that make money, for example those big building that nearly bankrupted Cayman. The schools are great and the I’m sure the government employees are very comfortable in their fancy new digs. But had Cayman used this money to build docking facilities, they would have made more than enough money to build new schools and new buildings for them to stay cool in and they wouldn’t have to give the profit away or be facing 50 or more years of someone else controlling the facility and making all the money.

    This reminds me of something my father said when I got my first job after graduation and had my eye on this fancy rather expensive car. ‘He said why would you but such an expensive car that is only going to cost you money when you don’t even have a driveway to put it in’. That made me realize the you need to make calculated financial decisions that are not always what you want or be very popular in order to secure you financial future. Well let’s just say that that first house I brought instead of the fancy car was a life changing decision that I am still reaping the rewards of 25 years later.. I wonder what that car would have been worth 4 years later when it was paid for..

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  7. Bodden, I get what you are saying and it sounds great on the surface. But I have to ask with the port development being tossed around for so long were there actually any offers like what you mentioned put on the table like from an array of local businesses to build and finance the dock? Also regarding what you say about the unemployed local community and ailing businesses. Can you elaborate on how you suggest they all be included..

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  8. NJ2Cay – you suggest that the next govt. will blame all of the problems on the current administration but clearly you have no problem in laying all blame for our current problems on the previous govt. The recent revelations by Mr. Glidden show that there is plenty of blame to go around for the failure to build the cruise port but you conveniently forget that and prefer to use expenditure on the schools as your whipping boy as if building a cruise port and building schools were in any comparable.

    Contrary to what you suggest, building new docking facilities will not earn us more revenue (in fact we will receive less than currently because of the public/private partnership arrangements) but it may prevent us from losing much of what we already have.

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  9. Speaker, you misunderstand me, I mentioned years of spending which in my opinion spans multiple administrations not just the last two. I think this problem has been brewing for a long time and Cayman is now starting to see the effects of it. I believe they all spent money like it grew on trees, by doing things like building big fancy buildings, holding onto assets that are a serious drain on the public purse, making bad deals that end up costing money or flying around the world just to say hello in addition to just giving money away in an effort to how is it said ‘Build a Nation’ one way or the other they are all at fault for the current financial situation. I used the Schools and Government Administration building as examples of things that cost money compared to something that would make money like the Docking facilities. The point I was trying to make about the dock was that I do believe it would have made a lot of money for Cayman if they would have built it themselves without a publicprivate partnership which is now required to get it done.

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  10. NJ2Cay, I didn’t meant to exaggerate on the ALL UNEMPLOYED COMMUNITY, but in a nutshell what I am saying, is contained in your question – were there any offers put on the table from an array of local businesses to build and finance the dock? The answer is NO. If it was suggested in talks, there was some deviation from it, and greed and special interest had to play a role.

    It is so shameful that they promise you so many things to get elected, but when they get in there, they are easily sold out to the special interest. I think it is going to get worse, and I personally dont blame people for not looking out for themselves, when the politicians are not! God help us.

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  11. This is becoming more comical than originally expected!!!

    So now we have a ‘Project Manager’ who was contracted by the CIG (Premier McKeeva Bush) to whom claims to have salvaged the original deal that was leaked to the media. This Mr. Patterson, who also seems to play the role of the CIG consultant for this project to the media, now claims that a better deal (second revision) had been made, to which has yet to be produced in defense of the blunder that had been made by the disgraced Mr. Bush. It can only be assumed that this phantom revised contract would similarly display ALL signatures of authorized parties as did the original contract which Mr. Patterson claims he was privy to.

    It truly baffles me to comprehend how this recent CHEC deal would have proven the Cayman people such rewards. It further behooves me as to why Mr. Patterson and Mr. Bush cannot put forth this revised contract that would illustrate to the country that indeed he had not intended to sell out this country with that 80 year extortion deal with CHEC. So please quit with the slobbering Mr. Patterson and Mr. Bush with the smoke screens you’re attempting to put forth. Unless you have revised signed and dated contract documents to prove otherwise, clearly indicating that all prior agreements have been voided. It’s been made very clear what mid-night cloak-n-dagger deals had been negotiated for the skin of our children!

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  12. NJ2Cay – Thanks for clarifying that as you mentioned only schools and govt. admin. bldg. and did not mention multiple administrations in your original post.

    Let’s assume we are able to build the cruise terminal ourselves using borrowed funds. Please explain to me exactly how this would increase our revenues so that we could also afford to construct schools etc. Give me the maths and logic. You seem to be forgetting that any such additional borrowing would need to be repaid at interest and there is a limit on how much we can charge in berthing fees and passenger tax.

    I contend that at best we would be breaking even on revenues for the next 20 years.

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  13. Speaker, we have to borrow something to get something back. That if the UK allow us to borrow from any of our local bank lenders. There is also the other option of making a deal to pay back the developer from one or some of our revenue streams like the tourist fees. I think this is where Mac has got critics on his tail, because he made like 80 year deals to pay back the developer. But like he said, which is true – nothing is for nothing! If you are unable to borrow then you must be able to make deals to pay the developer something.

    The thing I don’t understand, is why havent we conglomerated the local entities like DECCO, DHL, et cetera together to construct the cruise berthing facility instead of benefiting and dealing with one entity?! At least if we had an array of many local developers, it would have created more jobs on the island. But this again is where greed and special interest somehow is of more value than the people here. Sad

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  14. Bodden – I am afraid I need you to be more explicit than that to demonstrate exactly how we would be deriving so much greater revenue from the cruise port above our loan repayments that it would have enabled us to build the schools etc. My point is that we are using the revenue stream to repay the developer then it will obviously not be available for new projects.

    Please don’t misunderstand – I think that the cruise port can help to stimulate the economy in other ways e.g. if cruise ships stay overnight cruise tourists may be likely to spend more onshore. But that is not the point at issue here.

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  15. Speaker, In a nutshell what I am trying to say is that things like the Admin Building and the School cost a truckload of money to build and maintain while bringing in no profit. On the other hand no matter how you put it the dock would be an income generator even if it had a note on it and if built by the CIG that income would go to the CIG not to an outside investor. That seems obvious to me..

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  16. NJ2Cay – This is the trouble with debating these issues – people tend to speak in vague generalities without actually illustrating their point. Obviously it does not follow that because the port generates revenue it would be sufficient revenue to cover debt repayments on the cost to build the port plus build new schools and govt. admin bldg etc., which was the point you asserted.

    While I am sure there is valid criticism of the amount spent on the schools there is little doubt that new schools were needed. Rather than pitting two completely different needs against each other and trying to rank them why not compare expenditure for which there was no need at all?

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  17. NJ2Cay – also re the Govt. Admin Bldg. which you said cost a truckload of money to build and maintain while bringing in no profit, you are missing the points that the old Glass House had been condemned as unfit for use, the new bldg. is super-efficient and therefore SAVES on maintenance costs and was intended to SAVE on rental costs.

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  18. Speaker, school and admin building is no concern to me. Is it because you are ppm? I am merely focusing on the wealth-distribution of the project on who gets what among so many unemployed people and local businesses that are suffering. That to me is of grave importance than revenues going towards fixed assets and government properties… these things are less of importance than it is to creating jobs and giving local developers a chance to make a difference in the market.

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  19. I could care less in defending the viewpoints of PPM and UDP! Speaker and NJ2Cay it is obvious what Cayman need are locals being able to maintain and grow their own businesses, and create jobs and opportinities on the island. The deals pertaining the port, should be crafted towards that – Let us not fool ourselves or lose focus!

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  20. Bodden – I am not PPM (or any other party) but I am concerned that we look at these issues objectively.

    I fully agree with your comments concerning the deals pertaining to the port. Let’s be forward looking about this rather than trying to score political points.

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  21. This article had vindicate Mckeeva Bush! Now we know you had the Cayman at heart. The Governor is anti the development of these beautiful islands. Only if he had allow the project to go through as planned Cayman would be poised for new heights.

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  22. Bush vindicated are you all insane?? Bush should have had a port when royal watler was built.You forgot didn’t you . When he had told cruise lines he would build them.
    Chuckie gave away 63 calls of cruise ships that would of brought a lot of revenue to this country. Plus all the businesses that do business with them . Don’t forget its not just gov’t that makes money from fees collected per passengers. But also the busses taxis pay fuel tax, stores pay duties . All the businesses pay licensing fees. Then when individuals and companies go day to day spending brings in more money from taxes on utilities. Thats all part and parcel of the package.
    But Bush wasn’t the only one lets not forget the builders of schools and admin building. Roads were necessary but not schools.
    Gov’t could have easily given church schools money to build more schools and it would have been so much cheaper.
    Triple c school came in at 5 million for 540 students. Wow wow again why did we build so many schools that have failed. Plus they cost everyday to run on our taxes. Nothing comes back in return. Of course you going to say well the student . They could have done that by paying their way. So so foolish look at the money wasted. The cruise ship port would have helped families to pay their way for their own kids. Two birds with one stone.

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  23. The Dart deal made the most sense financially. Locally self-financed, local contractors, etc…
    We would be using it by now and we’d be the envy
    of the Western Caribbean. How pathetic that this can’t be resolved.

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  24. If you let the cruise lines build the port they will be forced to keep the Caymans a long term stop. The investment they make will insure tourism success for many years. After spending millions on a docking facility it would be bad business to not get full use out of the investment. Caymans will be gauranteed tourists with dollars, yen,yuan,euros,rubles,pesos,pounds and ofcourse bitcoins–

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  25. This is sad news indeed. Almost every third world island in the Caribbean has port facilities, yet we don’t, and we call ourselves the jewel of the Caribbean. We are a laughing stock.

    Even more amazing, is how we wrap ourselves in red tape, we worry more about the bureaucratic process than the end results, meanwhile the decades go by and nothing ever gets done. Lets not rush this process says one blogger. How foolish is that! Do they know what will happen to this island if we don’t build a port?

    Here are some brief facts. The 10 largest cruise ships in the world have been built in the last 9 years. Do you know how many of them stop in Cayman? Two. 7 of the 10 cruise the Caribbean, and go to Cozumel, Bahamas, Jamaica, Belize, St. Thomas, St. Martin, and the list goes on. All have berthing facilities of course. The fact is, they WON’T come here b/c it takes too long to unload their passengers and reload them by tender, Think of the awful experience these cruise passengers have waiting in line all day long (with a trip to Hell in between). Is that how you want to spend your vacation? Would you come back?

    Competition is already fierce, and if Cuba opens it doors, look out. These cruise ships will just cruise on by and they wont even stop to wave. There are thousands of jobs directly linked to cruise ship tourism, from the hundred plus shops in town to tour and diving operators, restaurants, taxi drivers, and the list goes on. If we don’t build this port NOW not only will we not attract the new ships, we will loose the ones we already have. A port means we can attract more ships, negotiate longer port times, that all adds up to more revenue. Since government does not have the funds, give it to a developer that does. Get the best deal you can of course, but just MAKE THE DEAL! We cant afford to wait any longer. Wake up Cayman, the cruise lines don’t need us… we need them!

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  26. I don’t care what anyone says I think the best choice for this would be to let Dart do it. The work would be done by local contractors, they go out of their way to hire local people contrary to what people say and they have a huge vested interest in seeing the Cayman Islands product succeed and no one can say the work they do isn’t top notch.

    And for the people that say they already have too much, it’s better than some foreign company coming in and doing it when the money would be reinvested into Cayman if it was done by them..

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  27. NJ2Cay – Coming from the U.S. as you do I am surprised that you don’t appear to recognise the obvious dangers of allowing one person/company/group to control the country’s entire economy.

    Do you know what the Dart proposal entailed or is this the common shallow approach of ‘Dart is a Caymanian and always builds to a high quality so we should let him take over our entire Island’?

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  28. Good point speaker. You are right, but I don’t think that even with the port they would control the whole economy, although it would be a big part of it yes. But I think that would better than CHEC. The idea of a bunch of local companies doing it like Bodden mention is a good idea, but I just don’t see anyone out there looking to drop the kind of capital needed to do something like this. Dart would have it can do and would do it well, there’s still a lot that he doesn’t have control of. So yep I still would think it’s a good idea compared to the other options, but let’s see what the new tender brings. Hopefully people will take it seriously since this will be like the 100th time..

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  29. NJ2Cay – controlling the entire economy appears to be the end game of the Dart corporation. He is simply proceeding by degrees – huge tracts of land, new town (Camana Bay) to divert economic and social activity away from George Town, hotel(s) that involve retaining 50% of room taxes, landfill closure relocation, road diversion, duty free stores, liquor stores, electricity generation, cruise port involving control of upland development which would squeeze out the remaining duty free store competitors etc. etc…

    Your answer does not suggest that you know the details of Dart’s proposal for the cruise port but oddly that doesn’t stop you from endorsing it.

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  30. Nope Speaker, I don’t know the details of Darts proposal on the Port, I am just going by the work he’s done so far and from what I see everything he touches turns to gold, just like king Midas. I did hear that he wanted something like a 99 year lease (Way To Much), but apparently that was still on the negotiating table when they were dropped because of a public outcry against Dart doing it. As far as his end game to control the entire economy, you’re probably right, but he can only buy up the land that’s for sale, so until the land owners start to say no there’s nothing illegal or wrong about him buying it all up, I’ll bet the people selling the land love it. In my opinion I would think Cayman would be better off with Dart controlling the economy than the CIG anywayJust an opinion..

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  31. The 99 year lease was an important part of why there was a public outcry.

    The fact that it is not illegal for him to purchase or that there are persons willing to sell completely misses the point that it is not in the public interest. Again, you should be familiar with that concept in the U.S.

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  32. Yep you definitely have a point, just because it’s not illegal doesn’t mean it’s right and in the public’s interest, but don’t expect a huge company like Dart to put the public interest over their own. And I am quite sure they think it’s in their own best interest to control as much of the economy as they can, most likely due to what they have seen over the past 22 years. The best way to keep a wave like this at bay it to stand solid on your own two feet, this is what Cayman needs to do, plant their feet in solid ground, take charge and get control of their financial situation. Unfortunately things may be too far gone and people aren’t willing to make the sacrifices and hard choices it will take to turn things around all while digging themselves into a deeper hole that they will never be able to dig themselves out of without selling their soul.

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  33. NJ2Cay

    You’ve made some good points here but the situation…and history with Dart and Cayman is a bit more complex than that.

    Dart has bought up much of Cayman’s land assets…and economy simply because it was SOLD to him…he didn’t come into Cayman holding a gun to anyone’s head saying,sell to me…or else.

    Cayman’s political/economic culture has been based on having a ‘sugar daddy’ to bail the CI Govt, meaning the politicians who end up as the government…it absolves them of having to make good economic decisions for the entire country…

    and not even their remit of at least providing an effective and cost-conscious civil service…and the essential services that ALL governments are responsible for providing for their citizens have the CI Govt been able to handle properly.

    The worse example has been this UDP, formerly McKeeva Bush led government, who happened to be the first government elected under Cayman’s new constitution, which gave the local CI Govt more independent power than any local government had ever had before.

    And anyone can see what has happened there…they couldn’t even see out their first term fully…much less address the most pressing economic issues in Cayman.

    Cayman’s main needs for the economy…and safety are…

    Providing a fully-facilitated cruiseship berthing and docking port…

    And addressing Cayman’s huge waste-management problem.

    This UDP Govt came into power with those two major issues and responsibilities to see to…

    And are leaving power with things exactly as they found them…for the next incoming lot to sort out.

    Dart’s issues in Cayman are a private sector matter but the sugar daddy culture has come back to bite McKeeva Bush squarely in the ar*e.

    His first big sugar daddy, Michael Ryan, has come up empty at the end of the day….more show than substance…and…

    His second big sugar daddy, Ken Dart…has bought out the island’s economy..or almost has.

    If there are people in Cayman who have such a problem with Dart, then they need find out what it takes to become more competitive in the business and economy of Cayman.

    Whining and moaning about Dart gets them absolutely nowhwere…

    He’s just running a more effective and profitable operation than they are.

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  34. Firey, You managed to explain the point I have been trying to make better than I could myself. Thanks, I agree with you completely…

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  35. Anyone notice how the proposed sites keep changing?

    As a site is chosen real estate values in the surrounding area explode…

    A bit of Data Mining and a FOI request to the land registry to see who was buying up real estate adjacent to berthing sites prior to the info going public might tell an interesting story.

    Real estate speculation is not illegal but if there is any link to persons in the government with insider knowledge…

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